FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

N-CSRS 1 d375446dncsrs.htm FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST - CLASS 2 FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST - CLASS 2

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSRS

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-05583

Franklin Templeton Variable Insurance Products Trust

(Exact name of registrant as specified in charter)

One Franklin Parkway, San Mateo, CA 94403-1906

(Address of principal executive offices) (Zip code)

Craig S. Tyle, One Franklin Parkway, San Mateo, CA 94403-1906

(Name and address of agent for service)

Registrant’s telephone number, including area code: (650) 312-2000

Date of fiscal year end: 12/31

Date of reporting period: 06/30/12

Item 1.

Reports to Stockholders.

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JUNE 30, 2012

FRANKLIN TEMPLETON
VARIABLE INSURANCE PRODUCTS TRUST

SEMIANNUAL

REPORT

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FRANKLIN TEMPLETON VARIABLE INSURANCE

PRODUCTS TRUST SEMIANNUAL REPORT

TABLE OF CONTENTS


Important Notes to Performance Information			i
Fund Summaries
Franklin Flex Cap Growth Securities Fund			FFC-1
*Statement of Additional Information Supplement			FFC-7
Franklin Global Real Estate Securities Fund			FGR-1
*Statement of Additional Information Supplement			FGR-8
Franklin Growth and Income Securities Fund			FGI-1
Franklin High Income Securities Fund			FH-1
Franklin Income Securities Fund			FI-1
Franklin Large Cap Growth Securities Fund			FLG-1
Franklin Large Cap Value Securities Fund			FLV-1
Franklin Rising Dividends Securities Fund			FRD-1
Franklin Small Cap Value Securities Fund			FSV-1
*Prospectus Supplement			FSV-7
Franklin Small-Mid Cap Growth Securities Fund			FSC-1
Franklin Strategic Income Securities Fund			FSI-1
Franklin Templeton VIP Founding Funds Allocation Fund			FFA-1
Franklin U.S. Government Fund			FUS-1
Mutual Global Discovery Securities Fund			MGD-1
Mutual International Securities Fund			MI-1
Mutual Shares Securities Fund			MS-1
Templeton Developing Markets Securities Fund			TD-1
Templeton Foreign Securities Fund			TF-1
Templeton Global Bond Securities Fund			TGB-1
Templeton Growth Securities Fund			TG-1
Index Descriptions			I-1
Shareholder Information			SI-1

*Not part of the semiannual report

NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE

MASTER CLASS – 2

IMPORTANT NOTES TO PERFORMANCE INFORMATION

Performance data is historical and cannot predict or guarantee future results. Principal value and investment return will fluctuate with market conditions, and you may have a gain or loss when you withdraw your money. Inception dates of the funds may have preceded the effective dates of the subaccounts, contracts, or their availability in all states.

When reviewing the index comparisons, please keep in mind that indexes have a number of inherent performance differentials over the funds. First, unlike the funds, which must hold a minimum amount of cash to maintain liquidity, indexes do not have a cash component. Second, the funds are actively managed and, thus, are subject to management fees to cover salaries of securities analysts or portfolio managers in addition to other expenses. Indexes are unmanaged and do not include any commissions or other expenses typically associated with investing in securities. Third, indexes often contain a different mix of securities than the fund to which they are compared. Additionally, please remember that indexes are simply a measure of performance and cannot be invested in directly.

FRANKLIN FLEX CAP GROWTH SECURITIES FUND

This semiannual report for Franklin Flex Cap Growth Securities Fund covers the period ended June 30, 2012.

Performance Summary as of 6/30/12

Franklin Flex Cap Growth Securities Fund – Class 2 delivered a +7.78% total return* for the six-month period ended 6/30/12.

*The investment manager and administrator have contractually agreed to waive or assume certain expenses so that common expenses of the Fund (excluding Rule 12b-1 fees and acquired fund fees and expenses) do not exceed 0.68% (other than certain nonroutine expenses) until 4/30/13. Fund investment results reflect the expense reduction, without which the results would have been lower.

Performance reflects the Fund’s Class 2 operating expenses, but does not include any contract fees, expenses or sales charges. If they had been included, performance would be lower. These charges and deductions, particularly for variable life policies, can have a significant effect on contract values and insurance benefits. See the contract prospectus for a complete description of these expenses, including sales charges.

Franklin Flex Cap Growth Securities Fund – Class 2

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares.

Current performance may differ from figures shown.

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Fund Goal and Main Investments: Franklin Flex Cap Growth Securities Fund seeks capital appreciation. Under normal market conditions, the Fund invests predominantly in equity securities of companies that the investment manager believes have the potential for capital appreciation.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. The Fund underperformed the Russell 1000^® Growth Index, which had a +10.08% total return, and the Russell 3000^® Growth Index, which had a +9.98% total return, for the same period.¹

Economic and Market Overview

The U.S. economy, as measured by gross domestic product, grew modestly during the six-month period ended June 30, 2012. In the first quarter, personal income and spending rose, while federal, state and local government spending declined. The national unemployment rate for June 2012 stood at 8.2%, compared with 8.5% at the start of the period.²Jobless claims touched a four-year low in February amid robust job creation; however, hiring slowed during the remainder of the period and jobless claims at period-end reached January’s level. Industrial production and manufacturing activity continued to increase, but the manufacturing sector shrank unexpectedly in June. Although gasoline prices hit a peak in early April, they plunged to a five-month low near period-end due to lower crude oil prices. In keeping with its goal to strengthen U.S. economic recovery by fostering increased employment while keeping inflation in check, during June the Federal Reserve Board (Fed) extended through 2012 its program (dubbed Operation Twist) to buy long-term Treasuries in an attempt to lower long-term yields. The Fed also reaffirmed its intention to keep the federal funds target rate low at least through late 2014.

During late March and early April 2012, improved economic reports helped U.S. stock markets reach multi-year highs. The Dow Jones Industrial Average exceeded 13,000 and the Standard & Poor’s^® 500 Index topped 1,400 for the first time since 2008, while the NASDAQ Composite Index hit an 11-year high.³ Global markets grew volatile, however, amid renewed concerns about eurozone debt and slowing

2. Source: Bureau of Labor Statistics.

3. Please see Index Descriptions following the Fund Summaries.

Fund Risks: All investments involve risks, including possible loss of principal. Investors should be comfortable with fluctuations in the value of their investments, as small- and midsized-company stocks can be volatile, especially over the short term. Smaller, midsized and relatively new or unseasoned companies can be particularly sensitive to changing economic conditions, and their prospects for growth are less certain than those of larger, more established companies. The Fund may focus on particular sectors of the market from time to time, which can carry greater risks of adverse developments in such sectors. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

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global economic growth. Fears of a Greek debt default and exit from the eurozone were somewhat mitigated by secured bailout financing and bondholder concessions in February, as well as elections in May and June that resulted in the formation of a new coalition government. Risk-averse investors seeking safety drove U.S. Treasury yields to historical lows during the period.

At the end of the reporting period, significant challenges to the U.S. economy remained, including weak jobs reports, lack of broad public and political agreement on how to achieve U.S. deficit reduction, and uncertainty surrounding deeply indebted European countries including Greece, Italy and Spain. Signs of China’s economic growth slowdown further contributed to pessimism. Although long-term resolution of European debt issues remained unclear, the European Central Bank’s latest plan to allow the European Stability Mechanism to directly recapitalize troubled banks throughout the eurozone, as well as a late-June proposal leaning toward fiscal and banking union, supported cautious optimism in U.S. and global markets.

Investment Strategy

We use fundamental, bottom-up research to seek companies meeting our criteria of growth potential, quality and valuation. In seeking sustainable growth characteristics, we look for companies we believe can produce sustainable earnings and cash flow growth, evaluating the long-term market opportunity and competitive structure of an industry to target leaders and emerging leaders. We define quality companies as those with strong and improving competitive positions in attractive markets. We also believe important attributes of quality are experienced and talented management teams as well as financial strength reflected in the capital structure, gross and operating margins, free cash flow generation and returns on capital employed. Our valuation analysis includes a range of potential outcomes based on an assessment of multiple scenarios. In assessing value, we consider whether security prices fully reflect the balance of the sustainable growth opportunities relative to business and financial risks.

Manager’s Discussion

From a sector perspective, stock selection in the consumer staples, health care and consumer discretionary sectors contributed to the Fund’s performance relative to the Russell 3000^® Growth Index during

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the six months under review.⁴ In the consumer staples sector, our holdings in energy drink maker Monster Beverage, natural and organic foods retailer Whole Foods Market and infant formula producer Mead Johnson Nutrition aided results. Health care information technology developer Cerner and heart valve maker Edwards Lifesciences in the health care sector also benefited the Fund. Among our consumer discretionary holdings, discount retailer Dollar General boosted Fund performance.

In contrast, stock selection in the energy, materials and industrials sectors constrained relative Fund performance.⁵ Among our energy holdings, independent energy company SM Energy, oilfield services company Key Energy Services and independent exploration and production company Whiting Petroleum were notable detractors. Materials holdings including chemical manufacturer Celanese, precious metal producer Goldcorp⁶ and industrial gas provider Praxair also hurt relative results. Key detractors in the industrials sector included solid waste services provider Waste Connections, industrial supply company Fastenal and power, control and information solution provider Rockwell Automation. Our underweighting in Apple in information technology also hindered relative Fund performance, as the computer hardware and software developer benefited from global demand for its iPhone and iPad products.

Fund cash levels were briefly elevated — as reflected in figures for the end of the period — by certain shareholder transactions.

Thank you for your participation in Franklin Flex Cap Growth Securities Fund. We look forward to serving your future investment needs.

4. The consumer staples sector comprises food and staples retailing; and food, beverage and tobacco in the SOI. The health care sector comprises health care equipment and services; and pharmaceuticals, biotechnology and life sciences in the SOI. The consumer discretionary sector comprises automobiles and components, consumer durables and apparel, consumer services, media, and retailing in the SOI.

5. The energy sector comprises energy in the SOI. The materials sector comprises materials in the SOI. The industrials sector comprises capital goods, commercial and professional services, and transportation in the SOI.

6. Not an index component.

The foregoing information reflects our analysis, opinions and portfolio holdings as of June 30, 2012, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

Top 10 Holdings

Franklin Flex Cap Growth Securities Fund

6/30/12


Company *Sector/Industry*	% of Total Net Assets
Apple Inc.		4.3%
Technology Hardware & Equipment
Praxair Inc.		1.8%
Materials
International Business Machines Corp.		1.5%
Software & Services
EMC Corp.		1.5%
Technology Hardware & Equipment
Visa Inc., A		1.4%
Software & Services
MasterCard Inc., A		1.4%
Software & Services
Dollar General Corp.		1.3%
Retailing
Discovery Communications Inc., C		1.3%
Media
United Technologies Corp.		1.3%
Capital Goods
Chevron Corp.		1.2%
Energy

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).

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Fund Expenses

As an investor in a variable insurance contract (Contract) that indirectly provides for investment in an underlying mutual fund, you can incur transaction and/or ongoing expenses at both the Fund level and the Contract level.

•

Transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes.

•

Ongoing expenses can include management fees, distribution and service (12b-1) fees, contract fees, annual maintenance fees, mortality and expense risk fees and other fees and expenses. All mutual funds and Contracts have some types of ongoing expenses.

The expenses shown in the table are meant to highlight ongoing expenses at the Fund level only and do not include ongoing expenses at the Contract level, or transaction expenses at either the Fund or Contract levels. While the Fund does not have transaction expenses, if the transaction and ongoing expenses at the Contract level were included, the expenses shown below would be higher. You should consult your Contract prospectus or disclosure document for more information.

The table shows Fund-level ongoing expenses and can help you understand these expenses and compare them with those of other mutual funds offered through the Contract. The table assumes a $1,000 investment held for the six months indicated. Please refer to the Fund prospectus for additional information on operating expenses.

Actual Fund Expenses

The first line (Actual) of the table provides actual account values and expenses. The “Ending Account Value” is derived from the Fund’s actual return, which includes the effect of ongoing Fund expenses, but does not include the effect of ongoing Contract expenses.

You can estimate the Fund-level expenses you incurred during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:

1.	Divide your account value by $1,000.

If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6.

2.	Multiply the result by the number under the heading “Fund-Level Expenses Incurred During Period.”

If Fund-Level Expenses Incurred During Period were $7.50, then 8.6 x $7.50 = $64.50.

In this illustration, the estimated expenses incurred this period at the Fund level are $64.50.

Franklin Flex Cap Growth Securities Fund – Class 2

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Hypothetical Example for Comparison with Other Mutual Funds

Information in the second line (Hypothetical) of the table can help you compare ongoing expenses of the Fund with those of other mutual funds offered through the Contract. This information may not be used to estimate the actual ending account balance or expenses you incurred during the period. The hypothetical “Ending Account Value” is based on the Fund’s actual expense ratio and an assumed 5% annual rate of return before expenses, which does not represent the Fund’s actual return. The figure under the heading “Fund-Level Expenses Incurred During Period” shows the hypothetical expenses your account would have incurred under this scenario. You can compare this figure with the 5% hypothetical examples that appear in shareholder reports of other funds offered through a Contract.


Class 2	Beginning Account Value 1/1/12		Ending Account Value 6/30/12		Fund-Level Expenses Incurred During Period* 1/1/12–6/30/12
Actual	$	1,000	$	1,077.80	$	4.80
Hypothetical (5% return before expenses)	$	1,000	$	1,020.24	$	4.67

*Expenses are calculated using the most recent six-month annualized expense ratio, net of expense waivers, for the Fund’s Class 2 shares (0.93%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 182/366 to reflect the one-half year period.

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SUPPLEMENT DATED AUGUST 15, 2012

TO THE STATEMENT OF

ADDITIONAL INFORMATION DATED MAY 1, 2012 OF

Franklin Flex Cap Growth Securities Fund

(A series of Franklin Templeton Variable Insurance Products Trust)

The Statement of Additional Information is amended as follows:

The section beginning on page 12 entitled “Glossary of Investments, Techniques, Strategies and Their Risks” is revised to add the following:

Exchange-traded funds. The Fund may invest in exchange-traded funds (ETFs). ETFs are regulated as registered investment companies under the 1940 Act. Many ETFs acquire and hold securities of all of the companies or other issuers, or a representative sampling of companies or other issuers, that are components of a particular index. Such ETFs are intended to provide investment results that, before expenses, generally correspond to the price and yield performance of the corresponding market index, and the value of their shares should, under normal circumstances, closely track the value of the index’s underlying component securities. Because an ETF has operating expenses and transaction costs, while a market index does not, ETFs that track particular indices typically will be unable to match the performance of the index exactly. ETF shares may be purchased and sold in the secondary trading market on a securities exchange, in lots of any size, at any time during the trading day. More recently, actively managed ETFs have been created that are managed similarly to other investment companies.

The shares of an ETF may be assembled in a block (typically 50,000 shares) known as a creation unit and redeemed in kind for a portfolio of the underlying securities (based on the ETF’s net asset value) together with a cash payment generally equal to accumulated dividends as of the date of redemption. Conversely, a creation unit may be purchased from the ETF by depositing a specified portfolio of the ETF’s underlying securities, as well as a cash payment generally equal to accumulated dividends of the securities (net of expenses) up to the time of deposit. ETF shares, as opposed to creation units, are generally purchased and sold by smaller investors in a secondary market on a securities exchange.

ETF shares can be traded in lots of any size, at any time during the trading day. Although the Fund, like most other investors in ETFs, intends to purchase and sell ETF shares primarily in the secondary trading market, the Fund may redeem creation units for the underlying securities (and any applicable cash), and may assemble a portfolio of the underlying securities and use it (and any required cash) to purchase creation units, if the investment manager believes it is in the Fund’s best interest to do so.

An investment in an ETF is subject to all of the risks of investing in the securities held by the ETF and have the same risks as investing in a closed-end fund. In addition, because of the ability of large market participants to arbitrage price differences by purchasing or redeeming creation units, the difference between the market value and the net asset value of ETF shares should in most cases be small. An ETF may be terminated and need to liquidate its portfolio securities at a time when the prices for those securities are falling.

Please keep this supplement for future reference.

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Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Franklin Flex Cap Growth Securities Fund


	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31,
Class 2	Six Months Ended June 30, 2012 (unaudited)			2011			2010			2009			2008			2007

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	12.09		$	12.70		$	10.93		$	8.22		$	12.72		$	11.14

Income from investment operations^a:
Net investment income (loss)^b		(0.01	)		(0.02	)		(0.02	)		(—	)^c		—	^c		0.04
Net realized and unrealized gains (losses)		0.95			(0.59	)		1.79			2.71			(4.49	)		1.55

Total from investment operations		0.94			(0.61	)		1.77			2.71			(4.49	)		1.59

Less distributions from net investment income		—			—			—			—			(0.01	)		(0.01	)

Net asset value, end of period	$	13.03		$	12.09		$	12.70		$	10.93		$	8.22		$	12.72


Total return^d		7.78%			(4.80)%			16.19%			32.97%			(35.31)%			14.32%
Ratios to average net assets^e
Expenses before waiver and payments by affiliates		1.17%			1.16%			1.18%			1.19%			1.21%			1.25%
Expenses net of waiver and payments by affiliates		0.93%			0.93%			0.93%			0.93%	^f		0.93%			0.93%	^f
Net investment income (loss)		(0.15)%			(0.14)%			(0.17)%			(0.01)%			0.04%			0.31%

Supplemental data
Net assets, end of period (000’s)	$	192,328		$	188,527		$	227,774		$	244,768		$	195,425		$	206,218
Portfolio turnover rate		15.73%			63.99%			60.00%			33.64%			32.76%			30.15%

^aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.

^bBased on average daily shares outstanding.

^cAmount rounds to less than $0.01 per share.

^dTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which the Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle. Total return is not annualized for periods less than one year.

^eRatios are annualized for periods less than one year.

^fBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

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Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin Flex Cap Growth Securities Fund


	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31,
Class 4	Six Months Ended June 30, 2012 (unaudited)			2011			2010			2009			2008^a

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	12.01		$	12.63		$	10.88		$	8.21		$	11.22

Income from investment operations^b:
Net investment income (loss)^c		(0.02	)		(0.03	)		(0.03	)		(0.01	)		—	^d
Net realized and unrealized gains (losses)		0.95			(0.59	)		1.78			2.69			(2.98	)

Total from investment operations		0.93			(0.62	)		1.75			2.68			(2.98	)

Less distributions from net investment income		—			—			—			(0.01	)		(0.03	)

Net asset value, end of period	$	12.94		$	12.01		$	12.63		$	10.88		$	8.21


Total return^e		7.74%			(4.91)%			16.08%			32.69%			(26.68)%
Ratios to average net assets^f
Expenses before waiver and payments by affiliates		1.27%			1.26%			1.28%			1.29%			1.31%
Expenses net of waiver and payments by affiliates		1.03%			1.03%			1.03%			1.03%	^g		1.03%
Net investment income (loss)		(0.25)%			(0.24)%			(0.27)%			(0.11)%			(0.06)%

Supplemental data
Net assets, end of period (000’s)	$	281,387		$	270,598		$	263,746		$	218,798		$	50,268
Portfolio turnover rate		15.73%			63.99%			60.00%			33.64%			32.76%

^aFor the period February 29, 2008 (effective date) to December 31, 2008.

^bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.

^cBased on average daily shares outstanding.

^dAmount rounds to less than $0.01 per share.

^eTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which the Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle. Total return is not annualized for periods less than one year.

^fRatios are annualized for periods less than one year.

^gBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

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Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited)


Franklin Flex Cap Growth Securities Fund	Shares		Value
Common Stocks 75.4%
Automobiles & Components 1.7%
^aBorgWarner Inc.		69,320	$	4,546,699
Johnson Controls Inc.		134,700		3,732,537

				8,279,236

Banks 1.0%
^aSignature Bank		31,400		1,914,458
Wells Fargo & Co.		84,720		2,833,037

				4,747,495

Capital Goods 6.3%
Cummins Inc.		50,880		4,930,781
Danaher Corp.		71,080		3,701,846
Fastenal Co.		97,280		3,921,357
Pall Corp.		31,420		1,722,130
Precision Castparts Corp.		34,800		5,724,252
Rockwell Automation Inc.		44,300		2,926,458
Roper Industries Inc.		9,900		975,942
United Technologies Corp.		78,570		5,934,392

				29,837,158

Commercial & Professional Services 1.6%
^aIHS Inc., A		13,940		1,501,756
^aStericycle Inc.		35,910		3,291,870
Waste Connections Inc.		99,460		2,975,843

				7,769,469

Consumer Durables & Apparel 3.2%
^aLululemon Athletica Inc. (Canada)		42,360		2,525,927
NIKE Inc., B		38,510		3,380,408
Ralph Lauren Corp.		30,030		4,206,002
^aUnder Armour Inc., A		53,920		5,094,361

				15,206,698

Consumer Services 0.7%
^aChipotle Mexican Grill Inc.		4,770		1,812,362
Wynn Resorts Ltd.		12,710		1,318,281

				3,130,643

Diversified Financials 1.1%
BlackRock Inc.		10,870		1,845,943
T. Rowe Price Group Inc.		51,680		3,253,773

				5,099,716

Energy 4.7%
Anadarko Petroleum Corp.		40,820		2,702,284
^aCameron International Corp.		15,400		657,734
Chevron Corp.		54,630		5,763,465
^aFMC Technologies Inc.		52,380		2,054,867
^aKey Energy Services Inc.		187,060		1,421,656
QEP Resources Inc.		73,170		2,192,905
Schlumberger Ltd.		42,650		2,768,412
SM Energy Co.		32,220		1,582,324
^aWhiting Petroleum Corp.		77,020		3,167,062

				22,310,709

Food & Staples Retailing 0.8%
Whole Foods Market Inc.		41,150		3,922,418

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Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Flex Cap Growth Securities Fund	Shares		Value
Common Stocks (continued)
Food, Beverage & Tobacco 2.9%
The Coca-Cola Co.		15,090	$	1,179,887
Mead Johnson Nutrition Co., A		64,440		5,188,065
^aMonster Beverage Corp.		47,760		3,400,512
PepsiCo Inc.		54,250		3,833,305

				13,601,769

Health Care Equipment & Services 5.4%
^aCerner Corp.		67,350		5,567,151
^aDaVita Inc.		21,970		2,157,674
^aDexCom Inc.		130,420		1,690,243
^aEdwards Lifesciences Corp.		28,060		2,898,598
^aExpress Scripts Holding Co.		88,580		4,945,421
^aIDEXX Laboratories Inc.		4,900		471,037
^aIntuitive Surgical Inc.		8,860		4,906,579
McKesson Corp.		32,450		3,042,188

				25,678,891

Insurance 1.2%
ACE Ltd.		39,040		2,894,035
Aflac Inc.		68,620		2,922,526

				5,816,561

Materials 5.0%
Airgas Inc.		4,500		378,045
Albemarle Corp.		44,900		2,677,836
Celanese Corp., A		86,200		2,984,244
Ecolab Inc.		74,830		5,128,100
Goldcorp Inc. (Canada)		101,020		3,796,332
Praxair Inc.		78,570		8,542,916

				23,507,473

Media 2.8%
^aDIRECTV, A		86,050		4,200,961
^aDiscovery Communications Inc., C		119,390		5,980,245
The Walt Disney Co.		64,600		3,133,100

				13,314,306

Pharmaceuticals, Biotechnology & Life Sciences 5.1%
Abbott Laboratories		79,650		5,135,036
Allergan Inc.		12,830		1,187,673
^aBiogen Idec Inc.		25,430		3,671,584
^aCelgene Corp.		26,190		1,680,350
Merck & Co. Inc.		97,280		4,061,440
Novo Nordisk AS, ADR (Denmark)		3,000		436,020
Perrigo Co.		8,400		990,612
^aWaters Corp.		35,260		2,802,112
^aWatson Pharmaceuticals Inc.		53,920		3,989,541

				23,954,368

Real Estate 1.1%
American Tower Corp.		77,020		5,384,468

Retailing 3.5%
^aAmazon.com Inc.		13,090		2,989,102
Dick’s Sporting Goods Inc.		64,350		3,088,800
^aDollar General Corp.		117,460		6,388,649

FFC-11

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Flex Cap Growth Securities Fund	Shares		Value
Common Stocks (continued)
Retailing (continued)
Guess? Inc.		56,130	$	1,704,668
^aPriceline.com Inc.		3,070		2,040,076
Ulta Salon Cosmetics & Fragrance Inc.		5,500		513,590

				16,724,885

Semiconductors & Semiconductor Equipment 2.8%
Avago Technologies Ltd. (Singapore)		80,750		2,898,925
Intel Corp.		112,250		2,991,462
^aLam Research Corp.		12,480		470,995
Microchip Technology Inc.		104,770		3,465,792
Xilinx Inc.		101,530		3,408,362

				13,235,536

Software & Services 13.4%
^aBottomline Technologies Inc.		72,530		1,309,167
^aCheck Point Software Technologies Ltd. (Israel)		48,640		2,412,058
^aCitrix Systems Inc.		52,380		4,396,777
^aCognizant Technology Solutions Corp., A		46,210		2,772,600
^aeBay Inc.		28,330		1,190,143
^aFacebook Inc., A		61,620		1,917,614
FactSet Research Systems Inc.		23,570		2,190,596
^aFortinet Inc.		82,310		1,911,238
^aInformatica Corp.		111,680		4,730,765
International Business Machines Corp.		37,360		7,306,869
MasterCard Inc., A		14,960		6,434,446
^aNuance Communications Inc.		134,300		3,199,026
Oracle Corp.		168,360		5,000,292
^aRed Hat Inc.		88,580		5,002,998
^aSalesforce.com Inc.		25,030		3,460,648
^aServiceSource International Inc.		112,250		1,554,662
^aVantiv Inc., A		40,430		941,615
^aVeriFone Systems Inc.		40,350		1,335,182
Visa Inc., A		52,380		6,475,739

				63,542,435

Technology Hardware & Equipment 8.7%
^aAcme Packet Inc.		84,720		1,580,028
^aApple Inc.		34,660		20,241,440
^aAruba Networks Inc.		42,820		644,441
^aEMC Corp.		269,390		6,904,466
^aF5 Networks Inc.		15,010		1,494,396
National Instruments Corp.		90,650		2,434,859
QUALCOMM Inc.		65,270		3,634,233
^aTrimble Navigation Ltd.		92,430		4,252,704

				41,186,567

Transportation 2.4%
Expeditors International of Washington Inc.		50,060		1,939,825
^aHub Group Inc., A		96,280		3,485,336
Kansas City Southern		74,830		5,205,175
^aSpirit Airlines Inc.		26,960		524,641

				11,154,977

Total Common Stocks (Cost $253,371,717)				357,405,778

FFC-12

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Flex Cap Growth Securities Fund	Shares		Value
Short Term Investments (Cost $9,458,914) 2.0%
Money Market Funds 2.0%
^a,bInstitutional Fiduciary Trust Money Market Portfolio		9,458,914	$	9,458,914

Total Investments (Cost $262,830,631) 77.4%				366,864,692
Other Assets, less Liabilities 22.6%				106,850,354

Net Assets 100.0%			$	473,715,046

See Abbreviations on page 22.

^aNon-income producing.

^bSee Note 7 regarding investments in the Institutional Fiduciary Trust Money Market Portfolio.

The accompanying notes are an integral part of these financial statements.

FFC-13

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

June 30, 2012 (unaudited)


	Franklin Flex Cap Growth Securities Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	253,371,717
Cost - Sweep Money Fund (Note 7)		9,458,914

Total cost of investments	$	262,830,631

Value - Unaffiliated issuers	$	357,405,778
Value - Sweep Money Fund (Note 7)		9,458,914

Total value of investments		366,864,692
Receivables:
Investment securities sold		115,543,524
Capital shares sold		130,974
Dividends and interest		254,932
Other assets		9,923

Total assets		482,804,045

Liabilities:
Payables:
Investment securities purchased		8,164,183
Capital shares redeemed		375,248
Affiliates		493,174
Accrued expenses and other liabilities		56,394

Total liabilities		9,088,999

Net assets, at value	$	473,715,046

Net assets consist of:
Paid-in capital	$	378,315,484
Undistributed net investment income (loss)		(521,247	)
Net unrealized appreciation (depreciation)		104,034,061
Accumulated net realized gain (loss)		(8,113,252	)

Net assets, at value	$	473,715,046

Class 2:
Net assets, at value	$	192,327,790

Shares outstanding		14,764,204

Net asset value and maximum offering price per share	$	13.03

Class 4:
Net assets, at value	$	281,387,256

Shares outstanding		21,743,439

Net asset value and maximum offering price per share	$	12.94

The accompanying notes are an integral part of these financial statements.

FFC-14

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the six months ended June 30, 2012 (unaudited)


	Franklin Flex Cap Growth Securities Fund
Investment income:
Dividends	$	1,919,362
Income from securities loaned		3,085

Total investment income		1,922,447

Expenses:
Management fees (Note 3a)		1,584,719
Administrative fees (Note 3b)		617,539
Distribution fees: (Note 3c)
Class 2		252,874
Class 4		511,115
Unaffiliated transfer agent fees		410
Custodian fees (Note 4)		3,419
Reports to shareholders		34,555
Professional fees		16,960
Trustees’ fees and expenses		967
Other		8,814

Total expenses		3,031,372
Expenses waived/paid by affiliates (Note 3e)		(587,678	)

Net expenses		2,443,694

Net investment income (loss)		(521,247	)

Realized and unrealized gains (losses):
Net realized gain (loss) from investments		24,493,383
Net change in unrealized appreciation (depreciation) on investments		12,969,385

Net realized and unrealized gain (loss)		37,462,768

Net increase (decrease) in net assets resulting from operations	$	36,941,521

The accompanying notes are an integral part of these financial statements.

FFC-15

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets


	Franklin Flex Cap Growth Securities Fund
	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31, 2011

Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	(521,247	)	$	(951,190	)
Net realized gain (loss) from investments		24,493,383			23,226,156
Net change in unrealized appreciation (depreciation) on investments		12,969,385			(41,102,831	)

Net increase (decrease) in net assets resulting from operations		36,941,521			(18,827,865	)

Capital share transactions: (Note 2)
Class 2		(11,138,170	)		(31,049,447	)
Class 4		(11,212,871	)		17,482,144

Total capital share transactions		(22,351,041	)		(13,567,303	)

Net increase (decrease) in net assets		14,590,480			(32,395,168	)
Net assets:
Beginning of period		459,124,566			491,519,734

End of period	$	473,715,046		$	459,124,566

Undistributed net investment income (loss) included in net assets:
End of period	$	(521,247	)	$	—

The accompanying notes are an integral part of these financial statements.

FFC-16

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited)

Franklin Flex Cap Growth Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment company, consisting of twenty separate funds. The Franklin Flex Cap Growth Securities Fund (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. At June 30, 2012, 77.55% of the Fund’s shares were held through one insurance company. The Fund offers two classes of shares: Class 2 and Class 4. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

The Fund’s investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Under procedures approved by the Trust’s Board of Trustees (the Board), the Fund’s administrator, investment manager and other affiliates have formed the Valuation and Liquidity Oversight Committee (VLOC). The VLOC provides administration and oversight of the Fund’s valuation policies and procedures, which are approved annually by the Board. Among other things, these procedures allow the Fund to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

Equity securities listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded, or the NYSE, whichever is earlier. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at the close of the NYSE on the day that the value of the security is determined. Over-the-counter securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities. Investments in open-end mutual funds are valued at the closing net asset value.

The Fund has procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the VLOC convenes on a regular basis to review such financial instruments and considers a number of factors, including significant unobservable valuation inputs, when arriving at fair value. The VLOC primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. The VLOC employs various methods for calibrating these valuation approaches including a regular review of key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.

Trading in securities on foreign securities stock exchanges and over-the-counter markets may be completed before the daily close of business on the NYSE. Occasionally, events occur between the time at which trading in a foreign security is completed and the close of the NYSE that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund’s portfolio securities as determined at the foreign market close and the latest indications of value at the close of the NYSE. In order to minimize the potential for these differences, the VLOC monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depositary Receipts, futures contracts and exchange traded funds). These price movements are measured

FFC-17

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Flex Cap Growth Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

a. Financial Instrument Valuation (continued)

against established trigger thresholds for each specific market proxy to assist in determining if an event has occurred that may call into question the reliability of the values of the foreign securities held by the Fund. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services.

b. Securities Lending

The Fund participates in an agency based securities lending program. The fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the market value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the market value of loaned securities, as determined at the close of fund business each day; any additional collateral required due to changes in security values is delivered to the fund on the next business day. The fund receives income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. The fund bears the market risk with respect to the collateral investment, securities loaned, and the risk that the agent may default on its obligations to the fund. The securities lending agent has agreed to indemnify the fund in the event of default by a third party borrower. At June 30, 2012, the Fund had no securities on loan.

c. Income and Deferred Taxes

It is the Fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and if applicable, excise taxes. As a result, no provision for U.S. federal income taxes is required.

The Fund may be subject to foreign taxation related to income received, capital gains on the sale of securities and certain foreign currency transactions in the foreign jurisdictions in which it invests. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests. When a capital gain tax is determined to apply the Fund records an estimated deferred tax liability in an amount that would be payable if the securities were disposed of on the valuation date.

The Fund recognizes the tax benefits of uncertain tax positions only when the position is “more likely than not” to be sustained upon examination by the tax authorities based on the technical merits of the tax position. As of June 30, 2012, and for all open tax years, the Fund has determined that no liability for unrecognized tax benefits is required in the Fund’s financial statements related to uncertain tax positions taken on a tax return (or expected to be taken on future tax returns). Open tax years are those that remain subject to examination and are based on each tax jurisdiction statute of limitation.

d. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Estimated expenses are accrued daily. Dividend income is recorded on the ex-dividend date except that certain dividends from foreign securities are recognized as soon as the Fund is notified of the ex-dividend date. Distributions to shareholders are recorded on the ex-dividend date and are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with accounting principles generally accepted in the United States of America. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.

Common expenses incurred by the Trust are allocated among the funds based on the ratio of net assets of each fund to the combined net assets of the Trust. Fund specific expenses are charged directly to the fund that incurred the expense.

FFC-18

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Flex Cap Growth Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

d. Security Transactions, Investment Income, Expenses and Distributions (continued)

Realized and unrealized gains and losses and net investment income, not including class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions, by class, are generally due to differences in class specific expenses.

e. Accounting Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

f. Guarantees and Indemnifications

Under the Trust’s organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust, on behalf of the Fund, enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.

2. SHARES OF BENEFICIAL INTEREST

At June 30, 2012, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:


	Six Months Ended June 30, 2012						Year Ended December 31, 2011
Class 2 Shares:	Shares			Amount			Shares			Amount
Shares sold		1,386,572		$	18,737,523			2,603,604		$	32,933,090
Shares redeemed		(2,221,009	)		(29,875,693	)		(4,943,943	)		(63,982,537	)

Net increase (decrease)		(834,437	)	$	(11,138,170	)		(2,340,339	)	$	(31,049,447	)

Class 4 Shares:
Shares sold		2,226,348		$	29,225,679			8,511,819		$	106,665,741
Shares redeemed		(3,008,303	)		(40,438,550	)		(6,865,481	)		(89,183,597	)

Net increase (decrease)		(781,955	)	$	(11,212,871	)		1,646,338		$	17,482,144

3. TRANSACTIONS WITH AFFILIATES

Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton Investments. Certain officers and trustees of the Fund are also officers and/or directors of the following subsidiaries


Subsidiary		Affiliation
Franklin Advisers, Inc. (Advisers)		Investment manager
Franklin Templeton Services, LLC (FT Services)		Administrative manager
Franklin Templeton Distributors, Inc. (Distributors)		Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services)		Transfer agent

FFC-19

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Flex Cap Growth Securities Fund

3. TRANSACTIONS WITH AFFILIATES (continued)

a. Management Fees

The Fund pays an investment management fee to Advisers based on the average daily net assets of the Fund as follows:


Annualized Fee Rate		Net Assets
0.750%		Up to and including $100 million
0.650%		Over $100 million, up to and including $250 million
0.600%		Over $250 million, up to and including $10 billion
0.550%		Over $10 billion, up to and including $12.5 billion
0.525%		Over $12.5 billion, up to and including $15 billion
0.500%		In excess of $15 billion

b. Administrative Fees

The Fund pays an administrative fee to FT Services of 0.25% per year of the average daily net assets of the Fund.

c. Distribution Fees

The Board has adopted distribution plans for Class 2 and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to 0.35% per year of its average daily net assets of each class. The Board has agreed to limit the current rate to 0.25% per year for Class 2.

d. Transfer Agent Fees

Investor Services, under terms of an agreement, performs shareholder servicing for the Fund and is not paid by the Fund for the services.

e. Waiver and Expense Reimbursements

FT Services has contractually agreed in advance to waive or limit its fees and to assume as its own expense certain expenses otherwise payable by the Fund so that the common expenses (i.e. a combination of management fees, administrative fees, and other expenses, but excluding distribution fees, and acquired fund fees and expenses, for each class of the Fund do not exceed 0.68% (other than certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations, and liquidations) until April 30, 2013.

4. EXPENSE OFFSET ARRANGEMENT

The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses. During the period ended June 30, 2012, there were no credits earned.

5. INCOME TAXES

FFC-20

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Flex Cap Growth Securities Fund

5. INCOME TAXES (continued)

At December 31, 2011, capital loss carryforwards were as follows:


Capital loss carryforwards expiring in:
2017	$	25,971,698
2018		4,128,864

		$30,100,562

At June 30, 2012, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:


Cost of investments	$	265,846,605


Unrealized appreciation	$	112,387,086
Unrealized depreciation		(11,368,999	)

Net unrealized appreciation (depreciation)	$	101,018,087

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatment of wash sales.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2012, aggregated $75,084,683 and $194,899,580, respectively.

7. INVESTMENTS IN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO

The Fund invests in the Institutional Fiduciary Trust Money Market Portfolio (Sweep Money Fund), an open-end investment company managed by Advisers. Management fees paid by the Fund are reduced on assets invested in the Sweep Money Fund, in an amount not to exceed the management and administrative fees paid by the Sweep Money Fund.

8. CREDIT FACILITY

The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $1.5 billion (Global Credit Facility) which matures on January 18, 2013. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests.

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.08% based upon the unused portion of the Global Credit Facility, which is reflected in other expenses on the Statement of Operations. During the period ended June 30, 2012, the Fund did not use the Global Credit Facility.

FFC-21

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Flex Cap Growth Securities Fund

9. FAIR VALUE MEASUREMENTS

The Fund follows a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Fund’s own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund’s financial instruments and are summarized in the following fair value hierarchy:

•

Level 1 – quoted prices in active markets for identical financial instruments

•

Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)

•

Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of financial instruments)

The inputs or methodology used for valuing financial instruments are not an indication of the risk associated with investing in those financial instruments.

For movements between the levels within the fair value hierarchy, the Fund has adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.

At June 30, 2012, all of the Fund’s investments in securities carried at fair value were valued using Level 1 inputs. For detailed categories, see the accompanying Statement of Investments.

10. NEW ACCOUNTING PRONOUNCEMENTS

In December 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. The amendments in the ASU enhance disclosures about offsetting of financial assets and liabilities to enable investors to understand the effect of these arrangements on a fund’s financial position. The ASU is effective for interim and annual reporting periods beginning on or after January 1, 2013. The Fund believes the adoption of this ASU will not have a material impact on its financial statements.

11. SUBSEQUENT EVENTS

The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure, except the following:

Subsequent to June 30, 2012, shares held through one insurance company were redeemed, representing approximately 20% of the Fund’s outstanding shares as of June 30, 2012.


ABBREVIATIONS
Selected Portfolio

ADR - American Depositary Receipt

FFC-22

FRANKLIN GLOBAL REAL ESTATE SECURITIES FUND

This semiannual report for Franklin Global Real Estate Securities Fund covers the period ended June 30, 2012.

Performance Summary as of 6/30/12

Franklin Global Real Estate Securities Fund – Class 2 delivered a +14.20% total return for the six-month period ended 6/30/12.

Franklin Global Real Estate Securities Fund Class 2

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares.

Current performance may differ from figures shown.

FGR-1

Fund Goal and Main Investments: Franklin Global Real Estate Securities Fund seeks high total return. Under normal market conditions, the Fund invests at least 80% of its net assets in investments of companies located anywhere in the world that operate in the real estate sector.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. The Fund underperformed the +15.29% total return of its benchmark, the FTSE^® EPRA/NAREIT Developed Index.¹

Economic and Market Overview

The U.S. economy, as measured by gross domestic product, grew modestly during the six-month period ended June 30, 2012, as personal income and spending rose. The national unemployment rate for June 2012 stood at 8.2%, compared with 8.5% at the start of the period.²Job growth was more pronounced in the first quarter, and jobless claims touched a four-year low; however, hiring slowed in the second quarter. Industrial production and manufacturing activity expanded during most of the period under review, but the manufacturing sector shrank unexpectedly in June. In keeping with its goal to strengthen U.S. economic recovery by fostering increased employment while keeping inflation in check, during June the Federal Reserve Board (Fed) extended through 2012 its program (dubbed Operation Twist) to buy long-term Treasuries in an attempt to lower long-term yields. The Fed also reaffirmed its intention to keep the federal funds target rate low at least through late 2014.

Global growth trends generally moderated, led by Europe, which narrowly avoided recession mainly because of German export strength. Yet, even the more resilient economies of Germany and China showed signs of a slowdown at period-end. The combination of flagging growth, political uncertainty and populist unrest pressured investor confidence, and ratings agencies downgraded global banks and European sovereigns. Concerns about Italian and Spanish borrowing costs added to investor anxiety as bond yields climbed. Europe’s initial policy responses — including enhanced liquidity measures and an ineffective Spanish banking bailout — did little to address the structural imbalances of eurozone economies or the solvency fears plaguing the region’s banking system.

2. Bureau of Labor Statistics.

Fund Risks: All investments involve risks, including possible loss of principal. The Fund concentrates in real estate securities, which involve special risks, such as declines in the value of real estate and increased susceptibility to adverse economic or regulatory developments affecting the sector. The Fund’s investments in REITs involve additional risks; since REITs typically are invested in a limited number of projects or in a particular market segment, they are more susceptible to adverse developments affecting a single project or market segment than more broadly diversified investments. Foreign investing, especially in emerging markets, involves additional risks such as currency and market volatility, as well as political and social instability. Also, the Fund is a “nondiversified” fund, and investing in a nondiversified fund involves the risk of greater price fluctuation than a more diversified portfolio. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

FGR-2

Global developed stock markets, as measured by the MSCI World

Index, delivered the best annual start in more than a decade, as signs of U.S. economic recovery and European policy relief underpinned a rally in cyclical stocks.³ During late March and early April 2012, U.S. stocks, as measured by the Standard & Poor’s^® 500 Index, reached multi-year highs.³ However, stocks dropped sharply in late spring amid renewed global economic weakness and European debt concerns before additional policy action prompted a rebound in June. Politics largely drove the markets during the first half of 2012 as investors closely monitored developments in Europe, where German-led austerity demands were met with increasing resentment from some highly indebted eurozone members. Fears of a Greek debt default and exit from the eurozone were somewhat mitigated in February by secured bailout financing and bondholder concessions, as well as May and June elections that resulted in the formation of a new coalition government. The Fed’s Operation Twist purchases and risk-averse investors seeking safety drove U.S. Treasury yields to historical lows during the period. In the latter part of the period, the euro declined while the U.S. dollar and Japanese yen made gains.

including Greece, Italy and Spain. Although long-term resolution of European debt issues remained unclear, the European Central Bank’s plan to allow the European Stability Mechanism to directly recapitalize troubled banks throughout the eurozone, as well as a late-June proposal leaning toward fiscal and banking union, supported cautious optimism in U.S. and global markets.

Global Real Estate Market Overview

Most global real estate markets rose during the reporting period, as real estate securities in many countries benefited from a generally improved global economic sentiment early in the year. According to the FTSE EPRA/NAREIT Developed Index, in U.S. dollar terms, Singapore, Japan and Germany led country real estate markets. Australia, the U.K. and the U.S. also posted strong results. Some markets represented in the index lost value, however, such as Israel and Finland.

3. Please see Index Descriptions following the Fund Summaries.

LOGO

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Investment Strategy

We are research-driven, fundamental investors. We seek to limit price volatility by investing across markets and property types. We also seek strong total return performance. We center our active investment strategy on the belief that unsynchronized regional economic activity within the global economy can provide consistent, attractive return opportunities in the global real estate markets. We use a bottom-up, value-oriented stock selection process that incorporates macro-level views in the evaluation process. We use top-down macro overlays to provide country/regional, property type, and company size perspectives in identifying international/local cyclical and thematic trends that highlight investment opportunities.

Manager’s Discussion

During the six months under review, significant contributors to the Fund’s performance relative to the FTSE EPRA/NAREIT Developed Index included overweighted positions in several diversified property companies. Japan-based Mitsui Fudosan performed well, largely as a result of an improved local economy that benefited healthy condominium sales and slowing national land price declines that helped underpin the property sector. In Singapore, large-capitalization developers with higher exposure to Chinese property markets, such as Keppel Land, generally outperformed their peers. Real estate developers in China that primarily focus on housing, such as Sunac China Holdings,⁴ China Overseas Land & Investment and Evergrande Real Estate Group,⁴ also rose in value largely due to incremental credit easing and positive government announcements seeking to improve demand from first-time homebuyers. In Australia, our underweighted position in diversified REIT Stockland, whose stock underperformed the index, aided the Fund’s relative performance.

Several holdings that contributed to the Fund’s absolute results weighed on relative performance because their returns lagged the benchmark index’s. These positions included student housing property manager American Campus Communities (U.S.),⁵ logistics facilities investment company Japan Logistics Fund (Japan),^{4, 5}hotel and leisure property company Starwood Hotels & Resorts Worldwide (U.S.),⁴ and retail REITs Frontier Real Estate Investment (Japan)⁴ and Unibail-Rodamco (France). The Fund’s underweighting in diversified property company City Developments (Singapore)⁵ hampered relative results as

4. This holding is not an index component.

5. Sold by period-end.

Top 10 Holdings

Franklin Global Real Estate Securities Fund

6/30/12


Company Sector/Industry, Country	% of Total Net Assets
Simon Property Group Inc.		5.7%
Retail REITs, U.S.
Westfield Group		3.3%
Retail REITs, Australia
Mitsui Fudosan Co. Ltd.		3.1%
Diversified Real Estate Activities, Japan
Unibail-Rodamco SE		2.9%
Retail REITs, France
Mitsubishi Estate Co. Ltd.		2.9%
Diversified Real Estate Activities, Japan
Equity Residential		2.7%
Residential REITs, U.S.
Public Storage		2.4%
Specialized REITs, U.S.
Boston Properties Inc.		2.3%
Office REITs, U.S.
Health Care REIT Inc., ord & cvt. pfd.		2.2%
Specialized REITs, U.S.
Prologis Inc.		2.1%
Industrial REITs, U.S.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments.

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its stock outperformed the index. Other key detractors from relative performance included residential REIT Nippon Accommodations Fund (Japan), as well as new positions in commercial and residential property company Hongkong Land Holdings (Hong Kong) and diversified property companies CapitaLand (Singapore) and Sino Land (Hong Kong).

Thank you for your participation in Franklin Global Real Estate Securities Fund. We look forward to serving your future investment needs.

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Fund Expenses

•

Transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes.

•

Actual Fund Expenses

You can estimate the Fund-level expenses you incurred during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:

1.	Divide your account value by $1,000.

If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6.

2.	Multiply the result by the number under the heading “Fund-Level Expenses Incurred During Period.”

If Fund-Level Expenses Incurred During Period were $7.50, then 8.6 x $7.50 = $64.50.

In this illustration, the estimated expenses incurred this period at the Fund level are $64.50.

Franklin Global Real Estate Securities Fund Class 2

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Hypothetical Example for Comparison with Other Mutual Funds


Class 2	Beginning Account Value 1/1/12		Ending Account Value 6/30/12		Fund-Level Expenses Incurred During Period* 1/1/12–6/30/12
Actual	$	1,000	$	1,142.00	$	6.92
Hypothetical (5% return before expenses)	$	1,000	$	1,018.40	$	6.52

*Expenses are calculated using the most recent six-month annualized expense ratio, net of expense waivers, for the Fund’s Class 2 shares (1.30%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 182/366 to reflect the one-half year period.

FGR-7

SUPPLEMENT DATED MAY 21, 2012

TO THE STATEMENT OF ADDITIONAL INFORMATION

DATED MAY 1, 2012

FRANKLIN GLOBAL REAL ESTATE SECURITIES FUND

(FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST)

The Statement of Additional Information is amended as follows:

The section beginning on page 4 entitled “The Funds – Goals, Additional Strategies and Risks – Franklin Global Real Estate Securities Fund (Global Real Estate Fund)” is revised to add the following bullet point:

The Fund also may:

•

purchase securities of other investment companies, including exchange-traded funds (ETFs).

Please keep this supplement for future reference.

FGR-8

Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Franklin Global Real Estate Securities Fund


	Six Months Ended June 30, 2012 (unaudited)		Year Ended December 31,
Class 1	Six Months Ended June 30, 2012 (unaudited)		2011			2010			2009			2008			2007

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	11.47	$	13.12		$	11.16		$	10.84		$	25.42		$	35.25

Income from investment operations^a:
Net investment income^b		0.13		0.21			0.38			0.30			0.62			0.80
Net realized and unrealized gains (losses)		1.51		(0.83	)		1.94			1.36			(9.10	)		(7.56	)

Total from investment operations		1.64		(0.62	)		2.32			1.66			(8.48	)		(6.76	)

Less distributions from:
Net investment income and net realized foreign currency gains		—		(1.03	)		(0.36	)		(1.34	)		(0.32	)		(0.81	)
Net realized gains		—		—			—			—			(5.78	)		(2.26	)

Total distributions		—		(1.03	)		(0.36	)		(1.34	)		(6.10	)		(3.07	)

Net asset value, end of period	$	13.11	$	11.47		$	13.12		$	11.16		$	10.84		$	25.42


Total return^c		14.30%		(5.45)%			21.24%			19.41%			(42.22)%			(20.65)%
Ratios to average net assets^d
Expenses before waiver and payments by affiliates		1.12%		1.12%			1.11%			1.11%			1.08%			0.84%
Expenses net of waiver and payments by affiliates		1.05%		0.98%			0.86%			0.76%	^e		0.60%	^e		0.52%	^e
Net investment income		2.10%		1.64%			3.24%			3.13%			3.41%			2.57%

Supplemental data
Net assets, end of period (000’s)	$	36,337	$	33,670		$	40,430		$	38,486		$	39,018		$	83,250
Portfolio turnover rate		14.48%		28.95%			76.52%			87.34%			77.28%			121.84%

^bBased on average daily shares outstanding.

^cTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which the Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle. Total return is not annualized for periods less than one year.

^dRatios are annualized for periods less than one year.

^eBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

FGR-9

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin Global Real Estate Securities Fund


	Six Months Ended June 30, 2012 (unaudited)		Year Ended December 31,
Class 2	Six Months Ended June 30, 2012 (unaudited)		2011			2010			2009			2008			2007

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	11.20	$	12.83		$	10.92		$	10.61		$	24.97		$	34.67

Income from investment operations^a:
Net investment income^b		0.11		0.17			0.34			0.27			0.56			0.72
Net realized and unrealized gains (losses)		1.48		(0.81	)		1.90			1.33			(8.93	)		(7.43	)

Total from investment operations		1.59		(0.64	)		2.24			1.60			(8.37	)		(6.71	)

Less distributions from:
Net investment income and net realized foreign currency gains		—		(0.99	)		(0.33	)		(1.29	)		(0.21	)		(0.73	)
Net realized gains		—		—			—			—			(5.78	)		(2.26	)

Total distributions		—		(0.99	)		(0.33	)		(1.29	)		(5.99	)		(2.99	)

Net asset value, end of period	$	12.79	$	11.20		$	12.83		$	10.92		$	10.61		$	24.97


Total return^c		14.20%		(5.65)%			20.97%			19.08%			(42.39)%			(20.86)%
Ratios to average net assets^d
Expenses before waiver and payments by affiliates		1.37%		1.37%			1.36%			1.36%			1.33%			1.09%
Expenses net of waiver and payments by affiliates		1.30%		1.23%			1.11%			1.01%	^e		0.85%	^e		0.77%	^e
Net investment income		1.85%		1.39%			2.99%			2.88%			3.16%			2.32%

Supplemental data
Net assets, end of period (000’s)	$	320,808	$	292,356		$	352,854		$	345,445		$	343,701		$	893,837
Portfolio turnover rate		14.48%		28.95%			76.52%			87.34%			77.28%			121.84%

^bBased on average daily shares outstanding.

^dRatios are annualized for periods less than one year.

^eBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

FGR-10

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited)


Franklin Global Real Estate Securities Fund	Country	Shares/ Units		Value
Common Stocks and Other Equity Interests 96.8%
Diversified Real Estate Activities 11.3%
CapitaLand Ltd.	Singapore		720,500	$	1,535,399
Hang Lung Properties Ltd.	Hong Kong		1,593,000		5,379,745
Mitsubishi Estate Co. Ltd.	Japan		583,600		10,345,603
Mitsui Fudosan Co. Ltd.	Japan		582,000		11,132,141
Sun Hung Kai Properties Ltd.	Hong Kong		609,000		7,151,223
The Wharf Holdings Ltd.	Hong Kong		865,500		4,752,491

					40,296,602

Diversified REITs 9.8%
American Assets Trust Inc.	United States		80,200		1,944,850
British Land Co. PLC	United Kingdom		478,400		3,820,746
Canadian REIT	Canada		67,100		2,679,913
Dexus Property Group	Australia		2,045,809		1,947,599
GPT Group	Australia		1,200,365		4,042,599
H&R REIT	Canada		153,300		3,689,259
Kenedix Realty Investment Corp.	Japan		568		1,827,058
Land Securities Group PLC	United Kingdom		512,062		5,922,782
Liberty Property Trust	United States		34,200		1,259,928
Shaftesbury PLC	United Kingdom		171,000		1,377,749
Stockland	Australia		417,125		1,315,129
United Urban Investment Corp.	Japan		1,390		1,492,699
Vornado Realty Trust	United States		43,227		3,630,203

					34,950,514

Homebuilding 0.4%
SPDR S&P Homebuilders ETF	United States		69,800		1,490,230

Industrial REITs 4.1%
Ascendas REIT	Singapore		816,000		1,384,688
Goodman Group	Australia		901,124		3,385,339
Mapletree Logistics Trust	Singapore		1,268,280		980,990
^aMapletree Logistics Trust, 144A	Singapore		960,100		742,619
Prologis Inc.	United States		221,572		7,362,837
STAG Industrial Inc.	United States		61,200		892,296

					14,748,769

Office REITs 10.4%
Alexandria Real Estate Equities Inc.	United States		21,900		1,592,568
Boston Properties Inc.	United States		75,700		8,203,609
Brandywine Realty Trust	United States		224,300		2,767,862
Commonwealth Property Office Fund	Australia		1,871,411		1,944,405
Coresite Realty Corp.	United States		28,500		735,870
Derwent London PLC	United Kingdom		45,860		1,331,043
Digital Realty Trust Inc.	United States		27,300		2,049,411
Douglas Emmett Inc.	United States		92,700		2,141,370
Great Portland Estates PLC	United Kingdom		471,436		2,912,388
Highwoods Properties Inc.	United States		80,400		2,705,460
Japan Real Estate Investment Corp.	Japan		296		2,705,038
Kilroy Realty Corp.	United States		87,100		4,216,511
SL Green Realty Corp.	United States		45,800		3,674,992

					36,980,527

FGR-11

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Global Real Estate Securities Fund	Country	Shares/ Units		Value
Common Stocks and Other Equity Interests (continued)
Real Estate Development 3.4%
Agile Property Holdings Ltd.	China		1,306,000	$	1,678,352
China Overseas Land & Investment Ltd.	China		908,000		2,104,361
Evergrande Real Estate Group Ltd.	China		3,141,000		1,591,128
Keppel Land Ltd.	Singapore		927,000		2,355,911
Sino Land Co. Ltd.	Hong Kong		2,248,000		3,361,235
Sunac China Holdings Ltd.	China		2,365,000		987,690

					12,078,677

Real Estate Operating Companies 6.3%
Brookfield Office Properties Inc.	Canada		188,600		3,301,264
Deutsche Euroshop AG	Germany		22,340		790,669
^bGlobal Logistic Properties Ltd.	Singapore		55,000		90,726
^a,bGlobal Logistic Properties Ltd., 144A	Singapore		1,817,000		2,997,261
GSW Immobilien AG	Germany		33,636		1,148,531
^aGSW Immobilien AG, 144A	Germany		39,739		1,356,923
Hongkong Land Holdings Ltd.	Hong Kong		458,100		2,615,751
Hufvudstaden AB, A	Sweden		294,290		3,148,147
Hysan Development Co. Ltd.	Hong Kong		906,000		3,421,688
PSP Swiss Property AG	Switzerland		26,970		2,377,282
Sponda OYJ	Finland		323,530		1,207,906

					22,456,148

Residential REITs 10.0%
Apartment Investment & Management Co., A	United States		109,700		2,965,191
AvalonBay Communities Inc.	United States		24,790		3,507,289
Boardwalk REIT	Canada		45,900		2,642,502
Camden Property Trust	United States		58,600		3,965,462
Canadian Apartment Properties REIT	Canada		74,000		1,728,520
Colonial Properties Trust	United States		116,000		2,568,240
Equity Lifestyle Properties Inc.	United States		29,000		2,000,130
Equity Residential	United States		152,900		9,534,844
Essex Property Trust Inc.	United States		22,580		3,475,514
Nippon Accommodations Fund Inc.	Japan		225		1,454,244
UDR Inc.	United States		76,670		1,981,153

					35,823,089

Retail REITs 28.2%
CBL & Associates Properties Inc.	United States		99,500		1,944,230
Centro Retail Australia	Australia		1,234,380		2,501,875
Charter Hall Retail REIT	Australia		448,204		1,518,641
Corio NV	Netherlands		26,614		1,166,431
DDR Corp.	United States		301,076		4,407,753
Eurocommercial Properties NV	Netherlands		49,550		1,708,860
Federal Realty Investment Trust	United States		42,400		4,413,416
Frontier Real Estate Investment Corp.	Japan		183		1,464,183
General Growth Properties Inc.	United States		79,900		1,445,391
Hammerson PLC	United Kingdom		548,060		3,804,351
Japan Retail Fund Investment Corp.	Japan		1,246		1,970,484
^aJapan Retail Fund Investment Corp., 144A	Japan		316		499,737
Kimco Realty Corp.	United States		186,400		3,547,192
Klepierre	France		81,300		2,664,936
The Link REIT	Hong Kong		1,295,600		5,277,189
The Macerich Co.	United States		84,090		4,965,514

FGR-12

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Global Real Estate Securities Fund	Country	Shares/ Units		Value
Common Stocks and Other Equity Interests (continued)
Retail REITs (continued)
Regency Centers Corp.	United States		19,100	$	908,587
RioCan REIT	Canada		141,200		3,841,894
Simon Property Group Inc.	United States		129,744		20,195,951
Suntec REIT	Singapore		1,780,000		1,896,606
Tanger Factory Outlet Centers Inc.	United States		79,500		2,547,975
Taubman Centers Inc.	United States		59,200		4,567,872
Unibail-Rodamco SE	France		56,503		10,376,129
Westfield Group	Australia		1,196,914		11,639,600
Westfield Retail Trust	Australia		530,576		1,547,904

					100,822,701

Specialized REITs 12.9%
CDL Hospitality Trusts	Singapore		1,430,000		2,200,868
CubeSmart	United States		45,100		526,317
Extra Space Storage Inc.	United States		65,000		1,989,000
HCP Inc.	United States		137,400		6,066,210
Health Care REIT Inc.	United States		118,300		6,896,890
Host Hotels & Resorts Inc.	United States		239,139		3,783,179
LaSalle Hotel Properties	United States		73,700		2,147,619
Pebblebrook Hotel Trust	United States		115,530		2,693,005
Public Storage	United States		58,900		8,505,749
Senior Housing Properties Trust	United States		40,300		899,496
Starwood Hotels & Resorts Worldwide Inc.	United States		53,730		2,849,839
^bSunstone Hotel Investors Inc.	United States		134,500		1,478,155
Ventas Inc.	United States		95,050		5,999,556

					46,035,883

Total Common Stocks and Other Equity Interests (Cost $250,447,620)					345,683,140

Convertible Preferred Stocks (Cost $885,000) 0.3%
Specialized REITs 0.3%
Health Care REIT Inc., 6.50%, cvt. pfd.	United States		17,700		955,800

Total Investments before Short Term Investments (Cost $251,332,620)					346,638,940

FGR-13

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Global Real Estate Securities Fund	Country	Principal Amount		Value
Short Term Investments (Cost $10,036,168) 2.8%
Repurchase Agreements 2.8%
^cJoint Repurchase Agreement, 0.129%, 7/02/12 (Maturity Value $10,036,276)	United States	$	10,036,168		10,036,168
BNP Paribas Securities Corp. (Maturity Value $1,960,587)
Credit Suisse Securities (USA) LLC (Maturity Value $2,287,368)
Deutsche Bank Securities Inc. (Maturity Value $1,540,368)
HSBC Securities (USA) Inc. (Maturity Value $1,307,024)
Merrill Lynch, Pierce, Fenner & Smith Inc. (Maturity Value $1,307,024)
Morgan Stanley & Co. LLC (Maturity Value $653,562)
UBS Securities LLC (Maturity Value $980,343)
Collateralized by U.S. Government Agency Securities, 0.00% - 5.25%, 8/01/12 - 6/28/17; ^dU.S. Treasury Bills, 7/26/12; and U.S. Treasury Notes, 1.125% - 3.00%, 12/15/12 - 2/15/22 (valued at $10,240,665)

Total Investments (Cost $261,368,788) 99.9%				$	356,675,108
Other Assets, less Liabilities 0.1%					470,410

Net Assets 100.0%				$	357,145,518

See Abbreviations on page FGR-24.

^aSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At June 30, 2012, the aggregate value of these securities was $5,596,540, representing 1.57% of net assets.

^bNon-income producing.

^cSee Note 1(c) regarding joint repurchase agreement.

^dThe security is traded on a discount basis with no stated coupon rate.

The accompanying notes are an integral part of these financial statements.

FGR-14

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

June 30, 2012 (unaudited)


	Franklin Global Real Estate Securities Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	251,332,620
Cost - Repurchase agreements		10,036,168

Total cost of investments	$	261,368,788

Value - Unaffiliated issuers	$	346,638,940
Value - Repurchase agreements		10,036,168

Total value of investments		356,675,108
Foreign currency, at value (cost $7,031)		7,102
Receivables:
Capital shares sold		114,847
Dividends		1,287,897
Other assets		83

Total assets		358,085,037

Liabilities:
Payables:
Capital shares redeemed		409,615
Affiliates		425,280
Accrued expenses and other liabilities		104,624

Total liabilities		939,519

Net assets, at value	$	357,145,518

Net assets consist of:
Paid-in capital	$	629,112,215
Distributions in excess of net investment income		(5,038,350	)
Net unrealized appreciation (depreciation)		95,312,727
Accumulated net realized gain (loss)		(362,241,074	)

Net assets, at value	$	357,145,518

Class 1:
Net assets, at value	$	36,337,143

Shares outstanding		2,771,612

Net asset value and maximum offering price per share	$	13.11

Class 2:
Net assets, at value	$	320,808,375

Shares outstanding		25,090,557

Net asset value and maximum offering price per share	$	12.79

The accompanying notes are an integral part of these financial statements.

FGR-15

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the six months ended June 30, 2012 (unaudited)


	Franklin Global Real Estate Securities Fund
Investment income:
Dividends (net of foreign taxes of $330,751)	$	5,486,977
Interest		4,412

Total investment income		5,491,389

Expenses:
Management fees (Note 3a)		1,393,153
Administrative fees (Note 3b)		435,360
Distribution fees - Class 2 (Note 3c)		391,208
Unaffiliated transfer agent fees		353
Custodian fees (Note 4)		29,138
Reports to shareholders		61,235
Professional fees		19,745
Trustees’ fees and expenses		733
Other		11,103

Total expenses		2,342,028
Expenses waived/paid by affiliates (Note 3e)		(123,025	)

Net expenses		2,219,003

Net investment income		3,272,386

Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		8,625,276
Realized gain distributions from REITs		740,853
Foreign currency transactions		33,599

Net realized gain (loss)		9,399,728

Net change in unrealized appreciation (depreciation) on:
Investments		32,777,816
Translation of other assets and liabilities denominated in foreign currencies		8,829

Net change in unrealized appreciation (depreciation)		32,786,645

Net realized and unrealized gain (loss)		42,186,373

Net increase (decrease) in net assets resulting from operations	$	45,458,759

The accompanying notes are an integral part of these financial statements.

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Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets


	Franklin Global Real Estate Securities Fund
	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31, 2011

Increase (decrease) in net assets:
Operations:
Net investment income	$	3,272,386		$	5,230,839
Net realized gain (loss) from investments, realized gain distributions from REITs and foreign currency transactions		9,399,728			18,398,566
Net change in unrealized appreciation (depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies		32,786,645			(42,827,542	)

Net increase (decrease) in net assets resulting from operations		45,458,759			(19,198,137	)

Distributions to shareholders from net investment income and net foreign currency gains:
Class 1		—			(2,965,988	)
Class 2		—			(25,849,452	)

Total distributions to shareholders		—			(28,815,440	)

Capital share transactions: (Note 2)
Class 1		(2,048,393	)		(1,885,405	)
Class 2		(12,291,717	)		(17,357,651	)
Class 4		—			(2,896	)

Total capital share transactions		(14,340,110	)		(19,245,952	)

Net increase (decrease) in net assets		31,118,649			(67,259,529	)
Net assets:
Beginning of period		326,026,869			393,286,398

End of period	$	357,145,518		$	326,026,869

Distributions in excess of net investment income included in net assets:
End of period	$	(5,038,350	)	$	(8,310,736	)

The accompanying notes are an integral part of these financial statements.

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited)

Franklin Global Real Estate Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment company, consisting of twenty separate funds. The Franklin Global Real Estate Securities Fund (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. At June 30, 2012, 58.81% of the Fund’s shares were held through one insurance company. The Fund offers two classes of shares: Class 1 and Class 2. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

Equity securities and exchange traded funds listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded, or the NYSE, whichever is earlier. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at the close of the NYSE on the day that the value of the security is determined. Over-the-counter (OTC) securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities. Repurchase agreements are valued at cost, which approximates market value.

Trading in securities on foreign securities stock exchanges and OTC markets may be completed before the daily close of business on the NYSE. Occasionally, events occur between the time at which trading in a foreign security is completed and the close of the NYSE that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund’s portfolio securities as determined at the foreign market close and the latest indications of value at the close of the NYSE. In order to minimize the potential for these differences, the VLOC monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depositary Receipts, futures contracts and exchange traded funds). These price movements are measured against

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Global Real Estate Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

a. Financial Instrument Valuation (continued)

established trigger thresholds for each specific market proxy to assist in determining if an event has occurred that may call into question the reliability of the values of the foreign securities held by the Fund. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services.

b. Foreign Currency Translation

Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Fund may enter into foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. Portfolio securities and assets and liabilities denominated in foreign currencies contain risks that those currencies will decline in value relative to the U.S. dollar. Occasionally, events may impact the availability or reliability of foreign exchange rates used to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Board.

The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments on the Statement of Operations.

Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period.

c. Joint Repurchase Agreement

The Fund enters into a joint repurchase agreement whereby its uninvested cash balance is deposited into a joint cash account with other funds managed by the investment manager or an affiliate of the investment manager and is used to invest in one or more repurchase agreements. The value and face amount of the joint repurchase agreement are allocated to the funds based on their pro-rata interest. A repurchase agreement is accounted for as a loan by the fund to the seller, collateralized by securities which are delivered to the fund’s custodian. The market value, including accrued interest, of the initial collateralization is required to be at least 102% of the dollar amount invested by the funds, with the value of the underlying securities marked to market daily to maintain coverage of at least 100%. The joint repurchase agreement held by the Fund at period end had been entered into on June 29, 2012.

d. Income and Deferred Taxes

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Global Real Estate Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

d. Income and Deferred Taxes (continued)

e. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Dividend income is recorded on the ex-dividend date except that certain dividends from foreign securities are recognized as soon as the Fund is notified of the ex-dividend date. Distributions to shareholders are recorded on the ex-dividend date and are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with accounting principles generally accepted in the United States of America. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.

Distributions received by the Fund from certain securities may be a return of capital (ROC). Such distributions reduce the cost basis of the securities, and any distributions in excess of the cost basis are recognized as capital gains.

f. Accounting Estimates

g. Guarantees and Indemnifications

FGR-20

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Global Real Estate Securities Fund

2. SHARES OF BENEFICIAL INTEREST

At June 30, 2012, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:


	Six Months Ended June 30, 2012						Year Ended December 31, 2011^a
Class 1 Shares:	Shares			Amount			Shares			Amount
Shares sold		10,934		$	138,694			55,042		$	671,863
Shares issued in reinvestment of distributions		—			—			235,958			2,965,988
Shares redeemed		(174,293	)		(2,187,087	)		(438,527	)		(5,523,256	)

Net increase (decrease)		(163,359	)	$	(2,048,393	)		(147,527	)	$	(1,885,405	)

Class 2 Shares:
Shares sold		839,821		$	10,290,899			620,268		$	7,524,987
Shares issued in reinvestment of distributions		—			—			2,103,291			25,849,452
Shares redeemed		(1,847,374	)		(22,582,616	)		(4,127,293	)		(50,732,090	)

Net increase (decrease)		(1,007,553	)	$	(12,291,717	)		(1,403,734	)	$	(17,357,651	)

Class 4 Shares:
Shares redeemed								(214	)		(2,896	)

Net increase (decrease)								(214	)	$	(2,896	)

^aEffective

March 4, 2011, Class 4 was liquidated.

3. TRANSACTIONS WITH AFFILIATES


Subsidiary		Affiliation
Franklin Templeton Institutional, LLC (FT Institutional)		Investment manager
Franklin Templeton Services, LLC (FT Services)		Administrative manager
Franklin Templeton Distributors, Inc. (Distributors)		Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services)		Transfer agent

a. Management Fees

The Fund pays an investment management fee to FT Institutional based on the average daily net assets of the Fund as follows:


Annualized Fee Rate		Net Assets
0.800%		Up to and including $500 million
0.700%		Over $500 million, up to and including $1 billion
0.650%		Over $1 billion, up to and including $1.5 billion
0.600%		Over $1.5 billion, up to and including $6.5 billion
0.580%		Over $6.5 billion, up to and including $11.5 billion
0.560%		Over $11.5 billion, up to and including $16.5 billion
0.540%		Over $16.5 billion, up to and including $19 billion
0.530%		Over $19 billion, up to and including $21.5 billion
0.520%		In excess of $21.5 billion

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Global Real Estate Securities Fund

3. TRANSACTIONS WITH AFFILIATES (continued)

b. Administrative Fees

The Fund pays an administrative fee to FT Services of 0.25% per year of the average daily net assets of the Fund.

c. Distribution Fees

The Board adopted a distribution plan for Class 2 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s compensation distribution plan, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to 0.35% per year of its average daily net assets. The Board has agreed to limit the current rate to 0.25% per year for Class 2.

d. Transfer Agent Fees

Investor Services, under terms of an agreement, performs shareholder servicing for the Fund and is not paid by the Fund for the services.

e. Waiver and Expense Reimbursements

FT Services and FT Institutional have contractually agreed in advance to waive or limit their respective fees so that the increase in the Fund’s investment management and fund administration fees that became effective May 1, 2007 is phased in over a five year period, with there being no increase in the rate of such fees for the first year ending April 30, 2008. For each of the four years thereafter through April 30, 2012, the manager and administrator will receive one-fifth of the increase in the rate of fees. Beginning May 1, 2012, the full new investment management and administrative fees were in effect.

4. EXPENSE OFFSET ARRANGEMENT

5. INCOME TAXES

At December 31, 2011, capital loss carryforwards were as follows:


Capital loss carryforwards expiring in:
2016	$	146,729,161
2017		207,448,609
2018		2,192,369

	$	356,370,139

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Global Real Estate Securities Fund

5. INCOME TAXES (continued)

At June 30, 2012, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:


Cost of investments	$	283,609,160


Unrealized appreciation	$	92,745,747
Unrealized depreciation		(19,679,799	)

Net unrealized appreciation (depreciation)	$	73,065,948

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of passive foreign investment company shares and wash sales.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2012, aggregated $49,617,785 and $61,707,355, respectively.

7. CONCENTRATION OF RISK

Investing in foreign securities may include certain risks and considerations not typically associated with investing in U.S. securities, such as fluctuating currency values and changing local and regional economic, political and social conditions, which may result in greater market volatility. In addition, certain foreign securities may not be as liquid as U.S. securities.

8. CREDIT FACILITY

9. FAIR VALUE MEASUREMENTS

•

Level 1 – quoted prices in active markets for identical financial instruments

•

Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)

•

Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of financial instruments)

FGR-23

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Global Real Estate Securities Fund

9. FAIR VALUE MEASUREMENTS (continued)

The inputs or methodology used for valuing financial instruments are not an indication of the risk associated with investing in those financial instruments.

For movements between the levels within the fair value hierarchy, the Fund has adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.

A summary of inputs used as of June 30, 2012, in valuing the Fund’s assets carried at fair value, is as follows:


	Level 1		Level 2		Level 3		Total

Assets:
Investments in Securities:
Equity Investments^a,b	$	346,638,940	$	—	$	—	$	346,638,940
Short Term Investments		—		10,036,168		—		10,036,168

Total Investments in Securities	$	346,638,940	$	10,036,168	$	—	$	356,675,108

^aIncludes common and convertible preferred stocks.

^bFor detailed categories, see the accompanying Statement of Investments.

10. NEW ACCOUNTING PRONOUNCEMENTS

11. SUBSEQUENT EVENTS

The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure.


ABBREVIATIONS
Selected Portfolio

ETF - Exchange Traded Fund
REIT - Real Estate Investment Trust
SPDR - S&P Depositary Receipt

FGR-24

FRANKLIN GROWTH AND INCOME SECURITIES FUND

This semiannual report for Franklin Growth and Income Securities Fund covers the period ended June 30, 2012.

Performance Summary as of 6/30/12

Franklin Growth and Income Securities Fund – Class 2 delivered a +5.66% total return for the six-month period ended 6/30/12.

Franklin Growth and Income Securities Fund Class 2

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares.

Current performance may differ from figures shown.

FGI-1

Fund Goals and Main Investments: Franklin Growth and Income Securities Fund seeks capital appreciation with current income as a secondary goal. Under normal market conditions, the Fund invests predominantly in equity securities, including securities convertible into common stock.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. The Fund underperformed its benchmark, the Standard & Poor’s^® 500 Index (S&P 500^®), which produced a +9.49% total return.¹ The Fund also underperformed its peers as measured by the Lipper VIP Equity Income Funds Classification Average, which posted a +7.33% return for the same period.²

Economic and Market Overview

The U.S. economy, as measured by gross domestic product, grew modestly during the six-month period ended June 30, 2012. In the first quarter, personal income and spending rose, while federal, state and local government spending declined. The national unemployment rate for June 2012 stood at 8.2%, compared with 8.5% at the start of the period.³Jobless claims touched a four-year low in February amid robust job creation; however, hiring slowed during the remainder of the period and jobless claims at period-end reached January’s level. Industrial production and manufacturing activity continued to increase, but the manufacturing sector shrank unexpectedly in June. Although gasoline prices hit a peak in early April, they plunged to a five-month low near period-end due to lower crude oil prices. In keeping with its goal to strengthen U.S. economic recovery by fostering increased employment while keeping inflation in check, during June the Federal Reserve Board (Fed) extended through 2012 its program (dubbed Operation Twist) to buy long-term Treasuries in an attempt to lower long-term yields. The Fed also reaffirmed its intention to keep the federal funds target rate low at least through late 2014.

During late March and early April 2012, improved economic reports helped U.S. stock markets reach multi-year highs. The Dow Jones Industrial Average exceeded 13,000 and the S&P 500 topped 1,400 for the first time since 2008, while the NASDAQ Composite Index hit an 11-year high.⁴ Global markets grew volatile, however, amid renewed

2. Source: Lipper Inc.

One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

3. Source: Bureau of Labor Statistics.

4. Please see Index Descriptions following the Fund Summaries.

FGI-2

concerns about eurozone debt and slowing global economic growth. Fears of a Greek debt default and exit from the eurozone were somewhat mitigated by secured bailout financing and bondholder concessions in February, as well as elections in May and June that resulted in the formation of a new coalition government. Risk-averse investors seeking safety drove U.S. Treasury yields to historical lows during the period.

Investment Strategy

We seek to invest in a broadly diversified portfolio of equity securities that we consider to be financially strong, with a focus on “blue chip” companies. We apply a bottom-up approach to investing in individual securities. We will assess the market price of a company’s securities relative to our evaluation of the company’s long-term earnings, asset value and cash flow potential. We also consider a company’s price/earnings ratio, profit margins, balance sheet and liquidation value. We consider dividend yield in selecting stocks for the Fund because we believe that, over time, dividend income can contribute significantly to total return and can be a more consistent source of investment return than capital appreciation. We seek to take advantage of price dislocations that result from the market’s short-term focus and choose to invest in those companies that, in our opinion, offer the best trade-off between growth opportunity, business and financial risk, and valuation.

Manager’s Discussion

The Fund’s absolute performance during the first six months of 2012 was aided primarily by its investments in the financials, industrials and consumer discretionary sectors. Within the financials sector, diversified financial services provider Well Fargo & Co. was a standout performer, driven in part by a surge in mortgage banking. Investment firm T. Rowe

LOGO

FGI-3

Price Group was another notable contributor. Among industrials stocks, trucking and transportation company J.B. Hunt Transport Services performed well, as did our holdings in multinational conglomerates General Electric and 3M. The Fund’s consumer discretionary holdings, including cable television, Internet and phone service provider Comcast; discount retailer Target; and home-improvement chain Lowe’s also boosted results.

The only sector held in the Fund that detracted from absolute performance during the period was the energy sector. Our energy-related equity linked securities issued by JPMorgan Chase and Credit Suisse as well as our holdings in major oil producers Chesapeake Energy and Royal Dutch Shell declined in value as oil prices became volatile. Other individual holdings that detracted from performance included network equipment maker Cisco Systems in information technology and sports apparel maker NIKE in consumer discretionary.

Thank you for your participation in Franklin Growth and Income Securities Fund. We look forward to serving your future investment needs.

Top 10 Holdings

Franklin Growth and Income Securities Fund

6/30/12


Company *Sector/Industry*	% of Total Net Assets
Intel Corp.		2.3%
Information Technology
General Electric Co.		2.3%
Industrials
Merck & Co. Inc.		2.1%
Health Care
JPMorgan Chase & Co.		2.1%
Financials
Sempra Energy		2.0%
Utilities
International Business Machines Corp.		2.0%
Information Technology
NIKE Inc., B		2.0%
Consumer Discretionary
Bank of America Corp.		1.9%
Financials
E. I. du Pont de Nemours and Co.		1.9%
Materials
Target Corp.		1.9%
Consumer Discretionary

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments.

FGI-4

Fund Expenses

•

Transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes.

•

Actual Fund Expenses

You can estimate the Fund-level expenses you incurred during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:

1.	Divide your account value by $1,000.

If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6.

2.	Multiply the result by the number under the heading “Fund-Level Expenses Incurred During Period.”

If Fund-Level Expenses Incurred During Period were $7.50, then 8.6 x $7.50 = $64.50.

In this illustration, the estimated expenses incurred this period at the Fund level are $64.50.

Franklin Growth and Income Securities Fund Class 2

FGI-5

Hypothetical Example for Comparison with Other Mutual Funds


Class 2	Beginning Account Value 1/1/12		Ending Account Value 6/30/12		Fund-Level Expenses Incurred During Period* 1/1/12–6/30/12
Actual	$	1,000	$	1,056.60	$	4.30
Hypothetical (5% return before expenses)	$	1,000	$	1,020.69	$	4.22

*Expenses are calculated using the most recent six-month annualized expense ratio for the Fund’s Class 2 shares (0.84%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 182/366 to reflect the one-half year period.

FGI-6

Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Franklin Growth and Income Securities Fund


	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31,
Class 1	Six Months Ended June 30, 2012 (unaudited)			2011			2010			2009			2008			2007

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	11.60		$	11.76		$	10.47		$	8.72		$	15.07		$	16.83

Income from investment operations^a:
Net investment income^b		0.16			0.33			0.38			0.31			0.39			0.41
Net realized and unrealized gains (losses)		0.52			(0.03	)		1.32			1.92			(5.17	)		(0.82	)

Total from investment operations		0.68			0.30			1.70			2.23			(4.78	)		(0.41	)

Less distributions from:
Net investment income		(0.39	)		(0.46	)		(0.41	)		(0.48	)		(0.45	)		(0.42	)
Net realized gains		—			—			—			—			(1.12	)		(0.93	)

Total distributions		(0.39	)		(0.46	)		(0.41	)		(0.48	)		(1.57	)		(1.35	)

Net asset value, end of period	$	11.89		$	11.60		$	11.76		$	10.47		$	8.72		$	15.07


Total return^c		5.86%			2.64%			16.93%			26.82%			(34.95)%			(3.46)%
Ratios to average net assets^d
Expenses		0.59%			0.59%			0.59%			0.60%	^e		0.55%	^e		0.52%	^e
Net investment income		2.63%			2.80%			3.62%			3.46%			3.17%			2.47%

Supplemental data
Net assets, end of period (000’s)	$	156,506		$	156,830		$	176,590		$	174,403		$	162,936		$	306,691
Portfolio turnover rate		14.93%			32.93%			26.83%			51.05%			30.66%			36.66%

^bBased on average daily shares outstanding.

^dRatios are annualized for periods less than one year.

^eBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

FGI-7

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin Growth and Income Securities Fund


	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31,
Class 2	Six Months Ended June 30, 2012 (unaudited)			2011			2010			2009			2008			2007

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	11.44		$	11.60		$	10.33		$	8.59		$	14.86		$	16.62

Income from investment operations^a:
Net investment income^b		0.14			0.29			0.35			0.28			0.35			0.37
Net realized and unrealized gains (losses)		0.50			(0.02	)		1.31			1.90			(5.10	)		(0.82	)

Total from investment operations		0.64			0.27			1.66			2.18			(4.75	)		(0.45	)

Less distributions from:
Net investment income		(0.35	)		(0.43	)		(0.39	)		(0.44	)		(0.40	)		(0.38	)
Net realized gains		—			—			—			—			(1.12	)		(0.93	)

Total distributions		(0.35	)		(0.43	)		(0.39	)		(0.44	)		(1.52	)		(1.31	)

Net asset value, end of period	$	11.73		$	11.44		$	11.60		$	10.33		$	8.59		$	14.86


Total return^c		5.66%			2.41%			16.68%			26.55%			(35.14)%			(3.71)%
Ratios to average net assets^d
Expenses		0.84%			0.84%			0.84%			0.85%	^e		0.80%	^e		0.77%	^e
Net investment income		2.38%			2.55%			3.37%			3.21%			2.92%			2.22%

Supplemental data
Net assets, end of period (000’s)	$	130,256		$	129,309		$	151,481		$	152,077		$	141,359		$	312,692
Portfolio turnover rate		14.93%			32.93%			26.83%			51.05%			30.66%			36.66%

^bBased on average daily shares outstanding.

^dRatios are annualized for periods less than one year.

^eBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

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Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited)


Franklin Growth and Income Securities Fund	Country	Shares		Value
Common Stocks 90.1%
Consumer Discretionary 9.4%
Comcast Corp., A	United States		123,380	$	3,944,458
Limited Brands Inc.	United States		98,300		4,180,699
Lowe’s Cos. Inc.	United States		123,700		3,518,028
McDonald’s Corp.	United States		46,400		4,107,792
NIKE Inc., B	United States		63,900		5,609,142
Target Corp.	United States		95,000		5,528,050

					26,888,169

Consumer Staples 8.4%
The Coca-Cola Co.	United States		43,800		3,424,722
Diageo PLC, ADR	United Kingdom		47,000		4,844,290
Kellogg Co.	United States		81,500		4,020,395
PepsiCo Inc.	United States		77,100		5,447,886
The Procter & Gamble Co.	United States		48,600		2,976,750
Unilever NV, N.Y. shs.	Netherlands		99,900		3,331,665

					24,045,708

Energy 8.6%
Anadarko Petroleum Corp.	United States		30,000		1,986,000
Chevron Corp.	United States		50,100		5,285,550
ConocoPhillips	United States		58,100		3,246,628
Exxon Mobil Corp.	United States		49,744		4,256,594
Phillips 66	United States		29,050		965,622
Royal Dutch Shell PLC, A, ADR	United Kingdom		72,900		4,915,647
Spectra Energy Corp.	United States		135,100		3,926,006

					24,582,047

Financials 12.9%
Aflac Inc.	United States		111,900		4,765,821
Bank of America Corp.	United States		192,900		1,577,922
BlackRock Inc.	United States		30,800		5,230,456
JPMorgan Chase & Co.	United States		167,470		5,983,703
Marsh & McLennan Cos. Inc.	United States		102,300		3,297,129
People’s United Financial Inc.	United States		250,000		2,902,500
QBE Insurance Group Ltd.	Australia		275,000		3,766,520
T. Rowe Price Group Inc.	United States		72,500		4,564,600
Wells Fargo & Co.	United States		150,800		5,042,752

					37,131,403

Health Care 7.9%
Abbott Laboratories	United States		56,700		3,655,449
Johnson & Johnson	United States		68,900		4,654,884
Merck & Co. Inc.	United States		143,361		5,985,322
Pfizer Inc.	United States		203,400		4,678,200
Roche Holding AG	Switzerland		20,600		3,551,275

					22,525,130

Industrials 14.0%
3M Co.	United States		49,100		4,399,360
The Boeing Co.	United States		57,000		4,235,100
Caterpillar Inc.	United States		36,600		3,107,706
Emerson Electric Co.	United States		104,700		4,876,926
General Electric Co.	United States		315,000		6,564,600
Honeywell International Inc.	United States		95,500		5,332,720

FGI-9

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Growth and Income Securities Fund	Country	Shares		Value
Common Stocks (continued)
Industrials (continued)
J.B. Hunt Transport Services Inc.	United States		57,800	$	3,444,880
Republic Services Inc.	United States		124,000		3,281,040
United Parcel Service Inc., B	United States		63,700		5,017,012

					40,259,344

Information Technology 13.0%
^aApple Inc.	United States		5,000		2,920,000
Cisco Systems Inc.	United States		247,308		4,246,278
Intel Corp.	United States		252,000		6,715,800
International Business Machines Corp.	United States		29,200		5,710,936
Microchip Technology Inc.	United States		139,400		4,611,352
Microsoft Corp.	United States		156,000		4,772,040
Paychex Inc.	United States		130,000		4,083,300
Xerox Corp.	United States		532,500		4,190,775

					37,250,481

Materials 5.4%
The Dow Chemical Co.	United States		125,400		3,950,100
E. I. du Pont de Nemours and Co.	United States		109,600		5,542,472
Freeport-McMoRan Copper & Gold Inc., B	United States		88,238		3,006,269
LyondellBasell Industries NV, A	United States		76,200		3,068,574

					15,567,415

Telecommunication Services 3.1%
AT&T Inc.	United States		131,397		4,685,617
Vodafone Group PLC, ADR	United Kingdom		146,300		4,122,734

					8,808,351

Utilities 7.4%
American Electric Power Co. Inc.	United States		114,200		4,556,580
Great Plains Energy Inc.	United States		119,048		2,548,818
Progress Energy Inc.	United States		65,000		3,911,050
Sempra Energy	United States		83,042		5,719,933
The Southern Co.	United States		96,700		4,477,210

					21,213,591

Total Common Stocks (Cost $208,096,478)					258,271,639

^bEquity-Linked Securities 2.3%
Energy 2.3%
Credit Suisse New York into Halliburton Co., 8.00%	United States		110,000		3,163,391
^cJPMorgan Chase & Co. into Schlumberger Ltd., 6.00%, 144A	United States		54,000		3,566,225

Total Equity-Linked Securities (Cost $10,222,000)					6,729,616

Convertible Preferred Stocks 5.8%
Consumer Discretionary 0.9%
General Motors Co., 4.75%, cvt. pfd., B	United States		77,000		2,556,400

Energy 1.1%
^cChesapeake Energy Corp., 5.75%, cvt. pfd., 144A	United States		3,500		3,114,216

Financials 2.9%
Bank of America Corp., 7.25%, cvt. pfd., L	United States		4,100		3,997,500
MetLife Inc., 5.00%, cvt. pfd.	United States		71,100		4,398,957

					8,396,457

FGI-10

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Growth and Income Securities Fund	Country	Shares		Value
Convertible Preferred Stocks (continued)
Materials 0.9%
AngloGold Ashanti Holdings Finance PLC, 6.00%, cvt. pfd.	South Africa		65,000	$	2,678,000

Total Convertible Preferred Stocks (Cost $18,748,126)					16,745,073

Preferred Stocks (Cost $8,133,100) 0.2%
Financials 0.2%
^aFannie Mae, 8.25%, pfd.	United States		325,000		529,750

Total Investments before Short Term Investments (Cost $245,199,704)					282,276,078


		Principal Amount
Short Term Investments (Cost $3,953,418) 1.4%
Repurchase Agreements 1.4%
^dJoint Repurchase Agreement, 0.129%, 7/02/12 (Maturity Value $3,953,460)	United States	$	3,953,418		3,953,418
BNP Paribas Securities Corp. (Maturity Value $772,308)
Credit Suisse Securities (USA) LLC (Maturity Value $901,033)
Deutsche Bank Securities Inc. (Maturity Value $606,778)
HSBC Securities (USA) Inc. (Maturity Value $514,859)
Merrill Lynch, Pierce, Fenner & Smith Inc. (Maturity Value $514,859)
Morgan Stanley & Co. LLC (Maturity Value $257,449)
UBS Securities LLC (Maturity Value $386,174)
Collateralized by U.S. Government Agency Securities, 0.00% - 5.25%, 8/01/12 - 6/28/17; ^eU.S. Treasury Bills, 7/26/12; and U.S. Treasury Notes, 1.125% - 3.00%, 12/15/12 - 2/15/22 (valued at $4,033,973)

Total Investments (Cost $249,153,122) 99.8%					286,229,496
Other Assets, less Liabilities 0.2%					532,620

Net Assets 100.0%				$	286,762,116

See Abbreviations on page FGI-22.

^aNon-income producing.

^bSee Note 1(e) regarding equity-linked securities.

^cSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At June 30, 2012, the aggregate value of these securities was $6,680,441, representing 2.33% of net assets.

^dSee Note 1(c) regarding joint repurchase agreement.

^eThe security is traded on a discount basis with no stated coupon rate.

The accompanying notes are an integral part of these financial statements.

FGI-11

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

June 30, 2012 (unaudited)


	Franklin Growth and Income Securities Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	245,199,704
Cost - Repurchase agreements		3,953,418

Total cost of investments	$	249,153,122

Value - Unaffiliated issuers	$	282,276,078
Value - Repurchase agreements		3,953,418

Total value of investments		286,229,496
Receivables:
Capital shares sold		331,866
Dividends		649,821
Other assets		73

Total assets		287,211,256

Liabilities:
Payables:
Capital shares redeemed		169,095
Affiliates		176,995
Reports to shareholders		74,038
Accrued expenses and other liabilities		29,012

Total liabilities		449,140

Net assets, at value	$	286,762,116

Net assets consist of:
Paid-in capital	$	297,624,771
Undistributed net investment income		3,508,191
Net unrealized appreciation (depreciation)		37,073,174
Accumulated net realized gain (loss)		(51,444,020	)

Net assets, at value	$	286,762,116

Class 1:
Net assets, at value	$	156,506,372

Shares outstanding		13,162,593

Net asset value and maximum offering price per share	$	11.89

Class 2:
Net assets, at value	$	130,255,744

Shares outstanding		11,101,667

Net asset value and maximum offering price per share	$	11.73

The accompanying notes are an integral part of these financial statements.

FGI-12

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the six months ended June 30, 2012 (unaudited)


	Franklin Growth and Income Securities Fund
Investment income:
Dividends	$	4,665,700
Interest		29,418

Total investment income		4,695,118

Expenses:
Management fees (Note 3a)		781,073
Distribution fees - Class 2 (Note 3c)		165,590
Unaffiliated transfer agent fees		113
Custodian fees (Note 4)		3,212
Reports to shareholders		54,593
Professional fees		16,294
Trustees’ fees and expenses		604
Other		7,507

Total expenses		1,028,986

Net investment income		3,666,132

Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		7,170,251
Foreign currency transactions		4,894

Net realized gain (loss)		7,175,145

Net change in unrealized appreciation (depreciation) on:
Investments		5,643,103
Translation of other assets and liabilities denominated in foreign currencies		(6,121	)

Net change in unrealized appreciation (depreciation)		5,636,982

Net realized and unrealized gain (loss)		12,812,127

Net increase (decrease) in net assets resulting from operations	$	16,478,259

The accompanying notes are an integral part of these financial statements.

FGI-13

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets


	Franklin Growth and Income Securities Fund
	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31, 2011

Increase (decrease) in net assets:
Operations:
Net investment income	$	3,666,132		$	8,197,307
Net realized gain (loss) from investments and foreign currency transactions		7,175,145			24,190,927
Net change in unrealized appreciation (depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies		5,636,982			(24,900,751	)

Net increase (decrease) in net assets resulting from operations		16,478,259			7,487,483

Distributions to shareholders from:
Net investment income:
Class 1		(4,951,744	)		(6,502,022	)
Class 2		(3,811,748	)		(5,102,769	)

Total distributions to shareholders		(8,763,492	)		(11,604,791	)

Capital share transactions: (Note 2)
Class 1		(4,528,188	)		(17,555,780	)
Class 2		(2,563,131	)		(20,259,007	)
Class 4		—			(4,301	)

Total capital share transactions		(7,091,319	)		(37,819,088	)

Net increase (decrease) in net assets		623,448			(41,936,396	)
Net assets:
Beginning of period		286,138,668			328,075,064

End of period	$	286,762,116		$	286,138,668

Undistributed net investment income included in net assets:
End of period	$	3,508,191		$	8,605,551

The accompanying notes are an integral part of these financial statements.

FGI-14

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited)

Franklin Growth and Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment company, consisting of twenty separate funds. The Franklin Growth and Income Fund (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. At June 30, 2012, 76.62% of the Fund’s shares were held through one insurance company. The Fund offers two classes of shares: Class 1 and Class 2. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

Equity securities and derivative financial instruments (derivatives) listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded, or the NYSE, whichever is earlier. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at the close of the NYSE on the day that the value of the security is determined. Over-the-counter securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.

Debt securities generally trade in the over-the-counter market rather than on a securities exchange. The Fund’s pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value. Repurchase agreements are valued at cost, which approximates market value.

FGI-15

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Growth and Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

a. Financial Instrument Valuation (continued)

b. Foreign Currency Translation

c. Joint Repurchase Agreement

d. Derivative Financial Instruments

FGI-16

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Growth and Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

d. Derivative Financial Instruments (continued)

is smaller than would normally be required to have a similar response to changes in market factors, and require or permit net settlement. Derivatives contain various risks including the potential inability of the counterparty to fulfill their obligations under the terms of the contract, the potential for an illiquid secondary market, and/or the potential for market movements which expose the Fund to gains or losses in excess of the amounts shown on the Statement of Assets and Liabilities. Realized gain and loss and unrealized appreciation and depreciation on these contracts for the period are included in the Statement of Operations.

The Fund purchased or wrote option contracts primarily to manage and/or gain exposure to equity price risk. An option is a contract entitling the holder to purchase or sell a specific amount of shares or units of an asset or notional amount of a swap (swaption), at a specified price. Options purchased are recorded as an asset while options written are recorded as a liability. Upon exercise of an option, the acquisition cost or sales proceeds of the underlying investment is adjusted by any premium received or paid. Upon expiration of an option, any premium received or paid is recorded as a realized gain or loss. Upon closing an option other than through expiration or exercise, the difference between the premium and the cost to close the position is recorded as a realized gain or loss. Pursuant to the terms of the written option contract, cash or securities may be required to be deposited as collateral.

See Notes 6 and 8 regarding investment transactions and other derivative information, respectively.

e. Equity-Linked Securities

The Fund invests in equity-linked securities. Equity-linked securities are hybrid financial instruments that generally combine both debt and equity characteristics into a single note form. Income received from equity linked securities is recorded as realized gains in the Statement of Operations and may be based on the performance of an underlying equity security, an equity index, or an option position. The risks of investing in equity-linked securities include unfavorable price movements in the underlying security and the credit risk of the issuing financial institution. There may be no guarantee of a return of principal with equity linked securities and the appreciation potential may be limited. Equity-linked securities may be more volatile and less liquid than other investments held by the Fund.

f. Income and Deferred Taxes

FGI-17

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Growth and Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

g. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Amortization of premium and accretion of discount on debt securities are included in interest income. Dividend income is recorded on the ex-dividend date except that certain dividends from foreign securities are recognized as soon as the Fund is notified of the ex-dividend date. Distributions to shareholders are recorded on the ex-dividend date and are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with accounting principles generally accepted in the United States of America. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.

h. Accounting Estimates

i. Guarantees and Indemnifications

2. SHARES OF BENEFICIAL INTEREST

At June 30, 2012, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:


	Six Months Ended June 30, 2012						Year Ended December 31, 2011^a
Class 1 Shares:	Shares			Amount			Shares			Amount
Shares sold		6,299		$	77,234			187,427		$	2,361,235
Shares issued in reinvestment of distributions		419,284			4,951,744			570,854			6,502,022
Shares redeemed		(782,578	)		(9,557,166	)		(2,250,738	)		(26,419,037	)

Net increase (decrease)		(356,995	)	$	(4,528,188	)		(1,492,457	)	$	(17,555,780	)

FGI-18

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Growth and Income Securities Fund

2. SHARES OF BENEFICIAL INTEREST (continued)


	Six Months Ended June 30, 2012						Year Ended December 31, 2011^a
Class 2 Shares:	Shares			Amount			Shares			Amount
Shares sold		476,297		$	5,683,326			624,568		$	7,137,921
Shares issued in reinvestment of distributions		327,189			3,811,748			453,579			5,102,769
Shares redeemed		(1,009,914	)		(12,058,205	)		(2,828,839	)		(32,499,697	)

Net increase (decrease)		(206,428	)	$	(2,563,131	)		(1,750,692	)	$	(20,259,007	)

Class 4 Shares:
Shares redeemed								(353	)	$	(4,301	)

Net increase (decrease)								(353	)	$	(4,301	)

^aEffective

March 4, 2011, Class 4 was liquidated.

3. TRANSACTIONS WITH AFFILIATES


Subsidiary		Affiliation
Franklin Advisers, Inc. (Advisers)		Investment manager
Franklin Templeton Services, LLC (FT Services)		Administrative manager
Franklin Templeton Distributors, Inc. (Distributors)		Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services)		Transfer agent

a. Management Fees

The Fund pays an investment management fee to Advisers based on the average daily net assets of the Fund as follows:


Annualized Fee Rate		Net Assets
0.625%		Up to and including $100 million
0.500%		Over $100 million, up to and including $250 million
0.450%		Over $250 million, up to and including $7.5 billion
0.440%		Over $7.5 billion, up to and including $10 billion
0.430%		Over $10 billion, up to and including $12.5 billion
0.420%		Over $12.5 billion, up to and including $15 billion
0.400%		In excess of $15 billion

b. Administrative Fees

Under an agreement with Advisers, FT Services provides administrative services to the Fund. The fee is paid by Advisers based on average daily net assets, and is not an additional expense of the Fund.

c. Distribution Fees

FGI-19

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Growth and Income Securities Fund

3. TRANSACTIONS WITH AFFILIATES (continued)

d. Transfer Agent Fees

Investor Services, under terms of an agreement, performs shareholder servicing for the Fund and is not paid by the Fund for the services.

4. EXPENSE OFFSET ARRANGEMENT

5. INCOME TAXES

At December 31, 2011, the Fund had capital loss carryforwards of $58,091,205 expiring in 2017.

At June 30, 2012, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:


Cost of investments	$	249,602,794


Unrealized appreciation	$	58,158,298
Unrealized depreciation		(21,531,596	)

Net unrealized appreciation (depreciation)	$	36,626,702

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatment of wash sales.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2012, aggregated $41,954,960 and $47,968,140, respectively.

Transactions in options written during the period ended June 30, 2012, were as follows:


	Number of Contracts			Premiums Received
Options outstanding at December 31, 2011		—		$	—
Options written		350			105,428
Options expired		—			—
Options exercised		(350	)		(105,428	)
Options closed		—			—

Options outstanding at June 30, 2012		—		$	—

See Notes 1(d) and 8 regarding derivative financial instruments and other derivative information, respectively.

FGI-20

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Growth and Income Securities Fund

7. CREDIT RISK

At June 30, 2012, the Fund had 6.85% of its portfolio invested in high yield or other securities rated below investment grade. These securities may be more sensitive to economic conditions causing greater price volatility and are potentially subject to a greater risk of loss due to default than higher rated securities.

8. OTHER DERIVATIVE INFORMATION

For the period ended June 30, 2012, the effect of derivative contracts on the Fund’s Statement of Operations was as follows:


Derivative Contracts Not Accounted for as Hedging Instruments	Statement of Operations Locations	Realized Gain (Loss) for the Period		Change in Unrealized Appreciation (Depreciation) for the Period
Equity contracts	Net realized gain (loss) from investments and written options/Net change in unrealized appreciation (depreciation) on investments	$	—	$	—

For the period ended June 30, 2012, the average month end market value of derivatives represented 0.01% of average month end net assets. The average month end number of open derivative contracts for the period was 1.

See Notes 1(d) and 6 regarding derivative financial instruments and investment transactions, respectively.

9. CREDIT FACILITY

10. FAIR VALUE MEASUREMENTS

•

Level 1 – quoted prices in active markets for identical financial instruments

•

Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)

•

Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of financial instruments)

The inputs or methodology used for valuing financial instruments are not an indication of the risk associated with investing in those financial instruments.

FGI-21

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Growth and Income Securities Fund

10. FAIR VALUE MEASUREMENTS (continued)

For movements between the levels within the fair value hierarchy, the Fund has adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.

A summary of inputs used as of June 30, 2012, in valuing the Fund’s assets carried at fair value, is as follows:


	Level 1		Level 2		Level 3		Total

Assets:
Investments in Securities:
Equity Investments:^a
Energy	$	24,582,047	$	3,114,216	$	—	$	27,696,263
All Other Equity Investments^b		247,850,199		—		—		247,850,199
Equity-Linked Securities		—		6,729,616		—		6,729,616
Short Term Investments		—		3,953,418		—		3,953,418

Total Investments in Securities	$	272,432,246	$	13,797,250	$	—	$	286,229,496

^aIncludes common, preferred and convertible preferred stocks as well as other equity investments.

^bFor detailed categories, see the accompanying Statement of Investments.

11. NEW ACCOUNTING PRONOUNCEMENTS

12. SUBSEQUENT EVENTS

The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure.


ABBREVIATIONS
Selected Portfolio

ADR - American Depositary Receipt

FGI-22

FRANKLIN HIGH INCOME SECURITIES FUND

We are pleased to bring you Franklin High Income Securities Fund’s semiannual report for the period ended June 30, 2012.

Performance Summary as of 6/30/12

Franklin High Income Securities Fund – Class 2 delivered a +6.92% total return for the six-month period ended 6/30/12.

Franklin High Income Securities Fund – Class 2

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares.

Current performance may differ from figures shown.

FH-1

Fund Goals and Main Investments: Franklin High Income Securities Fund seeks a high level of current income with capital appreciation as a secondary goal. Under normal market conditions, the Fund invests primarily to predominantly in high yield, lower rated debt securities and preferred stocks.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. In comparison, the Fund’s benchmark, the Credit Suisse (CS) High Yield Index, posted a +6.66% total return for the period under review.¹ The Fund’s peers, as measured by the Lipper VIP High Current Yield Funds Classification Average, delivered a +6.48% total return.²

Economic and Market Overview

During the six months under review, uncertainty regarding the eurozone’s future continued to influence financial markets, and U.S. economic data appeared mixed. U.S. manufacturing indicators looked to have weakened, employment gains slowed and wage growth was sluggish during the period. However, energy prices declined significantly over the period and housing data strengthened with new and existing home sales as well as house prices pointing toward a gradual strengthening trend, albeit from a low base. The U.S. consumer showed resilience as consumption remained steady even as consumer confidence declined.

Financial markets seemed to be largely influenced by politics, sentiment and uncertainty in the eurozone, and they were quick to discount the latest Greek election results. The June 2012 Federal Open Market Committee meeting concluded with the extension of its plan designed to boost the economy by driving down long-term interest rates (dubbed Operation Twist) but made no formal announcement of an additional round of quantitative easing. During the six months under review, investment-grade fixed income markets, as measured by the Barclays U.S. Aggregate Index, posted modest returns.³ U.S. stocks, as measured by the Standard & Poor’s^® 500 Index, faced bouts of risk aversion as investors shunned risk assets in light of uneven economic data but ended the period with robust gains.³ Overall, investor concerns about ongoing eurozone uncertainty, weak U.S. employment gains, and a lack

2. Source: Lipper Inc.

One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

3. Please see Index descriptions following the Fund summaries.

Fund Risks: All investments involve risks, including possible loss of principal. Risks associated with higher yielding, lower rated securities include higher risk of default and loss of principal. Investments in foreign securities involve special risks such as currency fluctuations, and political and economic uncertainty. Interest rate movements will affect the Fund’s share price and yield. As the prices of bonds in the Fund adjust to a rise in interest rates, the Fund’s share price may decline. Changes in the financial strength of a bond issuer or in a bond’s credit rating may affect its value. The Fund may from time to time enter into certain transactions involving derivatives, particularly credit default swap agreements, interest rate swap agreements and currency forwards; such techniques may not achieve the anticipated benefits and/or may result in losses to the Fund. The Fund is actively managed but there is no guarantee that these decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

FH-2

of broad public and political agreement on how to achieve U.S. deficit reduction drove the 10-year U.S. Treasury yield from 1.89% on December 31, 2011, to 1.67% on June 30, 2012.

Investment Strategy

We are research-driven, fundamental investors who rely on a team of analysts to provide in-depth industry expertise and use qualitative and quantitative analyses to evaluate companies. As bottom-up investors, we focus primarily on individual securities. We also consider sectors when choosing investments. In selecting securities for the Fund’s investment portfolio, we do not rely principally on ratings assigned by rating agencies, but perform our own independent analysis to evaluate an issuer’s creditworthiness. We consider a variety of factors, including an issuer’s experience and managerial strength, its sensitivity to economic conditions and its current financial condition. We may also enter into various transactions involving certain currency-, interest rate- or credit-related derivative instruments for hedging purposes, to enhance returns or to obtain exposure to various market sectors.

Manager’s Discussion

Despite market volatility for high yield bonds in the second quarter of 2012, the Fund delivered a positive return for the six months ended June 30, 2012. On the heels of a strong fourth quarter of 2011, the credit markets started 2012 with a very solid tone. The rally continued through mid-May but similar to the first half of 2011, faltered heading into June. In the U.S., second-quarter unemployment numbers disappointed investors and the pace of economic growth appeared to lose steam. Outside the U.S., although concerns regarding Greece began to recede from daily financial market headlines, concerns over Spain and Italy’s fiscal conditions and sovereign financing costs moved to the forefront. Although the high yield market initially decoupled from U.S. stock market weakness, by the middle of the second quarter high yield bond prices began to come under pressure. However, high yield bonds ended on a positive note as new-issue supply in the high yield market slowed and the stock market had one of its best single-day results of the year at June’s end when European leaders provided a plan to try to support banks, maintain the eurozone and restore investor confidence. Correspondingly, high yield bond prices also rallied at period-end.

Although cognizant of challenges to the economy, we remained encouraged by corporate balance sheet strength and mostly improving earnings. Trends for the U.S. economy remained positive, albeit at a slower

LOGO

FH-3

rate of improvement. Accordingly, although we targeted subtle changes based on market valuations, we maintained a slightly elevated risk stance during the period. In addition, we drew on our fundamental research process to adjust industry positioning. Within that framework, we over- and underweighted certain industries relative to our benchmark, the CS High Yield Index.

For instance, amid continued pricing pressures in the utilities sector, which includes some pipeline and midstream energy companies, we underweighted this sector. The sector notably underperformed the benchmark, boosting the Fund’s relative performance. Similarly, we continued to find the paper industry unattractive as ongoing demand declines, price competition and a lack of positive near-term catalysts weighed on companies.⁴ Our resulting underweighted position benefited the Fund following the industry’s underperformance. In contrast, the auto sector represented one of the more strongly performing sectors as many auto companies restructured and benefited from rationalized cost structures and more stable demand.⁵ Bonds of one of the largest sector issuers, Ford Motor Credit, were upgraded to investment grade ratings during the period, providing a boost to prices. Given our favorable view of Ford Motor Credit bonds at the beginning of the review period as well as on certain auto sector issuers, we overweighted the sector in the Fund, contributing to relative performance.

Although some of the Fund’s positioning enhanced relative performance versus its benchmark, certain weightings detracted from relative results. For example, the Fund’s energy, building and wireless telecommunication services positioning versus the index was a drag on performance.⁶ Although security selection in energy aided relative performance, the Fund’s overweighting during the period resulted in an overall negative effect. One of the warmest winters on record, combined with growing production from shale operations, drove down natural gas prices, and the energy sector underperformed the benchmark. Although high yield energy companies usually produce natural gas and oil, production during the period in review was more heavily weighted to gas. In addition, European refiner Petroplus Holdings defaulted during the period on one of the Fund’s bonds, as the company failed to obtain the financing required to fund its working capital needs.

4. Paper holdings are part of materials in the SOI.

5. Auto holdings are part of automobiles and components in the SOI.

6. Building holdings are part of consumer durables and apparel in the SOI. Wireless telecommunication services is part of telecommunication services in the SOI.

Top 10 Sectors/Industries

Franklin High Income Securities Fund

6/30/12


	% of Total Net Assets
Energy		22.9%
Telecommunication Services		9.0%
Media		8.4%
Materials		8.2%
Health Care Equipment & Services		5.8%
Software & Services		4.3%
Consumer Services		4.2%
Diversified Financials		3.7%
Automobiles & Components		3.1%
Utilities		2.9%

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).

FH-4

In contrast, the building industry followed 2011’s underperformance relative to the benchmark with outperformance for the six-month period in review. Home builders reported the best spring selling season since the housing market’s downturn began in 2006, and housing-related reports seemed to confirm a housing recovery. Investors helped drive the outperformance by shrugging off concerns about Europe, disappointing U.S. economic reports and the possibility that unseasonably warm weather throughout the U.S. accounted for the increased housing demand. The Fund maintained an underweighting given our more conservative outlook for the sector and this proved to hinder relative performance. Our overweighting in wireless telecommunication services

negatively impacted relative performance versus the benchmark as the industry slightly underperformed. Certain sector holdings, such as Sprint, notably outperformed and positively contributed to relative performance, but overall the sector did not keep pace with the index. Therefore, the overweighted telecommunications position negatively impacted the Fund’s relative performance.

Thank you for your participation in Franklin High Income Securities Fund. We look forward to serving your future investment needs.

FH-5

Fund Expenses

•

Transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes.

•

Actual Fund Expenses

You can estimate the Fund-level expenses you incurred during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:

1.	Divide your account value by $1,000.

If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6.

2.	Multiply the result by the number under the heading “Fund-Level Expenses Incurred During Period.”

If Fund-Level Expenses Incurred During Period were $7.50, then 8.6 x $7.50 = $64.50.

In this illustration, the estimated expenses incurred this period at the Fund level are $64.50.

Franklin High Income Securities Fund – Class 2

FH-6

Hypothetical Example for Comparison with Other Mutual Funds


Class 2	Beginning Account Value 1/1/12		Ending Account Value 6/30/12		Fund-Level Expenses Incurred During Period* 1/1/12–6/30/12
Actual	$	1,000	$	1,069.20	$	4.27
Hypothetical (5% return before expenses)	$	1,000	$	1,020.74	$	4.17

*Expenses are calculated using the most recent six-month annualized expense ratio for the Fund’s Class 2 shares (0.83%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 182/366 to reflect the one-half year period.

FH-7

Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Franklin High Income Securities Fund


	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31,
Class 1	Six Months Ended June 30, 2012 (unaudited)			2011			2010			2009			2008			2007

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	6.52		$	6.63		$	6.26		$	4.68		$	6.72		$	6.96

Income from investment operations^a:
Net investment income^b		0.25			0.50			0.49			0.46			0.50			0.51
Net realized and unrealized gains (losses)		0.21			(0.19	)		0.32			1.50			(1.92	)		(0.30	)

Total from investment operations		0.46			0.31			0.81			1.96			(1.42	)		0.21

Less distributions from net investment income		(0.50	)		(0.42	)		(0.44	)		(0.38	)		(0.62	)		(0.45	)

Net asset value, end of period	$	6.48		$	6.52		$	6.63		$	6.26		$	4.68		$	6.72


Total return^c		7.17%			4.63%			13.71%			42.99%			(23.16)%			3.02%
Ratios to average net assets^d
Expenses		0.58%			0.58%			0.61%			0.63%	^e		0.66%	^e		0.61%	^e
Net investment income		7.35%			7.52%			7.71%			8.33%			8.30%			7.38%

Supplemental data
Net assets, end of period (000’s)	$	41,075		$	41,971		$	48,051		$	48,855		$	38,225		$	61,286
Portfolio turnover rate		15.50%			45.11%			60.80%			26.41%			21.75%			40.65%

^bBased on average daily shares outstanding.

^dRatios are annualized for periods less than one year.

^eBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

FH-8

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin High Income Securities Fund


	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31,
Class 2	Six Months Ended June 30, 2012 (unaudited)			2011			2010			2009			2008			2007

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	6.36		$	6.47		$	6.13		$	4.59		$	6.60		$	6.85

Income from investment operations^a:
Net investment income^b		0.23			0.47			0.47			0.44			0.47			0.48
Net realized and unrealized gains (losses)		0.20			(0.18	)		0.30			1.47			(1.88	)		(0.29	)

Total from investment operations		0.43			0.29			0.77			1.91			(1.41	)		0.19

Less distributions from net investment income		(0.48	)		(0.40	)		(0.43	)		(0.37	)		(0.60	)		(0.44	)

Net asset value, end of period	$	6.31		$	6.36		$	6.47		$	6.13		$	4.59		$	6.60


Total return^c		6.92%			4.56%			13.26%			42.70%			(23.38)%			2.72%
Ratios to average net assets^d
Expenses		0.83%			0.83%			0.86%			0.88%	^e		0.91%	^e		0.86%	^e
Net investment income		7.10%			7.27%			7.46%			8.08%			8.05%			7.13%

Supplemental data
Net assets, end of period (000’s)	$	267,041		$	249,452		$	239,824		$	198,567		$	84,396		$	155,777
Portfolio turnover rate		15.50%			45.11%			60.80%			26.41%			21.75%			40.65%

^bBased on average daily shares outstanding.

^dRatios are annualized for periods less than one year.

^eBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

FH-9

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin High Income Securities Fund


	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31,
Class 4	Six Months Ended June 30, 2012 (unaudited)			2011			2010			2009			2008^a

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	6.46		$	6.57		$	6.22		$	4.67		$	6.55

Income from investment operations^b:
Net investment income^c		0.23			0.47			0.47			0.45			0.39
Net realized and unrealized gains (losses)		0.20			(0.18	)		0.31			1.48			(1.65	)

Total from investment operations		0.43			0.29			0.78			1.93			(1.26	)

Less distributions from net investment income		(0.47	)		(0.40	)		(0.43	)		(0.38	)		(0.62	)

Net asset value, end of period	$	6.42		$	6.46		$	6.57		$	6.22		$	4.67


Total return^d		6.84%			4.39%			13.31%			42.36%			(21.34)%
Ratios to average net assets^e
Expenses		0.93%			0.93%			0.96%			0.98%	^f		1.01%	^f
Net investment income		7.00%			7.17%			7.36%			7.98%			7.95%

Supplemental data
Net assets, end of period (000’s)	$	26,906		$	27,055		$	25,934		$	15,105		$	2,244
Portfolio turnover rate		15.50%			45.11%			60.80%			26.41%			21.75%

^aFor the period February 29, 2008 (effective date) to December 31, 2008.

^cBased on average daily shares outstanding.

^eRatios are annualized for periods less than one year.

^fBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

FH-10

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited)


Franklin High Income Securities Fund	Country		Shares		Value
Preferred Stocks (Cost $770,000) 0.2%
Diversified Financials 0.2%
GMAC Capital Trust I, 8.125%, pfd.		United States		30,800	$	740,740


			Principal Amount*
Corporate Bonds 93.7%
Automobiles & Components 3.1%
^aAllison Transmission Holdings Inc., senior note, 144A, 7.125%, 5/15/19		United States		1,000,000		1,047,500
Exide Technologies, senior secured note, 8.625%, 2/01/18		United States		1,000,000		793,751
Ford Motor Credit Co. LLC, senior note,
7.00%, 4/15/15		United States		1,000,000		1,113,879
6.625%, 8/15/17		United States		1,000,000		1,139,224
5.00%, 5/15/18		United States		1,000,000		1,064,922
8.125%, 1/15/20		United States		1,000,000		1,225,881
The Goodyear Tire & Rubber Co., senior note, 8.25%, 8/15/20		United States		2,200,000		2,340,250
^aInternational Automotive Components Group SL, senior secured note, 144A, 9.125%, 6/01/18		United States		1,600,000		1,470,000

						10,195,407

Banks 1.6%
CIT Group Inc., senior note,
5.375%, 5/15/20		United States		1,700,000		1,735,062
^a144A, 7.00%, 5/02/17		United States		2,303,465		2,310,664
Regions Bank, sub. note, 7.50%, 5/15/18		United States		1,250,000		1,403,125

						5,448,851

Capital Goods 2.8%
^aAbengoa Finance SAU, senior note, 144A, 8.875%, 11/01/17		Spain		3,000,000		2,700,000
The Manitowoc Co. Inc., senior note,
9.50%, 2/15/18		United States		1,400,000		1,540,000
8.50%, 11/01/20		United States		500,000		542,500
Meritor Inc., senior note, 10.625%, 3/15/18		United States		1,900,000		2,028,250
RBS Global & Rexnord Corp., senior note, 8.50%, 5/01/18		United States		2,500,000		2,725,000

						9,535,750

Commercial & Professional Services 1.3%
^b,cGoss Graphic Systems Inc., senior sub. note, 12.25%, 11/19/05		United States		1,912,374		191
RSC Equipment Rental Inc./RSC Holdings III LLC, senior note, 10.25%, 11/15/19		United States		1,000,000		1,130,000
United Rentals North America Inc., senior sub. note, 8.375%, 9/15/20		United States		2,900,000		3,066,750

						4,196,941

Consumer Durables & Apparel 2.3%
M/I Homes Inc., senior note, 8.625%, 11/15/18		United States		1,500,000		1,556,250
Shea Homes LP/Funding Corp., senior secured note, 8.625%, 5/15/19		United States		1,600,000		1,728,000
^aTaylor Morrison Communities/Monarch Communities Inc., senior note, 144A, 7.75%, 4/15/20		United States		1,200,000		1,257,000
Visant Corp., senior note, 10.00%, 10/01/17		United States		3,100,000		3,092,250

						7,633,500

Consumer Services 4.2%
Choice Hotels International Inc., 5.75%, 7/01/22		United States		600,000		629,019
ClubCorp Club Operations Inc., senior note, 10.00%, 12/01/18		United States		2,200,000		2,343,000
^a,bFontainebleau Las Vegas, 144A, 11.00%, 6/15/15		United States		1,700,000		1,063
Harrah’s Operating Co. Inc., senior secured note, 11.25%, 6/01/17		United States		3,000,000		3,288,750
MGM Resorts International, senior note, 6.625%, 7/15/15		United States		2,000,000		2,070,000
senior note, 6.875%, 4/01/16		United States		1,200,000		1,212,000
^asenior note, 144A, 8.625%, 2/01/19		United States		400,000		430,000
senior secured note, 9.00%, 3/15/20		United States		600,000		669,000

FH-11

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin High Income Securities Fund	Country	Principal Amount*		Value
Corporate Bonds (continued)
Consumer Services (continued)
Pinnacle Entertainment Inc.,
senior note, 8.625%, 8/01/17	United States		2,200,000	$	2,403,500
senior sub. note, 7.75%, 4/01/22	United States		100,000		107,125
^aShingle Springs Tribal Gaming Authority, senior note, 144A, 9.375%, 6/15/15	United States		1,300,000		1,001,000

					14,154,457

Diversified Financials 3.5%
Ally Financial Inc., senior note, 7.50%, 9/15/20	United States		1,500,000		1,691,250
^dBank of America Corp., pfd., sub. bond, M, 8.125% to 5/15/18, FRN thereafter, Perpetual	United States		2,500,000		2,626,400
GMAC Inc.,
senior note, 6.875%, 8/28/12	United States		2,000,000		2,015,000
sub. note, 8.00%, 12/31/18	United States		800,000		890,000
International Lease Finance Corp.,
senior note, R, 5.65%, 6/01/14	United States		2,000,000		2,060,000
^asenior secured note, 144A, 6.75%, 9/01/16	United States		1,200,000		1,296,000
^aNeuberger Berman Group LLC/Finance Corp., senior note, 144A,
5.625%, 3/15/20	United States		500,000		522,500
5.875%, 3/15/22	United States		600,000		628,500

					11,729,650

Energy 22.9%
Alpha Natural Resources Inc., senior note,
6.00%, 6/01/19	United States		1,100,000		943,250
6.25%, 6/01/21	United States		2,000,000		1,700,000
Antero Resources Finance Corp., senior note, 9.375%, 12/01/17	United States		2,600,000		2,886,000
Arch Coal Inc., senior note,
7.00%, 6/15/19	United States		700,000		595,000
7.25%, 6/15/21	United States		1,000,000		842,500
^aBreitBurn Energy Partners LP/Finance Corp., senior note, 144A, 7.875%, 4/15/22	United States		1,600,000		1,608,000
Calumet Specialty Products Partners LP/Finance Corp., senior note,
9.375%, 5/01/19	United States		1,700,000		1,712,750
^a144A, 9.625%, 8/01/20	United States		600,000		612,000
Carrizo Oil & Gas Inc., senior note, 8.625%, 10/15/18	United States		2,000,000		2,100,000
Chaparral Energy Inc., senior note,
9.875%, 10/01/20	United States		1,400,000		1,562,750
8.25%, 9/01/21	United States		600,000		637,500
^a144A, 7.625%, 11/15/22	United States		400,000		407,000
CHC Helicopter SA, senior secured note, first lien, 9.25%, 10/15/20	Canada		3,000,000		2,947,500
Chesapeake Energy Corp., senior note,
6.625%, 8/15/20	United States		3,000,000		2,985,000
6.125%, 2/15/21	United States		1,000,000		972,500
Chesapeake Midstream Partners LP/CHKM Finance Corp., senior note, 6.125%, 7/15/22	United States		700,000		689,500
Clayton Williams Energy Inc., senior note, 7.75%, 4/01/19	United States		2,000,000		1,970,000
Compagnie Generale de Geophysique-Veritas, senior note, 6.50%, 6/01/21	France		2,500,000		2,512,500
CONSOL Energy Inc., senior note,
8.00%, 4/01/17	United States		500,000		521,250
8.25%, 4/01/20	United States		1,000,000		1,055,000
6.375%, 3/01/21	United States		300,000		283,500
Eagle Rock Energy Partners LP/Finance Corp., senior note, 8.375%, 6/01/19	United States		1,800,000		1,804,500
Energy Transfer Equity LP, senior note, 7.50%, 10/15/20	United States		3,000,000		3,307,500
Energy XXI Gulf Coast Inc., senior note, 9.25%, 12/15/17	United States		2,500,000		2,687,500
^eEnterprise Products Operating LLC, junior sub. note, FRN, 7.034%, 1/15/68	United States		1,500,000		1,606,839

FH-12

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin High Income Securities Fund	Country	Principal Amount*		Value
Corporate Bonds (continued)
Energy (continued)
^aExpro Finance Luxembourg, senior secured note, 144A, 8.50%, 12/15/16	United Kingdom		2,307,000	$	2,220,487
Goodrich Petroleum Corp., senior note, 8.875%, 3/15/19	United States		2,200,000		2,106,500
^aKinder Morgan Finance Co. LLC, senior secured note, 144A, 6.00%, 1/15/18	United States		1,500,000		1,567,500
^aKodiak Oil & Gas Corp., senior note, 144A, 8.125%, 12/01/19	United States		1,400,000		1,442,000
Linn Energy LLC/Finance Corp., senior note,
8.625%, 4/15/20	United States		2,000,000		2,165,000
7.75%, 2/01/21	United States		700,000		735,000
^a144A, 6.50%, 5/15/19	United States		600,000		597,000
Martin Midstream Partners LP, senior note, 8.875%, 4/01/18	United States		1,316,000		1,335,740
Offshore Group Investment Ltd., senior secured note,
11.50%, 8/01/15	United States		1,700,000		1,853,000
^afirst lien, 144A, 11.50%, 8/01/15	United States		1,300,000		1,417,000
^aPBF Holding Co. LLC, senior secured note, 144A, 8.25%, 2/15/20	United States		2,000,000		2,005,000
Peabody Energy Corp., senior note,
6.50%, 9/15/20	United States		1,700,000		1,729,750
^a144A, 6.25%, 11/15/21	United States		1,700,000		1,691,500
^aPenn Virginia Resource Partners LP/Finance Corp. II, senior note, 144A, 8.375%, 6/01/20	United States		1,300,000		1,326,000
^a,b,fPetroplus Finance Ltd., senior note, 144A, 6.75%, 5/01/14	Switzerland		1,600,000		200,000
Plains Exploration & Production Co., senior note,
7.625%, 6/01/18	United States		2,200,000		2,348,500
6.125%, 6/15/19	United States		600,000		606,000
QEP Resources Inc., senior note, 5.375%, 10/01/22	United States		1,500,000		1,507,500
Quicksilver Resources Inc., senior note,
8.25%, 8/01/15	United States		2,000,000		1,880,000
9.125%, 8/15/19	United States		1,000,000		875,000
^aSamson Investment Co., senior note, 144A, 9.75%, 2/15/20	United States		3,200,000		3,188,000
SandRidge Energy Inc., senior note,
8.75%, 1/15/20	United States		300,000		314,250
7.50%, 3/15/21	United States		400,000		397,000
^a144A, 8.00%, 6/01/18	United States		2,500,000		2,543,750
W&T Offshore Inc., senior note, 8.50%, 6/15/19	United States		1,500,000		1,556,250

					76,557,566

Food & Staples Retailing 0.9%
Rite Aid Corp., senior secured note,
9.75%, 6/12/16	United States		1,800,000		1,993,500
8.00%, 8/15/20	United States		1,000,000		1,137,500

					3,131,000

Food, Beverage & Tobacco 2.8%
^aCEDC Finance Corp. International Inc., senior secured note, 144A, 9.125%, 12/01/16	Russia		700,000		445,813
Dean Foods Co., senior note, 9.75%, 12/15/18	United States		1,100,000		1,232,000
Del Monte Corp., senior note, 7.625%, 2/15/19	United States		2,900,000		2,939,875
^aJBS USA LLC/Finance Inc., senior note, 144A, 8.25%, 2/01/20	United States		2,500,000		2,437,500
Pinnacle Foods Finance LLC/Corp., senior note,
9.25%, 4/01/15	United States		1,300,000		1,342,250
8.25%, 9/01/17	United States		1,000,000		1,062,500

					9,459,938

Health Care Equipment & Services 5.8%
Amerigroup Corp., senior note, 7.50%, 11/15/19	United States		1,600,000		1,728,000
Aviv Healthcare Properties LP/Aviv Healthcare CapitalCorp., senior note, 7.75%, 2/15/19	United States		2,200,000		2,277,000
CHS/Community Health Systems Inc., senior note, 8.00%, 11/15/19	United States		1,700,000		1,810,500

FH-13

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin High Income Securities Fund	Country	Principal Amount*		Value
Corporate Bonds (continued)
Health Care Equipment & Services (continued)
^aDJO Finance LLC/DJO Finance Corp., secured note, 144A, 8.75%, 3/15/18	United States		700,000	$	717,500
Emergency Medical Services Corp., senior note, 8.125%, 6/01/19	United States		1,000,000		1,048,750
ExamWorks Group Inc., senior note, 9.00%, 7/15/19	United States		1,000,000		1,030,000
HCA Inc.,
senior note, 7.50%, 2/15/22	United States		800,000		874,000
senior secured bond, 7.25%, 9/15/20	United States		900,000		994,500
senior secured note, 7.875%, 2/15/20	United States		1,000,000		1,115,000
senior secured note, 5.875%, 3/15/22	United States		1,000,000		1,047,500
^aHealth Management Associates Inc., senior note, 144A, 7.375%, 1/15/20	United States		2,100,000		2,244,375
MedAssets Inc., senior note, 8.00%, 11/15/18	United States		2,000,000		2,120,000
^aUnited Surgical Partners International Inc., senior note, 144A, 9.00%, 4/01/20	United States		900,000		958,500
Vanguard Health Holding Co. II LLC/Inc., senior note, 8.00%, 2/01/18	United States		1,300,000		1,335,750
Vanguard Health Systems Inc., senior note, zero cpn., 2/01/16	United States		64,000		42,880

					19,344,255

Materials 8.2%
^aCemex SAB de CV, senior secured note, 144A, 9.00%, 1/11/18	Mexico		3,500,000		3,141,250
Euramax International Inc., senior secured note, 9.50%, 4/01/16	United States		2,000,000		1,775,000
Exopack Holding Corp., senior note, 10.00%, 6/01/18	United States		1,600,000		1,612,000
^aFMG Resources August 2006 Pty. Ltd., senior note, 144A,
7.00%, 11/01/15	Australia		800,000		811,500
6.875%, 2/01/18	Australia		2,000,000		2,027,500
8.25%, 11/01/19	Australia		500,000		532,500
^aIneos Finance PLC, senior secured note, 144A,
9.00%, 5/15/15	United Kingdom		1,000,000		1,060,000
8.375%, 2/15/19	United Kingdom		200,000		206,625
7.50%, 5/01/20	United Kingdom		500,000		504,687
^aIneos Group Holdings Ltd., senior secured note, 144A, 8.50%, 2/15/16	United Kingdom		1,500,000		1,383,750
^aInmet Mining Corp., senior note, 144A, 8.75%, 6/01/20	Canada		2,300,000		2,288,500
^aKinove German Bondco GmbH, senior secured note, 144A, 9.625%, 6/15/18	Germany		1,400,000		1,449,000
^aMacDermid Inc., senior sub. note, 144A, 9.50%, 4/15/17	United States		2,500,000		2,625,000
^b,fNewPage Corp., senior secured note, 11.375%, 12/31/14	United States		2,500,000		1,637,500
Novelis Inc., senior note, 8.75%, 12/15/20	Canada		1,300,000		1,407,250
^aReynolds Group Issuer Inc./LLC/SA, senior note, 144A,
8.50%, 5/15/18	United States		2,800,000		2,758,000
9.00%, 4/15/19	United States		200,000		200,500
9.875%, 8/15/19	United States		200,000		207,750
8.25%, 2/15/21	United States		400,000		380,000
^aSealed Air Corp., senior note, 144A,
8.125%, 9/15/19	United States		800,000		896,000
8.375%, 9/15/21	United States		400,000		454,000

					27,358,312

Media 7.8%
^aBresnan Broadband Holdings LLC, senior note, 144A, 8.00%, 12/15/18	United States		1,200,000		1,260,000
Cablevision Systems Corp., senior note, 7.75%, 4/15/18	United States		1,000,000		1,070,000
CCO Holdings LLC/CCO Holdings Capital Corp., senior note,
8.125%, 4/30/20	United States		700,000		784,000
6.50%, 4/30/21	United States		2,200,000		2,354,000
6.625%, 1/31/22	United States		300,000		322,500
Clear Channel Communications Inc., senior note, 9.00%, 3/01/21	United States		3,800,000		3,325,000

FH-14

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin High Income Securities Fund	Country	Principal Amount*		Value
Corporate Bonds (continued)
Media (continued)
^aClear Channel Worldwide Holdings Inc., senior sub. note, 144A, 7.625%,
3/15/20	United States		1,100,000	$	1,080,750
3/15/20	United States		200,000		192,500
^aCSC Holdings Inc., senior note, 144A, 6.75%, 11/15/21	United States		1,500,000		1,605,000
DISH DBS Corp., senior note,
7.125%, 2/01/16	United States		3,000,000		3,307,500
6.75%, 6/01/21	United States		1,500,000		1,627,500
Media General Inc., senior secured note, 11.75%, 2/15/17	United States		1,400,000		1,512,000
^gRadio One Inc., senior sub. note, PIK, 15.00%, 5/24/16	United States		1,676,514		1,337,020
^aUnitymedia Hessen/NRW, senior secured note, 144A, 8.125%, 12/01/17	Germany		1,500,000		1,617,270
^aUnivision Communications Inc., senior secured note, 144A,
6.875%, 5/15/19	United States		2,500,000		2,587,500
7.875%, 11/01/20	United States		700,000		752,500
^aUPCB Finance III Ltd., senior secured note, 144A, 6.625%, 7/01/20	Netherlands		1,000,000		1,020,000
^aUPCB Finance VI Ltd., senior secured note, 144A, 6.875%, 1/15/22	Netherlands		500,000		506,562

					26,261,602

Pharmaceuticals, Biotechnology & Life Sciences 2.3%
Endo Health Solutions Inc., senior note, 7.00%,
7/15/19	United States		1,000,000		1,092,500
12/15/20	United States		1,000,000		1,090,000
Giant Funding Corp., senior secured note, 8.25%, 2/01/18	Spain		2,300,000		2,484,000
^ainVentiv Health Inc., senior note, 144A, 10.00%,
8/15/18	United States		2,200,000		1,892,000
8/15/18	United States		200,000		173,000
^aJaguar Holding Co. II/Merger Sub Inc., senior note, 144A, 9.50%, 12/01/19	United States		700,000		769,125
^aMylan Inc., senior note, 144A, 7.875%, 7/15/20	United States		300,000		337,875

					7,838,500

Real Estate 0.6%
Forest City Enterprises Inc., senior note,
7.625%, 6/01/15	United States		1,800,000		1,795,500
6.50%, 2/01/17	United States		300,000		288,750

					2,084,250

Retailing 2.2%
^aAcademy Ltd./Finance Corp., senior note, 144A, 9.25%, 8/01/19	United States		1,500,000		1,635,000
Asbury Automotive Group Inc., senior sub. note, 8.375%, 11/15/20	United States		1,400,000		1,533,000
Michaels Stores Inc., senior note, 7.75%, 11/01/18	United States		1,500,000		1,590,000
^aPetco Animal Supplies Inc., senior note, 144A, 9.25%, 12/01/18	United States		2,500,000		2,743,750

					7,501,750

Semiconductors & Semiconductor Equipment 1.2%
Advanced Micro Devices Inc., senior note,
8.125%, 12/15/17	United States		300,000		327,000
7.75%, 8/01/20	United States		400,000		442,000
Freescale Semiconductor Inc., senior note, 8.05%, 2/01/20	United States		2,000,000		1,985,000
10.75%, 8/01/20	United States		1,104,000		1,192,320

					3,946,320

FH-15

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin High Income Securities Fund	Country	Principal Amount*			Value
Corporate Bonds (continued)
Software & Services 4.3%
^a,hCeridian Corp., 144A, 8.875%, 7/15/19	United States		600,000		$	622,500
First Data Corp., senior bond, 12.625%, 1/15/21	United States		1,000,000			1,006,250
senior note, 9.875%, 9/24/15	United States		111,000			112,942
senior note, 9.875%, 9/24/15	United States		71,000			71,888
^asenior secured bond, 144A, 8.25%, 1/15/21	United States		2,500,000			2,512,500
^aLawson Software Inc., senior note, 144A, 9.375%, 4/01/19	United States		600,000			643,500
Sitel LLC/Finance Corp., senior note, 11.50%, 4/01/18	United States		1,300,000			932,750
^asenior secured note, 144A, 11.00%, 8/01/17	United States		700,000			680,750
Sterling International Inc., senior note, 11.00%, 10/01/19	United States		1,200,000			1,212,000
SunGard Data Systems Inc., senior note, 7.625%, 11/15/20	United States		2,300,000			2,461,000
West Corp., senior note, 7.875%, 1/15/19	United States		3,000,000			3,150,000
^aZayo Escrow Corp., senior secured note, 144A, 8.125%, 1/01/20	United States		1,000,000			1,050,000

						14,456,080

Technology Hardware & Equipment 1.8%
CDW LLC/Finance Corp., senior note, 8.50%, 4/01/19	United States		3,200,000			3,424,000
^aCommScope Inc., senior note, 144A, 8.25%, 1/15/19	United States		2,300,000			2,443,750

						5,867,750

Telecommunication Services 9.0%
CenturyLink Inc., senior note,
6.45%, 6/15/21	United States		400,000			417,219
5.80%, 3/15/22	United States		3,000,000			2,994,192
Cricket Communications Inc., senior note, 7.75%, 10/15/20	United States		3,500,000			3,360,000
^aDigicel Group Ltd., senior note, 144A, 8.875%, 1/15/15	Jamaica		2,000,000			2,030,000
^aeAccess Ltd., senior note, 144A, 8.25%, 4/01/18	Japan		1,800,000			1,656,000
Frontier Communications Corp., senior note,
8.25%, 4/15/17	United States		400,000			432,000
8.50%, 4/15/20	United States		2,500,000			2,662,500
8.75%, 4/15/22	United States		900,000			949,500
Intelsat Jackson Holdings SA, senior note,
7.25%, 10/15/20	Luxembourg		900,000			951,750
7.50%, 4/01/21	Luxembourg		3,800,000			4,037,500
MetroPCS Wireless Inc., senior note, 7.875%, 9/01/18	United States		1,500,000			1,563,750
Sprint Nextel Corp., senior note,
8.375%, 8/15/17	United States		3,000,000			3,090,000
^a144A, 9.00%, 11/15/18	United States		3,000,000			3,360,000
^a144A, 7.00%, 3/01/20	United States		300,000			312,750
^aWind Acquisition Finance SA, senior secured note, 144A, 11.75%, 7/15/17	Italy		2,000,000			1,637,500
^a,gWind Acquisition Holdings Finance SA, senior secured note, 144A, PIK, 12.25%,
7/15/17	Italy		512,255	EUR		447,576
7/15/17	Italy		530,625			365,940

						30,268,177

Transportation 2.5%
^a,bAmerican Airlines Inc., senior secured note, 144A, 7.50%, 3/15/16	United States		2,500,000			2,375,000
^aCeva Group PLC, senior secured note, 144A,
11.625%, 10/01/16	United Kingdom		200,000			209,500
8.375%, 12/01/17	United Kingdom		1,300,000			1,265,063
11.50%, 4/01/18	United Kingdom		1,000,000			927,500
Hertz Corp., senior note,
7.50%, 10/15/18	United States		1,100,000			1,185,250

FH-16

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin High Income Securities Fund	Country	Principal Amount*		Value
Corporate Bonds (continued)
Transportation (continued)
6.75%, 4/15/19	United States		2,000,000	$	2,090,000
^a144A, 6.75%, 4/15/19	United States		200,000		209,000

					8,261,313

Utilities 2.6%
^aCalpine Corp., senior secured note, 144A,
7.875%, 7/31/20	United States		800,000		886,000
7.50%, 2/15/21	United States		1,500,000		1,627,500
7.875%, 1/15/23	United States		1,000,000		1,095,000
^aIntergen NV, senior secured note, 144A, 9.00%, 6/30/17	Netherlands		2,500,000		2,482,813
Texas Competitive Electric Holdings Co. LLC/Texas Competitive Electric Holdings Finance Inc., senior secured note,
^a144A, 11.50%, 10/01/20	United States		3,500,000		2,406,250
B, 15.00%, 4/01/21	United States		852,000		293,940

					8,791,503

Total Corporate Bonds (Cost $311,091,656)					314,022,872

^e,iSenior Floating Rate Interests 0.9%
Media 0.6%
Cumulus Media Holdings Inc., Second Lien Term Loan, 7.50%, 9/16/19	United States		1,500,000		1,503,750
Univision Communications Inc., Initial Term Loan, 2.245%, 9/29/14	United States		379,585		370,009

					1,873,759

Utilities 0.3%
Texas Competitive Electric Holdings Co. LLC, 2017 Term Loan, 4.741%, 10/10/17	United States		1,431,288		858,635

Total Senior Floating Rate Interests (Cost $3,016,584)					2,732,394

Total Investments before Short Term Investments (Cost $314,878,240)					317,496,006

Short Term Investments (Cost $12,360,844) 3.7%
Repurchase Agreements 3.7%
^jJoint Repurchase Agreement, 0.129%, 7/02/12 (Maturity Value $12,360,977)	United States		12,360,844		12,360,844
BNP Paribas Securities Corp. (Maturity Value $2,414,717)
Credit Suisse Securities (USA) LLC (Maturity Value $2,817,190)
Deutsche Bank Securities Inc. (Maturity Value $1,897,163)
HSBC Securities (USA) Inc. (Maturity Value $1,609,770)
Merrill Lynch, Pierce, Fenner & Smith Inc. (Maturity Value $1,609,770)
Morgan Stanley & Co. LLC (Maturity Value $804,947)
UBS Securities LLC (Maturity Value $1,207,420)
Collateralized by U.S. Government Agency Securities, 0.00% - 5.25%, 8/01/12 - 6/28/17; ^kU.S. Treasury Bills, 7/26/12; and U.S. Treasury Notes, 1.125% - 3.00%, 12/15/12 - 2/15/22 (valued at $12,612,708)

Total Investments (Cost $327,239,084) 98.5%					329,856,850
Other Assets, less Liabilities 1.5%					5,165,321

Net Assets 100.0%				$	335,022,171

FH-17

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited)


Franklin High Income Securities Fund

*The principal amount is stated in U.S. dollars unless otherwise indicated.

^bSee Note 7 regarding defaulted securities.

^cSecurity has been deemed illiquid because it may not be able to be sold within seven days. At June 30, 2012, the value of this security was $191, representing less than 0.01% of net assets.

^dPerpetual security with no stated maturity date.

^eThe coupon rate shown represents the rate at period end.

^fAt June 30, 2012, pursuant to the Fund’s policies and the requirements of applicable securities law, the Fund may be restricted from trading these securities for a limited or extended period of time due to ownership limits and/or potential possession of material non-public information.

^gIncome may be received in additional securities and/or cash.

^hSecurity purchased on a when-issued basis.

ⁱSee Note 1(f) regarding senior floating rate interests.

^jSee Note 1(c) regarding joint repurchase agreement.

^kThe security is traded on a discount basis with no stated coupon rate.

FH-18

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin High Income Securities Fund

Forward Exchange Contracts

At June 30, 2012, the Fund had the following forward exchange contracts outstanding. See Note 1(e).

Currency

Counterparty

Type

Quantity

Contract
Amount

Settlement
Date

Unrealized
Appreciation

Unrealized
Depreciation

Euro

DBAB

Sell

400,000

525,560

12/17/12

18,310

—

See Abbreviations on page FH-32.

The accompanying notes are an integral part of these financial statements.

FH-19

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

June 30, 2012 (unaudited)


	Franklin High Income Securities Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	314,878,240
Cost - Repurchase agreements		12,360,844

Total cost of investments	$	327,239,084

Value - Unaffiliated issuers	$	317,496,006
Value - Repurchase agreements		12,360,844

Total value of investments		329,856,850
Cash		685
Receivables:
Capital shares sold		71,237
Interest		6,302,116
Unrealized appreciation on forward exchange contracts		18,310
Other assets		80

Total assets		336,249,278

Liabilities:
Payables:
Investment securities purchased		682,142
Capital shares redeemed		180,373
Affiliates		264,169
Reports to shareholders		76,134
Accrued expenses and other liabilities		24,289

Total liabilities		1,227,107

Net assets, at value	$	335,022,171

Net assets consist of:
Paid-in capital	$	359,054,498
Undistributed net investment income		10,924,405
Net unrealized appreciation (depreciation)		2,636,076
Accumulated net realized gain (loss)		(37,592,808	)

Net assets, at value	$	335,022,171

The accompanying notes are an integral part of these financial statements.

FH-20

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Assets and Liabilities (continued)

June 30, 2012 (unaudited)


	Franklin High Income Securities Fund
Class 1:
Net assets, at value	$	41,074,988

Shares outstanding		6,340,339

Net asset value and maximum offering price per share	$	6.48

Class 2:
Net assets, at value	$	267,040,937

Shares outstanding		42,319,193

Net asset value and maximum offering price per share	$	6.31

Class 4:
Net assets, at value	$	26,906,246

Shares outstanding		4,188,641

Net asset value and maximum offering price per share	$	6.42

The accompanying notes are an integral part of these financial statements.

FH-21

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the six months ended June 30, 2012 (unaudited)


	Franklin High Income Securities Fund
Investment income:
Dividends	$	70,781
Interest		12,986,607

Total investment income		13,057,388

Expenses:
Management fees (Note 3a)		865,129
Distribution fees: (Note 3c)
Class 2		325,687
Class 4		47,664
Unaffiliated transfer agent fees		15
Custodian fees (Note 4)		2,367
Reports to shareholders		51,742
Professional fees		21,491
Trustees’ fees and expenses		641
Other		13,195

Total expenses		1,327,931

Net investment income		11,729,457

Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		1,315,912
Foreign currency transactions		4
Swap Contracts		(236,015	)

Net realized gain (loss)		1,079,901

Net change in unrealized appreciation (depreciation) on:
Investments		9,429,756
Translation of other assets and liabilities denominated in foreign currencies		13,457

Net change in unrealized appreciation (depreciation)		9,443,213

Net realized and unrealized gain (loss)		10,523,114

Net increase (decrease) in net assets resulting from operations	$	22,252,571

The accompanying notes are an integral part of these financial statements.

FH-22

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets


	Franklin High Income Securities Fund
	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31, 2011

Increase (decrease) in net assets:
Operations:
Net investment income	$	11,729,457		$	24,281,884
Net realized gain (loss) from investments, foreign currency transactions and swap contracts		1,079,901			7,087,968
Net change in unrealized appreciation (depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies		9,443,213			(18,159,827	)

Net increase (decrease) in net assets resulting from operations		22,252,571			13,210,025

Distributions to shareholders from:
Net investment income:
Class 1		(2,935,357	)		(2,826,791	)
Class 2		(18,731,686	)		(16,984,105	)
Class 4		(1,858,828	)		(1,620,002	)

Total distributions to shareholders		(23,525,871	)		(21,430,898	)

Capital share transactions: (Note 2)
Class 1		(869,092	)		(5,339,666	)
Class 2		18,811,914			16,598,368
Class 4		(125,850	)		1,632,254

Total capital share transactions		17,816,972			12,890,956

Net increase (decrease) in net assets		16,543,672			4,670,083
Net assets:
Beginning of period		318,478,499			313,808,416

End of period	$	335,022,171		$	318,478,499

Undistributed net investment income included in net assets:
End of period	$	10,924,405		$	22,720,819

The accompanying notes are an integral part of these financial statements.

FH-23

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited)

Franklin High Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment company, consisting of twenty separate funds. The Franklin High Income Securities Fund (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. At June 30, 2012, 85.18% of the Fund’s shares were held through one insurance company. The Fund offers three classes of shares: Class 1, Class 2, and Class 4. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

Equity securities listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Over-the-counter (OTC) securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.

Debt securities generally trade in the OTC market rather than on a securities exchange. The Fund’s pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value. Securities denominated in a foreign currency are converted into their U.S. dollar equivalent at the foreign exchange rate in effect at the close of the NYSE on the date that the values of the foreign debt securities are determined. Repurchase agreements are valued at cost, which approximates market value.

Certain derivative financial instruments (derivatives) trade in the OTC market. The Fund’s pricing services use various techniques including industry standard option pricing models and proprietary discounted cash flow models to determine the fair value of those instruments. The Fund’s net benefit or obligation under the derivative contract, as measured by the fair market value of the contract, is included in net assets.

FH-24

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin High Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

a. Financial Instrument Valuation (continued)

value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. The VLOC employs various methods for calibrating these valuation approaches including a regular review of key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.

b. Foreign Currency Translation

c. Joint Repurchase Agreement

FH-25

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin High Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

d. Securities Purchased on a When-Issued Basis

The Fund purchases securities on a when-issued basis, with payment and delivery scheduled for a future date. These transactions are subject to market fluctuations and are subject to the risk that the value at delivery may be more or less than the trade date purchase price. Although the Fund will generally purchase these securities with the intention of holding the securities, it may sell the securities before the settlement date. Sufficient assets have been segregated for these securities.

e. Derivative Financial Instruments

The Fund invested in derivatives in order to manage risk or gain exposure to various other investments or markets. Derivatives are financial contracts based on an underlying or notional amount, require no initial investment or an initial net investment that is smaller than would normally be required to have a similar response to changes in market factors, and require or permit net settlement. Derivatives contain various risks including the potential inability of the counterparty to fulfill their obligations under the terms of the contract, the potential for an illiquid secondary market, and/or the potential for market movements which expose the Fund to gains or losses in excess of the amounts shown on the Statement of Assets and Liabilities. Realized gain and loss and unrealized appreciation and depreciation on these contracts for the period are included in the Statement of Operations.

The Fund entered into forward exchange contracts primarily to manage and/or gain exposure to certain foreign currencies. A forward exchange contract is an agreement between the Fund and a counterparty to buy or sell a foreign currency for a specific exchange rate on a future date. Pursuant to the terms of the forward exchange contracts, cash or securities may be required to be deposited as collateral. Unrestricted cash may be invested according to the Fund’s investment objectives.

The Fund entered into credit default swap contracts primarily to manage and/or gain exposure to credit risk. A credit default swap is an agreement between the Fund and a counterparty whereby the buyer of the contract receives credit protection and the seller of the contract guarantees the credit worthiness of a referenced debt obligation. The underlying referenced debt obligation may be a single issuer of corporate or sovereign debt, a credit index, or a tranche of a credit index. In the event of a default of the underlying referenced debt obligation, the buyer is entitled to receive the notional amount of the credit default swap contract from the seller in exchange for the referenced debt obligation, a net settlement amount equal to the notional amount of the credit default swap less the recovery value of the referenced debt obligation, or other agreed upon amount. Over the term of the contract, the buyer pays the seller a periodic stream of payments, provided that no event of default has occurred. Such periodic payments are accrued daily as an unrealized appreciation or depreciation until the payments are made, at which time they are realized. Payments received or paid to initiate a credit default swap contract are reflected on the Statement of Assets and Liabilities and represent compensating factors between stated terms of the credit default swap agreement and prevailing market conditions (credit spreads and other relevant factors). These upfront payments are amortized over the term of the contract as a realized gain or loss on the Statement of Operations. Pursuant to the terms of the credit default swap contract, cash or securities may be required to be deposited as collateral. Unrestricted cash may be invested according to the Fund’s investment objectives.

The Fund’s investments in OTC derivatives are subject to the terms of International Swaps and Derivatives Association Master Agreements and other related agreements between the Fund and certain derivative counterparties. These agreements contain various provisions, including but not limited to collateral requirements, events of default, requirements for the Fund to maintain certain net asset levels and/or limit the decline in net assets over various periods of time. Should the Fund fail to meet any of these provisions, the derivative counterparty has the right to terminate the derivative contract and require immediate payment by the Fund for those OTC derivatives with that particular counterparty that are in a net unrealized loss position. At June 30, 2012, the Fund had no OTC derivatives in a net unrealized loss position for such contracts.

See Note 8 regarding other derivative information.

FH-26

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin High Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

f. Senior Floating Rate Interests

The Fund invests in senior secured corporate loans that pay interest at rates which are periodically reset by reference to a base lending rate plus a spread. These base lending rates are generally the prime rate offered by a designated U.S. bank or the London InterBank Offered Rate (LIBOR). Senior secured corporate loans often require prepayment of principal from excess cash flows or at the discretion of the borrower. As a result, actual maturity may be substantially less than the stated maturity.

Senior secured corporate loans in which the Fund invests are generally readily marketable, but may be subject to some restrictions on resale.

g. Income and Deferred Taxes

h. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Amortization of premium and accretion of discount on debt securities are included in interest income. Facility fees are recognized as income over the expected term of the loan. Dividend income is recorded on the ex-dividend date except that certain dividends from foreign securities are recognized as soon as the Fund is notified of the ex-dividend date. Distributions to shareholders are recorded on the ex-dividend date and are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with accounting principles generally accepted in the United States of America. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.

FH-27

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin High Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

i. Accounting Estimates

j. Guarantees and Indemnifications

2. SHARES OF BENEFICIAL INTEREST

At June 30, 2012, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:


	Year Ended June 30,
	2012						2011
	Six Months Ended June 30, 2012						Year Ended December 31, 2011
Class 1 Shares:	Shares			Amount			Shares			Amount
Shares sold		75,634		$	504,520			351,292		$	2,313,979
Shares issued in reinvestment of distributions		461,534			2,935,357			434,223			2,826,791
Shares redeemed		(632,655	)		(4,308,969	)		(1,598,692	)		(10,480,436	)

Net increase (decrease)		(95,487	)	$	(869,092	)		(813,177	)	$	(5,339,666	)

Class 2 Shares:
Shares sold		3,863,510		$	25,457,450			12,499,502		$	81,812,457
Shares issued in reinvestment of distributions		3,021,240			18,731,686			2,674,662			16,984,105
Shares redeemed		(3,811,299	)		(25,377,222	)		(12,968,695	)		(82,198,194	)

Net increase (decrease)		3,073,451		$	18,811,914			2,205,469		$	16,598,368

Class 4 Shares:
Shares sold		26,564		$	178,396			337,849		$	2,262,900
Shares issued on reinvestment of distributions		294,584			1,858,828			250,774			1,620,002
Shares redeemed		(321,849	)		(2,163,074	)		(344,910	)		(2,250,648	)

Net increase (decrease)		(701	)	$	(125,850	)		243,713		$	1,632,254

FH-28

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin High Income Securities Fund

3. TRANSACTIONS WITH AFFILIATES


Subsidiary		Affiliation
Franklin Advisers, Inc. (Advisers)		Investment manager
Franklin Templeton Services, LLC (FT Services)		Administrative manager
Franklin Templeton Distributors, Inc. (Distributors)		Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services)		Transfer agent

a. Management Fees

The Fund pays an investment management fee to Advisers based on the average daily net assets of the Fund as follows:


Annualized Fee Rate		Net Assets
0.625%		Up to and including $100 million
0.500%		Over $100 million, up to and including $250 million
0.450%		Over $250 million, up to and including $7.5 billion
0.440%		Over $7.5 billion, up to and including $10 billion
0.430%		Over $10 billion, up to and including $12.5 billion
0.420%		Over $12.5 billion, up to and including $15 billion
0.400%		In excess of $15 billion

b. Administrative Fees

c. Distribution Fees

The Board adopted distribution plans for Class 2 and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to 0.35% per year of its average daily net assets of each class. The Board has agreed to limit the current rate to 0.25% per year for Class 2.

d. Transfer Agent Fees

Investor Services, under terms of an agreement, performs shareholder servicing for the Fund and is not paid by the Fund for the services.

4. EXPENSE OFFSET ARRANGEMENT

FH-29

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin High Income Securities Fund

5. INCOME TAXES

At December 31, 2011, capital loss carryforwards were as follows:


Capital loss carryforwards expiring in:
2012	$	9,009,590
2013		6,321,190
2014		40,420
2015		4,493,289
2016		8,150,741
2017		10,621,353

	$	38,636,583

At June 30, 2012, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:


Cost of investments	$	328,026,150


Unrealized appreciation	$	13,879,203
Unrealized depreciation		(12,048,503	)

Net unrealized appreciation (depreciation)	$	1,830,700

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of defaulted securities, foreign currency transactions, payments-in-kind, bond discounts and premiums, and wash sales.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2012, aggregated $59,789,657 and $49,022,670, respectively.

7. CREDIT RISK AND DEFAULTED SECURITIES

At June 30, 2012, the Fund had 93.40% of its portfolio invested in high yield securities, senior secured floating rate notes, or other securities rated below investment grade. These securities may be more sensitive to economic conditions causing greater price volatility and are potentially subject to a greater risk of loss due to default than higher rated securities.

The Fund held defaulted securities and/or other securities for which the income has been deemed uncollectible. At June 30, 2012, the aggregate value of these securities was $4,213,754 representing 1.26% of the Fund’s net assets. The Fund discontinues accruing income on securities for which income has been deemed uncollectible and provides an estimate for losses on interest receivable. The securities have been identified on the accompanying Statement of Investments.

FH-30

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin High Income Securities Fund

8. OTHER DERIVATIVE INFORMATION

At June 30, 2012, the Fund has invested in derivative contracts which are reflected on the Statement of Assets and Liabilities as follows:

Asset Derivatives

Liability Derivatives

Derivative Contracts Not Accounted
for as Hedging Instruments

Statement of Assets and
Liabilities Location

Fair
Value
Amount

Statement of Assets and
Liabilities Location

Fair
Value
Amount

Foreign exchange contracts

Unrealized appreciation on forward exchange contracts

18,310

Unrealized depreciation on forward exchange contracts

—

For the period ended June 30, 2012, the effect of derivative contracts on the Fund’s Statement of Operations was as follows:


Derivative Contracts Not Accounted for as Hedging Instruments	Statement of Operations Locations	Realized Gain (Loss) for the Period			Change in Unrealized Appreciation (Depreciation) for the Period
Foreign exchange contracts	Net realized gain (loss) from foreign currency transactions/ Net change in unrealized appreciation (depreciation) on translation of other assets and liabilities denominated in foreign currencies	$	—		$	13,458
Credit contracts	Net realized gain (loss) from swap contracts/Net change in unrealized appreciation (depreciation) on investments	($	236,015	)	$	—

For the period ended 6/30/12, the average month end market value of derivatives represented .01% of average month end net assets. The average month end number of open derivative contracts for the period was one.

See Note 1(e) regarding derivative financial instruments.

9. CREDIT FACILITY

FH-31

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin High Income Securities Fund

10. FAIR VALUE MEASUREMENTS

•

Level 1 – quoted prices in active markets for identical financial instruments

•

Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)

•

Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of financial instruments)

The inputs or methodology used for valuing financial instruments are not an indication of the risk associated with investing in those financial instruments.

For movements between the levels within the fair value hierarchy, the Fund has adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.

A summary of inputs used as of June 30, 2012, in valuing the Fund’s assets and liabilities carried at fair value, is as follows:


	Level 1		Level 2		Level 3		Total

Assets:
Investments in Securities:
Equity Investments:^a,b	$	740,740	$	—	$	—	$	740,740
Corporate Bonds		—		314,022,681		191		314,022,872
Senior Floating Rate Interests		—		2,732,394		—		2,732,394
Short Term Investments		—		12,360,844		—		12,360,844

Total Investments in Securities	$	740,740	$	329,115,919	$	191	$	329,856,850

Forward Exchange Contracts		—		18,310		—		18,310

^aIncludes common and preferred stocks.

^bFor detailed categories, see the accompanying Statement of Investments.

A reconciliation of assets in which Level 3 inputs are used in determining fair value is presented when there are significant Level 3 investments at the end of the period.

11. NEW ACCOUNTING PRONOUNCEMENTS

12. SUBSEQUENT EVENTS

The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure.


ABBREVIATIONS
Counterparty	Currency	Selected Portfolio

DBAB - Deutsche Bank AG	EUR - Euro	FRN - Floating Rate Note
		PIK - Payment-In-Kind

FH-32

FRANKLIN INCOME SECURITIES FUND

This semiannual report for Franklin Income Securities Fund covers the period ended June 30, 2012.

Performance Summary as of 6/30/12

Franklin Income Securities Fund – Class 2 delivered a +5.78% total return for the six-month period ended 6/30/12.

Franklin Income Securities Fund – Class 2

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown.

FI-1

Fund Goal and Main Investments: Franklin Income Securities Fund seeks to maximize income while maintaining prospects for capital appreciation. Under normal market conditions, the Fund invests in both equity and debt securities.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. The Fund underperformed its equity benchmark, the Standard & Poor’s^® 500 Index (S&P 500^®), which produced a +9.49% total return, but outperformed its fixed income benchmark, the Barclays U.S. Aggregate Index, which posted a +2.37% total return for the same period.¹

Economic and Market Overview

During late March and early April 2012, improved economic reports helped U.S. stock markets reach multi-year highs. The Dow Jones Industrial Average exceeded 13,000 and the S&P 500 topped 1,400 for the first time since 2008, while the NASDAQ Composite Index hit an 11-year high.³ Global markets grew volatile, however, amid renewed concerns about eurozone debt and slowing global economic growth.

2. Source: Bureau of Labor Statistics.

3. Please see Index Descriptions following the Fund Summaries.

Fund Risks: All investments involve risks, including possible loss of principal. The Fund’s share price and yield will be affected by interest rate movements. Bond prices generally move in the opposite direction of interest rates. Thus, as the prices of bonds in the Fund adjust to a rise in interest rates, the Fund’s share price may decline. Changes in the financial strength of a bond issuer or in a bond’s credit rating may affect its value. The Fund’s portfolio includes a substantial portion of higher yielding, lower rated corporate bonds because of the relatively higher yields they offer. Floating rate loans are lower rated, higher yielding instruments, which are subject to increased risk of default and can potentially result in loss of principal. These securities carry a greater degree of credit risk relative to investment-grade securities. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

FI-2

Fears of a Greek debt default and exit from the eurozone were somewhat mitigated by secured bailout financing and bondholder concessions in February, as well as elections in May and June that resulted in the formation of a new coalition government. Risk-averse investors seeking safety drove U.S. Treasury yields to historical lows during the period.

For the six months under review, investment-grade fixed income markets, as measured by the Barclays U.S. Aggregate Index, posted modest returns. U.S. stocks, as measured by the S&P 500, faced bouts of risk aversion as investors shunned risk assets in light of uneven economic data but ended the period with robust gains. Overall, general investor concerns drove the 10-year U.S. Treasury yield from 1.89% on December 31, 2011, to 1.67% on June 30, 2012.

Investment Strategy

We search for undervalued or out-of-favor securities we believe offer opportunities for income today and growth tomorrow. We generally perform independent analysis of the debt securities being considered for the Fund’s portfolio, rather than relying principally on ratings assigned by rating agencies. In analyzing debt and equity securities, we consider a variety of factors, including: a security’s relative value based on such factors as anticipated cash flow, interest or dividend coverage, asset coverage, and earnings prospects; the experience and strength of a company’s management; a company’s sensitivity to changes in interest rates and business conditions; a company’s debt maturity schedules and borrowing requirements; and a company’s changing financial condition and market recognition of the change.

Manager’s Discussion

During the six-month period, the Fund’s equity and fixed income holdings contributed to performance, largely due to strong returns of securities

Portfolio Breakdown

Franklin Income Securities Fund

6/30/12


	% of Total Net Assets
Equity*		41.3%
Utilities		10.3%
Financials		8.8%
Health Care		6.5%
Energy		5.8%
Telecommunication Services		2.9%
Materials		2.3%
Industrials		1.4%
Consumer Discretionary		1.2%
Information Technology		1.1%
Consumer Staples		1.0%
Fixed Income		47.4%
Consumer Discretionary		8.7%
Information Technology		8.2%
Energy		7.4%
Utilities		5.9%
Financials		5.9%
Materials		2.8%
Health Care		2.8%
Industrials		2.8%
Telecommunication Services		2.0%
Consumer Staples		0.9%
Short-Term Investments & Other Net Assets		11.3%

*Includes convertible bonds.

FI-3

in the S&P 500 and Barclays U.S. Aggregate Index driven by continued, albeit modest, economic growth, resilient corporate profits and continued low long-term interest rates.

Investor optimism regarding economic growth potential gave way to a more subdued outlook as challenges mounted, including Europe’s continued sovereign and fiscal imbalances, looming fiscal deadlines in the U.S., and a deteriorating labor market outlook. We believe weakening energy and select commodity prices may provide some relief to the recent slowdown in economic activity but could also challenge their respective sectors.

Within the Fund’s equity holdings, the financials, utilities and health care sectors were primary contributors while energy and materials struggled. Bank of America and Wells Fargo & Co. in financials provided strong gains early in the period following improved clarity on the banks’ pace of capital accumulation as well as improvement in key credit areas, particularly within the mortgage markets. Preferred stock of Ally Financial also helped performance. Utilities continued to stand out as strong performers, largely due to their historically consistent returns, high degree of visibility and predictability of results, as well as a favorable backdrop of declining interest rates and corporate bond yields. Sempra Energy and PG&E were strong performers during the period. In the health care sector, our holdings in major pharmaceutical companies including Merck & Co. and Roche Holding delivered strong returns. Select telecommunication services holdings including AT&T, Telstra Corp. and Vodafone Group also contributed to performance.

Weak energy prices and investor fears of slower global economic activity weighed on the performance of our positions in Canadian Oil Sands, Royal Dutch Shell, Chesapeake Energy and Weatherford International. In materials, metals and mining companies including Barrick Gold, Newmont Mining⁴ and BHP Billiton also performed poorly.

Within fixed income markets, a generally favorable backdrop prevailed, including low long-term interest rates, stable to declining credit spreads and functioning capital markets that provided ready access to capital at a near-record pace of issuance for investment-grade and high yield corporate bonds. We largely focused on high yield opportunities during the period and were attracted to the higher potential yields and returns as well as the opportunity to continue to benefit from the favorable environment for many individual credits. Key positive themes were low

4. Equity-linked security.

Top Five Equity Holdings

Franklin Income Securities Fund

6/30/12


Company *Sector/Industry*	% of Total Net Assets
Merck & Co. Inc.		2.1%
Health Care
Wells Fargo & Co.		2.1%
Financials
Bank of America Corp.		1.7%
Financials
Roche Holding AG (Switzerland)		1.6%
Health Care
Johnson & Johnson		1.3%
Health Care

Top Five Fixed Income and Senior Floating Rate Interests Holdings*

Franklin Income Securities Fund

6/30/12


Issuer *Sector/Industry*	% of Total Net Assets
First Data Corp.		4.4%
Information Technology
Texas Competitive Electric Holdings Co. LLC		3.1%
Utilities
Freescale Semiconductor Inc.		2.1%
Information Technology
Dynegy Holdings Inc.**		1.7%
Utilities
CIT Group Inc.		1.6%
Financials

*Does not include convertible bonds.

**Includes bonds issued by Dynegy Midwest Generation and Dynegy Power and defaulted securities issued by Dynegy Holdings.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).

FI-4

default rates, recent debt maturity extensions, interest cost reductions and stable corporate performance in terms of margins and cash flow.

The technology, communications, consumer cyclical and consumer non-cyclical sectors delivered strong performance, while the electric utility and energy sectors had poor results.⁵ Generally, these results had more to do with individual company dynamics than systemic risk. First Data in technology continued to reduce debt through improved performance and growth and by taking necessary actions to fix its overall capital structure, including extending debt maturities. Sprint Nextel in communications and Freescale Semiconductor in technology also showed improved credit trends despite challenging and competitive business environments. CIT Group in finance companies remained a strong performer, although the size of our position declined as the company called for redemption and refinancing of its debt at lower rates and longer maturities.

Among the key fixed income detractors was PetroPlus Finance in energy, as PetroPlus Holdings remained mired in weak European refining conditions resulting in disappointing bond recoveries and dimmed prospects for a successful corporate reorganization. The company defaulted on its bonds during the period. Other poor performers in the energy sector were oil and gas exploration and production companies such as ATP Oil & Gas, Chesapeake Energy and Quicksilver Resources. Arch Coal also hurt performance as low natural gas prices caused a substantial number of customers, particularly electric utilities, to switch from coal.

The Fund’s equity allocation did not change significantly during the period, however our fixed income allocation decreased. Among stock allocations, materials, financials and utilities increased while information technology and consumer discretionary decreased. However, within fixed income, our basic industry and consumer cyclical allocations rose while finance companies, consumer non-cyclicals and electric utilities declined.

We largely focused on corporate bonds within fixed income during the period, given the potential for higher yields and long-term total return relative to other fixed income securities. We maintained significant diversification with holdings across a range of sectors. While sector

5. Technology holdings are in information technology in the SOI. Communications holdings are in telecommunication services and consumer discretionary in the SOI. Consumer cyclical holdings are in consumer discretionary and financials in the SOI. Consumer non-cyclical holdings are in consumer discretionary, consumer staples, financials and health care in the SOI. Electric utility holdings are in utilities in the SOI.

FI-5

diversification remains important, we emphasize bottom-up fundamental research to identify what we believe are the most attractive investment opportunities to help us meet the Fund’s objective.

The Fund’s equity exposure continued to focus on dividend paying common stocks and convertible securities. We continued to seek what we considered to be attractive current yield as well as those companies with potential favorable outlooks for dividend growth. Convertible securities remained attractive to us given the possible opportunity for high, current income and the potential to participate in the appreciation of the underlying common stock. At period-end, we had limited holdings in other equity securities including preferred stocks and warrants. We remain largely focused on U.S. securities.

Thank you for your participation in Franklin Income Securities Fund. We look forward to serving your future investment needs.

FI-6

Fund Expenses

•

Transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes.

•

Actual Fund Expenses

You can estimate the Fund-level expenses you incurred during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:

1.	Divide your account value by $1,000.

If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6.

2.	Multiply the result by the number under the heading “Fund-Level Expenses Incurred During Period.”

If Fund-Level Expenses Incurred During Period were $7.50, then 8.6 x $7.50 = $64.50.

In this illustration, the estimated expenses incurred this period at the Fund level are $64.50.

Franklin Income Securities Fund – Class 2

FI-7

Hypothetical Example for Comparison with Other Mutual Funds


Class 2	Beginning Account Value 1/1/12		Ending Account Value 6/30/12		Fund-Level Expenses Incurred During Period* 1/1/12–6/30/12
Actual	$	1,000	$	1,057.80	$	3.68
Hypothetical (5% return before expenses)	$	1,000	$	1,021.28	$	3.62

*Expenses are calculated using the most recent six-month annualized expense ratio for the Fund’s Class 2 shares (0.72%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 182/366 to reflect the one-half year period.

FI-8

Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Franklin Income Securities Fund


	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31,
Class 1	Six Months Ended June 30, 2012 (unaudited)			2011			2010			2009			2008			2007

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	14.68		$	15.16		$	14.43		$	11.53		$	17.63		$	17.65

Income from investment operations^a:
Net investment income^b		0.47			0.96			0.89			0.91			1.10			1.03
Net realized and unrealized gains (losses)		0.38			(0.54	)		0.85			3.08			(5.99	)		(0.31	)

Total from investment operations		0.85			0.42			1.74			3.99			(4.89	)		0.72

Less distributions from:
Net investment income		(1.02	)		(0.90	)		(1.01	)		(1.09	)		(0.86	)		(0.63	)
Net realized gains		—			—			—			—			(0.35	)		(0.11	)

Total distributions		(1.02	)		(0.90	)		(1.01	)		(1.09	)		(1.21	)		(0.74	)

Net asset value, end of period	$	14.51		$	14.68		$	15.16		$	14.43		$	11.53		$	17.63


Total return^c		5.90%			2.71%			12.87%			35.88%			(29.41)%			4.01%
Ratios to average net assets^d
Expenses		0.47%			0.47%	^e		0.47%	^e		0.47%	^e		0.47%	^e		0.47%	^e
Net investment income		6.23%			6.35%			6.28%			7.23%			7.28%			5.77%

Supplemental data
Net assets, end of period (000’s)	$	1,458,268		$	1,300,935		$	1,449,028		$	910,504		$	433,370		$	455,932
Portfolio turnover rate		11.32%			28.65%			41.65%			42.30%			43.89%			32.11%

^bBased on average daily shares outstanding.

^dRatios are annualized for periods less than one year.

^eBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

FI-9

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin Income Securities Fund


	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31,
Class 2	Six Months Ended June 30, 2012 (unaudited)			2011			2010			2009			2008			2007

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	14.32		$	14.82		$	14.12		$	11.30		$	17.31		$	17.36

Income from investment operations^a:
Net investment income^b		0.44			0.90			0.86			0.86			1.04			0.97
Net realized and unrealized gains (losses)		0.37			(0.53	)		0.82			3.01			(5.87	)		(0.30	)

Total from investment operations		0.81			0.37			1.68			3.87			(4.83	)		0.67

Less distributions from:
Net investment income		(0.98	)		(0.87	)		(0.98	)		(1.05	)		(0.83	)		(0.61	)
Net realized gains		—			—			—			—			(0.35	)		(0.11	)

Total distributions		(0.98	)		(0.87	)		(0.98	)		(1.05	)		(1.18	)		(0.72	)

Net asset value, end of period	$	14.15		$	14.32		$	14.82		$	14.12		$	11.30		$	17.31


Total return^c		5.78%			2.38%			12.67%			35.59%			(29.66)%			3.76%
Ratios to average net assets^d
Expenses		0.72%			0.72%	^e		0.72%	^e		0.72%	^e		0.72%	^e		0.72%	^e
Net investment income		5.98%			6.10%			6.03%			6.98%			7.03%			5.52%

Supplemental data
Net assets, end of period (000’s)	$	6,038,574		$	5,915,637		$	6,309,207		$	6,114,898		$	4,944,457		$	7,429,064
Portfolio turnover rate		11.32%			28.65%			41.65%			42.30%			43.89%			32.11%

^bBased on average daily shares outstanding.

^dRatios are annualized for periods less than one year.

^eBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

FI-10

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin Income Securities Fund


	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31,
Class 4	Six Months Ended June 30, 2012 (unaudited)			2011			2010			2009			2008^a

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	14.54		$	15.04		$	14.33		$	11.49		$	16.90

Income from investment operations^b:
Net investment income^c		0.44			0.90			0.85			0.86			0.87
Net realized and unrealized gains (losses)		0.39			(0.54	)		0.84			3.06			(5.07	)

Total from investment operations		0.83			0.36			1.69			3.92			(4.20	)

Less distributions from:
Net investment income		(0.97	)		(0.86	)		(0.98	)		(1.08	)		(0.86	)
Net realized gains		—			—			—			—			(0.35	)

Total distributions		(0.97	)		(0.86	)		(0.98	)		(1.08	)		(1.21	)

Net asset value, end of period	$	14.40		$	14.54		$	15.04		$	14.33		$	11.49


Total return^d		5.80%			2.29%			12.54%			35.37%			(26.61)%
Ratios to average net assets^e
Expenses		0.82%			0.82%	^f		0.82%	^f		0.82%	^f		0.82%	^f
Net investment income		5.88%			6.00%			5.93%			6.88%			6.93%

Supplemental data
Net assets, end of period (000’s)	$	440,415		$	431,435		$	415,541		$	347,733		$	135,360
Portfolio turnover rate		11.32%			28.65%			41.65%			42.30%			43.89%

^aFor the period February 29, 2008 (effective date) to December 31, 2008.

^cBased on average daily shares outstanding.

^eRatios are annualized for periods less than one year.

^fBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

FI-11

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited)


Franklin Income Securities Fund	Country	Shares/ Warrants		Value
Common Stocks and Other Equity Interests 36.5%
Consumer Discretionary 0.9%
^aCharter Communications Inc., wts., 11/30/14	United States		311,018	$	8,241,977
Comcast Corp., A	United States		900,000		28,773,000
^a,b,cDex One Corp.	United States		2,642,381		2,470,626
^aGeneral Motors Co., wts., 7/10/16	United States		129,731		1,429,636
^aGeneral Motors Co., wts., 7/10/19	United States		129,731		879,576
^aMotors Liquidation Co., GUC Trust	United States		35,826		438,868
^aSuperMedia Inc., Litigation Trust	United States		3,472,135		65,103
Target Corp.	United States		453,900		26,412,441

					68,711,227

Consumer Staples 1.0%
Diageo PLC	United Kingdom		1,150,000		29,575,932
PepsiCo Inc.	United States		672,500		47,518,850

					77,094,782

Energy 5.6%
^aAlpha Natural Resources Inc.	United States		135,000		1,175,850
BP PLC, ADR	United Kingdom		1,300,000		52,702,000
^aCallon Petroleum Co.	United States		782,594		3,333,850
Canadian Oil Sands Ltd.	Canada		3,700,000		71,670,350
Chesapeake Energy Corp.	United States		900,000		16,740,000
Chevron Corp.	United States		500,000		52,750,000
ConocoPhillips	United States		750,000		41,910,000
Exxon Mobil Corp.	United States		804,650		68,853,901
Phillips 66	United States		500,000		16,620,000
Royal Dutch Shell PLC, A, ADR	United Kingdom		850,000		57,315,500
Schlumberger Ltd.	United States		251,000		16,292,410
Spectra Energy Corp.	United States		500,000		14,530,000
Total SA, B, ADR	France		512,500		23,036,875
^aWeatherford International Ltd.	United States		750,000		9,472,500

					446,403,236

Financials 5.5%
Banco Santander SA	Spain		2,205,480		14,573,144
Bank of America Corp.	United States		6,000,000		49,080,000
Barclays PLC	United Kingdom		4,000,000		10,205,810
BlackRock Inc.	United States		240,800		40,892,656
^aCIT Group Inc.	United States		691,600		24,648,624
Citigroup Inc.	United States		580,000		15,897,800
^aFannie Mae	United States		1,928,019		491,645
HSBC Holdings PLC	United Kingdom		5,000,000		43,959,090
JPMorgan Chase & Co.	United States		1,850,000		66,100,500
M&T Bank Corp.	United States		500,000		41,285,000
QBE Insurance Group Ltd.	Australia		1,000,000		13,696,437
Wells Fargo & Co.	United States		2,909,600		97,297,024
Westfield Retail Trust	Australia		6,384,600		18,626,448

					436,754,178

Health Care 6.5%
Johnson & Johnson	United States		1,500,000		101,340,000
Merck & Co. Inc.	United States		4,000,000		167,000,000
Pfizer Inc.	United States		3,518,775		80,931,825
Roche Holding AG	Switzerland		750,000		129,293,994
Sanofi, ADR	France		1,000,000		37,780,000

					516,345,819

FI-12

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Income Securities Fund	Country	Shares/ Warrants		Value
Common Stocks and Other Equity Interests (continued)
Industrials 1.4%
Caterpillar Inc.	United States		80,000	$	6,792,800
General Electric Co.	United States		4,853,782		101,152,817

					107,945,617

Information Technology 0.8%
Intel Corp.	United States		2,500,000		66,625,000

Materials 1.6%
Barrick Gold Corp.	Canada		700,000		26,299,000
BHP Billiton PLC	United Kingdom		1,000,000		28,303,340
The Dow Chemical Co.	United States		500,000		15,750,000
E. I. du Pont de Nemours and Co.	United States		200,000		10,114,000
Freeport-McMoRan Copper & Gold Inc., B	United States		237,286		8,084,334
LyondellBasell Industries NV, A	United States		1,000,000		40,270,000

					128,820,674

Telecommunication Services 2.9%
AT&T Inc.	United States		2,000,000		71,320,000
CenturyLink Inc.	United States		500,000		19,745,000
France Telecom SA	France		528,500		6,939,522
Frontier Communications Corp.	United States		2,000,000		7,660,000
SK Telecom Co. Ltd., ADR	South Korea		505,100		6,111,710
Telstra Corp. Ltd.	Australia		8,000,000		30,218,148
Vivendi SA	France		516,666		9,566,447
Vodafone Group PLC	United Kingdom		27,500,000		77,230,985

					228,791,812

Utilities 10.3%
AGL Resources Inc.	United States		450,000		17,437,500
American Electric Power Co. Inc.	United States		1,523,800		60,799,620
Dominion Resources Inc.	United States		637,600		34,430,400
Duke Energy Corp.	United States		1,000,000		23,060,000
^a,cDynegy Inc.	United States		2,200,000		1,287,000
Entergy Corp.	United States		850,000		57,706,500
Exelon Corp.	United States		1,500,000		56,430,000
FirstEnergy Corp.	United States		750,000		36,892,500
NextEra Energy Inc.	United States		750,000		51,607,500
PG&E Corp.	United States		1,750,000		79,222,500
Pinnacle West Capital Corp.	United States		300,000		15,522,000
PPL Corp.	United States		1,250,000		34,762,500
Progress Energy Inc.	United States		1,200,000		72,204,000
Public Service Enterprise Group Inc.	United States		2,100,000		68,250,000
Sempra Energy	United States		1,000,000		68,880,000
The Southern Co.	United States		1,000,000		46,300,000
TECO Energy Inc.	United States		2,250,000		40,635,000
Xcel Energy Inc.	United States		1,970,464		55,980,882

					821,407,902

Total Common Stocks and Other Equity Interests (Cost $2,659,033,646)					2,898,900,247

^dEquity-Linked Securities 0.9%
Consumer Discretionary 0.2%
^eJPMorgan Chase & Co. into Target Corp., 6.25%, 144A	United States		300,000		17,151,810

FI-13

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Income Securities Fund	Country	Shares/ Warrants		Value
^dEquity-Linked Securities (continued)
Information Technology 0.3%
Credit Suisse New York into Intel Corp., 9.00%	United States		750,000	$	18,845,100

Materials 0.4%
^eBarclays Bank PLC into Nucor Corp., 8.00%, 144A	United States		300,000		11,421,540
^eUBS AG into Newmont Mining Corp., 8.00%, 144A	United States		400,000		19,746,040

					31,167,580

Total Equity-Linked Securities (Cost $69,141,000)					67,164,490

Convertible Preferred Stocks 3.0%
Consumer Discretionary 0.1%
General Motors Co., 4.75%, cvt. pfd., B	United States		322,400		10,703,680

Energy 0.2%
ATP Oil & Gas Corp., 8.00%, cvt. pfd., B	United States		50,000		874,500
SandRidge Energy Inc., 7.00%, cvt. pfd.	United States		140,000		14,688,240

					15,562,740

Financials 2.6%
Bank of America Corp., 7.25%, cvt. pfd., L	United States		90,000		87,750,000
Citigroup Inc., 7.50%, cvt. pfd.	United States		54,200		4,637,352
^aFannie Mae, 5.375%, cvt. pfd.	United States		600		2,310,000
Felcor Lodging Trust Inc., 7.80%, cvt. pfd., A	United States		400,000		10,476,000
MetLife Inc., 5.00%, cvt. pfd.	United States		525,000		32,481,750
Wells Fargo & Co., 7.50%, cvt. pfd., A	United States		61,000		68,777,500

					206,432,602

Materials 0.1%
AngloGold Ashanti Holdings Finance PLC, 6.00%, cvt. pfd.	South Africa		200,000		8,240,000

Total Convertible Preferred Stocks (Cost $285,434,927)					240,953,022

Preferred Stocks 0.5%
Consumer Discretionary 0.0%†
^aMotors Liquidation Co., Escrow pfd., C	United States		1,400,000		14,000

Financials 0.5%
^eAlly Financial Inc., 7.00%, pfd., 144A	United States		36,265		32,310,984
Ally Financial Inc., 8.50%, pfd., A	United States		75,000		1,721,250
^aFannie Mae, 6.75%, pfd.	United States		500,000		650,000
^aFannie Mae, 7.625%, pfd., R	United States		800,000		1,056,000
^aFannie Mae, 8.25%, pfd.	United States		851,500		1,387,945
^aFreddie Mac, 8.375%, pfd., Z	United States		1,549,200		3,361,764

Total Preferred Stocks (Cost $107,210,325)					40,487,943


		Principal Amount*
Convertible Bonds 0.4%
Financials 0.2%
^eForest City Enterprises Inc., cvt., senior note, 144A, 4.25%, 8/15/18	United States		20,000,000		19,850,000

FI-14

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Income Securities Fund	Country	Principal Amount*			Value
Convertible Bonds (continued)
Materials 0.2%
Cemex SAB de CV, cvt., sub. note,
3.25%, 3/15/16	Mexico		9,100,000		$	7,769,125
3.75%, 3/15/18	Mexico		7,920,000			6,662,700

						14,431,825

Total Convertible Bonds (Cost $36,184,582)						34,281,825

Corporate Bonds 39.7%
Consumer Discretionary 6.4%
^eAcademy Ltd./Finance Corp., senior note, 144A, 9.25%, 8/01/19	United States		5,300,000			5,777,000
Cablevision Systems Corp., senior note,
7.75%, 4/15/18	United States		20,000,000			21,400,000
8.00%, 4/15/20	United States		27,500,000			29,837,500
^eCaesars Operating Escrow LLC/Corp., senior secured note, 144A, 8.50%, 2/15/20	United States		8,900,000			8,989,000
CCO Holdings LLC/CCO Holdings Capital Corp., senior note, 6.50%, 4/30/21	United States		15,000,000			16,050,000
^eCequel Communications Holdings I LLC, senior note, 144A, 8.625%, 11/15/17	United States		10,000,000			10,825,000
Chrysler Group LLC/CG Co-Issuer Inc., senior secured note,
8.00%, 6/15/19	United States		25,000,000			25,812,500
8.25%, 6/15/21	United States		12,800,000			13,216,000
CityCenter Holdings/Finance, senior secured note,
7.625%, 1/15/16	United States		4,100,000			4,315,250
^fPIK, 11.50%, 1/15/17	United States		7,144,187			7,535,631
Clear Channel Communications Inc., senior note,
10.75%, 8/01/16	United States		12,000,000			7,620,000
9.00%, 3/01/21	United States		69,100,000			60,462,500
Clear Channel Worldwide Holdings Inc., senior note, B, 9.25%, 12/15/17	United States		17,000,000			18,615,000
^esenior sub. note, 144A, 7.625%, 3/15/20	United States		8,750,000			8,596,875
^esenior sub. note, 144A, 7.625%, 3/15/20	United States		1,250,000			1,203,125
ClubCorp Club Operations Inc., senior note, 10.00%, 12/01/18	United States		15,000,000			15,975,000
^eCSC Holdings Inc., senior note, 144A, 6.75%, 11/15/21	United States		23,000,000			24,610,000
Cumulus Media Holdings Inc., senior note, 7.75%, 5/01/19	United States		10,000,000			9,475,000
^b,c,fDex One Corp., senior sub. note, PIK, 14.00%, 1/29/17	United States		13,930,135			3,354,181
The Goodyear Tire & Rubber Co., senior note,
8.25%, 8/15/20	United States		9,700,000			10,318,375
7.00%, 5/15/22	United States		5,000,000			5,018,750
Harrah’s Operating Co. Inc., senior secured note, 11.25%, 6/01/17	United States		10,000,000			10,962,500
^eHD Supply Inc., 144A, 8.125%, 4/15/19	United States		5,000,000			5,412,500
^eJaguar Land Rover PLC, 144A, 8.125%, 5/15/21	United Kingdom		2,118,000			2,166,979
KB Home, senior note,
5.75%, 2/01/14	United States		6,500,000			6,483,750
6.25%, 6/15/15	United States		15,000,000			14,925,000
7.25%, 6/15/18	United States		10,600,000			10,600,000
^eLandry’s Inc., senior note, 144A, 9.375, 9.375%, 5/01/20	United States		7,500,000			7,659,375
MGM Resorts International, senior note,
6.625%, 7/15/15	United States		5,000,000			5,175,000
10.00%, 11/01/16	United States		20,000,000			22,250,000
^e144A, 8.625%, 2/01/19	United States		3,700,000			3,977,500
Shea Homes LP/Funding Corp., senior secured note, 8.625%, 5/15/19	United States		11,700,000			12,636,000
^eUnitymedia Hessen/NRW, senior secured note, 144A, 8.125%,
12/01/17	Germany		6,300,000			6,792,534
12/01/17	Germany		5,500,000	EUR		7,467,894
^eUnivision Communications Inc., senior secured note, 144A, 6.875%, 5/15/19	United States		15,000,000			15,525,000

FI-15

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Income Securities Fund	Country	Principal Amount*			Value
Corporate Bonds (continued)
Consumer Discretionary (continued)
^eUPC Germany GmbH, senior secured note, 144A, 9.625%, 12/01/19	Germany		3,000,000	EUR	$	4,145,099
^eUPCB Finance III Ltd., senior secured note, 144A, 6.625%, 7/01/20	Netherlands		12,500,000			12,750,000
^eUPCB Finance V Ltd., senior secured note, 144A, 7.25%, 11/15/21	Netherlands		6,000,000			6,300,000
^eUPCB Finance VI Ltd., senior secured note, 144A, 6.875%, 1/15/22	Netherlands		7,100,000			7,193,188
Virgin Media Secured Finance, senior secured note, 7.00%, 1/15/18	United Kingdom		2,100,000	GBP		3,541,693
Visant Corp., senior note, 10.00%, 10/01/17	United States		32,800,000			32,718,000

						507,688,699

Consumer Staples 0.9%
^eBoparan Finance PLC, senior note, 144A,
9.75%, 4/30/18	United Kingdom		7,000,000	EUR		9,357,530
9.875%, 4/30/18	United Kingdom		7,500,000	GBP		12,250,027
JBS USA LLC/Finance Inc., senior note, 11.625%, 5/01/14	United States		10,000,000			11,400,000
^e144A, 8.25%, 2/01/20	United States		10,000,000			9,750,000
^e144A, 7.25%, 6/01/21	United States		12,500,000			11,687,500
SUPERVALU Inc., senior note, 8.00%, 5/01/16	United States		17,500,000			17,806,250

						72,251,307

Energy 7.2%
Alpha Natural Resources Inc., senior note, 6.25%, 6/01/21	United States		2,500,000			2,125,000
Antero Resources Finance Corp., senior note,
9.375%, 12/01/17	United States		14,600,000			16,206,000
7.25%, 8/01/19	United States		3,900,000			4,056,000
Arch Coal Inc., senior note, 7.00%, 6/15/19	United States		5,500,000			4,675,000
7.25%, 6/15/21	United States		12,500,000			10,531,250
ATP Oil & Gas Corp., senior secured note, 11.875%, 5/01/15	United States		15,000,000			7,050,000
Bill Barrett Corp., senior note, 7.00%, 10/15/22	United States		5,000,000			4,787,500
Callon Petroleum Co., senior secured note, 13.00%, 9/15/16	United States		7,765,750			7,959,894
CHC Helicopter SA, senior secured note, first lien, 9.25%, 10/15/20	Luxembourg		25,000,000			24,562,500
Chesapeake Energy Corp., senior note, 6.50%, 8/15/17	United States		34,000,000			34,000,000
6.875%, 8/15/18	United States		16,200,000			16,200,000
7.25%, 12/15/18	United States		33,000,000			33,825,000
^g6.775%, 3/15/19	United States		17,500,000			17,084,375
Compagnie Generale de Geophysique-Veritas, senior note, 6.50%, 6/01/21	France		12,500,000			12,562,500
^eConnacher Oil and Gas Ltd., secured note, 144A, 8.50%, 8/01/19	Canada		7,000,000			5,985,000
CONSOL Energy Inc., senior note, 8.25%, 4/01/20	United States		1,800,000			1,899,000
El Paso Corp., senior note, MTN, 7.75%, 1/15/32	United States		22,000,000			24,869,174
Energy XXI Gulf Coast Inc., senior note, 9.25%, 12/15/17	United States		15,000,000			16,125,000
^eEverest Acquisition LLC/Finance Inc., senior note, 144A, 9.375%, 5/01/20	United States		10,000,000			10,375,000
EXCO Resources Inc., senior note, 7.50%, 9/15/18	United States		10,500,000			9,135,000
^eExpro Finance Luxembourg, senior secured note, 144A, 8.50%, 12/15/16	United Kingdom		16,840,000			16,208,500
^e,hHalcon Resources Corp., senior note, 144A, 9.75%, 7/15/20	United States		10,000,000			9,864,600
Linn Energy LLC/Finance Corp., senior note, 8.625%, 4/15/20	United States		20,000,000			21,650,000
^eMagnum Hunter Resources Corp., senior note, 144A, 9.75%, 5/15/20	United States		5,000,000			4,875,000
^eOffshore Group Investment Ltd., senior secured note, first lien, 144A, 11.50%, 8/01/15	United States		15,000,000			16,350,000
^eOGX Petroleo e Gas Participacoes SA, senior note, 144A, 8.50%, 6/01/18	Brazil		15,000,000			13,395,000
^ePeabody Energy Corp., senior note, 144A, 6.25%, 11/15/21	United States		10,000,000			9,950,000
^ePetroBakken Energy Ltd., senior note, 144A, 8.625%, 2/01/20	Canada		5,000,000			4,990,500
^c,e,iPetroplus Finance Ltd., senior note, 144A, 6.75%, 5/01/14	Switzerland		17,515,000			2,189,375
7.00%, 5/01/17	Switzerland		30,000,000			3,750,000
9.375%, 9/15/19	Switzerland		5,000,000			625,000
Plains Exploration & Production Co., senior note, 6.125%, 6/15/19	United States		10,300,000			10,403,000

FI-16

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Income Securities Fund	Country	Principal Amount*		Value
Corporate Bonds (continued)
Energy (continued)
Quicksilver Resources Inc., senior note, 9.125%, 8/15/19	United States		20,000,000	$	17,500,000
Sabine Pass LNG LP, senior secured note, 7.50%, 11/30/16	United States		25,000,000		26,375,000
^eSamson Investment Co., senior note, 144A, 9.75%, 2/15/20	United States		26,300,000		26,201,375
SandRidge Energy Inc., senior note,
9.875%, 5/15/16	United States		17,500,000		19,250,000
8.75%, 1/15/20	United States		25,000,000		26,187,500
7.50%, 3/15/21	United States		13,300,000		13,200,250
^e144A, 8.00%, 6/01/18	United States		21,800,000		22,181,500
W&T Offshore Inc., senior note, 8.50%, 6/15/19	United States		40,500,000		42,018,750

					571,178,543

Financials 4.8%
Ally Financial Inc., senior note,
6.25%, 12/01/17	United States		5,000,000		5,287,715
8.00%, 3/15/20	United States		10,000,000		11,550,000
^jBank of America Corp., pfd., sub. bond, M, 8.125% to 5/15/18, FRN thereafter, Perpetual	United States		5,000,000		5,252,800
^eCIT Group Inc., second lien, 144A, 7.00%, 5/02/17	United States		47,988,861		48,138,826
secured bond, 144A, 7.00%, 5/02/16	United States		80,000,000		80,300,000
CNL Income Properties Inc., senior note, 7.25%, 4/15/19	United States		15,000,000		13,875,000
Hexion U.S. Finance Corp., senior secured note, 8.875%, 2/01/18	United States		8,000,000		8,200,000
International Lease Finance Corp., senior note,
8.75%, 3/15/17	United States		15,000,000		16,912,500
8.875%, 9/01/17	United States		20,000,000		22,650,000
^jJPMorgan Chase & Co., junior sub. note, 1, 7.90% to 4/30/18, FRN thereafter, Perpetual	United States		85,000,000		93,508,160
^eKinetic Concepts Inc./USA, senior note, 144A, 12.50%, 11/01/19	United States		5,000,000		4,575,000
^e,kLiberty Mutual Group Inc., junior sub. note, 144A, FRN, 10.75%, 6/15/88	United States		25,000,000		34,250,000
^e,jM&T Bank Corp., 144A, 6.875% to 6/15/16, FRN thereafter, Perpetual	United States		12,000,000		11,850,000
Morgan Stanley, senior note, 5.50%, 1/26/20	United States		15,000,000		14,722,665
^eNationstar Mort/Cap Corp., senior note, 144A, 9.625%, 5/01/19	United States		10,000,000		10,625,000

					381,697,666

Health Care 2.8%
CHS/Community Health Systems Inc., senior note, 8.875%, 7/15/15	United States		11,267,000		11,576,842
Giant Funding Corp., senior secured note, 8.25%, 2/01/18	Spain		4,900,000		5,292,000
HCA Holdings Inc., senior note, 7.75%, 5/15/21	United States		10,000,000		10,775,000
HCA Inc., senior note, 8.00%, 10/01/18	United States		12,000,000		13,500,000
senior note, 7.50%, 2/15/22	United States		34,500,000		37,691,250
senior secured note, 8.50%, 4/15/19	United States		10,000,000		11,250,000
senior secured note, 6.50%, 2/15/20	United States		20,000,000		21,725,000
^eHealth Management Associates Inc., senior note, 144A, 7.375%, 1/15/20	United States		4,300,000		4,595,625
Tenet Healthcare Corp., senior note, 8.00%, 8/01/20	United States		24,600,000		25,584,000
^esenior note, 144A, 8.00%, 8/01/20	United States		6,779,377		7,033,604
^ksenior note, FRN, 9.25%, 2/01/15	United States		13,500,000		15,086,250
senior secured note, 10.00%, 5/01/18	United States		21,250,000		24,437,500
^esenior secured note, 144A, 6.25%, 11/01/18	United States		6,381,654		6,636,920
Vanguard Health Holding Co. II LLC/Inc., senior note,
8.00%, 2/01/18	United States		23,100,000		23,735,250
7.75%, 2/01/19	United States		4,000,000		4,060,000

					222,979,241

FI-17

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Income Securities Fund	Country	Principal Amount*		Value
Corporate Bonds (continued)
Industrials 2.3%
^eAbengoa Finance SAU, senior note, 144A, 8.875%, 11/01/17	Spain		12,900,000	$	11,610,000
^e,iAmerican Airlines Inc., senior secured note, 144A, 7.50%, 3/15/16	United States		15,000,000		14,250,000
^eCeva Group PLC, senior note, 144A, 12.75%, 3/31/20	United Kingdom		15,000,000		13,687,500
senior secured note, 144A, 8.375%, 12/01/17	United Kingdom		7,500,000		7,298,437
senior secured note, 144A, 11.50%, 4/01/18	United Kingdom		30,300,000		28,103,250
^eDelta Air Lines Inc., senior secured note, 144A, 9.50%, 9/15/14	United States		2,168,000		2,300,790
Hertz Corp., senior note, 6.75%, 4/15/19	United States		7,500,000		7,837,500
The Manitowoc Co. Inc., senior note, 9.50%, 2/15/18	United States		10,000,000		11,000,000
RBS Global & Rexnord Corp., senior note, 8.50%, 5/01/18	United States		18,900,000		20,601,000
Terex Corp., senior sub. note, 8.00%, 11/15/17	United States		45,000,000		46,912,500
United Rentals North America Inc., senior sub. note, 8.375%, 9/15/20	United States		8,800,000		9,306,000
^eUR Financing Escrow Corp., senior note, 144A, 7.625%, 4/15/22	United States		8,000,000		8,400,000

					181,306,977

Information Technology 6.8%
CDW LLC/Finance Corp., senior note, 8.50%, 4/01/19	United States		28,725,000		30,735,750
senior sub. note, 12.535%, 10/12/17	United States		5,000,000		5,450,000
Ceridian Corp., senior note, 11.25%, 11/15/15	United States		4,500,000		4,342,500
^eCommScope Inc., senior note, 144A, 8.25%, 1/15/19	United States		4,000,000		4,250,000
First Data Corp., senior bond, 12.625%, 1/15/21	United States		80,000,000		80,500,000
senior note, 9.875%, 9/24/15	United States		7,500,000		7,631,250
senior note, 9.875%, 9/24/15	United States		4,645,000		4,703,062
^fsenior note, PIK, 10.55%, 9/24/15	United States		13,500,000		13,871,250
^esenior secured bond, 144A, 8.25%, 1/15/21	United States		45,000,000		45,225,000
^e,fsenior secured note, 144A, PIK, 8.75%, 1/15/22	United States		33,188,000		33,602,850
senior sub. note, 11.25%, 3/31/16	United States		90,000,000		85,275,000
Freescale Semiconductor Inc., senior note, 8.05%, 2/01/20	United States		35,000,000		34,737,500
senior note, 10.75%, 8/01/20	United States		64,846,000		70,033,680
^esenior secured note, 144A, 10.125%, 3/15/18	United States		4,438,000		4,870,705
^esenior secured note, 144A, 9.25%, 4/15/18	United States		51,700,000		55,577,500
^eLawson Software Inc., senior note, 144A, 9.375%, 4/01/19	United States		4,100,000		4,397,250
^eSanmina-SCI Corp., senior note, 144A, 7.00%, 5/15/19	United States		15,000,000		14,625,000
^eSophia LP/Finance Inc., senior note, 144A, 9.75%, 1/15/19	United States		5,000,000		5,387,500
Sterling International Inc., senior note, 11.00%, 10/01/19	United States		7,500,000		7,575,000
SunGard Data Systems Inc., senior note, 7.625%, 11/15/20	United States		10,000,000		10,700,000
^eViaSat Inc., senior note, 144A, 6.875%, 6/15/20	United States		12,500,000		12,687,500

					536,178,297

Materials 2.7%
Berry Plastics Corp., senior secured note, 9.75%, 1/15/21	United States		5,000,000		5,462,500
^eCemex Finance LLC, senior secured note, 144A, 9.50%, 12/14/16	United States		3,000,000		2,940,000
^eCemex SAB de CV, senior secured note, 144A, 9.00%, 1/11/18	Mexico		26,000,000		23,335,000
^eDynacast International LLC/Finance Inc., secured note, 144A, 9.25%, 7/15/19	United States		10,000,000		10,425,000
^eFMG Resources August 2006 Pty. Ltd., senior note, 144A,
7.00%, 11/01/15	Australia		10,000,000		10,143,750
6.875%, 2/01/18	Australia		11,900,000		12,063,625
8.25%, 11/01/19	Australia		15,000,000		15,975,000
Huntsman International LLC, senior note, 5.50%, 6/30/16	United States		1,750,000		1,754,375
^eIneos Finance PLC, senior secured note, 144A, 8.375%, 2/15/19	United Kingdom		5,100,000		5,268,938

FI-18

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Income Securities Fund	Country	Principal Amount*			Value
Corporate Bonds (continued)
Materials (continued)
^eIneos Group Holdings Ltd., senior note, 144A, 7.875%, 2/15/16	United Kingdom		30,000,000	EUR	$	33,127,079
senior secured note, 144A, 8.50%, 2/15/16	United Kingdom		5,000,000			4,612,500
^eInmet Mining Corp., senior note, 144A, 8.75%, 6/01/20	Canada		4,500,000			4,477,500
^eKerling PLC, senior secured note, 144A, 10.625%, 1/28/17	United Kingdom		9,400,000	EUR		10,546,906
^eKinove German Bondco GmbH, senior secured bond, 144A, 10.00%, 6/15/18	Germany		8,910,000	EUR		11,579,551
senior secured note, 144A, 9.625%, 6/15/18	Germany		11,100,000			11,488,500
^eReynolds Group Issuer Inc./LLC/SA, senior note, 144A, 9.00%, 4/15/19	United States		5,000,000			5,012,500
senior note, 144A, 9.875%, 8/15/19	United States		16,800,000			17,451,000
senior note, 144A, 8.25%, 2/15/21	United States		5,200,000			4,940,000
senior secured note, 144A, 7.875%, 8/15/19	United States		10,000,000			10,875,000
senior secured note, 144A, 6.875%, 2/15/21	United States		10,000,000			10,475,000
Vulcan Materials Co., senior note, 6.50%, 12/01/16	United States		6,200,000			6,556,500

						218,510,224

Telecommunication Services 2.0%
Cricket Communications Inc., senior note, 7.75%, 10/15/20	United States		45,000,000			43,200,000
Frontier Communications Corp., senior note,
8.25%, 4/15/17	United States		1,200,000			1,296,000
8.50%, 4/15/20	United States		12,900,000			13,738,500
9.25%, 7/01/21	United States		7,400,000			7,992,000
Intelsat Jackson Holdings SA, senior note, 7.50%, 4/01/21	Luxembourg		1,700,000			1,806,250
Sprint Nextel Corp.,
6.00%, 12/01/16	United States		10,000,000			9,625,000
^e144A, 11.50%, 11/15/21	United States		30,000,000			33,525,000
senior note, 8.375%, 8/15/17	United States		12,700,000			13,081,000
^esenior note, 144A, 9.125%, 3/01/17	United States		13,300,000			13,998,250
^esenior note, 144A, 9.00%, 11/15/18	United States		20,000,000			22,400,000

						160,662,000

Utilities 3.8%
^eCalpine Corp., senior secured note, 144A,
7.875%, 7/31/20	United States		5,700,000			6,312,750
7.50%, 2/15/21	United States		15,000,000			16,275,000
7.875%, 1/15/23	United States		11,200,000			12,264,000
^c,i,lDynegy Holdings Inc., senior note,
7.50%, 6/01/15	United States		20,000,000			13,500,000
7.50%, 6/01/15	United States		15,000,000			9,525,000
8.375%, 5/01/16	United States		64,699,000			43,995,320
7.75%, 6/01/19	United States		50,000,000			33,750,000
GenOn Energy Inc., senior note,
7.625%, 6/15/14	United States		14,500,000			14,862,500
7.875%, 6/15/17	United States		25,000,000			23,375,000
^eIntergen NV, senior secured note, 144A, 9.00%, 6/30/17	Netherlands		7,500,000			7,448,438
Niska Gas Storage U.S./Canada, senior note, 8.875%, 3/15/18	United States		15,000,000			14,700,000
^fTexas Competitive Electric Holdings Co. LLC, senior note, PIK, 11.25%, 11/01/16	United States		15,319,477			2,839,205
Texas Competitive Electric Holdings Co. LLC/Texas Competitive Electric Holdings Finance Inc., senior note, A, 10.25%, 11/01/15	United States		152,939,000			40,146,487
senior note, B, 10.25%, 11/01/15	United States		64,193,000			15,727,285
^esenior secured note, 144A, 11.50%, 10/01/20	United States		20,000,000			13,750,000
senior secured note, B, 15.00%, 4/01/21	United States		93,125,000			32,128,125

						300,599,110

Total Corporate Bonds (Cost $3,268,111,308)						3,153,052,064

FI-19

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Income Securities Fund	Country	Principal Amount*		Value
^k,mSenior Floating Rate Interests 7.2%
Consumer Discretionary 2.3%
Chrysler Group LLC, Tranche B Term Loan, 6.00%, 5/24/17	United States		44,253,000	$	44,637,470
Clear Channel Communications Inc., Tranche B Term Loan, 3.895%, 1/29/16	United States		71,118,109		56,750,046
ClubCorp Club Operations Inc., Term B Loan, 6.00%, 11/30/16	United States		9,850,000		9,899,250
Cumulus Media Holdings Inc., Second Lien Term Loan, 7.50%, 9/16/19	United States		40,000,000		40,100,000
^bDex Media West LLC, Term Loan B, 7.25%, 10/24/14	United States		3,837,056		2,385,371
HD Supply Inc., Term Loan Facility, 7.25%, 10/12/17	United States		7,000,000		7,035,000
Landry’s Inc., B Term Loan, 6.50%, 4/24/18	United States		14,962,500		15,018,610
SuperMedia Inc., Exit Term Loan, 11.00%, 12/31/15	United States		2,416,166		1,379,802

					177,205,549

Energy 0.2%
Chesapeake Energy Corp., Unsecured Term Loan, 8.50%, 12/02/17	United States		15,000,000		14,909,400

Financials 0.6%
iStar Financial Inc., Tranche A2 Term Loan, 7.00%, 6/30/14	United States		50,000,000		50,050,000

Industrials 0.5%
Altegrity Inc.,
Term Loan B, 2.994%, 2/21/15	United States		12,476,821		11,821,788
Tranche D Term Loan, 7.75%, 2/21/15	United States		12,585,755		12,522,826
Ceva Group PLC,
Dollar Tranche B L/C, 5.461%, 8/31/16	United Kingdom		2,105,263		1,987,720
EGL Tranche B Term Loans, 5.466%, 8/31/16	United Kingdom		12,291,882		11,677,288

					38,009,622

Information Technology 1.4%
First Data Corp.,
2017 Term Loan, 5.245%, 3/24/17	United States		57,510,381		54,868,527
2018 Term Loan, 4.245%, 3/24/18	United States		22,436,455		20,667,834
Freescale Semiconductor Inc., Tranche B-1 Term Loan, 4.489%, 12/01/16	United States		2,581,931		2,447,670
Lawson Software Inc., Tranche B Term Loan, 6.25%, 4/05/18	United States		15,000,000		15,094,650
Sophia LP (Datatel), Initial Term Loan, 6.25%, 7/19/18	United States		7,481,250		7,539,701
SRA International Inc., Term Loan, 6.50%, 7/20/18	United States		8,400,000		8,142,750

					108,761,132

Materials 0.1%
Ineos US Finance LLC, Dollar Term Loan, 6.50%, 4/27/18	United States		9,975,000		9,780,487

Utilities 2.1%
Dynegy Midwest Generation LLC, Term Loan, 9.25%, 8/05/16	United States		10,421,250		10,681,781
Dynegy Power LLC, Term Loan, 9.25%, 8/05/16	United States		19,402,500		20,033,082
Texas Competitive Electric Holdings Co. LLC,
2014 Term Loan, 3.741%, 10/10/14	United States		15,000,000		9,448,290
2017 Term Loan, 4.741%, 10/10/17	United States		214,606,875		128,743,523

					168,906,676

Total Senior Floating Rate Interests (Cost $629,532,232)					567,622,866

Asset-Backed Securities and Commercial Mortgage-Backed Securities (Cost $32,561,606) 0.5%
Financials 0.5%
^e,kBanc of America Large Loan, 2010-HLTN, 144A, FRN, 1.992%, 11/15/15	United States		37,427,134		35,482,813

Total Investments before Short Term Investments (Cost $7,087,209,626)					7,037,945,270

FI-20

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Income Securities Fund	Country	Principal Amount*		Value
Short Term Investments 10.0%
U.S. Government and Agency Securities (Cost $194,392,039) 2.4%
ⁿFHLB, 7/20/12	United States		194,400,000	$	194,398,056

Total Investments before Money Market Funds and Repurchase Agreements (Cost $7,281,601,665)					7,232,343,326

Repurchase Agreements (Cost $596,531,702) 7.5%
^oJoint Repurchase Agreement, 0.129%, 7/02/12 (Maturity Value $596,538,111)	United States		596,531,702		596,531,702
BNP Paribas Securities Corp. (Maturity Value $116,533,720) Credit Suisse Securities (USA) LLC (Maturity Value $135,957,001) Deutsche Bank Securities Inc. (Maturity Value $91,556,669) HSBC Securities (USA) Inc. (Maturity Value $77,687,158) Merrill Lynch, Pierce, Fenner & Smith Inc. (Maturity Value $77,687,158) Morgan Stanley & Co. LLC (Maturity Value $38,846,562) UBS Securities LLC (Maturity Value $58,269,843)
Collateralized by U.S. Government Agency Securities, 0.00% - 5.25%, 8/01/12 - 6/28/17; ⁿU.S. Treasury Bills, 7/26/12; and U.S. Treasury Notes, 1.125% - 3.00%, 12/15/12 - 2/15/22 (valued at $608,686,621)

		Shares
^pInvestments from Cash Collateral Received for Loaned Securities (Cost $6,426,000) 0.1%
Money Market Funds 0.1%
^qBNY Mellon Overnight Government Fund, 0.182%	United States		6,426,000		6,426,000

Total Investments (Cost $7,884,559,367) 98.7%					7,835,301,028
Other Assets, less Liabilities 1.3%					101,955,942

Net Assets 100.0%				$	7,937,256,970

See Abbreviations on page FI-34.

†Rounds to less than 0.1% of net assets.

*The principal amount is stated in U.S. dollars unless otherwise indicated.

^aNon-income producing.

^bSee Note 8 regarding holdings of 5% voting securities.

^cAt June 30, 2012, pursuant to the Fund’s policies and the requirements of applicable securities law, the Fund may be restricted from trading these securities for a limited or extended period of time due to ownership limits and/or potential possession of material non-public information.

^dSee Note 1(e) regarding equity-linked securities.

^eSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At June 30, 2012, the aggregate value of these securities was $1,270,328,707, representing 16.00% of net assets.

^fIncome may be received in additional securities and/or cash.

^gA portion or all of the security is on loan at June 30, 2012. See Note 1(f).

^hSecurity purchased on a when-issued basis. See Note 1(d).

ⁱSee Note 7 regarding defaulted securities.

^jPerpetual security with no stated maturity date.

^kThe coupon rate shown represents the rate at period end.

^lSecurity has been deemed illiquid because it may not be able to be sold within seven days. At June 30, 2012, the aggregate value of these securities was $100,770,320, representing 1.27% of net assets.

^mSee Note 1(g) regarding senior floating rate interests.

ⁿThe security is traded on a discount basis with no stated coupon rate.

^oSee Note 1(c) regarding joint repurchase agreement.

^pSee Note 1(f) regarding securities on loan.

^qThe rate shown is the annualized seven-day yield at period end.

The accompanying notes are an integral part of these financial statements.

FI-21

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

June 30, 2012 (unaudited)


	Franklin Income Securities Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	7,163,163,902
Cost - Non-controlled affiliated issuers (Note 8)		124,863,763
Cost - Repurchase agreements		596,531,702

Total cost of investments	$	7,884,559,367

Value - Unaffiliated issuers	$	7,230,559,148
Value - Non-controlled affiliated issuers (Note 8)		8,210,178
Value - Repurchase agreements		596,531,702

Total value of investments (Includes securities loaned in the amount of $6,150,375)		7,835,301,028
Cash		1,229,845
Receivables:
Investment securities sold		38,745,733
Capital shares sold		2,807,079
Dividends and interest		87,694,627
Other assets		22,753

Total assets		7,965,801,065

Liabilities:
Payables:
Investment securities purchased		9,878,676
Capital shares redeemed		5,551,969
Affiliates		5,594,180
Payable upon return of securities loaned		6,426,000
Accrued expenses and other liabilities		1,093,270

Total liabilities		28,544,095

Net assets, at value	$	7,937,256,970

Net assets consist of:
Paid-in capital	$	8,721,946,702
Undistributed net investment income		220,043,025
Net unrealized appreciation (depreciation)		(49,381,590	)
Accumulated net realized gain (loss)		(955,351,167	)

Net assets, at value	$	7,937,256,970

The accompanying notes are an integral part of these financial statements.

FI-22

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Assets and Liabilities (continued)

June 30, 2012 (unaudited)


	Franklin Income Securities Fund
Class 1:
Net assets, at value	$	1,458,268,056

Shares outstanding		100,489,410

Net asset value and maximum offering price per share	$	14.51

Class 2:
Net assets, at value	$	6,038,574,358

Shares outstanding		426,685,160

Net asset value and maximum offering price per share	$	14.15

Class 4:
Net assets, at value	$	440,414,556

Shares outstanding		30,590,495

Net asset value and maximum offering price per share	$	14.40

The accompanying notes are an integral part of these financial statements.

FI-23

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the six months ended June 30, 2012 (unaudited)


	Franklin Income Securities Fund
Investment income:
Dividends	$	68,215,311
Interest:
Unaffiliated issuers		196,207,854
Non-controlled affiliated issuers (Note 8)		1,141,651
Income from securities loaned		461,297

Total investment income		266,026,113

Expenses:
Management fees (Note 3a)		17,976,669
Distribution fees: (Note 3c)
Class 2		7,518,287
Class 4		766,549
Unaffiliated transfer agent fees		2,229
Custodian fees (Note 4)		109,655
Reports to shareholders		349,360
Professional fees		89,697
Trustees’ fees and expenses		15,890
Other		81,764

Total expenses		26,910,100

Net investment income		239,116,013

Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments:
Unaffiliated issuers		49,255,756
Non-controlled affiliated issuers (Note 8)		(14,465,746	)
Foreign currency transactions		252,953

Net realized gain (loss)		35,042,963

Net change in unrealized appreciation (depreciation) on:
Investments		167,156,406
Translation of other assets and liabilities denominated in foreign currencies		70,473

Net change in unrealized appreciation (depreciation)		167,226,879

Net realized and unrealized gain (loss)		202,269,842

Net increase (decrease) in net assets resulting from operations	$	441,385,855

The accompanying notes are an integral part of these financial statements.

FI-24

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets


	Franklin Income Securities Fund
	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31, 2011

Increase (decrease) in net assets:
Operations:
Net investment income	$	239,116,013		$	498,525,907
Net realized gain (loss) from investments, written options and foreign currency transactions		35,042,963			224,314,451
Net change in unrealized appreciation (depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies		167,226,879			(562,321,188	)

Net increase (decrease) in net assets resulting from operations		441,385,855			160,519,170

Distributions to shareholders from:
Net investment income:
Class 1		(90,282,701	)		(96,601,395	)
Class 2		(392,684,736	)		(356,087,463	)
Class 4		(28,048,130	)		(24,430,578	)

Total distributions to shareholders		(511,015,567	)		(477,119,436	)

Capital share transactions: (Note 2)
Class 1		169,283,441			(55,103,339	)
Class 2		177,049,271			(185,660,731	)
Class 4		12,547,008			31,595,919

Total capital share transactions		358,879,720			(209,168,151	)

Net increase (decrease) in net assets		289,250,008			(525,768,417	)
Net assets:
Beginning of period		7,648,006,962			8,173,775,379

End of period	$	7,937,256,970		$	7,648,006,962

Undistributed net investment income included in net assets:
End of period	$	220,043,025		$	491,942,579

The accompanying notes are an integral part of these financial statements.

FI-25

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited)

Franklin Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment company, consisting of twenty separate funds. The Franklin Income Securities Fund (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. The Fund offers three classes of shares: Class 1, Class 2 and Class 4. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

Equity securities listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded, or the NYSE, whichever is earlier. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at the close of the NYSE on the day that the value of the security is determined. Over-the-counter (OTC) securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities. Investments in non-registered money market funds are valued at the closing net asset value.

FI-26

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

a. Financial Instrument Valuation (continued)

b. Foreign Currency Translation

c. Joint Repurchase Agreement

d. Securities Purchased on a When-Issued Basis

FI-27

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

d. Securities Purchased on a When-Issued Basis (continued)

purchase price. Although the Fund will generally purchase these securities with the intention of holding the securities, it may sell the securities before the settlement date. Sufficient assets have been segregated for these securities.

e. Equity-Linked Securities

f. Securities Lending

The Fund participates in an agency based securities lending program. The fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the market value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the market value of loaned securities, as determined at the close of fund business each day; any additional collateral required due to changes in security values is delivered to the fund on the next business day. The collateral is invested in a non-registered money fund as indicated on the Statement of Investments. The fund receives income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. The fund bears the market risk with respect to the collateral investment, securities loaned, and the risk that the agent may default on its obligations to the fund. The securities lending agent has agreed to indemnify the fund in the event of default by a third party borrower.

g. Senior Floating Rate Interests

Senior secured corporate loans in which the Fund invests are generally readily marketable, but may be subject to some restrictions on resale.

h. Income and Deferred Taxes

FI-28

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

h. Income and Deferred Taxes (continued)

i. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Amortization of premium and accretion of discount on debt securities are included in interest income. Facility fees are recognized as income over the expected term of the loan. Dividend income is recorded on the ex-dividend date except that certain dividends from foreign securities are recognized as soon as the Fund is notified of the ex-dividend date. Distributions to shareholders are recorded on the ex-dividend date and are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with accounting principles generally accepted in the United States of America. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.

j. Accounting Estimates

k. Guarantees and Indemnifications

FI-29

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Income Securities Fund

2. SHARES OF BENEFICIAL INTEREST

At June 30, 2012, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:


	Six Months Ended June 30, 2012						Year Ended December 31, 2011
Class 1 Shares:	Shares			Amount			Shares			Amount
Shares sold		27,538,904		$	411,875,595			46,373,672		$	684,944,435
Shares issued in reinvestment of distributions		6,331,185			90,282,701			6,487,669			96,601,395
Shares redeemed		(22,023,892	)		(332,874,855	)		(59,777,035	)		(836,649,169	)

Net increase (decrease)		11,846,197		$	169,283,441			(6,915,694	)	$	(55,103,339	)

Class 2 Shares:
Shares sold		20,484,213		$	302,385,786			36,881,385		$	540,163,327
Shares issued in reinvestment of distributions		28,230,391			392,684,736			24,473,365			356,087,463
Shares redeemed		(35,207,233	)		(518,021,251	)		(74,034,875	)		(1,081,911,521	)

Net increase (decrease)		13,507,371		$	177,049,271			(12,680,125	)	$	(185,660,731	)

Class 4 Shares:
Shares sold		1,645,372		$	24,664,850			4,165,273		$	62,663,608
Shares issued on reinvestment of distributions		1,982,200			28,048,130			1,652,948			24,430,578
Shares redeemed		(2,703,715	)		(40,165,972	)		(3,777,871	)		(55,498,267	)

Net increase (decrease)		923,857		$	12,547,008			2,040,350		$	31,595,919

3. TRANSACTIONS WITH AFFILIATES


Subsidiary		Affiliation
Franklin Advisers, Inc. (Advisers)		Investment manager
Franklin Templeton Services, LLC (FT Services)		Administrative manager
Franklin Templeton Distributors, Inc. (Distributors)		Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services)		Transfer agent

a. Management Fees

The Fund pays an investment management fee to Advisers based on the average daily net assets of the Fund as follows:


Annualized Fee Rate		Net Assets
0.625%		Up to and including $100 million
0.500%		Over $100 million, up to and including $250 million
0.450%		Over $250 million, up to and including $7.5 billion
0.440%		Over $7.5 billion, up to and including $10 billion
0.430%		Over $10 billion, up to and including $12.5 billion
0.420%		Over $12.5 billion, up to and including $15 billion
0.400%		In excess of $15 billion

FI-30

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Income Securities Fund

3. TRANSACTIONS WITH AFFILIATES (continued)

b. Administrative Fees

c. Distribution Fees

d. Transfer Agent Fees

Investor Services, under terms of an agreement, performs shareholder servicing for the Fund and is not paid by the Fund for the services.

e. Other Affiliated Transactions

At June 30, 2012, Franklin Templeton Variable Insurance Products Trust – Franklin Templeton VIP Founding Funds Allocation Fund owned 14.79% of the Fund’s outstanding shares.

4. EXPENSE OFFSET ARRANGEMENT

5. INCOME TAXES

At December 31, 2011, capital loss carryforwards were as follows:


Capital loss carryforwards subject to expiration:
2016	$	310,696,517
2017		521,405,875
2018		157,561,044

	$	989,663,436

At June 30, 2012, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:


Cost of investments	$	7,899,734,495


Unrealized appreciation	$	806,993,761
Unrealized depreciation		(871,427,228	)

Net unrealized appreciation (depreciation)	$	(64,433,467	)

FI-31

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Income Securities Fund

5. INCOME TAXES (continued)

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2012, aggregated $839,295,505 and $1,405,524,417, respectively.

7. CREDIT RISK AND DEFAULTED SECURITIES

At June 30, 2012, the Fund had 45.87% of its portfolio invested in high yield, senior secured floating rate notes, or other securities rated below investment grade. These securities may be more sensitive to economic conditions causing greater price volatility and are potentially subject to a greater risk of loss due to default than higher rated securities.

The Fund held defaulted securities and/or other securities for which the income has been deemed uncollectible. At June 30, 2012, the aggregate value of these securities was $121,584,695, representing 1.53% of the Fund’s net assets. The Fund discontinues accruing income on securities for which income has been deemed uncollectible and provides an estimate for losses on interest receivable. The securities have been identified on the accompanying Statement of Investments.

8. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES

The 1940 Act defines “affiliated companies” to include investments in portfolio companies in which a fund owns 5% or more of the outstanding voting securities. Investments in “affiliated companies” for the Fund for the period ended June 30, 2012, were as shown below.


Name of Issuer	Number of Shares/Principal Amount Held at Beginning of Period		Gross Additions		Gross Reductions		Number of Shares/Principal Amount Held at End of Period		Value at End of Period		Investment Income		Realized Capital Gain (Loss)
Non-Controlled Affiliates
^aDex Media West LLC, Term Loan B, 7.25%, 10/24/14		4,265,968		—		428,912		3,837,056	$	2,385,371	$	122,839	$	96,150
Dex One Corp.		2,642,381		—		—		2,642,381		2,470,626		—		—
Dex One Corp., senior sub. note, PIK, 14.00%, 1/29/17		32,511,674		1,137,910		19,719,449		13,930,135		3,354,181		1,018,812		(14,561,896	)

Total Affiliated Securities (0.10% of Net Assets)									$	8,210,178	$	1,141,651	$	(14,465,746	)

^aCompany is a wholly owned subsidiary of Dex One Corp.

9. CREDIT FACILITY

FI-32

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Income Securities Fund

9. CREDIT FACILITY (continued)

10. FAIR VALUE MEASUREMENTS

•

Level 1 – quoted prices in active markets for identical financial instruments

•

Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)

•

Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of financial instruments)

The inputs or methodology used for valuing financial instruments are not an indication of the risk associated with investing in those financial instruments.

For movements between the levels within the fair value hierarchy, the Fund has adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.

A summary of inputs used as of June 30, 2012, in valuing the Fund’s assets carried at fair value, is as follows:


	Level 1		Level 2		Level 3		Total

Assets:
Investments in Securities:
Equity Investments:^a
Consumer Discretionary	$	70,668,959	$	8,759,948	$	—	$	79,428,907
Energy		447,277,736		14,688,240		—		461,965,976
Financials		580,276,239		103,398,484		—		683,674,723
All Other Equity Investments^b		1,955,271,606		—		—		1,955,271,606
Equity-Linked Securities		—		67,164,490		—		67,164,490
Convertible Bonds		—		34,281,825		—		34,281,825
Corporate Bonds		—		3,153,052,064		—		3,153,052,064
Senior Floating Rate Interests		—		567,622,866		—		567,622,866
Asset-Backed Securities and Commercial Mortgage-Backed Securities		—		35,482,813		—		35,482,813
Short Term Investments		—		797,355,758		—		797,355,758

Total Investments in Securities	$	3,053,494,540	$	4,781,806,488	$	—	$	7,835,301,028

^aIncludes common, preferred, and convertible preferred stocks as well as other equity investments.

^bFor detailed categories, see the accompanying Statement of Investments.

FI-33

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Income Securities Fund

11. NEW ACCOUNTING PRONOUNCEMENTS

12. SUBSEQUENT EVENTS

The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure.


ABBREVIATIONS
Currency		Selected Portfolio

EUR - Euro		ADR - American Depositary Receipt
GBP - British Pound		FHLB - Federal Home Loan Bank
		FRN - Floating Rate Note
		L/C - Letter of Credit
		MTN - Medium Term Note
		PIK - Payment-In-Kind

FI-34

FRANKLIN LARGE CAP GROWTH SECURITIES FUND

This semiannual report for Franklin Large Cap Growth Securities Fund covers the period ended June 30, 2012.

Performance Summary as of 6/30/12

Franklin Large Cap Growth Securities Fund – Class 2 delivered a +6.75% total return for the six-month period ended 6/30/12.

Franklin Large Cap Growth Securities Fund Class 2

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares.

Current performance may differ from figures shown.

FLG-1

Fund Goal and Main Investments: Franklin Large Cap Growth Securities Fund seeks capital appreciation. Under normal market conditions, the Fund invests at least 80% of its net assets in investments of large capitalization companies. For this Fund, large capitalization companies are those with market capitalization values within those of the top 50% of companies in the Russell 1000^® Index at the time of purchase.¹

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. The Fund underperformed its benchmark, the Standard & Poor’s^® 500 Index (S&P 500^®), which posted a +9.49% total return.²

Economic and Market Overview

The U.S. economy, as measured by gross domestic product, grew modestly during the six-month period ended June 30, 2012. In the first quarter, personal income and spending rose, while federal, state and local government spending declined. The national unemployment rate for June 2012 stood at 8.2%, compared with 8.5% at the start of the period.³Jobless claims touched a four-year low in February amid robust job creation; however, hiring slowed during the remainder of the period and jobless claims at period-end reached January’s level. Industrial production and manufacturing activity continued to increase, but the manufacturing sector shrank unexpectedly in June. Although gasoline prices hit a peak in early April, they plunged to a five-month low near period-end due to lower crude oil prices. In keeping with its goal to strengthen U.S. economic recovery by fostering increased employment while keeping inflation in check, during June the Federal Reserve Board (Fed) extended through 2012 its program (dubbed Operation Twist) to buy long-term Treasuries in an attempt to lower long-term yields. The Fed also reaffirmed its intention to keep the federal funds target rate low at least through late 2014.

During late March and early April 2012, improved economic reports helped U.S. stock markets reach multi-year highs. The Dow Jones Industrial Average exceeded 13,000 and the S&P 500 topped 1,400 for the first time since 2008, while the NASDAQ Composite Index hit an 11-year high.¹ Global markets grew volatile, however, amid renewed

1. Please see Index Descriptions following the Fund Summaries.

3. Source: Bureau of Labor Statistics.

Fund Risks: All investments involve risks, including possible loss of principal. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. The Fund may focus on particular sectors of the market from time to time, which can carry greater risks of adverse developments in such sectors. Smaller- or midsized-company securities can be particularly sensitive to changing economic conditions, and their prospects for growth are less certain than those of larger, more established companies. Investments in foreign securities may involve special risks including currency fluctuations and economic and political uncertainty. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

FLG-2

Investment Strategy

We employ our long-held strategy: bottom-up, individual-company, fundamental research aimed at opportunistically finding what we believe to be outstanding large-cap companies across all sectors, at valuations we believe understate their fair worth, with future growth potential being a key driver of estimated worth. In doing so, we work hard seeking to ensure we are being adequately compensated for the risks that are inherent to all forecasting efforts, aiming to own those stocks that make the most sense from a risk/return perspective. We believe this disciplined, bottom-up analysis of future growth potential, current valuation and other risks on a stock-by-stock basis best supports our efforts to maintain a portfolio with superior risk/return characteristics and thus affords us the best prospects for strong performance over the long term.

Manager’s Discussion

Looking back on the key factors impacting the Fund’s returns during the six months under review, we would like to remind shareholders that our investment strategy is primarily bottom-up and driven by

LOGO

FLG-3

individual stock selection. However, we recognize that a sector-based discussion can be a helpful way to organize a portfolio review of key performance drivers.

From a sector perspective, our stock selection in the health care sector helped the Fund’s performance relative to the S&P 500. In particular, our positions in genetic analysis solutions company Illumina,⁴ pharmacy benefits manager Express Scripts Holdings and generic drug company Watson Pharmaceuticals boosted performance. Illumina’s first-quarter earnings rose due to declining expenses, and the firm also announced a stock buyback. Watson Pharmaceuticals’ first-quarter earnings also rose because of sharply higher revenue partly based on new generic drugs and robust growth in its branded drug business. In the case of Express Scripts Holdings, first-quarter revenues increased more than expected despite lower earnings due to expenses incurred before its April acquisition of Medco Health Solutions. Stock selection in the utilities sector also aided relative results. Other key contributors to relative Fund returns included diversified financial services firm Wells Fargo & Co., cable services provider Comcast and family entertainment and media company Walt Disney.

In contrast, stock selection in the information technology sector was a major detractor from returns relative to the S&P 500, particularly the Fund’s positions in social networking service Facebook⁴ and mobile phone hardware and software developer Research In Motion.⁵Facebook’s stock price declined after its initial public offering in May amid controversy about revised revenue and earnings estimates as well as concerns about the profitability of the firm’s mobile site. Research in Motion lost value largely because it posted a loss early in 2012 and delayed the launch of its next-generation BlackBerry phones until 2013. The Fund’s stock selection and overweighted allocation in the materials sector also hampered relative performance, particularly our position in global technology materials producer Celanese.⁵ First-quarter operating profit for Celanese declined by about half from the prior year due to European recessionary trends and the higher cost of raw materials. Other detractors included oil and gas exploration and production companies Anadarko Petroleum and Halliburton, which were impacted in part by declining oil and gas prices during the period.

4. This holding is not an index component and was sold by period-end.

5. This holding is not an index component.

Top 10 Holdings

Franklin Large Cap Growth Securities Fund

6/30/12


Company *Sector/Industry*	% of Total Net Assets
Apple Inc.		4.5%
Information Technology
Wells Fargo & Co.		4.0%
Financials
Anadarko Petroleum Corp.		2.6%
Energy
AT&T Inc.		2.4%
Telecommunication Services
General Electric Co.		2.3%
Industrials
Google Inc.		2.1%
Information Technology
International Business Machines Corp.		2.1%
Information Technology
Merck & Co. Inc.		2.0%
Health Care
QUALCOMM Inc.		2.0%
Information Technology
U.S. Bancorp		1.9%
Financials

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments.

FLG-4

Thank you for your participation in Franklin Large Cap Growth Securities Fund. We look forward to serving your future investment needs.

FLG-5

Fund Expenses

•

Transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes.

•

Actual Fund Expenses

You can estimate the Fund-level expenses you incurred during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:

1.	Divide your account value by $1,000.

If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6.

2.	Multiply the result by the number under the heading “Fund-Level Expenses Incurred During Period.”

If Fund-Level Expenses Incurred During Period were $7.50, then 8.6 x $7.50 = $64.50.

In this illustration, the estimated expenses incurred this period at the Fund level are $64.50.

Franklin Large Cap Growth Securities Fund Class 2

FLG-6

Hypothetical Example for Comparison with Other Mutual Funds


Class 2	Beginning Account Value 1/1/12		Ending Account Value 6/30/12		Fund-Level Expenses Incurred During Period* 1/1/12–6/30/12
Actual	$	1,000	$	1,067.50	$	5.35
Hypothetical (5% return before expenses)	$	1,000	$	1,019.69	$	5.22

*Expenses are calculated using the most recent six-month annualized expense ratio for the Fund’s Class 2 shares (1.04%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 182/366 to reflect the one-half year period.

FLG-7

Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Franklin Large Cap Growth Securities Fund


	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31,
Class 1	Six Months Ended June 30, 2012 (unaudited)			2011			2010			2009			2008			2007

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	14.75		$	15.07		$	13.62		$	10.66		$	17.51		$	16.70

Income from investment operations^a:
Net investment income^b		0.09			0.15			0.12			0.12			0.17			0.21
Net realized and unrealized gains (losses)		0.92			(0.33	)		1.48			3.04			(5.82	)		0.89

Total from investment operations		1.01			(0.18	)		1.60			3.16			(5.65	)		1.10

Less distributions from:
Net investment income		(0.18	)		(0.14	)		(0.15	)		(0.20	)		(0.24	)		(0.16	)
Net realized gains		—			—			—			—			(0.96	)		(0.13	)

Total distributions		(0.18	)		(0.14	)		(0.15	)		(0.20	)		(1.20	)		(0.29	)

Net asset value, end of period	$	15.58		$	14.75		$	15.07		$	13.62		$	10.66		$	17.51


Total return^c		6.83%			(1.22)%			11.85%			30.04%			(34.39)%			6.53%
Ratios to average net assets^d
Expenses		0.79%			0.80%			0.79%			0.81%	^e		0.77%	^e		0.74%	^e
Net investment income		1.16%			0.99%			0.86%			1.03%			1.19%			1.21%

Supplemental data
Net assets, end of period (000’s)	$	48,801		$	48,666		$	58,265		$	58,287		$	51,651		$	96,920
Portfolio turnover rate		19.54%			56.61%			46.75%			71.95%			66.04%			50.67%

^bBased on average daily shares outstanding.

^dRatios are annualized for periods less than one year.

^eBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

FLG-8

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin Large Cap Growth Securities Fund


	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31,
Class 2	Six Months Ended June 30, 2012 (unaudited)			2011			2010			2009			2008			2007

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	14.54		$	14.86		$	13.43		$	10.50		$	17.25		$	16.47

Income from investment operations^a:
Net investment income^b		0.07			0.11			0.08			0.09			0.13			0.17
Net realized and unrealized gains (losses)		0.91			(0.33	)		1.46			3.00			(5.73	)		0.87

Total from investment operations		0.98			(0.22	)		1.54			3.09			(5.60	)		1.04

Less distributions from:
Net investment income		(0.13	)		(0.10	)		(0.11	)		(0.16	)		(0.19	)		(0.13	)
Net realized gains		—			—			—			—			(0.96	)		(0.13	)

Total distributions		(0.13	)		(0.10	)		(0.11	)		(0.16	)		(1.15	)		(0.26	)

Net asset value, end of period	$	15.39		$	14.54		$	14.86		$	13.43		$	10.50		$	17.25


Total return^c		6.75%			(1.51)%			11.59%			29.73%			(34.53)%			6.23%
Ratios to average net assets^d
Expenses		1.04%			1.05%			1.04%			1.06%	^e		1.02%	^e		0.99%	^e
Net investment income		0.91%			0.74%			0.61%			0.78%			0.94%			0.96%

Supplemental data
Net assets, end of period (000’s)	$	283,712		$	293,226		$	357,405		$	373,821		$	328,597		$	642,351
Portfolio turnover rate		19.54%			56.61%			46.75%			71.95%			66.04%			50.67%

^bBased on average daily shares outstanding.

^dRatios are annualized for periods less than one year.

^eBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

FLG-9

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited)


Franklin Large Cap Growth Securities Fund	Country	Shares		Value
Common Stocks 95.7%
Consumer Discretionary 10.0%
^aAmazon.com Inc.	United States		11,700	$	2,671,695
^aBorgWarner Inc.	United States		88,500		5,804,715
Comcast Corp., A	United States		160,300		5,124,791
Johnson Controls Inc.	United States		97,600		2,704,496
Kohl’s Corp.	United States		95,300		4,335,197
McDonald’s Corp.	United States		22,300		1,974,219
NIKE Inc., B	United States		23,600		2,071,608
Target Corp.	United States		28,300		1,646,777
^aTenneco Inc.	United States		43,440		1,165,061
The Walt Disney Co.	United States		119,400		5,790,900

					33,289,459

Consumer Staples 7.4%
Altria Group Inc.	United States		57,400		1,983,170
CVS Caremark Corp.	United States		83,900		3,920,647
PepsiCo Inc.	United States		86,700		6,126,222
Philip Morris International Inc.	United States		69,500		6,064,570
The Procter & Gamble Co.	United States		76,445		4,682,256
Wal-Mart Stores Inc.	United States		27,000		1,882,440

					24,659,305

Energy 9.4%
Anadarko Petroleum Corp.	United States		131,150		8,682,130
Chevron Corp.	United States		27,200		2,869,600
ConocoPhillips	United States		64,700		3,615,436
Devon Energy Corp.	United States		71,300		4,134,687
Exxon Mobil Corp.	United States		21,700		1,856,869
Halliburton Co.	United States		153,300		4,352,187
Schlumberger Ltd.	United States		89,570		5,813,989

					31,324,898

Financials 11.9%
American Express Co.	United States		26,400		1,536,744
Bank of America Corp.	United States		140,700		1,150,926
BlackRock Inc.	United States		12,900		2,190,678
Citigroup Inc.	United States		34,990		959,076
CME Group Inc.	United States		8,070		2,163,648
Comerica Inc.	United States		82,300		2,527,433
Invesco Ltd.	United States		81,300		1,837,380
JPMorgan Chase & Co.	United States		169,145		6,043,551
Prudential Financial Inc.	United States		35,100		1,699,893
U.S. Bancorp	United States		197,627		6,355,684
Wells Fargo & Co.	United States		393,700		13,165,328

					39,630,341

Health Care 13.3%
Aetna Inc.	United States		121,400		4,706,678
^aExpress Scripts Holding Co.	United States		112,200		6,264,126
^aGilead Sciences Inc.	United States		38,800		1,989,664
Johnson & Johnson	United States		71,900		4,857,564
Medtronic Inc.	United States		36,600		1,417,518
Merck & Co. Inc.	United States		155,675		6,499,431
Pfizer Inc.	United States		218,700		5,030,100
Roche Holding AG, ADR	Switzerland		100,000		4,322,000

FLG-10

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Large Cap Growth Securities Fund	Country	Shares		Value
Common Stocks (continued)
Health Care (continued)
Teva Pharmaceutical Industries Ltd., ADR	Israel		72,200	$	2,847,568
^aThoratec Corp.	United States		47,800		1,605,124
^aWatson Pharmaceuticals Inc.	United States		61,700		4,565,183

					44,104,956

Industrials 7.8%
The Boeing Co.	United States		65,900		4,896,370
Emerson Electric Co.	United States		28,600		1,332,188
FedEx Corp.	United States		41,500		3,801,815
General Electric Co.	United States		363,500		7,575,340
Honeywell International Inc.	United States		15,200		848,768
Union Pacific Corp.	United States		23,200		2,767,992
United Technologies Corp.	United States		64,100		4,841,473

					26,063,946

Information Technology 24.1%
^aApple Inc.	United States		25,700		15,008,800
Broadcom Corp., A	United States		39,400		1,331,720
Cisco Systems Inc.	United States		196,000		3,365,320
Corning Inc.	United States		153,600		1,986,048
^aDell Inc.	United States		259,900		3,253,948
^aElectronic Arts Inc.	United States		219,450		2,710,208
^aEMC Corp.	United States		237,400		6,084,562
FLIR Systems Inc.	United States		41,600		811,200
^aGoogle Inc., A	United States		12,100		7,018,847
Hewlett-Packard Co.	United States		87,200		1,753,592
Intel Corp.	United States		174,100		4,639,765
International Business Machines Corp.	United States		35,000		6,845,300
MasterCard Inc., A	United States		6,330		2,722,596
Microsoft Corp.	United States		157,500		4,817,925
Oracle Corp.	United States		98,500		2,925,450
QUALCOMM Inc.	United States		116,590		6,491,731
^aResearch In Motion Ltd.	Canada		90,400		668,056
^aSemtech Corp.	United States		33,900		824,448
^aSymantec Corp.	United States		101,900		1,488,759
^aVeriFone Systems Inc.	United States		39,400		1,303,746
Visa Inc., A	United States		25,700		3,177,291
Xilinx Inc.	United States		24,800		832,536

					80,061,848

Materials 4.8%
Celanese Corp., A	United States		127,500		4,414,050
E. I. du Pont de Nemours and Co.	United States		19,200		970,944
LyondellBasell Industries NV, A	United States		48,190		1,940,611
Potash Corp. of Saskatchewan Inc.	Canada		83,200		3,636,757
Randgold Resources Ltd., ADR	United Kingdom		24,400		2,196,244
Walter Energy Inc.	United States		62,700		2,768,832

					15,927,438

Telecommunication Services 3.9%
AT&T Inc.	United States		225,262		8,032,843
^aSprint Nextel Corp.	United States		354,300		1,155,018
Vodafone Group PLC, ADR	United Kingdom		135,600		3,821,208

					13,009,069

FLG-11

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Large Cap Growth Securities Fund	Country	Shares		Value
Common Stocks (continued)
Utilities 3.1%
American Electric Power Co. Inc.	United States		104,500	$	4,169,550
PG&E Corp.	United States		52,550		2,378,938
Sempra Energy	United States		29,400		2,025,072
The Southern Co.	United States		36,400		1,685,320

					10,258,880

Total Common Stocks (Cost $231,072,307)					318,330,140


		Principal Amount
Short Term Investments (Cost $14,678,461) 4.4%
Repurchase Agreements 4.4%
^bJoint Repurchase Agreement, 0.129%, 7/02/12 (Maturity Value $14,678,619)	United States	$	14,678,461		14,678,461
BNP Paribas Securities Corp. (Maturity Value $2,867,468)
Credit Suisse Securities (USA) LLC (Maturity Value $3,345,403)
Deutsche Bank Securities Inc. (Maturity Value $2,252,874)
HSBC Securities (USA) Inc. (Maturity Value $1,911,597)
Merrill Lynch, Pierce, Fenner & Smith Inc. (Maturity Value $1,911,597)
Morgan Stanley & Co. LLC (Maturity Value $955,872)
UBS Securities LLC (Maturity Value $1,433,808)
Collateralized by U.S. Government Agency Securities, 0.00% - 5.25%, 8/01/12 - 6/28/17; ^cU.S. Treasury Bills, 7/26/12; and U.S. Treasury Notes, 1.125% - 3.00%, 12/15/12 - 2/15/22 (valued at $14,977,549)

Total Investments (Cost $245,750,768) 100.1%					333,008,601
Other Assets, less Liabilities (0.1)%					(496,364	)

Net Assets 100.0%				$	332,512,237

See Abbreviations on page FLG-22.

^aNon-income producing.

^bSee Note 1(c) regarding joint repurchase agreement.

^cThe security is traded on a discount basis with no stated coupon rate.

The accompanying notes are an integral part of these financial statements.

FLG-12

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

June 30, 2012 (unaudited)


	Franklin Large Cap Growth Securities Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	231,072,307
Cost - Repurchase agreements		14,678,461

Total cost of investments	$	245,750,768

Value - Unaffiliated issuers	$	318,330,140
Value - Repurchase agreements		14,678,461

Total value of investments		333,008,601
Receivables:
Capital shares sold		45,431
Dividends		541,667
Other assets		87

Total assets		333,595,786

Liabilities:
Payables:
Investment securities purchased		394,242
Capital shares redeemed		242,288
Affiliates		319,068
Reports to shareholders		104,846
Accrued expenses and other liabilities		23,105

Total liabilities		1,083,549

Net assets, at value	$	332,512,237

Net assets consist of:
Paid-in capital	$	318,373,173
Undistributed net investment income		1,644,388
Net unrealized appreciation (depreciation)		87,257,833
Accumulated net realized gain (loss)		(74,763,157	)

Net assets, at value	$	332,512,237

Class 1:
Net assets, at value	$	48,800,599

Shares outstanding		3,131,578

Net asset value and maximum offering price per share	$	15.58

Class 2:
Net assets, at value	$	283,711,638

Shares outstanding		18,438,781

Net asset value and maximum offering price per share	$	15.39

The accompanying notes are an integral part of these financial statements.

FLG-13

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the six months ended June 30, 2012 (unaudited)


	Franklin Large Cap Growth Securities Fund
Investment income:
Dividends	$	3,403,799
Interest		6,451

Total investment income		3,410,250

Expenses:
Management fees (Note 3a)		1,311,757
Distribution fees - Class 2 (Note 3c)		374,551
Unaffiliated transfer agent fees		304
Custodian fees (Note 4)		2,544
Reports to shareholders		50,855
Professional fees		14,389
Trustees’ fees and expenses		756
Other		9,030

Total expenses		1,764,186

Net investment income		1,646,064

Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		16,799,342
Foreign currency transactions		(391	)

Net realized gain (loss)		16,798,951

Net change in unrealized appreciation (depreciation) on investments		4,900,574

Net realized and unrealized gain (loss)		21,699,525

Net increase (decrease) in net assets resulting from operations	$	23,345,589

The accompanying notes are an integral part of these financial statements.

FLG-14

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets


	Franklin Large Cap Growth Securities Fund
	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31, 2011

Increase (decrease) in net assets:
Operations:
Net investment income	$	1,646,064		$	2,937,400
Net realized gain (loss) from investments and foreign currency transactions		16,798,951			20,697,833
Net change in unrealized appreciation (depreciation) on investments		4,900,574			(28,917,851	)

Net increase (decrease) in net assets resulting from operations		23,345,589			(5,282,618	)

Distributions to shareholders from:
Net investment income:
Class 1		(544,179	)		(492,852	)
Class 2		(2,394,442	)		(2,152,135	)

Total distributions to shareholders		(2,938,621	)		(2,644,987	)

Capital share transactions: (Note 2)
Class 1		(2,708,142	)		(8,419,530	)
Class 2		(27,078,771	)		(57,429,668	)
Class 4		—			(4,876	)

Total capital share transactions		(29,786,913	)		(65,854,074	)

Net increase (decrease) in net assets		(9,379,945	)		(73,781,679	)
Net assets:
Beginning of period		341,892,182			415,673,861

End of period	$	332,512,237		$	341,892,182

Undistributed net investment income included in net assets:
End of period	$	1,644,388		$	2,936,945

The accompanying notes are an integral part of these financial statements.

FLG-15

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited)

Franklin Large Cap Growth Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment company, consisting of twenty separate funds. The Franklin Large Cap Growth Securities Fund (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. The Fund offers two classes of shares: Class 1 and Class 2. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

Equity securities listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded, or the NYSE, whichever is earlier. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at the close of the NYSE on the day that the value of the security is determined. Over-the-counter securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities. Repurchase agreements are valued at cost, which approximates market value.

FLG-16

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Large Cap Growth Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

a. Financial Instrument Valuation (continued)

call into question the reliability of the values of the foreign securities held by the Fund. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services.

b. Foreign Currency Translation

c. Joint Repurchase Agreement

d. Income and Deferred Taxes

FLG-17

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Large Cap Growth Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

d. Income and Deferred Taxes (continued)

e. Security Transactions, Investment Income, Expenses and Distributions

f. Accounting Estimates

g. Guarantees and Indemnifications

FLG-18

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Large Cap Growth Securities Fund

2. SHARES OF BENEFICIAL INTEREST

At June 30, 2012, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:


	Six Months Ended June 30, 2012						Year Ended December 31, 2011^a
Class 1 Shares:	Shares			Amount			Shares			Amount
Shares sold		4,252		$	68,475			99,760		$	1,555,529
Shares issued in reinvestment of distributions		35,290			544,179			33,122			492,852
Shares redeemed		(207,751	)		(3,320,796	)		(698,667	)		(10,467,911	)

Net increase (decrease)		(168,209	)	$	(2,708,142	)		(565,785	)	$	(8,419,530	)

Class 2 Shares:
Shares sold		553,932		$	8,606,833			983,185		$	14,361,125
Shares issued in reinvestment of distributions		157,219			2,394,442			146,503			2,152,135
Shares redeemed		(2,439,795	)		(38,080,046	)		(5,015,686	)		(73,942,928	)

Net increase (decrease)		(1,728,644	)	$	(27,078,771	)		(3,885,998	)	$	(57,429,668	)

Class 4 Shares:
Shares redeemed								(312	)	$	(4,876	)

Net increase (decrease)								(312	)	$	(4,876	)

^aEffective

March 4, 2011, Class 4 was liquidated.

3. TRANSACTIONS WITH AFFILIATES


Subsidiary		Affiliation
Franklin Advisers, Inc. (Advisers)		Investment manager
Franklin Templeton Services, LLC (FT Services)		Administrative manager
Franklin Templeton Distributors, Inc. (Distributors)		Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services)		Transfer agent

a. Management Fees

The Fund pays an investment management fee to Advisers based on the average daily net assets of the Fund as follows:


Annualized Fee Rate		Net Assets
0.750%		Up to and including $500 million
0.625%		Over $500 million, up to and including $1 billion
0.500%		In excess of $1 billion

b. Administrative Fees

FLG-19

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Large Cap Growth Securities Fund

3. TRANSACTIONS WITH AFFILIATES (continued)

c. Distribution Fees

d. Transfer Agent Fees

Investor Services, under terms of an agreement, performs shareholder servicing for the Fund and is not paid by the Fund for the services.

4. EXPENSE OFFSET ARRANGEMENT

5. INCOME TAXES

At December 31, 2011, capital loss carryforwards were as follows:


Capital loss carryforwards subject to expiration:
2016	$	22,027,788
2017		62,499,598

Total capital loss carryforwards	$	84,527,386

At June 30, 2012, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:


Cost of investments	$	252,674,208


Unrealized appreciation	$	91,308,432
Unrealized depreciation		(10,974,039	)

Net unrealized appreciation (depreciation)	$	80,334,393

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatment of wash sales.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2012, aggregated $66,279,286 and $103,399,390, respectively.

FLG-20

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Large Cap Growth Securities Fund

7. CREDIT FACILITY

8. FAIR VALUE MEASUREMENTS

•

Level 1 – quoted prices in active markets for identical financial instruments

•

Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)

•

Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of financial instruments)

The inputs or methodology used for valuing financial instruments are not an indication of the risk associated with investing in those financial instruments.

For movements between the levels within the fair value hierarchy, the Fund has adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.

A summary of inputs used as of June 30, 2012, in valuing the Fund’s assets carried at fair value, is as follows:


	Level 1		Level 2		Level 3		Total

Assets:
Investments in Securities:
Equity Investments^a	$	318,330,140	$	—	$	—	$	318,330,140
Short Term Investments		—		14,678,461		—		14,678,461

Total Investments in Securities	$	318,330,140	$	14,678,461	$	—	$	333,008,601

^aFor detailed categories, see the accompanying Statement of Investments.

FLG-21

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Large Cap Growth Securities Fund

9. NEW ACCOUNTING PRONOUNCEMENTS

10. SUBSEQUENT EVENTS

The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure.


ABBREVIATIONS
Selected Portfolio

ADR - American Depositary Receipt

FLG-22

FRANKLIN LARGE CAP VALUE SECURITIES FUND

This semiannual report for Franklin Large Cap Value Securities Fund covers the period ended June 30, 2012.

Performance Summary as of 6/30/12

Franklin Large Cap Value Securities Fund – Class 2 delivered a +4.93% total return* for the six-month period ended 6/30/12.

*The investment manager and administrator have contractually agreed to waive or assume certain expenses so that common expenses of the Fund (excluding Rule 12b-1 fees and acquired fund fees and expenses) do not exceed 0.65% (other than certain nonroutine expenses) until 4/30/13. Fund investment results reflect the expense reduction, without which the results would have been lower.

Franklin Large Cap Value Securities Fund – Class 2

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares.

Current performance may differ from figures shown.

FLV-1

Fund Goal and Main Investments: Franklin Large Cap Value Securities Fund seeks long-term capital appreciation. Under normal market conditions, the Fund invests at least 80% of its net assets in investments of large capitalization companies, focusing on those the investment manager believes to be undervalued. For this Fund, large capitalization companies are those that are similar in size to those in the Russell 1000^® Index at the time of purchase.¹

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. The Fund underperformed its benchmark, the Russell 1000^® Value Index, which rose 8.68% for the same period.² Please note that the Fund employs a bottom-up stock selection process, and the managers invest in securities without regard to benchmark comparisons.

Economic and Market Overview

The U.S. economy, as measured by gross domestic product, grew modestly during the six-month period ended June 30, 2012. In the first quarter, personal income and spending rose, while federal, state and local government spending declined. The national unemployment rate for June 2012 stood at 8.2%, compared with 8.5% at the start of the period.³Jobless claims touched a four-year low in February amid robust job creation; however, hiring slowed during the remainder of the period and jobless claims at period-end reached January’s level. Industrial production and manufacturing activity continued to increase, but the manufacturing sector shrank unexpectedly in June. Although gasoline prices hit a peak in early April, they plunged to a five-month low near period-end due to lower crude oil prices. In keeping with its goal to strengthen U.S. economic recovery by fostering increased employment while keeping inflation in check, during June the Federal Reserve Board (Fed) extended through 2012 its program (dubbed Operation Twist) to buy long-term Treasuries in an attempt to lower long-term yields. The Fed also reaffirmed its intention to keep the federal funds target rate low at least through late 2014.

1. Please see Index Descriptions following the Fund Summaries.

3. Source: Bureau of Labor Statistics.

FLV-2

Composite Index hit an 11-year high.¹ Global markets grew volatile, however, amid renewed concerns about eurozone debt and slowing global economic growth. Fears of a Greek debt default and exit from the eurozone were somewhat mitigated by secured bailout financing and bondholder concessions in February, as well as elections in May and June that resulted in the formation of a new coalition government. Risk-averse investors seeking safety drove U.S. Treasury yields to historical lows during the period.

Investment Strategy

Although this report covers a six-month period, our investment horizon aims for longer term results. We seek to invest in securities of large-capitalization companies that we determine are selling below their underlying worth and hold them until they reach what we believe is their fair market value. Our aim is to construct a diversified portfolio of fundamentally sound companies purchased at attractive prices, often when they are out of favor with other investors for reasons we believe are temporary. Portfolio securities are selected without regard to benchmark comparisons and are chosen based on fundamental, bottom-up research focusing on several criteria, such as low price relative to earnings, cash flow or book value. We also consider stocks with recent sharp price declines that we feel still have significant growth potential or that possess valuable intangibles not reflected in the stock price.

Manager’s Discussion

During the six-month period under review, significant contributors to absolute Fund performance included several positions in the financials sector, notably property casualty insurer Allstate and bank holding company U.S. Bancorp.⁴ Some health care sector holdings also boosted

4. The financials sector comprises banks, diversified financials and insurance in the SOI.

LOGO

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results, including biopharmaceutical company Gilead Sciences, as well as certain consumer discretionary holdings such as home improvement retailer The Home Depot.⁵ Another key contributor to Fund performance was global software and services provider Microsoft.

In contrast, the Fund’s energy sector holdings overall lost value, due in part to declining oil and gas prices. Among these were oil and gas companies Devon Energy and Occidental Petroleum. Other detractors included diversified power management company Eaton, the largest franchiser of fast food restaurants, McDonald’s, and global machinery manufacturer Dover.

During the reporting period, the Fund initiated six positions in what we considered attractively valued securities: oilfield services provider Baker Hughes, bank holding companies Comerica and Keycorp, semiconductor products developer and manufacturer Microchip Technology, manufacturing services provider Rockwell Automation, and generic drug maker Watson Pharmaceuticals. We also added significantly to our holdings in Corning, Johnson Controls, Johnson & Johnson, Devon Energy, Apache, Archer-Daniels-Midland and Citigroup, and made smaller additions to eight other positions. We liquidated our positions in Bank of NY Mellon, Chesapeake Energy, Ensco, Masco, Medtronic, Morgan Stanley, Peabody Energy, J.C. Penney and PepsiCo. We also reduced our holdings in Microsoft, The Home Depot, State Street, Chubb, International Business Machines, Praxair, Merck & Co. and Wal-Mart Stores, among others.

Thank you for your participation in Franklin Large Cap Value Securities Fund. We look forward to serving your future investment needs.

5. The health care sector comprises health care equipment and services; and pharmaceuticals, biotechnology and life sciences in the SOI. The consumer discretionary sector comprises automobiles and components, consumer durables and apparel, consumer services and retailing in the SOI.

Top 10 Holdings

Franklin Large Cap Value Securities Fund

6/30/12


Company *Sector/Industry*	% of Total Net Assets
International Business Machines Corp.		2.9%
Software & Services
The Allstate Corp.		2.5%
Insurance
Xerox Corp.		2.4%
Technology Hardware & Equipment
Merck & Co. Inc.		2.3%
Pharmaceuticals, Biotechnology & Life Sciences
Nucor Corp.		2.3%
Materials
State Street Corp.		2.3%
Diversified Financials
Pfizer Inc.		2.2%
Pharmaceuticals, Biotechnology & Life Sciences
The Home Depot Inc.		2.1%
Retailing
Exxon Mobil Corp.		2.1%
Energy
Aflac Inc.		2.1%
Insurance

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).

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Fund Expenses

•

Transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes.

•

Actual Fund Expenses

You can estimate the Fund-level expenses you incurred during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:

1.	Divide your account value by $1,000.

If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6.

2.	Multiply the result by the number under the heading “Fund-Level Expenses Incurred During Period.”

If Fund-Level Expenses Incurred During Period were $7.50, then 8.6 x $7.50 = $64.50.

In this illustration, the estimated expenses incurred this period at the Fund level are $64.50.

Franklin Large Cap Value Securities Fund – Class 2

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Hypothetical Example for Comparison with Other Mutual Funds


Class 2	Beginning Account Value 1/1/12		Ending Account Value 6/30/12		Fund-Level Expenses Incurred During Period* 1/1/12–6/30/12
Actual	$	1,000	$	1,049.30	$	4.59
Hypothetical (5% return before expenses)	$	1,000	$	1,020.39	$	4.52

*Expenses are calculated using the most recent six-month annualized expense ratio, net of expense waivers, for the Fund’s Class 2 shares (0.90%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 182/366 to reflect the one-half year period.

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Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Franklin Large Cap Value Securities Fund


	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31,
Class 2	Six Months Ended June 30, 2012 (unaudited)			2011			2010			2009			2008			2007

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	9.83		$	10.50		$	9.36		$	7.54		$	11.63		$	11.86

Income from investment operations^a:
Net investment income^b		0.07			0.14			0.12			0.17			0.19			0.22
Net realized and unrealized gains (losses)		0.41			(0.69	)		1.19			1.81			(4.28	)		(0.25	)

Total from investment operations		0.48			(0.55	)		1.31			1.98			(4.09	)		(0.03	)

Less distributions from:
Net investment income		(0.16	)		(0.12	)		(0.17	)		(0.16	)		—			(0.19	)
Net realized gains		—			—			—			—			—			(0.01	)

Total distributions		(0.16	)		(0.12	)		(0.17	)		(0.16	)		—			(0.20	)

Net asset value, end of period	$	10.15		$	9.83		$	10.50		$	9.36		$	7.54		$	11.63


Total return^c		4.93%			(5.26)%			14.27%			26.76%			(35.17)%			(0.26)%
Ratios to average net assets^d
Expenses before waiver and payments by affiliates		1.39%			1.39%			1.40%			1.38%			1.34%			1.36%
Expenses net of waiver and payments by affiliates		0.90%			0.90%			0.90%			0.90%			0.90%			0.90%	^e
Net investment income		1.34%			1.35%			1.25%			2.15%			1.93%			1.82%

Supplemental data
Net assets, end of period (000’s)	$	32,491		$	34,091		$	40,183		$	35,892		$	26,776		$	37,797
Portfolio turnover rate		21.33%			20.31%			13.91%			15.64%			12.92%			15.80%

^bBased on average daily shares outstanding.

^dRatios are annualized for periods less than one year.

^eBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

FLV-7

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited)


Franklin Large Cap Value Securities Fund	Shares		Value
Common Stocks 97.6%
Automobiles & Components 1.2%
Johnson Controls Inc.		14,500	$	401,795

Banks 5.2%
Comerica Inc.		16,500		506,715
KeyCorp		67,800		524,772
U.S. Bancorp		20,500		659,280

				1,690,767

Capital Goods 13.1%
3M Co.		7,000		627,200
Dover Corp.		8,700		466,407
Eaton Corp.		15,000		594,450
General Dynamics Corp.		7,000		461,720
General Electric Co.		26,500		552,260
Illinois Tool Works Inc.		7,000		370,230
Parker Hannifin Corp.		7,000		538,160
Rockwell Automation Inc.		2,000		132,120
United Technologies Corp.		6,700		506,051

				4,248,598

Consumer Durables & Apparel 1.3%
NIKE Inc., B		4,800		421,344

Consumer Services 1.4%
McDonald’s Corp.		5,000		442,650

Diversified Financials 6.3%
Bank of America Corp.		35,500		290,390
Citigroup Inc.		24,500		671,545
Northern Trust Corp.		7,300		335,946
State Street Corp.		16,500		736,560

				2,034,441

Energy 16.1%
Apache Corp.		6,300		553,707
Baker Hughes Inc.		14,400		591,840
Chevron Corp.		5,000		527,500
ConocoPhillips		9,700		542,036
Devon Energy Corp.		9,200		533,508
Ensco PLC, A		14,000		657,580
Exxon Mobil Corp.		8,000		684,560
Noble Corp.		13,000		422,890
Occidental Petroleum Corp.		6,500		557,505
Phillips 66		5,300		176,172

				5,247,298

Food & Staples Retailing 1.2%
Wal-Mart Stores Inc.		5,500		383,460

Food, Beverage & Tobacco 1.5%
Archer-Daniels-Midland Co.		16,500		487,080

Health Care Equipment & Services 2.3%
Becton, Dickinson and Co.		7,000		523,250
Covidien PLC		4,400		235,400

				758,650

FLV-8

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Large Cap Value Securities Fund	Shares		Value
Common Stocks (continued)
Household & Personal Products 1.5%
The Procter & Gamble Co.		8,000	$	490,000

Insurance 12.4%
Aflac Inc.		16,000		681,440
The Allstate Corp.		23,000		807,070
^aBerkshire Hathaway Inc., A		2		249,890
The Chubb Corp.		7,500		546,150
MetLife Inc.		21,700		669,445
The Progressive Corp.		2,400		49,992
Prudential Financial Inc.		14,000		678,020
The Travelers Cos. Inc.		5,400		344,736

				4,026,743

Materials 5.7%
Air Products and Chemicals Inc.		2,500		201,825
Alcoa Inc.		67,000		586,250
Nucor Corp.		19,700		746,630
Praxair Inc.		3,000		326,190

				1,860,895

Pharmaceuticals, Biotechnology & Life Sciences 12.4%
Abbott Laboratories		9,700		625,359
^aGilead Sciences Inc.		12,000		615,360
Johnson & Johnson		9,000		608,040
Merck & Co. Inc.		18,000		751,500
Pfizer Inc.		31,000		713,000
Teva Pharmaceutical Industries Ltd., ADR (Israel)		12,000		473,280
^aWatson Pharmaceuticals Inc.		3,300		244,167

				4,030,706

Retailing 3.8%
The Home Depot Inc.		13,000		688,870
Nordstrom Inc.		10,000		496,900
^aOffice Depot Inc.		17,500		37,800

				1,223,570

Semiconductors & Semiconductor Equipment 0.9%
Microchip Technology Inc.		8,500		281,180

Software & Services 5.0%
International Business Machines Corp.		4,900		958,342
Microsoft Corp.		22,000		672,980

				1,631,322

Technology Hardware & Equipment 3.7%
Corning Inc.		34,000		439,620
Xerox Corp.		97,500		767,325

				1,206,945

Transportation 1.6%
Norfolk Southern Corp.		7,500		538,275

Utilities 1.0%
Sempra Energy		4,600		316,848

Total Common Stocks (Cost $26,322,863)				31,722,567

FLV-9

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Large Cap Value Securities Fund	Shares		Value
Short Term Investments (Cost $731,646) 2.3%
Money Market Funds 2.3%
^a,bInstitutional Fiduciary Trust Money Market Portfolio		731,646	$	731,646

Total Investments (Cost $27,054,509) 99.9%				32,454,213
Other Assets, less Liabilities 0.1%				37,218

Net Assets 100.0%			$	32,491,431

See Abbreviations on page FLV-19.

^aNon-income producing.

^bSee Note 7 regarding investments in the Institutional Fiduciary Trust Money Market Portfolio.

The accompanying notes are an integral part of these financial statements.

FLV-10

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

June 30, 2012 (unaudited)


	Franklin Large Cap Value Securities Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	26,322,863
Cost - Sweep Money Fund (Note 7)		731,646

Total cost of investments	$	27,054,509

Value - Unaffiliated issuers	$	31,722,567
Value - Sweep Money Fund (Note 7)		731,646

Total value of investments		32,454,213
Receivables:
Capital shares sold		33,248
Dividends		59,714

Total assets		32,547,175

Liabilities:
Payables:
Capital shares redeemed		6,476
Affiliates		26,237
Reports to shareholders		7,628
Professional fees		12,340
Accrued expenses and other liabilities		3,063

Total liabilities		55,744

Net assets, at value	$	32,491,431

Net assets consist of:
Paid-in capital	$	35,386,356
Undistributed net investment income		248,303
Net unrealized appreciation (depreciation)		5,399,704
Accumulated net realized gain (loss)		(8,542,932	)

Net assets, at value	$	32,491,431

Class 2:
Net assets, at value	$	32,491,431

Shares outstanding		3,200,324

Net asset value and maximum offering price per share	$	10.15

The accompanying notes are an integral part of these financial statements.

FLV-11

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the six months ended June 30, 2012 (unaudited)


	Franklin Large Cap Value Securities Fund
Investment income:
Dividends	$	415,052

Expenses:
Management fees (Note 3a)		137,923
Administrative fees (Note 3b)		46,273
Distribution fees - Class 2 (Note 3c)		46,297
Unaffiliated transfer agent fees		109
Custodian fees (Note 4)		266
Reports to shareholders		7,604
Professional fees		13,863
Other		4,571

Total expenses		256,906
Expenses waived/paid by affiliates (Note 3e)		(90,299	)

Net expenses		166,607

Net investment income		248,445

Realized and unrealized gains (losses):
Net realized gain (loss) from investments		(776,601	)
Net change in unrealized appreciation (depreciation) on investments		2,610,218

Net realized and unrealized gain (loss)		1,833,617

Net increase (decrease) in net assets resulting from operations	$	2,082,062

The accompanying notes are an integral part of these financial statements.

FLV-12

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets


	Franklin Large Cap Value Securities Fund
	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31, 2011

Increase (decrease) in net assets:
Operations:
Net investment income	$	248,445		$	517,783
Net realized gain (loss) from investments		(776,601	)		572,867
Net change in unrealized appreciation (depreciation) on investments		2,610,218			(3,078,747	)

Net increase (decrease) in net assets resulting from operations		2,082,062			(1,988,097	)

Distributions to shareholders from net investment income - Class 2		(517,878	)		(463,423	)

Capital share transactions: (Note 2)
Class 2		(3,163,640	)		(3,640,238	)
Class 4		—			(4,956	)

Total capital share transactions		(3,163,640	)		(3,645,194	)

Net increase (decrease) in net assets		(1,599,456	)		(6,096,714	)
Net assets:
Beginning of period		34,090,887			40,187,601

End of period	$	32,491,431		$	34,090,887

Undistributed net investment income included in net assets:
End of period	$	248,303		$	517,736

The accompanying notes are an integral part of these financial statements.

FLV-13

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited)

Franklin Large Cap Value Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment company, consisting of twenty separate funds. The Franklin Large Cap Value Securities Fund (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. At June 30, 2012, 99.59% of the Fund’s shares were held through one insurance company. The Fund offers one class of shares: Class 2.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

b. Income and Deferred Taxes

FLV-14

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Large Cap Value Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

b. Income and Deferred Taxes (continued)

regulations and rates that exist in the foreign markets in which the Fund invests. When a capital gain tax is determined to apply the Fund records an estimated deferred tax liability in an amount that would be payable if the securities were disposed of on the valuation date.

c. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Estimated expenses are accrued daily. Dividend income is recorded on the ex-dividend date. Distributions to shareholders are recorded on the ex-dividend date and are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with accounting principles generally accepted in the United States of America. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.

d. Accounting Estimates

e. Guarantees and Indemnifications

FLV-15

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Large Cap Value Securities Fund

2. SHARES OF BENEFICIAL INTEREST

At June 30, 2012, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:


	Six Months Ended June 30, 2012						Year Ended December 31, 2011^a
Class 2 Shares:	Shares			Amount			Shares			Amount
Shares sold		868,106		$	8,854,663			688,292		$	7,034,269
Shares issued in reinvestment of distributions		51,582			517,878			45,080			463,423
Shares redeemed		(1,187,352	)		(12,536,181	)		(1,093,620	)		(11,137,930	)

Net increase (decrease)		(267,664	)	$	(3,163,640	)		(360,248	)	$	(3,640,238	)

Class 4 Shares:
Shares redeemed								(452	)	$	(4,956	)

Net increase (decrease)								(452	)	$	(4,956	)

^aEffective March 4, 2011, Class 4 was liquidated.

3. TRANSACTIONS WITH AFFILIATES


Subsidiary		Affiliation
Franklin Advisory Services, LLC (Advisory Services)		Investment manager
Franklin Templeton Services, LLC (FT Services)		Administrative manager
Franklin Templeton Distributors, Inc. (Distributors)		Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services)		Transfer agent

a. Management Fees

The Fund pays an investment management fee to Advisory Services based on the average daily net assets of the Fund as follows:


Annualized Fee Rate		Net Assets
0.750%		Up to and including $500 million
0.650%		Over $500 million, up to and including $1 billion
0.600%		Over $1 billion, up to and including $1.5 billion
0.550%		Over $1.5 billion, up to and including $6.5 billion
0.525%		Over $6.5 billion, up to and including $11.5 billion
0.500%		Over $11.5 billion, up to and including $16.5 billion
0.490%		Over $16.5 billion, up to and including $19 billion
0.480%		Over $19 billion, up to and including $21.5 billion
0.470%		In excess of $21.5 billion

b. Administrative Fees

The Fund pays an administrative fee to FT Services of 0.25% per year of the average daily net assets of the Fund.

FLV-16

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Large Cap Value Securities Fund

3. TRANSACTIONS WITH AFFILIATES (continued)

c. Distribution Fees

The Board has adopted a distribution plan for Class 2 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s compensation distribution plan, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to 0.35% per year of its average daily net assets. The Board has agreed to limit the current rate to 0.25% per year for Class 2.

d. Transfer Agent Fees

Investor Services, under terms of an agreement, performs shareholder servicing for the Fund and is not paid by the Fund for the services.

e. Waiver and Expense Reimbursements

Advisory Services and FT Services have contractually agreed in advance to waive or limit their respective fees and to assume as their own expense certain expenses otherwise payable by the Fund so that the common expenses (i.e. a combination of management fees, administrative fees, and other expenses, but excluding distribution fees and acquired fund fees and expenses) do not exceed 0.65% (other than certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations, and liquidations) until April 30, 2013.

4. EXPENSE OFFSET ARRANGEMENT

5. INCOME TAXES

At December 31, 2011, capital loss carryforwards were as follows:


Capital loss carryforwards subject to expiration:
2016	$	4,203,088
2017		2,320,965
2018		1,173,534

Total capital loss carryforwards	$	7,697,587

At June 30, 2012, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:


Cost of investments	$	27,123,252


Unrealized appreciation	$	6,916,832
Unrealized depreciation		(1,585,871	)

Net unrealized appreciation (depreciation)	$	5,330,961

FLV-17

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Large Cap Value Securities Fund

5. INCOME TAXES (continued)

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatment of wash sales.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2012, aggregated $7,498,448 and $10,665,171, respectively.

7. INVESTMENTS IN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO

The Fund invests in the Institutional Fiduciary Trust Money Market Portfolio (Sweep Money Fund), an open-end investment company managed by Franklin Advisers, Inc. (an affiliate of the investment manager). Management fees paid by the Fund are reduced on assets invested in the Sweep Money Fund, in an amount not to exceed the management and administrative fees paid by the Sweep Money Fund.

8. CREDIT FACILITY

9. FAIR VALUE MEASUREMENTS

•

Level 1 – quoted prices in active markets for identical financial instruments

•

Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)

•

Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of financial instruments)

The inputs or methodology used for valuing financial instruments are not an indication of the risk associated with investing in those financial instruments.

For movements between the levels within the fair value hierarchy, the Fund has adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.

FLV-18

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Large Cap Value Securities Fund

9. FAIR VALUE MEASUREMENTS (continued)

At June 30, 2012, all of the Fund’s investments in financial instruments carried at fair value were valued using Level 1 inputs. For detailed categories, see the accompanying Statement of Investments.

10. NEW ACCOUNTING PRONOUNCEMENTS

In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. The amendments in the ASU enhance disclosures about offsetting of financial assets and liabilities to enable investors to understand the effect of these arrangements on a fund’s financial position. The ASU is effective for interim and annual reporting periods beginning on or after January 1, 2013. The Fund believes the adoption of this ASU will not have a material impact on its financial statements.

11. SUBSEQUENT EVENTS

The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure.


ABBREVIATIONS
Selected Portfolio

ADR - American Depositary Receipt

FLV-19

FRANKLIN RISING DIVIDENDS SECURITIES FUND

This semiannual report for Franklin Rising Dividends Securities Fund covers the period ended June 30, 2012.

Performance Summary as of 6/30/12

Franklin Rising Dividends Securities Fund – Class 2 delivered a +4.46% total return for the six-month period ended 6/30/12.

Franklin Rising Dividends Securities Fund – Class 2

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares.

Current performance may differ from figures shown.

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Fund Goal and Main Investments: Franklin Rising Dividends Securities Fund seeks long-term capital appreciation, with preservation of capital as an important consideration. Under normal market conditions, the Fund invests at least 80% of its net assets in investments of companies that have paid rising dividends.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. The Fund underperformed its benchmark, the Standard & Poor’s^® 500 Index (S&P 500^®), which rose 9.49% for the same period.¹ Please note the Fund employs a bottom-up stock selection process, and the managers invest in securities without regard to benchmark comparisons.

Economic and Market Overview

2. Source: Bureau of Labor Statistics.

Fund Risks: All investments involve risks, including possible loss of principal. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Value securities may not increase in price as anticipated, or may decline further in value. While smaller and midsized companies may offer substantial opportunities for capital growth, they also involve heightened risks and should be considered speculative. Historically, smaller- and midsized-company securities have been more volatile in price than larger company securities, especially over the short term. Smaller companies often have relatively small revenues, limited product lines and a small market share. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

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11-year high.³ Global markets grew volatile, however, amid renewed concerns about eurozone debt and slowing global economic growth. Fears of a Greek debt default and exit from the eurozone were somewhat mitigated by secured bailout financing and bondholder concessions in February, as well as elections in May and June that resulted in the formation of a new coalition government. Risk-averse investors seeking safety drove U.S. Treasury yields to historical lows during the period.

Investment Strategy

We are a research-driven, fundamental investment adviser, pursuing a disciplined value-oriented strategy. As bottom-up investors concentrating primarily on individual securities, we seek fundamentally sound companies that we believe meet our screening criteria, which include consistent, substantial dividend increases; reinvested earnings; and strong balance sheets. We attempt to acquire such stocks at attractive prices, often when they are out of favor with other investors. In following these criteria, we do not necessarily focus on companies whose securities pay a high dividend but rather on companies that consistently raise their dividends.

Manager’s Discussion

During the six months under review, three holdings that helped absolute Fund performance were West Pharmaceutical Services, Wal-Mart Stores and Abbott Laboratories. The stock price of West Pharmaceutical Services, a manufacturer of delivery system components for injection drugs and other health care products, increased after a favorable first-quarter earnings report showed higher sales and earnings per share compared with last year’s first-quarter results. West Pharmaceutical

LOGO

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3. Please see Index Descriptions following the Fund Summaries.

Services has raised its dividend for the past 19 years. General merchandise discount retailer Wal-Mart’s shares appreciated after better-than-expected domestic comparable store sales in the first quarter of 2012. Wal-Mart has had 38 consecutive years of dividend increases. Investors placed a higher valuation on diversified health care products manufacturer Abbott Laboratories prior to its expected split into two separate companies in late 2012. Abbott has increased its dividend for the 40th year in a row.

Detractors from performance included Procter & Gamble, Hillenbrand and Dover. Shares of household products manufacturer and marketer Procter & Gamble declined after it provided the lowest quarterly earnings guidance in over 10 years based on falling demand in Europe and China as well as unfavorable foreign exchange rates. The stock price of casket and memorialization products manufacturer Hillenbrand decreased after lower earnings estimates based on generally improved life expectancy and a growing preference for cremation. Dover, a manufacturer of equipment and industrial products, suffered largely from concern that its sales growth would slow as the economic cycle matured.

During the period, we initiated new positions in publisher John Wiley & Sons (19 years of consecutive dividend increases) and oil and gas exploration and production company Occidental Petroleum (10 years). We made significant additions to holdings of large integrated energy company Chevron (25 years), integrated energy company Exxon Mobil (30 years), health care products manufacturer Johnson & Johnson (50 years), therapeutic and diagnostics products manufacturer Medtronic (35 years) and water and electronic end markets manufacturer Pentair (36 years) and made smaller additions to 10 other positions. We liquidated our positions in Hudson City Bancorp, People’s Bancorp, Trustco Bank and U.S. Bancorp during the period. We also reduced our positions in Abbott Laboratories, Old Republic International, State Street and Wal-Mart Stores and made smaller reductions in other holdings.

Our 10 largest positions on June 30, 2012, represented 44.2% of the Fund’s total net assets. It is interesting to note how these 10 companies would respond, in aggregate, to the Fund’s screening criteria based on a simple average of statistical measures. On average, these 10 companies have raised their dividends 31 years in a row and by 300% in the past 10 years. Their most recent year-over-year dividend increases averaged 12.4% with a yield of 2.3% on June 30, 2012, and a dividend payout

Top 10 Holdings

Franklin Rising Dividends Securities Fund 6/30/12


Company *Sector/Industry*	% of Total Net Assets
International Business Machines Corp.		4.9%
Software & Services
Praxair Inc.		4.9%
Materials
Abbott Laboratories		4.8%
Pharmaceuticals, Biotechnology & Life Sciences
Roper Industries Inc.		4.7%
Electrical Equipment
Wal-Mart Stores Inc.		4.7%
Food & Staples Retailing
United Technologies Corp.		4.3%
Aerospace & Defense
The Procter & Gamble Co.		4.3%
Household & Personal Products
Becton, Dickinson and Co.		4.3%
Health Care Equipment & Services
Chevron Corp.		3.8%
Energy
Family Dollar Stores Inc.		3.5%
Retailing

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments.

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ratio of 32.3%, based on estimates of calendar year 2012 operating earnings. The average price/earnings ratio was 14.7 times calendar year 2012 estimates versus 13.1 for that of the unmanaged S&P 500.

Thank you for your participation in Franklin Rising Dividends Securities Fund. We look forward to serving your future investment needs.

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Fund Expenses

•

Transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes.

•

Actual Fund Expenses

You can estimate the Fund-level expenses you incurred during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:

1.	Divide your account value by $1,000.

If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6.

2.	Multiply the result by the number under the heading “Fund-Level Expenses Incurred During Period.”

If Fund-Level Expenses Incurred During Period were $7.50, then 8.6 x $7.50 = $64.50.

In this illustration, the estimated expenses incurred this period at the Fund level are $64.50.

Franklin Rising Dividends Securities Fund – Class 2

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Hypothetical Example for Comparison with Other Mutual Funds


Class 2	Beginning Account Value 1/1/12		Ending Account Value 6/30/12		Fund-Level Expenses Incurred During Period* 1/1/12–6/30/12
Actual	$	1,000	$	1,044.60	$	4.47
Hypothetical (5% return before expenses)	$	1,000	$	1,020.49	$	4.42

*Expenses are calculated using the most recent six-month annualized expense ratio for the Fund’s Class 2 shares (0.88%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 182/366 to reflect the one-half year period.

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Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Franklin Rising Dividends Securities Fund


	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31,
Class 1	Six Months Ended June 30, 2012 (unaudited)			2011			2010			2009			2008			2007

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	20.01		$	19.15		$	16.13		$	13.96		$	19.61		$	20.88

Income from investment operations^a:
Net investment income^b		0.18			0.36			0.32			0.14	^c		0.35			0.36
Net realized and unrealized gains (losses)		0.74			0.83			3.01			2.28			(5.51	)		(0.80	)

Total from investment operations		0.92			1.19			3.33			2.42			(5.16	)		(0.44	)

Less distributions from:
Net investment income		(0.39	)		(0.33	)		(0.31	)		(0.25	)		(0.36	)		(0.53	)
Net realized gains		—			—			—			—			(0.13	)		(0.30	)

Total distributions		(0.39	)		(0.33	)		(0.31	)		(0.25	)		(0.49	)		(0.83	)

Net asset value, end of period	$	20.54		$	20.01		$	19.15		$	16.13		$	13.96		$	19.61


Total return^d		4.59%			6.29%			20.94%			17.67%			(26.94)%			(2.41)%
Ratios to average net assets^e
Expenses		0.63%			0.63%			0.64%			0.65%	^f		0.61%	^f		0.59%	^f
Net investment income		1.74%			1.87%			1.88%			0.99%	^c		2.05%			1.72%

Supplemental data
Net assets, end of period (000’s)	$	138,525		$	140,297		$	148,544		$	139,816		$	142,862		$	235,946
Portfolio turnover rate		5.74%			12.76%			8.97%			16.99%			5.39%			3.29%

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $(0.15) per share as a return of capital adjustment to a previously recorded special dividend received by the Fund. Excluding this non-recurring amount, the ratio of net investment income to average net assets would have been 2.07%. See Note 1(c).

^eRatios are annualized for periods less than one year.

^fBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

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Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin Rising Dividends Securities Fund


	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31,
Class 2	Six Months Ended June 30, 2012 (unaudited)			2011			2010			2009			2008			2007

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	19.65		$	18.82		$	15.86		$	13.72		$	19.27		$	20.55

Income from investment operations^a:
Net investment income^b		0.15			0.31			0.28			0.10	^c		0.31			0.30
Net realized and unrealized gains (losses)		0.73			0.81			2.95			2.24			(5.42	)		(0.79	)

Total from investment operations		0.88			1.12			3.23			2.34			(5.11	)		(0.49	)

Less distributions from:
Net investment income		(0.34	)		(0.29	)		(0.27	)		(0.20	)		(0.31	)		(0.49	)
Net realized gains		—			—			—			—			(0.13	)		(0.30	)

Total distributions		(0.34	)		(0.29	)		(0.27	)		(0.20	)		(0.44	)		(0.79	)

Net asset value, end of period	$	20.19		$	19.65		$	18.82		$	15.86		$	13.72		$	19.27


Total return^d		4.46%			6.00%			20.64%			17.34%			(27.10)%			(2.69)%
Ratios to average net assets^e
Expenses		0.88%			0.88%			0.89%			0.90%	^f		0.86%	^f		0.84%	^f
Net investment income		1.49%			1.62%			1.63%			0.74%	^c		1.80%			1.47%

Supplemental data
Net assets, end of period (000’s)	$	1,522,994		$	1,523,396		$	1,572,732		$	1,371,351		$	1,286,878		$	2,079,366
Portfolio turnover rate		5.74%			12.76%			8.97%			16.99%			5.39%			3.29%

^bBased on average daily shares outstanding.

^eRatios are annualized for periods less than one year.

^fBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

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Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin Rising Dividends Securities Fund


	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31,
Class 4	Six Months Ended June 30, 2012 (unaudited)			2011			2010			2009			2008^a

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	19.83		$	19.04		$	16.09		$	13.92		$	18.51

Income from investment operations^b:
Net investment income^c		0.14			0.31			0.32			0.13	^d		0.26
Net realized and unrealized gains (losses)		0.73			0.80			2.94			2.24			(4.36	)

Total from investment operations		0.87			1.11			3.26			2.37			(4.10	)

Less distributions from:
Net investment income		(0.36	)		(0.32	)		(0.31	)		(0.20	)		(0.36	)
Net realized gains		—			—			—			—			(0.13	)

Total distributions		(0.36	)		(0.32	)		(0.31	)		(0.20	)		(0.49	)

Net asset value, end of period	$	20.34		$	19.83		$	19.04		$	16.09		$	13.92


Total return^e		4.39%			5.89%			20.62%			17.22%			(22.82)%
Ratios to average net assets^f
Expenses		0.98%			0.98%			0.99%			1.00%	^g		0.96%	^g
Net investment income		1.39%			1.52%			1.53%			0.64%	^d		1.70%

Supplemental data
Net assets, end of period (000’s)	$	5,053		$	3,020		$	1,007		$	15		$	4
Portfolio turnover rate		5.74%			12.76%			8.97%			16.99%			5.39%

^aFor the period February 29, 2008 (effective date) to December 31, 2008.

^cBased on average daily shares outstanding.

^dNet investment income per share includes approximately $(0.15) per share as a return of capital adjustment to a previously recorded special dividend received by the Fund. Excluding this non-recurring amount, the ratio of net investment income to average net assets would have been 1.72%. See Note 1(c).

^fRatios are annualized for periods less than one year.

^gBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

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Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited)


Franklin Rising Dividends Securities Fund	Shares		Value
Common Stocks 97.9%
Aerospace & Defense 4.5%
General Dynamics Corp.		38,000	$	2,506,480
United Technologies Corp.		951,400		71,859,242

				74,365,722

Automobiles & Components 0.9%
Johnson Controls Inc.		529,500		14,672,445

Commercial & Professional Services 1.7%
ABM Industries Inc.		951,288		18,607,193
Cintas Corp.		267,700		10,335,897

				28,943,090

Consumer Durables & Apparel 2.6%
^aKid Brands Inc.		265,947		531,894
Leggett & Platt Inc.		711,800		15,040,334
NIKE Inc., B		277,000		24,315,060
Superior Uniform Group Inc.		237,100		2,904,475

				42,791,763

Consumer Services 2.6%
Hillenbrand Inc.		1,191,300		21,896,094
Matthews International Corp., A		39,000		1,267,110
McDonald’s Corp.		234,345		20,746,563

				43,909,767

Diversified Financials 0.4%
State Street Corp.		128,500		5,736,240

Electrical Equipment 6.2%
Brady Corp., A		889,579		24,472,318
Roper Industries Inc.		799,250		78,790,065

				103,262,383

Energy 5.9%
Chevron Corp.		601,000		63,405,500
Exxon Mobil Corp.		330,500		28,280,885
Occidental Petroleum Corp.		69,790		5,985,888

				97,672,273

Food & Staples Retailing 4.7%
Wal-Mart Stores Inc.		1,125,100		78,441,972

Food, Beverage & Tobacco 5.4%
Archer-Daniels-Midland Co.		516,000		15,232,320
McCormick & Co. Inc.		792,000		48,034,800
PepsiCo Inc.		363,900		25,713,174

				88,980,294

Health Care Equipment & Services 13.9%
Becton, Dickinson and Co.		949,143		70,948,439
Hill-Rom Holdings Inc.		375,103		11,571,928
Medtronic Inc.		730,000		28,272,900
Stryker Corp.		630,400		34,735,040
Teleflex Inc.		506,753		30,866,325
West Pharmaceutical Services Inc.		1,087,600		54,912,924

				231,307,556

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Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Rising Dividends Securities Fund	Shares		Value
Common Stocks (continued)
Household & Personal Products 4.9%
Colgate-Palmolive Co.		95,500	$	9,941,550
The Procter & Gamble Co.		1,171,600		71,760,500

				81,702,050

Industrial Conglomerates 0.3%
Carlisle Cos. Inc.		96,261		5,103,758

Insurance 6.7%
Aflac Inc.		309,200		13,168,828
Arthur J. Gallagher & Co.		753,000		26,407,710
The Chubb Corp.		45,000		3,276,900
Erie Indemnity Co., A		613,585		43,938,822
Mercury General Corp.		154,200		6,425,514
Old Republic International Corp.		1,069,708		8,867,880
RLI Corp.		147,571		10,064,342

				112,149,996

Machinery 5.6%
Donaldson Co. Inc.		350,068		11,681,769
Dover Corp.		1,096,700		58,794,087
Pentair Inc.		593,000		22,700,040

				93,175,896

Materials 12.4%
Air Products and Chemicals Inc.		559,700		45,184,581
Albemarle Corp.		435,000		25,943,400
Bemis Co. Inc.		986,200		30,907,508
Ecolab Inc.		66,000		4,522,980
Nucor Corp.		499,002		18,912,176
Praxair Inc.		746,260		81,140,850

				206,611,495

Media 0.1%
John Wiley & Sons Inc., A		37,000		1,812,630

Pharmaceuticals, Biotechnology & Life Sciences 10.7%
Abbott Laboratories		1,239,800		79,929,906
Johnson & Johnson		726,100		49,055,316
Pfizer Inc.		2,158,100		49,636,300

				178,621,522

Retailing 3.5%
Family Dollar Stores Inc.		886,335		58,923,551

Semiconductors & Semiconductor Equipment 0.0%†
Cohu Inc.		50,300		511,048

Software & Services 4.9%
International Business Machines Corp.		419,500		82,045,810

Total Common Stocks (Cost $1,115,472,033)				1,630,741,261

FRD-12

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Rising Dividends Securities Fund	Shares		Value
Short Term Investments (Cost $33,929,710) 2.0%
Money Market Funds 2.0%
^a,bInstitutional Fiduciary Trust Money Market Portfolio		33,929,710	$	33,929,710

Total Investments (Cost $1,149,401,743) 99.9%				1,664,670,971
Other Assets, less Liabilities 0.1%				1,900,640

Net Assets 100.0%			$	1,666,571,611

†Rounds to less than 0.1% of net assets.

^aNon-income producing.

^bSee Note 7 regarding investments in the Institutional Fiduciary Trust Money Market Portfolio.

The accompanying notes are an integral part of these financial statements.

FRD-13

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

June 30, 2012 (unaudited)


	Franklin Rising Dividends Securities Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	1,115,472,033
Cost - Sweep Money Fund (Note 7)		33,929,710

Total cost of investments	$	1,149,401,743

Value - Unaffiliated issuers	$	1,630,741,261
Value - Sweep Money Fund (Note 7)		33,929,710

Total value of investments		1,664,670,971
Receivables:
Investment securities sold		6,039,812
Capital shares sold		189,445
Dividends		1,642,616
Other assets		423

Total assets		1,672,543,267

Liabilities:
Payables:
Investment securities purchased		2,426,499
Capital shares redeemed		1,745,686
Affiliates		1,461,857
Accrued expenses and other liabilities		337,614

Total liabilities		5,971,656

Net assets, at value	$	1,666,571,611

Net assets consist of:
Paid-in capital	$	1,262,405,996
Undistributed net investment income		12,798,936
Net unrealized appreciation (depreciation)		515,269,228
Accumulated net realized gain (loss)		(123,902,549	)

Net assets, at value	$	1,666,571,611

Class 1:
Net assets, at value	$	138,524,624

Shares outstanding		6,745,382

Net asset value and maximum offering price per share	$	20.54

Class 2:
Net assets, at value	$	1,522,994,113

Shares outstanding		75,420,118

Net asset value and maximum offering price per share	$	20.19

Class 4:
Net assets, at value	$	5,052,874

Shares outstanding		248,435

Net asset value and maximum offering price per share	$	20.34

The accompanying notes are an integral part of these financial statements.

FRD-14

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the six months ended June 30, 2012 (unaudited)


	Franklin Rising Dividends Securities Fund
Investment income:
Dividends	$	20,076,533

Expenses:
Management fees (Note 3a)		5,128,549
Distribution fees: (Note 3c)
Class 2		1,941,600
Class 4		7,194
Unaffiliated transfer agent fees		878
Custodian fees (Note 4)		11,559
Reports to shareholders		135,545
Professional fees		26,270
Trustees’ fees and expenses		3,317
Other		17,748

Total expenses		7,272,660

Net investment income		12,803,873

Realized and unrealized gains (losses):
Net realized gain (loss) from investments		1,851,212
Net change in unrealized appreciation (depreciation) on investments		59,793,730

Net realized and unrealized gain (loss)		61,644,942

Net increase (decrease) in net assets resulting from operations	$	74,448,815

The accompanying notes are an integral part of these financial statements.

FRD-15

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets


	Franklin Rising Dividends Securities Fund
	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31, 2011

Increase (decrease) in net assets:
Operations:
Net investment income	$	12,803,873		$	27,655,892
Net realized gain (loss) from investments		1,851,212			120,463,536
Net change in unrealized appreciation (depreciation) on investments		59,793,730			(50,218,731	)

Net increase (decrease) in net assets resulting from operations		74,448,815			97,900,697

Distributions to shareholders from:
Net investment income:
Class 1		(2,577,724	)		(2,458,866	)
Class 2		(24,994,784	)		(23,318,584	)
Class 4		(85,528	)		(30,729	)

Total distributions to shareholders		(27,658,036	)		(25,808,179	)

Capital share transactions: (Note 2)
Class 1		(5,622,418	)		(14,479,695	)
Class 2		(43,298,658	)		(115,088,554	)
Class 4		1,989,628			1,904,859

Total capital share transactions		(46,931,448	)		(127,663,390	)

Net increase (decrease) in net assets		(140,669	)		(55,570,872	)
Net assets:
Beginning of period		1,666,712,280			1,722,283,152

End of period	$	1,666,571,611		$	1,666,712,280

Undistributed net investment income included in net assets:
End of period	$	12,798,936		$	27,653,099

The accompanying notes are an integral part of these financial statements.

FRD-16

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited)

Franklin Rising Dividends Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment company, consisting of twenty separate funds. The Franklin Rising Dividends Securities Fund (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. At June 30, 2012, 57.99% of the Fund’s shares were held through one insurance company. The Fund offers three classes of shares: Class 1, Class 2, and Class 4. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

Equity securities listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Over-the-counter securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities. Investments in open-end mutual funds are valued at the closing net asset value.

b. Income Taxes

FRD-17

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Rising Dividends Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

c. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Estimated expenses are accrued daily. Dividend income is recorded on the ex-dividend date. Distributions to shareholders are recorded on the ex-dividend date and are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with accounting principles generally accepted in the United States of America. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.

d. Accounting Estimates

e. Guarantees and Indemnifications

2. SHARES OF BENEFICIAL INTEREST

At June 30, 2012, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:


	Six Months Ended June 30, 2012						Year Ended December 31, 2011
Class 1 Shares:	Shares			Amount			Shares			Amount
Shares sold		132,607		$	2,733,022			601,890		$	11,765,470
Shares issued in reinvestment of distributions		125,681			2,577,724			126,876			2,458,866
Shares redeemed		(525,109	)		(10,933,164	)		(1,473,505	)		(28,704,031	)

Net increase (decrease)		(266,821	)	$	(5,622,418	)		(744,739	)	$	(14,479,695	)

FRD-18

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Rising Dividends Securities Fund

2. SHARES OF BENEFICIAL INTEREST (continued)


	Six Months Ended June 30, 2012						Year Ended December 31, 2011
Class 2 Shares:	Shares			Amount			Shares			Amount
Shares sold		2,693,575		$	54,837,316			5,855,934		$	111,121,703
Shares issued in reinvestment of distributions		1,239,206			24,994,784			1,222,789			23,318,584
Shares redeemed		(6,021,444	)		(123,130,758	)		(13,131,700	)		(249,528,841	)

Net increase (decrease)		(2,088,663	)	$	(43,298,658	)		(6,052,977	)	$	(115,088,554	)

Class 4 Shares:
Shares sold		106,225		$	2,197,508			125,061		$	2,400,178
Shares issued on reinvestment of distributions		4,211			85,528			1,596			30,729
Shares redeemed		(14,281	)		(293,408	)		(27,259	)		(526,048	)

Net increase (decrease)		96,155		$	1,989,628			99,398		$	1,904,859

3. TRANSACTIONS WITH AFFILIATES


Subsidiary		Affiliation
Franklin Advisory Services, LLC (Advisory Services)		Investment manager
Franklin Templeton Services, LLC (FT Services)		Administrative manager
Franklin Templeton Distributors, Inc. (Distributors)		Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services)		Transfer agent

a. Management Fees

The Fund pays an investment management fee to Advisory Services based on the average daily net assets of the Fund as follows:


Annualized Fee Rate		Net Assets
0.750%		Up to and including $500 million
0.625%		Over $500 million, up to and including $1 billion
0.500%		In excess of $1 billion

b. Administrative Fees

Under an agreement with Advisory Services, FT Services provides administrative services to the Fund. The fee is paid by Advisory Services based on average daily net assets, and is not an additional expense of the Fund.

c. Distribution Fees

FRD-19

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Rising Dividends Securities Fund

3. TRANSACTIONS WITH AFFILIATES (continued)

d. Transfer Agent Fees

Investor Services, under terms of an agreement, performs shareholder servicing for the Fund and is not paid by the Fund for the services.

4. EXPENSE OFFSET ARRANGEMENT

5. INCOME TAXES

At December 31, 2011, capital loss carryforwards were as follows:


Capital loss carryforwards subject to expiration:
2016	$	16,233,576
2017		107,931,803

Total capital loss carryforwards	$	124,165,379

At June 30, 2012, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:


Cost of investments	$	1,150,990,124


Unrealized appreciation	$	545,480,474
Unrealized depreciation		(31,799,627	)

Net unrealized appreciation (depreciation)	$	513,680,847

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatment of wash sales.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2012, aggregated $93,510,638 and $108,421,104 , respectively.

7. INVESTMENTS IN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO

FRD-20

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Rising Dividends Securities Fund

8. CREDIT FACILITY

9. FAIR VALUE MEASUREMENTS

•

Level 1 – quoted prices in active markets for identical financial instruments

•

Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)

•

Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of financial instruments)

The inputs or methodology used for valuing financial instruments are not an indication of the risk associated with investing in those financial instruments.

For movements between the levels within the fair value hierarchy, the Fund has adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.

10. NEW ACCOUNTING PRONOUNCEMENTS

11. SUBSEQUENT EVENTS

The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure.

FRD-21

FRANKLIN SMALL CAP VALUE SECURITIES FUND

This semiannual report for Franklin Small Cap Value Securities Fund covers the period ended June 30, 2012.

Performance Summary as of 6/30/12

Franklin Small Cap Value Securities Fund – Class 2 delivered a +1.37% total return for the six-month period ended 6/30/12.

Franklin Small Cap Value Securities Fund – Class 2

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares.

Current performance may differ from figures shown.

FSV-1

Fund Goal and Main Investments: Franklin Small Cap Value Securities Fund seeks long-term total return. Under normal market conditions, the Fund invests at least 80% of its net assets in investments of small capitalization companies. For this Fund, small capitalization companies are those with market capitalizations under $3.5 billion at the time of purchase. The Fund invests generally in equity securities of companies that the manager believes are undervalued and have the potential for capital appreciation.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. The Fund underperformed its benchmark, the Russell 2500^TM Value Index, which rose 8.15% for the same period.¹ Please note the Fund employs a bottom-up stock selection process, and the managers invest in securities without regard to benchmark comparisons.

Economic and Market Overview

During late March and early April 2012, improved economic reports helped U.S. stock markets reach multi-year highs. The Dow Jones Industrial Average exceeded 13,000 and the Standard & Poor’s^® 500

2. Source: Bureau of Labor Statistics.

Fund Risks: All investments involve risks, including possible loss of principal. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Value securities may not increase in price as anticipated, or may decline further in value. Smaller-company stocks have historically exhibited special risks, including greater price volatility, particularly over the short term. Smaller companies often have relatively small revenues, limited product lines and a small market share. Investments in foreign securities may involve special risks including currency fluctuations and economic and political uncertainty. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

FSV-2

Index topped 1,400 for the first time since 2008, while the NASDAQ Composite Index hit an 11-year high.³ Global markets grew volatile, however, amid renewed concerns about eurozone debt and slowing global economic growth. Fears of a Greek debt default and exit from the eurozone were somewhat mitigated by secured bailout financing and bondholder concessions in February, as well as elections in May and June that resulted in the formation of a new coalition government. Risk-averse investors seeking safety drove U.S. Treasury yields to historical lows during the period.

Investment Strategy

We are a research-driven, fundamental investment adviser, pursuing a disciplined, value-oriented strategy for the Fund. As a bottom-up adviser concentrating primarily on individual securities, we focus on the market price of a company’s securities relative to our evaluation of the company’s potential long-term earnings, asset value or cash flow. We seek bargains among the “unloved,” out-of-favor companies that offer, in our opinion, attractive long-term potential. These might include current growth companies that are being ignored by the market, former growth companies that have stumbled recently, dropping sharply in price but that still have significant growth potential, in our opinion, or companies that may be potential turnaround candidates or takeover targets.

Manager’s Discussion

During the six months under review, significant contributors to Fund performance came from positions in the financials sector, including insurer Protective Life.⁴ Several consumer discretionary sector holdings also boosted performance, such as footwear manufacturer and marketer

3. Please see Index Descriptions following the Fund Summaries.

4. The financials sector comprises banks and insurance in the SOI.

LOGO

FSV-3

Brown Shoe, and single-family home builders M/I Homes and M.D.C. Holdings.⁵ Industrials sector holdings also helped performance, notably lumber products manufacturer Universal Forest Products.⁶

Most market sectors represented in the Fund contributed to performance with the exception of the Fund’s energy and information technology (IT) holdings.⁷ Key individual detractors from performance included regional airline company SkyWest, auto components supplier Gentex, industrial compressor and blower manufacturer Gardner Denver, aircraft-related aftermarket service provider AAR, and railcar manufacturer and lessor Trinity Industries.

The Fund initiated a position in IT products distributor Ingram Micro, which we considered an attractively valued security. In addition to increasing existing positions in AAR and Gentex, we also added to our positions in road construction equipment manufacturer Astec Industries, medical equipment manufacturer Hill-Rom Holdings, branded women’s apparel manufacturer Maidenform Brands, laser equipment producer Rofin-Sinar Technologies and brand marketing consultant Schawk. We liquidated eight positions during the period: American National Insurance, Casey’s General Stores, D.R. Horton, Mettler-Toledo International, J.C. Penney, PNM Resources, Transatlantic Holdings and Tuesday Morning. An additional security, a Mueller Industries corporate bond, was redeemed via the company’s call option. We also made significant reductions to holdings in AptarGroup, Fred’s, NV Energy, RLI, Roper Industries and Steel Dynamics, and made smaller reductions to eight other positions.

Thank you for your participation in Franklin Small Cap Value Securities Fund. We look forward to serving your future investment needs.

5. The consumer discretionary sector comprises automobiles and components, consumer durables and apparel, consumer services and retailing in the SOI.

6. The industrials sector comprises aerospace and defense, building products, commercial and professional services, construction and engineering, electrical equipment, industrial conglomerates, machinery, trading companies and distributors, and transportation in the SOI.

7. The information technology sector comprises semiconductors and semiconductor equipment, and technology hardware and equipment in the SOI.

Top 10 Holdings

Franklin Small Cap Value Securities Fund

6/30/12


Company *Sector/Industry*	% of Total Net Assets
Protective Life Corp.		2.7%
Insurance
Thor Industries Inc.		1.8%
Automobiles & Components
Group 1 Automotive Inc.		1.8%
Retailing
Universal Forest Products Inc.		1.8%
Building Products
Reliance Steel & Aluminum Co.		1.8%
Materials
Rowan Cos. PLC		1.6%
Energy
Tidewater Inc.		1.6%
Energy
RPM International Inc.		1.6%
Materials
Bristow Group Inc.		1.6%
Energy
Granite Construction Inc.		1.6%
Construction & Engineering

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).

FSV-4

Fund Expenses

•

Transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes.

•

Actual Fund Expenses

You can estimate the Fund-level expenses you incurred during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:

1.	Divide your account value by $1,000.

If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6.

2.	Multiply the result by the number under the heading “Fund-Level Expenses Incurred During Period.”

If Fund-Level Expenses Incurred During Period were $7.50, then 8.6 x $7.50 = $64.50.

In this illustration, the estimated expenses incurred this period at the Fund level are $64.50.

Franklin Small Cap Value Securities Fund – Class 2

FSV-5

Hypothetical Example for Comparison with Other Mutual Funds


Class 2	Beginning Account Value 1/1/12		Ending Account Value 6/30/12		Fund-Level Expenses Incurred During Period* 1/1/12–6/30/12
Actual	$	1,000	$	1,013.70	$	4.61
Hypothetical (5% return before expenses)	$	1,000	$	1,020.29	$	4.62

*Expenses are calculated using the most recent six-month annualized expense ratio for the Fund’s Class 2 shares (0.92%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 182/366 to reflect the one-half year period.

FSV-6

SUPPLEMENT DATED JULY 2, 2012

TO THE PROSPECTUSES

DATED MAY 1, 2012 OF

FRANKLIN SMALL CAP VALUE SECURITIES FUND

(A series of Franklin Templeton Variable Insurance Products Trust)

The Prospectus is amended as follows:

I. The portfolio management team under the “Fund Summary — Portfolio Managers” section on page FSV-S4 is revised as follows:

PORTFOLIO MANAGERS

William J. Lippman President of Advisory Services and portfolio manager of the Fund since inception (1998).

Steven B. Raineri Portfolio Manager of Advisory Services and portfolio manager of the Fund since July 2012.

Bruce C. Baughman, CPA Senior Vice President of Advisory Services and portfolio manager of the Fund since inception (1998).

Margaret McGee Vice President of Advisory Services and portfolio manager of the Fund since inception (1998).

Donald G. Taylor, CPA Senior Vice President of Advisory Services and portfolio manager of the Fund since inception (1998).

II. The portfolio management team under the “Fund Details — Management” section beginning on page FSV-D5 is revised as follows:


William Lippman PRESIDENT OF ADVISORY SERVICES		Mr. Lippman has been the lead portfolio manager of the Fund since its inception and became a co-lead in 2007. He joined Franklin Templeton Investments in 1988.

Steven B. Raineri PORTFOLIO MANAGER OF ADVISORY SERVICES		Mr. Raineri has been a co-lead portfolio manager of the Fund since July 2012. He joined Franklin Templeton Investments in 2005.

Bruce Baughman SENIOR VICE PRESIDENT OF ADVISORY SERVICES		Mr. Baughman has been a portfolio manager of the Fund since its inception. He joined Franklin Templeton Investments in 1988.

FSV-7


Margaret McGee VICE PRESIDENT OF ADVISORY SERVICES		Ms. McGee has been a portfolio manager of the Fund since its inception. She joined Franklin Templeton Investments in 1988.

Donald G. Taylor, CPA SENIOR VICE PRESIDENT OF ADVISORY SERVICES		Mr. Taylor has been a portfolio manager of the Fund since its inception. He joined Franklin Templeton Investments in 1996.

Please keep this supplement for future reference.

FSV-8

Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Franklin Small Cap Value Securities Fund


	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31,
Class 1	Six Months Ended June 30, 2012 (unaudited)			2011			2010			2009			2008			2007

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	15.82		$	16.55		$	13.00		$	10.73		$	17.38		$	19.07

Income from investment operations^a:
Net investment income^b		0.14			0.16			0.14			0.15			0.24			0.22
Net realized and unrealized gains (losses)		0.10			(0.74	)		3.54			2.86			(5.44	)		(0.44	)

Total from investment operations		0.24			(0.58	)		3.68			3.01			(5.20	)		(0.22	)

Less distributions from:
Net investment income		(0.17	)		(0.15	)		(0.13	)		(0.22	)		(0.23	)		(0.17	)
Net realized gains		—			—			—			(0.52	)		(1.22	)		(1.30	)

Total distributions		(0.17	)		(0.15	)		(0.13	)		(0.74	)		(1.45	)		(1.47	)

Net asset value, end of period	$	15.89		$	15.82		$	16.55		$	13.00		$	10.73		$	17.38


Total return^c		1.56%			(3.53)%			28.49%			29.54%			(32.87)%			(2.14)%
Ratios to average net assets^d
Expenses		0.67%			0.66%			0.67%			0.68%	^e		0.67%	^e		0.64%	^e
Net investment income		1.63%			1.02%			0.98%			1.29%			1.62%			1.13%

Supplemental data
Net assets, end of period (000’s)	$	37,775		$	39,374		$	47,300		$	42,428		$	34,901		$	57,045
Portfolio turnover rate		2.88%			14.39%			15.92%			6.68%			16.98%			16.27%

^bBased on average daily shares outstanding.

^dRatios are annualized for periods less than one year.

^eBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

FSV-9

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin Small Cap Value Securities Fund


	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31,
Class 2	Six Months Ended June 30, 2012 (unaudited)			2011			2010			2009			2008			2007

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	15.53		$	16.25		$	12.77		$	10.55		$	17.10		$	18.79

Income from investment operations^a:
Net investment income^b		0.11			0.12			0.10			0.12			0.20			0.17
Net realized and unrealized gains (losses)		0.10			(0.73	)		3.48			2.81			(5.35	)		(0.43	)

Total from investment operations		0.21			(0.61	)		3.58			2.93			(5.15	)		(0.26	)

Less distributions from:
Net investment income		(0.13	)		(0.11	)		(0.10	)		(0.19	)		(0.18	)		(0.13	)
Net realized gains		—			—			—			(0.52	)		(1.22	)		(1.30	)

Total distributions		(0.13	)		(0.11	)		(0.10	)		(0.71	)		(1.40	)		(1.43	)

Net asset value, end of period	$	15.61		$	15.53		$	16.25		$	12.77		$	10.55		$	17.10


Total return^c		1.37%			(3.76)%			28.22%			29.16%			(33.02)%			(2.38)%
Ratios to average net assets^d
Expenses		0.92%			0.91%			0.92%			0.93%	^e		0.92%	^e		0.89%	^e
Net investment income		1.38%			0.77%			0.73%			1.04%			1.37%			0.88%

Supplemental data
Net assets, end of period (000’s)	$	1,183,480		$	1,211,168		$	1,362,292		$	1,109,855		$	784,773		$	1,177,367
Portfolio turnover rate		2.88%			14.39%			15.92%			6.68%			16.98%			16.27%

^bBased on average daily shares outstanding.

^dRatios are annualized for periods less than one year.

^eBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

FSV-10

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin Small Cap Value Securities Fund


	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31,
Class 4	Six Months Ended June 30, 2012 (unaudited)			2011			2010			2009			2008^a

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	15.71		$	16.44		$	12.92		$	10.70		$	16.42

Income from investment operations^b:
Net investment income^c		0.11			0.11			0.09			0.11			0.15
Net realized and unrealized gains (losses)		0.10			(0.75	)		3.53			2.84			(4.42	)

Total from investment operations		0.21			(0.64	)		3.62			2.95			(4.27	)

Less distributions from:
Net investment income		(0.12	)		(0.09	)		(0.10	)		(0.21	)		(0.23	)
Net realized gains		—			—			—			(0.52	)		(1.22	)

Total distributions		(0.12	)		(0.09	)		(0.10	)		(0.73	)		(1.45	)

Net asset value, end of period	$	15.80		$	15.71		$	16.44		$	12.92		$	10.70


Total return^d		1.34%			(3.87)%			28.14%			29.04%			(29.14)%
Ratios to average net assets^e
Expenses		1.02%			1.01%			1.02%			1.03%	^f		1.02%	^f
Net investment income		1.28%			0.67%			0.63%			0.94%			1.27%

Supplemental data
Net assets, end of period (000’s)	$	34,025		$	34,284		$	39,075		$	28,599		$	14,850
Portfolio turnover rate		2.88%			14.39%			15.92%			6.68%			16.98%

^aFor the period February 29, 2008 (effective date) to December 31, 2008.

^cBased on average daily shares outstanding.

^eRatios are annualized for periods less than one year.

^fBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

FSV-11

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited)


Franklin Small Cap Value Securities Fund	Shares		Value
Common Stocks 97.4%
Aerospace & Defense 1.9%
AAR Corp.		1,017,000	$	13,709,160
Ceradyne Inc.		397,500		10,195,875

				23,905,035

Automobiles & Components 5.3%
Autoliv Inc.		326,800		17,862,888
^aDrew Industries Inc.		251,400		7,001,490
Gentex Corp.		725,000		15,130,750
Thor Industries Inc.		820,000		22,476,200
^aWinnebago Industries Inc.		423,100		4,311,389

				66,782,717

Banks 2.2%
Chemical Financial Corp.		360,854		7,758,361
Oriental Financial Group Inc.		602,000		6,670,160
Peoples Bancorp Inc.		158,000		3,472,840
TrustCo Bank Corp. NY		1,690,000		9,227,400

				27,128,761

Building Products 5.6%
A.O. Smith Corp.		126,700		6,194,363
^aAmerican Woodmark Corp.		431,300		7,375,230
Apogee Enterprises Inc.		778,100		12,504,067
^aGibraltar Industries Inc.		900,100		9,343,038
Simpson Manufacturing Co. Inc.		433,400		12,789,634
Universal Forest Products Inc.		566,000		22,062,680

				70,269,012

Commercial & Professional Services 3.1%
ABM Industries Inc.		633,200		12,385,392
Insperity Inc.		296,100		8,009,505
Mine Safety Appliances Co.		328,300		13,210,792
Schawk Inc.		440,800		5,598,160

				39,203,849

Construction & Engineering 2.2%
EMCOR Group Inc.		272,700		7,586,514
Granite Construction Inc.		747,000		19,504,170

				27,090,684

Consumer Durables & Apparel 4.4%
Brunswick Corp.		500,000		11,110,000
Ethan Allen Interiors Inc.		159,000		3,168,870
Hooker Furniture Corp.		509,700		6,009,363
^aLa-Z-Boy Inc.		1,089,000		13,383,810
M.D.C. Holdings Inc.		213,800		6,984,846
^aM/I Homes Inc.		435,900		7,549,788
^aMaidenform Brands Inc.		347,600		6,924,192

				55,130,869

Consumer Services 2.2%
Hillenbrand Inc.		539,000		9,906,820
Regis Corp.		992,000		17,816,320

				27,723,140

FSV-12

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Small Cap Value Securities Fund	Shares		Value
Common Stocks (continued)
Electrical Equipment 3.2%
Brady Corp., A		453,000	$	12,462,030
^aEnerSys		24,100		845,187
Franklin Electric Co. Inc.		199,232		10,186,732
^aGeneral Cable Corp.		103,500		2,684,790
^aPowell Industries Inc.		220,500		8,237,880
Roper Industries Inc.		57,000		5,619,060

				40,035,679

Energy 11.5%
Arch Coal Inc.		111,500		768,235
^aAtwood Oceanics Inc.		405,400		15,340,336
Bristow Group Inc.		480,000		19,521,600
CONSOL Energy Inc.		68,500		2,071,440
Energen Corp.		219,000		9,883,470
^aHelix Energy Solutions Group Inc.		819,500		13,447,995
^aOil States International Inc.		255,200		16,894,240
^bOverseas Shipholding Group Inc.		371,000		4,121,810
Peabody Energy Corp.		103,200		2,530,464
^aRowan Cos. PLC		638,100		20,629,773
Teekay Corp. (Canada)		226,831		6,641,612
Tidewater Inc.		443,700		20,569,932
^aUnit Corp.		333,900		12,317,571

				144,738,478

Food, Beverage & Tobacco 1.1%
Lancaster Colony Corp.		194,800		13,871,708

Health Care Equipment & Services 3.5%
Hill-Rom Holdings Inc.		306,000		9,440,100
STERIS Corp.		382,500		11,999,025
Teleflex Inc.		227,900		13,881,389
West Pharmaceutical Services Inc.		157,500		7,952,175

				43,272,689

Industrial Conglomerates 1.5%
Carlisle Cos. Inc.		353,400		18,737,268

Insurance 11.7%
Arthur J. Gallagher & Co.		168,200		5,898,774
Aspen Insurance Holdings Ltd.		550,100		15,897,890
The Hanover Insurance Group Inc.		372,200		14,564,186
HCC Insurance Holdings Inc.		188,200		5,909,480
Montpelier Re Holdings Ltd.		649,000		13,817,210
Old Republic International Corp.		1,401,500		11,618,435
Protective Life Corp.		1,135,000		33,380,350
RLI Corp.		45,000		3,069,000
StanCorp Financial Group Inc.		401,000		14,901,160
Tower Group Inc.		700,000		14,609,000
Validus Holdings Ltd. (Bermuda)		422,700		13,539,081

				147,204,566

Machinery 14.3%
^aAstec Industries Inc.		359,100		11,017,188
Briggs & Stratton Corp.		588,900		10,299,861
CIRCOR International Inc.		122,102		4,162,457

FSV-13

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Small Cap Value Securities Fund	Shares		Value
Common Stocks (continued)
Machinery (continued)
^aEnPro Industries Inc.		402,000	$	15,022,740
Gardner Denver Inc.		238,800		12,634,908
Graco Inc.		214,900		9,902,592
Kaydon Corp.		399,000		8,534,610
Kennametal Inc.		397,300		13,170,495
Lincoln Electric Holdings Inc.		419,000		18,348,010
Mueller Industries Inc.		409,000		17,419,310
Nordson Corp.		209,800		10,760,642
Pentair Inc.		214,800		8,222,544
Timken Co.		80,200		3,672,358
Trinity Industries Inc.		764,400		19,094,712
^aWabash National Corp.		1,350,000		8,937,000
Watts Water Technologies Inc., A		257,200		8,575,048

				179,774,475

Materials 7.7%
A. Schulman Inc.		459,000		9,111,150
AptarGroup Inc.		70,000		3,573,500
Cabot Corp.		324,100		13,190,870
Commercial Metals Co.		389,000		4,916,960
H.B. Fuller Co.		202,100		6,204,470
Reliance Steel & Aluminum Co.		436,000		22,018,000
RPM International Inc.		753,600		20,497,920
Sensient Technologies Corp.		195,300		7,173,369
Steel Dynamics Inc.		850,000		9,987,500

				96,673,739

Retailing 8.3%
Brown Shoe Co. Inc.		982,000		12,677,620
The Cato Corp., A		460,000		14,011,600
Christopher & Banks Corp.		1,183,304		1,396,299
Fred’s Inc.		300,000		4,587,000
^bGameStop Corp., A		690,000		12,668,400
Group 1 Automotive Inc.		485,900		22,161,899
The Men’s Wearhouse Inc.		526,317		14,810,560
Pier 1 Imports Inc.		581,000		9,545,830
^a,bSaks Inc.		532,548		5,671,636
^aWest Marine Inc.		610,700		7,175,725

				104,706,569

Semiconductors & Semiconductor Equipment 0.7%
Cohu Inc.		826,500		8,397,240

Technology Hardware & Equipment 4.0%
^aBenchmark Electronics Inc.		1,271,000		17,730,450
^aIngram Micro Inc., A		700,000		12,229,000
^aMulti-Fineline Electronix Inc.		274,100		6,753,824
^aRofin-Sinar Technologies Inc.		705,000		13,345,650

				50,058,924

Trading Companies & Distributors 0.5%
Applied Industrial Technologies Inc.		178,700		6,585,095

Transportation 1.6%
^aGenesee & Wyoming Inc.		260,300		13,754,252
SkyWest Inc.		990,000		6,464,700

				20,218,952

FSV-14

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Small Cap Value Securities Fund	Shares		Value
Common Stocks (continued)
Utilities 0.9%
NV Energy Inc.		630,000	$	11,075,400

Total Common Stocks (Cost $1,031,433,152)				1,222,584,849

Short Term Investments 3.9%
Money Market Funds (Cost $29,543,419) 2.3%
^a,cInstitutional Fiduciary Trust Money Market Portfolio		29,543,419		29,543,419


	Principal Amount
^dInvestments from Cash Collateral Received for Loaned Securities 1.6%
^eRepurchase Agreements 1.6%
BNP Paribas Securities Corp., 0.16%, 7/02/12 (Maturity Value $4,702,089) Collateralized by ^fU.S. Government Agency Discount Notes, 7/18/12 - 12/26/12; U.S Government Agency Securities, 0.125% - 10.35%, 7/03/12 - 8/06/38; and U.S. Government Agency Strips, zero cpn., 5/15/22 (valued at $4,796,075)	$	4,702,026		4,702,026
Credit Suisse Securities (USA) LLC, 0.15%, 7/02/12 (Maturity Value $989,910) Collateralized by U.S. Treasury Notes, 0.625% - 2.00%, 4/15/14 - 7/15/21 (valued at $1,009,698)		989,898		989,898
Deutsche Bank Securities Inc., 0.15%, 7/02/12 (Maturity Value $4,702,085) Collateralized by U.S. Government Agency Securities, zero cpn. - 5.27%, 8/28/12 - 11/02/40 (valued at $4,796,074)		4,702,026		4,702,026
HSBC Securities (USA) Inc., 0.16%, 7/02/12 (Maturity Value $4,702,089) Collateralized by U.S. Government Agency Securities, zero cpn. - 0.40%, 5/22/14 - 3/17/31; U.S. Government Agency Strips, zero cpn., 10/15/12 - 4/15/30 (valued at $4,796,116)		4,702,026		4,702,026
Merrill Lynch, Pierce, Fenner & Smith Inc., 0.14%, 7/02/12 (Maturity Value $4,702,081) Collateralized by U.S. Treasury Bonds, 4.25% - 4.50%, 2/15/36 - 11/15/40; and U.S. Treasury Notes, 0.125% - 2.00%, 4/15/15 - 1/15/22 (valued at $4,805,924)		4,702,026		4,702,026

Total Repurchase Agreements (Cost $19,798,002)				19,798,002

Total Investments (Cost $1,080,774,573) 101.3%				1,271,926,270
Other Assets, less Liabilities (1.3)%				(16,646,490	)

Net Assets 100.0%			$	1,255,279,780

^aNon-income producing.

^bA portion or all of the security is on loan at June 30, 2012. See Note 1(c).

^cSee Note 7 regarding investments in the Institutional Fiduciary Trust Money Market Portfolio.

^dSee Note 1(c) regarding securities on loan.

^eSee Note 1(b) regarding repurchase agreements.

^fThe security is traded on a discount basis with no stated coupon rate.

FSV-15

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

June 30, 2012 (unaudited)


	Franklin Small Cap Value Securities Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	1,031,433,152
Cost - Sweep Money Fund (Note 7)		29,543,419
Cost - Repurchase agreements		19,798,002

Total cost of investments	$	1,080,774,573

Value - Unaffiliated issuers	$	1,222,584,849
Value - Sweep Money Fund (Note 7)		29,543,419
Value - Repurchase agreements		19,798,002

Total value of investments (includes securities loaned in the amount of $19,975,247)		1,271,926,270
Receivables:
Investment securities sold		5,971,220
Capital shares sold		321,136
Dividends		886,056
Other assets		327

Total assets		1,279,105,009

Liabilities:
Payables:
Investment securities purchased		379,443
Capital shares redeemed		2,150,625
Affiliates		1,149,201
Payable upon return of securities loaned		19,798,002
Accrued expenses and other liabilities		347,958

Total liabilities		23,825,229

Net assets, at value	$	1,255,279,780

Net assets consist of:
Paid-in capital	$	1,041,515,093
Undistributed net investment income		9,258,289
Net unrealized appreciation (depreciation)		191,151,697
Accumulated net realized gain (loss)		13,354,701

Net assets, at value	$	1,255,279,780

The accompanying notes are an integral part of these financial statements.

FSV-16

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Assets and Liabilities (continued)

June 30, 2012 (unaudited)


	Franklin Small Cap Value Securities Fund
Class 1:
Net assets, at value	$	37,774,802

Shares outstanding		2,377,430

Net asset value and maximum offering price per share	$	15.89

Class 2:
Net assets, at value	$	1,183,479,775

Shares outstanding		75,798,581

Net asset value and maximum offering price per share	$	15.61

Class 4:
Net assets, at value	$	34,025,203

Shares outstanding		2,152,906

Net asset value and maximum offering price per share	$	15.80

The accompanying notes are an integral part of these financial statements.

FSV-17

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the six months ended June 30, 2012 (unaudited)


	Franklin Small Cap Value Securities Fund
Investment income:
Dividends	$	14,909,998
Interest		44,808
Income from securities loaned		360,530

Total investment income		15,315,336

Expenses:
Management fees (Note 3a)		3,372,664
Administrative fees (Note 3b)		785,321
Distribution fees: (Note 3c)
Class 2		1,569,151
Class 4		65,311
Unaffiliated transfer agent fees		2,893
Custodian fees (Note 4)		9,371
Reports to shareholders		218,962
Professional fees		23,287
Trustees’ fees and expenses		2,671
Other		16,369

Total expenses		6,066,000

Net investment income		9,249,336

Realized and unrealized gains (losses):
Net realized gain (loss) from investments		32,216,798
Net change in unrealized appreciation (depreciation) on investments		(20,833,755	)

Net realized and unrealized gain (loss)		11,383,043

Net increase (decrease) in net assets resulting from operations	$	20,632,379

The accompanying notes are an integral part of these financial statements.

FSV-18

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets


	Franklin Small Cap Value Securities Fund
	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31, 2011

Increase (decrease) in net assets:
Operations:
Net investment income	$	9,249,336		$	10,424,838
Net realized gain (loss) from investments		32,216,798			79,690,343
Net change in unrealized appreciation (depreciation) on investments		(20,833,755	)		(139,845,262	)

Net increase (decrease) in net assets resulting from operations		20,632,379			(49,730,081	)

Distributions to shareholders from:
Net investment income:
Class 1		(407,505	)		(392,860	)
Class 2		(9,757,412	)		(8,773,166	)
Class 4		(256,129	)		(201,936	)

Total distributions to shareholders		(10,421,046	)		(9,367,962	)

Capital share transactions: (Note 2)
Class 1		(1,899,795	)		(5,885,116	)
Class 2		(37,441,162	)		(95,600,673	)
Class 4		(416,807	)		(3,256,590	)

Total capital share transactions		(39,757,764	)		(104,742,379	)

Net increase (decrease) in net assets		(29,546,431	)		(163,840,422	)
Net assets:
Beginning of period		1,284,826,211			1,448,666,633

End of period	$	1,255,279,780		$	1,284,826,211

Undistributed net investment income included in net assets:
End of period	$	9,258,289		$	10,429,999

The accompanying notes are an integral part of these financial statements.

FSV-19

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited)

Franklin Small Cap Value Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment company, consisting of twenty separate funds. The Franklin Small Cap Value Securities Fund (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. The Fund offers three classes of shares: Class 1, Class 2 and Class 4. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

Equity securities listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Over-the-counter securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities. Investments in open-end mutual funds are valued at the closing net asset value. Repurchase agreements are valued at cost, which approximates market value.

b. Repurchase Agreements

The Fund enters into repurchase agreements, which are accounted for as a loan by the fund to the seller, collateralized by securities which are delivered to the fund’s custodian. The market value, including accrued interest, of the initial collateralization is required to be at least 102% of the dollar amount invested by the fund, with the value of the underlying securities marked to market daily to maintain coverage of at least 100%. All repurchase agreements held by the Fund at period end had been entered into on June 29, 2012.

c. Securities Lending

The Fund participates in a principal based securities lending program. The fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the market value of the loaned securities. Collateral is maintained over the life

FSV-20

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Small Cap Value Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

c. Securities Lending (continued)

of the loan in an amount not less than 100% of the market value of loaned securities, as determined at the close of fund business each day; any additional collateral required due to changes in security values is delivered to the fund on the next business day. The collateral is invested in repurchase agreements as indicated on the Statement of Investments. The fund receives income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. The fund bears the market risk with respect to the collateral investment, securities loaned, and the risk that the principal may default on its obligations to the fund.

d. Income Taxes

e. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Dividend income is recorded on the ex-dividend date. Distributions to shareholders are recorded on the ex-dividend date and are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with accounting principles generally accepted in the United States of America. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.

f. Accounting Estimates

g. Guarantees and Indemnifications

FSV-21

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Small Cap Value Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

g. Guarantees and Indemnifications (continued)

Fund, enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.

2. SHARES OF BENEFICIAL INTEREST

At June 30, 2012, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:


	Six Months Ended June 30, 2012						Year Ended December 31, 2011
Class 1 Shares:	Shares			Amount			Shares			Amount
Shares sold		68,830		$	1,158,423			385,043		$	6,445,781
Shares issued in reinvestment of distributions		26,308			407,505			24,646			392,860
Shares redeemed		(205,972	)		(3,465,723	)		(778,610	)		(12,723,757	)

Net increase (decrease)		(110,834	)	$	(1,899,795	)		(368,921	)	$	(5,885,116	)

Class 2 Shares:
Shares sold		5,290,373		$	86,796,323			12,352,861		$	192,000,345
Shares issued in reinvestment of distributions		641,091			9,757,412			559,870			8,773,166
Shares redeemed		(8,127,115	)		(133,994,897	)		(18,752,469	)		(296,374,184	)

Net increase (decrease)		(2,195,651	)	$	(37,441,162	)		(5,839,738	)	$	(95,600,673	)

Class 4 Shares:
Shares sold		341,712		$	5,813,731			385,949		$	6,104,316
Shares issued on reinvestment of distributions		16,621			256,129			12,732			201,936
Shares redeemed		(387,526	)		(6,486,667	)		(593,170	)		(9,562,842	)

Net increase (decrease)		(29,193	)	$	(416,807	)		(194,489	)	$	(3,256,590	)

3. TRANSACTIONS WITH AFFILIATES


Subsidiary		Affiliation
Franklin Advisory Services, LLC (Advisory Services)		Investment manager
Franklin Templeton Services, LLC (FT Services)		Administrative manager
Franklin Templeton Distributors, Inc. (Distributors)		Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services)		Transfer agent

a. Management Fees

The Fund pays an investment management fee to Advisory Services based on the average daily net assets of the Fund as follows:


Annualized Fee Rate		Net Assets
0.600%		Up to and including $200 million
0.500%		Over $200 million, up to and including $1.3 billion
0.400%		In excess of $1.3 billion

FSV-22

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Small Cap Value Securities Fund

3. TRANSACTIONS WITH AFFILIATES (continued)

b. Administrative Fees

The Fund pays an administrative fee to FT Services based on the Fund’s average daily net assets as follows:


Annualized Fee Rate		Net Assets
0.150%		Up to and including $200 million
0.135%		Over $200 million, up to and including $700 million
0.100%		Over $700 million, up to and including $1.2 billion
0.075%		In excess of $1.2 billion

c. Distribution Fees

d. Transfer Agent Fees

Investor Services, under terms of an agreement, performs shareholder servicing for the Fund and is not paid by the Fund for the services.

4. EXPENSE OFFSET ARRANGEMENT

5. INCOME TAXES

At December 31, 2011, the Fund had capital loss carryforwards of $18,771,926 expiring in 2018.

At June 30, 2012, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:


Cost of investments	$	1,080,864,744


Unrealized appreciation	$	318,050,369
Unrealized depreciation		(126,988,843	)

Net unrealized appreciation (depreciation)	$	191,061,526

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of bond discounts and premiums and wash sales.

FSV-23

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Small Cap Value Securities Fund

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2012, aggregated $37,060,769 and $68,404,240, respectively.

7. INVESTMENTS IN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO

8. CREDIT FACILITY

9. FAIR VALUE MEASUREMENTS

•

Level 1 – quoted prices in active markets for identical financial instruments

•

Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)

•

Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of financial instruments)

The inputs or methodology used for valuing financial instruments are not an indication of the risk associated with investing in those financial instruments.

For movements between the levels within the fair value hierarchy, the Fund has adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.

FSV-24

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Small Cap Value Securities Fund

9. FAIR VALUE MEASUREMENTS (continued)

A summary of inputs used as of June 30, 2012, in valuing the Fund’s assets and liabilities carried at fair value, is as follows:


	Level 1		Level 2		Level 3		Total

Assets:
Investments in Securities:
Equity Investments^a	$	1,222,584,849	$	—	$	—	$	1,222,584,849
Short Term Investments		29,543,419		19,798,002		—		49,341,421

Total Investments in Securities	$	1,252,128,268	$	19,798,002	$	—	$	1,271,926,270

^aFor detailed categories, see the accompanying Statement of Investments.

10. NEW ACCOUNTING PRONOUNCEMENTS

11. SUBSEQUENT EVENTS

The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure.

FSV-25

FRANKLIN SMALL-MID CAP GROWTH SECURITIES FUND

This semiannual report for Franklin Small-Mid Cap Growth Securities Fund covers the period ended June 30, 2012.

Performance Summary as of 6/30/12

Franklin Small-Mid Cap Growth Securities Fund – Class 2 delivered a +5.85% total return for the six-month period ended 6/30/12.

Franklin Small-Mid Cap Growth Securities Fund Class 2

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares.

Current performance may differ from figures shown.

FSC-1

Fund Goal and Main Investments: Franklin Small-Mid Cap Growth Securities Fund seeks long-term capital growth. Under normal market conditions, the Fund invests at least 80% of its net assets in investments of small capitalization and mid-capitalization companies. For this Fund, small cap companies are those within the market capitalization range of companies in the Russell 2500^TM Index at the time of purchase, and midcap companies are companies within the market capitalization range of companies in the Russell Midcap^® Index at the time of purchase.¹

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. The Fund underperformed its narrow benchmark, the Russell Midcap^® Growth Index, which generated a total return of +8.10%, and its broad benchmark, the Standard & Poor’s^® 500 Index (S&P 500^®), which posted a +9.49% total return, for the same period.²

Economic and Market Overview

The U.S. economy, as measured by gross domestic product, grew modestly during the six-month period ended June 30, 2012. In the first quarter, personal income and spending rose, while federal, state and local government spending declined. The national unemployment rate for June 2012 stood at 8.2%, compared with 8.5% at the start of the period.³Jobless claims touched a four-year low in February amid robust job creation; however, hiring slowed during the remainder of the period and jobless claims at period-end reached January’s level. Industrial production and manufacturing activity continued to increase, but the manufacturing sector shrank unexpectedly in June. Although gasoline prices hit a peak in early April, they plunged to a five-month low near period-end due to lower crude oil prices. In keeping with its goal to strengthen U.S. economic recovery by fostering increased employment while keeping inflation in check, during June the Federal Reserve Board (Fed) extended through 2012 its program (dubbed Operation Twist) to buy long-term Treasuries in an attempt to lower long-term yields. The Fed also reaffirmed its intention to keep the federal funds target rate low at least through late 2014.

During late March and early April 2012, improved economic reports helped U.S. stock markets reach multi-year highs. The Dow Jones

1. Please see Index Descriptions following the Fund Summaries.

3. Source: Bureau of Labor Statistics.

Fund Risks: All investments involve risks, including possible loss of principal. Investors should be comfortable with fluctuations in the value of their investment, as small- and midsized-company stocks can be volatile, especially over the short term. Smaller or relatively new or unseasoned companies can be particularly sensitive to changing economic conditions, and their prospects for growth are less certain than those of larger, more established companies. The Fund may focus on particular sectors of the market from time to time, which can carry greater risks of adverse developments in such sectors. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

FSC-2

Industrial Average exceeded 13,000 and the S&P 500 topped 1,400 for the first time since 2008, while the NASDAQ Composite Index hit an 11-year high.¹ Global markets grew volatile, however, amid renewed concerns about eurozone debt and slowing global economic growth. Fears of a Greek debt default and exit from the eurozone were somewhat mitigated by secured bailout financing and bondholder concessions in February, as well as elections in May and June that resulted in the formation of a new coalition government. Risk-averse investors seeking safety drove U.S. Treasury yields to historical lows during the period.

Investment Strategy

LOGO

FSC-3

Manager’s Discussion

During the six months under review, most sectors represented in the Fund’s portfolio produced positive returns as the broad market’s first- quarter rally largely offset the volatility experienced later in the reporting period. Stock selection in the consumer discretionary and consumer staples sectors was a key contributor to the Fund’s performance relative to the benchmark Russell Midcap^® Growth Index. Diverse consumer products company Jarden and discount retailer Dollar General in the consumer discretionary sector boosted relative results. Jarden, whose numerous brands include Coleman, Crockpot, Sunbeam and First Alert, continued to improve its gross margins by introducing new products, which commanded higher price points. Dollar General delivered strong profit growth in recent quarters by opening new stores and selling well-known brands. In the consumer staples sector, Monster Beverage aided relative returns as the company benefited from U.S. market share gains and international expansion. Although our information technology (IT) holdings generally detracted from relative returns, Netherlands-based NXP Semiconductors⁴ and open source software solutions provider Red Hat were key contributors. NXP Semiconductors, whose products are used in a wide array of applications including automotive, security identification and wireless infrastructure, won new contracts to supply more chips to top smartphone manufacturers, as well as significant design deals in leading handsets beyond near-field communication. Red Hat benefited from enterprise customers’ broad migration to cloud computing and storage, as well as improved IT spending.

In contrast, key detractors from the Fund’s relative performance included stock selection in the materials and health care sectors. Within the materials sector, global technology and specialty materials manufacturer Celanese’s share price was pressured by lower profit margins resulting from higher costs and softer demand from Asia and Europe. In an effort to counteract weak demand and improve margins, the company planned to cut costs, run its plants more efficiently and expand customer relationships. Our underweighted allocation to outperforming health care equipment and supplies company Edwards Lifesciences in the health care sector also hurt relative results.⁵ Stock selection largely offset the positive effects of overweighting in the IT sector, particularly our position in Higher One Holdings, a technology and payment services company that offers disbursement and payment solutions for

4. This holding is not an index component.

5. Sold by period-end.

Top 10 Holdings

Franklin Small-Mid Cap Growth Securities Fund

6/30/12


Company *Sector/Industry*	% of Total Net Assets
Whiting Petroleum Corp.		1.8%
Energy
QEP Resources Inc.		1.8%
Energy
Trimble Navigation Ltd.		1.7%
Information Technology
Dollar General Corp.		1.7%
Consumer Discretionary
AMETEK Inc.		1.6%
Industrials
BorgWarner Inc.		1.6%
Consumer Discretionary
Dick’s Sporting Goods Inc.		1.6%
Consumer Discretionary
Nuance Communications Inc.		1.5%
Information Technology
Cerner Corp.		1.5%
Health Care
Roper Industries Inc.		1.5%
Industrials

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments.

FSC-4

higher education institutions and their students.⁴Other key individual detractors included oil and gas explorer and producer SM Energy in the energy sector and industrial compressor and blower manufacturer Gardner Denver in the industrials sector. Despite SM Energy’s strong revenue and income growth in recent quarters, its share price declined along with crude oil and natural gas prices. A slightly lower-than-expected full year 2012 earnings guidance weighed on Gardner Denver’s stock price. With a strong balance sheet and a sizable amount of shares available for repurchase, the company continued its strategy of opportunistically purchasing its own common stock while focusing on selective acquisitions and organic growth.

Thank you for your participation in Franklin Small-Mid Cap Growth Securities Fund. We look forward to serving your future investment needs.

FSC-5

Fund Expenses

•

Transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes.

•

Actual Fund Expenses

You can estimate the Fund-level expenses you incurred during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:

1.	Divide your account value by $1,000.

If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6.

2.	Multiply the result by the number under the heading “Fund-Level Expenses Incurred During Period.”

If Fund-Level Expenses Incurred During Period were $7.50, then 8.6 x $7.50 = $64.50.

In this illustration, the estimated expenses incurred this period at the Fund level are $64.50.

Franklin Small-Mid Cap Growth Securities Fund Class 2

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Hypothetical Example for Comparison with Other Mutual Funds


Class 2	Beginning Account Value 1/1/12		Ending Account Value 6/30/12		Fund-Level Expenses Incurred During Period* 1/1/12–6/30/12
Actual	$	1,000	$	1,058.50	$	5.32
Hypothetical (5% return before expenses)	$	1,000	$	1,019.69	$	5.22

FSC-7

Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Franklin Small-Mid Cap Growth Securities Fund


	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31,
Class 1	Six Months Ended June 30, 2012 (unaudited)			2011			2010			2009			2008			2007

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	21.19		$	22.21		$	17.36		$	12.06		$	23.39		$	22.51

Income from investment operations^a:
Net investment income (loss)^b		(0.03	)		(0.05	)		(0.01	)		(0.10	)^c		0.01			(0.02	)
Net realized and unrealized gains (losses)		1.28			(0.97	)		4.86			5.40			(8.98	)		2.65

Total from investment operations		1.25			(1.02	)		4.85			5.30			(8.97	)		2.63

Less distributions from net realized gains		(1.58	)		—			—			—			(2.36	)		(1.75	)

Net asset value, end of period	$	20.86		$	21.19		$	22.21		$	17.36		$	12.06		$	23.39


Total return^d		5.98%			(4.59)%			27.94%			43.95%			(42.34)%			11.51%
Ratios to average net assets^e
Expenses		0.79%			0.79%			0.79%			0.80%	^f		0.76%	^f		0.74%	^f
Net investment income (loss)		(0.22)%			(0.21)%			(0.07)%			(0.72)%	^c		0.06%			(0.10)%

Supplemental data
Net assets, end of period (000’s)	$	76,517		$	76,384		$	89,826		$	79,670		$	63,531		$	127,602
Portfolio turnover rate		20.40%			45.00%			46.69%			63.93%			60.12%			66.94%

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $(0.06) per share as a return of capital adjustment to a previously recorded special dividend received by the Fund. Excluding this non-recurring amount, the ratio of net investment income to average net assets would have been (0.22)%.

^eRatios are annualized for periods less than one year.

^fBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

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Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin Small-Mid Cap Growth Securities Fund


	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31,
Class 2	Six Months Ended June 30, 2012 (unaudited)			2011			2010			2009			2008			2007

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	20.49		$	21.54		$	16.87		$	11.75		$	22.91		$	22.13

Income from investment operations^a:
Net investment income (loss)^b		(0.05	)		(0.10	)		(0.06	)		(0.13	)^c		(0.03	)		(0.08	)
Net realized and unrealized gains (losses)		1.23			(0.95	)		4.73			5.25			(8.77	)		2.61

Total from investment operations		1.18			(1.05	)		4.67			5.12			(8.80	)		2.53

Less distributions from net realized gains		(1.58	)		—			—			—			(2.36	)		(1.75	)

Net asset value, end of period	$	20.09		$	20.49		$	21.54		$	16.87		$	11.75		$	22.91


Total return^d		5.85%			(4.87)%			27.68%			43.57%			(42.49)%			11.24%
Ratios to average net assets^e
Expenses		1.04%			1.04%			1.04%			1.05%	^f		1.01%	^f		0.99%	^f
Net investment income (loss)		(0.47)%			(0.46)%			(0.32)%			(0.97)%	^c		(0.19)%			(0.35)%

Supplemental data
Net assets, end of period (000’s)	$	705,616		$	717,086		$	939,481		$	813,480		$	614,053		$	1,217,177
Portfolio turnover rate		20.40%			45.00%			46.69%			63.93%			60.12%			66.94%

^bBased on average daily shares outstanding.

^eRatios are annualized for periods less than one year.

^fBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

FSC-9

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin Small-Mid Cap Growth Securities Fund


	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31,
Class 4	Six Months Ended June 30, 2012 (unaudited)			2011			2010			2009			2008^a

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	20.90		$	21.98		$	17.24		$	12.02		$	20.60

Income from investment operations^b:
Net investment income (loss)^c		(0.06	)		(0.12	)		(0.07	)		(0.15	)^d		0.02
Net realized and unrealized gains (losses)		1.25			(0.96	)		4.81			5.37			(6.24	)

Total from investment operations		1.19			(1.08	)		4.74			5.22			(6.22	)

Less distributions from net realized gains		(1.58	)		—			—			—			(2.36	)

Net asset value, end of period	$	20.51		$	20.90		$	21.98		$	17.24		$	12.02


Total return^e		5.83%			(4.91)%			27.49%			43.43%			(34.74)%
Ratios to average net assets^f
Expenses		1.14%			1.14%			1.14%			1.15%	^g		1.11%	^g
Net investment income (loss)		(0.57)%			(0.56)%			(0.42)%			(1.07)%	^d		(0.29)%

Supplemental data
Net assets, end of period (000’s)	$	15,776		$	12,664		$	15,413		$	11,029		$	3,538
Portfolio turnover rate		20.40%			45.00%			46.69%			63.93%			60.12%

^aFor the period February 29, 2008 (effective date) to December 31, 2008.

^cBased on average daily shares outstanding.

^dNet investment income per share includes approximately $(0.06) per share as a return of capital adjustment to a previously recorded special dividend received by the Fund. Excluding this non-recurring amount, the ratio of net investment income to average net assets would have been (0.57)%.

^fRatios are annualized for periods less than one year.

^gBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

FSC-10

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited)


Franklin Small-Mid Cap Growth Securities Fund	Shares/ Warrants		Value
Common Stocks and Other Equity Interests 98.9%
Consumer Discretionary 24.1%
^a,bBlue Nile Inc.		40,900	$	1,215,139
^aBorgWarner Inc.		192,000		12,593,280
^aBuffalo Wild Wings Inc.		110,000		9,530,400
^aChipotle Mexican Grill Inc.		21,000		7,978,950
Dick’s Sporting Goods Inc.		259,300		12,446,400
^aDiscovery Communications Inc., A		142,700		7,705,800
^aDiscovery Communications Inc., C		62,400		3,125,616
^aDollar General Corp.		250,000		13,597,500
Guess? Inc.		240,100		7,291,837
^a,bHomeAway Inc.		85,000		1,847,900
^aIconix Brand Group Inc.		168,100		2,936,707
International Game Technology		360,200		5,673,150
Jarden Corp.		250,000		10,505,000
^aLululemon Athletica Inc. (Canada)		76,000		4,531,880
Marriott International Inc., A		250,000		9,800,000
Nordstrom Inc.		85,000		4,223,650
^a,bPeet’s Coffee & Tea Inc.		168,500		10,116,740
Ralph Lauren Corp.		63,200		8,851,792
Starwood Hotels & Resorts Worldwide Inc.		96,100		5,097,144
^aTenneco Inc.		195,800		5,251,356
Tiffany & Co.		85,000		4,500,750
Tractor Supply Co.		105,000		8,721,300
Ulta Salon Cosmetics & Fragrance Inc.		75,000		7,003,500
^aUnder Armour Inc., A		87,794		8,294,777
^aUrban Outfitters Inc.		200,000		5,518,000
Wolverine World Wide Inc.		225,000		8,725,500
Wynn Resorts Ltd.		48,000		4,978,560

				192,062,628

Consumer Staples 6.1%
^a,bBoston Beer Inc., A		85,000		10,285,000
Mead Johnson Nutrition Co., A		110,400		8,888,304
^aMonster Beverage Corp.		131,500		9,362,800
^aTreeHouse Foods Inc.		143,900		8,963,531
Whole Foods Market Inc.		115,000		10,961,800

				48,461,435

Energy 7.6%
^aCameron International Corp.		153,700		6,564,527
^aFMC Technologies Inc.		120,000		4,707,600
^aOil States International Inc.		87,000		5,759,400
QEP Resources Inc.		475,000		14,235,750
SM Energy Co.		176,500		8,667,915
^aSuperior Energy Services Inc.		310,000		6,271,300
^aWhiting Petroleum Corp.		355,000		14,597,600

				60,804,092

Financials 7.1%
^aAffiliated Managers Group Inc.		96,100		10,518,145
Comerica Inc.		360,000		11,055,600
Hancock Holding Co.		156,000		4,748,640
^aIntercontinentalExchange Inc.		49,908		6,786,490
Jones Lang LaSalle Inc.		125,000		8,796,250

FSC-11

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Small-Mid Cap Growth Securities Fund	Shares/ Warrants		Value
Common Stocks and Other Equity Interests (continued)
Financials (continued)
Lazard Ltd., A		200,000	$	5,198,000
^aSignature Bank		105,000		6,401,850
T. Rowe Price Group Inc.		50,000		3,148,000

				56,652,975

Health Care 12.4%
Agilent Technologies Inc.		150,000		5,886,000
^aAlexion Pharmaceuticals Inc.		90,000		8,937,000
^aAllscripts Healthcare Solutions Inc.		275,600		3,012,308
^aBioMarin Pharmaceutical Inc.		12,000		474,960
^aCareFusion Corp.		149,300		3,834,024
^aCerner Corp.		144,000		11,903,040
^aDaVita Inc.		111,700		10,970,057
^aHospira Inc.		60,000		2,098,800
^aIDEXX Laboratories Inc.		4,272		410,667
^aIllumina Inc.		40,000		1,615,600
^aIntuitive Surgical Inc.		17,000		9,414,430
^aMedivation Inc.		35,000		3,199,000
^aMettler-Toledo International Inc.		38,300		5,969,055
^aOnyx Pharmaceuticals Inc.		35,600		2,365,620
^aRegeneron Pharmaceuticals Inc.		13,400		1,530,548
^a,bStereotaxis Inc.		631,400		132,594
^a,cStereotaxis Inc., 144A		1,228,433		232,174
^a,cStereotaxis Inc., wts., 144A, 5/07/18		1,228,433		195,689
^aThoratec Corp.		90,000		3,022,200
^aVarian Medical Systems Inc.		115,000		6,988,550
^aVertex Pharmaceuticals Inc.		50,000		2,796,000
^aWaters Corp.		73,100		5,809,257
^aWatson Pharmaceuticals Inc.		105,000		7,768,950

				98,566,523

Industrials 14.4%
^aAllegiant Travel Co.		86,500		6,027,320
AMETEK Inc.		253,200		12,637,212
^aBE Aerospace Inc.		135,000		5,894,100
Cummins Inc.		60,000		5,814,600
Fastenal Co.		192,000		7,739,520
Flowserve Corp.		50,000		5,737,500
Fluor Corp.		90,300		4,455,402
Gardner Denver Inc.		45,000		2,380,950
^aHexcel Corp.		185,000		4,771,150
^aIHS Inc., A		24,500		2,639,385
J.B. Hunt Transport Services Inc.		124,300		7,408,280
Kansas City Southern		85,000		5,912,600
The Manitowoc Co. Inc.		100,000		1,170,000
Pall Corp.		91,500		5,015,115
Robert Half International Inc.		192,000		5,485,440
Rockwell Automation Inc.		160,000		10,569,600
Roper Industries Inc.		118,000		11,632,440
^aSensata Technologies Holding NV		250,000		6,695,000
^aVerisk Analytics Inc., A		66,000		3,251,160

				115,236,774

FSC-12

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Small-Mid Cap Growth Securities Fund	Shares/ Warrants		Value
Common Stocks and Other Equity Interests (continued)
Information Technology 22.1%
^aAcme Packet Inc.		165,000	$	3,077,250
^aAlliance Data Systems Corp.		55,000		7,425,000
^aANSYS Inc.		165,000		10,413,150
Avago Technologies Ltd. (Singapore)		260,000		9,334,000
^aBottomline Technologies Inc.		145,000		2,617,250
^aCheck Point Software Technologies Ltd. (Israel)		75,000		3,719,250
^aCitrix Systems Inc.		105,000		8,813,700
^aCommVault Systems Inc.		110,000		5,452,700
^aElectronic Arts Inc.		275,000		3,396,250
^aEquinix Inc.		30,000		5,269,500
^aF5 Networks Inc.		70,000		6,969,200
FactSet Research Systems Inc.		60,000		5,576,400
^aFortinet Inc.		40,600		942,732
^a,bHigher One Holdings Inc.		350,000		4,277,000
^aHittite Microwave Corp.		165,800		8,475,696
^aInformatica Corp.		150,000		6,354,000
^aLinkedIn Corp., A		26,700		2,837,409
^aNuance Communications Inc.		500,000		11,910,000
^aNXP Semiconductors NV (Netherlands)		125,000		2,906,250
^aRed Hat Inc.		183,700		10,375,376
^aRiverbed Technology Inc.		150,000		2,422,500
^aShoretel Inc.		288,100		1,261,878
^aSilicon Laboratories Inc.		171,300		6,492,270
^aTeradata Corp.		70,000		5,040,700
^aTrimble Navigation Ltd.		300,000		13,803,000
^aVeriFone Systems Inc.		150,000		4,963,500
^aViaSat Inc.		163,300		6,167,841
Western Union Co.		350,000		5,894,000
Xilinx Inc.		264,200		8,869,194
^a,bZynga Inc.		300,000		1,632,000

				176,688,996

Materials 3.0%
Albemarle Corp.		60,000		3,578,400
Celanese Corp., A		217,800		7,540,236
The Sherwin-Williams Co.		50,000		6,617,500
Walter Energy Inc.		150,000		6,624,000

				24,360,136

Telecommunication Services 1.4%
^aSBA Communications Corp.		192,000		10,953,600

Utilities 0.7%
^aCalpine Corp.		336,200		5,550,662

Total Common Stocks and Other Equity Interests (Cost $597,990,506)				789,337,821

Short Term Investments 3.3%
Money Market Funds (Cost $5,211,736) 0.6%
^a,dInstitutional Fiduciary Trust Money Market Portfolio		5,211,736		5,211,736

FSC-13

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Small-Mid Cap Growth Securities Fund	Shares/ Warrants		Value
Short Term Investments (continued)
^eInvestments from Cash Collateral Received for Loaned Securities (Cost $21,258,325) 2.7%
Money Market Funds 2.7%
^fBNY Mellon Overnight Government Fund, 0.182%		21,258,325	$	21,258,325

Total Investments (Cost $624,460,567) 102.2%				815,807,882
Other Assets, less Liabilities (2.2)%				(17,898,121	)

Net Assets 100.0%			$	797,909,761

^aNon-income producing.

^bA portion or all of the security is on loan at June 30, 2012. See Note 1(b).

^cSee Note 8 regarding restricted securities.

^dSee Note 7 regarding investments in the Institutional Fiduciary Trust Money Market Portfolio.

^eSee Note 1(b) regarding securities on loan.

^fThe rate shown is the annualized seven-day yield at period end.

The accompanying notes are an integral part of these financial statements.

FSC-14

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

June 30, 2012 (unaudited)


	Franklin Small-Mid Cap Growth Securities Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	619,248,831
Cost - Sweep Money Fund (Note 7)		5,211,736

Total cost of investments	$	624,460,567

Value - Unaffiliated issuers	$	810,596,146
Value - Sweep Money Fund (Note 7)		5,211,736

Total value of investments (includes securities loaned in the amount of $21,297,578)		815,807,882
Receivables:
Investment securities sold		5,100,748
Capital shares sold		29,079
Dividends and interest		341,280
Other assets		197,882

Total assets		821,476,871

Liabilities:
Payables:
Investment securities purchased		377,983
Capital shares redeemed		813,936
Affiliates		788,564
Payable upon return of securities loaned		21,258,325
Accrued expenses and other liabilities		328,302

Total liabilities		23,567,110

Net assets, at value	$	797,909,761

Net assets consist of:
Paid-in capital	$	575,028,439
Undistributed net investment income (loss)		(1,924,103	)
Net unrealized appreciation (depreciation)		191,347,315
Accumulated net realized gain (loss)		33,458,110

Net assets, at value	$	797,909,761

Class 1:
Net assets, at value	$	76,517,205

Shares outstanding		3,667,404

Net asset value and maximum offering price per share	$	20.86

Class 2:
Net assets, at value	$	705,616,300

Shares outstanding		35,115,229

Net asset value and maximum offering price per share	$	20.09

Class 4:
Net assets, at value	$	15,776,256

Shares outstanding		769,234

Net asset value and maximum offering price per share	$	20.51

The accompanying notes are an integral part of these financial statements.

