Franklin Templeton Distributors, Inc. (Distributors) and/or its affiliates may provide financial support to securities dealers that sell shares of Franklin Templeton funds, or participate in the offering of variable insurance products that invest in the Trust (VIP Qualifying Dealers); such financial support may be made by payments from Distributors' and/or its affiliates' resources, including from Distributors' retention of underwriting concessions and, in the case of Rule 12b-1 share classes, from payments to Distributors under such plans.

Distributors makes these payments in connection with VIP Qualifying Dealers' efforts to educate financial advisors about our funds. A number of factors will be considered in determining payments, including such dealer's sales, assets and redemption rates, and the quality of the dealer's relationship with Distributors. Distributors will, on an annual basis, determine the advisability of continuing these payments. To the extent permitted by SEC and FINRA rules and other applicable laws and regulations, Distributors and/or its affiliates may pay or allow other promotional incentives or payments to dealers. Sale of shares of the Funds, as well as shares of other Franklin Templeton funds, is not considered a factor in the selection of securities dealers to execute the Funds' portfolio transactions. Accordingly, the allocation of portfolio transactions for execution by VIP Qualifying Dealers is not considered marketing support payments.

You can find further details in the SAI about the payments made by Distributors and/or its affiliates and the services provided by your VIP Qualifying Dealer. While your insurance company's fees and charges are generally disclosed in the insurance contract prospectus, your VIP Qualifying Dealer may charge you additional fees or commissions other than those disclosed in this prospectus. You can ask your insurance company and VIP Qualifying Dealer for information about any payments they receive from Distributors and/or its affiliates and any services they provide, as well as about fees and/or commissions they charge. These payments and other fees and charges are not reflected in the fee table included in this prospectus. Additional disclosure may be included in the insurance contract prospectus.

A description of the Trust's policies and procedures regarding the release of portfolio holdings information for each Fund of the Trust (collectively, the "Fund") is also available in the Trust's SAI. Portfolio holdings information can be viewed online at franklintempleton.com.

Contract Owners should receive financial reports for the Fund related to their Contract from the sponsoring Insurer every six months.

Franklin Templeton Services, LLC provides business administration services and facilities for the Fund and makes certain payments (see the SAI for more information) to insurance companies out of its own resources for certain administrative services.

Distributions and Taxes

Each Fund (sometimes referred to as, “the Fund”) intends to pay income dividends at least annually from its net investment income. Capital gains, if any, may be paid at least annually. The amount of any distribution will vary, and there is no guarantee the Fund will pay either income dividends or capital gain distributions.

The Trust consists of multiple Funds each of which for federal income tax purposes is treated separately from any other. Each Fund expects to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). Accordingly, the assets, income and distributions of the Fund are considered separately for purposes of determining whether the Fund qualifies as a regulated investment company. If the Fund so qualifies, it will not be subject to federal income tax on the portion of its income and gains that it distributes to shareholders. Additionally, each Fund intends to comply with the diversification requirements imposed by Section 817(h) of the Code.

For federal income tax purposes, the insurance companies and their separate accounts are treated as the owners of the shares of the Fund selected as an investment option rather than the purchasers of a variable annuity contract or variable life insurance policy (variable contracts). In light of the tax-favored status of life insurance company separate accounts, there should be no adverse federal income tax consequences to them as a result of their buying, holding, exchanging or selling Fund shares or on their receipt of Fund distributions, subject to applicable limitations under the Code.

Insurance companies offer variable annuity and variable life insurance products to investors including pension plans (Contracts), through separate accounts (Insurers). When shares of the Fund are investment options of Contracts, separate accounts, and not the owners of the Contracts including group contract and pension plan certificate holders (Contract Owners), are generally the shareholders of the Fund. As a result, it is anticipated that any income dividends or capital gains distributions paid by the Fund will be exempt from current taxation to the purchaser of such variable contracts if left to accumulate within a variable contract. Withdrawals from such contracts may be subject to ordinary income tax plus a 10% penalty tax if made before age 59 1/2. For more information on taxes, please refer to the accompanying prospectus of the annuity or life insurance program for which shares of the Fund are underlying investment options.

Other tax information. This discussion of “Distributions and Taxes” is for general information only and is not tax advice. You should consult your own tax advisor regarding your particular circumstances and about any federal, state or local tax consequences before making an investment in a variable contract or the Fund.

Fund Account Information

Buying Shares

Shares of the Fund are sold at net asset value (NAV). When sold in connection with Contracts, the Fund corresponds with the investment options offered by the Insurer to Contract Owners. The board of trustees monitors the Fund for the existence of any material irreconcilable conflicts of interest between different types of their separate account investors. If there were any such conflicts, the board of trustees will determine what action, if any, shall be taken in response. Please refer to the accompanying contract prospectus for information on how to select the Fund as an investment option.

Contract Owners' payments will be allocated by the insurance company separate account to sub-accounts that purchase shares of the Fund corresponding with the sub-account chosen by the Contract Owner, and are subject to any limits or conditions in the contract. Requests to buy shares are processed at the NAV next calculated after we or our designees receive the request in proper form. Please refer to your Contract prospectus or other disclosure document for further information. The Fund does not issue share certificates.

Selling Shares

An Insurer that holds shares of the Fund in connection with a Contract sells shares of the Fund to make benefit or surrender payments or to execute exchanges (transfers) between investment options under the terms of the Contract.

Exchanging Shares

Contract Owners may exchange interests in sub-accounts of an insurance company separate account that corresponds with shares of any one class or Fund, for interests in sub-accounts that correspond with shares of other classes or Fund, subject to the terms and any specific limitations on the exchange (or "transfer") privilege described in the Contract prospectus.

Frequent exchanges or excessive trading can harm performance and interfere with Fund portfolio management or operations and increase Fund costs. The Funds discourage short-term or excessive trading and may seek to restrict or reject such trading (please see "Fund Account Information - Market Timing Trading Policy," below).

Market Timing Trading Policy

The board of trustees has adopted the following policies and procedures with respect to market timing (Market Timing Trading Policy):

Market timing generally. The Fund discourages and does not intend to accommodate short-term or frequent purchases and redemptions of fund shares, often referred to as "market timing," and asks its Fund of Fund investors and participating Insurers for their cooperation in trying to discourage such activity in their separate accounts by Contract Owners and their financial advisors. The Fund intends to seek to restrict or reject such trading or take other action, as described below, if in the judgment of the Fund manager or transfer agent such trading may interfere with the efficient management of the Fund's portfolio, may materially increase the Fund's transaction costs, administrative costs or taxes, or may otherwise be detrimental to the interests of the Fund and its shareholders.

Market timing consequences. If information regarding trading activity in the Fund or in any other Franklin Templeton fund or non-Franklin Templeton fund is brought to the attention of the Fund's investment manager or transfer agent and based on that information the Fund or its investment manager or transfer agent in their sole discretion conclude that such trading may be detrimental to the Fund as described in this Market Timing Trading Policy, the Fund may temporarily or permanently bar future purchases into the Fund or, alternatively, may limit the amount, number or frequency of any future purchases and/or the method by which an Insurer or a Fund of Funds may request future purchases and redemptions (including purchases and/or redemptions by an exchange or transfer between the Fund and any other mutual fund). In determining what actions should be taken, the Fund's transfer agent may consider a variety of factors, including the potential impact of such remedial actions on the Fund or its shareholders. If the Fund is a "fund of funds," the Fund's transfer agent may take into account the impact of the trading activity and of any proposed remedial action on both the Fund and the underlying funds in which the Fund invests.

In considering trading activity, the Fund may consider, among other factors, trading history both directly and, if known, through financial intermediaries, in the Fund, in other Franklin Templeton funds, in non-Franklin Templeton mutual funds, or in accounts under common control or ownership.

Market timing through Insurers. As a Contract Owner you are also subject to this policy. An Insurer's order for purchases and/or redemptions pursuant to a Contract Owner's instructions (including purchases and/or redemptions by an exchange or transfer between the Fund and any mutual fund) are submitted pursuant to aggregated orders (Aggregated Orders). A fund of fund's order for purchases and/or redemptions pursuant to its investors' instructions are also submitted pursuant to Aggregated Orders. While the Fund will encourage Insurers and funds of funds to apply the Fund's Market Timing Trading Policy to their investors, the Fund is limited in its ability to monitor the trading activity or enforce the Fund's Market Timing Trading Policy because Insurers and funds of funds have the relationships with, and are responsible for maintaining the account records of, the individual investors. For example, should it occur, the Fund may not be able to detect market timing that may be facilitated by financial intermediaries or made difficult to identify in the Aggregated Orders used by Insurers and Fund of Fund investors.

Therefore, the Fund or its agent selectively monitor the Aggregated Orders used by Insurers and Fund of Fund investors for purchases, exchanges and redemptions in respect of all their investors and seek the cooperation of Insurers and Fund of Fund investors to apply the Fund's Market Timing Trading Policy. There may be legal and technological limitations on the ability of an Insurer or Fund of Fund to impose trading restrictions and to apply the Fund's Market Timing Trading Policy to their investors through such methods as implementing short-term trading limitations or restrictions, assessing the Fund's redemption fee (if applicable) and monitoring trading activity for what might be market timing. As a result, the Fund may not be able to determine whether trading by Insurers or funds of funds in respect of their investors is contrary to the Fund's Market Timing Trading Policy.

Risks from market timers. Depending on various factors, including the size of the Fund, the amount of assets the portfolio manager typically maintains in cash or cash equivalents and the dollar amount and number and frequency of trades and the types of securities in which the Fund typically invests, short-term or frequent trading may interfere with the efficient management of the Fund's portfolio, increase the Fund's transaction costs, administrative costs and taxes and/or impact Fund performance.

In addition, if the nature of the Fund's portfolio holdings exposes the Fund to "arbitrage market timers," the value of the Fund's shares may be diluted if redeeming shareholders receive proceeds (and buying shareholders receive shares) based upon net asset values which do not reflect appropriate fair value prices. Arbitrage market timing occurs when an investor seeks to take advantage of the possible delay between the change in the value of a mutual fund's portfolio holdings and the reflection of the change in the fund's net asset value per share. A fund that invests significantly in foreign securities may be particularly vulnerable to arbitrage market timing. Arbitrage market timing in foreign investments may occur because of time zone differences between the foreign markets on which the Fund's international portfolio securities trade and the time as of which the Fund's NAV is calculated. Arbitrage market timers may purchase shares of the Fund based on events occurring after foreign market closing prices are established, but before calculation of the Fund's NAV. One of the objectives of the Trust's fair value pricing procedures is to minimize the possibilities of this type of arbitrage market timing (please see "Fund Account Information - Valuation - Foreign Securities – Potential Impact of Time Zones and Market Holidays").

Since the Fund may invest significantly in securities that are, or may be, restricted, unlisted, traded infrequently, thinly traded, or relatively illiquid (relatively illiquid securities), the Fund may be particularly vulnerable to arbitrage market timing. An arbitrage market timer may seek to take advantage of a possible differential between the last available market prices for one or more of these relatively illiquid securities that are used to calculate the Fund's net asset value and the latest indications of market values for those securities. One of the objectives of the Fund's fair value pricing procedures is to minimize the possibilities of this type of arbitrage market timing (please see "Fund Account Information - Fair Valuation – Individual Securities" under the heading "Fund Account Policies", below).

The Fund is currently using several methods to reduce the risk of market timing. These methods include:

seeking the cooperation of Insurers and funds of funds to assist the Fund in identifying potential market timing activity;
committing staff to selectively review on a continuing basis recent trading activity in order to identify trading activity that may be contrary to the Fund's Market Timing Trading Policy;
monitoring potential price differentials following the close of trading in foreign markets to determine whether the application of fair value pricing procedures is warranted; and
seeking the cooperation of financial intermediaries to assist the Fund in identifying market timing activity.

Though these methods involve judgments that are inherently subjective and involve some selectivity in their application, the Fund seeks to make judgments and applications that are consistent with the interests of the Fund's shareholders. There is no assurance that the Fund or its agents will gain access to any or all information necessary to detect market timing in Insurers' separate accounts. While the Fund will seek to take actions (directly and with the assistance of Insurers) that will detect market timing, it cannot represent that such trading activity can be minimized or completely eliminated.

Revocation of market timing trades. Transactions placed in violation of a Fund's Market Timing Trading Policy or exchange limit guidelines are not necessarily deemed accepted by the Fund and may be cancelled or revoked by the Fund, in full or in part, as soon as practicable following receipt by the Fund and prompt inquiry of the intermediary.

Involuntary Redemptions

The Fund reserves the right to close an account (and involuntarily redeem any investment) if it is deemed to have engaged in activities that are illegal (such as late trading) or otherwise believed to be detrimental to the Fund (such as market timing), to the fullest extent permitted by law and consistent with the best interests of the Fund and its shareholders. Thus, for example, if upon inquiry the Fund and insurance company identify a contract owner that has engaged in late trading or market timing activities, the Fund may advise the insurance company that it will not accept future investments, or is redeeming any investment related to that contract owner. Involuntary redemptions may be in cash or in kind.

Fund Account Policies

CALCULATING SHARE PRICE

When they buy and sell shares, the Fund's shareholders pay and receive the net asset value (NAV) per share.

The value of a mutual fund is determined by deducting the fund's liabilities from the total assets of the portfolio. The NAV per share of a class of the Fund is determined by dividing the net asset value of the Fund's share class by the applicable number of shares outstanding of that share class. The Fund's NAV does not include any fee or sales charge imposed by variable insurance contracts for which the Fund is an investment option or funds of funds that purchase shares of the Fund. Investors should consult the contract prospectus, disclosure document or Fund of Funds prospectus for more information.

The Fund calculates the NAV per share each business day as of 1 p.m. Pacific time which normally coincides with the close of trading on the New York Stock Exchange (NYSE). The Fund does not calculate the NAV on days the NYSE is closed for trading, which include New Year’s Day, Martin Luther King Jr. Day, President’s Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. If the NYSE has a scheduled early close or unscheduled early close, the Fund’s share price would still be determined as of 1 p.m. Pacific time/4 p.m. Eastern time.

When determining the NAV, the Fund values cash and receivables at their realizable amounts, and records interest as accrued and dividends on the ex-dividend date. The Fund generally utilizes two independent pricing services to assist in determining a current market value for each security. If market quotations are readily available for portfolio securities listed on a securities exchange (including exchange-traded funds), the Fund values those securities at the last quoted sale price or the official closing price of the day, respectively, or, if there is no reported sale, within the range of the most recent quoted bid and ask prices. The Fund values over-the-counter portfolio securities within the range of the most recent bid and ask prices. If portfolio securities trade both in the over-the-counter market and on a stock exchange, the Fund values them according to the broadest and most representative market.

Generally, trading in corporate bonds, U.S. government securities and money market instruments is substantially completed each day at various times before the close of the NYSE. The value of these securities used in computing the NAV is determined as of such times. Occasionally, events affecting the values of these securities may occur between the times at which they are determined and the close of the NYSE that will not be reflected in the computation of the NAV. The Fund relies on third party pricing vendors to monitor for events materially affecting the value of these securities during this period. If an event occurs, the third party pricing vendors will provide revised values to the Fund.

FAIR VALUATION - INDIVIDUAL SECURITIES

Since the Fund may invest in securities that are restricted, unlisted, traded infrequently, thinly traded, or relatively illiquid, there is the possibility of a differential between the last available market prices for one or more of those securities and the latest indications of market values for those securities. The Fund has procedures, approved by the board of trustees, to determine the fair value of individual securities and other assets for which market prices are not readily available (such as certain restricted or unlisted securities and private placements) or which may not be reliably priced (such as in the case of trade suspensions or halts, price movement limits set by certain foreign markets, and thinly traded or illiquid securities). Some methods for valuing these securities may include: fundamental analysis (earnings multiple, etc.), matrix pricing, discounts from market prices of similar securities, or discounts applied due to the nature and duration of restrictions on the disposition of the securities. The board of trustees oversees the application of fair value pricing procedures.

The application of fair value pricing procedures represents a good faith determination based upon specifically applied procedures. There can be no assurance that the Funds could obtain the fair value assigned to a security if they were able to sell the security at approximately the time at which a Fund determines its NAV per share.

SECURITY VALUATION - U.S. PASS-THROUGH SECURITIES, CMO, ABS, MBS

Mortgage pass-through securities (such as Ginnie Mae, Fannie Mae and Freddie Mac), other mortgage-backed securities (MBS), collateralized mortgage obligations (CMOs) and asset-backed securities (ABS), generally trade in the over-the-counter market rather than on a securities exchange. The Fund may value these portfolio securities by utilizing quotations from bond dealers, information with respect to bond and note transactions and may rely on independent pricing services. The Fund's pricing services use valuation models or matrix pricing to determine current value. In general, they use information with respect to comparable bond and note transactions, quotations from bond dealers or by reference to other securities that are considered comparable in such characteristics as rating, interest rate, maturity date, option adjusted spread models, prepayment projections, interest rate spreads and yield curves. Matrix pricing is considered a form of fair value pricing.

SECURITY VALUATION - CORPORATE DEBT SECURITIES

Corporate debt securities generally trade in the over-the-counter market rather than on a securities exchange. The Fund may value these portfolio securities by utilizing quotations from bond dealers, information with respect to bond and note transactions and may rely on independent pricing services to assist in determining a current market value for each security. The Fund's pricing services uses independent quotations from bond dealers and bond market activity to determine current value.

SECURITY VALUATION - SENIOR SECURED CORPORATE LOANS

Senior secured corporate loans with floating or variable interest rates generally trade in the over-the-counter market rather than on a securities exchange. The Fund may value these portfolio securities by utilizing quotations from loan dealers and other financial institutions, information with respect to bond and note transactions and may rely on independent pricing services to assist in determining a current market value for each security. These pricing services may utilize independent market quotations from loan dealers or financial institutions and may incorporate valuation methodologies that incorporate multiple bond characteristics. These characteristics may include dealer quotes, issuer type, coupon, maturity, weighted average maturity, interest rate spreads and yield curves, cash flow and credit risk/quality analysis.

SECURITY VALUATION – MUNICIPAL SECURITIES – MATRIX PRICING (FAIR VALUATION)

Municipal securities generally trade in the over-the-counter market rather than on a securities exchange. The Fund's pricing services use valuation models or matrix pricing to determine current value. In general, they use information with respect to comparable bond and note transactions, quotations from bond dealers or by reference to other securities that are considered comparable in such characteristics as rating, interest rate and maturity date. Matrix pricing is considered a form of fair value pricing.

SECURITY VALUATION - OPTIONS

The Fund values actively traded call options at their market price as determined above. The current market value of any option the Fund holds is its last sale price on the relevant exchange before the Fund values its assets. If there are no sales that day or if the last sale price is outside the bid and ask prices, the Fund values options within the range of the current closing bid and ask prices if the Fund believes the valuation fairly reflects the contract's market value.

VALUATION - FOREIGN SECURITIES - COMPUTATION OF U.S. EQUIVALENT VALUE

The Fund generally determines the value of a foreign security as of the close of trading on the foreign stock exchange on which the security is primarily traded, or as of the close of trading on the NYSE, if 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 (generally 1:00 p.m. Pacific time) on the day that the value of the foreign security is determined. If no sale is reported at that time, the foreign security will be valued within the range of the most recent quoted bid and ask prices. Occasionally events (such as repatriation limits or restrictions) 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 of trustees.

VALUATION – FOREIGN SECURITIES – POTENTIAL IMPACT OF TIME ZONES AND MARKET HOLIDAYS

Trading in securities on foreign securities stock exchanges and over-the-counter markets, such as those in Europe and Asia, may be completed well before the close of business on the NYSE on each day that the NYSE is open. 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 availability (including the reliability) of the value of a foreign portfolio security held by the Fund. As a result, the Fund may be susceptible to what is referred to as "time zone arbitrage." Certain investors in the Fund may seek to take advantage of discrepancies in the value of the Fund's portfolio securities as determined by the foreign market at its close and the latest indications of value attributable to the portfolio securities at the time the Fund's NAV is computed. Trading by these investors, often referred to as "arbitrage market timers," may dilute the value of the Fund's shares, if such discrepancies in security values actually exist. To attempt to minimize the possibilities for time zone arbitrage, and in accordance with procedures established and approved by the board of trustees, the investment managers monitor 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 (ADRs), futures contracts and exchange traded funds).

These price movements are measured against established trigger thresholds for each specific market proxy to assist in determining if an event has occurred that might call into question the availability (including the reliability) of the values of foreign securities between the times at which they are determined and the close of the NYSE. If such an event occurs, the foreign securities may be valued using fair value procedures established and approved by the board of trustees. In certain circumstances these procedures include the use of independent pricing services. The intended effect of applying fair value pricing is to compute an NAV that accurately reflects the value of a Fund's portfolio at the time that the NAV is calculated, to discourage potential arbitrage market timing in Fund shares, to mitigate the dilutive impact of such attempted arbitrage market timing and to be fair to purchasing, redeeming and existing shareholders. However, the application of fair value pricing procedures may, on occasion, worsen rather than mitigate the potential dilutive impact of shareholder trading.

In addition, trading in foreign portfolio securities generally, or in securities markets in a particular country or countries, may not take place on every NYSE business day. Furthermore, trading takes place in various foreign markets on days that are not business days for the NYSE, and on which the Fund's NAV is not calculated. Thus, the calculation of the Fund's NAV does not take place contemporaneously with the determination of the prices of many of the foreign portfolio securities used in the calculation. If events affecting the last determined values of these foreign securities occur (determined through the monitoring process described above), the securities will be valued at fair value determined in good faith in accordance with the Fund's fair value procedures established and approved by the board of trustees.

SHARE CLASSES

Class 1, Class 2, Class 3, Class 4 and Class 5 shares of the Funds are identical except that Class 2, Class 3, Class 4 and Class 5 each have a distribution plan or "rule 12b-1" plan, as described in their respective prospectuses for Class 2, Class 3, Class 4 and Class 5 shares. Class 3 shares may assess a 1.00% redemption fee, as described in the prospectuses for Class 3 shares.

ADDITIONAL POLICIES

Please note that the Fund maintains additional policies and reserves certain rights, including:

The Fund may restrict, reject or cancel any purchase orders, including an exchange request.
At any time, the Fund may establish or change investment minimums.
The Fund may make material changes to or discontinue the exchange privilege on 60 days' notice to insurance company or Fund of Fund shareholders, or as otherwise provided by law.
Purchases of shares of the Fund (including the purchase side of an exchange) may be made only when such shares are eligible for sale in the appropriate state or jurisdiction.
In unusual circumstances, we may temporarily suspend redemptions or postpone the payment of proceeds, as allowed by federal securities laws.
For redemptions over a certain amount, the Fund may pay redemption proceeds in securities or other assets rather than cash if the investment manager determines it is in the best interest of the Fund, consistent with applicable law.
To permit their investors to obtain the current price, participating insurance companies and funds of funds are responsible for transmitting all orders to the Fund promptly.

Questions

More detailed information about the Trust and the Fund's account policies can be found in the Fund's SAI. If you have any questions about the Fund, you can write to us at One Franklin Parkway, P.O. Box 7777, San Mateo, CA 94403-7777. You can also call us at 1-800/362-6243 (a toll-free number). For your protection and to help ensure we provide you with quality service, all calls may be monitored or recorded.

FOR MORE INFORMATION

For information on the Fund, including a free copy of the Fund's prospectus and Statement of Additional Information, and the Fund's Annual and Semiannual Reports, contact your financial advisor or the insurance company offering your Contract.

Shares of the insurance funds of Franklin Templeton Variable Insurance Products Trust (FTVIPT) are not offered to the public; they are offered and sold only to: (1) insurance company separate accounts to serve as the underlying investment vehicles for variable contracts; (2) certain qualified plans; and (3) other mutual funds (funds of funds).

Not all Funds and classes are available in all Contracts. For information on the terms of investment in a Contract, please consult the Contract prospectus that accompanies this Fund prospectus.

You can learn more about the Fund in the following documents:

Annual/Semiannual Fund Reports to Shareholders

Include a discussion of recent market conditions and Fund strategies that significantly affected Fund performance during its last fiscal year, financial statements, detailed performance information, portfolio holdings and, in the annual report only, the Independent Registered Public Accounting Firm's report.

Statement of Additional Information (SAI)

Contains more information about the Fund, its investments, policies, and risks. It is incorporated by reference into (is legally a part of) this prospectus.

You also can obtain information about the Funds by visiting the SEC's Public Reference Room in Washington, DC (phone 1-202/551-8090) or the EDGAR Database on the SEC's Internet site at http://www.sec.gov. You can obtain copies of this information, after paying a duplicating fee, by writing to the SEC's Public Reference Section, 100 F Street, N.W., Washington, DC 20549-1520 or by electronic request at the following email address: publicinfo@sec.gov.

Investment Company Act file #811-05583
© 2013 Franklin Templeton Investments. All rights reserved.

VIP1 P 05/13

May 1, 2013
The U.S. Securities and Exchange Commission (SEC) has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense.

Class 2

Franklin Flex Cap Growth Securities Fund
Franklin Global Real Estate Securities Fund
Franklin Growth and Income Securities Fund
Franklin High Income Securities Fund
Franklin Income Securities Fund
Franklin Large Cap Growth Securities Fund
Franklin Large Cap Value Securities Fund
Franklin Rising Dividends Securities Fund
Franklin Small Cap Value Securities Fund
Franklin Small-Mid Cap Growth Securities Fund
Franklin Strategic Income Securities Fund
Franklin Templeton VIP Founding Funds Allocation Fund
Franklin U.S. Government Fund
Mutual Global Discovery Securities Fund
Mutual International Securities Fund
Mutual Shares Securities Fund
Templeton Developing Markets Securities Fund
Templeton Foreign Securities Fund
Templeton Global Bond Securities Fund
Templeton Growth Securities Fund

PROSPECTUS

Franklin Templeton Variable Insurance Products Trust

		Contents

		FUND SUMMARIES
INFORMATION ABOUT THE FUND YOU SHOULD KNOW BEFORE INVESTING		Franklin Flex Cap Growth Securities Fund Franklin Global Real Estate Securities Fund Franklin Growth and Income Securities Fund Franklin High Income Securities Fund Franklin Income Securities Fund Franklin Large Cap Growth Securities Fund Franklin Large Cap Value Securities Fund Franklin Rising Dividends Securities Fund Franklin Small Cap Value Securities Fund Franklin Small-Mid Cap Growth Securities Fund Franklin Strategic Income Securities Fund Franklin Templeton VIP Founding Funds Allocation Fund Franklin U.S. Government Fund Mutual Global Discovery Securities Fund Mutual International Securities Fund Mutual Shares Securities Fund Templeton Developing Markets Securities Fund Templeton Foreign Securities Fund Templeton Global Bond Securities Fund Templeton Growth Securities Fund

		Overview
		Franklin Templeton Variable Insurance Products Trust

		FUND DETAILS
MORE INFORMATION ON INVESTMENT POLICIES, PRACTICES AND RISKS/FINANCIAL HIGHLIGHTS		Franklin Flex Cap Growth Securities Fund Franklin Global Real Estate Securities Fund Franklin Growth and Income Securities Fund Franklin High Income Securities Fund Franklin Income Securities Fund Franklin Large Cap Growth Securities Fund Franklin Large Cap Value Securities Fund Franklin Rising Dividends Securities Fund Franklin Small Cap Value Securities Fund Franklin Small-Mid Cap Growth Securities Fund Franklin Strategic Income Securities Fund Franklin Templeton VIP Founding Funds Allocation Fund Franklin U.S. Government Fund Mutual Global Discovery Securities Fund Mutual International Securities Fund Mutual Shares Securities Fund Templeton Developing Markets Securities Fund Templeton Foreign Securities Fund Templeton Global Bond Securities Fund Templeton Growth Securities Fund

		Additional Information, All Funds DEALER COMPENSATION PORTFOLIO HOLDINGS STATEMENTS AND REPORTS ADMINISTRATIVE SERVICES

		Distributions and Taxes INCOME AND CAPITAL GAINS DISTRIBUTIONS Tax Considerations

		FUND ACCOUNT INFORMATION
INFORMATION ABOUT FUND TRANSACTIONS AND SERVICES		Buying Shares Selling Shares Exchanging Shares Market Timing Trading Policy Involuntary Redemptions Fund Account Policies Questions

		FOR MORE INFORMATION
WHERE TO LEARN MORE ABOUT EACH FUND		Back Cover

FUND SUMMARIES

Franklin Flex Cap Growth Securities Fund

Investment Goal

Capital appreciation.

Fees and Expenses of the Fund

ANNUAL FUND OPERATING EXPENSES
(expenses that you pay each year as a percentage of the value of your investment)

	Class 2
Management fees	0.65%
Distribution and service (12b-1) fees	0.25%
Other expenses	0.29%
Total annual Fund operating expenses	1.19%
Fee waiver and/or expense reimbursement¹	-0.26%
Total annual Fund operating expenses after fee waiver and/or expense reimbursement	0.93%

1. Management 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 0.68% (other than certain non-routine expenses), until April 30, 2014. Management also has agreed in advance to reduce its fees as a result of the Fund’s investment in a Franklin Templeton money fund (acquired fund) for at least the next 12-month period. Contractual fee waiver and/or expense reimbursement agreements may not be terminated during the terms set forth above.

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of the period. The Example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. The Example reflects adjustments made to the Fund's operating expenses due to the fee waiver and/or expense reimbursement by management for the 1 Year numbers only. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

	1 Year	3 Years	5 Years	10 Years
Class 2	$ 95	$ 352	$ 629	$ 1,420

Portfolio Turnover

Principal Investment Strategies

Under normal market conditions, the Fund invests predominantly in equity securities of companies that the investment manager believes have the potential for capital appreciation. The equity securities in which the Fund invests are predominantly common stock.

The Fund has the flexibility to invest in companies located, headquartered, or operating inside and outside the United States, across the entire market capitalization spectrum from small, emerging growth companies to well-established, large-cap companies. A significant to substantial portion of the Fund's investments may be in smaller and mid-size companies.

In evaluating sector (broad industry) weightings in the Fund's investment portfolio, the investment manager considers, but may deviate from, the relative weightings of sectors in the Russell 3000^® Growth Index. Consequently, the Fund, from time to time, may have significant positions in particular sectors such as technology (including electronic technology, technology services, biotechnology and health care technology) and health care.

Principal Risks

Focus To the extent that the Fund has significant investments in one or a few sectors, such as technology, it bears more risk than a fund which always maintains broad sector diversification. Technology company stocks can be subject to abrupt or erratic price movements and have been volatile due to the rapid pace of product change and development affecting such companies. Technology companies are subject to significant competitive pressures, such as new market entrants, aggressive pricing, and tight profit margins. The biotechnology and health technology industries are affected by government regulatory requirements, regulatory approval for new drugs and medical products, patent considerations, product liability, and similar matters. The profitability of health care companies may be adversely affected by reductions in federal or state government funding or subsidies, changes in policies on health care reimbursements, regulatory approval for new drugs or medical instruments, and similar matters.

Performance

The following bar chart and table provide some indication of the risks of investing in the Fund. The bar chart shows changes in the Fund's performance from year to year for Class 2 shares. The table shows how the Fund's average annual returns for 1 year, 5 years, 10 years or since inception, as applicable, compare with those of a broad measure of market performance. The Fund's past performance is not necessarily an indication of how the Fund will perform in the future.

The inclusion of the Russell 1000^® Growth Index shows how the Fund's performance compares to a group of securities in an additional leading growth securities index. The inclusion of the S&P 500^® Index shows how the Fund's performance compares to a group of securities in an additional leading stock index.

ANNUAL TOTAL RETURNS

Best Quarter:	Q1'12	16.21%
Worst Quarter:	Q4'08	-21.49%
As of March 31, 2013, the Fund's year-to-date return was 8.55%.

AVERAGE ANNUAL TOTAL RETURNS

For the periods ended December 31, 2012

	1 Year	5 Years	Since Inception 3/1/2005
Franklin Flex Cap Growth Securities Fund - Class 2	9.26%	0.78%	3.66%
Russell 3000^® Growth Index (index reflects no deduction for fees, expenses or taxes)	15.21%	3.15%	5.62%
Russell 1000^® Growth Index (index reflects no deduction for fees, expenses or taxes)	15.26%	3.12%	5.60%
S&P 500^® Index (index reflects no deduction for fees, expenses or taxes)	16.00%	1.66%	4.36%

Investment Manager

Franklin Advisers, Inc. (Advisers)

Portfolio Managers

CONRAD B. HERRMANN, CFA Senior Vice President of Advisers and portfolio manager of the Fund since inception (2005).

MATTHEW J. MOBERG, CPA Vice President of Advisers and portfolio manager of the Fund since inception (2005).

Purchase and Sale of Fund Shares

Taxes

Payments to Sponsoring Insurance
Companies and Other Financial Intermediaries

Franklin Global Real Estate Securities Fund

Investment Goal

High total return.

Fees and Expenses of the Fund

ANNUAL FUND OPERATING EXPENSES
(expenses that you pay each year as a percentage of the value of your investment)

	Class 2
Management fees	0.80%
Distribution and service (12b-1) fees	0.25%
Other expenses	0.31%
Total annual Fund operating expenses	1.36%

Example

	1 Year	3 Years	5 Years	10 Years
Class 2	$ 138	$ 431	$ 745	$ 1,635

Portfolio Turnover

Principal Investment Strategies

A REIT is a type of real estate company that is dedicated to owning and usually operating income-producing real estate such as apartments, hotels, industrial properties, office building or shopping centers. REITs typically concentrate on a specific geographic region or property type. The Fund may also invest in issuers engaged in businesses whose products and services are related to the real estate sector.

Principal Risks

Performance

ANNUAL TOTAL RETURNS

Best Quarter:	Q3'09	26.64%
Worst Quarter:	Q4'08	-32.12%
As of March 31, 2013, the Fund's year-to-date return was 5.19%.

AVERAGE ANNUAL TOTAL RETURNS

For the periods ended December 31, 2012

	1 Year	5 Years	10 Years
Franklin Global Real Estate Securities Fund - Class 2	27.41%	-0.05%	6.81%
FTSE EPRA/NAREIT Developed Index (index reflects no deduction for fees, expenses or taxes)	28.65%	1.07%	12.08%

Investment Manager

Franklin Templeton Institutional, LLC (FT Institutional)

Portfolio Managers

WILSON MAGEE Portfolio Manager of FT Institutional and portfolio manager of the Fund since 2010.

JACK FOSTER Senior Vice President of FT Institutional and portfolio manager of the Fund since 2007.

Purchase and Sale of Fund Shares

Taxes

Payments to Sponsoring Insurance
Companies and Other Financial Intermediaries

Franklin Growth and Income Securities Fund

Investment Goal

Capital appreciation. Its secondary goal is current income.

Fees and Expenses of the Fund

ANNUAL FUND OPERATING EXPENSES
(expenses that you pay each year as a percentage of the value of your investment)

	Class 2
Management fees	0.54%
Distribution and service (12b-1) fees	0.25%
Other expenses	0.06%
Total annual Fund operating expenses	0.85%

Example

	1 Year	3 Years	5 Years	10 Years
Class 2	$ 87	$ 271	$ 471	$ 1,049

Portfolio Turnover

Principal Investment Strategies

While the Fund does not concentrate in any one industry, from time to time, based on economic conditions, it may make significant investments in certain sectors.

Principal Risks

Performance

ANNUAL TOTAL RETURNS

Best Quarter:	Q2'03	17.10%
Worst Quarter:	Q4'08	-19.04%
As of March 31, 2013, the Fund's year-to-date return was 9.63%.

AVERAGE ANNUAL TOTAL RETURNS

For the periods ended December 31, 2012

	1 Year	5 Years	10 Years
Franklin Growth & Income Securities Fund - Class 2	12.23%	1.94%	5.94%
S&P 500^® Index (index reflects no deduction for fees, expenses or taxes)	16.00%	1.66%	7.10%

Investment Manager

Franklin Advisers, Inc. (Advisers)

Portfolio Managers

ALAN E. MUSCHOTT, CFA Vice President of Advisers and portfolio manager of the Fund since 2005.

MATTHEW QUINLAN Portfolio Manager of Advisers and portfolio manager of the Fund since 2011.

KIMBERLY STRAND, CFA Portfolio Manager and Research Analyst of Advisers and portfolio manager of the Fund since May 2013.

Purchase and Sale of Fund Shares

Taxes

Payments to Sponsoring Insurance
Companies and Other Financial Intermediaries

Franklin High Income Securities Fund

Investment Goal

To earn a high level of current income. Its secondary goal is capital appreciation.

Fees and Expenses of the Fund

ANNUAL FUND OPERATING EXPENSES
(expenses that you pay each year as a percentage of the value of your investment)

	Class 2
Management fees	0.52%
Distribution and service (12b-1) fees	0.25%
Other expenses	0.06%
Total annual Fund operating expenses	0.83%

Example

	1 Year	3 Years	5 Years	10 Years
Class 2	$ 85	$ 265	$ 460	$ 1,025

Portfolio Turnover

Principal Investment Strategies

Principal Risks

Performance

The inclusion of the Lipper VIP High Current Yield Funds Classification Average shows how the Fund's performance compares with the returns of an index of funds with similar investment objectives.

ANNUAL TOTAL RETURNS

Best Quarter:	Q2'09	16.45%
Worst Quarter:	Q4'08	-15.60%
As of March 31, 2013, the Fund's year-to-date return was 2.93%.

AVERAGE ANNUAL TOTAL RETURNS

For the periods ended December 31, 2012

	1 Year	5 Years	10 Years
Franklin High Income Securities Fund - Class 2	15.56%	8.39%	9.61%
Credit Suisse High Yield Index (index reflects no deduction for fees, expenses or taxes)	14.71%	9.53%	10.25%
Lipper VIP High Current Yield Funds Classification Average (index reflects no deduction for fees, expenses or taxes)	14.09%	7.89%	8.97%

Investment Manager

Franklin Advisers, Inc. (Advisers)

Portfolio Managers

PATRICIA O'CONNOR, CFA, CPA Vice President of Advisers and portfolio manager of the Fund since 2002.

ERIC G. TAKAHA, CFA Senior Vice President of Advisers and portfolio manager of the Fund since 2005.

Purchase and Sale of Fund Shares

Taxes

Payments to Sponsoring Insurance
Companies and Other Financial Intermediaries

Franklin Income Securities Fund

Investment Goal

To maximize income while maintaining prospects for capital appreciation.

Fees and Expenses of the Fund

ANNUAL FUND OPERATING EXPENSES
(expenses that you pay each year as a percentage of the value of your investment)

	Class 2
Management fees	0.45%
Distribution and service (12b-1) fees	0.25%
Other expenses	0.02%
Total annual Fund operating expenses	0.72%

Example

	1 Year	3 Years	5 Years	10 Years
Class 2	$ 74	$ 230	$ 401	$ 894

Portfolio Turnover

Principal Investment Strategies

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 the company's management;
the company's changing financial condition and market recognition of the change;
the company's sensitivity to changes in interest rates and business conditions; and
the company's debt maturity schedules and borrowing requirements.

Principal Risks

Performance

The inclusion of the Barclays U.S. Aggregate Index shows how the Fund's performance compares to a group of securities in an additional leading bond index.

ANNUAL TOTAL RETURNS

Best Quarter:	Q2'09	17.28%
Worst Quarter:	Q3'08	-14.85%
As of March 31, 2013, the Fund's year-to-date return was 5.11%.

AVERAGE ANNUAL TOTAL RETURNS

For the periods ended December 31, 2012

	1 Year	5 Years	10 Years
Franklin Income Securities Fund - Class 2	12.65%	4.39%	8.77%
S&P 500^® Index (index reflects no deduction for fees, expenses or taxes)	16.00%	1.66%	7.10%
Barclays U.S. Aggregate Index (index reflects no deduction for fees, expenses or taxes)	4.21%	5.95%	5.18%

Investment Manager

Franklin Advisers, Inc. (Advisers)

Sub-Advisor

Templeton Investment Counsel, LLC (Investment Counsel). The term "investment manager" includes any Sub-Advisor.

Portfolio Managers

EDWARD D. PERKS, CFA Senior Vice President of Advisers and portfolio manager of the Fund since 2002.

MATTHEW QUINLAN Portfolio Manager of Advisers and portfolio manager of the Fund since December 2012.

ALEX W. PETERS, CFA Vice President of Advisers and portfolio manager of the Fund since December 2012.

CHARLES B. JOHNSON Chairman of Franklin Resources, Inc. and portfolio manager of the Fund since 1989.

Purchase and Sale of Fund Shares

Taxes

Payments to Sponsoring Insurance
Companies and Other Financial Intermediaries

Franklin Large Cap Growth Securities Fund

Investment Goal

Capital appreciation.

Fees and Expenses of the Fund

ANNUAL FUND OPERATING EXPENSES
(expenses that you pay each year as a percentage of the value of your investment)

	Class 2
Management fees	0.75%
Distribution and service (12b-1) fees	0.25%
Other expenses	0.05%
Total annual Fund operating expenses	1.05%

Example

	1 Year	3 Years	5 Years	10 Years
Class 2	$ 107	$ 334	$ 579	$ 1,283

Portfolio Turnover

Principal Investment Strategies

Principal Risks

Performance

ANNUAL TOTAL RETURNS

Best Quarter:	Q2'09	17.55%
Worst Quarter:	Q4'08	-20.03%
As of March 31, 2013, the Fund's year-to-date return was 9.26%.

AVERAGE ANNUAL TOTAL RETURNS

For the periods ended December 31, 2012

	1 Year	5 Years	10 Years
Franklin Large Cap Growth Securities Fund - Class 2	12.37%	0.96%	5.52%
S&P 500^® Index (index reflects no deduction for fees, expenses or taxes)	16.00%	1.66%	7.10%

Investment Manager

Franklin Advisers, Inc. (Advisers)

Portfolio Managers

KENT SHEPHERD, CFA Senior Vice President of Advisers and portfolio manager of the Fund since 1999.

ALEX W. PETERS, CFA Vice President of Advisers and portfolio manager of the Fund since 2005.

Purchase and Sale of Fund Shares

Taxes

Payments to Sponsoring Insurance
Companies and Other Financial Intermediaries

Franklin Large Cap Value Securities Fund

Investment Goal

Long-term capital appreciation.

Fees and Expenses of the Fund

ANNUAL FUND OPERATING EXPENSES
(expenses that you pay each year as a percentage of the value of your investment)

	Class 2
Management fees	0.76%
Distribution and service (12b-1) fees	0.25%
Other expenses	0.42%
Acquired fund fees and expenses¹	0.01%
Total annual Fund operating expenses	1.44%
Fee waiver and/or expense reimbursement²	-0.53%
Total annual Fund operating expenses after fee waiver and/or expense reimbursement¹	0.91%

2. Management 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 0.65% (other than certain non-routine expenses), until April 30, 2014. Management also has agreed in advance to reduce its fees as a result of the Fund’s investment in a Franklin Templeton money fund (acquired fund) for at least the next 12-month period. Contractual fee waiver and/or expense reimbursement agreements may not be terminated during the terms set forth above.

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of the period. The Example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. The Example reflects adjustments made to the Fund's operating expenses due to the fee waiver and/or expense reimbursement by management for the 1 Year numbers only. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

	1 Year	3 Years	5 Years	10 Years
Class 2	$ 93	$ 403	$ 737	$ 1,679

Portfolio Turnover

Principal Investment Strategies

Under normal market conditions, the Fund will invest at least 80% of its net assets in investments of large-capitalization (large-cap) companies. Large-cap companies are those with market capitalizations (share price times the number of common stock shares outstanding) that are similar in size to those in the Russell 1000^® Index at the time of purchase. The Fund may invest up to 20% of its net assets in small and mid-capitalization companies.

The Fund, from time to time, may have significant investments in particular sectors.

Principal Risks

Performance

ANNUAL TOTAL RETURNS

Best Quarter:	Q3'09	17.62%
Worst Quarter:	Q4'08	-20.88%
As of March 31, 2013, the Fund's year-to-date return was 11.38%.

AVERAGE ANNUAL TOTAL RETURNS

For the periods ended December 31, 2012

	1 Year	5 Years	Since Inception 3/1/2005
Franklin Large Cap Value Securities Fund - Class 2	14.44%	0.36%	2.68%
Russell 1000^® Value Index (index reflects no deduction for fees, expenses or taxes)	17.51%	0.59%	3.67%

Investment Manager

Franklin Advisory Services, LLC (Advisory Services)

Portfolio Managers

WILLIAM J. LIPPMAN President of Advisory Services and portfolio manager of the Fund since inception (2005).

BRUCE C. BAUGHMAN, CPA Senior Vice President of Advisory Services and portfolio manager of the Fund since inception (2005).

MARGARET MCGEE Vice President of Advisory Services and portfolio manager of the Fund since inception (2005).

DONALD G. TAYLOR, CPA Senior Vice President of Advisory Services and portfolio manager of the Fund since inception (2005).

Purchase and Sale of Fund Shares

Taxes

Payments to Sponsoring Insurance
Companies and Other Financial Intermediaries

Franklin Rising Dividends Securities Fund

Investment Goal

Long-term capital appreciation. Preservation of capital, while not a goal, is also an important consideration.

Fees and Expenses of the Fund

ANNUAL FUND OPERATING EXPENSES
(expenses that you pay each year as a percentage of the value of your investment)

	Class 2
Management fees	0.61%
Distribution and service (12b-1) fees	0.25%
Other expenses	0.02%
Total annual Fund operating expenses	0.88%

Example

	1 Year	3 Years	5 Years	10 Years
Class 2	$ 90	$ 281	$ 488	$ 1,084

Portfolio Turnover

Principal Investment Strategies

Under normal market conditions, the Fund invests at least 80% of its net assets in equity securities of financially sound companies that have paid consistently rising dividends. The Fund invests predominantly in equity securities, mostly common stocks. Companies that have paid consistently rising dividends include those companies that currently pay dividends on their common stocks and have maintained or increased their dividend rate during the last four consecutive years.

Under normal market conditions, the Fund invests at least 65% of its net assets in securities of companies that have:

consistently increased dividends in at least 8 out of the last 10 years and have not decreased dividends during that time;
increased dividends substantially (at least 100%) over the last 10 years;
reinvested earnings, paying out less than 65% of current earnings in dividends;
either long-term debt that is no more than 50% of total capitalization or senior debt that has been rated investment grade by at least one of the major bond rating organizations; and
attractive prices, either: (1) in the lower half of the stock's price/earnings ratio range for the past 10 years; or (2) less than price/earnings ratio of the Standard & Poor's^® 500 Stock Index.

The Fund may invest up to 25% of its total assets in foreign securities.

Principal Risks

Performance

ANNUAL TOTAL RETURNS

Best Quarter:	Q2'09	14.19%
Worst Quarter:	Q4'08	-15.62%
As of March 31, 2013, the Fund's year-to-date return was 11.55%.

AVERAGE ANNUAL TOTAL RETURNS

For the periods ended December 31, 2012

	1 Year	5 Years	10 Years
Franklin Rising Dividends Securities Fund - Class 2	11.96%	4.14%	7.16%
S&P 500^® Index (index reflects no deduction for fees, expenses or taxes)	16.00%	1.66%	7.10%

Investment Manager

Franklin Advisory Services, LLC (Advisory Services)

Portfolio Managers

DONALD G. TAYLOR, CPA Senior Vice President of Advisory Services and portfolio manager of the Fund since 1996.

