UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSRS

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-05583

Franklin Templeton Variable Insurance Products Trust

(Exact name of registrant as specified in charter)

One Franklin Parkway, San Mateo, CA 94403-1906

(Address of principal executive offices) (Zip code)

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

(Name and address of agent for service)

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

Date of fiscal year end: 12/31

Date of reporting period: 06/30/11

Item 1. Reports to Stockholders.

JUNE 30, 2011

FRANKLIN TEMPLETON
VARIABLE INSURANCE PRODUCTS TRUST

SEMIANNUAL

REPORT

FRANKLIN TEMPLETON VARIABLE INSURANCE

PRODUCTS TRUST SEMIANNUAL REPORT

TABLE OF CONTENTS

Important Notes to Performance Information	i
Fund Summaries
Franklin Flex Cap Growth Securities Fund	FFC-1
Franklin High Income Securities Fund	FH-1
Franklin Income Securities Fund	FI-1
Franklin Rising Dividends Securities Fund	FRD-1
Franklin Small Cap Value Securities Fund	FSV-1
Franklin Small-Mid Cap Growth Securities Fund	FSC-1
Franklin Strategic Income Securities Fund	FSI-1
Franklin Templeton VIP Founding Funds Allocation Fund	FFA-1
Mutual Global Discovery Securities Fund	MGD-1
Mutual International Securities Fund	MI-1
Mutual Shares Securities Fund	MS-1
Templeton Developing Markets Securities Fund	TD-1
*Prospectus Supplement	TD-8
Templeton Foreign Securities Fund	TF-1
Templeton Global Bond Securities Fund	TGB-1
Templeton Growth Securities Fund	TG-1
Index Descriptions	I-1
Shareholder Information	SI-1

*Not part of the semiannual report

NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE

MASTER CLASS 4

IMPORTANT NOTES TO PERFORMANCE INFORMATION

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

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

i

FRANKLIN FLEX CAP GROWTH SECURITIES FUND

This semiannual report for Franklin Flex Cap Growth Securities Fund covers the period ended June 30, 2011.

Performance Summary as of 6/30/11

Franklin Flex Cap Growth Securities Fund – Class 4 delivered a +5.30% total return* for the six-month period ended 6/30/11.

*The investment manager and administrator have contractually agreed to waive or assume certain expenses so that common expenses of the Fund (excluding Rule 12b-1 fees and acquired fund fees and expenses) do not exceed 0.68% (other than certain nonroutine expenses) until 4/30/12. If the manager and administrator had not waived fees, the Fund’s total returns would have been lower.

Performance reflects the Fund’s Class 4 operating expenses, but does not include any contract fees, expenses or sales charges. If they had been included, performance would be lower. These charges and deductions, particularly for variable life policies, can have a significant effect on contract values and insurance benefits. See the contract prospectus for a complete description of these expenses, including sales charges.

Franklin Flex Cap Growth Securities Fund – Class 4

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

Current performance may differ from figures shown.

FFC-1

FRANKLIN FLEX CAP GROWTH SECURITIES FUND

This semiannual report for Franklin Flex Cap Growth Securities Fund covers the period ended June 30, 2011.

Performance Summary as of 6/30/11

Franklin Flex Cap Growth Securities Fund – Class 2 delivered a +5.35% total return* for the six-month period ended 6/30/11.

*The investment manager and administrator have contractually agreed to waive or assume certain expenses so that common expenses of the Fund (excluding Rule 12b-1 fees and acquired fund fees and expenses) do not exceed 0.68% (other than certain nonroutine expenses) until 4/30/12. If the manager and administrator had not waived fees, the Fund’s total returns would have been lower.

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

Franklin Flex Cap Growth Securities Fund – Class 2

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

Current performance may differ from figures shown.

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Fund Goal and Main Investments: Franklin Flex Cap Growth Securities Fund seeks capital appreciation. The Fund normally invests predominantly in equity securities of companies that the manager believes have the potential for capital appreciation.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. The Fund underperformed its benchmarks, the Russell 1000^® Growth Index, which generated a +6.83% total return, and the Russell 3000^® Growth Index, which produced a +6.98% total return, for the same period.¹

Economic and Market Overview

The U.S. economy expanded despite geopolitical and inflationary pressures from around the globe during the six-month period ended June 30, 2011. Business activity increased and consumer spending stayed above pre-recession levels. The U.S. has been a key engine in a sustained global manufacturing expansion as international trade volume continued to increase, albeit at a moderate pace. Worldwide demand for capital goods aided U.S. manufacturing profits and increased employment in the industry.

The unemployment rate improved in the first quarter when job creation began to gain some traction. However, government payrolls continued to trend down and job creation slowed in the second quarter, causing the unemployment rate to end the period at 9.2%.² Consumer spending rose for 11 consecutive months through May but declined in June as concerns about job growth and rising gasoline and food prices dampened consumer confidence. To offset the disruption of global oil supply caused by the conflicts in Libya, the International Energy Agency announced in June the release of 60 million barrels of oil in July from strategic reserves of the U.S. and 27 other nations. The U.S. financial system appeared closer to a full recovery, although the country still faced challenges dealing with housing market weakness and massive debt at period-end.

Inflation at the consumer, producer and trade levels rose across much of the world, but in the U.S. it remained relatively contained. As a result, the Federal Reserve Board (Fed) maintained its accommodative monetary policy while ending its second round of quantitative easing

1. Source: © 2011 Morningstar. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

2. Source: Bureau of Labor Statistics.

Fund Risks: The Fund’s investments in stocks may offer the potential for long-term gains but can be subject to short-term price fluctuations. Smaller and midsize company securities can increase the risk of greater price fluctuations, particularly over the short term. Smaller, newer or unseasoned companies can also be particularly sensitive to changing economic conditions, and their prospects for growth are less certain than those of larger, more established companies. Foreign investing involves additional risks, including currency fluctuations, economic instability, market volatility, and political and social instability. The Fund may from time to time have significant investments in particular sectors such as technology, which can be highly volatile. The manager applies various techniques and analyses in making investment decisions for the Fund, but there can be no guarantee that these decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

FFC-2

on June 30. The Fed said, however, it would continue to purchase Treasuries with proceeds from maturing debt in an effort to support economic growth.

Investors’ attitudes shifted with each release of economic, regulatory and geopolitical news, causing equity market volatility to increase globally. U.S. investors weathered international events that included revolutions and civil unrest across the Middle East and North Africa, the multiple crises triggered by Japan’s earthquake and tsunami, and sovereign debt worries and credit downgrades in Europe. Ultimately, stock indexes produced solid gains during the six months under review as domestic and global equity markets rose amid generally improving economic signs and record-high corporate earnings growth.

Investment Strategy

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

Manager’s Discussion

During the six months under review, most sectors represented in the Fund’s portfolio contributed to absolute performance as the broad market delivered solid returns. Stock selection in the information technology and materials sectors benefited the Fund’s performance relative to the Russell 3000 Growth Index.³ Major contributors from the information technology sector included data integration and business software solutions provider Informatica and complete programmable logic solutions developer Xilinx. Visa and MasterCard, the world’s largest payment networks, boosted relative returns as their share prices

3. The information technology sector comprises semiconductors and semiconductor equipment, software and services, and technology hardware and equipment in the SOI.

FFC-3

surged at period-end following the Fed’s decision to cap debit-card transaction fees. Chemical and advanced materials producer Celanese in the materials sector produced strong returns as the company delivered better-than-expected first quarter earnings and raised its long-term earnings growth outlook. Outside of these sectors, a new health care holding, worldwide health care solutions and services company Cerner, which benefited from demand driven by federal stimulus, health care reform and other regulatory requirements, also supported the Fund’s performance.⁴

In contrast, stock selection in the consumer discretionary, financials and health care sectors weighed on the Fund’s relative performance.⁵ In the consumer discretionary sector, worldwide hotel operator and franchisor Marriott International declined in value due to a slower growth rate in its domestic market and weakness in its timeshare unit, which the company planned to spin off under the name Marriott Vacations Worldwide. Insurance business holding company Aflac in the financials sector hurt relative returns as the company recorded losses tied to investments in Greek, Irish and Portuguese banks. A health care sector detractor was prescription pharmaceutical product developer Salix Pharmaceuticals, which failed to gain expanded Food and Drug Administration approval for its key drug, and we sold it by period-end. Stock selection and an underweighted allocation in the energy sector, where coal explorer and miner Alpha Natural Resources was a major detractor, also hindered relative results. Although our information technology holdings generally benefited the Fund’s absolute and relative performance, lower-than-expected semiconductor capital expenditure negatively affected the shares of some equipment providers including Lam Research, which supplies wafer fabrication and equipment to the worldwide semiconductor industry.

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

4. The health care sector comprises health care equipment and services; and pharmaceuticals, biotechnology and life sciences in the SOI.

5. The consumer discretionary sector comprises automobiles and components, consumer durables and apparel, consumer services, media, and retailing in the SOI. The financials sector comprises banks, diversified financials and insurance in the SOI.

The foregoing information reflects our analysis, opinions and portfolio holdings as of June 30, 2011, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

Top 10 Holdings

Franklin Flex Cap Growth Securities Fund

6/30/11

Company Sector/Industry	% of Total Net Assets
Apple Inc.		4.1%
Technology Hardware & Equipment
Praxair Inc.		2.4%
Materials
EMC Corp.		2.2%
Technology Hardware & Equipment
Celanese Corp.		2.0%
Materials
Johnson Controls Inc.		1.9%
Automobiles & Components
International Business Machines Corp.		1.8%
Software & Services
United Technologies Corp.		1.8%
Capital Goods
Kansas City Southern		1.8%
Transportation
Oracle Corp.		1.7%
Software & Services
Polo Ralph Lauren Corp.		1.6%
Consumer Durables & Apparel

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

FFC-4

Fund Expenses

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

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

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

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

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

Actual Fund Expenses

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

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

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

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

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

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

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

Franklin Flex Cap Growth Securities Fund – Class 4

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Hypothetical Example for Comparison with Other Mutual Funds

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

Class 4	Beginning Account Value 1/1/11		Ending Account Value 6/30/11		Fund-Level Expenses Incurred During Period* 1/1/11–6/30/11
Actual	$	1,000	$	1,053.00	$	5.24
Hypothetical (5% return before expenses)	$	1,000	$	1,019.69	$	5.16

*Expenses are calculated using the most recent six-month annualized expense ratio, net of expense waivers, for the Fund’s Class 4 shares (1.03%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 181/365 to reflect the one-half year period.

FFC-6

Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Franklin Flex Cap Growth Securities Fund

	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31,
Class 2				2010			2009			2008			2007			2006
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	12.70		$	10.93		$	8.22		$	12.72		$	11.14		$	10.59
Income from investment operationsa:
Net investment income (loss)b		(0.02	)		(0.02	)		(—	)c		—	c		0.04			0.02
Net realized and unrealized gains (losses)		0.70			1.79			2.71			(4.49	)		1.55			0.53
Total from investment operations		0.68			1.77			2.71			(4.49	)		1.59			0.55
Less distributions from net investment income		—			—			—			(0.01	)		(0.01	)		(—	)c
Net asset value, end of period	$	13.38		$	12.70		$	10.93		$	8.22		$	12.72		$	11.14
Total returnd		5.35%			16.19%			32.97%			(35.31)%			14.32%			5.20%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		1.17%			1.18%			1.19%			1.21%			1.25%			1.32%
Expenses net of waiver and payments by affiliates		0.93%			0.93%			0.93%	f		0.93%			0.93%	f		0.93%	f
Net investment income (loss)		(0.23)%			(0.17)%			(0.01)%			0.04%			0.31%			0.19%
Supplemental data
Net assets, end of period (000’s)	$	214,379		$	227,774		$	244,768		$	195,425		$	206,218		$	60,520
Portfolio turnover rate		31.80%			60.00%			33.64%			32.76%			30.15%			67.01%

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

^bBased on average daily shares outstanding.

^cAmount rounds to less than $0.01 per share.

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

^eRatios are annualized for periods less than one year.

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

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

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Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin Flex Cap Growth Securities Fund

	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31,
Class 4				2010			2009			2008a
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	12.63		$	10.88		$	8.21		$	11.22
Income from investment operationsb:
Net investment income (loss)c		(0.02	)		(0.03	)		(0.01	)		—	d
Net realized and unrealized gains (losses)		0.69			1.78			2.69			(2.98	)
Total from investment operations		0.67			1.75			2.68			(2.98	)
Less distributions from net investment income		—			—			(0.01	)		(0.03	)
Net asset value, end of period	$	13.30		$	12.63		$	10.88		$	8.21
Total returne		5.30%			16.08%			32.69%			(26.68)%
Ratios to average net assetsf
Expenses before waiver and payments by affiliates		1.27%			1.28%			1.29%			1.31%
Expenses net of waiver and payments by affiliates		1.03%			1.03%			1.03%	g		1.03%
Net investment income (loss)		(0.33)%			(0.27)%			(0.11)%			(0.06)%
Supplemental data
Net assets, end of period (000’s)	$	265,911		$	263,746		$	218,798		$	50,268
Portfolio turnover rate		31.80%			60.00%			33.64%			32.76%

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

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

^cBased on average daily shares outstanding.

^dAmount rounds to less than $0.01 per share.

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

^fRatios are annualized for periods less than one year.

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

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

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Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited)

Franklin Flex Cap Growth Securities Fund	Shares		Value
Common Stocks 98.6%
Automobiles & Components 3.2%
aBorgWarner Inc.		80,180	$	6,477,742
Johnson Controls Inc.		213,800		8,906,908
				15,384,650
Banks 0.6%
Wells Fargo & Co.		102,450		2,874,747
Capital Goods 10.7%
Cummins Inc.		72,420		7,494,746
Danaher Corp.		90,250		4,782,348
Emerson Electric Co.		89,080		5,010,750
Flowserve Corp.		22,280		2,448,349
General Electric Co.		178,170		3,360,286
Joy Global Inc.		62,360		5,939,166
Precision Castparts Corp.		37,420		6,161,203
Rockwell Automation Inc.		84,630		7,342,499
United Technologies Corp.		97,990		8,673,095
				51,212,442
Commercial & Professional Services 1.3%
aStericycle Inc.		71,540		6,375,645
Consumer Durables & Apparel 3.0%
NIKE Inc., B		75,720		6,813,286
Polo Ralph Lauren Corp.		57,900		7,678,119
				14,491,405
Consumer Services 1.5%
Arcos Dorados Holdings Inc. (Argentina)		35,990		759,029
Marriott International Inc., A		71,270		2,529,373
Wynn Resorts Ltd.		26,730		3,836,824
				7,125,226
Diversified Financials 3.6%
BlackRock Inc.		31,180		5,980,636
JPMorgan Chase & Co.		65,630		2,686,892
Lazard Ltd., A		115,810		4,296,551
T. Rowe Price Group Inc.		71,270		4,300,432
				17,264,511
Energy 6.8%
aAlpha Natural Resources Inc.		75,720		3,440,717
aConcho Resources Inc.		57,900		5,318,115
aFMC Technologies Inc.		57,900		2,593,341
Halliburton Co.		80,180		4,089,180
aPetrohawk Energy Corp.		253,890		6,263,466
Schlumberger Ltd.		44,540		3,848,256
SM Energy Co.		97,990		7,200,305
				32,753,380
Food, Beverage & Tobacco 3.0%
aHansen Natural Corp.		37,860		3,064,767
Mead Johnson Nutrition Co., A		92,620		6,256,481
PepsiCo Inc.		71,270		5,019,546
				14,340,794

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Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin Flex Cap Growth Securities Fund	Shares		Value
Common Stocks (continued)
Health Care Equipment & Services 6.5%
aAllscripts Healthcare Solutions Inc.		159,642	$	3,100,247
aCerner Corp.		106,900		6,532,659
aDaVita Inc.		30,290		2,623,417
aEdwards Lifesciences Corp.		57,900		5,047,722
aExpress Scripts Inc.		106,910		5,771,002
aIntuitive Surgical Inc.		8,020		2,984,322
Universal Health Services Inc., B		48,990		2,524,455
aVarian Medical Systems Inc.		35,640		2,495,513
				31,079,337
Household & Personal Products 0.5%
The Procter & Gamble Co.		40,090		2,548,521
Insurance 1.8%
ACE Ltd.		36,530		2,404,405
Aflac Inc.		133,620		6,237,381
				8,641,786
Materials 5.5%
Celanese Corp., A		178,170		9,498,243
Ecolab Inc.		102,440		5,775,567
Praxair Inc.		104,230		11,297,490
				26,571,300
Media 3.3%
aDIRECTV, A		126,090		6,407,894
aDiscovery Communications Inc., C		160,350		5,860,792
The Walt Disney Co.		89,080		3,477,683
				15,746,369
Pharmaceuticals, Biotechnology & Life Sciences 4.2%
aCelgene Corp.		67,710		4,084,267
aGilead Sciences Inc.		75,190		3,113,618
aHuman Genome Sciences Inc.		92,940		2,280,748
aIllumina Inc.		36,000		2,705,400
Merck & Co. Inc.		80,180		2,829,552
aWaters Corp.		53,450		5,117,303
				20,130,888
Retailing 1.7%
aAmazon.com Inc.		14,250		2,913,982
aHomeAway Inc.		11,700		452,790
aPriceline.com Inc.		9,360		4,791,665
				8,158,437
Semiconductors & Semiconductor Equipment 4.9%
Avago Technologies Ltd. (Singapore)		97,990		3,723,620
aFirst Solar Inc.		15,590		2,062,089
aFreescale Semiconductor Holdings I Ltd.		45,440		835,642
aLam Research Corp.		60,940		2,698,423
Microchip Technology Inc.		191,530		7,260,902
Xilinx Inc.		182,620		6,660,152
				23,240,828
Software & Services 16.9%
aBottomline Technologies Inc.		111,360		2,751,706
aCitrix Systems Inc.		89,080		7,126,400

FFC-10

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin Flex Cap Growth Securities Fund	Shares		Value
Common Stocks (continued)
Software & Services (continued)
aCognizant Technology Solutions Corp., A		69,490	$	5,096,397
FactSet Research Systems Inc.		44,190		4,521,521
aFortinet Inc.		133,620		3,646,490
aInformatica Corp.		122,050		7,131,381
International Business Machines Corp.		50,780		8,711,309
MasterCard Inc., A		22,280		6,713,855
aNuance Communications Inc.		191,530		4,112,149
Oracle Corp.		253,890		8,355,520
aRed Hat Inc.		146,990		6,746,841
aSalesforce.com Inc.		37,420		5,574,831
aTaleo Corp., A		106,910		3,958,877
Visa Inc., A		80,180		6,755,967
				81,203,244
Technology Hardware & Equipment 14.6%
aAcme Packet Inc.		46,320		3,248,422
aApple Inc.		58,170		19,525,924
aAruba Networks Inc.		100,000		2,955,000
aEMC Corp.		384,750		10,599,862
aF5 Networks Inc.		35,630		3,928,208
aFabrinet		115,810		2,811,867
FLIR Systems Inc.		115,810		3,903,955
aFusion-io-Inc.		5,350		160,982
National Instruments Corp.		144,990		4,304,753
aNetApp Inc.		115,810		6,112,452
QUALCOMM Inc.		111,360		6,324,134
aTrimble Navigation Ltd.		159,460		6,320,994
				70,196,553
Telecommunication Services 1.0%
aAmerican Tower Corp., A		93,540		4,894,948
Transportation 4.0%
C.H. Robinson Worldwide Inc.		32,250		2,542,591
Expeditors International of Washington Inc.		84,630		4,332,210
FedEx Corp.		40,090		3,802,536
aKansas City Southern		145,000		8,602,850
				19,280,187
Total Common Stocks (Cost $334,537,874)				473,515,198
Short Term Investments (Cost $45,892,789) 9.5%
Money Market Funds 9.5%
a,bInstitutional Fiduciary Trust Money Market Portfolio		45,892,789		45,892,789
Total Investments (Cost $380,430,663) 108.1%				519,407,987
Other Assets, less Liabilities (8.1)%				(39,117,657	)
Net Assets 100.0%			$	480,290,330

^aNon-income producing.

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

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

FFC-11

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

June 30, 2011 (unaudited)

	Franklin Flex Cap Growth Securities Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	334,537,874
Cost - Sweep Money Fund (Note 7)		45,892,789
Total cost of investments	$	380,430,663
Value - Unaffiliated issuers	$	473,515,198
Value - Sweep Money Fund (Note 7)		45,892,789
Total value of investments		519,407,987
Receivables:
Investment securities sold		34,319,581
Capital shares sold		289,927
Dividends		237,206
Other assets		15,790
Total assets		554,270,491
Liabilities:
Payables:
Investment securities purchased		5,952,069
Capital shares redeemed		67,360,127
Affiliates		552,298
Accrued expenses and other liabilities		115,667
Total liabilities		73,980,161
Net assets, at value	$	480,290,330
Net assets consist of:
Paid-in capital	$	377,065,109
Undistributed net investment income (loss)		(750,054	)
Net unrealized appreciation (depreciation)		138,977,324
Accumulated net realized gain (loss)		(35,002,049	)
Net assets, at value	$	480,290,330
Class 2:
Net assets, at value	$	214,379,431
Shares outstanding		16,024,934
Net asset value and maximum offering price per share	$	13.38
Class 4:
Net assets, at value	$	265,910,899
Shares outstanding		19,988,104
Net asset value and maximum offering price per share	$	13.30

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

FFC-12

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the six months ended June 30, 2011 (unaudited)

	Franklin Flex Cap Growth Securities Fund
Investment income:
Dividends	$	1,823,307
Expenses:
Management fees (Note 3a)		1,663,605
Administrative fees (Note 3b)		652,802
Distribution fees: (Note 3c)
Class 2		292,685
Class 4		505,054
Unaffiliated transfer agent fees		383
Custodian fees (Note 4)		3,484
Reports to shareholders		58,569
Professional fees		17,689
Trustees’ fees and expenses		987
Other		10,635
Total expenses		3,205,893
Expenses waived/paid by affiliates (Note 3e)		(632,532	)
Net expenses		2,573,361
Net investment income (loss)		(750,054	)
Realized and unrealized gains (losses):
Net realized gain (loss) from investments		20,831,449
Net change in unrealized appreciation (depreciation) on investments		6,809,817
Net realized and unrealized gain (loss)		27,641,266
Net increase (decrease) in net assets resulting from operations	$	26,891,212

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

FFC-13

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets

	Franklin Flex Cap Growth Securities Fund
	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31, 2010
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	(750,054	)	$	(1,037,499	)
Net realized gain (loss) from investments		20,831,449			(4,167,287	)
Net change in unrealized appreciation (depreciation) on investments		6,809,817			66,627,082
Net increase (decrease) in net assets resulting from operations		26,891,212			61,422,296
Capital share transactions: (Note 2)
Class 2		(25,559,404	)		(46,447,755	)
Class 4		(12,561,212	)		12,979,114
Total capital share transactions		(38,120,616	)		(33,468,641	)
Net increase (decrease) in net assets		(11,229,404	)		27,953,655
Net assets:
Beginning of period		491,519,734			463,566,079
End of period	$	480,290,330		$	491,519,734
Undistributed net investment income (loss) included in net assets:
End of period	$	(750,054	)	$	—

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

FFC-14

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited)

Franklin Flex Cap Growth Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment company, consisting of twenty separate funds. The Franklin Flex Cap Growth Securities (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. At June 30, 2011, 76.47% of the Fund’s shares were held through one insurance company. The Fund offers two classes of shares: Class 2 and Class 4. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

The Fund’s investments in securities and other financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Under procedures approved by the Trust’s Board of Trustees, the Fund may utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

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

The Fund has procedures to determine the fair value of securities and other financial instruments for which market prices are not readily available or which may not be reliably priced. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.

Trading in securities on foreign securities stock exchanges and over-the-counter markets may be completed before the daily close of business on the NYSE. Occasionally, events occur between the time at which trading in a foreign security is completed and the close of the NYSE that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund’s portfolio securities as determined at the foreign market close and the latest indications of value at the close of the NYSE. In order to minimize the potential for these differences, the investment manager monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depository Receipts, 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 may call into question the reliability of the values of the foreign securities held by the Fund. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services.

FFC-15

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Flex Cap Growth Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

b. Foreign Currency Translation

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

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

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

c. Income Taxes

It is the Fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and excise taxes. As a result, no provision for U.S. federal income taxes is required. The Fund files U.S. income tax returns as well as tax returns in certain other jurisdictions. The Fund records a provision for taxes in its financial statements including penalties and interest, if any, for a tax position taken on a tax return (or expected to be taken) when it fails to meet the more likely than not (a greater than 50% probability) threshold and based on the technical merits, the tax position may not be sustained upon examination by the tax authorities. As of June 30, 2011, and for all open tax years, the Fund has determined that no provision for income tax is required in the Fund’s financial statements. Open tax years are those that remain subject to examination and are based on each tax jurisdiction statute of limitation.

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

d. Security Transactions, Investment Income, Expenses and Distributions

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

FFC-16

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Flex Cap Growth Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

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

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

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

e. Accounting Estimates

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

f. Guarantees and Indemnifications

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

2. SHARES OF BENEFICIAL INTEREST

At June 30, 2011, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:

	Six Months Ended June 30, 2011						Year Ended December 31, 2010
Class 2 Shares:	Shares			Amount			Shares			Amount
Shares sold		1,457,418		$	19,198,361			2,712,486		$	30,583,993
Shares redeemed		(3,371,464	)		(44,757,765	)		(7,177,369	)		(77,031,748	)
Net increase (decrease)		(1,914,046	)	$	(25,559,404	)		(4,464,883	)	$	(46,447,755	)
Class 4 Shares:
Shares sold		4,396,198		$	57,493,181			9,474,153		$	105,454,276
Shares redeemed		(5,287,150	)		(70,054,393	)		(8,700,670	)		(92,475,162	)
Net increase (decrease)		(890,952	)	$	(12,561,212	)		773,483		$	12,979,114

FFC-17

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Flex Cap Growth Securities Fund

3. TRANSACTIONS WITH AFFILIATES

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

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

a. Management Fees

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

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

b. Administrative Fees

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

c. Distribution Fees

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

d. Transfer Agent Fees

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

e. Waiver and Expense Reimbursements

FT Services has contractually agreed in advance to waive or limit its respective fees and to assume as its own expense certain expenses otherwise payable by the fund so that the common expenses (i.e. a combination of management fees, administrative fees, and other expenses, but excluding distribution fees, and acquired fund fees and expenses) for each class of the Fund do not exceed 0.68% (other than certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations, and liquidations) until April 30, 2012.

4. EXPENSE OFFSET ARRANGEMENT

The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses. During the period ended June 30, 2011, there were no credits earned.

FFC-18

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Flex Cap Growth Securities Fund

5. INCOME TAXES

For tax purposes, capital losses may be carried over to offset future capital gains, if any. At December 31, 2010, the capital loss carryforwards were as follows:

Capital loss carryforwards expiring in:
2013	$	233,183
2014		2,517,251
2015		777,263
2016		15,495,131
2017		30,645,725
2018		4,113,202
	$	53,781,755

Under the Regulated Investment Company Modernization Act of 2010, the Fund will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. Post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered short-term as under previous law. Any post-enactment capital losses generated will be required to be utilized prior to the losses incurred in pre-enactment tax years.

At June 30, 2011, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	381,889,071
Unrealized appreciation	$	138,942,605
Unrealized depreciation		(1,423,689	)
Net unrealized appreciation (depreciation)	$	137,518,916

Net investment income (loss) differs for financial statement and tax purposes primarily due to differing treatment of pass-through entity income.

Net realized gains (losses) differ for financial statement and tax purposes primarily due to differing treatments of wash sales and pass-through entity income.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2011, aggregated $160,439,965 and $196,871,568, respectively.

7. INVESTMENTS IN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO

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

8. CREDIT FACILITY

The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $750 million (Global Credit

FFC-19

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Flex Cap Growth Securities Fund

8. CREDIT FACILITY (continued)

Facility) which matures on January 20, 2012. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests.

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.08% based upon the unused portion of the Global Credit Facility, which is reflected in other expenses on the Statement of Operations. During the period ended June 30, 2011, the Fund did not use the Global Credit Facility.

9. FAIR VALUE MEASUREMENTS

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

• Level 1 – quoted prices in active markets for identical securities

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

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

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

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

At June 30, 2011, all of the Fund’s investments in securities carried at fair value were in Level 1 inputs. For detailed categories, see the accompanying Statement of Investments.

10. NEW ACCOUNTING PRONOUNCEMENTS

In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (IFRS). The amendments in the ASU will improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRS and include new guidance for certain fair value measurement principles and disclosure requirements. The ASU is effective for interim and annual periods beginning after December 15, 2011. The Fund is currently evaluating the impact, if any, of applying this provision.

11. SUBSEQUENT EVENTS

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

FFC-20

FRANKLIN HIGH INCOME SECURITIES FUND

This semiannual report for Franklin High Income Securities Fund covers the period ended June 30, 2011.

Performance Summary as of 6/30/11

Franklin High Income Securities Fund – Class 4 delivered a +4.55% total return for the six-month period ended 6/30/11.

Performance reflects the Fund’s Class 4 operating expenses, but does not include any contract fees, expenses or sales charges. If they had been included, performance would be lower. These charges and deductions, particularly for variable life policies, can have a significant effect on contract values and insurance benefits. See the contract prospectus for a complete description of these expenses, including sales charges.

Franklin High Income Securities Fund – Class 4

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

FH-1

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

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. In comparison, the Fund’s benchmark, the Credit Suisse (CS) High Yield Index, posted a +4.84% total return for the period under review.¹ The Fund’s peers, as measured by the Lipper VIP High Current Yield Funds Classification Average, posted a +4.38% total return.²

Economic and Market Overview

As consumer spending rose during the six-month reporting period, the U.S. economy expanded, although the pace of growth slowed. The Federal Reserve Board (Fed) announced in November it intended to buy $600 billion of longer term Treasury securities by the end of the second quarter of 2011. It sought to promote a stronger recovery and help maintain inflation levels the Fed believed consistent with its dual mandate to foster maximum employment and price stability. Despite the Fed’s actions, the economic recovery stalled. U.S. home prices fell sharply during the first quarter of 2011, and unemployment remained stubbornly high. After showing solid improvement during the period, manufacturing activity weakened partly because of auto supply-chain disruptions following Japan’s natural disasters.