FSC-15

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the six months ended June 30, 2012 (unaudited)


	Franklin Small-Mid Cap Growth Securities Fund
Investment income:
Dividends	$	2,072,528
Income from securities loaned		361,673

Total investment income		2,434,201

Expenses:
Management fees (Note 3a)		2,151,202
Administrative fees (Note 3b)		1,066,065
Distribution fees: (Note 3c)
Class 2		947,155
Class 4		27,378
Unaffiliated transfer agent fees		1,710
Custodian fees (Note 4)		6,031
Reports to shareholders		123,328
Professional fees		21,069
Trustees’ fees and expenses		1,908
Other		12,458

Total expenses		4,358,304

Net investment income (loss)		(1,924,103	)

Realized and unrealized gains (losses):
Net realized gain (loss) from investments		35,605,476
Net change in unrealized appreciation (depreciation) on investments		14,688,589

Net realized and unrealized gain (loss)		50,294,065

Net increase (decrease) in net assets resulting from operations	$	48,369,962

The accompanying notes are an integral part of these financial statements.

FSC-16

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets


	Franklin Small-Mid Cap Growth Securities Fund
	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31, 2011

Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	(1,924,103	)	$	(4,181,310	)
Net realized gain (loss) from investments		35,605,476			95,464,105
Net change in unrealized appreciation (depreciation) on investments		14,688,589			(133,141,452	)

Net increase (decrease) in net assets resulting from operations		48,369,962			(41,858,657	)

Distributions to shareholders from:
Net realized gains:
Class 1		(5,398,642	)		—
Class 2		(51,973,132	)		—
Class 4		(1,174,175	)		—

Total distributions to shareholders		(58,545,949	)		—

Capital share transactions: (Note 2)
Class 1		785,241			(9,862,944	)
Class 2		(2,587,712	)		(184,782,471	)
Class 4		3,753,871			(2,082,119	)

Total capital share transactions		1,951,400			(196,727,534	)

Net increase (decrease) in net assets		(8,224,587	)		(238,586,191	)
Net assets:
Beginning of period		806,134,348			1,044,720,539

End of period	$	797,909,761		$	806,134,348

Undistributed net investment income (loss) included in net assets:
End of period	$	(1,924,103	)	$	—

The accompanying notes are an integral part of these financial statements.

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited)

Franklin Small-Mid Cap Growth Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment company, consisting of twenty separate funds. The Franklin Small-Mid Cap Growth Securities Fund (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. The Fund offers three classes of shares: Class 1, Class 2, and Class 4. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

b. Securities Lending

The Fund participates in an agency based securities lending program. The fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the market value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the market value of loaned securities, as determined at the close of fund business each day; any additional collateral required due to changes in security values is delivered to the fund on the next business day. The collateral is invested in a non-registered money fund as indicated on the Statement of Investments. The fund receives income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. The fund bears the

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Small-Mid Cap Growth Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

b. Securities Lending (continued)

market risk with respect to the collateral investment, securities loaned, and the risk that the agent may default on its obligations to the fund. The securities lending agent has agreed to indemnify the fund in the event of default by a third party borrower.

c. Income Taxes

d. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Estimated expenses are accrued daily. Dividend income is recorded on the ex-dividend date. Distributions to shareholders are recorded on the ex-dividend date and are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with accounting principles generally accepted in the United States of America. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.

e. Accounting Estimates

f. Guarantees and Indemnifications

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Small-Mid Cap Growth Securities Fund

2. SHARES OF BENEFICIAL INTEREST

At June 30, 2012, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:


	Six Months Ended June 30, 2012						Year Ended December 31, 2011
Class 1 Shares:	Shares			Amount			Shares			Amount
Shares sold		55,275		$	1,273,885			213,179		$	4,851,501
Shares issued in reinvestment of distributions		261,943			5,398,642			—			—
Shares redeemed		(253,894	)		(5,887,286	)		(652,643	)		(14,714,445	)

Net increase (decrease)		63,324		$	785,241			(439,464	)	$	(9,862,944	)

Class 2 Shares:
Shares sold		1,228,507		$	27,765,708			3,213,965		$	70,946,756
Shares issued in reinvestment of distributions		2,618,294			51,973,132			—			—
Shares redeemed		(3,722,093	)		(82,326,552	)		(11,848,847	)		(255,729,227	)

Net increase (decrease)		124,708		$	(2,587,712	)		(8,634,882	)	$	(184,782,471	)

Class 4 Shares:
Shares sold		189,962		$	4,425,936			311,193		$	7,039,340
Shares issued on reinvestment of distributions		57,955			1,174,175			—			—
Shares redeemed		(84,745	)		(1,846,240	)		(406,340	)		(9,121,459	)

Net increase (decrease)		163,172		$	3,753,871			(95,147	)	$	(2,082,119	)

3. TRANSACTIONS WITH AFFILIATES


Subsidiary		Affiliation
Franklin Advisers, Inc. (Advisers)		Investment manager
Franklin Templeton Services, LLC (FT Services)		Administrative manager
Franklin Templeton Distributors, Inc. (Distributors)		Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services)		Transfer agent

a. Management Fees

The Fund pays an investment management fee to Advisers based on the average daily net assets of the Fund as follows:


Annualized Fee Rate		Net Assets
0.550%		Up to and including $500 million
0.450%		Over $500 million, up to and including $1 billion
0.400%		Over $1 billion, up to and including $1.5 billion
0.350%		Over $1.5 billion, up to and including $6.5 billion
0.325%		Over $6.5 billion, up to and including $11.5 billion
0.300%		Over $11.5 billion, up to and including $16.5 billion
0.290%		Over $16.5 billion, up to and including $19 billion
0.280%		Over $19 billion, up to and including $21.5 billion
0.270%		In excess of $21.5 billion

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Small-Mid Cap Growth Securities Fund

3. TRANSACTIONS WITH AFFILIATES (continued)

b. Administrative Fees

The Fund pays an administrative fee to FT Services of 0.25% per year of the average daily net assets of the Fund.

c. Distribution Fees

d. Transfer Agent Fees

Investor Services, under terms of an agreement, performs shareholder servicing for the Fund and is not paid by the Fund for the services.

4. EXPENSE OFFSET ARRANGEMENT

5. INCOME TAXES

At June 30, 2012, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:


Cost of investments	$	626,779,632


Unrealized appreciation	$	232,971,272
Unrealized depreciation		(43,943,022	)

Net unrealized appreciation (depreciation)	$	189,028,250

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatment of wash sales.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2012, aggregated $168,976,531 and $223,886,828, respectively.

7. INVESTMENTS IN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Small-Mid Cap Growth Securities Fund

8. RESTRICTED SECURITIES

The Fund invests in securities that are restricted under the Securities Act of 1933 (1933 Act) or which are subject to legal, contractual, or other agreed upon restrictions on resale. Restricted securities are often purchased in private placement transactions, and cannot be sold without prior registration unless the sale is pursuant to an exemption under the 1933 Act. Disposal of these securities may require greater effort and expense, and prompt sale at an acceptable price may be difficult. The Fund may have registration rights for restricted securities. The issuer generally incurs all registration costs.

At June 30, 2012, the Fund held investments in restricted securities, excluding certain securities exempt from registration under the 1933 Act deemed to be liquid, as follows:


Shares/ Warrants		Issuer	Acquisition Date		Cost		Value
	1,228,433	^aStereotaxis Inc., 144A		5/07/12	$	412,876	$	232,174
	1,228,433	^aStereotaxis Inc., wts.,144A, 5/07/18		5/07/12		153,554		195,689

		Total Restricted Securities (0.05% of Net Assets)					$	427,863

^aThe Fund also invests in an unrestricted security of the issuer, valued at $132,594 as of June 30, 2012.

9. CREDIT FACILITY

10. FAIR VALUE MEASUREMENTS

•

Level 1 – quoted prices in active markets for identical financial instruments

•

Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)

•

Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of financial instruments)

The inputs or methodology used for valuing financial instruments are not an indication of the risk associated with investing in those financial instruments.

For movements between the levels within the fair value hierarchy, the Fund has adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Small-Mid Cap Growth Securities Fund

10. FAIR VALUE MEASUREMENTS (continued)

A summary of inputs used as of June 30, 2012, in valuing the Fund’s assets carried at fair value, is as follows:


	Level 1		Level 2		Level 3		Total

Assets:
Investments in Securities:
Equity Securities:
Health Care	$	98,138,660	$	—	$	427,863	$	98,566,523
Other Equity Investments^a		690,771,298		—		—		690,771,298
Short Term Investments		5,211,736		21,258,325		—		26,470,061

Total Investments in Securities	$	794,121,694	$	21,258,325	$	427,863	$	815,807,882

^aFor detailed categories, see the accompanying Statement of Investments.

A reconciliation of assets in which Level 3 inputs are used in determining fair value is presented when there are significant Level 3 investments at the end of the period.

11. NEW ACCOUNTING PRONOUNCEMENTS

12. SUBSEQUENT EVENTS

The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure.

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FRANKLIN STRATEGIC INCOME SECURITIES FUND

We are pleased to bring you Franklin Strategic Income Securities Fund’s semiannual report for the period ended June 30, 2012.

Performance Summary as of 6/30/12

Franklin Strategic Income Securities Fund – Class 2 delivered a +5.64% total return for the six-month period ended 6/30/12.

Franklin Strategic Income Securities Fund – Class 2

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares.

Current performance may differ from figures shown.

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Fund Goals and Main Investments: Franklin Strategic Income Securities Fund seeks a high level of current income, with capital appreciation over the long term as a secondary goal. Under normal market conditions, the Fund invests primarily to predominantly in U.S. and foreign debt securities, including those in emerging markets.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. The Fund outperformed the +2.37% total return of its benchmark, the Barclays U.S. Aggregate Index.¹ The Fund also outperformed the +5.03% total return of its peers, as measured by the Lipper Multi-Sector Income Funds Classification Average.²

Economic and Market Overview

During the six months under review, uncertainty regarding the eurozone’s future continued to influence financial markets, and U.S. economic data appeared mixed. U.S. manufacturing indicators look to have weakened, employment gains slowed and wage growth was sluggish during the period. However, energy prices declined significantly over the period and housing data strengthened with new and existing home sales as well as house prices pointing toward a gradual strengthening trend, albeit from a low base. The U.S. consumer showed resilience as consumption remained steady even as consumer confidence declined.

The global economic recovery was mixed during the first half of 2012. Emerging markets continued to lead the recovery with many economies returning to and exceeding pre-crisis activity levels. Although some developed economies, such as those of Australia and some Scandinavian countries, also enjoyed relatively strong recoveries, growth in the G-3 (U.S., eurozone and Japan) continued to trail the pace of previous recoveries. Policymakers in the largest developed economies increased their already unprecedented efforts to supply liquidity and with few exceptions, policymakers elsewhere in the world either paused their monetary tightening cycles or reversed previous tightening efforts in response to the external environment. Positive economic data, including first-quarter year-over-year real gross domestic product growth of 2.0% in the U.S. and 8.1% in China, challenged more dire predictions of a severe global economic slowdown.³

2. Lipper Inc.

One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

3. Sources: Bureau of Economic Analysis (U.S.); the website of the National Bureau of Statistics of the People’s Republic of China (www.stats.gov.cn).

Fund Risks: All investments involve risks, including possible loss of principal. As the prices of bonds in the Fund adjust to a rise in interest rates, the Fund’s share price may decline. Risks associated with higher yielding, lower rated securities (junk bonds) include higher risk of default and loss of principal. Floating rate loans and high yield corporate bonds are rated below investment grade and are subject to greater risk of default, which could result in loss of principal. Investments in foreign securities involve risks such as currency fluctuations and political uncertainty. Investments in developing markets involve heightened risks related to the same factors, in addition to those associated with their relatively small size and lesser liquidity. Investing in derivative securities and the use of foreign currency techniques involve special risks as such may not achieve the anticipated benefits and/or may result in losses to the Fund. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

FSI-2

Financial markets seemed to be largely influenced by politics, sentiment and uncertainty in the eurozone, and they were quick to discount the latest Greek election results. The June 2012 Federal Open Market Committee meeting concluded with the extension of its plan designed to boost the economy by driving down long-term interest rates (dubbed Operation Twist) but made no formal announcement of an additional round of quantitative easing. Increased liquidity creation, particularly from the European Central Bank’s Long-Term Refinancing Operation, and meaningful progress toward coordinated action to address persistent banking and structural economic issues alleviated investor fears of a disorderly sovereign credit event and the potential for financial contagion.

Overall, investor concerns about ongoing eurozone uncertainty, weak U.S. employment gains and a lack of broad public and political agreement on how to achieve U.S. deficit reduction drove the 10-year U.S. Treasury yield from 1.89% on December 31, 2011, to 1.67% on June 30, 2012. In the latter part of the period, commodities extended recent losses, with oil falling back below $100, while the euro dipped and traditional safe havens like U.S. Treasuries, the U.S. dollar and the Japanese yen made gains.

Investment Strategy

We allocate our investments among the various types of debt available based on our assessment of changing economic, global market, industry and issuer conditions. We use a top-down analysis of macroeconomic trends, combined with a bottom-up fundamental analysis of market sectors, industries and issuers, seeking to take advantage of varying sector reactions to economic events. For example, we may evaluate business cycles, yield curves, country risk, and the relative interest rates among currencies, and values between and within markets. In selecting debt securities, we generally conduct our own analysis of the security’s intrinsic value rather than simply relying on the coupon rate or rating. We may also enter into various transactions involving certain currency-, interest rate- or credit-related derivative instruments for hedging purposes, to enhance returns or to obtain exposure to various market sectors.

Manager’s Discussion

During the six-month period ended June 30, 2012, macroeconomic and political headlines continued to drive financial market volatility. Financial markets began to rally in the first quarter of 2012 from their second-half 2011 lows amid healthier U.S. economic data as well as eurozone liquidity backstop measures that helped ease concerns regarding the European banking system. Consequently, during the first quarter the risk aversion that had driven down financial markets in the second half of 2011 had

LOGO

*Includes short-term foreign government securities.

**Includes unrealized gains/losses on forward currency contracts.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).

FSI-3

largely dissipated, allowing stock markets to rally as indicated by the Standard & Poor’s^® 500 Index’s (S&P 500^®’s) 12.59% gain in the first quarter.¹ However, weaker economic data along with renewed concerns regarding the eurozone again pressured financial markets in the second quarter of 2012, and the S&P 500 fell 2.75%.¹ Given investors’ generally more tempered view toward domestic economic growth and seemingly little concern regarding domestic inflationary pressures, U.S. longer term rates further declined during the period. As a result of this decline in long-dated U.S. Treasury rates, most fixed income sectors delivered positive total returns during the period. Strong performance during the first quarter of the year led many of the spread sectors to outperform the U.S. Treasury market for the full six-month period. Similarly, while the U.S. dollar strengthened compared to the euro and yen during the six-month period in review, a rebound in certain international fixed income currency markets drove relative outperformance from that sector during the period.

In this environment, the Fund posted a positive total return, outpacing the performance of the Barclays U.S. Aggregate Index as well as the Lipper Multi-Sector Income Funds Classification Average. The Fund’s higher exposure to high yield credit sectors positively impacted performance compared to the index. Compared to the Lipper peer average, the Fund’s higher exposure to certain non-U.S. dollar holdings also boosted returns.

While financial market volatility contributed to spread widening in the corporate credit sectors during the second quarter of 2012, overall corporate credit fundamentals remained fairly supportive during the six-month reporting period. Many companies have built up significant liquidity over the past few years and extended debt maturities given the relative openness of the new-issue debt markets. Major banks, particularly in the U.S., raised their capital ratios materially since 2008. Although the pace of gains began to slow as operating margins reached historical highs, improvements in corporate earnings furthered credit improvement. Nonetheless, the slowdown in eurozone economic growth is likely to be a headwind for certain corporates during the second half of 2012, and global default rates have begun to edge higher. Overall, however, with an expectation for positive U.S. economic growth and a soft landing in China, and considering spread valuations in line to somewhat cheap compared to historical averages, the Fund’s largest sector weighting remained in corporate bonds. During the period the Fund incrementally added to its leveraged bank loan and investment-grade corporate weighting, while maintaining its largest weighting in high yield corporate bonds. Within investment-grade corporate bonds, the Fund’s exposure was largely in financials, which offered a yield spread pick-up relative to the overall sector.⁴

4. The financials sector comprises banks, diversified financials, insurance and real estate in the SOI.

FSI-4

In the global markets, many of the currencies under pressure during the second half of 2011 experienced a rebound during the reporting period, particularly during the first four months of 2012. Non-U.S. dollar holdings in Mexico, the Philippines and Singapore performed well. The Fund’s long currency positions in Sweden and Poland also outperformed the euro, which the Fund sold forward as a proxy hedge. On the other hand, currency positions in countries such as Brazil and India underperformed as those currencies declined in value. We maintained only a modest weighting in hard currency (U.S. dollar and euro) emerging market sovereign bonds, given valuations that remained somewhat rich to longer term averages.

The continued decline in longer term U.S. Treasury yields drove positive returns for the more interest rate-sensitive sectors of the domestic fixed income market, with the longest maturity bonds generally delivering the greatest total returns. Given their higher current yield, offset by their shorter effective maturities, agency mortgage-backed securities generally performed in line with Treasuries. While the slack in the U.S. economy could keep longer term inflationary pressures subdued, with five- to 10-year Treasury yields lower than the inflation rate, we did not find significant value in fixed income U.S. government securities at recent yield levels. Consequently, we maintained a relatively low weighting in these sectors, while favoring the higher current yield of agency mortgages relative to Treasuries. Commercial mortgage-backed securities (CMBS) generally performed well in the first half of 2012, with healthy demand for CMBS. The Fund modestly added exposure to certain less highly rated (by the national rating agencies) CMBS tranches while reducing exposure to higher priced CMBS, favoring the yield pickup in those less highly rated securities. Given the longer maturity profile for the Fund’s municipal bond holdings, with a combination of a decline in long-term U.S. rates and healthy sector performance over the past year, the Fund continued to pare its municipal bond holdings.

Thank you for your participation in Franklin Strategic Income Securities Fund. We look forward to serving your future investment needs.

FSI-5

Fund Expenses

•

Transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes.

•

Actual Fund Expenses

You can estimate the Fund-level expenses you incurred during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:

1.	Divide your account value by $1,000.

If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6.

2.	Multiply the result by the number under the heading “Fund-Level Expenses Incurred During Period.”

If Fund-Level Expenses Incurred During Period were $7.50, then 8.6 x $7.50 = $64.50.

In this illustration, the estimated expenses incurred this period at the Fund level are $64.50.

Franklin Strategic Income Securities Fund – Class 2

FSI-6

Hypothetical Example for Comparison with Other Mutual Funds


Class 2	Beginning Account Value 1/1/12		Ending Account Value 6/30/12		Fund-Level Expenses Incurred During Period* 1/1/12–6/30/12
Actual	$	1,000	$	1,056.40	$	4.29
Hypothetical (5% return before expenses)	$	1,000	$	1,020.69	$	4.22

FSI-7

Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Franklin Strategic Income Securities Fund


	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31,
Class 1	Six Months Ended June 30, 2012 (unaudited)			2011			2010			2009			2008			2007

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	12.55		$	12.99		$	12.28		$	10.58		$	12.78		$	12.73

Income from investment operations^a:
Net investment income^b		0.34			0.69			0.72			0.70			0.69			0.73
Net realized and unrealized gains (losses)		0.38			(0.32	)		0.61			1.95			(1.99	)		0.04

Total from investment operations		0.72			0.37			1.33			2.65			(1.30	)		0.77

Less distributions from:
Net investment income and net foreign currency gains		(0.93	)		(0.81	)		(0.62	)		(0.95	)		(0.87	)		(0.68	)
Net realized gains		(0.02	)		—			—			—			(0.03	)		(0.04	)

Total distributions		(0.95	)		(0.81	)		(0.62	)		(0.95	)		(0.90	)		(0.72	)

Net asset value, end of period	$	12.32		$	12.55		$	12.99		$	12.28		$	10.58		$	12.78


Total return^c		5.82%			2.78%			11.21%			26.11%			(11.03)%			6.20%
Ratios to average net assets^d
Expenses		0.59%			0.60%	^e		0.59%	^e		0.58%	^e		0.61%	^e		0.62%	^e
Net investment income		5.23%			5.36%			5.71%			6.13%			5.83%			5.72%

Supplemental data
Net assets, end of period (000’s)	$	1,032,236		$	1,043,690		$	1,195,149		$	1,173,313		$	903,358		$	1,086,850
Portfolio turnover rate		24.60%			55.65%			56.46%			56.19%			47.68%			46.88%
Portfolio turnover rate excluding mortgage dollar rolls^f		24.60%			55.65%			56.46%			56.19%			47.68%			46.43%

^bBased on average daily shares outstanding.

^dRatios are annualized for periods less than one year.

^eBenefit of expense reduction rounds to less than 0.01%.

^fSee Note 1(g) regarding mortgage dollar rolls.

The accompanying notes are an integral part of these financial statements.

FSI-8

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin Strategic Income Securities Fund


	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31,
Class 2	Six Months Ended June 30, 2012 (unaudited)			2011			2010			2009			2008			2007

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	12.27		$	12.72		$	12.05		$	10.41		$	12.60		$	12.56

Income from investment operations^a:
Net investment income^b		0.31			0.64			0.68			0.66			0.65			0.69
Net realized and unrealized gains (losses)		0.37			(0.30	)		0.59			1.91			(1.96	)		0.05

Total from investment operations		0.68			0.34			1.27			2.57			(1.31	)		0.74

Less distributions from:
Net investment income and net foreign currency gains		(0.90	)		(0.79	)		(0.60	)		(0.93	)		(0.85	)		(0.66	)
Net realized gains		(0.02	)		—			—			—			(0.03	)		(0.04	)

Total distributions		(0.92	)		(0.79	)		(0.60	)		(0.93	)		(0.88	)		(0.70	)

Net asset value, end of period	$	12.03		$	12.27		$	12.72		$	12.05		$	10.41		$	12.60


Total return^c		5.64%			2.57%			10.91%			25.75%			(11.24)%			5.91%
Ratios to average net assets^d
Expenses		0.84%			0.85%	^e		0.84%	^e		0.83%	^e		0.86%	^e		0.87%	^e
Net investment income		4.98%			5.11%			5.46%			5.88%			5.58%			5.47%

Supplemental data
Net assets, end of period (000’s)	$	137,230		$	123,749		$	101,347		$	68,240		$	33,155		$	24,613
Portfolio turnover rate		24.60%			55.65%			56.46%			56.19%			47.68%			46.88%
Portfolio turnover rate excluding mortgage dollar rolls^f		24.60%			55.65%			56.46%			56.19%			47.68%			46.43%

^bBased on average daily shares outstanding.

^dRatios are annualized for periods less than one year.

^eBenefit of expense reduction rounds to less than 0.01%.

^fSee Note 1(g) regarding mortgage dollar rolls.

The accompanying notes are an integral part of these financial statements.

FSI-9

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin Strategic Income Securities Fund


	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31,
Class 4	Six Months Ended June 30, 2012 (unaudited)			2011			2010			2009			2008^a

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	12.44		$	12.88		$	12.20		$	10.54		$	12.84

Income from investment operations^b:
Net investment income^c		0.31			0.64			0.67			0.66			0.53
Net realized and unrealized gains (losses)		0.38			(0.31	)		0.60			1.94			(1.93	)

Total from investment operations		0.69			0.33			1.27			2.60			(1.40	)

Less distributions from:
Net investment income and net foreign currency gains		(0.89	)		(0.77	)		(0.59	)		(0.94	)		(0.87	)
Net realized gains		(0.02	)		—			—			—			(0.03	)

Total distributions		(0.91	)		(0.77	)		(0.59	)		(0.94	)		(0.90	)

Net asset value, end of period	$	12.22		$	12.44		$	12.88		$	12.20		$	10.54


Total return^d		5.58%			2.46%			10.88%			25.52%			(11.69)%
Ratios to average net assets^e
Expenses		0.94%			0.95%	^f		0.94%	^f		0.93%	^f		0.96%	^f
Net investment income		4.88%			5.01%			5.36%			5.78%			5.48%

Supplemental data
Net assets, end of period (000’s)	$	202,257		$	188,786		$	188,178		$	162,074		$	59,766
Portfolio turnover rate		24.60%			55.65%			56.46%			56.19%			47.68%

^aFor the period February 29, 2008 (effective date) to December 31, 2008.

^cBased on average daily shares outstanding.

^eRatios are annualized for periods less than one year.

^fBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

FSI-10

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited)


Franklin Strategic Income Securities Fund	Country	Shares		Value
Common Stocks 0.6%
Consumer Durables & Apparel 0.1%
^a,bComfort Co. Inc.	United States		13,427	$	720,359

Consumer Services 0.1%
^a,c,dTurtle Bay Resort	United States		1,901,449		1,711,304

Media 0.4%
^aMGM Holdings Inc., A	United States		216,185		5,458,671

Total Common Stocks (Cost $8,590,364)					7,890,334

Preferred Stocks (Cost $865,000) 0.1%
Diversified Financials 0.1%
GMAC Capital Trust I, 8.125%, pfd.	United States		34,600		832,130


		Principal Amount*
Corporate Bonds 37.2%
Automobiles & Components 0.7%
Exide Technologies, senior secured note, 8.625%, 2/01/18	United States		1,400,000		1,111,250
Ford Motor Credit Co. LLC, senior note,
7.00%, 4/15/15	United States		500,000		556,940
6.625%, 8/15/17	United States		1,000,000		1,139,224
5.00%, 5/15/18	United States		1,000,000		1,064,922
8.125%, 1/15/20	United States		1,200,000		1,471,057
5.75%, 2/01/21	United States		600,000		661,050
The Goodyear Tire & Rubber Co., senior note, 8.25%, 8/15/20	United States		3,000,000		3,191,250

					9,195,693

Banks 1.4%
^eBanco do Brasil SA, sub. note, 144A, 5.875%, 1/26/22	Brazil		3,500,000		3,603,985
CIT Group Inc., senior note,
^e144A, 7.00%, 5/02/17	United States		2,303,465		2,310,664
^e144A, 6.625%, 4/01/18	United States		500,000		542,500
5.375%, 5/15/20	United States		1,600,000		1,633,000
HSBC USA Inc., sub. note, 5.00%, 9/27/20	United States		4,500,000		4,583,233
Regions Bank, sub. note, 7.50%, 5/15/18	United States		1,000,000		1,122,500
Regions Financial Corp., senior note,
7.75%, 11/10/14	United States		2,500,000		2,706,250
5.75%, 6/15/15	United States		300,000		315,750
UBS AG Stamford, senior note, 5.875%, 12/20/17	United States		2,400,000		2,685,240

					19,503,122

Capital Goods 1.0%
^eAbengoa Finance SAU, senior note, 144A, 8.875%, 11/01/17	Spain		3,500,000		3,150,000
The Manitowoc Co. Inc., senior note,
9.50%, 2/15/18	United States		2,000,000		2,200,000
8.50%, 11/01/20	United States		1,500,000		1,627,500
Meritor Inc., senior note, 10.625%, 3/15/18	United States		3,000,000		3,202,500
RBS Global & Rexnord Corp., senior note, 8.50%, 5/01/18	United States		3,000,000		3,270,000

					13,450,000

Commercial & Professional Services 0.3%
United Rentals North America Inc., senior sub. note, 8.375%, 9/15/20	United States		4,000,000		4,230,000

Consumer Durables & Apparel 0.8%
Jarden Corp., senior sub. note, 7.50%, 5/01/17	United States		3,000,000		3,375,000

FSI-11

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Strategic Income Securities Fund	Country	Principal Amount*			Value
Corporate Bonds (continued)
Consumer Durables & Apparel (continued)
M/I Homes Inc., senior note, 8.625%, 11/15/18	United States		2,400,000		$	2,490,000
Shea Homes LP/Funding Corp., senior secured note, 8.625%, 5/15/19	United States		2,000,000			2,160,000
Visant Corp., senior note, 10.00%, 10/01/17	United States		3,500,000			3,491,250

						11,516,250

Consumer Services 2.0%
CKE Restaurants Inc., senior secured note, 11.375%, 7/15/18	United States		1,432,000			1,643,220
ClubCorp Club Operations Inc., senior note, 10.00%, 12/01/18	United States		2,900,000			3,088,500
^e,fFontainebleau Las Vegas, 144A, 11.00%, 6/15/15	United States		2,500,000			1,563
^eGala Group Finance Ltd., senior secured bond, 144A, 8.875%, 9/01/18	United Kingdom		2,000,000	GBP		2,760,535
Harrah’s Operating Co. Inc., senior secured note, 11.25%, 6/01/17	United States		5,000,000			5,481,250
MGM Resorts International, senior note, 6.625%, 7/15/15	United States		4,500,000			4,657,500
Pinnacle Entertainment Inc.,
senior note, 8.625%, 8/01/17	United States		1,500,000			1,638,750
senior sub. note, 7.75%, 4/01/22	United States		400,000			428,500
Royal Caribbean Cruises Ltd., senior deb., 7.25%, 3/15/18	United States		1,500,000			1,627,500
^eShingle Springs Tribal Gaming Authority, senior note, 144A, 9.375%, 6/15/15	United States		2,000,000			1,540,000
Starwood Hotels & Resorts Worldwide Inc., senior note,
6.75%, 5/15/18	United States		2,000,000			2,327,130
7.15%, 12/01/19	United States		500,000			590,402
Universal City Development,
senior note, 8.875%, 11/15/15	United States		1,286,000			1,378,125
senior sub. note, 10.875%, 11/15/16	United States		284,000			334,139

						27,497,114

Diversified Financials 4.0%
Ally Financial Inc., senior note, 7.50%, 9/15/20	United States		2,500,000			2,818,750
Bank of America Corp.,
^gpfd., sub. bond, M, 8.125% to 5/15/18, FRN thereafter, Perpetual	United States		4,500,000			4,727,520
senior note, 5.65%, 5/01/18	United States		1,500,000			1,606,731
Capital One Capital VI, pfd., junior sub. bond, 8.875%, 5/15/40	United States		3,000,000			3,066,603
Citigroup Inc.,
senior note, 6.125%, 11/21/17	United States		1,500,000			1,664,573
senior note, 5.375%, 8/09/20	United States		1,000,000			1,083,094
sub. note, 5.00%, 9/15/14	United States		3,000,000			3,077,109
General Electric Capital Corp.,
senior note, A, 8.50%, 4/06/18	United States		64,000,000	MXN		5,012,606
sub. note, 5.30%, 2/11/21	United States		1,000,000			1,125,134
GMAC Inc.,
senior note, 6.875%, 8/28/12	United States		2,000,000			2,015,000
sub. note, 8.00%, 12/31/18	United States		900,000			1,001,250
International Lease Finance Corp.,
senior note, 8.25%, 12/15/20	United States		1,000,000			1,148,385
^esenior secured note, 144A, 6.75%, 9/01/16	United States		3,500,000			3,780,000
JPMorgan Chase & Co.,
6.00%, 1/15/18	United States		1,500,000			1,724,669
senior note, 4.25%, 10/15/20	United States		2,500,000			2,632,707
JPMorgan Chase Capital XXII, sub. bond, 6.45%, 2/02/37	United States		3,000,000			3,015,000
^eKKR Group Finance Co., senior note, 144A, 6.375%, 9/29/20	United States		3,000,000			3,259,515
Merrill Lynch & Co. Inc., senior note, 6.40%, 8/28/17	United States		2,000,000			2,178,854
Moody’s Corp., senior note, 5.50%, 9/01/20	United States		2,600,000			2,817,209
Morgan Stanley, senior note,
6.00%, 4/28/15	United States		3,000,000			3,103,515

FSI-12

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Strategic Income Securities Fund	Country	Principal Amount*		Value
Corporate Bonds (continued)
Diversified Financials (continued)
Morgan Stanley, senior note, (continued)
5.50%, 7/24/20	United States		1,500,000	$	1,470,845
5.50%, 7/28/21	United States		800,000		790,151
^eNeuberger Berman Group LLC/Finance Corp., senior note, 144A,
5.625%, 3/15/20	United States		600,000		627,000
5.875%, 3/15/22	United States		600,000		628,500

					54,374,720

Energy 6.8%
Alpha Natural Resources Inc., senior note,
6.00%, 6/01/19	United States		1,500,000		1,286,250
6.25%, 6/01/21	United States		2,000,000		1,700,000
Antero Resources Finance Corp., senior note,
9.375%, 12/01/17	United States		2,500,000		2,775,000
7.25%, 8/01/19	United States		300,000		312,000
Arch Coal Inc., senior note,
7.00%, 6/15/19	United States		800,000		680,000
7.25%, 6/15/21	United States		2,000,000		1,685,000
Atlas Pipeline Partners LP, senior note, 8.75%, 6/15/18	United States		2,500,000		2,681,250
Chaparral Energy Inc., senior note,
9.875%, 10/01/20	United States		2,000,000		2,232,500
8.25%, 9/01/21	United States		1,000,000		1,062,500
^e144A, 7.625%, 11/15/22	United States		300,000		305,250
CHC Helicopter SA, senior secured note, first lien, 9.25%, 10/15/20	Canada		3,500,000		3,438,750
Chesapeake Energy Corp., senior note,
7.25%, 12/15/18	United States		300,000		307,500
6.625%, 8/15/20	United States		4,000,000		3,980,000
6.125%, 2/15/21	United States		1,500,000		1,458,750
Chesapeake Midstream Partners LP/CHKM Finance Corp., senior note, 6.125%, 7/15/22	United States		700,000		689,500
Compagnie Generale de Geophysique-Veritas, senior note,
7.75%, 5/15/17	France		2,100,000		2,174,813
6.50%, 6/01/21	France		2,000,000		2,010,000
CONSOL Energy Inc., senior note,
8.00%, 4/01/17	United States		1,500,000		1,563,750
8.25%, 4/01/20	United States		1,500,000		1,582,500
6.375%, 3/01/21	United States		200,000		189,000
Crosstex Energy LP/Crosstex Energy Finance Corp., senior note, 8.875%, 2/15/18	United States		3,500,000		3,703,437
El Paso Corp., senior bond, 6.50%, 9/15/20	United States		2,300,000		2,532,824
Energy Transfer Equity LP, senior note, 7.50%, 10/15/20	United States		3,500,000		3,858,750
Energy Transfer Partners LP, senior note, 5.20%, 2/01/22	United States		900,000		966,327
Energy XXI Gulf Coast Inc., senior note, 9.25%, 12/15/17	United States		3,000,000		3,225,000
^hEnterprise Products Operating LLC, junior sub. note, FRN, 7.034%, 1/15/68	United States		2,000,000		2,142,452
^eExpro Finance Luxembourg, senior secured note, 144A, 8.50%, 12/15/16	United Kingdom		3,113,000		2,996,263
^eGaz Capital SA,
GAZPROM, loan participation, senior note, 144A, 5.092%, 11/29/15	Russia		3,000,000		3,164,565
OJSC GAZPROM, loan participation, senior note, 144A, 6.51%, 3/07/22	Russia		500,000		556,880
^eKinder Morgan Finance Co. LLC, senior secured note, 144A, 6.00%, 1/15/18	United States		3,500,000		3,657,500
Linn Energy LLC/Finance Corp., senior note,
8.625%, 4/15/20	United States		3,000,000		3,247,500
7.75%, 2/01/21	United States		1,000,000		1,050,000
Martin Midstream Partners LP, senior note, 8.875%, 4/01/18	United States		1,754,000		1,780,310
Offshore Group Investment Ltd., senior secured note,
^efirst lien, 144A, 11.50%, 8/01/15	United States		900,000		981,000
11.50%, 8/01/15	United States		2,100,000		2,289,000

FSI-13

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Strategic Income Securities Fund	Country	Principal Amount*			Value
Corporate Bonds (continued)
Energy (continued)
^ePBF Holding Co. LLC, senior secured note, 144A, 8.25%, 2/15/20	United States		2,100,000		$	2,105,250
Peabody Energy Corp., senior note,
6.50%, 9/15/20	United States		2,500,000			2,543,750
^e144A, 6.00%, 11/15/18	United States		700,000			700,000
^e144A, 6.25%, 11/15/21	United States		1,000,000			995,000
^ePenn Virginia Resource Partners LP/Finance Corp. II, senior note, 144A, 8.375%, 6/01/20	United States		1,400,000			1,428,000
^c,e,fPetroplus Finance Ltd., senior note, 144A, 6.75%, 5/01/14	Switzerland		2,100,000			262,500
Plains Exploration & Production Co., senior note,
7.625%, 6/01/18	United States		3,000,000			3,202,500
6.125%, 6/15/19	United States		600,000			606,000
Quicksilver Resources Inc., senior note,
8.25%, 8/01/15	United States		3,000,000			2,820,000
9.125%, 8/15/19	United States		500,000			437,500
^eSamson Investment Co., senior note, 144A, 9.75%, 2/15/20	United States		3,500,000			3,486,875
SandRidge Energy Inc., senior note,
8.75%, 1/15/20	United States		1,000,000			1,047,500
^e144A, 8.00%, 6/01/18	United States		3,000,000			3,052,500
W&T Offshore Inc., senior note, 8.50%, 6/15/19	United States		2,000,000			2,075,000

						93,028,496

Food & Staples Retailing 0.5%
Rite Aid Corp., senior secured note,
9.75%, 6/12/16	United States		2,200,000			2,436,500
8.00%, 8/15/20	United States		1,300,000			1,478,750
Safeway Inc., senior bond, 3.95%, 8/15/20	United States		3,500,000			3,385,277

						7,300,527

Food, Beverage & Tobacco 1.8%
^eBoparan Finance PLC, senior note, 144A, 9.75%, 4/30/18	United Kingdom		2,500,000	EUR		3,341,975
^eCampofrio Food Group SA, senior note, 144A, 8.25%, 10/31/16	Spain		3,000,000	EUR		3,739,848
^eCEDC Finance Corp. International Inc., senior secured note, 144A, 9.125%, 12/01/16	Russia		1,800,000			1,146,375
Dean Foods Co., senior note, 9.75%, 12/15/18	United States		1,300,000			1,456,000
Del Monte Corp., senior note, 7.625%, 2/15/19	United States		4,000,000			4,055,000
JBS USA LLC/Finance Inc., senior note,
11.625%, 5/01/14	United States		1,500,000			1,710,000
^e144A, 8.25%, 2/01/20	United States		1,500,000			1,462,500
^eKraft Foods Inc., senior bond, 144A, 3.50%, 6/06/22	United States		3,000,000			3,087,504
Pinnacle Foods Finance LLC/Corp., senior note, 9.25%, 4/01/15	United States		2,500,000			2,581,250
^eRefresco Group BV, senior secured sub. bond, 144A, 7.375%, 5/15/18	Netherlands		2,000,000	EUR		2,391,984

						24,972,436

Health Care Equipment & Services 1.4%
Amerigroup Corp., senior note, 7.50%, 11/15/19	United States		2,500,000			2,700,000
CHS/Community Health Systems Inc., senior note,
8.875%, 7/15/15	United States		1,125,000			1,155,937
8.00%, 11/15/19	United States		2,100,000			2,236,500
Emergency Medical Services Corp., senior note, 8.125%, 6/01/19	United States		2,500,000			2,621,875
HCA Inc., senior note, 6.50%, 2/15/16	United States		800,000			866,000
senior note, 7.50%, 2/15/22	United States		2,000,000			2,185,000
senior secured bond, 7.25%, 9/15/20	United States		300,000			331,500
senior secured note, 5.875%, 3/15/22	United States		1,900,000			1,990,250
^eHealth Management Associates Inc., senior note, 144A, 7.375%, 1/15/20	United States		2,800,000			2,992,500

FSI-14

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Strategic Income Securities Fund	Country	Principal Amount*			Value
Corporate Bonds (continued)
Health Care Equipment & Services (continued)
Vanguard Health Holding Co. II LLC/Inc., senior note, 8.00%, 2/01/18	United States		2,500,000		$	2,568,750
Vanguard Health Systems Inc., senior note, zero cpn., 2/01/16	United States		30,000			20,100

						19,668,412

Insurance 0.5%
^hMetLife Inc., junior sub. note, FRN, 6.40%, 12/15/66	United States		3,500,000			3,473,750
^e,hMitsui Sumitomo Insurance Co. Ltd., sub. note, 144A, FRN, 7.00%, 3/15/72	Japan		3,000,000			3,137,535

						6,611,285

Materials 3.5%
ArcelorMittal, senior note,
5.50%, 3/01/21	Luxembourg		4,000,000			3,802,520
6.25%, 2/25/22	Luxembourg		1,000,000			983,020
^eCemex SAB de CV, senior secured note, 144A, 9.00%, 1/11/18	Mexico		4,000,000			3,590,000
Euramax International Inc., senior secured note, 9.50%, 4/01/16	United States		2,000,000			1,775,000
^eFMG Resources August 2006 Pty. Ltd., senior note, 144A,
7.00%, 11/01/15	Australia		700,000			710,062
6.00%, 4/01/17	Australia		500,000			499,850
6.875%, 2/01/18	Australia		3,000,000			3,041,250
Huntsman International LLC, senior sub. note, 8.625%, 3/15/21	United States		1,100,000			1,245,750
^eIneos Finance PLC, senior secured note, 144A,
9.00%, 5/15/15	United Kingdom		300,000			318,000
9.25%, 5/15/15	United Kingdom		100,000	EUR		135,407
8.375%, 2/15/19	United Kingdom		200,000			206,625
7.50%, 5/01/20	United Kingdom		300,000			302,812
^eIneos Group Holdings Ltd., senior note, 144A, 7.875%, 2/15/16	United Kingdom		1,500,000	EUR		1,656,354
senior secured note, 144A, 8.50%, 2/15/16	United Kingdom		1,500,000			1,383,750
^eInmet Mining Corp., senior note, 144A, 8.75%, 6/01/20	Canada		2,700,000			2,686,500
^eKerling PLC, senior secured note, 144A, 10.625%, 1/28/17	United Kingdom		3,000,000	EUR		3,366,034
^eKinove German Bondco GmbH, senior secured bond, 144A, 10.00%, 6/15/18	Germany		2,250,000	EUR		2,924,129
^eMacDermid Inc., senior sub. note, 144A, 9.50%, 4/15/17	United States		3,000,000			3,150,000
^c,fNewPage Corp., senior secured note, 11.375%, 12/31/14	United States		3,500,000			2,292,500
Novelis Inc., senior note,
8.375%, 12/15/17	Canada		1,500,000			1,612,500
8.75%, 12/15/20	Canada		1,600,000			1,732,000
^eReynolds Group Issuer Inc./LLC/SA, senior note, 144A, 8.50%, 5/15/18	United States		3,500,000			3,447,500
senior note, 144A, 9.875%, 8/15/19	United States		100,000			103,875
senior note, 144A, 8.25%, 2/15/21	United States		500,000			475,000
senior secured note, 144A, 7.125%, 4/15/19	United States		1,000,000			1,052,500
^eSealed Air Corp., senior note, 144A,
8.125%, 9/15/19	United States		1,000,000			1,120,000
8.375%, 9/15/21	United States		500,000			567,500
^eXstrata Finance Canada Ltd., senior note, 144A, 4.95%, 11/15/21	Canada		4,000,000			4,143,796

						48,324,234

Media 3.6%
^eAMC Networks Inc., senior note, 144A, 7.75%, 7/15/21	United States		1,300,000			1,439,750
Cablevision Systems Corp., senior note, 8.625%, 9/15/17	United States		500,000			560,000
CCH II LLC/CCH II Capital Corp., senior note, 13.50%, 11/30/16	United States		1,500,000			1,676,250
CCO Holdings LLC/CCO Holdings Capital Corp., senior note,
8.125%, 4/30/20	United States		900,000			1,008,000

FSI-15

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Strategic Income Securities Fund	Country	Principal Amount*			Value
Corporate Bonds (continued)
Media (continued)
CCO Holdings LLC/CCO Holdings Capital Corp., senior note, (continued)
6.50%, 4/30/21	United States		2,000,000		$	2,140,000
^eCet 21 Spol SRO, senior secured note, 144A, 9.00%, 11/01/17	Czech Republic		300,000	EUR		399,613
Clear Channel Communications Inc., senior note, 9.00%, 3/01/21	United States		4,700,000			4,112,500
^eClear Channel Worldwide Holdings Inc., senior sub. note, 144A, 7.625%,
3/15/20	United States		1,300,000			1,277,250
3/15/20	United States		200,000			192,500
CSC Holdings Inc.,
senior deb., 7.625%, 7/15/18	United States		1,500,000			1,683,750
^esenior note, 144A, 6.75%, 11/15/21	United States		2,000,000			2,140,000
DIRECTV Holdings LLC/DIRECTV Financing Co. Inc., senior note, 4.60%, 2/15/21	United States		2,000,000			2,132,390
DISH DBS Corp., senior note,
7.75%, 5/31/15	United States		500,000			557,500
7.125%, 2/01/16	United States		4,000,000			4,410,000
6.75%, 6/01/21	United States		500,000			542,500
^e144A, 5.875%, 7/15/22	United States		500,000			507,500
Media General Inc., senior secured note, 11.75%, 2/15/17	United States		2,000,000			2,160,000
^eNara Cable Funding Ltd., senior note, 144A, 8.875%, 12/01/18	Spain		800,000			692,000
ⁱRadio One Inc., senior sub. note, PIK, 15.00%, 5/24/16	United States		2,280,619			1,799,005
^e,fSeat Pagine Gialle SpA, senior secured note, 144A, 10.50%, 1/31/17	Italy		2,000,000	EUR		1,645,280
Time Warner Inc.,
7.625%, 4/15/31	United States		2,500,000			3,241,240
senior bond, 3.40%, 6/15/22	United States		500,000			505,685
^eUnitymedia Hessen/NRW, senior secured note, 144A, 9.50%, 3/15/21	Germany		1,500,000	EUR		2,068,069
^eUnivision Communications Inc., senior secured note, 144A,
6.875%, 5/15/19	United States		1,000,000			1,035,000
7.875%, 11/01/20	United States		2,500,000			2,687,500
^eUPCB Finance II Ltd., senior secured note, 144A, 6.375%, 7/01/20	Netherlands		2,000,000	EUR		2,500,319
^eUPCB Finance VI Ltd., senior secured note, 144A, 6.875%, 1/15/22	Netherlands		500,000			506,563
WMG Acquisition Corp., senior secured note, 9.50%, 6/15/16	United States		2,000,000			2,190,000
^eZiggo Bond Co., senior bond, 144A, 8.00%, 5/15/18	Netherlands		2,500,000	EUR		3,446,782

						49,256,946

Pharmaceuticals, Biotechnology & Life Sciences 1.1%
^eCapsugel FinanceCo SCA, senior note, 144A, 9.875%, 8/01/19	United States		2,000,000	EUR		2,784,320
Endo Health Solutions Inc., senior note, 7.00%, 7/15/19	United States		2,000,000			2,185,000
Giant Funding Corp., senior secured note, 8.25%, 2/01/18	Spain		3,300,000			3,564,000
Gilead Sciences Inc., senior note,
4.50%, 4/01/21	United States		2,000,000			2,228,220
4.40%, 12/01/21	United States		1,000,000			1,106,721
^einVentiv Health Inc., senior note, 144A, 10.00%,
8/15/18	United States		1,200,000			1,032,000
8/15/18	United States		1,100,000			951,500
^eMylan Inc., senior note, 144A, 7.875%, 7/15/20	United States		500,000			563,125

						14,414,886

Real Estate 0.1%
Forest City Enterprises Inc., senior note, 7.625%, 6/01/15	United States		2,000,000			1,995,000

Retailing 1.2%
^eAcademy Ltd./Finance Corp., senior note, 144A, 9.25%, 8/01/19	United States		2,500,000			2,725,000
^e,hEdcon Pty. Ltd., senior secured note, 144A, FRN, 3.912%, 6/15/14	South Africa		3,000,000	EUR		3,467,731
^eMatalan Finance Ltd., senior secured note, 144A, 8.875%, 4/29/16	United Kingdom		2,300,000	GBP		3,095,807
Michaels Stores Inc., senior note, 7.75%, 11/01/18	United States		3,500,000			3,710,000

FSI-16

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Strategic Income Securities Fund	Country	Principal Amount*			Value
Corporate Bonds (continued)
Retailing (continued)
^ePetco Animal Supplies Inc., senior note, 144A, 9.25%, 12/01/18	United States		3,000,000		$	3,292,500

						16,291,038

Semiconductors & Semiconductor Equipment 0.5%
Advanced Micro Devices Inc., senior note,
8.125%, 12/15/17	United States		800,000			872,000
7.75%, 8/01/20	United States		900,000			994,500
Freescale Semiconductor Inc.,
senior note, 8.875%, 12/15/14	United States		660,000			681,450
senior note, 8.05%, 2/01/20	United States		1,600,000			1,588,000
senior note, 10.75%, 8/01/20	United States		1,382,000			1,492,560
^esenior secured note, 144A, 9.25%, 4/15/18	United States		500,000			537,500

						6,166,010

Software & Services 1.2%
^e,jCeridian Corp., 144A, 8.875%, 7/15/19	United States		600,000			622,500
First Data Corp., senior bond, 12.625%, 1/15/21	United States		300,000			301,875
^esenior secured bond, 144A, 8.25%, 1/15/21	United States		4,500,000			4,522,500
^eLawson Software Inc., senior note, 144A, 9.375%, 4/01/19	United States		700,000			750,750
Sitel LLC/Finance Corp., senior note, 11.50%, 4/01/18	United States		2,500,000			1,793,750
Sterling International Inc., senior note, 11.00%, 10/01/19	United States		800,000			808,000
SunGard Data Systems Inc., senior note, 7.625%, 11/15/20	United States		3,000,000			3,210,000
West Corp., senior note, 7.875%, 1/15/19	United States		3,500,000			3,675,000
^eZayo Escrow Corp., first lien, 144A, 8.125%, 1/01/20	United States		1,000,000			1,050,000

						16,734,375

Technology Hardware & Equipment 0.5%
CDW LLC/Finance Corp., senior note, 8.50%, 4/01/19	United States		3,800,000			4,066,000
^eCommScope Inc., senior note, 144A, 8.25%, 1/15/19	United States		3,000,000			3,187,500

						7,253,500

Telecommunication Services 2.7%
CenturyLink Inc., senior note,
6.00%, 4/01/17	United States		3,000,000			3,191,727
6.45%, 6/15/21	United States		1,000,000			1,043,049
Cricket Communications Inc., senior note, 7.75%, 10/15/20	United States		3,500,000			3,360,000
^eDigicel Group Ltd., senior note, 144A, 8.875%, 1/15/15	Jamaica		2,500,000			2,537,500
^eDigicel Ltd., senior note, 144A, 8.25%, 9/01/17	Jamaica		300,000			308,250
^eeAccess Ltd., senior note, 144A,
8.25%, 4/01/18	Japan		1,400,000			1,288,000
8.375%, 4/01/18	Japan		600,000	EUR		664,440
Frontier Communications Corp., senior note,
8.50%, 4/15/20	United States		3,500,000			3,727,500
8.75%, 4/15/22	United States		1,500,000			1,582,500
Intelsat Jackson Holdings SA, senior note,
11.25%, 6/15/16	Luxembourg		1,185,000			1,244,250
7.50%, 4/01/21	Luxembourg		2,000,000			2,125,000
^e144A, 7.25%, 10/15/20	Luxembourg		1,600,000			1,692,000
Intelsat Luxembourg SA, senior note, 11.25%, 2/04/17	Luxembourg		700,000			723,625
MetroPCS Wireless Inc., senior note, 7.875%, 9/01/18	United States		2,500,000			2,606,250
Sprint Nextel Corp., senior note,
8.375%, 8/15/17	United States		4,000,000			4,120,000

FSI-17

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Strategic Income Securities Fund	Country	Principal Amount*			Value
Corporate Bonds (continued)
Telecommunication Services (continued)
Sprint Nextel Corp., senior note, (continued)
^e144A, 9.00%, 11/15/18	United States		2,000,000		$	2,240,000
^e144A, 7.00%, 3/01/20	United States		800,000			834,000
^eWind Acquisition Finance SA, senior secured note, 144A, 11.75%, 7/15/17	Italy		3,500,000			2,865,625
^e,iWind Acquisition Holdings Finance SA, senior secured note, 144A, PIK, 12.25%, 7/15/17	Italy		640,321	EUR		559,471

						36,713,187

Transportation 0.6%
^e,fAmerican Airlines Inc., senior secured note, 144A, 7.50%, 3/15/16	United States		3,000,000			2,850,000
^eCeva Group PLC, senior secured note, 144A,
11.625%, 10/01/16	United Kingdom		300,000			314,250
8.375%, 12/01/17	United Kingdom		1,500,000			1,459,688
11.50%, 4/01/18	United Kingdom		1,000,000			927,500
^eHertz Corp., senior note, 144A, 6.75%, 4/15/19	United States		2,000,000			2,090,000

						7,641,438

Utilities 1.0%
^eCalpine Corp., senior secured note, 144A,
7.875%, 7/31/20	United States		1,100,000			1,218,250
7.50%, 2/15/21	United States		2,500,000			2,712,500
7.875%, 1/15/23	United States		500,000			547,500
CMS Energy Corp., senior note, 8.75%, 6/15/19	United States		2,000,000			2,478,444
^eIntergen NV, senior secured note, 144A, 9.00%, 6/30/17	Netherlands		3,000,000			2,979,375
Texas Competitive Electric Holdings Co. LLC/Texas Competitive Electric Holdings Finance Inc., senior secured note, ^e144A, 11.50%, 10/01/20	United States		4,600,000			3,162,500
B, 15.00%, 4/01/21	United States		1,830,000			631,350

						13,729,919

Total Corporate Bonds (Cost $499,634,693)						509,868,588

^h,kSenior Floating Rate Interests 17.3%
Automobiles & Components 0.1%
August Lux U.K. Holding Co., Lux Second Lien, 10.50%, 4/27/19	Luxembourg		532,023			532,023
August U.S. Holding Co. Inc., U.S. Second Lien, 10.50%, 4/27/19	United States		409,610			409,610
Federal-Mogul Corp.,
Tranche B Term Loan, 2.178% - 2.188%, 12/27/14	United States		415,296			396,175
Tranche C Term Loan, 2.178% - 2.188%, 12/27/15	United States		211,886			202,130

						1,539,938

Capital Goods 1.1%
Goodman Global Inc., Initial Term Loan, 5.75%, 10/28/16	United States		1,243,704			1,245,570
^jRBS Global Inc. (Rexnord), Term B Loan, 5.00%, 4/01/18	United States		4,028,902			4,054,921
Sensus USA Inc., Second Lien Term Loan, 8.50%, 5/09/18	United States		2,345,433			2,348,130
Terex Corp., U.S. Term Loan, 5.50%, 4/28/17	United States		3,594,437			3,616,902
Tomkins LLC and Tomkins Inc., Term B-1 Loan, 4.25%, 9/21/16	United States		2,098,041			2,099,788
TransDigm Inc.,
Tranche B1 Term Loan, 4.00%, 2/14/17	United States		1,809,040			1,810,547
Tranche B2 Term Loan, 4.00%, 2/14/17	United States		510,137			508,861

						15,684,719

Commercial & Professional Services 1.2%
ARAMARK Corp.,
Extended Synthetic L/C, 3.346%, 7/26/16	United States		186,538			185,101

FSI-18

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Strategic Income Securities Fund	Country	Principal Amount*		Value
^h,kSenior Floating Rate Interests (continued)
Commercial & Professional Services (continued)
ARAMARK Corp., (continued)
Extended US Term Loan B-3, 3.495% - 3.711%, 7/26/16	United States		1,138,629	$	1,129,853
Synthetic L/C-3, 3.346%, 7/26/16	United States		91,726		90,923
Term Loan B Extended, 3.495%, 7/26/16	United States		2,834,838		2,812,987
Brock Holdings III Inc., Second Lien Term Loan, 10.00%, 3/16/18	United States		1,187,270		1,175,397
EnviroSolutions Real Property Holdings, Second Lien Term Loan, 8.00%, 7/29/14	United States		502,938		499,795
Interactive Data Corp., Term B Loans, 4.50%, 2/11/18	United States		5,573,824		5,492,490
KAR Auction Services Inc. (Adesa), Term Loan, 5.00%, 5/19/17	United States		5,314,146		5,330,089

					16,716,635

Consumer Durables & Apparel 0.3%
^b,iSleep Innovations Inc., Term Loan, PIK, 11.50%, 3/05/15	United States		1,161,736		1,161,736
Visant Corp. (Jostens), New Loan, 5.25%, 12/22/16	United States		3,675,384		3,565,122

					4,726,858

Consumer Services 1.6%
Ameristar Casinos Inc., B Term Loan, 4.00%, 4/14/18	United States		2,295,714		2,298,584
Burger King Holdings Inc., Tranche B Term Loan, 4.50%, 10/19/16	United States		8,284,169		8,259,971
DineEquity Inc., Term B-1 Loan, 4.25%, 10/19/17	United States		2,714,165		2,705,118
Revel AC Inc., Tranche B Loan, 9.00%, 2/17/17	United States		1,206,407		1,037,510
^c,iTurtle Bay Holdings LLC,
Term Loan A, PIK, 10.25%, 3/01/13	United States		2,062,925		2,011,352
Term Loan B, PIK, 3.00%, 2/09/15	United States		4,096,039		3,297,312
Weight Watchers International Inc., Term F Loan, 3.75%, 3/15/19	United States		1,322,339		1,295,231
^jWendy’s International Inc., Closing date Term Loan, 4.75%, 5/15/19	United States		1,379,064		1,371,882

					22,276,960

Diversified Financials 0.9%
Asurion LLC, Second Lien Term Loan, 9.00%, 5/24/19	United States		3,651,257		3,744,820
MoneyGram Payment Systems Worldwide Inc.,
Term Loan, 4.25%, 11/18/17	United States		3,357,159		3,319,391
Tranche B-1 Loan, 4.25%, 11/18/17	United States		1,078,823		1,066,686
TransUnion LLC/TransUnion FICO, Term Loan, 5.50%, 2/10/18	United States		3,830,308		3,839,884

					11,970,781

Energy 0.3%
Arch Coal Inc., Term Loan B, 5.75%, 5/16/18	United States		3,712,107		3,653,111

Food, Beverage & Tobacco 0.6%
Del Monte Foods Co., Initial Term Loan, 4.50%, 3/08/18	United States		8,434,949		8,318,968

Health Care Equipment & Services 2.1%
Bausch & Lomb Inc., Parent Term Loan, 5.25%, 5/18/19	United States		5,625,945		5,601,332
Community Health Systems Inc.,
Extended Term Loan, 3.961% - 3.967%, 1/25/17	United States		6,114,635		6,024,346
Term Loan, 2.495% - 2.717%, 7/25/14	United States		2,543,553		2,511,043
DaVita Inc., Tranche B Term Loan, 4.50%, 10/20/16	United States		1,973,890		1,983,759
HCA Inc., Tranche B-2 Term Loan, 3.711%, 3/31/17	United States		8,318,841		8,099,731
Universal Health Services Inc., New Tranche B Term Loan, 3.75%, 11/15/16	United States		4,357,005		4,304,359

					28,524,570

Materials 2.9%
^jAmerican Rock Salt Co. LLC, Initial Loan, 5.50%, 4/25/17	United States		3,893,001		3,695,108
Anchor Glass Container Corp., Second Lien Term Loan, 10.00%, 9/02/16	United States		5,813,900		5,806,633
Consolidated Container Co. LLC, Second Lien Term Loan, 5.75%, 9/28/14	United States		1,686,399		1,680,075

FSI-19

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Strategic Income Securities Fund	Country	Principal Amount*		Value
^h,kSenior Floating Rate Interests (continued)
Materials (continued)
^jIneos US Finance LLC, Dollar Term Loan, 6.50%, 4/27/18	United States		3,115,586	$	3,054,832
^cNewPage Corp., DIP Term Loan, 8.00%, 3/07/13	United States		3,410,423		3,448,790
PL Propylene LLC, Tranche B Term Loan, 7.00%, 3/27/17	United States		2,317,593		2,343,666
Potters Holdings II LP, Second Lien Term Loan, 10.25%, 11/06/17	United States		247,452		250,081
Reynolds Group Holdings Inc.,
Tranche B Term Loan, 6.50%, 2/09/18	United States		2,854,501		2,876,703
Tranche C Term Loan, 6.50%, 8/09/18	United States		4,927,779		4,966,108
Road Infrastructure Investment LLC, Second Lien Term Loan, 10.25%, 9/30/18	United States		5,707,888		5,693,618
Tronox Pigments (Netherlands) BV,
Closing Date Term Loan, 4.25%, 2/08/18	Netherlands		1,392,303		1,372,725
Delayed Draw Term Loan, 4.25%, 2/08/18	Netherlands		379,719		373,667
Walter Energy Inc., B Term Loan, 4.00%, 4/01/18	United States		4,478,059		4,394,096

					39,956,102

Media 2.7%
Atlantic Broadband Finance LLC, Second Lien Term Loan, 9.75%, 10/04/19	United States		1,892,400		1,877,418
Cinemark USA Inc., Extended Term Loan, 3.50% - 3.72%, 4/30/16	United States		1,899,045		1,891,924
Clear Channel Communications Inc.,
Tranche A Term Loan, 3.645%, 5/13/14	United States		1,893,112		1,723,915
Tranche B Term Loan, 3.895%, 1/29/16	United States		5,014,627		4,001,517
CSC Holdings Inc. (Cablevision), Incremental T-2 Extended TL, 1.995%, 3/29/16	United States		4,952,553		4,917,474
Cumulus Media Holdings Inc., Second Lien Term Loan, 7.50%, 9/16/19	United States		5,450,000		5,463,625
^jHubbard Radio LLC, Second Lien Term Loan, 8.75%, 4/29/18	United States		1,433,484		1,437,068
R.H. Donnelley Inc., Term Loan B, 9.00%, 10/24/14	United States		195,333		86,630
Regal Cinemas Corp., Term Loan, 3.245% - 3.461%, 8/23/17	United States		2,886,382		2,864,734
Sinclair Television Group Inc., New Tranche B Term Loan, 4.00%, 10/29/16	United States		1,041,357		1,039,187
Telesat Canada, U.S. Term B Loan, 4.25%, 3/28/19	Canada		2,650,635		2,627,442
TWCC Holding Corp., Term Loan, 4.25%, 2/11/17	United States		2,769,495		2,771,226
Univision Communications Inc., Extended First Lien Term Loan, 4.495%, 3/31/17	United States		2,141,315		2,022,875
UPC Financing Partnership,
Term Loan T, 3.739%, 12/31/16	Netherlands		2,935,799		2,902,771
Term Loan X, 3.739%, 12/31/17	Netherlands		1,384,751		1,360,518

					36,988,324

Pharmaceuticals, Biotechnology & Life Sciences 0.6%
Valeant Pharmaceuticals International Inc.,
Series A Tranche B Term Loan, 4.75%, 2/13/19	Canada		1,850,003		1,826,415
Series B Tranche B Term Loan, 6.00%, 2/13/19	Canada		615,000		602,700
Warner Chilcott Co. LLC, Term B-2 Loan, 4.25%, 3/15/18	Puerto Rico		1,310,145		1,306,168
Warner Chilcott Corp., Term B-1 Loan, 4.25%, 3/15/18	United States		2,620,291		2,612,335
WC Luxco S.A.R.L., Term B-3 Loan, 4.25%, 3/15/18	Luxembourg		1,801,450		1,795,981

					8,143,599

Retailing 0.8%
BJ’s Wholesale Club Inc.,
Replacement Loans, 5.25%, 9/30/18	United States		6,032,976		6,057,488
Second Lien Term Loan, 10.00%, 3/30/19	United States		4,648,792		4,794,067
Savers Inc., Term Loan B, 7.25%, 7/09/19	United States		500,000		500,000

					11,351,555

Software & Services 0.7%
AVG Technologies NV, Term Loan, 7.50%, 3/15/16	Netherlands		4,207,997		4,144,877
Fidelity National Information Services Inc., Term A-2 Loans, 2.489%, 7/18/14	United States		330,313		330,519

FSI-20

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Strategic Income Securities Fund	Country	Principal Amount*			Value
^h,kSenior Floating Rate Interests (continued)
Software & Services (continued)
SunGard Data Systems Inc., Tranche B U.S. Term Loan, 3.866% - 4.091%, 2/28/16	United States		2,942,137		$	2,920,807
Vertafore Inc., Second Lien Term Loan, 9.75%, 10/27/17	United States		1,832,000			1,822,840

						9,219,043

Technology Hardware & Equipment 0.1%
Flextronics International USA Inc.,
A Closing Date Loan, 2.489% - 2.495%, 10/01/14	United States		95,629			93,896
A-1-A Delayed Draw Term Loan, 2.495%, 10/01/14	United States		27,480			27,111
A-1-B Delayed Draw TL, 2.495%, 10/01/14	United States		196,420			192,860
A-2 Delayed Draw Term Loan, 2.495%, 10/01/14	United States		673,510			661,302
A-3 Delayed Draw Term Loan, 2.489%, 10/01/14	United States		214,700			211,816

						1,186,985

Telecommunication Services 0.6%
Intelsat Jackson Holdings SA, Tranche B Term Loan, 5.25%, 4/02/18	Luxembourg		8,743,722			8,716,354

Transportation 0.7%
^jAvis Budget Car Rental LLC, Tranche C Term Loan, 4.25%, 3/15/19	United States		3,092,073			3,085,632
Evergreen International Aviation Inc., Term Loan, 11.50%, 6/30/15	United States		1,120,226			971,796
Hertz Corp.,
Credit Linked Deposit, 3.75%, 3/11/18	United States		1,736,300			1,666,848
Tranche B Term Loan, 3.75%, 3/11/18	United States		3,347,280			3,313,807

						9,038,083

Total Senior Floating Rate Interests (Cost $237,913,875)						238,012,585

Foreign Government and Agency Securities 22.3%
^eArab Republic of Egypt, 144A, 5.75%, 4/29/20	Egypt		2,000,000			1,928,260
^h,lGovernment of Argentina, senior bond, FRN, 0.785%, 8/03/12	Argentina		23,000,000			2,770,697
Government of Australia, senior bond, 6.50%, 5/15/13	Australia		5,700,000	AUD		6,016,833
Government of Hungary,
5.50%, 2/12/14	Hungary		1,443,700,000	HUF		6,221,173
5.50%, 2/12/16	Hungary		1,864,700,000	HUF		7,754,026
6.50%, 6/24/19	Hungary		206,000,000	HUF		850,259
7.50%, 11/12/20	Hungary		312,600,000	HUF		1,355,554
senior note, 6.25%, 1/29/20	Hungary		5,507,000			5,414,069
senior note, 6.375%, 3/29/21	Hungary		1,550,000			1,526,750
^eGovernment of Iceland, 144A, 5.875%, 5/11/22	Iceland		1,890,000			1,858,239
Government of Indonesia,
FR19, 14.25%, 6/15/13	Indonesia		35,480,000,000	IDR		4,118,476
FR20, 14.275%, 12/15/13	Indonesia		23,637,000,000	IDR		2,852,005
FR26, 11.00%, 10/15/14	Indonesia		1,800,000,000	IDR		216,263
FR34, 12.80%, 6/15/21	Indonesia		37,155,000,000	IDR		5,754,722
FR42, 10.25%, 7/15/27	Indonesia		2,000,000,000	IDR		283,737
FR44, 10.00%, 9/15/24	Indonesia		9,300,000,000	IDR		1,268,265
Government of Ireland,
4.60%, 4/18/16	Ireland		383,000	EUR		473,843
5.90%, 10/18/19	Ireland		2,228,000	EUR		2,765,758
4.50%, 4/18/20	Ireland		1,987,000	EUR		2,254,031
5.00%, 10/18/20	Ireland		3,562,000	EUR		4,151,930
senior bond, 4.50%, 10/18/18	Ireland		748,000	EUR		871,981
senior bond, 4.40%, 6/18/19	Ireland		3,338,000	EUR		3,819,964
senior bond, 5.40%, 3/13/25	Ireland		2,534,000	EUR		2,948,111

FSI-21

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Strategic Income Securities Fund	Country	Principal Amount*			Value
Foreign Government and Agency Securities (continued)
Government of Israel,
5.00%, 3/31/13	Israel		4,370,000	ILS	$	1,140,687
3.50%, 9/30/13	Israel		16,505,000	ILS		4,287,246
Government of Malaysia, senior bond,
2.509%, 8/27/12	Malaysia		19,455,000	MYR		6,131,654
3.702%, 2/25/13	Malaysia		20,473,000	MYR		6,487,284
3.70%, 5/15/13	Malaysia		2,695,000	MYR		855,317
3.21%, 5/31/13	Malaysia		15,055,000	MYR		4,758,762
3.461%, 7/31/13	Malaysia		14,715,000	MYR		4,665,377
8.00%, 10/30/13	Malaysia		50,000	MYR		16,793
5.094%, 4/30/14	Malaysia		2,290,000	MYR		749,193
3.814%, 2/15/17	Malaysia		11,400,000	MYR		3,692,845
4.24%, 2/07/18	Malaysia		600,000	MYR		198,454
Government of Mexico,
9.00%, 12/20/12	Mexico		58,000	^m MXN		443,631
9.00%, 6/20/13	Mexico		1,074,360	^m MXN		8,387,470
8.00%, 12/19/13	Mexico		1,062,700	^m MXN		8,352,538
7.00%, 6/19/14	Mexico		120,000	^m MXN		939,338
9.50%, 12/18/14	Mexico		283,300	^m MXN		2,362,878
8.00%, 12/17/15	Mexico		140,000	^m MXN		1,157,428
Government of Poland,
5.25%, 4/25/13	Poland		7,895,000	PLN		2,380,729
5.00%, 10/24/13	Poland		3,845,000	PLN		1,159,860
5.75%, 4/25/14	Poland		32,105,000	PLN		9,830,994
5.50%, 4/25/15	Poland		5,975,000	PLN		1,836,820
6.25%, 10/24/15	Poland		15,760,000	PLN		4,965,348
5.75%, 9/23/22	Poland		4,300,000	PLN		1,347,905
senior note, 6.375%, 7/15/19	Poland		785,000			928,361
Strip, 1/25/13	Poland		3,400,000	PLN		994,571
Strip, 7/25/13	Poland		9,270,000	PLN		2,652,885
Strip, 1/25/14	Poland		12,960,000	PLN		3,627,287
^eGovernment of Russia, 144A, 7.50%, 3/31/30	Russia		3,816,505			4,582,668
Government of Sri Lanka,
A, 6.90%, 8/01/12	Sri Lanka		1,900,000	LKR		14,207
A, 8.50%, 1/15/13	Sri Lanka		50,900,000	LKR		374,963
A, 13.50%, 2/01/13	Sri Lanka		59,500,000	LKR		449,123
A, 7.50%, 8/01/13	Sri Lanka		48,640,000	LKR		345,709
A, 7.00%, 3/01/14	Sri Lanka		7,020,000	LKR		47,939
A, 11.25%, 7/15/14	Sri Lanka		176,100,000	LKR		1,274,412
A, 11.75%, 3/15/15	Sri Lanka		1,160,000	LKR		8,345
A, 6.50%, 7/15/15	Sri Lanka		28,980,000	LKR		179,845
A, 11.00%, 8/01/15	Sri Lanka		200,400,000	LKR		1,405,996
A, 6.40%, 8/01/16	Sri Lanka		19,500,000	LKR		112,792
B, 8.50%, 7/15/13	Sri Lanka		1,110,000	LKR		8,009
B, 6.60%, 6/01/14	Sri Lanka		7,100,000	LKR		47,455
B, 6.40%, 10/01/16	Sri Lanka		16,000,000	LKR		92,020
Government of Sweden,
5.50%, 10/08/12	Sweden		171,395,000	SEK		25,057,433
1.50%, 8/30/13	Sweden		106,380,000	SEK		15,482,465
Government of the Philippines, senior bond, 8.75%, 3/03/13	Philippines		57,170,000	PHP		1,409,792
senior note, 6.25%, 1/27/14	Philippines		141,200,000	PHP		3,509,203

FSI-22

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Strategic Income Securities Fund	Country	Principal Amount*			Value
Foreign Government and Agency Securities (continued)
^eGovernment of Ukraine,
144A, 7.75%, 9/23/20	Ukraine		6,000,000		$	5,448,750
senior note, 144A, 7.95%, 2/23/21	Ukraine		1,500,000			1,372,477
ⁿGovernment of Uruguay, senior note, Index Linked, 4.375%, 12/15/28	Uruguay		124,986,112	UYU		6,331,272
^eGovernment of Vietnam, 144A, 6.75%, 1/29/20	Vietnam		1,500,000			1,605,000
Indonesia Retail Bond, senior bond, ORI7, 7.95%, 8/15/13	Indonesia		8,300,000,000	IDR		913,168
Korea Monetary Stabilization Bond, senior bond, 3.76%, 6/02/13	South Korea		707,150,000	KRW		622,204
senior bond, 3.90%, 8/02/13	South Korea		1,325,900,000	KRW		1,169,471
senior bond, 3.59%, 10/02/13	South Korea		1,237,510,000	KRW		1,088,247
senior bond, 3.48%, 12/02/13	South Korea		2,121,430,000	KRW		1,863,598
senior bond, 3.47%, 2/02/14	South Korea		2,916,950,000	KRW		2,562,802
senior bond, 3.59%, 4/02/14	South Korea		4,287,030,000	KRW		3,808,824
senior note, 3.28%, 6/02/14	South Korea		5,082,540,000	KRW		4,453,972
Korea Treasury Bond,
5.25%, 9/10/12	South Korea		2,850,000,000	KRW		2,506,204
5.25%, 3/10/13	South Korea		346,570,000	KRW		307,620
senior bond, 4.25%, 12/10/12	South Korea		3,560,000,000	KRW		3,131,736
senior bond, 5.00%, 3/26/13	South Korea		1,163,000,000	KRW		1,031,311
senior bond, 3.75%, 6/10/13	South Korea		5,340,340,000	KRW		4,699,573
senior bond, 3.00%, 12/10/13	South Korea		15,972,210,000	KRW		13,935,560
New South Wales Treasury Corp.,
5.25%, 5/01/13	Australia		1,605,000	AUD		1,672,765
5.50%, 8/01/13	Australia		9,925,000	AUD		10,416,737
senior note, 5.50%, 3/01/17	Australia		1,240,000	AUD		1,396,458
Nota Do Tesouro Nacional,
10.00%, 1/01/14	Brazil		2,700	^o BRL		1,380,674
10.00%, 1/01/17	Brazil		7,400	^o BRL		3,782,802
^pIndex Linked, 6.00%, 5/15/15	Brazil		3,890	^o BRL		4,454,664
^pIndex Linked, 6.00%, 8/15/16	Brazil		1,604	^o BRL		1,857,921
^pIndex Linked, 6.00%, 8/15/18	Brazil		1,525	^o BRL		1,789,374
Queensland Treasury Corp.,
6.00%, 8/14/13	Australia		600,000	AUD		633,971
6.00%, 9/14/17	Australia		1,200,000	AUD		1,370,592
senior note, 6.00%, 8/21/13	Australia		2,705,000	AUD		2,855,373
Western Australia Treasury Corp.,
5.50%, 7/17/12	Australia		6,714,000	AUD		6,879,411
8.00%, 6/15/13	Australia		4,602,000	AUD		4,927,668

Total Foreign Government and Agency Securities (Cost $307,526,632)						306,499,176

U.S. Government and Agency Securities 2.1%
U.S. Treasury Bond,
4.50%, 2/15/16	United States		3,000,000			3,428,205
7.875%, 2/15/21	United States		900,000			1,377,774
7.125%, 2/15/23	United States		1,980,000			3,030,329
U.S. Treasury Note,
2.375%, 3/31/16	United States		3,500,000			3,738,164
4.625%, 2/15/17	United States		600,000			707,203
4.75%, 8/15/17	United States		2,900,000			3,481,134
3.75%, 11/15/18	United States		7,000,000			8,205,862
ⁿIndex Linked, 0.125%, 4/15/16	United States		2,397,000			2,497,748

FSI-23

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Strategic Income Securities Fund	Country	Principal Amount*		Value
U.S. Government and Agency Securities (continued)
U.S. Treasury Note, (continued)
ⁿIndex Linked, 0.625%, 7/15/21	United States		2,551,634	$	2,847,065

Total U.S. Government and Agency Securities (Cost $26,825,625)					29,313,484

Asset-Backed Securities and Commercial Mortgage-Backed Securities 3.4%
Banks 1.3%
^e,hBanc of America Large Loan, 2010-HLTN, 144A, FRN, 1.992%, 11/15/15	United States		4,210,553		3,991,816
Bear Stearns Commercial Mortgage Securities Inc.,
^h2006-PW11, AJ, FRN, 5.451%, 3/11/39	United States		500,000		466,243
2006-PW13, AJ, 5.611%, 9/11/41	United States		2,100,000		1,792,640
Countrywide Asset-Backed Certificates, 2005-11, AF4, 5.21%, 3/25/34	United States		1,275,000		757,438
^hGS Mortgage Securities Corp. II, 2006-GG6, A4, FRN, 5.553%, 4/10/38	United States		2,405,000		2,683,914
^e,hWachovia Bank Commercial Mortgage Trust, 2007-WHL8, A1, 144A, FRN, 0.322%, 6/15/20	United States		4,803,918		4,475,419
Wells Fargo Mortgage Backed Securities Trust,
^h2004-W, A9, FRN, 2.762%, 11/25/34	United States		1,999,697		2,019,549
2007-3, 3A1, 5.50%, 4/25/37	United States		1,958,865		2,034,621

					18,221,640

Diversified Financials 2.1%
^e,hARES CLO Funds, 2007-12A, B, 144A, FRN, 1.467%, 11/25/20	Cayman Islands		1,380,000		1,164,686
^e,hArmstrong Loan Funding Ltd., 2008-1A, B, 144A, FRN, 1.466%, 8/01/16	Cayman Islands		2,324,510		2,306,890
^e,hCent CDO Ltd., 2007-15A, A2B, 144A, FRN, 0.808%, 3/11/21	Cayman Islands		1,251,000		1,042,083
Citigroup Commercial Mortgage Trust,
2006-C5, AJ, 5.482%, 10/15/49	United States		800,000		697,809
^h2007-C6, AM, FRN, 5.70%, 6/10/17	United States		1,700,000		1,803,333
^h2008-C7, A4, FRN, 6.073%, 12/10/49	United States		8,700,000		10,201,877
^hCitigroup/Deutsche Bank Commercial Mortgage Trust,
2005-CD1, AJ, FRN, 5.399%, 7/15/44	United States		2,230,000		2,180,137
2006-CD3, AJ, FRN, 5.688%, 10/15/48	United States		420,000		295,549
^e,hColumbus Nova CLO Ltd., 2007-2A, A2, 144A, FRN, 1.467%, 10/15/21	Cayman Islands		860,000		752,539
^e,hCommercial Industrial Finance Corp., 2007-3A, A1J, 144A, FRN, 0.866%, 7/26/21	Cayman Islands		960,000		799,958
^e,hCredit Suisse Mortgage Capital Certificates, 2006-TF2A, A2, 144A, FRN, 0.412%, 10/15/21	United States		399,033		373,853
^e,hGleneagles CLO Ltd., 2005-1A, A2, 144A, FRN, 0.866%, 11/01/17	Cayman Islands		1,000,000		817,000
^e,hMAPS CLO Fund LLC, 2005-1A, B, 144A, FRN, 0.968%, 12/21/17	United States		1,400,000		1,320,410
Residential Asset Securities Corp., 2004-KS1, AI4, 4.213%, 4/25/32	United States		70,813		69,485
^e,hWestchester CLO Ltd., 2007-1A, A1A, 144A, FRN, 0.691%, 8/01/22	Cayman Islands		4,379,921		3,999,349

					27,824,958

Total Asset-Backed Securities and Commercial Mortgage-Backed Securities (Cost $43,029,031)					46,046,598

Mortgage-Backed Securities 4.0%
^hFederal Home Loan Mortgage Corp. (FHLMC) Adjustable Rate 0.0%†
FHLMC, 2.348%, 1/01/33	United States		79,300		84,086

Federal Home Loan Mortgage Corp. (FHLMC) Fixed Rate 1.1%
FHLMC Gold 15 Year, 4.50%, 10/01/18 - 6/01/19	United States		912,674		972,147
FHLMC Gold 15 Year, 5.00%, 12/01/17 - 9/01/19	United States		1,163,738		1,249,885
FHLMC Gold 15 Year, 5.50%, 7/01/17 - 7/01/19	United States		289,586		316,551
FHLMC Gold 15 Year, 6.00%, 5/01/17	United States		11,638		12,683
FHLMC Gold 15 Year, 6.50%, 5/01/16	United States		3,064		3,241
FHLMC Gold 30 Year, 3.50%, 1/01/41	United States		700,000		735,392

FSI-24

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Strategic Income Securities Fund	Country	Principal Amount*		Value
Mortgage-Backed Securities (continued)
Federal Home Loan Mortgage Corp. (FHLMC) Fixed Rate (continued)
FHLMC Gold 30 Year, 4.00%, 9/01/40	United States		1,847,218	$	1,963,336
FHLMC Gold 30 Year, 4.50%, 10/01/40	United States		2,728,451		2,919,458
FHLMC Gold 30 Year, 5.00%, 4/01/34 - 8/01/35	United States		1,203,157		1,299,851
FHLMC Gold 30 Year, 5.50%, 3/01/33 - 6/01/36	United States		3,113,017		3,421,199
FHLMC Gold 30 Year, 6.00%, 4/01/33 - 2/01/36	United States		1,004,523		1,117,314
FHLMC Gold 30 Year, 6.50%, 12/01/23 - 6/01/36	United States		197,410		223,062
FHLMC Gold 30 Year, 7.00%, 9/01/21 - 4/01/30	United States		59,073		68,790
FHLMC Gold 30 Year, 7.50%, 3/01/30 - 7/01/31	United States		1,851		2,014

					14,304,923

^hFederal National Mortgage Association (FNMA) Adjustable Rate 0.0%†
FNMA, 2.31%, 12/01/34	United States		263,376		278,843
FNMA, 2.33%, 4/01/20	United States		58,222		59,452

					338,295

Federal National Mortgage Association (FNMA) Fixed Rate 2.7%
FNMA 15 Year, 3.00%, 10/01/26 - 6/01/27	United States		3,899,652		4,092,712
FNMA 15 Year, 4.50%, 6/01/19 - 3/01/20	United States		219,683		236,449
FNMA 15 Year, 5.00%, 10/01/17 - 6/01/18	United States		248,095		268,661
FNMA 15 Year, 5.50%, 11/01/13 - 11/01/18	United States		2,190,035		2,376,592
FNMA 15 Year, 6.00%, 4/01/16 - 7/01/16	United States		4,170		4,491
FNMA 30 Year, 3.50%, 2/01/41 - 6/01/42	United States		6,849,932		7,225,715
FNMA 30 Year, 4.00%, 1/01/41	United States		949,187		1,012,117
FNMA 30 Year, 4.50%, 12/01/40	United States		5,120,787		5,512,874
FNMA 30 Year, 5.00%, 4/01/30 - 7/01/41	United States		9,907,788		10,806,324
FNMA 30 Year, 5.50%, 8/01/33 - 9/01/35	United States		1,655,079		1,818,107
FNMA 30 Year, 6.00%, 6/01/34 - 5/01/38	United States		2,288,396		2,537,352
FNMA 30 Year, 6.50%, 6/01/28 - 10/01/37	United States		1,193,642		1,352,415

					37,243,809

Government National Mortgage Association (GNMA) Fixed Rate 0.2%
GNMA I SF 30 Year, 5.00%, 11/15/33 - 7/15/34	United States		924,662		1,024,459
GNMA I SF 30 Year, 5.50%, 12/15/32 - 6/15/36	United States		983,164		1,097,903
GNMA I SF 30 Year, 6.50%, 11/15/31 - 2/15/32	United States		6,608		7,671
GNMA I SF 30 Year, 7.00%, 10/15/28 - 6/15/32	United States		62,061		74,357
GNMA I SF 30 Year, 7.50%, 9/15/30	United States		1,960		2,405
GNMA II SF 30 Year, 5.00%, 9/20/33 - 11/20/33	United States		247,560		275,293
GNMA II SF 30 Year, 6.00%, 11/20/34	United States		282,110		318,783
GNMA II SF 30 Year, 6.50%, 4/20/31 - 2/20/34	United States		110,056		127,364
GNMA II SF 30 Year, 7.50%, 1/20/28 - 4/20/32	United States		30,496		37,275

					2,965,510

Total Mortgage-Backed Securities (Cost $52,862,462)					54,936,623

Municipal Bonds 3.4%
Bay Area Toll Authority Toll Bridge Revenue, Build America Bonds, Series S1, 7.043%, 4/01/50	United States		4,000,000		5,661,880
California State GO,
Build America Bonds, Various Purpose, 7.625%, 3/01/40	United States		1,500,000		1,940,760
Refunding, 5.00%, 4/01/38	United States		9,700,000		10,182,284
Various Purpose, 6.00%, 4/01/38	United States		2,500,000		2,898,175
Various Purpose, 6.00%, 11/01/39	United States		160,000		186,982
Various Purpose, 5.25%, 11/01/40	United States		560,000		612,007
Various Purpose, Refunding, 5.25%, 3/01/38	United States		1,500,000		1,598,670

FSI-25

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Strategic Income Securities Fund	Country	Principal Amount*			Value
Municipal Bonds (continued)
California State GO, (continued)
Various Purpose, Refunding, NATL Insured, 4.50%, 12/01/32	United States		300,000		$	308,559
Various Purpose, Refunding, Series 1, AGMC Insured, 4.75%, 9/01/31	United States		290,000			300,109
Chicago Waterworks Revenue, second lien, Refunding, 5.25%, 11/01/38	United States		1,895,000			2,087,172
Clovis USD, GO, Capital Appreciation, Election of 2004, Series A, NATL RE, FGIC Insured, zero cpn., 8/01/25	United States		2,500,000			1,404,500
8/01/26	United States		1,290,000			682,088
8/01/27	United States		1,720,000			859,002
8/01/29	United States		1,720,000			764,041
Illinois State GO,
5.877%, 3/01/19	United States		3,575,000			3,967,893
Build America Bonds, 7.35%, 7/01/35	United States		3,000,000			3,489,360
^eNew York City IDA Rental Revenue, Yankee Stadium Project, 144A, 11.00%, 3/01/29	United States		600,000			859,062
Poway USD, GO, Election of 2008, ID No. 2007-1, Series A, zero cpn.,
8/01/27	United States		370,000			185,059
8/01/30	United States		370,000			155,078
8/01/32	United States		460,000			168,714
8/01/33	United States		245,000			84,258
Redondo Beach USD, GO, Build America Bonds, Election of 2008, Direct Payment to District, Series D, 6.461%, 8/01/40	United States		1,510,000			1,638,290
San Francisco City and County GO, Build America Bonds,
5.75%, 6/15/27	United States		1,700,000			2,077,485
5.93%, 6/15/28	United States		1,520,000			1,863,338
Sonoma County Pension Obligation Revenue, Series A, 6.00%, 12/01/29	United States		2,100,000			2,367,897

Total Municipal Bonds (Cost $39,494,520)						46,342,663

Total Investments before Short Term Investments (Cost $1,216,742,202)						1,239,742,181

Short Term Investments 6.5%
Foreign Government and Agency Securities 2.9%
^qAustralia Treasury Bill, 8/10/12	Australia		4,010,000	AUD		4,088,499
^qBank of Negara Monetary Note, 8/02/12 - 6/20/13	Malaysia		43,360,000	MYR		13,444,052
Korea Monetary Stabilization Bond,
3.83%, 4/02/13	South Korea		441,970,000	KRW		388,787
senior bond, 3.38%, 5/09/13	South Korea		4,420,000,000	KRW		3,875,566
senior note, 3.28%, 6/09/13	South Korea		4,397,300,000	KRW		3,852,417
senior note, Strip, 12/18/12	South Korea		1,104,900,000	KRW		953,603
^qMalaysia Treasury Bills, 7/27/12 - 5/31/13	Malaysia		700,000	MYR		217,068
^qPhilippine Treasury Bills, 7/11/12 - 5/29/13	Philippines		167,980,000	PHP		3,957,779
^qSingapore Treasury Bills, 7/05/12 - 5/02/13	Singapore		11,180,000	SGD		8,818,498
^qSri Lanka Treasury Bills, 7/06/12 - 9/28/12	Sri Lanka		8,130,000	LKR		60,754

Total Foreign Government and Agency Securities (Cost $39,837,672)						39,657,023

Total Investments before Money Market Funds (Cost $1,256,579,874)						1,279,399,204

FSI-26

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Strategic Income Securities Fund	Country	Shares		Value
Money Market Funds (Cost $50,165,155) 3.6%
^a,rInstitutional Fiduciary Trust Money Market Portfolio	United States		50,165,155	$	50,165,155

Total Investments (Cost $1,306,745,029) 96.9%					1,329,564,359
Other Assets, less Liabilities 3.1%					42,158,672

Net Assets 100.0%				$	1,371,723,031

See Abbreviations on page FSI-45.

†Rounds to less than 0.1% of net assets.

*The principal amount is stated in U.S. dollars unless otherwise indicated.

^aNon-income producing.

^bSecurity has been deemed illiquid because it may not be able to be sold within seven days. At June 30, 2012, the aggregate value of these securities was $1,882,095, representing 0.14% of net assets.

^dSee Note 1(f) regarding investment in FT Holdings Corporation III.

^fSee Note 8 regarding defaulted securities.

^gPerpetual security with no stated maturity date.

^hThe coupon rate shown represents the rate at period end.

ⁱIncome may be received in additional securities and/or cash.

^jA portion or all of the security purchased on a when-issued or delayed delivery basis. See Note 1(c).

^kSee Note 1(h) regarding senior floating rate interests.

^lThe principal amount is stated in original face, and scheduled paydowns are reflected in the market price on ex-date.

^mPrincipal amount is stated in 100 Mexican Peso Units.

ⁿPrincipal amount of security is adjusted for inflation. See Note 1(j).

^oPrincipal amount is stated in 1,000 Brazilian Real Units.

^pRedemption price at maturity is adjusted for inflation. See Note 1(j).

^qThe security is traded on a discount basis with no stated coupon rate.

^rSee Note 7 regarding investments in the Institutional Fiduciary Trust Money Market Portfolio.

FSI-27

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Strategic Income Securities Fund

At June 30, 2012, the Fund had the following forward exchange contracts outstanding. See Note 1(d).

Forward Exchange Contracts


Currency	Counterparty		Type		Quantity		Contract Amount		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
British Pound		DBAB		Sell		297,656	$	474,018		7/09/12	$	7,676	$	—
Euro		DBAB		Buy		2,065,396		2,753,482		7/09/12		—		(139,302	)
Euro		DBAB		Sell		2,065,396		2,924,600		7/09/12		310,420		—
Indian Rupee		JPHQ		Buy		192,280,000		4,121,069		7/16/12		—		(670,047	)
Euro		DBAB		Buy		900,000		1,200,015		7/25/12		—		(60,731	)
Euro		DBAB		Sell		900,000		1,280,340		7/25/12		141,056		—
Euro		BZWS		Buy		3,140,000		3,946,069		8/01/12		29,030		—
Euro		BZWS		Sell		3,140,000		4,450,008		8/01/12		474,909		—
Euro		DBAB		Sell		1,056,111		1,501,209		8/06/12		164,146		—
Euro		CITI		Sell		317,220		445,361		8/08/12		43,743		—
British Pound		DBAB		Sell		169,385		275,589		8/09/12		10,234		—
Euro		CITI		Sell		92,411		130,027		8/09/12		13,028		—
Chilean Peso		JPHQ		Buy		1,141,336,600		2,333,745		8/20/12		—		(71,671	)
Euro		DBAB		Sell		193,056		276,726		8/20/12		32,275		—
Japanese Yen		UBSW		Sell		32,055,000		420,228		8/20/12		19,190		—
Japanese Yen		JPHQ		Sell		15,928,000		208,359		8/20/12		9,085		—
Japanese Yen		DBAB		Sell		19,550,000		255,887		8/20/12		11,298		—
Japanese Yen		HSBC		Sell		65,957,000		865,478		8/20/12		40,295		—
Euro		BZWS		Buy		40,000		50,281		8/22/12		369		—
Euro		BZWS		Sell		2,124,000		3,043,692		8/22/12		354,176		—
Euro		UBSW		Sell		3,500,000		4,984,525		8/22/12		552,648		—
Japanese Yen		BZWS		Sell		15,895,000		208,788		8/22/12		9,921		—
Japanese Yen		MSCO		Sell		12,500,000		164,184		8/22/12		7,793		—
Japanese Yen		DBAB		Sell		15,915,000		209,026		8/22/12		9,909		—
Euro		BZWS		Sell		263,159		378,423		8/23/12		45,194		—
Japanese Yen		FBCO		Sell		31,524,000		414,299		8/23/12		19,888		—
Japanese Yen		CITI		Sell		31,757,000		418,075		8/23/12		20,749		—
Japanese Yen		DBAB		Sell		15,708,000		207,130		8/23/12		10,600		—
Singapore Dollar		DBAB		Buy		578,000		460,796		8/23/12		—		(4,591	)
Euro		BZWS		Sell		441,303		633,093		8/24/12		74,281		—
Japanese Yen		JPHQ		Sell		31,689,000		415,403		8/24/12		18,922		—
Singapore Dollar		DBAB		Buy		580,000		461,196		8/24/12		—		(3,411	)
Euro		BZWS		Sell		3,068,753		4,414,138		8/27/12		528,113		—
Euro		DBAB		Sell		298,304		429,901		8/27/12		52,152		—
Euro		UBSW		Sell		2,085,332		3,000,000		8/27/12		359,301		—
Japanese Yen		DBAB		Buy		155,000,000		2,006,472		8/27/12		—		(67,090	)
Japanese Yen		DBAB		Buy		200,000,000		2,480,466		8/27/12		21,962		—
Japanese Yen		BZWS		Sell		44,152,000		578,929		8/27/12		26,493		—
Japanese Yen		DBAB		Sell		427,099,000		5,620,315		8/27/12		276,392		—
Japanese Yen		UBSW		Sell		34,903,000		459,054		8/27/12		22,342		—
Japanese Yen		JPHQ		Sell		15,991,000		210,270		8/27/12		10,188		—
Japanese Yen		HSBC		Sell		50,145,000		657,855		8/27/12		30,434		—
Singapore Dollar		DBAB		Buy		722,000		575,597		8/27/12		—		(5,732	)
Euro		DBAB		Sell		1,383,356		1,980,412		8/29/12		228,602		—
Euro		DBAB		Sell		690,000		991,530		8/30/12		117,740		—
Japanese Yen		BZWS		Sell		37,600,000		493,438		8/30/12		22,963		—
Euro		DBAB		Sell		12,470		18,035		8/31/12		2,244		—
Japanese Yen		JPHQ		Sell		15,743,000		206,317		8/31/12		9,328		—
Singapore Dollar		DBAB		Buy		361,500		287,635		8/31/12		—		(2,304	)
Indian Rupee		HSBC		Buy		32,771,000		569,015		9/04/12		13,091		—
Euro		BZWS		Sell		271,320		380,960		9/10/12		37,331		—

FSI-28

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited)

Franklin Strategic Income Securities Fund

Forward Exchange Contracts (continued)


Currency	Counterparty		Type		Quantity		Contract Amount		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
Indian Rupee		HSBC		Buy		5,576,000	$	98,575		9/10/12	$	367	$	—
Euro		BZWS		Sell		266,006		371,876		9/12/12		34,970		—
Indian Rupee		HSBC		Buy		14,080,000		250,251		9/13/12		—		(541	)
Euro		BZWS		Sell		759,073		1,038,279		9/14/12		76,864		—
Euro		UBSW		Sell		708,181		970,704		9/17/12		73,718		—
Indian Rupee		DBAB		Buy		14,156,000		249,032		9/18/12		1,808		—
Euro		BZWS		Sell		178,354		247,234		9/19/12		21,325		—
Singapore Dollar		JPHQ		Buy		1,394,000		1,100,671		9/19/12		—		(307	)
Indian Rupee		DBAB		Buy		12,894,000		227,733		9/20/12		666		—
Euro		BZWS		Sell		469,210		638,370		9/24/12		44,021		—
Euro		DBAB		Sell		185,654		249,909		10/04/12		14,711		—
Philippine Peso		DBAB		Buy		21,010,000		482,434		10/04/12		15,018		—
Philippine Peso		HSBC		Buy		16,853,000		382,319		10/04/12		16,708		—
Euro		UBSW		Sell		2,850,000		3,797,696		10/05/12		187,096		—
Philippine Peso		DBAB		Buy		25,119,000		576,785		10/05/12		17,915		—
Philippine Peso		HSBC		Buy		25,126,000		566,398		10/05/12		28,467		—
Philippine Peso		DBAB		Buy		20,621,000		473,774		10/09/12		14,301		—
Philippine Peso		JPHQ		Buy		6,636,000		152,132		10/09/12		4,934		—
Euro		BZWS		Sell		2,749,000		3,645,641		10/11/12		162,714		—
Philippine Peso		DBAB		Buy		16,501,000		379,072		10/11/12		11,434		—
Philippine Peso		JPHQ		Buy		8,232,000		188,721		10/11/12		6,094		—
Philippine Peso		HSBC		Buy		24,786,000		569,911		10/11/12		16,664		—
Philippine Peso		DBAB		Buy		4,913,000		112,554		10/12/12		3,707		—
Euro		DBAB		Sell		121,043		166,845		10/15/12		13,478		—
Philippine Peso		JPHQ		Buy		18,311,000		420,018		10/15/12		13,204		—
Philippine Peso		HSBC		Buy		8,192,000		187,739		10/15/12		6,076		—
Euro		DBAB		Sell		587,951		811,125		10/18/12		66,133		—
Japanese Yen		DBAB		Buy		238,000,000		3,000,504		10/22/12		—		(20,068	)
Japanese Yen		DBAB		Sell		382,080,000		5,015,687		10/22/12		230,960		—
Philippine Peso		JPHQ		Buy		237,550,000		5,469,721		10/22/12		147,815		—
Euro		BZWS		Sell		217,715		299,162		10/24/12		23,273		—
Euro		BZWS		Sell		1,659,340		2,302,168		10/25/12		199,421		—
Euro		BZWS		Sell		1,993,000		2,759,886		10/26/12		234,285		—
Euro		CITI		Sell		648,569		902,918		10/26/12		81,028		—
Japanese Yen		JPHQ		Sell		270,990,000		3,577,355		10/26/12		183,549		—
Euro		UBSW		Sell		2,679,000		3,729,168		10/29/12		334,105		—
Singapore Dollar		DBAB		Buy		6,168,500		4,955,415		10/29/12		—		(84,483	)
Euro		DBAB		Sell		1,494,524		2,106,995		10/31/12		212,952		—
Japanese Yen		JPHQ		Sell		360,360,000		4,785,340		10/31/12		271,888		—
Euro		DBAB		Sell		243,767		339,065		11/02/12		30,126		—
Euro		BZWS		Sell		529,706		730,253		11/05/12		58,900		—
Euro		BZWS		Sell		473,670		651,367		11/08/12		51,010		—
Euro		BZWS		Sell		227,970		311,031		11/15/12		22,061		—
Euro		UBSW		Sell		1,480,440		2,011,770		11/19/12		135,095		—
Euro		BZWS		Sell		63,419		86,938		11/19/12		6,545		—
Euro		BZWS		Sell		221,993		301,245		11/21/12		19,828		—
Euro		BZWS		Sell		201,376		273,328		11/23/12		18,040		—
Euro		UBSW		Sell		2,020,000		2,731,444		12/03/12		170,314		—
Singapore Dollar		JPHQ		Buy		4,945,200		3,849,303		12/05/12		57,160		—
Japanese Yen		BZWS		Sell		257,790,000		3,343,580		12/06/12		112,737		—
Euro		UBSW		Sell		3,400,000		4,552,566		12/10/12		241,346		—
Euro		DBAB		Sell		5,466,617		7,331,882		12/10/12		400,179		—
Japanese Yen		UBSW		Sell		351,760,000		4,586,778		12/12/12		177,754		—

FSI-29

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited)


Franklin Strategic Income Securities Fund

Forward Exchange Contracts (continued)


Currency	Counterparty		Type		Quantity		Contract Amount		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
British Pound		DBAB		Sell		600,000	$	922,440		12/17/12	$	—	$	(17,115	)
Euro		DBAB		Sell		486,875		639,705		12/17/12		22,286		—
Euro		CITI		Sell		3,868,000		5,051,879		12/17/12		146,768		—
Euro		UBSW		Sell		2,137,312		2,799,559		12/20/12		89,068		—
Euro		DBAB		Sell		262,167		343,177		12/20/12		10,702		—
Euro		DBAB		Sell		239,450		305,897		1/03/13		2,173		—
Chilean Peso		DBAB		Sell		510,000,000		972,911		1/10/13		—		(20,950	)
Chilean Peso		DBAB		Buy		2,449,000,000		4,646,177		1/10/13		126,306		—
Indian Rupee		HSBC		Buy		94,400,000		1,702,318		1/10/13		—		(58,375	)
Japanese Yen		HSBC		Sell		183,560,000		2,402,932		1/10/13		100,975		—
Euro		UBSW		Sell		3,940,000		5,039,654		1/11/13		41,489		—
Euro		BZWS		Sell		1,691,484		2,164,339		1/11/13		18,573		—
Euro		DBAB		Sell		2,187,000		2,808,327		1/14/13		33,846		—
Euro		JPHQ		Sell		1,802,953		2,299,576		1/14/13		12,307		—
Japanese Yen		BZWS		Sell		460,675,000		6,026,228		1/15/13		248,563		—
Euro		DBAB		Sell		252,750		330,243		1/17/13		9,585		—
Euro		BZWS		Sell		2,912,410		3,716,235		1/22/13		21,059		—
Euro		DBAB		Sell		186,978		238,990		1/22/13		1,758		—
Japanese Yen		DBAB		Sell		271,680,000		3,556,021		1/22/13		148,259		—
Euro		DBAB		Sell		465,260		603,675		1/24/13		13,350		—
Euro		BZWS		Sell		1,007,118		1,313,231		1/28/13		35,322		—
Euro		DBAB		Sell		3,774,662		4,908,633		1/28/13		119,048		—
Euro		DBAB		Sell		4,032,721		5,311,900		1/30/13		194,723		—
Euro		DBAB		Sell		3,014,151		3,960,293		1/31/13		135,539		—
Chilean Peso		DBAB		Buy		725,000,000		1,434,167		2/07/13		—		(24,913	)
Chilean Peso		JPHQ		Buy		482,900,000		958,325		2/08/13		—		(19,750	)
Indian Rupee		HSBC		Buy		186,760,000		3,668,507		2/08/13		—		(429,551	)
Chilean Peso		BZWS		Buy		1,487,300,000		2,958,623		2/11/13		—		(68,661	)
Euro		UBSW		Sell		2,151,000		2,862,400		2/13/13		132,420		—
Singapore Dollar		DBAB		Buy		361,500		288,301		2/28/13		—		(2,482	)
Euro		UBSW		Sell		2,581,000		3,478,156		3/01/13		201,683		—
Japanese Yen		HSBC		Sell		85,800,000		1,073,070		3/01/13		—		(3,869	)
Japanese Yen		JPHQ		Sell		85,800,000		1,073,842		3/01/13		—		(3,097	)
Euro		DBAB		Sell		5,979,967		8,000,000		3/04/13		408,354		—
Japanese Yen		UBSW		Sell		95,700,000		1,194,048		3/04/13		—		(7,217	)
Euro		DBAB		Sell		324,000		424,084		3/18/13		12,679		—
Singapore Dollar		HSBC		Buy		1,113,000		880,747		3/19/13		—		(586	)
Singapore Dollar		DBAB		Buy		973,400		768,696		3/19/13		1,069		—
Singapore Dollar		DBAB		Buy		1,048,000		835,592		3/21/13		—		(6,816	)
Singapore Dollar		HSBC		Buy		837,000		667,251		3/21/13		—		(5,338	)
Euro		DBAB		Sell		333,108		440,136		3/26/13		17,118		—
Euro		DBAB		Sell		7,647,393		10,159,601		4/02/13		447,066		—
Euro		DBAB		Sell		222,456		297,469		4/03/13		14,935		—
Indian Rupee		HSBC		Buy		108,100,000		2,000,000		4/03/13		—		(139,399	)
Euro		BZWS		Sell		132,570		176,948		4/05/13		8,570		—
British Pound		DBAB		Sell		456,285		720,246		4/11/13		6,008		—
Euro		DBAB		Sell		949,814		1,251,011		4/11/13		44,542		—
Indian Rupee		DBAB		Buy		20,841,000		383,696		4/12/13		—		(25,413	)
Chilean Peso		MSCO		Buy		116,230,000		229,138		4/15/13		—		(4,555	)
Indian Rupee		DBAB		Buy		44,691,000		817,214		4/15/13		—		(49,229	)
Euro		HSBC		Sell		142,717		188,818		4/16/13		7,523		—

FSI-30

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin Strategic Income Securities Fund

Forward Exchange Contracts (continued)


Currency	Counterparty		Type		Quantity		Contract Amount		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
Indian Rupee		JPHQ		Buy		30,019,000	$	550,585		4/16/13	$	—	$	(34,797	)
Indian Rupee		JPHQ		Buy		29,466,000		538,595		4/18/13		—		(32,443	)
Chilean Peso		MSCO		Buy		104,150,000		205,505		4/19/13		—		(4,333	)
Euro		BZWS		Sell		130,134		171,152		4/19/13		5,834		—
Indian Rupee		JPHQ		Buy		14,719,000		269,695		4/22/13		—		(16,994	)
Indian Rupee		DBAB		Buy		10,360,000		189,582		4/22/13		—		(11,718	)
Euro		JPHQ		Sell		36,314		48,058		4/23/13		1,923		—
Indian Rupee		DBAB		Buy		20,931,000		373,361		4/26/13		—		(14,202	)
Chilean Peso		CITI		Buy		377,668,000		747,857		4/29/13		—		(18,995	)
Chilean Peso		JPHQ		Buy		234,301,000		462,680		4/29/13		—		(10,502	)
Indian Rupee		JPHQ		Buy		17,801,000		319,386		4/29/13		—		(14,057	)
Euro		DBAB		Sell		753,750		1,000,000		4/30/13		42,303		—
Euro		BZWS		Sell		91,515		121,559		4/30/13		5,283		—
Indian Rupee		JPHQ		Buy		14,829,000		265,529		4/30/13		—		(11,210	)
British Pound		DBAB		Sell		453,906		732,877		5/02/13		22,390		—
Euro		DBAB		Sell		71,000		93,003		5/02/13		2,789		—
Philippine Peso		JPHQ		Buy		91,360,000		2,144,953		5/06/13		—		(8,025	)
Chilean Peso		DBAB		Buy		574,000,000		1,134,051		5/08/13		—		(27,142	)
Singapore Dollar		DBAB		Buy		3,707,640		2,984,016		5/10/13		—		(50,699	)
Euro		DBAB		Sell		429,000		557,357		5/13/13		12,174		—
British Pound		DBAB		Buy		640,000		997,664		5/17/13		4,082		—
British Pound		DBAB		Sell		2,287,500		3,654,968		5/17/13		74,511		—
Euro		DBAB		Sell		1,053,792		1,310,844		6/05/13		—		(28,800	)
Euro		UBSW		Sell		4,274,000		5,354,467		6/28/13		—		(80,768	)
Euro		DBAB		Sell		320,700		402,767		6/28/13		—		(5,068	)
Japanese Yen		BZWS		Sell		620,288,000		7,871,176		7/02/13		65,176		—

Unrealized appreciation (depreciation)												11,532,406		(2,387,347	)

Net unrealized appreciation (depreciation)											$	9,145,059

See Abbreviations on page FSI-45.

The accompanying notes are an integral part of these financial statements.

FSI-31

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

June 30, 2012 (unaudited)


	Franklin Strategic Income Securities Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	1,256,579,874
Cost - Sweep Money Fund (Note 7)		50,165,155

Total cost of investments	$	1,306,745,029

Value - Unaffiliated issuers	$	1,279,399,204
Value - Sweep Money Fund (Note 7)		50,165,155

Total value of investments		1,329,564,359
Cash		867,316
Restricted cash (Note 1e)		7,520,000
Foreign currency, at value (cost $11,053,839)		11,157,296
Receivables:
Investment securities sold		7,871,007
Capital shares sold		1,651,442
Interest		16,721,658
Due from brokers		890,000
Unrealized appreciation on forward exchange contracts		11,532,406
Other assets		345

Total assets		1,387,775,829

Liabilities:
Payables:
Investment securities purchased		4,268,648
Capital shares redeemed		311,465
Affiliates		772,657
Due to brokers		7,520,000
Unrealized depreciation on forward exchange contracts		2,387,347
Unrealized depreciation on unfunded loan commitments (Note 9)		7,282
Deferred tax		183,054
Accrued expenses and other liabilities		602,345

Total liabilities		16,052,798

Net assets, at value	$	1,371,723,031

Net assets consist of:
Paid-in capital	$	1,312,033,560
Undistributed net investment income		24,122,344
Net unrealized appreciation (depreciation)		31,678,833
Accumulated net realized gain (loss)		3,888,294

Net assets, at value	$	1,371,723,031

The accompanying notes are an integral part of these financial statements.

FSI-32

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Assets and Liabilities (continued)

June 30, 2012 (unaudited)


	Franklin Strategic Income Securities Fund
Class 1:
Net assets, at value	$	1,032,235,537

Shares outstanding		83,806,611

Net asset value and maximum offering price per share	$	12.32

Class 2:
Net assets, at value	$	137,230,380

Shares outstanding		11,409,924

Net asset value and maximum offering price per share	$	12.03

Class 4:
Net assets, at value	$	202,257,114

Shares outstanding		16,553,851

Net asset value and maximum offering price per share	$	12.22

The accompanying notes are an integral part of these financial statements.

FSI-33

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the six months ended June 30, 2012 (unaudited)


	Franklin Strategic Income Securities Fund
Investment income:
Dividends	$	35,141
Interest		40,082,040

Total investment income		40,117,181

Expenses:
Management fees (Note 3a)		2,372,711
Administrative fees (Note 3b)		1,376,484
Distribution fees: (Note 3c)
Class 2		164,965
Class 4		341,950
Unaffiliated transfer agent fees		750
Custodian fees (Note 4)		164,564
Reports to shareholders		98,059
Professional fees		43,034
Trustees’ fees and expenses		2,819
Other		34,478

Total expenses		4,599,814

Net investment income		35,517,367

Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		1,081,911
Foreign currency transactions		553,522
Swap contracts		2,551,176

Net realized gain (loss)		4,186,609

Net change in unrealized appreciation (depreciation) on:
Investments		30,408,840
Translation of other assets and liabilities denominated in foreign currencies		6,539,539
Change in deferred taxes on unrealized appreciation		93,834

Net change in unrealized appreciation (depreciation)		37,042,213

Net realized and unrealized gain (loss)		41,228,822

Net increase (decrease) in net assets resulting from operations	$	76,746,189

The accompanying notes are an integral part of these financial statements.

FSI-34

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets


	Franklin Strategic Income Securities Fund
	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31, 2011

Increase (decrease) in net assets:
Operations:
Net investment income	$	35,517,367		$	76,340,737
Net realized gain (loss) from investments, foreign currency transactions and swap contracts		4,186,609			33,514,759
Net change in unrealized appreciation (depreciation) on investments, translation of other assets and liabilities denominated in foreign currencies and deferred taxes		37,042,213			(71,081,939	)

Net increase (decrease) in net assets resulting from operations		76,746,189			38,773,557

Distributions to shareholders from and net foreign currency gains:
Net investment income:
Class 1		(72,486,947	)		(69,631,166	)
Class 2		(9,567,293	)		(7,304,903	)
Class 4		(13,446,008	)		(11,235,444	)
Net realized gains:
Class 1		(1,182,191	)		—
Class 2		(160,795	)		—
Class 4		(230,338	)		—

Total distributions to shareholders		(97,073,572	)		(88,171,513	)

Capital share transactions: (Note 2)
Class 1		3,070,473			(114,013,494	)
Class 2		16,128,195			27,304,975
Class 4		16,625,992			7,657,719

Total capital share transactions		35,824,660			(79,050,800	)

Net increase (decrease) in net assets		15,497,277			(128,448,756	)
Net assets:
Beginning of period		1,356,225,754			1,484,674,510

End of period	$	1,371,723,031		$	1,356,225,754

Undistributed net investment income included in net assets:
End of period	$	24,122,344		$	84,105,225

The accompanying notes are an integral part of these financial statements.

FSI-35

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited)

Franklin Strategic Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment company, consisting of twenty separate funds. The Franklin Strategic Income Securities Fund (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. At June 30, 2012, 91.09% of the Fund’s shares were held through one insurance company. The Fund offers three classes of shares: Class 1, Class 2, and Class 4. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

FSI-36

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Strategic Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

a. Financial Instrument Valuation (continued)

to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. The VLOC employs various methods for calibrating these valuation approaches including a regular review of key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.

b. Foreign Currency Translation

c. Securities Purchased on a When-Issued and Delayed Delivery Basis

The Fund purchases securities on a when-issued and delayed delivery basis, with payment and delivery scheduled for a future date. These transactions are subject to market fluctuations and are subject to the risk that the value at delivery may be more or less than the trade date purchase price. Although the Fund will generally purchase these securities with the intention of holding the securities, it may sell the securities before the settlement date. Sufficient assets have been segregated for these securities.

d. Derivative Financial Instruments

The Fund entered into OTC forward exchange contracts primarily to manage and/or gain exposure to certain foreign currencies. A forward exchange contract is an agreement between the Fund and a counterparty to buy or sell a foreign currency for a specific exchange rate on a future date. Pursuant to the terms of the forward exchange contracts, cash or securities may be required to be deposited as collateral. Unrestricted cash may be invested according to the Fund’s investment objectives.

FSI-37

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Strategic Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

d. Derivative Financial Instruments (continued)

The Fund entered into OTC credit default swap contracts primarily to manage and/or gain exposure to credit risk. A credit default swap is an agreement between the Fund and a counterparty whereby the buyer of the contract receives credit protection and the seller of the contract guarantees the credit worthiness of a referenced debt obligation. The underlying referenced debt obligation may be a single issuer of corporate or sovereign debt, a credit index, or a tranche of a credit index. In the event of a default of the underlying referenced debt obligation, the buyer is entitled to receive the notional amount of the credit default swap contract from the seller in exchange for the referenced debt obligation, a net settlement amount equal to the notional amount of the credit default swap less the recovery value of the referenced debt obligation, or other agreed upon amount. Over the term of the contract, the buyer pays the seller a periodic stream of payments, provided that no event of default has occurred. Such periodic payments are accrued daily as an unrealized appreciation or depreciation until the payments are made, at which time they are realized. Payments received or paid to initiate a credit default swap contract are reflected on the Statement of Assets and Liabilities and represent compensating factors between stated terms of the credit default swap agreement and prevailing market conditions (credit spreads and other relevant factors). These upfront payments are amortized over the term of the contract as a realized gain or loss on the Statement of Operations. Pursuant to the terms of the credit default swap contract, cash or securities may be required to be deposited as collateral. Unrestricted cash may be invested according to the Fund’s investment objectives.

The Fund’s investments in OTC derivatives are subject to the terms of International Swaps and Derivatives Association Master Agreements and other related agreements between the Fund and certain derivative counterparties. These agreements contain various provisions, including but not limited to collateral requirements, events of default, requirements for the Fund to maintain certain net asset levels and/or limit the decline in net assets over various periods of time. Should the Fund fail to meet any of these provisions, the derivative counterparty has the right to terminate the derivative contract and require immediate payment by the Fund for those OTC derivatives with that particular counterparty that are in a net unrealized loss position. At June 30, 2012, the Fund had OTC derivatives in a net unrealized loss position of $523,562 and the aggregate value of collateral pledged for such contracts was $890,000.

At June 30, 2012, the Fund holds $4,289,069 in U.S. treasury bills, bonds, and notes as collateral for derivatives.

See Note 10 regarding other derivative information.

e. Restricted Cash

At June 30, 2012, the Fund held restricted cash in connection with investments in certain derivative securities. Restricted cash is held in a segregated account with the Fund’s custodian / counterparty broker and is reflected in the Statement of Assets and Liabilities.

f. FT Holdings Corporation III (FT Subsidiary)

The Fund invests in certain securities through its investment in FT Subsidiary, a Delaware Corporation and a wholly-owned subsidiary of the Fund. The FT Subsidiary has the ability to invest in securities consistent with the investment objective of the Fund. At June 30, 2012, all FT Subsidiary investments as well as any other assets and liabilities are reflected in the Fund’s Statement of Investments and Statement of Assets and Liabilities. All income and expenses of the FT Subsidiary during the period ended June 30, 2012, have been included in the Fund’s Statement of Operations.

g. Mortgage Dollar Rolls

The Fund enters into mortgage dollar rolls, typically on a TBA basis. Mortgage dollar rolls are agreements between the Fund and a financial institution to simultaneously sell and repurchase mortgage-backed securities at a future date. Gains or losses are

FSI-38

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Strategic Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

g. Mortgage Dollar Rolls (continued)

realized on the initial sale, and the difference between the repurchase price and the sale price is recorded as an unrealized gain or loss to the fund upon entering into the mortgage dollar roll. In addition, the Fund may invest the cash proceeds that are received from the initial sale. During the period between the sale and repurchase, the Fund is not entitled to principal and interest paid on the mortgage backed securities. The risks of mortgage dollar roll transactions include the potential inability of the counterparty to fulfill its obligations.

h. Senior Floating Rate Interests

Senior secured corporate loans in which the Fund invests are generally readily marketable, but may be subject to some restrictions on resale.

i. Income and Deferred Taxes

j. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Amortization of premium and accretion of discount on debt securities are included in interest income. Facility fees are recognized as income over the expected term of the loan. Dividend income is recorded on the ex-dividend date. Distributions to shareholders are recorded on the ex-dividend date and are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with accounting principles generally accepted in the United States of America. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.