BRUCE C. BAUGHMAN, CPA Senior Vice President of Advisory Services and portfolio manager of the Fund since inception (1992).

WILLIAM J. LIPPMAN President of Advisory Services and portfolio manager of the Fund since inception (1992).

MARGARET MCGEE Vice President of Advisory Services and portfolio manager of the Fund since inception (1992).

Purchase and Sale of Fund Shares

Taxes

Payments to Sponsoring Insurance
Companies and Other Financial Intermediaries

Franklin Small Cap Value Securities Fund

Investment Goal

Long-term total return.

Fees and Expenses of the Fund

ANNUAL FUND OPERATING EXPENSES
(expenses that you pay each year as a percentage of the value of your investment)

	Class 2
Management fees	0.51%
Distribution and service (12b-1) fees	0.25%
Other expenses	0.16%
Total annual Fund operating expenses	0.92%

Example

	1 Year	3 Years	5 Years	10 Years
Class 2	$ 94	$ 293	$ 509	$ 1,131

Portfolio Turnover

Principal Investment Strategies

The Fund may invest up to 25% of its total assets in foreign securities.

The Fund, from time to time, may have significant investments in particular sectors.

Principal Risks

Performance

ANNUAL TOTAL RETURNS

Best Quarter:	Q2'09	24.33%
Worst Quarter:	Q4'08	-27.34%
As of March 31, 2013, the Fund's year-to-date return was 10.20%.

AVERAGE ANNUAL TOTAL RETURNS

For the periods ended December 31, 2012

	1 Year	5 Years	10 Years
Franklin Small Cap Value Securities Fund - Class 2	18.39%	4.80%	9.88%
Russell 2500™ Value Index (index reflects no deduction for fees, expenses or taxes)	19.21%	4.54%	10.20%

Investment Manager

Franklin Advisory Services, LLC (Advisory Services)

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).

Purchase and Sale of Fund Shares

Taxes

Payments to Sponsoring Insurance
Companies and Other Financial Intermediaries

Franklin Small-Mid Cap Growth Securities Fund

Investment Goal

Long-term capital growth.

Fees and Expenses of the Fund

ANNUAL FUND OPERATING EXPENSES
(expenses that you pay each year as a percentage of the value of your investment)

	Class 2
Management fees	0.51%
Distribution and service (12b-1) fees	0.25%
Other expenses	0.29%
Total annual Fund operating expenses	1.05%

Example

	1 Year	3 Years	5 Years	10 Years
Class 2	$ 107	$ 334	$ 579	$ 1,283

Portfolio Turnover

Principal Investment Strategies

The Fund, from time to time, may have significant positions in particular sectors such as technology (including health care technology, technology services and electronic technology) and industrials.

Principal Risks

Performance

The inclusion of the S&P 500^® Index shows how the Fund's performance compares to a group of securities in an additional leading stock index.

ANNUAL TOTAL RETURNS

Best Quarter:	Q2'03	19.22%
Worst Quarter:	Q4'08	-27.15%
As of March 31, 2013, the Fund's year-to-date return was 11.45%.

AVERAGE ANNUAL TOTAL RETURNS

For the periods ended December 31, 2012

	1 Year	5 Years	10 Years
Franklin Small-Mid Cap Growth Securities Fund - Class 2	10.85%	2.14%	7.98%
Russell Midcap^® Growth Index (index reflects no deduction for fees, expenses or taxes)	15.81%	3.23%	10.32%
S&P 500^® Index (index reflects no deduction for fees, expenses or taxes)	16.00%	1.66%	7.10%

Investment Manager

Franklin Advisers, Inc. (Advisers)

Portfolio Managers

EDWARD B. JAMIESON President, Chief Investment Officer and Director of Advisers and portfolio manager of the Fund since 2005.

JAMES CROSS Portfolio Manager of Advisers and portfolio manager of the Fund since 2006.

MICHAEL MCCARTHY Senior Vice President of Advisers and portfolio manager of the Fund since 1995.

Purchase and Sale of Fund Shares

Taxes

Payments to Sponsoring Insurance
Companies and Other Financial Intermediaries

Franklin Strategic Income Securities Fund

Investment Goal

High level of current income. A secondary goal is long-term capital appreciation.

Fees and Expenses of the Fund

ANNUAL FUND OPERATING EXPENSES
(expenses that you pay each year as a percentage of the value of your investment)

	Class 2
Management fees	0.35%
Distribution and service (12b-1) fees	0.25%
Other expenses	0.24%
Acquired fund fees and expenses¹	0.01%
Total annual Fund operating expenses	0.85%
Fee waiver and/or expense reimbursement²	-0.01%
Total annual Fund operating expenses after fee waiver and/or expense reimbursement¹	0.84%

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of the period. The Example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. The Example reflects adjustments made to the Fund's operating expenses due to the fee waiver and/or expense reimbursement by management for the 1 Year numbers only. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

	1 Year	3 Years	5 Years	10 Years
Class 2	$ 86	$ 270	$ 470	$ 1,048

Portfolio Turnover

Principal Investment Strategies

Principal Risks

Performance

The inclusion of the Lipper Multi-Sector Income Funds Classification Average shows how the Fund's performance compares with the returns of an index of funds with similar investment objectives.

ANNUAL TOTAL RETURNS

Best Quarter:	Q2'09	9.65%
Worst Quarter:	Q4'08	-5.96%
As of March 31, 2013, the Fund's year-to-date return was 1.64%.

AVERAGE ANNUAL TOTAL RETURNS

For the periods ended December 31, 2012

	1 Year	5 Years	10 Years
Franklin Strategic Income Securities Fund - Class 2	12.75%	7.44%	8.18%
Barclays U.S. Aggregate Index (index reflects no deduction for fees, expenses or taxes)	4.21%	5.95%	5.18%
Lipper Multi-Sector Income Funds Classification Average (index reflects no deduction for fees, expenses or taxes)	11.21%	7.02%	7.39%

Investment Manager

Franklin Advisers, Inc. (Advisers)

Portfolio Managers

ERIC G. TAKAHA, CFA Senior Vice President of Advisers and portfolio manager of the Fund since inception (1999).

CHRISTOPHER J. MOLUMPHY, CFA Executive Vice President and Director of Advisers and portfolio manager of the Fund since inception (1999).

Purchase and Sale of Fund Shares

Taxes

Payments to Sponsoring Insurance
Companies and Other Financial Intermediaries

Franklin Templeton VIP Founding Funds Allocation Fund

Investment Goal

Capital appreciation. Its secondary goal is income.

Fees and Expenses of the Fund

ANNUAL FUND OPERATING EXPENSES
(expenses that you pay each year as a percentage of the value of your investment)

	Class 2
Management fees	None
Distribution and service (12b-1) fees	0.25%
Other expenses	0.11%
Acquired fund fees and expenses¹	0.65%
Total annual Fund operating expenses	1.01%
Fee waiver and/or expense reimbursement²	-0.01%
Total annual Fund operating expenses after fee waiver and/or expense reimbursement¹	1.00%

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of the period. The Example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. The Example reflects adjustments made to the Fund's operating expenses due to the fee waiver and/or expense reimbursement by management for the 1 Year numbers only. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

	1 Year	3 Years	5 Years	10 Years
Class 2	$ 102	$ 321	$ 557	$ 1,235

Portfolio Turnover

Principal Investment Strategies

Principal Risks

Performance

The inclusion of the MSCI World Index shows how the Fund's performance compares to a group of securities in an additional leading equity index.

ANNUAL TOTAL RETURNS

Best Quarter:	Q2'09	17.62%
Worst Quarter:	Q4'08	-18.21%
As of March 31, 2013, the Fund's year-to-date return was 6.93%.

AVERAGE ANNUAL TOTAL RETURNS

For the periods ended December 31, 2012

	1 Year	5 Years	Since Inception 7/2/2007
Franklin Templeton VIP Founding Funds Allocation Fund - Class 2	15.33%	0.90%	-0.48%
S&P 500^® Index (index reflects no deduction for fees, expenses or taxes)	16.00%	1.66%	1.26%
MSCI World Index (index reflects no deduction for fees, expenses or taxes)	16.54%	-0.60%	-0.53%

Investment Manager

Purchase and Sale of Fund Shares

Shares of the Fund are sold to insurance companies’ separate accounts (Insurers) to fund variable annuity or variable life insurance contracts and to qualified plans. Insurance companies offer variable annuity and variable life insurance products through separate accounts. In addition, Fund shares are held by a limited number of Insurers and qualified retirement plans. Substantial withdrawals by one or more Insurers or qualified retirement plans could reduce Fund assets, causing total Fund expenses to become higher than the numbers shown in the fees and expenses table above.

Taxes

Payments to Sponsoring Insurance
Companies and Other Financial Intermediaries

Franklin U.S. Government Fund

Investment Goal

Income.

Fees and Expenses of the Fund

ANNUAL FUND OPERATING EXPENSES
(expenses that you pay each year as a percentage of the value of your investment)

	Class 2
Management fees	0.47%
Distribution and service (12b-1) fees	0.25%
Other expenses	0.03%
Total annual Fund operating expenses	0.75%

Example

	1 Year	3 Years	5 Years	10 Years
Class 2	$ 77	$ 240	$ 417	$ 930

Portfolio Turnover

Principal Investment Strategies

The Fund may invest in U.S. Treasury STRIPS, bills, bonds and notes.

The Fund may also invest in other U.S. government securities, which may or may not be backed by the full faith and credit of the U.S. government.

Principal Risks

Performance

The inclusion of the Lipper VIP General US Government Funds Classification Average shows how the Fund's performance compares with the returns of an index of funds with similar investment objectives.

ANNUAL TOTAL RETURNS

Best Quarter:	Q4'08	4.42%
Worst Quarter:	Q2'04	-1.40%
As of March 31, 2013, the Fund's year-to-date return was -0.23%.

AVERAGE ANNUAL TOTAL RETURNS

For the periods ended December 31, 2012

	1 Year	5 Years	10 Years
Franklin U.S. Government Fund - Class 2	1.89%	4.69%	4.21%
Barclays U.S. Government Index: Intermediate Component (index reflects no deduction for fees, expenses or taxes)	1.73%	4.51%	4.10%
Lipper VIP General US Government Funds Classification Average (index reflects no deduction for fees, expenses or taxes)	2.80%	5.53%	4.53%

Investment Manager

Franklin Advisers, Inc. (Advisers)

Portfolio Managers

PAUL VARUNOK Portfolio Manager of Advisers and portfolio manager of the Fund since 2004.

PATRICK KLEIN, PH.D. Research Analyst of Advisers and portfolio manager of the Fund since 2010.

Purchase and Sale of Fund Shares

Taxes

Payments to Sponsoring Insurance
Companies and Other Financial Intermediaries

Mutual Global Discovery Securities Fund

Investment Goal

Capital appreciation.

Fees and Expenses of the Fund

ANNUAL FUND OPERATING EXPENSES
(expenses that you pay each year as a percentage of the value of your investment)

	Class 2
Management fees	0.80%
Distribution and service (12b-1) fees	0.25%
Other expenses	0.19%
Total annual Fund operating expenses	1.24%

Example

	1 Year	3 Years	5 Years	10 Years
Class 2	$ 126	$ 393	$ 681	$ 1,500

Portfolio Turnover

Principal Investment Strategies

Portfolio Selection

Principal Risks

Performance

The inclusion of the S&P 500^® Index shows how the Fund's performance compares to a group of securities in an additional leading equity index.

ANNUAL TOTAL RETURNS

Best Quarter:	Q2'03	14.48%
Worst Quarter:	Q3'11	-15.71%
As of March 31, 2013, the Fund's year-to-date return was 8.72%.

AVERAGE ANNUAL TOTAL RETURNS

For the periods ended December 31, 2012

	1 Year	5 Years	10 Years
Mutual Global Discovery Securities Fund - Class 2	13.36%	1.67%	10.21%
MSCI World Index (index reflects no deduction for fees, expenses or taxes)	16.54%	-0.60%	8.08%
S&P 500^® Index (index reflects no deduction for fees, expenses or taxes)	16.00%	1.66%	7.10%

Investment Manager

Franklin Mutual Advisers, LLC (Franklin Mutual)

Portfolio Managers

PETER A. LANGERMAN Chairman, President and Chief Executive Officer of Franklin Mutual and portfolio manager of the Fund since 2009.

PHILIPPE BRUGERE-TRELAT Executive Vice President of Franklin Mutual and portfolio manager of the Fund since 2009.

TIMOTHY RANKIN, CFA Portfolio Manager of Franklin Mutual and portfolio manager of the Fund since 2010.

Purchase and Sale of Fund Shares

Taxes

Payments to Sponsoring Insurance
Companies and Other Financial Intermediaries

Mutual International Securities Fund

Investment Goal

Capital appreciation, which may occasionally be short term. The secondary goal is income.

Fees and Expenses of the Fund

ANNUAL FUND OPERATING EXPENSES
(expenses that you pay each year as a percentage of the value of your investment)

	Class 2
Management fees	0.80%
Distribution and service (12b-1) fees	0.25%
Other expenses	5.11%
Total annual Fund operating expenses	6.16%
Fee waiver and/or expense reimbursement¹	-4.96%
Total annual Fund operating expenses after fee waiver and/or expense reimbursement	1.20%

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of the period. The Example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. The Example reflects adjustments made to the Fund's operating expenses due to the fee waiver and/or expense reimbursement by management for the 1 Year numbers only. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

	1 Year	3 Years	5 Years	10 Years
Class 2	$ 122	$ 1,386	$ 2,621	$ 5,585

Portfolio Turnover

Principal Investment Strategies

Under normal market conditions, the Fund invests at least 80% of its net assets in securities of non-U.S. issuers. The investment manager focuses the Fund’s investments on securities believed to be available at market prices less than their value based on certain recognized or objective criteria (intrinsic value). Following this value-oriented strategy, the Fund invests primarily in undervalued equity securities (securities trading at a discount to intrinsic value). The equity securities in which the Fund primarily invests are common stocks. To a lesser extent, the Fund also invests in merger arbitrage securities and the debt and equity of distressed companies.

The Fund invests primarily in securities of Asian and European companies that the investment manager believes are undervalued.

The Fund normally invests in securities from at least five different countries, although, from time to time, it may invest all of its assets in a single country. The Fund also may invest up to 20% of its total assets in securities of U.S. issuers, and securities of issuers from the Middle East and the remaining regions of the world, including emerging markets.

The Fund is not limited to pre-set maximums or minimums governing the size of the companies in which it may invest. However, the Fund currently invests the equity portion of its portfolio primarily to predominantly in mid- and large cap companies, with the remaining portion of its equity portfolio in smaller companies.

Portfolio Selection

Principal Risks

Region Focus Because the Fund invests its assets primarily in companies in a specific region, the Fund 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 values held by the Fund.

Performance

ANNUAL TOTAL RETURNS

Best Quarter:	Q1'12	12.53%
Worst Quarter:	Q3'11	-19.54%
As of March 31, 2013, the Fund's year-to-date return was 3.89%.

AVERAGE ANNUAL TOTAL RETURNS

For the periods ended December 31, 2012

	1 Year	Since Inception 6/15/2009
Mutual International Securities Fund - Class 2	17.38%	11.68%
MSCI EAFE Index Net Return (Local currency) (index reflects no deduction for fees, expenses or taxes)	17.31%	7.20%

Investment Manager

Franklin Mutual Advisers, LLC (Franklin Mutual)

Portfolio Managers

PHILIPPE BRUGERE-TRELAT Executive Vice President of Franklin Mutual and portfolio manager of the Fund since inception (2009).

ANDREW SLEEMAN, CFA Portfolio Manager of Franklin Mutual and portfolio manager of the Fund since inception (2009).

Purchase and Sale of Fund Shares

Taxes

Payments to Sponsoring Insurance
Companies and Other Financial Intermediaries

Mutual Shares Securities Fund

Investment Goal

Capital appreciation. Its secondary goal is income.

Fees and Expenses of the Fund

ANNUAL FUND OPERATING EXPENSES
(expenses that you pay each year as a percentage of the value of your investment)

	Class 2
Management fees	0.60%
Distribution and service (12b-1) fees	0.25%
Other expenses	0.11%
Total annual Fund operating expenses	0.96%

Example

	1 Year	3 Years	5 Years	10 Years
Class 2	$ 98	$ 306	$ 531	$ 1,178

Portfolio Turnover

Principal Investment Strategies

The Fund may invest a significant portion of its assets (up to 35%) in foreign securities, which may include sovereign debt and participations in foreign government debt.

Portfolio Selection

Principal Risks

Performance

ANNUAL TOTAL RETURNS

Best Quarter:	Q2'09	16.20%
Worst Quarter:	Q4'08	-21.10%
As of March 31, 2013, the Fund's year-to-date return was 9.99%.

AVERAGE ANNUAL TOTAL RETURNS

For the periods ended December 31, 2012

	1 Year	5 Years	10 Years
Mutual Shares Securities Fund - Class 2	14.24%	-0.07%	6.64%
S&P 500^® Index (index reflects no deduction for fees, expenses or taxes)	16.00%	1.66%	7.10%

Investment Manager

Franklin Mutual Advisers, LLC (Franklin Mutual)

Portfolio Managers

PETER A. LANGERMAN Chairman, President and Chief Executive Officer of Franklin Mutual and portfolio manager of the Fund since 2005.

F. DAVID SEGAL, CFA Portfolio Manager of Franklin Mutual and portfolio manager of the Fund since 2002.

DEBBIE TURNER, CFA Portfolio Manager of Franklin Mutual and portfolio manager of the Fund since 2001.

Purchase and Sale of Fund Shares

Taxes

Payments to Sponsoring Insurance
Companies and Other Financial Intermediaries

Templeton Developing Markets Securities Fund

Investment Goal

Long-term capital appreciation.

Fees and Expenses of the Fund

ANNUAL FUND OPERATING EXPENSES
(expenses that you pay each year as a percentage of the value of your investment)

	Class 2
Management fees	1.10%
Distribution and service (12b-1) fees	0.25%
Other expenses	0.25%
Total annual Fund operating expenses	1.60%

Example

	1 Year	3 Years	5 Years	10 Years
Class 2	$ 163	$ 505	$ 871	$ 1,900

Portfolio Turnover

Principal Investment Strategies

Principal Risks

Performance

The inclusion of the S&P/IFCI Composite Index shows how the Fund's performance compares to a group of securities in an additional leading emerging markets index.

ANNUAL TOTAL RETURNS

Best Quarter:	Q2'09	31.88%
Worst Quarter:	Q4'08	-28.86%
As of March 31, 2013, the Fund's year-to-date return was 1.05%.

AVERAGE ANNUAL TOTAL RETURNS

For the periods ended December 31, 2012

	1 Year	5 Years	10 Years
Templeton Developing Markets Securities Fund - Class 2	13.16%	-1.78%	13.87%
MSCI Emerging Markets Index (index reflects no deduction for fees, expenses or taxes)	18.63%	-0.61%	16.88%
S&P/IFCI Composite Index (index reflects no deduction for fees, expenses or taxes)	18.89%	-0.56%	17.50%

Investment Manager

Templeton Asset Management Ltd. (Asset Management)

Portfolio Managers

MARK MOBIUS, PH.D. Executive Chairman of Templeton Emerging Markets Group, Portfolio Manager of Asset Management and portfolio manager of the Fund since inception (1996).

TOM WU Director of Asset Management and portfolio manager of the Fund since inception (1996).

DENNIS LIM Co-Chief Executive Officer and Director of Asset Management and portfolio manager of the Fund since inception (1996).

ALLAN LAM Portfolio Manager of Asset Management and portfolio manager of the Fund since 2011.

Purchase and Sale of Fund Shares

Taxes

Payments to Sponsoring Insurance
Companies and Other Financial Intermediaries

Templeton Foreign Securities Fund

Investment Goal

Long-term capital growth.

Fees and Expenses of the Fund

ANNUAL FUND OPERATING EXPENSES
(expenses that you pay each year as a percentage of the value of your investment)

	Class 2
Management fees	0.64%
Distribution and service (12b-1) fees	0.25%
Other expenses	0.15%
Total annual Fund operating expenses	1.04%

Example

	1 Year	3 Years	5 Years	10 Years
Class 2	$ 106	$ 331	$ 574	$ 1,271

Portfolio Turnover

Principal Investment Strategies

Principal Risks

Performance

ANNUAL TOTAL RETURNS

Best Quarter:	Q3'09	22.85%
Worst Quarter:	Q4'08	-19.82%
As of March 31, 2013, the Fund's year-to-date return was 0.70%.

AVERAGE ANNUAL TOTAL RETURNS

For the periods ended December 31, 2012

	1 Year	5 Years	10 Years
Templeton Foreign Securities Fund - Class 2	18.23%	-1.32%	8.52%
MSCI EAFE Index (index reflects no deduction for fees, expenses or taxes)	17.90%	-3.21%	8.70%

Investment Manager

Templeton Investment Counsel, LLC (Investment Counsel)

Portfolio Managers

PETER A. NORI, CFA Executive Vice President/Portfolio Manager - Research Analyst of Investment Counsel and portfolio manager of the Fund since 1999.

CINDY L. SWEETING, CFA President of Investment Counsel and portfolio manager of the Fund since June 2012.

Purchase and Sale of Fund Shares

Taxes

Payments to Sponsoring Insurance
Companies and Other Financial Intermediaries

Templeton Global Bond Securities Fund

Investment Goal

High current income, consistent with preservation of capital. Capital appreciation is a secondary consideration.

Fees and Expenses of the Fund

ANNUAL FUND OPERATING EXPENSES
(expenses that you pay each year as a percentage of the value of your investment)

	Class 2
Management fees	0.46%
Distribution and service (12b-1) fees	0.25%
Other expenses	0.09%
Total annual Fund operating expenses	0.80%

Example

	1 Year	3 Years	5 Years	10 Years
Class 2	$ 82	$ 255	$ 444	$ 990

Portfolio Turnover

Principal Investment Strategies

Principal Risks

Performance

The inclusion of the Citigroup World Government Bond Index (WGBI) shows how the Fund's performance compares to a group of securities in an additional leading government bond index.

ANNUAL TOTAL RETURNS

Best Quarter:	Q4'04	10.22%
Worst Quarter:	Q3'11	-7.52%
As of March 31, 2013, the Fund's year-to-date return was 1.49%.

AVERAGE ANNUAL TOTAL RETURNS

For the periods ended December 31, 2012

	1 Year	5 Years	10 Years
Templeton Global Bond Securities Fund - Class 2	15.07%	10.47%	10.86%
J.P. Morgan Government Bond Index - Global (index reflects no deduction for fees, expenses or taxes)	1.30%	5.70%	6.20%
Citigroup World Government Bond Index (WGBI) (index reflects no deduction for fees, expenses or taxes)	1.65%	5.27%	6.04%

Investment Manager

Franklin Advisers, Inc. (Advisers)

Portfolio Managers

MICHAEL HASENSTAB, PH.D. Senior Vice President of Advisers and portfolio manager of the Fund since 2001.

SONAL DESAI, PH.D. Portfolio Manager of Advisers and portfolio manager of the Fund since 2011.

Purchase and Sale of Fund Shares

Taxes

Payments to Sponsoring Insurance
Companies and Other Financial Intermediaries

Templeton Growth Securities Fund

Investment Goal

Long-term capital growth.

Fees and Expenses of the Fund

ANNUAL FUND OPERATING EXPENSES
(expenses that you pay each year as a percentage of the value of your investment)

	Class 2
Management fees	0.74%
Distribution and service (12b-1) fees	0.25%
Other expenses	0.04%
Total annual Fund operating expenses	1.03%

Example

	1 Year	3 Years	5 Years	10 Years
Class 2	$ 105	$ 328	$ 569	$ 1,259

Portfolio Turnover

Principal Investment Strategies

Principal Risks

Performance

The inclusion of the MSCI All Country World Index shows how the Fund's performance compares to a group of securities in an additional leading equity index.

ANNUAL TOTAL RETURNS

Best Quarter:	Q2'03	20.77%
Worst Quarter:	Q4'08	-21.61%
As of March 31, 2013, the Fund's year-to-date return was 6.10%.

AVERAGE ANNUAL TOTAL RETURNS

For the periods ended December 31, 2012

	1 Year	5 Years	10 Years
Templeton Growth Securities Fund - Class 2	21.07%	-1.77%	6.65%
MSCI World Index (index reflects no deduction for fees, expenses or taxes)	16.54%	-0.60%	8.08%
MSCI All Country World Index (index reflects no deduction for fees, expenses or taxes)	16.80%	-0.61%	8.66%

Investment Manager

Templeton Global Advisors Limited (Global Advisors)

Portfolio Managers

NORMAN BOERSMA, CFA President, Chief Executive Officer and Director of Global Advisors and portfolio manager of the Fund since 2011.

LISA F. MYERS, J.D., CFA Executive Vice President of Global Advisors and portfolio manager of the Fund since 2010.

MATTHEW R. NAGLE, CFA Senior Vice President of Global Advisors and portfolio manager of the Fund since 2010.

JAMES HARPER, CFA Senior Vice President of Global Advisors and portfolio manager of the Fund since 2010.

Purchase and Sale of Fund Shares

Taxes

Payments to Sponsoring Insurance
Companies and Other Financial Intermediaries

Franklin Templeton Variable Insurance Products Trust

Overview

Investment Considerations

The following give a general sense of the level of fund assets associated with a particular investment or strategy: "small portion" (less than 10%); "portion" (10% to 25%); "significant" (25% to 50%); "substantial" (50% to 66%); "primary" (66% to 80%); and "predominant" (80% or more). The percentages are not limitations unless specifically stated as such in this prospectus or in the Trust's Statement of Additional Information (SAI).

Risks

Fund shares are not deposits or obligations of, or guaranteed or endorsed by, any bank, and are not federally insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other agency of the U.S. government. Fund shares involve investment risks, including the possible loss of principal.
Because you could lose money by investing in a Fund, take the time to read each Fund description and consider all risks before investing.

Additional Information

More detailed information about each Fund, its investment policies, and its particular risks can be found in the SAI.

Investment Management

FUND DETAILS

Franklin Flex Cap Growth Securities Fund

Investment Goal

The Fund's investment goal is capital appreciation.

Principal Investment Policies and Practices

For this Fund, smaller companies are those that generally have market capitalizations under $1.5 billion and mid-size companies are those that generally have market capitalizations of $1.5 to $8 billion.

In evaluating sector (broad industry) weightings in the Fund’s investment portfolio, the investment manager considers, but may deviate from, the relative weightings of sectors in the Russell 3000^® Growth Index. Consequently, the Fund, from time to time, may have significant positions in particular sectors such as technology (including electronic technology, technology services, biotechnology and health care technology) and health care.

When suitable opportunities are available, the Fund may invest in initial public offerings of securities.

Portfolio Selection

The investment manager uses fundamental, "bottom-up" research to seek companies meeting its criteria of growth potential, quality and valuation. In seeking sustainable growth characteristics, the investment manager looks for companies it believes 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. The investment manager defines quality companies as those with strong and improving competitive positions in attractive markets. The investment manager also believes 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. The investment manager’s valuation analysis includes a range of potential outcomes based on an assessment of multiple scenarios. In assessing value, the investment manager considers whether security prices fully reflect the balance of the sustainable growth opportunities relative to business and financial risks.

In choosing equity investments, the Fund's investment manager considers such factors as the financial strength of the company, the expertise of management, the growth potential of the company within the industry, and the growth potential of the industry itself.

Temporary Investments

When the investment manager believes market or economic conditions are unfavorable for investors, the investment manager may invest up to 100% of the Fund's assets in a temporary defensive manner by holding all or a substantial portion of its assets in cash, cash equivalents or other high quality short-term investments. Temporary defensive investments generally may include short-term U.S. government securities, money market fund shares (including shares of an affiliated money market fund), high-grade commercial paper, bank obligations, repurchase agreements and other money market instruments. The investment manager also may invest in these types of securities or hold cash while looking for suitable investment opportunities or to maintain liquidity. In these circumstances, the Fund may be unable to achieve its investment goal.

Principal Risks

Market

Growth Style Investing

Smaller and Midsize Companies

Focus

Foreign Securities

Management

More detailed information about the Fund, its policies and risks can be found in the Fund's SAI.

Management

Franklin Advisers, Inc. (Advisers), One Franklin Parkway, San Mateo, California 94403-1906, is the Fund's investment manager.

The Fund is managed by a team of dedicated professionals focused on investments in sectors believed to have growth potential. The portfolio managers of the team are as follows:

CONRAD B. HERRMANN, CFA Senior Vice President of Advisers		Mr. Herrmann has been the lead portfolio manager of the Fund since its inception (2005). He has primary responsibility for the investments of the Fund. He has final authority over all aspects of the Fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio risk assessment, and the management of daily cash balances in accordance with anticipated investment management requirements. The degree to which he may perform these functions, and the nature of these functions, may change from time to time. He joined Franklin Templeton Investments in 1989.

MATTHEW J. MOBERG, CPA Vice President of Advisers		Mr. Moberg has been a portfolio manager of the Fund since its inception (2005), providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. He joined Franklin Templeton Investments in 1998.

CFA^® and Chartered Financial Analyst^® are trademarks owned by CFA Institute.

The Fund’s SAI provides additional information about portfolio manager compensation, other accounts that they manage and their ownership of Fund shares.

The Fund pays Advisers a fee for managing the Fund's assets. Advisers agreed to reduce its fees to reflect reduced services resulting from the Fund's investment in a Franklin Templeton money fund. In addition, Advisers and the Fund's administrator have agreed to waive or limit their fees and to assume as their own certain expenses otherwise payable by the Fund so that common expenses (i.e., a combination of investment management fees, administration fees, and other expenses, but excluding the Rule 12b-1 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, 2014. The investment management fees before and after such waiver and/or reduction for the fiscal year ended December 31, 2012, were 0.65% and 0.64%, respectively.

Financial Highlights

This table presents the financial performance of Class 2 shares for the past five years or since inception. The table shows certain information on a single Fund share basis (per share performance). It also shows some key Fund statistics, such as total return (past performance) and expense ratios. Total return represents the annual change in value of a share assuming reinvestment of dividends and capital gains. This information has been audited by PricewaterhouseCoopers LLP. Their report, along with the Fund's financial statements, is included in the annual report, which is available upon request.

Class 2	Year Ended December 31,
	2012	2011	2010	2009	2008
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$ 12.09	$ 12.70	$ 10.93	$ 8.22	$ 12.72
Income from investment operations:^a
Net investment income (loss)^b	0.01	-0.02	-0.02	—^c	—^c
Net realized and unrealized gains (losses)	1.11	-0.59	1.79	2.71	-4.49
Total from investment operations	1.12	-0.61	1.77	2.71	-4.49
Less distributions from net investment income	—	—	—	—	-0.01
Net asset value, end of year	$ 13.21	$ 12.09	$ 12.70	$ 10.93	$ 8.22
Total return^d	9.26%	-4.80%	16.19%	32.97%	-35.31%
Ratios to average net assets
Expenses before waiver and payments by affiliates	1.18%	1.16%	1.18%	1.19%	1.21%
Expenses net of waiver and payments by affiliates	0.93%	0.93%	0.93%	0.93%^e	0.93%
Net investment income (loss)	0.09%	-0.14%	-0.17%	-0.01%	0.04%
Supplemental data
Net assets, end of year (000’s)	$ 159,122	$ 188,527	$ 227,774	$ 244,768	$ 195,425
Portfolio turnover rate	43.50%	63.99%	60.00%	33.64%	32.76%

b. Based on average daily shares outstanding.

c. Amount rounds to less than $0.01 per share.

e. Benefit of expense reduction rounds to less than 0.01%.

Franklin Global Real Estate Securities Fund

Investment Goal

The Fund's principal investment goal is high total return.

Principal Investment Policies and Practices

real estate investment trusts (REITs) (defined below) and similar REIT-like entities domiciled outside the U.S.;
companies qualifying under U.S. federal tax law as REITs; and
companies that derive at least half of their assets or revenues from the ownership, management, development or sale of residential or commercial real estate (such as real estate operating or service companies).

Under normal market conditions the Fund expects to invest at least 40% of its net assets in foreign securities.

The investment manager seeks to limit price volatility by investing across markets and property types. The investment manager also seeks to provide a consistently high level of income.

A REIT is a type of real estate company that is dedicated to owning and usually operating income-producing real estate such as apartments, hotels, industrial properties, office building or shopping centers. Equity REITs generally receive income from rents received. REITs are generally operated by experienced property management teams and typically concentrate on a specific geographic region or property type. Although the REIT structure originated in the U.S., a number of countries around the world have adopted, or are considering adopting, similar REIT and REIT-like structures. While the Fund is not limited to investing in REITs and REIT-like entities, it is expected that the Fund currently will focus on these types of entities.

In addition to the Fund's main investments, the Fund may invest in issuers engaged in businesses whose products and services are related to the real estate sector.

Portfolio Selection

Bottom-up analysis of individual stock and real estate market fundamentals; and
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.

Commodity Exchange Act Exclusions

Temporary Investments

Principal Risks

Real Estate Securities

Foreign Securities

Market

Liquidity

Derivative Instruments

Management

More detailed information about the Fund, its policies and risks can be found in the Fund's SAI.

Management

Franklin Templeton Institutional, LLC (FT Institutional), 600 Fifth Avenue, New York, New York 10020, is the Fund's investment manager.

The Fund is managed by a team of dedicated professionals focused on investments in the global real estate securities market. The portfolio managers of the team are as follows:

WILSON MAGEE Portfolio Manager and Research Analyst of FT Institutional		Mr. Magee assumed the duties of lead portfolio manager of the Fund in 2010. He has primary responsibility for the investments of the Fund. He has final authority over all aspects of the Fund’s investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio risk assessment, and the management of daily cash balances in accordance with anticipated investment management requirements. The degree to which he may perform these functions, and the nature of these functions, may change from time to time. He joined Franklin Templeton Investments in 2010. Prior to joining Franklin Templeton Investments, he was President and portfolio manager of Colony Investment Management. He previously was a portfolio manager at Goldman Sachs Asset Management and Grantham Mayo Van Otterloo (GMO) and an investor at AEW.

JACK FOSTER Senior Vice President of FT Institutional		Mr. Foster has been a portfolio manager of the Fund since 2007, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. He joined Franklin Templeton Investments in 1987.

The Fund’s SAI provides additional information about portfolio manager compensation, other accounts that they manage and their ownership of Fund shares.

Financial Highlights

Class 2	Year Ended December 31,
	2012	2011	2010	2009	2008
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$ 11.20	$ 12.83	$ 10.92	$ 10.61	$ 24.97
Income from investment operations:^a
Net investment income^b	0.21	0.17	0.34	0.27	0.56
Net realized and unrealized gains (losses)	2.86	-0.81	1.90	1.33	-8.93
Total from investment operations	3.07	-0.64	2.24	1.60	-8.37
Less distributions from:
Net investment income and net realized foreign currency gains	—	-0.99	-0.33	-1.29	-0.21
Net realized gains	—	—	—	—	-5.78
Total distributions	—	-0.99	-0.33	-1.29	-5.99
Net asset value, end of year	$ 14.27	$ 11.20	$ 12.83	$ 10.92	$ 10.61
Total return^c	27.41%	-5.65%	20.97%	19.08%	-42.39%
Ratios to average net assets
Expenses before waiver and payments by affiliates	1.36%	1.37%	1.36%	1.36%	1.33%
Expenses net of waiver and payments by affiliates	1.32%	1.23%	1.11%	1.01%^d	0.85%^d
Net investment income	1.67%	1.39%	2.99%	2.88%	3.16%
Supplemental data
Net assets, end of year (000’s)	$ 344,044	$ 292,356	$ 352,854	$ 345,445	$ 343,701
Portfolio turnover rate	22.29%	28.95%	76.52%	87.34%	77.28%

b. Based on average daily shares outstanding.

d. Benefit of expense reduction rounds to less than 0.01%.

Franklin Growth and Income Securities Fund

Investment Goal

The Fund’s principal investment goal is capital appreciation. Its secondary goal is to provide current income.

Principal Investment Policies and Practices

Portfolio Selection

Commodity Exchange Act Exclusions

Temporary Investments

Principal Risks

Market

Convertible Securities

Blend Style Investing

Income

Focus

Foreign Securities

Credit

Equity-Linked Notes (ELNs)

High-Yield Debt Securities

Derivative Instruments

Management

Interest Rate

More detailed information about the Fund, its policies and risks can be found in the Fund's SAI.

Management

Franklin Advisers, Inc. (Advisers), One Franklin Parkway, San Mateo, California 94403-1906, is the Fund's investment manager.

The Fund is managed by a team of dedicated professionals focused on investments of securities believed to be undervalued. The portfolio managers of the team are as follows:

ALAN E. MUSCHOTT, CFA Vice President of Advisers		Mr. Muschott has been the lead portfolio manager of the Fund since 2005. He has primary responsibility for the investments of the Fund. He has final authority overall aspects of the Fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio risk assessment, and the management of daily cash balances in accordance with anticipated investment management requirements. The degree to which he may perform these functions, and the nature of these functions, may change from time to time. He joined Franklin Templeton Investments in 1998.

MATTHEW QUINLAN Portfolio Manager of Advisers		Mr. Quinlan has been a portfolio manager of the Fund since 2011, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. He joined Franklin Templeton Investments in 2005.

KIMBERLY STRAND, CFA Portfolio Manager and Research Analyst of Advisers		Ms. Strand has been a portfolio manager of the Fund since May 2013, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. She joined Franklin Templeton Investments in 2005.

CFA^® and Chartered Financial Analyst^® are trademarks owned by CFA Institute.

The Fund’s SAI provides additional information about portfolio manager compensation, other accounts that they manage and their ownership of Fund shares.

Financial Highlights

Class 2	Year Ended December 31,
	2012	2011	2010	2009	2008
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$ 11.44	$ 11.60	$ 10.33	$ 8.59	$ 14.86
Income from investment operations:^a
Net investment income^b	0.32	0.29	0.35	0.28	0.35
Net realized and unrealized gains (losses)	1.05	-0.02	1.31	1.90	-5.10
Total from investment operations	1.37	0.27	1.66	2.18	-4.75
Less distributions from:
Net investment income	-0.35	-0.43	-0.39	-0.44	-0.40
Net realized gains	—	—	—	—	-1.12
Total distributions	-0.35	-0.43	-0.39	-0.44	-1.52
Net asset value, end of year	$ 12.46	$ 11.44	$ 11.60	$ 10.33	$ 8.59
Total return^c	12.23%	2.41%	16.68%	26.55%	-35.14%
Ratios to average net assets
Expenses	0.85%	0.84%	0.84%	0.85%^d	0.80%^d
Net investment income	2.61%	2.55%	3.37%	3.21%	2.92%
Supplemental data
Net assets, end of year (000’s)	$ 131,400	$ 129,309	$ 151,481	$ 152,077	$ 141,359
Portfolio turnover rate	30.00%	32.93%	26.83%	51.05%	30.66%

b. Based on average daily shares outstanding.

d. Benefit of expense reduction rounds to less than 0.01%.

Franklin High Income Securities Fund

Investment Goal

The Fund’s principal investment goal is to earn a high level of current income. Its secondary goal is capital appreciation.

Principal Investment Policies and Practices

The Fund may invest up to 100% of its total assets in debt securities that are rated below investment grade, sometimes called "junk bonds." Investment grade debt securities are rated in one of the top four ratings categories by independent rating organizations such as Standard & Poor's (S&P^®) and Moody's Investors Service (Moody's). The Fund may buy both rated and unrated debt securities including securities rated below B by Moody's or S&P (or deemed comparable by the Fund’s investment manager). If subsequent to its purchase, a security is downgraded in rating or goes into default, the Fund will consider such events in its evaluation of the overall investment merits of that security but will not necessarily dispose of the security immediately. The Fund may invest a small portion of its assets in defaulted debt securities.

Portfolio Selection

Commodity Exchange Act Exclusions

Temporary Investments

When the investment manager believes market or economic conditions are unfavorable for investors, the investment manager may invest up to 100% of the Fund's assets in a temporary defensive manner by holding all or a substantial portion of its assets in cash, cash equivalents or other high quality short-term investments. Temporary defensive investments generally may include short-term debt and money market instruments, including U.S. government securities, money market fund shares (including shares of an affiliated money market fund), high-grade commercial paper, repurchase agreements and other money market equivalents. The investment manager also may invest in these types of securities or hold cash while looking for suitable investment opportunities or to maintain liquidity. In these circumstances, the Fund may be unable to achieve its investment goals.

Principal Risks

Credit

High-Yield Debt Securities

Interest Rate

Income

Foreign Securities

Focus

Developing Markets

Prepayment

Derivative Instruments

Credit-Linked Securities

Variable Rate Securities

Market

Unrated Debt Securities

Management

More detailed information about the Fund, its policies and risks can be found in the Fund's SAI.

Management

Franklin Advisers, Inc. (Advisers), One Franklin Parkway, San Mateo, California 94403-1906, is the Fund's investment manager.

The Fund is managed by a team of dedicated professionals focused on high yield debt investments. The portfolio managers of the team are as follows:

PATRICIA O'CONNOR, CFA, CPA Vice President of Advisers		Ms. O'Connor has been the lead portfolio manager of the Fund since 2002. She has primary responsibility for the investments of the Fund. She has final authority over all aspects of the Fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio risk assessment, and the management of daily cash balances in accordance with anticipated investment management requirements. The degree to which she may perform these functions, and the nature of these functions, may change from time to time. She joined Franklin Templeton Investments in 1997.

ERIC G. TAKAHA, CFA Senior Vice President of Advisers		Mr. Takaha has been a portfolio manager of the Fund since 2005, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. He joined Franklin Templeton Investments in 1989.

CFA^® and Chartered Financial Analyst^® are trademarks owned by CFA Institute.

The Fund’s SAI provides additional information about portfolio manager compensation, other accounts that they manage and their ownership of Fund shares.

Financial Highlights

Class 2	Year Ended December 31,
	2012	2011	2010	2009	2008
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$ 6.36	$ 6.47	$ 6.13	$ 4.59	$ 6.60
Income from investment operations:^a
Net investment income^b	0.46	0.47	0.47	0.44	0.47
Net realized and unrealized gains (losses)	0.48	-0.18	0.30	1.47	-1.88
Total from investment operations	0.94	0.29	0.77	1.91	-1.41
Less distributions from net investment income	-0.48	-0.40	-0.43	-0.37	-0.60
Net asset value, end of year	$ 6.82	$ 6.36	$ 6.47	$ 6.13	$ 4.59
Total return^c	15.56%	4.56%	13.26%	42.70%	-23.38%
Ratios to average net assets
Expenses	0.83%	0.83%	0.86%	0.88%^d	0.91%^d
Net investment income	6.90%	7.27%	7.46%	8.08%	8.05%
Supplemental data
Net assets, end of year (000’s)	$ 281,851	$ 249,452	$ 239,824	$ 198,567	$ 84,396
Portfolio turnover rate	37.03%	45.11%	60.80%	26.41%	21.75%

b. Based on average daily shares outstanding.

d. Benefit of expense reduction rounds to less than 0.01%.

Franklin Income Securities Fund

Investment Goal

The Fund’s investment goal is to maximize income while maintaining prospects for capital appreciation.

Principal Investment Policies and Practices

Portfolio Selection

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 the company's management;
the company's changing financial condition and market recognition of the change;
the company's sensitivity to changes in interest rates and business conditions; and
the company's debt maturity schedules and borrowing requirements.

With respect to debt and equity securities in the utilities industry, the investment manager considers the effects of the regulatory environment on utilities companies.

Commodity Exchange Act Exclusions

Temporary Investments

When the investment manager believes market or economic conditions are unfavorable for investors, the investment manager may invest up to 100% of the Fund's assets in a temporary defensive manner by holding all or a substantial portion of its assets in cash, cash equivalents or other high quality short-term investments. Temporary defensive investments generally may include short-term U.S. government securities, high-grade commercial paper, bank obligations, repurchase agreements, and other money market instruments. The investment manager also may invest in these types of securities or hold cash while looking for suitable investment opportunities or to maintain liquidity. In these circumstances, the Fund may be unable to achieve its investment goal.

Principal Risks

Market

High-Yield Debt Securities

Credit

Income

Prepayment

Interest Rate

Foreign Securities

Convertible Securities

Focus

Derivative Instruments

Equity-Linked Notes (ELNs)

Value Style Investing

Management

More detailed information about the Fund, its policies and risks can be found in the Fund's SAI.

Management

Franklin Advisers, Inc. (Advisers), One Franklin Parkway, San Mateo, California 94403-1906, is the Fund's investment manager.

The Fund is managed by a team of dedicated professionals focused on investments in debt and equity securities. The portfolio managers of the team are as follows:

EDWARD D. PERKS, CFA Senior Vice President of Advisers		Mr. Perks has been the lead portfolio manager of the Fund since 2002. He has primary responsibility for the investments of the Fund. He has final authority over all aspects of the Fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio risk assessment, and the management of daily cash balances in accordance with anticipated investment management requirements. The degree to which he may perform these functions, and the nature of these functions, may change from time to time. He joined Franklin Templeton Investments in 1992.

MATTHEW QUINLAN Portfolio Manager of Advisers		Mr. Quinlan has been a portfolio manager of the Fund since December 2012, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. He joined Franklin Templeton Investments in 2005.

ALEX W. PETERS, CFA Vice President of Advisers		Mr. Peters has been a portfolio manager of the Fund since December 2012, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. He joined Franklin Templeton Investments in 1992.

CHARLES B. JOHNSON Chairman of Franklin Resources, Inc.		Mr. Johnson has been a portfolio manager of the Fund since 1989, providing research, advice and portfolio risk assessment on the Fund's investment portfolio. He joined Franklin Templeton Investments in 1957.

CFA^® and Chartered Financial Analyst^® are trademarks owned by CFA Institute.

The Fund’s SAI provides additional information about portfolio manager compensation, other accounts that they manage and their ownership of Fund shares.

Financial Highlights

Class 2	Year Ended December 31,
	2012	2011	2010	2009	2008
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$ 14.32	$ 14.82	$ 14.12	$ 11.30	$ 17.31
Income from investment operations:^a
Net investment income^b	0.85	0.90	0.86	0.86	1.04
Net realized and unrealized gains (losses)	0.88	-0.53	0.82	3.01	-5.87
Total from investment operations	1.73	0.37	1.68	3.87	-4.83
Less distributions from:
Net investment income	-0.98	-0.87	-0.98	-1.05	-0.83
Net realized gains	—	—	—	—	-0.35
Total distributions	-0.98	-0.87	-0.98	-1.05	-1.18
Net asset value, end of year	$ 15.07	$ 14.32	$ 14.82	14.12	$ 11.30
Total return^c	12.65%	2.38%	12.67%	35.59%	-29.66%
Ratios to average net assets
Expenses	0.72%	0.72%^d	0.72%^d	0.72%^d	0.72%^d
Net investment income	5.78%	6.10%	6.03%	6.98%	7.03%
Supplemental data
Net assets, end of year (000’s)	$ 6,182,997	$ 5,915,637	$ 6,309,207	$ 6,114,898	$ 4,944,457
Portfolio turnover rate	26.66%^e	28.65%	41.65%	42.30%	43.89%

b. Based on average daily shares outstanding.

d. Benefit of expense reduction rounds to less than 0.01%.

e. Excludes the value of portfolio securities delivered as a result of a redemption in-kind.