Geopolitical instability in North Africa and the Middle East drove up oil prices for most of the period. However, investor concerns over weak economic data caused crude oil prices to drop from their six-month high of $114 per barrel on April 29 to $95 at period-end. Storms and droughts in several states reduced crop yields, pushing up grain prices. As oil and food prices rose, the pace of inflation accelerated during the period.

Despite turmoil in North Africa and the Middle East, the multiple crises triggered by Japan’s earthquake and headwinds facing the U.S. economy, generally favorable economic improvements and positive corporate earnings reports gave investors confidence. While equity and fixed

1. Source: © 2011 Morningstar.

2. Source: Lipper Inc.

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

Fund Risks: Because the Fund invests in bonds and other debt obligations, its share price and yield will be affected by interest rate movements. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in the Fund adjust to a rise in interest rates, the Fund’s share price may decline. The Fund invests primarily to predominantly in high yield, lower rated (junk) bonds, which generally have greater price swings and higher risk of default and loss of principal than investment-grade bonds. Foreign investing, especially in developing markets, involves additional risks including currency fluctuations, economic instability, market volatility, and political and social instability. Derivative instruments may be volatile and illiquid, may give rise to leverage and may involve a small investment relative to the risk assumed. Bank loans, corporate loans and loan participations involve credit, interest rate and illiquidity risks. The manager applies various techniques and analyses in making investment decisions for the Fund, but there can be no guarantee that these decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

FH-2

income markets performed well overall for the six months under review, investors reacted to reports on the Greek debt crisis by seeking the perceived safe haven of U.S. Treasuries. At period-end, the Greek government approved an austerity bill to secure a bailout loan from international creditors, which helped relieve investor anxiety.

Although the high yield market lost some steam in 2010’s fourth quarter, market sentiment was generally positive in early 2011 with a rally that extended through May. In June, however, a confluence of factors weighed heavily on equity markets, which in turn pressured the high yield market. Increased oil prices coupled with still weak U.S. housing data and spotty consumer confidence heightened concerns about the domestic economic recovery. Overseas, Greece’s fiscal crisis was coming to a head, which also increased market volatility. These factors combined to make investors skittish, leading to technical selling pressure in June as some high yield mutual fund investors redeemed shares. This selling contributed to the high yield market’s first negative monthly total return of 2011.

Investment Strategy

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

Manager’s Discussion

With continued overall strength in the high yield market, Franklin High Income Securities Fund generated a positive total return for the six-month period ended June 30, 2011. The Fund performed in line with its benchmark, the CS High Yield Index, and its peer group, the Lipper VIP High Current Yield Funds Classification Average.

Overall, given the health of corporate balance sheets and indications the U.S. economy would slowly continue to improve, somewhat offset by

FH-3

tighter high yield spreads relative to U.S. Treasury securities, we maintained a generally neutral risk stance for most of the reporting period. In addition, as typical, we drew on our fundamental research process to set the Fund’s industry positioning. Within that framework, we over- and underweighted certain industries relative to our benchmark in an effort to outperform the benchmark CS High Yield Index.

For instance, given our lack of confidence that the U.S. housing market had bottomed, we underweighted the building industry, which underperformed the benchmark index.³ Although the industry rallied in the latter part of 2010 on hopes homebuyers would return in force, actual housing data continued to disappoint the market during the review period, causing bonds to sell off and, ultimately, underperform the index. Our underweighted positioning therefore aided relative performance. Similarly, we continued to be cautious regarding a strong consumer recovery and therefore underweighted the retail industry.⁴ This industry showed periodic pockets of strength but underperformed the CS High Yield Index for the six months under review. The paper industry was another poor performer.⁵ Companies in this industry faced declining demand and heavy price competition as well as increased input costs in some subsectors. Thus, we limited our exposure and underweighted the industry, which benefited relative Fund performance.

Although some Fund industry positioning enhanced relative performance, certain weightings had a negative impact. For example, the Fund’s weightings in the technology, financials and industrials sectors hindered relative performance.⁶ Although the Fund increased its technology sector exposure during the period, it remained slightly underweighted versus the benchmark index while the sector finished among the index’s top performers. Some bonds in the sector rallied as certain large-capitalization, highly leveraged issuers experienced improved operating results and used the debt markets to improve liquidity. Our relatively underweighted financials sector exposure also negatively impacted performance as the sector was a strong performer. Conversely, the Fund was overweighted in the industrials sector as a result of our bottom-up analysis. However, the sector slightly underperformed the benchmark index as it suffered more than many other

3. Building holdings are in consumer durables and apparel, and materials in the SOI.

4. Retail holdings are in food and staples retailing, and retailing in the SOI.

5. Paper holdings are in materials in the SOI.

6. Technology holdings are in semiconductors and semiconductor equipment, software and services, and technology hardware and equipment in the SOI. Financials holdings are in banks, commercial and professional services, diversified financials, and real estate in the SOI. Industrials holdings are in capital goods, commercial and professional services, materials, and transportation in the SOI.

Top 10 Sectors/Industries

Franklin High Income Securities Fund

6/30/11

	% of Total Net Assets
Energy		19.9%
Media		9.1%
Telecommunication Services		8.4%
Materials		8.2%
Diversified Financials		5.8%
Health Care Equipment & Services		5.7%
Consumer Services		5.4%
Automobiles & Components		5.3%
Capital Goods		4.9%
Utilities		3.8%

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

FH-4

sectors during the market’s June sell-off. Therefore, the Fund’s overweighted positioning negatively impacted relative performance.

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

The foregoing information reflects our analysis, opinions and portfolio holdings as of June 30, 2011, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

FH-5

Fund Expenses

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

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

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

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

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

Actual Fund Expenses

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

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

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

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

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

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

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

Franklin High Income Securities Fund – Class 4

FH-6

Hypothetical Example for Comparison with Other Mutual Funds

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

Class 4	Beginning Account Value 1/1/11		Ending Account Value 6/30/11		Fund-Level Expenses Incurred During Period* 1/1/11–6/30/11
Actual	$	1,000	$	1,045.50	$	4.67
Hypothetical (5% return before expenses)	$	1,000	$	1,020.23	$	4.61

*Expenses are calculated using the most recent six-month annualized expense ratio for the Fund’s Class 4 shares (0.92%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 181/365 to reflect the one-half year period.

FH-7

Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Franklin High Income Securities Fund

	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31,
Class 1				2010			2009			2008			2007			2006
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	6.63		$	6.26		$	4.68		$	6.72		$	6.96		$	6.82
Income from investment operationsa:
Net investment incomeb		0.25			0.49			0.46			0.50			0.51			0.49
Net realized and unrealized gains (losses)		0.07			0.32			1.50			(1.92	)		(0.30	)		0.12
Total from investment operations		0.32			0.81			1.96			(1.42	)		0.21			0.61
Less distributions from net investment income		(0.42	)		(0.44	)		(0.38	)		(0.62	)		(0.45	)		(0.47	)
Net asset value, end of period	$	6.53		$	6.63		$	6.26		$	4.68		$	6.72		$	6.96
Total returnc		4.79%			13.71%			42.99%			(23.16)%			3.02%			9.48%
Ratios to average net assetsd
Expenses before expense reduction		0.57%			0.61%			0.63%			0.66%			0.61%			0.64%
Expenses net of expense reduction		0.57%			0.61%			0.63%	e		0.66%	e		0.61%	e		0.63%
Net investment income		7.41%			7.71%			8.33%			8.30%			7.38%			7.14%
Supplemental data
Net assets, end of period (000’s)	$	46,047		$	48,051		$	48,855		$	38,225		$	61,286		$	77,641
Portfolio turnover rate		25.12%			60.80%			26.41%			21.75%			40.65%			37.99%

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

^bBased on average daily shares outstanding.

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

^dRatios are annualized for periods less than one year.

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

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

FH-8

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin High Income Securities Fund

	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31,
Class 2				2010			2009			2008			2007			2006
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	6.47		$	6.13		$	4.59		$	6.60		$	6.85		$	6.71
Income from investment operationsa:
Net investment incomeb		0.24			0.47			0.44			0.47			0.48			0.46
Net realized and unrealized gains (losses)		0.06			0.30			1.47			(1.88	)		(0.29	)		0.13
Total from investment operations		0.30			0.77			1.91			(1.41	)		0.19			0.59
Less distributions from net investment income		(0.40	)		(0.43	)		(0.37	)		(0.60	)		(0.44	)		(0.45	)
Net asset value, end of period	$	6.37		$	6.47		$	6.13		$	4.59		$	6.60		$	6.85
Total returnc		4.72%			13.26%			42.70%			(23.38)%			2.72%			9.36%
Ratios to average net assetsd
Expenses before expense reduction		0.82%			0.86%			0.88%			0.91%			0.86%			0.89%
Expenses net of expense reduction		0.82%			0.86%			0.88%	e		0.91%	e		0.86%	e		0.88%
Net investment income		7.16%			7.46%			8.08%			8.05%			7.13%			6.89%
Supplemental data
Net assets, end of period (000’s)	$	277,012		$	239,824		$	198,567		$	84,396		$	155,777		$	166,318
Portfolio turnover rate		25.12%			60.80%			26.41%			21.75%			40.65%			37.99%

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

^bBased on average daily shares outstanding.

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

^dRatios are annualized for periods less than one year.

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

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

FH-9

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin High Income Securities Fund

	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31,
Class 4				2010			2009			2008a
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	6.57		$	6.22		$	4.67		$	6.55
Income from investment operationsb:
Net investment incomec		0.24			0.47			0.45			0.39
Net realized and unrealized gains (losses)		0.06			0.31			1.48			(1.65	)
Total from investment operations		0.30			0.78			1.93			(1.26	)
Less distributions from net investment income		(0.40	)		(0.43	)		(0.38	)		(0.62	)
Net asset value, end of period	$	6.47		$	6.57		$	6.22		$	4.67
Total returnd		4.55%			13.31%			42.36%			(21.34)%
Ratios to average net assetse
Expenses		0.92%			0.96%			0.98%	f		1.01%	f
Net investment income		7.06%			7.36%			7.98%			7.95%
Supplemental data
Net assets, end of period (000’s)	$	28,010		$	25,934		$	15,105		$	2,244
Portfolio turnover rate		25.12%			60.80%			26.41%			21.75%

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

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

^cBased on average daily shares outstanding.

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

^eRatios are annualized for periods less than one year.

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

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

FH-10

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited)

Franklin High Income Securities Fund	Country	Shares		Value
Common Stocks (Cost $865,221) 0.0%†
Media 0.0%†
aDex One Corp.	United States		27,909	$	70,610
Preferred Stocks (Cost $770,000) 0.2%
Diversified Financials 0.2%
GMAC Capital Trust I, 8.125%, pfd.	United States		30,800		788,480
		Principal Amount*
Corporate Bonds 95.5%
Automobiles & Components 5.3%
bChrysler Group LLC/CG Co-Issuer Inc., senior secured note, 144A, 8.25%, 6/15/21	United States		1,500,000		1,477,500
bExide Technologies, senior secured note, 144A, 8.625%, 2/01/18	United States		800,000		836,000
Ford Motor Credit Co. LLC,
7.80%, 6/01/12	United States		500,000		523,002
senior note, 7.00%, 4/15/15	United States		2,000,000		2,165,318
senior note, 6.625%, 8/15/17	United States		1,000,000		1,063,788
senior note, 5.00%, 5/15/18	United States		1,000,000		998,566
senior note, 8.125%, 1/15/20	United States		1,000,000		1,161,505
senior note, 5.75%, 2/01/21	United States		1,000,000		1,000,615
The Goodyear Tire & Rubber Co., senior note, 8.25%, 8/15/20	United States		3,500,000		3,797,500
International Automotive Components Group SL, senior secured note, 9.125%, 6/01/18	Luxembourg		1,400,000		1,429,750
bPittsburgh Glass Works LLC., secured senior note, 144A, 8.50%, 4/15/16	United States		2,300,000		2,374,750
bTRW Automotive Inc., senior note, 144A, 7.25%, 3/15/17	United States		1,700,000		1,895,500
					18,723,794
Banks 0.6%
cWells Fargo Capital XV, pfd., 9.75% to 9/26/13, FRN thereafter, Perpetual	United States		2,000,000		2,120,000
Capital Goods 4.9%
bAbengoa Finance SAU, senior note, 144A, 8.875%, 11/01/17	Spain		3,000,000		3,074,985
bAllison Transmission Holdings Inc., senior note, 144A, 7.125%, 5/15/19	United States		1,000,000		977,500
The Manitowoc Co. Inc., senior note,
9.50%, 2/15/18	United States		1,400,000		1,527,750
8.50%, 11/01/20	United States		500,000		536,250
Meritor Inc., senior note, 10.625%, 3/15/18	United States		1,900,000		2,142,250
bPinafore LLC/Inc., senior secured note, 144A, 9.00%, 10/01/18	United States		200,000		216,500
RBS Global & Rexnord Corp., senior note, 8.50%, 5/01/18	United States		3,000,000		3,183,750
RSC Equipment Rental Inc. and RSC Holdings III LLC, senior note, 10.25%, 11/15/19	United States		2,500,000		2,750,000
United Rentals North America Inc., senior sub. note, 8.375%, 9/15/20	United States		2,800,000		2,849,000
					17,257,985
Commercial & Professional Services 0.3%
b,dARAMARK Holdings Corp., senior note, 144A, PIK, 8.625%, 5/01/16	United States		600,000		613,500
e,fGoss Graphic Systems Inc., senior sub. note, 12.25%, 11/19/05	United States		1,912,374		191
bInteractive Data Corp., senior note, 144A, 10.25%, 8/01/18	United States		500,000		546,250
					1,159,941
Consumer Durables & Apparel 3.1%
Jarden Corp., senior note, 6.125%, 11/15/22	United States		500,000		498,125
senior sub. note, 7.50%, 5/01/17	United States		2,200,000		2,296,250
KB Home, senior note, 6.25%, 6/15/15	United States		2,000,000		1,920,000
M/I Homes Inc., senior note, 8.625%, 11/15/18	United States		1,500,000		1,483,125
bShea Homes LP/Funding Corp., senior secured note, 144A, 8.625%, 5/15/19	United States		1,600,000		1,580,000
Visant Corp., senior note, 10.00%, 10/01/17	United States		3,100,000		3,224,000
					11,001,500

FH-11

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin High Income Securities Fund	Country	Principal Amount*		Value
Corporate Bonds (continued)
Consumer Services 5.4%
bCityCenter Holdings/Finance, senior secured note, 144A, 7.625%, 1/15/16	United States		1,000,000	$	1,037,500
CKE Restaurants Inc., senior secured note, 11.375%, 7/15/18	United States		2,200,000		2,414,500
bClubCorp Club Operations Inc., senior note, 144A, 10.00%, 12/01/18	United States		2,200,000		2,189,000
b,eFontainebleau Las Vegas, 144A, 11.00%, 6/15/15	United States		1,700,000		850
Harrah’s Operating Co. Inc., senior secured note, 11.25%, 6/01/17	United States		3,000,000		3,326,250
MGM Resorts International, senior note, 6.625%, 7/15/15	United States		2,000,000		1,885,000
senior note, 6.875%, 4/01/16	United States		1,200,000		1,131,000
senior secured note, 9.00%, 3/15/20	United States		600,000		660,000
bNCL Corp. Ltd., senior note, 144A, 9.50%, 11/15/18	United States		500,000		535,000
Norwegian Cruise Line Ltd., senior secured note, 11.75%, 11/15/16	United States		800,000		925,000
Pinnacle Entertainment Inc., senior note, 8.625%, 8/01/17	United States		2,200,000		2,373,250
senior sub. note, 7.50%, 6/15/15	United States		400,000		409,000
bShingle Springs Tribal Gaming Authority, senior note, 144A, 9.375%, 6/15/15	United States		1,200,000		834,000
eStation Casinos Inc., senior note, 6.00%, 4/01/12	United States		200,000		20
senior note, 7.75%, 8/15/16	United States		1,000,000		100
senior sub. note, 6.50%, 2/01/14	United States		100,000		10
senior sub. note, 6.875%, 3/01/16	United States		1,000,000		100
bSugarhouse HSP Gaming Prop Mezz LP/Finance Corp., senior secured note, 144A, 8.625%, 4/15/16	United States		1,200,000		1,242,000
					18,962,580
Diversified Financials 5.6%
Ally Financial Inc., senior note, 7.50%, 9/15/20	United States		500,000		525,000
cBank of America Corp., pfd., sub. bond, M, 8.125% to 5/15/18, FRN thereafter, Perpetual	United States		2,500,000		2,613,900
bCIT Group Inc., secured bond, 144A, 7.00%, 5/02/17	United States		6,000,000		6,000,000
secured note, 144A, 6.625%, 4/01/18	United States		300,000		314,250
GMAC Inc., senior note, 6.875%, 8/28/12	United States		3,000,000		3,112,500
sub. note, 8.00%, 12/31/18	United States		800,000		860,000
International Lease Finance Corp., senior note, 8.25%, 12/15/20	United States		1,200,000		1,299,000
senior note, R, 5.65%, 6/01/14	United States		2,800,000		2,814,000
bsenior secured note, 144A, 6.75%, 9/01/16	United States		1,200,000		1,284,000
TransUnion LLC/TransUnion FICO, senior note, 11.375%, 6/15/18	United States		600,000		681,000
					19,503,650
Energy 19.9%
Alpha Natural Resources Inc., senior note, 6.00%, 6/01/19	United States		1,100,000		1,102,750
6.25%, 6/01/21	United States		1,100,000		1,111,000
Antero Resources Finance, senior note, 9.375%, 12/01/17	United States		2,600,000		2,808,000
bArch Coal Inc., senior note, 144A,
7.00%, 6/15/19	United States		700,000		701,750
7.25%, 6/15/21	United States		1,000,000		1,006,250
BreitBurn Energy Partners LP, senior note, 8.625%, 10/15/20	United States		1,200,000		1,272,000
Brigham Exploration Co., senior note, 8.75%, 10/01/18	United States		2,800,000		3,066,000
bCalumet Specialty Products Partners LP/Finance Corp., senior note, 144A, 9.375%, 5/01/19	United States		900,000		931,500
Carrizo Oil & Gas Inc., senior note, 8.625%, 10/15/18	United States		800,000		828,000

FH-12

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin High Income Securities Fund	Country	Principal Amount*		Value
Corporate Bonds (continued)
Energy (continued)
Chaparral Energy Inc., senior note,
9.875%, 10/01/20	United States		1,400,000	$	1,519,000
8.25%, 9/01/21	United States		600,000		607,500
bCHC Helicopter SA, senior secured note, 144A, 9.25%, 10/15/20	Canada		3,500,000		3,176,250
Chesapeake Energy Corp., senior note,
6.625%, 8/15/20	United States		2,900,000		3,066,750
6.125%, 2/15/21	United States		1,000,000		1,013,750
bClayton Williams Energy Inc., senior note, 144A, 7.75%, 4/01/19	United States		1,400,000		1,375,500
bCompagnie Generale de Geophysique-Veritas, senior note, 144A, 6.50%, 6/01/21	France		2,500,000		2,422,500
CONSOL Energy Inc., senior note,
8.00%, 4/01/17	United States		500,000		547,500
8.25%, 4/01/20	United States		500,000		547,500
b144A, 6.375%, 3/01/21	United States		300,000		300,000
Copano Energy LLC/Copano Energy Finance Corp., senior note, 7.125%, 4/01/21	United States		800,000		792,000
Crosstex Energy LP/Crosstex Energy Finance Corp., senior note, 8.875%, 2/15/18	United States		500,000		535,000
bEagle Rock Energy Partners LP/Finance Corp., senior note, 144A, 8.375%, 6/01/19	United States		1,400,000		1,401,750
El Paso Corp., senior bond, 6.50%, 9/15/20	United States		400,000		439,057
senior note, 6.875%, 6/15/14	United States		1,500,000		1,683,196
bEnergy XXI Gulf Coast Inc., senior note, 144A, 9.25%, 12/15/17	United States		2,500,000		2,668,750
gEnterprise Products Operating LLC, junior sub. note, FRN, 7.034%, 1/15/68	United States		1,900,000		1,999,984
bExpro Finance Luxembourg, senior secured note, 144A, 8.50%, 12/15/16	United Kingdom		3,000,000		2,910,000
bGoodrich Petroleum Corp., senior note, 144A, 8.875%, 3/15/19	United States		2,200,000		2,211,000
Linn Energy Corp., senior note,
8.625%, 4/15/20	United States		2,000,000		2,180,000
b144A, 6.50%, 5/15/19	United States		600,000		595,500
b144A, 7.75%, 2/01/21	United States		700,000		731,500
MarkWest Energy Partners LP/Finance Corp., senior note,
6.75%, 11/01/20	United States		1,500,000		1,537,500
6.50%, 8/15/21	United States		600,000		597,000
Martin Midstream Partners LP, senior note, 8.875%, 4/01/18	United States		1,500,000		1,582,500
bOasis Petroleum Inc., senior note, 144A, 7.25%, 2/01/19	United States		500,000		497,500
Offshore Group Investment Ltd., senior secured note,
11.50%, 8/01/15	United States		1,300,000		1,420,250
b144A, 11.50%, 8/01/15	United States		400,000		437,000
bOPTI Canada Inc., senior secured note, 144A,
9.00%, 12/15/12	Canada		700,000		707,000
9.75%, 8/15/13	Canada		1,000,000		997,500
Peabody Energy Corp., senior note, 6.50%, 9/15/20	United States		1,700,000		1,836,000
Petrohawk Energy Corp., senior note,
7.875%, 6/01/15	United States		1,800,000		1,894,500
7.25%, 8/15/18	United States		1,000,000		1,031,250
b144A, 6.25%, 6/01/19	United States		600,000		587,250
bPetroplus Finance Ltd., senior note, 144A, 6.75%, 5/01/14	Switzerland		1,600,000		1,576,000
Plains Exploration & Production Co., senior note, 7.625%, 6/01/18	United States		2,200,000		2,321,000
Quicksilver Resources Inc., senior note,
8.25%, 8/01/15	United States		2,000,000		2,117,500
9.125%, 8/15/19	United States		300,000		328,500
SandRidge Energy Inc., senior note,
8.75%, 1/15/20	United States		300,000		321,000
b144A, 8.00%, 6/01/18	United States		2,500,000		2,562,500
b144A, 7.50%, 3/15/21	United States		400,000		405,500
bW&T Offshore Inc., senior note, 144A, 8.50%, 6/15/19	United States		1,500,000		1,522,500
					69,830,987

FH-13

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin High Income Securities Fund	Country	Principal Amount*		Value
Corporate Bonds (continued)
Food & Staples Retailing 0.9%
Rite Aid Corp., senior secured note,
9.75%, 6/12/16	United States		1,800,000	$	1,995,750
8.00%, 8/15/20	United States		1,000,000		1,082,500
					3,078,250
Food, Beverage & Tobacco 2.4%
bBlue Merger Sub Inc., senior note, 144A, 7.625%, 2/15/19	United States		2,200,000		2,233,000
bCEDC Finance Corp. International Inc., senior secured note, 144A, 9.125%, 12/01/16	Poland		700,000		642,250
bDean Foods Co., senior note, 144A, 9.75%, 12/15/18	United States		2,800,000		2,989,000
Pinnacle Foods Finance LLC, senior note,
9.25%, 4/01/15	United States		1,300,000		1,355,250
8.25%, 9/01/17	United States		1,000,000		1,042,500
					8,262,000
Health Care Equipment & Services 5.7%
bAviv Healthcare Properties LP, senior note, 144A, 7.75%, 2/15/19	United States		2,000,000		2,055,000
bCDRT Merger Sub Inc., senior note, 144A, 8.125%, 6/01/19	United States		900,000		902,250
Community Health Systems Inc., senior note, 8.875%, 7/15/15	United States		3,000,000		3,097,500
bDJO Finance LLC, senior note, 144A, 7.75%, 4/15/18	United States		600,000		600,000
FMC Finance III SA, senior note, 6.875%, 7/15/17	Germany		1,000,000		1,045,133
HCA Inc., senior secured bond, 7.25%, 9/15/20	United States		900,000		970,875
senior secured note, 7.875%, 2/15/20	United States		1,500,000		1,635,000
bMedAssets Inc., senior note, 144A, 8.00%, 11/15/18	United States		2,000,000		1,990,000
dUnited Surgical Partners International Inc., senior sub. note, PIK, 9.25%, 5/01/17	United States		2,300,000		2,415,000
Universal Health Services Inc., senior note, 7.00%, 10/01/18	United States		2,600,000		2,691,000
Vanguard Health Holding Co. II LLC, senior note, 8.00%, 2/01/18	United States		1,300,000		1,348,750
Vanguard Health Systems Inc., senior note, zero cpn., 2/01/16	United States		1,900,000		1,261,125
					20,011,633
Materials 8.2%
bAleris International Inc., senior note, 144A, 7.625%, 2/15/18	United States		700,000		701,750
bAtkore International Inc., senior secured note, 144A, 9.875%, 1/01/18	United States		1,900,000		2,004,500
bCemex SAB de CV, senior secured note, 144A, 9.00%, 1/11/18	Mexico		1,900,000		1,946,673
bEuramax International Inc., senior secured note, 144A, 9.50%, 4/01/16	United States		2,000,000		1,950,000
bExopack Holding Corp., senior note, 144A, 10.00%, 6/01/18	United States		1,400,000		1,396,500
bFMG Resources August 2006 Pty. Ltd., senior note, 144A,
7.00%, 11/01/15	Australia		800,000		818,576
6.875%, 2/01/18	Australia		2,000,000		2,040,000
bIneos Finance PLC, senior secured note, 144A, 9.00%, 5/15/15	United Kingdom		200,000		211,000
bIneos Group Holdings PLC, senior secured note, 144A, 8.50%, 2/15/16	United Kingdom		2,000,000		1,985,000
bKinove German Bondco GmbH, senior secured note, 144A, 9.625%, 6/15/18	Germany		1,600,000		1,668,000
bMacDermid Inc., senior sub. note, 144A, 9.50%, 4/15/17	United States		2,500,000		2,612,500
NewPage Corp., senior secured note, 11.375%, 12/31/14	United States		2,500,000		2,343,750
Novelis Inc., senior note, 8.75%, 12/15/20	India		1,300,000		1,410,500
bOMNOVA Solutions Inc., senior note, 144A, 7.875%, 11/01/18	United States		2,100,000		2,029,125
bReynolds Group Holdings Ltd., senior note, 144A, 8.25%, 2/15/21	New Zealand		400,000		376,000
bReynolds Group Issuer Inc./LLC/SA, senior note, 144A,
8.75%, 5/15/18	New Zealand		2,800,000		2,765,000
9.00%, 4/15/19	New Zealand		200,000		198,500
Solo Cup Co., senior sub. note, 8.50%, 2/15/14	United States		1,500,000		1,406,250
Vulcan Materials Co., senior note, 7.50%, 6/15/21	United States		900,000		899,806
					28,763,430

FH-14

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin High Income Securities Fund	Country	Principal Amount*		Value
Corporate Bonds (continued)
Media 8.8%
bAMC Networks Inc., senior note, 144A, 7.75%, 7/15/21	United States		1,100,000	$	1,152,250
bBresnan Broadband Holdings LLC, senior note, 144A, 8.00%, 12/15/18	United States		700,000		725,375
Cablevision Systems Corp., senior note,
8.625%, 9/15/17	United States		1,000,000		1,088,750
7.75%, 4/15/18	United States		1,000,000		1,071,250
CCH II LLC/CCH II Capital Corp., senior note, 13.50%, 11/30/16	United States		1,000,000		1,182,500
CCO Holdings LLC/CCO Holdings Capital Corp., senior note,
8.125%, 4/30/20	United States		700,000		759,500
6.50%, 4/30/21	United States		2,200,000		2,180,750
bCitadel Broadcasting Corp., senior note, 144A, 7.75%, 12/15/18	United States		500,000		533,750
bClear Channel Communications Inc., senior note, 144A, 9.00%, 3/01/21	United States		4,000,000		3,850,000
Clear Channel Worldwide Holdings Inc., senior note, B, 9.25%, 12/15/17	United States		1,000,000		1,095,000
bCumulus Media Inc., senior note, 144A, 7.75%, 5/01/19	United States		600,000		582,000
DISH DBS Corp., senior note,
7.125%, 2/01/16	United States		3,000,000		3,180,000
b144A, 6.75%, 6/01/21	United States		1,500,000		1,545,000
bLive Nation Entertainment Inc., senior note, 144A, 8.125%, 5/15/18	United States		2,500,000		2,537,500
Media General Inc., senior secured note, 11.75%, 2/15/17	United States		1,400,000		1,368,500
b,dRadio One Inc., senior sub. note, 144A, PIK, 9.00%, 5/24/16	United States		1,533,750		1,547,170
bUnitymedia Hessen/NRW, senior secured note, 144A, 8.125%, 12/01/17	Germany		1,500,000		1,605,000
bUnivision Communications Inc., senior secured note, 144A,
6.875%, 5/15/19	United States		1,500,000		1,492,500
7.875%, 11/01/20	United States		700,000		721,000
bUPCB Finance III Ltd., senior secured note, 144A, 6.625%, 7/01/20	Cayman Islands		1,000,000		992,500
WMG Acquisition Corp., senior secured note, 9.50%, 6/15/16	United States		1,600,000		1,696,000
					30,906,295
Pharmaceuticals, Biotechnology & Life Sciences 2.4%
bEndo Pharmaceuticals Holdings Inc., senior note, 144A, 7.00%,
7/15/19	United States		600,000		618,000
12/15/20	United States		1,000,000		1,032,500
bGiant Funding Corp., senior note, 144A, 8.25%, 2/01/18	Spain		1,800,000		1,849,500
binVentiv Health Inc., senior note, 144A,
10.00%, 8/15/18	United States		2,200,000		2,161,500
h10.00%, 8/15/18	United States		200,000		190,000
bMylan Inc., senior note, 144A, 7.875%, 7/15/20	United States		2,200,000		2,425,500
					8,277,000
Real Estate 0.6%
Forest City Enterprises Inc., senior note,
7.625%, 6/01/15	United States		2,000,000		1,970,000
6.50%, 2/01/17	United States		300,000		286,500
					2,256,500
Retailing 2.2%
bAsbury Automotive Group Inc., senior sub. note, 144A, 8.375%, 11/15/20	United States		1,400,000		1,431,500
bMichaels Stores Inc., senior note, 144A, 7.75%, 11/01/18	United States		2,500,000		2,518,750
bNeedle Merger Sub Corp., senior note, 144A, 8.125%, 3/15/19	United States		1,100,000		1,113,750
bPetco Animal Supplies Inc., senior note, 144A, 9.25%, 12/01/18	United States		2,500,000		2,668,750
					7,732,750