FSI-39

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Strategic Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

j. Security Transactions, Investment Income, Expenses and Distributions (continued)

Inflation-indexed bonds are adjusted for inflation through periodic increases or decreases in the security’s interest accruals, face amount, or principal redemption value, by amounts corresponding to the rate of inflation as measured by an index. Any increase or decrease in the face amount or principal redemption value will be included as interest income on the Statement of Operations.

k. Accounting Estimates

l. Guarantees and Indemnifications

2. SHARES OF BENEFICIAL INTEREST

At June 30, 2012, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:


	Six Months Ended June 30, 2012						Year Ended December 31, 2011
Class 1 Shares:	Shares			Amount			Shares			Amount
Shares sold		2,071,510		$	26,657,790			2,569,621		$	33,265,626
Shares issued in reinvestment of distributions		6,063,304			73,669,138			5,474,148			69,631,166
Shares redeemed		(7,464,993	)		(97,256,455	)		(16,887,770	)		(216,910,286	)

Net increase (decrease)		669,821		$	3,070,473			(8,844,001	)	$	(114,013,494	)

Class 2 Shares:
Shares sold		1,536,446		$	19,516,632			3,778,943		$	48,008,160
Shares issued in reinvestment of distributions		819,552			9,728,088			586,739			7,304,903
Shares redeemed		(1,032,899	)		(13,116,525	)		(2,243,563	)		(28,008,088	)

Net increase (decrease)		1,323,099		$	16,128,195			2,122,119		$	27,304,975

Class 4 Shares:
Shares sold		1,056,894		$	13,440,584			2,126,744		$	27,218,734
Shares issued on reinvestment of distributions		1,134,025			13,676,346			889,584			11,235,444
Shares redeemed		(814,338	)		(10,490,938	)		(2,444,718	)		(30,796,459	)

Net increase (decrease)		1,376,581		$	16,625,992			571,610		$	7,657,719

FSI-40

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Strategic Income Securities Fund

3. TRANSACTIONS WITH AFFILIATES


Subsidiary		Affiliation
Franklin Advisers, Inc. (Advisers)		Investment manager
Franklin Templeton Services, LLC (FT Services)		Administrative manager
Franklin Templeton Distributors, Inc. (Distributors)		Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services)		Transfer agent

a. Management Fees

The Fund pays an investment management fee to Advisers based on the average daily net assets of the Fund as follows:


Annualized Fee Rate		Net Assets
0.425%		Up to and including $500 million
0.325%		Over $500 million, up to and including $1 billion
0.280%		Over $1 billion, up to and including $1.5 billion
0.235%		Over $1.5 billion, up to and including $6.5 billion
0.215%		Over $6.5 billion, up to and including $11.5 billion
0.200%		Over $11.5 billion, up to and including $16.5 billion
0.190%		Over $16.5 billion, up to and including $19 billion
0.180%		Over $19 billion, up to and including $21.5 billion
0.170%		In excess of $21.5 billion

b. Administrative Fees

The Fund pays an administrative fee to FT Services of 0.20% per year of the net assets of the Fund.

c. Distribution Fees

The Board has adopted distribution plans for Class 2 and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to 0.25% and 0.35% per year of its average daily net assets of Class 2 and Class 4, respectively.

d. Transfer Agent Fees

Investor Services, under terms of an agreement, performs shareholder servicing for the Fund and is not paid by the Fund for the services.

4. EXPENSE OFFSET ARRANGEMENT

FSI-41

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Strategic Income Securities Fund

5. INCOME TAXES

At June 30, 2012, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:


Cost of investments	$	1,310,672,322


Unrealized appreciation	$	55,132,637
Unrealized depreciation		(36,240,600	)

Net unrealized appreciation (depreciation)	$	18,892,037

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of defaulted securities, foreign currency transactions, paydown losses, payments-in-kind, bond discounts and premiums, swaps, tax straddles, inflation related adjustments on foreign securities and wash sales.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2012, aggregated $314,373,645 and $325,010,487, respectively.

7. INVESTMENTS IN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO

8. CREDIT RISK AND DEFAULTED SECURITIES

At June 30, 2012, the Fund had 52.45% of its portfolio invested in high yield , senior secured floating rate notes, or other securities rated below investment grade. These securities may be more sensitive to economic conditions causing greater price volatility and are potentially subject to a greater risk of loss due to default than higher rated securities.

The Fund held defaulted securities and/or other securities for which the income has been deemed uncollectible. At June 30, 2012, the aggregate value of these securities was $7,051,843, representing 0.51% of the Fund’s net assets. The Fund discontinues accruing income on securities for which income has been deemed uncollectible and provides an estimate for losses on interest receivable. The securities have been identified on the accompanying Statement of Investments.

9. UNFUNDED LOAN COMMITMENTS

The Fund enters into certain credit agreements, all or a portion of which may be unfunded. The Fund is obligated to fund these loan commitments at the borrowers’ discretion. Funded portions of credit agreements are presented on the Statement of Investments.

At June 30, 2012, unfunded commitments were as follows:


Borrower	Unfunded Commitment
Wendy’s International Inc., Delayed Draw Term Loan	$	964,282

Unfunded loan commitments and funded portions of credit agreements are marked to market daily and any unrealized appreciation or depreciation is included in the Statement of Assets and Liabilities and the Statement of Operations.

FSI-42

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Strategic Income Securities Fund

10. OTHER DERIVATIVE INFORMATION

At June 30, 2012, the Fund has invested in derivative contracts which are reflected on the Statement of Assets and Liabilities as follows:

Asset Derivatives

Liability Derivatives

Derivative Contracts Not Accounted
for as Hedging Instruments

Statement of Assets and
Liabilities Location

Fair
Value
Amount

Statement of Assets and
Liabilities Location

Fair
Value
Amount

Foreign exchange contracts

Unrealized appreciation on forward exchange contracts

11,532,406

Unrealized depreciation on forward exchange contracts

2,387,347

For the period ended June 30, 2012, the effect of derivative contracts on the Fund’s Statement of Operations was as follows:


Derivative Contracts Not Accounted for as Hedging Instruments	Statement of Operations Locations	Realized Gain (Loss) for the Period		Change in Unrealized Appreciation (Depreciation) for the Period
Foreign exchange contracts	Net realized gain (loss) from foreign currency transactions / Net change in unrealized appreciation (depreciation) on translation of other assets and liabilities denominated in foreign currencies	$	886,201	$	6,309,110
Credit contracts	Net realized gain (loss) from swap contracts / Net change in unrealized appreciation (depreciation) on investments		2,551,176		(776,779	)

For the period ended June 30, 2012, the average month end market value of derivatives represented 0.93% of average month end net assets. The average month end number of open derivative contracts for the period was 202.

See Note 1(d) regarding derivative financial instruments.

11. CREDIT FACILITY

12. FAIR VALUE MEASUREMENTS

•

Level 1 – quoted prices in active markets for identical financial instruments

FSI-43

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Strategic Income Securities Fund

12. FAIR VALUE MEASUREMENTS (continued)

•

Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)

•

Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of financial instruments)

The inputs or methodology used for valuing financial instruments are not an indication of the risk associated with investing in those financial instruments.

For movements between the levels within the fair value hierarchy, the Fund has adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.

A summary of inputs used as of June 30, 2012, in valuing the Fund’s assets and liabilities carried at fair value, is as follows:


	Level 1		Level 2		Level 3		Total

Assets:
Investments in Securities:
Equity Investments:^a
Consumer Durables & Apparel	$	—	$	—	$	720,359	$	720,359
Consumer Services		—		1,711,304		—		1,711,304
Media		—		5,458,671		—		5,458,671
Other Equity Investments^b		832,130		—		—		832,130
Corporate Bonds		—		509,868,588		—		509,868,588
Senior Floating Rate Interests		—		236,850,849		1,161,736		238,012,585
Foreign Government and Agency Securities		—		306,499,176		—		306,499,176
U.S. Government and Agency Securities		—		29,313,484		—		29,313,484
Asset-Backed Securities and
Commercial Mortgage-Backed Securities		—		46,046,598		—		46,046,598
Mortgage-Backed Securities		—		54,936,623		—		54,936,623
Municipal Bonds		—		46,342,663		—		46,342,663
Short Term Investments		50,165,155		39,657,023		—		89,822,178

Total Investments in Securities	$	50,997,285	$	1,276,684,979	$	1,882,095	$	1,329,564,359

Forward Exchange Contracts		—		11,532,406		—		11,532,406
Liabilities:
Forward Exchange Contracts		—		2,387,347		—		2,387,347
Unfunded Loan Commitments		—		7,282		—		7,282

^aIncludes common and preferred stocks.

^bFor detailed categories, see the accompanying Statement of Investments.

A reconciliation of assets in which Level 3 inputs are used in determining fair value is presented when there are significant Level 3 investments at the end of the period.

13. NEW ACCOUNTING PRONOUNCEMENTS

FSI-44

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Strategic Income Securities Fund

14. SUBSEQUENT EVENTS

The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure.


ABBREVIATIONS
Counterparty	Currency	Selected Portfolio

BZWS - Barclays Bank PLC	AUD - Australian Dollar	AGMC - Assured Guaranty Municipal Corp.
CITI - Citigroup, Inc.	BRL - Brazilian Real	CDO - Collateralized Debt Obligation
DBAB - Deutsche Bank AG	EUR - Euro	CLO - Collateralized Loan Obligation
FBCO - Credit Suisse Group AG	GBP - British Pound	DIP - Debtor-In-Possession
HSBC - HSBC Bank USA, N.A.	HUF - Hungarian Forint	FGIC - Financial Guaranty Insurance Co.
JPHQ - JPMorgan Chase & Co.	IDR - Indonesian Rupiah	FICO - Financing Corp.
MSCO - Morgan Stanley	ILS - New Israeli Shekel	FRN - Floating Rate Note
UBSW - UBS AG	KRW - South Korean Won	GO - General Obligation
	LKR - Sri Lankan Rupee	ID - Improvement District
	MXN - Mexican Peso	IDA - Industrial Development Authority/Agency
	MYR - Malaysian Ringgit	L/C - Letter of Credit
	PHP - Philippine Peso	NATL - National Public Financial Guarantee Corp.
	PLN - Polish Zloty SEK - Swedish Krona SGD - Singapore Dollar UYU - Uruguayan Peso	NATL RE - National Public Financial Guarantee Corp. Reinsured PIK - Payment-In-Kind PL - Project Loan SF - Single Family



		USD - Unified/Union School District

FSI-45

FRANKLIN TEMPLETON VIP FOUNDING FUNDS ALLOCATION FUND

This semiannual report for Franklin Templeton VIP Founding Funds Allocation Fund covers the period ended June 30, 2012.

Performance Summary as of 6/30/12

Franklin Templeton VIP Founding Funds Allocation Fund – Class 2 delivered a +5.03% total return* for the six-month period ended 6/30/12.

*The administrator has contractually agreed to waive or assume certain expenses so that common expenses of the Fund (excluding Rule 12b-1 fees and acquired fund fees and expenses) do not exceed 0.10% (other than certain nonroutine expenses) until 4/30/13. Fund investment results reflect the expense reduction, without which the results would have been lower.

Franklin Templeton VIP Founding Funds Allocation Fund – Class 2

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares.

Current performance may differ from figures shown.

FFA-1

Fund Goals and Main Investments: Franklin Templeton VIP Founding Funds Allocation Fund seeks capital appreciation, with income as a secondary goal. Under normal market conditions, the Fund invests equal portions in Class 1 shares of Franklin Income Securities Fund, Mutual Shares Securities Fund and Templeton Growth Securities Fund.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. The Fund underperformed the Standard & Poor’s^® 500 Index’s (S&P 500^®’s) +9.49% total return and the MSCI World Index’s +6.29% total return for the same period.¹

Economic and Market Overview

2. Source: Bureau of Labor Statistics.

Fund Risks: All investments involve risks, including possible loss of principal. Because the Fund invests in underlying funds that may engage in a variety of investment strategies involving certain risks, the Fund may be subject to these same risks. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Bonds are affected by changes in interest rates and the creditworthiness of their issuers. Bond prices generally move in the opposite direction of interest rates. Thus, as the prices of bonds adjust to a rise in interest rates, the Fund’s share price may decline. Higher yielding, lower rated corporate bonds entail a greater degree of credit risk compared to investment-grade securities. Foreign investing carries additional risks such as currency and market volatility and political or social instability, risks that are heightened in developing countries. Value securities may not increase in price as anticipated or may decline further in value. These and other risks are described more fully in the Fund’s and underlying funds’ prospectuses.

FFA-2

Spanish banking bailout — did little to address the structural imbalances of eurozone economies or the solvency fears plaguing the region’s banking system.

Global developed stock markets, as measured by the MSCI World Index, delivered the best annual start in more than a decade, as signs of U.S. economic recovery and European policy relief underpinned a rally in cyclical stocks. During late March and early April 2012, U.S. stocks, as measured by the S&P 500, reached multi-year highs. However, stocks dropped sharply in late spring amid renewed global economic weakness and European debt concerns before additional policy action prompted a rebound in June. Politics largely drove the markets during the first half of 2012 as investors closely monitored developments in Europe, where German-led austerity demands were met with increasing resentment from some highly indebted eurozone members. Fears of a Greek debt default and exit from the eurozone were somewhat mitigated in February by secured bailout financing and bondholder concessions, as well as May and June elections that resulted in the formation of a new coalition government. The Fed’s Operation Twist purchases and risk-averse investors seeking safety drove U.S. Treasury yields to historical lows during the period. In the latter part of the period, the euro declined while the U.S. dollar and Japanese yen made gains.

At the end of the reporting period, significant challenges to the U.S. and global economies remained, including weak jobs reports, lack of broad public and political agreement on how to achieve U.S. deficit reduction, and uncertainty surrounding deeply indebted European countries including Greece, Italy and Spain. Although long-term resolution of European debt issues remained unclear, the European Central Bank’s plan to allow the European Stability Mechanism to directly recapitalize troubled banks throughout the eurozone, as well as a late-June proposal leaning toward fiscal and banking union, supported cautious optimism in U.S. and global markets.

FFA-3

LOGO

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s SOI.

Investment Strategy

The Fund normally invests its assets in an equally weighted combination of Class 1 shares of Franklin Income Securities Fund, Mutual Shares Securities Fund and Templeton Growth Securities Fund. These underlying funds, in turn, invest in a variety of U.S. and foreign equity securities and, to a lesser extent, fixed income and money market securities. As market conditions affect the underlying funds, we rebalance the Fund’s allocations seeking to maintain equal weightings of approximately 33¹/₃% of total net assets in each underlying fund whenever the actual allocations exceed plus or minus 3% of the fixed allocation percentages.

Manager’s Discussion

The Fund’s performance can be attributed largely to its allocation among the underlying funds and their investments in domestic and foreign equities, fixed income securities, and short-term investments and other net assets.

During the six months under review, Mutual Shares Securities Fund – Class 1 and Franklin Income Securities Fund – Class 1 underperformed the S&P 500. Templeton Growth Securities Fund – Class 1 underperformed the MSCI World Index.

Thank you for your participation in Franklin Templeton VIP Founding Funds Allocation Fund. We look forward to serving your future investment needs.

FFA-4

Franklin Templeton VIP Founding Funds Allocation Fund – Class 2

Fund Expenses

•

Transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes.

•

Actual Fund Expenses

You can estimate the Fund-level expenses you incurred during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:

1.	Divide your account value by $1,000.

If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6.

2.	Multiply the result by the number under the heading “Fund-Level Expenses Incurred During Period.”

If Fund-Level Expenses Incurred During Period were $7.50, then 8.6 x $7.50 = $64.50.

In this illustration, the estimated expenses incurred this period at the Fund level are $64.50.

FFA-5

Hypothetical Example for Comparison with Other Mutual Funds


Class 2	Beginning Account Value 1/1/12		Ending Account Value 6/30/12		Fund-Level Expenses Incurred During Period* 1/1/12–6/30/12		Fund-Level Expenses Incurred During Period** 1/1/12–6/30/12
Actual	$	1,000	$	1,050.30	$	1.78	$	5.15
Hypothetical (5% return before expenses)	$	1,000	$	1,023.12	$	1.76	$	5.07

*Expenses are calculated using the most recent six-month annualized expense ratio excluding expenses of the underlying funds, net of expense waivers, for the Fund’s Class 2 shares (0.35%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 182/366 to reflect the one-half year period.

**Expenses are calculated using the most recent six-month annualized expense ratio including expenses of the underlying funds, net of expense waivers, for the Fund’s Class 2 shares (1.01%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 182/366 to reflect the one-half year period.

FFA-6

Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Franklin Templeton VIP Founding Funds Allocation Fund


	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31,
Class 1	Six Months Ended June 30, 2012 (unaudited)			2011			2010			2009			2008			2007^a

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	7.63		$	7.73		$	7.15		$	5.61		$	9.33		$	10.00

Income from investment operations^b:
Net investment income (loss)^c,d		0.24			0.25			0.24			0.26			0.28			(0.19	)
Net realized and unrealized gains (losses)		0.14			(0.35	)		0.52			1.46			(3.64	)		(0.48	)

Total from investment operations		0.38			(0.10	)		0.76			1.72			(3.36	)		(0.67	)

Less distributions from:
Net investment income		(0.24	)		—	^e		(0.18	)		(0.18	)		(0.19	)		—
Net realized gains		—			—			—	^e		—			(0.17	)		—

Total distributions		(0.24	)		—	^e		(0.18	)		(0.18	)		(0.36	)		—

Net asset value, end of period	$	7.77		$	7.63		$	7.73		$	7.15		$	5.61		$	9.33


Total return^f		5.01%			(1.28)%			10.64%			30.47%			(35.75)%			(6.70)%
Ratios to average net assets^g
Expenses before waiver and payments by affiliates^h		0.11%			0.11%			0.11%			0.12%			0.13%			0.41%
Expenses net of waiver and payments by affiliates^h		0.10%			0.10%			0.10%			0.10%			0.13%			0.41%
Net investment income (loss)^d		5.08%			3.44%			3.04%			4.16%			3.81%			(0.41)%

Supplemental data
Net assets, end of period (000’s)	$	520		$	470		$	437		$	629		$	339		$	466
Portfolio turnover rate		21.04%			58.42%			17.81%			4.23%			22.09%			0.04%

^aFor the period July 2, 2007 (commencement of operations) to December 31, 2007

^cBased on average daily shares outstanding.

^dRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds in which the Fund invests.

^eAmount rounds to less than $0.01 per share.

^fTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which the Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle. Total return is not annualized for periods less than one year.

^gRatios are annualized for periods less than one year.

^hDoes not include expenses of the Underlying Funds in which the Fund invests. The weighted average indirect expenses of the Underlying Funds were 0.66% for the period ended June 30, 2012.

The accompanying notes are an integral part of these financial statements.

FFA-7

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin Templeton VIP Founding Funds Allocation Fund


	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31,
Class 2	Six Months Ended June 30, 2012 (unaudited)			2011			2010			2009			2008			2007^a

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	7.59		$	7.71		$	7.14		$	5.61		$	9.31		$	10.00

Income from investment operations^b:
Net investment income (loss)^c,d		0.20			0.23			0.21			0.26			0.27			(0.03	)
Net realized and unrealized gains (losses)		0.18			(0.35	)		0.52			1.44			(3.63	)		(0.66	)

Total from investment operations		0.38			(0.12	)		0.73			1.70			(3.36	)		(0.69	)

Less distributions from:
Net investment income		(0.22	)		—	^e		(0.16	)		(0.17	)		(0.17	)		—
Net realized gains		—			—			—	^e		—			(0.17	)		—

Total distributions		(0.22	)		—	^e		(0.16	)		(0.17	)		(0.34	)		—

Net asset value, end of period	$	7.75		$	7.59		$	7.71		$	7.14		$	5.61		$	9.31


Total return^f		5.03%			(1.54)%			10.25%			30.25%			(35.87)%			(6.90)%
Ratios to average net assets^g
Expenses before waiver and payments by affiliates^h		0.36%			0.36%			0.36%			0.37%			0.38%			0.66%
Expenses net of waiver and payments by affiliates^h		0.35%			0.35%			0.35%			0.35%			0.38%			0.66%
Net investment income (loss)^d		4.83%			3.19%			2.79%			3.91%			3.56%			(0.66)%

Supplemental data
Net assets, end of period (000’s)	$	455,610		$	448,101		$	488,057		$	474,176		$	338,320		$	131,710
Portfolio turnover rate		21.04%			58.42%			17.81%			4.23%			22.09%			0.04%

^aFor the period July 2, 2007 (commencement of operations) to December 31, 2007.

^cBased on average daily shares outstanding.

^dRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds in which the Fund invests.

^eAmount rounds to less than $0.01 per share.

^gRatios are annualized for periods less than one year.

^hDoes not include expenses of the Underlying Funds in which the Fund invests. The weighted average indirect expenses of the Underlying Funds were 0.66% for the period ended June 30, 2012.

The accompanying notes are an integral part of these financial statements.

FFA-8

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin Templeton VIP Founding Funds Allocation Fund


	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31,
Class 4	Six Months Ended June 30, 2012 (unaudited)			2011			2010			2009			2008^a

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	7.58		$	7.71		$	7.14		$	5.62		$	8.65

Income from investment operations^b:
Net investment income^c,d		0.18			0.24			0.19			0.23			0.19
Net realized and unrealized gains (losses)		0.19			(0.37	)		0.54			1.46			(2.87	)

Total from investment operations		0.37			(0.13	)		0.73			1.69			(2.68	)

Less distributions from:
Net investment income		(0.22	)		—	^e		(0.16	)		(0.17	)		(0.18	)
Net realized gains		—			—			—	^e		—			(0.17	)

Total distributions		(0.22	)		—	^e		(0.16	)		(0.17	)		(0.35	)

Net asset value, end of period	$	7.73		$	7.58		$	7.71		$	7.14		$	5.62


Total return^f		4.86%			(1.67)%			10.24%			30.06%			(30.81)%
Ratios to average net assets^g
Expenses before waiver and payments by affiliates^h		0.46%			0.46%			0.46%			0.47%			0.48%
Expenses net of waiver and payments by affiliates^h		0.45%			0.45%			0.45%			0.45%			0.48%
Net investment income^d		4.73%			3.09%			2.69%			3.81%			3.46%

Supplemental data
Net assets, end of period (000’s)	$	3,274,608		$	2,860,928		$	3,036,272		$	1,424,479		$	263,001
Portfolio turnover rate		21.04%			58.42%			17.81%			4.23%			22.09%

^aFor the period February 29, 2008 (effective date) to December 31, 2008.

^cBased on average daily shares outstanding.

^dRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds in which the Fund invests.

^eAmount rounds to less than $0.01 per share.

^gRatios are annualized for periods less than one year.

^hDoes not include expenses of the Underlying Funds in which the Fund invests. The weighted average indirect expenses of the Underlying Funds were 0.66% for the period ended June 30, 2012.

The accompanying notes are an integral part of these financial statements.

FFA-9

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited)


Franklin Templeton VIP Founding Funds Allocation Fund	Shares		Value
Investments in Underlying Funds^a
Domestic Equity 31.4%
Mutual Shares Securities Fund, Class 1		71,040,810	$	1,172,883,775

Domestic Hybrid 32.1%
Franklin Income Securities Fund, Class 1		82,484,463		1,196,849,551

Foreign Equity 31.9%
Templeton Growth Securities Fund, Class 1		114,158,334		1,190,671,423

Total Investments in Underlying Funds (Cost $3,196,062,046) 95.4%				3,560,404,749
Other Assets, less Liabilities 4.6%				170,333,927

Net Assets 100.0%			$	3,730,738,676

^aSee Note 7 regarding investments in Underlying Funds.

The accompanying notes are an integral part of these financial statements.

FFA-10

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

June 30, 2012 (unaudited)


	Franklin Templeton VIP Founding Funds Allocation Fund
Assets:
Investments in Underlying Funds: (Note 7)
Cost	$	3,196,062,046

Value	$	3,560,404,749
Cash		153,786,970
Receivables:
Investment securities sold		258,729
Capital shares sold		18,916,172
Other assets		839

Total assets		3,733,367,459

Liabilities:
Payables:
Capital shares redeemed		135,778
Affiliates		2,333,742
Accrued expenses and other liabilities		159,263

Total liabilities		2,628,783

Net assets, at value	$	3,730,738,676

Net assets consist of:
Paid-in capital	$	3,662,213,702
Undistributed net investment income		92,030,092
Net unrealized appreciation (depreciation)		364,342,703
Accumulated net realized gain (loss)		(387,847,821	)

Net assets, at value	$	3,730,738,676

Class 1:
Net assets, at value	$	519,875

Shares outstanding		66,881

Net asset value and maximum offering price per share	$	7.77

Class 2:
Net assets, at value	$	455,610,455

Shares outstanding		58,822,807

Net asset value and maximum offering price per share	$	7.75

Class 4:
Net assets, at value	$	3,274,608,346

Shares outstanding		423,587,104

Net asset value and maximum offering price per share	$	7.73

The accompanying notes are an integral part of these financial statements.

FFA-11

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the six months ended June 30, 2012 (unaudited)


	Franklin Templeton VIP Founding Funds Allocation Fund
Investment income:
Dividends from Underlying Funds (Note 7)	$	100,555,040

Expenses:
Administrative fees (Note 3a)		1,939,183
Distribution fees: (Note 3b)
Class 2		574,673
Class 4		5,990,372
Unaffiliated transfer agent fees		1,677
Custodian fees (Note 4)		712
Reports to shareholders		135,094
Professional fees		31,200
Trustees’ fees and expenses		7,218
Other		11,977

Total expenses		8,692,106
Expenses waived/paid by affiliates (Note 3d)		(187,878	)

Net expenses		8,504,228

Net investment income		92,050,812

Realized and unrealized gains (losses):
Net realized gain (loss) from sale of investments in Underlying Funds (Note 7)		(24,035,425	)
Net change in unrealized appreciation (depreciation) on investments in Underlying Funds		73,154,870

Net realized and unrealized gain (loss)		49,119,445

Net increase (decrease) in net assets resulting from operations	$	141,170,257

The accompanying notes are an integral part of these financial statements.

FFA-12

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets


	Franklin Templeton VIP Founding Funds Allocation Fund
	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31, 2011

Increase (decrease) in net assets:
Operations:
Net investment income	$	92,050,812		$	115,027,209
Net realized gain (loss) from Underlying Funds		(24,035,425	)		(183,417,581	)
Net change in unrealized appreciation (depreciation) on investments in Underlying Funds		73,154,870			(140,904,024	)

Net increase (decrease) in net assets resulting from operations		141,170,257			(209,294,396	)

Distributions to shareholders from:
Net investment income:
Class 1		(14,007	)		(68	)
Class 2		(12,894,473	)		(73,496	)
Class 4		(102,116,912	)		(555,926	)

Total distributions to shareholders		(115,025,392	)		(629,490	)

Capital share transactions: (Note 2)
Class 1		38,753			45,474
Class 2		(1,675,121	)		(32,955,021	)
Class 4		396,731,267			27,566,498

Total capital share transactions		395,094,899			(5,343,049	)

Net increase (decrease) in net assets		421,239,764			(215,266,935	)
Net assets:
Beginning of period		3,309,498,912			3,524,765,847

End of period	$	3,730,738,676		$	3,309,498,912

Undistributed net investment income included in net assets:
End of period	$	92,030,092		$	115,004,672

The accompanying notes are an integral part of these financial statements.

FFA-13

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited)

Franklin Templeton VIP Founding Funds Allocation Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment company, consisting of twenty separate funds. The Franklin Templeton VIP Founding Funds Allocation Fund (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. The Fund invests primarily in other funds of the Trust (Underlying Funds). Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. At June 30, 2012, 74.99% of the Fund’s shares were held through one insurance company. The Fund offers three classes of shares: Class 1, Class 2 and Class 4. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

The Fund’s investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Under procedures approved by the Fund’s Board of Trustees (the Board), the Fund’s administrator and other affiliates have formed the Valuation and Liquidity Oversight Committee (VLOC). The VLOC provides administration and oversight of the Fund’s valuation policies and procedures, which are approved annually by the Board. Investments in the Underlying Funds are valued at their closing net asset value each trading day.

b. Income Taxes

c. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Estimated expenses are accrued daily. Dividend income and realized gain distributions by Underlying Funds are recorded on the ex-dividend date. Distributions to shareholders are recorded on the ex-dividend date and are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with accounting principles generally accepted in the United States of America. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.

The Fund indirectly bears its proportionate share of expenses from the Underlying Funds. Since the Underlying Funds have varied expense levels and the Fund may own different proportions of the Underlying Funds at different times, the amount of expenses incurred indirectly by the Fund will vary.

FFA-14

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Templeton VIP Founding Funds Allocation Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

d. Accounting Estimates

e. Guarantees and Indemnifications

2. SHARES OF BENEFICIAL INTEREST

At June 30, 2012, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:


	Six Months Ended June 30, 2012						Year Ended December 31, 2011
Class 1 Shares:	Shares			Amount			Shares			Amount
Shares sold		16,432		$	125,266			12,893		$	104,448
Shares issued in reinvestment of distributions		1,805			14,007			9			68
Shares redeemed		(12,992	)		(100,520	)		(7,764	)		(59,042	)

Net increase (decrease)		5,245		$	38,753			5,138		$	45,474

Class 2 Shares:
Shares sold		1,393,230		$	10,909,309			6,091,791		$	47,334,953
Shares issued in reinvestment of distributions		1,665,953			12,894,473			9,187			73,496
Shares redeemed		(3,257,921	)		(25,478,903	)		(10,341,627	)		(80,363,470	)

Net increase (decrease)		(198,738	)	$	(1,675,121	)		(4,240,649	)	$	(32,955,021	)

Class 4 Shares:
Shares sold		141,883,801		$	1,115,892,339			298,702,307		$	2,283,542,888
Shares issued on reinvestment of distributions		13,227,579			102,116,912			69,578			555,926
Shares redeemed		(109,036,136	)		(821,277,984	)		(315,059,008	)		(2,256,532,316	)

Net increase (decrease)		46,075,244		$	396,731,267			(16,287,123	)	$	27,566,498

FFA-15

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Templeton VIP Founding Funds Allocation Fund

3. TRANSACTIONS WITH AFFILIATES


Subsidiary		Affiliation
Franklin Templeton Services, LLC (FT Services)		Administrative manager
Franklin Templeton Distributors, Inc. (Distributors)		Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services)		Transfer agent

a. Administrative Fees

The Fund pays an administrative fee to FT Services of 0.10% per year of the average daily net assets of the Fund for administrative services including monitoring and rebalancing the percentage of each Fund’s investment in the Underlying Funds.

b. Distribution Fees

c. Transfer Agent Fees

Investor Services, under terms of an agreement, performs shareholder servicing for the Fund and is not paid by the Fund for the services.

d. Waiver and Expense Reimbursements

FT Services has contractually agreed in advance to waive or limit its fees and to assume as its own expense certain expenses otherwise payable by the Fund so that the common expenses (i.e. a combination of administrative fees and other expenses, but excluding distribution fees and acquired fund fees and expenses) for each class of the Fund do not exceed 0.10% (other than certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations, and liquidations) until April 30, 2013.

4. EXPENSE OFFSET ARRANGEMENT

5. INCOME TAXES

For tax purposes, capital losses may be carried over to offset future capital gains, if any. At December 31, 2011, the Fund had capital loss carryforwards of $114,009,072.

FFA-16

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Templeton VIP Founding Funds Allocation Fund

5. INCOME TAXES (continued)

At June 30, 2012, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:


Cost of investments	$	3,454,038,016


Unrealized appreciation	$	126,135,725
Unrealized depreciation		(19,768,992	)

Net unrealized appreciation (depreciation)	$	106,366,733

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatment of wash sales.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2012, aggregated $1,147,555,040 and $779,265,307, respectively.

7. INVESTMENTS IN UNDERLYING FUNDS

The Fund invests primarily in the Underlying Funds which are managed by affiliates of the Fund’s administrative manager, FT Services. The Fund does not invest in the Underlying Funds for the purpose of exercising a controlling influence over the management or policies. Investments in Underlying Funds for the period ended June 30, 2012, were as follows:


Underlying Funds	Number of Shares Held at Beginning of Period		Gross Additions		Gross Reductions		Number of Shares Held at End of Period		Value at End of Period		Investment Income		Realized Capital Gain (Loss)			% of Underlying Fund Shares Outstanding Held at End of Period
Franklin Income Securities Fund, Class 1		71,098,618		32,211,491		20,825,646		82,484,463	$	1,196,849,551	$	73,110,255	$	(274,482	)		14.79%
Mutual Shares Securities Fund, Class 1		67,201,395		20,042,576		16,203,161		71,040,810		1,172,883,775		—		(6,295,870	)		21.42%
Templeton Growth Securities Fund, Class 1		102,526,012		31,435,046		19,802,724		114,158,334		1,190,671,423		27,444,785		(17,465,073	)		44.81%

Total									$	3,560,404,749	$	100,555,040	$	(24,035,425	)

8. CREDIT FACILITY

FFA-17

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Templeton VIP Founding Funds Allocation Fund

8. CREDIT FACILITY (continued)

and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.08% based upon the unused portion of the Global Credit Facility, which is reflected in other expenses on the Statement of Operations. During the period ended June 30, 2012, the Fund did not use the Global Credit Facility.

9. FAIR VALUE MEASUREMENTS

•

Level 1 – quoted prices in active markets for identical financial instruments

•

Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)

•

Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of financial instruments)

The inputs or methodology used for valuing financial instruments are not an indication of the risk associated with investing in those financial instruments.

For movements between the levels within the fair value hierarchy, the Fund has adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.

10. SUBSEQUENT EVENTS

The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure.

FFA-18

FRANKLIN U.S. GOVERNMENT FUND

This semiannual report for Franklin U.S. Government Fund covers the period ended June 30, 2012.

Performance Summary as of 6/30/12

Franklin U.S. Government Fund – Class 2 delivered a +1.20% total return for the six-month period ended 6/30/12.

Franklin U.S. Government Fund – Class 2

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares.

Current performance may differ from figures shown.

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Fund Goal and Main Investments: Franklin U.S. Government Fund seeks income. Under normal market conditions, the Fund invests at least 80% of its net assets in U.S. government securities.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. The Fund outperformed the +1.07% total return of its benchmark, the Barclays U.S. Government: Intermediate Index.¹ The Fund underperformed its secondary benchmark, the Lipper VIP General U.S. Government Funds Classification Average, which posted a +2.95% total return.² Funds in the Lipper average may allocate as much as 35% of their investments in asset types other than U.S. government and agency mortgage-backed securities.

Economic and Market Overview

Financial markets seemed to be largely influenced by politics, sentiment and uncertainty in the eurozone, and they were quick to discount the latest Greek election results. The June 2012 Federal Open Market Committee meeting concluded with the extension of its plan designed to boost the economy by driving down long-term interest rates (dubbed Operation Twist) but made no formal announcement of an additional round of quantitative easing. During the six months under review, investment-grade fixed income markets, as measured by the Barclays U.S. Aggregate Index, posted modest returns.³ Overall, investor concerns about ongoing eurozone uncertainty, weak U.S. employment gains, and a lack of broad public and political agreement on how to achieve U.S. deficit reduction drove the 10-year U.S. Treasury yield from 1.89% on December 31, 2011, to 1.67% on June 30, 2012.

2. Source: Lipper, Inc. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

3. Please see Index Descriptions following the Fund Summaries.

Fund Risks: All investments involve risks, including possible loss of principal. The Fund’s share price and yield will be affected by interest rate movements and mortgage prepayments. Bond prices generally move in the opposite direction of interest rates. Thus, as the prices of bonds in the Fund adjust to a rise in interest rates, the Fund’s share price may decline. U.S. government securities owned by the Fund, but not shares of the Fund, may be guaranteed by the U.S. government, its agencies or instrumentalities as to the timely payment of principal and interest. The Fund’s yield and share price are not guaranteed and will fluctuate with market conditions. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

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Investment Strategy

Using our straightforward investment approach, we seek to produce current income with a high degree of credit safety from a conservatively managed portfolio of U.S. government securities. Analyzing securities using proprietary and nonproprietary research, we seek to identify attractive investment opportunities.

Manager’s Discussion

During the first half of the period, the U.S. economy continued to make strides toward a self-sustaining recovery. A number of high frequency economic releases supported this trend and this generally healthy data bolstered most risk assets but weighed on Treasuries. In the second half of the period, however, the markets experienced frequent bouts of risk aversion, as investor uncertainty regarding the future of the eurozone weighed on financial markets and U.S. economic data became more mixed.

Mortgages continued to perform well during the period. Overall performance was driven by slower prepayments and investors’ expectations for continued moderation of prepayment rates. While prepayment risk remained heightened, actual prepayment levels were constrained due to the associated cost of refinancing, loss of home equity, tighter underwriting standards and declining home prices.

Within the agency mortgage pass-through sector, Fannie Mae mortgage-backed securities (MBS) provided the strongest performance, versus Freddie Mac (FHLMC) and Ginnie Mae (GNMA) MBS. On an excess return basis, lower coupon 3.5% and 4.0% GNMAs were the best performers, while 5.0% coupon and higher GNMAs lagged with negative excess returns.

Franklin U.S. Government Fund’s investment process and strategy did not change, and the investment team continued to look for strong cash-flow fundamentals and valuations to uncover opportunities across the agency mortgage and agency debenture universe. The Fund emphasized agency pass-throughs, primarily GNMA MBS, which remain the only MBS backed by the full faith and credit of the U.S. government, and invested in other agency securities for diversification.⁴ We remained allocated toward the GNMA sector and added to lower coupon 3.5% GNMA II (comprising multiple-issuer pools) securities. We decreased

4. Securities owned by the Fund, but not shares of the Fund, are guaranteed by the U.S. government, its agencies or instrumentalities as to timely payment of principal and interest. The Fund’s yield and share price are not guaranteed and will vary with market conditions

LOGO

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments.

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the Fund’s allocation to 4.5% coupon GNMA securities. We also purchased a small amount of lower coupon 3.5% and 4.0% FHLMC MBS. Our heaviest allocation remained in 4.0% through 5.0% coupons. The Fund’s allocation in 3.5% and 4.0% GNMA II securities benefited performance, but its allocation in 5.5% and 6.0% coupons hindered results on an excess return basis.

Thank you for your participation in Franklin U.S. Government Fund. We look forward to serving your future investment needs

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Fund Expenses

•

Transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes.

•

Actual Fund Expenses

You can estimate the Fund-level expenses you incurred during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:

1.	Divide your account value by $1,000.

If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6.

2.	Multiply the result by the number under the heading “Fund-Level Expenses Incurred During Period.”

If Fund-Level Expenses Incurred During Period were $7.50, then 8.6 x $7.50 = $64.50.

In this illustration, the estimated expenses incurred this period at the Fund level are $64.50.

Franklin U.S. Government Fund – Class 2

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Hypothetical Example for Comparison with Other Mutual Funds


Class 2	Beginning Account Value 1/1/12		Ending Account Value 6/30/12		Fund-Level Expenses Incurred During Period* 1/1/12–6/30/12
Actual	$	1,000	$	1,012.00	$	3.75
Hypothetical (5% return before expenses)	$	1,000	$	1,021.13	$	3.77

*Expenses are calculated using the most recent six-month annualized expense ratio for the Fund’s Class 2 shares (0.75%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 182/366 to reflect the one-half year period.

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Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Franklin U.S. Government Fund


	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31,
Class 1	Six Months Ended June 30, 2012 (unaudited)			2011			2010			2009			2008			2007

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	13.67		$	13.34		$	13.08		$	13.19		$	12.89		$	12.69

Income from investment operations^a:
Net investment income^b		0.17			0.42	^c		0.47	^c		0.52	^c		0.59	^c		0.62	^c
Net realized and unrealized gains (losses)		0.01			0.36	^c		0.25	^c		(0.09	)^c		0.38	^c		0.21	^c

Total from investment operations		0.18			0.78			0.72			0.43			0.97			0.83

Less distributions from net investment income		(0.39	)		(0.45	)		(0.46	)		(0.54	)		(0.67	)		(0.63	)

Net asset value, end of period	$	13.46		$	13.67		$	13.34		$	13.08		$	13.19		$	12.89


Total return^d		1.29%			5.96%			5.56%			3.34%			7.91%			6.85%
Ratios to average net assets^e
Expenses		0.50%			0.51%			0.52%			0.53%			0.53%	^f		0.53%	^f
Net investment income		2.59%			3.11%	^c		3.51%	^c		3.96%	^c		4.59%	^c		4.88%	^c

Supplemental data
Net assets, end of period (000’s)	$	134,470		$	136,628		$	157,551		$	162,524		$	173,018		$	167,700
Portfolio turnover rate		15.66%			37.89%			51.04%			27.51%			17.06%			27.50%

^bBased on average daily shares outstanding.

^cSee Note 9 regarding revisions to previously issued financial statements.

^eRatios are annualized for periods less than one year.

^fBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

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Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin U.S. Government Fund


	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31,
Class 2	Six Months Ended June 30, 2012 (unaudited)			2011			2010			2009			2008			2007

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	13.42		$	13.11		$	12.87		$	12.99		$	12.71		$	12.52

Income from investment operations^a:
Net investment income^b		0.16			0.38	^c		0.43	^c		0.48	^c		0.55	^c		0.58	^c
Net realized and unrealized gains (losses)		—	^d		0.35	^c		0.24	^c		(0.09	)^c		0.37	^c		0.21	^c

Total from investment operations		0.16			0.73			0.67			0.39			0.92			0.79

Less distributions from net investment income		(0.36	)		(0.42	)		(0.43	)		(0.51	)		(0.64	)		(0.60	)

Net asset value, end of period	$	13.22		$	13.42		$	13.11		$	12.87		$	12.99		$	12.71


Total return^e		1.20%			5.68%			5.28%			3.09%			7.59%			6.61%
Ratios to average net assets^f
Expenses		0.75%			0.76%			0.77%			0.78%			0.78%	^g		0.78%^g
Net investment income		2.34%			2.86%	^c		3.26%	^c		3.71%	^c		4.34%	^c		4.63%	^c

Supplemental data
Net assets, end of period (000’s)	$	1,040,571		$	894,699		$	703,997		$	557,809		$	450,603		$	379,386
Portfolio turnover rate		15.66%			37.89%			51.04%			27.51%			17.06%			27.50%

^bBased on average daily shares outstanding.

^cSee Note 9 regarding revisions to previously issued financial statements.

^dAmount rounds to less than $0.01 per share.

^fRatios are annualized for periods less than one year.

^gBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

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Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited)


Franklin U.S. Government Fund	Principal Amount		Value
Mortgage-Backed Securities 75.9%
^aFederal Home Loan Mortgage Corp. (FHLMC) Adjustable Rate 0.0%†
FHLMC, 2.221%, 6/01/22	$	150,487	$	153,955
FHLMC, 2.32%, 2/01/19		30,217		31,162

				185,117

Federal Home Loan Mortgage Corp. (FHLMC) Fixed Rate 9.8%
FHLMC Gold 15 Year, 4.50%, 3/01/25 - 4/01/25		10,888,135		11,625,369
^bFHLMC Gold 30 Year, 3.50%, 4/01/42 - 6/01/42		22,971,208		24,123,158
FHLMC Gold 30 Year, 4.00%, 9/01/40 - 12/01/41		22,585,700		24,010,874
FHLMC Gold 30 Year, 4.50%, 5/01/40 - 7/01/41		15,140,285		16,207,286
FHLMC Gold 30 Year, 5.00%, 9/01/33 - 4/01/40		20,743,708		22,400,363
FHLMC Gold 30 Year, 5.50%, 7/01/33 - 5/01/38		8,060,319		8,801,300
FHLMC Gold 30 Year, 6.00%, 1/01/24 - 8/01/35		3,874,592		4,332,952
FHLMC Gold 30 Year, 6.50%, 12/01/23 - 5/01/35		1,549,409		1,763,580
FHLMC Gold 30 Year, 7.00%, 4/01/24 - 10/01/32		653,777		771,896
FHLMC Gold 30 Year, 7.50%, 12/01/22 - 5/01/24		28,735		30,353
FHLMC Gold 30 Year, 8.00%, 7/01/21 - 5/01/22		18,824		20,985
FHLMC Gold 30 Year, 8.50%, 10/01/21 - 7/01/31		936,742		1,163,609
FHLMC PC 30 Year, 8.00%, 1/01/17 - 5/01/17		5,090		5,131
FHLMC PC 30 Year, 8.50%, 9/01/20		958		1,114

				115,257,970

^aFederal National Mortgage Association (FNMA) Adjustable Rate 0.1%
FNMA, 2.153%, 2/01/19		63,401		67,060
FNMA, 2.16%, 1/01/18		635,152		660,276
FNMA, 2.434%, 9/01/18		218,003		233,576
FNMA, 4.317%, 3/01/20		88,269		93,872
FNMA, 4.442%, 7/01/19		97,940		98,887

				1,153,671

Federal National Mortgage Association (FNMA) Fixed Rate 14.8%
FNMA 15 Year, 5.50%, 6/01/16 - 1/01/25		8,525,061		9,318,986
FNMA 15 Year, 6.00%, 8/01/17 - 9/01/17		471,081		517,354
FNMA 30 Year, 4.00%, 6/01/41		13,244,492		14,126,721
FNMA 30 Year, 4.00%, 3/01/39 - 9/01/41		49,574,518		52,861,702
FNMA 30 Year, 4.50%, 12/01/40		16,851,827		18,142,135
FNMA 30 Year, 4.50%, 8/01/40 - 6/01/41		13,325,387		14,365,038
FNMA 30 Year, 5.00%, 3/01/34 - 7/01/41		27,041,438		29,379,006
FNMA 30 Year, 5.50%, 12/01/32 - 8/01/35		6,716,987		7,383,553
FNMA 30 Year, 6.00%, 1/01/24 - 8/01/38		17,715,749		19,535,060
FNMA 30 Year, 6.50%, 1/01/24 - 9/01/36		3,196,411		3,627,357
FNMA 30 Year, 7.50%, 4/01/23 - 8/01/25		77,181		86,283
FNMA 30 Year, 8.00%, 7/01/16 - 2/01/25		165,634		177,741
FNMA 30 Year, 8.50%, 10/01/19 - 6/01/21		1,877		2,168
FNMA 30 Year, 9.00%, 10/01/26		357,956		445,240
FNMA GL 30 Year, 8.00%, 8/01/19		35,027		35,882
FNMA PL 30 Year, 5.50%, 4/01/34		3,219,976		3,541,655

				173,545,881

Government National Mortgage Association (GNMA) Fixed Rate 51.2%
GNMA I SF 30 Year, 4.00%, 9/15/41		4,291,350		4,695,953
GNMA I SF 30 Year, 4.50%, 1/15/39 - 4/15/41		62,374,031		68,516,267
GNMA I SF 30 Year, 5.00%, 2/15/40		12,534,383		13,906,750
GNMA I SF 30 Year, 5.00%, 6/15/30 - 9/15/40		73,774,487		81,662,359

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Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin U.S. Government Fund	Principal Amount		Value
Mortgage-Backed Securities (continued)
Government National Mortgage Association (GNMA) Fixed Rate (continued)
GNMA I SF 30 Year, 5.50%, 11/15/28 - 10/15/39	$	28,009,656	$	31,250,284
GNMA I SF 30 Year, 6.00%, 11/15/23 - 11/15/38		14,551,815		16,404,891
GNMA I SF 30 Year, 6.50%, 5/15/23 - 9/15/38		5,130,407		5,947,599
GNMA I SF 30 Year, 7.00%, 3/15/22 - 1/15/32		1,508,823		1,784,807
GNMA I SF 30 Year, 7.50%, 2/15/17 - 8/15/33		1,375,860		1,609,359
GNMA I SF 30 Year, 8.00%, 2/15/17 - 5/15/24		414,569		453,454
GNMA I SF 30 Year, 8.25%, 4/15/25		18,551		18,704
GNMA I SF 30 Year, 8.50%, 6/15/22 - 12/15/24		141,795		156,247
GNMA I SF 30 Year, 9.00%, 6/15/16 - 5/15/20		45,922		47,459
GNMA I SF 30 Year, 9.50%, 7/15/16 - 6/15/21		145,132		155,200
GNMA I SF 30 Year, 10.00%, 10/15/17 - 8/15/21		84,620		90,415
GNMA II SF 30 Year, 3.50%, 1/20/42		17,062,469		18,267,320
GNMA II SF 30 Year, 3.50%, 12/20/40 - 3/20/42		11,733,054		12,561,574
GNMA II SF 30 Year, 3.50%, 4/20/42		63,707,852		68,206,526
GNMA II SF 30 Year, 3.50%, 5/20/42		16,395,431		17,553,180
GNMA II SF 30 Year, 4.00%, 11/20/41		28,855,361		31,609,834
GNMA II SF 30 Year, 4.00%, 11/20/39 - 1/20/42		64,754,716		70,884,987
GNMA II SF 30 Year, 4.50%, 4/20/41		18,736,193		20,698,243
GNMA II SF 30 Year, 4.50%, 5/20/41		11,406,041		12,600,479
GNMA II SF 30 Year, 4.50%, 6/20/41		16,095,066		17,729,034
GNMA II SF 30 Year, 4.50%, 7/20/41		16,462,386		18,133,644
GNMA II SF 30 Year, 4.50%, 10/20/39 - 9/20/41		23,534,581		25,967,467
GNMA II SF 30 Year, 5.00%, 9/20/33 - 6/20/40		16,925,524		18,801,344
GNMA II SF 30 Year, 5.50%, 5/20/34 - 6/20/38		22,576,359		25,174,429
GNMA II SF 30 Year, 6.00%, 11/20/23 - 7/20/39		13,817,355		15,594,376
GNMA II SF 30 Year, 6.50%, 12/20/27 - 4/20/34		1,325,809		1,537,708
GNMA II SF 30 Year, 7.00%, 5/20/32		23,180		27,376
GNMA II SF 30 Year, 7.50%, 5/20/17 - 5/20/33		279,761		326,037
GNMA II SF 30 Year, 8.00%, 7/20/16 - 8/20/26		29,969		33,035
GNMA II SF 30 Year, 9.50%, 4/20/25		2,944		2,988

				602,409,329

Total Mortgage-Backed Securities (Cost $854,349,399)				892,551,968

U.S. Government and Agency Securities 20.2%
FFCB, 1.50%, 11/16/15		10,000,000		10,309,740
FHLB, 0.875%, 8/22/12		20,000,000		20,020,820
3.625%, 5/29/13		4,500,000		4,638,330
3.625%, 10/18/13		15,000,000		15,642,330
4.75%, 12/16/16		17,000,000		19,915,432
5.125%, 8/14/13		11,000,000		11,601,073
5.25%, 6/05/17		9,000,000		10,843,380
FICO, 15, Strip, 3/07/16		15,000,000		14,489,505
15P, Strip, 3/07/19		1,798,000		1,621,303
16, Strip, 4/05/17		12,367,000		11,671,443
A-P, Strip, 2/08/18		1,000,000		926,341
Strip, 11/02/18		1,296,000		1,180,456
Strip, 12/27/18		2,500,000		2,267,395
FNMA, 1.75%, 5/07/13		7,900,000		7,997,857
senior note, 5.375%, 6/12/17		17,800,000		21,599,802

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Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Franklin U.S. Government Fund	Principal Amount		Value
U.S. Government and Agency Securities (continued)
HUD, 96-A, 7.63%, 8/01/14	$	190,000	$	190,054
7.66%, 8/01/15		67,582		67,612
SBA, ^aFRN, 2.85%, 6/25/19		312,842		324,002
^aFRN, 3.125%, 3/25/18		448,760		458,659
PC, 1995-20L, 1, 6.45%, 12/01/15		221,328		235,869
PC, 1996-20L, 1, 6.70%, 12/01/16		268,381		288,457
PC, 1997-20G, 1, 6.85%, 7/01/17		332,962		362,588
PC, 1998-20I, 1, 6.00%, 9/01/18		959,028		1,044,803
TVA, 5.88%, 4/01/36		5,000,000		6,995,350
U.S. Treasury Note, 0.875%, 11/30/16		2,500,000		2,526,173
1.25%, 1/31/19		10,000,000		10,145,310
1.75%, 10/31/18		3,000,000		3,141,798
2.375%, 9/30/14		17,000,000		17,779,620
2.375%, 8/31/14 - 10/31/14		15,000,000		15,678,749
2.50%, 4/30/15		6,950,000		7,358,855
3.125%, 8/31/13		7,000,000		7,232,421
4.75%, 5/15/14		8,000,000		8,660,311

Total U.S. Government and Agency Securities (Cost $225,662,800)				237,215,838

Total Investments before Short Term Investments (Cost $1,080,012,199)				1,129,767,806

Short Term Investments (Cost $50,209,699) 4.3%
Repurchase Agreements 4.3%
^cJoint Repurchase Agreement, 0.129%, 7/02/12 (Maturity Value $50,210,238)		50,209,699		50,209,699
BNP Paribas Securities Corp. (Maturity Value $9,808,571)
Credit Suisse Securities (USA) LLC (Maturity Value $11,443,415)
Deutsche Bank Securities Inc. (Maturity Value $7,706,267)
HSBC Securities (USA) Inc. (Maturity Value $6,538,879)
Merrill Lynch, Pierce, Fenner & Smith Inc. (Maturity Value $6,538,879)
Morgan Stanley & Co. LLC (Maturity Value $3,269,691)
UBS Securities LLC (Maturity Value $4,904,536)
Collateralized by U.S. Government Agency Securities, 0.00% - 5.25%, 8/01/12 - 6/28/17; ^dU.S. Treasury Bills, 7/26/12; and U.S. Treasury Notes, 1.125% - 3.00%, 12/15/12 - 2/15/22 (valued at $51,232,770)

Total Investments (Cost $1,130,221,898) 100.4%				1,179,977,505
Other Assets, less Liabilities (0.4)%				(4,936,420	)

Net Assets 100.0%			$	1,175,041,085

See Abbreviations on page FUS-21.

^†Rounds to less than 0.1% of net assets.

^aThe coupon rate shown represents the rate at period end.

^bA portion or all of the security purchased on a to-be-announced (TBA) basis. See Note 1(c).

^cSee Note 1(b) regarding joint repurchase agreement.

^dThe security is traded on a discount basis with no stated coupon rate.

The accompanying notes are an integral part of these financial statements.

FUS-11

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

June 30, 2012 (unaudited)


	Franklin U.S. Government Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	1,080,012,199
Cost - Repurchase agreements		50,209,699

Total cost of investments	$	1,130,221,898

Value - Unaffiliated issuers	$	1,129,767,806
Value - Repurchase agreements		50,209,699

Total value of investments		1,179,977,505
Receivables:
Investment securities sold		12,218
Capital shares sold		740,579
Interest		4,045,624
Other assets		262

Total assets		1,184,776,188

Liabilities:
Payables:
Investment securities purchased		8,384,375
Capital shares redeemed		362,311
Affiliates		865,124
Accrued expenses and other liabilities		123,293

Total liabilities		9,735,103

Net assets, at value	$	1,175,041,085

Net assets consist of:
Paid-in capital	$	1,120,408,940
Undistributed net investment income		14,471,507
Net unrealized appreciation (depreciation)		49,755,607
Accumulated net realized gain (loss)		(9,594,969	)

Net assets, at value	$	1,175,041,085

Class 1:
Net assets, at value	$	134,469,996

Shares outstanding		9,989,397

Net asset value and maximum offering price per share	$	13.46

Class 2:
Net assets, at value	$	1,040,571,089

Shares outstanding		78,711,817

Net asset value and maximum offering price per share	$	13.22

The accompanying notes are an integral part of these financial statements.

FUS-12

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the six months ended June 30, 2012 (unaudited)


	Franklin U.S. Government Fund
Investment income:
Interest	$	16,620,060

Expenses:
Management fees (Note 3a)		2,542,337
Distribution fees - Class 2 (Note 3c)		1,178,859
Unaffiliated transfer agent fees		822
Custodian fees (Note 4)		8,002
Reports to shareholders		87,121
Professional fees		21,941
Trustees’ fees and expenses		1,802
Other		21,014

Total expenses		3,861,898

Net investment income		12,758,162

Realized and unrealized gains (losses):
Net realized gain (loss) from investments		1,869,975
Net change in unrealized appreciation (depreciation) on investments		(1,481,283	)

Net realized and unrealized gain (loss)		388,692

Net increase (decrease) in net assets resulting from operations	$	13,146,854

The accompanying notes are an integral part of these financial statements.

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Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets


	Franklin U.S. Government Fund
	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31, 2011

Increase (decrease) in net assets:
Operations:
Net investment income	$	12,758,162		$	26,836,883	^a
Net realized gain (loss) from investments		1,869,975			4,945,621
Net change in unrealized appreciation (depreciation) on investments		(1,481,283	)		19,030,387	^a

Net increase (decrease) in net assets resulting from operations		13,146,854			50,812,891

Distributions to shareholders from:
Net investment income:
Class 1		(3,761,370	)		(4,966,923	)
Class 2		(27,304,487	)		(24,186,254	)

Total distributions to shareholders		(31,065,857	)		(29,153,177	)

Capital share transactions: (Note 2)
Class 1		(148,403	)		(24,494,530	)
Class 2		161,781,687			172,613,515
Class 4		—			(5,048	)

Total capital share transactions		161,633,284			148,113,937

Net increase (decrease) in net assets		143,714,281			169,773,651
Net assets:
Beginning of period		1,031,326,804			861,553,153

End of period	$	1,175,041,085		$	1,031,326,804

Undistributed net investment income included in net assets:
End of period	$	14,471,507		$	32,779,202	^a

^aSee Note 9 regarding revisions to previously issued financial statements.

The accompanying notes are an integral part of these financial statements.

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited)

Franklin U.S. Government Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment company, consisting of twenty separate funds. The Franklin U.S. Government Fund (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. The Fund offers two classes of shares: Class 1 and Class 2. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

b. Joint Repurchase Agreement

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin U.S. Government Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

b. Joint Repurchase Agreement (continued)

required to be at least 102% of the dollar amount invested by the funds, with the value of the underlying securities marked to market daily to maintain coverage of at least 100%. The joint repurchase agreement held by the Fund at period end had been entered into on June 29, 2012.

c. Securities Purchased on a TBA Basis

The Fund purchases securities on a to-be-announced (TBA) basis, with payment and delivery scheduled for a future date. These transactions are subject to market fluctuations and are subject to the risk that the value at delivery may be more or less than the trade date purchase price. Although the Fund will generally purchase these securities with the intention of holding the securities, it may sell the securities before the settlement date. Sufficient assets have been segregated for these securities.

d. Income Taxes

e. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Amortization of premium and accretion of discount on debt securities are included in interest income. Distributions to shareholders are recorded on the ex-dividend date and are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with accounting principles generally accepted in the United States of America. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.

f. Accounting Estimates

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin U.S. Government Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

g. Guarantees and Indemnifications

2. SHARES OF BENEFICIAL INTEREST

At June 30, 2012, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:


	Six Months Ended June 30, 2012						Year Ended December 31, 2011^a
Class 1 Shares:	Shares			Amount			Shares			Amount
Shares sold		537,058		$	7,405,020			756,773		$	10,178,368
Shares issued in reinvestment of distributions		279,656			3,761,370			374,862			4,966,923
Shares redeemed		(824,932	)		(11,314,793	)		(2,941,594	)		(39,639,821	)

Net increase (decrease)		(8,218	)	$	(148,403	)		(1,809,959	)	$	(24,494,530	)

Class 2 Shares:
Shares sold		14,088,039		$	189,878,754			22,722,855		$	301,179,226
Shares issued in reinvestment of distributions		2,066,956			27,304,487			1,856,198			24,186,254
Shares redeemed		(4,115,837	)		(55,401,554	)		(11,586,947	)		(152,751,965	)

Net increase (decrease)		12,039,158		$	161,781,687			12,992,106		$	172,613,515

Class 4 Shares:
Shares redeemed								(379	)	$	(5,048	)

Net increase (decrease)								(379	)	$	(5,048	)

^a	Effective March 4, 2011, Class 4 was liquidated.

3. TRANSACTIONS WITH AFFILIATES


Subsidiary		Affiliation
Franklin Advisers, Inc. (Advisers)		Investment manager
Franklin Templeton Services, LLC (FT Services)		Administrative manager
Franklin Templeton Distributors, Inc. (Distributors)		Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services)		Transfer agent

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin U.S. Government Fund

3. TRANSACTIONS WITH AFFILIATES (continued)

a. Management Fees

The Fund pays an investment management fee to Advisers based on the average daily net assets of the Fund as follows:


Annualized Fee Rate		Net Assets
0.625%		Up to and including $100 million
0.500%		Over $100 million, up to and including $250 million
0.450%		Over $250 million, up to and including $7.5 billion
0.440%		Over $7.5 billion, up to and including $10 billion
0.430%		Over $10 billion, up to and including $12.5 billion
0.420%		Over $12.5 billion, up to and including $15 billion
0.400%		In excess of $15 billion

b. Administrative Fees

c. Distribution Fees

e. Transfer Agent Fees

Investor Services, under terms of an agreement, performs shareholder servicing for the Fund and is not paid by the Fund for the services.

4. EXPENSE OFFSET ARRANGEMENT

5. INCOME TAXES

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin U.S. Government Fund

5. INCOME TAXES (continued)

At December 31, 2011, capital loss carryforwards were as follows:


Capital loss carryforwards expiring in:
2012	$	3,331,578
2013		2,102,640
2014		1,618,397
2015		2,329,071
2016		841,479
2017		401,851
2018		426,637

Capital loss carryforwards not subject to expiration:
Short term		373,160

Total capital loss carryforwards	$	11,424,813

At June 30, 2012, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:


Cost of investments	$	1,132,699,175


Unrealized appreciation	$	48,110,293
Unrealized depreciation		(831,963	)

Net unrealized appreciation (depreciation)	$	47,278,330

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatment of paydown losses and bond discounts and premiums.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2012, aggregated $307,047,374 and $164,238,387, respectively.

7. CREDIT FACILITY

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin U.S. Government Fund

8. FAIR VALUE MEASUREMENTS

•

Level 1 – quoted prices in active markets for identical financial instruments

•

Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)

•

Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of financial instruments)

The inputs or methodology used for valuing financial instruments are not an indication of the risk associated with investing in those financial instruments.

For movements between the levels within the fair value hierarchy, the Fund has adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.

At June 30, 2012, all of the Fund’s investments in financial instruments carried at fair value were valued using Level 2 inputs. For detailed categories, see the accompanying Statement of Investments.

9. REVISIONS TO PREVIOUSLY ISSUED FINANCIAL STATEMENTS

After the Fund issued its December 31, 2011 financial statements, the Fund determined a security was not properly accruing income since purchase date in accordance with the effective interest rate method, resulting in an understatement of investment income. The offsetting impact of this error is to unrealized appreciation (depreciation). Accordingly, there is no impact on net increase (decrease) in net assets resulting from operations, beginning and ending net assets, or total return. These adjustments were not considered to be material individually or in aggregate to previously issued financial statements. However, because of the significance of these adjustments to the current year’s financial statements, the Fund has determined to revise the applicable impacted financial statements and financial highlights the next time such financial statements and financial highlights are filed. Accordingly, the Fund will revise the financial statements for the year ended December 31, 2011, and certain Financial Highlights information for the years ended December 31, 2011, 2010, 2009, 2008 and 2007 to give effect to this change. The following sets forth the line items affected by the revisions discussed above.


	Previously Reported		As Revised
Statement of Operations for the year ended December 31, 2011
Investment Income - interest	$	33,076,985	$	33,460,301
Net investment income		26,453,567		26,836,883
Net change in unrealized appreciation (depreciation) on investments		19,413,703		19,030,387
Net realized and unrealized gain (loss)		24,359,324		23,976,008


	Previously Reported		As Revised
Statement of Changes in Net Assets for the year ended December 31, 2011
Net investment income	$	26,453,567	$	26,836,883
Net change in unrealized appreciation (depreciation) on investments		19,413,703		19,030,387
Undistributed net investment income included in net assets		29,334,459		32,779,202

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin U.S. Government Fund

9. REVISIONS TO PREVIOUSLY ISSUED FINANCIAL STATEMENTS (continued)


	Previously Reported			As Revised			Previously Reported			As Revised			Previously Reported			As Revised			Previously Reported			As Revised			Previously Reported			As Revised
Financial Highlights - Class 1	2011			2011			2010			2010			2009			2009			2008			2008			2007			2007
Per share operating performance
Income from investment operations:
Net investment income	$	0.42		$	0.42	^a	$	0.46		$	0.47			$0.51			$0.52		$	0.58		$	0.59		$	0.61		$	0.62
Net realized and unrealized gains (losses)		0.36			0.36	^a		0.26			0.25			(0.08	)		(0.09	)		0.39			0.38			0.22			0.21
Ratios to average net assets:
Net investment income		3.07	%		3.11	%		3.47	%		3.51	%		3.91	%		3.96	%		4.54	%		4.59	%		4.83	%		4.88	%


	Previously Reported			As Revised			Previously Reported			As Revised			Previously Reported			As Revised			Previously Reported			As Revised			Previously Reported			As Revised
Financial Highlights - Class 2	2011			2011			2010			2010			2009			2009			2008			2008			2007			2007
Per share operating performance
Income from investment operations:
Net investment income	$	0.37		$	0.38		$	0.42		$	0.43			$0.47			$0.48		$	0.54		$	0.55		$	0.57		$	0.58
Net realized and unrealized gains (losses)		0.36			0.35			0.25			0.24			(0.08	)		(0.09	)		0.38			0.37			0.22			0.21
Ratios to average net assets:
Net investment income		2.82	%		2.86	%		3.22	%		3.26	%		3.66	%		3.71	%		4.29	%		4.34	%		4.58	%		4.63	%

^a	Changes in per share amounts due to revision round to less than $0.01.

10. NEW ACCOUNTING PRONOUNCEMENTS

11. SUBSEQUENT EVENTS

The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure.

ABBREVIATIONS

Selected Portfolio

FFCB - Federal Farm Credit Bank

FHLB - Federal Home Loan Bank

FICO - Financing Corp.

FRN - Floating Rate Note

GL - Government Loan

HUD - Housing and Urban Development

PC - Participation Certificate

PL - Project Loan

SBA - Small Business Administration

SF - Single Family

TVA - Tennessee Valley Authority

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MUTUAL GLOBAL DISCOVERY SECURITIES FUND

This semiannual report for Mutual Global Discovery Securities Fund covers the period ended June 30, 2012.

Performance Summary as of 6/30/12

Mutual Global Discovery Securities Fund – Class 2 delivered a +5.23% total return for the six-month period ended 6/30/12.

Mutual Global Discovery Securities Fund – Class 2

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Fund Goal and Main Investments: Mutual Global Discovery Securities Fund seeks capital appreciation. Under normal market conditions, the Fund invests primarily in U.S. and foreign equity securities that the investment manager believes are undervalued.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. The Fund underperformed its benchmarks, the MSCI World Index, which generated a +6.29% total return, and the Standard & Poor’s^® 500 Index, which posted a +9.49% total return for the same period.¹

Economic and Market Overview

The six months under review encompassed two different market environments. The first quarter of 2012 delivered the best annual start for global developed stocks in more than a decade, as measured by the MSCI World Index, as signs of U.S. economic recovery and European policy relief underpinned a rally in cyclical stocks.² Yet, renewed global economic weakness and European debt concerns led the market lower in the second quarter, and stocks dropped sharply in the spring before additional policy action prompted a rebound in June. Politics largely drove the markets during the first half of 2012 as investors closely monitored developments in Europe, where German-led austerity demands were met with increasing resentment from some highly indebted eurozone members. Coalition-building efforts in Greece collapsed amid anger over the terms of the country’s second bailout, forcing a new election that brought some relief when the pro-euro party won. Elsewhere in the region, France’s socialist candidate clinched the presidency on a pro-growth platform and the Dutch cabinet resigned in the wake of a contentious austerity deal.

On the economic front, global growth trends generally moderated, led by Europe, which narrowly avoided recession mainly because of German export strength. Yet, even the more resilient economies of Germany, the U.S. and China showed signs of a slowdown at period-end. The combination of flagging growth, political uncertainty and populist unrest pressured investor confidence, and ratings agencies downgraded global banks and European sovereigns. Concerns about Italian and Spanish borrowing costs added to investor anxiety as bond yields climbed. Europe’s initial policy responses — including enhanced

2. Please see Index Descriptions following the Fund Summaries.

Fund Risks: All investments involve risks, including possible loss of principal. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Value securities may not increase in price as anticipated, or may decline further in value. Investments in foreign securities involve certain risks including currency fluctuations, and economic and political uncertainties. Smaller company stocks have exhibited greater price volatility than larger company stocks, particularly over the short term. Investments in companies engaged in mergers, reorganizations or liquidations also involve special risks as pending deals may not be completed on time or on favorable terms. Investments in lower rated bonds entail higher credit risk. The Fund may from time to time enter into certain transactions involving derivatives; such techniques may not achieve the anticipated benefits and/or may result in losses to the Fund. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

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liquidity measures and an ineffective Spanish banking bailout — did little to address the structural imbalances of eurozone economies or the solvency fears plaguing the region’s banking system. Yet, encouraging progress did emerge at period-end when leaders in Brussels agreed to ease conditions of sovereign bond purchases and permit the region’s bailout fund to directly recapitalize banks. Meanwhile, the U.S. Federal Reserve Board (Fed) opted to extend its strategy, dubbed Operation Twist, designed to lower systemically important interest rates, and the People’s Bank of China slashed interest rates for the first time since the global financial crisis began. In the latter part of the period, commodities extended recent losses, with oil falling back below $100, while the euro dipped and traditional safe havens like U.S. Treasuries, the U.S. dollar and the Japanese yen made gains.

Investment Strategy

At Mutual Series, we are committed to our distinctive value approach to investing. Our major investment strategy is investing in undervalued stocks. When selecting undervalued equities, we are attracted to fundamentally strong companies with healthy balance sheets, high-quality assets, substantial free cash flow and shareholder-oriented management teams and whose stocks are trading at discounts to our assessment of the companies’ intrinsic or business value. We also look for asset rich companies whose shares may be trading at depressed levels due to concerns over short-term earnings disappointments, litigation, management strategy or other perceived negatives. While the vast majority of our undervalued equity investments are made in publicly traded companies globally, we may invest occasionally in privately held companies as well.

We complement this more traditional investment strategy with two others. One is distressed investing, which is complex and can take many forms. The most common distressed investment the Fund undertakes is the purchase of financially troubled or bankrupt companies’ debt at a substantial discount to face value. After the financially distressed company is reorganized, often in bankruptcy court, the old debt is typically replaced with new securities issued by the financially stronger company.

LOGO

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One form of arbitrage involves purchasing the target company’s stock when it is trading below the value we believe it would receive in a deal. In keeping with our commitment to a relatively conservative investment approach, we typically focus our arbitrage efforts on announced deals, and eschew rumored deals or other situations we consider relatively risky.

In addition, it is our practice to hedge the Fund’s currency exposure when we deem it advantageous for our shareholders.

Manager’s Discussion

In an environment of generally rising equity prices, many Fund holdings increased in value during the six-month period. Three particularly strong performers were U.S. drugstore chain and pharmacy benefits manager CVS Caremark, U.S.-based nationwide financial services company Wells Fargo, and U.S.-based tobacco company Lorillard.

CVS shares appreciated as management in May increased its 2012 guidance, reflecting strong first-quarter 2012 and fiscal year 2011 results. Strong growth in pharmacy network claims processed and increases in same-store sales led to revenue growth across business segments, supporting the stock price during the period.

Despite a difficult operating environment for banks, Wells Fargo communicated encouraging news to investors throughout the period. Early in the year, the bank released strong fourth-quarter 2011 results that included net interest margin (NIM) expansion, sequential loan growth, a continued inflow of deposits and solid mortgage banking results. In March 2012, the Fed announced summary results of its annual bank stress tests. Wells Fargo successfully met requirements and received no objections from the Fed with respect to its capital adequacy and planning. Consequently, Wells Fargo boosted its quarterly dividend and received permission to repurchase stock. Operational results were strong throughout the remainder of the period, led by robust performance in the mortgage banking segment and continued NIM expansion.

After a strong 2011, the Fund’s investment in Lorillard continued to boost performance in the first half of 2012. During the period, Lorillard reported fourth-quarter results that were well above consensus estimates on many metrics. Increased volumes and prices drove impressive top-line results, which in turn led to improved margins. Lorillard’s board of directors also approved a dividend increase due to the company’s

Top 10 Sectors/Industries

Mutual Global Discovery Securities Fund

6/30/12


	% of Total Net Assets
Tobacco		8.6%
Oil, Gas & Consumable Fuels		7.0%
Commercial Banks		6.9%
Pharmaceuticals		6.6%
Insurance		6.1%
Media		4.8%
Diversified Financial Services		3.9%
Industrial Conglomerates		3.4%
Food & Staples Retailing		3.4%
Software		3.3%

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strong 2011 performance. Later in the period, Lorillard announced first-quarter 2012 results that met internal expectations, and the company continued to reward investors through share repurchases and dividends.

During the period under review, some of the Fund’s investments lost value and negatively impacted Fund performance. Key detractors included French media company Eutelsat Communications, German industrial conglomerate ThyssenKrupp and a new Fund holding, Netherlands-based financial services firm ING Groep.

Eutelsat’s share price declined in the first half of 2012 as the company announced fiscal third-quarter revenues that fell short of analyst estimates and also announced a downward revision to its revenue guidance. Despite the near-term weakness, we believe Eutelsat shares remain undervalued and we will continue monitoring the company’s fundamentals and strategy closely as it approaches the end of its fiscal year and a planned disclosure of its revised three-year outlook.

During the period, ThyssenKrupp’s operating performance was broadly in line with expectations, with the exception of the company’s Steel Europe and Americas businesses, which struggled due to cyclical pricing pressures and launch issues in the Americas. While the company continued to execute on its original restructuring plan, the uncertain and volatile macroeconomic environment weighed on operations, contributing to management’s recent announcement that it would explore all strategic options regarding the Steel Americas division. At period-end, we continued to see upside potential in our investment based on our view that ThyssenKrupp has a strong set of assets, manageable debt maturity ladder, ability to generate strong free cash flow and a restructuring plan designed to create value.

ING Groep’s shares declined in value during the period amid increased uncertainty regarding Europe’s political and economic outlook. Although the economic backdrop created headwinds, we believe our investment has upside potential as ING continues to divest insurance assets at attractive prices in its efforts to simplify its holding company structure while maintaining a well-capitalized banking operation.

During the period, the Fund held currency forwards and futures to somewhat hedge the currency risk of the portfolio’s non-U.S. dollar investments. The hedges had a minor positive impact on the Fund’s performance during the period.

Top 10 Holdings

Mutual Global Discovery Securities Fund 6/30/12


Company Sector/Industry, Country	% of Total Net Assets
Merck & Co. Inc.		2.6%
Pharmaceuticals, U.S.
British American Tobacco PLC		2.5%
Tobacco, U.K.
Vodafone Group PLC		2.3%
Wireless Telecommunication Services, U.K.
ACE Ltd.		2.3%
Insurance, U.S.
Jardine Strategic Holdings Ltd.		2.2%
Industrial Conglomerates, Hong Kong
Microsoft Corp.		2.1%
Software, U.S.
Wells Fargo & Co.		2.0%
Commercial Banks, U.S.
Royal Dutch Shell PLC, A		1.9%
Oil, Gas & Consumable Fuels, U.K.
Pernod Ricard SA		1.8%
Beverages, France
Kraft Foods Inc., A		1.8%
Food Products, U.S.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments.

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Thank you for your participation in Mutual Global Discovery Securities Fund. We look forward to serving your future investment needs.

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Fund Expenses

•

Transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes.

•

Actual Fund Expenses

You can estimate the Fund-level expenses you incurred during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:

1.	Divide your account value by $1,000.

If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6.

2.	Multiply the result by the number under the heading “Fund-Level Expenses Incurred During Period.”

If Fund-Level Expenses Incurred During Period were $7.50, then 8.6 x $7.50 = $64.50.

In this illustration, the estimated expenses incurred this period at the Fund level are $64.50.

Mutual Global Discovery Securities Fund – Class 2

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Hypothetical Example for Comparison with Other Mutual Funds


Class 2	Beginning Account Value 1/1/12		Ending Account Value 6/30/12		Fund-Level Expenses Incurred During Period* 1/1/12–6/30/12
Actual	$	1,000	$	1,052.30	$	6.38
Hypothetical (5% return before expenses)	$	1,000	$	1,018.65	$	6.27

*Expenses are calculated using the most recent six-month annualized expense ratio for the Fund’s Class 2 shares (1.25%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 182/366 to reflect the one-half year period.

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Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Mutual Global Discovery Securities Fund


	Six Months Ended June 30, 2012 (unaudited)		Year Ended December 31,
Class 1	Six Months Ended June 30, 2012 (unaudited)		2011			2010			2009			2008			2007

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	19.66	$	21.16		$	19.14		$	16.12		$	24.08		$	22.05

Income from investment operations^a:
Net investment income^b		0.27		0.52			0.38			0.19	^c		0.37			0.47
Net realized and unrealized gains (losses)		0.79		(1.09	)		1.94			3.57			(6.95	)		2.22

Total from investment operations		1.06		(0.57	)		2.32			3.76			(6.58	)		2.69

Less distributions from:
Net investment income		—		(0.50	)		(0.30	)		(0.26	)		(0.52	)		(0.38	)
Net realized gains		—		(0.43	)		—			(0.48	)		(0.86	)		(0.28	)

Total distributions		—		(0.93	)		(0.30	)		(0.74	)		(1.38	)		(0.66	)

Net asset value, end of period	$	20.72	$	19.66		$	21.16		$	19.14		$	16.12		$	24.08


Total return^d		5.39%		(2.73)%			12.24%			23.63%			(28.29)%			12.17%
Ratios to average net assets^e
Expenses^f		1.00%		0.97%	^g		1.00%	^g		1.06%	^g		0.98%	^g		0.97%	^g
Expenses incurred in connection with securities sold short		—%		—%	^h		0.02%			0.09%			0.01%			—%	^h
Net investment income		2.62%		2.34%			1.93%			1.07%	^c		1.82%			1.96%

Supplemental data
Net assets, end of period (000’s)	$	1,021	$	974		$	84,213		$	86,755		$	81,320		$	142,751
Portfolio turnover rate		14.91%		26.17%	ⁱ		49.31%			43.35%			22.76%			28.20%

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $(0.03) per share related to an adjustment for uncollectible interest. Excluding the effect of this adjustment, the ratio of net investment income to average net assets would have been 1.26%.

^eRatios are annualized for periods less than one year.

^fIncludes dividend or interest expense on securities sold short and security borrowing fees, if any. See below for the ratios of such expenses to average net assets for the periods presented. See Note 1(f).

^gBenefit of expense reduction rounds to less than 0.01%.

^hRounds to less than 0.01%.

ⁱExcludes the value of portfolio securities delivered as a result of a redemption in-kind. See Note 13.

The accompanying notes are an integral part of these financial statements.

MGD-9

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Mutual Global Discovery Securities Fund


	Six Months Ended June 30, 2012 (unaudited)		Year Ended December 31,
Class 2	Six Months Ended June 30, 2012 (unaudited)		2011			2010			2009			2008			2007

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	19.30	$	20.80		$	18.81		$	15.85		$	23.69		$	21.73

Income from investment operations^a:
Net investment income^b		0.24		0.43			0.33			0.14	^c		0.32			0.40
Net realized and unrealized gains (losses)		0.77		(1.04	)		1.91			3.50			(6.84	)		2.18

Total from investment operations		1.01		(0.61	)		2.24			3.64			(6.52	)		2.58

Less distributions from:
Net investment income		—		(0.46	)		(0.25	)		(0.20	)		(0.46	)		(0.34	)
Net realized gains		—		(0.43	)		—			(0.48	)		(0.86	)		(0.28	)

Total distributions		—		(0.89	)		(0.25	)		(0.68	)		(1.32	)		(0.62	)

Net asset value, end of period	$	20.31	$	19.30		$	20.80		$	18.81		$	15.85		$	23.69


Total return^d		5.23%		(2.96)%			11.96%			23.31%			(28.45)%			11.85%
Ratios to average net assets^e
Expenses^f		1.25%		1.22%	^g		1.25%	^g		1.31%	^g		1.23%	^g		1.22%	^g
Expenses incurred in connection with securities sold short		—%		—%	^h		0.02%			0.09%			0.01%			—%	^h
Net investment income		2.37%		2.09%			1.68%			0.82%	^c		1.57%			1.71%

Supplemental data
Net assets, end of period (000’s)	$	668,575	$	712,161		$	1,351,223		$	1,309,852		$	1,113,720		$	1,867,484
Portfolio turnover rate		14.91%		26.17%	ⁱ		49.31%			43.35%			22.76%			28.20%

^bBased on average daily shares outstanding.

^eRatios are annualized for periods less than one year.

^gBenefit of expense reduction rounds to less than 0.01%.

^hRounds to less than 0.01%.

ⁱExcludes the value of portfolio securities delivered as a result of a redemption in-kind. See Note 13.

The accompanying notes are an integral part of these financial statements.

MGD-10

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Mutual Global Discovery Securities Fund


	Six Months Ended June 30, 2012 (unaudited)		Year Ended December 31,
Class 4	Six Months Ended June 30, 2012 (unaudited)		2011			2010			2009			2008^a

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	19.50	$	21.02		$	19.02		$	16.07		$	22.50

Income from investment operations^b:
Net investment income^c		0.23		0.40			0.31			0.11	^d		0.09
Net realized and unrealized gains (losses)		0.79		(1.05	)		1.94			3.56			(5.14	)

Total from investment operations		1.02		(0.65	)		2.25			3.67			(5.05	)

Less distributions from:
Net investment income		—		(0.44	)		(0.25	)		(0.24	)		(0.52	)
Net realized gains		—		(0.43	)		—			(0.48	)		(0.86	)

Total distributions		—		(0.87	)		(0.25	)		(0.72	)		(1.38	)

Net asset value, end of period	$	20.52	$	19.50		$	21.02		$	19.02		$	16.07


Total return^e		5.23%		(3.08)%			11.87%			23.19%			(23.48)%
Ratios to average net assets^f
Expenses^g		1.35%		1.32%	^h		1.35%	^h		1.41%	^h		1.33%	^h
Expenses incurred in connection with securities sold short		—%		—%ⁱ			0.02%			0.09%			0.01%
Net investment income		2.27%		1.99%			1.58%			0.72%	^d		1.47%

Supplemental data
Net assets, end of period (000’s)	$	65,475	$	66,695		$	70,613		$	59,178		$	23,981
Portfolio turnover rate		14.91%		26.17%	^j		49.31%			43.35%			22.76%

^aFor the period February 29, 2008 (effective date) to December 31, 2008.

^cBased on average daily shares outstanding.

^dNet investment income per share includes approximately $(0.03) per share related to an adjustment for uncollectible interest. Excluding the effect of this adjustment, the ratio of net investment income to average net assets would have been 0.91%.

^fRatios are annualized for periods less than one year.

^gIncludes dividend or interest expense on securities sold short and security borrowing fees, if any. See below for the ratios of such expenses to average net assets for the periods presented. See Note 1(f).

^hBenefit of expense reduction rounds to less than 0.01%.

ⁱRounds to less than 0.01%.

^jExcludes the value of portfolio securities delivered as a result of a redemption in-kind. See Note 13.

The accompanying notes are an integral part of these financial statements.

MGD-11

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited)


Mutual Global Discovery Securities Fund	Country	Shares		Value
Common Stocks and Other Equity Interests 86.7%
Auto Components 0.9%
^a,b,cCollins & Aikman Products Co., Contingent Distribution	United States		218,708	$	525
Continental AG	Germany		61,983		5,147,606
^a,dInternational Automotive Components Group Brazil LLC	Brazil		424,073		144,397
^a,d,eInternational Automotive Components Group North America, LLC	United States		3,000,220		1,480,758

					6,773,286

Automobiles 0.4%
Daimler AG	Germany		161		7,202
^aGeneral Motors Co.	United States		136,940		2,700,457

					2,707,659

Beverages 3.0%
Coca-Cola Enterprises Inc.	United Kingdom		107,220		3,006,449
Dr. Pepper Snapple Group Inc.	United States		120,110		5,254,812
^fPernod Ricard SA	France		126,640		13,504,820

					21,766,081

Biotechnology 0.6%
Amgen Inc.	United States		61,796		4,513,580

Capital Markets 1.9%
Morgan Stanley	United States		450,600		6,574,254
UBS AG	Switzerland		609,866		7,101,180

					13,675,434

Chemicals 0.7%
Linde AG	Germany		32,336		5,019,383

Commercial Banks 6.9%
^a,d,gThe Bankshares Inc.	United States		800,000		2,636,792
Barclays PLC	United Kingdom		277,170		707,186
^fBNP Paribas SA	France		138,020		5,298,860
^a,dCapital Bank Financial Corp., A, 144A	United States		78,494		1,295,151
^a,dCapital Bank Financial Corp., B, 144A, non-voting	United States		269,922		4,453,713
^aCIT Group Inc.	United States		81,872		2,917,918
^a,dElephant Capital Holdings Ltd.	Japan		1,903		—
HSBC Holdings PLC	United Kingdom		687,585		6,045,122
KB Financial Group Inc.	South Korea		101,400		3,278,362
^a,dNCB Warrant Holdings Ltd., A	Japan		9,306		—
PNC Financial Services Group Inc.	United States		157,001		9,594,332
Wells Fargo & Co.	United States		445,130		14,885,148

					51,112,584

Communications Equipment 1.0%
Cisco Systems Inc.	United States		359,180		6,167,121
^aResearch In Motion Ltd.	Canada		156,132		1,153,815

					7,320,936

Construction & Engineering 0.6%
Vinci SA	France		99,255		4,620,826

Construction Materials 0.5%
CRH PLC	Ireland		211,723		4,048,824

Consumer Finance 0.0%†
^aComdisco Holding Co. Inc.	United States		44		220

MGD-12

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Mutual Global Discovery Securities Fund	Country	Shares		Value
Common Stocks and Other Equity Interests (continued)
Containers & Packaging 0.9%
Rexam PLC	United Kingdom		1,039,817	$	6,855,393

Diversified Financial Services 3.2%
Citigroup Inc.	United States		203,910		5,589,173
Deutsche Boerse AG	Germany		131,677		7,087,642
^aING Groep NV	Netherlands		994,910		6,630,726
JPMorgan Chase & Co.	United States		62,020		2,215,974
NYSE Euronext	United States		77,522		1,983,013

					23,506,528

Diversified Telecommunication Services 0.7%
^aAboveNet Inc.	United States		19,329		1,623,636
Cable & Wireless Communications PLC	Panama		942,775		437,811
^a,b,cGlobal Crossing Holdings Ltd., Contingent Distribution	United States		2,236,777		—
^a,b,cMarconi Corp., Contingent Distribution	United Kingdom		1,739,100		32,386
Vivendi SA	France		183,456		3,396,821

					5,490,654

Electric Utilities 1.5%
^a,dAET&D Holdings No. 1 Pty. Ltd.	Australia		1,361,600		—
Exelon Corp.	United States		288,450		10,851,489

					10,851,489

Electrical Equipment 0.3%
Alstom SA	France		82,608		2,606,399

Electronic Equipment, Instruments & Components 0.5%
Hoya Corp.	Japan		169,554		3,703,098

Energy Equipment & Services 2.6%
Baker Hughes Inc.	United States		156,156		6,418,012
Ensco PLC, A	United States		95,904		4,504,611
Petroleum Geo-Services ASA	Norway		7,349		89,128
^aSBM Offshore NV	Netherlands		325,498		4,484,078
Transocean Ltd.	United States		73,643		3,294,051

					18,789,880

Food & Staples Retailing 3.4%
CVS Caremark Corp.	United States		206,846		9,665,914
Koninklijke Ahold NV	Netherlands		647,986		8,015,570
Metro AG	Germany		126,985		3,697,184
Walgreen Co.	United States		118,419		3,502,834

					24,881,502

Food Products 1.8%
^aFarmer Brothers Co.	United States		19,353		154,050
Kraft Foods Inc., A	United States		337,176		13,021,737

					13,175,787

Health Care Equipment & Supplies 2.0%
^aBoston Scientific Corp.	United States		777,474		4,408,277
Medtronic Inc.	United States		257,934		9,989,784

					14,398,061

Health Care Providers & Services 1.1%
Cigna Corp.	United States		177,778		7,822,232

MGD-13

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Mutual Global Discovery Securities Fund	Country	Shares		Value
Common Stocks and Other Equity Interests (continued)
Hotels, Restaurants & Leisure 1.6%
Accor SA	France		233,246	$	7,285,440
Ladbrokes PLC	United Kingdom		1,872,315		4,612,850

					11,898,290

Independent Power Producers & Energy Traders 0.9%
^aNRG Energy Inc.	United States		364,067		6,320,203

Industrial Conglomerates 3.4%
Jardine Matheson Holdings Ltd.	Hong Kong		189,097		9,152,295
Jardine Strategic Holdings Ltd.	Hong Kong		526,698		16,064,289

					25,216,584

Insurance 6.1%
ACE Ltd.	United States		223,660		16,579,916
^aAlleghany Corp.	United States		2,730		927,517
^aAmerican International Group Inc.	United States		312,656		10,033,131
E-L Financial Corp. Ltd.	Canada		5,378		2,192,299
^a,dImagine Group Holdings Ltd.	Bermuda		120,290		1,411,471
MetLife Inc.	United States		78,866		2,433,016
^a,dOlympus Re Holdings Ltd.	United States		2,140		—
PartnerRe Ltd.	Bermuda		94,940		7,184,110
Zurich Insurance Group AG	Switzerland		17,558		3,950,087

					44,711,547

Machinery 0.5%
Stanley Black & Decker Inc.	United States		58,667		3,775,808

Marine 1.4%
A.P. Moller - Maersk AS, B	Denmark		1,565		10,241,331

Media 4.8%
CBS Corp., B	United States		179,115		5,871,390
Comcast Corp., Special A	United States		48,623		1,526,762
Daekyo Co. Ltd.	South Korea		5,820		28,557
Eutelsat Communications	France		220,746		6,779,062
News Corp., B	United States		224,400		5,053,488
Reed Elsevier PLC	United Kingdom		792,969		6,357,901
Time Warner Cable Inc.	United States		66,570		5,465,397
Viacom Inc., B	United States		92,770		4,362,045

					35,444,602

Metals & Mining 0.6%
ThyssenKrupp AG	Germany		261,199		4,242,910

Multi-Utilities 2.3%
E.ON AG	Germany		367,602		7,909,030
GDF Suez	France		368,134		8,738,149

					16,647,179

Multiline Retail 0.5%
Kohl’s Corp.	United States		79,740		3,627,373

Office Electronics 1.3%
Xerox Corp.	United States		1,261,817		9,930,500

Oil, Gas & Consumable Fuels 7.0%
Apache Corp.	United States		110,560		9,717,118
BP PLC	United Kingdom		799,477		5,284,951

MGD-14

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Mutual Global Discovery Securities Fund	Country	Shares		Value
Common Stocks and Other Equity Interests (continued)
Oil, Gas & Consumable Fuels (continued)
CONSOL Energy Inc.	United States		205,976	$	6,228,714
Marathon Oil Corp.	United States		198,761		5,082,319
Marathon Petroleum Corp.	United States		116,351		5,226,487
Murphy Oil Corp.	United States		93,480		4,701,109
Royal Dutch Shell PLC, A	United Kingdom		423,890		14,272,922
^aWPX Energy Inc.	United States		59,656		965,234

					51,478,854

Personal Products 0.0%†
Avon Products Inc.	United States		10,284		166,704

Pharmaceuticals 6.6%
Eli Lilly & Co.	United States		119,950		5,147,055
Merck & Co. Inc.	United States		455,858		19,032,071
Novartis AG, ADR	Switzerland		126,364		7,063,748
Pfizer Inc.	United States		539,351		12,405,073
Teva Pharmaceutical Industries Ltd., ADR	Israel		115,150		4,541,516

					48,189,463

Real Estate Management & Development 1.0%
^cCanary Wharf Group PLC	United Kingdom		487,324		1,765,285
Great Eagle Holdings Ltd.	Hong Kong		1,012,524		2,589,355
Swire Pacific Ltd., B	Hong Kong		1,224,472		2,798,351
Swire Properties Ltd.	Hong Kong		171,426		513,741

					7,666,732

Software 3.3%
Microsoft Corp.	United States		506,298		15,487,656
Nintendo Co. Ltd.	Japan		29,900		3,457,620
^aSymantec Corp.	United States		347,270		5,073,614

					24,018,890

Tobacco 8.6%
Altria Group Inc.	United States		278,254		9,613,676
British American Tobacco PLC	United Kingdom		360,126		18,297,895
Imperial Tobacco Group PLC	United Kingdom		337,446		12,992,644
Lorillard Inc.	United States		79,726		10,519,846
Philip Morris International Inc.	United States		83,471		7,283,679
Reynolds American Inc.	United States		101,494		4,554,036

					63,261,776

Wireless Telecommunication Services 2.3%
Vodafone Group PLC	United Kingdom		6,057,446		17,011,728

Total Common Stocks and Other Equity Interests (Cost $585,702,050)					637,490,310

Preferred Stocks 1.2%
Automobiles 0.5%
Volkswagen AG, pfd.	Germany		23,398		3,689,718

Diversified Financial Services 0.7%
^a,dHightower Holding LLC, pfd., A, Series 2	United States		2,172,000		4,880,202

Total Preferred Stocks (Cost $7,412,251)					8,569,920

MGD-15

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Mutual Global Discovery Securities Fund	Country		Principal Amount*		Value
Corporate Bonds, Notes and Senior Floating Rate Interests 4.7%
Clear Channel Communications Inc.,
^h,iDelayed Draw 2 Term Loan, 3.895%, 1/29/16		United States		1,485,257	$	1,143,648
^jsenior note, PIK, 11.00%, 8/01/16		United States		2,001,000		1,250,625
^h,iTranche B Term Loan, 3.895%, 1/29/16		United States		8,729,455		6,965,835
^h,iTranche C Term Loan, 3.895%, 1/29/16		United States		1,774,088		1,375,287
^kEnergy Future Intermediate Holding Co. LLC/Finance Inc., secured note, 144A, 11.75%, 3/01/22		United States		1,403,000		1,445,090
^hHilton Worldwide Inc., FRN,
Mezzanine D Loan, 3.492%, 11/12/15		United States		252,414		227,172
Mezzanine E Loan, 3.742%, 11/12/15		United States		323,946		285,073
Mezzanine F Loan, 3.992%, 11/12/15		United States		808,866		713,825
Mezzanine G Loan, 4.242%, 11/12/15		United States		1,456,759		1,260,097
^h,iiStar Financial Inc.,
New Tranche A-1 Term Loan, 5.25%, 3/19/16		United States		132,244		131,803
New Tranche A-2 Term Loan, 7.00%, 3/19/17		United States		495,000		496,237
NRG Energy Inc., senior note, 7.375%, 1/15/17		United States		810,000		844,425
Realogy Corp.,
^h,iExtended First Lien Term Loan, 4.491%, 10/10/16		United States		5,315,596		5,033,205
^h,iExtended Synthetic Letter of Credit, 4.496%, 10/10/16		United States		331,081		313,492
^f,ksenior secured note, 144A, 7.875%, 2/15/19		United States		411,000		403,807
^ksenior secured note, 144A, 9.00%, 1/15/20		United States		365,000		377,775
^h,iTexas Competitive Electric Holdings Co. LLC, Extended Term Loan, 4.741%, 10/10/17		United States		12,912,264		7,746,119
Texas Competitive Electric Holdings Co. LLC/Texas Competitive Electric Holdings Finance Inc.,
senior note, A, 10.25%, 11/01/15		United States		1,428,000		374,850
^ksenior secured note, 144A, 11.50%, 10/01/20		United States		5,895,000		4,052,812

Total Corporate Bonds, Notes and Senior Floating Rate Interests (Cost $40,527,438)						34,441,177

Corporate Notes and Senior Floating Rate Interests in Reorganization 1.0%
^d,lBroadband Ventures III LLC, secured promissory note, 5.00%, 2/01/12		United States		722		—
^lNewPage Corp., senior secured note, 11.375%, 12/31/14		United States		4,854,000		3,179,370
^h,i,lTribune Co.,
Incremental Term Loan, 7.25%, 8/04/14		United States		761,000		497,979
^mInitial Tranche B Term Loan, 5.25%, 8/04/14		United States		5,361,000		3,584,542

Total Corporate Notes and Senior Floating Rate Interests in Reorganization (Cost $8,900,834)						7,261,891


			Shares
Companies in Liquidation 0.0%†
^aAdelphia Recovery Trust		United States		5,379,562		5,380
^a,bAdelphia Recovery Trust, Arahova Contingent Value Vehicle, Contingent Distribution		United States		386,774		7,735
^a,b,cCentury Communications Corp., Contingent Distribution		United States		1,074,000		—
^a,dFIM Coinvestor Holdings I, LLC		United States		2,077,368		—

Total Companies in Liquidation (Cost $481,248)						13,115

Total Investments before Short Term Investments (Cost $643,023,821)						687,776,413

MGD-16

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Mutual Global Discovery Securities Fund	Country	Principal Amount*		Value
Short Term Investments 6.7%
Convertible Notes (Cost $2,757,068) 0.4%
^hiStar Financial Inc., cvt., senior note, FRN, 0.968%, 10/01/12	United States		2,829,000	$	2,828,717

U.S. Government and Agency Securities 4.7%
ⁿFHLB, 7/02/12	United States		15,000,000		15,000,000
^n,oU.S. Treasury Bills, 9/20/12 - 12/27/12	United States		20,000,000		19,989,901

Total U.S. Government and Agency Securities (Cost $34,989,222)					34,989,901

Total Investments before Money Market Funds (Cost $680,770,111)					725,595,031


		Shares
^pInvestments from Cash Collateral Received for Loaned Securities (Cost $11,968,206) 1.6%
Money Market Funds 1.6%
^qBNY Mellon Overnight Government Fund, 0.182%			11,968,206		11,968,206

Total Investments (Cost $692,738,317) 100.3%					737,563,237
Other Assets, less Liabilities (0.3)%					(2,492,024	)

Net Assets 100.0%				$	735,071,213

^†Rounds to less than 0.1% of net assets.

*The principal amount is stated in U.S. dollars unless otherwise indicated.

^aNon-income producing.

^bContingent distributions represent the right to receive additional distributions, if any, during the reorganization of the underlying company. Shares represent total underlying principal of debt securities.

^cSecurity has been deemed illiquid because it may not be able to be sold within seven days. At June 30, 2012, the aggregate value of these securities was $1,798,196, representing 0.24% of net assets.

^dSee Note 9 regarding restricted securities.

^eAt June 30, 2012, pursuant to the Fund’s policies and the requirements of applicable securities law, the Fund may be restricted from trading this security for a limited or extended period of time due to ownership limits and/or potential possession of material non-public information.

^fA portion or all of the security is on loan at June 30, 2012. See Note 1(g).

^gSee Note 11 regarding holdings of 5% voting securities.

^hThe coupon rate shown represents the rate at period end.

ⁱSee Note 1(h) regarding senior floating rate interests.

^jIncome may be received in additional securities and/or cash.

^kSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At June 30, 2012, the aggregate value of these securities was $6,279,484, representing 0.85% of net assets.

^lSee Note 7 regarding credit risk and defaulted securities.

^mA portion or all of the security purchased on a delayed delivery basis. See Note 1(c).

ⁿThe security is traded on a discount basis with no stated coupon rate.

^oSecurity or a portion of the security has been pledged as collateral for open futures contracts. At June 30, 2012, the value of this security pledged as collateral was $1,056,730, representing 0.14% of net assets.

^pSee Note 1(g) regarding securities on loan.

^qThe rate shown is the annualized seven-day yield at period end.

MGD-17

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Mutual Global Discovery Securities Fund

At June 30, 2012, the Fund had the following futures contracts outstanding. See Note 1(d).

Futures Contracts


Description	Type		Number of Contracts		Notional Value		Expiration Date		Unrealized Appreciation		Unrealized Depreciation
Currency Contracts
EUR/USD		Short		215	$	34,045,250		9/17/12	$	—	$	(364,078	)
GBP/USD		Short		129		12,639,581		9/17/12		—		(122,600	)

Net unrealized appreciation (depreciation)											$	(486,678	)

At June 30, 2012, the Fund had the following forward exchange contracts outstanding. See Note 1(d).

Forward Exchange Contracts


Currency	Counterparty		Type		Quantity		Contract Amount		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
Euro		DBAB		Buy		4,478,513	$	5,540,149		7/17/12	$	128,698	$	—
Euro		BZWS		Buy		91,397		113,222		7/17/12		2,468		—
Euro		HSBC		Buy		2,549,025		3,156,710		7/17/12		69,814		—
Euro		FBCO		Buy		1,055,303		1,316,912		7/17/12		18,877		—
Euro		HSBC		Sell		6,491,546		8,272,010		7/17/12		55,090		—
Euro		DBAB		Sell		7,719,231		10,195,993		7/17/12		425,085		—
Euro		BZWS		Sell		3,725,586		4,909,864		7/17/12		194,063		—
Euro		BOFA		Sell		878,467		1,159,902		7/17/12		47,949		—
Euro		HAND		Sell		503,368		667,909		7/17/12		30,752		—
Euro		SSBT		Sell		155,008		206,415		7/17/12		10,208		—
British Pound		BZWS		Sell		6,596,096		10,314,316		7/19/12		—		(19,612	)
British Pound		DBAB		Sell		6,338,544		9,910,947		7/19/12		—		(19,480	)
British Pound		DBAB		Buy		130,000		207,672		7/19/12		—		(4,005	)
British Pound		FBCO		Sell		294,891		462,725		7/19/12		724		—
Swiss Franc		BZWS		Buy		3,012,319		3,317,642		8/10/12		—		(140,088	)
Swiss Franc		DBAB		Buy		2,599,215		2,870,138		8/10/12		—		(128,348	)
Swiss Franc		BOFA		Buy		1,632,757		1,794,126		8/10/12		—		(71,808	)
Swiss Franc		HSBC		Buy		1,360,096		1,486,566		8/10/12		—		(51,864	)
Swiss Franc		SSBT		Buy		214,000		233,579		8/10/12		—		(7,840	)
Swiss Franc		DBAB		Sell		95,941		100,790		8/10/12		—		(414	)
Swiss Franc		DBAB		Buy		126,135		130,866		8/10/12		2,188		—
Swiss Franc		BOFA		Buy		81,710		84,616		8/10/12		1,576		—
Swiss Franc		FBCO		Buy		74,969		77,879		8/10/12		1,203		—
Swiss Franc		BOFA		Sell		7,286,591		7,989,440		8/10/12		303,157		—
Swiss Franc		DBAB		Sell		7,487,867		8,217,183		8/10/12		318,582		—
Swiss Franc		BZWS		Sell		335,893		368,583		8/10/12		14,265		—
British Pound		DBAB		Buy		1,196,901		1,898,579		8/16/12		—		(23,572	)
British Pound		BZWS		Buy		625,527		987,062		8/16/12		—		(7,142	)
British Pound		HSBC		Sell		534,444		831,866		8/16/12		—		(5,368	)
British Pound		BZWS		Sell		149,825		233,111		8/16/12		—		(1,597	)
British Pound		FBCO		Sell		370,000		578,095		8/16/12		—		(1,528	)
British Pound		DBAB		Buy		331,223		513,400		8/16/12		5,478		—
British Pound		BZWS		Sell		6,336,893		10,100,408		8/16/12		173,345		—
British Pound		DBAB		Sell		7,140,629		11,392,081		8/16/12		205,925		—
British Pound		HAND		Sell		179,049		281,509		8/16/12		1,019		—
British Pound		HSBC		Sell		179,049		281,902		8/16/12		1,413		—
Euro		DBAB		Buy		614,947		806,646		8/31/12		—		(27,893	)
Euro		BZWS		Sell		11,774,495		15,765,036		8/31/12		854,105		—
Euro		DBAB		Sell		603,543		792,362		8/31/12		28,050		—
Euro		BOFA		Sell		11,032,225		14,491,572		8/31/12		520,633		—

MGD-18

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Mutual Global Discovery Securities Fund

Forward Exchange Contracts (continued)


Currency	Counterparty		Type		Quantity		Contract Amount		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
Euro		HSBC		Sell		457,615	$	600,569		8/31/12	$	21,057	$	—
Euro		BZWS		Sell		6,049,944		7,982,750		10/16/12		317,077		—
Euro		BOFA		Sell		5,681,718		7,494,527		10/16/12		295,420		—
Euro		DBAB		Sell		1,396,475		1,843,604		10/16/12		74,179		—
Japanese Yen		HSBC		Sell		271,426,158		3,346,808		10/22/12		—		(52,218	)
Japanese Yen		DBAB		Buy		14,320,700		180,640		10/22/12		—		(1,304	)
Japanese Yen		HSBC		Buy		6,615,500		81,625		10/22/12		1,219		—
Japanese Yen		DBAB		Buy		16,678,718		207,894		10/22/12		971		—
Japanese Yen		DBAB		Sell		120,314,643		1,509,134		10/22/12		2,453		—
Japanese Yen		HSBC		Sell		3,040,000		38,138		10/22/12		71		—
British Pound		HSBC		Buy		68,479		106,146		11/21/12		1,097		—
British Pound		BZWS		Buy		281,621		436,749		11/21/12		4,289		—
British Pound		DBAB		Buy		1,561,907		2,399,318		11/21/12		46,735		—
British Pound		HSBC		Sell		3,440,676		5,444,285		11/21/12		55,951		—
British Pound		BZWS		Sell		6,249,284		9,886,367		11/21/12		99,562		—
British Pound		BOFA		Sell		3,124,642		4,944,215		11/21/12		50,812		—
British Pound		HAND		Sell		241,944		379,632		11/21/12		728		—
Euro		BZWS		Sell		7,099,580		8,919,202		11/30/12		—		(81,892	)
Euro		DBAB		Sell		6,678,342		8,394,009		11/30/12		—		(73,026	)
Euro		HSBC		Sell		2,389,518		3,019,789		11/30/12		—		(9,680	)
Euro		HAND		Sell		1,176,899		1,486,165		11/30/12		—		(5,901	)
Euro		FBCO		Sell		879,470		1,114,394		11/30/12		—		(584	)
Euro		DBAB		Sell		732,110		929,290		11/30/12		1,106		—
Euro		BOFA		Sell		219,868		279,240		11/30/12		496		—
Euro		BZWS		Sell		219,868		279,019		11/30/12		274		—
Euro		SCBT		Sell		234,901		298,352		11/30/12		547		—
Canadian Dollar		DBAB		Sell		1,935,100		1,881,972		12/17/12		—		(11,721	)
Canadian Dollar		HAND		Sell		45,609		44,573		12/17/12		—		(63	)

Unrealized appreciation (depreciation)												4,388,711		(746,948	)

Net unrealized appreciation (depreciation)											$	3,641,763

See Abbreviations on page MGD-36.

The accompanying notes are an integral part of these financial statements.

MGD-19

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

June 30, 2012 (unaudited)


	Mutual Global Discovery Securities Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	684,738,317
Cost - Non-controlled affiliated issuers (Note 11)		8,000,000

Total cost of investments	$	692,738,317

Value - Unaffiliated issuers	$	734,926,445
Value - Non-controlled affiliated issuers (Note 11)		2,636,792

Total value of investments (includes securities loaned in the amount of $12,321,692)		737,563,237
Cash		65,469
Restricted cash (Note 1e)		1,460,000
Foreign currency, at value (cost $1,782,289)		1,785,287
Receivables:
Investment securities sold		4,768,097
Capital shares sold		50,420
Dividends and interest		3,578,052
Unrealized appreciation on forward exchange contracts		4,388,711
Other assets		386

Total assets		753,659,659

Liabilities:
Payables:
Investment securities purchased		1,124,978
Capital shares redeemed		1,259,842
Affiliates		873,746
Variation margin		771,850
Payable upon return of securities loaned		11,968,206
Due to brokers		1,460,000
Unrealized depreciation on forward exchange contracts		746,948
Accrued expenses and other liabilities		382,876

Total liabilities		18,588,446

Net assets, at value	$	735,071,213

Net assets consist of:
Paid-in capital	$	578,543,327
Undistributed net investment income		28,476,461
Net unrealized appreciation (depreciation)		48,014,334
Accumulated net realized gain (loss)		80,037,091

Net assets, at value	$	735,071,213

The accompanying notes are an integral part of these financial statements.

MGD-20

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Assets and Liabilities (continued)

June 30, 2012 (unaudited)


	Mutual Global Discovery Securities Fund
Class 1:
Net assets, at value	$	1,021,152

Shares outstanding		49,285

Net asset value and maximum offering price per share	$	20.72

Class 2:
Net assets, at value	$	668,575,074

Shares outstanding		32,913,337

Net asset value and maximum offering price per share	$	20.31

Class 4:
Net assets, at value	$	65,474,987

Shares outstanding		3,191,241

Net asset value and maximum offering price per share	$	20.52

The accompanying notes are an integral part of these financial statements.

MGD-21

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the six months ended June 30, 2012 (unaudited)


	Mutual Global Discovery Securities Fund
Investment income:
Dividends (net of foreign taxes of $792,472)	$	11,592,927
Interest		2,082,909
Income from securities loaned		369,222

Total investment income		14,045,058

Expenses:
Management fees (Note 3a)		3,096,673
Administrative fees (Note 3b)		523,833
Distribution fees: (Note 3c)
Class 2		879,563
Class 4		117,563
Unaffiliated transfer agent fees		991
Custodian fees (Note 4)		38,094
Reports to shareholders		150,073
Professional fees		51,690
Trustees’ fees and expenses		2,584
Other		25,134

Total expenses		4,886,198

Net investment income		9,158,860

Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		48,426,709
Written options		60,098
Foreign currency transactions		11,170,419
Futures contracts		1,281,349
Securities sold short		(1,024,968	)

Net realized gain (loss)		59,913,607

Net change in unrealized appreciation (depreciation) on:
Investments		(18,706,509	)
Translation of other assets and liabilities denominated in foreign currencies		(10,004,891	)

Net change in unrealized appreciation (depreciation)		(28,711,400	)

Net realized and unrealized gain (loss)		31,202,207

Net increase (decrease) in net assets resulting from operations	$	40,361,067

The accompanying notes are an integral part of these financial statements.

MGD-22

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets


	Mutual Global Discovery Securities Fund
	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31, 2011

Increase (decrease) in net assets:
Operations:
Net investment income	$	9,158,860		$	26,618,951
Net realized gain (loss) from investments, written options, foreign currency transactions, futures contracts and securities sold short		59,913,607			68,619,465
Net change in unrealized appreciation (depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies and deferred taxes		(28,711,400	)		(151,927,152	)

Net increase (decrease) in net assets resulting from operations		40,361,067			(56,688,736	)

Distributions to shareholders from:
Net investment income:
Class 1		—			(1,808,753	)
Class 2		—			(27,559,671	)
Class 4		—			(1,533,102	)
Net realized gains:
Class 1		—			(1,558,774	)
Class 2		—			(25,603,997	)
Class 4		—			(1,468,422	)

Total distributions to shareholders		—			(59,532,719	)

Capital share transactions: (Note 2)
Class 1		(7,492	)		(75,411,767	)
Class 2		(80,480,821	)		(536,023,097	)
Class 4		(4,630,812	)		1,436,142

Total capital share transactions		(85,119,125	)		(609,998,722	)

Net increase (decrease) in net assets		(44,758,058	)		(726,220,177	)
Net assets:
Beginning of period		779,829,271			1,506,049,448

End of period	$	735,071,213		$	779,829,271

Undistributed net investment income included in net assets:
End of period	$	28,476,461		$	19,317,601

The accompanying notes are an integral part of these financial statements.

MGD-23

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited)

Mutual Global Discovery Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment company, consisting of twenty separate funds. The Mutual Global Discovery Securities Fund (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. At June 30, 2012, 84.96% of the Fund’s shares were held through one insurance company. The Fund offers three classes of shares: Class 1, Class 2, and Class 4. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

Equity securities and derivative financial instruments (derivatives) listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded, or the NYSE, whichever is earlier. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at the close of the NYSE on the day that the value of the security is determined. Over-the-counter (OTC) securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities. Investments in non-registered money market funds are valued at the closing net asset value.

Certain derivatives trade in the OTC market. The Fund’s pricing services use various techniques including industry standard option pricing models and proprietary discounted cash flow models to determine the fair value of those instruments. The Fund’s net benefit or obligation under the derivative contract, as measured by the fair market value of the contract, is included in net assets.

MGD-24

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual Global Discovery Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

a. Financial Instrument Valuation (continued)

values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. The VLOC employs various methods for calibrating these valuation approaches including a regular review of key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.

b. Foreign Currency Translation

c. Securities Purchased on a Delayed Delivery Basis

The Fund purchases securities on a delayed delivery basis, with payment and delivery scheduled for a future date. These transactions are subject to market fluctuations and are subject to the risk that the value at delivery may be more or less than the trade date purchase price. Although the Fund will generally purchase these securities with the intention of holding the securities, it may sell the securities before the settlement date. Sufficient assets have been segregated for these securities.

MGD-25

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual Global Discovery Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

d. Derivative Financial Instruments

The Fund entered into exchange traded futures contracts primarily to manage exposure to certain foreign currencies. A futures contract is an agreement between the Fund and a counterparty to buy or sell an asset for a specified price on a future date. Required initial margin deposits of cash or securities are pledged by the Fund. Subsequent payments, known as variation margin, are made or received by the Fund, depending on fluctuations in the value of the underlying security. Such variation margin is accounted for as unrealized appreciation or depreciation until the contract is closed, at which time the gains or losses are realized.

The Fund entered into OTC forward exchange contracts primarily to manage exposure to certain foreign currencies. A forward exchange contract is an agreement between the Fund and a counterparty to buy or sell a foreign currency for a specific exchange rate on a future date. Pursuant to the terms of the forward exchange contracts, cash or securities may be required to be deposited as collateral. Unrestricted cash may be invested according to the Fund’s investment objectives.

The Fund purchased or wrote exchange traded option contracts primarily to manage exposure to equity price risk. An option is a contract entitling the holder to purchase or sell a specific amount of shares or units of an asset or notional amount of a swap (swaption), at a specified price. Options purchased are recorded as an asset while options written are recorded as a liability. Upon exercise of an option, the acquisition cost or sales proceeds of the underlying investment is adjusted by any premium received or paid. Upon expiration of an option, any premium received or paid is recorded as a realized gain or loss. Upon closing an option other than through expiration or exercise, the difference between the premium and the cost to close the position is recorded as a realized gain or loss. Pursuant to the terms of the written option contract, cash or securities may be required to be deposited as collateral.

At June 30, 2012, the Fund held $3,551,525 in United Kingdom treasury bonds and U.S. treasury bills as collateral for derivatives.

See Notes 6 and 10 regarding investment transactions and other derivative information, respectively.

e. Restricted Cash

At June 30, 2012, the Fund held restricted cash in connection with investments in certain derivative securities. Restricted cash is held in a segregated account with the Fund’s custodian and is reflected in the Statement of Assets and Liabilities.

MGD-26

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual Global Discovery Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

f. Securities Sold Short

The Fund is engaged in selling securities short, which obligates the fund to replace a borrowed security with the same security at current market value. The fund incurs a loss if the price of the security increases between the date of the short sale and the date on which the fund replaces the borrowed security. The fund realizes a gain if the price of the security declines between those dates. Gains are limited to the price at which the fund sold the security short, while losses are potentially unlimited in size.

The fund is required to establish a margin account with the broker lending the security sold short. While the short sale is outstanding, the broker retains the proceeds of the short sale and the fund must maintain a deposit with the broker consisting of cash and/or securities having a value equal to a specified percentage of the value of the securities sold short. The fund is obligated to pay fees for borrowing the securities sold short and is required to pay the counterparty any dividends or interest due on securities sold short. Such dividends or interest and any security borrowing fees are recorded as an expense to the fund.

g. Securities Lending

The Fund participates in an agency based securities lending program. The fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the market value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the market value of loaned securities, as determined at the close of fund business each day; any additional collateral required due to changes in security values is delivered to the fund on the next business day. The collateral is invested in a non-registered money fund as indicated on the Statement of Investments. The fund receives income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. The fund bears the market risk with respect to the collateral investment, securities loaned, and the risk that the agent may default on its obligations to the fund. The securities lending agent has agreed to indemnify the fund in the event of default by a third party borrower.

h. Senior Floating Rate Interests

Senior secured corporate loans in which the Fund invests are generally readily marketable, but may be subject to some restrictions on resale.

i. Income and Deferred Taxes

MGD-27

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual Global Discovery Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

i. Income and Deferred Taxes (continued)

tax years, the Fund has determined that no liability for unrecognized tax benefits is required in the Fund’s financial statements related to uncertain tax positions taken on a tax return (or expected to be taken on future tax returns). Open tax years are those that remain subject to examination and are based on each tax jurisdiction statute of limitation.

j. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Amortization of premium and accretion of discount on debt securities are included in interest income. Facility fees are recognized as income over the expected term of the loan. Dividend income and dividends declared on securities sold short are recorded on the ex-dividend date except that certain dividends from foreign securities are recognized as soon as the Fund is notified of the ex-dividend date. Distributions to shareholders are recorded on the ex-dividend date and are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with accounting principles generally accepted in the United States of America. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.

k. Accounting Estimates

l. Guarantees and Indemnifications

MGD-28

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual Global Discovery Securities Fund

2. SHARES OF BENEFICIAL INTEREST

At June 30, 2012, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:


	Six Months Ended June 30, 2012						Year Ended December 31, 2011
Class 1 Shares:	Shares			Amount			Shares			Amount
Shares sold		4,516		$	92,844			140,069		$	3,084,356
Shares issued in reinvestment of distributions		—			—			168,285			3,367,527
Shares redeemed in-kind (Note 13)		—			—			(3,394,333	)		(67,951,585	)
Shares redeemed		(4,778	)		(100,336	)		(843,405	)		(13,912,065	)

Net increase (decrease)		(262	)	$	(7,492	)		(3,929,384	)	$	(75,411,767	)

Class 2 Shares:
Shares sold		692,546		$	14,025,028			1,990,050		$	40,633,273
Shares issued in reinvestment of distributions		—			—			2,709,831			53,163,668
Shares redeemed in-kind (Note 13)		—			—			(21,446,416	)		(398,285,682	)
Shares redeemed		(4,683,352	)		(94,505,849	)		(11,321,410	)		(231,534,356	)

Net increase (decrease)		(3,990,806	)	$	(80,480,821	)		(28,067,945	)	$	(536,023,097	)

Class 4 Shares:
Shares sold		47,161		$	974,584			410,892		$	8,602,556
Shares issued on reinvestment of distributions		—			—			151,460			3,001,524
Shares redeemed		(275,965	)		(5,605,396	)		(502,145	)		(10,167,938	)

Net increase (decrease)		(228,804	)	$	(4,630,812	)		60,207		$	1,436,142

3. TRANSACTIONS WITH AFFILIATES


Subsidiary		Affiliation
Franklin Mutual Advisers, LLC (Franklin Mutual)		Investment manager
Franklin Templeton Services, LLC (FT Services)		Administrative manager
Franklin Templeton Distributors, Inc. (Distributors)		Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services)		Transfer agent

a. Management Fees

The Fund pays an investment management fee to Franklin Mutual based on the average daily net assets of the Fund as follows:


Annualized Fee Rate		Net Assets
0.800%		Up to and including $4 billion
0.770%		Over $4 billion, up to and including $7 billion
0.750%		Over $7 billion, up to and including $10 billion
0.730%		In excess of $10 billion

MGD-29

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual Global Discovery Securities Fund

3. TRANSACTIONS WITH AFFILIATES (continued)

b. Administrative Fees

The Fund pays an administrative fee to FT Services based on the Fund’s average daily net assets as follows:


Annualized Fee Rate		Net Assets
0.150%		Up to and including $200 million
0.135%		Over $200 million, up to and including $700 million
0.100%		Over $700 million, up to and including $1.2 billion
0.075%		In excess of $1.2 billion

c. Distribution Fees

d. Transfer Agent Fees

Investor Services, under terms of an agreement, performs shareholder servicing for the Fund and is not paid by the Fund for the services.

4. EXPENSE OFFSET ARRANGEMENT

5. INCOME TAXES

At June 30, 2012, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:


Cost of investments	$	694,400,814


Unrealized appreciation	$	128,797,790
Unrealized depreciation		(85,635,367	)

Net unrealized appreciation (depreciation)	$	43,162,423

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of foreign currency transactions, passive foreign investment company shares, bond discounts and premiums and corporate actions.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities and securities sold short) for the period ended June 30, 2012, aggregated $109,310,723 and $158,407,792, respectively.