Franklin Large Cap Growth Securities Fund

Investment Goal

The Fund's investment goal is capital appreciation.

Principal Investment Policies and Practices

Portfolio Selection

Temporary Investments

When the investment manager believes market or economic conditions are unfavorable for investors, the investment manager may invest up to 100% of the Fund's assets in a temporary defensive manner by holding all or a substantial portion of its assets in cash, cash equivalents or other high quality short-term investments. Temporary defensive investments generally may include short-term U.S. government securities, commercial paper, bank obligations, repurchase agreements, money market fund shares (including shares of an affiliated money market fund), and other money market instruments. The investment manager also may invest in these types of securities or hold cash while looking for suitable investment opportunities or to maintain liquidity. In these circumstances, the Fund may be unable to achieve its investment goals.

Principal Risks

Market

Growth Style Investing

Focus

Foreign Securities

Smaller and Midsize Companies

Management

More detailed information about the Fund, its policies and risks can be found in the Fund's SAI.

Management

Franklin Advisers, Inc. (Advisers), One Franklin Parkway, San Mateo, California 94403-1906, is the Fund's investment manager.

The Fund is managed by a team of dedicated professionals focused on investments in large capitalization growth companies. The portfolio managers of the team are as follows:

KENT SHEPHERD, CFA Senior Vice President of Advisers		Mr. Shepherd has been the lead portfolio manager of the Fund since 1999. He has primary responsibility for the investments in the Fund. Mr. Shepherd has final authority over all aspects of the Fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio risk assessment, and the management of daily cash balances in accordance with anticipated investment management requirements. The degree to which Mr. Shepherd may perform these functions, and the nature of these functions, may change from time to time. He joined Franklin Templeton Investments in 1991.

ALEX W. PETERS, CFA Vice President of Advisers		Mr. Peters has been a portfolio manager of the Fund since 2005, providing research, advice and portfolio risk assessment on the Fund's investment portfolio. He joined Franklin Templeton Investments in 1992.

CFA^® and Chartered Financial Analyst^® are trademarks owned by CFA Institute.

The Fund’s SAI provides additional information about portfolio manager compensation, other accounts that they manage and their ownership of Fund shares.

Financial Highlights

Class 2	Year Ended December 31,
	2012	2011	2010	2009	2008
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$ 14.54	$ 14.86	$ 13.43	$ 10.50	$ 17.25
Income from investment operations:^a
Net investment income^b	0.17	0.11	0.08	0.09	0.13
Net realized and unrealized gains (losses)	1.62	-0.33	1.46	3.00	-5.73
Total from investment operations	1.79	-0.22	1.54	3.09	-5.60
Less distributions from:
Net investment income	-0.13	-0.10	-0.11	-0.16	-0.19
Net realized gains	—	—	—	—	-0.96
Total distributions	-0.13	-0.10	-0.11	-0.16	-1.15
Net asset value, end of year	$ 16.20	$ 14.54	$ 14.86	$ 13.43	$ 10.50
Total return^c	12.37%	-1.51%	11.59%	29.73%	-34.53%
Ratios to average net assets
Expenses	1.05%	1.05%	1.04%	1.06%^d	1.02%^d
Net investment income	1.06%	0.74%	0.61%	0.78%	0.94%
Supplemental data
Net assets, end of year (000’s)	$ 278,989	$ 293,226	$ 357,405	$ 373,821	$ 328,597
Portfolio turnover rate	33.88%	56.61%	46.75%	71.95%	66.04%

b. Based on average daily shares outstanding.

d. Benefit of expense reduction rounds to less than 0.01%.

Franklin Large Cap Value Securities Fund

Investment Goal

The Fund’s investment goal is long-term capital appreciation.

Principal Investment Policies and Practices

Under normal market conditions, the Fund invests at least 80% of its net assets in investments of large-capitalization (large-cap) companies. Shareholders will be given at least 60 days' advance notice of any change to this 80% policy. For this Fund, large-cap companies are those that are similar in size to those in the Russell 1000^® Index at the time of purchase. That index is designed to measure the 1,000 largest companies based on total market capitalization. The market capitalizations of companies in the Russell 1000 Index ranged from approximately $1.4 billion to $540 billion as of its last reconstitution date and the median market capitalization was approximately $5.2 billion. The index is reconstituted annually. The investment manager generally expects that the Fund's median market capitalization will exceed the index's median market capitalization. The Fund may invest up to 20% of its net assets in small and mid-capitalization companies.

The Fund generally invests in equity securities that the Fund's investment manager believes are undervalued and have the potential for capital appreciation. An equity security represents a proportionate share of the ownership of a company; its value is based on the success or failure of the company’s business, any income paid to stockholders, the value of its assets and general market conditions. Common stocks and preferred stocks, and securities convertible into common stocks, are examples of equity securities. The Fund invests primarily in common stocks. The Fund may invest in convertible securities without regard to the ratings assigned by the rating services. Following this strategy, the Fund invests in companies with, for example:

Stock prices that are low relative to current, or historical or future earnings, book value, cash flow or sales -- all relative to the market, a company's industry or a company's earnings history
Recent sharp price declines but the potential for good long-term earnings prospects, in the investment manager's opinion
Valuable intangibles not reflected in the stock price, such as franchises, distribution networks or market share for particular products or services, underused or understated assets or cash, or patents and trademarks

A stock price is undervalued, or is a "value," when it trades at less than the price at which the investment manager believes it would trade if the market reflected all factors relating to the company's worth. The investment manager may consider a company to be undervalued because of overreaction by investors to unfavorable news about a company, an industry or the stock market in general, or as a result of a general market decline, poor economic conditions, tax-loss selling, or actual or anticipated unfavorable developments affecting a company. The types of companies the Fund may invest in include those that are attempting to recover from business setbacks or adverse events (turnarounds) or cyclical downturns.

The Fund may invest up to 25% of its total assets in foreign securities.

To the extent that the Fund focuses on particular countries or sectors from time to time, such as financial services companies, the Fund may carry greater risk of adverse developments in a country or sector than a fund that invests in a wide variety of countries or sectors.

Portfolio Selection

The investment manager is a research driven, fundamental investment adviser, pursuing a disciplined value-oriented strategy for this Fund. As a "bottom-up" investor concentrating primarily on individual securities, the investment manager seeks fundamentally sound companies that meet the criteria above and attempts to acquire them at attractive prices, often when they are out of favor with other investors. The investment manager invests in securities without regard to benchmark comparisons. The investment manager seeks bargains among the “under researched and unloved,” out of favor companies that offer, in the investment manager’s opinion, attractive long-term potential such as 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 growth potential in the investment manager’s opinion, and companies that are or may be potential turnaround candidates or takeover targets.

Temporary Investments

When the investment manager believes market or economic conditions are unfavorable for investors, the investment manager may invest up to 100% of the Fund's assets in a temporary defensive manner by holding all or a substantial portion of its assets in cash, cash equivalents or other high quality short-term investments. Temporary defensive investments generally may include short-term U.S. government securities, commercial paper, bank obligations, repurchase agreements, money market fund shares (including shares of an affiliated money market fund), and other money market instruments. The investment manager also may invest in these types of securities or hold cash while looking for suitable investment opportunities or to maintain liquidity. In these circumstances, the Fund may be unable to achieve its investment goals.

Principal Risks

Market

Value Style Investing

Focus

Foreign Securities

Smaller and Midsize Companies

Management

More detailed information about the Fund, its policies and risks can be found in the Fund's SAI.

Management

Franklin Advisory Services, LLC (Advisory Services), One Parker Plaza, Ninth Floor, Fort Lee, New Jersey 07024, is the Fund's investment manager.

The Fund is managed by a team of dedicated professionals focused on investments of large capitalization companies believed undervalued. The portfolio managers of the team are as follows:

WILLIAM J. LIPPMAN President of Advisory Services		Mr. Lippman assumed the duties of lead portfolio manager in 2007 and has been a portfolio manager of the Fund since its inception. He has primary responsibility for the investments of the Fund. He has final authority over all aspects of the Fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio risk assessment, and the management of daily cash balances in accordance with anticipated investment management requirements. The degree to which he may perform these functions, and the nature of these functions, may change from time to time. He joined Franklin Templeton Investments in 1988.

BRUCE C. BAUGHMAN, CPA Senior Vice President of Advisory Services		Mr. Baughman has been a portfolio manager of the Fund since its inception, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. He joined Franklin Templeton Investments in 1988.

MARGARET MCGEE Vice President of Advisory Services		Ms. McGee has been a portfolio manager of the Fund since its inception, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. 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, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. He joined Franklin Templeton Investments in 1996.

The Fund’s SAI provides additional information about portfolio manager compensation, other accounts that they manage and their ownership of Fund shares.

The Fund pays Advisory Services a fee for managing the Fund’s assets. Advisory Services agreed to reduce its fees to reflect reduced services resulting from the Fund's investment in a Franklin Templeton money fund. In addition, Advisory Services and the Fund's administrator have agreed to waive or limit their fees and to assume as their own certain expenses otherwise payable by the Fund so that common expenses (i.e., a combination of investment management fees, administration fees, and other expenses, but excluding the Rule 12b-1 fees and acquired fund fees and expenses) for each class of the Fund 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, 2014. The investment management fees before and after such waiver and/or reduction for the fiscal year ended December 31, 2012, were 0.76% and 0.47%, respectively.

Financial Highlights

Class 2	Year Ended December 31,
	2012	2011	2010	2009	2008
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$ 9.83	$ 10.50	$ 9.36	$ 7.54	$ 11.63
Income from investment operations:^a
Net investment income^b	0.15	0.14	0.12	0.17	0.19
Net realized and unrealized gains (losses)	1.25	-0.69	1.19	1.81	-4.28
Total from investment operations	1.40	-0.55	1.31	1.98	-4.09
Less distributions from net investment income	-0.16	-0.12	-0.17	-0.16	—
Net asset value, end of year	$ 11.07	$ 9.83	$ 10.50	$ 9.36	$ 7.54
Total return^c	14.44%	-5.26%	14.27%	26.76%	-35.17%
Ratios to average net assets
Expenses before waiver and payments by affiliates	1.42%	1.39%	1.40%	1.38%	1.34%
Expenses net of waiver and payments by affiliates	0.90%	0.90%	0.90%	0.90%	0.90%
Net investment income	1.42%	1.35%	1.25%	2.15%	1.93%
Supplemental data
Net assets, end of year (000’s)	$ 31,148	$ 34,091	$ 40,183	$ 35,892	$ 26,776
Portfolio turnover rate	29.50%	20.31%	13.91%	15.64%	12.92%

b. Based on average daily shares outstanding.

Franklin Rising Dividends Securities Fund

Investment Goal

The Fund's investment goal is long-term capital appreciation. Preservation of capital, while not a goal, is also an important consideration.

Principal Investment Policies and Practices

Under normal market conditions, the Fund invests at least 80% of its net assets in equity securities of financially sound companies that have paid consistently rising dividends. Shareholders will be given at least 60 days’ advance notice of any change to this 80% policy. The Fund invests predominantly in equity securities, mostly common stocks. Companies that have paid consistently rising dividends include those companies that currently pay dividends on their common stocks and have maintained or increased their dividend rate during the last four consecutive years. Under normal market conditions, the Fund invests at least 65% of its net assets in securities of companies that have:

consistently increased dividends in at least 8 out of the last 10 years and have not decreased dividends during that time;
increased dividends substantially (at least 100%) over the last 10 years;
reinvested earnings, paying out less than 65% of current earnings in dividends;
either long-term debt that is no more than 50% of total capitalization or senior debt that has been rated investment grade by at least one of the major bond rating organizations; and
attractive prices, either: (1) in the lower half of the stock's price/earnings ratio range for the past 10 years; or (2) less than price/earnings ratio of the Standard & Poor's^® 500 Stock Index.

The Fund may invest up to 25% of its total assets in foreign securities.

Portfolio Selection

Temporary Investments

When the investment manager believes market or economic conditions are unfavorable for investors, the investment manager may invest up to 100% of the Fund's assets in a temporary defensive manner by holding all or a substantial portion of its assets in cash, cash equivalents or other high quality short-term investments. Temporary defensive investments generally may include short-term U.S. government securities, high grade commercial paper, bank obligations, repurchase agreements, money market fund shares (including shares of an affiliated money market fund) and other money market instruments. The investment manager also may invest in these types of securities or hold cash while looking for suitable investment opportunities or to maintain liquidity. In these circumstances, the Fund may be unable to achieve its investment goal.

Principal Risks

Market

Investing Style

Dividend-Oriented Companies

Smaller and Midsize Companies

Focus

Foreign Securities

Management

More detailed information about the Fund, its policies and risks can be found in the Fund's SAI.

Management

Franklin Advisory Services, LLC (Advisory Services), One Parker Plaza, Ninth Floor, Fort Lee, New Jersey 07024, is the Fund's investment manager.

The Fund is managed by a team of dedicated professionals focused on investments that have paid rising dividends. The portfolio managers of the team are as follows:

DONALD G. TAYLOR, CPA Senior Vice President of Advisory Services		Mr. Taylor has been the lead portfolio manager of the Fund since 1996. He has primary responsibility for the investments of the Fund. He has final authority over all aspects of the Fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio risk assessment, and the management of daily cash balances in accordance with anticipated investment management requirements. The degree to which he may perform these functions, and the nature of these functions, may change from time to time. He joined Franklin Templeton Investments in 1996.

BRUCE C. BAUGHMAN, CPA Senior Vice President of Advisory Services		Mr. Baughman has been a portfolio manager of the Fund since its inception, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. He joined Franklin Templeton Investments in 1988.

WILLIAM J. LIPPMAN President of Advisory Services		Mr. Lippman has been a portfolio manager of the Fund since its inception, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. He joined Franklin Templeton Investments in 1988.

MARGARET MCGEE Vice President of Advisory Services		Ms. McGee has been a portfolio manager of the Fund since its inception, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. She joined Franklin Templeton Investments in 1988.

The Fund’s SAI provides additional information about portfolio manager compensation, other accounts that they manage and their ownership of Fund shares.

Financial Highlights

Class 2	Year Ended December 31,
	2012	2011	2010	2009	2008
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$ 19.65	$ 18.82	$ 15.86	$ 13.72	$ 19.27
Income from investment operations:^a
Net investment income^b	0.35	0.31	0.28	0.10^c	0.31
Net realized and unrealized gains (losses)	1.98	0.81	2.95	2.24	-5.42
Total from investment operations	2.33	1.12	3.23	2.34	-5.11
Less distributions from:
Net investment income	-0.34	-0.29	-0.27	-0.20	-0.31
Net realized gains	—	—	—	—	-0.13
Total distributions	-0.34	-0.29	-0.27	-0.20	-0.44
Net asset value, end of year	$ 21.64	$ 19.65	$ 18.82	$ 15.86	$ 13.72
Total return^d	11.96%	6.00%	20.64%	17.34%	-27.10%
Ratios to average net assets
Expenses	0.88%	0.88%	0.89%	0.90%^e	0.86%^e
Net investment income	1.71%	1.62%	1.63%	0.74%^c	1.80%
Supplemental data
Net assets, end of year (000’s)	$ 1,550,084	$ 1,523,396	$ 1,572,732	$ 1,371,351	$ 1,286,878
Portfolio turnover rate	11.19%	12.76%	8.97%	16.99%	5.39%

b. Based on average daily shares outstanding.

e. Benefit of expense reduction rounds to less than 0.01%.

Franklin Small Cap Value Securities Fund

Investment Goal

The Fund’s investment goal is long-term total return.

Principal Investment Policies and Practices

Stock prices that are low relative to current or historical or future earnings, book value, cash flow or sales -- all relative to the market, a company's industry or a company's earnings history
Recent sharp price declines but the potential for good long-term earnings prospects, in the investment manager's opinion
Valuable intangibles not reflected in the stock price, such as franchises, distribution networks or market share for particular products or services, underused or understated assets or cash, or patents and trademarks

The Fund may invest up to 25% of its total assets in foreign securities.

The Fund, from time to time, may have significant investments in particular sectors.

Portfolio Selection

The Fund employs a "bottom-up" stock selection process and the investment manager invests in securities without regard to benchmark comparisons.

Temporary Investments

When the investment manager believes market or economic conditions are unfavorable for investors, the investment manager may invest up to 100% of the Fund's assets in a temporary defensive manner by holding all or a substantial portion of its assets in cash, cash equivalents or other high quality short-term investments. Temporary defensive investments generally may include short-term U.S. government securities, commercial paper, bank obligations, repurchase agreements, money market fund shares (including shares of an affiliated money market fund), and other money market instruments. The investment manager also may invest in these types of securities or hold cash while looking for suitable investment opportunities or to maintain liquidity. In these circumstances, the Fund may be unable to achieve its investment goals.

Principal Risks

Market

Value Style Investing

Smaller Companies

Focus

Foreign Securities

Management

More detailed information about the Fund, its policies and risks can be found in the Fund's SAI.

Management

Franklin Advisory Services, LLC (Advisory Services), One Parker Plaza, Ninth Floor, Fort Lee, New Jersey 07024, is the Fund's investment manager.

The Fund is managed by a team of dedicated professionals focused on investments of small cap value companies. The portfolio managers of the team are as follows:

WILLIAM J. 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 C. BAUGHMAN, CPA 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.

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.

The Fund’s SAI provides additional information about portfolio manager compensation, other accounts that they manage and their ownership of Fund shares.

Financial Highlights

Class 2	Year Ended December 31,
	2012	2011	2010	2009	2008
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$ 15.53	$ 16.25	$ 12.77	$ 10.55	$ 17.10
Income from investment operations:^a
Net investment income^b	0.24^c	0.12	0.10	0.12	0.20
Net realized and unrealized gains (losses)	2.59	-0.73	3.48	2.81	-5.35
Total from investment operations	2.83	-0.61	3.58	2.93	-5.15
Less distributions from:
Net investment income	-0.13	-0.11	-0.10	-0.19	-0.18
Net realized gains	—	—	—	-0.52	-1.22
Total distributions	-0.13	-0.11	-0.10	-0.71	-1.40
Net asset value, end of year	$ 18.23	$ 15.53	$ 16.25	$ 12.77	$ 10.55
Total return^d	18.39%	-3.76%	28.22%	29.16%	-33.02%
Ratios to average net assets
Expenses	0.92%	0.91%	0.92%	0.93%^e	0.92%^e
Net investment income	1.45%^c	0.77%	0.73%	1.04%	1.37%
Supplemental data
Net assets, end of year (000’s)	$ 1,286,573	$ 1,211,168	$ 1,362,292	$ 1,109,855	$ 784,773
Portfolio turnover rate	5.84%	14.39%	15.92%	6.68%	16.98%

b. Based on average daily shares outstanding.

e. Benefit of expense reduction rounds to less than 0.01%.

Franklin Small-Mid Cap Growth Securities Fund

Investment Goal

The Fund's investment goal is long-term capital growth.

Principal Investment Policies and Practices

The Fund, from time to time, may have significant positions in particular sectors such as technology (including health care technology, technology services and electronic technology) and industrials.

The Fund may invest up to 10% of its total assets in foreign securities.

Portfolio Selection

Temporary Investments

When the investment manager believes market or economic conditions are unfavorable for investors, the investment manager may invest up to 100% of the Fund's assets in a temporary defensive manner by holding all or a substantial portion of its assets in cash, cash equivalents or other high quality short-term investments. Temporary defensive investments generally may include short-term U.S. government securities, high grade commercial paper, bank obligations, repurchase agreements, money market fund shares (including shares of an affiliated money market fund) and other money market instruments. The investment manager also may invest in these types of securities or hold cash while looking for suitable investment opportunities or to maintain liquidity. In these circumstances, the Fund may be unable to achieve its investment goal.

Principal Risks

Market

Growth Style Investing

Smaller and Midsize Companies

Focus

Liquidity

Management

Foreign Securities

More detailed information about the Fund, its policies and risks can be found in the Fund's SAI.

Management

Franklin Advisers, Inc. (Advisers), One Franklin Parkway, San Mateo, California 94403-1906, is the Fund's investment manager.

EDWARD B. JAMIESON President, Chief Investment Officer and Director of Advisers		Mr. Jamieson has been the lead portfolio manager of the Fund since 2005. He has primary responsibility for the investments of the Fund. He has final authority over all aspects of the Fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio risk assessment, and the management of daily cash balances in accordance with anticipated investment management requirements. The degree to which he may perform these functions, and the nature of these functions, may change from time to time. He joined Franklin Templeton Investments in 1987.

JAMES CROSS Portfolio Manager of Advisers		Mr. Cross has been a portfolio manager of the Fund since 2006, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. He joined Franklin Templeton Investments in 1998.

MICHAEL MCCARTHY Senior Vice President of Advisers		Mr. McCarthy has been a portfolio manager of the Fund since 1995, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. He joined Franklin Templeton Investments in 1992.

The Fund’s SAI provides additional information about portfolio manager compensation, other accounts that they manage and their ownership of Fund shares.

Financial Highlights

Class 2	Year Ended December 31,
	2012	2011	2010	2009	2008
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$ 20.49	$ 21.54	$ 16.87	$ 11.75	$ 22.91
Income from investment operations:^a
Net investment income (loss)^b	-0.06^c	-0.10	-0.06	-0.13^d	-0.03
Net realized and unrealized gains (losses)	2.19	-0.95	4.73	5.25	-8.77
Total from investment operations	2.13	-1.05	4.67	5.12	-8.80
Less distributions from net realized gains	-1.58	—	—	—	-2.36
Net asset value, end of year	$ 21.04	$ 20.49	$ 21.54	$ 16.87	$ 11.75
Total return^e	10.85%	-4.87%	27.68%	43.57%	-42.49%
Ratios to average net assets
Expenses	1.05%	1.04%	1.04%	1.05%^f	1.01%^f
Net investment income (loss)	-0.28%^c	-0.46%	-0.32%	-0.97%^d	-0.19%
Supplemental data
Net assets, end of year (000’s)	$ 670,193	$ 717,086	$ 939,481	$ 813,480	$ 614,053
Portfolio turnover rate	41.44%	45.00%	46.69%	63.93%	60.12%

b. Based on average daily shares outstanding.

f. Benefit of expense reduction rounds to less than 0.01%.

Franklin Strategic Income Securities Fund

Investment Goal

The Fund’s principal investment goal is to earn a high level of current income. Its secondary goal is long-term capital appreciation.

Principal Investment Policies and Practices

Under normal market conditions, the Fund invests its assets primarily to predominantly in U.S. and foreign debt securities, including those in emerging markets. Debt securities include all varieties of fixed and floating rate income securities, including bonds, loans, bank loans (and loan participations), mortgage-backed securities and other asset-backed securities, convertible securities and government and municipal securities. The Fund shifts its investments among the following general asset classes, and at any given time may have a considerable amount of its assets invested in any one of these classes:

High yield and investment grade corporate bonds and preferred stocks of issuers located in the U.S. and foreign countries, including emerging market countries
Developed country (non-U.S.) government and agency bonds
Emerging market government and agency bonds
U.S. government and agency bonds, including inflation-indexed securities issued by the U.S. Treasury
Mortgage-backed securities and other asset-backed securities
Floating and variable interest rate investments (which may be issued by corporations or governments and may be asset-backed securities) which are debt securities
Bank loans and loan participations
Convertible securities, including bonds and preferred stocks
Municipal securities

Portfolio Selection

Commodity Exchange Act Exclusions

Temporary Investments

When the investment manager believes market or economic conditions are unfavorable for investors, the investment manager may invest up to 100% of the Fund's assets in a temporary defensive manner by holding all or a substantial portion of its assets in cash, cash equivalents or other high quality short-term investments. Temporary defensive investments generally may include U.S. government securities, money market fund shares (including shares of an affiliated money market fund), high-grade commercial paper, bank obligations, repurchase agreements and other money market investments. The investment manager also may invest in these types of securities or hold cash while looking for suitable investment opportunities or to maintain liquidity. In these circumstances, the Fund may be unable to achieve its investment goals.

Principal Risks

Credit

High-Yield Debt Securities

Interest Rate

Variable Rate Securities

Income

Foreign Securities

Developing Markets

Derivative Instruments

Prepayment

Extension

Debt Securities Ratings

Mortgage-Backed Securities and Asset-Backed Securities

Convertible Securities

Unrated Debt Securities

Market

Liquidity

Focus

Inflation risk

Floating Rate Corporate Investments

Management

More detailed information about the Fund, its policies and risks can be found in the Fund's SAI.

Management

Franklin Advisers, Inc. (Advisers), One Franklin Parkway, San Mateo, California 94403-1906, is the Fund's investment manager.

The Fund is managed by a team of dedicated professionals focused on investments in U.S. and foreign debt securities. The portfolio managers of the team are as follows:

ERIC G. TAKAHA, CFA Senior Vice President of Advisers		Mr. Takaha has been the lead portfolio manager of the Fund since inception. He has primary responsibility for the investments of the Fund. He has final authority over all aspects of the Fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio risk assessment, and the management of daily cash balances in accordance with anticipated investment management requirements. The degree to which he may perform these functions, and the nature of these functions, may change from time to time. He joined Franklin Templeton Investments in 1989.

CHRISTOPHER J. MOLUMPHY, CFA Executive Vice President and Director of Advisers		Mr. Molumphy has been a portfolio manager of the Fund since inception, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. He joined Franklin Templeton Investments in 1988.

CFA^® and Chartered Financial Analyst^® are trademarks owned by CFA Institute.

The Fund’s SAI provides additional information about portfolio manager compensation, other accounts that they manage and their ownership of Fund shares.

Financial Highlights

Class 2	Year Ended December 31,
	2012	2011	2010	2009	2008
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$ 12.27	$ 12.72	$ 12.05	$ 10.41	$ 12.60
Income from investment operations:^a
Net investment income^b	0.60	0.64	0.68	0.66	0.65
Net realized and unrealized gains (losses)	0.89	-0.30	0.59	1.91	-1.96
Total from investment operations	1.49	0.34	1.27	2.57	-1.31
Less distributions from:
Net investment income and net of foreign currency gains	-0.90	-0.79	-0.60	-0.93	-0.85
Net realized gains	-0.02	—	—	—	-0.03
Total distributions	-0.92	-0.79	-0.60	-0.93	-0.88
Net asset value, end of year	$ 12.84	$ 12.27	$ 12.72	$ 12.05	$ 10.41
Total return^c	12.75%	2.57%	10.91%	25.75%	-11.24%
Ratios to average net assets
Expenses	0.83%	0.85%^d	0.84%^d	0.83%^d	0.86%^d
Net investment income	4.79%	5.11%	5.46%	5.88%	5.58%
Supplemental data
Net assets, end of year (000’s)	$ 158,451	$ 123,749	$ 101,347	$ 68,240	$ 33,155
Portfolio turnover rate	49.98%	55.65%	56.46%	56.19%	47.68%
Portfolio turnover rate excluding mortgage dollar rolls	48.75%	55.65%	56.46%	56.19%	47.68%

b. Based on average daily shares outstanding.

d. Benefit of expense reduction rounds to less than 0.01%.

Franklin Templeton VIP Founding Funds Allocation Fund

Investment Goal

Principal Investment Policies and Practices

The Fund is a “fund of funds” meaning that it seeks to achieve its investment goal by investing its assets in a combination of Class 1 shares of the Franklin Income Securities Fund (33 1/3%), Mutual Shares Securities Fund (33 1/3%) and Templeton Growth Securities Fund (33 1/3%) (underlying funds). The Fund makes equal allocations to each of the underlying funds on a fixed percentage basis. The administrator rebalances the Fund’s investments in the underlying funds periodically and may recommend to the Fund’s board of trustees additional or different underlying funds for investment (without the approval of shareholders). The underlying funds, in turn, invest primarily in U.S. and foreign equity securities, and, to a lesser extent, fixed income and money market securities, each following a value oriented approach. The investment policies of the underlying funds are summarized in the section below entitled "Information about the Underlying Funds."

The Fund seeks to maintain equal investments in each of the three underlying funds.

Rebalancing and Fund Performance

Temporary Investments

Information about the Underlying Funds

Risks of Investing in the Underlying Funds

The following sections describe some of the risks associated with certain of the underlying Franklin Templeton funds (hereafter the "Fund" or "Funds").

Market

Value Style Investing

Foreign Securities

Developing Markets

Focus

Smaller and Midsize Companies

Derivative Instruments

Income

Credit

Interest Rate

High-Yield Debt Securities

Merger Arbitrage Securities and Distressed Companies

Prepayment

Convertible Securities

Management

More detailed information about the Fund, its policies and risks can be found in the Fund's SAI.

Administration

Fund Administration Agreement and Services

The Fund does not receive rule 12b-1 service or distribution fees from any of the underlying funds in connection with its investments in them.

T. ANTHONY COFFEY, CFA

Vice President of Advisers

Mr. Coffey oversees the rebalancing process on behalf of FT Services. He joined Franklin Templeton Investments in 1989.

CFA^® and Chartered Financial Analyst^® are trademarks owned by CFA Institute.

The Fund's SAI provides additional information about Mr. Coffey's compensation, other accounts he manages or oversees and his ownership of Fund shares.

Administration Fees

Underlying Fund	Manager	Annual Fee Rate
Franklin Income Securities Fund	Advisers	0.45%
Mutual Shares Securities Fund	Franklin Mutual Advisers, LLC	0.60%
Templeton Growth Securities Fund	Templeton Global Advisors, Limited	0.74%

Financial Highlights

Class 2	Year Ended December 31,
	2012	2011	2010	2009	2008
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$ 7.59	$ 7.71	$ 7.14	$ 5.61	$ 9.31
Income from investment operations:^a
Net investment income^b,^c	0.25	0.23	0.21	0.26	0.27
Net realized and unrealized gains (losses)	0.89	-0.35	0.52	1.44	-3.63
Total from investment operations	1.14	-0.12	0.73	1.70	-3.36
Less distributions from:
Net investment income	-0.22	—^d	-0.16	-0.17	-0.17
Net realized gains	—	—	—^d	—	-0.17
Total distributions	-0.22	—^d	-0.16	-0.17	-0.34
Net asset value, end of year	$ 8.51	$ 7.59	$ 7.71	$ 7.14	$ 5.61
Total return^e	15.33%	-1.54%	10.25%	30.25%	-35.87%
Ratios to average net assets
Expenses before waiver and payments by affiliates^f	0.36%	0.36%	0.36%	0.37%	0.38%
Expenses net of waiver and payments by affiliates^f	0.35%	0.35%	0.35%	0.35%	0.38%
Net investment income^c	3.81%	3.19%	2.79%	3.91%	3.56%
Supplemental data
Net assets, end of year (000’s)	$ 472,686	$ 448,101	$ 488,057	$ 474,176	$ 338,320
Portfolio turnover rate	28.46%^g	58.42%	17.81%	4.23%	22.09%

b. Based on average daily shares outstanding.

c. Recognition 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.

d. Amount rounds to less than $0.01 per share.

f. Does not include expenses of the Underlying Funds in which the Fund invests. The weighted average indirect expenses of the Underlying Funds was 0.65% for the year ended December 31, 2012.

g. Excludes the value of portfolio securities delivered as a result of a redemption in-kind.

Franklin U.S. Government Fund

Investment Goal

The Fund’s investment goal is income.

Principal Investment Policies and Practices

Government agency or instrumentality issues have different levels of credit support. Ginnie Mae pass-through mortgage certificates are backed by the full faith and credit of the U.S. government. U.S. government-sponsored entities, such as Fannie Mae and Freddie Mac, may be chartered by Acts of Congress, but their securities are neither issued nor guaranteed by the U.S. government. Although the U.S. government has provided financial support to Fannie Mae and Freddie Mac, no assurance can be given that the U.S. government will continue to do so. Accordingly, securities issued by Fannie Mae and Freddie Mac may involve a risk of non-payment of principal and interest. For example, Fannie Mae and Freddie Mac pass-through mortgage certificates are backed by the credit of the respective instrumentality and are not guaranteed by the U.S. government. The U.S. Department of the Treasury, however, has the authority to support Fannie Mae and Freddie Mac by purchasing limited amounts of their respective obligations. Investors should remember that guarantees of timely repayment of principal and interest do not apply to the market prices and yields of the securities or to the net asset value or performance of the Fund, which will vary with changes in interest rates and other market conditions. Any downgrade of the credit rating of the securities issued by the U.S. government may result in a downgrade of securities issued by its agencies or instrumentalities, including government-sponsored entities.

Portfolio Selection

Temporary Investments

Principal Risks

Interest Rate

Prepayment

Extension

Mortgage-Backed Securities

Ginnie Maes

Income

Credit

When-Issued, Delayed Delivery and To-Be-Announced Purchases

Management

Market

Mortgage Dollar Rolls

More detailed information about the Fund, its policies and risks can be found in the Fund's SAI.

Management

Franklin Advisers, Inc. (Advisers), One Franklin Parkway, San Mateo, California 94403-1906, is the Fund's investment manager.

The Fund is managed by the following dedicated professional focused on investments in U.S. government securities:

PAUL VARUNOK Portfolio Manager of Advisers		Mr. Varunok has been the portfolio manager of the Fund since 2004. He has primary responsibility for the investments of the Fund. He has final authority over all aspects of the Fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio risk assessment, and the management of daily cash balances in accordance with anticipated investment management requirements. The degree to which he may perform these functions, and the nature of these functions, may change from time to time. He joined Franklin Templeton Investments in 2001.

PATRICK KLEIN, PH.D. Research Analyst of Advisers		Mr. Klein has been a portfolio manager of the Fund since 2010, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. He joined Franklin Templeton Investments in 2005.

The Fund’s SAI provides additional information about portfolio manager compensation, other accounts that they manage and their ownership of Fund shares.

Financial Highlights

Class 2	Year Ended December 31,
	2012	2011	2010	2009	2008
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$ 13.42	$ 13.11	$ 12.87	$ 12.99	$ 12.71
Income from investment operations:^a
Net investment income^b	0.28	0.38	0.43	0.48	0.55
Net realized and unrealized gains (losses)	-0.03	0.35	0.24	-0.09	0.37
Total from investment operations	0.25	0.73	0.67	0.39	0.92
Less distributions from net investment income	-0.36	-0.42	-0.43	-0.51	-0.64
Net asset value, end of year	$ 13.31	$ 13.42	$ 13.11	$ 12.87	$ 12.99
Total return^c	1.89%	5.68%	5.28%	3.09%	7.59%
Ratios to average net assets
Expenses	0.75%	0.76%	0.77%	0.78%	0.78%^d
Net investment income	2.11%	2.86%	3.26%	3.71%	4.34%
Supplemental data
Net assets, end of year (000’s)	$ 1,206,089	$ 894,699	$ 703,997	$ 557,809	$ 450,603
Portfolio turnover rate	45.89%	37.89%	51.04%	27.51%	17.06%

b. Based on average daily shares outstanding.

d. Benefit of expense reduction rounds to less than 0.01%.

Mutual Global Discovery Securities Fund

Investment Goal

The Fund's investment goal is capital appreciation.

Principal Investment Policies and Practices

Under normal market conditions, the Fund invests primarily in equity securities (including securities convertible into, or that the investment manager expects to be exchanged for, common or preferred stock) of U.S. and foreign companies that the investment manager believes are available at market prices less than their value based on certain recognized or objective criteria (intrinsic value). The equity securities in which the Fund invests are primarily common stock. Following this value-oriented strategy, the Fund invests primarily in:

Undervalued Securities - Securities trading at a discount to intrinsic value.

And, to a lesser extent, the Fund also invests in:

Merger Arbitrage Securities - Securities of companies involved in restructurings (such as mergers, acquisitions, consolidations, liquidations, spin-offs, or tender or exchange offers) or that the investment manager believes are cheap relative to an economically equivalent security of another or the same company.
Distressed Companies - Securities of companies that are, or are about to be, involved in reorganizations, financial restructurings, or bankruptcy.

Portfolio Selection

Commodity Exchange Act Exclusions

Temporary Investments

Principal Risks

Market

Value Style Investing

Foreign Securities

Smaller and Midsize Companies

Credit

High-Yield Debt Securities

Derivative Instruments

Merger Arbitrage Securities and Distressed Companies

Management

More detailed information about the Fund, its policies and risks can be found in the Fund's SAI.

Management

Franklin Mutual Advisers, LLC (Franklin Mutual), 101 John F. Kennedy Parkway, Short Hills, NJ 07078, is the Fund's investment manager.

The Fund is managed by a team of dedicated professionals focused on investments in equity securities they consider to be undervalued. The portfolio managers of the team are as follows:

PETER A. LANGERMAN Chairman, President and Chief Executive Officer of Franklin Mutual		Mr. Langerman has been a co-lead portfolio manager since 2009. He joined Franklin Templeton Investments in 1996, serving in various capacities, including President and Chief Executive Officer of Franklin Mutual and member of the management team of the Fund, before leaving in 2002 and serving as director of New Jersey's Division of Investment, overseeing employee pension funds. Between 1986 and 1996, he was employed at Heine Securities Corporation, the predecessor of Franklin Mutual.

PHILIPPE BRUGERE-TRELAT Executive Vice President of Franklin Mutual		Mr. Brugere-Trelat has been a co-lead portfolio manager of the Fund since 2009. He joined Franklin Templeton Investments in 2004. Prior to joining Franklin Templeton Investments, he was president and portfolio manager of Eurovest.

TIMOTHY RANKIN, CFA Portfolio Manager of Franklin Mutual		Mr. Rankin has been a portfolio manager of the Fund since 2010. He rejoined Franklin Templeton Investments in 2010. Prior to rejoining Franklin Templeton investments, he was managing director of Blue Harbour Group, LLC, a private investment firm focused on small- and mid-cap North American companies. Previously, he worked at Franklin Templeton Investments from 1997 through 2004.

CFA^® and Chartered Financial Analyst^® are trademarks owned by CFA Institute.

The Fund’s SAI provides additional information about portfolio manager compensation, other accounts that they manage and their ownership of Fund shares.

Financial Highlights

Class 2	Year Ended December 31,
	2012	2011	2010	2009	2008
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$ 19.30	$ 20.80	$ 18.81	$ 15.85	$ 23.69
Income from investment operations:^a
Net investment income^b	0.38	0.43	0.33	0.14^c	0.32
Net realized and unrealized gains (losses)	2.15	-1.04	1.91	3.50	-6.84
Total from investment operations	2.53	-0.61	2.24	3.64	-6.52
Less distributions from:
Net investment income	-0.55	-0.46	-0.25	-0.20	-0.46
Net realized gains	-1.11	-0.43	—	-0.48	-0.86
Total distributions	-1.66	-0.89	-0.25	-0.68	-1.32
Net asset value, end of year	$ 20.17	$ 19.30	$ 20.80	$ 18.81	$ 15.85
Total return^d	13.36%	-2.96%	11.96%	23.31%	-28.45%
Ratios to average net assets
Expenses^e	1.24%	1.22%^f	1.25%^f	1.31%^f	1.23%^f
Expenses incurred in connection with securities sold short	—%^g	—%^g	0.02%	0.09%	0.01%
Net investment income	1.87%	2.09%	1.68%	0.82%^c	1.57%
Supplemental data
Net assets, end of year (000’s)	$ 660,465	$ 712,161	$ 1,351,223	$ 1,309,852	$ 1,113,720
Portfolio turnover rate	25.63%	26.17%^h	49.31%	43.35%	22.76%

b. Based on average daily shares outstanding.

e. Includes 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.

f. Benefit of expense reduction rounds to less than 0.01%.

g. Rounds to less than 0.01%.

h. Excludes the value of portfolio securities delivered as a result of a redemption in-kind.

Mutual International Securities Fund

Investment Goal

The Fund's principal investment goal is capital appreciation, which may occasionally be short term. Its secondary goal is income.

Principal Investment Policies and Practices

Undervalued Securities - Securities trading at a discount to intrinsic value.

And, to a lesser extent, the Fund also invests in:

Merger Arbitrage Securities - Securities of companies involved in restructurings (such as mergers, acquisitions, consolidations, liquidations, spin-offs, or tender or exchange offers) or that the investment manager believes are cheap relative to an economically equivalent security of another or the same company.
Distressed Companies - Securities of companies that are, or are about to be, involved in reorganizations, financial restructurings, or bankruptcy.

The Fund invests primarily in equity securities (including securities convertible into, or that the investment manager expects to be exchanged for, common or preferred stock) of Asian and European companies that the investment manager believes are undervalued. An equity security represents a proportionate share of the ownership of a company; its value is based on the success or failure of the company's business, any income paid to stockholders, the value of its assets and general market conditions. Common stocks and preferred stocks, and securities convertible into common stocks, are examples of equity securities. The Fund may invest in convertible securities without regard to the ratings assigned by the rating agencies.

In pursuit of its value-oriented strategy, the Fund is not limited to pre-set maximums or minimums governing the size of the companies in which it may invest. However, the Fund currently invests the equity portion of its portfolio primarily to predominantly in mid- and large-cap companies with market capitalization values (share price times the number of common stock shares outstanding) greater than $1.5 billion. The Fund may invest the remaining portion of its equity investments in smaller companies.

The Fund defines Asian companies as issuers (i) organized under the laws of, or (ii) the principal business operations of which are located in, or (iii) that earn at least 50% of their revenue from, Asian countries. For purposes of the Fund’s investments, Asian countries means Australia, China (including Hong Kong and Taiwan), Japan, New Zealand, North Korea, South Korea and all of the countries that are members of the Association of Southeast Asian Nations. Some of these countries are considered to be emerging market countries. The Fund currently intends to make its investments in Asian issuers primarily in securities of those in more developed markets such as Australia, Hong Kong, Japan, New Zealand, South Korea, Singapore and Taiwan.

The Fund defines European companies as issuers (i) organized under the laws of, or (ii) whose principal business operations are located in, or (iii) who earn at least 50% of their revenue from, European countries. For purposes of the Fund's investments, European countries means all of the countries that are in Western and Eastern Europe, as well as Scandinavia.

The Fund normally invests in securities from at least five different countries although, from time to time, it may invest all of its assets in issuers in a single country. The Fund also may invest up to 20% of its total assets in securities of U.S. issuers, and securities of issuers from the Middle East and the remaining regions of the world, including emerging markets.

The Fund's investments in Distressed Companies typically involve the purchase of bank debt, lower-rated or defaulted debt securities, comparable unrated debt securities, trade claims or other indebtedness (or participations in the indebtedness) of such companies. Such other indebtedness generally represents a specific commercial loan or portion of a loan made to a company by a financial institution such as a bank. Loan participations represent fractional interests in a company's indebtedness and are generally made available by banks or other institutional investors. By purchasing all or a part of a company's direct indebtedness, the Fund, in effect, steps into the shoes of the lender. If the loan is secured, the Fund will have a priority claim to the assets of the company ahead of unsecured creditors and stockholders. The Fund generally makes such investments to achieve capital appreciation, in addition to generating income.

Portfolio Selection

Commodity Exchange Act Exclusions

Temporary Investments

Principal Risks

Market

Value Style Investing

Foreign Securities

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. One or more EU member states might exit the EU, placing the European currency and banking system in jeopardy. Efforts of the EU to further unify the economic and monetary policies of its members may increase the potential interdependence of the economies of the EU members and thereby increase the risk that adverse developments in one country will adversely affect the securities of issues located in other countries.

Developing Markets

Smaller and Midsize Companies

Credit

High-Yield Debt Securities

Derivative Instruments

Merger Arbitrage Securities and Distressed Companies

Management

More detailed information about the Fund, its policies and risks can be found in the Fund's SAI.

Management

Franklin Mutual Advisers, LLC (Franklin Mutual), 101 John F. Kennedy Parkway, Short Hills, NJ 07078, is the Fund's investment manager.

The Fund is managed by a team of dedicated professionals focused on investments of undervalued securities in Asian and European countries. The portfolio managers of the team are as follows:

PHILIPPE BRUGERE-TRELAT Executive Vice President of Franklin Mutual		Mr. Brugere-Trelat has been a co-lead portfolio manager of the Fund since its inception. He joined Franklin Templeton Investments in 2004. Prior to joining Franklin Templeton Investments, he was president and portfolio manager of Eurovest.

ANDREW SLEEMAN, CFA Portfolio Manager of Franklin Mutual		Mr. Sleeman has been a co-lead portfolio manager of the Fund since its inception. He joined Franklin Templeton Investments in 2007. Prior to joining Franklin Templeton Investments, he was with Fox-Pitt, Kelton, a financials specialist firm, where he focused on international financial equities. Previously, he worked in international equities at BNP Paribas. He also worked in Australia in the fixed income division of JP Morgan Investment Management.

The portfolio managers of the Fund have equal authority over all aspects of the Fund's investment portfolio, including, but not limited to, purchases and sales of individual securities, portfolio risk assessment, and the management of daily cash balances in accordance with anticipated investment management requirements. The degree to which each portfolio manager may perform these functions, and the nature of these functions, may change from time to time.

CFA^® and Chartered Financial Analyst^® are trademarks owned by CFA Institute.

The Fund’s SAI provides additional information about portfolio manager compensation, other accounts that they manage and their ownership of Fund shares.

The Fund pays Franklin Mutual a fee for managing the Fund’s assets. Franklin Mutual has agreed to waive or limit its fees and to assume as its own certain expenses otherwise payable by the Fund so that common expenses (i.e., a combination of investment management fees, administration fees, and other expenses, but excluding the Rule 12b-1 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, 2014. The investment management fees before and after such waiver for the fiscal year ended December 31, 2012, were 0.80% and 0.00%, respectively. Franklin Mutual has also agreed to reduce its fees to reflect reduced services to the extent the Fund invested in a Franklin Templeton money fund.

Financial Highlights

Class 2	Year Ended December 31,
	2012	2011	2010	2009^a
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$ 9.66	$ 12.04	$ 11.82	$ 10.00
Income from investment operations:^b
Net investment income^c	0.22	0.24	0.25	0.08
Net realized and unrealized gains (losses)	1.45	-1.67	1.51	2.30
Total from investment operations	1.67	-1.43	1.76	2.38
Less distributions from:
Net investment income	-0.13	-0.29	-0.67	-0.13
Net realized gains	-0.16	-0.66	-0.87	-0.43
Total distributions	-0.29	-0.95	-1.54	-0.56
Net asset value, end of year	$ 11.04	$ 9.66	$ 12.04	$ 11.82
Total return^d	17.38%	-11.92%	15.49%	23.91%
Ratios to average net assets^e
Expenses before waiver and payments by affiliates	6.16%	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	2.08%	2.12%	2.07%	1.27%
Supplemental data
Net assets, end of year (000’s)	$ 1,104	$ 966	$ 1,204	$ 1,182
Portfolio turnover rate	43.70%	67.91%	41.11%	41.84%

a. For the period June 15, 2009 (commencement of operations) to December 31, 2009.

b. The amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations in the annual report 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.

c. Based on average daily shares outstanding.

e. Ratios are annualized for periods less than one year.

f. Includes 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.

g. Benefit of expense reduction round to less than 0.01%.

Mutual Shares Securities Fund

Investment Goal

The Fund’s principal investment goal is capital appreciation. Its secondary goal is income.