FH-15

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin High Income Securities Fund	Country	Principal Amount*			Value
Corporate Bonds (continued)
Semiconductors & Semiconductor Equipment 1.8%
Advanced Micro Devices Inc., senior note,
8.125%, 12/15/17	United States		500,000		$	525,000
7.75%, 8/01/20	United States		1,000,000			1,035,000
Freescale Semiconductor Inc., senior note,
10.125%, 12/15/16	United States		200,000			216,250
b144A, 8.05%, 2/01/20	United States		1,200,000			1,212,000
b144A, 10.75%, 8/01/20	United States		1,600,000			1,816,000
bNXP BV/NXP Funding LLC, senior secured note, 144A, 9.75%, 8/01/18	Netherlands		1,300,000			1,457,625
						6,261,875
Software & Services 1.5%
First Data Corp., bsenior bond, 144A, 12.625%, 1/15/21	United States		808,000			868,600
senior note, 9.875%, 9/24/15	United States		71,000			72,420
senior note, 9.875%, 9/24/15	United States		111,000			114,608
bsenior secured bond, 144A, 8.25%, 1/15/21	United States		808,000			795,880
Sitel LLC/Finance Corp., senior note, 11.50%, 4/01/18	United States		1,300,000			1,196,000
SunGard Data Systems Inc., senior note, 7.625%, 11/15/20	United States		2,300,000			2,334,500
						5,382,008
Technology Hardware & Equipment 1.4%
bCDW Escrow Corp., senior note, 144A, 8.50%, 4/01/19	United States		2,600,000			2,561,000
bCommScope Inc., senior note, 144A, 8.25%, 1/15/19	United States		2,300,000			2,380,500
						4,941,500
Telecommunication Services 8.4%
Cricket Communications Inc., senior note,
7.75%, 10/15/20	United States		3,000,000			2,947,500
b144A, 7.75%, 10/15/20	United States		500,000			491,250
Crown Castle International Corp., senior bond, 7.125%, 11/01/19	United States		600,000			634,500
senior note, 9.00%, 1/15/15	United States		2,000,000			2,180,000
bDigicel Group Ltd., senior note, 144A, 8.875%, 1/15/15	Jamaica		2,600,000			2,671,500
beAccess Ltd., senior note, 144A, 8.25%, 4/01/18	Japan		1,800,000			1,823,625
Frontier Communications Corp., senior note,
8.25%, 4/15/17	United States		400,000			437,000
8.50%, 4/15/20	United States		2,000,000			2,190,000
8.75%, 4/15/22	United States		900,000			985,500
bIntegra Telecom Inc., senior secured note, 144A, 10.75%, 4/15/16	United States		2,200,000			2,227,500
bIntelsat Jackson Holding SA, senior note, 144A,
7.25%, 10/15/20	Luxembourg		900,000			897,750
7.50%, 4/01/21	Luxembourg		3,500,000			3,486,875
MetroPCS Wireless Inc., senior note, 7.875%, 9/01/18	United States		1,500,000			1,595,625
Sprint Nextel Corp., senior note, 8.375%, 8/15/17	United States		3,000,000			3,311,250
bWest Corp., senior note, 144A, 7.875%, 1/15/19	United States		3,000,000			2,917,500
b,dWind Acquisition Holdings Finance SA, senior secured note, 144A, PIK, 12.25%, 7/15/17	Italy		482,692	EUR		767,421
						29,564,796
Transportation 2.6%
bAmerican Airlines Inc., senior secured note, 144A, 7.50%, 3/15/16	United States		3,300,000			3,250,500
bCeva Group PLC, senior secured note, 144A,
11.625%, 10/01/16	United Kingdom		200,000			218,500
8.375%, 12/01/17	United Kingdom		500,000			508,125
11.50%, 4/01/18	United Kingdom		1,800,000			1,903,500

FH-16

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin High Income Securities Fund	Country	Principal Amount*		Value
Corporate Bonds (continued)
Transportation (continued)
bHertz Corp., senior note, 144A,
7.50%, 10/15/18	United States		1,100,000	$	1,138,500
6.75%, 4/15/19	United States		2,000,000		1,990,000
					9,009,125
Utilities 3.5%
bAES Corp., senior note, 144A, 7.375%, 7/01/21	United States		1,000,000		1,016,250
bCalpine Corp., senior secured note, 144A,
7.875%, 7/31/20	United States		800,000		840,000
7.50%, 2/15/21	United States		1,500,000		1,537,500
7.875%, 1/15/23	United States		1,000,000		1,031,250
Dynegy Holdings Inc., senior note, 8.375%, 5/01/16	United States		1,000,000		805,000
bIntergen NV, senior secured note, 144A, 9.00%, 6/30/17	Netherlands		2,000,000		2,125,000
bKinder Morgan Finance Co. LLC, senior secured note, 144A, 6.00%, 1/15/18	United States		2,000,000		2,085,000
Texas Competitive Electric Holdings Co. LLC, senior note, A, 10.25%, 11/01/15	United States		1,000,000		610,000
bTexas Competitive Electric Holdings Co. LLC/Texas Competitive Electric Holdings Finance Inc., secured note, B, 144A, 15.00%, 4/01/21	United States		852,000		702,900
senior secured note, 144A, 11.50%, 10/01/20	United States		1,500,000		1,481,250
					12,234,150
Total Corporate Bonds (Cost $327,020,491)					335,241,749
g,iSenior Floating Rate Interests 0.6%
Media 0.3%
Univision Communications Inc., Initial Term Loan, 2.186%, 9/29/14	United States		874,148		837,870
Utilities 0.3%
Texas Competitive Electric Holdings Co. LLC, 2017 Term Loan, 4.69% - 4.768%, 10/10/17	United States		1,431,288		1,120,241
Total Senior Floating Rate Interests (Cost $1,942,927)					1,958,111
Total Investments before Short Term Investments (Cost $330,598,639)					338,058,950
Short Term Investments (Cost $5,539,431) 1.6%
Repurchase Agreements 1.6%
jJoint Repurchase Agreement, 0.005%, 7/01/11 (Maturity Value $5,539,432)	United States		5,539,431		5,539,431
Barclays Capital Inc. (Maturity Value $474,675) BNP Paribas Securities Corp. (Maturity Value $1,265,760) Credit Suisse Securities (USA) LLC (Maturity Value $949,292) Deutsche Bank Securities Inc. (Maturity Value $634,653) HSBC Securities (USA) Inc. (Maturity Value $474,674) Merrill Lynch, Pierce, Fenner & Smith Inc. (Maturity Value $316,412) Morgan Stanley & Co. LLC (Maturity Value $474,674) UBS Securities LLC (Maturity Value $949,292)
Collateralized by U.S. Government Agency Securities, 0.75% - 5.375%, 10/15/11 - 9/13/19; kU.S. Government Agency Discount Notes, 9/28/11 - 12/28/11; kU.S. Treasury Bills, 8/04/11 - 8/25/11; U.S. Treasury Bonds, 7.25% - 11.25%, 2/15/15 - 5/15/16; and U.S. Treasury Notes, 0.375% - 5.00%, 7/31/11 - 6/30/16 (valued at $5,664,344 )
Total Investments (Cost $336,138,070) 97.9%					343,598,381
Other Assets, less Liabilities 2.1%					7,471,103
Net Assets 100.0%				$	351,069,484

FH-17

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin High Income Securities Fund

†Rounds to less than 0.1% of net assets.

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

^aNon-income producing.

^bSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At June 30, 2011, the aggregate value of these securities was $170,365,805, representing 48.53% of net assets.

^cPerpetual security with no stated maturity date.

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

^eSee Note 7 regarding defaulted securities.

^fSecurity has been deemed illiquid because it may not be able to be sold within seven days. At June 30, 2011, the value of this security was $191, representing less than 0.01% of net assets.

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

^hSecurity purchased on a delayed delivery basis. See Note 1(d).

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

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

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

At June 30, 2011, the Fund had the following forward exchange contracts outstanding. See Note 1(e).

Forward Exchange Contracts

Currency	Counterparty		Type		Quantity		Contract Amount		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
Euro		DBAB		Sell		464,500	$	617,441		12/15/11	$	—	$	(52,716	)

See Abbreviations on page FH-30.

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

FH-18

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

June 30, 2011 (unaudited)

	Franklin High Income Securities Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	330,598,639
Cost - Repurchase agreements		5,539,431
Total cost of investments	$	336,138,070
Value - Unaffiliated issuers	$	338,058,950
Value - Repurchase agreements		5,539,431
Total value of investments		343,598,381
Receivables:
Investment securities sold		709,698
Capital shares sold		1,068,318
Interest		6,366,332
Other assets		81
Total assets		351,742,810
Liabilities:
Payables:
Investment securities purchased		198,222
Capital shares redeemed		20,598
Affiliates		288,337
Reports to shareholders		89,904
Unrealized depreciation on forward exchange contracts		52,716
Accrued expenses and other liabilities		23,549
Total liabilities		673,326
Net assets, at value	$	351,069,484
Net assets consist of:
Paid-in capital	$	389,744,931
Undistributed net investment income		10,689,485
Net unrealized appreciation (depreciation)		7,407,337
Accumulated net realized gain (loss)		(56,772,269	)
Net assets, at value	$	351,069,484

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

FH-19

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Assets and Liabilities (continued)

June 30, 2011 (unaudited)

	Franklin High Income Securities Fund
Class 1:
Net assets, at value	$	46,047,433
Shares outstanding		7,054,958
Net asset value and maximum offering price per share	$	6.53
Class 2:
Net assets, at value	$	277,011,964
Shares outstanding		43,491,802
Net asset value and maximum offering price per share	$	6.37
Class 4:
Net assets, at value	$	28,010,087
Shares outstanding		4,325,964
Net asset value and maximum offering price per share	$	6.47

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

FH-20

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the six months ended June 30, 2011 (unaudited)

	Franklin High Income Securities Fund
Investment income:
Dividends	$	53,628
Interest		13,743,828
Total investment income		13,797,456
Expenses:
Management fees (Note 3a)		901,079
Distribution fees: (Note 3c)
Class 2		338,207
Class 4		47,742
Unaffiliated transfer agent fees		164
Custodian fees (Note 4)		2,420
Reports to shareholders		57,394
Professional fees		20,910
Trustees’ fees and expenses		579
Other		8,704
Total expenses		1,377,199
Net investment income		12,420,257
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		6,576,386
Foreign currency transactions		(155	)
Net realized gain (loss)		6,576,231
Net change in unrealized appreciation (depreciation) on:
Investments		(3,893,561	)
Translation of other assets and liabilities denominated in foreign currencies		(51,792	)
Net change in unrealized appreciation (depreciation)		(3,945,353	)
Net realized and unrealized gain (loss)		2,630,878
Net increase (decrease) in net assets resulting from operations	$	15,051,135

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

FH-21

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets

	Franklin High Income Securities Fund
	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31, 2010
Increase (decrease) in net assets:
Operations:
Net investment income	$	12,420,257		$	20,367,704
Net realized gain (loss) from investments and foreign currency transactions		6,576,231			8,248,722
Net change in unrealized appreciation (depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies		(3,945,353	)		5,468,339
Net increase (decrease) in net assets resulting from operations		15,051,135			34,084,765
Distributions to shareholders from:
Net investment income:
Class 1		(2,826,791	)		(3,172,829	)
Class 2		(16,984,105	)		(12,418,978	)
Class 4		(1,620,002	)		(1,394,573	)
Total distributions to shareholders		(21,430,898	)		(16,986,380	)
Capital share transactions: (Note 2)
Class 1		(1,433,012	)		(3,710,324	)
Class 2		42,580,194			28,368,422
Class 4		2,493,649			9,525,024
Total capital share transactions		43,640,831			34,183,122
Net increase (decrease) in net assets		37,261,068			51,281,507
Net assets:
Beginning of period		313,808,416			262,526,909
End of period	$	351,069,484		$	313,808,416
Undistributed net investment income included in net assets:
End of period	$	10,689,485		$	19,700,126

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

FH-22

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited)

Franklin High Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment company, consisting of twenty separate funds. The Franklin High Income Securities Fund (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. At June 30, 2011, 86.74% of the Fund’s shares were held through one insurance company. The Fund offers three classes of shares: Class 1, Class 2, and Class 4. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

The Fund’s investments in securities and other financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Under procedures approved by the Trust’s Board of Trustees, the Fund may utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

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

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

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

The Fund has procedures to determine the fair value of securities and other financial instruments for which market prices are not readily available or which may not be reliably priced. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.

FH-23

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin High Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

b. Foreign Currency Translation

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

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

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

c. Joint Repurchase Agreement

The Fund enters into a joint repurchase agreement whereby its uninvested cash balance is deposited into a joint cash account with other funds managed by the investment manager or an affiliate of the investment manager and is used to invest in one or more repurchase agreements. The value and face amount of the joint repurchase agreement are allocated to the funds based on their pro-rata interest. A repurchase agreement is accounted for as a loan by the fund to the seller, collateralized by securities which are delivered to the fund’s custodian. The market value, including accrued interest, of the initial collateralization is required to be at least 102% of the dollar amount invested by the funds, with the value of the underlying securities marked to market daily to maintain coverage of at least 100%. The joint repurchase agreement held by the Fund at period end had been entered into on June 30, 2011.

d. Securities Purchased on a Delayed Delivery Basis

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

e. Derivative Financial Instruments

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

FH-24

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin High Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

e. Derivative Financial Instruments (continued)

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

See Note 8 regarding other derivative information.

f. Senior Floating Rate Interests

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

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

g. Income Taxes

It is the Fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and excise taxes. As a result, no provision for U.S. federal income taxes is required. The Fund files U.S. income tax returns as well as tax returns in certain other jurisdictions. The Fund records a provision for taxes in its financial statements including penalties and interest, if any, for a tax position taken on a tax return (or expected to be taken) when it fails to meet the more likely than not (a greater than 50% probability) threshold and based on the technical merits, the tax position may not be sustained upon examination by the tax authorities. As of June 30, 2011, and for all open tax years, the Fund has determined that no provision for income tax is required in the Fund’s financial statements. Open tax years are those that remain subject to examination and are based on each tax jurisdiction statute of limitation.

h. Security Transactions, Investment Income, Expenses and Distributions

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

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

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

FH-25

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin High Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

i. Accounting Estimates

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

j. Guarantees and Indemnifications

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

2. SHARES OF BENEFICIAL INTEREST

At June 30, 2011, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:

	Six Months Ended June 30, 2011						Year Ended December 31, 2010
Class 1 Shares:	Shares			Amount			Shares			Amount
Shares sold		95,525		$	658,876			472,188		$	3,062,794
Shares issued in reinvestment of distributions		434,223			2,826,791			533,249			3,172,829
Shares redeemed		(723,793	)		(4,918,679	)		(1,559,378	)		(9,945,947	)
Net increase (decrease)		(194,045	)	$	(1,433,012	)		(553,941	)	$	(3,710,324	)
Class 2 Shares:
Shares sold		8,153,251		$	54,496,416			12,032,804		$	75,255,716
Shares issued in reinvestment of distributions		2,674,662			16,984,105			2,133,845			12,418,978
Shares redeemed		(4,376,384	)		(28,900,327	)		(9,532,012	)		(59,306,272	)
Net increase (decrease)		6,451,529		$	42,580,194			4,634,637		$	28,368,422
Class 4 Shares:
Shares sold		274,007		$	1,859,099			1,337,992		$	8,481,976
Shares issued on reinvestment of distributions		250,774			1,620,002			235,968			1,394,573
Shares redeemed		(144,446	)		(985,452	)		(55,035	)		(351,525	)
Net increase (decrease)		380,335		$	2,493,649			1,518,925		$	9,525,024

3. TRANSACTIONS WITH AFFILIATES

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

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

FH-26

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin High Income Securities Fund

3. TRANSACTIONS WITH AFFILIATES (continued)

a. Management Fees

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

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

b. Administrative Fees

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

c. Distribution Fees

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

d. Transfer Agent Fees

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

4. EXPENSE OFFSET ARRANGEMENT

The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses. During the period ended June 30, 2011, there were no credits earned.

5. INCOME TAXES

For tax purposes, capital losses may be carried over to offset future capital gains, if any. At December 31, 2010, the capital loss carryforwards were as follows:

Capital loss carryforwards expiring in:
2011	$	24,711,916
2012		9,009,590
2013		6,321,190
2014		40,420
2015		4,493,289
2016		8,150,741
2017		10,621,353
		$63,348,499

FH-27

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin High Income Securities Fund

5. INCOME TAXES (continued)

Under the Regulated Investment Company Modernization Act of 2010, the Fund will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. Post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered short-term as under previous law. Any post-enactment capital losses generated will be required to be utilized prior to the losses incurred in pre-enactment tax years.

At June 30, 2011, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	336,737,674
Unrealized appreciation	$	14,337,010
Unrealized depreciation		(7,476,303	)
Net unrealized appreciation (depreciation)	$	6,860,707

Net investment income differs for financial statement and tax purposes primarily due to differing treatments of defaulted securities, foreign currency transactions, payments-in-kind, and bond discounts and premiums.

Net realized gains (losses) differ for financial statement and tax purposes primarily due to differing treatments of wash sales, defaulted securities, foreign currency transactions, payments-in-kind, and bond discounts and premiums.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2011, aggregated $128,125,851 and $82,850,854, respectively.

7. CREDIT RISK AND DEFAULTED SECURITIES

At June 30, 2011, the Fund had 97.15% of its portfolio invested in high yield securities, senior secured floating rate notes, or other securities rated below investment grade. These securities may be more sensitive to economic conditions causing greater price volatility and are potentially subject to a greater risk of loss due to default than higher rated securities.

The Fund held defaulted securities and/or other securities for which the income has been deemed uncollectible. At June 30, 2011, the aggregate value of these securities represents less than 0.05% of the Fund’s net assets. The Fund discontinues accruing income on securities for which income has been deemed uncollectible and provides an estimate for losses on interest receivable. The securities have been identified on the accompanying Statement of Investments.

8. OTHER DERIVATIVE INFORMATION

At June 30, 2011, the Fund has invested in derivative contracts which are reflected on the Statement of Assets and Liabilities as follows:

	Asset Derivatives			Liability Derivatives
Derivative Contracts Not Accounted for as Hedging Instruments	Statement of Assets and Liabilities Location	Fair Value Amount		Statement of Assets and Liabilities Location	Fair Value Amount
Foreign exchange contracts	Unrealized appreciation on forward exchange contracts	$	—	Unrealized depreciation on forward exchange contracts	$	52,716

FH-28

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin High Income Securities Fund

8. OTHER DERIVATIVE INFORMATION (continued)

For the period ended June 30, 2011, the effect of derivative contracts on the Fund’s Statement of Operations was as follows:

Derivative Contracts Not Accounted for as Hedging Instruments	Statement of Operations Locations	Realized Gain (Loss) for the Period		Change in Unrealized Appreciation (Depreciation) for the Period
Foreign exchange contracts	Net realized gain (loss) from foreign currency transactions/Net change in unrealized appreciation (depreciation) on translation of other assets and liabilities denominated in foreign currencies	$	—	$	(51,792	)

For the period ended June 30, 2011, the average month end market value of derivatives represented 0.01% of average month end net assets. The average month end number of open derivative contracts for the period was 2.

See Note 1(e) regarding derivative financial instruments.

9. CREDIT FACILITY

The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $750 million (Global Credit Facility) which matures on January 20, 2012. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests.

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.08% based upon the unused portion of the Global Credit Facility, which is reflected in other expenses on the Statement of Operations. During the period ended June 30, 2011, the Fund did not use the Global Credit Facility.

10. FAIR VALUE MEASUREMENTS

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

• Level 1 – quoted prices in active markets for identical securities

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

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

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

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

FH-29

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin High Income Securities Fund

10. FAIR VALUE MEASUREMENTS (continued)

The following is a summary of the inputs used as of June 30, 2011, in valuing the Fund’s assets and liabilities carried at fair value:

	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities:
Equity Investmentsa,b	$	859,090	$	—	$	—	$	859,090
Corporate Bonds		—		335,241,558		191		335,241,749
Senior Floating Rate Interests		—		1,958,111		—		1,958,111
Short Term Investments		—		5,539,431		—		5,539,431
Total Investments in Securities	$	859,090	$	342,739,100	$	191	$	343,598,381
Liabilities:
Forward Exchange Contracts		—		52,716		—		52,716

^aFor detailed industry descriptions, see the accompanying Statement of Investments.

^bIncludes common and preferred stocks.

11. NEW ACCOUNTING PRONOUNCEMENTS

In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (IFRS). The amendments in the ASU will improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRS and include new guidance for certain fair value measurement principles and disclosure requirements. The ASU is effective for interim and annual periods beginning after December 15, 2011. The Fund is currently evaluating the impact, if any, of applying this provision.

12. SUBSEQUENT EVENTS

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

ABBREVIATIONS
Counterparty	Currency	Selected Portfolio
DBAB - Deutsche Bank AG	EUR - Euro	FICO - Financing Corp.
		FRN - Floating Rate Note
		PIK - Payment-In-Kind

FH-30

FRANKLIN INCOME SECURITIES FUND

This semiannual report for Franklin Income Securities Fund covers the period ended June 30, 2011.

Performance Summary as of 6/30/11

Franklin Income Securities Fund – Class 4 delivered a +5.38% total return for the six-month period ended 6/30/11.

Performance reflects the Fund’s Class 4 operating expenses, but does not include any contract fees, expenses or sales charges. If they had been included, performance would be lower. These charges and deductions, particularly for variable life policies, can have a significant effect on contract values and insurance benefits. See the contract prospectus for a complete description of these expenses, including sales charges.

Franklin Income Securities Fund – Class 4

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

Current performance may differ from figures shown.

FI-1

Fund Goal and Main Investments: Franklin Income Securities Fund seeks to maximize income while maintaining prospects for capital appreciation. The Fund normally invests in both equity and debt securities.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. The Fund underperformed its equity benchmark, the Standard & Poor’s 500 Index, which produced a +6.02% total return, but outperformed its fixed income benchmark, the Barclays Capital U.S. Aggregate Index, which posted a +2.72% total return for the same period.¹

Economic and Market Overview

The U.S. economy expanded despite geopolitical and inflationary pressures from around the globe during the six-month period ended June 30, 2011. Business activity increased and consumer spending stayed above pre-recession levels. The U.S. has been a key engine in a sustained global manufacturing expansion as international trade volume continued to increase, albeit at a moderate pace. Worldwide demand for capital goods aided U.S. manufacturing profits and increased employment in the industry.

The unemployment rate improved in the first quarter when job creation began to gain some traction. However, government payrolls continued to trend down and job creation slowed in the second quarter, causing the unemployment rate to end the period at 9.2%.² Consumer spending rose noticeably for 11 consecutive months through May but declined in June as concerns about job growth and rising gasoline and food prices dampened consumer confidence. To offset the disruption of global oil supply caused by the conflicts in Libya, the International Energy Agency announced in June the release of 60 million barrels of oil in July from strategic reserves of the U.S. and 27 other nations. The U.S. financial system appeared closer to a full recovery, although the country still faced challenges dealing with housing market weakness and massive debt at period-end.

Inflation at the consumer, producer and trade levels rose across much of the world, but in the U.S. it remained relatively contained. As a result, the Federal Reserve Board (Fed) maintained its accommodative

1. Source: © 2011 Morningstar. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

2. Source: Bureau of Labor Statistics.

Fund Risks: The Fund’s investments in stocks may offer the potential for long-term gains but can be subject to short-term price fluctuations. Changes in the financial strength of a debt issuer or in the rating of its securities may affect the securities’ value and, as a result, impact Fund performance. Because the Fund invests in bonds and other debt obligations, its share price and yield will be affected by interest rate movements. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in the Fund adjust to a rise in interest rates, the Fund’s share price may decline. The Fund may invest all of its assets in high yield, lower rated (junk) bonds, which generally have greater price swings and higher risk of default and loss of principal than investment-grade bonds. The Fund may from time to time have significant investments in particular sectors, which can be highly volatile. Foreign investing involves additional risks, including currency fluctuations, economic instability, market volatility, and political and social instability. Derivative instruments may be volatile and illiquid, may give rise to leverage and may involve a small investment relative to the risk assumed. The manager applies various techniques and analyses in making investment decisions for the Fund, but there can be no guarantee that these decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

FI-2

monetary policy while ending its second round of quantitative easing on June 30. The Fed said, however, it would continue to purchase Treasuries with proceeds from maturing debt in an effort to support economic growth.

Investors’ attitudes shifted with each release of economic, regulatory and geopolitical news, causing equity market volatility to increase globally. U.S. investors weathered international events that included revolutions and civil unrest across the Middle East and North Africa, the multiple crises triggered by Japan’s earthquake and tsunami, and sovereign debt worries and credit downgrades in Europe. Ultimately, stock indexes produced solid gains during the six months under review as domestic and global equity markets rose amid generally improving economic signs and record-high corporate earnings growth.

Despite turmoil in North Africa and the Middle East, the multiple crises triggered by Japan’s earthquake and headwinds facing the U.S. economy, generally favorable economic improvements and positive corporate earnings reports gave investors confidence. Equity and fixed income markets performed well overall for the six months under review.

Manager’s Discussion

Fixed income markets benefited from continued low, long-term interest rates and generally stable credit spreads for both investment-grade and high yield corporate bonds. Within equity markets, stocks appreciated in part due to continued economic growth in the U.S. and abroad, although investor uncertainty increased over the slowing pace of economic growth as the end of the period approached. Investor concerns impacting markets included European sovereign debt issues and economic headwinds caused by fiscal austerity measures, monetary policies in select emerging economies that targeted rising inflationary pressures and hampered growth, and rising domestic fears related to efforts to reduce the federal deficits amid political gridlock in Washington.

Among the Fund’s fixed income holdings, top contributors to performance included utility company Energy Future Holdings, which benefited from a comprehensive debt maturity extension; transaction data processing company First Data, which advanced in part following clarity around regulatory reform; and natural gas provider Chesapeake Energy, which benefited from improved energy demand and a strong production and reserve profile. Detractors included NewPage, which struggled with higher material costs; CHC Helicopter, which

Portfolio Breakdown

Franklin Income Securities Fund

6/30/11

	% of Total Net Assets
Equity		45.0%
Utilities		12.4%
Financials		8.9%
Energy		7.3%
Health Care		5.7%
Telecommunication Services		3.0%
Information Technology		2.2%
Consumer Discretionary		2.0%
Other		3.5%
Fixed Income		53.5%
Financials		9.0%
Consumer Discretionary		8.5%
Energy		7.8%
Utilities		7.8%
Information Technology		7.6%
Health Care		4.1%
Industrials		3.5%
Materials		2.4%
Other		2.8%
Short-Term Investments & Other Net Assets		1.5%

FI-3

experienced higher-than-expected repair costs leading to lower profitability; and R.H. Donnelley (no longer held by period-end), which suffered from declining print and Internet-based sales.

Top contributors among equity holdings included major pharmaceutical companies Roche Holding and Pfizer, as well as diversified health care company Johnson & Johnson. Energy and utility investments generally also aided performance. Strong total returns came from energy sector holdings Exxon Mobil, ConocoPhillips and Canadian Oil Sands, and electric utility holdings Dominion Resources and FirstEnergy. Equity detractors included financials holdings Bank of America, Citigroup and Wells Fargo. These companies suffered from regulatory concerns and investor fears related to continued mortgage losses and potential exposure to the debt of certain European nations.

At period-end, the Fund held 53.5% of total net assets in fixed income securities, 45.0% in equity securities and 1.5% in cash equivalents. As of December 31, 2010, the Fund held 52.0% of total net assets in fixed income securities, 44.3% in equity securities and 3.7% in cash equivalents. Within our fixed income sector allocation, the Fund continued to emphasize corporate debt securities, particularly high yield corporate bonds. Our largest fixed income sector allocations included financials, electric utility and technology.³ Our equity allocation was primarily composed of dividend paying common stocks and convertible securities. Top equity sector exposures included utilities, energy and health care.

We continued to favor investment opportunities where fundamental research may drive results while seeking to limit fixed income investments that may show greater sensitivity to rises in long-term interest rates going forward.

3. Electric utility holdings are in utilities in the SOI. Technology holdings are in information technology in the SOI.

Top Five Equity Holdings*

Franklin Income Securities Fund

6/30/11

Company Sector/Industry	% of Total Net Assets
Roche Holding AG (Switzerland)		1.9%
Health Care
Merck & Co. Inc.		1.6%
Health Care
The Southern Co.		1.4%
Utilities
Canadian Oil Sands Ltd. (Canada)		1.2%
Energy
BP PLC, ADR (U.K.)		1.2%
Energy

*Does not include convertible preferred stocks.

Top Five Fixed Income and Senior Floating Rate Interests Holdings**

Franklin Income Securities Fund

6/30/11

Issuer Sector/Industry	% of Total Net Assets
Texas Competitive Electric Holdings Co. LLC		4.8%
Utilities
CIT Group Inc.		4.1%
Financials
First Data Corp.		3.5%
Information Technology
Freescale Semiconductor Inc.		2.6%
Information Technology
Tenet Healthcare Corp.		1.5%
Health Care

**Does not include convertible bonds.

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

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

The foregoing information reflects our analysis, opinions and portfolio holdings as of June 30, 2011, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

FI-5

Fund Expenses

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

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

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

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

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

Actual Fund Expenses

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

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

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

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

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

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

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

Franklin Income Securities Fund – Class 4

FI-6

Hypothetical Example for Comparison with Other Mutual Funds

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

Class 4	Beginning Account Value 1/1/11		Ending Account Value 6/30/11		Fund-Level Expenses Incurred During Period* 1/1/11–6/30/11
Actual	$	1,000	$	1,053.80	$	4.18
Hypothetical (5% return before expenses)	$	1,000	$	1,020.73	$	4.11

*Expenses are calculated using the most recent six-month annualized expense ratio for the Fund’s Class 4 shares (0.82%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 181/365 to reflect the one-half year period.