MGD-30

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual Global Discovery Securities Fund

6. INVESTMENT TRANSACTIONS (continued)

Transactions in options written during the period ended June 30, 2012, were as follows:


	Number of Contracts			Premiums Received
Options outstanding at December 31, 2011		160		$	62,276
Options written		39			5,007
Options expired		(39	)		(5,007	)
Options exercised		(57	)		(22,197	)
Options closed		(103	)		(40,079	)

Options outstanding at June 30, 2012		—		$	—

See Notes 1(d) and 10 regarding derivative financial instruments and other derivative information, respectively.

7. CREDIT RISK AND DEFAULTED SECURITIES

The Fund may purchase the pre-default or defaulted debt of distressed companies. Distressed companies are financially troubled and are about to be or are already involved in financial restructuring or bankruptcy. Risks associated with purchasing these securities include the possibility that the bankruptcy or other restructuring process takes longer than expected, or that distributions in restructuring are less than anticipated, either or both of which may result in unfavorable consequences to the Fund. If it becomes probable that the income on debt securities, including those of distressed companies, will not be collected, the Fund discontinues accruing income and recognizes an adjustment for uncollectible interest. At June 30, 2012, the aggregate value of distressed company securities for which interest recognition has been discontinued was $7,261,891, representing 0.99% of the Fund’s net assets. For information as to specific securities, see the accompanying Statement of Investments.

8. CONCENTRATION OF RISK

9. RESTRICTED SECURITIES

At June 30 2012, the Fund held investments in restricted securities, excluding certain securities exempt from registration under the 1933 Act deemed to be liquid, as follows:


Principal Amount/ Shares		Issuer	Acquisition Dates		Cost		Value
	1,361,600	AET&D Holdings No. 1 Pty. Ltd.		10/13/10	$	—	$	—
	800,000	The Bankshares Inc.		3/22/07		8,000,000		2,636,792
	722	Broadband Ventures III LLC, secured promissory note, 5.00%, 2/01/12		7/01/10		722		—
	78,494	Capital Bank Financial Corp., A, 144A		12/16/09 - 7/02/10		1,569,880		1,295,151

MGD-31

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual Global Discovery Securities Fund

9. RESTRICTED SECURITIES (continued)


Principal Amount/ Shares		Issuer	Acquisition Dates		Cost		Value
	269,922	Capital Bank Financial Corp., B, 144A, non-voting		12/16/09 - 7/02/10	$	5,398,440	$	4,453,713
	1,903	Elephant Capital Holdings Ltd.		8/23/04 - 3/10/08		294,226		—
	2,077,368	FIM Coinvestor Holdings I, LLC		11/20/06 - 6/02/09		—		—
	2,172,000	Hightower Holding LLC, pfd., A, Series 2		6/10/10 - 5/10/12		5,430,000		4,880,202
	120,290	Imagine Group Holdings Ltd.		8/31/04		1,231,950		1,411,471
	424,073	International Automotive Components Group Brazil LLC		4/13/06 - 12/26/08		281,629		144,397
	3,000,220	International Automotive Components Group North America, LLC		1/12/06 - 10/10/07		2,879,270		1,480,758
	9,306	NCB Warrant Holdings Ltd., A		12/16/05 - 3/10/08		87,597		—
	2,140	Olympus Re Holdings Ltd.		12/19/01		201,741		—

		Total Restricted Securities (2.22% of Net Assets)					$	16,302,484

10. OTHER DERIVATIVE INFORMATION

At June 30, 2012, the Fund has invested in derivative contracts which are reflected on the Statement of Assets and Liabilities as follows:

Asset Derivatives

Liability Derivatives

Derivative Contracts Not Accounted
for as Hedging Instruments

Statement of Assets and
Liabilities Location

Fair
Value
Amount

Statement of Assets and
Liabilities Location

Fair
Value
Amount

Foreign exchange contracts

Unrealized appreciation on forward exchange contracts

4,388,711

Unrealized depreciation on forward exchange contracts / Net assets consist of – net unrealized appreciation (depreciation)

1,233,626^a

^aIncludes cumulative appreciation (depreciation) of futures contracts as reported in the Statement of Investments. Only current day’s variation margin is separately reported within the Statement of Assets and Liabilities.

For the period ended June 30, 2012, the effect of derivative contracts on the Fund’s Statement of Operations was as follows:


Derivative Contracts Not Accounted for as Hedging Instruments	Statement of Operations Locations	Realized Gain (Loss) for the Period		Change in Unrealized Appreciation (Depreciation) for the Period
Foreign exchange contracts	Net realized gain (loss) from foreign currency transactions and futures contracts / Net change in unrealized appreciation (depreciation) on translation of other assets and liabilities denominated in foreign currencies	$	12,669,385	$	(10,008,935	)
Equity contracts	Net realized gain (loss) from written options / Net change in unrealized appreciation (depreciation) on investments		60,098		8,284

For the period ended June 30, 2012, the average month end market value of derivatives represented 0.98% of average month end net assets. The average month end number of open derivative contracts for the period was 113.

See Notes 1(d) and 6 regarding derivative financial instruments and investment transactions, respectively.

MGD-32

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual Global Discovery Securities Fund

11. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES


Name of Issuer	Number of Shares Held at Beginning of Year		Gross Additions		Gross Reductions		Number of Shares Held at End of Year		Value at End of Year		Investment Income		Realized Capital Gain (Loss)
Non-Controlled Affiliates
The Bankshares Inc. (0.36% of Net Assets)		800,000		—		—		800,000	$	2,636,792	$	—	$	—

12. CREDIT FACILITY

13. REDEMPTION IN-KIND

During the year ended December 31, 2011, the Fund realized $45,310,078 of net gains resulting from a redemption in-kind in which a shareholder redeemed fund shares for securities held by the Fund rather than for cash. Because such gains are not taxable to the Fund, and are not netted with capital gains that are distributed to remaining shareholders, they have been reclassified from accumulated net realized gains to paid-in capital.

14. FAIR VALUE MEASUREMENTS

•

Level 1 – quoted prices in active markets for identical financial instruments

•

Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)

•

Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of financial instruments)

The inputs or methodology used for valuing financial instruments are not an indication of the risk associated with investing in those financial instruments.

MGD-33

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual Global Discovery Securities Fund

14. FAIR VALUE MEASUREMENTS (continued)

For movements between the levels within the fair value hierarchy, the Fund has adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.

A summary of inputs used as of June 30, 2012, in valuing the Fund’s assets and liabilities carried at fair value, is as follows:


	Level 1		Level 2		Level 3			Total

Assets:
Investments in Securities:
Equity Investments:^a
Auto Components	$	5,147,606	$	—	$	1,625,680		$	6,773,286
Commercial Banks		42,726,928		—		8,385,656	^b		51,112,584
Consumer Finance		—		220		—			220
Diversified Financial Services		23,506,528		—		4,880,202			28,386,730
Diversified Telecommunication Services		5,458,268		—		32,386	^b		5,490,654
Insurance		43,300,076		—		1,411,471	^b		44,711,547
Real Estate Management & Development		5,901,447		—		1,765,285			7,666,732
Other Equity Investments^c		501,918,477		—		—	^b		501,918,477
Corporate Bonds, Notes and Senior Floating Rate Interests		—		34,441,177		—			34,441,177
Corporate Notes and Senior Floating Rate Interests in Reorganization		—		7,261,891		—			7,261,891
Companies in Liquidation		—		13,115		—			13,115
Short Term Investments		19,989,901		29,796,923		—			49,786,824

Total Investments in Securities	$	647,949,231	$	71,513,326	$	18,100,680		$	737,563,237

Forward Exchange Contracts		—		4,388,711		—			4,388,711
Liabilities:
Forward Exchange Contracts		—		746,948		—			746,948
Futures Contracts		486,678		—		—			486,678

^aIncludes common and preferred stocks as well as other equity investments.

^bIncludes securities determined to have no value at June 30, 2012.

^cFor detailed categories, see the accompanying Statement of Investments.

At June 30, 2012, the reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining fair value, is as follows:


	Balance at Beginning of Period			Purchases		Sales		Transfers Into Level 3^a		Transfers Out of Level 3		Cost Basis Adjustments^b			Net Realized Gain (Loss)		Net Unrealized Gain (Loss)			Balance at End of Period			Net Change in Unrealized Appreciation (Depreciation) on Assets Held at Period End
Assets
Investments in Securities:
Equity Investments:^c
Auto Components	$	1,616,712		$	—	$	—	$	—	$	—	$	(720,173	)	$	—	$	729,141		$	1,625,680		$	729,141
Commercial Banks		2,859,392	^d		—		—		5,748,864		—		—			—		(222,600	)		8,385,656	^d		(222,600	)
Diversified Financial Services		2,333,811			2,644,464		—		—		—		—			—		(98,073	)		4,880,202			(98,073	)
Diversified Telecommunication Services		32,340	^d		—		—		—		—		—			—		46			32,386	^d		46

MGD-34

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual Global Discovery Securities Fund

14. FAIR VALUE MEASUREMENTS (continued)


	Balance at Beginning of Period			Purchases		Sales		Transfers Into Level 3^a		Transfers Out of Level 3		Cost Basis Adjustments^b			Net Realized Gain (Loss)		Net Unrealized Gain (Loss)			Balance at End of Period			Net Change in Unrealized Appreciation (Depreciation) on Assets Held at Period End
Insurance	$	1,505,983	^d	$	—	$	—	$	—	$	—	$	—		$	—	$	(94,512	)	$	1,411,471	^d	$	(94,512	)
Real Estate Management & Development		1,789,048			—		—		—		—		—			—		(23,763	)		1,765,285			(23,763	)

Total	$	10,137,286		$	2,644,464	$	—	$	5,748,864	$	—	$	(720,173	)	$	—	$	290,239		$	18,100,680		$	290,239

^aThe investments were transferred into Level 3 as a result of the unavailability of a quoted market price in an active market for identical securities and other significant observable valuation inputs.

^bMay include accretion, amortization, partnership adjustments, and/or other cost basis adjustments.

^cIncludes common and preferred stocks as well as other equity investments.

^dIncludes securities determined to have no value.

Significant unobservable inputs developed by the VLOC for material Level 3 investments as of June 30, 2012, are as follows:

Description

Fair Value at
End of Period

Valuation Technique

Unobservable Inputs

Amount

Assets:

Investments in Securities:

Equity Investments:^a

Auto Components

1,480,758

Market comparables

Discount for lack of marketability

15%

EV / EBITDA multiple

3.3x

Commercial Banks

2,636,792

Market comparables

Discount for lack of marketability

10%

Price / tangible book multiple

0.99x

Diversified Financial Services

4,880,202

Option pricing model

Stock price volatility

28.6%

Insurance

1,411,471

Market comparables

Discount for lack of marketability

Price / book multiple

1.0x

Real Estate Management & Development

1,765,285

Market comparables

Discount for lack of marketability

^aIncludes common and preferred stocks as well as other equity investments.

The significant unobservable inputs used in the fair value measurement of the Fund's investment in auto components companies are an enterprise value (EV) to earnings before interest, taxes, depreciation and amortization (EBITDA) multiple and a discount for lack of marketability. A significant and reasonable increase or decrease in the EV to EBITDA multiple would result in a significant increase or decrease in the fair value measurement. A significant and reasonable increase or decrease in the discount for lack of marketability would result in a significant decrease or increase in the fair value measurement.

The significant unobservable inputs used in the fair value measurement of the Fund's investments in commercial banks companies are the price to tangible book multiple and a discount for lack of marketability. A significant and reasonable increase or decrease in the price to tangible book multiple would result in a significant increase or decrease in the fair value measurement. A significant and reasonable increase or decrease in the discount for lack of marketability would result in a significant decrease or increase in the fair value measurement.

The significant unobservable input used in the fair value measurement of the Fund's investment in diversified financial services companies is stock price volatility. A significant and reasonable increase or decrease in the input would result in a significant increase or decrease in the fair value measurement.

MGD-35

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual Global Discovery Securities Fund

14. FAIR VALUE MEASUREMENTS (continued)

The significant unobservable inputs used in the fair value measurement of the Fund's investment in insurance companies are the price to book multiple and a discount for lack of marketability. A significant and reasonable increase or decrease in the price to book multiple would not result in a significant increase or decrease in the fair value measurement. A significant and reasonable increase or decrease in the discount for lack of marketability would result in a significant decrease or increase in the fair value measurement.

The significant unobservable input used in the fair value measurement of the Fund's investment in real estate management & development companies is a discount for lack of marketability. A significant and reasonable increase or decrease in the input would result in a significant decrease or increase in the fair value measurement.

The difference in fair value measurements, caused by significant and reasonable changes in any of these inputs, except the EV to EBITDA multiple and the stock price volatility inputs, would not materially impact the net assets of the Fund.

15. NEW ACCOUNTING PRONOUNCEMENTS

16. SUBSEQUENT EVENTS

The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure.


ABBREVIATIONS
Counterparty	Currency	Selected Portfolio

BOFA - Bank of America Corp.	EUR - Euro	ADR - American Depositary Receipt
BZWS - Barclays Bank PLC	GBP - British Pound	FHLB - Federal Home Loan Bank
DBAB - Deutsche Bank AG	USD - United States Dollar	FRN - Floating Rate Note
FBCO - Credit Suisse Group AG		PIK - Payment-In-Kind
HAND - Svenska Handelsbanken
HSBC - HSBC Bank USA, N.A.
SCBT - Standard Chartered Bank
SSBT - State Street Bank and Trust Co.

MGD-36

MUTUAL INTERNATIONAL SECURITIES FUND

We are pleased to bring you Mutual International Securities Fund’s semiannual report for the period ended June 30, 2012.

Performance Summary as of 6/30/12

Mutual International Securities Fund – Class 2 delivered a +4.55% total return* for the six-month period ended 6/30/12.

*The investment manager and administrator have contractually agreed to waive or assume certain expenses so that common expenses of the Fund (excluding Rule 12b-1 fees and acquired fund fees and other expenses) do not exceed 0.95% (other than certain nonroutine expenses) until 4/30/13. Fund investment results reflect the expense reduction, without which the results would have been lower.

Mutual International Securities Fund – Class 2

MI-1

Fund Goals and Main Investments: Mutual International Securities Fund seeks capital appreciation, which may occasionally be short term, with income as a secondary goal. Under normal market conditions, the Fund invests at least 80% of its net assets in securities of non-U.S. issuers.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. The Fund outperformed its benchmark, the MSCI Europe, Australasia, Far East (EAFE) Index Net Return (Local Currency), which posted a total return of +4.24% for the same period.¹

Economic and Market Overview

2. Please see Index Descriptions following the Fund Summaries.

Fund Risks: All investments involve risks, including possible loss of principal. Value securities may not increase in price as anticipated or may decline further in value. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments; investments in emerging markets involve heightened risks related to the same factors. Because the Fund invests its assets primarily in companies in a specific region, it is subject to greater risks of adverse developments in that region and/or the surrounding regions than a fund that is more broadly diversified geographically. Political, social or economic disruptions in the region, even in countries in which the Fund is not invested, may adversely affect the value of securities held by the Fund. Current political uncertainty surrounding the European Union (EU) and its membership may increase market volatility. The financial instability of some countries in the EU, including Greece, Italy and Spain, together with the risk of that impacting other more stable countries may increase the economic risk of investing in companies in Europe. The Fund’s investments in companies engaged in mergers, reorganizations or liquidations also involve special risks as pending deals may not be completed on time or on favorable terms. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

MI-2

liquidity measures and an ineffective Spanish banking bailout — did little to address the structural imbalances of eurozone economies or the solvency fears plaguing the region’s banking system. Yet, encouraging progress did emerge at period-end when leaders in Brussels agreed to ease conditions of sovereign bond purchases and permit the region’s bailout fund to directly recapitalize banks. Meanwhile, the U.S. Federal Reserve Board opted to extend its strategy, dubbed Operation Twist, designed to lower systemically important interest rates, and the People’s Bank of China slashed interest rates for the first time since the global financial crisis began. In the latter part of the period, commodities extended recent losses, with oil falling back below $100, while the euro dipped and traditional safe havens like U.S. Treasuries, the U.S. dollar and the Japanese yen made gains.

Investment Strategy

At Mutual Series, we are committed to our distinctive value approach to investing. Our major investment strategy is investing in undervalued stocks in Asia and Europe. When selecting undervalued equities, we are attracted to fundamentally strong companies with healthy balance sheets, high-quality assets, substantial free cash flow and shareholder-oriented management teams and whose stocks are trading at discounts to our assessment of the companies’ intrinsic or business value. We also look for asset rich companies whose shares may be trading at depressed levels due to concerns over short-term earnings disappointments, litigation, management strategy or other perceived negatives. While the vast majority of our undervalued equity investments are made in publicly traded companies internationally, we may invest occasionally in privately held companies as well.

LOGO

MI-3

form of arbitrage involves purchasing the target company’s stock when it is trading below the value we believe it would receive in a deal. In keeping with our commitment to a relatively conservative investment approach, we typically focus our arbitrage efforts on announced deals, and eschew rumored deals or other situations we consider relatively risky.

In addition, it is our practice to hedge the Fund’s currency exposure when we deem it advantageous for our shareholders.

Manager’s Discussion

During the six months under review, Fund performance benefited from several investments. Three of the largest contributors during the period were Beijing-based media advertising firm Sinomedia Holding, German tire and auto parts manufacturer Continental and Hong Kong-based real estate developer Franshion Properties China.

Sinomedia is a leading provider of nationwide television advertising coverage and campaign planning for advertisers and advertising agents. The company is the largest private sector operator of television advertisement time for CCTV, the predominant state television broadcaster in China, and also maintains integrated brand communication and creative production businesses. In an environment of rising Chinese consumer demand, companies have been increasing their advertising spending and we believe Sinomedia stands to benefit from this trend. In our view at period-end, Sinomedia traded at attractive multiples with considerable cash on the balance sheet and offered an attractive dividend payout to investors.

Continental posted strong operating results in fiscal year 2011, which included double-digit revenue growth and earnings growth. The company has also taken steps to strengthen its balance sheet and management expects net debt will continue to decline in 2012. Continental has demonstrated its ability to improve performance in certain business segments, and we continue to believe it is one of the best positioned auto suppliers globally, due to its focus on fuel efficiency, carbon dioxide emission reduction, vehicle electronics and technology solutions for global automotive original equipment manufacturers. We believe the company’s prospects could remain positive over the next several years, based on its improving balance sheet and cash flow profile.

Franshion Properties China is a developer and operator of large-scale and high-end commercial real estate projects. During the period, operating results testified to Franshion’s ability to execute in residential

Top 10 Sectors/Industries

Mutual International Securities Fund 6/30/12


	% of Total Net Assets
Insurance		11.4%
Commercial Banks		7.9%
Construction & Engineering		4.9%
Hotels, Restaurants & Leisure		4.8%
Diversified Financial Services		4.4%
Pharmaceuticals		4.2%
Food & Staples Retailing		4.2%
Chemicals		3.7%
Media		2.8%
Oil, Gas & Consumable Fuels		2.8%

MI-4

development, an area in which the company’s capabilities had previously been largely discounted. Franshion also reported a significant increase in rental revenues from its premium property portfolio, which benefited its share price.

Despite the Fund’s positive performance during the period, there were a few disappointments in the portfolio. Among the top detractors were German industrial conglomerate ThyssenKrupp, U.K. financial services restructuring company Resolution, and Australian infrastructure firm Transfield Services.

Resolution is a holding company formed to complete leveraged buyouts and mergers of U.K. life insurance operators. At its annual meeting of shareholders in May, the company announced it would delay the second stage of its share buyback plan until the second half of 2012, sending shares lower. Despite the stock’s near-term weakness, we continue to view our investment in Resolution favorably, as the underlying insurance operations have held up in a difficult operating environment, resulting in an increase in operating profit for the company’s most recent fiscal year. We also believe the share repurchase delay was only a cautionary step taken by management.

Transfield Services provides operations, maintenance and construction services to the resources, energy, industrial, property and defense sectors. The company’s share price declined as investors sold off after the company’s announcement that adverse weather conditions across northern Australia will negatively impact fiscal year 2012 earnings. Thinking like company owners and investing with a long-term perspective, we sought to capitalize on this short-term weakness arising from what we viewed as a nonrecurring event and added to our position.

Top 10 Holdings

Mutual International Securities Fund

6/30/12


Company Sector/Industry, Country	% of Total Net Assets
Rexam PLC		1.8%
Containers & Packaging, U.K.
REXLot Holdings Ltd.		1.8%
Hotels, Restaurants & Leisure, Hong Kong
Sinomedia Holding Ltd.		1.7%
Media, China
Aozora Bank Ltd.		1.6%
Commercial Banks, Japan
Continental AG		1.6%
Auto Components, Germany
RSA Insurance Group PLC		1.6%
Insurance, U.K.
Boart Longyear Ltd.		1.6%
Construction & Engineering, Australia
Transfield Services Ltd.		1.5%
Commercial Services & Supplies, Australia
FamilyMart Co. Ltd.		1.4%
Food & Staples Retailing, Japan
Hoya Corp.		1.4%
Electronic Equipment, Instruments & Components, Japan

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments.

MI-5

During the period, the Fund held currency forwards to somewhat hedge the currency risk of the portfolio’s non-U.S. dollar investments. The hedges had a positive impact on the Fund’s performance during the period.

Thank you for your participation in Mutual International Securities Fund. We look forward to serving your future investment needs.

MI-6

Fund Expenses

•

Transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes.

•

Actual Fund Expenses

You can estimate the Fund-level expenses you incurred during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:

1.	Divide your account value by $1,000.

If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6.

2.	Multiply the result by the number under the heading “Fund-Level Expenses Incurred During Period.”

If Fund-Level Expenses Incurred During Period were $7.50, then 8.6 x $7.50 = $64.50.

In this illustration, the estimated expenses incurred this period at the Fund level are $64.50.

Mutual International Securities Fund – Class 2

MI-7

Hypothetical Example for Comparison with Other Mutual Funds


Class 2	Beginning Account Value 1/1/12		Ending Account Value 6/30/12		Fund-Level Expenses Incurred During Period* 1/1/12–6/30/12
Actual	$	1,000	$	1,045.50	$	6.10
Hypothetical (5% return before expenses)	$	1,000	$	1,018.90	$	6.02

*Expenses are calculated using the most recent six-month annualized expense ratio, net of expense waivers, for the Fund’s Class 2 shares (1.20%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 182/366 to reflect the one-half year period.

MI-8

Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Mutual International Securities Fund


	Six Months Ended June 30, 2012 (unaudited)		Year Ended December 31,
Class 2	Six Months Ended June 30, 2012 (unaudited)		2011			2010			2009^a

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	9.66	$	12.04		$	11.82		$	10.00

Income from investment operations^b:
Net investment income^c		0.16		0.24			0.25			0.08
Net realized and unrealized gains (losses)		0.28		(1.67	)		1.51			2.30

Total from investment operations		0.44		(1.43	)		1.76			2.38

Less distributions from:
Net investment income		—		(0.29	)		(0.67	)		(0.13	)
Net realized gains		—		(0.66	)		(0.87	)		(0.43	)

Total distributions		—		(0.95	)		(1.54	)		(0.56	)

Net asset value, end of period	$	10.10	$	9.66		$	12.04		$	11.82


Total return^d		4.55%		(11.92)%			15.49%			23.91%
Ratios to average net assets^e
Expenses before waiver and payments by affiliates		6.31%		5.13%			4.97%			8.61%^f
Expenses net of waiver and payments by affiliates		1.20%		1.20%			1.20%	^g		1.21%	^f,g
Expenses incurred in connection with securities sold short		—%		—%			—%			0.01%
Net investment income		3.14%		2.12%			2.07%			1.27%

Supplemental data
Net assets, end of period (000’s)	$	1,010	$	966		$	1,204		$	1,182
Portfolio turnover rate		13.24%		67.91%			41.11%			41.84%

^aFor the period June 15, 2009 (commencement of operations) to December 31, 2009.

^cBased on average daily shares outstanding.

^eRatios are annualized for periods less than one year.

^fIncludes dividend expense on securities sold short and borrowing fees, if any. See below for the ratios of such expenses to average net assets for the period

presented.

^gBenefit of expense reduction round to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

MI-9

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Mutual International Securities Fund


	Six Months Ended June 30, 2012 (unaudited)		Year Ended December 31,
Class 4	Six Months Ended June 30, 2012 (unaudited)		2011			2010			2009^a

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	9.65	$	12.04		$	11.81		$	10.00

Income from investment operations^b:
Net investment income^c		0.16		0.23			0.24			0.07
Net realized and unrealized gains (losses)		0.28		(1.68	)		1.51			2.29

Total from investment operations		0.44		(1.45	)		1.75			2.36

Less distributions from:
Net investment income		—		(0.28	)		(0.65	)		(0.12	)
Net realized gains		—		(0.66	)		(0.87	)		(0.43	)

Total distributions		—		(0.94	)		(1.52	)		(0.55	)

Net asset value, end of period	$	10.09	$	9.65		$	12.04		$	11.81


Total return^d		4.56%		(12.10)%			15.49%			23.76%
Ratios to average net assets^e
Expenses before waiver and payments by affiliates		6.41%		5.23%			5.07%			8.71%	^f
Expenses net of waiver and payments by affiliates		1.30%		1.30%			1.30%	^g		1.31%	^f,g
Expenses incurred in connection with securities sold short		—%		—%			—%			0.01%
Net investment income		3.04%		2.02%			1.97%			1.17%

Supplemental data
Net assets, end of period (000’s)	$	1,009	$	965		$	1,204		$	1,181
Portfolio turnover rate		13.24%		67.91%			41.11%			41.84%

^aFor the period June 15, 2009 (commencement of operations) to December 31, 2009.

^cBased on average daily shares outstanding.

^eRatios are annualized for periods less than one year.

^fIncludes dividend expense on securities sold short and borrowing fees, if any. See below for the ratios of such expenses to average net assets for the period presented.

^gBenefit of expense reduction round to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

MI-10

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited)


Mutual International Securities Fund	Country	Shares/ Rights		Value
Common Stocks and Other Equity Interests 90.4%
Aerospace & Defense 1.0%
Safran SA	France		561	$	20,732

Air Freight & Logistics 0.3%
PostNL NV	Netherlands		813		3,344
TNT Express NV	Netherlands		261		3,052

					6,396

Auto Components 2.5%
Continental AG	Germany		395		32,804
Valeo SA	France		415		17,065

					49,869

Automobiles 0.0%†
Daimler AG	Germany		1		45

Beverages 2.1%
Asahi Group Holdings Ltd.	Japan		1,093		23,352
^aPernod Ricard SA	France		180		19,195

					42,547

Capital Markets 2.8%
F&C Asset Management PLC	United Kingdom		17,090		22,244
Sun Hung Kai & Co. Ltd.	Hong Kong		28,298		14,007
UBS AG	Switzerland		1,703		19,829

					56,080

Chemicals 3.7%
Akzo Nobel NV	Netherlands		255		11,954
Huabao International Holdings Ltd.	Hong Kong		40,000		19,489
Koninklijke DSM NV	Netherlands		439		21,557
Linde AG	Germany		141		21,887

					74,887

Commercial Banks 7.9%
Aozora Bank Ltd.	Japan		13,951		32,963
Barclays PLC	United Kingdom		6,340		16,176
Hana Financial Group Inc.	South Korea		780		24,740
HSBC Holdings PLC	United Kingdom		2,990		26,288
KB Financial Group Inc.	South Korea		534		17,265
^bKorea Exchange Bank	South Korea		3,070		21,922
Woori Finance Holdings Co. Ltd.	South Korea		1,740		18,981

					158,335

Commercial Services & Supplies 1.8%
Edenred	France		248		7,013
Transfield Services Ltd.	Australia		16,225		30,145

					37,158

Construction & Engineering 4.9%
Boart Longyear Ltd.	Australia		11,034		32,304
Henderson Investment Ltd.	Hong Kong		312,750		22,978
^bKHD Humboldt Wedag International AG	Germany		3,290		20,486
Vinci SA	France		490		22,812

					98,580

MI-11

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Mutual International Securities Fund	Country	Shares/ Rights		Value
Common Stocks and Other Equity Interests (continued)
Construction Materials 1.4%
CRH PLC	Ireland		872	$	16,675
SA des Ciments Vicat	France		236		11,410

					28,085

Consumer Finance 0.9%
Samsung Card Co. Ltd.	South Korea		610		17,050

Containers & Packaging 1.8%
Rexam PLC	United Kingdom		5,555		36,623

Diversified Financial Services 4.4%
Deutsche Boerse AG	Germany		169		9,097
First Pacific Co. Ltd.	Hong Kong		25,752		26,655
^bING Groep NV	Netherlands		3,629		24,186
Osaka Securities Exchange Co. Ltd.	Japan		5		28,128

					88,066

Diversified Telecommunication Services 0.8%
Vivendi SA	France		919		17,016

Electric Utilities 0.0%
^b,cAET&D Holdings No. 1 Pty. Ltd.	Australia		6,987		—

Electronic Equipment, Instruments & Components 1.4%
Hoya Corp.	Japan		1,300		28,392

Energy Equipment & Services 0.9%
^bDockwise Ltd.	Netherlands		410		6,434
^bSBM Offshore NV	Netherlands		885		12,192

					18,626

Food & Staples Retailing 4.2%
FamilyMart Co. Ltd.	Japan		625		28,519
Koninklijke Ahold NV	Netherlands		1,634		20,213
Lawson Inc.	Japan		306		21,346
Metro AG	Germany		523		15,227

					85,305

Food Products 1.4%
China Fishery Group Ltd.	Singapore		41,035		28,339

Hotels, Restaurants & Leisure 4.8%
Accor SA	France		553		17,273
Ladbrokes PLC	United Kingdom		8,018		19,754
Mandarin Oriental International Ltd.	Hong Kong		18,000		23,220
REXLot Holdings Ltd.	Hong Kong		510,168		36,168

					96,415

Household Durables 2.1%
^bThe Berkeley Group Holdings PLC	United Kingdom		1,024		22,629
Skyworth Digital Holdings Ltd.	Hong Kong		44,861		19,776

					42,405

Industrial Conglomerates 2.6%
Jardine Matheson Holdings Ltd.	Hong Kong		473		22,893
Jardine Strategic Holdings Ltd.	Hong Kong		364		11,102

MI-12

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Mutual International Securities Fund	Country	Shares/ Rights		Value
Common Stocks and Other Equity Interests (continued)
Industrial Conglomerates (continued)
Shanghai Industrial Holdings Ltd.	China		6,650	$	17,486

					51,481

Insurance 11.4%
ACE Ltd.	United States		325		24,092
Ageas	Belgium		9,527		18,810
AXA SA	France		1,143		15,160
Catlin Group Ltd.	United Kingdom		3,741		24,963
Great Eastern Holdings Ltd.	Singapore		2,000		20,126
Hiscox Ltd.	United Kingdom		3,383		22,680
Lancashire Holdings Ltd.	United Kingdom		1,803		22,507
Resolution Ltd.	United Kingdom		7,611		23,372
RSA Insurance Group PLC	United Kingdom		19,320		32,707
Zurich Insurance Group AG	Switzerland		115		25,872

					230,289

Internet Software & Services 0.4%
Gree Inc.	Japan		400		7,906

IT Services 0.6%
Polaris Financial Technology Ltd.	India		5,415		12,428

Machinery 1.6%
Bradken Ltd.	Australia		3,031		16,103
^bKUKA AG	Germany		690		15,487

					31,590

Marine 1.3%
A.P. Moller - Maersk AS, B	Denmark		4		26,176

Media 2.8%
Eutelsat Communications	France		233		7,155
Reed Elsevier PLC	United Kingdom		1,960		15,715
Sinomedia Holding Ltd.	China		88,017		34,036

					56,906

Metals & Mining 0.6%
ThyssenKrupp AG	Germany		746		12,118

Multi-Utilities 1.9%
E.ON AG	Germany		927		19,944
GDF Suez	France		798		18,942

					38,886

Multiline Retail 2.0%
Hyundai Department Store Co. Ltd.	South Korea		86		10,700
Marks & Spencer Group PLC	United Kingdom		2,614		13,310
New World Department Store China	China		32,000		17,159

					41,169

Oil, Gas & Consumable Fuels 2.8%
BP PLC	United Kingdom		2,920		19,302
Repsol YPF SA	Spain		953		15,245
Repsol YPF SA, rts., 7/05/12	Spain		937		657
Royal Dutch Shell PLC, A	United Kingdom		634		21,348

					56,552

MI-13

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Mutual International Securities Fund	Country	Shares/ Rights		Value
Common Stocks and Other Equity Interests (continued)
Pharmaceuticals 4.2%
Novartis AG	Switzerland		495	$	27,593
Roche Holding AG	Switzerland		144		24,824
Sanofi	France		167		12,626
Teva Pharmaceutical Industries Ltd., ADR	Israel		520		20,509

					85,552

Real Estate Investment Trusts (REITs) 1.6%
The Link REIT	Hong Kong		4,000		16,293
Parkway Life REIT	Singapore		11,000		16,322

					32,615

Real Estate Management & Development 1.2%
Franshion Properties China Ltd.	China		80,390		24,144

Software 0.6%
Nintendo Co. Ltd.	Japan		100		11,564

Tobacco 2.6%
British American Tobacco PLC	United Kingdom		521		26,472
Imperial Tobacco Group PLC	United Kingdom		670		25,797

					52,269

Wireless Telecommunication Services 1.1%
Vodafone Group PLC	United Kingdom		8,056		22,624

Total Common Stocks and Other Equity Interests (Cost $1,829,753)					1,825,220

Preferred Stocks (Cost $4,983) 0.5%
Automobiles 0.5%
Volkswagen AG, pfd.	Germany		61		9,619

Total Investments before Short Term Investments (Cost $1,834,736)					1,834,839

Short Term Investments (Cost $18,974) 0.9%
^dInvestments from Cash Collateral Received for Loaned Securities 0.9%
Money Market Funds 0.9%
^eBNY Mellon Overnight Government Fund, 0.182%	United States		18,974		18,974

Total Investments (Cost $1,853,710) 91.8%					1,853,813
Other Assets, less Liabilities 8.2%					164,848

Net Assets 100.0%				$	2,018,661

^†Rounds to less than 0.1% of net assets.

^aA portion or all of the security is on loan at June 30, 2012. See Note 1(d).

^bNon-income producing.

^cSee Note 8 regarding restricted securities.

^dSee Note 1(d) regarding securities on loan.

^eThe rate shown is the annualized seven-day yield at period end.

MI-14

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Mutual International Securities Fund

At June 30, 2012, the Fund had the following forward exchange contracts outstanding. See Note 1(c).

Forward Exchange Contracts


Currency	Counterparty		Type		Quantity		Contract Amount		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
Euro		DBAB		Buy		36,488	$	47,697		7/17/12	$	—	$	(1,511	)
Euro		SSBT		Buy		20,600		27,156		7/17/12		—		(1,081	)
Euro		BOFA		Buy		10,706		14,054		7/17/12		—		(502	)
Euro		HSBC		Sell		17,187		21,678		7/17/12		—		(77	)
Euro		FBCO		Sell		4,487		5,677		7/17/12		—		(3	)
Euro		BZWS		Buy		277		343		7/17/12		7		—
Euro		HSBC		Buy		5,003		6,193		7/17/12		140		—
Euro		DBAB		Buy		255		316		7/17/12		7		—
Euro		SSBT		Buy		650		807		7/17/12		15		—
Euro		SSBT		Sell		404,626		530,376		7/17/12		18,205		—
Euro		BZWS		Sell		7,586		9,900		7/17/12		298		—
Euro		HSBC		Sell		18,794		24,658		7/17/12		869		—
Euro		DBAB		Sell		17,777		23,315		7/17/12		814		—
Euro		BOFA		Sell		1,122		1,423		7/17/12		3		—
South Korean Won		BOFA		Sell		27,086,840		23,331		8/10/12		—		(331	)
South Korean Won		DBAB		Sell		8,221,500		7,152		8/10/12		—		(30	)
South Korean Won		BOFA		Buy		16,736,780		14,388		8/10/12		233		—
South Korean Won		BOFA		Sell		81,077,040		71,731		8/10/12		905		—
Swiss Franc		DBAB		Buy		2,825		3,110		8/10/12		—		(130	)
Swiss Franc		SSBT		Buy		960		1,066		8/10/12		—		(53	)
Swiss Franc		BOFA		Buy		621		676		8/10/12		—		(21	)
Swiss Franc		HSBC		Sell		1,700		1,785		8/10/12		—		(8	)
Swiss Franc		HSBC		Buy		248		268		8/10/12		—		(6	)
Swiss Franc		BZWS		Buy		595		631		8/10/12		—		(3	)
Swiss Franc		DBAB		Sell		587		617		8/10/12		—		(3	)
Swiss Franc		SSBT		Buy		470		485		8/10/12		11		—
Swiss Franc		DBAB		Buy		621		644		8/10/12		11		—
Swiss Franc		BOFA		Buy		202		209		8/10/12		4		—
Swiss Franc		BOFA		Sell		33,432		36,639		8/10/12		1,373		—
Swiss Franc		DBAB		Sell		31,187		34,211		8/10/12		1,314		—
Swiss Franc		SSBT		Sell		8,010		8,874		8/10/12		425		—
British Pound		HSBC		Sell		6,762		10,559		8/16/12		—		(34	)
British Pound		SSBT		Sell		1,800		2,807		8/16/12		—		(13	)
British Pound		BZWS		Sell		820		1,276		8/16/12		—		(9	)
British Pound		SSBT		Sell		179,969		284,711		8/16/12		2,780		—
British Pound		DBAB		Sell		3,000		4,719		8/16/12		19		—
Japanese Yen		HSBC		Sell		15,795,735		194,769		10/22/12		—		(3,038	)
Japanese Yen		HSBC		Buy		734,534		9,313		10/22/12		—		(115	)
Japanese Yen		DBAB		Buy		622,242		7,831		10/22/12		—		(39	)
Japanese Yen		DBAB		Buy		318,000		3,971		10/22/12		11		—
Japanese Yen		HSBC		Buy		1,371,366		17,075		10/22/12		99		—
Japanese Yen		DBAB		Sell		963,400		12,271		10/22/12		207		—

Unrealized appreciation (depreciation)												27,750		(7,007	)

Net unrealized appreciation (depreciation)											$	20,743

See Abbreviations on page MI-26.

The accompanying notes are an integral part of these financial statements.

MI-15

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

June 30, 2012 (unaudited)


	Mutual International Securities Fund
Assets:
Investments in securities:
Cost	$	1,853,710

Value (includes securities loaned in the amount of $19,088)	$	1,853,813
Cash		57,131
Foreign currency, at value (cost $94,063)		95,058
Receivables:
Investment securities sold		6,101
Dividends		5,150
Affiliates		40,853
Unrealized appreciation on forward exchange contracts		27,750

Total assets		2,085,856

Liabilities:
Payables:
Investment securities purchased		3,068
Reports to shareholders		5,341
Professional fees		26,107
Pricing fees		5,440
Payable upon return of securities loaned		18,974
Unrealized depreciation on forward exchange contracts		7,007
Accrued expenses and other liabilities		1,258

Total liabilities		67,195

Net assets, at value	$	2,018,661

Net assets consist of:
Paid-in capital	$	1,997,140
Undistributed net investment income		391
Net unrealized appreciation (depreciation)		21,953
Accumulated net realized gain (loss)		(823	)

Net assets, at value	$	2,018,661

Class 2:
Net assets, at value	$	1,009,733

Shares outstanding		100,000

Net asset value and maximum offering price per share	$	10.10

Class 4:
Net assets, at value	$	1,008,928

Shares outstanding		100,000

Net asset value and maximum offering price per share	$	10.09

The accompanying notes are an integral part of these financial statements.

MI-16

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the six months ended June 30, 2012 (unaudited)


	Mutual International Securities Fund
Investment income:
Dividends (net of foreign taxes of $3,282)	$	43,859
Income from securities loaned		838

Total investment income		44,697

Expenses:
Management fees (Note 3a)		8,234
Administrative fees (Note 3b)		2,573
Distribution fees: (Note 3c)
Class 2		1,287
Class 4		1,801
Custodian fees (Note 4)		825
Reports to shareholders		5,917
Professional fees		31,497
Pricing fees		12,644
Other		748

Total expenses		65,526
Expenses waived/paid by affiliates (Note 3e)		(52,660	)

Net expenses		12,866

Net investment income		31,831

Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		1,711
Foreign currency transactions		43,203

Net realized gain (loss)		44,914

Net change in unrealized appreciation (depreciation) on:
Investments		41,382
Translation of other assets and liabilities denominated in foreign currencies		(30,629	)

Net change in unrealized appreciation (depreciation)		10,753

Net realized and unrealized gain (loss)		55,667

Net increase (decrease) in net assets resulting from operations	$	87,498

The accompanying notes are an integral part of these financial statements.

MI-17

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets


	Mutual International Securities Fund
	Six Months Ended June 30, 2012 (unaudited)		Year Ended December 31, 2011

Increase (decrease) in net assets:
Operations:
Net investment income	$	31,831	$	47,727
Net realized gain (loss) from investments, foreign currency transactions		44,914		27,154
Net change in unrealized appreciation (depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies		10,753		(363,298	)

Net increase (decrease) in net assets resulting from operations		87,498		(288,417	)

Distributions to shareholders from:
Net investment income:
Class 2		—		(28,830	)
Class 4		—		(27,670	)
Net realized gains:
Class 2		—		(65,960	)
Class 4		—		(65,960	)

Total distributions to shareholders		—		(188,420	)

Net increase (decrease) in net assets		87,498		(476,837	)
Net assets:
Beginning of period		1,931,163		2,408,000

End of period	$	2,018,661	$	1,931,163

Undistributed net investment income (distributions in excess of net investment income) included in net assets:
End of period	$	391	$	(31,440	)

The accompanying notes are an integral part of these financial statements.

MI-18

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited)

Mutual International Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment company, consisting of twenty separate funds. The Mutual International Securities Fund (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. The Fund offers two classes of shares: Class 2 and Class 4. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

Equity securities listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded, or the NYSE, whichever is earlier. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at the close of the NYSE on the day that the value of the security is determined. Over-the-counter (OTC) securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities. Investments in non-registered money market funds are valued at the closing net asset value.

MI-19

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual International Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

a. Financial Instrument Valuation (continued)

valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. The VLOC employs various methods for calibrating these valuation approaches including a regular review of key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.

b. Foreign Currency Translation

c. Derivative Financial Instruments

MI-20

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual International Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

c. Derivative Financial Instruments (continued)

The Fund entered into forward exchange contracts primarily to manage exposure to certain foreign currencies. A forward exchange contract is an agreement between the Fund and a counterparty to buy or sell a foreign currency for a specific exchange rate on a future date. Pursuant to the terms of the forward exchange contracts, cash or securities may be required to be deposited as collateral. Unrestricted cash may be invested according to the Fund’s investment objectives.

The Fund’s investments in OTC derivatives are subject to the terms of International Swaps and Derivatives Association Master Agreements and other related agreements between the Fund and certain derivative counterparties. These agreements contain various provisions, including but not limited to collateral requirements, events of default, requirements for the Fund to maintain certain net asset levels and/or limit the decline in net assets over various periods of time. Should the Fund fail to meet any of these provisions, the derivative counterparty has the right to terminate the derivative contract and require immediate payment by the Fund for those OTC derivatives with that particular counterparty that are in a net unrealized loss position. At June 30, 2012, the Fund had OTC derivatives in a net unrealized loss position for such contracts of $2,173.

See Note 9 regarding other derivative information.

d. Securities Lending

The Fund participates in an agency based securities lending program. The fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the market value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the market value of loaned securities, as determined at the close of fund business each day; any additional collateral required due to changes in security values is delivered to the fund on the next business day. The collateral is invested in a non-registered money fund as indicated on the Statement of Investments. The fund receives income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. The fund bears the market risk with respect to the collateral investment, securities loaned, and the risk that the agent may default on its obligations to the fund. The securities lending agent has agreed to indemnify the fund in the event of default by a third party borrower.

e. Income and Deferred Taxes

MI-21

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual International Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

f. Security Transactions, Investment Income, Expenses and Distributions

g. Accounting Estimates

h. Guarantees and Indemnifications

2. SHARES OF BENEFICIAL INTEREST

At June 30, 2012, there were an unlimited number of shares authorized (without par value). During the period ended June 30, 2012 and the year ended December 31, 2011, there were no transactions of the Fund’s shares.

3. TRANSACTIONS WITH AFFILIATES


Subsidiary		Affiliation
Franklin Mutual Advisers, LLC (Franklin Mutual)		Investment manager
Franklin Templeton Services, LLC (FT Services)		Administrative manager
Franklin Templeton Distributors, Inc. (Distributors)		Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services)		Transfer agent

MI-22

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual International Securities Fund

3. TRANSACTIONS WITH AFFILIATES (continued)

a. Management Fees

The Fund pays an investment management fee to Franklin Mutual based on the average daily net assets of the Fund as follows:


Annualized Fee Rate		Net Assets
0.800%		Up to and including $4 billion
0.770%		Over $4 billion, up to and including $7 billion
0.750%		Over $7 billion, up to and including $10 billion
0.730%		In excess of $10 billion

b. Administrative Fees

The Fund pays an administrative fee to FT Services of 0.25% per year of the average daily net assets of the Fund.

c. Distribution Fees

d. Transfer Agent Fees

Investor Services, under terms of an agreement, performs shareholder servicing for the Fund and is not paid by the Fund for the services.

e. Waiver and Expense Reimbursements

FT Services and Franklin Mutual have contractually agreed in advance to waive or limit their respective fees and to assume as their own expense certain expenses otherwise payable by the Fund so that the common expenses (i.e. a combination of management fees, administrative fees, and other expenses, but excluding distribution fees, and acquired fund fees and expenses) for each class of the Fund do not exceed 0.95% (other than certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations, and liquidations) until April 30, 2013.

f. Other Affiliated Transactions

At June 30, 2012, Franklin Advisers, Inc., an affiliate of the Investment Manager, owned 100% of the Fund’s outstanding shares.

4. EXPENSE OFFSET ARRANGEMENT

5. INCOME TAXES

At December 31, 2011, the Fund deferred post-October capital losses and late-year ordinary losses of $22,965 and $2,737, respectively.

MI-23

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual International Securities Fund

5. INCOME TAXES (continued)

At June 30, 2012, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:


Cost of investments	$	1,875,153


Unrealized appreciation	$	225,682
Unrealized depreciation		(247,022	)

Net unrealized appreciation (depreciation)	$	(21,340	)

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2012, aggregated $362,130 and $242,187, respectively.

7. CONCENTRATION OF RISK

8. RESTRICTED SECURITIES

At June 30, 2012, the Fund held investments in restricted securities, excluding certain securities exempt from registration under the 1933 Act deemed to be liquid, as follows:


Shares		Issuer	Acquisition Date		Cost		Value
	6,987	AET&D Holdings No. 1 Pty. Ltd. (0.00% of Net Assets)		10/13/10	$	—	$	—

9. OTHER DERIVATIVE INFORMATION

At June 30, 2012, the Fund has invested in derivative contracts which are reflected on the Statement of Assets and Liabilities as follows:

Asset Derivatives

Liability Derivatives

Derivative Contracts Not Accounted
for as Hedging Instruments

Statement of Assets and
Liabilities Location

Fair
Value
Amount

Statement of Assets and
Liabilities Location

Fair
Value
Amount

Foreign exchange contracts

Unrealized appreciation on forward exchange contracts

27,750

Unrealized depreciation on forward exchange contracts

7,007

MI-24

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual International Securities Fund

9. OTHER DERIVATIVE INFORMATION (continued)

For the period ended June 30, 2012, the effect of derivative contracts on the Fund’s Statement of Operations was as follows:


Derivative Contracts Not Accounted for as Hedging Instruments	Statement of Operations Locations	Realized Gain (Loss) for the Period		Change in Unrealized Appreciation (Depreciation) for the Period
Foreign exchange contracts	Net realized gain (loss) from foreign currency transactions/ Net change in unrealized appreciation (depreciation) on translation of other assets and liabilities denominated in foreign currencies	$	47,289	$	(31,557	)

For the period ended 6/30/12, the average month end market value of derivatives represented 1.97% of average month end net assets. The average month end number of open derivative contracts for the period was 56.

See Note 1(c) regarding derivative financial instruments.

10. CREDIT FACILITY

11. FAIR VALUE MEASUREMENTS

•

Level 1 – quoted prices in active markets for identical financial instruments

•

Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)

•

Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of financial instruments)

The inputs or methodology used for valuing financial instruments are not an indication of the risk associated with investing in those financial instruments.

For movements between the levels within the fair value hierarchy, the Fund has adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.

MI-25

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual International Securities Fund

11. FAIR VALUE MEASUREMENTS (continued)

A summary of inputs used as of June 30, 2012, in valuing the Fund’s assets and liabilities carried at fair value, is as follows:


	Level 1		Level 2		Level 3		Total

Assets:
Investments in Securities:
Equity Investments^a,b	$	1,834,839	$	—	$	—^c	$	1,834,839
Short Term Investments		—		18,974		—		18,974

Total Investments in Securities	$	1,834,839	$	18,974	$	—	$	1,853,813

Forward Exchange Contracts		—		27,750		—		27,750
Liabilities:
Forward Exchange Contracts		—		7,007		—		7,007

^aIncludes common and preferred stocks.

^bFor detailed categories, see the accompanying Statement of Investments.

^cIncludes securities determined to have no value at June 30, 2012.

A reconciliation of assets in which Level 3 inputs are used in determining fair value is presented when there are significant Level 3 investments at the end of the period.

12. NEW ACCOUNTING PRONOUNCEMENTS

13. SUBSEQUENT EVENTS

The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure.


ABBREVIATIONS
Counterparty		Selected Portfolio

BOFA - Bank of America Corp.		ADR - American Depositary Receipt
BZWS - Barclays Bank PLC
DBAB - Deutsche Bank AG
FBCO - Credit Suisse Group AG
HSBC - HSBC Bank USA, NA
SSBT - State Street Bank and Trust Co.

MI-26

MUTUAL SHARES SECURITIES FUND

This semiannual report for Mutual Shares Securities Fund covers the period ended June 30, 2012.

Performance Summary as of 6/30/12

Mutual Shares Securities Fund – Class 2 delivered a +5.85% total return for the six-month period ended 6/30/12.

Mutual Shares Securities Fund – Class 2

MS-1

Fund Goals and Main Investments: Mutual Shares Securities Fund seeks capital appreciation, with income as a secondary goal. Under normal market conditions, the Fund invests primarily in U.S. and foreign equity securities that the investment manager believes are undervalued.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. The Fund underperformed its benchmark, the Standard & Poor’s^® 500 Index (S&P 500^®), which delivered a +9.49% total return for the period under review.¹

Economic and Market Overview

2. Source: Bureau of Labor Statistics.

Fund Risks: All investments involve risks, including possible loss of principal. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Value securities may not increase in price as anticipated or may decline further in value. The risks of investment in foreign securities include currency fluctuations and economic and political uncertainty. Investments in companies engaged in mergers, reorganizations or liquidations involve special risks as pending deals may not be completed on time or on favorable terms, as well as lower rated bonds, which entail higher credit risk. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

MS-2

Global developed stock markets, as measured by the MSCI World Index, delivered the best annual start in more than a decade, as signs of U.S. economic recovery and European policy relief underpinned a rally in cyclical stocks.³ During late March and early April 2012, U.S. stocks, as measured by the S&P 500, reached multi-year highs. However, stocks dropped sharply in late spring amid renewed global economic weakness and European debt concerns before additional policy action prompted a rebound in June. Politics largely drove the markets during the first half of 2012 as investors closely monitored developments in Europe, where German-led austerity demands were met with increasing resentment from some highly indebted eurozone members. Fears of a Greek debt default and exit from the eurozone were somewhat mitigated in February by secured bailout financing and bondholder concessions, as well as May and June elections that resulted in the formation of a new coalition government. The Fed’s Operation Twist purchases and risk-averse investors seeking safety drove U.S. Treasury yields to historical lows during the period. In the latter part of the period, the euro declined while the U.S. dollar and Japanese yen made gains.

Investment Strategy

3. Please see Index Descriptions following the Fund Summaries.

LOGO

MS-3

vast majority of our undervalued equity investments are made in publicly traded companies globally, we may invest occasionally in privately held companies as well.

The other piece of our investment strategy is participating in arbitrage situations, another highly specialized field. When companies announce proposed mergers or takeovers, commonly referred to as “deals,” the target company may trade at a discount to the bid it ultimately accepts. One form of arbitrage involves purchasing the target company’s stock when it is trading below the value we believe it would receive in a deal. In keeping with our commitment to a relatively conservative investment approach, we typically focus our arbitrage efforts on announced deals, and eschew rumored deals or other situations we consider relatively risky.

In addition, it is our practice to hedge the Fund’s currency exposure when we deem it advantageous for our shareholders.

Manager’s Discussion

In an environment of generally rising U.S. equity prices, many Fund holdings increased in value during the six-month period. Three particularly strong performers were software company Microsoft, drugstore chain and pharmacy benefits manager CVS Caremark, and the second-largest U.S. cable company, Time Warner Cable (TWC).

Microsoft shares performed well as revenues grew, driven by sales of its Windows 7 operating system, the Office productivity suite, and strength in the Server and Tools division. Operating strength led company management to continue its policy of paying dividends and buying back shares. Also, the company released an early version of its next operating system, Windows 8, which will enable touch interaction and bring Windows to the world of tablets. Microsoft also announced it would be entering the hardware market with a tablet of its own, Surface. Given the potential stemming from the releases of Windows 8 and Surface and the ongoing success of Microsoft’s enterprise business, we consider this investment attractive at recent valuations.

Top 10 Sectors/Industries

Mutual Shares Securities Fund Based on Equity Securities 6/30/12


	% of Total Net Assets
Tobacco		8.2%
Oil, Gas & Consumable Fuels		8.2%
Media		6.8%
Pharmaceuticals		6.3%
Insurance		6.0%
Food & Staples Retailing		4.6%
Software		3.4%
Food Products		3.2%
Health Care Providers & Services		3.2%
Beverages		3.2%

MS-4

CVS shares appreciated as management in May increased its 2012 guidance, reflecting strong first-quarter and 2011 results. Strong growth in pharmacy network claims processed and increases in same-store sales led to revenue growth across business segments, supporting the stock price during the period.

Positive operating results drove TWC’s share price higher as the company reported better-than-expected subscriber metrics and revenues and raised its 2012 free cash flow guidance. The company also raised its quarterly dividend and increased its share buyback authorization.

During the period under review, some of the Fund’s investments lost value and negatively impacted performance. These included U.S. oil and gas exploration and production company Marathon Oil, German industrial conglomerate ThyssenKrupp and U.S.-based integrated power company Texas Competitive Electric Holdings.

Marathon Oil hindered performance during the first half of 2012 as disappointing results combined with a sharp drop in oil prices to negatively impact investor sentiment. Based on our research, we viewed the high oil prices of the past year as unsustainable and took that into consideration in our valuation analyses. We were encouraged by continued progress in the company’s key underlying operating trends and continued to hold this position.

Our holdings of Texas Competitive Electric debt declined during the six months under review as depressed natural gas prices and uncertainty over the potential impact of the Cross-State Air Pollution Rule resulted in a challenging operating environment. Weak volumes and pricing continued to hinder performance, while depressed forward power curves diminished prospects for business to improve in the short term.

Top 10 Holdings

Mutual Shares Securities Fund 6/30/12


Company Sector/Industry, Country	% of Total Net Assets
Merck & Co. Inc.		3.0%
Pharmaceuticals, U.S.
British American Tobacco PLC, ord. & ADR		2.9%
Tobacco, U.K.
Microsoft Corp.		2.4%
Software, U.S.
Kraft Foods Inc., A		2.3%
Food Products, U.S.
CVS Caremark Corp.		2.2%
Food & Staples Retailing, U.S.
Vodafone Group PLC		2.0%
Wireless Telecommunication Services, U.K.
Pfizer Inc.		1.9%
Pharmaceuticals, U.S.
Imperial Tobacco Group PLC		1.8%
Tobacco, U.K.
Royal Dutch Shell PLC, A		1.8%
Oil, Gas & Consumable Fuels, U.K.
Time Warner Cable Inc.		1.7%
Media, U.S.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments.

MS-5

During the period, the Fund held currency forwards and futures to somewhat hedge the currency risk of the portfolio’s non-U.S. dollar investments. The hedges had a negligible impact on the Fund’s performance.

Thank you for your participation in Mutual Shares Securities Fund. We look forward to serving your future investment needs.

MS-6

Fund Expenses

•

Transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes.

•

Actual Fund Expenses

You can estimate the Fund-level expenses you incurred during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:

1.	Divide your account value by $1,000.

If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6.

2.	Multiply the result by the number under the heading “Fund-Level Expenses Incurred During Period.”

If Fund-Level Expenses Incurred During Period were $7.50, then 8.6 x $7.50 = $64.50.

In this illustration, the estimated expenses incurred this period at the Fund level are $64.50.

Mutual Shares Securities Fund – Class 2

MS-7

Hypothetical Example for Comparison with Other Mutual Funds


Class 2	Beginning Account Value 1/1/12		Ending Account Value 6/30/12		Fund-Level Expenses Incurred During Period* 1/1/12–6/30/12
Actual	$	1,000	$	1,058.50	$	4.91
Hypothetical (5% return before expenses)	$	1,000	$	1,020.09	$	4.82

*Expenses are calculated using the most recent six-month annualized expense ratio for the Fund’s Class 2 shares (0.96%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 182/366 to reflect the one-half year period.

MS-8

Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Mutual Shares Securities Fund


	Six Months Ended June 30, 2012 (unaudited)		Year Ended December 31,
Class 1	Six Months Ended June 30, 2012 (unaudited)		2011			2010			2009			2008			2007

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	15.57	$	16.14		$	14.75		$	11.92		$	20.42		$	20.67

Income from investment operations^a:
Net investment income^b		0.18		0.38	^c		0.40	^d		0.23	^e		0.34			0.54
Net realized and unrealized gains (losses)		0.76		(0.53	)		1.27			2.89			(7.54	)		0.31

Total from investment operations		0.94		(0.15	)		1.67			3.12			(7.20	)		0.85

Less distributions from:
Net investment income		—		(0.42	)		(0.28	)		(0.29	)		(0.57	)		(0.35	)
Net realized gains		—		—			—			—			(0.73	)		(0.75	)

Total distributions		—		(0.42	)		(0.28	)		(0.29	)		(1.30	)		(1.10	)

Net asset value, end of period	$	16.51	$	15.57		$	16.14		$	14.75		$	11.92		$	20.42


Total return^f		6.04%		(0.79)%			11.47%			26.35%			(36.93)%			3.72%
Ratios to average net assets^g
Expenses^h		0.71%		0.73%	ⁱ		0.74%	ⁱ		0.78%	ⁱ		0.73%	ⁱ		0.72%	ⁱ
Expenses incurred in connection with securities sold short		—%		—%	^j		0.02%			0.06%			—%	^j		—%	^j
Net investment income		2.25%		2.28%	^c		2.66%	^d		1.85%	^e		2.16%			2.58%

Supplemental data
Net assets, end of period (000’s)	$	1,301,298	$	1,170,781		$	1,301,520		$	767,553		$	319,703		$	272,509
Portfolio turnover rate		20.49%		41.02%			32.05%			49.33%			44.11%			41.73%	^k

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $0.02 per share related to interest income received that had previously been deemed uncollectible. Excluding this amount, the ratio of net investment income to average net assets would have been 2.14%.

^dNet investment income per share includes approximately $0.11 per share received in the form of a special dividend paid in connection with a corporate real estate investment trust (REIT) conversion. Excluding this non-recurring amount, the ratio of the net investment income to average net assets would have been 1.93%.

^eNet investment income per share includes approximately $(0.03) per share related to an adjustment for uncollectible interest. Excluding the effect of this

adjustment, the ratio of net investment income to average net assets would have been 2.08%.

^gRatios are annualized for periods less than one year.

^hIncludes dividend expense on securities sold short and security borrowing fees, if any. See below for the ratios of such expenses to average net assets for the periods presented. See Note 1(f).

ⁱBenefit of expense reduction rounds to less than 0.01%.

^jRounds to less than 0.01%.

^kExcludes the value of portfolio securities delivered as a result of redemption in-kind.

The accompanying notes are an integral part of these financial statements.

MS-9

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Mutual Shares Securities Fund


	Six Months Ended June 30, 2012 (unaudited)		Year Ended December 31,
Class 2	Six Months Ended June 30, 2012 (unaudited)		2011			2010			2009			2008			2007

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	15.38	$	15.95		$	14.58		$	11.78		$	20.19		$	20.46

Income from investment operations^a:
Net investment income^b		0.16		0.32	^c		0.36	^d		0.20	^e		0.32			0.48
Net realized and unrealized gains (losses)		0.74		(0.51	)		1.25			2.85			(7.49	)		0.31

Total from investment operations		0.90		(0.19	)		1.61			3.05			(7.17	)		0.79

Less distributions from:
Net investment income		—		(0.38	)		(0.24	)		(0.25	)		(0.51	)		(0.31	)
Net realized gains		—		—			—			—			(0.73	)		(0.75	)

Total distributions		—		(0.38	)		(0.24	)		(0.25	)		(1.24	)		(1.06	)

Net asset value, end of period	$	16.28	$	15.38		$	15.95		$	14.58		$	11.78		$	20.19


Total return^f		5.85%		(1.04)%			11.19%			26.05%			(37.11)%			3.48%
Ratios to average net assets^g
Expenses^h		0.96%		0.98%	ⁱ		0.99%	ⁱ		1.03%	ⁱ		0.98%	ⁱ		0.97%	ⁱ
Expenses incurred in connection with securities sold short		—%		—%	^j		0.02%			0.06%			—%	^j		—%	^j
Net investment income		2.00%		2.03%	^c		2.41%	^d		1.60%	^e		1.91%			2.33%

Supplemental data
Net assets, end of period (000’s)	$	3,953,225	$	3,913,220		$	4,188,821		$	3,953,435		$	3,303,761		$	5,925,551
Portfolio turnover rate		20.49%		41.02%			32.05%			49.33%			44.11%			41.73%	^k

^bBased on average daily shares outstanding.

^eNet investment income per share includes approximately $(0.03) per share related to an adjustment for uncollectible interest. Excluding the effect of this

adjustment, the ratio of net investment income to average net assets would have been 1.83%.

^gRatios are annualized for periods less than one year.

^hIncludes dividend expense on securities sold short and security borrowing fees, if any. See below for the ratios of such expenses to average net assets for the periods presented. See Note 1(f).

ⁱBenefit of expense reduction rounds to less than 0.01%.

^jRounds to less than 0.01%.

^kExcludes the value of portfolio securities delivered as a result of redemption in-kind.

The accompanying notes are an integral part of these financial statements.

MS-10

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Mutual Shares Securities Fund


	Six Months Ended June 30, 2012 (unaudited)		Year Ended December 31,
Class 4	Six Months Ended June 30, 2012 (unaudited)		2011			2010			2009			2008^a

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	15.45	$	16.03		$	14.66		$	11.88		$	18.91

Income from investment operations^b:
Net investment income^c		0.15		0.30	^d		0.35	^e		0.19	^f		0.17
Net realized and unrealized gains (losses)		0.75		(0.51	)		1.26			2.87			(5.90	)

Total from investment operations		0.90		(0.21	)		1.61			3.06			(5.73	)

Less distributions from:
Net investment income		—		(0.37	)		(0.24	)		(0.28	)		(0.57	)
Net realized gains		—		—			—			—			(0.73	)

Total distributions		—		(0.37	)		(0.24	)		(0.28	)		(1.30	)

Net asset value, end of period	$	16.35	$	15.45		$	16.03		$	14.66		$	11.88


Total return^g		5.83%		(1.12)%			11.06%			25.94%			(32.12)%
Ratios to average net assets^h
Expensesⁱ		1.06%		1.08%	^j		1.09%	^j		1.13%	^j		1.08%	^j
Expenses incurred in connection with securities sold short		—%		—%	^k		0.02%			0.06%			—%	^k
Net investment income		1.90%		1.93%	^d		2.31%	^e		1.50%	^f		1.81%

Supplemental data
Net assets, end of period (000’s)	$	163,851	$	162,049		$	167,274		$	141,446		$	57,266
Portfolio turnover rate		20.49%		41.02%			32.05%			49.33%			44.11%

^aFor the period February 29, 2008 (effective date) to December 31, 2008.

^cBased on average daily shares outstanding.

^dNet investment income per share includes approximately $0.02 per share related to interest income received that had previously been deemed uncollectible. Excluding this amount, the ratio of net investment income to average net assets would have been 1.79%.

^eNet investment income per share includes approximately $0.11 per share received in the form of a special dividend paid in connection with a corporate real estate investment trust (REIT) conversion. Excluding this non-recurring amount, the ratio of the net investment income to average net assets would have been 1.58%.

^fNet investment income per share includes approximately $(0.03) per share related to an adjustment for uncollectible interest. Excluding the effect of this

adjustment, the ratio of net investment income to average net assets would have been 1.73%.

^gTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which the Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle. Total return is not annualized for periods less than one year.

^hRatios are annualized for periods less than one year.

ⁱIncludes dividend expense on securities sold short and security borrowing fees, if any. See below for the ratios of such expenses to average net assets for the periods presented. See Note 1(f).

^jBenefit of expense reduction rounds to less than 0.01%.

^kRounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

MS-11

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited)


Mutual Shares Securities Fund	Country	Shares		Value
Common Stocks and Other Equity Interests 87.3%
Aerospace & Defense 2.2%
^aGenCorp Inc.	United States		494,180	$	3,217,112
Goodrich Corp.	United States		237,930		30,193,317
^aHuntington Ingalls Industries Inc.	United States		852,088		34,288,021
Raytheon Co.	United States		917,186		51,903,556

					119,602,006

Auto Components 0.1%
^a,b,cCollins & Aikman Products Co., Contingent Distribution	United States		929,505		2,231
^a,dInternational Automotive Components Group Brazil LLC	Brazil		1,730,515		589,240
^a,d,eInternational Automotive Components Group North America, LLC	United States		11,387,027		5,620,067

					6,211,538

Automobiles 0.7%
^aGeneral Motors Co.	United States		1,927,320		38,006,750

Beverages 3.2%
Coca-Cola Enterprises Inc.	United Kingdom		1,190,962		33,394,574
Dr. Pepper Snapple Group Inc.	United States		1,256,549		54,974,019
^fPernod Ricard SA	France		789,788		84,222,559

					172,591,152

Biotechnology 0.9%
Amgen Inc.	United States		634,333		46,331,682

Building Products 0.7%
^aOwens Corning Inc.	United States		1,395,045		39,814,584

Capital Markets 1.2%
Morgan Stanley	United States		2,763,478		40,319,144
UBS AG	Switzerland		2,356,378		27,437,278

					67,756,422

Chemicals 0.6%
^a,b,cDow Corning Corp., Contingent Distribution	United States		100,000		—
Linde AG	Germany		227,675		35,341,042

					35,341,042

Commercial Banks 3.2%
Barclays PLC	United Kingdom		2,023,934		5,163,971
^aCIT Group Inc.	United States		517,223		18,433,828
^a,dElephant Capital Holdings Ltd.	Japan		11,728		—
^a,dFirst Southern Bancorp Inc.	United States		140,952		1,336,873
^aGuaranty Bancorp	United States		1,288,316		2,718,347
KB Financial Group Inc.	South Korea		410,501		13,271,902
^a,dNCB Warrant Holdings Ltd., A	Japan		57,295		—
PNC Financial Services Group Inc.	United States		1,499,989		91,664,328
^aState Bank Financial Corp.	United States		433,000		6,564,280
Wells Fargo & Co.	United States		951,740		31,826,185

					170,979,714

Communications Equipment 1.3%
Cisco Systems Inc.	United States		3,595,260		61,730,614
^aResearch In Motion Ltd.	Canada		1,193,030		8,816,492

					70,547,106

Consumer Finance 0.1%
^a,dAlly Financial Inc.	United States		194		1,127,868
^dCerberus CG Investor I LLC	United States		9,845,095		1,181,411

MS-12

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Mutual Shares Securities Fund	Country		Shares		Value
Common Stocks and Other Equity Interests (continued)
Consumer Finance (continued)
^dCerberus CG Investor II LLC		United States		9,845,012	$	1,181,401
^dCerberus CG Investor III LLC		United States		4,922,879		590,746
^aComdisco Holding Co. Inc.		United States		180		900

						4,082,326

Diversified Financial Services 2.8%
^a,gBond Street Holdings LLC, A, 144A		United States		493,723		9,627,598
Citigroup Inc.		United States		1,072,309		29,391,990
Deutsche Boerse AG		Germany		492,140		26,489,911
^aING Groep NV		Netherlands		4,246,435		28,301,000
JPMorgan Chase & Co.		United States		881,890		31,509,930
NYSE Euronext		United States		987,020		25,247,971

						150,568,400

Diversified Telecommunication Services 0.2%
^aAboveNet Inc.		United States		52,441		4,405,044
Cable & Wireless Communications PLC		Panama		14,125,048		6,559,457
^a,b,cGlobal Crossing Holdings Ltd., Contingent Distribution		United States		9,005,048		—
^a,b,cMarconi Corp., Contingent Distribution		United Kingdom		9,945,700		185,165

						11,149,666

Electric Utilities 1.3%
^a,dAET&D Holdings No. 1 Pty. Ltd.		Australia		4,709,226		—
Entergy Corp.		United States		357,700		24,284,253
Exelon Corp.		United States		1,239,629		46,634,843

						70,919,096

Electronic Equipment, Instruments & Components 0.8%
TE Connectivity Ltd.		United States		1,388,012		44,291,463

Energy Equipment & Services 2.5%
Baker Hughes Inc.		United States		1,511,264		62,112,950
Ensco PLC, A		United States		448,574		21,069,521
Transocean Ltd.		United States		1,134,117		50,729,054

						133,911,525

Food & Staples Retailing 4.6%
CVS Caremark Corp.		United States		2,589,043		120,985,980
The Kroger Co.		United States		2,915,532		67,611,187
Wal-Mart Stores Inc.		United States		519,642		36,229,440
Walgreen Co.		United States		898,181		26,568,194

						251,394,801

Food Products 3.2%
General Mills Inc.		United States		1,323,944		51,024,802
Kraft Foods Inc., A		United States		3,234,429		124,913,648

						175,938,450

Health Care Equipment & Supplies 2.1%
^aBoston Scientific Corp.		United States		5,962,490		33,807,318
Medtronic Inc.		United States		2,006,982		77,730,413

						111,537,731

Health Care Providers & Services 3.2%
Cigna Corp.		United States		1,367,104		60,152,576
^aCommunity Health Systems Inc.		United States		1,277,022		35,794,927

MS-13

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Mutual Shares Securities Fund	Country	Shares		Value
Common Stocks and Other Equity Interests (continued)
Health Care Providers & Services (continued)
Coventry Health Care Inc.	United States		1,414,284	$	44,960,088
^aTenet Healthcare Corp.	United States		6,250,847		32,754,438

					173,662,029

Hotels, Restaurants & Leisure 0.0%†
^a,d,hGLCP Harrah’s Investment LP	United States		5,565,600		434,506

Independent Power Producers & Energy Traders 0.6%
^aNRG Energy Inc.	United States		1,941,240		33,699,926

Insurance 6.0%
ACE Ltd.	United States		1,024,275		75,929,506
^aAlleghany Corp.	United States		85,147		28,928,693
^aAmerican International Group Inc.	United States		2,315,348		74,299,517
CNO Financial Group Inc.	United States		964,957		7,526,665
MetLife Inc.	United States		996,593		30,744,894
^a,dOlympus Re Holdings Ltd.	United States		16,280		—
White Mountains Insurance Group Ltd.	United States		140,935		73,532,836
Zurich Insurance Group AG	Switzerland		148,176		33,335,697

					324,297,808

Internet Software & Services 0.7%
^aGoogle Inc., A	United States		66,840		38,771,879

Leisure Equipment & Products 0.7%
Mattel Inc.	United States		1,105,235		35,853,823

Machinery 1.1%
^aFederal Signal Corp.	United States		930,921		5,436,579
^aOshkosh Corp.	United States		1,098,890		23,021,745
Stanley Black & Decker Inc.	United States		512,944		33,013,079

					61,471,403

Marine 1.0%
A.P. Moller-Maersk AS, B	Denmark		8,589		56,206,255

Media 6.8%
British Sky Broadcasting Group PLC	United Kingdom		4,240,555		46,291,302
CBS Corp., B	United States		1,351,537		44,303,383
Comcast Corp., Special A	United States		342,248		10,746,587
News Corp., B	United States		3,792,649		85,410,455
Reed Elsevier PLC	United Kingdom		6,998,940		56,116,405
Time Warner Cable Inc.	United States		1,130,488		92,813,065
Viacom Inc., B	United States		666,980		31,361,400

					367,042,597

Metals & Mining 0.5%
ThyssenKrupp AG	Germany		1,664,698		27,041,313

Multi-Utilities 1.3%
E.ON AG	Germany		2,163,963		46,558,094
GDF Suez	France		1,065,032		25,279,948

					71,838,042

Multiline Retail 0.6%
Kohl’s Corp.	United States		724,500		32,957,505

Office Electronics 1.5%
Xerox Corp.	United States		10,553,594		83,056,785

MS-14

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Mutual Shares Securities Fund	Country	Shares		Value
Common Stocks and Other Equity Interests (continued)
Oil, Gas & Consumable Fuels 8.2%
Apache Corp.	United States		851,890	$	74,872,612
BP PLC	United Kingdom		4,439,900		29,350,004
CONSOL Energy Inc.	United States		1,916,130		57,943,771
Marathon Oil Corp.	United States		3,352,318		85,718,771
Marathon Petroleum Corp.	United States		954,870		42,892,761
Murphy Oil Corp.	United States		663,080		33,346,293
Royal Dutch Shell PLC, A	United Kingdom		2,817,116		94,855,920
The Williams Cos. Inc.	United States		536,404		15,459,163
^aWPX Energy Inc.	United States		464,774		7,520,044

					441,959,339

Paper & Forest Products 2.6%
Domtar Corp.	United States		239,069		18,338,983
International Paper Co.	United States		2,488,136		71,932,012
MeadWestvaco Corp.	United States		1,711,669		49,210,484

					139,481,479

Personal Products 0.3%
Avon Products Inc.	United States		883,021		14,313,770

Pharmaceuticals 6.3%
Eli Lilly & Co.	United States		494,428		21,215,905
^aHospira Inc.	United States		722,308		25,266,334
Merck & Co. Inc.	United States		3,875,498		161,802,042
Pfizer Inc.	United States		4,516,554		103,880,742
Teva Pharmaceutical Industries Ltd., ADR	Israel		769,719		30,357,717

					342,522,740

Real Estate Investment Trusts (REITs) 0.4%
Alexander’s Inc.	United States		49,326		21,264,932

Real Estate Management & Development 0.2%
^cCanary Wharf Group PLC	United Kingdom		1,535,898		5,563,644
^aForestar Group Inc.	United States		320,853		4,110,127

					9,673,771

Software 3.4%
Microsoft Corp.	United States		4,312,607		131,922,648
Nintendo Co. Ltd.	Japan		123,923		14,330,388
^aSymantec Corp.	United States		2,469,540		36,079,980

					182,333,016

Tobacco 8.2%
Altria Group Inc.	United States		2,207,264		76,260,971
British American Tobacco PLC	United Kingdom		3,072,790		156,127,551
British American Tobacco PLC, ADR	United Kingdom		4,218		430,742
Imperial Tobacco Group PLC	United Kingdom		2,507,227		96,535,467
Lorillard Inc.	United States		353,117		46,593,788
Philip Morris International Inc.	United States		443,310		38,683,231
Reynolds American Inc.	United States		681,552		30,581,238

					445,212,988

Wireless Telecommunication Services 2.0%
Vodafone Group PLC	United Kingdom		38,007,977		106,741,583

Total Common Stocks and Other Equity Interests (Cost $4,315,092,049)					4,730,812,943

MS-15

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Mutual Shares Securities Fund	Country	Shares		Value
Convertible Preferred Stocks (Cost $241,000) 0.0%†
Commercial Banks 0.0%†
^a,dFirst Southern Bancorp Inc., cvt. pfd., C	United States		241	$	866,123


		Principal Amount*
Corporate Bonds, Notes and Senior Floating Rate Interests 4.1%
ⁱCapmark Financial Group Inc., senior secured note, B, FRN, 9.00%, 9/30/17	United States		2,747,854		2,763,311
Clear Channel Communications Inc.,
^i,jDelayed Draw 2 Term Loan, 3.895%, 1/29/16	United States		5,851,461		4,505,625
senior note, 9.00%, 3/01/21	United States		2,981,000		2,608,375
^ksenior note, PIK, 11.00%, 8/01/16	United States		12,556,000		7,847,500
^i,jTranche B Term Loan, 3.895%, 1/29/16	United States		34,848,922		27,808,359
^i,jTranche C Term Loan, 3.895%, 1/29/16	United States		6,795,466		5,267,899
^gEnergy Future Intermediate Holding Co. LLC/Finance Inc., secured note, 144A, 11.75%, 3/01/22	United States		9,670,000		9,960,100
^i,jHilton Worldwide Inc., FRN,
Mezzanine D Loan, 3.492%, 11/12/15	United States		1,708,718		1,537,846
Mezzanine E Loan, 3.742%, 11/12/15	United States		2,190,638		1,927,762
Mezzanine F Loan, 3.992%, 11/12/15	United States		5,477,095		4,833,537
Mezzanine G Loan, 4.242%, 11/12/15	United States		9,858,372		8,527,491
^i,jiStar Financial Inc.,
New Tranche A-1 Term Loan, 5.25%, 3/19/16	United States		938,528		935,400
New Tranche A-2 Term Loan, 7.00%, 3/19/17	United States		3,511,000		3,519,778
Tranche A-1 Term Loan, 5.00%, 6/28/13	United States		1,739,400		1,737,486
Tranche A-2 Term Loan, 7.00%, 6/30/14	United States		1,926,000		1,927,926
NRG Energy Inc., senior note, 7.375%, 1/15/17	United States		14,900,000		15,533,250
Realogy Corp.,
^i,jExtended First Lien Term Loan, 4.491%, 10/10/16	United States		19,375,151		18,345,846
^i,j,lExtended Revolver, 7.243%, 4/10/16	United States		2,415,984		2,083,786
^i,jExtended Synthetic Letter of Credit, 4.496%, 10/10/16	United States		1,348,114		1,276,495
Second Lien Term Loan, 13.50%, 10/15/17	United States		5,314,000		5,466,778
senior note, 11.50%, 4/15/17	United States		3,654,000		3,480,435
^f,gsenior secured note, 144A, 7.875%, 2/15/19	United States		4,388,000		4,311,210
^gsenior secured note, 144A, 9.00%, 1/15/20	United States		1,956,000		2,024,460
^i,jTexas Competitive Electric Holdings Co. LLC, Extended Term Loan, 4.741%, 10/10/17	United States		90,618,405		54,362,344
Texas Competitive Electric Holdings Co. LLC/Texas Competitive Electric Holdings Finance Inc., senior note, A, 10.25%, 11/01/15	United States		9,820,000		2,577,750
^gsenior secured note, 144A, 11.50%, 10/01/20	United States		39,308,000		27,024,250

Total Corporate Bonds, Notes and Senior Floating Rate Interests (Cost $256,884,059)					222,194,999

Corporate Notes and Senior Floating Rate Interests in Reorganization 0.5%
^d,mBroadband Ventures III LLC, secured promissory note, 5.00%, 2/01/12	United States		2,128		—
^i,j,mTribune Co.,
Incremental Term Loan, 7.25%, 6/04/14	United States		3,098,000		2,027,254
ⁿInitial Tranche B Term Loan, 5.25%, 6/04/14	United States		39,280,000		26,263,904

Total Corporate Notes and Senior Floating Rate Interests in Reorganization (Cost $28,349,364)					28,291,158

MS-16

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Mutual Shares Securities Fund	Country	Shares			Value
Companies in Liquidation 0.0%†
^aAdelphia Recovery Trust	United States		29,283,354		$	29,283
^a,bAdelphia Recovery Trust, Arahova Contingent Value Vehicle, Contingent Distribution	United States		1,955,453			39,109
^a,d,e,hCB FIM Coinvestors LLC	United States		6,400,507			—
^a,b,cCentury Communications Corp., Contingent Distribution	United States		5,487,000			—
^a,dFIM Coinvestor Holdings I, LLC	United States		8,006,950			—
^a,b,cTropicana Litigation Trust, Contingent Distribution	United States		18,305,000			—

		Principal Amount*
^c,mPeregrine Investments Holdings Ltd., 1/15/98	Hong Kong		5,000,000	JPY		—
^c,mPIV Investment Finance (Cayman) Ltd., 12/01/00	Hong Kong		12,200,000			—

Total Companies in Liquidation (Cost $2,704,974)						68,392

Total Investments before Short Term Investments (Cost $4,603,271,446)						4,982,233,615

Short Term Investments 8.0%
Convertible Notes ($18,312,756) 0.4%
ⁱiStar Financial Inc., cvt., senior note, FRN, 0.968%, 10/01/12	United States		18,780,000			18,778,122

U.S. Government and Agency Securities 7.0%
^oFHLB, 7/02/12	United States		110,000,000			110,000,000
^o,pU.S. Treasury Bills, 7/05/12 - 12/27/12	United States		268,100,000			268,023,833

Total U.S. Government and Agency Securities (Cost $378,003,097)						378,023,833

Total Investments before Money Market Funds (Cost $4,999,587,299)						5,379,035,570


		Shares
^qInvestments from Cash Collateral Received for Loaned Securities (Cost $32,800,522) 0.6%
Money Market Funds 0.6%
^rBNY Mellon Overnight Government Fund, 0.182%	United States		32,800,522			32,800,522

Total Investments (Cost $5,032,387,821) 99.9%						5,411,836,092
Other Assets, less Liabilities 0.1%						6,538,175

Net Assets 100.0%					$	5,418,374,267

MS-17

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Mutual Shares Securities Fund

†Rounds to less than 0.1% of net assets.

*The principal amount is stated in U.S. dollars unless otherwise indicated.

^aNon-income producing.

^cSecurity has been deemed illiquid because it may not be able to be sold within seven days. At June 30, 2012, the aggregate value of these securities was $5,751,040, representing 0.11% of net assets.

^dSee Note 8 regarding restricted securities.

^eAt June 30, 2012, pursuant to the Fund’s policies and the requirements of applicable securities law, the Fund may be restricted from trading these securities for a limited or extended period of time due to ownership limits and/or potential possession of material non-public information.

^fA portion or all of the security is on loan at June 30, 2012. See Note 1(g).

^gSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At June 30, 2012, the aggregate value of these securities was $52,947,618, representing 0.98% of net assets.

^hSee Note 12 regarding holdings of 5% voting securities.

ⁱThe coupon rate shown represents the rate at period end.

^jSee Note 1(h) regarding senior floating rate interests.

^kIncome may be received in additional securities and/or cash.

^lSee Note 9 regarding unfunded loan commitments.

^mSee Note 7 regarding credit risk and defaulted securities.

ⁿA portion or all of the security purchased on a delayed delivery basis. See Note 1(c).

^oThe security is traded on a discount basis with no stated coupon rate.

^pSecurity or a portion of the security has been pledged as collateral for open futures contracts. At June 30, 2012, the value of this security and/or cash pledged as collateral was $2,280,510, representing 0.04% of net assets.

^qSee Note 1(g) regarding securities on loan.

^rThe rate shown is the annualized seven-day yield at period end.

MS-18

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Mutual Shares Securities Fund

At June 30, 2012, the Fund had the following futures contracts outstanding. See Note 1(d).

Futures Contracts


Description	Type		Number of Contracts		Notional Value		Expiration Date		Unrealized Appreciation		Unrealized Depreciation
Currency Contracts
EUR/USD		Short		435	$	68,882,250		9/18/12	$	—	$	(736,913	)
GBP/USD		Short		472		46,247,150		9/18/12		—		(448,598	)

Net unrealized appreciation (depreciation)											$	(1,185,511	)

At June 30, 2012, the Fund had the following forward exchange contracts outstanding. See Note 1(d).

Forward Exchange Contracts


Currency	Counterparty		Type		Quantity		Contract Amount		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
Euro		BZWS		Buy		455,171	$	563,861		7/17/12	$	12,289	$	—
Euro		HSBC		Buy		2,533,638		3,145,305		7/17/12		61,743		—
Euro		DBAB		Buy		3,118,358		3,881,289		7/17/12		65,891		—
Euro		HSBC		Sell		18,401,705		23,447,678		7/17/12		155,025		—
Euro		DBAB		Sell		9,674,338		12,778,980		7/17/12		533,321		—
Euro		BZWS		Sell		3,099,993		4,091,690		7/17/12		167,756		—
Euro		BOFA		Sell		1,246,624		1,654,022		7/17/12		76,061		—
British Pound		DBAB		Sell		36,194,505		56,566,017		7/19/12		—		(138,948	)
British Pound		BZWS		Sell		34,148,507		53,398,020		7/19/12		—		(101,534	)
British Pound		SSBT		Buy		3,455,091		5,423,940		7/19/12		—		(10,941	)
British Pound		BZWS		Sell		4,678,029		7,469,813		7/19/12		140,870		—
British Pound		DBAB		Sell		1,571,919		2,519,979		7/19/12		57,295		—
British Pound		FBCO		Sell		3,541,136		5,556,538		7/19/12		8,695		—
Swiss Franc		DBAB		Buy		2,573,687		2,826,042		8/10/12		—		(111,180	)
Swiss Franc		BOFA		Buy		1,216,603		1,328,607		8/10/12		—		(45,269	)
Swiss Franc		HSBC		Buy		203,502		219,575		8/10/12		—		(4,910	)
Swiss Franc		HSBC		Sell		481,000		503,929		8/10/12		—		(3,456	)
Swiss Franc		BZWS		Buy		363,754		385,823		8/10/12		—		(2,116	)
Swiss Franc		DBAB		Sell		326,012		342,489		8/10/12		—		(1,406	)
Swiss Franc		DBAB		Buy		443,291		459,917		8/10/12		7,690		—
Swiss Franc		BOFA		Buy		274,892		284,669		8/10/12		5,302		—
Swiss Franc		FBCO		Buy		244,796		254,297		8/10/12		3,927		—
Swiss Franc		BOFA		Sell		12,304,282		13,498,816		8/10/12		519,605		—
Swiss Franc		DBAB		Sell		13,160,321		14,441,866		8/10/12		559,660		—
British Pound		SSBT		Buy		6,160,033		9,724,043		8/16/12		—		(74,041	)
British Pound		FBCO		Sell		3,300,000		5,155,986		8/16/12		—		(13,630	)
British Pound		HSBC		Sell		691,394		1,076,066		8/16/12		—		(7,037	)
British Pound		BZWS		Sell		360,059		560,212		8/16/12		—		(3,838	)
British Pound		BZWS		Sell		35,730,696		56,969,148		8/16/12		995,211		—
British Pound		DBAB		Sell		42,401,616		67,652,599		8/16/12		1,228,330		—
British Pound		HAND		Sell		553,097		869,603		8/16/12		3,149		—
British Pound		HSBC		Sell		553,098		870,820		8/16/12		4,364		—
Euro		BZWS		Buy		1,944,418		2,554,621		8/31/12		—		(92,258	)
Euro		DBAB		Buy		664,678		873,879		8/31/12		—		(32,147	)
Euro		BZWS		Sell		27,763,917		37,156,453		8/31/12		1,996,910		—
Euro		DBAB		Sell		3,369,540		4,440,788		8/31/12		173,685		—
Euro		BOFA		Sell		25,157,292		32,979,322		8/31/12		1,120,746		—
Euro		HSBC		Sell		1,201,240		1,576,495		8/31/12		55,274		—
Euro		BZWS		Sell		27,798,847		36,659,738		10/16/12		1,436,789		—
Euro		BOFA		Sell		21,994,901		29,012,594		10/16/12		1,143,622		—

MS-19

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Mutual Shares Securities Fund

Forward Exchange Contracts (continued)


Currency	Counterparty		Type		Quantity		Contract Amount		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
Euro		DBAB		Sell		7,296,641	$	9,611,423		10/16/12	$	366,104	$	—
Euro		HSBC		Sell		1,555,088		2,057,692		10/16/12		87,295		—
Japanese Yen		HSBC		Sell		626,740,572		7,727,997		10/22/12		—		(120,575	)
Japanese Yen		DBAB		Buy		21,687,100		273,559		10/22/12		—		(1,975	)
Japanese Yen		HSBC		Buy		33,707,056		423,200		10/22/12		—		(1,092	)
Japanese Yen		HSBC		Buy		37,393,700		461,383		10/22/12		6,892		—
Japanese Yen		DBAB		Buy		62,580,539		779,903		10/22/12		3,784		—
British Pound		HAND		Sell		4,084,112		6,355,143		11/21/12		—		(40,854	)
British Pound		HSBC		Sell		18,725,802		29,630,398		11/21/12		304,514		—
British Pound		BZWS		Sell		34,011,590		53,806,335		11/21/12		541,864		—
British Pound		BOFA		Sell		17,005,795		26,908,780		11/21/12		276,544		—
British Pound		HAND		Sell		1,863,712		2,924,332		11/21/12		5,601		—
Euro		DBAB		Sell		14,808,765		18,617,581		11/30/12		—		(157,486	)
Euro		BZWS		Sell		12,244,379		15,382,613		11/30/12		—		(141,236	)
Euro		FBCO		Sell		4,940,286		6,196,929		11/30/12		—		(66,441	)
Euro		HAND		Sell		2,784,955		3,516,767		11/30/12		—		(13,980	)
Euro		HSBC		Sell		4,559,246		5,775,089		11/30/12		—		(5,177	)
Euro		DBAB		Sell		1,672,616		2,123,133		11/30/12		2,561		—
Euro		BOFA		Sell		520,071		660,508		11/30/12		1,173		—
Euro		BZWS		Sell		520,072		659,986		11/30/12		650		—
Euro		SCBT		Sell		555,632		705,719		11/30/12		1,300		—

Unrealized appreciation (depreciation)												12,131,492		(1,191,527	)

Net unrealized appreciation (depreciation)											$	10,939,965

See Abbreviations on page MS-36.

The accompanying notes are an integral part of these financial statements.

MS-20

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

June 30, 2012 (unaudited)


	Mutual Shares Securities Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	5,029,603,854
Cost - Non-controlled affiliated issuers (Note 12)		2,783,967

Total cost of investments	$	5,032,387,821

Value - Unaffiliated issuers	$	5,411,401,586
Value - Non-controlled affiliated issuers (Note 12)		434,506

Total value of investments (includes securities loaned in the amount of $32,945,227)		5,411,836,092
Cash		743,791
Restricted cash (Note 1e)		5,342,000
Foreign currency, at value (cost $8,180,619)		8,228,399
Receivables:
Investment securities sold		38,309,134
Capital shares sold		519,865
Dividends and interest		15,866,925
Unrealized appreciation on forward exchange contracts		12,131,492
Other assets		200,739

Total assets		5,493,178,437

Liabilities:
Payables:
Investment securities purchased		24,491,889
Capital shares redeemed		2,455,616
Affiliates		4,642,712
Variation margin		1,804,300
Payable upon return of securities loaned		32,800,522
Due to brokers		5,342,000
Unrealized depreciation on forward exchange contracts		1,191,527
Unrealized depreciation on unfunded loan commitments (Note 9)		676,537
Accrued expenses and other liabilities		1,399,067

Total liabilities		74,804,170

Net assets, at value	$	5,418,374,267

Net assets consist of:
Paid-in capital	$	5,336,614,577
Undistributed net investment income		155,417,188
Net unrealized appreciation (depreciation)		388,499,464
Accumulated net realized gain (loss)		(462,156,962	)

Net assets, at value	$	5,418,374,267

The accompanying notes are an integral part of these financial statements.

MS-21

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Assets and Liabilities (continued)

June 30, 2012 (unaudited)


	Mutual Shares Securities Fund
Class 1:
Net assets, at value	$	1,301,298,274

Shares outstanding		78,827,299

Net asset value and maximum offering price per share	$	16.51

Class 2:
Net assets, at value	$	3,953,224,930

Shares outstanding		242,769,970

Net asset value and maximum offering price per share	$	16.28

Class 4:
Net assets, at value	$	163,851,063

Shares outstanding		10,020,289

Net asset value and maximum offering price per share	$	16.35

The accompanying notes are an integral part of these financial statements.

MS-22

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the six months ended June 30, 2012 (unaudited)


	Mutual Shares Securities Fund
Investment income:
Dividends	$	66,538,237
Interest		14,044,163
Income from securities loaned		837,069

Total investment income		81,419,469

Expenses:
Management fees (Note 3a)		16,429,313
Administrative fees (Note 3b)		2,349,536
Distribution fees: (Note 3c)
Class 2		4,968,617
Class 4		287,623
Unaffiliated transfer agent fees		2,470
Custodian fees (Note 4)		136,121
Reports to shareholders		402,967
Professional fees		207,396
Trustees’ fees and expenses		10,993
Other		90,173

Total expenses		24,885,209

Net investment income		56,534,260

Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		114,265,382
Written options		265,845
Foreign currency transactions		21,269,564
Futures contracts		2,220,149
Securities sold short		(10,276,834	)

Net realized gain (loss)		127,744,106

Net change in unrealized appreciation (depreciation) on:
Investments		139,207,828
Translation of other assets and liabilities denominated in foreign currencies		(19,589,112	)

Net change in unrealized appreciation (depreciation)		119,618,716

Net realized and unrealized gain (loss)		247,362,822

Net increase (decrease) in net assets resulting from operations	$	303,897,082

The accompanying notes are an integral part of these financial statements.

MS-23

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets


	Mutual Shares Securities Fund
	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31, 2011

Increase (decrease) in net assets:
Operations:
Net investment income	$	56,534,260		$	116,919,415
Net realized gain (loss) from investments, written options, foreign currency transactions, futures contracts and securities sold short		127,744,106			(69,197,475	)
Net change in unrealized appreciation (depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies		119,618,716			(151,843,785	)

Net increase (decrease) in net assets resulting from operations		303,897,082			(104,121,845	)

Distributions to shareholders from:
Net investment income:
Class 1		—			(32,920,483	)
Class 2		—			(95,354,646	)
Class 4		—			(3,732,632	)

Total distributions to shareholders		—			(132,007,761	)

Capital share transactions: (Note 2)
Class 1		64,679,377			(34,519,147	)
Class 2		(188,868,407	)		(141,255,692	)
Class 4		(7,384,023	)		339,468

Total capital share transactions		(131,573,053	)		(175,435,371	)

Net increase (decrease) in net assets		172,324,029			(411,564,977	)
Net assets:
Beginning of period		5,246,050,238			5,657,615,215

End of period	$	5,418,374,267		$	5,246,050,238

Undistributed net investment income included in net assets:
End of period	$	155,417,188		$	98,882,928

The accompanying notes are an integral part of these financial statements.

MS-24

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited)

Mutual Shares Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment company, consisting of twenty separate funds. The Mutual Shares Securities Fund (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. The Fund offers three classes of shares: Class 1, Class 2, and Class 4. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

Equity securities and derivative financial instruments (derivatives) listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded, or the NYSE, whichever is earlier. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at the close of the NYSE on the day that the value of the security is determined. Over-the-counter (OTC) securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities. Investments in non-registered money market funds are valued at the closing net asset value.

MS-25

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual Shares Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

a. Financial Instrument Valuation (continued)

b. Foreign Currency Translation

c. Securities Purchased on a Delayed Delivery Basis

MS-26

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual Shares Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

d. Derivative Financial Instruments

The Fund’s investments in OTC derivatives are subject to the terms of International Swaps and Derivatives Association Master Agreements and other related agreements between the Fund and certain derivative counterparties. These agreements contain various provisions, including but not limited to collateral requirements, events of default, requirements for the Fund to maintain certain net asset levels and/or limit the decline in net assets over various periods of time. Should the Fund fail to meet any of these provisions, the derivative counterparty has the right to terminate the derivative contract and require immediate payment by the Fund for those OTC derivatives with that particular counterparty that are in a net unrealized loss position. At June 30, 2012, the Fund had OTC derivatives in a net unrealized loss position for such contracts of $198,515.

At June 30, 2012, the Fund held $11,593,374 in United Kingdom treasury bonds and U.S. treasury bills and bonds as collateral for derivatives.

See Notes 6 and 11 regarding investment transactions and other derivative information, respectively.

e. Restricted Cash

At June 30, 2012, the Fund held restricted cash in connection with investments in certain derivative securities. Restricted cash is held in a segregated account with the Fund’s custodian/counterparty broker and is reflected in the Statement of Assets and Liabilities.

MS-27

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual Shares Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

MS-28

f. Securities Sold Short

g. Securities Lending

The Fund participates in an agency based securities lending program. The fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the market value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the market value of loaned securities, as determined at the close of fund business each day; any additional collateral required due to changes in security values is delivered to the fund on the next business day. The collateral is invested in a non-registered money fund as indicated on the Statement of Investments. The fund receives income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. The fund bears the market risk with respect to the collateral investment, securities loaned, and the risk that the agent may default on its obligations to the fund. The securities lending agent has agreed to indemnify the fund in the event of default by a third party borrower.

h. Senior Floating Rate Interests

Senior secured corporate loans in which the Fund invests are generally readily marketable, but may be subject to some restrictions on resale.

i. Income and Deferred Taxes

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual Shares Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

i. Income and Deferred Taxes (continued)

j. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Amortization of premium and accretion of discount on debt securities are included in interest income. Facility fees are recognized as income over the expected term of the loan. Dividend income and dividends declared on securities sold short are recorded on the ex-dividend date except that certain dividends from foreign securities are recognized as soon as the Fund is notified of the ex-dividend date. Distributions to shareholders are recorded on the ex-dividend date and are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with accounting principles generally accepted in the United States of America. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.

k. Accounting Estimates

l. Guarantees and Indemnifications

MS-29

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual Shares Securities Fund

MS-30

2. SHARES OF BENEFICIAL INTEREST

At June 30, 2012, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:


	Six Months Ended June 30, 2012						Year Ended December 31, 2011
Class 1 Shares:	Shares			Amount			Shares			Amount
Shares sold		20,593,792		$	337,034,129			42,708,405		$	674,448,160
Shares issued in reinvestment of distributions		—			—			2,247,132			32,920,483
Shares redeemed		(16,970,064	)		(272,354,752	)		(50,368,429	)		(741,887,790	)

Net increase (decrease)		3,623,728		$	64,679,377			(5,412,892	)	$	(34,519,147	)

Class 2 Shares:
Shares sold		10,628,085		$	171,374,350			25,072,748		$	394,507,314
Shares issued in reinvestment of distributions		—			—			6,585,266			95,354,646
Shares redeemed		(22,365,077	)		(360,242,757	)		(39,735,152	)		(631,117,652	)

Net increase (decrease)		(11,736,992	)	$	(188,868,407	)		(8,077,138	)	$	(141,255,692	)

Class 4 Shares:
Shares sold		209,723		$	3,447,432			534,093		$	8,261,151
Shares issued on reinvestment of distributions		—			—			256,538			3,732,632
Shares redeemed		(679,561	)		(10,831,455	)		(736,961	)		(11,654,315	)

Net increase (decrease)		(469,838	)	$	(7,384,023	)		53,670		$	339,468

3. TRANSACTIONS WITH AFFILIATES


Subsidiary		Affiliation
Franklin Mutual Advisers, LLC (Franklin Mutual)		Investment manager
Franklin Templeton Services, LLC (FT Services)		Administrative manager
Franklin Templeton Distributors, Inc. (Distributors)		Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services)		Transfer agent

a. Management Fees

The Fund pays an investment management fee to Franklin Mutual based on the average daily net assets of the Fund as follows:


Annualized Fee Rate		Net Assets
0.600%		Up to and including $5 billion
0.570%		Over $5 billion, up to and including $10 billion
0.550%		Over $10 billion, up to and including $15 billion
0.530%		Over $15 billion, up to and including $20 billion
0.510%		In excess of $20 billion

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual Shares Securities Fund

3. TRANSACTIONS WITH AFFILIATES (continued)

MS-31

b. Administrative Fees

The Fund pays an administrative fee to FT Services based on the Fund’s average daily net assets as follows:


Annualized Fee Rate		Net Assets
0.150%		Up to and including $200 million
0.135%		Over $200 million, up to and including $700 million
0.100%		Over $700 million, up to and including $1.2 billion
0.075%		In excess of $1.2 billion

c. Distribution Fees

d. Transfer Agent Fees

Investor Services, under terms of an agreement, performs shareholder servicing for the Fund and is not paid by the Fund for the services.

e. Other Affiliated Transactions

At June 30, 2012, Franklin Templeton Variable Insurance Products Trust – Franklin Templeton VIP Founding Funds Allocation Fund owned 21.42% of the Fund’s outstanding shares.

4. EXPENSE OFFSET ARRANGEMENT

5. INCOME TAXES

At December 31, 2011, the Fund had capital loss carryforwards of $508,530,121 expiring in 2017 and capital loss carryforwards of $11,314,074 not subject to expiration.

At June 30, 2012, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:


Cost of investments	$	5,081,659,863


Unrealized appreciation	$	855,050,119
Unrealized depreciation		(524,873,890	)

Net unrealized appreciation (depreciation)	$	330,176,229

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual Shares Securities Fund

5. INCOME TAXES (continued)

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of foreign currency transactions, corporate actions, and wash sales.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities and securities sold short) for the period ended June 30, 2012, aggregated $1,048,135,724 and $1,103,205,965, respectively.

Transactions in options written during the period ended June 30, 2012, were as follows:


	Number of Contracts			Premiums Received
Options outstanding at December 31, 2011		122		$	247,051
Options written		254			32,609
Options expired		(254	)		(32,609	)
Options exercised		—			—
Options closed		(122	)		(247,051	)

Options outstanding at June 30, 2012		—		$	—

See Notes 1(d) and 11 regarding derivative financial instruments and other derivative information, respectively.

7. CREDIT RISK AND DEFAULTED SECURITIES

At June 30, 2012, the aggregate value of distressed company securities for which interest recognition has been discontinued was $28,291,158, representing 0.52% of the Fund’s net assets. For information as to specific securities, see the accompanying Statement of Investments.

8. RESTRICTED SECURITIES

MS-32

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual Shares Securities Fund

8. RESTRICTED SECURITIES (continued)

At June 30, 2012, the Fund held investments in restricted securities, excluding certain securities exempt from registration under the 1933 Act deemed to be liquid, as follows:


Principal Amount/ Shares		Issuer	Acquisition Dates		Cost		Value
	4,709,226	AET&D Holdings No. 1 Pty. Ltd.		10/13/10	$	—	$	—
	194	Ally Financial Inc.		1/15/09		905,185		1,127,868
	2,128	Broadband Ventures III LLC, secured promissory note, 5.00%, 2/01/12		7/01/10		2,128		—
	6,400,507	CB FIM Coinvestors LLC		1/15/09 - 6/02/09		—		—
	9,845,095	Cerberus CG Investor I LLC		7/26/07 - 6/17/08		4,593,328		1,181,411
	9,845,012	Cerberus CG Investor II LLC		7/26/07 - 6/17/08		4,593,276		1,181,401
	4,922,879	Cerberus CG Investor III LLC		7/26/07		2,296,874		590,746
	11,728	Elephant Capital Holdings Ltd.		8/29/03 - 3/10/08		1,813,542		—
	8,006,950	FIM Coinvestor Holdings I, LLC		11/20/06 - 6/02/09		—		—
	140,952	First Southern Bancorp Inc.		1/27/10 - 7/07/10		2,974,087		1,336,873
	241	First Southern Bancorp Inc., cvt. pfd., C		1/27/10 - 7/07/10		241,000		866,123
	5,565,600	GLCP Harrah’s Investment LP		1/15/08		2,783,967		434,506
	1,730,515	International Automotive Components Group Brazil LLC		4/13/06 - 12/26/08		1,149,241		589,240
	11,387,027	International Automotive Components Group North America, LLC		1/12/06 - 10/10/07		11,193,197		5,620,067
	57,295	NCB Warrant Holdings Ltd., A		12/16/05 - 3/10/08		539,528		—
	16,280	Olympus Re Holdings Ltd.		12/19/01		1,534,738		—

		Total Restricted Securities (0.24% of Net Assets)					$	12,928,235

9. UNFUNDED LOAN COMMITMENTS

At June 30, 2012, unfunded commitments were as follows:


Borrower	Unfunded Commitment
Realogy Corp., Extended Revolver, 7.243%, 4/10/16	$	5,617,379

10. UNFUNDED CAPITAL COMMITMENTS

The Fund enters into certain capital commitments and may be obligated to perform on such agreements at a future date. The Fund monitors these commitments and assesses the probability of required performance. For any agreements whose probability of performance is determined to be greater than remote, the Fund assesses the fair value of the commitment. In instances where the probability of performance is greater than remote and the performance under the commitment would result in an unrealized loss, the Fund recognizes such losses on the Statement of Assets and Liabilities and the Statement of Operations.

At June 30, 2012, the Fund had aggregate unfunded capital commitments of $198,418, for which no depreciation has been recognized.

MS-33

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual Shares Securities Fund

11. OTHER DERIVATIVE INFORMATION

At June 30, 2012, the Fund has invested in derivative contracts which are reflected on the Statement of Assets and Liabilities as follows:

Asset Derivatives

Liability Derivatives

Derivative Contracts Not Accounted
for as Hedging Instruments

Statement of Assets and
Liabilities Location

Fair
Value
Amount

Statement of Assets and
Liabilities Location

Fair
Value
Amount

Foreign exchange contracts

Unrealized appreciation on forward exchange contracts

12,131,492

Unrealized depreciation on forward exchange contracts / Net assets consist of – net unrealized appreciation (depreciation)

2,377,038^a

For the period ended June 30, 2012, the effect of derivative contracts on the Fund’s Statement of Operations was as follows:


Derivative Contracts Not Accounted for as Hedging Instruments	Statement of Operations Locations	Realized Gain (Loss) for the Period		Change in Unrealized Appreciation (Depreciation) for the Period
Foreign exchange contracts	Net realized gain (loss) from foreign currency transactions and futures contracts/Net change in unrealized appreciation (depreciation) on translation of other assets and liabilities denominated in foreign currencies	$	23,799,389	$	(19,619,793	)
Equity contracts	Net realized gain (loss) from written options/Net change in unrealized appreciation (depreciation) on investments		265,845		96,989

For the period ended June 30, 2012, the average month end market value of derivatives represented 0.38% of average month end net assets. The average month end number of open derivative contracts for the period was 109.

See Notes 1(d) and 6 regarding derivative financial instruments and investment transactions, respectively.

12. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES


Name of Issuer	Number of Shares Held at Beginning of Period		Gross Additions		Gross Reductions		Number of Shares Held at End of Period		Value at End of Period		Investment Income		Realized Capital Gain (Loss)
Non-Controlled Affiliates
CB FIM Coinvestors LLC		6,400,507		—		—		6,400,507	$	—	$	—	$	—
GLCP Harrah’s Investment LP		5,565,600		—		—		5,565,600		434,506		—		—

Total Affiliated Securities (0.01% of Net Assets)									$	434,506	$	—	$	—

MS-34

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual Shares Securities Fund

13. CREDIT FACILITY

14. FAIR VALUE MEASUREMENTS

•

Level 1 – quoted prices in active markets for identical financial instruments

•

Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)

•

Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of financial instruments)

The inputs or methodology used for valuing financial instruments are not an indication of the risk associated with investing in those financial instruments.

For movements between the levels within the fair value hierarchy, the Fund has adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.

A summary of inputs used as of June 30, 2012, in valuing the Fund’s assets and liabilities carried at fair value, is as follows:


	Level 1		Level 2		Level 3			Total

Assets:
Investments in Securities:
Equity Investments:^a
Auto Components	$	—	$	—	$	6,211,538		$	6,211,538
Commercial Banks		169,642,841		—		2,202,996	^b		171,845,837
Consumer Finance		—		1,128,768		2,953,558			4,082,326
Diversified Financial Services		140,940,802		9,627,598		—			150,568,400
Diversified Telecommunication Services		10,964,501		—		185,165	^b		11,149,666
Hotels, Restaurants & Leisure		—		—		434,506			434,506
Real Estate Management & Development		4,110,127		—		5,563,644			9,673,771
Other Equity Investments^c		4,377,713,022		—		—	^b		4,377,713,022
Corporate Bonds, Notes and Senior Floating Rate Interests		—		222,194,999		—			222,194,999
Corporate Notes and Senior Floating Rate Interests in Reorganization		—		28,291,158		—	^b		28,291,158
Companies in Liquidation		—		68,392		—	^b		68,392
Short Term Investments		268,023,833		161,578,644		—			429,602,477

Total Investments in Securities	$	4,971,395,126	$	422,889,559	$	17,551,407		$	5,411,836,092

Forward Exchange Contracts		—		12,131,492		—			12,131,492

MS-35

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual Shares Securities Fund

14. FAIR VALUE MEASUREMENTS (continued)


	Level 1		Level 2		Level 3		Total

Liabilities:
Forward Exchange Contracts	$	—	$	1,191,527	$	—	$	1,191,527
Futures Contracts		1,185,511		—		—		1,185,511
Unfunded Loan Commitments		—		676,537		—		676,537

^aIncludes common and convertible preferred stocks as well as other equity investments.

^bIncludes securities determined to have no value at June 30, 2012.

^cFor detailed categories, see the accompanying Statement of Investments.

A reconciliation of assets in which Level 3 inputs are used in determining fair value is presented when there are significant Level 3 investments at the end of the period.

15. NEW ACCOUNTING PRONOUNCEMENTS

16. SUBSEQUENT EVENTS

The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure.


ABBREVIATIONS
Counterparty	Currency	Selected Portfolio

BOFA - Bank of America Corp.	EUR - Euro	ADR - American Depositary Receipt
BZWS - Barclays Bank PLC	GBP - British Pound	FHLB - Federal Home Loan Bank
DBAB - Deutsche Bank AG	JPY - Japanese Yen	FRN - Floating Rate Note
FBCO - Credit Suisse Group AG	USD - United States Dollar	PIK - Payment-In-Kind
HAND - Svenska Handelsbanken
HSBC - HSBC Bank USA, N.A.
SCBT - Standard Chartered Bank
SSBT - State Street Bank and Trust Co.

MS-36

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

This semiannual report for Templeton Developing Markets Securities Fund covers the period ended June 30, 2012.

Performance Summary as of 6/30/12

Templeton Developing Markets Securities Fund – Class 2 delivered a +0.23% total return for the six-month period ended 6/30/12.

Templeton Developing Markets Securities Fund Class 2

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares.

Current performance may differ from figures shown.

TD-1

Fund Goal and Main Investments: Templeton Developing Markets Securities Fund seeks long-term capital appreciation. Under normal market conditions, the Fund invests at least 80% of its net assets in emerging market investments.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. In comparison, the MSCI Emerging Markets (EM) Index posted a +4.12% total return, and the Standard & Poor’s^®/International Finance Corporation Investable Composite Index had a +4.48% total return for the same period.¹ Please note index performance numbers are for reference and we do not attempt to track an index but rather undertake investments on the basis of fundamental research.

Economic and Market Overview

Emerging market economies generally continued to grow faster than developed market economies during the six months under review. Emerging market stocks had a solid start to 2012 as improved economic data, government and central bank efforts to stimulate growth and substantial investment inflows drove market performance. The European Union’s approval of a second bailout package for Greece and the European Central Bank’s additional issuance of low interest loans to the region’s banks worth more than 529 billion euros (approximately US$700 billion) to ease the credit crunch and contain the debt crisis provided investors with additional reasons to remain positive.

The tide changed in April, however, as it became evident the eurozone sovereign debt crisis was far from contained. Record-high unemployment in the region, speculation on Greece’s exit from the European Union and concerns about Spanish banks’ solvency worsened. Weaker-than-expected U.S. economic data raised fears of another recession in the world’s largest economy. Major emerging economies including China and India reported slowing gross domestic product growth. News that the Chinese government had no plans to implement a wide-scale stimulus package also weighed on investor confidence.

Global stock prices rebounded in the first three weeks of June as optimism on the victory of the pro-bailout New Democracy party in Greece

Fund Risks: All investments involve risks, including possible loss of principal. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Value securities may not increase in price as anticipated, or may decline further in value. Risks associated with foreign investing include currency fluctuations, economic instability and political developments. Investments in developing markets involve heightened risks related to the same factors, in addition to those associated with these markets’ smaller size and lesser liquidity. The Fund may focus on particular sectors of the market from time to time, which can carry greater risks of adverse developments in such sectors. Smaller or midsized companies can be particularly sensitive to changing economic conditions, and their prospects for growth are less certain than those of larger, more established companies. The Fund is designed for the aggressive portion of a well-diversified portfolio. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

TD-2

and expectations of a third quantitative easing (QE3) program from the U.S. Federal Reserve Board (Fed) fueled stock market performance. However, sentiment turned sour as investors focused on Spain’s banking crisis and the Fed’s decision to extend the maturity extension program, dubbed Operation Twist, rather than to implement QE3.

Financial markets received good news on the last trading day of June when European leaders agreed to directly recapitalize the region’s struggling banks and work toward budgetary and political union. Global stocks rallied, leading emerging market stocks, as measured by the MSCI EM Index, to post a +4.12% total return in U.S. dollar terms for the six-month period.¹

Investment Strategy

We employ a fundamental research, value-oriented, long-term investment approach. We focus on the market price of a company’s securities relative to our evaluation of its long-term earnings, asset value and cash flow potential. We also consider a company’s profit and loss outlook, balance sheet strength, cash flow trends and asset value in relation to the current price. Our analysis considers the company’s corporate governance behavior as well as its position in its sector, the economic framework and political environment. We invest in securities without regard to benchmark comparisons.

Manager’s Discussion

During the six months under review, key contributors to the Fund’s absolute performance were Souza Cruz, a major Brazilian cigarette company; Brazil-based AmBev (Companhia de Bebidas das Americas), one of the world’s largest beer and soft drink producers; and Kasikornbank, one of Thailand’s leading commercial banks. The strong market positions of Souza Cruz and AmBev have allowed their businesses to achieve superior returns and build market share as consumers become wealthier and more discerning. In our view, these companies have strong operations, low debt levels, good dividend yields and popular brands that make them attractive investments. We believe Kasikornbank is well positioned to benefit from Thailand’s potentially strong economic growth as the country recovers from last year’s floods and the government’s fiscal stimulus measures, including minimum wage increases, work through the economy. The bank enjoyed strong earnings in the first half of 2012 as it benefited from strong loan growth.

LOGO

TD-3

In contrast, key detractors from absolute performance during the reporting period included Itau Unibanco Holding, one of Brazil’s largest financial conglomerates; Luk Fook Holdings (International), a major jewelry retail chain in Hong Kong and mainland China; and Astra International, Indonesia’s leading car and motorcycle company. Itau Unibanco’s share price weakened as ongoing central bank interest rate cuts threatened to hurt the bank’s profit margins. In our long-term view, the bank could benefit from its strong market position as Brazil’s economy grows and consumer wealth increases. Luk Fook’s sales growth eased recently as China’s slowing economic growth led Chinese tourists to cut spending on luxury items such as jewelry. However, we maintained a positive view of the company because we feel it has a solid market position, high return on equity, strong balance sheet and increasing presence in mainland China. Astra’s share price corrected largely due to investor expectations that new rules in Indonesia, which increased the minimum down payment required for vehicle purchases, could impact sales. As a leader in the Indonesian car and motorcycle markets, which have been enjoying strong secular growth trends, Astra could benefit from the potential continuation of the country’s robust economic growth, higher incomes and affordable credit in the long term.

It is important to recognize the effect of currency movements on the Fund’s performance. In general, if the value of the U.S. dollar goes up compared with a foreign currency, an investment traded in that foreign currency will go down in value because it will be worth fewer U.S. dollars. This can have a negative effect on Fund performance. Conversely, when the U.S. dollar weakens in relation to a foreign currency, an investment traded in that foreign currency will increase in value, which can contribute to Fund performance. For the six months ended June 30, 2012, the U.S. dollar rose in value relative to many currencies in which the Fund’s investments were traded. As a result, the Fund’s performance was negatively affected by the portfolio’s investment predominantly in securities with non-U.S. currency exposure.

In the past six months, we initiated positions in Colombia and Kenya and increased our holdings in Hong Kong, South Africa and South Korea as we continued to search for what we considered to be attractive investment opportunities. We added to casinos and gaming, catalog retail and specialty retail companies. Key purchases included additional shares of SJM Holdings, one of Macau’s largest casino operators, and the aforementioned Luk Fook, as well as a new position in South Korea-based Samsung Electronics, one of the world’s largest electronics manufacturers.

Top 10 Holdings

Templeton Developing Markets Securities Fund

6/30/12


Company Sector/Industry, Country	% of Total Net Assets
AmBev (Companhia de Bebidas das Americas)		7.8%
Beverages, Brazil
PT Astra International Tbk		6.0%
Automobiles, Indonesia
Tata Consultancy Services Ltd.		5.2%
IT Services, India
Souza Cruz SA		5.0%
Tobacco, Brazil
LUKOIL Holdings, ADR		3.4%
Oil, Gas & Consumable Fuels, Russia
PetroChina Co. Ltd., H		3.2%
Oil, Gas & Consumable Fuels, China
Sberbank of Russia		3.0%
Commercial Banks, Russia
Kasikornbank PCL, fgn.		3.0%
Commercial Banks, Thailand
Vale SA, ADR, pfd., A		2.9%
Metals & Mining, Brazil
Gazprom, ADR		2.9%
Oil, Gas & Consumable Fuels, Russia

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments.

TD-4

As certain stocks reached our sale targets, we reduced the Fund’s investments in Brazil, Indonesia and Taiwan to focus on stocks we considered to be more attractively valued within our investment universe. We reduced the Fund’s holdings largely in diversified metals and mining, diversified banking and food retail companies. Key reductions included Brazilian iron ore and nickel producer Vale, Indonesia-based Bank Central Asia and Taiwan-based convenience retail operator President Chain Store.

Thank you for your participation in Templeton Developing Markets Securities Fund. We look forward to serving your future investment needs.

Top 10 Countries

Templeton Developing Markets Securities Fund

6/30/12


	% of Total Net Assets
Brazil		18.4%
Russia		15.0%
China		9.9%
India		9.0%
Indonesia		8.7%
Thailand		6.7%
Hong Kong		6.2%
Chile		4.2%
South Africa		4.1%
Singapore		2.4%

TD-5

Fund Expenses

•

Transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes.

•

Actual Fund Expenses

You can estimate the Fund-level expenses you incurred during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:

1.	Divide your account value by $1,000.

If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6.

2.	Multiply the result by the number under the heading “Fund-Level Expenses Incurred During Period.”

If Fund-Level Expenses Incurred During Period were $7.50, then 8.6 x $7.50 = $64.50.