Principal Investment Policies and Practices

Under normal market conditions, the Fund invests primarily in equity securities (including securities convertible into, or that the investment manager expects to be exchanged for, common or preferred stock) of U.S. and foreign companies that the investment manager believes are available at market prices less than their value based on certain recognized or objective criteria (intrinsic value). The equity securities in which the Fund invests are primarily common stock. Following this value-oriented strategy, the Fund invests primarily in:

Undervalued Securities - Securities trading at a discount to intrinsic value.

And, to a lesser extent, the Fund also invests in:

Merger Arbitrage Securities - Securities of companies involved in restructurings (such as mergers, acquisitions, consolidations, liquidations, spin-offs, or tender or exchange offers) or that the investment manager believes are cheap relative to an economically equivalent security of another or the same company.
Distressed Companies - Securities of companies that are, or are about to be, involved in reorganizations, financial restructurings, or bankruptcy.

In pursuit of its value-oriented strategy, the Fund is not limited to pre-set maximums or minimums governing the size of the companies in which it may invest. However, as a general rule, the Fund generally invests the equity portion of its portfolio primarily to predominantly in companies with market capitalizations (share price multiplied by the number of shares of common stock outstanding) greater than $5 billion, with a portion or significant amount in smaller companies.

The Fund may invest a significant portion (up to 35%) of its assets in foreign securities, which may include sovereign debt and participations in foreign government debt.

Portfolio Selection

Commodity Exchange Act Exclusions

Temporary Investments

Principal Risks

Market

Value Style Investing

Foreign Securities

Smaller and Midsize Companies

Credit

High-Yield Debt Securities

Derivative Instruments

Merger Arbitrage Securities and Distressed Companies

Management

More detailed information about the Fund, its policies and risks can be found in the Fund's SAI.

Management

Franklin Mutual Advisers, LLC (Franklin Mutual), 101 John F. Kennedy Parkway, Short Hills, NJ 07078, is the Fund's investment manager.

The Fund is managed by a team of dedicated professionals focused on investments in equity securities they consider to be undervalued. The portfolio managers of the team are as follows:

PETER A. LANGERMAN Chairman, President and Chief Executive Officer of Franklin Mutual		Mr. Langerman assumed the duties of lead portfolio manager of the Fund when he rejoined Franklin Templeton Investments in 2005 and became a co-lead portfolio manager in 2007. He joined Franklin Templeton Investments in 1996, serving in various capacities, including President and Chief Executive Officer of Franklin Mutual and member of the management team of the Fund, before leaving in 2002 and serving as director of New Jersey's Division of Investment, overseeing employee pension funds. Between 1986 and 1996, he was employed at Heine Securities Corporation, the predecessor of Franklin Mutual.

F. DAVID SEGAL, CFA Portfolio Manager of Franklin Mutual		Mr. Segal assumed the duties of co-lead portfolio manager with Mr. Langerman in 2007 and had been a portfolio manager of the Fund since joining Franklin Templeton Investments in 2002. Prior to joining Franklin Templeton Investments, he was an analyst in the Structured Finance Group of MetLife for the period 1999-2002.

DEBBIE TURNER, CFA Portfolio Manager of Franklin Mutual		Ms. Turner has been a portfolio manager of the Fund since 2001 and has been with Franklin Templeton Investments since 1996.

CFA^® and Chartered Financial Analyst^® are trademarks owned by CFA Institute.

The Fund’s SAI provides additional information about portfolio manager compensation, other accounts that they manage and their ownership of Fund shares.

Financial Highlights

Class 2	Year Ended December 31,
	2012	2011	2010	2009	2008
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$ 15.38	$ 15.95	$ 14.58	$ 11.78	$ 20.19
Income from investment operations:^a
Net investment income^b	0.30	0.32^c	0.36^d	0.20^e	0.32
Net realized and unrealized gains (losses)	1.90	-0.51	1.25	2.85	-7.49
Total from investment operations	2.20	-0.19	1.61	3.05	-7.17
Less distributions from:
Net investment income	-0.35	-0.38	-0.24	-0.25	-0.51
Net realized gains	—	—	—	—	-0.73
Total distributions	-0.35	-0.38	-0.24	-0.25	-1.24
Net asset value, end of year	$ 17.23	$ 15.38	$ 15.95	$ 14.58	$ 11.78
Total return^f	14.24%	-1.04%	11.19%	26.05%	-37.11%
Ratios to average net assets
Expenses^g	0.96%	0.98%^h	0.99%^h	1.03%^h	0.98%^h
Expenses incurred in connection with securities sold short	—%ⁱ	—%ⁱ	0.02%	0.06%	—%ⁱ
Net investment income	1.81%	2.03%^c	2.41%^d	1.60%^e	1.91%
Supplemental data
Net assets, end of year (000’s)	$ 4,069,803	$ 3,913,220	$ 4,188,821	$ 3,953,435	$ 3,303,761
Portfolio turnover rate	34.07%^j	41.02%	32.05%	49.33%	44.11%

b. Based on average daily shares outstanding.

g. Includes 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.

h. Benefit of expense reduction rounds to less than 0.01%.

i. Rounds to less than 0.01%.

j. Excludes the value of portfolio securities delivered as a result of redemption in-kind.

Templeton Developing Markets Securities Fund

Investment Goal

The Fund’s investment goal is long-term capital appreciation.

Principal Investment Policies and Practices

whose principal securities trading markets are in developing market countries; or
that derive 50% or more of their total revenue or profit from either goods or services produced or sales made in developing market countries; or
that have 50% or more of their assets in developing market countries; or
that are linked to currencies of developing market countries; or
that are organized under the laws of, or with principal offices in, developing market countries.

In addition to the Fund's main investments, the Fund may invest up to 20% of its net assets in the securities of issuers in developed market countries.

Portfolio Selection

The investment manager invests in securities without regard to benchmark comparisons.

Temporary Investments

When the investment manager believes market or economic conditions are unfavorable for investors, the investment manager may invest up to 100% of the Fund's assets in a temporary defensive manner by holding all or a substantial portion of its assets in U.S. or non-U.S. currency denominated short-term or medium-term (generally less than 5 years for this Fund) investments. Temporary defensive investments generally may include money market securities, including shares of money market funds managed by affiliates of the investment manager, and exchange-traded funds, U.S. and foreign government securities, high grade commercial paper, bank obligations, and repurchase agreements denominated in the currency of any nation. The investment manager also may invest in these types of securities or hold cash while looking for suitable investment opportunities or to maintain liquidity. In these circumstances, the Fund may be unable to achieve its investment goal.

Principal Risks

Market

Foreign Securities

Developing Markets

less social, political and economic stability;
smaller securities markets with low or nonexistent trading volume and greater illiquidity and price volatility;
more restrictive national policies on foreign investment, including restrictions on investment in issuers or industries deemed sensitive to national interests;
less transparent and established taxation policies;
less developed regulatory or legal structures governing private and foreign investment or allowing for judicial redress for injury to private property;
less familiarity with a capital market structure or market-oriented economy and more widespread corruption and fraud;
less financial sophistication, creditworthiness and/or resources possessed by, and less government regulation of, the financial institutions and issuers with which the Fund transacts;
less government supervision and regulation of business and industry practices, stock exchanges, brokers and listed companies than in the U.S.;
greater concentration in a few industries resulting in greater vulnerability to regional and global trade conditions;
higher rates of inflation and more rapid and extreme fluctuations in inflation rates;
greater sensitivity to interest rate changes;
increased volatility in currency exchange rates and potential for currency devaluations and/or currency controls;
greater debt burdens relative to the size of the economy;
more delays in settling portfolio transactions and heightened risk of loss from share registration and custody practices; and
less assurance that recent favorable economic developments will not be slowed or reversed by unanticipated economic, political or social events in such countries.

Because of the above factors, the Fund's investments in developing market countries are subject to greater price volatility and illiquidity than investments in developed markets.

The definition of developing market countries or companies as used in this prospectus may differ from the definition of the same terms as used in other Franklin Templeton fund prospectuses.

Focus

Smaller and Midsize Companies

Value Style Investing

Depositary Receipts

Management

More detailed information about the Fund, its policies and risks can be found in the Fund's SAI.

Management

The Fund is managed by a team of dedicated professionals focused on investments in emerging or developing market securities. The portfolio managers of the team are as follows:

MARK MOBIUS, PH.D. Executive Chairman of Templeton Emerging Markets Group and Portfolio Manager of Asset Management		Dr. Mobius has been the lead portfolio manager of the Fund since inception. Dr. Mobius has primary responsibility for the investments of the Fund. Dr. Mobius has final authority over all aspects of the Fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio risk assessment, and the management of daily cash balances in accordance with anticipated investment management requirements. The degree to which Dr. Mobius may perform these functions, and the nature of these functions, may change from time to time. Dr. Mobius joined Franklin Templeton Investments in 1987.

TOM WU Director of Asset Management		Mr. Wu has been a portfolio manager of the Fund since inception, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. He joined Franklin Templeton Investments in 1987.

DENNIS LIM Co-Chief Executive Officer and Director of Asset Management		Mr. Lim has been a portfolio manager of the Fund since inception, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. He joined Franklin Templeton Investments in 1990.

ALLAN LAM Portfolio Manager of Asset Management		Mr. Lam has been a portfolio manager of the Fund since 2011, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. He joined Franklin Templeton Investments in 1987.

The Fund’s SAI provides additional information about portfolio manager compensation, other accounts that they manage and their ownership of Fund shares.

Financial Highlights

Class 2	Year Ended December 31,
	2012	2011	2010	2009	2008
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$ 9.42	$ 11.30	$ 9.78	$ 6.04	$ 15.99
Income from investment operations:^a
Net investment income^b	0.17	0.14	0.06	0.11	0.15
Net realized and unrealized gains (losses)	1.05	-1.92	1.62	3.98	-7.33
Total from investment operations	1.22	-1.78	1.68	4.09	-7.18
Less distributions from:
Net investment income	-0.14	-0.10	-0.16	-0.32	-0.33
Net realized gains	—	—	—	-0.03	-2.44
Total distributions	-0.14	-0.10	-0.16	-0.35	-2.77
Redemption fees^c	—	—	—	—	—
Net asset value, end of year	$ 10.50	$ 9.42	$ 11.30	$ 9.78	$ 6.04
Total return^d	13.16%	-15.86%	17.58%	72.59%	-52.70%
Ratios to average net assets
Expenses	1.60%	1.65%	1.74%^e	1.70%^e	1.77%^e
Net investment income	1.68%	1.32%	0.62%	1.39%	1.27%
Supplemental data
Net assets, end of year (000’s)	$ 291,638	$ 295,223	$ 392,546	$ 435,947	$ 264,186
Portfolio turnover rate	24.45%	14.90%	24.41%	56.58%^f	75.11%^f

b. Based on average daily shares outstanding.

c. Amount rounds to less than $0.01 per share.

e. Benefit of expense reduction rounds to less than 0.01%.

f. Excludes the value of portfolio securities delivered as a result of redemptions in-kind.

Templeton Foreign Securities Fund

Investment Goal

The Fund's investment goal is long-term capital growth.

Principal Investment Policies and Practices

Portfolio Selection

Temporary Investments

When the investment manager believes market or economic conditions are unfavorable for investors, the investment manager may invest up to 100% of the Fund's assets in a temporary defensive manner by holding all or a substantial portion of its assets in cash, cash equivalents or other high quality short-term investments. Temporary defensive investments generally may include money market securities, including shares of money market funds managed by the investment manager or its affiliates, or short-term debt securities. The investment manager also may invest in these types of securities or hold cash while looking for suitable investment opportunities or to maintain liquidity. In these circumstances, the Fund may be unable to achieve its investment goal.

Principal Risks

Market

Foreign Securities

Developing Markets

less social, political and economic stability;
smaller securities markets with low or nonexistent trading volume and greater illiquidity and price volatility;
more restrictive national policies on foreign investment, including restrictions on investment in issuers or industries deemed sensitive to national interests;
less transparent and established taxation policies;
less developed regulatory or legal structures governing private and foreign investment or allowing for judicial redress for injury to private property;
less familiarity with a capital market structure or market-oriented economy and more widespread corruption and fraud;
less financial sophistication, creditworthiness and/or resources possessed by, and less government regulation of, the financial institutions and issuers with which the Fund transacts;
less government supervision and regulation of business and industry practices, stock exchanges, brokers and listed companies than in the U.S.;
greater concentration in a few industries resulting in greater vulnerability to regional and global trade conditions;
higher rates of inflation and more rapid and extreme fluctuations in inflation rates;
greater sensitivity to interest rate changes;
increased volatility in currency exchange rates and potential for currency devaluations and/or currency controls;
greater debt burdens relative to the size of the economy;
more delays in settling portfolio transactions and heightened risk of loss from share registration and custody practices; and
less assurance that recent favorable economic developments will not be slowed or reversed by unanticipated economic, political or social events in such countries.

Because of the above factors, the Fund's investments in developing market countries are subject to greater price volatility and illiquidity than investments in developed markets.

Focus

Derivative Instruments

Equity-Linked Notes (ELNs)

Value Style Investing

Smaller and Midsize Companies

Credit

Interest Rate

Management

More detailed information about the Fund, its policies and risks can be found in the Fund's SAI.

Management

Templeton Investment Counsel, LLC (Investment Counsel), 300 S.E. 2nd Street, Fort Lauderdale, Florida 33301-1923, is the Fund’s investment manager.

The Fund is managed by a team of dedicated professionals focused on global investments of issuers outside the U.S. The portfolio managers of the team are as follows:

PETER A. NORI, CFA Executive Vice President/Portfolio Manager - Research Analyst of Investment Counsel		Mr. Nori has been the lead portfolio manager of the Fund since 1999. He has primary responsibility for the investments of the Fund. He has final authority over all aspects of the Fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio risk assessment, and the management of daily cash balances in accordance with anticipated investment management requirements. The degree to which he may perform these functions, and the nature of these functions, may change from time to time. He joined Franklin Templeton Investments in 1987.

CINDY L. SWEETING, CFA President of Investment Counsel		Ms. Sweeting has been a portfolio manager of the Fund since June 2012, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. She joined Franklin Templeton Investments in 1997.

CFA^® and Chartered Financial Analyst^® are trademarks owned by CFA Institute.

The Fund’s SAI provides additional information about portfolio manager compensation, other accounts that they manage and their ownership of Fund shares.

Financial Highlights

Class 2	Year Ended December 31,
	2012	2011	2010	2009	2008
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$ 12.56	$ 14.29	$ 13.45	$ 10.76	$ 20.25
Income from investment operations:^a
Net investment income^b	0.34	0.37	0.25	0.22	0.40
Net realized and unrealized gains (losses)	1.87	-1.86	0.84	3.34	-7.89
Total from investment operations	2.21	-1.49	1.09	3.56	-7.49
Less distributions from:
Net investment income	-0.40	-0.24	-0.25	-0.39	-0.39
Net realized gains	—	—	—	-0.48	-1.61
Total distributions	-0.40	-0.24	-0.25	-0.87	-2.00
Redemption fees^c	—	—	—	—	—
Net asset value, end of year	$ 14.37	$ 12.56	$ 14.29	$ 13.45	$ 10.76
Total return^d	18.23%	-10.63%	8.41%	37.04%	-40.38%
Ratios to average net assets
Expenses	1.04%	1.04%^e	1.03%^e	1.03%^e	1.02%^e
Net investment income	2.59%	2.67%	1.85%	2.03%	2.57%
Supplemental data
Net assets, end of year (000’s)	$ 1,744,231	$ 1,679,412	$ 2,090,757	$ 2,010,268	$ 1,702,038
Portfolio turnover rate	12.53%	21.09%	19.16%	22.50%	18.27%

b. Based on average daily shares outstanding.

c. Amount rounds to less than $0.01 per share.

e. Benefit of expense reduction rounds to less than 0.01%.

Templeton Global Bond Securities Fund

Investment Goal

The Fund’s investment goal is high current income, consistent with preservation of capital. Capital appreciation is a secondary consideration.

Principal Investment Policies and Practices

The Fund may use any of the above currency techniques or other derivative transactions for the purposes of enhancing Fund returns, increasing liquidity, gaining exposure to particular instruments in more efficient or less expensive ways and/or hedging risks relating to changes in exchange rates, interest rates and other market factors. By way of example, when the investment manager believes that the value of a particular foreign currency is expected to increase compared to the U.S. dollar, the Fund could enter into a forward contract to purchase that foreign currency at a future date. If at such future date the value of the foreign currency exceeds the then current amount of U.S. dollars to be paid by the Fund under the contract, the Fund will recognize a gain. When used for hedging purposes, a forward contract or other derivative instrument could be used to protect against possible declines in a currency’s value where a security held or to be purchased by the Fund is denominated in that currency, or it may be used to hedge the Fund’s position by entering into a transaction on another currency expected to perform similarly to the currency of the security held or to be purchased (a “proxy hedge”).

Portfolio Selection

Commodity Exchange Act Exclusions

Temporary Investments

When the investment manager believes market or economic conditions are unfavorable for investors, the investment manager may invest up to 100% of the Fund's assets in a temporary defensive manner by holding all or a substantial portion of its assets in cash, cash equivalents or other high quality short-term investments. Temporary defensive investments generally may include short-term U.S. government securities, commercial paper, short-term bank time deposits, bankers' acceptances and money market fund shares (including shares of an affiliated money market fund). The investment manager also may invest in these types of securities or hold cash while looking for suitable investment opportunities, to maintain liquidity or to segregate on the Fund's books in connection with its forward currency, currency or interest rate futures positions. In these circumstances, the Fund may be unable to achieve its investment goal.

Principal Risks

Foreign Securities

Developing Markets

less social, political and economic stability;
smaller securities markets with low or nonexistent trading volume and greater illiquidity and price volatility;
more restrictive national policies on foreign investment, including restrictions on investment in issuers or industries deemed sensitive to national interests;
less transparent and established taxation policies;
less developed regulatory or legal structures governing private and foreign investment or allowing for judicial redress for injury to private property;
less familiarity with a capital market structure or market-oriented economy and more widespread corruption and fraud;
less financial sophistication, creditworthiness and/or resources possessed by, and less government regulation of, the financial institutions and issuers with which the Fund transacts;
less government supervision and regulation of business and industry practices, stock exchanges, brokers and listed companies than in the U.S.;
greater concentration in a few industries resulting in greater vulnerability to regional and global trade conditions;
higher rates of inflation and more rapid and extreme fluctuations in inflation rates;
greater sensitivity to interest rate changes;
increased volatility in currency exchange rates and potential for currency devaluations and/or currency controls;
greater debt burdens relative to the size of the economy;
more delays in settling portfolio transactions and heightened risk of loss from share registration and custody practices; and
less assurance that recent favorable economic developments will not be slowed or reversed by unanticipated economic, political or social events in such countries.

Because of the above factors, the Fund's investments in developing market countries are subject to greater price volatility and illiquidity than investments in developed markets.

Interest Rate

Credit

Unrated Debt Securities

High-Yield Debt Securities

Derivative Instruments

Inflation-Indexed Securities

Income

Non-Diversification

Market

Management

Debt Securities Ratings

More detailed information about the Fund, its policies and risks can be found in the Fund's SAI.

Management

Franklin Advisers, Inc. (Advisers), One Franklin Parkway, San Mateo, California 94403-1906, is the Fund's investment manager.

The Fund is managed by the following dedicated professionals focused on investments of debt securities in any country, including emerging markets:

MICHAEL HASENSTAB, PH.D. Senior Vice President of Advisers		Dr. Hasenstab has been the portfolio manager of the Fund since 2002 and an analyst since 2001. He has primary responsibility for the investments of the Fund. Dr. Hasenstab has final authority over all aspects of the Fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio risk assessment, and the management of daily cash balances in accordance with anticipated investment management requirements. The degree to which he may perform these functions, and the nature of these functions, may change from time to time. He first joined Franklin Templeton Investments in 1995, rejoining again in 2001 after a three-year leave to obtain his Ph.D.

SONAL DESAI, PH.D. Portfolio Manager of Advisers		Dr. Desai has been a portfolio manager of the Fund since 2011, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. She joined Franklin Templeton Investments in 2009. Prior to joining Franklin Templeton Investments, she was part of the Global Credit team at Thames River Capital in London, where she was responsible for shaping the team's top-down global view on macroeconomic and market developments covering both G10 and global emerging markets.

The Fund’s SAI provides additional information about portfolio manager compensation, other accounts that they manage and their ownership of Fund shares.

Financial Highlights

Class 2	Year Ended December 31,
	2012	2011	2010	2009	2008
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$ 18.15	$ 19.49	$ 17.34	$ 17.10	$ 16.72
Income from investment operations:^a
Net investment income^b	0.65	0.79	0.93	0.93	0.74
Net realized and unrealized gains (losses)	1.94	-0.89	1.54	1.98	0.27
Total from investment operations	2.59	-0.10	2.47	2.91	1.01
Less distributions from:
Net investment income and net foreign currency gains	-1.24	-1.11	-0.27	-2.67	-0.63
Net realized gains	-0.03	-0.13	-0.05	—	—
Total distributions	-1.27	-1.24	-0.32	-2.67	-0.63
Redemption fees^c	—	—	—	—	—
Net asset value, end of year	$ 19.47	$ 18.15	$ 19.49	17.34	$ 17.10
Total return^d	15.07%	-0.87%	14.45%	18.68%	6.21%
Ratios to average net assets
Expenses^e	0.80%	0.81%	0.80%	0.79%	0.83%
Net investment income	3.46%	4.15%	5.02%	5.48%	4.41%
Supplemental data
Net assets, end of year (000’s)	$ 2,418,229	$ 1,812,814	$ 1,490,794	$ 1,262,783	$ 793,773
Portfolio turnover rate	43.26%	34.18%	8.77%	20.84%	28.46%

b. Based on average daily shares outstanding.

c. Amount rounds to less than $0.01 per share.

e. Benefit of expense reduction rounds to less than 0.01%.

Templeton Growth Securities Fund

Investment Goal

The Fund’s investment goal is long-term capital growth.

Principal Investment Policies and Practices

An equity security represents a proportionate share of the ownership of a company; its value is based on the success or failure of the company’s business, any income paid to stockholders, the value of its assets and general market conditions. Common stocks and preferred stocks, and securities convertible into common stocks, are examples of equity securities. The Fund may invest in convertible securities without regard to the ratings assigned by the rating services. The Fund also invests in depositary receipts. These are certificates typically issued by a bank or trust company that give their holders the right to receive securities issued by a foreign or domestic company. Depositary receipts will be issued under sponsored or unsponsored programs. In sponsored programs, an issuer has made arrangements to have its securities traded in the form of depositary receipts. In unsponsored programs, the issuer may not be directly involved in the creation of the program.

Portfolio Selection

Temporary Investments

When the investment manager believes market or economic conditions are unfavorable for investors, the investment manager may invest up to 100% of the Fund's assets in a temporary defensive manner by holding all or a substantial portion of its assets in cash, cash equivalents or other high quality short-term investments. Temporary defensive investments generally may include U.S. government securities, bank time deposits denominated in the currency of any major nation, commercial paper, and repurchase agreements. The investment manager also may invest in these types of securities or hold cash while looking for suitable investment opportunities or to maintain liquidity. In these circumstances, the Fund may be unable to achieve its investment goal.

Principal Risks

Market

Foreign Securities

Emerging Markets

less social, political and economic stability;
smaller securities markets with low or nonexistent trading volume and greater illiquidity and price volatility;
more restrictive national policies on foreign investment, including restrictions on investment in issuers or industries deemed sensitive to national interests;
less transparent and established taxation policies;
less developed regulatory or legal structures governing private and foreign investment or allowing for judicial redress for injury to private property;
less familiarity with a capital market structure or market-oriented economy and more widespread corruption and fraud;
less financial sophistication, creditworthiness and/or resources possessed by, and less government regulation of, the financial institutions and issuers with which the Fund transacts;
less government supervision and regulation of business and industry practices, stock exchanges, brokers and listed companies than in the U.S.;
greater concentration in a few industries resulting in greater vulnerability to regional and global trade conditions;
higher rates of inflation and more rapid and extreme fluctuations in inflation rates;
greater sensitivity to interest rate changes;
increased volatility in currency exchange rates and potential for currency devaluations and/or currency controls;
greater debt burdens relative to the size of the economy;
more delays in settling portfolio transactions and heightened risk of loss from share registration and custody practices; and
less assurance that recent favorable economic developments will not be slowed or reversed by unanticipated economic, political or social events in such countries.

Because of the above factors, the Fund's investments in emerging market countries are subject to greater price volatility and illiquidity than investments in developed markets.

Value Style Investing

Management

Focus

Depositary Receipts

Interest Rate

Credit

More detailed information about the Fund, its policies and risks can be found in the Fund's SAI.

Management

Templeton Global Advisors Limited (Global Advisors), Lyford Cay, Nassau, Bahamas, is the Fund's investment manager.

The Fund is managed by a team of dedicated professionals focused on investments in equity securities of companies anywhere in the world. The portfolio managers of the team are as follows:

NORMAN BOERSMA, CFA President of Global Advisors		Mr. Boersma has been lead portfolio manager of the Fund since 2011. He has primary responsibility for the investments of the Fund. He has final authority over all aspects of the Fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio risk assessment, and the management of daily cash balances in accordance with anticipated investment management requirements. The degree to which he may perform these functions, and the nature of these functions, may change from time to time. He joined Franklin Templeton Investments in 1991.

LISA F. MYERS, J.D., CFA Executive Vice President of Global Advisors		Ms. Myers has been a portfolio manager of the Fund since 2010 providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. She joined Franklin Templeton Investments in 1996.

MATTHEW R. NAGLE, CFA Senior Vice President of Global Advisors		Mr. Nagle has been a portfolio manager of the Fund since 2010, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. He joined Franklin Templeton Investments in 2003.

JAMES HARPER, CFA Senior Vice President of Global Advisors		Mr. Harper has been a portfolio manager of the Fund since 2010, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. He joined Franklin Templeton Investments in 2007.

CFA^® and Chartered Financial Analyst^® are trademarks owned by CFA Institute.

The Fund’s SAI provides additional information about portfolio manager compensation, other accounts that they manage and their ownership of Fund shares.

Financial Highlights

Class 2	Year Ended December 31,
	2012	2011	2010	2009	2008
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$ 10.11	$ 11.01	$ 10.40	$ 8.20	$ 15.44
Income from investment operations:^a
Net investment income^b	0.21	0.21	0.15	0.16	0.29
Net realized and unrealized gains (losses)	1.88	-0.96	0.60	2.32	-6.44
Total from investment operations	2.09	-0.75	0.75	2.48	-6.15
Less distributions from:
Net investment income	-0.23	-0.15	-0.14	-0.28	-0.22
Net realized gains	—	—	—	—	-0.87
Total distributions	-0.23	-0.15	-0.14	-0.28	-1.09
Net asset value, end of year	$ 11.97	$ 10.11	$ 11.01	$ 10.40	$ 8.20
Total return^c	21.07%	-6.97%	7.39%	31.10%	-42.32%
Ratios to average net assets
Expenses^d	1.03%	1.03%	1.02%	1.04%	1.03%
Net investment income	2.06%	1.97%	1.46%	1.75%	2.39%
Supplemental data
Net assets, end of year (000’s)	$ 1,352,554	$ 1,254,193	$ 1,626,885	$ 1,718,894	$ 1,513,557
Portfolio turnover rate	18.73%^e	42.13%^e	9.61%	14.95%	18.37%

b. Based on average daily shares outstanding.

d. Benefit of expense reduction rounds to less than 0.01%.

e. Excludes the value of portfolio securities delivered as a result of a redemption in-kind.

Additional Information, All Funds

Contract Owners should receive financial reports for the Fund related to their Contract from the sponsoring Insurer every six months.

Distributions and Taxes

Fund Account Information

Buying Shares

Selling Shares

Exchanging Shares

Market Timing Trading Policy

The board of trustees has adopted the following policies and procedures with respect to market timing (Market Timing Trading Policy):

The Fund is currently using several methods to reduce the risk of market timing. These methods include:

seeking the cooperation of Insurers and funds of funds to assist the Fund in identifying potential market timing activity;
committing staff to selectively review on a continuing basis recent trading activity in order to identify trading activity that may be contrary to the Fund's Market Timing Trading Policy;
monitoring potential price differentials following the close of trading in foreign markets to determine whether the application of fair value pricing procedures is warranted; and
seeking the cooperation of financial intermediaries to assist the Fund in identifying market timing activity.

Involuntary Redemptions

Fund Account Policies

CALCULATING SHARE PRICE

When they buy and sell shares, the Fund's shareholders pay and receive the net asset value (NAV) per share.

FAIR VALUATION - INDIVIDUAL SECURITIES

SECURITY VALUATION - U.S. PASS-THROUGH SECURITIES, CMO, ABS, MBS

SECURITY VALUATION - CORPORATE DEBT SECURITIES

SECURITY VALUATION - SENIOR SECURED CORPORATE LOANS

SECURITY VALUATION – MUNICIPAL SECURITIES – MATRIX PRICING (FAIR VALUATION)

SECURITY VALUATION - OPTIONS

VALUATION - FOREIGN SECURITIES - COMPUTATION OF U.S. EQUIVALENT VALUE

VALUATION – FOREIGN SECURITIES – POTENTIAL IMPACT OF TIME ZONES AND MARKET HOLIDAYS

SHARE CLASSES

Class 1, Class 2, Class 3, Class 4 and Class 5 shares of the Funds are identical except that Class 2, Class 3, Class 4 and Class 5 each have a distribution plan or "rule 12b-1" plan, as described below for Class 2 shares and in their respective prospectuses for Class 3, Class 4 and Class 5 shares. Class 3 shares may assess a 1.00% redemption fee, as described in the prospectuses for Class 3 shares.

Distribution and service (12b-1) fees Class 2 has a distribution plan, sometimes known as a rule 12b-1 plan, that allows the Fund to pay distribution fees to those who sell and distribute Class 2 shares and provide services to shareholders and Contract Owners. Because these fees are paid out of Class 2's assets on an on-going basis, over time these fees will increase the cost of an investment, and may cost you more than paying other types of sales charges. While the maximum amount payable under most Funds' Class 2 rule 12b-1 plan is 0.35% per year of the Fund’s Class 2 average daily net assets, the board of trustees has set the current rate at 0.25%. However, Franklin Strategic Income Securities Fund, Templeton Developing Markets Securities Fund, Templeton Foreign Securities Fund and Templeton Global Bond Securities Fund each have a maximum rule 12b-1 plan fee of 0.25% per year. A portion of the fees payable to Franklin Templeton Distributors, Inc. (Distributors) or others under the rule 12b-1 plan may be retained by Distributors for distribution expenses.

Subject to applicable law, the board of trustees may from time to time, without the approval, vote or consent of shareholders of the Fund or any class, combine, merge or otherwise consolidate the shares of two or more classes of shares of the Fund with and/or into a single class of shares of the Fund, with such designation, preference, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, terms and conditions of redemption and other characteristics as the board of trustees may determine. Such transactions may be effected through share-for-share exchanges, transfers or sales of assets, shareholder in-kind redemptions and purchases, exchange offers, or any other method approved by the board of trustees.

ADDITIONAL POLICIES

Please note that the Fund maintains additional policies and reserves certain rights, including:

The Fund may restrict, reject or cancel any purchase orders, including an exchange request.
At any time, the Fund may establish or change investment minimums.
The Fund may make material changes to or discontinue the exchange privilege on 60 days' notice to insurance company or Fund of Fund shareholders, or as otherwise provided by law.
Purchases of shares of the Fund (including the purchase side of an exchange) may be made only when such shares are eligible for sale in the appropriate state or jurisdiction.
In unusual circumstances, we may temporarily suspend redemptions or postpone the payment of proceeds, as allowed by federal securities laws.
For redemptions over a certain amount, the Fund may pay redemption proceeds in securities or other assets rather than cash if the investment manager determines it is in the best interest of the Fund, consistent with applicable law.
To permit their investors to obtain the current price, participating insurance companies and funds of funds are responsible for transmitting all orders to the Fund promptly.

Questions

FOR MORE INFORMATION

Not all Funds and classes are available in all Contracts. For information on the terms of investment in a Contract, please consult the Contract prospectus that accompanies this Fund prospectus.

You can learn more about the Fund in the following documents:

Annual/Semiannual Fund Reports to Shareholders

Statement of Additional Information (SAI)

Contains more information about the Fund, its investments, policies, and risks. It is incorporated by reference into (is legally a part of) this prospectus.

Investment Company Act file #811-05583
© 2013 Franklin Templeton Investments. All rights reserved.

VIP2 P 05/13

May 1, 2013
The U.S. Securities and Exchange Commission (SEC) has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense.

Class 3

Templeton Developing Markets Securities Fund
Templeton Foreign Securities Fund
Templeton Global Bond Securities Fund

PROSPECTUS

Franklin Templeton Variable Insurance Products Trust

		Contents

		FUND SUMMARIES
INFORMATION ABOUT THE FUND YOU SHOULD KNOW BEFORE INVESTING		Templeton Developing Markets Securities Fund Templeton Foreign Securities Fund Templeton Global Bond Securities Fund

		Overview
		Franklin Templeton Variable Insurance Products Trust

		FUND DETAILS
MORE INFORMATION ON INVESTMENT POLICIES, PRACTICES AND RISKS/FINANCIAL HIGHLIGHTS		Templeton Developing Markets Securities Fund Templeton Foreign Securities Fund Templeton Global Bond Securities Fund

		Additional Information, All Funds DEALER COMPENSATION PORTFOLIO HOLDINGS STATEMENTS AND REPORTS ADMINISTRATIVE SERVICES

		Distributions and Taxes INCOME AND CAPITAL GAINS DISTRIBUTIONS Tax Considerations

		FUND ACCOUNT INFORMATION
INFORMATION ABOUT FUND TRANSACTIONS AND SERVICES		Buying Shares Selling Shares Exchanging Shares Market Timing Trading Policy Involuntary Redemptions Fund Account Policies Questions

		FOR MORE INFORMATION
WHERE TO LEARN MORE ABOUT EACH FUND		Back Cover

FUND SUMMARIES

Templeton Developing Markets Securities Fund

Investment Goal

Long-term capital appreciation.

Fees and Expenses of the Fund

These tables describe the fees and expenses that you may pay if you buy and hold shares of the Fund. The tables and the example do not include any fees or sales charges imposed by variable insurance contracts, qualified retirement plans or funds of funds. If they were included, your costs would be higher.

SHAREHOLDER FEES (fees paid directly from your investment)

	Class 3
Redemption fee on interests in separate accounts held less than 60 days (as a % of the amount redeemed). The redemption fee is retained by the Fund.	1.00%

ANNUAL FUND OPERATING EXPENSES
(expenses that you pay each year as a percentage of the value of your investment)

	Class 3
Management fees	1.10%
Distribution and service (12b-1) fees	0.25%
Other expenses	0.25%
Total annual Fund operating expenses	1.60%

Example

	1 Year	3 Years	5 Years	10 Years
Class 3	$ 163	$ 505	$ 871	$ 1,900

Portfolio Turnover

Principal Investment Strategies

Principal Risks

Performance

The following bar chart and table provide some indication of the risks of investing in the Fund. The bar chart shows changes in the Fund's performance from year to year for Class 3 shares. The table shows how the Fund's average annual returns for 1 year, 5 years, 10 years or since inception, as applicable, compare with those of a broad measure of market performance. The Fund's past performance is not necessarily an indication of how the Fund will perform in the future.

The inclusion of the S&P/IFCI Composite Index shows how the Fund's performance compares to a group of securities in an additional leading emerging markets index.

ANNUAL TOTAL RETURNS

Best Quarter:	Q2'09	31.88%
Worst Quarter:	Q4'08	-28.84%
As of March 31, 2013, the Fund's year-to-date return was 1.05%.

AVERAGE ANNUAL TOTAL RETURNS

For the periods ended December 31, 2012

	1 Year	5 Years	10 Years
Templeton Developing Markets Securities Fund - Class 3	13.16%	-1.78%	13.89%
MSCI Emerging Markets Index (index reflects no deduction for fees, expenses or taxes)	18.63%	-0.61%	16.88%
S&P/IFCI Composite Index (index reflects no deduction for fees, expenses or taxes)	18.89%	-0.56%	17.50%

Historical performance for Class 3 shares prior to their inception in 2005 is based on the performance of Class 2 Fund shares. Class 2 shares are not offered in this prospectus but have annual returns substantially similar to Class 3 because they invest in the same portfolio of securities and have substantially similar expenses, including rule 12b-1 fees.

Investment Manager

Templeton Asset Management Ltd. (Asset Management)

Portfolio Managers

MARK MOBIUS, PH.D. Executive Chairman of Templeton Emerging Markets Group, Portfolio Manager of Asset Management and portfolio manager of the Fund since inception (1996).

TOM WU Director of Asset Management and portfolio manager of the Fund since inception (1996).

DENNIS LIM Co-Chief Executive Officer and Director of Asset Management and portfolio manager of the Fund since inception (1996).

ALLAN LAM Portfolio Manager of Asset Management and portfolio manager of the Fund since 2011.

Purchase and Sale of Fund Shares

Taxes

Payments to Sponsoring Insurance
Companies and Other Financial Intermediaries

Templeton Foreign Securities Fund

Investment Goal

Long-term capital growth.

Fees and Expenses of the Fund

SHAREHOLDER FEES (fees paid directly from your investment)

	Class 3
Redemption fee on interests in separate accounts held less than 60 days (as a % of the amount redeemed). The redemption fee is retained by the Fund.	1.00%

ANNUAL FUND OPERATING EXPENSES
(expenses that you pay each year as a percentage of the value of your investment)

	Class 3
Management fees	0.64%
Distribution and service (12b-1) fees	0.25%
Other expenses	0.15%
Total annual Fund operating expenses	1.04%

Example

	1 Year	3 Years	5 Years	10 Years
Class 3	$ 106	$ 331	$ 574	$ 1,271

Portfolio Turnover

Principal Investment Strategies

Principal Risks

Performance

ANNUAL TOTAL RETURNS

Best Quarter:	Q3'09	23.03%
Worst Quarter:	Q4'08	-19.85%
As of March 31, 2013, the Fund's year-to-date return was 0.70%.

AVERAGE ANNUAL TOTAL RETURNS

For the periods ended December 31, 2012

	1 Year	5 Years	10 Years
Templeton Foreign Securities Fund - Class 3	18.30%	-1.30%	8.53%
MSCI EAFE Index (index reflects no deduction for fees, expenses or taxes)	17.90%	-3.21%	8.70%

Investment Manager

Templeton Investment Counsel, LLC (Investment Counsel)

Portfolio Managers

PETER A. NORI, CFA Executive Vice President/Portfolio Manager - Research Analyst of Investment Counsel and portfolio manager of the Fund since 1999.

CINDY L. SWEETING, CFA President of Investment Counsel and portfolio manager of the Fund since June 2012.

Purchase and Sale of Fund Shares

Taxes

Payments to Sponsoring Insurance
Companies and Other Financial Intermediaries

Templeton Global Bond Securities Fund

Investment Goal

High current income, consistent with preservation of capital. Capital appreciation is a secondary consideration.

Fees and Expenses of the Fund

SHAREHOLDER FEES (fees paid directly from your investment)

	Class 3
Redemption fee on interests in separate accounts held less than 60 days (as a % of the amount redeemed). The redemption fee is retained by the Fund.	1.00%

ANNUAL FUND OPERATING EXPENSES
(expenses that you pay each year as a percentage of the value of your investment)

	Class 3
Management fees	0.46%
Distribution and service (12b-1) fees	0.25%
Other expenses	0.09%
Total annual Fund operating expenses	0.80%

Example

	1 Year	3 Years	5 Years	10 Years
Class 3	$ 82	$ 255	$ 444	$ 990

Portfolio Turnover

Principal Investment Strategies

Principal Risks

Performance

The inclusion of the Citigroup World Government Bond Index (WGBI) shows how the Fund's performance compares to a group of securities in an additional leading government bond index.

ANNUAL TOTAL RETURNS

Best Quarter:	Q4'04	10.22%
Worst Quarter:	Q3'11	-7.47%
As of March 31, 2013, the Fund's year-to-date return was 1.44%.

AVERAGE ANNUAL TOTAL RETURNS

For the periods ended December 31, 2012

	1 Year	5 Years	10 Years
Templeton Global Bond Securities Fund - Class 3	15.06%	10.47%	10.86%
J.P. Morgan Government Bond Index - Global (index reflects no deduction for fees, expenses or taxes)	1.30%	5.70%	6.20%
Citigroup World Government Bond Index (WGBI) (index reflects no deduction for fees, expenses or taxes)	1.65%	5.27%	6.04%

Historical performance of Class 3 shares prior to their inception in 2005 is based on the performance of Class 2 shares. Class 2 shares are not offered in this prospectus but have annual returns substantially similar to Class 3 because they invest in the same portfolio of securities and have substantially similar expenses, including rule 12b-1 fees.

Investment Manager

Franklin Advisers, Inc. (Advisers)

Portfolio Managers

MICHAEL HASENSTAB, PH.D. Senior Vice President of Advisers and portfolio manager of the Fund since 2001.

SONAL DESAI, PH.D. Portfolio Manager of Advisers and portfolio manager of the Fund since 2011.

Purchase and Sale of Fund Shares

Taxes

Payments to Sponsoring Insurance
Companies and Other Financial Intermediaries

Franklin Templeton Variable Insurance Products Trust

Overview

Investment Considerations

The following give a general sense of the level of fund assets associated with a particular investment or strategy: "small portion" (less than 10%); "portion" (10% to 25%); "significant" (25% to 50%); "substantial" (50% to 66%); "primary" (66% to 80%); and "predominant" (80% or more). The percentages are not limitations unless specifically stated as such in this prospectus or in the Trust's Statement of Additional Information (SAI).

Risks

Fund shares are not deposits or obligations of, or guaranteed or endorsed by, any bank, and are not federally insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other agency of the U.S. government. Fund shares involve investment risks, including the possible loss of principal.
Because you could lose money by investing in a Fund, take the time to read each Fund description and consider all risks before investing.

Additional Information

More detailed information about each Fund, its investment policies, and its particular risks can be found in the SAI.

Investment Management

FUND DETAILS

Templeton Developing Markets Securities Fund

Investment Goal

The Fund’s investment goal is long-term capital appreciation.

Principal Investment Policies and Practices

whose principal securities trading markets are in developing market countries; or
that derive 50% or more of their total revenue or profit from either goods or services produced or sales made in developing market countries; or
that have 50% or more of their assets in developing market countries; or
that are linked to currencies of developing market countries; or
that are organized under the laws of, or with principal offices in, developing market countries.

In addition to the Fund's main investments, the Fund may invest up to 20% of its net assets in the securities of issuers in developed market countries.

Portfolio Selection

The investment manager invests in securities without regard to benchmark comparisons.

Temporary Investments

When the investment manager believes market or economic conditions are unfavorable for investors, the investment manager may invest up to 100% of the Fund's assets in a temporary defensive manner by holding all or a substantial portion of its assets in U.S. or non-U.S. currency denominated short-term or medium-term (generally less than 5 years for this Fund) investments. Temporary defensive investments generally may include money market securities, including shares of money market funds managed by affiliates of the investment manager, and exchange-traded funds, U.S. and foreign government securities, high grade commercial paper, bank obligations, and repurchase agreements denominated in the currency of any nation. The investment manager also may invest in these types of securities or hold cash while looking for suitable investment opportunities or to maintain liquidity. In these circumstances, the Fund may be unable to achieve its investment goal.

Principal Risks

Market

Foreign Securities

Developing Markets

less social, political and economic stability;
smaller securities markets with low or nonexistent trading volume and greater illiquidity and price volatility;
more restrictive national policies on foreign investment, including restrictions on investment in issuers or industries deemed sensitive to national interests;
less transparent and established taxation policies;
less developed regulatory or legal structures governing private and foreign investment or allowing for judicial redress for injury to private property;
less familiarity with a capital market structure or market-oriented economy and more widespread corruption and fraud;
less financial sophistication, creditworthiness and/or resources possessed by, and less government regulation of, the financial institutions and issuers with which the Fund transacts;
less government supervision and regulation of business and industry practices, stock exchanges, brokers and listed companies than in the U.S.;
greater concentration in a few industries resulting in greater vulnerability to regional and global trade conditions;
higher rates of inflation and more rapid and extreme fluctuations in inflation rates;
greater sensitivity to interest rate changes;
increased volatility in currency exchange rates and potential for currency devaluations and/or currency controls;
greater debt burdens relative to the size of the economy;
more delays in settling portfolio transactions and heightened risk of loss from share registration and custody practices; and
less assurance that recent favorable economic developments will not be slowed or reversed by unanticipated economic, political or social events in such countries.

Because of the above factors, the Fund's investments in developing market countries are subject to greater price volatility and illiquidity than investments in developed markets.

The definition of developing market countries or companies as used in this prospectus may differ from the definition of the same terms as used in other Franklin Templeton fund prospectuses.

Focus

Smaller and Midsize Companies

Value Style Investing

Depositary Receipts

Management

More detailed information about the Fund, its policies and risks can be found in the Fund's SAI.

Management

The Fund is managed by a team of dedicated professionals focused on investments in emerging or developing market securities. The portfolio managers of the team are as follows:

MARK MOBIUS, PH.D. Executive Chairman of Templeton Emerging Markets Group and Portfolio Manager of Asset Management		Dr. Mobius has been the lead portfolio manager of the Fund since inception. Dr. Mobius has primary responsibility for the investments of the Fund. Dr. Mobius has final authority over all aspects of the Fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio risk assessment, and the management of daily cash balances in accordance with anticipated investment management requirements. The degree to which Dr. Mobius may perform these functions, and the nature of these functions, may change from time to time. Dr. Mobius joined Franklin Templeton Investments in 1987.

TOM WU Director of Asset Management		Mr. Wu has been a portfolio manager of the Fund since inception, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. He joined Franklin Templeton Investments in 1987.

DENNIS LIM Co-Chief Executive Officer and Director of Asset Management		Mr. Lim has been a portfolio manager of the Fund since inception, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. He joined Franklin Templeton Investments in 1990.

ALLAN LAM Portfolio Manager of Asset Management		Mr. Lam has been a portfolio manager of the Fund since 2011, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. He joined Franklin Templeton Investments in 1987.

The Fund’s SAI provides additional information about portfolio manager compensation, other accounts that they manage and their ownership of Fund shares.

Financial Highlights

This table presents the financial performance of Class 3 shares for the past five years or since inception. The table shows certain information on a single Fund share basis (per share performance). It also shows some key Fund statistics, such as total return (past performance) and expense ratios. Total return represents the annual change in value of a share assuming reinvestment of dividends and capital gains. This information has been audited by PricewaterhouseCoopers LLP. Their report, along with the Fund's financial statements, is included in the annual report, which is available upon request.