FI-7

Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Franklin Income Securities Fund

	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31,
Class 1				2010			2009			2008			2007			2006
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	15.16		$	14.43		$	11.53		$	17.63		$	17.65		$	15.56
Income from investment operationsa:
Net investment incomeb		0.49			0.89			0.91			1.10			1.03			0.94
Net realized and unrealized gains (losses)		0.34			0.85			3.08			(5.99	)		(0.31	)		1.85
Total from investment operations		0.83			1.74			3.99			(4.89	)		0.72			2.79
Less distributions from:
Net investment income		(0.90	)		(1.01	)		(1.09	)		(0.86	)		(0.63	)		(0.62	)
Net realized gains		—			—			—			(0.35	)		(0.11	)		(0.08	)
Total distributions		(0.90	)		(1.01	)		(1.09	)		(1.21	)		(0.74	)		(0.70	)
Net asset value, end of period	$	15.09		$	15.16		$	14.43		$	11.53		$	17.63		$	17.65
Total returnc		5.58%			12.87%			35.88%			(29.41)%			4.01%			18.47%
Ratios to average net assetsd
Expensese		0.47%			0.47%			0.47%			0.47%			0.47%			0.47%
Net investment income		6.22%			6.28%			7.23%			7.28%			5.77%			5.70%
Supplemental data
Net assets, end of period (000’s)	$	1,715,055		$	1,449,028		$	910,504		$	433,370		$	455,932		$	458,613
Portfolio turnover rate		13.01%			41.65%			42.30%			43.89%			32.11%			25.05%

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

^bBased on average daily shares outstanding.

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

^dRatios are annualized for periods less than one year.

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

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

FI-8

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin Income Securities Fund

	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31,
Class 2				2010			2009			2008			2007			2006
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	14.82		$	14.12		$	11.30		$	17.31		$	17.36		$	15.32
Income from investment operationsa:
Net investment incomeb		0.46			0.86			0.86			1.04			0.97			0.89
Net realized and unrealized gains (losses)		0.33			0.82			3.01			(5.87	)		(0.30	)		1.82
Total from investment operations		0.79			1.68			3.87			(4.83	)		0.67			2.71
Less distributions from:
Net investment income		(0.87	)		(0.98	)		(1.05	)		(0.83	)		(0.61	)		(0.59	)
Net realized gains		—			—			—			(0.35	)		(0.11	)		(0.08	)
Total distributions		(0.87	)		(0.98	)		(1.05	)		(1.18	)		(0.72	)		(0.67	)
Net asset value, end of period	$	14.74		$	14.82		$	14.12		$	11.30		$	17.31		$	17.36
Total returnc		5.39%			12.67%			35.59%			(29.66)%			3.76%			18.24%
Ratios to average net assetsd
Expensese		0.72%			0.72%			0.72%			0.72%			0.72%			0.72%
Net investment income		5.97%			6.03%			6.98%			7.03%			5.52%			5.45%
Supplemental data
Net assets, end of period (000’s)	$	6,403,468		$	6,309,207		$	6,114,898		$	4,944,457		$	7,429,064		$	5,109,373
Portfolio turnover rate		13.01%			41.65%			42.30%			43.89%			32.11%			25.05%

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

^bBased on average daily shares outstanding.

^cTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.

^dRatios are annualized for periods less than one year.

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

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

FI-9

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin Income Securities Fund

	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31,
Class 4				2010			2009			2008a
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	15.04		$	14.33		$	11.49		$	16.90
Income from investment operationsb:
Net investment incomec		0.46			0.85			0.86			0.87
Net realized and unrealized gains (losses)		0.34			0.84			3.06			(5.07	)
Total from investment operations		0.80			1.69			3.92			(4.20	)
Less distributions from:
Net investment income		(0.86	)		(0.98	)		(1.08	)		(0.86	)
Net realized gains		—			—			—			(0.35	)
Total distributions		(0.86	)		(0.98	)		(1.08	)		(1.21	)
Net asset value, end of period	$	14.98		$	15.04		$	14.33		$	11.49
Total returnd		5.38%			12.54%			35.37%			(26.61)%
Ratios to average net assetse
Expensesf		0.82%			0.82%			0.82%			0.82%
Net investment income		5.87%			5.93%			6.88%			6.93%
Supplemental data
Net assets, end of period (000’s)	$	454,518		$	415,541		$	347,733		$	135,360
Portfolio turnover rate		13.01%			41.65%			42.30%			43.89%

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

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

^cBased on average daily shares outstanding.

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

^eRatios are annualized for periods less than one year.

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

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

FI-10

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited)

Franklin Income Securities Fund	Country	Shares/ Warrants		Value
Common Stocks and Other Equity Interests 38.7%
Consumer Discretionary 1.7%
aCharter Communications Inc., A	United States		1,100,000	$	59,686,000
aCharter Communications Inc., wts., 11/30/14	United States		311,018		4,354,252
Comcast Corp., A	United States		900,000		22,806,000
a,bDex One Corp.	United States		2,642,381		6,685,224
aGeneral Motors Co.	United States		136,218		4,135,578
aGeneral Motors Co., wts., 7/10/16	United States		123,835		2,650,069
aGeneral Motors Co., wts., 7/10/19	United States		123,835		1,972,692
The Home Depot Inc.	United States		615,800		22,304,276
aSuperMedia Inc., Litigation Trust	United States		3,472,135		13,020
Target Corp.	United States		453,900		21,292,449
					145,899,560
Consumer Staples 0.8%
Diageo PLC	United Kingdom		1,150,000		23,504,161
PepsiCo Inc.	United States		672,500		47,364,175
					70,868,336
Energy 6.2%
aAlpha Natural Resources Inc.	United States		135,000		6,134,400
Baker Hughes Inc.	United States		250,000		18,140,000
BP PLC, ADR	United Kingdom		2,300,000		101,867,000
aCallon Petroleum Co.	United States		782,594		5,493,810
Canadian Oil Sands Ltd.	Canada		3,700,000		106,799,772
Chesapeake Energy Corp.	United States		400,000		11,876,000
Chevron Corp.	United States		250,000		25,710,000
ConocoPhillips	United States		1,000,000		75,190,000
Exxon Mobil Corp.	United States		1,082,350		88,081,643
Schlumberger Ltd.	United States		251,000		21,686,400
Spectra Energy Corp.	United States		1,900,000		52,079,000
aWeatherford International Ltd.	United States		1,000,000		18,750,000
					531,808,025
Financials 5.2%
Banco Santander SA	Spain		2,030,769		23,450,396
Bank of America Corp.	United States		6,100,000		66,856,000
Barclays PLC	United Kingdom		4,000,000		16,464,669
aCIT Group Inc.	United States		691,600		30,610,216
Citigroup Inc.	United States		580,000		24,151,200
aFannie Mae	United States		1,928,019		638,174
HSBC Holdings PLC	United Kingdom		5,000,000		49,599,433
JPMorgan Chase & Co.	United States		1,850,000		75,739,000
M&T Bank Corp.	United States		500,000		43,975,000
QBE Insurance Group Ltd.	Australia		957,800		17,718,246
Wells Fargo & Co.	United States		2,750,000		77,165,000
Westfield Retail Trust	Australia		6,384,600		18,554,950
					444,922,284
Health Care 5.5%
Johnson & Johnson	United States		1,500,000		99,780,000
Merck & Co. Inc.	United States		4,000,000		141,160,000
Pfizer Inc.	United States		3,518,775		72,486,765
Roche Holding AG	Switzerland		950,000		158,973,597
					472,400,362

FI-11

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin Income Securities Fund	Country	Shares/ Warrants		Value
Common Stocks and Other Equity Interests (continued)
Industrials 0.8%
The Boeing Co.	United States		250,000	$	18,482,500
General Electric Co.	United States		2,808,700		52,972,082
					71,454,582
Information Technology 1.7%
Cisco Systems Inc.	United States		1,000,000		15,610,000
aFirst Solar Inc.	United States		28,694		3,795,355
Intel Corp.	United States		3,000,000		66,480,000
Maxim Integrated Products Inc.	United States		1,825,507		46,659,959
Xerox Corp.	United States		1,000,000		10,410,000
					142,955,314
Materials 1.4%
Barrick Gold Corp.	Canada		700,000		31,703,000
Freeport-McMoRan Copper & Gold Inc., B	United States		237,286		12,552,429
Newmont Mining Corp.	United States		1,015,000		54,779,550
Nucor Corp.	United States		400,000		16,488,000
					115,522,979
Telecommunication Services 3.0%
AT&T Inc.	United States		2,600,000		81,666,000
CenturyLink Inc.	United States		500,000		20,215,000
Frontier Communications Corp.	United States		988,047		7,973,539
Telstra Corp. Ltd.	Australia		10,000,000		30,992,360
Verizon Communications Inc.	United States		1,200,000		44,676,000
Vodafone Group PLC	United Kingdom		27,500,000		72,976,807
					258,499,706
Utilities 12.4%
AGL Resources Inc.	United States		550,000		22,390,500
American Electric Power Co. Inc.	United States		1,523,800		57,416,784
CenterPoint Energy Inc.	United States		850,000		16,447,500
Consolidated Edison Inc.	United States		750,000		39,930,000
Dominion Resources Inc.	United States		1,600,000		77,232,000
DTE Energy Co.	United States		240,000		12,004,800
Duke Energy Corp.	United States		5,000,000		94,150,000
a,cDynegy Inc.	United States		2,250,000		13,927,500
Entergy Corp.	United States		850,000		58,038,000
FirstEnergy Corp.	United States		750,000		33,112,500
NextEra Energy Inc.	United States		1,075,000		61,769,500
NiSource Inc.	United States		500,000		10,125,000
PG&E Corp.	United States		1,900,000		79,857,000
Pinnacle West Capital Corp.	United States		300,000		13,374,000
PPL Corp.	United States		1,250,000		34,787,500
Progress Energy Inc.	United States		1,400,000		67,214,000
Public Service Enterprise Group Inc.	United States		2,500,000		81,600,000
Sempra Energy	United States		1,100,000		58,168,000
The Southern Co.	United States		3,000,000		121,140,000
TECO Energy Inc.	United States		2,500,000		47,225,000
Xcel Energy Inc.	United States		2,670,464		64,892,275
					1,064,801,859
Total Common Stocks and Other Equity Interests (Cost $3,003,755,058)					3,319,133,007

FI-12

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin Income Securities Fund	Country	Shares/ Warrants		Value
dEquity-Linked Securities 1.1%
Consumer Discretionary 0.1%
Credit Suisse into Lowe’s Cos. Inc., 7.00%	United States		400,000	$	9,197,080
Energy 0.3%
Credit Suisse into Schlumberger Ltd., 8.00%	United States		100,000		7,463,460
eDeutsche Bank AG into Chesapeake Energy Corp., 8.50%, 144A	United States		500,000		15,048,850
					22,512,310
Industrials 0.2%
Citgroup into General Electric Co., 8.00%	United States		358,000		6,769,780
eJPMorgan Chase & Co. into General Electric Co., 0.70%, 144A	United States		500,000		9,636,900
					16,406,680
Information Technology 0.5%
eDeutsche Bank AG into Intel Corp., 8.00%, 144A	United States		500,000		11,172,000
eThe Goldman Sachs Group Inc. into Research In Motion Ltd., 8.00%, 144A	United States		200,000		6,063,200
eThe Goldman Sachs Group Inc. into Xerox Corp., 8.00%, 144A	United States		1,260,000		13,498,254
eMorgan Stanley into Apple Inc., 7.50%, 144A	United States		40,000		13,760,960
					44,494,414
Total Equity-Linked Securities (Cost $97,797,600)					92,610,484
Convertible Preferred Stocks 3.8%
Consumer Discretionary 0.2%
General Motors Co., 4.75%, cvt. pfd., B	United States		322,400		15,713,776
Energy 0.8%
ATP Oil & Gas Corp., 8.00%, cvt. pfd., B	United States		50,000		4,599,500
eChesapeake Energy Corp., 5.75%, cvt. pfd., 144A	United States		30,000		37,881,900
eSandRidge Energy Inc., 7.00%, cvt. pfd., 144A	United States		190,000		30,564,920
					73,046,320
Financials 2.5%
Bank of America Corp., 7.25%, cvt. pfd., L	United States		86,000		86,103,200
Citigroup Inc., 7.50%, cvt. pfd.	United States		54,200		6,512,130
aFannie Mae, 5.375%, cvt. pfd.	United States		600		5,040,000
Felcor Lodging Trust Inc., 7.80%, cvt. pfd., A	United States		400,000		10,444,000
Metlife Inc., 5.00%, cvt. pfd.	United States		525,000		43,275,750
Wells Fargo & Co., 7.50%, cvt. pfd., A	United States		61,000		64,660,000
					216,035,080
Health Care 0.2%
Tenet Healthcare Corp., 7.00%, cvt. pfd.	United States		13,500		13,635,000
Materials 0.1%
AngloGold Ashanti Holdings Finance PLC, 6.00%, cvt. pfd.	South Africa		200,000		9,978,000
Total Convertible Preferred Stocks (Cost $329,336,604)					328,408,176
Preferred Stocks 0.5%
Consumer Discretionary 0.0%†
aMotors Liquidation Co., Escrow pfd, C	United States		1,400,000		910,000
Financials 0.5%
Ally Financial Inc., 8.50%, pfd., A	United States		75,000		1,877,250
aFannie Mae, 6.75%, pfd.	United States		500,000		1,087,500
aFannie Mae, 7.625%, pfd., R	United States		800,000		1,680,000
aFannie Mae, 8.25%, pfd.	United States		851,500		1,830,725
aFreddie Mac, 8.375%, pfd., Z	United States		1,549,200		4,570,140

FI-13

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin Income Securities Fund	Country	Shares/ Warrants		Value
Preferred Stocks (continued)
Financials (continued)
eGMAC Inc., 7.00%, pfd., 144A	United States		36,265	$	34,084,567
					45,130,182
Total Preferred Stocks (Cost $109,624,886)					46,040,182
		Principal Amount*
Convertible Bonds 0.9%
Financials 0.7%
CapitalSource Inc., cvt., senior sub. note, 4.00%, 7/15/34	United States		5,000,000		5,025,000
fiStar Financial Inc., cvt., senior note, FRN, 0.805%, 10/01/12	United States		57,500,000		51,750,000
					56,775,000
Information Technology 0.0%†
Advanced Micro Devices Inc., cvt., senior note, 6.00%, 5/01/15	United States		2,383,000		2,427,681
Materials 0.2%
eCemex SAB de CV, cvt., sub. note, 144A,
3.25%, 3/15/16	Mexico		9,100,000		9,032,660
3.75%, 3/15/18	Mexico		5,420,000		5,406,992
					14,439,652
Total Convertible Bonds (Cost $71,361,553)					73,642,333
Corporate Bonds 46.0%
Consumer Discretionary 7.2%
eAMC Networks Inc., senior note, 144A, 7.75%, 7/15/21	United States		4,700,000		4,923,250
Cablevision Systems Corp., senior note,
7.75%, 4/15/18	United States		35,000,000		37,493,750
8.00%, 4/15/20	United States		35,000,000		37,712,500
CCH II LLC/CCH II Capital Corp., senior note, 13.50%, 11/30/16	United States		42,829,272		50,645,614
CCO Holdings LLC/CCO Holdings Capital Corp., senior note,
8.125%, 4/30/20	United States		22,200,000		24,087,000
6.50%, 4/30/21	United States		20,000,000		19,825,000
eCequel Communications Holdings I LLC, senior note, 144A, 8.625%, 11/15/17	United States		10,000,000		10,450,000
eChrysler Group LLC/CG Co-Issuer Inc., senior secured note, 144A,
8.00%, 6/15/19	United States		25,000,000		24,687,500
8.25%, 6/15/21	United States		12,800,000		12,608,000
eCityCenter Holdings/Finance, senior secured note, 144A,
7.625%, 1/15/16	United States		4,100,000		4,253,750
gPIK, 11.50%, 1/15/17	United States		6,400,000		6,650,931
CKE Restaurants Inc., senior secured note, 11.375%, 7/15/18	United States		6,000,000		6,585,000
Clear Channel Communications Inc., senior note,
10.75%, 8/01/16	United States		2,000,000		1,815,000
e144A, 9.00%, 3/01/21	United States		69,100,000		66,508,750
Clear Channel Worldwide Holdings Inc., senior note, B, 9.25%, 12/15/17	United States		17,000,000		18,615,000
eClubCorp Club Operations Inc., senior note, 144A, 10.00%, 12/01/18	United States		15,000,000		14,925,000
eCumulus Media Inc., senior note, 144A, 7.75%, 5/01/19	United States		10,000,000		9,700,000
b,gDex One Corp., senior sub. note, PIK, 12.00%, 1/29/17	United States		32,511,674		14,223,857
eDISH DBS Corp., senior note, 144A, 6.75%, 6/01/21	United States		15,000,000		15,450,000
Ford Motor Credit Co. LLC,
8.00%, 6/01/14	United States		5,000,000		5,487,215
senior note, 7.00%, 4/15/15	United States		15,000,000		16,239,885

FI-14

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin Income Securities Fund	Country	Principal Amount*			Value
Corporate Bonds (continued)
Consumer Discretionary (continued)
Ford Motor Credit Co. LLC, (continued)
senior note, 12.00%, 5/15/15	United States		12,900,000		$	16,004,695
The Goodyear Tire & Rubber Co., senior note, 8.25%, 8/15/20	United States		9,700,000			10,524,500
Harrah’s Operating Co. Inc., senior secured note, 11.25%, 6/01/17	United States		10,000,000			11,087,500
Host Hotels & Resorts LP, senior note, T, 9.00%, 5/15/17	United States		12,900,000			14,577,000
KB Home, senior note,
5.75%, 2/01/14	United States		6,500,000			6,370,000
6.25%, 6/15/15	United States		15,000,000			14,400,000
7.25%, 6/15/18	United States		10,600,000			9,632,750
MGM Resorts International, senior note,
6.75%, 4/01/13	United States		10,000,000			10,075,000
e144A, 10.00%, 11/01/16	United States		20,000,000			21,250,000
eShea Homes LP/Funding Corp., senior secured note, 144A, 8.625%, 5/15/19	United States		11,700,000			11,553,750
eUnitymedia Hessen/NRW, senior secured note, 144A, 8.125%,
12/01/17	Germany		6,300,000			6,741,000
12/01/17	Germany		5,500,000	EUR		8,367,558
eUPC Germany GmbH, senior secured note, 144A, 9.625%, 12/01/19	Germany		3,000,000	EUR		4,706,730
eUPCB Finance III Ltd., senior secured note, 144A, 6.625%, 7/01/20	Cayman Islands		20,000,000			19,850,000
Virgin Media Secured Finance, senior secured note, 7.00%, 1/15/18	United Kingdom		10,000,000	GBP		17,052,544
Visant Corp., senior note, 10.00%, 10/01/17	United States		32,800,000			34,112,000
						619,192,029
Consumer Staples 0.7%
eBoparan Holdings Ltd., senior note, 144A,
9.75%, 4/30/18	United Kingdom		7,000,000	EUR		9,706,942
9.875%, 4/30/18	United Kingdom		7,500,000	GBP		11,457,120
JBS USA LLC/Finance Inc., senior note,
11.625%, 5/01/14	Brazil		10,000,000			11,550,000
e144A, 7.25%, 6/01/21	Brazil		7,500,000			7,331,250
SUPERVALU Inc., senior note, 8.00%, 5/01/16	United States		16,000,000			16,400,000
						56,445,312
Energy 7.8%
Antero Resources Finance, senior note, 9.375%, 12/01/17	United States		14,600,000			15,768,000
eArch Coal Inc., senior note, 144A, 7.25%, 6/15/21	United States		11,100,000			11,169,375
ATP Oil & Gas Corp., senior secured note, 11.875%, 5/01/15	United States		15,000,000			15,300,000
Callon Petroleum Co., senior secured note, 13.00%, 9/15/16	United States		7,765,750			8,192,866
eCHC Helicopter SA, senior secured note, 144A, 9.25%, 10/15/20	Canada		25,000,000			22,687,500
Chesapeake Energy Corp., senior note,
9.50%, 2/15/15	United States		10,000,000			11,650,000
6.50%, 8/15/17	United States		34,000,000			36,125,000
6.875%, 8/15/18	United States		16,200,000			17,091,000
7.25%, 12/15/18	United States		33,000,000			36,135,000
eCompagnie Generale de Geophysique-Veritas, senior note, 144A, 6.50%, 6/01/21	France		12,500,000			12,112,500
eConnacher Oil and Gas Ltd., secured note, 144A, 8.50%, 8/01/19	Canada		7,500,000			7,143,750
CONSOL Energy Inc., senior note, 8.25%, 4/01/20	United States		6,800,000			7,446,000
El Paso Corp., senior note, MTN, 7.75%, 1/15/32	United States		22,000,000			25,701,984
Energy Transfer Equity LP, senior note, 7.50%, 10/15/20	United States		8,100,000			8,626,500
eEnergy XXI Gulf Coast Inc., senior note, 144A, 9.25%, 12/15/17	United States		15,000,000			16,012,500
EXCO Resources Inc., senior note, 7.50%, 9/15/18	United States		10,500,000			10,263,750
eExpro Finance Luxembourg, senior secured note, 144A, 8.50%, 12/15/16	United Kingdom		27,500,000			26,675,000
Holly Corp., senior note, 9.875%, 6/15/17	United States		2,300,000			2,576,000
Linn Energy Corp., senior note, 8.625%, 4/15/20	United States		20,000,000			21,800,000
eOGX Petroleo E Gas Participacoes SA, senior note, 144A, 8.50%, 6/01/18	Brazil		15,000,000			15,398,250

FI-15

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin Income Securities Fund	Country	Principal Amount*		Value
Corporate Bonds (continued)
Energy (continued)
Petrohawk Energy Corp., senior note,
10.50%, 8/01/14	United States		20,200,000	$	22,826,000
7.875%, 6/01/15	United States		23,000,000		24,207,500
e144A, 6.25%, 6/01/19	United States		7,500,000		7,340,625
ePetroplus Finance Ltd., senior note, 144A,
6.75%, 5/01/14	Switzerland		14,365,000		14,149,525
7.00%, 5/01/17	Switzerland		30,000,000		28,350,000
Pioneer Natural Resources Co., senior bond, 6.875%, 5/01/18	United States		7,965,000		8,635,287
Quicksilver Resources Inc., senior note, 9.125%, 8/15/19	United States		20,000,000		21,900,000
cSabine Pass LNG LP, senior secured note,
7.25%, 11/30/13	United States		10,000,000		10,300,000
7.50%, 11/30/16	United States		35,000,000		36,050,000
SandRidge Energy Inc., senior note,
8.75%, 1/15/20	United States		23,500,000		25,145,000
e144A, 9.875%, 5/15/16	United States		20,000,000		22,050,000
e144A, 8.00%, 6/01/18	United States		21,000,000		21,525,000
e144A, 7.50%, 3/15/21	United States		13,300,000		13,482,875
SESI LLC, senior note, 6.875%, 6/01/14	United States		18,500,000		18,823,750
Tesoro Corp., senior note, 9.75%, 6/01/19	United States		10,400,000		11,674,000
eW&T Offshore Inc., senior note, 144A, 8.50%, 6/15/19	United States		40,500,000		41,107,500
eWestern Refining Inc.,
fsenior note, 144A, FRN, 10.75%, 6/15/14	United States		5,000,000		5,375,000
senior secured note, 144A, 11.25%, 6/15/17	United States		5,000,000		5,650,000
					666,467,037
Financials 7.9%
hBank of America Corp., pfd., sub. bond, M, 8.125% to 5/15/18, FRN thereafter, Perpetual	United States		5,000,000		5,227,800
CIT Group Inc.,
7.00%, 5/01/14	United States		19,518,516		19,786,895
esecured bond, 144A, 7.00%, 5/04/15	United States		72,500,000		72,771,875
esecured bond, 144A, 7.00%, 5/02/16	United States		150,000,000		149,812,500
esecured bond, 144A, 7.00%, 5/02/17	United States		110,000,000		110,000,000
eCNL Income Properties Inc., senior note, 144A, 7.25%, 4/15/19	United States		15,000,000		13,650,000
FelCor Lodging LP, senior secured note, 10.00%, 10/01/14	United States		10,003,000		11,278,383
Ally Financial Inc., senior note, 8.00%, 3/15/20	United States		10,000,000		10,650,000
Hexion U.S. Finance Corp., senior secured note, 8.875%, 2/01/18	United States		8,000,000		8,360,000
International Lease Finance Corp., senior note,
8.625%, 9/15/15	United States		2,100,000		2,283,750
8.75%, 3/15/17	United States		20,000,000		21,925,000
8.875%, 9/01/17	United States		20,000,000		22,100,000
hJPMorgan Chase & Co., junior sub. note, 1, 7.90% to 4/30/18, FRN thereafter, Perpetual	United States		110,000,000		118,551,950
e,fLiberty Mutual Group, junior sub. note, 144A, FRN, 10.75%, 6/15/88	United States		25,000,000		33,437,500
e,hM&T Bank Corp., 144A, 6.875% to 6/15/16, FRN thereafter, Perpetual	United States		12,000,000		11,984,400
hWells Fargo Capital XIII, pfd., 7.70% to 3/26/13, FRN thereafter, Perpetual	United States		5,600,000		5,740,000
hWells Fargo Capital XV, pfd., 9.75% to 9/26/13, FRN thereafter, Perpetual	United States		55,000,000		58,300,000
					675,860,053
Health Care 4.1%
Community Health Systems Inc., senior note, 8.875%, 7/15/15	United States		55,000,000		56,787,500
eGiant Funding Corp., senior note, 144A, 8.25%, 2/01/18	Spain		4,900,000		5,034,750
eHCA Holdings Inc., senior note, 144A, 7.75%, 5/15/21	United States		10,000,000		10,425,000
HCA Inc., senior note, 6.375%, 1/15/15	United States		5,000,000		5,125,000
senior note, 6.50%, 2/15/16	United States		20,000,000		20,450,000

FI-16

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin Income Securities Fund	Country	Principal Amount*		Value
Corporate Bonds (continued)
Health Care (continued)
HCA Inc., (continued)
senior secured note, 9.25%, 11/15/16	United States		10,000,000	$	10,662,500
senior secured note, 8.50%, 4/15/19	United States		20,000,000		22,200,000
senior secured note, 7.875%, 2/15/20	United States		20,000,000		21,800,000
eMylan Inc., senior note, 144A, 6.00%, 11/15/18	United States		5,000,000		5,106,250
e,gQuintiles Transnational Corp., senior note, 144A, PIK, 9.50%, 12/30/14	United States		30,000,000		30,825,000
Tenet Healthcare Corp.,
senior note, 8.00%, 8/01/20	United States		24,600,000		25,122,750
fsenior note, FRN, 9.25%, 2/01/15	United States		13,500,000		14,833,125
senior secured note, 9.00%, 5/01/15	United States		40,000,000		43,100,000
senior secured note, 10.00%, 5/01/18	United States		41,250,000		47,076,562
Vanguard Health Holding Co. II LLC, senior note, 8.00%, 2/01/18	United States		23,100,000		23,966,250
Vanguard Health Holding Co. II LLC/Inc., senior note, 7.75%, 2/01/19	United States		4,000,000		4,070,000
Vanguard Health Systems Inc., zero cpn., 2/01/16	United States		10,300,000		6,836,625
					353,421,312
Industrials 2.7%
eAbengoa Finance SAU, senior note, 144A, 8.875%, 11/01/17	Spain		11,900,000		12,197,441
eAmerican Airlines Inc., senior secured note, 144A, 7.50%, 3/15/16	United States		25,000,000		24,625,000
eCeva Group PLC, senior secured note, 144A,
8.375%, 12/01/17	United Kingdom		6,800,000		6,910,500
11.50%, 4/01/18	United Kingdom		30,300,000		32,042,250
eDelta Air Lines Inc., senior secured note, 144A, 9.50%, 9/15/14	United States		10,860,000		11,633,775
Diversey Inc., senior note, 8.25%, 11/15/19	United States		9,000,000		10,597,500
Hertz Corp., senior note,
8.875%, 1/01/14	United States		6,951,000		7,159,530
e144A, 6.75%, 4/15/19	United States		4,500,000		4,477,500
eInteractive Data Corp., senior note, 144A, 10.25%, 8/01/18	United States		5,000,000		5,462,500
The Manitowoc Co. Inc., senior note, 9.50%, 2/15/18	United States		10,000,000		10,912,500
ePinafore LLC/Inc., senior secured note, 144A, 9.00%, 10/01/18	United States		3,600,000		3,897,000
RBS Global & Rexnord Corp.,
senior note, 8.50%, 5/01/18	United States		26,900,000		28,547,625
senior sub. note, 11.75%, 8/01/16	United States		13,500,000		14,343,750
Terex Corp., senior sub. note, 8.00%, 11/15/17	United States		45,000,000		46,350,000
United Rentals North America Inc., senior sub. note, 8.375%, 9/15/20	United States		9,800,000		9,971,500
					229,128,371
Information Technology 6.4%
Advanced Micro Devices Inc., senior note, 8.125%, 12/15/17	United States		5,000,000		5,250,000
eCDW Escrow Corp., senior note, 144A, 8.50%, 4/01/19	United States		22,300,000		21,965,500
CDW LLC/Finance Corp.,
senior note, 11.00%, 10/12/15	United States		442,000		467,415
senior sub. note, 12.535%, 10/12/17	United States		5,000,000		5,412,500
Ceridian Corp., senior note, 11.25%, 11/15/15	United States		20,000,000		20,100,000
eCommScope Inc., senior note, 144A, 8.25%, 1/15/19	United States		4,000,000		4,140,000
First Data Corp.,
esenior bond, 144A, 12.625%, 1/15/21	United States		76,298,000		82,020,350
senior note, 9.875%, 9/24/15	United States		4,758,000		4,912,635
esenior secured bond, 144A, 8.25%, 1/15/21	United States		45,000,000		44,325,000
e,gsenior secured note, 144A, PIK, 10.00%, 1/15/22	United States		33,188,000		30,948,042
senior sub. note, 11.25%, 3/31/16	United States		40,000,000		39,600,000
Freescale Semiconductor Inc.,
senior note, 10.125%, 12/15/16	United States		20,000,000		21,625,000
e,isenior note, 144A, 8.05%, 2/01/20	United States		25,000,000		25,250,000