In this illustration, the estimated expenses incurred this period at the Fund level are $64.50.

Templeton Developing Markets Securities Fund Class 2

TD-6

Hypothetical Example for Comparison with Other Mutual Funds


Class 2	Beginning Account Value 1/1/12		Ending Account Value 6/30/12		Fund-Level Expenses Incurred During Period* 1/1/12–6/30/12
Actual	$	1,000	$	1,002.30	$	7.97
Hypothetical (5% return before expenses)	$	1,000	$	1,016.91	$	8.02

*Expenses are calculated using the most recent six-month annualized expense ratio for the Fund’s Class 2 shares (1.60%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 182/366 to reflect the one-half year period.

TD-7

Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Templeton Developing Markets Securities Fund


	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31,
Class 1	Six Months Ended June 30, 2012 (unaudited)			2011			2010			2009			2008			2007

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	9.50		$	11.40		$	9.86		$	6.11		$	16.16		$	13.92

Income from investment operations^a:
Net investment income^b		0.11			0.17			0.09			0.12			0.16			0.32
Net realized and unrealized gains (losses)		(0.08	)		(1.94	)		1.63			4.02			(7.40	)		3.51

Total from investment operations		0.03			(1.77	)		1.72			4.14			(7.24	)		3.83

Less distributions from:
Net investment income		(0.17	)		(0.13	)		(0.18	)		(0.36	)		(0.37	)		(0.38	)
Net realized gains		—			—			—			(0.03	)		(2.44	)		(1.21	)

Total distributions		(0.17	)		(0.13	)		(0.18	)		(0.39	)		(2.81	)		(1.59	)

Redemption fees^c		—			—			—			—			—			—

Net asset value, end of period	$	9.36		$	9.50		$	11.40		$	9.86		$	6.11		$	16.16


Total return^d		0.33%			(15.67)%			17.83%			73.32%			(52.62)%			29.09%
Ratios to average net assets^e
Expenses		1.35%			1.40%			1.49%	^f		1.45%	^f		1.52%	^f		1.48%	^f
Net investment income		2.25%			1.57%			0.87%			1.64%			1.52%			2.07%

Supplemental data
Net assets, end of period (000’s)	$	198,960		$	232,544		$	347,242		$	325,927		$	234,213		$	753,843
Portfolio turnover rate		11.32%			14.90%			24.41%			56.58%	^g		75.11%	^g		98.32%

^bBased on average daily shares outstanding.

^cAmount rounds to less than $0.01 per share.

^eRatios are annualized for periods less than one year.

^fBenefit of expense reduction rounds to less than 0.01%.

^gExcludes the value of portfolio securities delivered as a result of redemptions in-kind.

The accompanying notes are an integral part of these financial statements.

TD-8

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Templeton Developing Markets Securities Fund


	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31,
Class 2	Six Months Ended June 30, 2012 (unaudited)			2011			2010			2009			2008			2007

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	9.42		$	11.30		$	9.78		$	6.04		$	15.99		$	13.79

Income from investment operations^a:
Net investment income^b		0.10			0.14			0.06			0.11			0.15			0.27
Net realized and unrealized gains (losses)		(0.08	)		(1.92	)		1.62			3.98			(7.33	)		3.49

Total from investment operations		0.02			(1.78	)		1.68			4.09			(7.18	)		3.76

Less distributions from:
Net investment income		(0.14	)		(0.10	)		(0.16	)		(0.32	)		(0.33	)		(0.35	)
Net realized gains		—			—			—			(0.03	)		(2.44	)		(1.21	)

Total distributions		(0.14	)		(0.10	)		(0.16	)		(0.35	)		(2.77	)		(1.56	)

Redemption fees^c		—			—			—			—			—			—

Net asset value, end of period	$	9.30		$	9.42		$	11.30		$	9.78		$	6.04		$	15.99


Total return^d		0.23%			(15.86)%			17.58%			72.59%			(52.70)%			28.78%
Ratios to average net assets^e
Expenses		1.60%			1.65%			1.74%	^f		1.70%	^f		1.77%	^f		1.73%	^f
Net investment income		2.00%			1.32%			0.62%			1.39%			1.27%			1.82%

Supplemental data
Net assets, end of period (000’s)	$	281,185		$	295,223		$	392,546		$	435,947		$	264,186		$	1,090,549
Portfolio turnover rate		11.32%			14.90%			24.41%			56.58%	^g		75.11%	^g		98.32%

^bBased on average daily shares outstanding.

^cAmount rounds to less than $0.01 per share.

^eRatios are annualized for periods less than one year.

^fBenefit of expense reduction rounds to less than 0.01%.

^gExcludes the value of portfolio securities delivered as a result of redemptions in-kind.

The accompanying notes are an integral part of these financial statements.

TD-9

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Templeton Developing Markets Securities Fund


	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31,
Class 3	Six Months Ended June 30, 2012 (unaudited)			2011			2010			2009			2008			2007

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	9.36		$	11.23		$	9.73		$	6.02		$	15.96		$	13.78

Income from investment operations^a:
Net investment income^b		0.10			0.14			0.06			0.10			0.11			0.24
Net realized and unrealized gains (losses)		(0.08	)		(1.91	)		1.60			3.97			(7.27	)		3.52

Total from investment operations		0.02			(1.77	)		1.66			4.07			(7.16	)		3.76

Less distributions from:
Net investment income		(0.14	)		(0.10	)		(0.16	)		(0.33	)		(0.34	)		(0.37	)
Net realized gains		—			—			—			(0.03	)		(2.44	)		(1.21	)

Total distributions		(0.14	)		(0.10	)		(0.16	)		(0.36	)		(2.78	)		(1.58	)

Redemption fees^c		—			—			—			—			—			—

Net asset value, end of period	$	9.24		$	9.36		$	11.23		$	9.73		$	6.02		$	15.96


Total return^d		0.25%			(15.86)%			17.51%			72.63%			(52.67)%			28.70%
Ratios to average net assets^e
Expenses		1.60%			1.65%			1.74%	^f		1.70%	^f		1.77%	^f		1.73%	^f
Net investment income		2.00%			1.32%			0.62%			1.39%			1.27%			1.82%

Supplemental data
Net assets, end of period (000’s)	$	47,836		$	44,702		$	66,484		$	66,718		$	32,953		$	100,961
Portfolio turnover rate		11.32%			14.90%			24.41%			56.58%	^g		75.11%	^g		98.32%

^bBased on average daily shares outstanding.

^cAmount rounds to less than $0.01 per share.

^eRatios are annualized for periods less than one year.

^fBenefit of expense reduction rounds to less than 0.01%.

^gExcludes the value of portfolio securities delivered as a result of redemptions in-kind.

The accompanying notes are an integral part of these financial statements.

TD-10

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Templeton Developing Markets Securities Fund


	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31,
Class 4	Six Months Ended June 30, 2012 (unaudited)			2011			2010			2009			2008^a

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	9.42		$	11.30		$	9.80		$	6.09		$	14.88

Income from investment operations^b:
Net investment income (loss)^c		0.10			0.13			0.05			0.09			(0.33	)
Net realized and unrealized gains (losses)		(0.10	)		(1.91	)		1.61			4.00			(5.65	)

Total from investment operations		—			(1.78	)		1.66			4.09			(5.98	)

Less distributions from:
Net investment income		(0.12	)		(0.10	)		(0.16	)		(0.35	)		(0.37	)
Net realized gains		—			—			—			(0.03	)		(2.44	)

Total distributions		(0.12	)		(0.10	)		(0.16	)		(0.38	)		(2.81	)

Redemption fees^d		—			—			—			—			—

Net asset value, end of period	$	9.30		$	9.42		$	11.30		$	9.80		$	6.09


Total return^e		0.04%			(15.88)%			17.41%			72.45%			(48.66)%
Ratios to average net assets^f
Expenses		1.70%			1.75%			1.84%	^g		1.80%	^g		1.87%	^g
Net investment income		1.90%			1.22%			0.52%			1.29%			1.17%

Supplemental data
Net assets, end of period (000’s)	$	22,698		$	24,380		$	37,198		$	26,362		$	7,208
Portfolio turnover rate		11.32%			14.90%			24.41%			56.58%	^h		75.11%	^h

^aFor the period February 29, 2008 (effective date) to December 31, 2008.

^cBased on average daily shares outstanding.

^dAmount rounds to less than $0.01 per share.

^fRatios are annualized for periods less than one year.

^gBenefit of expense reduction rounds to less than 0.01%.

^hExcludes the value of portfolio securities delivered as a result of redemptions in-kind.

The accompanying notes are an integral part of these financial statements.

TD-11

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited)


Templeton Developing Markets Securities Fund	Industry	Shares		Value
Closed End Funds 0.4%
Romania 0.4%
SIF Banat-Crisana	Diversified Financial Services		1,457,300	$	373,071
SIF Moldova	Diversified Financial Services		1,509,345		540,953
SIF Muntenia	Diversified Financial Services		1,278,433		260,007
SIF Oltenia	Diversified Financial Services		1,751,291		557,926
SIF Transilvania	Diversified Financial Services		4,500,540		573,129

Total Closed End Funds (Cost $2,899,996)					2,305,086

Common Stocks 90.4%
Australia 0.6%
BHP Billiton Ltd.	Metals & Mining		101,481		3,267,058

Austria 0.2%
^aRaiffeisen Bank International AG	Commercial Banks		40,018		1,304,154

Brazil 14.5%
Companhia de Bebidas das Americas (AmBev)	Beverages		1,362,350		42,852,674
Itau Unibanco Holding SA, ADR	Commercial Banks		653,674		9,099,142
Souza Cruz SA	Tobacco		1,888,597		27,727,702

					79,679,518

Chile 2.5%
Antofagasta PLC	Metals & Mining		794,779		13,554,220

China 9.9%
Anhui Conch Cement Co. Ltd., H	Construction Materials		1,945,144		5,265,210
CNOOC Ltd.	Oil, Gas & Consumable Fuels		7,181,000		14,254,444
^aGreat Wall Motor Co. Ltd., H	Automobiles		3,121,177		6,179,513
PetroChina Co. Ltd., H	Oil, Gas & Consumable Fuels		13,880,000		17,801,523
Tencent Holdings Ltd.	Internet Software & Services		82,000		2,388,729
Yantai Changyu Pioneer Wine Co. Ltd., B	Beverages		614,262		4,140,950
Yanzhou Coal Mining Co. Ltd., H	Oil, Gas & Consumable Fuels		3,038,000		4,691,257

					54,721,626

Colombia 0.3%
Ecopetrol SA, ADR	Oil, Gas & Consumable Fuels		30,437		1,698,080

Hong Kong 6.2%
Dairy Farm International Holdings Ltd.	Food & Staples Retailing		1,014,733		10,776,465
Giordano International Ltd.	Specialty Retail		1,069,045		753,751
I.T Ltd.	Specialty Retail		5,040,000		2,176,306
Luk Fook Holdings (International) Ltd.	Specialty Retail		2,032,313		4,217,558
^bLuk Fook Holdings (International) Ltd., 144A	Specialty Retail		130,000		269,783
SJM Holdings Ltd.	Hotels, Restaurants & Leisure		5,534,030		10,157,717
VTech Holdings Ltd.	Communications Equipment		506,300		6,003,996

					34,355,576

India 9.0%
Grasim Industries Ltd.	Construction Materials		28,924		1,379,426
Infosys Ltd.	IT Services		165,015		7,439,349
National Aluminium Co. Ltd.	Metals & Mining		180,606		193,913
Oil & Natural Gas Corp. Ltd.	Oil, Gas & Consumable Fuels		1,572,924		8,067,222
Tata Chemicals Ltd.	Chemicals		669,855		3,749,909
Tata Consultancy Services Ltd.	IT Services		1,244,539		28,642,782

					49,472,601

TD-12

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Templeton Developing Markets Securities Fund	Industry	Shares		Value
Common Stocks (continued)
Indonesia 8.7%
PT Astra International Tbk	Automobiles		45,325,000	$	33,055,762
PT Bank Central Asia Tbk	Commercial Banks		11,282,532		8,768,963
PT Bank Rakyat Indonesia (Persero) Tbk	Commercial Banks		8,664,000		5,857,482

					47,682,207

Kenya 0.2%
British American Tobacco Kenya Ltd. Corp.	Tobacco		45,200		199,459
Equity Bank Ltd.	Commercial Banks		1,181,300		297,778
Kenya Commercial Bank Ltd.	Commercial Banks		2,032,200		560,482

					1,057,719

Malaysia 0.5%
Kuala Lumpur Kepong Bhd.	Food Products		394,500		2,854,386

Mexico 0.7%
Kimberly Clark de Mexico SAB de CV, A	Household Products		1,952,613		3,823,001

Nigeria 0.6%
First Bank of Nigeria PLC	Commercial Banks		7,297,629		489,199
Guinness Nigeria PLC	Beverages		214,723		298,172
Nigerian Breweries PLC	Beverages		4,294,577		2,684,935

					3,472,306

Qatar 0.5%
Industries Qatar QSC	Industrial Conglomerates		77,085		2,646,423

Russia 15.0%
Gazprom, ADR	Oil, Gas & Consumable Fuels		1,203,700		11,435,150
Gazprom, ADR (London Stock Exchange)	Oil, Gas & Consumable Fuels		470,200		4,431,635
^cLUKOIL Holdings, ADR	Oil, Gas & Consumable Fuels		75,208		4,217,665
^cLUKOIL Holdings, ADR (London Stock Exchange)	Oil, Gas & Consumable Fuels		260,068		14,479,286
Mining and Metallurgical Co. Norilsk Nickel, ADR	Metals & Mining		251,243		4,175,659
Sberbank of Russia	Commercial Banks		6,150,040		16,400,739
TNK-BP Holding	Oil, Gas & Consumable Fuels		5,340,274		12,335,629
^dUralkali OJSC, GDR, Reg S	Chemicals		401,096		15,351,949

					82,827,712

Singapore 2.4%
Keppel Corp. Ltd.	Industrial Conglomerates		846,557		6,868,671
SembCorp Marine Ltd.	Machinery		1,672,000		6,307,940

					13,176,611

South Africa 4.1%
Exxaro Resources Ltd.	Oil, Gas & Consumable Fuels		272,483		6,339,188
Remgro Ltd.	Diversified Financial Services		614,891		9,896,268
Tiger Brands Ltd.	Food Products		212,099		6,360,153

					22,595,609

South Korea 1.6%
Samsung Electronics Co. Ltd.	Semiconductors & Semiconductor Equipment		4,453		4,685,849
SK Innovation Co. Ltd.	Oil, Gas & Consumable Fuels		35,682		4,314,404

					9,000,253

Taiwan 2.1%
President Chain Store Corp.	Food & Staples Retailing		2,133,075		11,347,667

TD-13

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Templeton Developing Markets Securities Fund	Industry	Shares		Value
Common Stocks (continued)
Thailand 6.7%
Kasikornbank PCL, fgn.	Commercial Banks		3,116,500	$	16,290,908
PTT Exploration and Production PCL, fgn.	Oil, Gas & Consumable Fuels		2,021,223		10,757,657
PTT PCL, fgn.	Oil, Gas & Consumable Fuels		938,100		9,599,439
Supalai PCL, fgn.	Real Estate Management & Development		184,644		100,029

					36,748,033

Turkey 1.1%
Tupras-Turkiye Petrol Rafinerileri AS	Oil, Gas & Consumable Fuels		274,426		5,873,727

United Arab Emirates 1.2%
Emaar Properties PJSC	Real Estate Management & Development		8,942,377		6,816,857

United Kingdom 0.9%
Anglo American PLC	Metals & Mining		146,649		4,869,782

United States 0.7%
Avon Products Inc.	Personal Products		246,420		3,994,468

Vietnam 0.2%
DHG Pharmaceutical JSC	Pharmaceuticals		95,800		290,997
Dong Phu Rubber JSC	Chemicals		88,000		218,895
Vinacafe Bien Hoa JSC	Food Products		68,500		422,699

					932,591

Total Common Stocks (Cost $339,459,761)					497,772,185

Preferred Stocks 6.2%
Brazil 3.9%
Itausa - Investimentos Itau SA, ADR, pfd.	Commercial Banks		17,790		74,422
Itausa - Investimentos Itau SA, pfd.	Commercial Banks		1,241,305		5,254,659
Vale SA, ADR, pfd., A	Metals & Mining		831,932		16,230,993

					21,560,074

Chile 1.7%
Embotelladora Andina SA, pfd., A	Beverages		2,049,785		8,964,612

Colombia 0.6%
Bancolombia SA, ADR, pfd.	Commercial Banks		53,200		3,289,888

Total Preferred Stocks (Cost $18,650,704)					33,814,574

Total Investments before Short Term Investments (Cost $361,010,461)					533,891,845

Short Term Investments 3.4%
Money Market Funds (Cost $16,675,196) 3.0%
United States 3.0%
^e,fInstitutional Fiduciary Trust Money Market Portfolio			16,675,196		16,675,196

TD-14

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Templeton Developing Markets Securities Fund	Shares		Value
Short Term Investments (continued)
^gInvestments from Cash Collateral Received for Loaned Securities (Cost $2,583,471) 0.4%
Money Market Funds 0.4%
United States 0.4%
^hBNY Mellon Overnight Government Fund, 0.182%		2,583,471	$	2,583,471

Total Investments (Cost $380,269,128) 100.4%				553,150,512
Other Assets, less Liabilities (0.4)%				(2,471,634	)

Net Assets 100.0%			$	550,678,878

See Abbreviations on page TD-26.

^aA portion or all of the security is on loan at June 30, 2012. See Note 1(c).

^bSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. This security has been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At June 30, 2012, the value of this security was $269,783, representing 0.05% of net assets.

^dSecurity was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. This security has been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At June 30, 2012, the value of this security was $15,351,949, representing 2.79% of net assets.

^eNon-income producing.

^fSee Note 7 regarding investments in the Institutional Fiduciary Trust Money Market Portfolio.

^gSee Note 1(c) regarding securities on loan.

^hThe rate shown is the annualized seven-day yield at period end.

The accompanying notes are an integral part of these financial statements.

TD-15

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

June 30, 2012 (unaudited)


	Templeton Developing Markets Securities Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	363,593,932
Cost - Sweep Money Fund (Note 7)		16,675,196

Total cost of investments	$	380,269,128

Value - Unaffiliated issuers	$	536,475,316
Value - Sweep Money Fund (Note 7)		16,675,196

Total value of investments (includes securities loaned in the amount of $2,509,564)		553,150,512
Foreign currency, at value (cost $92,399)		92,487
Receivables:
Investment securities sold		2,499,526
Capital shares sold		203,571
Dividends		2,924,807
Foreign tax		27,630
Other assets		151

Total assets		558,898,684

Liabilities:
Payables:
Investment securities purchased		3,430,205
Capital shares redeemed		1,099,997
Affiliates		689,157
Payable upon return of securities loaned		2,583,471
Accrued expenses and other liabilities		416,976

Total liabilities		8,219,806

Net assets, at value	$	550,678,878

Net assets consist of:
Paid-in capital	$	496,473,023
Undistributed net investment income		5,595
Net unrealized appreciation (depreciation)		172,853,271
Accumulated net realized gain (loss)		(118,653,011	)

Net assets, at value	$	550,678,878

The accompanying notes are an integral part of these financial statements.

TD-16

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Assets and Liabilities (continued)

June 30, 2012 (unaudited)


	Templeton Developing Markets Securities Fund
Class 1:
Net assets, at value	$	198,959,805

Shares outstanding		21,265,537

Net asset value and maximum offering price per share	$	9.36

Class 2:
Net assets, at value	$	281,184,776

Shares outstanding		30,250,841

Net asset value and maximum offering price per share	$	9.30

Class 3:
Net assets, at value	$	47,836,176

Shares outstanding		5,179,618

Net asset value and maximum offering price per share^a	$	9.24

Class 4:
Net assets, at value	$	22,698,121

Shares outstanding		2,439,605

Net asset value and maximum offering price per share	$	9.30

^aRedemption price is equal to net asset value less redemption fees retained by the Fund.

The accompanying notes are an integral part of these financial statements.

TD-17

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the six months ended June 30, 2012 (unaudited)


	Templeton Developing Markets Securities Fund
Investment income:
Dividends (net of foreign taxes of $1,012,523)	$	10,949,427
Income from securities loaned		43,857

Total investment income		10,993,284

Expenses:
Management fees (Note 3a)		3,342,776
Administrative fees (Note 3b)		426,683
Distribution fees: (Note 3c)
Class 2		378,092
Class 3		64,343
Class 4		43,892
Unaffiliated transfer agent fees		1,211
Custodian fees (Note 4)		206,811
Reports to shareholders		110,700
Professional fees		28,338
Trustees’ fees and expenses		1,439
Other		9,817

Total expenses		4,614,102

Net investment income		6,379,182

Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		13,584,804
Foreign currency transactions		(560,713	)

Net realized gain (loss)		13,024,091

Net change in unrealized appreciation (depreciation) on:
Investments		(14,616,878	)
Translation of other assets and liabilities denominated in foreign currencies		(5,476	)

Net change in unrealized appreciation (depreciation)		(14,622,354	)

Net realized and unrealized gain (loss)		(1,598,263	)

Net increase (decrease) in net assets resulting from operations	$	4,780,919

The accompanying notes are an integral part of these financial statements.

TD-18

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets


	Templeton Developing Markets Securities Fund
	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31, 2011

Increase (decrease) in net assets:
Operations:
Net investment income	$	6,379,182		$	10,217,132
Net realized gain (loss) from investments and foreign currency transactions		13,024,091			41,092,169
Net change in unrealized appreciation (depreciation) on investments, translation of other assets and liabilities denominated in foreign currencies and deferred taxes		(14,622,354	)		(168,736,087	)

Net increase (decrease) in net assets resulting from operations		4,780,919			(117,426,786	)

Distributions to shareholders from:
Net investment income:
Class 1		(3,523,272	)		(3,575,470	)
Class 2		(4,111,805	)		(3,331,863	)
Class 3		(716,639	)		(556,039	)
Class 4		(295,623	)		(314,405	)

Total distributions to shareholders		(8,647,339	)		(7,777,777	)

Capital share transactions: (Note 2)
Class 1		(32,894,640	)		(64,505,854	)
Class 2		(12,064,580	)		(37,899,841	)
Class 3		4,184,090			(11,807,405	)
Class 4		(1,529,976	)		(7,237,721	)

Total capital share transactions		(42,305,106	)		(121,450,821	)

Redemption fees		929			34,912

Net increase (decrease) in net assets		(46,170,597	)		(246,620,472	)
Net assets:
Beginning of period		596,849,475			843,469,947

End of period	$	550,678,878		$	596,849,475

Undistributed net investment income included in net assets:
End of period	$	5,595		$	2,273,752

The accompanying notes are an integral part of these financial statements.

TD-19

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited)

Templeton Developing Markets Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment company, consisting of twenty separate funds. The Templeton Developing Markets Securities Fund (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. The Fund offers four classes of shares: Class 1, Class 2, Class 3, and Class 4. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

Equity securities and exchange traded funds listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded, or the NYSE, whichever is earlier. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at the close of the NYSE on the day that the value of the security is determined. Over-the-counter securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities. Investments in open-end mutual funds and non-registered money market funds are valued at the closing net asset value.

TD-20

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Developing Markets Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

a. Financial Instrument Valuation (continued)

b. Foreign Currency Translation

c. Securities Lending

The Fund participates in an agency based securities lending program. The fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the market value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the market value of loaned securities, as determined at the close of fund business each day; any additional collateral required due to changes in security values is delivered to the fund on the next business day. The collateral is invested in a non-registered money fund as indicated on the Statement of Investments. The fund receives income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. The fund bears the market risk with respect to the collateral investment, securities loaned, and the risk that the agent may default on its obligations to the fund. The securities lending agent has agreed to indemnify the fund in the event of default by a third party borrower.

d. Income and Deferred Taxes

TD-21

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Developing Markets Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

d. Income and Deferred Taxes (continued)

e. Security Transactions, Investment Income, Expenses and Distributions

f. Accounting Estimates

g. Redemption Fees

Redemptions and exchanges of interests in an insurance company subaccount that invests in Class 3 shares of the Fund will be subject to a 1.0% short term trading fee if the interest in the subaccount has been held for less than 60 days. Such fees are retained by the Fund and accounted for as an addition to paid-in capital, allocated to each class of shares based upon the relative proportion of net assets of each class.

h. Guarantees and Indemnifications

TD-22

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Developing Markets Securities Fund

2. SHARES OF BENEFICIAL INTEREST

At June 30, 2012, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:


	Six Months Ended June 30, 2012						Year Ended December 31, 2011
Class 1 Shares:	Shares			Amount			Shares			Amount
Shares sold		686,552		$	6,995,534			2,813,987		$	30,009,154
Shares issued in reinvestment of distributions		385,901			3,523,272			324,453			3,575,470
Shares redeemed		(4,283,973	)		(43,413,446	)		(9,124,103	)		(98,090,478	)

Net increase (decrease)		(3,211,520	)	$	(32,894,640	)		(5,985,663	)	$	(64,505,854	)

Class 2 Shares:
Shares sold		2,219,589		$	21,763,966			6,746,331		$	70,699,788
Shares issued in reinvestment of distributions		453,341			4,111,805			304,558			3,331,863
Shares redeemed		(3,756,025	)		(37,940,351	)		(10,448,699	)		(111,931,492	)

Net increase (decrease)		(1,083,095	)	$	(12,064,580	)		(3,397,810	)	$	(37,899,841	)

Class 3 Shares:
Shares sold		862,807		$	8,748,041			848,211		$	9,362,399
Shares issued in reinvestment of distributions		79,538			716,639			51,154			556,039
Shares redeemed		(536,540	)		(5,280,590	)		(2,043,372	)		(21,725,843	)

Net increase (decrease)		405,805		$	4,184,090			(1,144,007	)	$	(11,807,405	)

Class 4 Shares:
Shares sold		183,124		$	1,808,096			464,313		$	5,040,717
Shares issued on reinvestment of distributions		32,558			295,623			28,739			314,405
Shares redeemed		(364,859	)		(3,633,695	)		(1,194,944	)		(12,592,843	)

Net increase (decrease)		(149,177	)	$	(1,529,976	)		(701,892	)	$	(7,237,721	)

3. TRANSACTIONS WITH AFFILIATES


Subsidiary		Affiliation
Templeton Asset Management Ltd. (TAML)		Investment manager
Franklin Templeton Services, LLC (FT Services)		Administrative manager
Franklin Templeton Distributors, Inc. (Distributors)		Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services)		Transfer agent

TD-23

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Developing Markets Securities Fund

3. TRANSACTIONS WITH AFFILIATES (continued)

a. Management Fees

The Fund pays an investment management fee to TAML based on the average daily net assets of the Fund as follows:


Annualized Fee Rate		Net Assets
1.100%		Up to and including $1 billion
1.050%		Over $1 billion, up to and including $5 billion
1.000%		Over $5 billion, up to and including $10 billion
0.950%		Over $10 billion, up to and including $15 billion
0.900%		Over $15 billion, up to and including $20 billion
0.850%		In excess of $20 billion

b. Administrative Fees

The Fund pays an administrative fee to FT Services based on the Fund’s average daily net assets as follows:


Annualized Fee Rate		Net Assets
0.150%		Up to and including $200 million
0.135%		Over $200 million, up to and including $700 million
0.100%		Over $700 million, up to and including $1.2 billion
0.075%		In excess of $1.2 billion

c. Distribution Fees

The Board has adopted distribution plans for Class 2, Class 3, and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to 0.25%, 0.35%, and 0.35% per year of its average daily net assets of Class 2, Class 3, and Class 4, respectively. The Board has agreed to limit the current rate to 0.25% per year for Class 3.

d. Transfer Agent Fees

Investor Services, under terms of an agreement, performs shareholder servicing for the Fund and is not paid by the Fund for the services.

4. EXPENSE OFFSET ARRANGEMENT

5. INCOME TAXES

At December 31, 2011, the Fund had capital loss carryforwards of $125,392,863 expiring in 2017.

TD-24

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Developing Markets Securities Fund

5. INCOME TAXES (continued)

At June 30, 2012, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:


Cost of investments	$	393,020,861


Unrealized appreciation	$	183,711,206
Unrealized depreciation		(23,581,555	)

Net unrealized appreciation (depreciation)	$	160,129,651

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2012, aggregated $66,436,750 and $88,333,846, respectively.

7. INVESTMENTS IN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO

8. CONCENTRATION OF RISK

9. CREDIT FACILITY

TD-25

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Developing Markets Securities Fund

10. FAIR VALUE MEASUREMENTS

•

Level 1 – quoted prices in active markets for identical financial instruments

•

Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)

•

Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of financial instruments)

The inputs or methodology used for valuing financial instruments are not an indication of the risk associated with investing in those financial instruments.

For movements between the levels within the fair value hierarchy, the Fund has adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.

A summary of inputs used as of June 30, 2012, in valuing the Fund’s assets and liabilities carried at fair value, is as follows:


	Level 1		Level 2		Level 3		Total

Assets:
Investments in Securities:
Closed End Funds	$	2,305,086	$	—	$	—	$	2,305,086
Equity Investments^a,b		531,586,759		—		—		531,586,759
Short Term Investments		16,675,196		2,583,471		—		19,258,667

Total Investments in Securities	$	550,567,041	$	2,583,471	$	—	$	553,150,512

^aIncludes common and preferred stocks.

^bFor detailed categories, see the accompanying Statement of Investments.

11. NEW ACCOUNTING PRONOUNCEMENTS

12. SUBSEQUENT EVENTS

The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure.


ABBREVIATIONS
Selected Portfolio

ADR - American Depositary Receipt
GDR - Global Depositary Receipt

TD-26

Franklin Templeton Variable Insurance Products Trust

Tax Information (unaudited)

Templeton Developing Markets Securities Fund

At December 31, 2011, more than 50% of the Fund’s total assets were invested in securities of foreign issuers. In most instances, foreign taxes were withheld from income paid to the Fund on these investments. As shown in the table below, the Fund hereby reports to shareholders the foreign source income and foreign taxes paid, pursuant to Section 853 of the Internal Revenue Code. This written statement will allow shareholders of record on June 14, 2012, to treat their proportionate share of foreign taxes paid by the Fund as having been paid directly by them. The shareholder shall consider these amounts as foreign taxes paid in the tax year in which they receive the Fund distribution.

The following table provides a detailed analysis of foreign tax paid, and foreign source income as reported by the Fund, to Class 1, Class 2, Class 3, and Class 4 shareholders of record.


Class	Foreign Tax Paid Per Share		Foreign Source Income Per Share
Class 1	$	0.0339	$	0.2177
Class 2	$	0.0339	$	0.1876
Class 3	$	0.0339	$	0.1890
Class 4	$	0.0339	$	0.1695

Foreign Tax Paid Per Share (Column 1) is the amount per share available to you, as a tax credit (assuming you held your shares in the Fund for a minimum of 16 days during the 31-day period beginning 15 days before the ex-dividend date of the Fund’s distribution to which the foreign taxes relate), or, as a tax deduction.

Foreign Source Income Per Share (Column 2) is the amount per share of income dividends attributable to foreign securities held by the Fund, plus any foreign taxes withheld on these dividends.

TD-27

TEMPLETON FOREIGN SECURITIES FUND

This semiannual report for Templeton Foreign Securities Fund covers the period ended June 30, 2012.

Performance Summary as of 6/30/12

Templeton Foreign Securities Fund – Class 2 delivered a +1.37% total return for the six-month period ended 6/30/12.

Templeton Foreign Securities Fund – Class 2

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares.

Current performance may differ from figures shown.

TF-1

Fund Goal and Main Investments: Templeton Foreign Securities Fund seeks long-term capital growth. Under normal market conditions, the Fund invests at least 80% of its net assets in investments of issuers located outside the U.S., including those in emerging markets.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. The Fund underperformed its benchmark, the MSCI Europe, Australasia, Far East (EAFE) Index, which produced a +3.38% total return for the same period.¹ Please note, index performance information is provided for reference and we do not attempt to track the index but rather undertake investments on the basis of fundamental research.

Economic and Market Overview

2. Please see Index Descriptions following the Fund Summaries.

Fund Risks: All investments involve risks, including possible loss of principal. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments; investments in emerging markets involve heightened risks related to the same factors. To the extent the Fund focuses on particular countries, regions, industries, sectors or types of investment from time to time, it may be subject to greater risks of adverse developments in such areas of focus than a fund that invests in a wider variety of countries, regions, industries, sectors or investments. Current political uncertainty surrounding the European Union (EU) and its membership may increase market volatility. The financial instability of some countries in the EU, including Greece, Italy and Spain, together with the risk of that impacting other more stable countries, may increase the economic risk of investing in companies in Europe. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

TF-2

downgraded global banks and European sovereigns. Concerns about Italian and Spanish borrowing costs added to investor anxiety as bond yields climbed. Europe’s initial policy responses — including enhanced liquidity measures and an ineffective Spanish banking bailout — did little to address the structural imbalances of eurozone economies or the solvency fears plaguing the region’s banking system. Yet, encouraging progress did emerge at period-end when leaders in Brussels agreed to ease conditions of sovereign bond purchases and permit the region’s bailout fund to directly recapitalize banks. Meanwhile, the U.S. Federal Reserve Board opted to extend its strategy, dubbed Operation Twist, designed to lower systemically important interest rates, and the People’s Bank of China slashed interest rates for the first time since the global financial crisis began. In the latter part of the period, commodities extended recent losses, with oil falling back below $100, while the euro dipped and traditional safe havens like U.S. Treasuries, the U.S. dollar and the Japanese yen made gains.

Investment Strategy

Our investment philosophy is bottom up, value oriented and long term. In choosing investments, we generally focus on the market price of a company’s securities relative to our evaluation of the company’s potential long-term earnings, asset value and cash flow. Among factors we consider are a company’s historical value measures, including price/earnings ratio, profit margins and liquidation value. We do in-depth research to construct a bargain list from which we buy.

Manager’s Discussion

During the six months under review, underweighting and stock selection in the economically sensitive materials sector, which suffered from a global commodity price correction, was a major contributor to Fund performance relative to the MSCI EAFE Index.³ Beverage-can maker Rexam (U.K.) became a standout materials holding after agreeing to sell two of its personal care divisions in 2011. Our stock selection in information technology⁴aided relative results, particularly in two companies that benefited from global demand for smartphones and tablet PCs: South Korean semiconductor, telecommunication and digital media products manufacturer Samsung Electronics⁵ and integrated circuit and semiconductor devices company Taiwan Semiconductor Manufacturing.⁵

3. The materials sector comprises chemicals, construction and engineering, construction materials, containers and packaging, and metals and mining in the SOI.

4. The information technology sector comprises communications equipment; computers and peripherals; electronic equipment, instruments and components; semiconductors and semiconductor equipment; and software in the SOI.

5. Not an index component.

LOGO

TF-3

Business management software developer SAP (Germany) was another key sector holding. Other individual contributors included reinsurer Swiss Re, oil services company Aker Solutions (Norway) and automobile manufacturer Toyota Motor (Japan).

In contrast, our underweighting and stock selection in the consumer staples sector was a key detractor from Fund performance, and supermarket chain Tesco (U.K.) led the Fund’s sector losses due to slowing sales growth and falling margins.⁶ The Fund’s overweighting in telecommunication services⁷ also weighed on relative results, including our positions in telecommunication and Internet services providers China Telecom⁵ and Telefonica⁵ (Spain). Our stock selection in health care hurt performance, notably our position in Lonza Group (Switzerland).⁸ The chemicals and biotechnology company underperformed as profits were squeezed by rising raw materials prices and a strong Swiss franc. Other individual detractors included European financial services providers UniCredit (Spain) and Credit Suisse Group (Switzerland).

From a geographic perspective, our stock selection in Asia boosted the Fund’s relative performance, as a number of our investments in Singapore, South Korea⁵ and Japan outperformed. Our China exposure, however, was detrimental.⁵ In Europe, our stock selection detracted from results, as investor concerns about the eurozone debt crisis weighed on market sentiment. During the period, our investments in the U.K., France and the Netherlands hindered relative performance, while an underweighting in the troubled Spanish market benefited results.

Thank you for your participation in Templeton Foreign Securities Fund. We look forward to serving your future investment needs.

6. The consumer staples sector comprises food and staples retailing in the SOI.

7. The telecommunication services sector comprises diversified telecommunication services and wireless telecommunication services in the SOI.

8. The health care sector comprises life sciences tools and services and pharmaceuticals in the SOI.

Top 10 Holdings

Templeton Foreign Securities Fund

6/30/12


Company Sector/Industry, Country	% of Total Net Assets
Sanofi		3.7%
Pharmaceuticals, France
Roche Holding AG		3.5%
Pharmaceuticals, Switzerland
Samsung Electronics Co. Ltd.		3.3%
Semiconductors & Semiconductor Equipment, South Korea
GlaxoSmithKline PLC		2.7%
Pharmaceuticals, U.K.
Swiss Re AG		2.5%
Insurance, Switzerland
Vodafone Group PLC, ADR		2.3%
Wireless Telecommunication Services, U.K.
Statoil ASA		2.1%
Oil, Gas & Consumable Fuels, Norway
Tesco PLC		2.1%
Food & Staples Retailing, U.K.
Telenor ASA		2.1%
Diversified Telecommunication Services, Norway
Royal Dutch Shell PLC, A & B		2.0%
Oil, Gas & Consumable Fuels, U.K.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).

TF-4

Fund Expenses

•

Transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes.

•

Actual Fund Expenses

You can estimate the Fund-level expenses you incurred during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:

1.	Divide your account value by $1,000.

If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6.

2.	Multiply the result by the number under the heading “Fund-Level Expenses Incurred During Period.”

If Fund-Level Expenses Incurred During Period were $7.50, then 8.6 x $7.50 = $64.50.

In this illustration, the estimated expenses incurred this period at the Fund level are $64.50.

Templeton Foreign Securities Fund – Class 2

TF-5

Hypothetical Example for Comparison with Other Mutual Funds


Class 2	Beginning Account Value 1/1/12		Ending Account Value 6/30/12		Fund-Level Expenses Incurred During Period* 1/1/12–6/30/12
Actual	$	1,000	$	1,013.70	$	5.26
Hypothetical (5% return before expenses)	$	1,000	$	1,019.64	$	5.27

*Expenses are calculated using the most recent six-month annualized expense ratio for the Fund’s Class 2 shares (1.05%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 182/366 to reflect the one-half year period.

TF-6

Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Templeton Foreign Securities Fund


	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31,
Class 1	Six Months Ended June 30, 2012 (unaudited)			2011			2010			2009			2008			2007

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	12.78		$	14.54		$	13.68		$	10.95		$	20.57		$	19.00

Income from investment operations^a:
Net investment income^b		0.29			0.42			0.28			0.25			0.45			0.45
Net realized and unrealized gains (losses)		(0.11	)		(1.90	)		0.86			3.39			(8.01	)		2.46

Total from investment operations		0.18			(1.48	)		1.14			3.64			(7.56	)		2.91

Less distributions from:
Net investment income		(0.44	)		(0.28	)		(0.28	)		(0.43	)		(0.45	)		(0.44	)
Net realized gains		—			—			—			(0.48	)		(1.61	)		(0.90	)

Total distributions		(0.44	)		(0.28	)		(0.28	)		(0.91	)		(2.06	)		(1.34	)

Redemption fees^c		—			—			—			—			—			—

Net asset value, end of period	$	12.52		$	12.78		$	14.54		$	13.68		$	10.95		$	20.57


Total return^d		1.49%			(10.44)%			8.67%			37.34%			(40.23)%			15.79%
Ratios to average net assets^e
Expenses		0.80%			0.79%	^f		0.78%	^f		0.78%	^f		0.77%	^f		0.75%	^f
Net investment income		4.36%			2.92%			2.10%			2.28%			2.82%			2.22%

Supplemental data
Net assets, end of period (000’s)	$	243,233		$	254,292		$	321,282		$	318,173		$	262,725		$	531,377
Portfolio turnover rate		4.08%			21.09%			19.16%			22.50%			18.27%			26.74%

^bBased on average daily shares outstanding.

^cAmount rounds to less than $0.01 per share.

^eRatios are annualized for periods less than one year.

^fBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

TF-7

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Templeton Foreign Securities Fund


	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31,
Class 2	Six Months Ended June 30, 2012 (unaudited)			2011			2010			2009			2008			2007

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	12.56		$	14.29		$	13.45		$	10.76		$	20.25		$	18.73

Income from investment operations^a:
Net investment income^b		0.27			0.37			0.25			0.22			0.40			0.38
Net realized and unrealized gains (losses)		(0.11	)		(1.86	)		0.84			3.34			(7.89	)		2.44

Total from investment operations		0.16			(1.49	)		1.09			3.56			(7.49	)		2.82

Less distributions from:
Net investment income		(0.40	)		(0.24	)		(0.25	)		(0.39	)		(0.39	)		(0.40	)
Net realized gains		—			—			—			(0.48	)		(1.61	)		(0.90	)

Total distributions		(0.40	)		(0.24	)		(0.25	)		(0.87	)		(2.00	)		(1.30	)

Redemption fees^c		—			—			—			—			—			—

Net asset value, end of period	$	12.32		$	12.56		$	14.29		$	13.45		$	10.76		$	20.25


Total return^d		1.37%			(10.63)%			8.41%			37.04%			(40.38)%			15.46%
Ratios to average net assets^e
Expenses		1.05%			1.04%	^f		1.03%	^f		1.03%	^f		1.02%	^f		1.00%	^f
Net investment income		4.11%			2.67%			1.85%			2.03%			2.57%			1.97%

Supplemental data
Net assets, end of period (000’s)	$	1,616,384		$	1,679,412		$	2,090,757		$	2,010,268		$	1,702,038		$	3,255,154
Portfolio turnover rate		4.08%			21.09%			19.16%			22.50%			18.27%			26.74%

^bBased on average daily shares outstanding.

^cAmount rounds to less than $0.01 per share.

^eRatios are annualized for periods less than one year.

^fBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

TF-8

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Templeton Foreign Securities Fund


	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31,
Class 3	Six Months Ended June 30, 2012 (unaudited)			2011			2010			2009			2008			2007

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	12.51		$	14.24		$	13.37		$	10.70		$	20.18		$	18.68

Income from investment operations^a:
Net investment income^b		0.27			0.37			0.25			0.25			0.39			0.37
Net realized and unrealized gains (losses)		(0.11	)		(1.86	)		0.84			3.30			(7.84	)		2.45

Total from investment operations		0.16			(1.49	)		1.09			3.55			(7.45	)		2.82

Less distributions from:
Net investment income		(0.40	)		(0.24	)		(0.22	)		(0.40	)		(0.42	)		(0.42	)
Net realized gains		—			—			—			(0.48	)		(1.61	)		(0.90	)

Total distributions		(0.40	)		(0.24	)		(0.22	)		(0.88	)		(2.03	)		(1.32	)

Redemption fees^c		—			—			—			—			—			—

Net asset value, end of period	$	12.27		$	12.51		$	14.24		$	13.37		$	10.70		$	20.18


Total return^d		1.37%			(10.68)%			8.41%			37.20%			(40.39)%			15.45%
Ratios to average net assets^e
Expenses		1.05%			1.04%	^f		1.03%	^f		1.03%	^f		1.02%	^f		1.00%	^f
Net investment income		4.11%			2.67%			1.85%			2.03%			2.57%			1.97%

Supplemental data
Net assets, end of period (000’s)	$	83,644		$	88,380		$	108,766		$	115,364		$	271,061		$	313,505
Portfolio turnover rate		4.08%			21.09%			19.16%			22.50%			18.27%			26.74%

^bBased on average daily shares outstanding.

^cAmount rounds to less than $0.01 per share.

^eRatios are annualized for periods less than one year.

^fBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

TF-9

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Templeton Foreign Securities Fund


	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31,
Class 4	Six Months Ended June 30, 2012 (unaudited)			2011			2010			2009			2008^a

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	12.66		$	14.43		$	13.59		$	10.91		$	18.90

Income from investment operations^b:
Net investment income^c		0.27			0.36			0.17			0.21			0.15
Net realized and unrealized gains (losses)		(0.12	)		(1.88	)		0.92			3.37			(6.08	)

Total from investment operations		0.15			(1.52	)		1.09			3.58			(5.93	)

Less distributions from:
Net investment income		(0.40	)		(0.25	)		(0.25	)		(0.42	)		(0.45	)
Net realized gains		—			—			—			(0.48	)		(1.61	)

Total distributions		(0.40	)		(0.25	)		(0.25	)		(0.90	)		(2.06	)

Redemption fees^d		—			—			—			—			—

Net asset value, end of period	$	12.41		$	12.66		$	14.43		$	13.59		$	10.91


Total return^e		1.25%			(10.74)%			8.38%			36.84%			(35.15)%
Ratios to average net assets^f
Expenses		1.15%			1.14%	^g		1.13%	^g		1.13%	^g		1.12%	^g
Net investment income		4.01%			2.57%			1.75%			1.93%			2.47%

Supplemental data
Net assets, end of period (000’s)	$	369,919		$	353,346		$	305,505		$	48,501		$	14,287
Portfolio turnover rate		4.08%			21.09%			19.16%			22.50%			18.27%

^aFor the period February 29, 2008 (effective date) to December 31, 2008.

^cBased on average daily shares outstanding.

^dAmount rounds to less than $0.01 per share.

^fRatios are annualized for periods less than one year.

^gBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

TF-10

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited)


Templeton Foreign Securities Fund	Country	Shares/ Units		Value
Common Stocks and Other Equity Interests 93.5%
Aerospace & Defense 1.0%
BAE Systems PLC	United Kingdom		5,263,730	$	23,804,819

Airlines 0.6%
Deutsche Lufthansa AG	Germany		1,161,930		13,401,018

Automobiles 1.8%
^aMazda Motor Corp.	Japan		5,453,000		7,294,299
Toyota Motor Corp., ADR	Japan		440,460		35,448,221

					42,742,520

Capital Markets 4.4%
Credit Suisse Group AG	Switzerland		1,969,870		35,827,140
KKR & Co., LP	United States		1,155,000		14,887,950
Nomura Holdings Inc.	Japan		5,636,100		20,715,257
UBS AG	Switzerland		2,504,440		29,161,288

					100,591,635

Chemicals 1.1%
Akzo Nobel NV	Netherlands		527,560		24,730,864

Commercial Banks 8.3%
BNP Paribas SA	France		896,310		34,411,110
DBS Group Holdings Ltd.	Singapore		2,993,520		32,770,420
HSBC Holdings PLC	United Kingdom		4,015,600		35,481,546
KB Financial Group Inc., ADR	South Korea		1,319,301		43,127,950
^aUniCredit SpA	Italy		8,365,386		31,549,951
United Overseas Bank Ltd.	Singapore		985,000		14,506,788

					191,847,765

Commercial Services & Supplies 1.0%
G4S PLC	United Kingdom		5,045,810		22,056,409

Communications Equipment 0.7%
Ericsson, B, ADR	Sweden		1,675,840		15,300,419

Computers & Peripherals 1.1%
Compal Electronics Inc.	Taiwan		28,536,431		26,195,589

Construction & Engineering 0.7%
Carillion PLC	United Kingdom		3,750,730		16,227,835

Construction Materials 0.5%
CRH PLC	Ireland		659,820		12,617,880

Containers & Packaging 0.9%
Rexam PLC	United Kingdom		3,021,290		19,919,015

Diversified Financial Services 1.7%
^aING Groep NV	Netherlands		5,880,644		39,192,430

Diversified Telecommunication Services 8.2%
China Telecom Corp. Ltd., H	China		47,482,357		20,503,203
France Telecom SA	France		2,164,143		28,416,495
Singapore Telecommunications Ltd.	Singapore		14,436,000		37,599,684
Telefonica SA, ADR	Spain		1,813,382		23,755,304
^bTelekom Austria AG	Austria		1,468,891		14,424,201
^bTelenor ASA	Norway		2,880,414		47,852,070
^bVivendi SA	France		928,427		17,190,501

					189,741,458

TF-11

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Templeton Foreign Securities Fund	Country	Shares/ Units		Value
Common Stocks and Other Equity Interests (continued)
Electrical Equipment 0.4%
Shanghai Electric Group Co. Ltd.	China		23,792,000	$	9,660,200

Electronic Equipment, Instruments & Components 1.3%
^aFlextronics International Ltd.	Singapore		4,961,670		30,762,354

Energy Equipment & Services 1.0%
Aker Solutions ASA	Norway		1,617,940		22,802,050

Food & Staples Retailing 2.1%
Tesco PLC	United Kingdom		10,082,690		48,974,820

Industrial Conglomerates 3.2%
Hutchison Whampoa Ltd.	Hong Kong		2,500,239		21,431,264
Koninklijke Philips Electronics NV	Netherlands		1,473,320		29,032,347
Siemens AG	Germany		285,414		23,891,087

					74,354,698

Insurance 11.6%
ACE Ltd.	United States		377,449		27,980,294
AIA Group Ltd.	Hong Kong		9,767,000		33,361,970
Aviva PLC	United Kingdom		9,269,960		39,598,896
AXA SA	France		2,547,968		33,794,941
Muenchener Rueckversicherungs-Gesellschaft AG	Germany		249,150		35,048,288
NKSJ Holdings Inc.	Japan		1,237,900		26,061,053
PartnerRe Ltd.	Bermuda		196,480		14,867,642
Swiss Re AG	Switzerland		917,340		57,563,327

					268,276,411

Life Sciences Tools & Services 0.3%
Lonza Group AG	Switzerland		175,440		7,280,113

Media 1.0%
Reed Elsevier NV	Netherlands		2,017,693		23,012,973

Metals & Mining 1.0%
POSCO	South Korea		73,420		23,383,600

Multi-Utilities 1.6%
E.ON AG	Germany		917,590		19,742,132
GDF Suez	France		697,431		16,554,450

					36,296,582

Multiline Retail 0.5%
Marks & Spencer Group PLC	United Kingdom		2,350,320		11,967,683

Oil, Gas & Consumable Fuels 10.2%
BP PLC	United Kingdom		4,406,715		29,130,634
Gazprom, ADR	Russia		2,623,000		24,918,500
Reliance Industries Ltd.	India		998,145		13,260,350
Royal Dutch Shell PLC, A	United Kingdom		16,803		565,419
Royal Dutch Shell PLC, B	United Kingdom		1,292,973		45,078,347
Statoil ASA	Norway		2,077,160		49,336,563
Suncor Energy Inc.	Canada		413,300		11,951,822
Talisman Energy Inc.	Canada		1,506,600		17,270,293
Total SA, B	France		979,926		44,026,897

					235,538,825

TF-12

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Templeton Foreign Securities Fund	Country	Shares/ Units		Value
Common Stocks and Other Equity Interests (continued)
Pharmaceuticals 11.6%
GlaxoSmithKline PLC	United Kingdom		2,772,585	$	62,867,783
Merck KGaA	Germany		287,310		28,624,129
Novartis AG	Switzerland		210,500		11,733,878
Roche Holding AG	Switzerland		468,100		80,696,691
Sanofi	France		1,127,925		85,278,958

					269,201,439

Professional Services 1.2%
Hays PLC	United Kingdom		11,353,070		13,095,990
Randstad Holding NV	Netherlands		477,910		14,017,234

					27,113,224

Real Estate Management & Development 0.0%†
Cheung Kong (Holdings) Ltd.	Hong Kong		922		11,255

Semiconductors & Semiconductor Equipment 5.8%
Infineon Technologies AG	Germany		1,103,225		7,444,760
Samsung Electronics Co. Ltd.	South Korea		72,608		76,404,696
Siliconware Precision Industries Co.	Taiwan		14,515,000		15,199,973
Taiwan Semiconductor Manufacturing Co. Ltd.	Taiwan		12,519,526		34,162,498

					133,211,927

Software 1.9%
Nintendo Co. Ltd.	Japan		166,400		19,242,405
Trend Micro Inc.	Japan		868,100		25,384,247

					44,626,652

Specialty Retail 1.8%
Kingfisher PLC	United Kingdom		9,366,486		42,183,122

Trading Companies & Distributors 0.9%
Itochu Corp.	Japan		2,102,500		21,868,734

Wireless Telecommunication Services 4.1%
China Mobile Ltd.	China		2,340,000		25,592,477
Mobile TeleSystems, ADR	Russia		914,865		15,735,678
Vodafone Group PLC, ADR	United Kingdom		1,875,870		52,862,017

					94,190,172

Total Common Stocks and Other Equity Interests (Cost $2,358,759,860)					2,163,086,490

Preferred Stocks 1.4%
Metals & Mining 1.0%
Vale SA, ADR, pfd., A	Brazil		1,210,222		23,611,431

Oil, Gas & Consumable Fuels 0.4%
Petroleo Brasileiro SA, ADR, pfd.	Brazil		517,880		9,394,343

Total Preferred Stocks (Cost $13,315,243)					33,005,774

Total Investments before Short Term Investments (Cost $2,372,075,103)					2,196,092,264

TF-13

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Templeton Foreign Securities Fund	Country	Shares/ Units		Value
Short Term Investments 4.9%
Money Market Funds (Cost $113,158,391) 4.9%
^a,cInstitutional Fiduciary Trust Money Market Portfolio	United States		113,158,391	$	113,158,391

^dInvestments from Cash Collateral Received for Loaned Securities (Cost $413,412) 0.0%†
Money Market Funds 0.0%†
^eBNY Mellon Overnight Government Fund, 0.182%	United States		413,412		413,412

Total Investments (Cost $2,485,646,906) 99.8%					2,309,664,067
Other Assets, less Liabilities 0.2%					3,516,460

Net Assets 100.0%				$	2,313,180,527

See Abbreviations on page TF-25.

†Rounds to less than 0.1% of net assets.

^aNon-income producing.

^bA portion or all of the security is on loan at June 30, 2012. See Note 1(c).

^cSee Note 7 regarding investments in the Institutional Fiduciary Trust Money Market Portfolio.

^dSee Note 1(c) regarding securities on loan.

^eThe rate shown is the annualized seven-day yield at period end.

The accompanying notes are an integral part of these financial statements.

TF-14

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statements of Assets and Liabilities

June 30, 2012 (unaudited)


	Templeton Foreign Securities Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	2,372,488,515
Cost - Sweep Money Fund (Note 7)		113,158,391

Total cost of investments	$	2,485,646,906

Value - Unaffiliated issuers	$	2,196,505,676
Value - Sweep Money Fund (Note 7)		113,158,391

Total value of investments (includes securities loaned in the amount $411,974)		2,309,664,067
Receivables:
Capital shares sold		902,268
Dividends and interest		7,826,746
Other assets		604

Total assets		2,318,393,685

Liabilities:
Payables:
Capital shares redeemed		1,662,182
Affiliates		2,259,891
Reports to shareholders		633,891
Payable upon return of securities loaned		413,412
Accrued expenses and other liabilities		243,782

Total liabilities		5,213,158

Net assets, at value	$	2,313,180,527

Net assets consist of:
Paid-in capital	$	2,542,478,184
Undistributed net investment income		48,939,068
Net unrealized appreciation (depreciation)		(176,117,336	)
Accumulated net realized gain (loss)		(102,119,389	)

Net assets, at value	$	2,313,180,527

The accompanying notes are an integral part of these financial statements.

TF-15

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Assets and Liabilities (continued)

June 30, 2012 (unaudited)


	Templeton Foreign Securities Fund
Class 1:
Net assets, at value	$	243,233,377

Shares outstanding		19,423,909

Net asset value and maximum offering price per share	$	12.52

Class 2:
Net assets, at value	$	1,616,384,141

Shares outstanding		131,232,143

Net asset value and maximum offering price per share	$	12.32

Class 3:
Net assets, at value	$	83,643,830

Shares outstanding		6,816,197

Net asset value and maximum offering price per share^a	$	12.27

Class 4:
Net assets, at value	$	369,919,179

Shares outstanding		29,796,502

Net asset value and maximum offering price per share	$	12.41

^aRedemption price is equal to net asset value less redemption fees retained by the fund.

The accompanying notes are an integral part of these financial statements.

TF-16

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Operations

for the six months ended June 30, 2012 (unaudited)


	Templeton Foreign Securities Fund
Investment income:
Dividends (net of foreign taxes of $6,139,020)	$	59,651,465
Income from securities loaned		2,684,917

Total investment income		62,336,382

Expenses:
Management fees (Note 3a)		7,764,148
Administrative fees (Note 3b)		1,192,518
Distribution fees: (Note 3c)
Class 2		2,122,555
Class 3		111,429
Class 4		659,316
Unaffiliated transfer agent fees		4,126
Custodian fees (Note 4)		267,781
Reports to shareholders		346,552
Professional fees		68,885
Trustees’ fees and expenses		5,009
Other		26,941

Total expenses		12,569,260

Net investment income		49,767,122

Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		28,499,923
Foreign currency transactions		(769,828	)

Net realized gain (loss)		27,730,095

Net change in unrealized appreciation (depreciation) on:
Investments		(39,578,463	)
Translation of other assets and liabilities denominated in foreign currencies		(121,547	)

Net change in unrealized appreciation (depreciation)		(39,700,010	)

Net realized and unrealized gain (loss)		(11,969,915	)

Net increase (decrease) in net assets resulting from operations	$	37,797,207

The accompanying notes are an integral part of these financial statements.

TF-17

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets


	Templeton Foreign Securities Fund
	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31, 2011

Increase (decrease) in net assets:
Operations:
Net investment income	$	49,767,122		$	72,239,766
Net realized gain (loss) from investments and foreign currency transactions		27,730,095			136,998,835
Net change in unrealized appreciation (depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies		(39,700,010	)		(482,312,094	)

Net increase (decrease) in net assets resulting from operations		37,797,207			(273,073,493	)

Distributions to shareholders from:
Net investment income:
Class 1		(8,240,958	)		(5,782,491	)
Class 2		(51,055,721	)		(33,309,204	)
Class 3		(2,656,996	)		(1,749,311	)
Class 4		(11,448,483	)		(5,966,192	)

Total distributions to shareholders		(73,402,158	)		(46,807,198	)

Capital share transactions: (Note 2)
Class 1		(7,189,761	)		(31,404,883	)
Class 2		(39,809,077	)		(183,781,604	)
Class 3		(3,469,186	)		(8,583,165	)
Class 4		23,821,462			92,765,363

Total capital share transactions		(26,646,562	)		(131,004,289	)

Redemption fees		1,966			4,895

Net increase (decrease) in net assets		(62,249,547	)		(450,880,085	)
Net assets:
Beginning of period		2,375,430,074			2,826,310,159

End of period	$	2,313,180,527		$	2,375,430,074

Undistributed net investment income included in net assets:
End of period	$	48,939,068		$	72,574,104

The accompanying notes are an integral part of these financial statements.

TF-18

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited)

Templeton Foreign Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment company, consisting of twenty separate funds. The Templeton Foreign Securities Fund (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. The Fund offers four classes of shares: Class 1, Class 2, Class 3, and Class 4. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

TF-19

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Foreign Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

a. Financial Instrument Valuation (continued)

b. Foreign Currency Translation

c. Securities Lending

The Fund participates in an agency based securities lending program. The fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the market value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the market value of loaned securities, as determined at the close of fund business each day; any additional collateral required due to changes in security values is delivered to the fund on the next business day. The collateral is invested in a non-registered money fund as indicated on the Statement of Investments. The fund receives income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. The fund bears the market risk with respect to the collateral investment, securities loaned, and the risk that the agent may default on its obligations to the fund. The securities lending agent has agreed to indemnify the fund in the event of default by a third party borrower.

d. Income and Deferred Taxes

TF-20

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Foreign Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

d. Income and Deferred Taxes (continued)

e. Security Transactions, Investment Income, Expenses and Distributions

f. Accounting Estimates

g. Redemption Fees

h. Guarantees and Indemnifications

TF-21

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Foreign Securities Fund

2. SHARES OF BENEFICIAL INTEREST

At June 30, 2012, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:


	Six Months Ended June 30, 2012						Year Ended December 31, 2011
Class 1 Shares:	Shares			Amount			Shares			Amount
Shares sold		303,241		$	4,042,623			596,966		$	8,620,768
Shares issued in reinvestment of distributions		676,598			8,240,958			392,832			5,782,491
Shares redeemed		(1,450,281	)		(19,473,342	)		(3,184,900	)		(45,808,142	)

Net increase (decrease)		(470,442	)	$	(7,189,761	)		(2,195,102	)	$	(31,404,883	)

Class 2 Shares:
Shares sold		6,894,340		$	88,290,696			14,900,290		$	201,768,631
Shares issued in reinvestment of distributions		4,261,747			51,055,721			2,300,359			33,309,203
Shares redeemed		(13,674,691	)		(179,155,494	)		(29,726,460	)		(418,859,438	)

Net increase (decrease)		(2,518,604	)	$	(39,809,077	)		(12,525,811	)	$	(183,781,604	)

Class 3 Shares:
Shares sold		109,026		$	1,447,697			712,054		$	9,594,087
Shares issued in reinvestment of distributions		222,529			2,656,996			121,227			1,749,311
Shares redeemed		(579,605	)		(7,573,879	)		(1,406,375	)		(19,926,563	)

Net increase (decrease)		(248,050	)	$	(3,469,186	)		(573,094	)	$	(8,583,165	)

Class 4 Shares:
Shares sold		3,429,020		$	45,349,437			10,343,049		$	143,108,311
Shares issued on reinvestment of distributions		947,722			11,448,483			408,643			5,966,192
Shares redeemed		(2,500,031	)		(32,976,458	)		(4,003,106	)		(56,309,140	)

Net increase (decrease)		1,876,711		$	23,821,462			6,748,586		$	92,765,363

3. TRANSACTIONS WITH AFFILIATES


Subsidiary		Affiliation
Templeton Investment Counsel, LLC (TIC)		Investment manager
Franklin Templeton Services, LLC (FT Services)		Administrative manager
Franklin Templeton Distributors, Inc. (Distributors)		Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services)		Transfer agent

TF-22

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Foreign Securities Fund

3. TRANSACTIONS WITH AFFILIATES (continued)

a. Management Fees

The Fund pays an investment management fee to TIC based on the average daily net assets of the Fund as follows:


Annualized Fee Rate		Net Assets
0.750%		Up to and including $200 million
0.675%		Over $200 million, up to and including $1.3 billion
0.600%		Over $1.3 billion, up to and including $10 billion
0.580%		Over $10 billion, up to and including $15 billion
0.560%		Over $15 billion, up to and including $20 billion
0.540%		In excess of $20 billion

b. Administrative Fees

The Fund pays an administrative fee to FT Services based on the Fund’s average daily net assets as follows:


Annualized Fee Rate		Net Assets
0.150%		Up to and including $200 million
0.135%		Over $200 million, up to and including $700 million
0.100%		Over $700 million, up to and including $1.2 billion
0.075%		In excess of $1.2 billion

c. Distribution Fees

e. Transfer Agent Fees

Investor Services, under terms of an agreement, performs shareholder servicing for the Fund and is not paid by the Fund for the services.

4. EXPENSE OFFSET ARRANGEMENT

5. INCOME TAXES

For tax purposes, capital losses may be carried over to offset future capital gains, if any. Capital loss carryforwards with no expiration, if any, must be fully utilized before those losses with expiration dates. At December 31, 2011, the Fund had capital loss carryforwards of $128,971,444 expiring in 2017.

TF-23

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Foreign Securities Fund

5. INCOME TAXES (continued)

At June 30, 2012, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:


Cost of investments	$	2,486,963,837


Unrealized appreciation	$	318,440,002
Unrealized depreciation		(495,739,772	)

Net unrealized appreciation (depreciation)	$	(177,299,770	)

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatment of pass-through entity income.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2012, aggregated $95,651,820 and $154,294,195, respectively.

7. INVESTMENTS IN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO

8. CONCENTRATION OF RISK

9. CREDIT FACILITY

TF-24

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Foreign Securities Fund

10. FAIR VALUE MEASUREMENTS

•

Level 1 – quoted prices in active markets for identical financial instruments

•

Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)

•

Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of financial instruments)

The inputs or methodology used for valuing financial instruments are not an indication of the risk associated with investing in those financial instruments.

For movements between the levels within the fair value hierarchy, the Fund has adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.

A summary of inputs used as of June 30, 2012, in valuing the Fund’s assets carried at fair value, is as follows:


	Level 1		Level 2		Level 3		Total

Assets:
Investments in Securities
Other Equity Investments^a,b	$	2,196,092,264	$	—	$	—	$	2,196,092,264
Short Term Investments		113,158,391		413,412		—		113,571,803

Total Investments in Securities	$	2,309,250,655	$	413,412	$	—	$	2,309,664,067

^aIncludes common and preferred stock as well as other equity investments.

^bFor detailed categories, see the accompanying Statement of Investments.

11. NEW ACCOUNTING PRONOUNCEMENTS

12. SUBSEQUENT EVENTS

The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure.


ABBREVIATIONS
Selected Portfolio

ADR - American Depositary Receipt

TF-25

Franklin Templeton Variable Insurance Products Trust

Tax Information (unaudited)

Templeton Foreign Securities Fund

The following table provides a detailed analysis of foreign tax paid, and foreign source income as reported by the Fund, to Class 1, Class 2, Class 3, and Class 4 shareholders of record.


Class	Foreign Tax Paid Per Share		Foreign Source Income Per Share
Class 1	$	0.0264	$	0.4390
Class 2	$	0.0264	$	0.4031
Class 3	$	0.0264	$	0.4028
Class 4	$	0.0264	$	0.4001

Foreign Source Income Per Share (Column 2) is the amount per share of income dividends attributable to foreign securities held by the Fund, plus any foreign taxes withheld on these dividends.

TF-26

TEMPLETON GLOBAL BOND SECURITIES FUND

We are pleased to bring you Templeton Global Bond Securities Fund’s semiannual report for the period ended June 30, 2012.

Performance Summary as of 6/30/12

Templeton Global Bond Securities Fund – Class 2 delivered a +5.49% total return for the six-month period ended 6/30/12.

Templeton Global Bond Securities Fund – Class 2

TGB-1

Fund Goal and Main Investments: Templeton Global Bond Securities Fund seeks high current income, consistent with preservation of capital, with capital appreciation as a secondary consideration. Under normal market conditions, the Fund invests at least 80% of its net assets in bonds, which include debt securities of any maturity, such as bonds, notes, bills and debentures.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. The Fund outperformed its benchmarks, the J.P. Morgan (JPM) Global Government Bond Index, which posted a +0.40% total return in U.S. dollar terms, and the Citigroup World Government Bond Index, which produced a +0.41% total return for the same period.¹

Economic and Market Overview

The global economic recovery was mixed during the first half of 2012. Emerging markets continued to lead the recovery with many economies returning to and exceeding pre-crisis activity levels. Although some developed economies, such as those of Australia and some Scandinavian countries, also enjoyed relatively strong recoveries, growth in the G-3 (U.S., eurozone and Japan) continued to be slow by the standards of previous recoveries. Fears surrounding the issues of sovereign debt in Europe, the possibility of another recession in the U.S., and a potential “hard landing” in China dominated financial market headlines early in the period. Policymakers in the largest developed economies increased their already unprecedented efforts to supply liquidity and with few exceptions, policymakers elsewhere in the world either paused their monetary tightening cycles or reversed previous tightening efforts in response to the external environment.

The continuing eurozone sovereign debt crisis contributed to periods of market risk aversion, during which yields declined, equity markets sold off and perceived safe-haven assets such as U.S. Treasuries rallied. These alternated with periods of heightened risk appetite, during which yields increased and investors again favored risk assets. Increased liquidity creation, particularly from the European Central Bank’s Long-Term Refinancing Operation and meaningful progress toward coordinated action to address persistent banking and structural economic issues alleviated investor fears of a disorderly sovereign credit event and

Fund Risks: All investments involve risks, including possible loss of principal. Changes in interest rates will affect the value of the Fund’s portfolio and its share price and yield. Bond prices generally move in the opposite direction of interest rates. Thus, as the prices of bonds in the Fund adjust to a rise in interest rates, the Fund’s share price may decline. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments. Investments in developing markets involve heightened risks related to the same factors, in addition to those associated with their relatively small size and lesser liquidity. The Fund’s use of derivatives and foreign currency techniques involves special risks as such usage may not achieve the anticipated benefits and/or may result in losses to the Fund. The Fund is also nondiversified, which involves the risk of greater price fluctuation than a more diversified portfolio. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

TGB-2

the potential for financial contagion. Positive economic data, including first quarter year-over-year real GDP growth of 2.0% in the U.S. and 8.1% in China challenged more dire predictions of a severe global economic slowdown.²

Investment Strategy

We allocate the Fund’s assets among issuers, geographic regions, and currencies based upon our assessment of relative interest rates among currencies, our outlook for changes in interest rates and currencies, and credit risks. In considering these factors, we may evaluate a country’s changing market, economic and political conditions, such as inflation rate, growth prospects, global trade patterns and government policies. We seek to manage the Fund’s exposure to various currencies and may utilize currency forward contracts.

Manager’s Discussion

The Fund’s total return was influenced by various factors, including interest rate developments, currency movements and exposure to sovereign debt markets. During the period under review, each of these sources of return benefited absolute and relative performance.

Interest Rate Strategy

We maintained a defensive posture with respect to interest rate risk in developed and emerging markets. At period-end, the Fund had a shorter duration position than the benchmark indexes, a stance arising from our assessment that there is limited scope for further global interest rate reductions. However, we maintained some duration exposure in countries where we believed long-term bond yields could benefit from declining risk premiums. Select duration exposures in Europe and Latin America contributed to absolute and relative performance. Underweighted duration exposures in the U.S. and Japan detracted from relative performance.

Currency Strategy

As part of the Fund’s investment strategy, we used currency forward contracts to hedge or gain exposure to various currencies. Overall, our diversified currency exposure contributed to absolute and relative performance and certain Latin American and Asia ex-Japan exposures were among the largest contributors. The Japanese yen depreciated 3.57% against the U.S. dollar, and the Fund’s net negative position in the

2. Sources: Bureau of Economic Analysis (U.S.); the website of the National Bureau of Statistics of the People’s Republic of China (www.stats.gov.cn).

LOGO

What is a currency forward contract?

A currency forward contract is an agreement between the Fund and a counterparty to buy or sell a foreign currency for a specific exchange rate on a future date.

What is duration?

Duration is a measure of a bond’s price sensitivity to interest rate changes. In general, a portfolio of securities with a lower duration can be expected to be less sensitive to interest rate changes than a portfolio with a higher duration.

TGB-3

currency helped absolute and relative performance.³ Our net negative position in the yen reflected our pessimistic view on the relative prospects for the Japanese economy and served as an implicit hedge against potential rising yields in the U.S., given the yen’s historically strong correlation to long-term U.S. Treasury yields. We also built positions in currencies of countries we believed to have attractive medium-term growth prospects and rising short-term interest rate differentials. In particular, we favored Asian, some Latin American, and non-euro European currencies.

Global Sovereign Debt Strategy

Sovereign credit exposures contributed to absolute and relative performance during the period. These exposures were concentrated in non-eurozone Europe and included select Latin American and Asian exposures.

Thank you for your participation in Templeton Global Bond Securities Fund. We look forward to serving your future investment needs.

3. Source: IDC/Exshare.

Currency Breakdown

Templeton Global Bond Securities Fund 6/30/12


	% of Total Net Assets

Americas		62.1%
U.S. Dollar		45.4%
Mexican Peso		8.5%
Chilean Peso		4.8%
Brazilian Real		3.2%
Peruvian Nuevo Sol		0.2%

Asia Pacific		32.4%
South Korean Won		15.2%
Malaysian Ringgit		11.9%
Singapore Dollar		8.3%
Indonesian Rupiah		4.7%
Philippine Peso		3.7%
Indian Rupee		3.1%
Sri Lankan Rupee		1.2%
Japanese Yen*		-15.7%

Australia & New Zealand		9.0%
Australian Dollar		9.0%

Middle East & Africa		2.1%
New Israeli Shekel		2.1%

Europe*		-5.6%
Swedish Krona		11.1%
Polish Zloty		10.4%
Norwegian Krone		3.1%
Hungarian Forint		1.4%
British Pound Sterling		0.1%
Euro*		-31.7%

*Holding is a negative percentage because of the Fund’s holdings of currency forward contracts.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments.

TGB-4

Fund Expenses

•

Transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes.

•

Actual Fund Expenses

You can estimate the Fund-level expenses you incurred during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:

1.	Divide your account value by $1,000.

If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6.

2.	Multiply the result by the number under the heading “Fund-Level Expenses Incurred During Period.”

If Fund-Level Expenses Incurred During Period were $7.50, then 8.6 x $7.50 = $64.50.

In this illustration, the estimated expenses incurred this period at the Fund level are $64.50.

Templeton Global Bond Securities Fund – Class 2

TGB-5

Hypothetical Example for Comparison with Other Mutual Funds


Class 2	Beginning Account Value 1/1/12		Ending Account Value 6/30/12		Fund-Level Expenses Incurred During Period* 1/1/12–6/30/12
Actual	$	1,000	$	1,054.90	$	4.09
Hypothetical (5% return before expenses)	$	1,000	$	1,020.89	$	4.02

*Expenses are calculated using the most recent six-month annualized expense ratio for the Fund’s Class 2 shares (0.80%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 182/366 to reflect the one-half year period.

TGB-6

Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Templeton Global Bond Securities Fund


	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31,
Class 1	Six Months Ended June 30, 2012 (unaudited)			2011			2010			2009			2008			2007

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	18.61		$	19.94		$	17.72		$	17.42		$	17.00		$	15.73

Income from investment operations^a:
Net investment income^b		0.37			0.87			1.00			0.99			0.80			0.77
Net realized and unrealized gains (losses)		0.65			(0.92	)		1.58			2.01			0.27			0.97

Total from investment operations		1.02			(0.05	)		2.58			3.00			1.07			1.74

Less distributions from:
Net investment income and net foreign currency gains		(1.28	)		(1.15	)		(0.31	)		(2.70	)		(0.65	)		(0.47	)
Net realized gains		(0.03	)		(0.13	)		(0.05	)		—			—			—

Total distributions		(1.31	)		(1.28	)		(0.36	)		(2.70	)		(0.65	)		(0.47	)

Redemption fees^c		—			—			—			—			—			—

Net asset value, end of period	$	18.32		$	18.61		$	19.94		$	17.72		$	17.42		$	17.00


Total return^d		5.63%			(0.61)%			14.71%			18.98%			6.46%			11.27%
Ratios to average net assets^e
Expenses^f		0.55%			0.56%			0.55%			0.54%			0.58%			0.64%
Net investment income		3.84%			4.40%			5.27%			5.73%			4.66%			4.70%

Supplemental data
Net assets, end of period (000’s)	$	275,838		$	269,819		$	272,232		$	195,662		$	220,588		$	137,700
Portfolio turnover rate		29.59%			34.18%			8.77%			20.84%			28.46%			47.33%

^bBased on average daily shares outstanding.

^cAmount rounds to less than $0.01 per share.

^eRatios are annualized for periods less than one year.

^fBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

TGB-7

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Templeton Global Bond Securities Fund


	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31,
Class 2	Six Months Ended June 30, 2012 (unaudited)			2011			2010			2009			2008			2007

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	18.15		$	19.49		$	17.34		$	17.10		$	16.72		$	15.50

Income from investment operations^a:
Net investment income^b		0.34			0.79			0.93			0.93			0.74			0.72
Net realized and unrealized gains (losses)		0.63			(0.89	)		1.54			1.98			0.27			0.96

Total from investment operations		0.97			(0.10	)		2.47			2.91			1.01			1.68

Less distributions from:
Net investment income and net foreign currency gains		(1.24	)		(1.11	)		(0.27	)		(2.67	)		(0.63	)		(0.46	)
Net realized gains		(0.03	)		(0.13	)		(0.05	)		—			—			—

Total distributions		(1.27	)		(1.24	)		(0.32	)		(2.67	)		(0.63	)		(0.46	)

Redemption fees^c		—			—			—			—			—			—

Net asset value, end of period	$	17.85		$	18.15		$	19.49		$	17.34		$	17.10		$	16.72


Total return^d		5.49%			(0.87)%			14.45%			18.68%			6.21%			11.00%
Ratios to average net assets^e
Expenses^f		0.80%			0.81%			0.80%			0.79%			0.83%			0.89%
Net investment income		3.59%			4.15%			5.02%			5.48%			4.41%			4.45%

Supplemental data
Net assets, end of period (000’s)	$	2,078,658		$	1,812,814		$	1,490,794		$	1,262,783		$	793,773		$	480,649
Portfolio turnover rate		29.59%			34.18%			8.77%			20.84%			28.46%			47.33%

^bBased on average daily shares outstanding.

^cAmount rounds to less than $0.01 per share.

^eRatios are annualized for periods less than one year.

^fBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

TGB-8

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Templeton Global Bond Securities Fund


	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31,
Class 3	Six Months Ended June 30, 2012 (unaudited)			2011			2010			2009			2008			2007

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	18.15		$	19.48		$	17.33		$	17.08		$	16.70		$	15.49

Income from investment operations^a:
Net investment income^b		0.34			0.80			0.93			0.93			0.74			0.72
Net realized and unrealized gains (losses)		0.63			(0.90	)		1.54			1.98			0.27			0.95

Total from investment operations		0.97			(0.10	)		2.47			2.91			1.01			1.67

Less distributions from:
Net investment income and net foreign currency gains		(1.23	)		(1.10	)		(0.27	)		(2.66	)		(0.63	)		(0.46	)
Net realized gains		(0.03	)		(0.13	)		(0.05	)		—			—			—

Total distributions		(1.26	)		(1.23	)		(0.32	)		(2.66	)		(0.63	)		(0.46	)

Redemption fees^c		—			—			—			—			—			—

Net asset value, end of period	$	17.86		$	18.15		$	19.48		$	17.33		$	17.08		$	16.70


Total return^d		5.43%			(0.83)%			14.38%			18.69%			6.21%			11.03%
Ratios to average net assets^e
Expenses^f		0.80%			0.81%			0.80%			0.79%			0.83%			0.89%
Net investment income		3.59%			4.15%			5.02%			5.48%			4.41%			4.45%

Supplemental data
Net assets, end of period (000’s)	$	187,645		$	185,811		$	183,380		$	143,264		$	128,155		$	91,162
Portfolio turnover rate		29.59%			34.18%			8.77%			20.84%			28.46%			47.33%

^bBased on average daily shares outstanding.

^cAmount rounds to less than $0.01 per share.

^eRatios are annualized for periods less than one year.

^fBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

TGB-9

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Templeton Global Bond Securities Fund


	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31,
Class 4	Six Months Ended June 30, 2012 (unaudited)			2011			2010			2009			2008^a

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	18.44		$	19.78		$	17.61		$	17.37		$	18.00

Income from investment operations^b:
Net investment income^c		0.33			0.79			0.93			0.93			0.66
Net realized and unrealized gains (losses)		0.65			(0.91	)		1.56			2.00			(0.64	)

Total from investment operations		0.98			(0.12	)		2.49			2.93			0.02

Less distributions from:
Net investment income and net foreign currency gains		(1.21	)		(1.09	)		(0.27	)		(2.69	)		(0.65	)
Net realized gains		(0.03	)		(0.13	)		(0.05	)		—			—

Total distributions		(1.24	)		(1.22	)		(0.32	)		(2.69	)		(0.65	)

Redemption fees^d		—			—			—			—			—

Net asset value, end of period	$	18.18		$	18.44		$	19.78		$	17.61		$	17.37


Total return^e		5.45%			(0.96)%			14.28%			18.58%			0.26%
Ratios to average net assets^f
Expenses^g		0.90%			0.91%			0.90%			0.89%			0.93%
Net investment income		3.49%			4.05%			4.92%			5.38%			4.31%

Supplemental data
Net assets, end of period (000’s)	$	157,129		$	151,695		$	150,891		$	108,910		$	43,069
Portfolio turnover rate		29.59%			34.18%			8.77%			20.84%			28.46%

^aFor the period February 29, 2008 (effective date) to December 31, 2008.

^cBased on average daily shares outstanding.

^dAmount rounds to less than $0.01 per share.

^fRatios are annualized for periods less than one year.

^gBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

TGB-10

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited)


Templeton Global Bond Securities Fund	Principal Amount*			Value
Foreign Government and Agency Securities 71.6%
Argentina 0.5%
^a,bGovernment of Argentina, senior bond, FRN, 0.785%, 8/03/12		107,485,000		$	12,948,192

Australia 6.7%
Government of Australia, senior bond, 6.50%, 5/15/13		12,260,000	AUD		12,941,471
New South Wales Treasury Corp.,
5.25%, 5/01/13		3,370,000	AUD		3,512,285
5.50%, 8/01/13		41,490,000	AUD		43,545,633
senior note, 5.50%, 3/01/17		32,225,000	AUD		36,291,012
Queensland Treasury Corp., 6.00%, 8/14/13		24,450,000	AUD		25,834,302
6.00%, 9/14/17		13,160,000	AUD		15,030,826
senior note, 6.00%, 8/21/13		8,888,000	AUD		9,382,092
Western Australia Treasury Corp., 5.50%, 7/17/12		19,612,000	AUD		20,095,177
8.00%, 6/15/13		13,794,000	AUD		14,770,154

					181,402,952

Brazil 3.2%
Nota Do Tesouro Nacional, 10.00%, 1/01/14		7,100^c	BRL		3,630,662
10.00%, 1/01/17		22,490^c	BRL		11,496,652
^dIndex Linked, 6.00%, 5/15/15		30,226^c	BRL		34,613,543
^dIndex Linked, 6.00%, 8/15/16		11,218^c	BRL		12,993,867
^dIndex Linked, 6.00%, 5/15/17		202^c	BRL		235,630
^dIndex Linked, 6.00%, 8/15/18		8,425^c	BRL		9,885,559
^dIndex Linked, 6.00%, 5/15/45		10,825^c	BRL		14,218,553

					87,074,466

Hungary 2.9%
Government of Hungary,
5.50%, 2/12/14		628,240,000	HUF		2,707,203
7.75%, 8/24/15		114,950,000	HUF		513,157
5.50%, 2/12/16		436,800,000	HUF		1,816,356
6.50%, 6/24/19		389,700,000	HUF		1,608,476
7.50%, 11/12/20		28,000,000	HUF		121,419
A, 8.00%, 2/12/15		280,000,000	HUF		1,259,183
A, 6.75%, 11/24/17		1,582,950,000	HUF		6,735,208
A, 7.00%, 6/24/22		249,200,000	HUF		1,043,336
B, 6.75%, 2/24/17		394,700,000	HUF		1,689,535
D, 6.75%, 2/12/13		310,800,000	HUF		1,371,898
D, 6.75%, 8/22/14		1,760,900,000	HUF		7,724,840
E, 7.50%, 10/24/13		248,600,000	HUF		1,102,933
senior note, 3.50%, 7/18/16		1,055,000	EUR		1,183,495
senior note, 4.375%, 7/04/17		7,480,000	EUR		8,392,455
senior note, 5.75%, 6/11/18		14,475,000	EUR		16,910,144
senior note, 6.25%, 1/29/20		6,420,000			6,311,663
senior note, 3.875%, 2/24/20		3,120,000	EUR		3,215,700
senior note, 6.375%, 3/29/21		14,820,000			14,597,700

					78,304,701

Iceland 0.3%
^eGovernment of Iceland, 144A, 5.875%, 5/11/22		7,660,000			7,531,274

TGB-11

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Templeton Global Bond Securities Fund	Principal Amount*			Value
Foreign Government and Agency Securities (continued)
Indonesia 4.7%
Government of Indonesia,
FR20, 14.275%, 12/15/13		14,267,000,000	IDR	$	1,721,435
FR31, 11.00%, 11/15/20		167,351,000,000	IDR		23,534,086
FR34, 12.80%, 6/15/21		207,810,000,000	IDR		32,186,486
FR35, 12.90%, 6/15/22		66,582,000,000	IDR		10,504,895
FR36, 11.50%, 9/15/19		30,075,000,000	IDR		4,227,023
FR39, 11.75%, 8/15/23		5,491,000,000	IDR		825,340
FR40, 11.00%, 9/15/25		46,856,000,000	IDR		6,875,996
FR43, 10.25%, 7/15/22		68,340,000,000	IDR		9,347,285
FR44, 10.00%, 9/15/24		4,454,000,000	IDR		607,404
FR46, 9.50%, 7/15/23		226,780,000,000	IDR		29,838,510
FR48, 9.00%, 9/15/18		16,920,000,000	IDR		2,095,863
FR49, 9.00%, 9/15/13		35,030,000,000	IDR		3,918,344

					125,682,667

Ireland 6.0%
Government of Ireland,
4.60%, 4/18/16		7,582,000	EUR		9,380,354
5.90%, 10/18/19		20,597,000	EUR		25,568,368
4.50%, 4/18/20		18,676,000	EUR		21,185,846
5.00%, 10/18/20		29,743,000	EUR		34,668,963
senior bond, 4.50%, 10/18/18		8,090,000	EUR		9,430,921
senior bond, 4.40%, 6/18/19		20,943,000	EUR		23,966,899
senior bond, 5.40%, 3/13/25		32,362,000	EUR		37,650,654

					161,852,005

Israel 2.1%
Government of Israel,
5.00%, 3/31/13		64,475,000	ILS		16,829,708
3.50%, 9/30/13		154,649,000	ILS		40,170,755

					57,000,463

Lithuania 1.5%
^eGovernment of Lithuania, 144A,
6.75%, 1/15/15		19,480,000			21,084,762
7.375%, 2/11/20		12,690,000			15,119,818
6.125%, 3/09/21		3,240,000			3,586,648

					39,791,228

Malaysia 2.4%
Government of Malaysia, senior bond,
2.509%, 8/27/12		29,695,000	MYR		9,359,006
3.702%, 2/25/13		48,883,000	MYR		15,489,566
3.70%, 5/15/13		7,855,000	MYR		2,492,955
3.21%, 5/31/13		7,710,000	MYR		2,437,068
3.461%, 7/31/13		26,885,000	MYR		8,523,864
8.00%, 10/30/13		250,000	MYR		83,965
5.094%, 4/30/14		13,850,000	MYR		4,531,145
3.814%, 2/15/17		18,885,000	MYR		6,117,489
4.24%, 2/07/18		44,360,000	MYR		14,672,379

					63,707,437

TGB-12

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Templeton Global Bond Securities Fund	Principal Amount*			Value
Foreign Government and Agency Securities (continued)
Mexico 6.6%
Government of Mexico,
9.00%, 12/20/12		265,000	^f MXN	$	2,026,934
9.00%, 6/20/13		4,178,160	^f MXN		32,618,669
8.00%, 12/19/13		10,300,200	^f MXN		80,956,825
8.00%, 12/17/15		726,000	^f MXN		6,002,093
7.25%, 12/15/16		250,000	^f MXN		2,056,403
7.75%, 12/14/17		4,473,000	^f MXN		38,038,969
^dMexican Udibonos, Index Linked,
4.50%, 12/18/14		208,203	^f MXN		1,714,899
5.00%, 6/16/16		533,378	^f MXN		4,664,378
3.50%, 12/14/17		534,752	^f MXN		4,553,570
4.00%, 6/13/19		367,041	^f MXN		3,257,742
2.50%, 12/10/20		289,063	^f MXN		2,343,217

					178,233,699

Norway 0.3%
Government of Norway, 6.50%, 5/15/13		49,400,000	NOK		8,654,252

Peru 0.2%
Government of Peru, 7.84%, 8/12/20		11,090,000	PEN		4,933,479

Philippines 0.3%
Government of the Philippines, senior bond, 5.25%, 1/07/13		61,770,000	PHP		1,491,032
senior bond, 8.75%, 3/03/13		163,600,000	PHP		4,034,318
senior bond, 7.00%, 1/27/16		53,190,000	PHP		1,367,734
senior bond, 9.125%, 9/04/16		31,840,000	PHP		868,977
senior bond, R3-7, 5.25%, 9/24/12		2,090,000	PHP		50,121
senior note, 6.25%, 1/27/14		30,480,000	PHP		757,511

					8,569,693

Poland 9.2%
Government of Poland,
5.25%, 4/25/13		29,160,000	PLN		8,793,167
5.00%, 10/24/13		136,450,000	PLN		41,160,689
5.75%, 4/25/14		187,925,000	PLN		57,545,227
5.50%, 4/25/15		7,835,000	PLN		2,408,616
6.25%, 10/24/15		53,460,000	PLN		16,843,118
5.75%, 9/23/22		48,750,000	PLN		15,281,478
senior note, 6.375%, 7/15/19		10,060,000			11,897,207
Strip, 7/25/12		11,905,000	PLN		3,563,495
Strip, 10/25/12		90,245,000	PLN		26,703,315
Strip, 1/25/13		121,425,000	PLN		35,519,355
Strip, 7/25/13		76,175,000	PLN		21,799,729
Strip, 1/25/14		25,330,000	PLN		7,089,442

					248,604,838

Russia 2.5%
^eGovernment of Russia, 144A, 7.50%, 3/31/30		57,023,785			68,471,310

Singapore 1.2%
Government of Singapore, senior bond,
2.50%, 10/01/12		6,340,000	SGD		5,030,507
1.625%, 4/01/13		34,700,000	SGD		27,671,840

					32,702,347

TGB-13

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Templeton Global Bond Securities Fund	Principal Amount*			Value
Foreign Government and Agency Securities (continued)
South Korea 11.3%
The Export-Import Bank of Korea, senior note, 4.625%, 2/20/17		230,000	EUR	$	313,676
KDICB Redemption Fund Bond, senior bond,
07-1, 5.57%, 9/14/12		6,600,000,000	KRW		5,807,017
08-1, 5.28%, 2/15/13		880,000,000	KRW		779,877
Korea Monetary Stabilization Bond, senior bond, 3.76%, 6/02/13		3,684,270,000	KRW		3,241,698
senior bond, 3.90%, 8/02/13		54,619,320,000	KRW		48,175,371
senior bond, 3.59%, 10/02/13		5,898,020,000	KRW		5,186,628
senior bond, 3.48%, 12/02/13		10,110,910,000	KRW		8,882,060
senior bond, 3.47%, 2/02/14		13,902,550,000	KRW		12,214,637
senior bond, 3.59%, 4/02/14		20,432,530,000	KRW		18,153,339
senior note, 3.28%, 6/02/14		24,224,170,000	KRW		21,228,316
Korea Treasury Bond,
5.25%, 9/10/12		28,539,000,000	KRW		25,096,338
5.25%, 3/10/13		6,483,790,000	KRW		5,755,096
5.00%, 9/10/16		2,806,000,000	KRW		2,606,823
senior bond, 4.25%, 12/10/12		23,404,000,000	KRW		20,588,522
senior bond, 3.75%, 6/10/13		57,125,360,000	KRW		50,271,111
senior bond, 3.00%, 12/10/13		87,529,850,000	KRW		76,368,735

					304,669,244

Sri Lanka 1.2%
Government of Sri Lanka,
A, 6.90%, 8/01/12		14,600,000	LKR		109,170
A, 8.50%, 1/15/13		694,400,000	LKR		5,115,403
A, 13.50%, 2/01/13		674,300,000	LKR		5,089,811
A, 7.50%, 8/01/13		350,190,000	LKR		2,488,974
A, 7.00%, 3/01/14		43,380,000	LKR		296,241
A, 11.25%, 7/15/14		773,000,000	LKR		5,594,099
A, 11.75%, 3/15/15		8,520,000	LKR		61,296
A, 6.50%, 7/15/15		218,480,000	LKR		1,355,852
A, 11.00%, 8/01/15		1,349,700,000	LKR		9,469,423
A, 6.40%, 8/01/16		109,200,000	LKR		631,633
B, 8.50%, 7/15/13		7,990,000	LKR		57,650
B, 6.60%, 6/01/14		56,800,000	LKR		379,636
B, 6.40%, 10/01/16		119,100,000	LKR		684,972

					31,334,160

^gSupranational 0.8%
European Investment Bank, senior note, 4.50%, 5/15/13		33,700,000	NOK		5,772,148
Inter-American Development Bank, senior note, 7.50%, 12/05/24		200,000,000	MXN		16,883,036

					22,655,184

Sweden 4.5%
Government of Sweden,
5.50%, 10/08/12		490,215,000	SEK		71,667,959
1.50%, 8/30/13		313,400,000	SEK		45,611,999
Kommuninvest I Sverige AB, senior note, 1.75%, 10/08/12		24,400,000	SEK		3,531,493

					120,811,451

Ukraine 2.2%
^eFinancing of Infrastructure Projects State Enterprise, 144A, 8.375%, 11/03/17		1,100,000			924,000
7.40%, 4/20/18		840,000			672,525

TGB-14

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Templeton Global Bond Securities Fund	Principal Amount*			Value
Foreign Government and Agency Securities (continued)
Ukraine (continued)
^eGovernment of Ukraine, 144A, 7.65%, 6/11/13		760,000		$	747,916
144A, 6.25%, 6/17/16		8,760,000			7,894,950
144A, 7.75%, 9/23/20		17,227,000			15,644,269
senior bond, 144A, 6.58%, 11/21/16		12,541,000			11,321,701
senior note, 144A, 4.95%, 10/13/15		290,000	EUR		313,839
senior note, 144A, 7.95%, 2/23/21		23,898,000			21,866,312

					59,385,512

Venezuela 0.5%
Government of Venezuela, 10.75%, 9/19/13		13,570,000			13,996,776

Vietnam 0.5%
^eGovernment of Vietnam, 144A, 6.75%, 1/29/20		13,110,000			14,027,700

Total Foreign Government and Agency Securities (Cost $1,904,900,446)					1,932,345,030

Municipal Bonds 0.1%
United States 0.1%
Bexar County Revenue, Venue Project, Refunding, Series A, BHAC Insured, 5.25%, 8/15/47		1,450,000			1,615,460
California State GO, Build America Bonds, Various Purpose, 7.625%, 3/01/40		1,320,000			1,707,869

Total Municipal Bonds (Cost $2,811,147)					3,323,329

Total Investments before Short Term Investments (Cost $1,907,711,593)					1,935,668,359

Short Term Investments 23.2%
Foreign Government and Agency Securities 11.1%
Australia 0.3%
^hAustralia Treasury Bill, 8/10/12		8,680,000	AUD		8,849,919

Hungary 0.1%
^hHungary Treasury Bill, 8/22/12		502,600,000	HUF		2,202,773

Malaysia 5.7%
^hBank of Negara Monetary Note,
2/26/13		143,400,000	MYR		44,362,998
7/26/12 - 6/20/13		344,027,000	MYR		106,911,062
^hMalaysia Treasury Bills, 7/27/12 - 5/31/13		5,320,000	MYR		1,661,985

					152,936,045

Norway 1.5%
^hNorway Treasury Bill, 3/20/13		242,890,000	NOK		40,384,563

Philippines 0.2%
^hPhilippine Treasury Bills, 7/11/12 - 5/29/13		196,870,000	PHP		4,661,389

Singapore 1.7%
Government of Singapore, senior bond, 3.50%, 7/01/12		2,120,000	SGD		1,673,243
^hSingapore Treasury Bills, 7/05/12 - 5/02/13		54,870,000	SGD		43,289,394

					44,962,637

South Korea 1.6%
Korea Monetary Stabilization Bond, 3.83%, 4/02/13		3,166,620,000	KRW		2,785,579

TGB-15

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Templeton Global Bond Securities Fund	Principal Amount*			Value
Short Term Investments (continued)
Foreign Government and Agency Securities (continued)
South Korea (continued)
senior bond, 3.38%, 5/09/13		21,273,320,000	KRW	$	18,652,974
senior note, 3.28%, 6/09/13		20,958,260,000	KRW		18,361,257
senior note, Strip, 12/18/12		5,266,120,000	KRW		4,545,015

					44,344,825

Sri Lanka 0.0%†
^hSri Lanka Treasury Bills, 7/06/12 - 9/28/12		78,400,000	LKR		585,823

Total Foreign Government and Agency Securities (Cost $305,719,146)					298,927,974

Total Investments before Repurchase Agreements (Cost $2,213,430,739)					2,234,596,333

Repurchase Agreements (Cost $327,773,318) 12.1%
United States 12.1%
ⁱJoint Repurchase Agreement, 0.129%, 7/02/12 (Maturity Value $327,776,840) BNP Paribas Securities Corp. (Maturity Value $64,031,206) Credit Suisse Securities (USA) LLC (Maturity Value $74,703,619) Deutsche Bank Securities Inc. (Maturity Value $50,307,189) HSBC Securities (USA) Inc. (Maturity Value $42,686,378) Merrill Lynch, Pierce, Fenner & Smith Inc. (Maturity Value $42,686,378) Morgan Stanley & Co. LLC (Maturity Value $21,344,828) UBS Securities LLC (Maturity Value $32,017,242)		327,773,318			327,773,318
Collateralized by U.S. Government Agency Securities, 0.00% - 5.25%, 8/01/12 - 6/28/17; ^hU.S. Treasury Bills, 7/26/12; and U.S. Treasury Notes, 1.125% - 3.00%, 12/15/12 - 2/15/22 (valued at $334,452,021)

Total Investments (Cost $2,541,204,057) 94.9%					2,562,369,651
Other Assets, less Liabilities 5.1%					136,901,203

Net Assets 100.0%				$	2,699,270,854

See Abbreviations on page TGB-38.

†Rounds to less than 0.1% of net assets.

*The principal amount is stated in U.S. dollars unless otherwise indicated.

^aThe coupon rate shown represents the rate at period end.

^bThe principal amount is stated in original face, and scheduled paydowns are reflected in the market price on ex-date.

^cPrincipal amount is stated in 1,000 Brazilian Real Units.

^dRedemption price at maturity is adjusted for inflation. See Note 1(g).

^fPrincipal amount is stated in 100 Mexican Peso Units.

^gA supranational organization is an entity formed by two or more central governments through international treaties.

^hThe security is traded on a discount basis with no stated coupon rate.

ⁱSee Note 1(c) regarding joint repurchase agreement.

TGB-16

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Templeton Global Bond Securities Fund

At June 30, 2012, the Fund had the following forward exchange contracts outstanding. See Note 1(d).

Forward Exchange Contracts


Currency	Counterparty		Type		Quantity		Contract Amount*			Settlement Date		Unrealized Appreciation		Unrealized Depreciation
British Pound		FBCO		Buy		3,431,879		5,452,913			7/02/12	$	—	$	(76,055	)
British Pound		FBCO		Sell		3,431,879		5,304,072			7/02/12		—		(72,785	)
Indian Rupee		DBAB		Buy		79,423,000		1,704,455			7/11/12		—		(277,421	)
Indian Rupee		JPHQ		Buy		127,745,000		2,753,345			7/12/12		—		(458,586	)
Indian Rupee		DBAB		Buy		40,128,000		861,351			7/12/12		—		(140,508	)
Malaysian Ringgit		DBAB		Buy		18,006,622		5,897,043			7/12/12		—		(222,813	)
Malaysian Ringgit		DBAB		Buy		13,610,000		4,466,835			7/13/12		—		(178,366	)
Euro		DBAB		Sell		2,243,000		3,142,533			7/16/12		303,394		—
Euro		UBSW		Sell		8,965,000		12,558,620			7/16/12		1,210,927		—
Euro		MSCO		Sell		7,888,000		11,004,746			7/16/12		1,020,294		—
Euro		UBSW		Sell		8,965,000		12,571,171			7/18/12		1,223,290		—
Euro		DBAB		Sell		3,518,000		4,934,663			7/18/12		481,585		—
Euro		MSCO		Sell		1,791,000		2,507,400			7/18/12		240,355		—
Malaysian Ringgit		DBAB		Buy		2,637,000		865,896			7/18/12		—		(35,278	)
Malaysian Ringgit		DBAB		Buy		11,455,000		2,669,790	EUR		7/18/12		228,751		—
Euro		BZWS		Sell		2,638,000		3,696,102			7/19/12		356,899		—
Indian Rupee		JPHQ		Buy		39,422,000		848,332			7/19/12		—		(141,253	)
Euro		MSCO		Sell		12,182,000		16,976,226			7/20/12		1,556,018		—
Euro		DBAB		Sell		1,935,000		2,699,035			7/20/12		249,675		—
Malaysian Ringgit		DBAB		Buy		4,160,000		1,361,880			7/20/12		—		(51,723	)
Malaysian Ringgit		DBAB		Buy		12,933,000		3,036,058	EUR		7/20/12		230,042		—
Euro		DBAB		Sell		1,759,000		2,467,437			7/23/12		240,806		—
Malaysian Ringgit		DBAB		Buy		5,058,000		1,667,216			7/25/12		—		(74,801	)
Malaysian Ringgit		DBAB		Buy		16,628,000		3,885,501	EUR		7/25/12		316,467		—
Malaysian Ringgit		JPHQ		Buy		5,318,000		1,763,964			7/27/12		—		(89,928	)
Malaysian Ringgit		JPHQ		Buy		16,628,000		3,875,268	EUR		7/27/12		328,604		—
Malaysian Ringgit		HSBC		Buy		3,005,000		1,009,745			7/31/12		—		(64,063	)
Euro		BZWS		Sell		185,174		262,429			8/01/12		28,007		—
Euro		BZWS		Sell		97,724		139,325			8/02/12		15,610		—
Euro		DBAB		Sell		5,724,900		8,099,168			8/06/12		851,299		—
Euro		BZWS		Sell		2,762,518		3,924,433			8/06/12		427,015		—
Malaysian Ringgit		JPHQ		Buy		1,100,000		365,509			8/06/12		—		(19,468	)
Euro		CITI		Sell		1,210,637		1,699,674			8/08/12		166,942		—
Euro		DBAB		Sell		6,343,900		8,927,453			8/08/12		895,736		—
Malaysian Ringgit		HSBC		Buy		6,100,000		2,030,220			8/08/12		—		(111,509	)
Australian Dollar		MSCO		Buy		10,560,886		11,193,483			8/09/12		—		(426,185	)
Australian Dollar		DBAB		Buy		3,351,000		272,402,790	JPY		8/09/12		9,006		—
Australian Dollar		CITI		Buy		3,351,000		272,146,438	JPY		8/09/12		12,212		—
Australian Dollar		BZWS		Buy		3,351,000		272,000,670	JPY		8/09/12		14,036		—
Euro		CITI		Sell		351,512		494,595			8/09/12		49,557		—
Euro		DBAB		Sell		4,845,000		6,861,651			8/09/12		727,554		—
South Korean Won		HSBC		Buy		21,363,430,000		19,660,804			8/09/12		—		(997,299	)
Euro		DBAB		Sell		2,166,000		3,061,186			8/10/12		318,853		—
Euro		DBAB		Sell		4,115,000		5,828,152			8/13/12		618,052		—
Polish Zloty		DBAB		Buy		59,155,000		13,945,073	EUR		8/16/12		—		(7,403	)
Singapore Dollar		BZWS		Buy		4,886,000		3,880,858			8/17/12		—		(24,448	)
Singapore Dollar		HSBC		Buy		7,334,000		5,803,363			8/17/12		—		(14,802	)
Euro		BZWS		Sell		19,627,000		28,201,112			8/20/12		3,348,965		—
Euro		FBCO		Sell		7,851,000		11,275,606			8/20/12		1,334,494		—

TGB-17

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Templeton Global Bond Securities Fund

Forward Exchange Contracts (continued)


Currency	Counterparty		Type		Quantity		Contract Amount*			Settlement Date		Unrealized Appreciation		Unrealized Depreciation
Euro		DBAB		Sell		7,851,000		11,258,098			8/20/12	$	1,316,987	$	—
Euro		MSCO		Sell		3,925,000		5,631,786			8/20/12		661,863		—
Japanese Yen		UBSW		Sell		758,781,000		9,947,313			8/20/12		454,261		—
Japanese Yen		JPHQ		Sell		377,047,000		4,932,265			8/20/12		215,058		—
Japanese Yen		DBAB		Sell		461,885,000		6,045,536			8/20/12		266,928		—
Japanese Yen		HSBC		Sell		1,621,372,000		21,274,729			8/20/12		989,867		—
Japanese Yen		BZWS		Sell		376,247,000		4,942,165			8/22/12		234,836		—
Japanese Yen		MSCO		Sell		300,000,000		3,940,421			8/22/12		187,039		—
Japanese Yen		DBAB		Sell		376,727,000		4,947,885			8/22/12		234,551		—
Euro		BZWS		Sell		1,002,141		1,441,079			8/23/12		172,103		—
Japanese Yen		FBCO		Sell		746,218,000		9,807,044			8/23/12		470,778		—
Japanese Yen		CITI		Sell		751,731,000		9,896,406			8/23/12		491,164		—
Japanese Yen		DBAB		Sell		371,821,000		4,902,929			8/23/12		250,911		—
Singapore Dollar		DBAB		Buy		4,765,000		3,798,780			8/23/12		—		(37,846	)
Euro		BZWS		Sell		1,678,784		2,408,384			8/24/12		282,575		—
Indian Rupee		HSBC		Buy		143,891,000		3,048,648			8/24/12		—		(487,471	)
Indian Rupee		DBAB		Buy		124,700,000		2,639,248			8/24/12		—		(419,660	)
Japanese Yen		JPHQ		Sell		750,133,000		9,833,296			8/24/12		447,917		—
Malaysian Ringgit		HSBC		Buy		1,223,000		389,851			8/24/12		—		(5,555	)
Singapore Dollar		DBAB		Buy		4,782,000		3,802,481			8/24/12		—		(28,125	)
Euro		BZWS		Sell		8,738,369		12,570,326			8/27/12		1,504,748		—
Euro		HSBC		Sell		18,537,726		26,609,988			8/27/12		3,135,279		—
Japanese Yen		BZWS		Sell		1,085,075,000		14,227,693			8/27/12		651,080		—
Japanese Yen		DBAB		Sell		685,950,000		9,026,608			8/27/12		443,904		—
Japanese Yen		UBSW		Sell		937,086,000		12,324,808			8/27/12		599,855		—
Japanese Yen		JPHQ		Sell		751,903,000		9,886,956			8/27/12		479,038		—
Japanese Yen		HSBC		Sell		1,247,125,000		16,361,102			8/27/12		756,896		—
Malaysian Ringgit		JPHQ		Buy		8,340,000		2,788,645			8/27/12		—		(168,515	)
Malaysian Ringgit		HSBC		Buy		2,087,700		661,921			8/27/12		—		(6,041	)
Singapore Dollar		DBAB		Buy		5,952,000		4,745,087			8/27/12		—		(47,252	)
Swedish Krona		UBSW		Buy		30,000,000		3,253,973	EUR		8/27/12		206,383		—
United States Dollar		CITI		Buy		7,760,297		5,387,112	EUR		8/27/12		938,484		—
United States Dollar		UBSW		Buy		16,993,151		11,812,119	EUR		8/27/12		2,035,218		—
United States Dollar		JPHQ		Buy		11,099,031		7,711,034	EUR		8/27/12		1,334,388		—
Euro		JPHQ		Sell		6,190,317		8,900,685			8/29/12		1,061,587		—
Euro		DBAB		Sell		1,011,997		1,448,775			8/29/12		167,234		—
Japanese Yen		BZWS		Sell		890,300,000		11,683,727			8/30/12		543,716		—
Euro		DBAB		Sell		46,315		66,985			8/31/12		8,333		—
Japanese Yen		JPHQ		Sell		372,662,000		4,883,848			8/31/12		220,797		—
Singapore Dollar		DBAB		Buy		2,980,000		2,371,101			8/31/12		—		(18,995	)
Indian Rupee		DBAB		Buy		217,594,000		3,808,019			9/04/12		57,069		—
Indian Rupee		HSBC		Buy		251,448,000		4,365,985			9/04/12		100,446		—
Euro		DBAB		Sell		541,000		767,582			9/06/12		82,429		—
Indian Rupee		DBAB		Buy		88,183,000		1,858,088			9/06/12		—		(292,252	)
Indian Rupee		DBAB		Buy		160,277,000		2,831,174			9/07/12		14,317		—
Euro		BZWS		Sell		1,033,224		1,450,750			9/10/12		142,161		—
Euro		DBAB		Sell		1,191,000		1,665,983			9/10/12		157,569		—
Indian Rupee		HSBC		Buy		42,784,000		756,358			9/10/12		2,815		—
Euro		DBAB		Sell		8,105,300		10,238,615			9/11/12		—		(26,943	)
Indian Rupee		DBAB		Buy		43,392,000		772,168			9/11/12		—		(2,340	)

TGB-18

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Templeton Global Bond Securities Fund

Forward Exchange Contracts (continued)


Currency	Counterparty		Type		Quantity		Contract Amount*		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
Euro		BZWS		Sell		1,012,110		1,414,930		9/12/12	$	133,054	$	—
Euro		DBAB		Sell		541,000		740,256		9/13/12		55,052		—
Indian Rupee		HSBC		Buy		108,000,000		1,919,539		9/13/12		—		(4,150	)
Euro		BZWS		Sell		2,890,070		3,953,110		9/14/12		292,649		—
Euro		UBSW		Sell		2,694,506		3,693,359		9/17/12		280,484		—
Singapore Dollar		BZWS		Buy		21,427,761		17,004,000		9/17/12		—		(89,973	)
Indian Rupee		DBAB		Buy		108,614,000		1,910,738		9/18/12		13,869		—
Japanese Yen		BZWS		Sell		285,057,504		3,677,924		9/18/12		110,202		—
Australian Dollar		CITI		Buy		16,742,000		17,246,269		9/19/12		—		(240,023	)
Euro		BZWS		Sell		678,250		940,190		9/19/12		81,097		—
Singapore Dollar		JPHQ		Buy		11,426,000		9,021,713		9/19/12		—		(2,515	)
Indian Rupee		DBAB		Buy		98,937,000		1,747,417		9/20/12		5,109		—
Australian Dollar		DBAB		Buy		8,729,942		9,032,871		9/21/12				(166,611	)
Euro		DBAB		Sell		8,070,000		11,027,953		9/24/12		805,685		—
Euro		BZWS		Sell		1,647,381		2,241,295		9/24/12		154,557		—
Indian Rupee		JPHQ		Buy		79,054,000		1,388,898		9/24/12		10,458		—
Philippine Peso		DBAB		Buy		165,158,000		3,711,833		9/24/12		201,215		—
Indian Rupee		DBAB		Buy		119,627,000		2,080,549		9/25/12		36,634		—
Euro		DBAB		Sell		3,753,000		5,077,396		9/26/12		323,370		—
Malaysian Ringgit		HSBC		Buy		11,490,000		3,605,271		9/26/12		—		(515	)
Malaysian Ringgit		DBAB		Buy		3,068,000		961,349		9/26/12		1,175		—
South Korean Won		HSBC		Buy		21,510,000,000		18,213,995		9/26/12		522,068		—
Indian Rupee		DBAB		Buy		25,000,000		485,692		9/27/12		—		(43,390	)
Indian Rupee		HSBC		Buy		80,337,000		1,394,159		9/27/12		27,169		—
Euro		DBAB		Sell		14,880,000		20,050,113		9/28/12		1,200,761		—
Euro		HSBC		Sell		5,430,000		7,294,553		9/28/12		416,060		—
Euro		FBCO		Sell		12,170,000		16,453,565		9/28/12		1,037,126		—
Euro		MSCO		Sell		4,020,000		5,461,472		9/28/12		369,106		—
Hungary Forint		DBAB		Buy		1,517,800,000		6,921,755		9/28/12		—		(291,041	)
Japanese Yen		JPHQ		Sell		172,207,000		2,268,867		9/28/12		113,264		—
Philippine Peso		HSBC		Buy		49,600,000		1,134,648		9/28/12		40,209		—
Philippine Peso		HSBC		Buy		39,700,000		904,431		10/03/12		35,607		—
Swedish Krona		DBAB		Buy		445,104,500		65,202,332		10/03/12		—		(1,078,698	)
Philippine Peso		DBAB		Buy		195,560,000		4,490,471		10/04/12		139,788		—
Philippine Peso		HSBC		Buy		156,866,000		3,558,585		10/04/12		155,518		—
Euro		UBSW		Sell		6,370,000		8,488,184		10/05/12		418,177		—
Philippine Peso		DBAB		Buy		233,811,000		5,368,794		10/05/12		166,751		—
Philippine Peso		HSBC		Buy		233,867,000		5,271,906		10/05/12		264,966		—
Euro		DBAB		Sell		12,680,000		16,748,632		10/09/12		683,763		—
Philippine Peso		DBAB		Buy		191,936,000		4,409,787		10/09/12		133,112		—
Philippine Peso		JPHQ		Buy		61,767,000		1,416,025		10/09/12		45,928		—
Mexican Peso		DBAB		Buy		259,112,000		19,607,861		10/11/12		—		(386,219	)
Philippine Peso		DBAB		Buy		153,588,000		3,528,325		10/11/12		106,425		—
Philippine Peso		JPHQ		Buy		76,627,000		1,756,694		10/11/12		56,729		—
Philippine Peso		HSBC		Buy		230,704,000		5,304,638		10/11/12		155,108		—
Malaysian Ringgit		DBAB		Buy		11,434,805		3,598,680		10/12/12		—		(13,155	)
Philippine Peso		DBAB		Buy		45,732,000		1,047,698		10/12/12		34,503		—
Philippine Peso		JPHQ		Buy		108,152,000		2,500,624		10/12/12		58,682		—
Malaysian Ringgit		DBAB		Buy		4,934,783		1,552,893		10/15/12		—		(5,682	)
Philippine Peso		JPHQ		Buy		194,374,000		4,458,552		10/15/12		140,166		—

TGB-19

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Templeton Global Bond Securities Fund

Forward Exchange Contracts (continued)


Currency	Counterparty		Type		Quantity		Contract Amount*			Settlement Date		Unrealized Appreciation		Unrealized Depreciation
Philippine Peso		HSBC		Buy		76,252,000		1,747,496			10/15/12	$	56,559	$	—
Euro		HSBC		Sell		12,569,000		17,260,839			10/17/12		1,334,882		—
Norwegian Krone		BZWS		Buy		61,773,000		7,840,706	EUR		10/18/12		398,402		—
Philippine Peso		DBAB		Buy		41,880,000		959,011			10/19/12		31,562		—
Philippine Peso		HSBC		Buy		154,149,000		3,574,801			10/19/12		71,232		—
Philippine Peso		DBAB		Buy		167,411,000		3,834,425			10/22/12		124,478		—
Philippine Peso		JPHQ		Buy		84,061,000		1,935,551			10/22/12		52,307		—
Chilean Peso		CITI		Buy		921,291,798		1,731,752			10/24/12		79,426		—
Euro		BZWS		Sell		649,907		893,037			10/24/12		69,474		—
Euro		BZWS		Sell		4,954,399		6,873,733			10/25/12		595,425		—
Euro		CITI		Sell		1,935,410		2,694,420			10/26/12		241,798		—
Chilean Peso		BZWS		Buy		199,342,000		382,028			10/29/12		9,630		—
Chilean Peso		DBAB		Buy		398,486,000		763,749			10/29/12		19,177		—
Indian Rupee		HSBC		Buy		213,392,000		4,137,549			10/29/12		—		(380,577	)
Indian Rupee		DBAB		Buy		208,500,000		4,036,434			10/29/12		—		(365,592	)
Norwegian Krone		BZWS		Buy		61,766,000		7,904,530	EUR		10/29/12		310,691		—
Philippine Peso		JPHQ		Buy		82,631,000		1,919,821			10/29/12		33,287		—
Philippine Peso		MSCO		Buy		17,610,000		407,639			10/29/12		8,600		—
Euro		DBAB		Sell		3,319,244		4,679,503			10/31/12		472,954		—
Indian Rupee		DBAB		Buy		440,314,000		8,559,792			10/31/12		—		(809,999	)
Indian Rupee		HSBC		Buy		317,880,000		6,178,426			10/31/12		—		(583,545	)
Euro		DBAB		Sell		224,556		312,344			11/02/12		27,752		—
Euro		BZWS		Sell		1,581,109		2,179,717			11/05/12		175,808		—
Euro		BZWS		Sell		8,969,211		12,334,011			11/08/12		965,909		—
Japanese Yen		CITI		Sell		341,992,119		4,415,023			11/08/12		131,018		—
Norwegian Krone		UBSW		Buy		47,173,200		5,985,687	EUR		11/08/12		298,405		—
Japanese Yen		BZWS		Sell		335,950,000		4,355,069			11/13/12		146,378		—
Japanese Yen		BZWS		Sell		429,663,000		5,572,802			11/14/12		190,004		—
Japanese Yen		UBSW		Sell		340,600,700		4,423,099			11/14/12		156,069		—
Philippine Peso		DBAB		Buy		48,500,000		1,121,647			11/14/12		23,473		—
Euro		BZWS		Sell		10,778,730		14,705,960			11/15/12		1,043,078		—
Japanese Yen		DBAB		Sell		796,770,000		10,433,980			11/16/12		451,728		—
Euro		UBSW		Sell		4,794,427		6,515,147			11/19/12		437,508		—
Euro		BZWS		Sell		3,019,521		4,139,310			11/19/12		311,625		—
Euro		DBAB		Sell		933,877		1,266,617			11/19/12		82,791		—
Japanese Yen		JPHQ		Sell		397,873,000		5,207,421			11/19/12		222,444		—
Japanese Yen		HSBC		Sell		207,909,000		2,723,818			11/19/12		118,912		—
Japanese Yen		UBSW		Sell		317,836,000		4,168,341			11/19/12		186,153		—
Japanese Yen		BZWS		Sell		986,239,000		12,942,769			11/19/12		586,117		—
Euro		BZWS		Sell		10,515,154		14,269,064			11/21/12		939,206		—
Japanese Yen		BZWS		Sell		1,107,834,000		14,557,608			11/21/12		676,992		—
Euro		BZWS		Sell		4,730,771		6,421,075			11/23/12		423,806		—
Malaysian Ringgit		HSBC		Buy		1,229,300		389,870			11/26/12		—		(4,972	)
Euro		DBAB		Sell		837,570		1,055,547			11/29/12		—		(6,338	)
Euro		DBAB		Sell		5,440,000		7,321,696			12/03/12		424,396		—
Euro		UBSW		Sell		1,057,200		1,320,020			12/07/12		—		(20,462	)
Euro		HSBC		Sell		2,155,292		2,897,574			12/07/12		164,762		—
Euro		UBSW		Sell		1,343,551		1,798,948			12/10/12		95,317		—
Euro		BZWS		Sell		5,095,000		6,861,437			12/12/12		400,772		—
Swedish Krona		MSCO		Buy		21,992,000		2,466,024	EUR		12/14/12		34,334		—

TGB-20

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Templeton Global Bond Securities Fund

Forward Exchange Contracts (continued)