Class 3	Year Ended December 31,
	2012	2011	2010	2009	2008
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$ 9.36	$ 11.23	$ 9.73	$ 6.02	$ 15.96
Income from investment operations:^a
Net investment income^b	0.17	0.14	0.06	0.10	0.11
Net realized and unrealized gains (losses)	1.04	-1.91	1.60	3.97	-7.27
Total from investment operations	1.21	-1.77	1.66	4.07	-7.16
Less distributions from:
Net investment income	-0.14	-0.10	-0.16	-0.33	-0.34
Net realized gains	—	—	—	-0.03	-2.44
Total distributions	-0.14	-0.10	-0.16	-0.36	-2.78
Redemption fees^c	—	—	—	—	—
Net asset value, end of year	$ 10.43	$ 9.36	$ 11.23	$ 9.73	$ 6.02
Total return^d	13.16%	-15.86%	17.51%	72.63%	-52.67%
Ratios to average net assets
Expenses	1.60%	1.65%	1.74%^e	1.70%^e	1.77%^e
Net investment income	1.68%	1.32%	0.62%	1.39%	1.27%
Supplemental data
Net assets, end of year (000’s)	$ 48,277	$ 44,702	$ 66,484	$ 66,718	$ 32,953
Portfolio turnover rate	24.45%	14.90%	24.41%	56.58%^f	75.11%^f

b. Based on average daily shares outstanding.

c. Amount rounds to less than $0.01 per share.

e. Benefit of expense reduction rounds to less than 0.01%.

f. Excludes the value of portfolio securities delivered as a result of redemptions in-kind.

Templeton Foreign Securities Fund

Investment Goal

The Fund's investment goal is long-term capital growth.

Principal Investment Policies and Practices

Portfolio Selection

Temporary Investments

When the investment manager believes market or economic conditions are unfavorable for investors, the investment manager may invest up to 100% of the Fund's assets in a temporary defensive manner by holding all or a substantial portion of its assets in cash, cash equivalents or other high quality short-term investments. Temporary defensive investments generally may include money market securities, including shares of money market funds managed by the investment manager or its affiliates, or short-term debt securities. The investment manager also may invest in these types of securities or hold cash while looking for suitable investment opportunities or to maintain liquidity. In these circumstances, the Fund may be unable to achieve its investment goal.

Principal Risks

Market

Foreign Securities

Developing Markets

less social, political and economic stability;
smaller securities markets with low or nonexistent trading volume and greater illiquidity and price volatility;
more restrictive national policies on foreign investment, including restrictions on investment in issuers or industries deemed sensitive to national interests;
less transparent and established taxation policies;
less developed regulatory or legal structures governing private and foreign investment or allowing for judicial redress for injury to private property;
less familiarity with a capital market structure or market-oriented economy and more widespread corruption and fraud;
less financial sophistication, creditworthiness and/or resources possessed by, and less government regulation of, the financial institutions and issuers with which the Fund transacts;
less government supervision and regulation of business and industry practices, stock exchanges, brokers and listed companies than in the U.S.;
greater concentration in a few industries resulting in greater vulnerability to regional and global trade conditions;
higher rates of inflation and more rapid and extreme fluctuations in inflation rates;
greater sensitivity to interest rate changes;
increased volatility in currency exchange rates and potential for currency devaluations and/or currency controls;
greater debt burdens relative to the size of the economy;
more delays in settling portfolio transactions and heightened risk of loss from share registration and custody practices; and
less assurance that recent favorable economic developments will not be slowed or reversed by unanticipated economic, political or social events in such countries.

Because of the above factors, the Fund's investments in developing market countries are subject to greater price volatility and illiquidity than investments in developed markets.

Focus

Derivative Instruments

Equity-Linked Notes (ELNs)

Value Style Investing

Smaller and Midsize Companies

Credit

Interest Rate

Management

More detailed information about the Fund, its policies and risks can be found in the Fund's SAI.

Management

Templeton Investment Counsel, LLC (Investment Counsel), 300 S.E. 2nd Street, Fort Lauderdale, Florida 33301-1923, is the Fund’s investment manager.

The Fund is managed by a team of dedicated professionals focused on global investments of issuers outside the U.S. The portfolio managers of the team are as follows:

PETER A. NORI, CFA Executive Vice President/Portfolio Manager - Research Analyst of Investment Counsel		Mr. Nori has been the lead portfolio manager of the Fund since 1999. He has primary responsibility for the investments of the Fund. He has final authority over all aspects of the Fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio risk assessment, and the management of daily cash balances in accordance with anticipated investment management requirements. The degree to which he may perform these functions, and the nature of these functions, may change from time to time. He joined Franklin Templeton Investments in 1987.

CINDY L. SWEETING, CFA President of Investment Counsel		Ms. Sweeting has been a portfolio manager of the Fund since June 2012, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. She joined Franklin Templeton Investments in 1997.

CFA^® and Chartered Financial Analyst^® are trademarks owned by CFA Institute.

The Fund’s SAI provides additional information about portfolio manager compensation, other accounts that they manage and their ownership of Fund shares.

Financial Highlights

Class 3	Year Ended December 31,
	2012	2011	2010	2009	2008
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$ 12.51	$ 14.24	$ 13.37	$ 10.70	$ 20.18
Income from investment operations:^a
Net investment income^b	0.34	0.37	0.25	0.25	0.39
Net realized and unrealized gains (losses)	1.87	-1.86	0.84	3.30	-7.84
Total from investment operations	2.21	-1.49	1.09	3.55	-7.45
Less distributions from:
Net investment income	-0.40	-0.24	-0.22	-0.40	-0.42
Net realized gains	—	—	—	-0.48	-1.61
Total distributions	-0.40	-0.24	-0.22	-0.88	-2.03
Redemption fees^c	—	—	—	—	—
Net asset value, end of year	$ 14.32	$ 12.51	$ 14.24	$ 13.37	$ 10.70
Total return^d	18.30%	-10.68%	8.41%	37.20%	-40.39%
Ratios to average net assets
Expenses	1.04%	1.04%^e	1.03%^e	1.03%^e	1.02%^e
Net investment income	2.59%	2.67%	1.85%	2.03%	2.57%
Supplemental data
Net assets, end of year (000’s)	$ 91,642	$ 88,380	$ 108,766	$ 115,364	$ 271,061
Portfolio turnover rate	12.53%	21.09%	19.16%	22.50%	18.27%

b. Based on average daily shares outstanding.

c. Amount rounds to less than $0.01 per share.

e. Benefit of expense reduction rounds to less than 0.01%.

Templeton Global Bond Securities Fund

Investment Goal

The Fund’s investment goal is high current income, consistent with preservation of capital. Capital appreciation is a secondary consideration.

Principal Investment Policies and Practices

The Fund may use any of the above currency techniques or other derivative transactions for the purposes of enhancing Fund returns, increasing liquidity, gaining exposure to particular instruments in more efficient or less expensive ways and/or hedging risks relating to changes in exchange rates, interest rates and other market factors. By way of example, when the investment manager believes that the value of a particular foreign currency is expected to increase compared to the U.S. dollar, the Fund could enter into a forward contract to purchase that foreign currency at a future date. If at such future date the value of the foreign currency exceeds the then current amount of U.S. dollars to be paid by the Fund under the contract, the Fund will recognize a gain. When used for hedging purposes, a forward contract or other derivative instrument could be used to protect against possible declines in a currency’s value where a security held or to be purchased by the Fund is denominated in that currency, or it may be used to hedge the Fund’s position by entering into a transaction on another currency expected to perform similarly to the currency of the security held or to be purchased (a “proxy hedge”).

Portfolio Selection

Commodity Exchange Act Exclusions

Temporary Investments

When the investment manager believes market or economic conditions are unfavorable for investors, the investment manager may invest up to 100% of the Fund's assets in a temporary defensive manner by holding all or a substantial portion of its assets in cash, cash equivalents or other high quality short-term investments. Temporary defensive investments generally may include short-term U.S. government securities, commercial paper, short-term bank time deposits, bankers' acceptances and money market fund shares (including shares of an affiliated money market fund). The investment manager also may invest in these types of securities or hold cash while looking for suitable investment opportunities, to maintain liquidity or to segregate on the Fund's books in connection with its forward currency, currency or interest rate futures positions. In these circumstances, the Fund may be unable to achieve its investment goal.

Principal Risks

Foreign Securities

Developing Markets

less social, political and economic stability;
smaller securities markets with low or nonexistent trading volume and greater illiquidity and price volatility;
more restrictive national policies on foreign investment, including restrictions on investment in issuers or industries deemed sensitive to national interests;
less transparent and established taxation policies;
less developed regulatory or legal structures governing private and foreign investment or allowing for judicial redress for injury to private property;
less familiarity with a capital market structure or market-oriented economy and more widespread corruption and fraud;
less financial sophistication, creditworthiness and/or resources possessed by, and less government regulation of, the financial institutions and issuers with which the Fund transacts;
less government supervision and regulation of business and industry practices, stock exchanges, brokers and listed companies than in the U.S.;
greater concentration in a few industries resulting in greater vulnerability to regional and global trade conditions;
higher rates of inflation and more rapid and extreme fluctuations in inflation rates;
greater sensitivity to interest rate changes;
increased volatility in currency exchange rates and potential for currency devaluations and/or currency controls;
greater debt burdens relative to the size of the economy;
more delays in settling portfolio transactions and heightened risk of loss from share registration and custody practices; and
less assurance that recent favorable economic developments will not be slowed or reversed by unanticipated economic, political or social events in such countries.

Because of the above factors, the Fund's investments in developing market countries are subject to greater price volatility and illiquidity than investments in developed markets.

Interest Rate

Credit

Unrated Debt Securities

High-Yield Debt Securities

Derivative Instruments

Inflation-Indexed Securities

Income

Non-Diversification

Market

Management

Debt Securities Ratings

More detailed information about the Fund, its policies and risks can be found in the Fund's SAI.

Management

Franklin Advisers, Inc. (Advisers), One Franklin Parkway, San Mateo, California 94403-1906, is the Fund's investment manager.

The Fund is managed by the following dedicated professionals focused on investments of debt securities in any country, including emerging markets:

MICHAEL HASENSTAB, PH.D. Senior Vice President of Advisers		Dr. Hasenstab has been the portfolio manager of the Fund since 2002 and an analyst since 2001. He has primary responsibility for the investments of the Fund. Dr. Hasenstab has final authority over all aspects of the Fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio risk assessment, and the management of daily cash balances in accordance with anticipated investment management requirements. The degree to which he may perform these functions, and the nature of these functions, may change from time to time. He first joined Franklin Templeton Investments in 1995, rejoining again in 2001 after a three-year leave to obtain his Ph.D.

SONAL DESAI, PH.D. Portfolio Manager of Advisers		Dr. Desai has been a portfolio manager of the Fund since 2011, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. She joined Franklin Templeton Investments in 2009. Prior to joining Franklin Templeton Investments, she was part of the Global Credit team at Thames River Capital in London, where she was responsible for shaping the team's top-down global view on macroeconomic and market developments covering both G10 and global emerging markets.

The Fund’s SAI provides additional information about portfolio manager compensation, other accounts that they manage and their ownership of Fund shares.

Financial Highlights

Class 3	Year Ended December 31,
	2012	2011	2010	2009	2008
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$ 18.15	$ 19.48	$ 17.33	$ 17.08	$ 16.70
Income from investment operations:^a
Net investment income^b	0.65	0.80	0.93	0.93	0.74
Net realized and unrealized gains (losses)	1.94	-0.90	1.54	1.98	0.27
Total from investment operations	2.59	-0.10	2.47	2.91	1.01
Less distributions from:
Net investment income and net foreign currency gains	-1.23	-1.10	-0.27	-2.66	-0.63
Net realized gains	-0.03	-0.13	-0.05	—	—
Total distributions	-1.26	-1.23	-0.32	-2.66	-0.63
Redemption fees^c	—	—	—	—	—
Net asset value, end of year	$ 19.48	$ 18.15	$ 19.48	$ 17.33	$ 17.08
Total return^d	15.06%	-0.83%	14.38%	18.69%	6.21%
Ratios to average net assets
Expenses^e	0.80%	0.81%	0.80%	0.79%	0.83%
Net investment income	3.46%	4.15%	5.02%	5.48%	4.41%
Supplemental data
Net assets, end of year (000’s)	$ 198,077	$ 185,811	$ 183,380	$ 143,264	$ 128,155
Portfolio turnover rate	43.26%	34.18%	8.77%	20.84%	28.46%

b. Based on average daily shares outstanding.

c. Amount rounds to less than $0.01 per share.

e. Benefit of expense reduction rounds to less than 0.01%.

Additional Information, All Funds

DEALER COMPENSATION

Contract Owners should receive financial reports for the Fund related to their Contract from the sponsoring Insurer every six months.

Distributions and Taxes

Fund Account Information

Buying Shares

Selling Shares

Exchanging Shares

Market Timing Trading Policy

The board of trustees has adopted the following policies and procedures with respect to market timing (Market Timing Trading Policy):

The Fund is currently using several methods to reduce the risk of market timing. These methods include:

seeking the cooperation of Insurers and funds of funds to assist the Fund in identifying potential market timing activity;
committing staff to selectively review on a continuing basis recent trading activity in order to identify trading activity that may be contrary to the Fund's Market Timing Trading Policy;
monitoring potential price differentials following the close of trading in foreign markets to determine whether the application of fair value pricing procedures is warranted; and
seeking the cooperation of financial intermediaries to assist the Fund in identifying market timing activity.

REDEMPTION FEE

A Contract Owner who chooses to redeem an interest in an insurance company sub account that invests in Class 3 shares of a Fund (either by exchanging to another investment option offered by the contract or by selling, whether voluntarily or involuntarily) will be subject to a 1.00% (using standard rounding criteria) short-term trading fee if the interest in the sub-account has been held for less than 60 days. For this purpose, interests held longest will be treated as being redeemed first and interests held shortest as being redeemed last. The redemption fee is paid to the Fund, and is intended to help to offset any cost from short-term money movements in and out of a Fund. The redemption fee may be deducted from the proceeds of the redemption or exchange. In certain limited circumstances discussed in the Contract prospectus, a Contract Owner may not pay the redemption fee. Refer to the Contract prospectus for more information on the redemption fee.

Involuntary Redemptions

Fund Account Policies

CALCULATING SHARE PRICE

When they buy and sell shares, the Fund's shareholders pay and receive the net asset value (NAV) per share.

FAIR VALUATION - INDIVIDUAL SECURITIES

SECURITY VALUATION - U.S. PASS-THROUGH SECURITIES, CMO, ABS, MBS

SECURITY VALUATION - CORPORATE DEBT SECURITIES

SECURITY VALUATION - SENIOR SECURED CORPORATE LOANS

SECURITY VALUATION – MUNICIPAL SECURITIES – MATRIX PRICING (FAIR VALUATION)

SECURITY VALUATION - OPTIONS

VALUATION - FOREIGN SECURITIES - COMPUTATION OF U.S. EQUIVALENT VALUE

VALUATION – FOREIGN SECURITIES – POTENTIAL IMPACT OF TIME ZONES AND MARKET HOLIDAYS

SHARE CLASSES

Class 1, Class 2, Class 3, Class 4 and Class 5 shares of the Funds are identical except that Class 2, Class 3, Class 4 and Class 5 each have a distribution plan or "rule 12b-1" plan, as described below for Class 3 shares and in their respective prospectuses for Class 2, Class 4 and Class 5 shares. Class 3 shares may assess a 1.00% redemption fee when contract owners redeem funds from an insurance company sub-account held for less than 60 days. For more details, see "Redemption Fee" in the section titled "Market Timing Trading Policy."

Distribution and service (12b-1) fees Class 3 has a distribution plan, sometimes known as a rule 12b-1 plan, that allows the Fund to pay distribution fees to those who sell and distribute Class 3 shares and provide services to shareholders and Contract Owners. Because these fees are paid out of Class 3's assets on an on-going basis, over time these fees will increase the cost of an investment, and may cost you more than paying other types of sales charges. While the maximum amount payable under the Fund's Class 3 rule 12b-1 plan is 0.35% per year of the daily net assets for the class, the board of trustees has set the current rate at 0.25%. A portion of the fees payable to Franklin Templeton Distributors, Inc. (Distributors) or others under the rule 12b-1 plan may be retained by Distributors for distribution expenses.

ADDITIONAL POLICIES

Please note that the Fund maintains additional policies and reserves certain rights, including:

The Fund may restrict, reject or cancel any purchase orders, including an exchange request.
At any time, the Fund may establish or change investment minimums.
The Fund may make material changes to or discontinue the exchange privilege on 60 days' notice to insurance company or Fund of Fund shareholders, or as otherwise provided by law.
Purchases of shares of the Fund (including the purchase side of an exchange) may be made only when such shares are eligible for sale in the appropriate state or jurisdiction.
In unusual circumstances, we may temporarily suspend redemptions or postpone the payment of proceeds, as allowed by federal securities laws.
For redemptions over a certain amount, the Fund may pay redemption proceeds in securities or other assets rather than cash if the investment manager determines it is in the best interest of the Fund, consistent with applicable law.
To permit their investors to obtain the current price, participating insurance companies and funds of funds are responsible for transmitting all orders to the Fund promptly.

Questions

FOR MORE INFORMATION

Not all Funds and classes are available in all Contracts. For information on the terms of investment in a Contract, please consult the Contract prospectus that accompanies this Fund prospectus.

You can learn more about the Fund in the following documents:

Annual/Semiannual Fund Reports to Shareholders

Statement of Additional Information (SAI)

Contains more information about the Fund, its investments, policies, and risks. It is incorporated by reference into (is legally a part of) this prospectus.

Investment Company Act file #811-05583
© 2013 Franklin Templeton Investments. All rights reserved.

VIP3 P 05/13

May 1, 2013
The U.S. Securities and Exchange Commission (SEC) has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense.

Class 4

Franklin Flex Cap Growth Securities Fund
Franklin High Income Securities Fund
Franklin Income Securities Fund
Franklin Rising Dividends Securities Fund
Franklin Small Cap Value Securities Fund
Franklin Small-Mid Cap Growth Securities Fund
Franklin Strategic Income Securities Fund
Franklin Templeton VIP Founding Funds Allocation Fund
Mutual Global Discovery Securities Fund
Mutual International Securities Fund
Mutual Shares Securities Fund
Templeton Developing Markets Securities Fund
Templeton Foreign Securities Fund
Templeton Global Bond Securities Fund
Templeton Growth Securities Fund

PROSPECTUS

Franklin Templeton Variable Insurance Products Trust

		Contents

		FUND SUMMARIES
INFORMATION ABOUT THE FUND YOU SHOULD KNOW BEFORE INVESTING		Franklin Flex Cap Growth Securities Fund Franklin High Income Securities Fund Franklin Income Securities Fund Franklin Rising Dividends Securities Fund Franklin Small Cap Value Securities Fund Franklin Small-Mid Cap Growth Securities Fund Franklin Strategic Income Securities Fund Franklin Templeton VIP Founding Funds Allocation Fund Mutual Global Discovery Securities Fund Mutual International Securities Fund Mutual Shares Securities Fund Templeton Developing Markets Securities Fund Templeton Foreign Securities Fund Templeton Global Bond Securities Fund Templeton Growth Securities Fund

		Overview
		Franklin Templeton Variable Insurance Products Trust

		FUND DETAILS
MORE INFORMATION ON INVESTMENT POLICIES, PRACTICES AND RISKS/FINANCIAL HIGHLIGHTS		Franklin Flex Cap Growth Securities Fund Franklin High Income Securities Fund Franklin Income Securities Fund Franklin Rising Dividends Securities Fund Franklin Small Cap Value Securities Fund Franklin Small-Mid Cap Growth Securities Fund Franklin Strategic Income Securities Fund Franklin Templeton VIP Founding Funds Allocation Fund Mutual Global Discovery Securities Fund Mutual International Securities Fund Mutual Shares Securities Fund Templeton Developing Markets Securities Fund Templeton Foreign Securities Fund Templeton Global Bond Securities Fund Templeton Growth Securities Fund

		Additional Information, All Funds DEALER COMPENSATION PORTFOLIO HOLDINGS STATEMENTS AND REPORTS ADMINISTRATIVE SERVICES

		Distributions and Taxes INCOME AND CAPITAL GAINS DISTRIBUTIONS Tax Considerations

		FUND ACCOUNT INFORMATION
INFORMATION ABOUT FUND TRANSACTIONS AND SERVICES		Buying Shares Selling Shares Exchanging Shares Market Timing Trading Policy Involuntary Redemptions Fund Account Policies Questions

		FOR MORE INFORMATION
WHERE TO LEARN MORE ABOUT EACH FUND		Back Cover

FUND SUMMARIES

Franklin Flex Cap Growth Securities Fund

Investment Goal

Capital appreciation.

Fees and Expenses of the Fund

ANNUAL FUND OPERATING EXPENSES
(expenses that you pay each year as a percentage of the value of your investment)

	Class 4
Management fees	0.65%
Distribution and service (12b-1) fees	0.35%
Other expenses	0.29%
Total annual Fund operating expenses	1.29%
Fee waiver and/or expense reimbursement¹	-0.26%
Total annual Fund operating expenses after fee waiver and/or expense reimbursement	1.03%

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of the period. The Example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. The Example reflects adjustments made to the Fund's operating expenses due to the fee waiver and/or expense reimbursement by management for the 1 Year numbers only. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

	1 Year	3 Years	5 Years	10 Years
Class 4	$ 105	$ 383	$ 683	$ 1,534

Portfolio Turnover

Principal Investment Strategies

Principal Risks

Performance

The following bar chart and table provide some indication of the risks of investing in the Fund. The bar chart shows changes in the Fund's performance from year to year for Class 4 shares. The table shows how the Fund's average annual returns for 1 year, 5 years, 10 years or since inception, as applicable, compare with those of a broad measure of market performance. The Fund's past performance is not necessarily an indication of how the Fund will perform in the future.

ANNUAL TOTAL RETURNS

Best Quarter:	Q1'12	16.24%
Worst Quarter:	Q4'08	-21.51%
As of March 31, 2013, the Fund's year-to-date return was 8.54%.

AVERAGE ANNUAL TOTAL RETURNS

For the periods ended December 31, 2012

	1 Year	5 Years	Since Inception 3/1/2005
Franklin Flex Cap Growth Securities Fund - Class 4	9.24%	0.69%	3.60%
Russell 3000^® Growth Index (index reflects no deduction for fees, expenses or taxes)	15.21%	3.15%	5.62%
Russell 1000^® Growth Index (index reflects no deduction for fees, expenses or taxes)	15.26%	3.12%	5.60%
S&P 500^® Index (index reflects no deduction for fees, expenses or taxes)	16.00%	1.66%	4.36%

Historical performance of Class 4 shares prior to their inception in 2008, is based on the performance of Class 2 shares, including the Class 2 rule 12b-1 plan fee.

Investment Manager

Franklin Advisers, Inc. (Advisers)

Portfolio Managers

CONRAD B. HERRMANN, CFA Senior Vice President of Advisers and portfolio manager of the Fund since inception (2005).

MATTHEW J. MOBERG, CPA Vice President of Advisers and portfolio manager of the Fund since inception (2005).

Purchase and Sale of Fund Shares

Taxes

Payments to Sponsoring Insurance
Companies and Other Financial Intermediaries

Franklin High Income Securities Fund

Investment Goal

To earn a high level of current income. Its secondary goal is capital appreciation.

Fees and Expenses of the Fund

ANNUAL FUND OPERATING EXPENSES
(expenses that you pay each year as a percentage of the value of your investment)

	Class 4
Management fees	0.52%
Distribution and service (12b-1) fees	0.35%
Other expenses	0.06%
Total annual Fund operating expenses	0.93%

Example

	1 Year	3 Years	5 Years	10 Years
Class 4	$ 95	$ 296	$ 515	$ 1,143

Portfolio Turnover

Principal Investment Strategies

Principal Risks

Performance

The inclusion of the Lipper VIP High Current Yield Funds Classification Average shows how the Fund's performance compares with the returns of an index of funds with similar investment objectives.

ANNUAL TOTAL RETURNS

Best Quarter:	Q2'09	16.55%
Worst Quarter:	Q4'08	-15.68%
As of March 31, 2013, the Fund's year-to-date return was 2.88%.

AVERAGE ANNUAL TOTAL RETURNS

For the periods ended December 31, 2012

	1 Year	5 Years	10 Years
Franklin High Income Securities Fund - Class 4	15.50%	8.32%	9.70%
Credit Suisse High Yield Index (index reflects no deduction for fees, expenses or taxes)	14.71%	9.53%	10.25%
Lipper VIP High Current Yield Funds Classification Average (index reflects no deduction for fees, expenses or taxes)	14.09%	7.89%	8.97%

Historical performance for Class 4 shares prior to their inception in 2008 is based on the performance of Class 1 shares, which do not assess a rule 12b-1 plan fee.

Investment Manager

Franklin Advisers, Inc. (Advisers)

Portfolio Managers

PATRICIA O'CONNOR, CFA, CPA Vice President of Advisers and portfolio manager of the Fund since 2002.

ERIC G. TAKAHA, CFA Senior Vice President of Advisers and portfolio manager of the Fund since 2005.

Purchase and Sale of Fund Shares

Taxes

Payments to Sponsoring Insurance
Companies and Other Financial Intermediaries

Franklin Income Securities Fund

Investment Goal

To maximize income while maintaining prospects for capital appreciation.

Fees and Expenses of the Fund

ANNUAL FUND OPERATING EXPENSES
(expenses that you pay each year as a percentage of the value of your investment)

	Class 4
Management fees	0.45%
Distribution and service (12b-1) fees	0.35%
Other expenses	0.02%
Total annual Fund operating expenses	0.82%

Example

	1 Year	3 Years	5 Years	10 Years
Class 4	$ 84	$ 262	$ 455	$ 1,014

Portfolio Turnover

Principal Investment Strategies

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 the company's management;
the company's changing financial condition and market recognition of the change;
the company's sensitivity to changes in interest rates and business conditions; and
the company's debt maturity schedules and borrowing requirements.

Principal Risks

Performance

The inclusion of the Barclays U.S. Aggregate Index shows how the Fund's performance compares to a group of securities in an additional leading bond index.

ANNUAL TOTAL RETURNS

Best Quarter:	Q2'09	17.37%
Worst Quarter:	Q3'08	-14.85%
As of March 31, 2013, the Fund's year-to-date return was 5.09%.

AVERAGE ANNUAL TOTAL RETURNS

For the periods ended December 31, 2012

	1 Year	5 Years	10 Years
Franklin Income Securities Fund - Class 4	12.56%	4.30%	8.85%
S&P 500^® Index (index reflects no deduction for fees, expenses or taxes)	16.00%	1.66%	7.10%
Barclays U.S. Aggregate Index (index reflects no deduction for fees, expenses or taxes)	4.21%	5.95%	5.18%

Historical performance for Class 4 shares prior to their inception in 2008 is based on the performance of Class 1 shares, which do not assess a rule 12b-1 plan fee.

Investment Manager

Franklin Advisers, Inc. (Advisers)

Sub-Advisor

Templeton Investment Counsel, LLC (Investment Counsel). The term "investment manager" includes any Sub-Advisor.

Portfolio Managers

EDWARD D. PERKS, CFA Senior Vice President of Advisers and portfolio manager of the Fund since 2002.

MATTHEW QUINLAN Portfolio Manager of Advisers and portfolio manager of the Fund since December 2012.

ALEX W. PETERS, CFA Vice President of Advisers and portfolio manager of the Fund since December 2012.

CHARLES B. JOHNSON Chairman of Franklin Resources, Inc. and portfolio manager of the Fund since 1989.

Purchase and Sale of Fund Shares

Taxes

Payments to Sponsoring Insurance
Companies and Other Financial Intermediaries

Franklin Rising Dividends Securities Fund

Investment Goal

Long-term capital appreciation. Preservation of capital, while not a goal, is also an important consideration.

Fees and Expenses of the Fund

ANNUAL FUND OPERATING EXPENSES
(expenses that you pay each year as a percentage of the value of your investment)

	Class 4
Management fees	0.61%
Distribution and service (12b-1) fees	0.35%
Other expenses	0.02%
Total annual Fund operating expenses	0.98%

Example

	1 Year	3 Years	5 Years	10 Years
Class 4	$ 100	$ 312	$ 542	$ 1,201

Portfolio Turnover

Principal Investment Strategies

Under normal market conditions, the Fund invests at least 80% of its net assets in equity securities of financially sound companies that have paid consistently rising dividends. The Fund invests predominantly in equity securities, mostly common stocks. Companies that have paid consistently rising dividends include those companies that currently pay dividends on their common stocks and have maintained or increased their dividend rate during the last four consecutive years.

Under normal market conditions, the Fund invests at least 65% of its net assets in securities of companies that have:

consistently increased dividends in at least 8 out of the last 10 years and have not decreased dividends during that time;
increased dividends substantially (at least 100%) over the last 10 years;
reinvested earnings, paying out less than 65% of current earnings in dividends;
either long-term debt that is no more than 50% of total capitalization or senior debt that has been rated investment grade by at least one of the major bond rating organizations; and
attractive prices, either: (1) in the lower half of the stock's price/earnings ratio range for the past 10 years; or (2) less than price/earnings ratio of the Standard & Poor's^® 500 Stock Index.

The Fund may invest up to 25% of its total assets in foreign securities.

Principal Risks

Performance

ANNUAL TOTAL RETURNS

Best Quarter:	Q2'03	14.07%
Worst Quarter:	Q4'08	-15.59%
As of March 31, 2013, the Fund's year-to-date return was 11.52%.

AVERAGE ANNUAL TOTAL RETURNS

For the periods ended December 31, 2012

	1 Year	5 Years	10 Years
Franklin Rising Dividends Securities Fund - Class 4	11.78%	4.05%	7.25%
S&P 500^® Index (index reflects no deduction for fees, expenses or taxes)	16.00%	1.66%	7.10%

Historical performance for Class 4 shares prior to their inception in 2008 is based on the performance of Class 1 shares, which do not assess a rule 12b-1 plan fee.

Investment Manager

Franklin Advisory Services, LLC (Advisory Services)

Portfolio Managers

DONALD G. TAYLOR, CPA Senior Vice President of Advisory Services and portfolio manager of the Fund since 1996.

BRUCE C. BAUGHMAN, CPA Senior Vice President of Advisory Services and portfolio manager of the Fund since inception (1992).

WILLIAM J. LIPPMAN President of Advisory Services and portfolio manager of the Fund since inception (1992).

MARGARET MCGEE Vice President of Advisory Services and portfolio manager of the Fund since inception (1992).

Purchase and Sale of Fund Shares

Taxes

Payments to Sponsoring Insurance
Companies and Other Financial Intermediaries

Franklin Small Cap Value Securities Fund

Investment Goal

Long-term total return.

Fees and Expenses of the Fund

ANNUAL FUND OPERATING EXPENSES
(expenses that you pay each year as a percentage of the value of your investment)

	Class 4
Management fees	0.51%
Distribution and service (12b-1) fees	0.35%
Other expenses	0.16%
Total annual Fund operating expenses	1.02%

Example

	1 Year	3 Years	5 Years	10 Years
Class 4	$ 104	$ 325	$ 563	$ 1,248

Portfolio Turnover

Principal Investment Strategies

The Fund may invest up to 25% of its total assets in foreign securities.

The Fund, from time to time, may have significant investments in particular sectors.

Principal Risks

Performance

ANNUAL TOTAL RETURNS

Best Quarter:	Q2'09	24.27%
Worst Quarter:	Q4'08	-27.41%
As of March 31, 2013, the Fund's year-to-date return was 10.20%.

AVERAGE ANNUAL TOTAL RETURNS

For the periods ended December 31, 2012

	1 Year	5 Years	10 Years
Franklin Small Cap Value Securities Fund - Class 4	18.27%	4.71%	9.98%
Russell 2500™ Value Index (index reflects no deduction for fees, expenses or taxes)	19.21%	4.54%	10.20%

Historical performance for Class 4 shares prior to their inception in 2008 is based on the performance of Class 1 shares, which do not assess a rule 12b-1 plan fee.

Investment Manager

Franklin Advisory Services, LLC (Advisory Services)

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).

Purchase and Sale of Fund Shares

Taxes

Payments to Sponsoring Insurance
Companies and Other Financial Intermediaries

Franklin Small-Mid Cap Growth Securities Fund

Investment Goal

Long-term capital growth.

Fees and Expenses of the Fund

ANNUAL FUND OPERATING EXPENSES
(expenses that you pay each year as a percentage of the value of your investment)

	Class 4
Management fees	0.51%
Distribution and service (12b-1) fees	0.35%
Other expenses	0.29%
Total annual Fund operating expenses	1.15%

Example

	1 Year	3 Years	5 Years	10 Years
Class 4	$ 117	$ 365	$ 633	$ 1,398

Portfolio Turnover

Principal Investment Strategies

The Fund, from time to time, may have significant positions in particular sectors such as technology (including health care technology, technology services and electronic technology) and industrials.

Principal Risks

Performance

The inclusion of the S&P 500^® Index shows how the Fund's performance compares to a group of securities in an additional leading stock index.

ANNUAL TOTAL RETURNS

Best Quarter:	Q2'03	19.22%
Worst Quarter:	Q4'08	-27.20%
As of March 31, 2013, the Fund's year-to-date return was 11.41%.

AVERAGE ANNUAL TOTAL RETURNS

For the periods ended December 31, 2012

	1 Year	5 Years	10 Years
Franklin Small-Mid Cap Growth Securities Fund - Class 4	10.79%	2.05%	8.06%
Russell Midcap^® Growth Index (index reflects no deduction for fees, expenses or taxes)	15.81%	3.23%	10.32%
S&P 500^® Index (index reflects no deduction for fees, expenses or taxes)	16.00%	1.66%	7.10%

Historical performance for Class 4 shares prior to their inception in 2008 is based on the performance of Class 1 shares, which do not assess a rule 12b-1 plan fee.

Investment Manager

Franklin Advisers, Inc. (Advisers)

Portfolio Managers

EDWARD B. JAMIESON President, Chief Investment Officer and Director of Advisers and portfolio manager of the Fund since 2005.

JAMES CROSS Portfolio Manager of Advisers and portfolio manager of the Fund since 2006.

MICHAEL MCCARTHY Senior Vice President of Advisers and portfolio manager of the Fund since 1995.

Purchase and Sale of Fund Shares

Taxes

Payments to Sponsoring Insurance
Companies and Other Financial Intermediaries

Franklin Strategic Income Securities Fund

Investment Goal

High level of current income. A secondary goal is long-term capital appreciation.

Fees and Expenses of the Fund

ANNUAL FUND OPERATING EXPENSES
(expenses that you pay each year as a percentage of the value of your investment)

	Class 4
Management fees	0.35%
Distribution and service (12b-1) fees	0.35%
Other expenses	0.24%
Acquired fund fees and expenses¹	0.01%
Total annual Fund operating expenses	0.95%
Fee waiver and/or expense reimbursement²	-0.01%
Total annual Fund operating expenses after fee waiver and/or expense reimbursement¹	0.94%

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of the period. The Example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. The Example reflects adjustments made to the Fund's operating expenses due to the fee waiver and/or expense reimbursement by management for the 1 Year numbers only. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

	1 Year	3 Years	5 Years	10 Years
Class 4	$ 96	$ 302	$ 525	$ 1,166

Portfolio Turnover

Principal Investment Strategies

Principal Risks

Performance

The inclusion of the Lipper Multi-Sector Income Funds Classification Average shows how the Fund's performance compares with the returns of an index of funds with similar investment objectives.

ANNUAL TOTAL RETURNS

Best Quarter:	Q2'09	9.74%
Worst Quarter:	Q4'08	-5.97%
As of March 31, 2013, the Fund's year-to-date return was 1.61%.

AVERAGE ANNUAL TOTAL RETURNS

For the periods ended December 31, 2012

	1 Year	5 Years	10 Years
Franklin Strategic Income Securities Fund - Class 4	12.67%	7.35%	8.27%
Barclays U.S. Aggregate Index (index reflects no deduction for fees, expenses or taxes)	4.21%	5.95%	5.18%
Lipper Multi-Sector Income Funds Classification Average (index reflects no deduction for fees, expenses or taxes)	11.21%	7.02%	7.39%

Historical performance for Class 4 shares prior to their inception in 2008 is based on the performance of Class 1 shares, which do not assess a rule 12b-1 plan fee.

Investment Manager

Franklin Advisers, Inc. (Advisers)

Portfolio Managers

ERIC G. TAKAHA, CFA Senior Vice President of Advisers and portfolio manager of the Fund since inception (1999).

CHRISTOPHER J. MOLUMPHY, CFA Executive Vice President and Director of Advisers and portfolio manager of the Fund since inception (1999).

Purchase and Sale of Fund Shares

Taxes

Payments to Sponsoring Insurance
Companies and Other Financial Intermediaries

Franklin Templeton VIP Founding Funds Allocation Fund

Investment Goal

Capital appreciation. Its secondary goal is income.

Fees and Expenses of the Fund

ANNUAL FUND OPERATING EXPENSES
(expenses that you pay each year as a percentage of the value of your investment)

	Class 4
Management fees	None
Distribution and service (12b-1) fees	0.35%
Other expenses	0.11%
Acquired fund fees and expenses¹	0.65%
Total annual Fund operating expenses	1.11%
Fee waiver and/or expense reimbursement²	-0.01%
Total annual Fund operating expenses after fee waiver and/or expense reimbursement¹	1.10%

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of the period. The Example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. The Example reflects adjustments made to the Fund's operating expenses due to the fee waiver and/or expense reimbursement by management for the 1 Year numbers only. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

	1 Year	3 Years	5 Years	10 Years
Class 4	$ 112	$ 352	$ 611	$ 1,351

Portfolio Turnover

Principal Investment Strategies

Principal Risks

Performance

The inclusion of the MSCI World Index shows how the Fund's performance compares to a group of securities in an additional leading equity index.

ANNUAL TOTAL RETURNS

Best Quarter:	Q2'09	17.58%
Worst Quarter:	Q4'08	-18.23%
As of March 31, 2013, the Fund's year-to-date return was 6.95%.

AVERAGE ANNUAL TOTAL RETURNS

For the periods ended December 31, 2012

	1 Year	5 Years	Since Inception 7/2/2007
Franklin Templeton VIP Founding Funds Allocation Fund - Class 4	15.17%	0.82%	-0.52%
S&P 500^® Index (index reflects no deduction for fees, expenses or taxes)	16.00%	1.66%	1.26%
MSCI World Index (index reflects no deduction for fees, expenses or taxes)	16.54%	-0.60%	-0.53%

Historical performance for Class 4 shares prior to their inception in 2008 is based on the performance of Class 1 shares, which do not assess a rule 12b-1 plan fee.

Investment Manager

Purchase and Sale of Fund Shares

Shares of the Fund are sold to insurance companies’ separate accounts (Insurers) to fund variable annuity or variable life insurance contracts and to qualified plans. Insurance companies offer variable annuity and variable life insurance products through separate accounts. In addition, Fund shares are held by a limited number of Insurers and qualified retirement plans. Substantial withdrawals by one or more Insurers or qualified retirement plans could reduce Fund assets, causing total Fund expenses to become higher than the numbers shown in the fees and expenses table above.

Taxes

Payments to Sponsoring Insurance
Companies and Other Financial Intermediaries

Mutual Global Discovery Securities Fund

Investment Goal

Capital appreciation.

Fees and Expenses of the Fund

ANNUAL FUND OPERATING EXPENSES
(expenses that you pay each year as a percentage of the value of your investment)

	Class 4
Management fees	0.80%
Distribution and service (12b-1) fees	0.35%
Other expenses	0.19%
Total annual Fund operating expenses	1.34%

Example

	1 Year	3 Years	5 Years	10 Years
Class 4	$ 136	$ 425	$ 734	$ 1,613

Portfolio Turnover

Principal Investment Strategies

Portfolio Selection

Principal Risks

Performance

The inclusion of the S&P 500^® Index shows how the Fund's performance compares to a group of securities in an additional leading equity index.

ANNUAL TOTAL RETURNS

Best Quarter:	Q2'03	14.52%
Worst Quarter:	Q3'11	-15.73%
As of March 31, 2013, the Fund's year-to-date return was 8.68%.

AVERAGE ANNUAL TOTAL RETURNS

For the periods ended December 31, 2012

	1 Year	5 Years	10 Years
Mutual Global Discovery Securities Fund - Class 4	13.27%	1.58%	10.30%
MSCI World Index (index reflects no deduction for fees, expenses or taxes)	16.54%	-0.60%	8.08%
S&P 500^® Index (index reflects no deduction for fees, expenses or taxes)	16.00%	1.66%	7.10%

Historical performance for Class 4 shares prior to their inception in 2008 is based on the performance of Class 1 shares, which do not assess a rule 12b-1 plan fee.

Investment Manager

Franklin Mutual Advisers, LLC (Franklin Mutual)

Portfolio Managers

PETER A. LANGERMAN Chairman, President and Chief Executive Officer of Franklin Mutual and portfolio manager of the Fund since 2009.

PHILIPPE BRUGERE-TRELAT Executive Vice President of Franklin Mutual and portfolio manager of the Fund since 2009.

TIMOTHY RANKIN, CFA Portfolio Manager of Franklin Mutual and portfolio manager of the Fund since 2010.

Purchase and Sale of Fund Shares

Taxes

Payments to Sponsoring Insurance
Companies and Other Financial Intermediaries

Mutual International Securities Fund

Investment Goal

Capital appreciation, which may occasionally be short term. The secondary goal is income.

Fees and Expenses of the Fund

ANNUAL FUND OPERATING EXPENSES
(expenses that you pay each year as a percentage of the value of your investment)

	Class 4
Management fees	0.80%
Distribution and service (12b-1) fees	0.35%
Other expenses	5.11%
Total annual Fund operating expenses	6.26%
Fee waiver and/or expense reimbursement¹	-4.96%
Total annual Fund operating expenses after fee waiver and/or expense reimbursement	1.30%

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of the period. The Example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. The Example reflects adjustments made to the Fund's operating expenses due to the fee waiver and/or expense reimbursement by management for the 1 Year numbers only. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

	1 Year	3 Years	5 Years	10 Years
Class 4	$ 132	$ 1,414	$ 2,664	$ 5,654

Portfolio Turnover

Principal Investment Strategies

The Fund invests primarily in securities of Asian and European companies that the investment manager believes are undervalued.

The Fund is not limited to pre-set maximums or minimums governing the size of the companies in which it may invest. However, the Fund currently invests the equity portion of its portfolio primarily to predominantly in mid- and large cap companies, with the remaining portion of its equity portfolio in smaller companies.

Portfolio Selection

Principal Risks

Performance

ANNUAL TOTAL RETURNS

Best Quarter:	Q1'12	12.64%
Worst Quarter:	Q3'11	-19.56%
As of March 31, 2013, the Fund's year-to-date return was 3.80%.

AVERAGE ANNUAL TOTAL RETURNS

For the periods ended December 31, 2012

	1 Year	Since Inception 6/15/2009
Mutual International Securities Fund - Class 4	17.39%	11.58%
MSCI EAFE Index Net Return (Local currency) (index reflects no deduction for fees, expenses or taxes)	17.31%	7.20%

Investment Manager

Franklin Mutual Advisers, LLC (Franklin Mutual)

Portfolio Managers

PHILIPPE BRUGERE-TRELAT Executive Vice President of Franklin Mutual and portfolio manager of the Fund since inception (2009).

ANDREW SLEEMAN, CFA Portfolio Manager of Franklin Mutual and portfolio manager of the Fund since inception (2009).

Purchase and Sale of Fund Shares

Taxes

Payments to Sponsoring Insurance
Companies and Other Financial Intermediaries

Mutual Shares Securities Fund

Investment Goal

Capital appreciation. Its secondary goal is income.

Fees and Expenses of the Fund

ANNUAL FUND OPERATING EXPENSES
(expenses that you pay each year as a percentage of the value of your investment)

	Class 4
Management fees	0.60%
Distribution and service (12b-1) fees	0.35%
Other expenses	0.11%
Total annual Fund operating expenses	1.06%

Example

	1 Year	3 Years	5 Years	10 Years
Class 4	$ 108	$ 337	$ 585	$ 1,294

Portfolio Turnover

Principal Investment Strategies

The Fund may invest a significant portion of its assets (up to 35%) in foreign securities, which may include sovereign debt and participations in foreign government debt.

Portfolio Selection

Principal Risks

Performance

ANNUAL TOTAL RETURNS

Best Quarter:	Q2'09	16.15%
Worst Quarter:	Q4'08	-21.12%
As of March 31, 2013, the Fund's year-to-date return was 9.94%.

AVERAGE ANNUAL TOTAL RETURNS

For the periods ended December 31, 2012

	1 Year	5 Years	10 Years
Mutual Shares Securities Fund - Class 4	14.20%	-0.14%	6.73%
S&P 500^® Index (index reflects no deduction for fees, expenses or taxes)	16.00%	1.66%	7.10%

Historical performance for Class 4 shares prior to their inception in 2008 is based on the performance of Class 1 shares, which do not assess a rule 12b-1 plan fee.

Investment Manager

Franklin Mutual Advisers, LLC (Franklin Mutual)

Portfolio Managers

PETER A. LANGERMAN Chairman, President and Chief Executive Officer of Franklin Mutual and portfolio manager of the Fund since 2005.

F. DAVID SEGAL, CFA Portfolio Manager of Franklin Mutual and portfolio manager of the Fund since 2002.

DEBBIE TURNER, CFA Portfolio Manager of Franklin Mutual and portfolio manager of the Fund since 2001.

Purchase and Sale of Fund Shares

Taxes

Payments to Sponsoring Insurance
Companies and Other Financial Intermediaries

Templeton Developing Markets Securities Fund

Investment Goal

Long-term capital appreciation.

Fees and Expenses of the Fund

ANNUAL FUND OPERATING EXPENSES
(expenses that you pay each year as a percentage of the value of your investment)

	Class 4
Management fees	1.10%
Distribution and service (12b-1) fees	0.35%
Other expenses	0.25%
Total annual Fund operating expenses	1.70%

Example

	1 Year	3 Years	5 Years	10 Years
Class 4	$ 173	$ 536	$ 923	$ 2,009

Portfolio Turnover

Principal Investment Strategies

Principal Risks

Performance

The inclusion of the S&P/IFCI Composite Index shows how the Fund's performance compares to a group of securities in an additional leading emerging markets index.

ANNUAL TOTAL RETURNS

Best Quarter:	Q2'09	32.01%
Worst Quarter:	Q4'08	-28.86%
As of March 31, 2013, the Fund's year-to-date return was 0.95%.

AVERAGE ANNUAL TOTAL RETURNS

For the periods ended December 31, 2012

	1 Year	5 Years	10 Years
Templeton Developing Markets Securities Fund - Class 4	13.06%	-1.88%	13.97%
MSCI Emerging Markets Index (index reflects no deduction for fees, expenses or taxes)	18.63%	-0.61%	16.88%
S&P/IFCI Composite Index (index reflects no deduction for fees, expenses or taxes)	18.89%	-0.56%	17.50%

Historical performance for Class 4 shares prior to their inception in 2008 is based on the performance of Class 1 shares, which do not assess a rule 12b-1 plan fee.

Investment Manager

Templeton Asset Management Ltd. (Asset Management)

Portfolio Managers

MARK MOBIUS, PH.D. Executive Chairman of Templeton Emerging Markets Group, Portfolio Manager of Asset Management and portfolio manager of the Fund since inception (1996).

TOM WU Director of Asset Management and portfolio manager of the Fund since inception (1996).

DENNIS LIM Co-Chief Executive Officer and Director of Asset Management and portfolio manager of the Fund since inception (1996).

ALLAN LAM Portfolio Manager of Asset Management and portfolio manager of the Fund since 2011.