FI-17

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin Income Securities Fund	Country	Principal Amount*			Value
Corporate Bonds (continued)
Information Technology (continued)
Freescale Semiconductor Inc., (continued)
esenior note, 144A, 10.75%, 8/01/20	United States		96,750,000		$	109,811,250
esenior secured note, 144A, 10.125%, 3/15/18	United States		5,000,000			5,575,000
esenior secured note, 144A, 9.25%, 4/15/18	United States		51,700,000			55,965,250
eNXP BV/NXP Funding LLC, senior secured note, 144A, 9.75%, 8/01/18	Netherlands		8,600,000			9,642,750
Sanmina-SCI Corp.,
esenior note, 144A, 7.00%, 5/15/19	United States		15,000,000			14,250,000
senior sub. note, 8.125%, 3/01/16	United States		15,600,000			16,282,500
SunGard Data Systems Inc.,
senior note, 10.625%, 5/15/15	United States		7,500,000			8,156,250
senior note, 7.625%, 11/15/20	United States		10,000,000			10,150,000
senior sub. note, 10.25%, 8/15/15	United States		14,500,000			15,043,750
						550,893,192
Materials 2.1%
Berry Plastics Corp., senior secured note, 9.75%, 1/15/21	United States		5,000,000			4,862,500
eBuilding Materials Corp. of America, senior note, 144A, 6.75%, 5/01/21	United States		10,000,000			10,075,000
eFMG Resources August 2006 Pty. Ltd., senior note, 144A,
7.00%, 11/01/15	Australia		14,000,000			14,325,080
6.875%, 2/01/18	Australia		11,900,000			12,138,000
Huntsman International LLC, senior note, 5.50%, 6/30/16	United States		1,750,000			1,730,313
eIneos Group Holdings PLC,
senior secured note, 144A, 8.50%, 2/15/16	United Kingdom		5,000,000			4,962,500
senior sub. note, 144A, 7.875%, 2/15/16	United Kingdom		30,000,000	EUR		42,694,666
eKerling PLC, senior secured note, 144A, 10.625%, 1/28/17	United Kingdom		9,400,000	EUR		14,483,374
eKinove German Bondco GmbH,
senior secured bond, 144A, 10.00%, 6/15/18	Germany		9,900,000	EUR		14,993,555
senior secured note, 144A, 9.625%, 6/15/18	Germany		13,100,000			13,656,750
NewPage Corp., senior secured note,
10.00%, 5/01/12	United States		10,800,000			3,294,000
11.375%, 12/31/14	United States		6,000,000			5,625,000
eReynolds Group Holdings Ltd.,
senior note, 144A, 8.25%, 2/15/21	New Zealand		5,200,000			4,888,000
senior secured note, 144A, 6.875%, 2/15/21	New Zealand		10,000,000			9,706,250
Vulcan Materials Co., senior note,
6.50%, 12/01/16	United States		11,200,000			11,138,030
7.50%, 6/15/21	United States		13,500,000			13,497,084
						182,070,102
Telecommunication Services 1.4%
eClearwire Corp., senior secured note, 144A, 12.00%, 12/01/15	United States		23,100,000			24,861,375
Cricket Communications Inc., senior note,
7.75%, 10/15/20	United States		40,000,000			39,300,000
e144A, 7.75%, 10/15/20	United States		5,000,000			4,912,500
Frontier Communications Corp., senior note,
8.25%, 4/15/17	United States		6,600,000			7,210,500
8.50%, 4/15/20	United States		12,900,000			14,125,500
eIntelsat Jackson Holding SA, senior note, 144A, 7.50%, 4/01/21	Luxembourg		20,000,000			19,925,000
Sprint Nextel Corp., senior note, 8.375%, 8/15/17	United States		7,700,000			8,498,875
						118,833,750
Utilities 5.7%
eAES Corp., senior note, 144A, 7.375%, 7/01/21	United States		5,800,000			5,894,250

FI-18

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin Income Securities Fund	Country	Principal Amount*		Value
Corporate Bonds (continued)
Utilities (continued)
eCalpine Corp., senior secured note, 144A,
7.25%, 10/15/17	United States		5,000,000	$	5,100,000
7.875%, 7/31/20	United States		10,700,000		11,235,000
7.50%, 2/15/21	United States		15,000,000		15,375,000
7.875%, 1/15/23	United States		15,000,000		15,468,750
Dynegy Holdings Inc., senior note,
7.50%, 6/01/15	United States		20,000,000		16,400,000
7.50%, 6/01/15	United States		15,000,000		12,150,000
8.375%, 5/01/16	United States		82,699,000		66,572,695
7.75%, 6/01/19	United States		24,500,000		17,946,250
Energy Future Holdings Corp., senior note, R, 6.55%, 11/15/34	United States		35,000,000		17,325,000
GenOn Energy Inc., senior note,
7.625%, 6/15/14	United States		9,500,000		9,832,500
7.875%, 6/15/17	United States		25,000,000		25,250,000
eIntergen NV, senior secured note, 144A, 9.00%, 6/30/17	Netherlands		7,500,000		7,968,750
Niska Gas Storage U.S./Canada, senior note, 8.875%, 3/15/18	United States		15,000,000		15,825,000
Public Service Co. of New Mexico, senior note, 7.95%, 5/15/18	United States		6,400,000		7,229,830
eTexas Competitive Electric Holdings Co. LLC/Texas Competitive Electric Holdings Finance Inc.,
secured note, B, 144A, 15.00%, 4/01/21	United States		17,800,000		17,577,500
senior secured note, 144A, 11.50%, 10/01/20	United States		100,125,000		82,603,125
Texas Competitive Electric Holdings Co. LLC, senior note,
A, 10.25%, 11/01/15	United States		149,690,000		91,310,900
B, 10.25%, 11/01/15	United States		64,193,000		38,836,765
gPIK, 11.25%, 11/01/16	United States		13,000,014		8,360,855
					488,262,170
Total Corporate Bonds (Cost $3,751,406,877)					3,940,573,328
f,jSenior Floating Rate Interests 6.4%
Consumer Discretionary 1.3%
Chrysler Group LLC, Tranche B Term Loan, 6.00%, 5/24/17	United States		39,700,000		38,773,680
Clear Channel Communications Inc., Tranche B Term Loan, 3.836%, 1/29/16	United States		72,254,969		61,089,336
Club Operations Inc., Term B Loan, 6.00%, 11/30/16	United States		9,950,000		9,968,656
bDex Media West LLC, Term Loan B, 7.00%, 10/24/14	United States		4,400,730		3,692,948
SuperMedia Inc., Exit Term Loan, 11.00%, 12/31/15	United States		2,733,904		1,661,822
					115,186,442
Financials 0.7%
iStar Financial Inc., Tranche A2 Term Loan, 7.00%, 6/30/14	United States		60,000,000		59,785,500
Industrials 0.8%
Allison Transmission Inc., Term Loan B, 2.94%, 8/07/14	United States		26,987,071		26,504,246
Altegrity Inc.,
Term Loan B, 2.997%, 2/21/15	United States		14,758,644		14,500,368
Tranche D Term Loan, 7.75%, 2/21/15	United States		14,887,500		15,022,425
Ceva Group PLC,
Dollar Tranche B L/C, 5.246%, 8/31/16	United Kingdom		2,105,263		2,067,105
EGL Tranche B Term Loans, 5.273%, 8/31/16	United Kingdom		12,291,882		12,199,693
					70,293,837
Information Technology 1.2%
First Data Corp.,
2018 Term Loan, 4.00% - 4.186%, 3/24/18	United States		22,436,455		20,626,618
Term Loan B-1, 2.936%, 9/24/14	United States		13,650,417		12,669,293

FI-19

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin Income Securities Fund	Country	Principal Amount*		Value
Senior Floating Rate Interests (continued)
Information Technology (continued)
First Data Corp., (continued)
Term Loan B-2, 2.936%, 9/24/14	United States		64,638,495	$	59,992,603
Term Loan B-3, 2.936%, 9/24/14	United States		2,387,693		2,216,078
Freescale Semiconductor Inc., Extended Term Loan, 4.441%, 12/01/16	United States		2,590,375		2,581,876
					98,086,468
Materials 0.3%
kDynacast International Ltd., Bridge Loan, 9.75%, 6/22/12	United Kingdom		25,000,000		25,032,750
Utilities 2.1%
Texas Competitive Electric Holdings Co. LLC, 2017 Term Loan, 4.69% - 4.768%, 10/10/17	United States		224,606,875		175,795,309
Total Senior Floating Rate Interests (Cost $561,840,735)					544,180,306
Asset-Backed Securities and Commercial Mortgage-Backed Securities (Cost $33,941,142) 0.4%
Financials 0.4%
e,fBanc of America Large Loan, 2010-HLTN, 144A, FRN, 1.937%, 11/15/15	United States		39,012,806		36,235,621
Municipal Bonds 0.7%
California State GO,
7.95%, 3/01/36	United States		25,000,000		27,263,500
5.25%, 11/01/40	United States		2,815,000		2,777,448
Build America Bonds, 7.60%, 11/01/40	United States		13,920,000		16,054,911
Various Purpose, 6.00%, 11/01/39	United States		830,000		884,116
Various Purpose, Refunding, NATL Insured, 4.50%, 12/01/32	United States		1,510,000		1,349,019
Various Purpose, Refunding, Series 1, AGMC Insured, 4.75%, 9/01/31	United States		1,460,000		1,413,893
Puerto Rico Sales Tax FICO Sales Tax Revenue, first sub., Series A, 5.50%, 8/01/42	United States		3,800,000		3,804,978
San Joaquin County Transportation Authority Sales Tax Revenue, Refunding, 5.50%, 3/01/41	United States		7,820,000		7,983,829
Total Municipal Bonds (Cost $55,827,256)					61,531,694
Total Investments before Short Term Investments (Cost $8,014,891,711)					8,442,355,131
Short Term Investments 1.0%
Repurchase Agreements (Cost $77,890,659) 0.9%
lJoint Repurchase Agreement, 0.005%, 7/01/11 (Maturity Value $77,890,670)	United States		77,890,659		77,890,659
Barclays Capital Inc. (Maturity Value $6,674,451)
BNP Paribas Securities Corp. (Maturity Value $17,798,018)
Credit Suisse Securities (USA) LLC (Maturity Value $13,348,124)
Deutsche Bank Securities Inc. (Maturity Value $8,923,934)
HSBC Securities (USA) Inc. (Maturity Value $6,674,452)
Merrill Lynch, Pierce, Fenner & Smith Inc. (Maturity Value $4,449,115)
Morgan Stanley & Co. LLC (Maturity Value $6,674,452)
UBS Securities LLC (Maturity Value $13,348,124)
Collateralized by U.S. Government Agency Securities, 0.75% - 5.375%, 10/15/11 - 9/13/19; mU.S. Government Agency Discount Notes, 9/28/11 - 12/28/11; mU.S. Treasury Bills, 8/04/11 - 8/25/11; U.S. Treasury Bonds, 7.25% - 11.25%, 2/15/15 - 5/15/16; and U.S. Treasury Notes, 0.375% - 5.00%, 7/31/11 - 6/30/16 (valued at $79,647,087)

FI-20

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin Income Securities Fund	Country	Shares		Value
Short Term Investments (continued)
nInvestments from Cash Collateral Received for Loaned Securities (Cost $6,810,310) 0.1%
Money Market Funds 0.1%
oBNY Mellon Overnight Government Fund, 0.05%	United States		6,810,310	$	6,810,310
Total Investments (Cost $8,099,592,680) 99.5%					8,527,056,100
Other Assets, less Liabilities 0.5%					45,984,367
Net Assets 100.0%				$	8,573,040,467

See Abbreviations on page FI-35.

†Rounds to less than 0.1% of net assets.

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

^aNon-income producing.

^bSee Note 9 regarding holdings of 5% voting securities.

^cAt June 30, 2011, pursuant to the Fund’s policies and the requirements of applicable securities law, the Fund may be restricted from trading these securities for a limited or extended period of time due to ownership limits and/or potential possession of material non-public information.

^dSee Note 1(f) regarding equity-linked securities.

^eSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At June 30, 2011, the aggregate value of these securities was $2,064,768,563, representing 24.08% of net assets.

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

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

^hPerpetual security with no stated maturity date.

ⁱA portion or all of the security is on loan at June 30, 2011. See Note 1(g).

^jSee Note 1(h) regarding senior floating rate interests.

^kSecurity purchased on a delayed delivery basis. See Note 1(d).

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

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

ⁿSee Note 1(g) regarding securities on loan.

^oThe rate shown is the annualized seven-day yield at period end.

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

FI-21

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

June 30, 2011 (unaudited)

	Franklin Income Securities Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	7,877,096,993
Cost - Non-controlled affiliated issuers (Note 9)		144,605,028
Cost - Repurchase agreements		77,890,659
Total cost of investments	$	8,099,592,680
Value - Unaffiliated issuers	$	8,424,563,412
Value - Non-controlled affiliated issuers (Note 9)		24,602,029
Value - Repurchase agreements		77,890,659
Total value of investments (includes securities loaned in the amount of $6,642,770)		8,527,056,100
Cash		602,037
Receivables:
Investment securities sold		8,253,429
Capital shares sold		3,178,289
Dividends and interest		92,660,318
Other assets		714,007
Total assets		8,632,464,180
Liabilities:
Payables:
Investment securities purchased		41,699,679
Capital shares redeemed		3,792,864
Affiliates		6,131,594
Payable upon return of securities loaned		6,810,310
Accrued expenses and other liabilities		989,266
Total liabilities		59,423,713
Net assets, at value	$	8,573,040,467
Net assets consist of:
Paid-in capital	$	9,003,119,417
Undistributed net investment income		237,360,854
Net unrealized appreciation (depreciation)		427,399,199
Accumulated net realized gain (loss)		(1,094,839,003	)
Net assets, at value	$	8,573,040,467

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

FI-22

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Assets and Liabilities (continued)

June 30, 2011 (unaudited)

	Franklin Income Securities Fund
Class 1:
Net assets, at value	$	1,715,055,274
Shares outstanding		113,653,147
Net asset value and maximum offering price per share	$	15.09
Class 2:
Net assets, at value	$	6,403,467,535
Shares outstanding		434,406,667
Net asset value and maximum offering price per share	$	14.74
Class 4:
Net assets, at value	$	454,517,658
Shares outstanding		30,341,167
Net asset value and maximum offering price per share	$	14.98

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

FI-23

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the six months ended June 30, 2011 (unaudited)

	Franklin Income Securities Fund
Investment income:
Dividends	$	72,779,618
Interest:
Unaffiliated issuers		208,650,737
Non-controlled affiliated issuers (Note 9)		2,077,560
Income from securities loaned		168,305
Total investment income		283,676,220
Expenses:
Management fees (Note 3a)		19,156,293
Distribution fees: (Note 3c)
Class 2		8,038,428
Class 4		768,254
Unaffiliated transfer agent fees		1,889
Custodian fees (Note 4)		86,909
Reports to shareholders		406,815
Professional fees		88,935
Trustees’ fees and expenses		15,856
Other		81,590
Total expenses		28,644,969
Expense reductions (Note 4)		(19	)
Net expenses		28,644,950
Net investment income		255,031,270
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments:
Unaffiliated issuers		108,257,344
Non-controlled affiliated issuers (Note 9)		110,799
Written options		415,499
Foreign currency transactions		50,340
Net realized gain (loss)		108,833,982
Net change in unrealized appreciation (depreciation) on:
Investments		81,712,603
Translation of other assets and liabilities denominated in foreign currencies		(26,123	)
Net change in unrealized appreciation (depreciation)		81,686,480
Net realized and unrealized gain (loss)		190,520,462
Net increase (decrease) in net assets resulting from operations	$	445,551,732

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

FI-24

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets

	Franklin Income Securities Fund
	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31, 2010
Increase (decrease) in net assets:
Operations:
Net investment income	$	255,031,270		$	459,831,319
Net realized gain (loss) from investments, written options and foreign currency transactions		108,833,982			1,566,016
Net change in unrealized appreciation (depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies		81,686,480			446,658,211
Net increase (decrease) in net assets resulting from operations		445,551,732			908,055,546
Distributions to shareholders from:
Net investment income:
Class 1		(96,601,395	)		(70,751,613	)
Class 2		(356,087,463	)		(403,393,475	)
Class 4		(24,430,578	)		(24,551,628	)
Total distributions to shareholders		(477,119,436	)		(498,696,716	)
Capital share transactions: (Note 2)
Class 1		280,302,927			469,690,616
Class 2		109,587,489			(125,499,592	)
Class 4		40,942,376			47,090,132
Total capital share transactions		430,832,792			391,281,156
Net increase (decrease) in net assets		399,265,088			800,639,986
Net assets:
Beginning of period		8,173,775,379			7,373,135,393
End of period	$	8,573,040,467		$	8,173,775,379
Undistributed net investment income included in net assets:
End of period	$	237,360,854		$	459,449,020

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

FI-25

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited)

Franklin Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

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

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

The Fund’s investments in securities and other financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Under procedures approved by the Trust’s Board of Trustees, the Fund may utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

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

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

The Fund has procedures to determine the fair value of securities and other financial instruments for which market prices are not readily available or which may not be reliably priced. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.

Trading in securities on foreign securities stock exchanges and over-the-counter markets may be completed before the daily close of business on the NYSE. Occasionally, events occur between the time at which trading in a foreign security is completed and the close of the NYSE that might call into question the reliability of the value of a portfolio security held by the Fund. As a result,

FI-26

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

a. Financial Instrument Valuation (continued)

differences may arise between the value of the Fund’s portfolio securities as determined at the foreign market close and the latest indications of value at the close of the NYSE. In order to minimize the potential for these differences, the investment manager monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depository Receipts, 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 may call into question the reliability of the values of the foreign securities held by the Fund. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services.

b. Foreign Currency Translation

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

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

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

c. Joint Repurchase Agreement

The Fund enters into a joint repurchase agreement whereby its uninvested cash balance is deposited into a joint cash account with other funds managed by the investment manager or an affiliate of the investment manager and is used to invest in one or more repurchase agreements. The value and face amount of the joint repurchase agreement are allocated to the funds based on their pro-rata interest. A repurchase agreement is accounted for as a loan by the fund to the seller, collateralized by securities which are delivered to the fund’s custodian. The market value, including accrued interest, of the initial collateralization is required to be at least 102% of the dollar amount invested by the funds, with the value of the underlying securities marked to market daily to maintain coverage of at least 100%. The joint repurchase agreement held by the Fund at period end had been entered into on June 30, 2011.

d. Securities Purchased on a Delayed Delivery Basis

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

FI-27

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

e. Derivative Financial Instruments

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

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

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

f. Equity-Linked Securities

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

g. Securities Lending

The Fund participates in an agency based security lending program. The Fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the market value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the market value of loaned securities, as determined at the close of Fund business each day; any additional collateral required due to changes in security values is delivered to the Fund on the next business day. The collateral is invested in a non-registered money fund managed by the Fund’s custodian on the Fund’s behalf. The Fund receives income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. The Fund bears the market risk with respect to the collateral investment, securities loaned, and the risk that the agent may default on its obligations to the Fund. The securities lending agent has agreed to indemnify the Fund in the event of default by a third party borrower.

h. Senior Floating Rate Interests

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

FI-28

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

h. Senior Floating Rate Interests (continued)

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

i. Income Taxes

It is the Fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and excise taxes. As a result, no provision for U.S. federal income taxes is required. The Fund files U.S. income tax returns as well as tax returns in certain other jurisdictions. The Fund records a provision for taxes in its financial statements including penalties and interest, if any, for a tax position taken on a tax return (or expected to be taken) when it fails to meet the more likely than not (a greater than 50% probability) threshold and based on the technical merits, the tax position may not be sustained upon examination by the tax authorities. As of June 30, 2011, and for all open tax years, the Fund has determined that no provision for income tax is required in the Fund’s financial statements. Open tax years are those that remain subject to examination and are based on each tax jurisdiction statute of limitation.

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

j. Security Transactions, Investment Income, Expenses and Distributions

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

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

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

k. Accounting Estimates

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

FI-29

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

l. Guarantees and Indemnifications

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

2. SHARES OF BENEFICIAL INTEREST

At June 30, 2011, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:

	Six Months Ended June 30, 2011						Year Ended December 31, 2010
Class 1 Shares:	Shares			Amount			Shares			Amount
Shares sold		13,568,291		$	214,732,411			44,758,864		$	645,042,814
Shares issued in reinvestment of distributions		6,487,669			96,601,395			5,206,153			70,751,613
Shares redeemed		(1,961,720	)		(31,030,879	)		(17,515,669	)		(246,103,811	)
Net increase (decrease)		18,094,240		$	280,302,927			32,449,348		$	469,690,616
Class 2 Shares:
Shares sold		17,084,824		$	262,506,301			26,818,536		$	380,019,084
Shares issued in reinvestment of distributions		24,473,365			356,087,463			30,330,336			403,393,475
Shares redeemed		(33,009,436	)		(509,006,275	)		(64,334,274	)		(908,912,151	)
Net increase (decrease)		8,548,753		$	109,587,489			(7,185,402	)	$	(125,499,592	)
Class 4 Shares:
Shares sold		2,443,626		$	38,175,821			4,608,224		$	66,369,834
Shares issued on reinvestment of distributions		1,652,948			24,430,578			1,817,293			24,551,628
Shares redeemed		(1,381,695	)		(21,664,023	)		(3,057,456	)		(43,831,330	)
Net increase (decrease)		2,714,879		$	40,942,376			3,368,061		$	47,090,132

3. TRANSACTIONS WITH AFFILIATES

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

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

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Income Securities Fund

3. TRANSACTIONS WITH AFFILIATES (continued)

a. Management Fees

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

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

b. Administrative Fees

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

c. Distribution Fees

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

d. Transfer Agent Fees

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

e. Other Affiliated Transactions

At June 30, 2011, Franklin Templeton Variable Insurance Products Trust - Franklin Templeton VIP Founding Funds Allocation Fund owned 16.40% of the Fund’s outstanding shares.

4. EXPENSE OFFSET ARRANGEMENT

The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses. During the period ended June 30, 2011, the custodian fees were reduced as noted in the Statement of Operations.

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Income Securities Fund

5. INCOME TAXES

For tax purposes, capital losses may be carried over to offset future capital gains, if any. At December 31, 2010, the capital loss carryforwards were as follows:

Capital loss carryforwards expiring in:
2016	$	524,982,657
2017		521,405,875
2018		158,391,805
	$	1,204,780,337

Under the Regulated Investment Company Modernization Act of 2010, the Fund will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. Post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered short-term as under previous law. Any post-enactment capital losses generated will be required to be utilized prior to the losses incurred in pre-enactment tax years.

At June 30, 2011, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	8,114,095,045
Unrealized appreciation	$	956,718,231
Unrealized depreciation		(543,757,176	)
Net unrealized appreciation (depreciation)	$	412,961,055

Net investment income differs for financial statement and tax purposes primarily due to differing treatments of defaulted securities, foreign currency transactions, payments-in-kind, bond discounts and premiums, and corporate actions.

Net realized gains (losses) differ for financial statement and tax purposes primarily due to differing treatments of defaulted securities, wash sales, foreign currency transactions, payments-in-kind, bond discounts and premiums, and corporate actions.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2011, aggregated $1,446,214,769 and $1,081,306,100, respectively.

Transactions in options written during the period ended June 30, 2011, were as follows:

	Number of Contracts			Premiums Received
Options outstanding at December 31, 2010		3,690		$	415,499
Options written		—			—
Options expired		(3,690	)		(415,499	)
Options exercised		—			—
Options closed		—			—
Options outstanding at June 30, 2011		—		$	—

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Income Securities Fund

7. CREDIT RISK

At June 30, 2011, the Fund had 50.17% of its portfolio invested in high yield securities, senior secured floating rate notes, or other securities rated below investment grade. These securities may be more sensitive to economic conditions causing greater price volatility and are potentially subject to a greater risk of loss due to default than higher rated securities.

8. OTHER DERIVATIVE INFORMATION

For the period ended June 30, 2011, the effect of derivative contracts on the Fund’s Statement of Operations was as follows:

Derivative Contracts Not Accounted for as Hedging Instruments	Statement of Operations Locations	Realized Gain (Loss) for the Period		Change in Unrealized Appreciation (Depreciation) for the Period
Equity contracts	Net realized gain (loss) from written options / Net change in unrealized appreciation (depreciation) on investments		$415,499	$3,501

For the period ended June 30, 2011, the average month end market value of derivatives represented less than 0.01% of average month end net assets. The average month end number of open derivative contracts for the period was 1.

See Note 1(e) regarding derivative financial instruments.

9. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES

The 1940 Act defines “affiliated companies” to include investments in portfolio companies in which a fund owns 5% or more of the outstanding voting securities. Investments in “affiliated companies” for the Fund for the period ended June 30, 2011, were as shown below.

Name of Issuer	Number of Shares/Principal Amount Held at Beginning of Period		Gross Additions		Gross Reductions		Number of Shares/Principal Amount Held at End of Period		Value at End of Period		Investment Income		Realized Capital Gain (Loss)
Non-Controlled Affiliates
aDex Media West LLC, Term Loan B, 7.00%, 10/24/14		4,783,951		—		383,221		4,400,730	$	3,692,948	$	137,697	$	110,799
Dex One Corp.		2,642,381		—		—		2,642,381		6,685,224		—		—
Dex One Corp., senior sub. note, PIK, 12.00%, 1/29/17		32,511,674		—		—		32,511,674		14,223,857		1,939,863		—
Total Affiliated Securities (0.29% of Net Assets)									$	24,602,029	$	2,077,560	$	110,799

^aCompany is a wholly owned subsidiary of Dex One Corp.

10. CREDIT FACILITY

The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $750 million (Global Credit Facility) which matures on January 20, 2012. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests.

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Income Securities Fund

10. CREDIT FACILITY (continued)

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.08% based upon the unused portion of the Global Credit Facility, which is reflected in other expenses on the Statement of Operations. During the period ended June 30, 2011, the Fund did not use the Global Credit Facility.

11. FAIR VALUE MEASUREMENTS

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

• Level 1 – quoted prices in active markets for identical securities

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

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

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

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

The following is a summary of the inputs used as of June 30, 2011, in valuing the Fund’s assets and liabilities carried at fair value:

	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities:
Equity Investments:a
Consumer Discretionary	$	157,246,064	$	5,277,272	$	—	$	162,523,336
Energy		531,808,025		73,046,320		—		604,854,345
Financials		666,962,979		39,124,567		—		706,087,546
Health Care		472,400,362		13,635,000		—		486,035,362
All Other Equity Investmentsb		1,734,080,776		—		—		1,734,080,776
Equity-Linked Securities				92,610,484		—		92,610,484
Convertible Bonds		—		73,642,333		—		73,642,333
Corporate Bonds		—		3,940,573,328		—		3,940,573,328
Senior Floating Rate Interests		—		544,180,306		—		544,180,306
Asset-Backed Securities and Commercial Mortgage-Backed Securities		—		36,235,621		—		36,235,621
Municipal Bonds		—		61,531,694		—		61,531,694
Short Term Investments		—		84,700,969		—		84,700,969
Total Investments in Securities	$	3,562,498,206	$	4,964,557,894	$	—	$	8,527,056,100

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

^bFor detailed industry descriptions, see the accompanying Statement of Investments.

FI-34

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Income Securities Fund

12. NEW ACCOUNTING PRONOUNCEMENTS

In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (IFRS). The amendments in the ASU will improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRS and include new guidance for certain fair value measurement principles and disclosure requirements. The ASU is effective for interim and annual periods beginning after December 15, 2011. The Fund is currently evaluating the impact, if any, of applying this provision.

13. SUBSEQUENT EVENTS

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

ABBREVIATIONS
Currency	Selected Portfolio
Euro - Euro	ADR - American Depository Receipt
GBP - British Pound	AGMC - Assured Guaranty Municipal Corp.
	FICO - Financing Corp.
	FRN - Floating Rate Note
	GO - General Obligation
	L/C - Letter of Credit
	MTN - Medium Term Note
	NATL - National Public Financial Guarantee Corp.
	PIK - Payment-In-Kind

FI-35

FRANKLIN RISING DIVIDENDS SECURITIES FUND

We are pleased to bring you Franklin Rising Dividends Securities Fund’s semiannual report for the period ended June 30, 2011.

Performance Summary as of 6/30/11

Franklin Rising Dividends Securities Fund – Class 4 delivered a +6.48% total return for the six-month period ended 6/30/11.

Performance reflects the Fund’s Class 4 operating expenses, but does not include any contract fees, expenses or sales charges. If they had been included, performance would be lower. These charges and deductions, particularly for variable life policies, can have a significant effect on contract values and insurance benefits. See the contract prospectus for a complete description of these expenses, including sales charges.

Franklin Rising Dividends Securities Fund – Class 4

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

Current performance may differ from figures shown.

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Fund Goal and Main Investments: Franklin Rising Dividends Securities Fund seeks long-term capital appreciation, with preservation of capital as an important consideration. The Fund normally invests at least 80% of its net assets in investments of companies that have paid rising dividends.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. The Fund outperformed its benchmark, the Standard & Poor’s 500 Index (S&P 500), which rose 6.02% for the same period.¹ Please note the Fund employs a bottom-up stock selection process, and the managers invest in securities without regard to benchmark comparisons.

Economic and Market Overview

The U.S. economy expanded despite geopolitical and inflationary pressures from around the globe during the six-month period ended June 30, 2011. Business activity increased and consumer spending stayed above pre-recession levels. The U.S. has been a key engine in a sustained global manufacturing expansion as international trade volume continued to increase, albeit at a moderate pace. Worldwide demand for capital goods aided U.S. manufacturing profits and increased employment in the industry.

The unemployment rate improved in the first quarter when job creation began to gain some traction. However, government payrolls continued to trend down and job creation slowed in the second quarter, causing the unemployment rate to end the period at 9.2%.² Consumer spending rose for 11 consecutive months through May but declined in June as concerns about job growth and rising gasoline and food prices dampened consumer confidence. To offset the disruption of global oil supply caused by the conflicts in Libya, the International Energy Agency announced in June the release of 60 million barrels of oil in July from strategic reserves of the U.S. and 27 other nations. The U.S. financial system appeared closer to a full recovery, although the country still faced challenges dealing with housing market weakness and massive debt at period-end.