Currency	Counterparty		Type		Quantity		Contract Amount*			Settlement Date		Unrealized Appreciation		Unrealized Depreciation
Malaysian Ringgit		JPHQ		Buy		13,361,013		4,138,330			12/17/12	$	42,192	$	—
Japanese Yen		JPHQ		Sell		285,510,329		3,694,970			12/27/12		115,378		—
Euro		DBAB		Sell		2,285,618		2,971,738			1/07/13		72,437		—
Japanese Yen		DBAB		Sell		770,370,000		10,132,981			1/07/13		472,571		—
Swedish Krona		DBAB		Buy		136,332,733		15,072,885	EUR		1/09/13		463,498		—
Euro		CITI		Sell		5,040,000		6,455,232			1/10/13		61,732		—
Japanese Yen		CITI		Sell		138,680,000		1,817,801			1/10/13		78,666		—
Euro		UBSW		Sell		13,846,000		17,710,419			1/11/13		145,801		—
Euro		BZWS		Sell		1,726,000		2,208,503			1/11/13		18,952		—
Japanese Yen		UBSW		Sell		138,650,000		1,816,574			1/11/13		77,785		—
Japanese Yen		BZWS		Sell		277,330,000		3,636,161			1/11/13		158,207		—
Chilean Peso		MSCO		Buy		2,254,600,000		4,282,241			1/14/13		109,808		—
Euro		DBAB		Sell		9,460,000		12,147,586			1/14/13		146,401		—
Euro		JPHQ		Sell		937,000		1,195,097			1/14/13		6,396		—
Japanese Yen		HSBC		Sell		536,380,000		7,016,275			1/15/13		289,137		—
Japanese Yen		DBAB		Sell		139,110,000		1,822,720			1/15/13		78,039		—
Japanese Yen		BZWS		Sell		394,150,000		5,155,995			1/15/13		212,669		—
Japanese Yen		UBSW		Sell		313,510,000		4,098,599			1/15/13		166,638		—
Euro		DBAB		Sell		4,856,000		6,190,429			1/17/13		29,726		—
Philippine Peso		DBAB		Buy		41,372,000		944,609			1/22/13		28,186		—
Philippine Peso		JPHQ		Buy		165,119,000		3,774,321			1/22/13		108,183		—
Chilean Peso		DBAB		Buy		2,227,910,000		4,372,309			1/24/13		—		(36,195	)
Chilean Peso		DBAB		Buy		3,160,140,000		6,228,629			1/25/13		—		(78,702	)
Chilean Peso		DBAB		Buy		1,967,720,000		3,888,467			1/28/13		—		(60,144	)
Euro		CITI		Sell		4,998,400		6,496,071			1/28/13		153,711		—
Japanese Yen		BZWS		Sell		1,079,470,000		13,980,961			1/28/13		439,415		—
Japanese Yen		DBAB		Sell		897,860,782		11,614,224			1/28/13		350,897		—
Japanese Yen		UBSW		Sell		944,420,000		12,212,064			1/28/13		364,670		—
Japanese Yen		HSBC		Sell		1,162,462,488		15,025,301			1/28/13		442,645		—
Philippine Peso		HSBC		Buy		154,149,000		3,555,589			1/28/13		67,951		—
Chilean Peso		DBAB		Buy		635,690,000		1,256,255			1/29/13		—		(19,592	)
Chilean Peso		JPHQ		Buy		675,370,000		1,331,434			1/30/13		—		(17,698	)
Chilean Peso		DBAB		Buy		1,271,380,000		2,489,241			1/30/13		—		(16,140	)
Chilean Peso		DBAB		Buy		1,186,400,000		2,319,453			1/31/13		—		(11,865	)
Euro		DBAB		Sell		31,205,000		41,000,250			1/31/13		1,403,215		—
Philippine Peso		DBAB		Buy		128,745,000		2,983,662			1/31/13		42,286		—
Euro		UBSW		Sell		5,540,000		7,266,264			2/01/13		236,278		—
Chilean Peso		MSCO		Buy		1,963,430,000		3,895,496			2/04/13		—		(77,945	)
Philippine Peso		DBAB		Buy		155,800,000		3,620,393			2/04/13		40,751		—
Philippine Peso		HSBC		Buy		99,500,000		2,313,200			2/04/13		24,950		—
Indian Rupee		JPHQ		Buy		21,500,000		414,827			2/06/13		—		(41,849	)
Philippine Peso		HSBC		Buy		84,800,000		1,970,535			2/06/13		21,993		—
Philippine Peso		JPHQ		Buy		60,500,000		1,408,287			2/07/13		13,202		—
Singapore Dollar		DBAB		Buy		6,207,000		4,999,597			2/07/13		—		(93,125	)
Singapore Dollar		HSBC		Buy		6,206,000		4,996,779			2/07/13		—		(91,097	)
Euro		UBSW		Sell		4,929,000		6,444,175			2/08/13		188,892		—
Euro		CITI		Sell		6,572,000		8,595,650			2/08/13		255,273		—
Euro		HSBC		Sell		1,800,000		2,355,858			2/08/13		71,519		—
Singapore Dollar		DBAB		Buy		12,363,000		9,948,339			2/08/13		—		(175,607	)
Chilean Peso		DBAB		Buy		1,145,000,000		2,306,143			2/11/13		—		(81,301	)

TGB-21

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Templeton Global Bond Securities Fund

Forward Exchange Contracts (continued)


Currency	Counterparty		Type		Quantity		Contract Amount*			Settlement Date		Unrealized Appreciation		Unrealized Depreciation
Chilean Peso		MSCO		Buy		964,250,000		1,951,923			2/11/13	$	—	$	(78,295	)
Euro		DBAB		Sell		28,210,000		37,280,037			2/11/13		1,477,827		—
Euro		JPHQ		Sell		300,000		397,358			2/11/13		16,618		—
Euro		BZWS		Sell		1,412,000		1,873,724			2/11/13		81,710		—
Polish Zloty		DBAB		Buy		17,528,000		4,057,877	EUR		2/11/13		—		(17,317	)
Polish Zloty		BZWS		Buy		17,528,000		4,052,717	EUR		2/11/13		—		(10,768	)
Japanese Yen		HSBC		Sell		413,563,000		5,406,052			2/12/13		216,681		—
Japanese Yen		MSCO		Sell		394,373,000		5,153,417			2/12/13		204,841		—
Chilean Peso		MSCO		Buy		2,590,220,000		5,248,673			2/13/13		—		(216,546	)
Chilean Peso		BZWS		Buy		1,142,900,000		2,305,628			2/13/13		—		(85,270	)
Euro		UBSW		Sell		657,000		874,290			2/13/13		40,446		—
Singapore Dollar		BZWS		Buy		1,717,028		1,383,919			2/13/13		—		(26,569	)
Euro		DBAB		Sell		1,738,000		2,296,246			2/14/13		90,400		—
Malaysian Ringgit		DBAB		Buy		97,443,480		31,832,831			2/14/13		—		(1,388,668	)
Polish Zloty		DBAB		Buy		17,528,000		4,026,463	EUR		2/14/13		20,983		—
Singapore Dollar		HSBC		Buy		10,521,600		8,478,324			2/14/13		—		(160,671	)
Chilean Peso		DBAB		Buy		2,188,820,000		4,399,461			2/15/13		—		(147,922	)
Japanese Yen		DBAB		Sell		123,057,280		1,593,470			2/15/13		49,270		—
Japanese Yen		JPHQ		Sell		144,920,000		1,877,932			2/15/13		59,385		—
Euro		UBSW		Sell		1,971,000		2,603,395			2/19/13		101,650		—
Euro		JPHQ		Sell		1,971,000		2,601,326			2/19/13		99,581		—
Malaysian Ringgit		HSBC		Buy		4,899,000		1,590,275			2/19/13		—		(59,866	)
Singapore Dollar		DBAB		Buy		7,334,000		5,843,825			2/19/13		—		(45,770	)
Chilean Peso		JPHQ		Buy		1,055,800,000		2,137,247			2/21/13		—		(87,588	)
Euro		UBSW		Sell		2,038,000		2,694,603			2/21/13		107,742		—
Chilean Peso		JPHQ		Buy		1,792,000,000		3,587,588			2/22/13		—		(109,034	)
Japanese Yen		HSBC		Sell		385,460,000		4,891,624			2/22/13		54,031		—
Chilean Peso		CITI		Buy		2,285,090,000		4,587,613			2/25/13		—		(153,099	)
Chilean Peso		MSCO		Buy		2,254,540,000		4,501,428			2/25/13		—		(126,200	)
Chilean Peso		DBAB		Buy		1,455,470,000		2,902,233			2/25/13		—		(77,705	)
Japanese Yen		JPHQ		Sell		385,700,000		4,865,342			2/25/13		24,480		—
Chilean Peso		DBAB		Buy		1,435,490,000		2,842,329			2/26/13		—		(56,827	)
Chilean Peso		MSCO		Buy		1,559,200,000		3,118,400			2/27/13		—		(93,118	)
Chilean Peso		DBAB		Buy		2,094,920,000		4,164,023			2/28/13		—		(99,663	)
Chilean Peso		JPHQ		Buy		593,800,000		1,184,284			2/28/13		—		(32,251	)
Euro		DBAB		Sell		1,530,900		2,059,581			2/28/13		116,195		—
Singapore Dollar		DBAB		Buy		2,980,000		2,376,585			2/28/13		—		(20,462	)
Chilean Peso		BZWS		Buy		3,010,700,000		6,047,240			3/01/13		—		(206,702	)
Chilean Peso		DBAB		Buy		790,050,000		1,575,217			3/01/13		—		(42,578	)
Euro		DBAB		Sell		2,579,651		3,473,500			3/01/13		198,740		—
Japanese Yen		HSBC		Sell		400,800,000		5,012,663			3/01/13		—		(18,074	)
Japanese Yen		JPHQ		Sell		401,100,000		5,020,025			3/01/13		—		(14,477	)
Chilean Peso		DBAB		Buy		1,253,970,000		2,504,934			3/04/13		—		(72,984	)
Japanese Yen		UBSW		Sell		447,200,000		5,579,712			3/04/13		—		(33,723	)
Euro		DBAB		Sell		1,536,000		2,051,405			3/05/13		101,405		—
Chilean Peso		DBAB		Buy		1,253,970,000		2,521,810			3/06/13		—		(90,300	)
Chilean Peso		DBAB		Buy		1,328,230,000		2,671,420			3/07/13		—		(96,150	)
Euro		BZWS		Sell		3,441,044		4,564,545			3/07/13		195,908		—
Chilean Peso		DBAB		Buy		1,320,220,000		2,629,920			3/08/13		—		(70,412	)
Euro		MSCO		Sell		5,225,000		6,874,559			3/08/13		240,974		—

TGB-22

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Templeton Global Bond Securities Fund

Forward Exchange Contracts (continued)


Currency	Counterparty		Type		Quantity		Contract Amount*		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
Euro		HSBC		Sell		1,844,000		2,428,087		3/08/13	$	86,971	$	—
Euro		CITI		Sell		31,404,613		41,303,033		3/08/13		1,432,190		—
Euro		DBAB		Sell		21,480,000		28,273,909		3/08/13		1,003,212		—
Mexican Peso		HSBC		Buy		135,500,950		10,103,190		3/08/13		—		(175,944	)
Chilean Peso		MSCO		Buy		662,100,000		1,294,428		3/11/13		—		(11,164	)
Euro		BZWS		Sell		3,785,232		4,977,202		3/11/13		171,320		—
Singapore Dollar		CITI		Buy		21,075,381		16,733,000		3/11/13		—		(67,954	)
Chilean Peso		DBAB		Buy		1,284,460,000		2,521,021		3/13/13		—		(31,966	)
Euro		BZWS		Sell		1,161,439		1,524,273		3/15/13		49,579		—
Japanese Yen		CITI		Sell		286,112,008		3,474,763		3/15/13		—		(117,331	)
Chilean Peso		DBAB		Buy		2,600,220,000		5,142,840		3/18/13		—		(106,355	)
Euro		CITI		Sell		861,168		1,130,826		3/19/13		37,327		—
Japanese Yen		MSCO		Sell		575,230,000		6,940,377		3/19/13		—		(282,062	)
Japanese Yen		CITI		Sell		407,702,000		4,906,161		3/19/13		—		(212,840	)
Singapore Dollar		HSBC		Buy		9,120,000		7,216,903		3/19/13		—		(4,802	)
Singapore Dollar		DBAB		Buy		7,978,100		6,300,324		3/19/13		8,762		—
Chilean Peso		JPHQ		Buy		1,065,000,000		2,134,269		3/21/13		—		(71,980	)
Euro		BZWS		Sell		744,197		987,847		3/21/13		42,850		—
Singapore Dollar		DBAB		Buy		8,589,700		6,848,748		3/21/13		—		(55,869	)
Singapore Dollar		HSBC		Buy		6,864,000		5,471,939		3/21/13		—		(43,772	)
Japanese Yen		BZWS		Sell		242,774,840		2,918,598		3/25/13		—		(129,944	)
Euro		DBAB		Sell		2,736,000		3,609,058		3/26/13		134,577		—
Euro		CITI		Sell		1,532,964		2,022,531		3/26/13		75,801		—
Malaysian Ringgit		DBAB		Buy		16,025,000		5,123,821		3/26/13		—		(121,870	)
Malaysian Ringgit		HSBC		Buy		7,634,000		2,442,177		3/26/13		—		(59,344	)
Singapore Dollar		FBCO		Buy		10,578,000		8,407,248		3/26/13		—		(41,556	)
Singapore Dollar		MSCO		Buy		10,570,700		8,356,285		3/26/13		3,635		—
Chilean Peso		DBAB		Buy		1,252,750,000		2,474,812		3/29/13		—		(50,682	)
Chilean Peso		DBAB		Buy		1,330,940,000		2,619,445		4/03/13		—		(45,121	)
Euro		DBAB		Sell		6,200,000		8,281,092		4/04/13		406,577		—
Euro		HSBC		Sell		8,692,000		11,450,841		4/10/13		410,289		—
Euro		UBSW		Sell		4,346,000		5,697,910		4/11/13		177,552		—
Euro		DBAB		Sell		7,243,000		9,500,353		4/11/13		300,180		—
Euro		JPHQ		Sell		3,907,000		5,129,696		4/12/13		166,888		—
Indian Rupee		DBAB		Buy		159,915,000		2,944,133		4/12/13		—		(195,000	)
Chilean Peso		MSCO		Buy		2,645,530,000		5,215,436		4/15/13		—		(103,685	)
Indian Rupee		DBAB		Buy		342,913,000		6,270,466		4/15/13		—		(377,731	)
Euro		HSBC		Sell		6,919,000		9,154,010		4/16/13		364,730		—
Indian Rupee		JPHQ		Buy		230,330,000		4,224,533		4/16/13		—		(266,990	)
Indian Rupee		JPHQ		Buy		226,092,000		4,132,629		4/18/13		—		(248,938	)
Chilean Peso		MSCO		Buy		2,370,410,000		4,677,210		4/19/13		—		(98,624	)
Malaysian Ringgit		JPHQ		Buy		4,069,213		1,307,000		4/19/13		—		(37,863	)
Indian Rupee		JPHQ		Buy		112,941,000		2,069,407		4/22/13		—		(130,398	)
Indian Rupee		DBAB		Buy		79,271,000		1,450,614		4/22/13		—		(89,663	)
Japanese Yen		CITI		Sell		261,800,000		3,238,255		4/22/13		—		(51,203	)
Japanese Yen		BZWS		Sell		261,900,000		3,240,535		4/22/13		—		(50,181	)
Euro		DBAB		Sell		4,545,000		5,997,128		4/23/13		222,961		—
Malaysian Ringgit		JPHQ		Buy		11,659,000		3,741,416		4/23/13		—		(105,597	)
Indian Rupee		DBAB		Buy		160,601,000		2,864,754		4/26/13		—		(108,969	)
Chilean Peso		CITI		Buy		2,420,966,000		4,793,992		4/29/13		—		(121,766	)

TGB-23

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Templeton Global Bond Securities Fund

Forward Exchange Contracts (continued)


Currency	Counterparty		Type		Quantity		Contract Amount*			Settlement Date		Unrealized Appreciation		Unrealized Depreciation
Chilean Peso		JPHQ		Buy		1,501,938,000		2,965,912			4/29/13	$	—	$	(67,320	)
Indian Rupee		JPHQ		Buy		136,582,000		2,450,561			4/29/13		—		(107,856	)
Euro		BZWS		Sell		6,575,679		8,734,474			4/30/13		379,572		—
Indian Rupee		JPHQ		Buy		113,782,000		2,037,388			4/30/13		—		(86,017	)
Indian Rupee		DBAB		Buy		71,377,981		1,277,184			4/30/13		—		(53,046	)
Swedish Krona		BZWS		Buy		122,773,200		13,605,940	EUR		4/30/13		296,464		—
Euro		FBCO		Sell		1,731,000		2,285,526			5/07/13		85,928		—
Euro		BZWS		Sell		1,259,000		1,664,209			5/07/13		64,386		—
Euro		MSCO		Sell		1,259,000		1,661,930			5/07/13		62,107		—
Euro		DBAB		Sell		2,045,000		2,695,351			5/08/13		96,711		—
Euro		UBSW		Sell		629,000		820,987			5/10/13		21,675		—
Euro		DBAB		Sell		1,259,000		1,643,184			5/10/13		43,289		—
Japanese Yen		CITI		Sell		733,721,000		9,247,923			5/10/13		25,222		—
Chilean Peso		MSCO		Buy		1,150,200,000		2,250,220			5/13/13		—		(33,110	)
Euro		CITI		Sell		5,658,426		7,373,382			5/13/13		182,522		—
Japanese Yen		UBSW		Sell		366,681,000		4,636,983			5/13/13		27,583		—
Japanese Yen		DBAB		Sell		490,555,000		6,201,707			5/13/13		35,137		—
Japanese Yen		CITI		Sell		366,680,000		4,613,923			5/14/13		4,434		—
Euro		BZWS		Sell		2,270,980		2,929,110			5/16/13		42,966		—
Euro		DBAB		Sell		1,812,000		2,323,618			5/20/13		20,646		—
Euro		BZWS		Sell		7,956,126		10,174,038			5/21/13		61,999		—
Euro		DBAB		Sell		2,642,000		3,368,814			5/21/13		10,898		—
Chilean Peso		MSCO		Buy		420,740,000		804,474			5/22/13		5,914		—
Euro		BZWS		Sell		3,419,406		4,377,866			5/22/13		31,820		—
Malaysian Ringgit		HSBC		Buy		298,500		93,568			5/22/13		—		(570	)
Euro		BZWS		Sell		2,836,669		3,594,485			5/29/13		—		(11,282	)
Euro		DBAB		Sell		463,000		586,042			5/29/13		—		(2,490	)
Euro		BZWS		Sell		4,907,308		6,102,238			6/05/13		—		(136,228	)
Euro		DBAB		Sell		785,200		976,734			6/05/13		—		(21,460	)
Euro		BZWS		Sell		2,203,083		2,756,718			6/06/13		—		(44,016	)
Euro		DBAB		Sell		2,033,100		2,544,628			6/07/13		—		(40,048	)
Euro		DBAB		Sell		8,105,300		10,281,573			6/11/13		—		(23,297	)
Polish Zloty		CITI		Buy		5,990,000		1,327,218	EUR		6/11/13		49,700		—
Polish Zloty		DBAB		Buy		30,704,000		6,820,838	EUR		6/11/13		232,273		—
Swedish Krona		MSCO		Buy		55,369,800		6,068,987	EUR		6/11/13		205,401		—
Swedish Krona		DBAB		Buy		41,300,000		4,543,554	EUR		6/11/13		131,933		—
Euro		DBAB		Sell		8,383,000		10,574,484			6/13/13		—		(83,764	)
Swedish Krona		MSCO		Buy		27,990,100		3,073,741	EUR		6/13/13		96,136		—
Swedish Krona		BZWS		Buy		24,372,000		2,707,398	EUR		6/13/13		44,321		—
Japanese Yen		CITI		Sell		310,702,000		3,930,002			6/14/13		21,530		—
Euro		BZWS		Sell		1,124,367		1,422,774			6/20/13		—		(6,908	)
South Korean Won		DBAB		Buy		21,440,000,000		18,216,577			6/27/13		286,269		—
Malaysian Ringgit		JPHQ		Buy		14,772,000		4,561,653			6/28/13		34,956		—
Swedish Krona		UBSW		Buy		302,991,000		33,837,108	EUR		6/28/13		296,625		—

Unrealized appreciation (depreciation)													78,068,001		(18,393,991	)

Net unrealized appreciation (depreciation)												$	59,674,010

*In U.S. dollars unless otherwise indicated.

TGB-24

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Templeton Global Bond Securities Fund

At June 30, 2012, the Fund had the following interest rate swap contracts outstanding. See Note 1(d).

Interest Rate Swap Contracts


Counterparty	Pay/Receive Floating Rate		Fixed Rate		Floating Rate	Notional Amount*		Expiration Date		Unrealized Appreciation		Unrealized Depreciation
JPHQ		Receive		3.558%	3-month USD BBA LIBOR		3,240,000		3/4/21	$	—	$	(555,955	)
DBAB		Receive		3.523%	3-month USD BBA LIBOR		14,630,000		3/28/21		—		(2,447,165	)
CITI		Receive		4.347%	3-month USD BBA LIBOR		7,460,000		2/25/41		—		(3,024,127	)
JPHQ		Receive		4.349%	3-month USD BBA LIBOR		7,460,000		2/25/41		—		(3,028,361	)
JPHQ		Receive		4.320%	3-month USD BBA LIBOR		5,600,000		2/28/41		—		(2,248,336	)
JPHQ		Receive		4.299%	3-month USD BBA LIBOR		1,870,000		3/1/41		—		(738,662	)

Net unrealized appreciation (depreciation)										$	—	$	(12,042,606	)

*In U.S. Dollars unless otherwise indicated.

The accompanying notes are an integral part of these financial statements.

TGB-25

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

June 30, 2012 (unaudited)


	Templeton Global Bond Securities Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	2,213,430,739
Cost - Repurchase agreements		327,773,318

Total cost of investments	$	2,541,204,057

Value - Unaffiliated issuers	$	2,234,596,333
Value - Repurchase agreements		327,773,318

Total value of investments		2,562,369,651
Cash		870,000
Restricted cash (Note 1e)		26,438,000
Foreign currency, at value (cost $31,250,335)		32,229,987
Receivables:
Investment securities sold		30,819,928
Capital shares sold		1,881,493
Interest		30,750,300
Due from brokers		4,730,000
Unrealized appreciation on forward exchange contracts		78,068,001
Other assets		613

Total assets		2,768,157,973

Liabilities:
Payables:
Investment securities purchased		1,194,055
Capital shares redeemed		2,472,775
Affiliates		1,987,834
Due to brokers		27,308,000
Unrealized depreciation on forward exchange contracts		18,393,991
Unrealized depreciation on swap contracts		12,042,606
Deferred tax		4,216,921
Accrued expenses and other liabilities		1,270,937

Total liabilities		68,887,119

Net assets, at value	$	2,699,270,854

Net assets consist of:
Paid-in capital	$	2,588,531,966
Distributions in excess of net investment income		(8,849,902	)
Net unrealized appreciation (depreciation)		64,632,872
Accumulated net realized gain (loss)		54,955,918

Net assets, at value	$	2,699,270,854

The accompanying notes are an integral part of these financial statements.

TGB-26

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Assets and Liabilities (continued)

June 30, 2012 (unaudited)


	Templeton Global Bond Securities Fund
Class 1:
Net assets, at value	$	275,838,402

Shares outstanding		15,057,922

Net asset value and maximum offering price per share	$	18.32

Class 2:
Net assets, at value	$	2,078,658,372

Shares outstanding		116,453,606

Net asset value and maximum offering price per share	$	17.85

Class 3:
Net assets, at value	$	187,645,267

Shares outstanding		10,508,556

Net asset value and maximum offering price per share^a	$	17.86

Class 4:
Net assets, at value	$	157,128,813

Shares outstanding		8,643,925

Net asset value and maximum offering price per share	$	18.18

^aRedemption price is equal to net asset value less redemption fees retained by the Fund.

The accompanying notes are an integral part of these financial statements.

TGB-27

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the six months ended June 30, 2012 (unaudited)


	Templeton Global Bond Securities Fund
Investment income:
Interest (net of foreign taxes of $1,393,167)	$	56,930,626

Expenses:
Management fees (Note 3a)		5,964,836
Distribution fees: (Note 3c)
Class 2		2,468,418
Class 3		237,804
Class 4		274,577
Unaffiliated transfer agent fees		2,165
Custodian fees (Note 4)		892,420
Reports to shareholders		189,007
Professional fees		37,427
Trustees’ fees and expenses		4,512
Other		24,080

Total expenses		10,095,246

Net investment income		46,835,380

Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		37,853,334
Foreign currency transactions		15,515,422
Swap contracts		1,673,450

Net realized gain (loss)		55,042,206

Net change in unrealized appreciation (depreciation) on:
Investments		(16,816,799	)
Translation of other assets and liabilities denominated in foreign currencies		46,199,837
Change in deferred taxes on unrealized appreciation		1,180,177

Net change in unrealized appreciation (depreciation)		30,563,215

Net realized and unrealized gain (loss)		85,605,421

Net increase (decrease) in net assets resulting from operations	$	132,440,801

The accompanying notes are an integral part of these financial statements.

TGB-28

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets


	Templeton Global Bond Securities Fund
	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31, 2011

Increase (decrease) in net assets:
Operations:
Net investment income	$	46,835,380		$	96,874,837
Net realized gain (loss) from investments and foreign currency transactions, futures contracts and swap contracts		55,042,206			52,604,567
Net change in unrealized appreciation (depreciation) on investments, translation of other assets and liabilities denominated in foreign currencies and deferred taxes		30,563,215			(180,068,912	)

Net increase (decrease) in net assets resulting from operations		132,440,801			(30,589,508	)

Distributions to shareholders from:
Net investment income:
Class 1		(18,014,760	)		(15,683,467	)
Class 2		(133,749,946	)		(93,946,669	)
Class 3		(12,114,860	)		(10,753,201	)
Class 4		(9,763,141	)		(8,615,701	)
Net realized gains:
Class 1		(438,387	)		(1,762,080	)
Class 2		(3,357,784	)		(10,925,216	)
Class 3		(306,543	)		(1,252,885	)
Class 4		(251,144	)		(1,020,280	)

Total distributions to shareholders		(177,996,565	)		(143,959,499	)

Capital share transactions: (Note 2)
Class 1		9,781,672			17,171,380
Class 2		303,278,145			451,366,379
Class 3		4,271,029			16,706,473
Class 4		7,356,340			12,126,720

Total capital share transactions		324,687,186			497,370,952

Redemption fees		1,873			18,113

Net increase (decrease) in net assets		279,133,295			322,840,058
Net assets:
Beginning of period		2,420,137,559			2,097,297,501

End of period	$	2,699,270,854		$	2,420,137,559

Undistributed net investment income (distributions in excess of net investment income) included in net assets:
End of period	$	(8,849,902	)	$	117,957,425

The accompanying notes are an integral part of these financial statements.

TGB-29

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited)

Templeton Global Bond Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment company, consisting of twenty separate funds. The Templeton Global Bond Securities Fund (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. The Fund offers four classes of shares: Class 1, Class 2, Class 3, and Class 4. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

Debt securities generally trade in the over-the-counter (OTC) market rather than on a securities exchange. The Fund’s pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value. Securities denominated in a foreign currency are converted into their U.S. dollar equivalent at the foreign exchange rate in effect at the close of the NYSE on the date that the values of the foreign debt securities are determined. Repurchase agreements are valued at cost, which approximates market value.

TGB-30

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Global Bond Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

a. Financial Instrument Valuation (continued)

b. Foreign Currency Translation

c. Joint Repurchase Agreement

d. Derivative Financial Instruments

TGB-31

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Global Bond Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

d. Derivative Financial Instruments (continued)

The Fund entered into OTC futures contracts primarily to manage interest rate and/or exposure to certain foreign currencies risk. A futures contract is an agreement between the Fund and a counterparty to buy or sell an asset for a specified price on a future date. Required initial margin deposits of cash or securities are pledged by the Fund. Subsequent payments, known as variation margin, are made or received by the Fund, depending on fluctuations in the value of the underlying security. Such variation margin is accounted for as unrealized appreciation or depreciation until the contract is closed, at which time the gains or losses are realized.

The Fund entered into OTC interest rate swap contracts primarily to manage interest rate risk. An interest rate swap is an agreement between the Fund and a counterparty to exchange cash flows based on the difference between two interest rates, applied to a notional principal amount. Over the term of the contract, contractually required payments to be paid and to be received are accrued daily and recorded as unrealized depreciation and appreciation until the payments are made, at which time they are realized. Pursuant to the terms of the interest rate swap contract, cash or securities may be required to be deposited as collateral. Unrestricted cash may be invested according to the Fund’s investment objectives.

The Fund’s investments in OTC derivatives are subject to the terms of International Swaps and Derivatives Association Master Agreements and other related agreements between the Fund and certain derivative counterparties. These agreements contain various provisions, including but not limited to collateral requirements, events of default, requirements for the Fund to maintain certain net asset levels and/or limit the decline in net assets over various periods of time. Should the Fund fail to meet any of these provisions, the derivative counterparty has the right to terminate the derivative contract and require immediate payment by the Fund for those OTC derivatives with that particular counterparty that are in a net unrealized loss position. At June 30, 2012, the Fund had OTC derivatives in a net unrealized loss position of $3,369,521 and the aggregate value of collateral pledged for such contracts was $4,730,000.

At June 30, 2012, the Fund held $29,062,831 in United Kingdom treasury bonds and notes, and U.S. treasury bills, bonds, and notes, and $870,000 in unrestricted cash as collateral for derivatives.

See Note 9 regarding other derivative information.

e. Restricted Cash

At June 30, 2012, the Fund held restricted cash in connection with investments in certain derivative securities. Restricted cash is held in a segregated account with the Fund’s custodian/counterparty broker and is reflected in the Statement of Assets and Liabilities.

TGB-32

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Global Bond Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

f. Income and Deferred Taxes

g. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Amortization of premium and accretion of discount on debt securities are included in interest income. Distributions to shareholders are recorded on the ex-dividend date and are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with accounting principles generally accepted in the United States of America. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.

h. Accounting Estimates

TGB-33

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Global Bond Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

i. Redemption Fees

j. Guarantees and Indemnifications

2. SHARES OF BENEFICIAL INTEREST

At June 30, 2012, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:


	Six Months Ended June 30, 2012						Year Ended December 31, 2011
Class 1 Shares:	Shares			Amount			Shares			Amount
Shares sold		1,288,275		$	25,261,278			2,403,657		$	47,343,365
Shares issued in reinvestment of distributions		1,028,604			18,453,147			889,172			17,445,546
Shares redeemed		(1,754,755	)		(33,932,753	)		(2,450,491	)		(47,617,531	)

Net increase (decrease)		562,124		$	9,781,672			842,338		$	17,171,380

Class 2 Shares:
Shares sold		14,810,451		$	280,052,891			29,318,184		$	564,580,203
Shares issued in reinvestment of distributions		7,843,692			137,107,730			5,473,480			104,871,884
Shares redeemed		(6,057,186	)		(113,882,476	)		(11,438,342	)		(218,085,708	)

Net increase (decrease)		16,596,957		$	303,278,145			23,353,322		$	451,366,379

Class 3 Shares:
Shares sold		423,619		$	8,108,409			1,851,973		$	36,090,442
Shares issued in reinvestment of distributions		710,200			12,421,403			626,622			12,006,087
Shares redeemed		(862,239	)		(16,258,783	)		(1,654,785	)		(31,390,056	)

Net increase (decrease)		271,580		$	4,271,029			823,810		$	16,706,473

Class 4 Shares:
Shares sold		524,460		$	10,104,468			1,191,215		$	23,562,082
Shares issued on reinvestment of distributions		562,284			10,014,286			494,660			9,635,982
Shares redeemed		(667,019	)		(12,762,414	)		(1,090,109	)		(21,071,344	)

Net increase (decrease)		419,725		$	7,356,340			595,766		$	12,126,720

TGB-34

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Global Bond Securities Fund

3. TRANSACTIONS WITH AFFILIATES


Subsidiary		Affiliation
Franklin Advisers, Inc. (Advisers)		Investment manager
Franklin Templeton Services, LLC (FT Services)		Administrative manager
Franklin Templeton Distributors, Inc. (Distributors)		Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services)		Transfer agent

a. Management Fees

The Fund pays an investment management fee to Advisers based on the average daily net assets of the Fund as follows:


Annualized Fee Rate		Net Assets
0.625%		Up to and including $100 million
0.500%		Over $100 million, up to and including $250 million
0.450%		Over $250 million, up to and including $7.5 billion
0.440%		Over $7.5 billion, up to and including $10 billion
0.430%		Over $10 billion, up to and including $12.5 billion
0.420%		Over $12.5 billion, up to and including $15 billion
0.400%		In excess of $15 billion

b. Administrative Fees

c. Distribution Fees

d. Transfer Agent Fees

Investor Services, under terms of an agreement, performs shareholder servicing for the Fund and is not paid by the Fund for the services.

4. EXPENSE OFFSET ARRANGEMENT

TGB-35

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Global Bond Securities Fund

5. INCOME TAXES

At June 30, 2012, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:


Cost of investments	$	2,561,654,487


Unrealized appreciation	$	100,246,492
Unrealized depreciation		(99,531,328	)

Net unrealized appreciation (depreciation)	$	715,164

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of foreign currency transactions, bond discounts and premiums, tax straddles, and inflation related adjustments on foreign securities.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2012, aggregated $640,583,662 and $596,190,508, respectively.

7. CREDIT RISK

At June 30, 2012, the Fund had 23.02% of its portfolio invested in high yield or other securities rated below investment grade. These securities may be more sensitive to economic conditions causing greater price volatility and are potentially subject to a greater risk of loss due to default than higher rated securities.

8. CONCENTRATION OF RISK

9. OTHER DERIVATIVE INFORMATION

At June 30, 2012, the Fund has invested in derivative contracts which are reflected on the Statement of Assets and Liabilities as follows:

Asset Derivatives

Liability Derivatives

Derivative Contracts Not Accounted
for as Hedging Instruments

Statement of Assets and
Liabilities Location

Fair
Value
Amount

Statement of Assets and
Liabilities Location

Fair
Value
Amount

Interest rate contracts

Unrealized appreciation on swap contracts

—

Unrealized depreciation on swap contracts

12,042,606

Foreign exchange contracts

Unrealized appreciation on forward exchange contracts

78,068,001

Unrealized depreciation on forward exchange contracts

18,393,991

TGB-36

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Global Bond Securities Fund

9. OTHER DERIVATIVE INFORMATION (continued)

For the period ended June 30, 2012, the effect of derivative contracts on the Fund’s Statement of Operations was as follows:


Derivative Contracts Not Accounted for as Hedging Instruments	Statement of Operations Locations	Realized Gain (Loss) for the Period		Change in Unrealized Appreciation (Depreciation) for the Period
Interest rate contracts	Net realized gain (loss) from swap contracts / Net change in unrealized appreciation (depreciation) on investments	$	1,186,164	$	1,009,007
Foreign exchange contracts	Net realized gain (loss) from foreign currency transactions / Net change in unrealized appreciation (depreciation) on translation of other assets and liabilities denominated in foreign currencies		17,729,011		45,677,854

For the period ended June 30, 2012, the average month end market value of derivatives represented 3.84% of average month end net assets. The average month end number of open derivative contracts for the period was 455.

See Note 1(d) regarding derivative financial instruments.

10. CREDIT FACILITY

11. FAIR VALUE MEASUREMENTS

•

Level 1 – quoted prices in active markets for identical financial instruments

•

Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)

•

Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of financial instruments)

The inputs or methodology used for valuing financial instruments are not an indication of the risk associated with investing in those financial instruments.

TGB-37

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Global Bond Securities Fund

11. FAIR VALUE MEASUREMENTS (continued)

For movements between the levels within the fair value hierarchy, the Fund has adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.

A summary of inputs used as of June 30, 2012, in valuing the Fund’s assets and liabilities carried at fair value, is as follows:


	Level 1		Level 2		Level 3		Total

Assets:
Investments in Securities:
Foreign Government and Agency Securities	$	—	$	1,932,345,030	$	—	$	1,932,345,030
Municipal Bonds		—		3,323,329		—		3,323,329
Short Term Investments		—		626,701,292		—		626,701,292

Total Investments in Securities	$	—	$	2,562,369,651	$	—	$	2,562,369,651

Forward Exchange Contracts		—		78,068,001		—		78,068,001
Liabilities:
Swaps		—		12,042,606		—		12,042,606
Forward Exchange Contracts		—		18,393,991		—		18,393,991

12. NEW ACCOUNTING PRONOUNCEMENTS

13. SUBSEQUENT EVENTS

The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure.


ABBREVIATIONS
Counterparty	Currency	Selected Portfolio

BZWS - Barclays Bank PLC	AUD - Australian Dollar	BHAC - Berkshire Hathaway Assurance Corp.
CITI - Citigroup, Inc.	BRL - Brazilian Real	FRN - Floating Rate Note
DBAB - Deutsche Bank AG	EUR - Euro	GO - General Obligation
FBCO - Credit Suisse Group AG	HUF - Hungarian Forint
HSBC - HSBC Bank USA, N.A.	IDR - Indonesian Rupiah
JPHQ - JP Morgan Chase & Co.	ILS - New Israeli Shekel
MSCO - Morgan Stanley	JPY - Japanese Yen
UBSW - UBS AG	KRW - South Korean Won
	LKR - Sri Lankan Rupee
	MXN - Mexican Peso
	MYR - Malaysian Ringgit
	NOK - Norwegian Krone
	PEN - Peruvian Nuevo Sol
	PHP - Philippine Peso
	PLN - Polish Zloty
	SEK - Swedish Krona
	SGD - Singapore Dollar

TGB-38

Franklin Templeton Variable Insurance Products Trust

Tax Information (unaudited)

Templeton Global Bond Securities Fund

The following table provides a detailed analysis of foreign tax paid, and foreign source income as reported by the Fund, to Class 1, Class 2, Class 3, and Class 4 shareholders of record.


Class	Foreign Tax Paid Per Share		Foreign Source Income Per Share
Class 1	$	0.0301	$	0.8773
Class 2	$	0.0301	$	0.8509
Class 3	$	0.0301	$	0.8446
Class 4	$	0.0301	$	0.8309

Foreign Source Income Per Share (Column 2) is the amount per share of income dividends attributable to foreign securities held by the Fund, plus any foreign taxes withheld on these dividends.

TGB-39

TEMPLETON GROWTH SECURITIES FUND

This semiannual report for Templeton Growth Securities Fund covers the period ended June 30, 2012.

Performance Summary as of 6/30/12

Templeton Growth Securities Fund – Class 2 delivered a +4.07% total return for the six-month period ended 6/30/12.

Templeton Growth Securities Fund – Class 2

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares.

Current performance may differ from figures shown.

TG-1

Fund Goal and Main Investments: Templeton Growth Securities Fund seeks long-term capital growth. Under normal market conditions, the Fund invests primarily in equity securities of companies located anywhere in the world, including those in the U.S. and in emerging markets.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. The Fund underperformed the +6.29% total return of the MSCI World Index for the period under review.¹

Economic and Market Overview

The six months under review encompassed two different market environments. The first quarter of 2012 delivered the best annual start for global developed stocks in more than a decade, as measured by the MSCI World Index, as signs of U.S. economic recovery and European policy relief underpinned a rally in cyclical stocks. Yet, renewed global economic weakness and European debt concerns led the market lower in the second quarter, and stocks dropped sharply in the spring before additional policy action prompted a rebound in June. Politics largely drove the markets during the first half of 2012 as investors closely monitored developments in Europe, where German-led austerity demands were met with increasing resentment from some highly indebted eurozone members. Coalition-building efforts in Greece collapsed amid anger over the terms of the country’s second bailout, forcing a new election that brought some relief when the pro-euro party won. Elsewhere in the region, France’s socialist candidate clinched the presidency on a pro-growth platform and the Dutch cabinet resigned in the wake of a contentious austerity deal.

On the economic front, global growth trends generally moderated, led by Europe, which narrowly avoided recession mainly because of German export strength. Yet, even the more resilient economies of Germany, the U.S. and China showed signs of a slowdown at period-end. The combination of flagging growth, political uncertainty and populist unrest pressured investor confidence, and ratings agencies downgraded global banks and European sovereigns. Concerns about the sustainability of Italian and Spanish borrowing costs added to investor anxiety as bond yields climbed. Europe’s initial policy responses — including enhanced liquidity measures and an ineffective Spanish banking bailout — did little to

All investments involve risks, including possible loss of principal. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments; investments in emerging markets involve heightened risks related to the same factors. To the extent the Fund focuses on particular countries, regions, industries, sectors or types of investment from time to time, it may be subject to greater risks of adverse developments in such areas of focus than a fund that invests in a wider variety of countries, regions, industries, sectors or investments. Current political uncertainty surrounding the European Union (EU) and its membership may increase market volatility. The financial instability of some countries in the EU, including Greece, Italy and Spain, together with the risk of that impacting other more stable countries may increase the economic risk of investing in companies in Europe. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

TG-2

address the structural imbalances of eurozone economies or the solvency fears plaguing the region’s banking system. Yet, encouraging progress did emerge at period-end when leaders in Brussels agreed to ease conditions of sovereign bond purchases and permit the region’s bailout fund to directly recapitalize banks. Meanwhile, the U.S. Federal Reserve Board opted to extend its strategy, dubbed Operation Twist, designed to lower systemically important interest rates, and the People’s Bank of China slashed interest rates for the first time since the global financial crisis began. In the latter part of this period, commodities extended recent losses, with oil falling back below $100, while the euro dipped and traditional safe havens like U.S. Treasuries, the U.S. dollar and the Japanese yen made gains.

Investment Strategy

Our investment philosophy is bottom up, value oriented and long term. In choosing investments, we will focus on the market price of a company’s securities relative to our evaluation of the company’s potential long-term earnings, asset value and cash flow. Among factors we may consider are a company’s historical value measures, including price/earnings ratio, profit margins and liquidation value. We do in-depth research to construct a bargain list from which we buy.

Manager’s Discussion

Although the Fund delivered absolute gains for shareholders during the volatile six months under review, the seemingly “bipolar” market environment that has persisted since the global financial crisis began continued to challenge bottom-up investors. What we viewed as the market’s refusal to distinguish value at the stock level produced a negative “stock selection effect” for the Fund, offsetting allocation benefits and resulting in relative underperformance versus the benchmark. Although we find underperformance unacceptable, we note that such periods are not unprecedented or unexpected. Under Sir John Templeton’s tenure, we experienced periods of long-term underperformance far deeper than what we have undergone recently. As Sir John explained in a note to clients in 1950, “The investor who selects stocks on the basis of long-term intrinsic value must expect certain problems.” Yet, he also knew, “The most costly errors in selecting stocks are made by people whose thinking is dominated by the question of temporary short-term trend(s).” We believe our disciplined investment strategy can allow us to see past the market’s myopic focus and allow us to uncover long-term values.

TG-3

The financials sector is one area where we believe near-term worries created selective long-term opportunities.² Fears abounded that a combination of asset impairment, funding seizure or deposit flight could possibly render European banks insolvent and spark a systemic contagion. Heavy investment outflows from financials accompanied this apprehension. By the end of the review period, the entire European banking sector’s market capitalization had shrunken considerably. It was perhaps unsurprising that many of the main European banks at period-end traded at all-time low valuations roughly in line with those of U.S. banks in 1932.

Stock-specific weakness among the Fund’s overweighting in European financials was a primary source of sector underperformance during the review period. Among the positions notably detracting from relative performance were French lender Credit Agricole, which fell to a record low following losses from its Greek operations, Italy’s UniCredit, which undertook an ill-timed rights offering at the beginning of the period, and Swiss financial services firm Credit Suisse Group, which the Swiss National Bank (SNB) asked to increase capital reserves. However, we believe Credit Agricole’s Greek exposure obscured the value of its core northern European businesses, where recent results confirmed to us encouraging operational progress. UniCredit, having already addressed capital adequacy concerns, is now progressing with cost-cutting and profit improvement initiatives. For Credit Suisse, the SNB is not the company’s regulator, capital ratios remained in line with Basel III targets, and we believe an equity issuance is unlikely given the firm’s various sources of available capital.

In our view, a stance against the European banking system at recent stock price levels reflected a bet that Europe’s political dysfunction will lead to an unraveling of the euro currency, a fate we believe will be avoided as forecasted break-up costs would handily exceed the costs of keeping the union intact. Furthermore, in our view, powerful policy tools still remained available as of period-end, and we believe depressed valuations failed to acknowledge such potentially supportive measures. As a result, our analysis led us to conclude certain deeply discounted regional banks with adequate capital positions, solid brands and good core businesses are likely to survive and can offer considerable upside potential should Europe ultimately establish a credible federal system of checks and balances on regional fiscal policy. In addition to holding

2. The financials sector comprises capital markets, commercial banks, diversified financial services and insurance in the SOI.

LOGO

TG-4

deep-value European banks, we maintained exposure to financials stocks with what we viewed as defensive characteristics and attractive growth profiles in other regions. We believe our selective holdings represent a dynamic investing approach in the market’s most challenging and potentially rewarding environment.

Although financial holdings were the primary source of relative underperformance at the sector level, the period also featured more modest laggards. An underweighted position and stock selection in the defensive consumer staples sector, where we believe volatile input costs and intense competition were likely to pressure margins for the foreseeable future, also detracted from relative returns.³ The sector’s underperformance was primarily attributable to stock-specific weakness at U.K. food retailer Tesco, which dropped sharply after holiday sales disappointed and the firm reduced earnings guidance due to weakness in its domestic operations. In our view, Tesco maintained a highly dominant domestic market position and remained arguably the most efficient food merchandiser with the best track record for global market expansion. A new management team brought a breath of fresh air to a company that many feared rested on its laurels, and could help address near-term challenges and sustain Tesco’s historically strong record for maintaining long-term shareholder returns.

Energy holdings also lagged mainly due to stock-specific weakness; among these were three of the Fund’s biggest detractors.⁴ French oil company Total’s share price retreated as oil prices declined and a gas leak at a North Sea well led the company to downgrade earnings forecasts. With the firm having contained the leak, we believe Total remained well positioned for long-term production growth given its sizable investments in its upstream portfolio. U.S. oilfield services firm Baker Hughes also lost value as low natural gas prices shifted activity to more profitable oil drilling, crimping margins as pressure pumping supply increased and equipment relocation stalled production. From our perspective, most issues plaguing Baker appeared transitory and the company was aggressively working to mitigate their impact, creating what we viewed as an opportunity to buy one of the world’s highest quality oilfield services firms at multi-decade low valuation levels. Finally, Dutch drilling company SBM Offshore’s share price slumped after allegations of improper sales practices surfaced. The full extent of this

3. The consumer staples sector comprises food and staples retailing in the SOI.

4. The energy sector comprises energy equipment and services; and oil, gas and consumable fuels in the SOI.

TG-5

issue remained difficult to predict; however, our analysis of potential outcomes suggested the market priced in worst-case scenarios. According to our analysis, with its healthy backlog and favorable pipeline of future products, SBM offers considerable room for appreciation over a long-term investment horizon. Overall, we remained favorable toward our energy holdings and believe certain firms with the technology and expertise to extract hydrocarbons stand to benefit as new reserves are developed in increasingly remote and difficult locations.

Similar challenges and opportunities confronted the global mining industry; however, although energy multiples remained relatively reasonable in recent years, mining valuations hit a record high and profit margins reached peak levels as official stimulus debased the U.S. dollar and underpinned commodities strength. Although such positive momentum bolstered consensus optimism in the sector, it signaled caution to us, and our long-standing materials underweighting notably contributed to relative performance during the period as commodities extended their declines amid global growth concerns. Consumer discretionary stocks also significantly contributed to relative returns, driven by individual stock strength.⁵ In particular, media holdings strongly outperformed, led by U.S. cable providers Comcast and Time Warner Cable each beating profit and sales estimates on broadband subscriber gains. We think recent results supported our long-held view that the cable industry’s control of the valuable broadband pipeline represents a powerful secular growth driver to buffer more cyclical revenue sources such as video and advertising. Content producers like U.S.-based Disney and News Corp. also strongly outperformed the benchmark as the proliferation of media consumption services and devices enhanced demand for quality content. Disney rallied to its highest share price after growing earnings more than 20%, and News Corp. surged after its board agreed to split the company’s low-growth publishing assets from its high-growth entertainment assets.

Regionally, the Fund’s North American holdings significantly outperformed as stock selection overcame a detractive underweighting in the resilient U.S. market. Asian holdings also notably contributed to relative performance, led by an overweighting in Singapore and off-benchmark stock selection in South Korea. However, these contributors were largely offset by underperformance in Europe, where an overweighted position and stock-specific weakness weighed on

5. The consumer discretionary sector comprises auto components, automobiles, media, multiline retail and specialty retail in the SOI.

Top 10 Holdings

Templeton Growth Securities Fund 6/30/12


Company Sector/Industry, Country	% of Total Net Assets
Amgen Inc.		2.4%
Biotechnology, U.S.
Pfizer Inc.		2.3%
Pharmaceuticals, U.S.
Sanofi		2.2%
Pharmaceuticals, France
Singapore Telecommunications Ltd.		2.0%
Diversified Telecommunication Services, Singapore
Microsoft Corp.		2.0%
Software, U.S.
GlaxoSmithKline PLC		1.9%
Pharmaceuticals, U.K.
Merck & Co. Inc.		1.9%
Pharmaceuticals, U.S.
Vodafone Group PLC		1.9%
Wireless Telecommunication Services, U.K.
Comcast Corp.		1.8%
Media, U.S.
Roche Holding AG		1.8%
Pharmaceuticals, Switzerland

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).

TG-6

relative results. Although the situation in Europe remained fluid, we found recent policy pronouncements encouraging and identified considerable valuation support. We believe restoring sustainable economic balance to the eurozone will likely ultimately require a combination of stimulus and structural reform to improve competitiveness and growth, spending cuts to restore fiscal sustainability and credible policy advancement toward banking and fiscal union. Recently announced measures, which included direct bank recapitalizations and easier conditions for sovereign bond purchases, could potentially serve to break the cycle between sovereigns and banks that has challenged the region’s private and public funding mechanisms.

Our bottom-up stock analysis indicated that European stocks at period-end traded at their lowest price-to-book levels since March 2009, offering what we believe were attractive entry points into some of the region’s highest quality global brands. Asian and emerging market stocks also remained below their long-term average price-to-earnings ratios and stood to potentially benefit should growth in these regions exceed diminished expectations. Keep in mind, we are not pinning our hopes on economic growth. In an era of low interest rates and investor uncertainty, we believe the assets most likely to outperform over the long term are the most undervalued stocks. Such discounts often exist for a reason, and investing in deeply undervalued stocks in times of crisis requires rigorous analysis, as well as patience and fortitude through periods of considerable adversity. Our discipline in such challenging environments has paid off in the past, and we are confident it will yet again if investors re-focus on fundamental value. We thank you for your patience and support as this process unfolds.

Thank you for your participation in Templeton Growth Securities Fund. We look forward to serving your future investment needs.

TG-7

Fund Expenses

•

Transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes.

•

Actual Fund Expenses

You can estimate the Fund-level expenses you incurred during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:

1.	Divide your account value by $1,000.

If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6.

2.	Multiply the result by the number under the heading “Fund-Level Expenses Incurred During Period.”

If Fund-Level Expenses Incurred During Period were $7.50, then 8.6 x $7.50 = $64.50.

In this illustration, the estimated expenses incurred this period at the Fund level are $64.50.

Templeton Growth Securities Fund – Class 2

TG-8

Hypothetical Example for Comparison with Other Mutual Funds


Class 2	Beginning Account Value 1/1/12		Ending Account Value 6/30/12		Fund-Level Expenses Incurred During Period* 1/1/12–6/30/12
Actual	$	1,000	$	1,040.70	$	5.18
Hypothetical (5% return before expenses)	$	1,000	$	1,019.79	$	5.12

*Expenses are calculated using the most recent six-month annualized expense ratio for the Fund’s Class 2 shares (1.02%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 182/366 to reflect the one-half year period.

TG-9

Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Templeton Growth Securities Fund


	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31,
Class 1	Six Months Ended June 30, 2012 (unaudited)			2011			2010			2009			2008			2007

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	10.27		$	11.19		$	10.56		$	8.34		$	15.68		$	16.16

Income from investment operations^a:
Net investment income^b		0.18			0.25			0.17			0.17			0.29			0.27
Net realized and unrealized gains (losses)		0.24			(0.99	)		0.62			2.36			(6.50	)		0.19

Total from investment operations		0.42			(0.74	)		0.79			2.53			(6.21	)		0.46

Less distributions from:
Net investment income		(0.26	)		(0.18	)		(0.16	)		(0.31	)		(0.26	)		(0.25	)
Net realized gains		—			—			—			—			(0.87	)		(0.69	)

Total distributions		(0.26	)		(0.18	)		(0.16	)		(0.31	)		(1.13	)		(0.94	)

Net asset value, end of period	$	10.43		$	10.27		$	11.19		$	10.56		$	8.34		$	15.68


Total return^c		4.13%			(6.80)%			7.74%			31.33%			(42.13)%			2.55%
Ratios to average net assets^d
Expenses before expense reduction		0.77%			0.78%			0.77%			0.79%			0.78%			0.77%
Expenses net of expense reduction		0.77%	^e		0.78%	^e		0.77%	^e		0.79%	^e		0.78%	^e		0.76%
Net investment income		3.26%			2.22%			1.71%			2.00%			2.64%			1.64%

Supplemental data
Net assets, end of period (000’s)	$	1,335,026		$	1,200,682		$	1,348,622		$	824,575		$	371,700		$	406,538
Portfolio turnover rate		10.90%			42.13%	^f		9.61%			14.95%			18.37%			20.45%

^bBased on average daily shares outstanding.

^dRatios are annualized for periods less than one year.

^eBenefit of expense reduction rounds to less than 0.01%.

^fExcludes the value of portfolio securities delivered as a result of a redemption in-kind.

The accompanying notes are an integral part of these financial statements.

TG-10

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Templeton Growth Securities Fund


	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31,
Class 2	Six Months Ended June 30, 2012 (unaudited)			2011			2010			2009			2008			2007

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	10.11		$	11.01		$	10.40		$	8.20		$	15.44		$	15.93

Income from investment operations^a:
Net investment income^b		0.16			0.21			0.15			0.16			0.29			0.22
Net realized and unrealized gains (losses)		0.25			(0.96	)		0.60			2.32			(6.44	)		0.20

Total from investment operations		0.41			(0.75	)		0.75			2.48			(6.15	)		0.42

Less distributions from:
Net investment income		(0.23	)		(0.15	)		(0.14	)		(0.28	)		(0.22	)		(0.22	)
Net realized gains		—			—			—			—			(0.87	)		(0.69	)

Total distributions		(0.23	)		(0.15	)		(0.14	)		(0.28	)		(1.09	)		(0.91	)

Net asset value, end of period	$	10.29		$	10.11		$	11.01		$	10.40		$	8.20		$	15.44


Total return^c		4.07%			(6.97)%			7.39%			31.10%			(42.32)%			2.35%
Ratios to average net assets^d
Expenses before expense reduction		1.02%			1.03%			1.02%			1.04%			1.03%			1.02%
Expenses net of expense reduction		1.02%	^e		1.03%	^e		1.02%	^e		1.04%	^e		1.03%	^e		1.01%
Net investment income		3.01%			1.97%			1.46%			1.75%			2.39%			1.39%

Supplemental data
Net assets, end of period (000’s)	$	1,245,299		$	1,254,193		$	1,626,885		$	1,718,894		$	1,513,557		$	3,182,203
Portfolio turnover rate		10.90%			42.13%	^f		9.61%			14.95%			18.37%			20.45%

^bBased on average daily shares outstanding.

^dRatios are annualized for periods less than one year.

^eBenefit of expense reduction rounds to less than 0.01%.

^fExcludes the value of portfolio securities delivered as a result of a redemption in-kind.

The accompanying notes are an integral part of these financial statements.

TG-11

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Templeton Growth Securities Fund


	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31,
Class 4	Six Months Ended June 30, 2012 (unaudited)			2011			2010			2009			2008^a

Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	10.19		$	11.11		$	10.50		$	8.31		$	14.08

Income from investment operations^b:
Net investment income^c		0.15			0.20			0.14			0.14			0.09
Net realized and unrealized gains (losses)		0.26			(0.98	)		0.61			2.36			(4.73	)

Total from investment operations		0.41			(0.78	)		0.75			2.50			(4.64	)

Less distributions from:
Net investment income		(0.22	)		(0.14	)		(0.14	)		(0.31	)		(0.26	)
Net realized gains		—			—			—			—			(0.87	)

Total distributions		(0.22	)		(0.14	)		(0.14	)		(0.31	)		(1.13	)

Net asset value, end of period	$	10.38		$	10.19		$	11.11		$	10.50		$	8.31

Total return^d		4.08%			(7.14)%			7.31%			30.98%			(35.79)%
Ratios to average net assets^e
Expenses^f		1.12%			1.13%			1.12%			1.14%			1.13%
Net investment income		2.91%			1.87%			1.36%			1.65%			2.29%

Supplemental data
Net assets, end of period (000’s)	$	59,682		$	56,170		$	60,569		$	56,218		$	24,877
Portfolio turnover rate		10.90%			42.13%	^g		9.61%			14.95%			18.37%

^aFor the period February 29, 2008 (effective date) to December 31, 2008.

^cBased on average daily shares outstanding.

^eRatios are annualized for periods less than one year.

^fBenefit of expense reduction rounds to less than 0.01%.

^gExcludes the value of portfolio securities delivered as a result of a redemption in-kind.

The accompanying notes are an integral part of these financial statements.

TG-12

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited)


Templeton Growth Securities Fund	Country	Shares		Value
Common Stocks 95.2%
Aerospace & Defense 0.5%
BAE Systems PLC	United Kingdom		2,750,373	$	12,438,353

Air Freight & Logistics 2.4%
Deutsche Post AG	Germany		884,414		15,603,241
FedEx Corp.	United States		218,750		20,039,688
United Parcel Service Inc., B	United States		339,990		26,777,612

					62,420,541

Airlines 2.4%
Deutsche Lufthansa AG	Germany		2,401,614		27,698,804
^aInternational Consolidated Airlines Group SA	United Kingdom		14,226,980		35,541,599

					63,240,403

Auto Components 1.2%
Cie Generale des Etablissements Michelin, B	France		483,672		31,512,723

Automobiles 2.5%
^aMazda Motor Corp.	Japan		9,367,690		12,530,852
Nissan Motor Co. Ltd.	Japan		1,902,720		17,792,656
Toyota Motor Corp.	Japan		870,120		34,700,372

					65,023,880

Biotechnology 2.4%
Amgen Inc.	United States		852,780		62,287,051

Capital Markets 2.5%
Credit Suisse Group AG	Switzerland		1,234,686		22,455,933
Morgan Stanley	United States		1,565,950		22,847,210
UBS AG	Switzerland		1,807,539		21,046,687

					66,349,830

Chemicals 1.0%
Akzo Nobel NV	Netherlands		549,347		25,752,191

Commercial Banks 7.1%
BNP Paribas SA	France		796,820		30,591,493
^aCredit Agricole SA	France		3,936,190		17,291,279
DBS Group Holdings Ltd.	Singapore		1,481,690		16,220,237
HSBC Holdings PLC	United Kingdom		3,042,424		26,882,634
ICICI Bank Ltd., ADR	India		416,350		13,493,904
^bIntesa Sanpaolo SpA	Italy		19,904,741		28,164,029
KB Financial Group Inc.	South Korea		657,984		21,273,271
^aLloyds Banking Group PLC	United Kingdom		15,290,520		7,451,645
^aUniCredit SpA	Italy		7,043,603		26,564,863

					187,933,355

Communications Equipment 3.0%
^aBrocade Communications Systems Inc.	United States		2,621,030		12,921,678
Cisco Systems Inc.	United States		2,347,340		40,303,828
Ericsson, B	Sweden		2,949,612		26,884,234

					80,109,740

Computers & Peripherals 1.1%
^aDell Inc.	United States		862,810		10,802,381
Hewlett-Packard Co.	United States		903,940		18,178,234

					28,980,615

TG-13

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Templeton Growth Securities Fund	Country	Shares		Value
Common Stocks (continued)
Construction & Engineering 0.1%
Carillion PLC	United Kingdom		805,720	$	3,486,012

Construction Materials 1.5%
CRH PLC	Ireland		2,030,641		38,832,385

Consumer Finance 0.7%
American Express Co.	United States		319,770		18,613,812

Diversified Financial Services 3.7%
Bank of America Corp.	United States		1,119,120		9,154,402
Citigroup Inc.	United States		1,225,490		33,590,681
^aING Groep NV	Netherlands		5,404,750		36,020,763
JPMorgan Chase & Co.	United States		556,770		19,893,392

					98,659,238

Diversified Telecommunication Services 4.7%
France Telecom SA	France		1,949,580		25,599,154
Singapore Telecommunications Ltd.	Singapore		20,718,470		53,962,866
Telefonica SA	Spain		1,431,248		18,784,087
Telekom Austria AG	Austria		466,837		4,584,241
Vivendi SA	France		1,175,810		21,770,977

					124,701,325

Electrical Equipment 1.1%
^bAlstom SA	France		938,094		29,598,185

Electronic Equipment, Instruments & Components 0.9%
^aFlextronics International Ltd.	Singapore		1,972,800		12,231,360
TE Connectivity Ltd.	United States		335,268		10,698,402

					22,929,762

Energy Equipment & Services 3.3%
Baker Hughes Inc.	United States		945,650		38,866,215
Halliburton Co.	United States		609,650		17,307,963
Noble Corp.	United States		709,160		23,068,975
^aSBM Offshore NV	Netherlands		544,135		7,496,034

					86,739,187

Food & Staples Retailing 2.2%
CVS Caremark Corp.	United States		619,220		28,936,151
Tesco PLC	United Kingdom		5,839,748		28,365,506

					57,301,657

Health Care Equipment & Supplies 1.2%
Medtronic Inc.	United States		790,840		30,629,233

Industrial Conglomerates 3.1%
Citic Pacific Ltd.	China		3,983		6,017
General Electric Co.	United States		1,198,610		24,979,033
Koninklijke Philips Electronics NV	Netherlands		1,581,151		31,157,199
Siemens AG	Germany		320,656		26,841,081

					82,983,330

Insurance 4.6%
Aviva PLC	United Kingdom		6,320,965		27,001,545
AXA SA	France		2,127,190		28,213,958
Muenchener Rueckversicherungs-Gesellschaft AG	Germany		212,557		29,900,698

TG-14

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Templeton Growth Securities Fund	Country	Shares		Value
Common Stocks (continued)
Insurance (continued)
Swiss Re AG	Switzerland		599,142	$	37,596,318

					122,712,519

Life Sciences Tools & Services 0.3%
Lonza Group AG	Switzerland		191,947		7,965,093

Machinery 1.1%
^aNavistar International Corp.	United States		1,001,030		28,399,221

Media 6.6%
Comcast Corp., Special A	United States		1,548,082		48,609,775
News Corp., A	United States		1,219,192		27,175,790
Time Warner Cable Inc.	United States		386,360		31,720,156
Time Warner Inc.	United States		668,970		25,755,345
Viacom Inc., B	United States		261,098		12,276,828
The Walt Disney Co.	United States		584,750		28,360,375

					173,898,269

Multiline Retail 0.7%
Target Corp.	United States		304,580		17,723,510

Oil, Gas & Consumable Fuels 8.7%
BP PLC	United Kingdom		6,878,717		45,471,829
Chesapeake Energy Corp.	United States		864,210		16,074,306
Chevron Corp.	United States		310,030		32,708,165
Eni SpA	Italy		1,234,795		26,223,054
Gazprom, ADR	Russia		1,330,750		12,642,125
Royal Dutch Shell PLC, B	United Kingdom		1,108,231		38,637,483
Talisman Energy Inc.	Canada		1,299,000		14,890,555
Total SA, B	France		983,466		44,185,945

					230,833,462

Pharmaceuticals 10.9%
GlaxoSmithKline PLC	United Kingdom		2,255,452		51,141,901
Merck & Co. Inc.	United States		1,220,811		50,968,859
Merck KGaA	Germany		206,127		20,536,026
Pfizer Inc.	United States		2,607,033		59,961,759
Roche Holding AG	Switzerland		274,748		47,364,355
Sanofi	France		757,937		57,305,298

					287,278,198

Professional Services 1.3%
Adecco SA	Switzerland		140,580		6,221,665
Hays PLC	United Kingdom		3,623		4,179
Randstad Holding NV	Netherlands		1,007,471		29,549,405

					35,775,249

Semiconductors & Semiconductor Equipment 2.4%
Samsung Electronics Co. Ltd.	South Korea		43,360		45,627,309
Taiwan Semiconductor Manufacturing Co. Ltd.	Taiwan		6,826,005		18,626,374

					64,253,683

Software 4.3%
Microsoft Corp.	United States		1,747,379		53,452,323
Nintendo Co. Ltd.	Japan		157,640		18,229,404
Oracle Corp.	United States		528,460		15,695,262

TG-15

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2012 (unaudited) (continued)


Templeton Growth Securities Fund	Country	Shares		Value
Common Stocks (continued)
Software (continued)
SAP AG	Germany		443,173	$	26,106,147

					113,483,136

Specialty Retail 1.0%
Kingfisher PLC	United Kingdom		5,739,648		25,849,211

Trading Companies & Distributors 0.5%
Itochu Corp.	Japan		1,225,590		12,747,730

Wireless Telecommunication Services 4.2%
^aSprint Nextel Corp.	United States		9,717,860		31,680,223
^aTurkcell Iletisim Hizmetleri AS, ADR	Turkey		2,349,100		29,481,205
Vodafone Group PLC	United Kingdom		18,096,428		50,822,000

					111,983,428

Total Common Stocks (Cost $2,755,863,241)					2,513,425,517

Preferred Stocks 0.6%
Metals & Mining 0.4%
Vale SA, ADR, pfd., A	Brazil		592,750		11,564,553

Oil, Gas & Consumable Fuels 0.2%
Petroleo Brasileiro SA, ADR, pfd.	Brazil		274,380		4,977,253

Total Preferred Stocks (Cost $18,810,970)					16,541,806

Non-Registered Mutual Funds (Cost $11,935,000) 0.5%
Diversified Financial Services 0.5%
^a,c,d,eTempleton China Opportunities Fund, Ltd., Reg D	China		1,194,518		12,745,505

Total Investments before Short Term Investments (Cost $2,786,609,211)					2,542,712,828

		Principal Amount
Short Term Investments 3.0%
Time Deposits 1.3%
Royal Bank of Canada, 0.11%, 7/02/12	United States	$	35,000,000		35,000,000


		Shares
^fInvestments from Cash Collateral Received for Loaned Securities 1.7%
Money Market Funds 1.7%
^gBNY Mellon Overnight Government Fund, 0.182%	United States		44,251,437		44,251,437

Total Short Term Investments (Cost $79,251,437)					79,251,437

Total Investments (Cost $2,865,860,648) 99.3%					2,621,964,265
Other Assets, less Liabilities 0.7%					18,041,860

Net Assets 100.0%				$	2,640,006,125

See Abbreviations on page TG-28.

^aNon-income producing.

^bA portion or all of the security is on loan at June 30, 2012. See Note 1(d).

^cSee Note 1(c) regarding investment in Templeton China Opportunities Fund, Ltd.

^dSee Note 8 regarding restricted securities.

^eSee Note 9 regarding holdings of 5% voting securities.

^fSee Note 1(d) regarding securities on loan.

^gThe rate shown is the annualized seven-day yield at period end.

The accompanying notes are an integral part of these financial statements.

TG-16

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

June 30, 2012 (unaudited)


	Templeton Growth Securities Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	2,853,925,648
Cost - Non-controlled affiliated issuers (Note 9)		11,935,000

Total cost of investments	$	2,865,860,648

Value - Unaffiliated issuers	$	2,609,218,760
Value - Non-controlled affiliated issuers (Note 9)		12,745,505

Total value of investments (includes securities loaned in the amount $30,407,038)		2,621,964,265
Cash		57,749,394
Receivables:
Capital shares sold		577,711
Dividends and interest		7,382,327
Other assets		638

Total assets		2,687,674,335

Liabilities:
Payables:
Investment securities purchased		42,110
Capital shares redeemed		764,235
Affiliates		2,052,886
Payable upon return of securities loaned		44,251,437
Accrued expenses and other liabilities		557,542

Total liabilities		47,668,210

Net assets, at value	$	2,640,006,125

Net assets consist of:
Paid-in capital	$	3,150,537,284
Undistributed net investment income		42,671,649
Net unrealized appreciation (depreciation)		(243,939,102	)
Accumulated net realized gain (loss)		(309,263,706	)

Net assets, at value	$	2,640,006,125

The accompanying notes are an integral part of these financial statements.

TG-17

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Assets and Liabilities (continued)

June 30, 2012 (unaudited)


	Templeton Growth Securities Fund
Class 1:
Net assets, at value	$	1,335,026,028

Shares outstanding		127,971,127

Net asset value and maximum offering price per share	$	10.43

Class 2:
Net assets, at value	$	1,245,298,541

Shares outstanding		121,062,459

Net asset value and maximum offering price per share	$	10.29

Class 4:
Net assets, at value	$	59,681,556

Shares outstanding		5,751,947

Net asset value and maximum offering price per share	$	10.38

The accompanying notes are an integral part of these financial statements.

TG-18

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the six months ended June 30, 2012 (unaudited)


	Templeton Growth Securities Fund
Investment income:
Dividends (net of foreign taxes $4,539,962)	$	52,919,819
Interest		31,573
Income from securities loaned		2,231,014

Total investment income		55,182,406

Expenses:
Management fees (Note 3a)		10,119,374
Distribution fees: (Note 3c)
Class 2		1,606,663
Class 4		105,559
Unaffiliated transfer agent fees		1,668
Custodian fees (Note 4)		162,033
Reports to shareholders		157,023
Professional fees		61,997
Trustees’ fees and expenses		5,668
Other		33,816

Total expenses		12,253,801
Expense reductions (Note 4)		(154	)

Net expenses		12,253,647

Net investment income		42,928,759

Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		43,975,124
Foreign currency transactions		(543,340	)

Net realized gain (loss)		43,431,784

Net change in unrealized appreciation (depreciation) on:
Investments		4,037,860
Translation of other assets and liabilities denominated in foreign currencies		30,842

Net change in unrealized appreciation (depreciation)		4,068,702

Net realized and unrealized gain (loss)		47,500,486

Net increase (decrease) in net assets resulting from operations	$	90,429,245

The accompanying notes are an integral part of these financial statements.

TG-19

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets


	Templeton Growth Securities Fund
	Six Months Ended June 30, 2012 (unaudited)			Year Ended December 31, 2011

Increase (decrease) in net assets:
Operations:
Net investment income	$	42,928,759		$	60,824,912
Net realized gain (loss) from investments and foreign currency transactions		43,431,784			119,363,548
Net change in unrealized appreciation (depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies		4,068,702			(404,407,949	)

Net increase (decrease) in net assets resulting from operations		90,429,245			(224,219,489	)

Distributions to shareholders from:
Net investment income:
Class 1		(30,925,492	)		(23,962,804	)
Class 2		(26,587,764	)		(19,367,342	)
Class 4		(1,228,892	)		(766,075	)

Total distributions to shareholders		(58,742,148	)		(44,096,221	)

Capital share transactions: (Note 2)
Class 1		129,725,166			15,269,781
Class 2		(34,951,195	)		(272,568,653	)
Class 4		2,499,938			582,974

Total capital share transactions		97,273,909			(256,715,898	)

Net increase (decrease) in net assets		128,961,006			(525,031,608	)
Net assets:
Beginning of period		2,511,045,119			3,036,076,727

End of period	$	2,640,006,125		$	2,511,045,119

Undistributed net investment income included in net assets:
End of period	$	42,671,649		$	58,485,038

The accompanying notes are an integral part of these financial statements.

TG-20

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited)

Templeton Growth Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment company, consisting of twenty separate funds. The Templeton Growth Securities Fund (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. The Fund offers three classes of shares: Class 1, Class 2, and Class 4. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

Debt securities generally trade in the over-the-counter market rather than on a securities exchange. The Fund’s pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value. Securities denominated in a foreign currency are converted into their U.S. dollar equivalent at the foreign exchange rate in effect at the close of the NYSE on the date that the values of the foreign debt securities are determined. Investments in non-registered money market funds are valued at the closing net asset value. Time deposits are valued at cost, which approximates market value.

TG-21

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Growth Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

a. Financial Instrument Valuation (continued)

b. Foreign Currency Translation

c. Investment in Templeton China Opportunities Fund, Ltd.

The Fund invests in Templeton China Opportunities Fund, Ltd. (China Fund), a private offering of unregistered shares in a Cayman Islands Exempt Company. The China Fund investment objective is to seek capital growth primarily through investments in A-shares of Chinese companies listed on the Shanghai and Shenzhen stock exchanges. Chinese A-shares are traded in Chinese Renminbi and are only available as an investment to domestic (Chinese) investors and holders of a Qualified Foreign Institutional Investors license. The China Fund is managed by Templeton Investment Counsel, LLC (an affiliate of the investment manager). No additional management or administrative fees are incurred on assets invested in the China Fund.

The China Fund may be subject to certain restrictions and administrative processes relating to its ability to repatriate cash balances, investment proceeds and earnings associated with its investment, as such activities are subject to approval by agencies of the Chinese government and thus the Fund may incur delays in redeeming its investment in the China Fund. The Fund’s investment in the China Fund is valued based upon the fair value of the China Fund’s portfolio securities and other assets and liabilities.

TG-22

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Growth Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

d. Securities Lending

The Fund participates in an agency based securities lending program. The fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the market value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the market value of loaned securities, as determined at the close of fund business each day; any additional collateral required due to changes in security values is delivered to the fund on the next business day. The collateral is invested in a non-registered money fund as indicated on the Statement of Investments. The fund receives income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. The fund bears the market risk with respect to the collateral investment, securities loaned, and the risk that the agent may default on its obligations to the fund. The securities lending agent has agreed to indemnify the fund in the event of default by a third party borrower.

e. Income and Deferred Taxes

f. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Amortization of premium and accretion of discount on debt securities are included in interest income. Dividend income is recorded on the ex-dividend date except that certain dividends from foreign securities are recognized as soon as the Fund is notified of the ex-dividend date. Distributions to shareholders are recorded on the ex-dividend date and are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with accounting principles generally accepted in the United States of America. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.

TG-23

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Growth Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

g. Accounting Estimates

h. Guarantees and Indemnifications

2. SHARES OF BENEFICIAL INTEREST

At June 30, 2012, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:


	Six Months Ended June 30, 2012						Year Ended December 31, 2011
Class 1 Shares:	Shares			Amount			Shares			Amount
Shares sold		28,800,067		$	314,802,820			64,351,377		$	689,220,432
Shares issued in reinvestment of distributions		3,052,862			30,925,492			2,081,912			23,962,804
Shares redeemed in-kind (Note 11)		—			—			(62,046	)		(778,675	)
Shares redeemed		(20,839,043	)		(216,003,146	)		(69,960,205	)		(697,134,780	)

Net increase (decrease)		11,013,886		$	129,725,166			(3,588,962	)	$	15,269,781

Class 2 Shares:
Shares sold		5,694,749		$	59,743,429			8,669,643		$	93,168,510
Shares issued in reinvestment of distributions		2,661,438			26,587,764			1,706,374			19,367,342
Shares redeemed in-kind (Note 11)		—			—			(7,322,431	)		(90,358,797	)
Shares redeemed		(11,384,703	)		(121,282,388	)		(26,665,336	)		(294,745,708	)

Net increase (decrease)		(3,028,516	)	$	(34,951,195	)		(23,611,750	)	$	(272,568,653	)

Class 4 Shares:
Shares sold		394,746		$	4,211,926			552,161		$	6,020,586
Shares issued on reinvestment of distributions		121,914			1,228,892			66,906			766,075
Shares redeemed		(276,019	)		(2,940,880	)		(559,011	)		(6,203,687	)

Net increase (decrease)		240,641		$	2,499,938			60,056		$	582,974

TG-24

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Growth Securities Fund

3. TRANSACTIONS WITH AFFILIATES


Subsidiary		Affiliation
Templeton Global Advisors Limited (TGAL)		Investment manager
Franklin Templeton Services, LLC (FT Services)		Administrative manager
Franklin Templeton Distributors, Inc. (Distributors)		Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services)		Transfer agent

a. Management Fees

The Fund pays an investment management fee to TGAL based on the average daily net assets of the Fund as follows:


Annualized Fee Rate		Net Assets
1.000%		Up to and including $100 million
0.900%		over $100 million, up to and including $250 million
0.800%		over $250 million, up to and including $500 million
0.750%		over $500 million, up to and including $1 billion
0.700%		over $1 billion, up to and including $5 billion
0.675%		over $5 billion, up to and including $10 billion
0.655%		over $10 billion, up to and including $15 billion
0.635%		over $15 billion, up to and including $20 billion
0.615%		In excess of $20 billion

b. Administrative Fees

Under an agreement with TGAL, FT Services provides administrative services to the Fund. The fee is paid by TGAL based on average daily net assets, and is not an additional expense of the Fund.

c. Distribution Fees

e. Transfer Agent Fees

Investor Services, under terms of an agreement, performs shareholder servicing for the Fund and is not paid by the Fund for the services.

g. Other Affiliated Transactions

At June 30, 2012, Franklin Templeton Variable Insurance Product Trust – Franklin Templeton VIP Founding Funds Allocation Fund owned 44.81% of the Fund’s outstanding shares.

TG-25

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Growth Securities Fund

4. EXPENSE OFFSET ARRANGEMENT

5. INCOME TAXES

At December 31, 2011, capital loss carryforwards were as follows:


Capital loss carryforwards expiring in:
2017	$	240,654,060
2018		55,299,629

		$295,953,689

At June 30, 2012, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:


Cost of investments	$	2,917,028,655


Unrealized appreciation	$	289,138,328
Unrealized depreciation		(584,202,718	)

Net unrealized appreciation (depreciation)	$	(295,064,390	)

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatment of wash sales.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2012, aggregated $371,523,048 and $285,912,627, respectively.

7. CONCENTRATION OF RISK

8. RESTRICTED SECURITIES

TG-26

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Growth Securities Fund

8. RESTRICTED SECURITIES (continued)

At June 30 2012, the Fund held investments in restricted securities, excluding certain securities exempt from registration under the 1933 Act deemed to be liquid, as follows:


Shares		Issuer	Acquisition Dates		Cost		Value
	1,194,518	Templeton China Opportunities Fund, Ltd., Reg D (0.48% of Net Assets)		3/17/10-12/1/11	$	11,935,000	$	12,745,505

9. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES


Name of Issuer	Number of Shares Held at Beginning of Period		Gross Additions		Gross Reductions		Number of Shares Held at End of Period		Value at End of Period		Investment Income		Realized Capital Gain (Loss)
Non-Controlled Affiliates
Templeton China Opportunities Fund, Ltd., Reg D		1,194,518		—		—		1,194,518	$	12,745,505	$	—	$	—

Total Affiliated Securities (0.48% of Net Assets)

10. CREDIT FACILITY

11. REDEMPTION IN-KIND

During the year ended December 31, 2011, the Fund realized $9,941,638 of net gains resulting from a redemption in-kind in which a shareholder redeemed fund shares for securities held by the Fund rather than for cash. Because such gains are not taxable to the Fund and are not distributed to remaining shareholders, they have been reclassified from accumulated net realized gains to paid-in capital.

TG-27

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Growth Securities Fund

12. FAIR VALUE MEASUREMENTS

•

Level 1 – quoted prices in active markets for identical financial instruments

•

Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)

•

Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of financial instruments)

The inputs or methodology used for valuing financial instruments are not an indication of the risk associated with investing in those financial instruments.

For movements between the levels within the fair value hierarchy, the Fund has adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.

A summary of inputs used as of June 30, 2012, in valuing the Fund’s assets carried at fair value, is as follows:


Assets:	Level 1		Level 2		Level 3		Total
Investments in Securities
Equity Investments:
Diversified Financial Services	$	98,659,238	$	—	$	12,745,505	$	111,404,743
Other Equity Investments^a,b		2,431,308,085		—		—		2,431,308,085
Short Term Investments		—		79,251,437		—		79,251,437

Total Investments in Securities	$	2,529,967,323	$	79,251,437	$	12,745,505	$	2,621,964,265

^aIncludes common preferred stocks as well as other equity investments.

^bFor detailed categories, see the accompanying Statement of Investments.

A reconciliation of assets in which Level 3 inputs are used in determining fair value is presented when there are significant Level 3 investments at the end of the period.

13. NEW ACCOUNTING PRONOUNCEMENTS

14. SUBSEQUENT EVENTS

The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure.


ABBREVIATIONS
Selected Portfolio

ADR - American Depositary Receipt

TG-28

Franklin Templeton Variable Insurance Products Trust

Tax Information (unaudited)

Templeton Growth Securities Fund

The following table provides a detailed analysis of foreign tax paid, and foreign source income as reported by the Fund, to Class 1, Class 2, and Class 4 shareholders of record.


Class	Foreign Tax Paid Per Share		Foreign Source Income Per Share
Class 1	$	0.0106	$	0.2085
Class 2	$	0.0106	$	0.1843
Class 4	$	0.0106	$	0.1792

Foreign Source Income Per Share (Column 2) is the amount per share of income dividends attributable to foreign securities held by the Fund, plus any foreign taxes withheld on these dividends.

TG-29

INDEX DESCRIPTIONS

The indexes are unmanaged and include reinvested distributions.

For indexes sourced by Morningstar: © 2012 Morningstar. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.

Russell^® is a trademark and Russell^™ is a servicemark of the Frank Russell Company.

Barclays U.S. Aggregate Index is a market capitalization-weighted index representing the U.S. investment-grade, fixed-rate, taxable bond market with index components for government and corporate, mortgage pass-through and asset-backed securities. All issues included are SEC registered, taxable, dollar denominated and nonconvertible, must have at least one year to final maturity and must be rated investment grade (Baa3/BBB-/BBB- or higher) using the middle rating of Moody’s, Standard & Poor’s and Fitch, respectively.

Barclays U.S. Government Index: Intermediate Component is the intermediate component of the Barclays U.S. Government Index, which includes public obligations of the U.S. Treasury with at least one year to final maturity and publicly issued debt of U.S. government agencies, quasi-federal corporations, and corporate or foreign debt guaranteed by the U.S. government.

Citigroup World Government Bond Index is a market capitalization-weighted index consisting of investment-grade world government bond markets.

Consumer Price Index (CPI), calculated by the U.S. Bureau of Labor Statistics, is a commonly used measure of the inflation rate.

Credit Suisse (CS) High Yield Index is designed to mirror the investable universe of the U.S. dollar-denominated high yield debt market.

Dow Jones Industrial Average is a price-weighted average of blue-chip stocks that are generally the leaders in their industry.

FTSE EPRA/NAREIT Developed Index is a free float-adjusted index designed to measure the performance of publicly traded real estate securities in the North American, European and Asian real estate markets. FTSE^® is a trademark of London Stock Exchange Plc and The Financial Times Limited and is used by FTSE under license.

J.P. Morgan (JPM) Global Government Bond Index (GGBI) tracks total returns for liquid, fixed-rate, domestic government bonds with maturities greater than one year issued by developed countries globally.

Lipper Multi-Sector Income Funds Classification Average is calculated by averaging the total returns of all funds within the Lipper Multi-Sector Income Funds classification in the Lipper Open-End underlying funds universe. Lipper Multi-Sector Income Funds are defined as funds that seek current income by allocating assets among different fixed income securities sectors (not primarily in one sector except for defensive purposes), including U.S. and foreign governments, with a significant portion rated below investment grade. For the six-month period ended 6/30/12, there were 231 funds in this category. Lipper calculations do not include contract fees, expenses or sales charges, and may have been different if such charges had been considered.

Lipper VIP Equity Income Funds Classification Average is an equally weighted average calculation of performance figures for all funds within the Lipper Equity Income Funds classification in the Lipper VIP underlying funds universe. Lipper Equity Income Funds seek relatively high current income and growth of income through investing 60% or more of their portfolios in equities. For the six-month period ended 6/30/12, there were 64 funds in this category. Lipper calculations do not include contract fees, expenses or sales charges, and may have been different if such charges had been considered.

Lipper VIP General U.S. Government Funds Classification Average is an equally weighted average calculation of performance figures for all funds within the Lipper General U.S. Government Funds classification in the Lipper VIP underlying funds universe. Lipper General U.S. Government Funds invest primarily in U.S. government and agency issues. For the six-month period ended 6/30/12, there were 84 funds in this category. Lipper calculations do not include contract fees, expenses or sales charges, and may have been different if such charges had been considered.

Lipper VIP High Current Yield Funds Classification Average is an equally weighted average calculation of performance figures for all funds within the Lipper High Current Yield Funds Classification in the Lipper VIP underlying funds universe. Lipper High Current Yield Funds aim at high (relative) current yield from fixed income securities, have no quality or maturity restrictions, and tend to invest in lower grade debt issues. For the six-month period ended 6/30/12, there were 123 funds in this

I-1

category. Lipper calculations do not include contract fees, expenses or sales charges, and may have been different if such charges had been considered.

MSCI All Country (AC) World Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed and emerging markets.

MSCI Emerging Markets (EM) Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global emerging markets.

MSCI Europe, Australasia, Far East (EAFE) Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed markets excluding the U.S. and Canada.

MSCI Europe, Australasia, Far East (EAFE) Index Net Return (Local Currency) is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance of global developed markets excluding the U.S. and Canada. The index is calculated in local currency and includes reinvested daily net dividends.

MSCI World Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed markets.

NASDAQ Composite Index is a broad-based, market capitalization-weighted index designed to measure all NASDAQ domestic and international based common type stocks listed on The NASDAQ Stock Market.

Russell 1000^® Growth Index is market capitalization weighted and measures performance of those Russell 1000^® Index companies with higher price-to-book ratios and higher forecasted growth values.

Russell 1000^® Index is market capitalization weighted and measures performance of the largest companies in the Russell 3000^® Index, which represents the majority of the U.S. market’s total capitalization.

Russell 1000^® Value Index is market capitalization weighted and measures performance of those Russell 1000^® Index companies with lower price-to-book ratios and lower forecasted growth values.

Russell 2500^™ Index is market capitalization weighted and measures performance of the smallest companies in the Russell 3000^® Index, which represent a modest amount of the Russell 3000^® Index’s total market capitalization.

Russell 2500^™ Value Index is market capitalization weighted and measures performance of those Russell 2500^™ Index companies with lower price-to-book ratios and lower forecasted growth values.

Russell 3000^® Growth Index is market capitalization weighted and measures performance of those Russell 3000^® Index companies with higher price-to-book ratios and higher forecasted growth values.

Russell 3000^® Index is market capitalization weighted and measures performance of the largest U.S. companies based on total market capitalization and represents the majority of the investable U.S. equity market.

Russell Midcap^® Growth Index is market capitalization weighted and measures performance of those Russell Midcap^® Index companies with higher price-to-book ratios and higher forecasted growth values.

Russell Midcap^® Index is market capitalization weighted and measures performance of the smallest companies in the Russell 1000^® Index, which represent a modest amount of the Russell 1000^® Index’s total market capitalization.

Standard & Poor’s^® 500 Index (S&P 500^®) is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance. STANDARD & POOR’S^®, S&P^® and S&P 500^® are registered trademarks of Standard & Poor’s Financial Services LLC.

Standard & Poor’s/International Finance Corporation Investable (S&P/IFCI) Composite Index is a free float-adjusted, market capitalization-weighted index designed to measure equity performance in global emerging markets.

I-2

Franklin Templeton Variable Insurance Products Trust

Shareholder Information

Board Review of Investment Management Agreement

At a meeting held April 17, 2012, the Board of Trustees (Board), including a majority of non-interested or independent Trustees, approved renewal of the investment management agreement for each of the separate funds within the Trust (Fund(s)). In reaching this decision, the Board took into account information furnished throughout the year at regular Board meetings, as well as information prepared specifically in connection with the annual renewal review process. Information furnished and discussed throughout the year included investment performance reports and related financial information for each Fund, as well as periodic reports on expenses, shareholder services, legal and compliance matters, pricing, brokerage commissions and execution and other services provided by the Investment Manager (Manager) and its affiliates. Information furnished specifically in connection with the renewal process included reports prepared by Lipper, Inc. (Lipper), an independent organization, as well as additional material, including a Fund profitability analysis prepared by management. The Lipper reports compared a Fund’s investment performance and expenses with those of other mutual funds deemed comparable to the Fund as selected by Lipper. The Fund profitability analysis discussed the profitability to Franklin Templeton Investments from its overall U.S. fund operations, as well as on an individual fund-by-fund basis. Additional material accompanying such profitability analysis included information on a fund-by-fund basis listing portfolio managers and other accounts they manage, as well as information on management fees charged by the Manager and its affiliates to U.S. mutual funds and other accounts, including management’s explanation of differences where relevant. Such material also included a memorandum prepared by management describing project initiatives and capital investments relating to the services provided to the Funds by the Franklin Templeton Investments organization, as well as a memorandum relating to economies of scale.

In considering such materials, the independent Trustees received assistance and advice from and met separately with independent counsel. While the investment management agreements for all Funds were considered at the same Board meeting, the Board dealt with each Fund separately. In approving continuance of the investment management agreement for each Fund, the Board, including a majority of independent Trustees, determined that the existing management fee structure was fair and reasonable and that continuance of the investment management agreement was in the best interests of each Fund and its shareholders. While attention was given to all information furnished, the following discusses some primary factors relevant to the Board’s decision.

NATURE, EXTENT AND QUALITY OF SERVICE. The Board was satisfied with the nature and quality of the overall services provided by the Manager and its affiliates to the Funds and their shareholders. In addition to investment performance and expenses discussed later, the Board’s opinion was based, in part, upon periodic reports furnished it showing that the investment policies and restrictions for each Fund were consistently complied with as well as other reports periodically furnished the Board covering matters such as the compliance of portfolio managers and other management personnel with the code of ethics adopted throughout the Franklin Templeton fund complex, the adherence to fair value pricing procedures established by the Board, and the accuracy of net asset value calculations. Favorable consideration was given to management’s continuous efforts and expenditures in establishing back-up systems and recovery procedures to function in the event of a natural disaster, it being noted that such systems and procedures had functioned smoothly during the Florida hurricanes and blackouts experienced in previous years. Among other factors taken into account by the Board were the Manager’s best execution trading policies, including a favorable report by an independent portfolio trading analytical firm, which also covered FOREX transactions. Consideration was also given to the experience of each Fund’s portfolio management team, the number of accounts managed and general method of compensation. In this latter respect, the Board noted that a primary factor in management’s determination of a portfolio manager’s bonus compensation was the relative investment performance of the funds he or she managed and that a portion of such bonus was required to be invested in a predesignated list of funds within such person’s fund management area so as to be aligned with the interests of shareholders. Particular attention was given to management’s conservative approach and diligent risk management procedures, including continuous monitoring of counterparty credit risk and attention given to derivatives and other complex instruments, including expanded collateralization requirements. The Board also took into account, among other things, management’s efforts in establishing a global credit facility for the benefit of the Funds and other accounts managed by Franklin Templeton Investments to provide a source of cash for temporary and emergency purposes or to meet unusual redemption requests as well as the strong financial position of the Manager’s parent company and its commitment to the mutual fund business as evidenced by its subsidization of money market funds.

SI-1

Franklin Templeton Variable Insurance Products Trust

Shareholder Information (continued)

Board Review of Investment Management Agreement (continued)

INVESTMENT PERFORMANCE. The Board placed significant emphasis on the investment performance of each of the Funds in view of its importance to shareholders. While consideration was given to performance reports and discussions with portfolio managers at Board meetings throughout the year, particular attention in assessing performance was given to the Lipper reports furnished for the agreement renewals of all Funds. The Lipper reports prepared for each of the individual Funds showed the investment performance of Class 1 shares for those Funds having such class of shares and Class 2 shares for those Funds that did not have Class 1 shares, in comparison to a performance universe selected by Lipper. Comparative performance for each Fund was shown for the one-year period ended January 31, 2012, and previous periods ended that date of up to 10 years unless otherwise noted. Performance was shown on a total return basis for each Fund and in certain cases, as indicated, on an income return basis as well. The following summarizes the performance results for each of the Funds and the Board’s view of such performance.

Franklin Flex Cap Growth Securities Fund – The performance universe for this Fund, which has been in operation for less than 10 full years, consisted of the Fund and all multi-cap growth funds underlying variable insurance products as selected by Lipper. The Lipper report showed the Fund’s comparative total return for the one-year period to be in the second-lowest quintile of its performance universe, and on an annualized basis to be in the second-lowest quintile of such universe for the previous three-year period and the middle quintile of such universe for the previous five-year period. The Board was not satisfied with the Fund’s recent underperformance and discussed the reasons for such performance and steps being taken to improve it, as well as the Fund’s portfolio management team with upper management. Based on such discussions and taking into account the Fund’s more acceptable longer term performance, the Board did not believe any immediate change in portfolio management was warranted, but intends to monitor future performance.

Franklin Global Real Estate Securities Fund – The performance universe for this Fund consisted of the Fund and all real estate funds underlying variable insurance products as selected by Lipper. The Lipper report showed the Fund’s total return to be in the second-lowest quintile of such universe for the one-year period, and on an annualized basis to be in the lowest quintile of such universe for the previous three-, five- and 10-year periods. The Lipper universe includes all real estate funds underlying variable annuities and is not limited to those having a global mandate such as the Fund. The Board noted, however, among the 14 global real estate funds with 26 share classes included in such universe, that the Fund’s Class 1 shares had the highest and second-highest total returns for the previous one and two years, respectively. The Board also noted steps that had been taken by management to improve the Fund’s performance, including the appointment of an additional portfolio manager in 2010. While the Board intends to continue monitoring the Fund’s results, it was satisfied with the efforts being made by management to improve performance and believed no change in portfolio management was warranted, noting the Fund’s favorable relative performance with respect to other global real estate funds as referred to above.

Franklin Growth and Income Securities Fund – The performance universe for this Fund consisted of the Fund and all equity income funds underlying variable insurance products as selected by Lipper. The Lipper report showed the Fund’s income return during the one-year period to be in the highest or best performing quintile of its performance universe, and on an annualized basis in each of the previous three-, five- and 10-year periods to also be in the highest quintile of such universe. The Lipper report showed the Fund’s total return for the one-year period to be in the second-highest quintile of its performance universe, and on an annualized basis to be in the highest quintile of such universe for the previous three-year period, the second-highest quintile of such universe for the previous five-year period, and the second-lowest quintile of such universe for the previous 10-year period. The Board was satisfied with the Fund’s performance as shown in the Lipper report.

Franklin High Income Securities Fund – The performance universe for this Fund consisted of the Fund and all high current yield funds underlying variable insurance products as selected by Lipper. The Lipper report showed the Fund’s income return for the one-year period to be in the second-lowest quintile of such universe, and on an annualized basis to also be in the second-lowest quintile for the previous three- and five-year periods, but to be in the highest quintile of such universe for the previous 10-year period. The Lipper report showed the Fund’s total return to be in the second-highest quintile of its performance universe for the one-year period, and on an annualized basis to be in the middle quintile of such universe for the previous three-year period, the second-highest quintile of such universe for the previous five-year period, and the middle quintile of such universe for the previous 10-year period. The Board believed the Fund’s performance as shown in the Lipper report to be acceptable and did not

SI-2

Franklin Templeton Variable Insurance Products Trust

Shareholder Information (continued)

Board Review of Investment Management Agreement (continued)

warrant any change in portfolio management. In reaching such conclusion, the Board noted that the Fund’s overall favorable comparative total returns and the level of its annualized income return, which amounted to 6.40%, 6.96%, and 7.53% for the one-, three- and five-year periods, respectively, appeared generally consistent with the Fund’s investment objective of earning a high level of current income with capital appreciation as a secondary goal.

Franklin Income Securities Fund – The performance universe for this Fund consisted of the Fund and all mixed-asset target allocation moderate funds underlying variable insurance products as selected by Lipper. The Lipper report showed the Fund’s income return to be in the highest or best performing quintile of such universe for the one-year period and to also be in the highest quintile of such universe for each of the previous three-, five- and 10-year periods on an annualized basis. The Lipper report showed the Fund’s total return to be in the middle quintile of its performance universe for the one-year period and on an annualized basis to be in the highest or second-highest quintile of such universe for each of the previous three-, five- and 10-year periods. The Board was satisfied with the Fund’s comparative performance as shown in the Lipper report.

Franklin Large Cap Growth Securities Fund – The performance universe for this Fund consisted of the Fund and all large-cap core funds underlying variable insurance products as selected by Lipper. The Lipper report showed the Fund’s comparative total return to be in the upper half of such universe for the one-year period, and on an annualized basis to be in the second-lowest quintile of such universe for the previous three-year period, the second-highest quintile of such universe for the previous five-year period, and the second-lowest quintile of such universe for the previous 10-year period. The Board believed the Fund’s overall performance as set forth in the Lipper report to be acceptable, noting that its three- and 10-year annualized returns in each case were within 50 basis points of the performance universe median.

Franklin Large Cap Value Securities Fund – The performance universe for this Fund, which has been in operation for less than 10 full years, consisted of the Fund and all large-cap value funds underlying variable insurance products as selected by Lipper. The Lipper report showed the Fund’s total return to be in the lowest quintile of such universe for the one-year period and on an annualized basis to be in the second-highest quintile and middle quintile of such universe for the previous three- and five-year periods, respectively. The Board discussed with management the reasons for the Fund’s one-year underperformance, including its holdings in energy stocks exposed to natural gas, which were hurt by lower gas prices, and also discussed steps being taken to improve performance, which included the addition of an experienced investment analyst to provide support for the Fund’s lead manager. Based on such discussions and the Fund’s longer term performance, the Board did not believe that any change in the Fund’s portfolio management was warranted.

Franklin Rising Dividends Securities Fund – The performance universe for this Fund consisted of the Fund and all multi-cap core funds underlying variable insurance products as selected by Lipper. The Lipper report showed the Fund’s comparative total return to be in the highest or best performing quintile of the performance universe for the one-year period, and on an annualized basis to be in the highest or second-highest quintile of such universe for each of the three-, five- and 10-year periods. The Board was satisfied with the Fund’s performance as set forth in the Lipper report.

Franklin Small Cap Value Securities Fund – The performance universe for this Fund consisted of the Fund and all small-cap value funds underlying variable insurance products as selected by Lipper. The Lipper report showed the Fund’s total return for the one-year period to be in the second-highest performing quintile of such performance universe, and on an annualized basis to also be in the second-highest quintile of such universe for each of the previous three- and five-year periods, and in the upper half of such universe for the previous 10-year period. The Board found the Fund’s comparative performance as set forth in the Lipper report to be satisfactory.

Franklin Small-Mid Cap Growth Securities Fund – The performance universe for this Fund consisted of the Fund and all mid-cap growth funds underlying variable insurance products as selected by Lipper. The Lipper report showed the Fund’s total return for the one-year period to be in the upper half of such universe, and on an annualized basis to also be in the upper half of such universe for each of the previous three- and five-year periods, and to be in the second-lowest quintile of such universe for the previous 10-year period. The Board found the Fund’s comparative investment performance as set forth in the Lipper report to be acceptable.

SI-3

Franklin Templeton Variable Insurance Products Trust

Shareholder Information (continued)

Board Review of Investment Management Agreement (continued)

Franklin Strategic Income Securities Fund – The performance universe for this Fund consisted of the Fund and all general bond funds underlying variable insurance products as selected by Lipper. The Lipper report showed the Fund’s income return to be in the second-highest quintile of such performance universe for the one-year period, and on an annualized basis to also be in the second-highest quintiles of such universe during the previous three- and five-year periods, and in the second-lowest quintile of such universe for the previous 10-year period. The Lipper report showed the Fund’s total return to be in the second-lowest quintile of such universe during the one-year period, and on an annualized basis to be in the upper half of such universe for each of the previous three- and five-year periods, and in the highest quintile of such universe for the previous 10-year period. The Board was generally satisfied with the Fund’s performance as shown in the Lipper report, noting its primary income objective and the fact that its total return for the one-year period exceeded 5%.

Franklin Templeton VIP Founding Funds Allocation Fund – The performance universe for this Fund consisted of the Fund and all mixed-asset target allocation growth funds underlying variable insurance products as selected by Lipper. The Fund has been in existence for only four full years and the Lipper report showed its income return to be in the lowest quintile of such performance universe for the one-year period, and on an annualized basis to be in the middle quintile of such universe for its four-year period of operation. The Lipper report showed the Fund’s total return for the one-year period to be in the second-lowest quintile of such universe and on an annualized basis to be in the lowest quintile of such universe for its four-year period of operation. In assessing the relevance of such comparative performance, the Board noted the Fund is not actively managed and that its performance reflects those of the three underlying funds in which it invests in equal portions. The Board reviewed and discussed the performance of such underlying funds with management and believes that each is being managed in accordance with its underlying investment mandate. The Board also notes management’s explanation that the performance of certain of the underlying funds reflects the general underperformance of value stocks during the past year. In view of the foregoing and taking into account the nature of the Fund and its short period of operation, the Board did not believe the Fund’s comparative investment performance as set forth in the Lipper report mandated any change in the investment strategy followed or manner in which the Fund operates.

Franklin U.S. Government Fund – The performance universe for this Fund consisted of the Fund and all general U.S. government funds underlying variable insurance products as selected by Lipper. The Lipper report showed the Fund’s income return for the one-year period to be in the second-highest quintile of such universe and on an annualized basis to be in the highest or second-highest quintile of such universe for each of the previous three-, five- and 10-year periods. The Lipper report showed the Fund’s total return to be in the lowest quintile of such universe for the one-year period, and on an annualized basis to be in the lowest quintile of such universe for the previous three-year period, the second-lowest quintile of such universe for the previous five-year period, and the middle quintile of such universe for the previous 10-year period. The Board found the Fund’s comparative performance as shown in the Lipper report to be acceptable, noting the Fund’s income objective, the nature of the Fund’s investments, which were primarily in U.S. mortgage-backed securities, and the fact that its total return exceeded 6% for the one-year period and exceeded 5% for all annualized periods shown in such report.

Mutual Global Discovery Securities Fund – The performance universe for this Fund consisted of the Fund and all global value funds underlying variable insurance products as selected by Lipper. The Lipper report showed the Fund’s total return to be in the highest quintile of such universe for the one-year period, and on an annualized basis to be in the lowest quintile of such universe for the three-year period, but to be in the highest quintile of such universe for each of the previous five- and 10-year periods. The Board found the Fund’s overall comparative performance as set forth in the Lipper report to be acceptable.

Mutual International Securities Fund – The performance universe for this Fund consisted of the Fund and all other international value funds underlying variable insurance products as selected by Lipper. The Fund has been in existence for only two full years at the date of the Lipper report, which showed its total return during each such year to be in either the highest or second-highest performing quintile of such universe. The Board was pleased with such comparative performance, but did not believe it to be particular meaningful in view of the Fund’s short period of operations.

Mutual Shares Securities Fund – The performance universe for this Fund consisted of the Fund and all large-cap value funds underlying variable insurance products as selected by Lipper. The Lipper report showed the Fund’s income return for the

SI-4

Franklin Templeton Variable Insurance Products Trust

Shareholder Information (continued)

Board Review of Investment Management Agreement (continued)

one-year period to be in the highest or best performing quintile of such universe, and on an annualized basis to be in either the highest or second-highest quintile of such universe for each of the previous three-, five- and 10-year periods. The Lipper report showed the Fund’s total return for the one-year period to be in the middle quintile of the performance universe, and on an annualized basis to be in the lowest quintile of such universe for the previous three-year period, the middle quintile of such universe for the previous five-year period, and the highest quintile of such universe for the previous 10-year period. The Board found the Fund’s overall performance as shown in the Lipper report to be acceptable, noting its annualized three-year total return exceeded 15%.

Templeton Developing Markets Securities Fund – The performance universe for this Fund consisted of the Fund and all emerging markets funds underlying variable insurance products as selected by Lipper. The Lipper report showed the Fund’s comparative total return for the one-year period to be in the highest or best performing quintile of such performance universe and on an annualized basis to be in the second-highest quintile of such universe during each of the previous three- and five-year periods, and the middle quintile of such universe during the previous 10-year period. The Board was satisfied with the comparative performance of the Fund as set forth in the Lipper report.

Templeton Foreign Securities Fund – The performance universe for this Fund consisted of the Fund and all international value funds underlying variable insurance products as selected by Lipper. The Lipper report showed the Fund’s comparative total return for the one-year period to be in the highest or best performing quintile of such performance universe and on an annualized basis to be in the highest or best performing quintile of such universe in each of the previous three- and five-year periods, and the second-highest quintile of such universe for the previous 10-year period. The Board was satisfied with the Fund’s comparative investment performance as set forth in the Lipper report.

Templeton Global Bond Securities Fund – The performance universe for this Fund consisted of the Fund and all global income funds underlying variable insurance products as selected by Lipper. The Lipper report showed the Fund’s income return for the one-year period to be in the highest or best performing quintile of such performance universe, and on an annualized basis to also be in the highest or best performing quintile of such universe for each of the previous three-, five- and 10-year periods. The Lipper report showed the Fund’s total return for the one-year period to be in the second-lowest performing quintile of its performance universe, but on an annualized basis to be in the highest or second-highest quintile of such universe during each of the previous three-, five- and 10-year periods. The Board discussed with management the reasons for the relative underperformance of the Fund’s total return as shown in the Lipper report for the one-year period, noting, however, that it exceeded 5%. The Board was satisfied with the Fund’s comparative performance as set forth in the Lipper report.

Templeton Growth Securities Fund – The performance universe for this Fund consisted of the Fund and all global value funds underlying variable insurance products as selected by Lipper. The Lipper report showed the Fund’s total return for the one-year period to be in the second-lowest quintile of such performance universe and on an annualized basis to also be in the second-lowest quintile of such universe for each of the previous three-, five- and 10-year periods. The Board was not satisfied with the Fund’s comparative performance as set forth in the Lipper report and discussed the Fund’s portfolio management team, performance and investment process in detail with upper management. Such discussion included the analytic process and reviews followed by the Fund’s portfolio managers in selecting securities for investment and the conviction of the Fund’s portfolio management team with the correctness of adhering to their disciplined, long-term, bottom-up, fundamental approach to investing. Based on such discussions, the Board did not believe any immediate change in portfolio management was warranted, but intends to continuously monitor future performance.

COMPARATIVE EXPENSES. Consideration was given to expense comparison information contained in the Lipper reports furnished for each Fund, which compared its management fee and total expense ratio with those of a group of other funds selected by Lipper as its appropriate Lipper expense group. Lipper expense data is based upon information taken from each fund’s most recent annual report, which reflects historical asset levels that may be quite different from those currently existing, particularly in a period of market volatility. While recognizing such inherent limitation and the fact that expense ratios generally increase as assets decline and decrease as assets grow, the Board believed the independent analysis conducted by Lipper to be an appropriate measure of comparative expenses. In reviewing comparative costs, Lipper provides information on a Fund’s

SI-5

Franklin Templeton Variable Insurance Products Trust

Shareholder Information (continued)

Board Review of Investment Management Agreement (continued)

contractual investment management fee rate in comparison with the contractual investment management fee rate that would have been charged by other funds within its Lipper expense group assuming they were similar in size to the Fund, as well as the actual total expense ratio of the Fund in comparison with those of its Lipper expense group. The Lipper contractual investment management fee analysis includes administrative charges at the fund level as being part of a management fee, and actual total expenses, for comparative consistency, are shown by Lipper for the same class of shares for all funds within a particular Lipper expense group. The results of such comparisons showed that both the contractual investment management fee rates and actual total expense ratios of the following Funds were in the least expensive quintile of their respective Lipper expense groups: Franklin Income Securities Fund, Franklin Small Cap Value Securities Fund, Franklin Growth and Income Securities Fund, Franklin High Income Securities Fund, Franklin Strategic Income Securities Fund and Templeton Global Bond Securities Fund. The Board was satisfied with the comparative contractual investment management fees and expenses of these Funds as shown in their Lipper reports. The contractual investment management fee rates and actual total expense ratios of each of Franklin Rising Dividend Securities Fund, Franklin Small-Mid Cap Growth Securities Fund and Franklin U.S. Government Fund were below the medians of their Lipper expense groups. The contractual investment management fee rate of Templeton Foreign Securities Fund was less than one-half of a basis point above the median of its Lipper expense group, while its actual total expense ratio was below the median of such group. The contractual investment fee rate and actual total expense ratio of Franklin Templeton VIP Founding Funds Allocation Fund were both at the median of its Lipper expense group. The Board was satisfied with the comparative contractual investment management fees and expenses of these Funds as shown in their Lipper reports. The contractual investment management fee rates for Mutual International Securities Fund, Templeton Growth Securities Fund and Franklin Large Cap Value Securities Fund were in the most expensive quintiles of their Lipper expense groups, but in each case their actual total expense ratios were below the median of such groups. The Board was satisfied with the comparative expenses of these Funds as shown in their Lipper reports, noting that, with the exception of Templeton Growth Securities Fund, the expenses of these Funds were subsidized through fee waivers. The contractual investment management fee rate of Franklin Flex Cap Growth Securities Fund was 13 basis points above its Lipper expense group median, while its actual total expense ratio was below its expense group median. The Board found the comparative expenses of this Fund as shown in its Lipper report to be acceptable, noting its expenses were subsidized through fee waivers. The contractual investment management fee rate and actual expense ratio for Franklin Large Cap Growth Securities Fund were in each case above but within eight basis points of the median of its Lipper expense group. The contractual investment fee rate of Franklin Global Real Estate Securities Fund was 20 basis points higher than the median of its Lipper expense group while its actual expense ratio was within nine basis points of its expense group median. The Board found the comparative expenses of these Funds as shown in their Lipper reports to be acceptable, noting with respect to Franklin Global Real Estate Securities Fund that a phased-in increase in its contractual investment fee rate had been approved by shareholders in 2007. The contractual investment management fee rate and actual total expense ratio of Templeton Developing Markets Securities Fund were both above the median of its Lipper expense group, but in each case were within 17 basis points of such median. The Board found the comparative expenses of this Fund to be acceptable, noting cost factors relating to the Fund’s operations, such as the quality and experience of its portfolio managers and research staff and the depth of its physical presence and coverage in developing markets geographical areas, as well as the fact that its investment management fee had been reduced effective May 1, 2011. The contractual investment management fee rates of both Mutual Global Discovery Securities Fund and Mutual Shares Securities Fund were in the most expensive quintiles of their Lipper expense groups, while the actual total expense ratio of Mutual Global Discovery Fund was 17 basis points above its expense group median, and the actual total expense ratio of Mutual Shares Securities Fund was four basis points above its expense group median. In discussing these comparative expenses, management stated its view that the expenses of these Funds were at an appropriate level in view of their overall favorable comparative investment performance, the quality and experience of their portfolio managers and the research-driven fundamental value strategy employed in their portfolio selections. The Board found the comparative expenses of these Funds to be acceptable noting the points raised by management.

MANAGEMENT PROFITABILITY. The Board also considered the level of profits realized by the Manager and its affiliates in connection with the operation of each Fund. In this respect, the Board reviewed the Fund profitability analysis that addresses the overall profitability of Franklin Templeton’s U.S. fund business, as well as its profits in providing management and other services to each of the individual funds during the 12-month period ended September 30, 2011, being the most recent fiscal year-end for Franklin Resources, Inc., the Manager’s parent. In reviewing the analysis, specific attention was given to the methodology

SI-6

Franklin Templeton Variable Insurance Products Trust

Shareholder Information (continued)

Board Review of Investment Management Agreement (continued)

followed in allocating costs to each Fund, it being recognized that allocation methodologies are inherently subjective and various allocation methodologies may each be reasonable while producing different results. In this respect, the Board noted that, while being continuously refined and reflecting changes in the Manager’s own cost accounting, the allocation methodology was consistent with that followed in profitability report presentations for the Funds made in prior years and that the Funds’ independent registered public accounting firm had been engaged by the Manager to review the reasonableness of the allocation methodologies solely for use by the Funds’ Board in reference to the profitability analysis. In reviewing and discussing such analysis, management discussed with the Board its belief that costs incurred in establishing the infrastructure necessary for the type of mutual fund operations conducted by the Manager and its affiliates may not be fully reflected in the expenses allocated to each Fund in determining its profitability, as well as the fact that the level of profits, to a certain extent, reflected operational cost savings and efficiencies initiated by management. The Board also took into account management’s expenditures in improving services provided the Funds, as well as the need to implement systems to meet additional regulatory and compliance requirements resulting from statutes such as the Sarbanes-Oxley and Dodd-Frank Acts and recent SEC and other regulatory requirements. In addition, the Board considered a third-party study comparing the profitability of the Manager’s parent on an overall basis to other publicly held managers broken down to show profitability from management operations exclusive of distribution expenses, as well as profitability including distribution expenses. The Board also considered the extent to which the Manager and its affiliates might derive ancillary benefits from Fund operations, including potential benefits resulting from allocation of fund brokerage and the use of commission dollars to pay for research. Based upon its consideration of all these factors, the Board determined that the level of profits realized by the Manager and its affiliates from providing services to each Fund was not excessive in view of the nature, quality and extent of services provided.

ECONOMIES OF SCALE. The Board also considered whether economies of scale are realized by the Manager as the Funds grow larger and the extent to which this is reflected in the level of management fees charged. While recognizing that any precise determination is inherently subjective, the Board noted that based upon the Fund profitability analysis, it appears that as some funds get larger, at some point economies of scale do result in the Manager realizing a larger profit margin on management services provided such a fund. The Board also noted that economies of scale are shared with a fund and its shareholders through management fee breakpoints so that as a fund grows in size, its effective management fee rate declines. In the case of Franklin Templeton VIP Founding Funds Allocation Fund, the management fees of the underlying funds in which it invests have management fee breakpoints that extend beyond their existing asset sizes, and in the case of each of the other Funds, their management fees contain breakpoints that extend beyond their existing asset sizes. To the extent economies of scale may be realized by the manager and its affiliates, the Board believed the schedule of investment management fees provides a sharing of benefits for each Fund and its shareholders.

Proxy Voting Policies and Procedures

The Trust’s investment manager has established Proxy Voting Policies and Procedures (Policies) that the Trust uses to determine how to vote proxies relating to portfolio securities. Shareholders may view the Trust’s complete Policies online at franklintempleton.com. Alternatively, shareholders may request copies of the Policies free of charge by calling the Proxy Group collect at (954) 527-7678 or by sending a written request to: Franklin Templeton Companies, LLC, 300 S.E. 2nd Street, Fort Lauderdale, FL 33301, Attention: Proxy Group. Copies of the Trust’s proxy voting records are also made available online at franklintempleton.com and posted on the U.S. Securities and Exchange Commission’s website at sec.gov and reflect the most recent 12-month period ended June 30.

Quarterly Statement of Investments

The Trust files a complete statement of investments with the U.S. Securities and Exchange Commission for the first and third quarters for each fiscal year on Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission’s website at sec.gov. The filed form may also be viewed and copied at the Commission’s Public Reference Room in Washington, DC. Information regarding the operations of the Public Reference Room may be obtained by calling (800) SEC-0330.

SI-7

VALUE

BLEND

GROWTH

SECTOR

GLOBAL

INTERNATIONAL

HYBRID

ASSET ALLOCATION

FIXED INCOME


		< GAIN FROM OUR PERSPECTIVE^® >

Semiannual Report

FRANKLIN TEMPLETON

VARIABLE INSURANCE PRODUCTS TRUST

Investment Managers

Franklin Advisers, Inc.

Franklin Advisory Services, LLC

Franklin Mutual Advisers, LLC

Franklin Templeton Institutional, LLC

Templeton Asset Management, Ltd.

Templeton Global Advisors Limited

Templeton Investment Counsel, LLC

Fund Administrator

Franklin Templeton Services, LLC

Distributor

Franklin Templeton Distributors, Inc.

Franklin Templeton Variable Insurance Products Trust (FTVIP) shares are not offered to the public; they are offered and sold only to: (1) insurance company separate accounts (Separate Account) to serve as the underlying investment vehicle for variable contracts; (2) certain qualified plans; and (3) other mutual funds (funds of funds).

Authorized for distribution to investors in Separate Accounts only when accompanied or preceded by the current prospectus for the applicable contract, which includes the Separate Account and the FTVIP prospectuses. Investors should carefully consider a fund’s investment goals, risks, charges and expenses before investing. The prospectus contains this and other information; please read it carefully before investing.

To ensure the highest quality of service, telephone calls to or from our service departments may be monitored, recorded and accessed. These calls can be identified by the presence of a regular beeping tone.


© 2012 Franklin Templeton Investments. All rights reserved.		VIP2 S 08/12

Item 2.

Code of Ethics.

(a)	The Registrant has adopted a code of ethics that applies to its principal executive officers and principal financial and accounting officer.

(c)

N/A

(d)

N/A

(f)	Pursuant to Item 12(a)(1), the Registrant is attaching as an exhibit a copy of its code of ethics that applies to its principal executive officers and principal financial and accounting officer.

Item 3.

Audit Committee Financial Expert.

(a)	(1) The Registrant has an audit committee financial expert serving on its audit committee.

(2) The audit committee financial expert is John B. Wilson and he is “Independent” as defined under the relevant Securities and Exchange Commission Rules and Releases.


Item 4. Principal Accountant Fees and Services.		N/A

Item 5. Audit Committee of Listed Registrants.		N/A

Item 6. Schedule of Investments.		N/A

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.		N/A

Item 8. Portfolio Managers of Closed-End Management Investment Companies.		N/A

Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers.		N/A

Item 10.

Submission of Matters to a vote of Security Holders.

There have been no changes to the procedures by which shareholders may recommend nominees to the Registrant’s Board of Trustees that would require disclosure herein.

Item 11.

Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures. The Registrant maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Registrant’s filings under the Securities Exchange Act of 1934 and the Investment Company Act of 1940 is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission. Such information is accumulated and communicated to the Registrant’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. The Registrant’s management, including the principal executive officer and the principal financial officer, recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Within 90 days prior to the filing date of this Shareholder Report on Form N-CSR, the Registrant had carried out an evaluation, under the supervision and with the participation of the Registrant’s management, including the Registrant’s principal executive officer and the Registrant’s principal financial officer, of the effectiveness of the design and operation of the Registrant’s disclosure controls and procedures. Based on such evaluation, the Registrant’s principal executive officer and principal financial officer concluded that the Registrant’s disclosure controls and procedures are effective.

(b) Changes in Internal Controls. There have been no significant changes in the Registrant’s internal controls or in other factors that could significantly affect the internal controls subsequent to the date of their evaluation in connection with the preparation of this Shareholder Report on Form N-CSR.

Item 12.

Exhibits.

(a)

(1) Code of Ethics

(a)

(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Laura F. Fergerson, Chief Executive Officer – Finance and Administration, and Gaston Gardey, Chief Financial Officer and Chief Accounting Officer

(b)

Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Laura F. Fergerson, Chief Executive Officer – Finance and Administration, and Gaston Gardey, Chief Financial Officer and Chief Accounting Officer

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST




By		/s/ LAURA F. FERGERSON
		Laura F. Fergerson Chief Executive Officer – Finance and Administration

Date August 24, 2012

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.




By		/s/ LAURA F. FERGERSON
		Laura F. Fergerson Chief Executive Officer – Finance and Administration

Date August 24, 2012




By		/s/ GASTON GARDEY
		Gaston Gardey Chief Financial Officer and Chief Accounting Officer

Date August 24, 2012