Purchase and Sale of Fund Shares

Taxes

Payments to Sponsoring Insurance
Companies and Other Financial Intermediaries

Templeton Foreign Securities Fund

Investment Goal

Long-term capital growth.

Fees and Expenses of the Fund

ANNUAL FUND OPERATING EXPENSES
(expenses that you pay each year as a percentage of the value of your investment)

	Class 4
Management fees	0.64%
Distribution and service (12b-1) fees	0.35%
Other expenses	0.15%
Total annual Fund operating expenses	1.14%

Example

	1 Year	3 Years	5 Years	10 Years
Class 4	$ 116	$ 362	$ 628	$ 1,386

Portfolio Turnover

Principal Investment Strategies

Principal Risks

Performance

ANNUAL TOTAL RETURNS

Best Quarter:	Q3'09	22.79%
Worst Quarter:	Q4'08	-19.84%
As of March 31, 2013, the Fund's year-to-date return was 0.69%.

AVERAGE ANNUAL TOTAL RETURNS

For the periods ended December 31, 2012

	1 Year	5 Years	10 Years
Templeton Foreign Securities Fund - Class 4	18.14%	-1.41%	8.61%
MSCI EAFE Index (index reflects no deduction for fees, expenses or taxes)	17.90%	-3.21%	8.70%

Historical performance for Class 4 shares prior to their inception in 2008 is based on the performance of Class 1 shares, which do not assess a rule 12b-1 plan fee.

Investment Manager

Templeton Investment Counsel, LLC (Investment Counsel)

Portfolio Managers

PETER A. NORI, CFA Executive Vice President/Portfolio Manager - Research Analyst of Investment Counsel and portfolio manager of the Fund since 1999.

CINDY L. SWEETING, CFA President of Investment Counsel and portfolio manager of the Fund since June 2012.

Purchase and Sale of Fund Shares

Taxes

Payments to Sponsoring Insurance
Companies and Other Financial Intermediaries

Templeton Global Bond Securities Fund

Investment Goal

High current income, consistent with preservation of capital. Capital appreciation is a secondary consideration.

Fees and Expenses of the Fund

ANNUAL FUND OPERATING EXPENSES
(expenses that you pay each year as a percentage of the value of your investment)

	Class 4
Management fees	0.46%
Distribution and service (12b-1) fees	0.35%
Other expenses	0.09%
Total annual Fund operating expenses	0.90%

Example

	1 Year	3 Years	5 Years	10 Years
Class 4	$ 92	$ 287	$ 498	$ 1,108

Portfolio Turnover

Principal Investment Strategies

Principal Risks

Performance

The inclusion of the Citigroup World Government Bond Index (WGBI) shows how the Fund's performance compares to a group of securities in an additional leading government bond index.

ANNUAL TOTAL RETURNS

Best Quarter:	Q4'04	10.34%
Worst Quarter:	Q3'11	-7.55%
As of March 31, 2013, the Fund's year-to-date return was 1.41%.

AVERAGE ANNUAL TOTAL RETURNS

For the periods ended December 31, 2012

	1 Year	5 Years	10 Years
Templeton Global Bond Securities Fund - Class 4	14.97%	10.38%	10.96%
J.P. Morgan Government Bond Index - Global (index reflects no deduction for fees, expenses or taxes)	1.30%	5.70%	6.20%
Citigroup World Government Bond Index (WGBI) (index reflects no deduction for fees, expenses or taxes)	1.65%	5.27%	6.04%

Historical performance for Class 4 shares prior to their inception in 2008 is based on the performance of Class 1 shares, which do not assess a rule 12b-1 plan fee.

Investment Manager

Franklin Advisers, Inc. (Advisers)

Portfolio Managers

MICHAEL HASENSTAB, PH.D. Senior Vice President of Advisers and portfolio manager of the Fund since 2001.

SONAL DESAI, PH.D. Portfolio Manager of Advisers and portfolio manager of the Fund since 2011.

Purchase and Sale of Fund Shares

Taxes

Payments to Sponsoring Insurance
Companies and Other Financial Intermediaries

Templeton Growth Securities Fund

Investment Goal

Long-term capital growth.

Fees and Expenses of the Fund

ANNUAL FUND OPERATING EXPENSES
(expenses that you pay each year as a percentage of the value of your investment)

	Class 4
Management fees	0.74%
Distribution and service (12b-1) fees	0.35%
Other expenses	0.04%
Total annual Fund operating expenses	1.13%

Example

	1 Year	3 Years	5 Years	10 Years
Class 4	$ 115	$ 359	$ 622	$ 1,375

Portfolio Turnover

Principal Investment Strategies

Principal Risks

Performance

The inclusion of the MSCI All Country World Index shows how the Fund's performance compares to a group of securities in an additional leading equity index.

ANNUAL TOTAL RETURNS

Best Quarter:	Q2'03	20.71%
Worst Quarter:	Q4'08	-21.60%
As of March 31, 2013, the Fund's year-to-date return was 6.05%.

AVERAGE ANNUAL TOTAL RETURNS

For the periods ended December 31, 2012

	1 Year	5 Years	10 Years
Templeton Growth Securities Fund - Class 4	21.02%	-1.85%	6.74%
MSCI World Index (index reflects no deduction for fees, expenses or taxes)	16.54%	-0.60%	8.08%
MSCI All Country World Index (index reflects no deduction for fees, expenses or taxes)	16.80%	-0.61%	8.66%

Historical performance for Class 4 shares prior to their inception in 2008 is based on the performance of Class 1 shares, which do not assess a rule 12b-1 plan fee.

Investment Manager

Templeton Global Advisors Limited (Global Advisors)

Portfolio Managers

NORMAN BOERSMA, CFA President, Chief Executive Officer and Director of Global Advisors and portfolio manager of the Fund since 2011.

LISA F. MYERS, J.D., CFA Executive Vice President of Global Advisors and portfolio manager of the Fund since 2010.

MATTHEW R. NAGLE, CFA Senior Vice President of Global Advisors and portfolio manager of the Fund since 2010.

JAMES HARPER, CFA Senior Vice President of Global Advisors and portfolio manager of the Fund since 2010.

Purchase and Sale of Fund Shares

Taxes

Payments to Sponsoring Insurance
Companies and Other Financial Intermediaries

Franklin Templeton Variable Insurance Products Trust

Overview

Investment Considerations

The following give a general sense of the level of fund assets associated with a particular investment or strategy: "small portion" (less than 10%); "portion" (10% to 25%); "significant" (25% to 50%); "substantial" (50% to 66%); "primary" (66% to 80%); and "predominant" (80% or more). The percentages are not limitations unless specifically stated as such in this prospectus or in the Trust's Statement of Additional Information (SAI).

Risks

Fund shares are not deposits or obligations of, or guaranteed or endorsed by, any bank, and are not federally insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other agency of the U.S. government. Fund shares involve investment risks, including the possible loss of principal.
Because you could lose money by investing in a Fund, take the time to read each Fund description and consider all risks before investing.

Additional Information

More detailed information about each Fund, its investment policies, and its particular risks can be found in the SAI.

Investment Management

FUND DETAILS

Franklin Flex Cap Growth Securities Fund

Investment Goal

The Fund's investment goal is capital appreciation.

Principal Investment Policies and Practices

When suitable opportunities are available, the Fund may invest in initial public offerings of securities.

Portfolio Selection

The investment manager uses fundamental, "bottom-up" research to seek companies meeting its criteria of growth potential, quality and valuation. In seeking sustainable growth characteristics, the investment manager looks for companies it believes 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. The investment manager defines quality companies as those with strong and improving competitive positions in attractive markets. The investment manager also believes 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. The investment manager’s valuation analysis includes a range of potential outcomes based on an assessment of multiple scenarios. In assessing value, the investment manager considers whether security prices fully reflect the balance of the sustainable growth opportunities relative to business and financial risks.

Temporary Investments

When the investment manager believes market or economic conditions are unfavorable for investors, the investment manager may invest up to 100% of the Fund's assets in a temporary defensive manner by holding all or a substantial portion of its assets in cash, cash equivalents or other high quality short-term investments. Temporary defensive investments generally may include short-term U.S. government securities, money market fund shares (including shares of an affiliated money market fund), high-grade commercial paper, bank obligations, repurchase agreements and other money market instruments. The investment manager also may invest in these types of securities or hold cash while looking for suitable investment opportunities or to maintain liquidity. In these circumstances, the Fund may be unable to achieve its investment goal.

Principal Risks

Market

Growth Style Investing

Smaller and Midsize Companies

Focus

Foreign Securities

Management

More detailed information about the Fund, its policies and risks can be found in the Fund's SAI.

Management

Franklin Advisers, Inc. (Advisers), One Franklin Parkway, San Mateo, California 94403-1906, is the Fund's investment manager.

The Fund is managed by a team of dedicated professionals focused on investments in sectors believed to have growth potential. The portfolio managers of the team are as follows:

CONRAD B. HERRMANN, CFA Senior Vice President of Advisers		Mr. Herrmann has been the lead portfolio manager of the Fund since its inception (2005). He has primary responsibility for the investments of the Fund. He has final authority over all aspects of the Fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio risk assessment, and the management of daily cash balances in accordance with anticipated investment management requirements. The degree to which he may perform these functions, and the nature of these functions, may change from time to time. He joined Franklin Templeton Investments in 1989.

MATTHEW J. MOBERG, CPA Vice President of Advisers		Mr. Moberg has been a portfolio manager of the Fund since its inception (2005), providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. He joined Franklin Templeton Investments in 1998.

CFA^® and Chartered Financial Analyst^® are trademarks owned by CFA Institute.

The Fund’s SAI provides additional information about portfolio manager compensation, other accounts that they manage and their ownership of Fund shares.

Financial Highlights

This table presents the financial performance of Class 4 shares for the past five years or since inception. The table shows certain information on a single Fund share basis (per share performance). It also shows some key Fund statistics, such as total return (past performance) and expense ratios. Total return represents the annual change in value of a share assuming reinvestment of dividends and capital gains. This information has been audited by PricewaterhouseCoopers LLP. Their report, along with the Fund's financial statements, is included in the annual report, which is available upon request.

Class 4	Year Ended December 31,
	2012	2011	2010	2009	2008^a
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$ 12.01	$ 12.63	$ 10.88	$ 8.21	$ 11.22
Income from investment operations:^b
Net investment income (loss)^c	—^d	-0.03	-0.03	-0.01	—^d
Net realized and unrealized gains (losses)	1.11	-0.59	1.78	2.69	-2.98
Total from investment operations	1.11	-0.62	1.75	2.68	-2.98
Less distributions from net investment income	—	—	—	-0.01	-0.03
Net asset value, end of year	$ 13.12	$ 12.01	$ 12.63	$ 10.88	$ 8.21
Total return^e	9.24%	-4.91%	16.08%	32.69%	-26.68%
Ratios to average net assets^f
Expenses before waiver and payments by affiliates	1.28%	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).	-0.01%	-0.24%	-0.27%	-0.11%	-0.06%
Supplemental data
Net assets, end of year (000’s)	$ 216,607	$ 270,598	$ 263,746	$ 218,798	$ 50,268
Portfolio turnover rate	43.50%	63.99%	60.00%	33.64%	32.76%

a. For the period February 29, 2008 (effective date) to December 31, 2008.

c. Based on average daily shares outstanding.

d. Amount rounds to less than $0.01 per share.

f. Ratios are annualized for periods less than one year.

g. Benefit of expense reduction rounds to less than 0.01%.

Franklin High Income Securities Fund

Investment Goal

The Fund’s principal investment goal is to earn a high level of current income. Its secondary goal is capital appreciation.

Principal Investment Policies and Practices

The Fund may invest up to 100% of its total assets in debt securities that are rated below investment grade, sometimes called "junk bonds." Investment grade debt securities are rated in one of the top four ratings categories by independent rating organizations such as Standard & Poor's (S&P^®) and Moody's Investors Service (Moody's). The Fund may buy both rated and unrated debt securities including securities rated below B by Moody's or S&P (or deemed comparable by the Fund’s investment manager). If subsequent to its purchase, a security is downgraded in rating or goes into default, the Fund will consider such events in its evaluation of the overall investment merits of that security but will not necessarily dispose of the security immediately. The Fund may invest a small portion of its assets in defaulted debt securities.

Portfolio Selection

Commodity Exchange Act Exclusions

Temporary Investments

When the investment manager believes market or economic conditions are unfavorable for investors, the investment manager may invest up to 100% of the Fund's assets in a temporary defensive manner by holding all or a substantial portion of its assets in cash, cash equivalents or other high quality short-term investments. Temporary defensive investments generally may include short-term debt and money market instruments, including U.S. government securities, money market fund shares (including shares of an affiliated money market fund), high-grade commercial paper, repurchase agreements and other money market equivalents. The investment manager also may invest in these types of securities or hold cash while looking for suitable investment opportunities or to maintain liquidity. In these circumstances, the Fund may be unable to achieve its investment goals.

Principal Risks

Credit

High-Yield Debt Securities

Interest Rate

Income

Foreign Securities

Focus

Developing Markets

Prepayment

Derivative Instruments

Credit-Linked Securities

Variable Rate Securities

Market

Unrated Debt Securities

Management

More detailed information about the Fund, its policies and risks can be found in the Fund's SAI.

Management

Franklin Advisers, Inc. (Advisers), One Franklin Parkway, San Mateo, California 94403-1906, is the Fund's investment manager.

The Fund is managed by a team of dedicated professionals focused on high yield debt investments. The portfolio managers of the team are as follows:

PATRICIA O'CONNOR, CFA, CPA Vice President of Advisers		Ms. O'Connor has been the lead portfolio manager of the Fund since 2002. She has primary responsibility for the investments of the Fund. She has final authority over all aspects of the Fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio risk assessment, and the management of daily cash balances in accordance with anticipated investment management requirements. The degree to which she may perform these functions, and the nature of these functions, may change from time to time. She joined Franklin Templeton Investments in 1997.

ERIC G. TAKAHA, CFA Senior Vice President of Advisers		Mr. Takaha has been a portfolio manager of the Fund since 2005, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. He joined Franklin Templeton Investments in 1989.

CFA^® and Chartered Financial Analyst^® are trademarks owned by CFA Institute.

The Fund’s SAI provides additional information about portfolio manager compensation, other accounts that they manage and their ownership of Fund shares.

Financial Highlights

Class 4	Year Ended December 31,
	2012	2011	2010	2009	2008^a
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$ 6.46	$ 6.57	$ 6.22	$ 4.67	$ 6.55
Income from investment operations:^b
Net investment income^c	0.46	0.47	0.47	0.45	0.39
Net realized and unrealized gains (losses)	0.49	-0.18	0.31	1.48	-1.65
Total from investment operations	0.95	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 year	$ 6.94	$ 6.46	$ 6.57	$ 6.22	$ 4.67
Total return^d	15.50%	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	6.80%	7.17%	7.36%	7.98%	7.95%
Supplemental data
Net assets, end of year (000’s)	$ 27,664	$ 27,055	$ 25,934	$ 15,105	$ 2,244
Portfolio turnover rate	37.03%	45.11%	60.80%	26.41%	21.75%

a. For the period February 29, 2008 (effective date) to December 31, 2008.

c. Based on average daily shares outstanding.

e. Ratios are annualized for periods less than one year.

f. Benefit of expense reduction rounds to less than 0.01%.

Franklin Income Securities Fund

Investment Goal

The Fund’s investment goal is to maximize income while maintaining prospects for capital appreciation.

Principal Investment Policies and Practices

Portfolio Selection

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 the company's management;
the company's changing financial condition and market recognition of the change;
the company's sensitivity to changes in interest rates and business conditions; and
the company's debt maturity schedules and borrowing requirements.

With respect to debt and equity securities in the utilities industry, the investment manager considers the effects of the regulatory environment on utilities companies.

Commodity Exchange Act Exclusions

Temporary Investments

When the investment manager believes market or economic conditions are unfavorable for investors, the investment manager may invest up to 100% of the Fund's assets in a temporary defensive manner by holding all or a substantial portion of its assets in cash, cash equivalents or other high quality short-term investments. Temporary defensive investments generally may include short-term U.S. government securities, high-grade commercial paper, bank obligations, repurchase agreements, and other money market instruments. The investment manager also may invest in these types of securities or hold cash while looking for suitable investment opportunities or to maintain liquidity. In these circumstances, the Fund may be unable to achieve its investment goal.

Principal Risks

Market

High-Yield Debt Securities

Credit

Income

Prepayment

Interest Rate

Foreign Securities

Convertible Securities

Focus

Derivative Instruments

Equity-Linked Notes (ELNs)

Value Style Investing

Management

More detailed information about the Fund, its policies and risks can be found in the Fund's SAI.

Management

Franklin Advisers, Inc. (Advisers), One Franklin Parkway, San Mateo, California 94403-1906, is the Fund's investment manager.

The Fund is managed by a team of dedicated professionals focused on investments in debt and equity securities. The portfolio managers of the team are as follows:

EDWARD D. PERKS, CFA Senior Vice President of Advisers		Mr. Perks has been the lead portfolio manager of the Fund since 2002. He has primary responsibility for the investments of the Fund. He has final authority over all aspects of the Fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio risk assessment, and the management of daily cash balances in accordance with anticipated investment management requirements. The degree to which he may perform these functions, and the nature of these functions, may change from time to time. He joined Franklin Templeton Investments in 1992.

MATTHEW QUINLAN Portfolio Manager of Advisers		Mr. Quinlan has been a portfolio manager of the Fund since December 2012, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. He joined Franklin Templeton Investments in 2005.

ALEX W. PETERS, CFA Vice President of Advisers		Mr. Peters has been a portfolio manager of the Fund since December 2012, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. He joined Franklin Templeton Investments in 1992.

CHARLES B. JOHNSON Chairman of Franklin Resources, Inc.		Mr. Johnson has been a portfolio manager of the Fund since 1989, providing research, advice and portfolio risk assessment on the Fund's investment portfolio. He joined Franklin Templeton Investments in 1957.

CFA^® and Chartered Financial Analyst^® are trademarks owned by CFA Institute.

The Fund’s SAI provides additional information about portfolio manager compensation, other accounts that they manage and their ownership of Fund shares.

Financial Highlights

Class 4	Year Ended December 31,
	2012	2011	2010	2009	2008^a
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$ 14.54	$ 15.04	$ 14.33	$ 11.49	$ 16.90
Income from investment operations:^b
Net investment income^c	0.85	0.90	0.85	0.86	0.87
Net realized and unrealized gains (losses)	0.90	-0.54	0.84	3.06	-5.07
Total from investment operations	1.75	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 year	$ 15.32	$ 14.54	15.04	$ 14.33	$ 11.49
Total return^d	12.56%	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	5.68%	6.00%	5.93%	6.88%	6.93%
Supplemental data
Net assets, end of year (000’s)	$ 436,405	$ 431,435	$ 415,541	$ 347,733	$ 135,360
Portfolio turnover rate	26.66%^g	28.65%	41.65%	42.30%	43.89%

a. For the period February 29, 2008 (effective date) to December 31, 2008.

c. Based on average daily shares outstanding.

e. Ratios are annualized for periods less than one year.

f. Benefit of expense reduction rounds to less than 0.01%.

g. Excludes the value of portfolio securities delivered as a result of a redemption in-kind.

Franklin Rising Dividends Securities Fund

Investment Goal

The Fund's investment goal is long-term capital appreciation. Preservation of capital, while not a goal, is also an important consideration.

Principal Investment Policies and Practices

Under normal market conditions, the Fund invests at least 80% of its net assets in equity securities of financially sound companies that have paid consistently rising dividends. Shareholders will be given at least 60 days’ advance notice of any change to this 80% policy. The Fund invests predominantly in equity securities, mostly common stocks. Companies that have paid consistently rising dividends include those companies that currently pay dividends on their common stocks and have maintained or increased their dividend rate during the last four consecutive years. Under normal market conditions, the Fund invests at least 65% of its net assets in securities of companies that have:

consistently increased dividends in at least 8 out of the last 10 years and have not decreased dividends during that time;
increased dividends substantially (at least 100%) over the last 10 years;
reinvested earnings, paying out less than 65% of current earnings in dividends;
either long-term debt that is no more than 50% of total capitalization or senior debt that has been rated investment grade by at least one of the major bond rating organizations; and
attractive prices, either: (1) in the lower half of the stock's price/earnings ratio range for the past 10 years; or (2) less than price/earnings ratio of the Standard & Poor's^® 500 Stock Index.

The Fund may invest up to 25% of its total assets in foreign securities.

Portfolio Selection

Temporary Investments

When the investment manager believes market or economic conditions are unfavorable for investors, the investment manager may invest up to 100% of the Fund's assets in a temporary defensive manner by holding all or a substantial portion of its assets in cash, cash equivalents or other high quality short-term investments. Temporary defensive investments generally may include short-term U.S. government securities, high grade commercial paper, bank obligations, repurchase agreements, money market fund shares (including shares of an affiliated money market fund) and other money market instruments. The investment manager also may invest in these types of securities or hold cash while looking for suitable investment opportunities or to maintain liquidity. In these circumstances, the Fund may be unable to achieve its investment goal.

Principal Risks

Market

Investing Style

Dividend-Oriented Companies

Smaller and Midsize Companies

Focus

Foreign Securities

Management

More detailed information about the Fund, its policies and risks can be found in the Fund's SAI.

Management

Franklin Advisory Services, LLC (Advisory Services), One Parker Plaza, Ninth Floor, Fort Lee, New Jersey 07024, is the Fund's investment manager.

The Fund is managed by a team of dedicated professionals focused on investments that have paid rising dividends. The portfolio managers of the team are as follows:

DONALD G. TAYLOR, CPA Senior Vice President of Advisory Services		Mr. Taylor has been the lead portfolio manager of the Fund since 1996. He has primary responsibility for the investments of the Fund. He has final authority over all aspects of the Fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio risk assessment, and the management of daily cash balances in accordance with anticipated investment management requirements. The degree to which he may perform these functions, and the nature of these functions, may change from time to time. He joined Franklin Templeton Investments in 1996.

BRUCE C. BAUGHMAN, CPA Senior Vice President of Advisory Services		Mr. Baughman has been a portfolio manager of the Fund since its inception, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. He joined Franklin Templeton Investments in 1988.

WILLIAM J. LIPPMAN President of Advisory Services		Mr. Lippman has been a portfolio manager of the Fund since its inception, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. He joined Franklin Templeton Investments in 1988.

MARGARET MCGEE Vice President of Advisory Services		Ms. McGee has been a portfolio manager of the Fund since its inception, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. She joined Franklin Templeton Investments in 1988.

The Fund’s SAI provides additional information about portfolio manager compensation, other accounts that they manage and their ownership of Fund shares.

Financial Highlights

Class 4	Year Ended December 31,
	2012	2011	2010	2009	2008^a
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$ 19.83	$ 19.04	$ 16.09	$ 13.92	$ 18.51
Income from investment operations:^b
Net investment income^c	0.35	0.31	0.32	0.13^d	0.26
Net realized and unrealized gains (losses)	1.96	0.80	2.94	2.24	-4.36
Total from investment operations	2.31	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 year	$ 21.78	$ 19.83	$ 19.04	$ 16.09	$ 13.92
Total return^e	11.78%	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	1.61%	1.52%	1.53%	0.64%^d	1.70%
Supplemental data
Net assets, end of year (000’s)	$ 6,432	$ 3,020	$ 1,007	$ 15	$ 4
Portfolio turnover rate	11.19%	12.76%	8.97%	16.99%	5.39%

a. For the period February 29, 2008 (effective date) to December 31, 2008.

c. Based on average daily shares outstanding.

d. Net 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%.

f. Ratios are annualized for periods less than one year.

g. Benefit of expense reduction rounds to less than 0.01%.

Franklin Small Cap Value Securities Fund

Investment Goal

The Fund’s investment goal is long-term total return.

Principal Investment Policies and Practices

Stock prices that are low relative to current or historical or future earnings, book value, cash flow or sales -- all relative to the market, a company's industry or a company's earnings history
Recent sharp price declines but the potential for good long-term earnings prospects, in the investment manager's opinion
Valuable intangibles not reflected in the stock price, such as franchises, distribution networks or market share for particular products or services, underused or understated assets or cash, or patents and trademarks

The Fund may invest up to 25% of its total assets in foreign securities.

The Fund, from time to time, may have significant investments in particular sectors.

Portfolio Selection

The Fund employs a "bottom-up" stock selection process and the investment manager invests in securities without regard to benchmark comparisons.

Temporary Investments

When the investment manager believes market or economic conditions are unfavorable for investors, the investment manager may invest up to 100% of the Fund's assets in a temporary defensive manner by holding all or a substantial portion of its assets in cash, cash equivalents or other high quality short-term investments. Temporary defensive investments generally may include short-term U.S. government securities, commercial paper, bank obligations, repurchase agreements, money market fund shares (including shares of an affiliated money market fund), and other money market instruments. The investment manager also may invest in these types of securities or hold cash while looking for suitable investment opportunities or to maintain liquidity. In these circumstances, the Fund may be unable to achieve its investment goals.

Principal Risks

Market

Value Style Investing

Smaller Companies

Focus

Foreign Securities

Management

More detailed information about the Fund, its policies and risks can be found in the Fund's SAI.

Management

Franklin Advisory Services, LLC (Advisory Services), One Parker Plaza, Ninth Floor, Fort Lee, New Jersey 07024, is the Fund's investment manager.

The Fund is managed by a team of dedicated professionals focused on investments of small cap value companies. The portfolio managers of the team are as follows:

WILLIAM J. 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 C. BAUGHMAN, CPA 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.

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.

The Fund’s SAI provides additional information about portfolio manager compensation, other accounts that they manage and their ownership of Fund shares.

Financial Highlights

Class 4	Year Ended December 31,
	2012	2011	2010	2009	2008^a
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$ 15.71	$ 16.44	$ 12.92	$ 10.70	$ 16.42
Income from investment operations:^b
Net investment income^c	0.22^d	0.11	0.09	0.11	0.15
Net realized and unrealized gains (losses)	2.63	-0.75	3.53	2.84	-4.42
Total from investment operations	2.85	-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 year	$ 18.44	$ 15.71	$ 16.44	$ 12.92	$ 10.70
Total return^e	18.27%	-3.87%	28.14%	29.04%	-29.14%
Ratios to average net assets^f
Expenses	1.02%	1.01%	1.02%	1.03%^g	1.02%^g
Net investment income	1.35%^d	0.67%	0.63%	0.94%	1.27%
Supplemental data
Net assets, end of year (000’s)	$ 32,424	$ 34,284	$ 39,075	$ 28,599	$ 14,850
Portfolio turnover rate	5.84%	14.39%	15.92%	6.68%	16.98%

a. For the period February 29, 2008 (effective date) to December 31, 2008.

c. Based on average daily shares outstanding.

d. Net investment income per share includes approximately $0.10 per share received in the form of special dividends. Excluding these amounts, the ratio of net investment income to average net assets would have been 0.75%.

f. Ratios are annualized for periods less than one year.

g. Benefit of expense reduction rounds to less than 0.01%.

Franklin Small-Mid Cap Growth Securities Fund

Investment Goal

The Fund's investment goal is long-term capital growth.

Principal Investment Policies and Practices

The Fund, from time to time, may have significant positions in particular sectors such as technology (including health care technology, technology services and electronic technology) and industrials.

The Fund may invest up to 10% of its total assets in foreign securities.

Portfolio Selection

Temporary Investments

When the investment manager believes market or economic conditions are unfavorable for investors, the investment manager may invest up to 100% of the Fund's assets in a temporary defensive manner by holding all or a substantial portion of its assets in cash, cash equivalents or other high quality short-term investments. Temporary defensive investments generally may include short-term U.S. government securities, high grade commercial paper, bank obligations, repurchase agreements, money market fund shares (including shares of an affiliated money market fund) and other money market instruments. The investment manager also may invest in these types of securities or hold cash while looking for suitable investment opportunities or to maintain liquidity. In these circumstances, the Fund may be unable to achieve its investment goal.

Principal Risks

Market

Growth Style Investing

Smaller and Midsize Companies

Focus

Liquidity

Management

Foreign Securities

More detailed information about the Fund, its policies and risks can be found in the Fund's SAI.

Management

Franklin Advisers, Inc. (Advisers), One Franklin Parkway, San Mateo, California 94403-1906, is the Fund's investment manager.

EDWARD B. JAMIESON President, Chief Investment Officer and Director of Advisers		Mr. Jamieson has been the lead portfolio manager of the Fund since 2005. He has primary responsibility for the investments of the Fund. He has final authority over all aspects of the Fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio risk assessment, and the management of daily cash balances in accordance with anticipated investment management requirements. The degree to which he may perform these functions, and the nature of these functions, may change from time to time. He joined Franklin Templeton Investments in 1987.

JAMES CROSS Portfolio Manager of Advisers		Mr. Cross has been a portfolio manager of the Fund since 2006, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. He joined Franklin Templeton Investments in 1998.

MICHAEL MCCARTHY Senior Vice President of Advisers		Mr. McCarthy has been a portfolio manager of the Fund since 1995, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. He joined Franklin Templeton Investments in 1992.

The Fund’s SAI provides additional information about portfolio manager compensation, other accounts that they manage and their ownership of Fund shares.

Financial Highlights

Class 4	Year Ended December 31,
	2012	2011	2010	2009	2008^a
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$ 20.90	$ 21.98	$ 17.24	$ 12.02	$ 20.60
Income from investment operations:^b
Net investment income (loss)^c	-0.09^d	-0.12	-0.07	-0.15^e	0.02
Net realized and unrealized gains (losses)	2.24	-0.96	4.81	5.37	-6.24
Total from investment operations	2.15	-1.08	4.74	5.22	-6.22
Less distributions from net realized gains	-1.58	—	—	—	-2.36
Net asset value, end of year	$ 21.47	$ 20.90	$ 21.98	$ 17.24	$ 12.02
Total return^f	10.79%	-4.91%	27.49%	43.43%	-34.74%
Ratios to average net assets^g
Expenses	1.15%	1.14%	1.14%	1.15%^h	1.11%^h
Net investment income (loss)	-0.38%^d	-0.56%	-0.42%	-1.07%^e	-0.29%
Supplemental data
Net assets, end of year (000’s)	$ 12,000	$ 12,664	$ 15,413	$ 11,029	$ 3,538
Portfolio turnover rate	41.44%	45.00%	46.69%	63.93%	60.12%

a. For the period February 29, 2008 (effective date) to December 31, 2008.

c. Based on average daily shares outstanding.

d. Net investment income per share includes approximately $0.03 per share received in the form of special dividends. Excluding these amounts, the ratio of net investment income to average net assets would have been (0.51)%.

e. Net 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)%.

g. Ratios are annualized for periods less than one year.

h. Benefit of expense reduction rounds to less than 0.01%.

Franklin Strategic Income Securities Fund

Investment Goal

The Fund’s principal investment goal is to earn a high level of current income. Its secondary goal is long-term capital appreciation.

Principal Investment Policies and Practices

Under normal market conditions, the Fund invests its assets primarily to predominantly in U.S. and foreign debt securities, including those in emerging markets. Debt securities include all varieties of fixed and floating rate income securities, including bonds, loans, bank loans (and loan participations), mortgage-backed securities and other asset-backed securities, convertible securities and government and municipal securities. The Fund shifts its investments among the following general asset classes, and at any given time may have a considerable amount of its assets invested in any one of these classes:

High yield and investment grade corporate bonds and preferred stocks of issuers located in the U.S. and foreign countries, including emerging market countries
Developed country (non-U.S.) government and agency bonds
Emerging market government and agency bonds
U.S. government and agency bonds, including inflation-indexed securities issued by the U.S. Treasury
Mortgage-backed securities and other asset-backed securities
Floating and variable interest rate investments (which may be issued by corporations or governments and may be asset-backed securities) which are debt securities
Bank loans and loan participations
Convertible securities, including bonds and preferred stocks
Municipal securities

Portfolio Selection

Commodity Exchange Act Exclusions

Temporary Investments

When the investment manager believes market or economic conditions are unfavorable for investors, the investment manager may invest up to 100% of the Fund's assets in a temporary defensive manner by holding all or a substantial portion of its assets in cash, cash equivalents or other high quality short-term investments. Temporary defensive investments generally may include U.S. government securities, money market fund shares (including shares of an affiliated money market fund), high-grade commercial paper, bank obligations, repurchase agreements and other money market investments. The investment manager also may invest in these types of securities or hold cash while looking for suitable investment opportunities or to maintain liquidity. In these circumstances, the Fund may be unable to achieve its investment goals.

Principal Risks

Credit

High-Yield Debt Securities

Interest Rate

Variable Rate Securities

Income

Foreign Securities

Developing Markets

Derivative Instruments

Prepayment

Extension

Debt Securities Ratings

Mortgage-Backed Securities and Asset-Backed Securities

Convertible Securities

Unrated Debt Securities

Market

Liquidity

Focus

Inflation risk

Floating Rate Corporate Investments

Management

More detailed information about the Fund, its policies and risks can be found in the Fund's SAI.

Management

Franklin Advisers, Inc. (Advisers), One Franklin Parkway, San Mateo, California 94403-1906, is the Fund's investment manager.

The Fund is managed by a team of dedicated professionals focused on investments in U.S. and foreign debt securities. The portfolio managers of the team are as follows:

ERIC G. TAKAHA, CFA Senior Vice President of Advisers		Mr. Takaha has been the lead portfolio manager of the Fund since inception. He has primary responsibility for the investments of the Fund. He has final authority over all aspects of the Fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio risk assessment, and the management of daily cash balances in accordance with anticipated investment management requirements. The degree to which he may perform these functions, and the nature of these functions, may change from time to time. He joined Franklin Templeton Investments in 1989.

CHRISTOPHER J. MOLUMPHY, CFA Executive Vice President and Director of Advisers		Mr. Molumphy has been a portfolio manager of the Fund since inception, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. He joined Franklin Templeton Investments in 1988.

CFA^® and Chartered Financial Analyst^® are trademarks owned by CFA Institute.

The Fund’s SAI provides additional information about portfolio manager compensation, other accounts that they manage and their ownership of Fund shares.

Financial Highlights

Class 4	Year Ended December 31,
	2012	2011	2010	2009	2008^a
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$ 12.44	$ 12.88	$ 12.20	$ 10.54	$ 12.84
Income from investment operations:^b
Net investment income^c	0.60	0.64	0.67	0.66	0.53
Net realized and unrealized gains (losses)	0.91	-0.31	0.60	1.94	-1.93
Total from investment operations	1.51	0.33	1.27	2.60	-1.40
Less distributions from:
Net investment income and net of 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 year	$ 13.04	$ 12.44	$ 12.88	$ 12.20	$ 10.54
Total return^d	12.67%	2.46%	10.88%	25.52%	-11.69%
Ratios to average net assets^e
Expenses	0.93%	0.95%^f	0.94%^f	0.93%^f	0.96%^f
Net investment income	4.69%	5.01%	5.36%	5.78%	5.48%
Supplemental data
Net assets, end of year (000’s)	$ 196,479	$ 188,786	$ 188,178	$ 162,074	$ 59,766
Portfolio turnover rate	49.98%	55.65%	56.46%	56.19%	47.68%
Portfolio turnover rate excluding mortgage dollar rolls	48.75%	55.65%	56.46%	56.19%	47.68%

a. For the period February 29, 2008 (effective date) to December 31, 2008.

c. Based on average daily shares outstanding.

e. Ratios are annualized for periods less than one year.

f. Benefit of expense reduction rounds to less than 0.01%.

Franklin Templeton VIP Founding Funds Allocation Fund

Investment Goal

Principal Investment Policies and Practices

The Fund is a “fund of funds” meaning that it seeks to achieve its investment goal by investing its assets in a combination of Class 1 shares of the Franklin Income Securities Fund (33 1/3%), Mutual Shares Securities Fund (33 1/3%) and Templeton Growth Securities Fund (33 1/3%) (underlying funds). The Fund makes equal allocations to each of the underlying funds on a fixed percentage basis. The administrator rebalances the Fund’s investments in the underlying funds periodically and may recommend to the Fund’s board of trustees additional or different underlying funds for investment (without the approval of shareholders). The underlying funds, in turn, invest primarily in U.S. and foreign equity securities, and, to a lesser extent, fixed income and money market securities, each following a value oriented approach. The investment policies of the underlying funds are summarized in the section below entitled "Information about the Underlying Funds."

The Fund seeks to maintain equal investments in each of the three underlying funds.

Rebalancing and Fund Performance

Temporary Investments

Information about the Underlying Funds

Risks of Investing in the Underlying Funds

The following sections describe some of the risks associated with certain of the underlying Franklin Templeton funds (hereafter the "Fund" or "Funds").

Market

Value Style Investing

Foreign Securities

Developing Markets

Focus

Smaller and Midsize Companies

Derivative Instruments

Income

Credit

Interest Rate

High-Yield Debt Securities

Merger Arbitrage Securities and Distressed Companies

Prepayment

Convertible Securities

Management

More detailed information about the Fund, its policies and risks can be found in the Fund's SAI.

Administration

Fund Administration Agreement and Services

The Fund does not receive rule 12b-1 service or distribution fees from any of the underlying funds in connection with its investments in them.

T. ANTHONY COFFEY, CFA

Vice President of Advisers

Mr. Coffey oversees the rebalancing process on behalf of FT Services. He joined Franklin Templeton Investments in 1989.

CFA^® and Chartered Financial Analyst^® are trademarks owned by CFA Institute.

The Fund's SAI provides additional information about Mr. Coffey's compensation, other accounts he manages or oversees and his ownership of Fund shares.

Administration Fees

Underlying Fund	Manager	Annual Fee Rate
Franklin Income Securities Fund	Advisers	0.45%
Mutual Shares Securities Fund	Franklin Mutual Advisers, LLC	0.60%
Templeton Growth Securities Fund	Templeton Global Advisors, Limited	0.74%

Financial Highlights

Class 4	Year Ended December 31,
	2012	2011	2010	2009	2008^a
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$ 7.58	$ 7.71	$ 7.14	$ 5.62	$ 8.65
Income from investment operations:^b
Net investment income^c,^d	0.30	0.24	0.19	0.23	0.19
Net realized and unrealized gains (losses)	0.83	-0.37	0.54	1.46	-2.87
Total from investment operations	1.13	-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 year	$ 8.49	$ 7.58	$ 7.71	$ 7.14	$ 5.62
Total return^f	15.17%	-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	3.71%	3.09%	2.69%	3.81%	3.46%
Supplemental data
Net assets, end of year (000’s)	$ 493,813	$ 2,860,928	$ 3,036,272	$ 1,424,479	$ 263,001
Portfolio turnover rate	28.46%ⁱ	58.42%	17.81%	4.23%	22.09%

a. For the period February 29, 2008 (effective date) to December 31, 2008.

c. Based on average daily shares outstanding.

d. Recognition 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.

e. Amount rounds to less than $0.01 per share.

g. Ratios are annualized for periods less than one year.

h. Does not include expenses of the Underlying Funds in which the Fund invests. The weighted average indirect expenses of the Underlying Funds was 0.65% for the year ended December 31, 2012.

i. Excludes the value of portfolio securities delivered as a result of a redemption in-kind.

Mutual Global Discovery Securities Fund

Investment Goal

The Fund's investment goal is capital appreciation.

Principal Investment Policies and Practices

Under normal market conditions, the Fund invests primarily in equity securities (including securities convertible into, or that the investment manager expects to be exchanged for, common or preferred stock) of U.S. and foreign companies that the investment manager believes are available at market prices less than their value based on certain recognized or objective criteria (intrinsic value). The equity securities in which the Fund invests are primarily common stock. Following this value-oriented strategy, the Fund invests primarily in:

Undervalued Securities - Securities trading at a discount to intrinsic value.

And, to a lesser extent, the Fund also invests in:

Merger Arbitrage Securities - Securities of companies involved in restructurings (such as mergers, acquisitions, consolidations, liquidations, spin-offs, or tender or exchange offers) or that the investment manager believes are cheap relative to an economically equivalent security of another or the same company.
Distressed Companies - Securities of companies that are, or are about to be, involved in reorganizations, financial restructurings, or bankruptcy.

Portfolio Selection

Commodity Exchange Act Exclusions

Temporary Investments

Principal Risks

Market

Value Style Investing

Foreign Securities

Smaller and Midsize Companies

Credit

High-Yield Debt Securities

Derivative Instruments

Merger Arbitrage Securities and Distressed Companies

Management

More detailed information about the Fund, its policies and risks can be found in the Fund's SAI.

Management

Franklin Mutual Advisers, LLC (Franklin Mutual), 101 John F. Kennedy Parkway, Short Hills, NJ 07078, is the Fund's investment manager.

The Fund is managed by a team of dedicated professionals focused on investments in equity securities they consider to be undervalued. The portfolio managers of the team are as follows:

PETER A. LANGERMAN Chairman, President and Chief Executive Officer of Franklin Mutual		Mr. Langerman has been a co-lead portfolio manager since 2009. He joined Franklin Templeton Investments in 1996, serving in various capacities, including President and Chief Executive Officer of Franklin Mutual and member of the management team of the Fund, before leaving in 2002 and serving as director of New Jersey's Division of Investment, overseeing employee pension funds. Between 1986 and 1996, he was employed at Heine Securities Corporation, the predecessor of Franklin Mutual.

PHILIPPE BRUGERE-TRELAT Executive Vice President of Franklin Mutual		Mr. Brugere-Trelat has been a co-lead portfolio manager of the Fund since 2009. He joined Franklin Templeton Investments in 2004. Prior to joining Franklin Templeton Investments, he was president and portfolio manager of Eurovest.

TIMOTHY RANKIN, CFA Portfolio Manager of Franklin Mutual		Mr. Rankin has been a portfolio manager of the Fund since 2010. He rejoined Franklin Templeton Investments in 2010. Prior to rejoining Franklin Templeton investments, he was managing director of Blue Harbour Group, LLC, a private investment firm focused on small- and mid-cap North American companies. Previously, he worked at Franklin Templeton Investments from 1997 through 2004.

CFA^® and Chartered Financial Analyst^® are trademarks owned by CFA Institute.

The Fund’s SAI provides additional information about portfolio manager compensation, other accounts that they manage and their ownership of Fund shares.

Financial Highlights

Class 4	Year Ended December 31,
	2012	2011	2010	2009	2008^a
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$ 19.50	$ 21.02	$ 19.02	$ 16.07	$ 22.50
Income from investment operations:^b
Net investment income^c	0.36	0.40	0.31	0.11^d	0.09
Net realized and unrealized gains (losses)	2.19	-1.05	1.94	3.56	-5.14
Total from investment operations	2.55	-0.65	2.25	3.67	-5.05
Less distributions from:
Net investment income	-0.56	-0.44	-0.25	-0.24	-0.52
Net realized gains	-1.11	-0.43	—	-0.48	-0.86
Total distributions	-1.67	-0.87	-0.25	-0.72	-1.38
Net asset value, end of year	$ 20.38	$ 19.50	$ 21.02	$ 19.02	$ 16.07
Total return^e	13.27%	-3.08%	11.87%	23.19%	-23.48%
Ratios to average net assets^f
Expenses^g	1.34%	1.32%^h	1.35%^h	1.41%^h	1.33%^h
Expenses incurred in connection with securities sold short	—%ⁱ	—%ⁱ	0.02%	0.09%	0.01%
Net investment income	1.77%	1.99%	1.58%	0.72%^d	1.47%
Supplemental data
Net assets, end of year (000’s)	$ 62,346	$ 66,695	$ 70,613	$ 59,178	$ 23,981
Portfolio turnover rate	25.63%	26.17%^j	49.31%	43.35%	22.76%

a. For the period February 29, 2008 (effective date) to December 31, 2008.

c. Based on average daily shares outstanding.

d. Net 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%.

f. Ratios are annualized for periods less than one year.

g. Includes 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.

h. Benefit of expense reduction rounds to less than 0.01%.

i. Rounds to less than 0.01%.

j. Excludes the value of portfolio securities delivered as a result of a redemption in-kind.

Mutual International Securities Fund

Investment Goal

The Fund's principal investment goal is capital appreciation, which may occasionally be short term. Its secondary goal is income.

Principal Investment Policies and Practices

Undervalued Securities - Securities trading at a discount to intrinsic value.

And, to a lesser extent, the Fund also invests in:

Merger Arbitrage Securities - Securities of companies involved in restructurings (such as mergers, acquisitions, consolidations, liquidations, spin-offs, or tender or exchange offers) or that the investment manager believes are cheap relative to an economically equivalent security of another or the same company.
Distressed Companies - Securities of companies that are, or are about to be, involved in reorganizations, financial restructurings, or bankruptcy.

Portfolio Selection

Commodity Exchange Act Exclusions

Temporary Investments

Principal Risks

Market

Value Style Investing

Foreign Securities

Developing Markets

Smaller and Midsize Companies

Credit

High-Yield Debt Securities

Derivative Instruments

Merger Arbitrage Securities and Distressed Companies

Management

More detailed information about the Fund, its policies and risks can be found in the Fund's SAI.

Management

Franklin Mutual Advisers, LLC (Franklin Mutual), 101 John F. Kennedy Parkway, Short Hills, NJ 07078, is the Fund's investment manager.

The Fund is managed by a team of dedicated professionals focused on investments of undervalued securities in Asian and European countries. The portfolio managers of the team are as follows:

PHILIPPE BRUGERE-TRELAT Executive Vice President of Franklin Mutual		Mr. Brugere-Trelat has been a co-lead portfolio manager of the Fund since its inception. He joined Franklin Templeton Investments in 2004. Prior to joining Franklin Templeton Investments, he was president and portfolio manager of Eurovest.

ANDREW SLEEMAN, CFA Portfolio Manager of Franklin Mutual		Mr. Sleeman has been a co-lead portfolio manager of the Fund since its inception. He joined Franklin Templeton Investments in 2007. Prior to joining Franklin Templeton Investments, he was with Fox-Pitt, Kelton, a financials specialist firm, where he focused on international financial equities. Previously, he worked in international equities at BNP Paribas. He also worked in Australia in the fixed income division of JP Morgan Investment Management.

CFA^® and Chartered Financial Analyst^® are trademarks owned by CFA Institute.

The Fund’s SAI provides additional information about portfolio manager compensation, other accounts that they manage and their ownership of Fund shares.

Financial Highlights

Class 4	Year Ended December 31,
	2012	2011	2010	2009^a
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$ 9.65	$ 12.04	$ 11.81	$ 10.00
Income from investment operations:^b
Net investment income^c	0.21	0.23	0.24	0.07
Net realized and unrealized gains (losses)	1.46	-1.68	1.51	2.29
Total from investment operations	1.67	-1.45	1.75	2.36
Less distributions from:
Net investment income	-0.12	-0.28	-0.65	-0.12
Net realized gains	-0.16	-0.66	-0.87	-0.43
Total distributions	-0.28	-0.94	-1.52	-0.55
Net asset value, end of year	$ 11.04	$ 9.65	$ 12.04	$ 11.81
Total return^d	17.39%	-12.10%	15.49%	23.76%
Ratios to average net assets^e
Expenses before waiver and payments by affiliates	6.26%	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	1.98%	2.02%	1.97%	1.17%
Supplemental data
Net assets, end of year (000’s)	$ 1,104	$ 965	$ 1,204	$ 1,181
Portfolio turnover rate	43.70%	67.91%	41.11%	41.84%

a. For the period June 15, 2009 (commencement of operations) to December 31, 2009.

c. Based on average daily shares outstanding.

e. Ratios are annualized for periods less than one year.

f. Includes 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.

g. Benefit of expense reduction round to less than 0.01%.