Inflation at the consumer, producer and trade levels rose across much of the world, but in the U.S. it remained relatively contained. As a result, the Federal Reserve Board (Fed) maintained its accommodative

1. Source: © 2011 Morningstar. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

2. Source: Bureau of Labor Statistics.

Fund Risks: The Fund’s investments in stocks may offer the potential for long-term gains but can be subject to short-term price fluctuations. Smaller and midsize company securities can increase the risk of greater price fluctuations, particularly over the short term. The Fund may have significant investments in particular sectors from time to time, such as financial institutions and health care, and may be at greater risk of adverse developments in a sector than a fund that invests more broadly. Foreign investing involves additional risks, including currency fluctuations, economic instability, market volatility, and political and social instability. The manager applies various techniques and analyses in making investment decisions for the Fund, but there can be no guarantee that these decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

FRD-2

monetary policy while ending its second round of quantitative easing on June 30. The Fed said, however, it would continue to purchase Treasuries with proceeds from maturing debt in an effort to support economic growth.

Investors’ attitudes shifted with each release of economic, regulatory and geopolitical news, causing equity market volatility to increase globally. U.S. investors weathered international events that included revolutions and civil unrest across the Middle East and North Africa, the multiple crises triggered by Japan’s earthquake and tsunami, and sovereign debt worries and credit downgrades in Europe. Ultimately, stock indexes produced solid gains during the six months under review as domestic and global equity markets rose amid generally improving economic signs and record-high corporate earnings growth.

Investment Strategy

We are a research-driven, fundamental investment adviser, pursuing a disciplined, value-oriented strategy. As bottom-up investors concentrating primarily on individual securities, we seek fundamentally sound companies that we believe meet our screening criteria, which include consistent, substantial dividend increases; reinvested earnings; and strong balance sheets. We attempt to acquire such stocks at attractive prices, often when they are out of favor with other investors. In following these criteria, we do not necessarily focus on companies whose securities pay a high dividend but rather on companies that consistently raise their dividends.

Manager’s Discussion

During the six months under review, significant contributors to Fund performance included Praxair, Dover and United Technologies. Shares appreciated in value for each of these companies as they experienced improved operating results and reported strong quarterly revenue growth. Industrial gases company Praxair has 18 consecutive years of dividend increases, while industrial conglomerates Dover and United Technologies have raised their dividends for 55 years and 17 years, respectively.

Detractors from performance included Hudson City Bancorp, Old Republic International and Aflac. Declining net interest margin led large savings bank Hudson City to restructure its balance sheet and reduce its dividend. In our analysis, prospective net interest margin may improve after the company reduces its high-cost borrowings and low-yielding securities. Multiline insurer Old Republic’s shares have been pressured

FRD-3

by continuing losses in the company’s mortgage insurance business. Supplemental insurance provider Aflac’s shares fell in value after the company disclosed that its decision to more conservatively position its investment portfolio would result in lower 2012 earnings than analysts’ estimates.

During the period, we initiated eight new positions: specialty chemicals company Albemarle (17 years of dividend increases), integrated energy company Chevron (23 years), insurer Chubb (46 years), consumer products manufacturer and marketer Colgate-Palmolive (48 years), integrated energy company Exxon Mobil (29 years), memorialization and related products manufacturer Matthews International (16 years), global athletic footwear and apparel maker Nike (9 years), and industrial equipment manufacturer Pentair (35 years). We made significant additions to holdings of restaurant operator McDonald’s and global snacks and beverage manufacturer PepsiCo and made smaller additions to eight other positions. During the period, Unilever completed its cash purchase of long-time Fund holding Alberto-Culver. We liquidated our position in Nordson during the period and made smaller reductions to 18 other holdings.

Our 10 largest positions on June 30, 2011, represented 45.1% of the Fund’s total net assets. It is interesting to note how these 10 companies would respond, in aggregate, to the Fund’s screening criteria based on a simple average of statistical measures. On average, these 10 companies have raised their dividends 33 years in a row and by 285% in the past 10 years. Their most recent year-over-year dividend increases averaged 12.7% with a yield of 2.1% on June 30, 2011, and a dividend payout ratio of 30.7%, based on estimates of calendar year 2011 operating earnings. The average price/earnings ratio was 15.5 times calendar year 2011 estimates versus 13.8 for that of the unmanaged S&P 500.

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

The foregoing information reflects our analysis, opinions and portfolio holdings as of June 30, 2011, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

Top 10 Holdings

Franklin Rising Dividends Securities Fund

6/30/11

Company Sector/Industry	% of Total Net Assets
Abbott Laboratories		5.0%
Pharmaceuticals, Biotechnology & Life Sciences
Becton, Dickinson and Co.		5.0%
Health Care Equipment & Services
United Technologies Corp.		5.0%
Aerospace & Defense
Praxair Inc.		4.8%
Materials
The Procter & Gamble Co.		4.7%
Household & Personal Products
Wal-Mart Stores Inc.		4.6%
Food & Staples Retailing
Dover Corp.		4.2%
Machinery
International Business Machines Corp.		4.2%
Software & Services
Roper Industries Inc.		4.1%
Electrical Equipment
Family Dollar Stores Inc.		3.5%
Retailing

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

FRD-4

Fund Expenses

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

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

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

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

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

Actual Fund Expenses

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

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

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

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

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

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

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

Franklin Rising Dividends Securities Fund – Class 4

FRD-5

Hypothetical Example for Comparison with Other Mutual Funds

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

Class 4	Beginning Account Value 1/1/11		Ending Account Value 6/30/11		Fund-Level Expenses Incurred During Period* 1/1/11–6/30/11
Actual	$	1,000	$	1,064.80	$	4.97
Hypothetical (5% return before expenses)	$	1,000	$	1,019.98	$	4.86

*Expenses are calculated using the most recent six-month annualized expense ratio for the Fund’s Class 4 shares (0.97%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 181/365 to reflect the one-half year period.

FRD-6

Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Franklin Rising Dividends Securities Fund

	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31,
Class 1				2010			2009			2008			2007			2006
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	19.15		$	16.13		$	13.96		$	19.61		$	20.88		$	18.11
Income from investment operationsa:
Net investment incomeb		0.16			0.32			0.14	c		0.35			0.36			0.58	d
Net realized and unrealized gains (losses)		1.11			3.01			2.28			(5.51	)		(0.80	)		2.53
Total from investment operations		1.27			3.33			2.42			(5.16	)		(0.44	)		3.11
Less distributions from:
Net investment income		(0.33	)		(0.31	)		(0.25	)		(0.36	)		(0.53	)		(0.24	)
Net realized gains		—			—			—			(0.13	)		(0.30	)		(0.10	)
Total distributions		(0.33	)		(0.31	)		(0.25	)		(0.49	)		(0.83	)		(0.34	)
Net asset value, end of period	$	20.09		$	19.15		$	16.13		$	13.96		$	19.61		$	20.88
Total returne		6.72%			20.94%			17.67%			(26.94)%			(2.41)%			17.43%
Ratios to average net assetsf
Expenses		0.62%			0.64%			0.65%	g		0.61%	g		0.59%	g		0.61%	g
Net investment income		1.67%			1.88%			0.99%	c		2.05%			1.72%			3.15%	d
Supplemental data
Net assets, end of period (000’s)	$	149,222		$	148,544		$	139,816		$	142,862		$	235,946		$	288,303
Portfolio turnover rate		9.51%			8.97%			16.99%			5.39%			3.29%			6.19%

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

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $(0.15) per share as a return of capital adjustment to a previously recorded special dividend received by the Fund. Excluding this non-recurring amount, the ratio of net investment income to average net assets would have been 2.07%.

^dNet investment income per share includes approximately $0.30 per share received in the form of a special dividend paid in connection with a corporate spin-off. Excluding this non-recurring amount, the ratio of net investment income to average net assets would have been 1.57%.

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

^fRatios are annualized for periods less than one year.

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

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

FRD-7

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin Rising Dividends Securities Fund

	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31,
Class 2				2010			2009			2008			2007			2006
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	18.82		$	15.86		$	13.72		$	19.27		$	20.55		$	17.84
Income from investment operationsa:
Net investment incomeb		0.14			0.28			0.10	c		0.31			0.30			0.56	d
Net realized and unrealized gains (losses)		1.09			2.95			2.24			(5.42	)		(0.79	)		2.46
Total from investment operations		1.23			3.23			2.34			(5.11	)		(0.49	)		3.02
Less distributions from:
Net investment income		(0.29	)		(0.27	)		(0.20	)		(0.31	)		(0.49	)		(0.21	)
Net realized gains		—			—			—			(0.13	)		(0.30	)		(0.10	)
Total distributions		(0.29	)		(0.27	)		(0.20	)		(0.44	)		(0.79	)		(0.31	)
Net asset value, end of period	$	19.76		$	18.82		$	15.86		$	13.72		$	19.27		$	20.55
Total returne		6.59%			20.64%			17.34%			(27.10)%			(2.69)%			17.12%
Ratios to average net assetsf
Expenses		0.87%			0.89%			0.90%	g		0.86%	g		0.84%	g		0.86%	g
Net investment income		1.42%			1.63%			0.74%	c		1.80%			1.47%			2.90%	d
Supplemental data
Net assets, end of period (000’s)	$	1,593,608		$	1,572,732		$	1,371,351		$	1,286,878		$	2,079,366		$	1,981,240
Portfolio turnover rate		9.51%			8.97%			16.99%			5.39%			3.29%			6.19%

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

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $(0.15) per share as a return of capital adjustment to a previously recorded special dividend received by the Fund. Excluding this non-recurring amount, the ratio of net investment income to average net assets would have been 1.82%.

^dNet investment income per share includes approximately $0.30 per share received in the form of a special dividend paid in connection with a corporate spin-off. Excluding this non-recurring amount, the ratio of net investment income to average net assets would have been 1.32%.

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

^fRatios are annualized for periods less than one year.

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

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

FRD-8

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin Rising Dividends Securities Fund

	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31,
Class 4				2010			2009			2008a
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	19.04		$	16.09		$	13.92		$	18.51
Income from investment operationsb:
Net investment incomec		0.13			0.32			0.13	d		0.26
Net realized and unrealized gains (losses)		1.09			2.94			2.24			(4.36	)
Total from investment operations		1.22			3.26			2.37			(4.10	)
Less distributions from:
Net investment income		(0.32	)		(0.31	)		(0.20	)		(0.36	)
Net realized gains		—			—			—			(0.13	)
Total distributions		(0.32	)		(0.31	)		(0.20	)		(0.49	)
Net asset value, end of period	$	19.94		$	19.04		$	16.09		$	13.92
Total returne		6.48%			20.62%			17.22%			(22.82)%
Ratios to average net assetsf
Expenses		0.97%			0.99%			1.00%	g		0.96%	g
Net investment income		1.32%			1.53%			0.64%	d		1.70%
Supplemental data
Net assets, end of period (000’s)	$	2,053		$	1,007		$	15		$	4
Portfolio turnover rate		9.51%			8.97%			16.99%			5.39%

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

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

^cBased on average daily shares outstanding.

^dNet investment income per share includes approximately $(0.15) per share as a return of capital adjustment to a previously recorded special dividend received by the Fund. Excluding this non-recurring amount, the ratio of net investment income to average net assets would have been 1.72%.

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

^fRatios are annualized for periods less than one year.

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

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

FRD-9

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited)

Franklin Rising Dividends Securities Fund	Shares		Value
Common Stocks 96.8%
Aerospace & Defense 5.1%
General Dynamics Corp.		28,000	$	2,086,560
United Technologies Corp.		970,400		85,890,104
				87,976,664
Banks 1.1%
Hudson City Bancorp Inc.		1,560,300		12,778,857
Peoples Bancorp Inc.		102,065		1,150,273
aTrustCo Bank Corp. NY		299,985		1,469,926
U.S. Bancorp		146,449		3,735,914
				19,134,970
Commercial & Professional Services 2.4%
ABM Industries Inc.		951,288		22,203,062
Cintas Corp.		481,200		15,894,036
Superior Uniform Group Inc.		237,100		2,785,925
				40,883,023
Consumer Durables & Apparel 2.6%
bKid Brands Inc.		265,947		1,372,286
Leggett & Platt Inc.		775,800		18,914,004
NIKE Inc., B		277,000		24,924,460
				45,210,750
Consumer Services 2.7%
Hillenbrand Inc.		1,191,300		28,174,245
Matthews International Corp., A		24,572		986,566
McDonald’s Corp.		212,345		17,904,930
				47,065,741
Diversified Financials 0.8%
State Street Corp.		324,500		14,631,705
Electrical Equipment 6.9%
Brady Corp., A		1,515,579		48,589,463
Roper Industries Inc.		854,250		71,159,025
				119,748,488
Energy 3.9%
Chevron Corp.		478,500		49,208,940
Exxon Mobil Corp.		226,500		18,432,570
				67,641,510
Food & Staples Retailing 4.6%
Wal-Mart Stores Inc.		1,519,100		80,724,974
Food, Beverage & Tobacco 4.2%
Archer-Daniels-Midland Co.		195,500		5,894,325
McCormick & Co. Inc.		1,015,000		50,313,550
PepsiCo Inc.		240,000		16,903,200
				73,111,075
Health Care Equipment & Services 13.4%
Becton, Dickinson and Co.		1,002,143		86,354,663
Hill-Rom Holdings Inc.		434,103		19,986,102
Medtronic Inc.		402,000		15,489,060
Stryker Corp.		508,500		29,843,865

FRD-10

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin Rising Dividends Securities Fund	Shares		Value
Common Stocks (continued)
Health Care Equipment & Services (continued)
Teleflex Inc.		530,753	$	32,407,778
West Pharmaceutical Services Inc.		1,132,941		49,577,498
				233,658,966
Household & Personal Products 5.0%
Colgate-Palmolive Co.		69,000		6,031,290
The Procter & Gamble Co.		1,281,600		81,471,312
				87,502,602
Industrial Conglomerates 0.4%
Carlisle Cos. Inc.		125,261		6,166,599
Insurance 8.9%
Aflac Inc.		309,200		14,433,456
Arthur J. Gallagher & Co.		753,000		21,490,620
Chubb Corp.		45,000		2,817,450
Erie Indemnity Co., A		727,775		51,468,248
Mercury General Corp.		154,200		6,089,358
Old Republic International Corp.		3,429,708		40,299,069
RLI Corp.		304,246		18,838,912
				155,437,113
Machinery 5.4%
Donaldson Co. Inc.		317,300		19,253,764
Dover Corp.		1,096,700		74,356,260
Pentair Inc.		23,000		928,280
				94,538,304
Materials 11.9%
Air Products and Chemicals Inc.		530,500		50,705,190
Albemarle Corp.		78,000		5,397,600
Bemis Co. Inc.		1,178,300		39,802,974
Nucor Corp.		699,002		28,812,863
Praxair Inc.		769,260		83,380,091
				208,098,718
Pharmaceuticals, Biotechnology & Life Sciences 9.8%
Abbott Laboratories		1,652,800		86,970,336
Johnson & Johnson		601,000		39,978,520
Pfizer Inc.		2,158,100		44,456,860
				171,405,716
Retailing 3.5%
Family Dollar Stores Inc.		1,168,130		61,396,913
Semiconductors & Semiconductor Equipment 0.0%†
Cohu Inc.		50,300		659,433
Software & Services 4.2%
International Business Machines Corp.		426,000		73,080,300
Total Common Stocks (Cost $1,180,248,528)				1,688,073,564

FRD-11

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin Rising Dividends Securities Fund	Shares		Value
Short Term Investments 2.7%
Money Market Funds (Cost $47,241,502) 2.7%
b,cInstitutional Fiduciary Trust Money Market Portfolio		47,241,502	$	47,241,502
dInvestments from Cash Collateral Received for Loaned Securities 0.0%†
Money Market Funds (Cost $632,226) 0.0%†
bBNY Institutional Cash Reserve Fund, Series B		632,226		505,781
Total Investments (Cost $1,228,122,257) 99.5%				1,735,820,847
Other Assets, less Liabilities 0.5%				9,061,816
Net Assets 100.0%			$	1,744,882,663

†Rounds to less than 0.1% of net assets.

^aA portion or all of the security is on loan at June 30, 2011. See Note 1(b).

^bNon-income producing.

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

^dSee Note 1(b) regarding securities on loan.

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

FRD-12

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

June 30, 2011 (unaudited)

	Franklin Rising Dividends Securities Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	1,180,880,755
Cost - Sweep Money Fund (Note 7)		47,241,502
Total cost of investments	$	1,228,122,257
Value - Unaffiliated issuers	$	1,688,579,345
Value - Sweep Money Fund (Note 7)		47,241,502
Total value of investments (includes securities loaned in the amount of $428,260)		1,735,820,847
Receivables:
Investment securities sold		11,863,200
Capital shares sold		57,279
Dividends		1,557,978
Other assets		441
Total assets		1,749,299,745
Liabilities:
Payables:
Capital shares redeemed		1,926,258
Affiliates		1,531,868
Reports to shareholders		271,763
Funds advanced by custodian		173,376
Payable upon return of securities loaned		458,850
Accrued expenses and other liabilities		54,967
Total liabilities		4,417,082
Net assets, at value	$	1,744,882,663
Net assets consist of:
Paid-in capital	$	1,373,929,710
Undistributed net investment income		12,605,812
Net unrealized appreciation (depreciation)		507,698,590
Accumulated net realized gain (loss)		(149,351,449	)
Net assets, at value	$	1,744,882,663

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

FRD-13

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Assets and Liabilities (continued)

June 30, 2011 (unaudited)

	Franklin Rising Dividends Securities Fund
Class 1:
Net assets, at value	$	149,222,237
Shares outstanding		7,429,423
Net asset value and maximum offering price per share	$	20.09
Class 2:
Net assets, at value	$	1,593,607,680
Shares outstanding		80,666,006
Net asset value and maximum offering price per share	$	19.76
Class 4:
Net assets, at value	$	2,052,746
Shares outstanding		102,945
Net asset value and maximum offering price per share	$	19.94

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

FRD-14

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the six months ended June 30, 2011 (unaudited)

	Franklin Rising Dividends Securities Fund
Investment income:
Dividends	$	20,037,335
Expenses:
Management fees (Note 3a)		5,221,380
Distribution fees: (Note 3c)
Class 2		1,992,001
Class 4		2,546
Unaffiliated transfer agent fees		838
Custodian fees (Note 4)		12,179
Reports to shareholders		150,922
Professional fees		26,583
Trustees’ fees and expenses		3,307
Other		18,975
Total expenses		7,428,731
Net investment income		12,608,604
Realized and unrealized gains (losses):
Net realized gain (loss) from investments		96,865,848
Net change in unrealized appreciation (depreciation) on investments		2,004,361
Net realized and unrealized gain (loss)		98,870,209
Net increase (decrease) in net assets resulting from operations	$	111,478,813

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

FRD-15

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets

	Franklin Rising Dividends Securities Fund
	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31, 2010
Increase (decrease) in net assets:
Operations:
Net investment income	$	12,608,604		$	25,813,336
Net realized gain (loss) from investments		96,865,848			67,941,220
Net change in unrealized appreciation (depreciation) on investments		2,004,361			203,294,325
Net increase (decrease) in net assets resulting from operations		111,478,813			297,048,881
Distributions to shareholders from:
Net investment income:
Class 1		(2,458,866	)		(2,516,672	)
Class 2		(23,318,583	)		(22,710,892	)
Class 4		(30,729	)		(5,357	)
Total distributions to shareholders		(25,808,178	)		(25,232,921	)
Capital share transactions: (Note 2)
Class 1		(6,619,897	)		(15,601,529	)
Class 2		(57,428,481	)		(46,034,000	)
Class 4		977,254			920,381
Total capital share transactions		(63,071,124	)		(60,715,148	)
Net increase (decrease) in net assets		22,599,511			211,100,812
Net assets:
Beginning of period		1,722,283,152			1,511,182,340
End of period	$	1,744,882,663		$	1,722,283,152
Undistributed net investment income included in net assets:
End of period	$	12,605,812		$	25,805,386

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

FRD-16

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited)

Franklin Rising Dividends Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment company, consisting of twenty separate funds. The Franklin Rising Dividends Securities Fund (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. At June 30, 2011, 61.33% of the Fund’s shares were held through one insurance company. The Fund offers three classes of shares: Class 1, Class 2, and Class 4. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

The Fund’s investments in securities and other financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Under procedures approved by the Trust’s Board of Trustees, the Fund may utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

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

The Fund has procedures to determine the fair value of securities and other financial instruments for which market prices are not readily available or which may not be reliably priced. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.

b. Securities Lending

The Fund participates in a principal based security lending program. The Fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the market value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the market value of loaned securities, as determined at the close of Fund business each day; any additional collateral required due to changes in security values is delivered to the Fund on the next business day. The collateral is invested in repurchase agreements or in a non-registered money fund managed by the Fund’s custodian on the Fund’s behalf. The Fund receives income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. The Fund bears the market risk with respect to the collateral investment, securities loaned, and the risk that the principal may default on its obligations to the Fund.

c. Income Taxes

It is the Fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and excise

FRD-17

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Rising Dividends Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

c. Income Taxes (continued)

taxes. As a result, no provision for U.S. federal income taxes is required. The Fund files U.S. income tax returns as well as tax returns in certain other jurisdictions. The Fund records a provision for taxes in its financial statements including penalties and interest, if any, for a tax position taken on a tax return (or expected to be taken) when it fails to meet the more likely than not (a greater than 50% probability) threshold and based on the technical merits, the tax position may not be sustained upon examination by the tax authorities. As of June 30, 2011, and for all open tax years, the Fund has determined that no provision for income tax is required in the Fund’s financial statements. Open tax years are those that remain subject to examination and are based on each tax jurisdiction statute of limitation.

d. Security Transactions, Investment Income, Expenses and Distributions

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

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

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

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

e. Accounting Estimates

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

f. Guarantees and Indemnifications

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

FRD-18

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Rising Dividends Securities Fund

2. SHARES OF BENEFICIAL INTEREST

At June 30, 2011, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:

	Six Months Ended June 30, 2011						Year Ended December 31, 2010
Class 1 Shares:	Shares			Amount			Shares			Amount
Shares sold		323,324		$	6,413,561			257,133		$	4,557,190
Shares issued in reinvestment of distributions		126,876			2,458,866			150,879			2,516,672
Shares redeemed		(777,719	)		(15,492,324	)		(1,321,083	)		(22,675,391	)
Net increase (decrease)		(327,519	)	$	(6,619,897	)		(913,071	)	$	(15,601,529	)
Class 2 Shares:
Shares sold		2,781,274		$	53,592,015			5,148,488		$	89,372,157
Shares issued in reinvestment of distributions		1,222,789			23,318,583			1,383,124			22,710,892
Shares redeemed		(6,899,815	)		(134,339,079	)		(9,446,580	)		(158,117,049	)
Net increase (decrease)		(2,895,752	)	$	(57,428,481	)		(2,914,968	)	$	(46,034,000	)
Class 4 Shares:
Shares sold		57,741		$	1,130,320			55,672		$	986,798
Shares issued on reinvestment of distributions		1,596			30,729			317			5,273
Shares redeemed		(9,274	)		(183,795	)		(4,068	)		(71,690	)
Net increase (decrease)		50,063		$	977,254			51,921		$	920,381

3. TRANSACTIONS WITH AFFILIATES

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

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

a. Management Fees

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

Annualized Fee Rate	Net Assets
0.750%	Up to and including $500 million
0.625%	Over $500 million, up to and including $1 billion
0.500%	In excess of $1 billion

b. Administrative Fees

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

FRD-19

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Rising Dividends Securities Fund

3. TRANSACTIONS WITH AFFILIATES (continued)

c. Distribution Fees

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

d. Transfer Agent Fees

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

4. EXPENSE OFFSET ARRANGEMENT

The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses. During the period ended June 30, 2011, there were no credits earned.

5. INCOME TAXES

For tax purposes, capital losses may be carried over to offset future capital gains, if any. At December 31, 2010, the capital loss carryforwards were as follows:

Capital loss carryforwards expiring in:
2016	$	136,099,518
2017		107,931,803
	$	244,031,321

Under the Regulated Investment Company Modernization Act of 2010, the Fund will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. Post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered short-term as under previous law. Any post-enactment capital losses generated will be required to be utilized prior to the losses incurred in pre-enactment tax years.

At June 30, 2011, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	1,230,193,351
Unrealized appreciation	$	557,187,764
Unrealized depreciation		(51,560,268	)
Net unrealized appreciation (depreciation)	$	505,627,496

Net realized gains (losses) differ for financial statement and tax purposes primarily due to differing treatment of wash sales.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2011, aggregated $159,672,982 and $207,880,797, respectively.

FRD-20

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Rising Dividends Securities Fund

7. INVESTMENTS IN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO

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

8. CREDIT FACILITY

The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $750 million (Global Credit Facility) which matures on January 20, 2012. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests.

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.08% based upon the unused portion of the Global Credit Facility, which is reflected in other expenses on the Statement of Operations. During the period ended June 30, 2011, the Fund did not use the Global Credit Facility.

9. FAIR VALUE MEASUREMENTS

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

• Level 1 – quoted prices in active markets for identical securities

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

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

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

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

The following is a summary of the inputs used as of June 30, 2011, in valuing the Fund’s assets and liabilities carried at fair value:

	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities:
Equity Investmentsa	$	1,688,073,564	$	—	$	—	$	1,688,073,564
Short term investments		47,241,502		505,781		—		47,747,283
Total Investments in Securities	$	1,735,315,066	$	505,781	$	—	$	1,735,820,847

^aFor detailed industry descriptions, see the accompanying Statement of Investments.

FRD-21

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Rising Dividends Securities Fund

10. NEW ACCOUNTING PRONOUNCEMENTS

In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (IFRS). The amendments in the ASU will improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRS and include new guidance for certain fair value measurement principles and disclosure requirements. The ASU is effective for interim and annual periods beginning after December 15, 2011. The Fund is currently evaluating the impact, if any, of applying this provision.

11. SUBSEQUENT EVENTS

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

FRD-22

FRANKLIN SMALL CAP VALUE SECURITIES FUND

This semiannual report for Franklin Small Cap Value Securities Fund covers the period ended June 30, 2011.

Performance Summary as of 6/30/11

Franklin Small Cap Value Securities Fund – Class 4 delivered a +2.25% total return for the six-month period ended 6/30/11.

Performance reflects the Fund’s Class 4 operating expenses, but does not include any contract fees, expenses or sales charges. If they had been included, performance would be lower. These charges and deductions, particularly for variable life policies, can have a significant effect on contract values and insurance benefits. See the contract prospectus for a complete description of these expenses, including sales charges.

Franklin Small Cap Value Securities Fund – Class 4

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

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Fund Goal and Main Investments: Franklin Small Cap Value Securities Fund seeks long-term total return. The Fund normally invests at least 80% of its net assets in investments of small-capitalization companies. For this Fund, small-capitalization companies are those with market capitalizations under $3.5 billion at the time of purchase. The Fund invests generally in equity securities of companies that the manager believes are undervalued and have the potential for capital appreciation.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. The Fund underperformed its benchmark, the Russell 2500^TM Value Index, which rose 6.10% for the same period.¹ Please note the Fund employs a bottom-up stock selection process, and the managers invest in securities without regard to benchmark comparisons.

Economic and Market Overview

The U.S. economy expanded despite geopolitical and inflationary pressures from around the globe during the six-month period ended June 30, 2011. Business activity increased and consumer spending stayed above pre-recession levels. The U.S. has been a key engine in a sustained global manufacturing expansion as international trade volume continued to increase, albeit at a moderate pace. Worldwide demand for capital goods aided U.S. manufacturing profits and increased employment in the industry.

The unemployment rate improved in the first quarter when job creation began to gain some traction. However, government payrolls continued to trend down and job creation slowed in the second quarter, causing the unemployment rate to end the period at 9.2% in June.² Consumer spending rose for 11 consecutive months through May but declined in June as concerns about job growth and rising gasoline and food prices dampened consumer confidence. To offset the disruption of global oil supply caused by the conflicts in Libya, the International Energy Agency announced in June the release of 60 million barrels of oil in July from strategic reserves of the U.S. and 27 other nations. The U.S. financial system appeared closer to a full recovery, although the country still faced challenges dealing with housing market weakness and massive debt at period-end.

1. Source: © 2011 Morningstar. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

2. Source: Bureau of Labor Statistics.

Fund Risks: The Fund’s investments in stocks may offer the potential for long-term gains but can be subject to short-term price fluctuations. Smaller company securities can increase the risk of greater price volatility, particularly over the short term. Smaller or relatively new or unseasoned companies can also be particularly sensitive to changing economic conditions, and their prospects for growth are less certain than those of larger, more established companies. The Fund may have significant investments in particular sectors from time to time, such as financial services and energy, and may be at greater risk of adverse developments in a sector than a fund that invests more broadly. Foreign investing involves additional risks, including currency fluctuations, economic instability, market volatility, and political and social instability. The manager applies various techniques and analyses in making investment decisions for the Fund, but there can be no guarantee that these decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

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Inflation at the consumer, producer and trade levels rose across much of the world, but in the U.S. it remained relatively contained. As a result, the Federal Reserve Board (Fed) maintained its accommodative monetary policy while ending its second round of quantitative easing on June 30. The Fed said, however, it would continue to purchase Treasuries with proceeds from maturing debt in an effort to support economic growth.

Investors’ attitudes shifted with each release of economic, regulatory and geopolitical news, causing equity market volatility to increase globally. U.S. investors weathered international events that included revolutions and civil unrest across the Middle East and North Africa, the multiple crises triggered by Japan’s earthquake and tsunami, and sovereign debt worries and credit downgrades in Europe. Ultimately, stock indexes produced solid gains during the six months under review as domestic and global equity markets rose amid generally improving economic signs and record-high corporate earnings growth.

Investment Strategy

We are a research-driven, fundamental investment adviser, pursuing a disciplined, value-oriented strategy for the Fund. As a bottom-up adviser concentrating primarily on individual securities, we focus on the market price of a company’s securities relative to our evaluation of the company’s potential long-term earnings, asset value or cash flow. We seek bargains among the “unloved,” out-of-favor companies that offer, in our opinion, attractive long-term potential. These might include current growth companies that are being ignored by the market, former growth companies that have stumbled recently, dropping sharply in price but that still have significant growth potential, in our opinion, or companies that may be potential turnaround candidates or takeover targets.

Manager’s Discussion

During the six months under review, significant contributors to Fund performance came from the industrials and energy sectors.³ In the industrials sector, railcar and wind tower manufacturer Trinity Industries, fluid handling products manufacturer Graco, air compressor and blower manufacturer Gardner Denver, industrial goods manufacturer Nordson and construction materials manufacturer Carlisle boosted

3. The industrials sector comprises aerospace and defense, building products, commercial and professional services, construction and engineering, electrical equipment, industrial conglomerates, machinery, trading companies and distributors, and transportation in the SOI.

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results. Diversified energy company Unit Corp., oil and gas equipment and services company Oil States International, and offshore energy company Helix Energy Solutions Group were among energy sector holdings that benefited performance. In the consumer discretionary sector, men’s apparel retailer The Men’s Wearhouse and new holding GameStop, a video game retailer, also helped results.⁴

Detractors from performance included some financials sector holdings such as regional bank TrustCo Bank Corp. NY and insurers Protective Life and Old Republic International.⁵ Several consumer discretionary holdings also hindered results, including home furnishing provider Hooker Furniture, shoe wholesaler and retailer Brown Shoe, and recreational vehicle manufacturers Thor Industries and Winnebago Industries. Lumber and building products provider Universal Forest Products and cabinet manufacturer American Woodmark in the industrials sector also detracted from performance, as did semiconductor equipment manufacturer Cohu in the information technology sector.⁶

In addition to purchasing shares of GameStop during the reporting period, the Fund initiated five positions in what we considered attractively valued securities: aircraft-related aftermarket services provider AAR Corp., specialty industrial components manufacturer Enpro Industries, flexible circuit material provider Multi Fineline Electronix, regional financial services company Oriental Financial Group and graphics services company Schawk. We also added to existing positions in Cato, A. Schulman and Transatlantic Holdings, among others. We liquidated three positions during the period: Bassett Furniture Industries, Erie Indemnity and Westlake Chemical. We made significant reductions to holdings in Graco, Mettler-Toledo International, Nordson and Warnaco Group and made smaller reductions to several other positions.

4. The consumer discretionary sector comprises automobiles and components, consumer durables and apparel, consumer services, and retailing in the SOI.

5. The financials sector comprises banks and insurance in the SOI.

6. The information technology sector comprises semiconductors and semiconductor equipment, and technology hardware and equipment in the SOI.

Top 10 Holdings

Franklin Small Cap Value Securities Fund

6/30/11

Company Sector/Industry	% of Total Net Assets
Trinity Industries Inc.		1.9%
Machinery
Bristow Group Inc.		1.8%
Energy
Autoliv Inc. (Sweden)		1.8%
Automobiles & Components
Rowan Cos. Inc.		1.8%
Energy
Tidewater Inc.		1.7%
Energy
Protective Life Corp.		1.7%
Insurance
Thor Industries Inc.		1.6%
Automobiles & Components
Mueller Industries Inc.		1.5%
Machinery
Gardner Denver Inc.		1.5%
Machinery
Benchmark Electronics Inc.		1.5%
Technology Hardware & Equipment

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

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

The foregoing information reflects our analysis, opinions and portfolio holdings as of June 30, 2011, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

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Fund Expenses

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

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

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

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

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

Actual Fund Expenses

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

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

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

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

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

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

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

Franklin Small Cap Value Securities Fund – Class 4

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\

Hypothetical Example for Comparison with Other Mutual Funds

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

Class 4	Beginning Account Value 1/1/11		Ending Account Value 6/30/11		Fund-Level Expenses Incurred During Period* 1/1/11–6/30/11
Actual	$	1,000	$	1,022.50	$	5.01
Hypothetical (5% return before expenses)	$	1,000	$	1,019.84	$	5.01

*Expenses are calculated using the most recent six-month annualized expense ratio for the Fund’s Class 4 shares (1.00%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 181/365 to reflect the one-half year period.

FSV-7

Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Franklin Small Cap Value Securities Fund

	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31,
Class 1				2010			2009			2008			2007			2006
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	16.55		$	13.00		$	10.73		$	17.38		$	19.07		$	17.02
Income from investment operationsa:
Net investment incomeb		0.07			0.14			0.15			0.24			0.22			0.18
Net realized and unrealized gains (losses)		0.33			3.54			2.86			(5.44	)		(0.44	)		2.69
Total from investment operations		0.40			3.68			3.01			(5.20	)		(0.22	)		2.87
Less distributions from:
Net investment income		(0.15	)		(0.13	)		(0.22	)		(0.23	)		(0.17	)		(0.16	)
Net realized gains		—			—			(0.52	)		(1.22	)		(1.30	)		(0.66	)
Total distributions		(0.15	)		(0.13	)		(0.74	)		(1.45	)		(1.47	)		(0.82	)
Net asset value, end of period	$	16.80		$	16.55		$	13.00		$	10.73		$	17.38		$	19.07
Total returnc		2.45%			28.49%			29.54%			(32.87)%			(2.14)%			17.30%
Ratios to average net assetsd
Expenses		0.65%			0.67%			0.68%	e		0.67%	e		0.64%	e		0.65%	e
Net investment income		0.84%			0.98%			1.29%			1.62%			1.13%			0.97%
Supplemental data
Net assets, end of period (000’s)	$	45,007		$	47,300		$	42,428		$	34,901		$	57,045		$	73,154
Portfolio turnover rate		7.11%			15.92%			6.68%			16.98%			16.27%			16.43%	f

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

^bBased on average daily shares outstanding.

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

^dRatios are annualized for periods less than one year.

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

^fExcludes the value of portfolio securities delivered as a result of a redemption in-kind.

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

FSV-8

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin Small Cap Value Securities Fund

	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31,
Class 2				2010			2009			2008			2007			2006
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	16.25		$	12.77		$	10.55		$	17.10		$	18.79		$	16.79
Income from investment operationsa:
Net investment incomeb		0.05			0.10			0.12			0.20			0.17			0.13
Net realized and unrealized gains (losses)		0.31			3.48			2.81			(5.35	)		(0.43	)		2.65
Total from investment operations		0.36			3.58			2.93			(5.15	)		(0.26	)		2.78
Less distributions from:
Net investment income		(0.11	)		(0.10	)		(0.19	)		(0.18	)		(0.13	)		(0.12	)
Net realized gains		—			—			(0.52	)		(1.22	)		(1.30	)		(0.66	)
Total distributions		(0.11	)		(0.10	)		(0.71	)		(1.40	)		(1.43	)		(0.78	)
Net asset value, end of period	$	16.50		$	16.25		$	12.77		$	10.55		$	17.10		$	18.79
Total returnc		2.25%			28.22%			29.16%			(33.02)%			(2.38)%			16.98%
Ratios to average net assetsd
Expenses		0.90%			0.92%			0.93%	e		0.92%	e		0.89%	e		0.90%	e
Net investment income		0.59%			0.73%			1.04%			1.37%			0.88%			0.72%
Supplemental data
Net assets, end of period (000’s)	$	1,317,643		$	1,362,292		$	1,109,855		$	784,773		$	1,177,367		$	1,240,892
Portfolio turnover rate		7.11%			15.92%			6.68%			16.98%			16.27%			16.43%	f

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

^bBased on average daily shares outstanding.

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

^dRatios are annualized for periods less than one year.

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

^fExcludes the value of portfolio securities delivered as a result of a redemption in-kind.

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

FSV-9

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin Small Cap Value Securities Fund

	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31,
Class 4				2010			2009			2008a
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	16.44		$	12.92		$	10.70		$	16.42
Income from investment operationsb:
Net investment incomec		0.04			0.09			0.11			0.15
Net realized and unrealized gains (losses)		0.32			3.53			2.84			(4.42	)
Total from investment operations		0.36			3.62			2.95			(4.27	)
Less distributions from:
Net investment income		(0.09	)		(0.10	)		(0.21	)		(0.23	)
Net realized gains		—			—			(0.52	)		(1.22	)
Total distributions		(0.09	)		(0.10	)		(0.73	)		(1.45	)
Net asset value, end of period	$	16.71		$	16.44		$	12.92		$	10.70
Total returnd		2.25%			28.14%			29.04%			(29.14)%
Ratios to average net assetse
Expenses		1.00%			1.02%			1.03%	f		1.02%	f
Net investment income		0.49%			0.63%			0.94%			1.27%
Supplemental data
Net assets, end of period (000’s)	$	35,284		$	39,075		$	28,599		$	14,850
Portfolio turnover rate		7.11%			15.92%			6.68%			16.98%

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

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

^cBased on average daily shares outstanding.

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

^eRatios are annualized for periods less than one year.

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

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

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Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited)

Franklin Small Cap Value Securities Fund	Shares		Value
Common Stocks 97.6%
Aerospace & Defense 1.5%
AAR Corp.		318,900	$	8,639,001
aCeradyne Inc.		310,000		12,086,900
				20,725,901
Automobiles & Components 5.3%
Autoliv Inc. (Sweden)		326,800		25,637,460
Drew Industries Inc.		90,700		2,242,104
Gentex Corp.		662,500		20,027,375
Thor Industries Inc.		755,000		21,774,200
aWinnebago Industries Inc.		485,000		4,685,100
				74,366,239
Banks 1.9%
Chemical Financial Corp.		405,554		7,608,193
Oriental Financial Group Inc.		602,000		7,759,780
Peoples Bancorp Inc.		158,000		1,780,660
bTrustCo Bank Corp. NY		1,889,400		9,258,060
				26,406,693
Building Products 4.3%
A.O. Smith Corp.		126,700		5,359,410
American Woodmark Corp.		423,303		7,331,608
Apogee Enterprises Inc.		778,100		9,967,461
aGibraltar Industries Inc.		900,100		10,189,132
Simpson Manufacturing Co. Inc.		462,800		13,823,836
Universal Forest Products Inc.		528,720		12,668,131
				59,339,578
Commercial & Professional Services 3.0%
ABM Industries Inc.		636,100		14,846,574
Insperity Inc.		296,100		8,767,521
Mine Safety Appliances Co.		328,300		12,258,722
Schawk Inc.		379,300		6,281,208
				42,154,025
Construction & Engineering 1.8%
aEMCOR Group Inc.		273,270		8,009,544
Granite Construction Inc.		703,000		17,244,590
				25,254,134
Consumer Durables & Apparel 3.9%
Brunswick Corp.		500,000		10,200,000
D.R. Horton Inc.		448,900		5,171,328
Ethan Allen Interiors Inc.		159,000		3,385,110
Hooker Furniture Corp.		510,700		4,524,802
aLa-Z-Boy Inc.		1,089,000		10,748,430
M.D.C. Holdings Inc.		240,700		5,930,848
aM/I Homes Inc.		500,000		6,130,000
aThe Warnaco Group Inc.		162,600		8,495,850
				54,586,368
Consumer Services 1.8%
Hillenbrand Inc.		401,000		9,483,650
Regis Corp.		992,000		15,197,440
				24,681,090

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Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin Small Cap Value Securities Fund	Shares		Value
Common Stocks (continued)
Electrical Equipment 3.2%
Brady Corp., A		453,000	$	14,523,180
Franklin Electric Co. Inc.		199,232		9,353,942
aPowell Industries Inc.		168,400		6,146,600
Roper Industries Inc.		170,000		14,161,000
				44,184,722
Energy 14.0%
Arch Coal Inc.		111,500		2,972,590
aAtwood Oceanics Inc.		405,400		17,890,302
Bristow Group Inc.		503,800		25,703,876
CONSOL Energy Inc.		68,500		3,320,880
Energen Corp.		219,000		12,373,500
aGlobal Industries Ltd.		1,575,600		8,634,288
aHelix Energy Solutions Group Inc.		768,900		12,732,984
aOil States International Inc.		255,200		20,393,032
bOverseas Shipholding Group Inc.		371,000		9,994,740
Peabody Energy Corp.		103,200		6,079,512
aRowan Cos. Inc.		638,100		24,764,661
Teekay Corp. (Canada)		245,431		7,578,909
Tidewater Inc.		443,700		23,875,497
aUnit Corp.		323,400		19,704,762
				196,019,533
Food & Staples Retailing 0.7%
Casey’s General Stores Inc.		215,600		9,486,400
Food, Beverage & Tobacco 1.0%
Lancaster Colony Corp.		238,900		14,529,898
Health Care Equipment & Services 2.6%
STERIS Corp.		412,500		14,429,250
Teleflex Inc.		241,300		14,733,778
West Pharmaceutical Services Inc.		172,700		7,557,352
				36,720,380
Industrial Conglomerates 1.2%
Carlisle Cos. Inc.		353,400		17,397,882
Insurance 11.7%
American National Insurance Co.		79,000		6,122,500
Arthur J. Gallagher & Co.		168,200		4,800,428
Aspen Insurance Holdings Ltd.		550,100		14,154,073
The Hanover Insurance Group Inc.		278,000		10,483,380
HCC Insurance Holdings Inc.		188,200		5,928,300
Montpelier Re Holdings Ltd. (Bermuda)		649,000		11,682,000
Old Republic International Corp.		1,513,000		17,777,750
Protective Life Corp.		1,015,000		23,476,950
RLI Corp.		138,700		8,588,304
StanCorp Financial Group Inc.		373,000		15,736,870
Tower Group Inc.		659,900		15,718,818
Transatlantic Holdings Inc.		335,000		16,418,350
Validus Holdings Ltd. (Bermuda)		422,700		13,082,565
				163,970,288

FSV-12

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin Small Cap Value Securities Fund	Shares		Value
Common Stocks (continued)
Machinery 13.7%
aAstec Industries Inc.		330,200	$	12,210,796
Briggs & Stratton Corp.		448,200		8,901,252
CIRCOR International Inc.		131,502		5,632,231
aCNH Global NV (Netherlands)		72,700		2,809,855
aEnPro Industries Inc.		221,400		10,642,698
Gardner Denver Inc.		256,900		21,592,445
Graco Inc.		343,800		17,416,908
Kennametal Inc.		397,300		16,770,033
Lincoln Electric Holdings Inc.		419,000		15,021,150
Mueller Industries Inc.		531,200		20,137,792
Nordson Corp.		209,800		11,507,530
Timken Co.		90,000		4,536,000
Trinity Industries Inc.		764,400		26,662,272
aWabash National Corp.		923,300		8,651,321
Watts Water Technologies Inc., A		257,200		9,107,452
				191,599,735
Materials 7.1%
A. Schulman Inc.		425,100		10,708,269
AptarGroup Inc.		198,600		10,394,724
Cabot Corp.		324,100		12,921,867
Glatfelter		311,200		4,786,256
Reliance Steel & Aluminum Co.		377,500		18,742,875
RPM International Inc.		753,600		17,347,872
Sensient Technologies Corp.		195,300		7,239,771
Steel Dynamics Inc.		937,100		15,227,875
United States Steel Corp.		43,600		2,007,344
				99,376,853
Pharmaceuticals, Biotechnology & Life Sciences 1.5%
aMettler-Toledo International Inc.		47,500		8,011,825
Pharmaceutical Product Development Inc.		495,800		13,307,272
				21,319,097
Retailing 9.1%
Brown Shoe Co. Inc.		982,000		10,458,300
The Cato Corp., A		433,800		12,493,440
Christopher & Banks Corp.		1,260,000		7,245,000
Fred’s Inc.		818,300		11,808,069
aGameStop Corp., A		569,000		15,175,230
Group 1 Automotive Inc.		502,000		20,672,360
J.C. Penney Co. Inc.		273,000		9,429,420
The Men’s Wearhouse Inc.		526,317		17,736,883
aPier 1 Imports Inc.		624,500		7,225,465
a,bSaks Inc.		532,548		5,948,561
aTuesday Morning Corp.		507,900		2,361,735
aWest Marine Inc.		678,900		7,040,193
				127,594,656
Semiconductors & Semiconductor Equipment 0.8%
Cohu Inc.		826,500		10,835,415
Technology Hardware & Equipment 2.6%
aBenchmark Electronics Inc.		1,271,000		20,971,500
aMulti-Fineline Electronix Inc.		82,900		1,791,469
aRofin-Sinar Technologies Inc.		395,800		13,516,570
				36,279,539

FSV-13

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin Small Cap Value Securities Fund	Shares		Value
Common Stocks (continued)
Trading Companies & Distributors 0.5%
Applied Industrial Technologies Inc.		178,700	$	6,363,507
Transportation 2.3%
aGenesee & Wyoming Inc.		292,500		17,152,200
SkyWest Inc.		953,500		14,359,710
				31,511,910
Utilities 2.1%
NV Energy Inc.		1,171,400		17,980,990
PNM Resources Inc.		708,000		11,851,920
				29,832,910
Total Common Stocks (Cost $1,034,965,499)				1,364,536,753
	Principal Amount
Corporate Bonds (Cost $1,484,925) 0.1%
Machinery 0.1%
Mueller Industries Inc., 6.00%, 11/01/14	$	1,494,000		1,494,000
Total Investments before Short Term Investments (Cost $1,036,450,424)				1,366,030,753
	Shares
Short Term Investments 3.5%
Money Market Funds (Cost $33,128,039) 2.4%
a,cInstitutional Fiduciary Trust Money Market Portfolio		33,128,039		33,128,039
dInvestments from Cash Collateral Received for Loaned Securities 1.1%
Money Market Funds (Cost $2,536,889) 0.2%
aBNY Institutional Cash Reserve Fund, Series B		2,536,889		2,029,511
	Principal Amount
eRepurchase Agreements 0.9%
Barclays Capital Inc., 0.01%, 7/01/11 (Maturity Value $2,500,001) Collateralized by U.S. Treasury Notes, 1.50%, 6/30/16 (valued at $2,550,000)	$	2,500,000		2,500,000
BNP Paribas Securities Corp., 0.04%, 7/01/11 (Maturity Value $3,049,665) Collateralized by U.S. Government Agency Securities, 0.36% - 5.375%, 9/09/11 - 12/11/20; U.S. Treasury Notes, 1.875% - 2.375%, 10/31/17 - 6/30/18 (valued at $3,110,669)		3,049,662		3,049,662
Credit Suisse Securities (USA) LLC, 0.01%, 7/01/11 (Maturity Value $2,500,001) Collateralized by U.S. Treasury Notes, 1.375% - 3.125%, 10/15/12 - 11/30/13 (valued at $2,550,007)		2,500,000		2,500,000
Deutsche Bank Securities Inc., 0.02%, 7/01/11 (Maturity Value $2,500,001) Collateralized by U.S. Government Agency Securities, 1.00% - 5.375%, 8/15/12 - 11/17/17 (valued at $2,550,078)		2,500,000		2,500,000
HSBC Securities (USA) Inc., 0.01%, 7/01/11 (Maturity Value $2,000,001) Collateralized by U.S. Government Agency Securities, 0.00% - 5.00%, 7/01/11 - 10/03/22 (valued at $2,040,014)		2,000,000		2,000,000

FSV-14

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin Small Cap Value Securities Fund	Principal Amount		Value
Repurchase Agreements (continued)
RBS Securities Inc., 0.01%, 7/01/11 (Maturity Value $291,020) Collateralized by U.S. Treasury Notes, 0.75% - 4.875%, 7/15/13 - 5/31/18 (valued at $296,844)	$	291,020	$	291,020
Total Repurchase Agreements (Cost $12,840,682)				12,840,682
Total Investments from Cash Collateral Received for Loaned Securities (Cost $15,377,571)				14,870,193
Total Investments (Cost $1,084,956,034) 101.2%				1,414,028,985
Other Assets, less Liabilities (1.2)%				(16,094,715	)
Net Assets 100.0%			$	1,397,934,270

^aNon-income producing.

^bA portion or all of the security is on loan at June 30, 2011. See Note 1(c).

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

^dSee Note 1(c) regarding securities on loan.

^eSee Note 1(b) regarding repurchase agreements.

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

FSV-15

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

June 30, 2011 (unaudited)

	Franklin Small Cap Value Securities Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	1,038,987,313
Cost - Sweep Money Fund (Note 7)		33,128,039
Cost - Repurchase agreements		12,840,682
Total cost of investments	$	1,084,956,034
Value - Unaffiliated issuers	$	1,368,060,264
Value - Sweep Money Fund (Note 7)		33,128,039
Value - Repurchase agreements		12,840,682
Total value of investments (includes securities loaned in the amount of $14,669,319)		1,414,028,985
Receivables:
Investment securities sold		543,312
Capital shares sold		795,399
Dividends and interest		770,071
Other assets		371
Total assets		1,416,138,138
Liabilities:
Payables:
Investment securities purchased		135,696
Capital shares redeemed		1,091,343
Affiliates		1,271,897
Payable upon return of securities loaned		15,377,571
Accrued expenses and other liabilities		327,361
Total liabilities		18,203,868
Net assets, at value	$	1,397,934,270
Net assets consist of:
Paid-in capital	$	1,111,717,857
Undistributed net investment income		4,279,415
Net unrealized appreciation (depreciation)		329,072,951
Accumulated net realized gain (loss)		(47,135,953	)
Net assets, at value	$	1,397,934,270
Class 1:
Net assets, at value	$	45,007,122
Shares outstanding		2,679,569
Net asset value and maximum offering price per share	$	16.80
Class 2:
Net assets, at value	$	1,317,643,109
Shares outstanding		79,843,565
Net asset value and maximum offering price per share	$	16.50
Class 4:
Net assets, at value	$	35,284,039
Shares outstanding		2,111,984
Net asset value and maximum offering price per share	$	16.71

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

FSV-16

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the six months ended June 30, 2011 (unaudited)

	Franklin Small Cap Value Securities Fund
Investment income:
Dividends	$	10,647,429
Interest		46,011
Income from securities loaned		40,613
Total investment income		10,734,053
Expenses:
Management fees (Note 3a)		3,584,146
Administrative fees (Note 3b)		824,260
Distribution fees: (Note 3c)
Class 2		1,710,993
Class 4		65,709
Unaffiliated transfer agent fees		2,236
Custodian fees (Note 4)		10,462
Reports to shareholders		218,015
Professional fees		23,307
Trustees’ fees and expenses		2,650
Other		18,021
Total expenses		6,459,799
Net investment income		4,274,254
Realized and unrealized gains (losses):
Net realized gain (loss) from investments		51,416,487
Net change in unrealized appreciation (depreciation) on investments		(22,757,763	)
Net realized and unrealized gain (loss)		28,658,724
Net increase (decrease) in net assets resulting from operations	$	32,932,978

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

FSV-17

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets

	Franklin Small Cap Value Securities Fund
	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31, 2010
Increase (decrease) in net assets:
Operations:
Net investment income	$	4,274,254		$	9,370,933
Net realized gain (loss) from investments		51,416,487			(9,121,196	)
Net change in unrealized appreciation (depreciation) on investments		(22,757,763	)		315,120,022
Net increase (decrease) in net assets resulting from operations		32,932,978			315,369,759
Distributions to shareholders from:
Net investment income:
Class 1		(392,860	)		(391,013	)
Class 2		(8,773,166	)		(9,354,014	)
Class 4		(201,936	)		(225,374	)
Total distributions to shareholders		(9,367,962	)		(9,970,401	)
Capital share transactions: (Note 2)
Class 1		(2,979,969	)		(5,400,815	)
Class 2		(66,894,808	)		(34,566,603	)
Class 4		(4,422,602	)		2,352,541
Total capital share transactions		(74,297,379	)		(37,614,877	)
Net increase (decrease) in net assets		(50,732,363	)		267,784,481
Net assets:
Beginning of period		1,448,666,633			1,180,882,152
End of period	$	1,397,934,270		$	1,448,666,633
Undistributed net investment income included in net assets:
End of period	$	4,279,415		$	9,373,123

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

FSV-18

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited)

Franklin Small Cap Value Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

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

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

The Fund’s investments in securities and other financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Under procedures approved by the Trust’s Board of Trustees, the Fund may utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

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

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

The Fund has procedures to determine the fair value of securities and other financial instruments for which market prices are not readily available or which may not be reliably priced. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.

b. Repurchase Agreements

The Fund enters into repurchase agreements, which are accounted for as a loan by the fund to the seller, collateralized by securities which are delivered to the fund’s custodian. The market value, including accrued interest, of the initial collateralization is required to be at least 102% of the dollar amount invested by the fund, with the value of the underlying securities marked to market daily to maintain coverage of at least 100%. All repurchase agreements held by the Fund at period end had been entered into on June 30, 2011.

FSV-19

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Small Cap Value Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

c. Securities Lending

The Fund participates in a principal based security lending program. The Fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the market value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the market value of loaned securities, as determined at the close of Fund business each day; any additional collateral required due to changes in security values is delivered to the Fund on the next business day. The collateral is invested in repurchase agreements and in a non-registered money fund managed by the Fund’s custodian on the Fund’s behalf. The Fund receives income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. The Fund bears the market risk with respect to the collateral investment, securities loaned, and the risk that the principal may default on its obligations to the Fund.

d. Income Taxes

It is the Fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and excise taxes. As a result, no provision for U.S. federal income taxes is required. The Fund files U.S. income tax returns as well as tax returns in certain other jurisdictions. The Fund records a provision for taxes in its financial statements including penalties and interest, if any, for a tax position taken on a tax return (or expected to be taken) when it fails to meet the more likely than not (a greater than 50% probability) threshold and based on the technical merits, the tax position may not be sustained upon examination by the tax authorities. As of June 30, 2011, and for all open tax years, the Fund has determined that no provision for income tax is required in the Fund’s financial statements. Open tax years are those that remain subject to examination and are based on each tax jurisdiction statute of limitation.

e. Security Transactions, Investment Income, Expenses and Distributions

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

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

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

f. Accounting Estimates

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

FSV-20

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Small Cap Value Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

g. Guarantees and Indemnifications

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

2. SHARES OF BENEFICIAL INTEREST

At June 30, 2011, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:

	Six Months Ended June 30, 2011						Year Ended December 31, 2010
Class 1 Shares:	Shares			Amount			Shares			Amount
Shares sold		307,753		$	5,309,769			487,990		$	7,004,812
Shares issued in reinvestment of distributions		24,646			392,860			28,110			391,013
Shares redeemed		(510,015	)		(8,682,598	)		(923,527	)		(12,796,640	)
Net increase (decrease)		(177,616	)	$	(2,979,969	)		(407,427	)	$	(5,400,815	)
Class 2 Shares:
Shares sold		5,828,924		$	97,013,525			16,505,195		$	234,092,954
Shares issued in reinvestment of distributions		559,870			8,773,166			684,273			9,354,014
Shares redeemed		(10,379,199	)		(172,681,499	)		(20,285,779	)		(278,013,571	)
Net increase (decrease)		(3,990,405	)	$	(66,894,808	)		(3,096,311	)	$	(34,566,603	)
Class 4 Shares:
Shares sold		136,220		$	2,302,328			706,330		$	9,842,641
Shares issued on reinvestment of distributions		12,732			201,936			16,284			225,374
Shares redeemed		(413,556	)		(6,926,866	)		(558,980	)		(7,715,474	)
Net increase (decrease)		(264,604	)	$	(4,422,602	)		163,634		$	2,352,541

3. TRANSACTIONS WITH AFFILIATES

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

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

FSV-21

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Small Cap Value Securities Fund

3. TRANSACTIONS WITH AFFILIATES (continued)

a. Management Fees

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

Annualized Fee Rate	Net Assets
0.600%	Up to and including $200 million
0.500%	over $200 million, up to and including $1.3 billion
0.400%	In excess of $1.3 billion

b. Administrative Fees

The Fund pays an administrative fee to FT Services based on the Fund’s average daily net assets as follows:

Annualized Fee Rate	Net Assets
0.150%	Up to and including $200 million
0.135%	over $200 million, up to and including $700 million
0.100%	over $700 million, up to and including $1.2 billion
0.075%	In excess of $1.2 billion

c. Distribution Fees

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

d. Transfer Agent Fees

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

4. EXPENSE OFFSET ARRANGEMENT

The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses. During the period ended June 30, 2011, there were no credits earned.

5. INCOME TAXES

For tax purposes, capital losses may be carried over to offset future capital gains, if any. At December 31, 2010, the capital loss carryforwards were as follows:

Capital loss carryforwards expiring in:
2017	$	76,440,230
2018		22,008,308
	$	98,448,538

FSV-22

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Small Cap Value Securities Fund

5. INCOME TAXES (continued)

Under the Regulated Investment Company Modernization Act of 2010, the Fund will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. Post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered short-term as under previous law. Any post-enactment capital losses generated will be required to be utilized prior to the losses incurred in pre-enactment tax years.

At June 30, 2011, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	1,085,032,749
Unrealized appreciation	$	441,658,245
Unrealized depreciation		(112,662,009	)
Net unrealized appreciation (depreciation)	$	328,996,236

Net investment income differs for financial statement and tax purposes primarily due to differing treatments of bond discounts and premiums.

Net realized gains (losses) differ for financial statement and tax purposes primarily due to differing treatment of wash sales.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2011, aggregated $100,709,550 and $145,326,666, respectively.

7. INVESTMENTS IN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO

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

8. CREDIT FACILITY

The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $750 million (Global Credit Facility) which matures on January 20, 2012. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests.

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.08% based upon the unused portion of the Global Credit Facility, which is reflected in other expenses on the Statement of Operations. During the period ended June 30, 2011, the Fund did not use the Global Credit Facility.

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Small Cap Value Securities Fund

9. FAIR VALUE MEASUREMENTS

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

• Level 1 – quoted prices in active markets for identical securities

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

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

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

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

The following is a summary of the inputs used as of June 30, 2011, in valuing the Fund’s assets and liabilities carried at fair value:

	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities
Equity Investmentsa	$	1,364,536,753	$	—	$	—	$	1,364,536,753
Corporate Bonds		—		1,494,000		—		1,494,000
Short Term Investments		33,128,039		14,870,193		—		47,998,232
Total Investments in Securities	$	1,397,664,792	$	16,364,193	$	—	$	1,414,028,985

^aFor detailed industry descriptions, see the accompanying Statement of Investments.

10. NEW ACCOUNTING PRONOUNCEMENTS

In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (IFRS). The amendments in the ASU will improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRS and include new guidance for certain fair value measurement principles and disclosure requirements. The ASU is effective for interim and annual periods beginning after December 15, 2011. The Fund is currently evaluating the impact, if any, of applying this provision.

11. SUBSEQUENT EVENTS

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

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FRANKLIN SMALL-MID CAP GROWTH SECURITIES FUND

This semiannual report for Franklin Small-Mid Cap Growth Securities Fund covers the period ended June 30, 2011.

Performance Summary as of 6/30/11

Franklin Small-Mid Cap Growth Securities Fund – Class 4 delivered a +7.64% total return for the six-month period ended 6/30/11.