Mutual Shares Securities Fund

Investment Goal

The Fund’s principal investment goal is capital appreciation. Its secondary goal is income.

Principal Investment Policies and Practices

Under normal market conditions, the Fund invests primarily in equity securities (including securities convertible into, or that the investment manager expects to be exchanged for, common or preferred stock) of U.S. and foreign companies that the investment manager believes are available at market prices less than their value based on certain recognized or objective criteria (intrinsic value). The equity securities in which the Fund invests are primarily common stock. Following this value-oriented strategy, the Fund invests primarily in:

Undervalued Securities - Securities trading at a discount to intrinsic value.

And, to a lesser extent, the Fund also invests in:

Merger Arbitrage Securities - Securities of companies involved in restructurings (such as mergers, acquisitions, consolidations, liquidations, spin-offs, or tender or exchange offers) or that the investment manager believes are cheap relative to an economically equivalent security of another or the same company.
Distressed Companies - Securities of companies that are, or are about to be, involved in reorganizations, financial restructurings, or bankruptcy.

In pursuit of its value-oriented strategy, the Fund is not limited to pre-set maximums or minimums governing the size of the companies in which it may invest. However, as a general rule, the Fund generally invests the equity portion of its portfolio primarily to predominantly in companies with market capitalizations (share price multiplied by the number of shares of common stock outstanding) greater than $5 billion, with a portion or significant amount in smaller companies.

The Fund may invest a significant portion (up to 35%) of its assets in foreign securities, which may include sovereign debt and participations in foreign government debt.

Portfolio Selection

Commodity Exchange Act Exclusions

Temporary Investments

Principal Risks

Market

Value Style Investing

Foreign Securities

Smaller and Midsize Companies

Credit

High-Yield Debt Securities

Derivative Instruments

Merger Arbitrage Securities and Distressed Companies

Management

More detailed information about the Fund, its policies and risks can be found in the Fund's SAI.

Management

Franklin Mutual Advisers, LLC (Franklin Mutual), 101 John F. Kennedy Parkway, Short Hills, NJ 07078, is the Fund's investment manager.

The Fund is managed by a team of dedicated professionals focused on investments in equity securities they consider to be undervalued. The portfolio managers of the team are as follows:

PETER A. LANGERMAN Chairman, President and Chief Executive Officer of Franklin Mutual		Mr. Langerman assumed the duties of lead portfolio manager of the Fund when he rejoined Franklin Templeton Investments in 2005 and became a co-lead portfolio manager in 2007. He joined Franklin Templeton Investments in 1996, serving in various capacities, including President and Chief Executive Officer of Franklin Mutual and member of the management team of the Fund, before leaving in 2002 and serving as director of New Jersey's Division of Investment, overseeing employee pension funds. Between 1986 and 1996, he was employed at Heine Securities Corporation, the predecessor of Franklin Mutual.

F. DAVID SEGAL, CFA Portfolio Manager of Franklin Mutual		Mr. Segal assumed the duties of co-lead portfolio manager with Mr. Langerman in 2007 and had been a portfolio manager of the Fund since joining Franklin Templeton Investments in 2002. Prior to joining Franklin Templeton Investments, he was an analyst in the Structured Finance Group of MetLife for the period 1999-2002.

DEBBIE TURNER, CFA Portfolio Manager of Franklin Mutual		Ms. Turner has been a portfolio manager of the Fund since 2001 and has been with Franklin Templeton Investments since 1996.

CFA^® and Chartered Financial Analyst^® are trademarks owned by CFA Institute.

The Fund’s SAI provides additional information about portfolio manager compensation, other accounts that they manage and their ownership of Fund shares.

Financial Highlights

Class 4	Year Ended December 31,
	2012	2011	2010	2009	2008^a
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$ 15.45	$ 16.03	14.66	$ 11.88	$ 18.91
Income from investment operations:^b
Net investment income^c	0.28	0.30^d	0.35^e	0.19^f	0.17
Net realized and unrealized gains (losses)	1.91	-0.51	1.26	2.87	-5.90
Total from investment operations	2.19	-0.21	1.61	3.06	-5.73
Less distributions from:
Net investment income	-0.33	-0.37	-0.24	-0.28	-0.57
Net realized gains	—	—	—	—	-0.73
Total distributions	-0.33	-0.37	-0.24	-0.28	-1.30
Net asset value, end of year	$ 17.31	$ 15.45	16.03	$ 14.66	$ 11.88
Total return^g	14.20%	-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	—%^k	0.02%	0.06%	—%^k
Net investment income	1.71%	1.93%^d	2.31%^e	1.50%^f	1.81%
Supplemental data
Net assets, end of year (000’s)	$ 165,015	$ 162,049	$ 167,274	$ 141,446	$ 57,266
Portfolio turnover rate	34.07%^l	41.02%	32.05%	49.33%	44.11%

a. For the period February 29, 2008 (effective date) to December 31, 2008.

c. Based on average daily shares outstanding.

d. Net 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%.

e. Net 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%.

f. Net 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%.

g. Total 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.

h. Ratios are annualized for periods less than one year.

i. Includes 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.

j. Benefit of expense reduction rounds to less than 0.01%.

k. Rounds to less than 0.01%.

l. Excludes the value of portfolio securities delivered as a result of redemption in-kind.

Templeton Developing Markets Securities Fund

Investment Goal

The Fund's investment goal is long-term capital appreciation.

Principal Investment Policies and Practices

whose principal securities trading markets are in developing market countries; or
that derive 50% or more of their total revenue or profit from either goods or services produced or sales made in developing market countries; or
that have 50% or more of their assets in developing market countries; or
that are linked to currencies of developing market countries; or
that are organized under the laws of, or with principal offices in, developing market countries.

In addition to the Fund's main investments, the Fund may invest up to 20% of its net assets in the securities of issuers in developed market countries.

Portfolio Selection

The investment manager invests in securities without regard to benchmark comparisons.

Temporary Investments

When the investment manager believes market or economic conditions are unfavorable for investors, the investment manager may invest up to 100% of the Fund's assets in a temporary defensive manner by holding all or a substantial portion of its assets in U.S. or non-U.S. currency denominated short-term or medium-term (generally less than 5 years for this Fund) investments. Temporary defensive investments generally may include money market securities, including shares of money market funds managed by affiliates of the investment manager, and exchange-traded funds, U.S. and foreign government securities, high grade commercial paper, bank obligations, and repurchase agreements denominated in the currency of any nation. The investment manager also may invest in these types of securities or hold cash while looking for suitable investment opportunities or to maintain liquidity. In these circumstances, the Fund may be unable to achieve its investment goal.

Principal Risks

Market

Foreign Securities

Developing Markets

less social, political and economic stability;
smaller securities markets with low or nonexistent trading volume and greater illiquidity and price volatility;
more restrictive national policies on foreign investment, including restrictions on investment in issuers or industries deemed sensitive to national interests;
less transparent and established taxation policies;
less developed regulatory or legal structures governing private and foreign investment or allowing for judicial redress for injury to private property;
less familiarity with a capital market structure or market-oriented economy and more widespread corruption and fraud;
less financial sophistication, creditworthiness and/or resources possessed by, and less government regulation of, the financial institutions and issuers with which the Fund transacts;
less government supervision and regulation of business and industry practices, stock exchanges, brokers and listed companies than in the U.S.;
greater concentration in a few industries resulting in greater vulnerability to regional and global trade conditions;
higher rates of inflation and more rapid and extreme fluctuations in inflation rates;
greater sensitivity to interest rate changes;
increased volatility in currency exchange rates and potential for currency devaluations and/or currency controls;
greater debt burdens relative to the size of the economy;
more delays in settling portfolio transactions and heightened risk of loss from share registration and custody practices; and
less assurance that recent favorable economic developments will not be slowed or reversed by unanticipated economic, political or social events in such countries.

Because of the above factors, the Fund's investments in developing market countries are subject to greater price volatility and illiquidity than investments in developed markets.

The definition of developing market countries or companies as used in this prospectus may differ from the definition of the same terms as used in other Franklin Templeton fund prospectuses.

Focus

Smaller and Midsize Companies

Value Style Investing

Depositary Receipts

Management

More detailed information about the Fund, its policies and risks can be found in the Fund's SAI.

Management

The Fund is managed by a team of dedicated professionals focused on investments in emerging or developing market securities. The portfolio managers of the team are as follows:

MARK MOBIUS, PH.D. Executive Chairman of Templeton Emerging Markets Group and Portfolio Manager of Asset Management		Dr. Mobius has been the lead portfolio manager of the Fund since inception. Dr. Mobius has primary responsibility for the investments of the Fund. Dr. Mobius has final authority over all aspects of the Fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio risk assessment, and the management of daily cash balances in accordance with anticipated investment management requirements. The degree to which Dr. Mobius may perform these functions, and the nature of these functions, may change from time to time. Dr. Mobius joined Franklin Templeton Investments in 1987.

TOM WU Director of Asset Management		Mr. Wu has been a portfolio manager of the Fund since inception, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. He joined Franklin Templeton Investments in 1987.

DENNIS LIM Co-Chief Executive Officer and Director of Asset Management		Mr. Lim has been a portfolio manager of the Fund since inception, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. He joined Franklin Templeton Investments in 1990.

ALLAN LAM Portfolio Manager of Asset Management		Mr. Lam has been a portfolio manager of the Fund since 2011, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. He joined Franklin Templeton Investments in 1987.

The Fund’s SAI provides additional information about portfolio manager compensation, other accounts that they manage and their ownership of Fund shares.

Financial Highlights

Class 4	Year Ended December 31,
	2012	2011	2010	2009	2008^a
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$ 9.42	$ 11.30	$ 9.80	$ 6.09	14.88
Income from investment operations:^b
Net investment income (loss)^c	0.16	0.13	0.05	0.09	-0.33
Net realized and unrealized gains (losses)	1.04	-1.91	1.61	4.00	-5.65
Total from investment operations	1.20	-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 year	$ 10.50	$ 9.42	$ 11.30	$ 9.80	$ 6.09
Total return^e	13.06%	-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	1.58%	1.22%	0.52%	1.29%	1.17%
Supplemental data
Net assets, end of year (000’s)	$ 23,341	$ 24,380	$ 37,198	$ 26,362	$ 7,208
Portfolio turnover rate	24.45%	14.90%	24.41%	56.58%^h	75.11%^h

a. For the period February 29, 2008 (effective date) to December 31, 2008.

c. Based on average daily shares outstanding.

d. Amount rounds to less than $0.01 per share.

f. Ratios are annualized for periods less than one year.

g. Benefit of expense reduction rounds to less than 0.01%.

h. Excludes the value of portfolio securities delivered as a result of redemptions in-kind.

Templeton Foreign Securities Fund

Investment Goal

The Fund's investment goal is long-term capital growth.

Principal Investment Policies and Practices

Portfolio Selection

Temporary Investments

When the investment manager believes market or economic conditions are unfavorable for investors, the investment manager may invest up to 100% of the Fund's assets in a temporary defensive manner by holding all or a substantial portion of its assets in cash, cash equivalents or other high quality short-term investments. Temporary defensive investments generally may include money market securities, including shares of money market funds managed by the investment manager or its affiliates, or short-term debt securities. The investment manager also may invest in these types of securities or hold cash while looking for suitable investment opportunities or to maintain liquidity. In these circumstances, the Fund may be unable to achieve its investment goal.

Principal Risks

Market

Foreign Securities

Developing Markets

less social, political and economic stability;
smaller securities markets with low or nonexistent trading volume and greater illiquidity and price volatility;
more restrictive national policies on foreign investment, including restrictions on investment in issuers or industries deemed sensitive to national interests;
less transparent and established taxation policies;
less developed regulatory or legal structures governing private and foreign investment or allowing for judicial redress for injury to private property;
less familiarity with a capital market structure or market-oriented economy and more widespread corruption and fraud;
less financial sophistication, creditworthiness and/or resources possessed by, and less government regulation of, the financial institutions and issuers with which the Fund transacts;
less government supervision and regulation of business and industry practices, stock exchanges, brokers and listed companies than in the U.S.;
greater concentration in a few industries resulting in greater vulnerability to regional and global trade conditions;
higher rates of inflation and more rapid and extreme fluctuations in inflation rates;
greater sensitivity to interest rate changes;
increased volatility in currency exchange rates and potential for currency devaluations and/or currency controls;
greater debt burdens relative to the size of the economy;
more delays in settling portfolio transactions and heightened risk of loss from share registration and custody practices; and
less assurance that recent favorable economic developments will not be slowed or reversed by unanticipated economic, political or social events in such countries.

Because of the above factors, the Fund's investments in developing market countries are subject to greater price volatility and illiquidity than investments in developed markets.

Focus

Derivative Instruments

Equity-Linked Notes (ELNs)

Value Style Investing

Smaller and Midsize Companies

Credit

Interest Rate

Management

More detailed information about the Fund, its policies and risks can be found in the Fund's SAI.

Management

Templeton Investment Counsel, LLC (Investment Counsel), 300 S.E. 2nd Street, Fort Lauderdale, Florida 33301-1923, is the Fund’s investment manager.

The Fund is managed by a team of dedicated professionals focused on global investments of issuers outside the U.S. The portfolio managers of the team are as follows:

PETER A. NORI, CFA Executive Vice President/Portfolio Manager - Research Analyst of Investment Counsel		Mr. Nori has been the lead portfolio manager of the Fund since 1999. He has primary responsibility for the investments of the Fund. He has final authority over all aspects of the Fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio risk assessment, and the management of daily cash balances in accordance with anticipated investment management requirements. The degree to which he may perform these functions, and the nature of these functions, may change from time to time. He joined Franklin Templeton Investments in 1987.

CINDY L. SWEETING, CFA President of Investment Counsel		Ms. Sweeting has been a portfolio manager of the Fund since June 2012, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. She joined Franklin Templeton Investments in 1997.

CFA^® and Chartered Financial Analyst^® are trademarks owned by CFA Institute.

The Fund’s SAI provides additional information about portfolio manager compensation, other accounts that they manage and their ownership of Fund shares.

Financial Highlights

Class 4	Year Ended December 31,
	2012	2011	2010	2009	2008^a
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$ 12.66	$ 14.43	$ 13.59	$ 10.91	$ 18.90
Income from investment operations:^b
Net investment income^c	0.33	0.36	0.17	0.21	0.15
Net realized and unrealized gains (losses)	1.89	-1.88	0.92	3.37	-6.08
Total from investment operations	2.22	-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 year	$ 14.48	$ 12.66	$ 14.43	$ 13.59	$ 10.91
Total return^e	18.14%	-10.74%	8.38%	36.84%	-35.15%
Ratios to average net assets^f
Expenses	1.14%	1.14%^g	1.13%^g	1.13%^g	1.12%^g
Net investment income	2.49%	2.57%	1.75%	1.93%	2.47%
Supplemental data
Net assets, end of year (000’s)	$ 416,277	$ 353,346	$ 305,505	$ 48,501	$ 14,287
Portfolio turnover rate	12.53%	21.09%	19.16%	22.50%	18.27%

a. For the period February 29, 2008 (effective date) to December 31, 2008.

c. Based on average daily shares outstanding.

d. Amount rounds to less than $0.01 per share.

f. Ratios are annualized for periods less than one year.

g. Benefit of expense reduction rounds to less than 0.01%.

Templeton Global Bond Securities Fund

Investment Goal

The Fund’s investment goal is high current income, consistent with preservation of capital. Capital appreciation is a secondary consideration.

Principal Investment Policies and Practices

The Fund may use any of the above currency techniques or other derivative transactions for the purposes of enhancing Fund returns, increasing liquidity, gaining exposure to particular instruments in more efficient or less expensive ways and/or hedging risks relating to changes in exchange rates, interest rates and other market factors. By way of example, when the investment manager believes that the value of a particular foreign currency is expected to increase compared to the U.S. dollar, the Fund could enter into a forward contract to purchase that foreign currency at a future date. If at such future date the value of the foreign currency exceeds the then current amount of U.S. dollars to be paid by the Fund under the contract, the Fund will recognize a gain. When used for hedging purposes, a forward contract or other derivative instrument could be used to protect against possible declines in a currency’s value where a security held or to be purchased by the Fund is denominated in that currency, or it may be used to hedge the Fund’s position by entering into a transaction on another currency expected to perform similarly to the currency of the security held or to be purchased (a “proxy hedge”).

Portfolio Selection

Commodity Exchange Act Exclusions

Temporary Investments

When the investment manager believes market or economic conditions are unfavorable for investors, the investment manager may invest up to 100% of the Fund's assets in a temporary defensive manner by holding all or a substantial portion of its assets in cash, cash equivalents or other high quality short-term investments. Temporary defensive investments generally may include short-term U.S. government securities, commercial paper, short-term bank time deposits, bankers' acceptances and money market fund shares (including shares of an affiliated money market fund). The investment manager also may invest in these types of securities or hold cash while looking for suitable investment opportunities, to maintain liquidity or to segregate on the Fund's books in connection with its forward currency, currency or interest rate futures positions. In these circumstances, the Fund may be unable to achieve its investment goal.

Principal Risks

Foreign Securities

Developing Markets

less social, political and economic stability;
smaller securities markets with low or nonexistent trading volume and greater illiquidity and price volatility;
more restrictive national policies on foreign investment, including restrictions on investment in issuers or industries deemed sensitive to national interests;
less transparent and established taxation policies;
less developed regulatory or legal structures governing private and foreign investment or allowing for judicial redress for injury to private property;
less familiarity with a capital market structure or market-oriented economy and more widespread corruption and fraud;
less financial sophistication, creditworthiness and/or resources possessed by, and less government regulation of, the financial institutions and issuers with which the Fund transacts;
less government supervision and regulation of business and industry practices, stock exchanges, brokers and listed companies than in the U.S.;
greater concentration in a few industries resulting in greater vulnerability to regional and global trade conditions;
higher rates of inflation and more rapid and extreme fluctuations in inflation rates;
greater sensitivity to interest rate changes;
increased volatility in currency exchange rates and potential for currency devaluations and/or currency controls;
greater debt burdens relative to the size of the economy;
more delays in settling portfolio transactions and heightened risk of loss from share registration and custody practices; and
less assurance that recent favorable economic developments will not be slowed or reversed by unanticipated economic, political or social events in such countries.

Because of the above factors, the Fund's investments in developing market countries are subject to greater price volatility and illiquidity than investments in developed markets.

Interest Rate

Credit

Unrated Debt Securities

High-Yield Debt Securities

Derivative Instruments

Inflation-Indexed Securities

Income

Non-Diversification

Market

Management

Debt Securities Ratings

More detailed information about the Fund, its policies and risks can be found in the Fund's SAI.

Management

Franklin Advisers, Inc. (Advisers), One Franklin Parkway, San Mateo, California 94403-1906, is the Fund's investment manager.

The Fund is managed by the following dedicated professionals focused on investments of debt securities in any country, including emerging markets:

MICHAEL HASENSTAB, PH.D. Senior Vice President of Advisers		Dr. Hasenstab has been the portfolio manager of the Fund since 2002 and an analyst since 2001. He has primary responsibility for the investments of the Fund. Dr. Hasenstab has final authority over all aspects of the Fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio risk assessment, and the management of daily cash balances in accordance with anticipated investment management requirements. The degree to which he may perform these functions, and the nature of these functions, may change from time to time. He first joined Franklin Templeton Investments in 1995, rejoining again in 2001 after a three-year leave to obtain his Ph.D.

SONAL DESAI, PH.D. Portfolio Manager of Advisers		Dr. Desai has been a portfolio manager of the Fund since 2011, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. She joined Franklin Templeton Investments in 2009. Prior to joining Franklin Templeton Investments, she was part of the Global Credit team at Thames River Capital in London, where she was responsible for shaping the team's top-down global view on macroeconomic and market developments covering both G10 and global emerging markets.

The Fund’s SAI provides additional information about portfolio manager compensation, other accounts that they manage and their ownership of Fund shares.

Financial Highlights

Class 4	Year Ended December 31,
	2012	2011	2010	2009	2008^a
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$ 18.44	$ 19.78	$ 17.61	$ 17.37	$ 18.00
Income from investment operations:^b
Net investment income^c	0.64	0.79	0.93	0.93	0.66
Net realized and unrealized gains (losses)	1.98	-0.91	1.56	2.00	-0.64
Total from investment operations	2.62	-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 year	$ 19.82	$ 18.44	$ 19.78	$ 17.61	$ 17.37
Total return^e	14.97%	-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	3.36%	4.05%	4.92%	5.38%	4.31%
Supplemental data
Net assets, end of year (000’s)	$ 163,241	$ 151,695	$ 150,891	$ 108,910	$ 43,069
Portfolio turnover rate	43.26%	34.18%	8.77%	20.84%	28.46%

a. For the period February 29, 2008 (effective date) to December 31, 2008.

c. Based on average daily shares outstanding.

d. Amount rounds to less than $0.01 per share.

f. Ratios are annualized for periods less than one year.

g. Benefit of expense reduction rounds to less than 0.01%.

Templeton Growth Securities Fund

Investment Goal

The Fund’s investment goal is long-term capital growth.

Principal Investment Policies and Practices

An equity security represents a proportionate share of the ownership of a company; its value is based on the success or failure of the company’s business, any income paid to stockholders, the value of its assets and general market conditions. Common stocks and preferred stocks, and securities convertible into common stocks, are examples of equity securities. The Fund may invest in convertible securities without regard to the ratings assigned by the rating services. The Fund also invests in depositary receipts. These are certificates typically issued by a bank or trust company that give their holders the right to receive securities issued by a foreign or domestic company. Depositary receipts will be issued under sponsored or unsponsored programs. In sponsored programs, an issuer has made arrangements to have its securities traded in the form of depositary receipts. In unsponsored programs, the issuer may not be directly involved in the creation of the program.

Portfolio Selection

Temporary Investments

When the investment manager believes market or economic conditions are unfavorable for investors, the investment manager may invest up to 100% of the Fund's assets in a temporary defensive manner by holding all or a substantial portion of its assets in cash, cash equivalents or other high quality short-term investments. Temporary defensive investments generally may include U.S. government securities, bank time deposits denominated in the currency of any major nation, commercial paper, and repurchase agreements. The investment manager also may invest in these types of securities or hold cash while looking for suitable investment opportunities or to maintain liquidity. In these circumstances, the Fund may be unable to achieve its investment goal.

Principal Risks

Market

Foreign Securities

Emerging Markets

less social, political and economic stability;
smaller securities markets with low or nonexistent trading volume and greater illiquidity and price volatility;
more restrictive national policies on foreign investment, including restrictions on investment in issuers or industries deemed sensitive to national interests;
less transparent and established taxation policies;
less developed regulatory or legal structures governing private and foreign investment or allowing for judicial redress for injury to private property;
less familiarity with a capital market structure or market-oriented economy and more widespread corruption and fraud;
less financial sophistication, creditworthiness and/or resources possessed by, and less government regulation of, the financial institutions and issuers with which the Fund transacts;
less government supervision and regulation of business and industry practices, stock exchanges, brokers and listed companies than in the U.S.;
greater concentration in a few industries resulting in greater vulnerability to regional and global trade conditions;
higher rates of inflation and more rapid and extreme fluctuations in inflation rates;
greater sensitivity to interest rate changes;
increased volatility in currency exchange rates and potential for currency devaluations and/or currency controls;
greater debt burdens relative to the size of the economy;
more delays in settling portfolio transactions and heightened risk of loss from share registration and custody practices; and
less assurance that recent favorable economic developments will not be slowed or reversed by unanticipated economic, political or social events in such countries.

Because of the above factors, the Fund's investments in emerging market countries are subject to greater price volatility and illiquidity than investments in developed markets.

Value Style Investing

Management

Focus

Depositary Receipts

Interest Rate

Credit

More detailed information about the Fund, its policies and risks can be found in the Fund's SAI.

Management

Templeton Global Advisors Limited (Global Advisors), Lyford Cay, Nassau, Bahamas, is the Fund's investment manager.

The Fund is managed by a team of dedicated professionals focused on investments in equity securities of companies anywhere in the world. The portfolio managers of the team are as follows:

NORMAN BOERSMA, CFA President of Global Advisors		Mr. Boersma has been lead portfolio manager of the Fund since 2011. He has primary responsibility for the investments of the Fund. He has final authority over all aspects of the Fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio risk assessment, and the management of daily cash balances in accordance with anticipated investment management requirements. The degree to which he may perform these functions, and the nature of these functions, may change from time to time. He joined Franklin Templeton Investments in 1991.

LISA F. MYERS, J.D., CFA Executive Vice President of Global Advisors		Ms. Myers has been a portfolio manager of the Fund since 2010 providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. She joined Franklin Templeton Investments in 1996.

MATTHEW R. NAGLE, CFA Senior Vice President of Global Advisors		Mr. Nagle has been a portfolio manager of the Fund since 2010, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. He joined Franklin Templeton Investments in 2003.

JAMES HARPER, CFA Senior Vice President of Global Advisors		Mr. Harper has been a portfolio manager of the Fund since 2010, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. He joined Franklin Templeton Investments in 2007.

CFA^® and Chartered Financial Analyst^® are trademarks owned by CFA Institute.

The Fund’s SAI provides additional information about portfolio manager compensation, other accounts that they manage and their ownership of Fund shares.

Financial Highlights

Class 4	Year Ended December 31,
	2012	2011	2010	2009	2008^a
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year .	$ 10.19	$ 11.11	$ 10.50	$ 8.31	$ 14.08
Income from investment operations:^b
Net investment income^c	0.20	0.20	0.14	0.14	0.09
Net realized and unrealized gains (losses)	1.90	-0.98	0.61	2.36	-4.73
Total from investment operations	2.10	-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 year	$ 12.07	$ 10.19	$ 11.11	$ 10.50	$ 8.31
Total return^d	21.02%	-7.14%	7.31%	30.98%	-35.79%
Ratios to average net assets^e
Expenses^f	1.13%	1.13%	1.12%	1.14%	1.13%
Net investment income	1.96%	1.87%	1.36%	1.65%	2.29%
Supplemental data
Net assets, end of year (000’s)	$ 67,158	$ 56,170	$ 60,569	$ 56,218	$ 24,877
Portfolio turnover rate	18.73%^g	42.13%^g	9.61%	14.95%	18.37%

a. For the period February 29, 2008 (effective date) to December 31, 2008.

c. Based on average daily shares outstanding.

e. Ratios are annualized for periods less than one year.

f. Benefit of expense reduction rounds to less than 0.01%.

g. Excludes the value of portfolio securities delivered as a result of a redemption in-kind.

Additional Information, All Funds

Contract Owners should receive financial reports for the Fund related to their Contract from the sponsoring Insurer every six months.

Distributions and Taxes

Distribution and service (12b-1) fees.

Fund Account Information

Buying Shares

Selling Shares

Exchanging Shares

Market Timing Trading Policy

The board of trustees has adopted the following policies and procedures with respect to market timing (Market Timing Trading Policy):

The Fund is currently using several methods to reduce the risk of market timing. These methods include:

seeking the cooperation of Insurers and funds of funds to assist the Fund in identifying potential market timing activity;
committing staff to selectively review on a continuing basis recent trading activity in order to identify trading activity that may be contrary to the Fund's Market Timing Trading Policy;
monitoring potential price differentials following the close of trading in foreign markets to determine whether the application of fair value pricing procedures is warranted; and
seeking the cooperation of financial intermediaries to assist the Fund in identifying market timing activity.

Involuntary Redemptions

Fund Account Policies

CALCULATING SHARE PRICE

When they buy and sell shares, the Fund's shareholders pay and receive the net asset value (NAV) per share.

FAIR VALUATION - INDIVIDUAL SECURITIES

SECURITY VALUATION - U.S. PASS-THROUGH SECURITIES, CMO, ABS, MBS

SECURITY VALUATION - CORPORATE DEBT SECURITIES

SECURITY VALUATION - SENIOR SECURED CORPORATE LOANS

SECURITY VALUATION – MUNICIPAL SECURITIES – MATRIX PRICING (FAIR VALUATION)

SECURITY VALUATION - OPTIONS

VALUATION - FOREIGN SECURITIES - COMPUTATION OF U.S. EQUIVALENT VALUE

VALUATION – FOREIGN SECURITIES – POTENTIAL IMPACT OF TIME ZONES AND MARKET HOLIDAYS

SHARE CLASSES

Class 1, Class 2, Class 3, Class 4 and Class 5 shares of the Funds are identical except that Class 2, Class 3, Class 4 and Class 5 each have a distribution plan or "rule 12b-1" plan, as described below for Class 4 shares and in their respective prospectuses for Class 2, Class 3 and Class 5 shares. Class 3 shares may assess a 1.00% redemption fee, as described in the prospectuses for Class 3 shares.

Class 4 has a distribution plan, sometimes known as a rule 12b-1 plan, that allows the Fund to pay distribution fees to those who sell and distribute Class 4 shares and provide services to shareholders and Contract Owners. Because these fees are paid out of Class 4’s assets on an on-going basis, over time these fees will increase the cost of an investment, and may cost you more than paying other types of sales charges. The maximum amount payable under the Fund's Class 4 rule 12b-1 plan is 0.35% per year of the Fund’s Class 4 average daily net assets. A portion of the fees payable to Franklin Templeton Distributors, Inc. (Distributors) or others under the rule 12b-1 plan may be retained by Distributors for distribution expenses.

ADDITIONAL POLICIES

Please note that the Fund maintains additional policies and reserves certain rights, including:

The Fund may restrict, reject or cancel any purchase orders, including an exchange request.
At any time, the Fund may establish or change investment minimums.
The Fund may make material changes to or discontinue the exchange privilege on 60 days' notice to insurance company or Fund of Fund shareholders, or as otherwise provided by law.
Purchases of shares of the Fund (including the purchase side of an exchange) may be made only when such shares are eligible for sale in the appropriate state or jurisdiction.
In unusual circumstances, we may temporarily suspend redemptions or postpone the payment of proceeds, as allowed by federal securities laws.
For redemptions over a certain amount, the Fund may pay redemption proceeds in securities or other assets rather than cash if the investment manager determines it is in the best interest of the Fund, consistent with applicable law.
To permit their investors to obtain the current price, participating insurance companies and funds of funds are responsible for transmitting all orders to the Fund promptly.

Questions

FOR MORE INFORMATION

Not all Funds and classes are available in all Contracts. For information on the terms of investment in a Contract, please consult the Contract prospectus that accompanies this Fund prospectus.

You can learn more about the Fund in the following documents:

Annual/Semiannual Fund Reports to Shareholders

Statement of Additional Information (SAI)

Contains more information about the Fund, its investments, policies, and risks. It is incorporated by reference into (is legally a part of) this prospectus.

Investment Company Act file #811-05583
© 2013 Franklin Templeton Investments. All rights reserved.

VIP4 P 05/13

May 1, 2013
The U.S. Securities and Exchange Commission (SEC) has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense.

Class 2

Franklin Managed Volatility Global Allocation VIP Fund

PROSPECTUS

Franklin Templeton Variable Insurance Products Trust

		Contents

		FUND SUMMARY
INFORMATION ABOUT THE FUND YOU SHOULD KNOW BEFORE INVESTING		Franklin Managed Volatility Global Allocation VIP Fund

		Overview
		Franklin Templeton Variable Insurance Products Trust

		FUND DETAILS
MORE INFORMATION ON INVESTMENT POLICIES, PRACTICES AND RISKS		Franklin Managed Volatility Global Allocation VIP Fund

		Additional Information, All Funds DEALER COMPENSATION PORTFOLIO HOLDINGS STATEMENTS AND REPORTS ADMINISTRATIVE SERVICES

		Distributions and Taxes INCOME AND CAPITAL GAINS DISTRIBUTIONS Tax Considerations

		FUND ACCOUNT INFORMATION
INFORMATION ABOUT FUND TRANSACTIONS AND SERVICES		Buying Shares Selling Shares Exchanging Shares Market Timing Trading Policy Involuntary Redemptions Fund Account Policies Questions

		FOR MORE INFORMATION
WHERE TO LEARN MORE ABOUT THE FUND		Back Cover

FUND SUMMARY

Franklin Managed Volatility Global Allocation VIP Fund

Investment Goal

Total return (including income and capital gains) while seeking to manage volatility.

Fees and Expenses of the Fund

ANNUAL FUND OPERATING EXPENSES
(expenses that you pay each year as a percentage of the value of your investment)

	Class 2
Management fees	1.00%
Distribution and service (12b-1) fees	0.25%
Other expenses¹	0.50%
Other expenses of the Fund	0.40%
Other expenses of the Subsidiary (including Subsidiary management fees)	0.10%
Acquired fund fees and expenses¹	0.12%
Total annual Fund operating expenses	1.87%
Fee waiver and/or expense reimbursement²	-0.67%
Total annual Fund operating expenses after fee waiver and/or expense reimbursement	1.20%

1. Other expenses and Acquired fund fees and expenses are based on estimated amounts for the current fiscal year.

2. The investment manager has contractually agreed to waive the management fee it receives from the Fund in an amount equal to the management fee paid by a Cayman Islands-based company that is wholly owned by the Fund (Subsidiary). This waiver may not be terminated and will remain in effect for as long as the investment manager's contract with the Subsidiary is in place. Additionally, the investment manager 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 0.83% (other than certain non-routine expenses), until April 30, 2014. The investment manager also has agreed in advance to reduce its fees as a result of the Fund's investment in a Franklin Templeton money fund (acquired fund) for at least the next 12-month period. Contractual fee waiver and/or expense reimbursement agreements may not be terminated during the terms set forth above.

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of the period. The Example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. The Example reflects adjustments made to the Fund's operating expenses due to the fee waiver and/or expense reimbursement by management for the 1 Year numbers only. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

	1 Year	3 Years
Class 2	$ 122	$ 523

Portfolio Turnover

Principal Investment Strategies

Under normal market conditions, the Fund seeks to achieve its investment goal by using an asset allocation strategy that seeks to diversify the Fund's portfolio across global asset classes (principally global equity and global fixed income securities), regions and sectors while seeking to limit the expected volatility of the Fund's returns to about 10% or less per year. Currently, the Fund intends to seek a target volatility of 9% or less per year ("Target Volatility"). This strategy may result in the Fund outperforming the general securities market during periods of flat or negative market performance, and underperforming the general securities market during periods of positive market performance. There is no guarantee that the Fund will achieve its Target Volatility.

The Fund’s Target Volatility is not a total return performance target – the Fund does not expect, nor does it represent, that its total return performance will be within any specified range. It is possible that the Fund could achieve its Target Volatility while having negative performance returns. Also, efforts to manage the Fund's volatility could limit the Fund's gains in rising markets, may expose the Fund to costs to which it would otherwise not have been exposed, and if unsuccessful may result in substantial losses.

Under normal market conditions, the Fund invests principally in a diversified portfolio of stocks and other equity securities (including unaffiliated exchange-traded funds (ETFs) and mutual funds), bonds and other debt securities (fixed income), and short-term (money market) investments allocated across the following broad asset classes, in approximately the following baseline percentages (plus or minus 5%):

55% Global Equity (U.S./International/Emerging Markets)
37% Global Fixed Income (U.S./International)
5% Commodity-Linked Instruments
3% Cash, Cash Equivalents and Money Market Securities

The Fund employs a managed volatility strategy, or volatility control process, principally by focusing on investments that the investment manager believes offer attractive returns relative to the risks assumed and by hedging through the use of derivatives. The managed volatility strategy seeks to stabilize the total return volatility of the Fund around its Target Volatility level and to reduce the downside risk of the Fund during periods of significant and sustained market declines. In this context, "volatility" is a statistical measurement of the frequency and level of up and down fluctuations in the value of the Fund's returns over time. Volatility may result in rapid and dramatic price swings. Volatility, in other words, represents the average annual deviation of the Fund's return around the average Fund return.

In seeking to manage the Fund’s volatility, the investment manager chooses core investments including low volatility stocks (currently largely through equity ETFs that seek to replicate certain low volatility stock indices) and adjusts its asset allocations in response to periods of high or low expected volatility (“bottom up” risk reduction investment strategies). In addition, the investment manager uses a “top-down,” hedging strategy that also seeks to reduce risk, using derivatives instruments (principally stock index and government bond futures). For example, when a particular asset class or classes appear to present high future volatility, reduction in the exposure to such classes would typically be sought; when such volatility appears to be reduced then exposure would typically be increased. The Fund’s exposure to various asset classes may be adjusted through the use of derivatives as often as daily or may not be adjusted for extended periods of time. The timing and extent of such adjustments are within the sole discretion of the investment manager. The volatility strategy may cause the Fund’s effective exposure to certain asset classes to be greater or lesser than its direct investments.

While there can be no guarantee that the Fund will achieve its Target Volatility, the investment manager will regularly use exchange-traded futures contracts and currency forwards to seek to manage the overall volatility of the Fund. Even in periods of low volatility in the equity markets, the investment manager may continue to use futures and forwards to seek to preserve gains after favorable market conditions and reduce losses in adverse market conditions. In situations of extreme market volatility, the futures and forwards could significantly reduce the Fund’s net economic exposure to equity securities. The Fund’s investment in futures and forwards and their accompanying costs could limit the Fund’s gains in rising markets relative to those of unhedged funds in general.

With respect to the Fund’s global equity investments, the Fund may invest in equity securities of U.S. and non-U.S. companies in any industry and of any market capitalization through direct investments, ETFs or mutual funds. The Fund currently intends to focus principally in unaffiliated ETFs that use an active portfolio process to select stocks the performance of which are intended to correspond to specific low volatility domestic and international low volatility indices. The emerging markets sub-set of the global equity strategy will invest predominantly in equity securities of companies located in emerging market countries, applying a fundamental research, value-oriented, long-term approach.

Overall, the Fund expects to have significant exposure to foreign securities.

With respect to the Fund’s global fixed-income investments, the Fund will invest predominantly in debt securities issued by governments and government agencies located around the world.

With respect to its cash investments, the Fund expects to hold high quality money market securities, including U.S. Government securities, U.S. Government agency securities, bank obligations, commercial paper, repurchase agreements and affiliated money market funds.

With respect to the Fund’s commodity investments, the investment manager currently intends to purchase exchange-traded notes (ETNs) to gain exposure to commodities. The ETNs are designed to provide investors, such as the Fund, with a cost-effective investment in broad-based commodities, as measured by various recognized commodity indices.

With respect to the Fund's derivative investments, for hedging or investment purposes, the Fund may enter into various transactions involving complex instruments that include but are not limited to, currency forwards, interest rate/bond futures, equity index futures, and exchange-traded notes (ETNs). The managed volatility strategy regularly uses stock index futures, interest rate/bond futures, and currency forwards for hedging purposes, while in the global fixed income portion of the Fund’s portfolio, the Fund may, from time to time, use interest rate/bond futures and currency forwards for both hedging and investment purposes. Derivative instruments can be used to adjust or obtain net long or net negative (short) exposure to various asset classes, regions, currencies, sectors or securities for hedging or investment purposes, or to otherwise manage the Fund’s volatility.

In connection with the Fund’s managed volatility strategy, the investment manager uses a combination of proprietary and third-party risk modeling systems to help it estimate the expected volatility of the Fund’s portfolio on a daily basis. Based on those estimates, the investment manager adjusts the Fund’s exposure to certain markets and asset classes (through derivatives or other investments) in an attempt to manage the Fund’s expected volatility. The Fund may, from time to time, have a net short position in certain asset classes, regions, currencies and sectors.

The Fund is structured as a multi-manager fund, with the investment manager responsible for the Fund's overall asset allocation, investment strategies including the managed volatility strategy, and investment performance monitoring; managing portions of the Fund's portfolio; and managing the commodity-linked instruments. The investment manager sub-contracts with various other investment managers within Franklin Templeton Investments (the "Sub-Advisors") who currently independently manage the following separate portions of the Fund’s portfolio: (1) the emerging markets sub-set of the global equity portion; and (2) the global fixed income portion.

Principal Risks

Managed Volatility Strategy There can be no guarantee that the Fund will achieve its Target Volatility; moreover, achieving the Fund's Target Volatility does not ensure the Fund will achieve a positive or competitive return. The actual volatility that the Fund experiences may be significantly higher or lower than its Target Volatility. For example, actual realized annual volatility can be expected to exceed the Target Volatility periodically, and this can result in negative returns (losses) that persist beyond one year. In addition, the managed volatility strategy could limit the Fund’s gains in rising markets, may expose the Fund to costs to which it would otherwise not have been exposed and, if unsuccessful, may cause the Fund to experience substantial losses greater than what the Fund might have experienced had such strategy not been implemented at all.

In seeking to manage the Fund’s portfolio and overall volatility, the investment manager uses proprietary and third-party risk modeling systems. These models use a large amount of data, including third-party data, selected historical returns (and recreations of such returns), and back-tested data over the past ten years. There is no assurance that the modeling systems are complete or accurate, or representative of future market cycles. The results generated by these models may perform differently than expected, and may negatively affect Fund performance and the ability of the Fund to achieve its Target Volatility for various reasons including human judgment that affects the financial algorithms and formulas used in these models, imprecise or stale historical data, non-quantitative factors (such as market/ trading system dysfunctions, investor over-reaction or other emotional considerations), or technical issues with the construction and implementation of quantitative models. The Fund may lose more (and significantly more) than it would have lost had the managed volatility strategy or the risk models not been used. In addition, in periods of extreme markets, the Fund’s managed volatility strategy may not protect fully against market decline, realized or actual volatility can be higher than the Target Volatility, and the Fund could be exposed to large losses regardless of its managed volatility strategy.

Investing in ETFs and Other Mutual Funds Because the Fund invests to a large extent in ETFs and other mutual funds, the Fund’s performance is directly related to the performance of the underlying ETFs and other mutual funds held by it. Investing in ETFs and other mutual funds may be more costly to the Fund than if the Fund had invested in the underlying securities directly. Shareholders of the Fund will indirectly bear the fees and expenses (including management and advisory fees and other expenses) of the underlying ETFs and other mutual funds. In addition, the Fund pays brokerage commissions in connection with the purchase and sale of shares of ETFs.

The Fund's investments in ETFs may subject the Fund to additional risks than if the Fund would have invested directly in the ETFs’ underlying securities. These risks include the possibility that an ETF may experience a lack of liquidity; an ETF may trade at a premium or discount to its net asset value; or an investment in an ETF may not achieve its intended purposes or may reduce the diversification benefits of the Fund.

Emerging Market Countries The Fund’s investments in emerging market countries are subject to all of the risks of foreign investing generally, and have additional heightened risks due to a lack of established legal, political, business and social frameworks to support securities markets, including: delays in settling portfolio securities transactions; currency and capital controls; greater sensitivity to interest rate changes; pervasiveness of corruption and crime; currency exchange rate volatility; and inflation, deflation or currency devaluation.

Derivative Instruments The performance of derivative instruments (including currency-related derivatives) depends largely on the performance of an underlying currency, security or index, and such instruments often have risks similar to their underlying instrument, in addition to other risks. Derivatives involve costs and can create economic leverage in the Fund's portfolio which may result in significant volatility and cause the Fund to participate in losses (as well as gains) in an amount that exceeds the Fund's initial investment. Other risks include illiquidity, mispricing or improper valuation of the derivative instrument, and imperfect correlation between the value of the derivative and the underlying instrument so that the Fund may not realize the intended benefits. When used for hedging, the change in value of the derivative may also not correlate specifically with the currency, security or other risk being hedged. With over-the-counter derivatives, there is the risk that the other party to the transaction will fail to perform.

Management The Fund is subject to management risk because it is an actively managed investment portfolio. The Fund's investment manager applies investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that these decisions will produce the desired results. In addition, the investment manager's allocation of Fund assets among different asset classes, Sub-Advisors, ETFs, mutual funds and direct investments may not prove beneficial in light of subsequent market events.

Commodities Although it is anticipated that the Fund will only have a 5% allocation of its assets to commodities, investing in physical commodities, either directly or through complex securities such as ETNs, presents unique risks. Investing in physical commodities, including trading in futures contracts thereon, is speculative and can be extremely volatile. Market prices of commodities may fluctuate rapidly based on numerous factors, including: changes in supply and demand relationships (whether actual, perceived, anticipated, unanticipated, or unrealized); weather; agriculture; trade; domestic and foreign political and economic events and policies; diseases; pestilence; technological developments; and monetary and other governmental policies, action and inaction. The current or "spot" prices of physical commodities may also affect, in a volatile and inconsistent manner, the prices of futures contracts in respect of the relevant commodity. Certain commodities are used primarily in one industry, and fluctuations in levels of activity in (or the availability of alternative resources to) one industry may have a disproportionate effect on global demand for a particular commodity. Moreover, recent growth in industrial production and gross domestic product has made China and other developing nations oversized users of commodities and has increased the extent to which certain commodities prices are influenced by those markets.

Index and Passive Investing The Fund will have exposure to certain broad-based securities, interest rate and commodity indexes. None of the index sponsors has any obligation or responsibility to the Fund or its shareholders in connection with any modification, discontinuance or suspension of an index, including any obligation or responsibility to notify the Fund of any such modification, discontinuance or suspension.

With respect to the Fund’s investment in passively managed ETFs, there is the risk that an ETF may not replicate exactly the performance of the benchmark index it seeks to track. In addition, because ETFs purchased by the Fund are not actively managed, they may be affected by a general decline in market segments relating to their respective indices, as such ETFs do not attempt to take defensive positions in declining markets. Some ETFs may use representative sampling in which case the ETF is subject to an increased risk of tracking error, in that the securities selected in the aggregate for the ETF may not have an investment profile similar to those of its index. In addition, an ETF’s performance may diverge from that of its underlying index due to imperfect correlation between an ETF’s portfolio securities and those in its index, rounding, timing of cash flows, the size of the ETF, fees and expenses borne by the ETF and changes to the index. This risk may be heightened during times of increased market volatility or other unusual market conditions.

Performance

Because the Fund is new, it does not have a full calendar year of performance.

Investment Manager

Franklin Advisers, Inc. (Advisers)

Sub-Advisors

Franklin Templeton Investment Management Limited (FTIML) and Templeton Asset Management Ltd. (Asset Management). For purposes of the Fund's investment strategies, techniques and risks, the term "investment manager" includes any Sub-Advisor.

Portfolio Managers

SAMER HABL Portfolio Manager of Advisers and a lead portfolio manager of the Fund since inception (2013).

MARK MOBIUS, PH.D. Executive Chairman of Templeton Emerging Markets Group, Portfolio Manager of Asset Management and portfolio manager of the emerging markets sub-set of the global equity portion of the Fund since May 2013.

TODD SAUNDERS Portfolio Manager of Advisers and a portfolio manager of the Fund since inception (2013).

DAVID ZAHN, CFA Portfolio Manager of FTIML and portfolio manager of the global fixed income portion of the Fund since inception (2013).

Purchase and Sale of Fund Shares

Taxes

Payments to Sponsoring Insurance
Companies and Other Financial Intermediaries

Franklin Templeton Variable Insurance Products Trust

Overview

Investment Considerations

The following give a general sense of the level of fund assets associated with a particular investment or strategy: "small portion" (less than 10%); "portion" (10% to 25%); "significant" (25% to 50%); "substantial" (50% to 66%); "primary" (66% to 80%); and "predominant" (80% or more). The percentages are not limitations unless specifically stated as such in this prospectus or in the Trust's Statement of Additional Information (SAI).

Risks

Fund shares are not deposits or obligations of, or guaranteed or endorsed by, any bank, and are not federally insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other agency of the U.S. government. Fund shares involve investment risks, including the possible loss of principal.
Because you could lose money by investing in a Fund, take the time to read each Fund description and consider all risks before investing.

Additional Information

More detailed information about each Fund, its investment policies, and its particular risks can be found in the SAI.

Investment Management

FUND DETAILS

Franklin Managed Volatility Global Allocation VIP Fund

Investment Goal

The Fund's investment goal is total return (including income and capital gains) while seeking to manage volatility. The Fund's investment goal is non-fundamental, which means it may be changed by the board of trustees without shareholder approval. Shareholders will be given at least 60 days' advance notice of any change to the Fund's investment goal.

Principal Investment Policies and Practices

Under normal market conditions, the Fund invests principally in a diversified portfolio of stocks and other equity securities (including unaffiliated exchange-traded funds (ETFs) and mutual funds), bonds and other debt securities, and short-term (money market) investments allocated across the following broad asset classes, in approximately the following baseline percentages (plus or minus 5%):

55% Global Equity (U.S./International/Emerging Markets)
37% Global Fixed Income (U.S./International)
5% Commodity-Linked Instruments
3% Cash, Cash Equivalents and Money Market Securities

At the discretion of the investment manager the above allocations (including sub-allocations within each asset class) may vary from time to time, e.g., based on market conditions, the investment manager’s assessment of an asset class' relative attractiveness as an investment opportunity, or as part of the managed volatility strategy. For example, as a result of the Fund’s use of derivatives, and/or in an effort to manage expected volatility, the Fund may hold significant amounts of money market instruments. The Fund may allocate, without limitation, assets into cash or short-term fixed income securities, and away from riskier assets, such as equity securities. At any given time, the Fund may be invested substantially or entirely in equity securities, global fixed income securities or cash and cash equivalents. While changes in the allocation of the broad asset classes are expected to be infrequent, at any given time, the Fund may be invested substantially or entirely in equity securities, global fixed income securities or cash and cash equivalents. However, emerging market equity, emerging market debt, and commodity-linked instruments are each intended to be limited to no more than 5% of the Fund’s net assets and to 10% of the Fund’s net assets in the aggregate.

The Fund employs a managed volatility strategy, or volatility control process, principally by focusing on investments that the investment manager believes offer attractive returns relative to the risks assumed and by hedging through the use of derivatives. The managed volatility strategy seeks to stabilize the total return volatility of the Fund around its Target Volatility level and to reduce the downside risk of the Fund during periods of significant and sustained market declines. In this context, “volatility” is a statistical measurement of the frequency and level of up and down fluctuations in the value of the Fund’s returns over time. Volatility may result in rapid and dramatic price swings. Volatility, in other words, represents the average annual deviation of the Fund’s return around the average Fund return.

In seeking to manage the Fund’s volatility, the investment manager chooses core investments including low volatility stocks (currently largely through equity ETFs that seek to replicate certain low volatility stock indices) and adjusts its asset allocations in response to periods of high or low actual or expected volatility (“bottom up” risk reduction investment strategies). In addition, the investment manager uses “top-down,” hedging that also seeks to reduce risk, using derivatives instruments (principally stock index and government bond futures). For example, when a particular asset class or classes appear to present high future volatility, reduction in the exposure to such classes would typically be sought; when such volatility appears to be reduced then exposure would typically be increased. The Fund’s exposure to various asset classes may be adjusted through the use of derivatives as often as daily or may not be adjusted for extended periods of time. The timing and extent of such adjustments are within the sole discretion of the investment manager. The investment manager does not generally seek to time the direction of the entire market, but attempts to keep the flexibility to shift the Fund's net exposure (the value of investments held long less the value of investments held short) depending generally on which market opportunities look more attractive in light of the Fund’s Target Volatility. The Fund may, from time to time, have a net short position in certain asset classes, regions, currencies and sectors. The volatility strategy may cause the Fund’s effective exposure to certain asset classes to be greater or lesser than its direct investments.

With respect to the Fund’s global fixed-income investments, the Fund will invest predominantly in debt securities issued by governments and government agencies located around the world.

Overall, the Fund expects to have significant exposure to foreign securities.

With respect to the Fund’s commodity investments, the investment manager currently intends to purchase exchange-traded notes (ETNs) to gain exposure to commodities. It is anticipated, however, that an affiliate of the investment manager will eventually manage the commodity-linked instruments for the Fund. The total return ETNs anticipated to be used by the investment manager are senior, unsubordinated debt securities that trade on U.S. and foreign stock exchanges at market price. The ETNs are designed to provide investors, such as the Fund, with a cost-effective investment in broad-based commodities, as measured by various commodity indices. The Fund intends to hold the ETNs and other commodity-linked instruments in a Cayman Islands-based company that is wholly owned by the Fund (the “Subsidiary”). Investing through the Subsidiary is principally intended to gain exposure to such commodity-linked instruments within the federal income tax requirements that apply to the Fund.

With respect to the Fund's derivative investments, for hedging or investment purposes, the Fund may enter into various transactions involving complex instruments that include but are not limited to, currency forwards, interest rate/bond futures, equity index futures, and exchange-traded notes (ETNs). The managed volatility strategy regularly uses equity index futures, interest rate/bond futures, and currency forwards, for hedging purposes, while in the global fixed income portion of the Fund's portfolio, the Fund may, from time to time, use interest rate/bond futures and currency forwards for both hedging and investment purposes. Derivative instruments can be used to adjust or obtain net long or net negative (short) exposure to various asset classes, regions, currencies, sectors or securities for hedging or investment purposes, or to otherwise manage the Fund's volatility.

In connection with the Fund’s managed volatility strategy, the investment manager uses a combination of proprietary and third-party risk modeling systems to help it estimate the expected volatility of the Fund’s portfolio on a daily basis. The risk models are based on the historical returns of selected broad asset classes (or, in some cases, recreations or simulations of such returns, e.g., for periods that predate the creation of the particular ETF or index) and can reflect certain back-tested data from the previous decade, to help estimate short-term and long-term risk (and volatility). For example, the investment manager makes future estimates of the volatility of the Fund, including the various asset classes in which it invests. Based on those estimates and other factors, the investment manager adjusts the Fund’s exposure to certain markets and asset classes (through derivatives or other investments) in an attempt to manage the Fund’s expected volatility.

The Fund uses complex securities, including derivative instruments, to pursue its investment goals and implement its investment strategies. For example, equity index futures may allow the Fund to obtain net long or net short exposures to a selected reference index and the underlying securities without actually having to purchase or sell such underlying securities. Interest rate/bond futures may allow the Fund to obtain net long or net short exposures to selected interest rates, durations or credit risks/issuers. Currency forwards may allow the Fund to obtain net long or net negative (short) exposure to selected currencies. Derivative instruments can be used to adjust or obtain net long or net negative (short) exposure to various asset classes, regions, currencies, sectors or securities for hedging or investment purposes, or to otherwise manage the Fund's volatility. For example, the use of such derivative instruments may allow the investment manager to implement the managed volatility strategy with lower transaction costs than it might otherwise incur by changing the allocations among the various asset classes within the Fund's portfolio.

A futures contract is a standard binding agreement to buy or sell a specified quantity of an underlying instrument or asset, such as a specific security or currency, at a specified price at a specified later date that trade on an exchange. A “sale” of a futures contract means the acquisition of a contractual obligation to deliver the underlying instrument specified in the contract at a specified price on a specified date. A “purchase” of a futures contract means the acquisition of a contractual obligation to purchase the underlying instrument specified in the contract at a specified price on a specified date. The purchase or sale of a futures contract will allow the Fund to increase or decrease its exposure to the underlying instrument or interest rate. Although most futures contracts used by the Fund by their terms require a cash payment of the net gain or loss on the contract at the time of delivery, some require the actual delivery or acquisition of the underlying instrument. The Fund may buy and sell futures contracts that trade on U.S. and foreign exchanges. By way of example, when the investment manager believes that the value of a particular foreign government bond is expected to increase in value, the Fund could purchase futures contracts on such bonds to purchase those bonds at a future date. If at such future date the value of bonds exceeds the amount to be paid by the Fund under the contract, the Fund will recognize a gain. When used for hedging purposes, a futures contract or other derivative instrument could be used to protect against possible declines in a security’s or currency’s value.

The ETNs used by the investment manager are senior, unsecured unsubordinated debt securities that trade on U.S. and foreign stock exchanges at market price. In addition, investors can receive a cash payment at the ETNs’ scheduled maturity or through early redemption. The ETNs are backed by the credit of the issuer and their return is linked to the performance of an index intended to reflect the returns that are potentially available through an investment in futures contracts on the physical commodities comprising the index, plus a specified rate of interest. No periodic interest payments are made on the ETNs and there is no principal protection.

Commodity Exchange Act Exclusions and Exemptions

The sub-advisors are not registered as CTAs and are relying on exemptions under the CEA and CFTC rules.

As of January 1, 2013, the terms of the CPO exclusion require the Fund, among other things, to adhere to certain limits on its investments in futures, commodity options, swaps and non-deliverable foreign currency forwards (other than certain transactions that qualify as bona fide hedging under CFTC rules). Because the investment manager and the Fund intend to comply with the terms of the CPO exclusion, the Fund may, in the future, need to adjust its investment strategies, consistent with its investment goals, to limit its investments in these types of instruments. The Fund is not intended as a vehicle for trading in the futures, commodity options or swaps markets. The CFTC has neither reviewed nor approved the investment manager’s reliance on these exclusions, or the Fund, its investment strategies or this prospectus.

Temporary Investments

When the investment manager believes market or economic conditions are unfavorable for investors, up to 100% of the Fund’s assets may be invested in a temporary defensive manner by holding all or a substantial portion of its assets in cash, cash equivalents or other high quality short-term investments. Temporary defensive investments generally may include short-term U.S. government securities, high-grade commercial paper, bank obligations, repurchase agreements, money market fund shares (including shares of an affiliated money market fund) and other money market instruments. The investment manager also may invest in these types of securities or hold cash while looking for suitable investment opportunities, to maintain liquidity, to meet expected redemption obligations, or to segregate on the Fund's books in connection with its derivative strategies. In any of these circumstances, the Fund may be unable to achieve its investment goals.

Principal Risks

Market

Managed Volatility Strategy

There can be no guarantee that the Fund will achieve its Target Volatility; moreover, achieving the Fund’s Target Volatility does not ensure the Fund will achieve a positive or competitive return. The actual volatility that the Fund experiences may be significantly higher or lower than its Target Volatility. For example, actual realized annual volatility can be expected to exceed the Target Volatility periodically, and this can result in negative returns (losses) that persist beyond one year. In addition, the managed volatility strategy could limit the Fund’s gains in rising markets, may expose the Fund to costs to which it would otherwise not have been exposed and, if unsuccessful, may cause the Fund to experience substantial losses greater than what the Fund might have experienced had such strategy not been implemented at all. Moreover, the volatility management strategy can also be expected to limit the Fund’s participation in market price appreciation when compared to similar funds that do not attempt to manage volatility within a given target level.

The use of derivative instruments in an effort to adjust the Fund’s exposures may at times increase its volatility, for reasons including the leveraging effect of those instruments. The investment manager expects that, in periods of particularly high volatility in certain markets, the Fund will experience volatility greater than its Target Volatility. The Fund could experience volatility greater than its Target Volatility at any time and for any period of time. Also, the Fund’s net asset value may be more volatile over short-term periods.

In seeking to manage the Fund’s portfolio and overall volatility, the investment manager uses proprietary and third-party risk modeling systems to obtain short-term risk and correlation forecasts. These models examine multiple economic factors and asset classes using a large amount of data, including third-party data, selected historical returns (or, in some cases, recreations of such returns), and certain back-tested data over the past ten years. There is no assurance that the modeling systems are complete or accurate, or representative of future market cycles, nor will they necessarily be beneficial to the Fund even if they are accurate. The results generated by these models may perform differently than in the past, or as expected. They may negatively affect Fund performance and the ability of the Fund to meet its Target Volatility for various reasons. For example, human judgment plays a role in building, using, testing, and modifying the financial algorithms and formulas used in these models. Additionally, there is a possibility that the historical data may be imprecise or become stale due to new events or changing circumstances which the models may not promptly detect. Market performance can be affected by non-quantitative factors (for example, market or trading system dysfunctions, investor fear or over-reaction or other emotional considerations) that are not easily integrated into the investment manager’s risk models. There may also be technical issues with the construction and implementation of quantitative models (for example, software or other technology malfunctions, or programming inaccuracies).

In cases of extreme market conditions during which there is price dislocation for certain securities or in the event of systemic market dislocation, the Fund’s managed volatility strategy may cause the Fund to be significantly over- or under-exposed to a specific security or asset class. In such cases, the Fund may lose more and, in some cases, may lose significantly more, than it would have lost had the managed volatility strategy or the risk models not been used. In addition, in periods of extreme or sudden market decline, if the investment manager’s risk models do not predict, or only detect after a time lag, such sudden or extreme declines, the Fund’s managed volatility strategy will not protect fully against the market decline, realized or actual volatility can be higher than the Target Volatility, and the Fund could be exposed to large losses regardless of its managed volatility strategy. Sustained market disruptions and price dislocation can also prevent the Fund from implementing its investment strategies, including its managed volatility strategy, for a period of time and may prevent the Fund from achieving its investment goal.

Interest Rate

Credit

Investing in ETFs and Other Mutual Funds

Because the Fund invests to a large extent in ETFs and other mutual funds, the Fund’s performance is directly related to the performance of the underlying ETFs and other mutual funds held by it. The ability of the Fund to achieve its investment goal is directly related to, in part, the ability of the underlying ETFs and other mutual funds to meet their investment goal.

Investing in ETFs and other mutual funds may be more costly to the Fund than if the Fund had invested in the underlying securities directly. Shareholders of the Fund will indirectly bear the fees and expenses (including management and advisory fees and other expenses) of the underlying ETFs and other mutual funds. As the Fund’s allocations among the underlying ETFs or mutual funds change from time to time, or to the extent that the expense ratios of the underlying ETFs or mutual funds change, the expenses borne by the Fund may increase or decrease. In addition, the Fund pays brokerage commissions in connection with the purchase and sale of shares of ETFs, in addition to a spread (the difference between what professional investors are willing to pay for ETF shares and the price at which they are willing to sell ETF shares).

The Fund's investments in ETFs may subject the Fund to additional risks than if the Fund would have invested directly in the ETFs’ underlying securities. These risks include the possibility that an ETF may experience a lack of liquidity that can result in greater volatility than its underlying securities. In addition, an ETF may trade at a premium or discount to its net asset value, as shares of an ETF are bought and sold based on exchanges on market values and not at the ETF’s net asset value.

Another risk of investing in ETFs and other mutual funds is the possibility that one ETF or mutual fund may buy the same securities that another ETF or mutual fund sells. If this happens, an investor in the Fund would indirectly bear the costs of these transactions without accomplishing the intended investment purpose. Also, an investor in the Fund may receive taxable gains from portfolio transactions by an ETF or mutual fund, as well as taxable gains from transactions in shares of the ETF or mutual fund by the Fund. The Fund or the underlying ETFs or mutual funds may hold common portfolio securities, thereby reducing the diversification benefits of the Fund.

Foreign Securities

less social, political and economic stability;
smaller securities markets with low or nonexistent trading volume and greater illiquidity and price volatility;
more restrictive national policies on foreign investment, including restrictions on investment in issuers or industries deemed sensitive to national interests;
less transparent and established taxation policies;
less developed regulatory or legal structures governing private and foreign investment or allowing for judicial redress for injury to private property;
less familiarity with a capital market structure or market-oriented economy and more widespread corruption and fraud;
less financial sophistication, creditworthiness and/or resources possessed by, and less government regulation of, the financial institutions and issuers with which the Fund transacts;
less government supervision and regulation of business and industry practices, stock exchanges, brokers and listed companies than in the U.S.;
greater concentration in a few industries resulting in greater vulnerability to regional and global trade conditions;
higher rates of inflation and more rapid and extreme fluctuations in inflation rates;
greater sensitivity to interest rate changes;
increased volatility in currency exchange rates and potential for currency devaluations and/or currency controls;
greater debt burdens relative to the size of the economy;
more delays in settling portfolio transactions and heightened risk of loss from share registration and custody practices; and
less assurance that recent favorable economic developments will not be slowed or reversed by unanticipated economic, political or social events in such countries.

Because of the above factors, the Fund's investments in emerging market countries are subject to greater price volatility and illiquidity than investments in developed markets.

Derivative Instruments

Management

The Fund is actively managed and could experience losses if the investment manager's judgment about markets, future volatility, interest rates, industries, sectors and regions or the attractiveness, relative values, liquidity, effectiveness or potential appreciation of particular investments made for the Fund's portfolio prove to be incorrect. The investment manager's allocation of Fund assets among different asset classes, Sub-Advisors, ETFs, mutual funds and direct investments may not prove beneficial in light of subsequent market events. There can be no guarantee that these techniques or the investment manager's investment decisions will produce the desired results. Additionally, legislative, regulatory, or tax developments may affect the investment techniques available to the investment manager in connection with managing the Fund and may also adversely affect the ability of the Fund to achieve its investment goals.

Commodities

Investing in physical commodities, either directly or through complex securities such as ETNs, presents unique risks. Investing in physical commodities, including trading in futures contracts thereon, is speculative and can be extremely volatile. Market prices of commodities may fluctuate rapidly based on numerous factors, including: changes in supply and demand relationships (whether actual, perceived, anticipated, unanticipated or unrealized); weather; agriculture; trade; domestic and foreign political and economic events and policies; diseases; pestilence; technological developments; and monetary and other governmental policies, action and inaction. The current or “spot” prices of physical commodities may also affect, in a volatile and inconsistent manner, the prices of futures contracts in respect of the relevant commodity. Certain commodities are used primarily in one industry, and fluctuations in levels of activity in (or the availability of alternative resources to) one industry may have a disproportionate effect on global demand for a particular commodity. Moreover, recent growth in industrial production and gross domestic product has made China and other developing nations oversized users of commodities and has increased the extent to which certain commodities prices are influenced by those markets.

Index and Passive Investing

The Fund will have exposure to certain broad-based securities, interest rate and commodity indexes. The sponsors of these indexes are under no obligation to continue the calculation and dissemination of the indexes. The sponsors of the indexes may at any time or from time to time modify the calculation or construction of the indexes. In addition, the sponsors of the indexes may discontinue or suspend the calculation or publication of the indexes. None of the index sponsors has any obligation or responsibility to the Fund or its shareholders in connection with any such modification, discontinuance or suspension, including any obligation or responsibility to notify the Fund of any such modification, discontinuance or suspension.

With respect to the Fund’s investment in passively managed ETFs, there is the risk that an ETF may not replicate exactly the performance of the benchmark index it seeks to track. If an ETF does not fully replicate the underlying index, it is subject to the risk that the manager’s investment management strategy may not produce the intended results. In addition, because ETFs purchased by the Fund are not actively managed, they may be affected by a general decline in market segments relating to their respective indices, as such ETFs do not attempt to take defensive positions in declining markets.

The ETFs in which the Fund invests may or may not hold every security in the index. Some ETFs may use representative sampling, which is a method of indexing that involves investing in a representative sample of securities that collectively have a similar investment profile to the index. When this occurs, the ETF is subject to an increased risk of tracking error, in that the securities selected in the aggregate for the ETF may not have an investment profile similar to those of its index.

In addition, an ETF’s performance may diverge from that of its underlying index due to imperfect correlation between an ETF’s portfolio securities and those in its index, rounding, timing of cash flows, the size of the ETF, fees and expenses borne by the ETF and changes to the index. This risk may be heightened during times of increased market volatility or other unusual market conditions.

Portfolio Turnover

The investment manager will sell a security or enter into or close out of a derivative position when it believes it is appropriate to do so, regardless of how long the Fund has held the instrument. These activities increase the Fund's portfolio turnover and may increase the Fund's transaction costs.

Tax Risk

The Fund must meet certain requirements under the Code for favorable tax treatment as a regulated investment company (RIC), including asset diversification and income requirements. The Fund intends to treat any income it derives from the Subsidiary as derived with respect to Fund's business of investing in the stock of Subsidiary and thus “qualifying income.” The Internal Revenue Service (IRS) has issued a number of private letter rulings to other mutual funds, upon which only the fund that received the private letter ruling can rely, which indicate that income from a fund’s investment in a wholly owned foreign subsidiary that invests in commodity-linked derivatives instruments, such as the Subsidiary, constitutes qualifying income. However, the IRS suspended the issuance of further such rulings in July 2011 pending a review of its position. If the IRS were to issue guidance, or Congress were to enact legislation, that adversely affects the tax treatment of the Fund’s investment in the Subsidiary (which guidance might be applied retroactively to the Fund’s investment in the Subsidiary), the Fund might not qualify as a RIC for one or more years. If for any taxable year the Fund does not qualify as a RIC, all of its taxable income (including its net capital gain) would be subject to tax at regular corporate income tax rates without any deduction for dividends paid to shareholders, and the dividends would be taxable to shareholders as dividends (possibly as qualified dividend income) to the extent of the Fund’s current or accumulated earnings and profits. In the event of any such adverse action, the Fund’s board of trustees may authorize a significant change in investment strategy. The Fund intends to limit its investment in the Subsidiary to no more than 25% of the value of its total assets in order to satisfy the asset diversification requirement.

More detailed information about the Fund, its policies and risks can be found in the Fund's SAI.

Management

Franklin Advisers, Inc. (Advisers), One Franklin Parkway, San Mateo, California 94403-1906, is the Fund's investment manager.

Under separate agreements with Advisers, Franklin Templeton Investment Management Limited (FTIML), The Adelphi Building, 1-11 John Adams Street, London, WC2N 6HT and Templeton Asset Management Ltd. (Asset Management), 7 Temasek Boulevard #38-03, Suntec Tower One, Singapore, 038987, are the Fund's Sub-Advisors. FTIML and Asset Management provide Advisers with investment management advice and assistance. FTIML and Asset Management are indirect subsidiaries of Franklin Resources, Inc. (Resources) and Advisers is a direct subsidiary of Resources. For purposes of the Fund's investment strategies, techniques and risks, the term "investment manager" includes any Sub-Advisor.

The Fund is managed by a team of dedicated professionals. The portfolio managers of the team, including those of the Sub-Advisors, are as follows:

SAMER HABL Portfolio Manager of Advisers		Mr. Habl has been a lead portfolio manager of the Fund since inception (2013). He has primary responsibility for the investments of the Fund. He has final authority and responsibility over all aspects of the Fund's investment portfolio, including but not limited to the Fund's investment decisions relating to its managed volatility strategy, portfolio risk assessment, and the management of daily cash balances in accordance with anticipated investment management requirements. The degree to which he may perform these functions, and the nature of these functions, may change from time to time. He joined Franklin Templeton Investments in 2010. Prior to joining Franklin Templeton Investments, he worked at Mellon Capital Management for approximately ten years, most recently as managing director of Global Tactical Asset Allocation Research.

MARK MOBIUS, PH.D. Executive Chairman of Templeton Emerging Markets Group and Portfolio Manager of Asset Management		Dr. Mobius has been a portfolio manager of the emerging markets sub-set of the global equity portion of the Fund since May 2013, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. Dr. Mobius joined Franklin Templeton Investments in 1987.

TODD SAUNDERS Portfolio Manager of Advisers		Mr. Saunders has been a portfolio manager of the Fund since inception (2013), providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. He joined Franklin Templeton Investments in 2011. Prior to joining Franklin Templeton Investments, he worked at Bayswater Asset Management LLC since 2007, most recently as chief financial officer and chief operating officer.

DAVID ZAHN, CFA Portfolio Manager of FTIML		Mr. Zahn has been a portfolio manager of the global fixed income portion of the Fund since inception (2013), providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. He joined Franklin Templeton Investments in 2006.

CFA^® and Chartered Financial Analyst^® are trademarks owned by CFA Institute.

The Fund’s SAI provides additional information about portfolio manager compensation, other accounts that they manage and their ownership of Fund shares.

The Fund pays Advisers a fee for managing the Fund's assets. The fee is equal to an annual rate of:

1.000% of the value of the Fund's average daily net assets up to and including $1 billion;
0.980% of the value of the Fund's average daily net assets over $1 billion up to and including $5 billion;
0.960% of the value of the Fund's average daily net assets over $5 billion up to and including $10 billion;
0.940% of the value of the Fund's average daily net assets over $10 billion up to and including $15 billion;
0.920% of the value of the Fund's average daily net assets over $15 billion up to and including $20 billion; and
0.900% of the value of the Fund's average daily net assets over $20 billion.

The investment manager compensates each Sub-Advisor for providing investment advice and analysis and for managing that portion of the Fund's assets allocated to it from time to time by the investment manager. The separate portions of the Fund's assets managed by the investment manager are allocated fees that are retained from, and not in addition to, the overall investment management fee paid to the investment manager by the Fund.

Advisers has contractually agreed to waive the management fee it receives from the Fund in an amount equal to the management fee paid by the Subsidiary. This waiver may not be terminated and will remain in effect for as long as the investment manager’s contract with the Subsidiary is in place. Advisers also agreed to reduce its fees to reflect reduced services resulting from the Fund’s investment in a Franklin Templeton money fund. In addition, Advisers has agreed to waive or limit its fees and to assume as its own certain expenses otherwise payable by the Fund so that common expenses (i.e., a combination of investment management fees, administration fees, and other expenses, but excluding the Rule 12b-1 fees and acquired fund fees and expenses) for each class of the Fund do not exceed 0.83% (other than certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations and liquidations) until April 30, 2014.

Manager of Managers Structure

Advisers and the Trust have received an exemptive order from the SEC that allows the Fund to operate in a "manager of managers" structure whereby Advisers, as the Fund’s investment manager, can appoint and replace sub-advisors from within Franklin Templeton Investments (“affiliated sub-advisors”), and enter into, amend and terminate sub-advisory agreements with affiliated sub-advisors, each subject to board approval but without obtaining prior shareholder approval (the "Manager of Managers Structure"). The Fund will, however, inform shareholders of the hiring of any new affiliated sub-advisor within 90 days after the hiring. The SEC exemptive order provides the Fund with greater flexibility.

The use of the Manager of Managers Structure with respect to the Fund is subject to certain conditions that are set forth in the SEC exemptive order. Under the Manager of Managers Structure, Advisers has the ultimate responsibility, subject to oversight by the Fund's board of trustees, to oversee the affiliated sub-advisors and recommend their hiring, termination and replacement. Advisers will also, subject to the review and approval of the Fund's board of trustees: set the Fund’s overall investment strategy; evaluate, select and recommend affiliated sub-advisors to manage all or a portion of the Fund’s assets; allocate and, when appropriate, reallocate the Fund’s assets among affiliated sub-advisors; monitor and evaluate the affiliated sub-advisors’ performance; and implement procedures reasonably designed to ensure that each affiliated sub-advisor complies with the Fund’s investment goal, policies and restrictions.

Additional Information, All Funds

Contract Owners should receive financial reports for the Fund related to their Contract from the sponsoring Insurer every six months.

Distributions and Taxes

Investment in commodities. The Fund must meet certain requirements under the Code for favorable tax treatment as a regulated investment company, including asset diversification and income requirements. The Fund intends to treat the income it derives from the Subsidiary as derived with respect to Fund's business of investing in the stock of Subsidiary and thus “qualifying income.” If, contrary to a number of private letter rulings (PLRs) issued by the IRS to other mutual funds, upon which only the fund that received the private letter ruling can rely, the IRS were to determine such income is non qualifying, the Fund might fail to satisfy the income requirement. If for any taxable year the Fund does not qualify as a RIC, all of its taxable income (including its net capital gain) would be subject to tax at regular corporate income tax rates without any deduction for dividends paid to shareholders, and the dividends would be taxable to shareholders as dividends (possibly as qualified dividend income) to the extent of the Fund’s current or accumulated earnings and profits. In lieu of disqualification, the Fund may be permitted to pay a tax for certain failures to satisfy the asset diversification or income requirements, which, in general, are limited to those due to reasonable cause and not willful neglect. The Fund intends to limit its investment in the Subsidiary to no more than 25% of the value of its total assets in order to satisfy the asset diversification requirement.

Fund Account Information

Buying Shares

Selling Shares

Exchanging Shares

Market Timing Trading Policy

The board of trustees has adopted the following policies and procedures with respect to market timing (Market Timing Trading Policy):

The Fund is currently using several methods to reduce the risk of market timing. These methods include:

seeking the cooperation of Insurers and funds of funds to assist the Fund in identifying potential market timing activity;
committing staff to selectively review on a continuing basis recent trading activity in order to identify trading activity that may be contrary to the Fund's Market Timing Trading Policy;
monitoring potential price differentials following the close of trading in foreign markets to determine whether the application of fair value pricing procedures is warranted; and
seeking the cooperation of financial intermediaries to assist the Fund in identifying market timing activity.

Involuntary Redemptions

Fund Account Policies

CALCULATING SHARE PRICE

When they buy and sell shares, the Fund's shareholders pay and receive the net asset value (NAV) per share.

To the extent that a Fund is invested in one or more open-end investment management companies (mutual funds), a mutual fund's net asset value is calculated based on the net asset value of the mutual fund last determined by the mutual fund, as described in its prospectus.

FAIR VALUATION - INDIVIDUAL SECURITIES

SECURITY VALUATION - U.S. PASS-THROUGH SECURITIES, CMO, ABS, MBS

SECURITY VALUATION - CORPORATE DEBT SECURITIES

SECURITY VALUATION - SENIOR SECURED CORPORATE LOANS

SECURITY VALUATION – MUNICIPAL SECURITIES – MATRIX PRICING (FAIR VALUATION)

SECURITY VALUATION - OPTIONS

VALUATION - FOREIGN SECURITIES - COMPUTATION OF U.S. EQUIVALENT VALUE

VALUATION – FOREIGN SECURITIES – POTENTIAL IMPACT OF TIME ZONES AND MARKET HOLIDAYS

SHARE CLASSES

Class 2 and Class 5 shares of the Fund are identical except that Class 2 and Class 5 each have a distribution plan or "rule 12b-1" plan, as described below for Class 2 shares and in the prospectus for Class 5 shares.

Distribution and service (12b-1) fees Class 2 has a distribution plan, sometimes known as a rule 12b-1 plan, that allows the Fund to pay distribution fees to those who sell and distribute Class 2 shares and provide services to shareholders and Contract Owners. Because these fees are paid out of Class 2's assets on an on-going basis, over time these fees will increase the cost of an investment, and may cost you more than paying other types of sales charges. While the maximum amount payable under the Fund's Class 2 rule 12b-1 plan is 0.35% per year of the Fund’s Class 2 average daily net assets, the board of trustees has set the current rate at 0.25%. A portion of the fees payable to Franklin Templeton Distributors, Inc. (Distributors) or others under the rule 12b-1 plan may be retained by Distributors for distribution expenses.

ADDITIONAL POLICIES

Please note that the Fund maintains additional policies and reserves certain rights, including:

The Fund may restrict, reject or cancel any purchase orders, including an exchange request.
At any time, the Fund may establish or change investment minimums.
The Fund may make material changes to or discontinue the exchange privilege on 60 days' notice to insurance company or Fund of Fund shareholders, or as otherwise provided by law.
Purchases of shares of the Fund (including the purchase side of an exchange) may be made only when such shares are eligible for sale in the appropriate state or jurisdiction.
In unusual circumstances, we may temporarily suspend redemptions or postpone the payment of proceeds, as allowed by federal securities laws.
For redemptions over a certain amount, the Fund may pay redemption proceeds in securities or other assets rather than cash if the investment manager determines it is in the best interest of the Fund, consistent with applicable law.
To permit their investors to obtain the current price, participating insurance companies and funds of funds are responsible for transmitting all orders to the Fund promptly.

Questions

FOR MORE INFORMATION

Not all Funds and classes are available in all Contracts. For information on the terms of investment in a Contract, please consult the Contract prospectus that accompanies this Fund prospectus.

You can learn more about the Fund in the following documents:

Annual/Semiannual Fund Reports to Shareholders

Statement of Additional Information (SAI)

Contains more information about the Fund, its investments, policies, and risks. It is incorporated by reference into (is legally a part of) this prospectus.

Investment Company Act file #811-05583
© 2013 Franklin Templeton Investments. All rights reserved.

792 P 05/13

May 1, 2013
The U.S. Securities and Exchange Commission (SEC) has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense.

Class 5

Franklin Managed Volatility Global Allocation VIP Fund

PROSPECTUS

Franklin Templeton Variable Insurance Products Trust

		Contents

		FUND SUMMARY
INFORMATION ABOUT THE FUND YOU SHOULD KNOW BEFORE INVESTING		Franklin Managed Volatility Global Allocation VIP Fund

		Overview
		Franklin Templeton Variable Insurance Products Trust

		FUND DETAILS
MORE INFORMATION ON INVESTMENT POLICIES, PRACTICES AND RISKS		Franklin Managed Volatility Global Allocation VIP Fund

		Additional Information, All Funds DEALER COMPENSATION PORTFOLIO HOLDINGS STATEMENTS AND REPORTS ADMINISTRATIVE SERVICES

		Distributions and Taxes INCOME AND CAPITAL GAINS DISTRIBUTIONS Tax Considerations

		FUND ACCOUNT INFORMATION
INFORMATION ABOUT FUND TRANSACTIONS AND SERVICES		Buying Shares Selling Shares Exchanging Shares Market Timing Trading Policy Involuntary Redemptions Fund Account Policies Questions

		FOR MORE INFORMATION
WHERE TO LEARN MORE ABOUT THE FUND		Back Cover

FUND SUMMARY

Franklin Managed Volatility Global Allocation VIP Fund

Investment Goal

Total return (including income and capital gains) while seeking to manage volatility.

Fees and Expenses of the Fund

ANNUAL FUND OPERATING EXPENSES
(expenses that you pay each year as a percentage of the value of your investment)

	Class 5
Management fees	1.00%
Distribution and service (12b-1) fees	0.10%
Other expenses¹	0.50%
Other expenses of the Fund	0.40%
Other expenses of the Subsidiary (including Subsidiary management fees)	0.10%
Acquired fund fees and expenses¹	0.12%
Total annual Fund operating expenses	1.72%
Fee waiver and/or expense reimbursement²	-0.67%
Total annual Fund operating expenses after fee waiver and/or expense reimbursement	1.05%

1. Other expenses and Acquired fund fees and expenses are based on estimated amounts for the current fiscal year.

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of the period. The Example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. The Example reflects adjustments made to the Fund's operating expenses due to the fee waiver and/or expense reimbursement by management for the 1 Year numbers only. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

	1 Year	3 Years
Class 5	$ 107	$ 476

Portfolio Turnover

Principal Investment Strategies

55% Global Equity (U.S./International/Emerging Markets)
37% Global Fixed Income (U.S./International)
5% Commodity-Linked Instruments
3% Cash, Cash Equivalents and Money Market Securities

Overall, the Fund expects to have significant exposure to foreign securities.

With respect to the Fund’s global fixed-income investments, the Fund will invest predominantly in debt securities issued by governments and government agencies located around the world.

In connection with the Fund’s managed volatility strategy, the investment manager uses a combination of proprietary and third-party risk modeling systems to help it estimate the expected volatility of the Fund’s portfolio on a daily basis. Based on those estimates, the investment manager adjusts the Fund’s exposure to certain markets and asset classes (through derivatives or other investments) in an attempt to manage the Fund’s expected volatility. The Fund may, from time to time, have a net short position in certain asset classes, regions, currencies and sectors.

Principal Risks

Derivative Instruments The performance of derivative instruments (including currency-related derivatives) depends largely on the performance of an underlying currency, security or index, and such instruments often have risks similar to their underlying instrument, in addition to other risks. Derivatives involve costs and can create economic leverage in the Fund's portfolio which may result in significant volatility and cause the Fund to participate in losses (as well as gains) in an amount that exceeds the Fund's initial investment. Other risks include illiquidity, mispricing or improper valuation of the derivative instrument, and imperfect correlation between the value of the derivative and the underlying instrument so that the Fund may not realize the intended benefits. When used for hedging, the change in value of the derivative may also not correlate specifically with the currency, security or other risk being hedged. With over-the-counter derivatives, there is the risk that the other party to the transaction will fail to perform.

Performance

Because the Fund is new, it does not have a full calendar year of performance.

Investment Manager

Franklin Advisers, Inc. (Advisers)

Sub-Advisors

Portfolio Managers

SAMER HABL Portfolio Manager of Advisers and a lead portfolio manager of the Fund since inception (2013).

TODD SAUNDERS Portfolio Manager of Advisers and a portfolio manager of the Fund since inception (2013).

DAVID ZAHN, CFA Portfolio Manager of FTIML and portfolio manager of the global fixed income portion of the Fund since inception (2013).

Purchase and Sale of Fund Shares

Taxes

Payments to Sponsoring Insurance
Companies and Other Financial Intermediaries

Franklin Templeton Variable Insurance Products Trust

Overview

Investment Considerations

The following give a general sense of the level of fund assets associated with a particular investment or strategy: "small portion" (less than 10%); "portion" (10% to 25%); "significant" (25% to 50%); "substantial" (50% to 66%); "primary" (66% to 80%); and "predominant" (80% or more). The percentages are not limitations unless specifically stated as such in this prospectus or in the Trust's Statement of Additional Information (SAI).

Risks

Fund shares are not deposits or obligations of, or guaranteed or endorsed by, any bank, and are not federally insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other agency of the U.S. government. Fund shares involve investment risks, including the possible loss of principal.
Because you could lose money by investing in a Fund, take the time to read each Fund description and consider all risks before investing.

Additional Information

More detailed information about each Fund, its investment policies, and its particular risks can be found in the SAI.

Investment Management

FUND DETAILS

Franklin Managed Volatility Global Allocation VIP Fund

Investment Goal

Principal Investment Policies and Practices

Under normal market conditions, the Fund invests principally in a diversified portfolio of stocks and other equity securities (including unaffiliated exchange-traded funds (ETFs) and mutual funds), bonds and other debt securities, and short-term (money market) investments allocated across the following broad asset classes, in approximately the following baseline percentages (plus or minus 5%):

55% Global Equity (U.S./International/Emerging Markets)
37% Global Fixed Income (U.S./International)
5% Commodity-Linked Instruments
3% Cash, Cash Equivalents and Money Market Securities

The Fund employs a managed volatility strategy, or volatility control process, principally by focusing on investments that the investment manager believes offer attractive returns relative to the risks assumed and by hedging through the use of derivatives. The managed volatility strategy seeks to stabilize the total return volatility of the Fund around its Target Volatility level and to reduce the downside risk of the Fund during periods of significant and sustained market declines. In this context, “volatility” is a statistical measurement of the frequency and level of up and down fluctuations in the value of the Fund’s returns over time. Volatility may result in rapid and dramatic price swings. Volatility, in other words, represents the average annual deviation of the Fund’s return around the average Fund return.

In seeking to manage the Fund’s volatility, the investment manager chooses core investments including low volatility stocks (currently largely through equity ETFs that seek to replicate certain low volatility stock indices) and adjusts its asset allocations in response to periods of high or low actual or expected volatility (“bottom up” risk reduction investment strategies). In addition, the investment manager uses “top-down,” hedging that also seeks to reduce risk, using derivatives instruments (principally stock index and government bond futures). For example, when a particular asset class or classes appear to present high future volatility, reduction in the exposure to such classes would typically be sought; when such volatility appears to be reduced then exposure would typically be increased. The Fund’s exposure to various asset classes may be adjusted through the use of derivatives as often as daily or may not be adjusted for extended periods of time. The timing and extent of such adjustments are within the sole discretion of the investment manager. The investment manager does not generally seek to time the direction of the entire market, but attempts to keep the flexibility to shift the Fund's net exposure (the value of investments held long less the value of investments held short) depending generally on which market opportunities look more attractive in light of the Fund’s Target Volatility. The Fund may, from time to time, have a net short position in certain asset classes, regions, currencies and sectors. The volatility strategy may cause the Fund’s effective exposure to certain asset classes to be greater or lesser than its direct investments.

With respect to the Fund’s global fixed-income investments, the Fund will invest predominantly in debt securities issued by governments and government agencies located around the world.

Overall, the Fund expects to have significant exposure to foreign securities.

With respect to the Fund's derivative investments, for hedging or investment purposes, the Fund may enter into various transactions involving complex instruments that include but are not limited to, currency forwards, interest rate/bond futures, equity index futures, and exchange-traded notes (ETNs). The managed volatility strategy regularly uses equity index futures, interest rate/bond futures, and currency forwards, for hedging purposes, while in the global fixed income portion of the Fund's portfolio, the Fund may, from time to time, use interest rate/bond futures and currency forwards for both hedging and investment purposes. Derivative instruments can be used to adjust or obtain net long or net negative (short) exposure to various asset classes, regions, currencies, sectors or securities for hedging or investment purposes, or to otherwise manage the Fund's volatility.

In connection with the Fund’s managed volatility strategy, the investment manager uses a combination of proprietary and third-party risk modeling systems to help it estimate the expected volatility of the Fund’s portfolio on a daily basis. The risk models are based on the historical returns of selected broad asset classes (or, in some cases, recreations or simulations of such returns, e.g., for periods that predate the creation of the particular ETF or index) and can reflect certain back-tested data from the previous decade, to help estimate short-term and long-term risk (and volatility). For example, the investment manager makes future estimates of the volatility of the Fund, including the various asset classes in which it invests. Based on those estimates and other factors, the investment manager adjusts the Fund’s exposure to certain markets and asset classes (through derivatives or other investments) in an attempt to manage the Fund’s expected volatility.

Commodity Exchange Act Exclusions and Exemptions

The sub-advisors are not registered as CTAs and are relying on exemptions under the CEA and CFTC rules.

As of January 1, 2013, the terms of the CPO exclusion require the Fund, among other things, to adhere to certain limits on its investments in futures, commodity options, swaps and non-deliverable foreign currency forwards (other than certain transactions that qualify as bona fide hedging under CFTC rules). Because the investment manager and the Fund intend to comply with the terms of the CPO exclusion, the Fund may, in the future, need to adjust its investment strategies, consistent with its investment goals, to limit its investments in these types of instruments. The Fund is not intended as a vehicle for trading in the futures, commodity options or swaps markets. The CFTC has neither reviewed nor approved the investment manager’s reliance on these exclusions, or the Fund, its investment strategies or this prospectus.

Temporary Investments

Principal Risks

Market

Managed Volatility Strategy

Interest Rate

Credit

Investing in ETFs and Other Mutual Funds

The Fund's investments in ETFs may subject the Fund to additional risks than if the Fund would have invested directly in the ETFs’ underlying securities. These risks include the possibility that an ETF may experience a lack of liquidity that can result in greater volatility than its underlying securities. In addition, an ETF may trade at a premium or discount to its net asset value, as shares of an ETF are bought and sold based on exchanges on market values and not at the ETF’s net asset value.

Foreign Securities

less social, political and economic stability;
smaller securities markets with low or nonexistent trading volume and greater illiquidity and price volatility;
more restrictive national policies on foreign investment, including restrictions on investment in issuers or industries deemed sensitive to national interests;
less transparent and established taxation policies;
less developed regulatory or legal structures governing private and foreign investment or allowing for judicial redress for injury to private property;
less familiarity with a capital market structure or market-oriented economy and more widespread corruption and fraud;
less financial sophistication, creditworthiness and/or resources possessed by, and less government regulation of, the financial institutions and issuers with which the Fund transacts;
less government supervision and regulation of business and industry practices, stock exchanges, brokers and listed companies than in the U.S.;
greater concentration in a few industries resulting in greater vulnerability to regional and global trade conditions;
higher rates of inflation and more rapid and extreme fluctuations in inflation rates;
greater sensitivity to interest rate changes;
increased volatility in currency exchange rates and potential for currency devaluations and/or currency controls;
greater debt burdens relative to the size of the economy;
more delays in settling portfolio transactions and heightened risk of loss from share registration and custody practices; and
less assurance that recent favorable economic developments will not be slowed or reversed by unanticipated economic, political or social events in such countries.

Because of the above factors, the Fund's investments in emerging market countries are subject to greater price volatility and illiquidity than investments in developed markets.

Derivative Instruments

Management

Commodities

Index and Passive Investing

Portfolio Turnover

Tax Risk

More detailed information about the Fund, its policies and risks can be found in the Fund's SAI.

Management

Franklin Advisers, Inc. (Advisers), One Franklin Parkway, San Mateo, California 94403-1906, is the Fund's investment manager.

The Fund is managed by a team of dedicated professionals. The portfolio managers of the team, including those of the Sub-Advisors, are as follows:

SAMER HABL Portfolio Manager of Advisers		Mr. Habl has been a lead portfolio manager of the Fund since inception (2013). He has primary responsibility for the investments of the Fund. He has final authority and responsibility over all aspects of the Fund's investment portfolio, including but not limited to the Fund's investment decisions relating to its managed volatility strategy, portfolio risk assessment, and the management of daily cash balances in accordance with anticipated investment management requirements. The degree to which he may perform these functions, and the nature of these functions, may change from time to time. He joined Franklin Templeton Investments in 2010. Prior to joining Franklin Templeton Investments, he worked at Mellon Capital Management for approximately ten years, most recently as managing director of Global Tactical Asset Allocation Research.

MARK MOBIUS, PH.D. Executive Chairman of Templeton Emerging Markets Group and Portfolio Manager of Asset Management		Dr. Mobius has been a portfolio manager of the emerging markets sub-set of the global equity portion of the Fund since May 2013, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. Dr. Mobius joined Franklin Templeton Investments in 1987.

TODD SAUNDERS Portfolio Manager of Advisers		Mr. Saunders has been a portfolio manager of the Fund since inception (2013), providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. He joined Franklin Templeton Investments in 2011. Prior to joining Franklin Templeton Investments, he worked at Bayswater Asset Management LLC since 2007, most recently as chief financial officer and chief operating officer.

DAVID ZAHN, CFA Portfolio Manager of FTIML		Mr. Zahn has been a portfolio manager of the global fixed income portion of the Fund since inception (2013), providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. He joined Franklin Templeton Investments in 2006.

CFA^® and Chartered Financial Analyst^® are trademarks owned by CFA Institute.

The Fund’s SAI provides additional information about portfolio manager compensation, other accounts that they manage and their ownership of Fund shares.

The Fund pays Advisers a fee for managing the Fund's assets. The fee is equal to an annual rate of:

1.000% of the value of the Fund's average daily net assets up to and including $1 billion;
0.980% of the value of the Fund's average daily net assets over $1 billion up to and including $5 billion;
0.960% of the value of the Fund's average daily net assets over $5 billion up to and including $10 billion;
0.940% of the value of the Fund's average daily net assets over $10 billion up to and including $15 billion;
0.920% of the value of the Fund's average daily net assets over $15 billion up to and including $20 billion; and
0.900% of the value of the Fund's average daily net assets over $20 billion.

Manager of Managers Structure

Additional Information, All Funds

Contract Owners should receive financial reports for the Fund related to their Contract from the sponsoring Insurer every six months.

Distributions and Taxes