Performance reflects the Fund’s Class 4 operating expenses, but does not include any contract fees, expenses or sales charges. If they had been included, performance would be lower. These charges and deductions, particularly for variable life policies, can have a significant effect on contract values and insurance benefits. See the contract prospectus for a complete description of these expenses, including sales charges.

Franklin Small-Mid Cap Growth Securities Fund Class 4

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

Current performance may differ from figures shown.

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Fund Goal and Main Investments: Franklin Small-Mid Cap Growth Securities Fund seeks long-term capital growth. The Fund normally invests at least 80% of its net assets in investments of small-capitalization (small cap) and mid-capitalization (midcap) companies. For this Fund, small cap companies are those within the market capitalization range of companies in the Russell 2500^TM Index at the time of purchase, and mid cap companies are companies within the market capitalization range of companies in the Russell Midcap^® Index at the time of purchase.¹

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. The Fund underperformed its narrow benchmark, the Russell Midcap Growth Index, which produced a +9.59% total return, but outperformed its broad benchmark, the Standard and Poor’s 500 Index, which posted a 6.02% total return, for the same period.²

Economic and Market Overview

The U.S. economy expanded despite geopolitical and inflationary pressures from around the globe during the six-month period ended June 30, 2011. Business activity increased and consumer spending stayed above pre-recession levels. The U.S. has been a key engine in a sustained global manufacturing expansion as international trade volume continued to increase, albeit at a moderate pace. Worldwide demand for capital goods aided U.S. manufacturing profits and increased employment in the industry.

The unemployment rate improved in the first quarter when job creation began to gain some traction. However, government payrolls continued to trend down and job creation slowed in the second quarter, causing the unemployment rate to end the period at 9.2%.³ Consumer spending rose noticeably for 11 consecutive months through May but declined in June as concerns about job growth and rising gasoline and food prices dampened consumer confidence. To offset the disruption of global oil supply caused by the conflicts in Libya, the International Energy Agency announced in June the release of 60 million barrels of oil in July from strategic reserves of the U.S. and 27 other nations. The U.S. financial system appeared closer to a full recovery, although the country still faced challenges dealing with housing market weakness and massive debt at period-end.

1. Please see Index Descriptions following the Fund Summaries.

2. Source: © 2011Morningstar. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

3. Source: Bureau of Labor Statistics.

Fund Risks: The Fund’s investments in stocks may offer the potential for long-term gains but can be subject to short-term price fluctuations. Smaller and midsize company securities can increase the risk of greater price fluctuations, particularly over the short term. Smaller or relatively new or unseasoned companies can also be particularly sensitive to changing economic conditions, and their prospects for growth are less certain than those of larger, more established companies. The Fund may have significant investments in particular sectors from time to time, such as technology, which has been among the most volatile sectors in the market and involves special risks. The manager applies various techniques and analyses in making investment decisions for the Fund, but there can be no guarantee that these decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

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Inflation at the consumer, producer and trade levels rose across much of the world, but in the U.S. it remained relatively contained. As a result, the Federal Reserve Board (Fed) maintained its accommodative monetary policy while ending its second round of quantitative easing on June 30. The Fed said, however, it would continue to purchase Treasuries with proceeds from maturing debt in an effort to support economic growth.

Investors’ attitudes shifted with each release of economic, regulatory and geopolitical news, causing equity market volatility to increase globally. U.S. investors weathered international events that included revolutions and civil unrest across the Middle East and North Africa, the multiple crises triggered by Japan’s earthquake and tsunami, and sovereign debt worries and credit downgrades in Europe. Ultimately, stock indexes produced solid gains during the six months under review as domestic and global equity markets rose amid generally improving economic signs and record-high corporate earnings growth.

Investment Strategy

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

Manager’s Discussion

During the six months under review, stock selection in the information technology sector boosted Fund performance relative to the Russell Midcap Growth Index. Our position in wireless technology provider Atheros Communications, which was acquired by Qualcomm in January, contributed to relative results.⁴ Semiconductor manufacturer Varian Semiconductor Equipment rose in value and also supported the

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Fund’s relative performance.⁴ In addition, significant individual contributors included consumer discretionary holding Ulta Salon Cosmetics & Fragrance, a cosmetic retailer; consumer staples stock Hansen Natural, a popular consumer beverage maker; and energy holding SM Energy, an oil and gas company.

In contrast, stock selection in the health care sector, more specifically weak returns from rural hospital operator Community Health Systems and pharmaceutical holding Salix Pharmaceuticals,⁵ hindered relative performance. In addition, stock selection in the financials sector detracted from the Fund’s relative performance, where banking and trust services provider Northern Trust lost value.⁵ Major individual detractors included energy sector company and major coal producer Alpha Natural Resources, and information technology holding SMART Technologies,⁵ a leading provider of interactive whiteboards.

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

4. Sold by period-end.

5. This holding is not an index component.

The foregoing information reflects our analysis, opinions and portfolio holdings as of June 30, 2011 the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

Top 10 Holdings

Franklin Small-Mid Cap Growth Securities Fund

6/30/11

Company Sector/Industry	% of Total Net Assets
SM Energy Co.		2.3%
Energy
Celanese Corp.		2.0%
Materials
Mettler-Toledo International Inc.		1.6%
Health Care
AMETEK Inc.		1.6%
Industrials
Nuance Communications Inc.		1.6%
Information Technology
BorgWarner Inc.		1.5%
Consumer Discretionary
Gardner Denver Inc.		1.4%
Industrials
Trimble Navigation Ltd.		1.4%
Information Technology
Waters Corp.		1.4%
Health Care
Wolverine World Wide Inc.		1.4%
Consumer Discretionary

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

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Fund Expenses

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

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

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

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

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

Actual Fund Expenses

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

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

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

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

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

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

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

Franklin Small-Mid Cap Growth Securities Fund Class 4

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Hypothetical Example for Comparison with Other Mutual Funds

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

Class 4	Beginning Account Value 1/1/11		Ending Account Value 6/30/11		Fund-Level Expenses Incurred During Period* 1/1/11–6/30/11
Actual	$	1,000	$	1,076.40	$	5.82
Hypothetical (5% return before expenses)	$	1,000	$	1,019.19	$	5.66

*Expenses are calculated using the most recent six-month annualized expense ratio for the Fund’s Class 4 shares (1.13%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 181/365 to reflect the one-half year period.

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Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Franklin Small-Mid Cap Growth Securities Fund

	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31,
Class 1				2010			2009			2008			2007			2006
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	22.21		$	17.36		$	12.06		$	23.39		$	22.51		$	20.66
Income from investment operationsa:
Net investment income (loss)b		(0.03	)		(0.01	)		(0.10	)c		0.01			(0.02	)		—	d
Net realized and unrealized gains (losses)		1.78			4.86			5.40			(8.98	)		2.65			1.85
Total from investment operations		1.75			4.85			5.30			(8.97	)		2.63			1.85
Less distributions from net realized gains		—			—			—			(2.36	)		(1.75	)		—
Net asset value, end of period	$	23.96		$	22.21		$	17.36		$	12.06		$	23.39		$	22.51
Total returne		7.88%			27.94%			43.95%			(42.34)%			11.51%			8.95%
Ratios to average net assetsf
Expenses		0.78%			0.79%			0.80%	g		0.76%	g		0.74%	g		0.76%	g
Net investment income (loss)		(0.23)%			(0.07)%			(0.72)%	c		0.06%			(0.10)%			(0.02)%
Supplemental data
Net assets, end of period (000’s)	$	90,969		$	89,826		$	79,670		$	63,531		$	127,602		$	135,402
Portfolio turnover rate		22.46%			46.69%			63.93%			60.12%			66.94%			50.08%

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

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $(0.06) per share as a return of capital adjustment to a previously recorded special dividend received by the Fund. Excluding this non-recurring amount, the ratio of net investment income to average net assets would have been (0.22)%.

^dAmount rounds to less than $0.01 per share.

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

^fRatios are annualized for periods less than one year.

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

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

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Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin Small-Mid Cap Growth Securities Fund

	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31,
Class 2				2010			2009			2008			2007			2006
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	21.54		$	16.87		$	11.75		$	22.91		$	22.13		$	20.36
Income from investment operationsa:
Net investment income (loss)b		(0.05	)		(0.06	)		(0.13	)c		(0.03	)		(0.08	)		(0.06	)
Net realized and unrealized gains (losses)		1.70			4.73			5.25			(8.77	)		2.61			1.83
Total from investment operations		1.65			4.67			5.12			(8.80	)		2.53			1.77
Less distributions from net realized gains		—			—			—			(2.36	)		(1.75	)		—
Net asset value, end of period	$	23.19		$	21.54		$	16.87		$	11.75		$	22.91		$	22.13
Total returnd		7.66%			27.68%			43.57%			(42.49)%			11.24%			8.69%
Ratios to average net assetse
Expenses		1.03%			1.04%			1.05%	f		1.01%	f		0.99%	f		1.01%	f
Net investment income (loss)		(0.48)%			(0.32)%			(0.97)%	c		(0.19)%			(0.35)%			(0.27)%
Supplemental data
Net assets, end of period (000’s)	$	900,543		$	939,481		$	813,480		$	614,053		$	1,217,177		$	1,184,521
Portfolio turnover rate		22.46%			46.69%			63.93%			60.12%			66.94%			50.08%

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

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $(0.06) per share as a return of capital adjustment to a previously recorded special dividend received by the Fund. Excluding this non-recurring amount, the ratio of net investment income to average net assets would have been (0.47)%.

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

^eRatios are annualized for periods less than one year.

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

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

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Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin Small-Mid Cap Growth Securities Fund

	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31,
Class 4				2010			2009			2008a
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	21.98		$	17.24		$	12.02		$	20.60
Income from investment operationsb:
Net investment income (loss)c		(0.07	)		(0.07	)		(0.15	)d		0.02
Net realized and unrealized gains (losses)		1.75			4.81			5.37			(6.24	)
Total from investment operations		1.68			4.74			5.22			(6.22	)
Less distributions from net realized gains		—			—			—			(2.36	)
Net asset value, end of period	$	23.66		$	21.98		$	17.24		$	12.02
Total returne		7.64%			27.49%			43.43%			(34.74)%
Ratios to average net assetsf
Expenses		1.13%			1.14%			1.15%	g		1.11%	g
Net investment income (loss)		(0.58)%			(0.42)%			(1.07)%	d		(0.29)%
Supplemental data
Net assets, end of period (000’s)	$	16,001		$	15,413		$	11,029		$	3,538
Portfolio turnover rate		22.46%			46.69%			63.93%			60.12%

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

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

^cBased on average daily shares outstanding.

^dNet investment income per share includes approximately $(0.06) per share as a return of capital adjustment to a previously recorded special dividend received by the Fund. Excluding this non-recurring amount, the ratio of net investment income to average net assets would have been (0.57)%.

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

^fRatios are annualized for periods less than one year.

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

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

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Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited)

Franklin Small-Mid Cap Growth Securities Fund	Shares		Value
Common Stocks 97.1%
Consumer Discretionary 20.7%
Arcos Dorados Holdings Inc. (Argentina)		168,100	$	3,545,230
a,bBlue Nile Inc.		73,500		3,232,530
aBorgWarner Inc.		192,000		15,511,680
aBuffalo Wild Wings Inc.		139,300		9,236,983
aChipotle Mexican Grill Inc.		35,500		10,940,745
aCtrip.com International Ltd., ADR (China)		72,000		3,101,760
aDick’s Sporting Goods Inc.		259,300		9,970,085
aDiscovery Communications Inc., A		142,700		5,844,992
aDiscovery Communications Inc., C		62,400		2,280,720
aDollar General Corp.		326,500		11,065,085
aDreamWorks Animation SKG Inc., A		84,500		1,698,450
Guess? Inc.		240,100		10,098,606
aIconix Brand Group Inc.		168,100		4,068,020
International Game Technology		360,200		6,332,316
Jarden Corp.		312,200		10,774,022
Limited Brands Inc.		211,300		8,124,485
Nordstrom Inc.		168,100		7,890,614
aPeet’s Coffee & Tea Inc.		170,649		9,846,447
Polo Ralph Lauren Corp.		67,300		8,924,653
aPriceline.com Inc.		12,000		6,143,160
Starwood Hotels & Resorts Worldwide Inc.		96,100		5,385,444
aTenneco Inc.		201,600		8,884,512
Tractor Supply Co.		48,500		3,243,680
aUlta Salon Cosmetics & Fragrance Inc.		96,100		6,206,138
aUnder Armour Inc., A		96,100		7,429,491
aUrban Outfitters Inc.		297,700		8,380,255
Wolverine World Wide Inc.		327,176		13,659,598
Wynn Resorts Ltd.		48,000		6,889,920
				208,709,621
Consumer Staples 2.6%
aHansen Natural Corp.		144,100		11,664,895
Mead Johnson Nutrition Co., A		110,400		7,457,520
aTreeHouse Foods Inc.		129,600		7,077,456
				26,199,871
Energy 7.0%
aAlpha Natural Resources Inc.		182,500		8,292,800
aCameron International Corp.		153,700		7,729,573
aFMC Technologies Inc.		192,000		8,599,680
aKey Energy Services Inc.		288,100		5,185,800
aOil States International Inc.		72,000		5,753,520
Patterson-UTI Energy Inc.		168,100		5,313,641
aPetrohawk Energy Corp.		285,300		7,038,351
SM Energy Co.		312,200		22,940,456
				70,853,821
Financials 5.9%
aAffiliated Managers Group Inc.		96,100		9,749,345
First Niagara Financial Group Inc.		489,900		6,466,680
Hancock Holding Co.		156,000		4,832,880
aIntercontinentalExchange Inc.		42,800		5,337,588
Lazard Ltd., A		276,500		10,258,150
Northern Trust Corp.		99,900		4,591,404

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Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin Small-Mid Cap Growth Securities Fund	Shares		Value
Common Stocks (continued)
Financials (continued)
aSignature Bank		120,000	$	6,864,000
T. Rowe Price Group Inc.		188,165		11,353,876
				59,453,923
Health Care 14.7%
aAgilent Technologies Inc.		264,100		13,498,151
aAllscripts Healthcare Solutions Inc.		275,600		5,352,152
aArQule Inc.		398,000		2,487,500
aAuxilium Pharmaceuticals Inc.		120,100		2,353,960
C. R. Bard Inc.		105,700		11,612,202
aCerner Corp.		144,000		8,799,840
aCommunity Health Systems Inc.		326,600		8,387,088
aCoventry Health Care Inc.		162,400		5,922,728
aDaVita Inc.		111,700		9,674,337
aDendreon Corp.		144,100		5,683,304
aEdwards Lifesciences Corp.		148,900		12,981,102
aHeartWare International Inc.		36,500		2,703,920
aHuman Genome Sciences Inc.		216,100		5,303,094
aMettler-Toledo International Inc.		96,100		16,209,187
Pharmaceutical Product Development Inc.		247,300		6,637,532
aSalix Pharmaceuticals Ltd.		124,900		4,974,767
aStereotaxis Inc.		631,400		2,216,214
aThoratec Corp.		72,000		2,363,040
aVarian Medical Systems Inc.		96,100		6,728,922
aWaters Corp.		144,100		13,796,134
				147,685,174
Industrials 16.6%
aAllegiant Travel Co.		86,500		4,281,750
AMETEK Inc.		360,200		16,172,980
C.H. Robinson Worldwide Inc.		62,400		4,919,616
Cooper Industries PLC, A		110,400		6,587,568
Cummins Inc.		115,300		11,932,397
aEsterline Technologies Corp.		91,200		6,967,680
Expeditors International of Washington Inc.		84,900		4,346,031
Fastenal Co.		192,000		6,910,080
Flowserve Corp.		67,300		7,395,597
Fluor Corp.		90,300		5,838,798
Gardner Denver Inc.		168,100		14,128,805
aHigher One Holdings Inc.		97,659		1,847,708
J.B. Hunt Transport Services Inc.		124,300		5,853,287
Joy Global Inc.		134,500		12,809,780
aKansas City Southern		72,000		4,271,760
Marten Transport Ltd.		6,719		145,130
Robert Half International Inc.		192,000		5,189,760
Rockwell Automation Inc.		144,100		12,502,116
Rockwell Collins Inc.		72,000		4,441,680
Roper Industries Inc.		72,000		5,997,600
aSensata Technologies Holding NV		330,000		12,424,500
aTerex Corp.		240,100		6,830,845
Textron Inc.		216,100		5,102,121
				166,897,589

FSC-11

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin Small-Mid Cap Growth Securities Fund	Shares		Value
Common Stocks (continued)
Information Technology 24.6%
aAcme Packet Inc.		25,000	$	1,753,250
aAlliance Data Systems Corp.		81,600		7,676,112
Analog Devices Inc.		206,500		8,082,410
aANSYS Inc.		187,300		10,239,691
aAruba Networks Inc.		240,100		7,094,955
Avago Technologies Ltd. (Singapore)		216,100		8,211,800
aBottomline Technologies Inc.		84,097		2,078,037
aCitrix Systems Inc.		124,900		9,992,000
aCommVault Systems Inc.		15,400		684,530
aF5 Networks Inc.		70,000		7,717,500
FactSet Research Systems Inc.		120,100		12,288,632
a,bFirst Solar Inc.		68,500		9,060,495
FLIR Systems Inc.		259,300		8,741,003
aFortinet Inc.		144,100		3,932,489
Global Payments Inc.		152,800		7,792,800
aHittite Microwave Corp.		165,800		10,264,678
aInformatica Corp.		100,000		5,843,000
aLam Research Corp.		100,800		4,463,424
aNetlogic Microsystems Inc.		249,700		10,092,874
aNuance Communications Inc.		734,800		15,776,156
aNXP Semiconductors NV (Netherlands)		480,300		12,838,419
aPolycom Inc.		100,000		6,430,000
a,bRealD Inc.		92,843		2,171,598
aRed Hat Inc.		264,200		12,126,780
aShoretel Inc.		288,100		2,938,620
aSilicon Laboratories Inc.		222,700		9,188,602
aSMART Technologies Inc., A (Canada)		480,400		2,738,280
aTaleo Corp., A		88,800		3,288,264
aTeradata Corp.		158,500		9,541,700
aTrimble Navigation Ltd.		349,900		13,870,036
aViaSat Inc.		163,300		7,065,991
Western Union Co.		192,000		3,845,760
Xilinx Inc.		264,200		9,635,374
				247,465,260
Materials 3.8%
Celanese Corp., A		384,200		20,481,702
CF Industries Holdings Inc.		25,000		3,541,750
Ecolab Inc.		105,700		5,959,366
The Scotts Miracle-Gro Co., A		138,100		7,085,911
a,bSTR Holdings Inc.		109,200		1,629,264
				38,697,993
Telecommunication Services 0.7%
aSBA Communications Corp.		192,000		7,332,480
Utilities 0.5%
aCalpine Corp.		336,200		5,422,906
Total Common Stocks (Cost $663,887,260)				978,718,638
Short Term Investments 3.6%
Money Market Funds (Cost $21,194,837) 2.1%
a,cInstitutional Fiduciary Trust Money Market Portfolio		21,194,837		21,194,837

FSC-12

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin Small-Mid Cap Growth Securities Fund	Shares		Value
dInvestments from Cash Collateral Received for Loaned Securities (Cost $15,130,907) 1.5%
Money Market Funds 1.5%
eBNY Mellon Overnight Government Fund, 0.05%		15,130,907	$	15,130,907
Total Investments (Cost $700,213,004) 100.7%				1,015,044,382
Other Assets, less Liabilities (0.7)%				(7,531,511	)
Net Assets 100.0%			$	1,007,512,871

See Abbreviations on page FSC-23.

^aNon-income producing.

^bA portion or all of the security is on loan at June 30, 2011. See Note 1(c).

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

^dSee Note 1(c) regarding securities on loan.

^eThe rate shown is the annualized seven-day yield at period end.

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

FSC-13

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

June 30, 2011 (unaudited)

	Franklin Small-Mid Cap Growth Securities Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	679,018,167
Cost - Sweep Money Fund (Note 7)		21,194,837
Total cost of investments	$	700,213,004
Value - Unaffiliated issuers	$	993,849,545
Value - Sweep Money Fund (Note 7)		21,194,837
Total value of investments (includes securities loaned in the amount of $14,960,292)		1,015,044,382
Receivables:
Investment securities sold		22,859,628
Capital shares sold		122,128
Dividends and interest		556,270
Other assets		151,791
Total assets		1,038,734,199
Liabilities:
Payables:
Investment securities purchased		12,828,449
Capital shares redeemed		1,946,744
Affiliates		1,007,047
Payable upon return of securities loaned		15,130,907
Accrued expenses and other liabilities		308,181
Total liabilities		31,221,328
Net assets, at value	$	1,007,512,871
Net assets consist of:
Paid-in capital	$	660,545,717
Undistributed net investment income (loss)		(2,449,587	)
Net unrealized appreciation (depreciation)		314,831,378
Accumulated net realized gain (loss)		34,585,363
Net assets, at value	$	1,007,512,871

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

FSC-14

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Assets and Liabilities (continued)

June 30, 2011 (unaudited)

	Franklin Small-Mid Cap Growth Securities Fund
Class 1:
Net assets, at value	$	90,968,513
Shares outstanding		3,797,311
Net asset value and maximum offering price per share	$	23.96
Class 2:
Net assets, at value	$	900,543,000
Shares outstanding		38,826,329
Net asset value and maximum offering price per share	$	23.19
Class 4:
Net assets, at value	$	16,001,358
Shares outstanding		676,296
Net asset value and maximum offering price per share	$	23.66

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

FSC-15

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the six months ended June 30, 2011 (unaudited)

	Franklin Small-Mid Cap Growth Securities Fund
Investment income:
Dividends	$	2,648,856
Income from securities loaned		231,302
Total investment income		2,880,158
Expenses:
Management fees (Note 3a)		2,580,083
Administrative fees (Note 3b)		1,323,409
Distribution fees: (Note 3c)
Class 2		1,186,860
Class 4		31,151
Unaffiliated transfer agent fees		1,586
Custodian fees (Note 4)		7,799
Reports to shareholders		160,784
Professional fees		21,220
Trustees’ fees and expenses		1,965
Other		14,888
Total expenses		5,329,745
Net investment income (loss)		(2,449,587	)
Realized and unrealized gains (losses):
Net realized gain (loss) from investments		73,650,885
Net change in unrealized appreciation (depreciation) on investments		5,031,200
Net realized and unrealized gain (loss)		78,682,085
Net increase (decrease) in net assets resulting from operations	$	76,232,498

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

FSC-16

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets

	Franklin Small-Mid Cap Growth Securities Fund
	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31, 2010
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	(2,449,587	)	$	(2,680,101	)
Net realized gain (loss) from investments and foreign currency transactions		73,650,885			110,745,622
Net change in unrealized appreciation (depreciation) on investments		5,031,200			119,428,953
Net increase (decrease) in net assets resulting from operations		76,232,498			227,494,474
Capital share transactions: (Note 2)
Class 1		(5,705,664	)		(10,074,842	)
Class 2		(107,169,369	)		(78,124,046	)
Class 4		(565,133	)		1,246,003
Total capital share transactions		(113,440,166	)		(86,952,885	)
Net increase (decrease) in net assets		(37,207,668	)		140,541,589
Net assets:
Beginning of period		1,044,720,539			904,178,950
End of period	$	1,007,512,871		$	1,044,720,539
Undistributed net investment income (loss) included in net assets:
End of period	$	(2,449,587	)	$	—

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

FSC-17

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited)

Franklin Small-Mid Cap Growth Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

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

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

The Fund’s investments in securities and other financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Under procedures approved by the Trust’s Board of Trustees, the Fund may utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

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

The Fund has procedures to determine the fair value of securities and other financial instruments for which market prices are not readily available or which may not be reliably priced. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.

Trading in securities on foreign securities stock exchanges and over-the-counter markets may be completed before the daily close of business on the NYSE. Occasionally, events occur between the time at which trading in a foreign security is completed and the close of the NYSE that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund’s portfolio securities as determined at the foreign market close and the latest indications of value at the close of the NYSE. In order to minimize the potential for these differences, the investment manager monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depository Receipts, 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 may call into question the reliability of the values of the foreign securities held by the Fund. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services.

b. Foreign Currency Translation

Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Fund may enter into foreign currency

FSC-18

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Small-Mid Cap Growth Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

b. Foreign Currency Translation (continued)

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

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

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

c. Securities Lending

The Fund participates in an agency based security lending program. The Fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the market value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the market value of loaned securities, as determined at the close of Fund business each day; any additional collateral required due to changes in security values is delivered to the Fund on the next business day. The collateral is invested in a non-registered money fund managed by the Fund’s custodian on the Fund’s behalf. The Fund receives income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. The Fund bears the market risk with respect to the collateral investment, securities loaned, and the risk that the agent may default on its obligations to the Fund. The securities lending agent has agreed to indemnify the Fund in the event of default by a third party borrower.

d. Income Taxes

It is the Fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and excise taxes. As a result, no provision for U.S. federal income taxes is required. The Fund files U.S. income tax returns as well as tax returns in certain other jurisdictions. The Fund records a provision for taxes in its financial statements including penalties and interest, if any, for a tax position taken on a tax return (or expected to be taken) when it fails to meet the more likely than not (a greater than 50% probability) threshold and based on the technical merits, the tax position may not be sustained upon examination by the tax authorities. As of June 30, 2011, and for all open tax years, the Fund has determined that no provision for income tax is required in the Fund’s financial statements. Open tax years are those that remain subject to examination and are based on each tax jurisdiction statute of limitation.

e. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Estimated expenses are accrued daily. Dividend income is recorded on the ex-dividend date except that certain dividends from foreign securities are recognized as soon as the Fund is notified of the ex-dividend date. Distributions to shareholders are recorded on the ex-dividend date and are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with accounting principles

FSC-19

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Small-Mid Cap Growth Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

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

generally accepted in the United States of America. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.

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

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

f. Accounting Estimates

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

g. Guarantees and Indemnifications

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

2. SHARES OF BENEFICIAL INTEREST

At June 30, 2011, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:

	Six Months Ended June 30, 2011						Year Ended December 31, 2010
	Shares			Amount			Shares			Amount
Class 1 Shares:
Shares sold		123,166		$	2,935,527			293,329		$	5,660,759
Shares redeemed		(369,399	)		(8,641,191	)		(838,792	)		(15,735,601	)
Net increase (decrease)		(246,233	)	$	(5,705,664	)		(545,463	)	$	(10,074,842	)
Class 2 Shares:
Shares sold		2,212,999		$	50,147,467			4,961,508		$	92,319,522
Shares redeemed		(7,012,073	)		(157,316,836	)		(9,551,006	)		(170,443,568	)
Net increase (decrease)		(4,799,074	)	$	(107,169,369	)		(4,589,498	)	$	(78,124,046	)
Class 4 Shares:
Shares sold		244,772		$	5,649,705			320,420		$	6,087,006
Shares redeemed		(269,685	)		(6,214,838	)		(258,807	)		(4,841,003	)
Net increase (decrease)		(24,913	)	$	(565,133	)		61,613		$	1,246,003

FSC-20

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Small-Mid Cap Growth Securities Fund

3. TRANSACTIONS WITH AFFILIATES

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

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

a. Management Fees

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

Annualized Fee Rate	Net Assets
0.550%	Up to and including $500 million
0.450%	Over $500 million, up to and including $1 billion
0.400%	Over $1 billion, up to and including $1.5 billion
0.350%	Over $1.5 billion, up to and including $6.5 billion
0.325%	Over $6.5 billion, up to and including $11.5 billion
0.300%	Over $11.5 billion, up to and including $16.5 billion
0.290%	Over $16.5 billion, up to and including $19 billion
0.280%	Over $19 billion, up to and including $21.5 billion
0.270%	In excess of $21.5 billion

b. Administrative Fees

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

c. Distribution Fees

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

d. Transfer Agent Fees

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

4. EXPENSE OFFSET ARRANGEMENT

The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses. During the period ended June 30, 2011, there were no credits earned.

FSC-21

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Small-Mid Cap Growth Securities Fund

5. INCOME TAXES

For tax purposes, capital losses may be carried over to offset future capital gains, if any. At December 31, 2010, the Fund had tax basis capital losses of $38,029,637 expiring in 2017.

Under the Regulated Investment Company Modernization Act of 2010, the Fund will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. Post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered short-term as under previous law. Any post-enactment capital losses generated will be required to be utilized prior to the losses incurred in pre-enactment tax years.

At June 30, 2011, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	700,623,198
Unrealized appreciation	$	324,608,835
Unrealized depreciation		(10,187,651	)
Net unrealized appreciation (depreciation)	$	314,421,184

Net investment income (loss) differs for financial statement and tax purposes primarily due to differing treatment of foreign currency transactions.

Net realized gains (losses) differ for financial statement and tax purposes primarily due to differing treatments of wash sales and foreign currency transactions.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2011, aggregated $231,860,138 and $331,923,101, respectively.

7. INVESTMENTS IN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO

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

8. CREDIT FACILITY

The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $750 million (Global Credit Facility) which matures on January 20, 2012. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests.

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.08% based upon the unused portion of the Global Credit Facility, which is reflected in other expenses on the Statement of Operations. During the period ended June 30, 2011, the Fund did not use the Global Credit Facility.

FSC-22

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Small-Mid Cap Growth Securities Fund

9. FAIR VALUE MEASUREMENTS

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

• Level 1 – quoted prices in active markets for identical securities

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

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

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

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

The following is a summary of the inputs used as of June 30, 2011, in valuing the Fund’s assets and liabilities carried at fair value:

	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities:
Equity Investmentsa	$	978,718,638	$	—	$	—	$	978,718,638
Short Term Investments		21,194,837		15,130,907		—		36,325,744
Total Investments in Securities	$	999,913,475	$	15,130,907	$	—	$	1,015,044,382

^aFor detailed industry descriptions, see the accompanying Statement of Investments.

10. NEW ACCOUNTING PRONOUNCEMENTS

In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (IFRS). The amendments in the ASU will improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRS and include new guidance for certain fair value measurement principles and disclosure requirements. The ASU is effective for interim and annual periods beginning after December 15, 2011. The Fund is currently evaluating the impact, if any, of applying this provision.

11. SUBSEQUENT EVENTS

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

ABBREVIATIONS

Selected Portfolio

ADR - American Depository Receipt

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FRANKLIN STRATEGIC INCOME SECURITIES FUND

We are pleased to bring you Franklin Strategic Income Securities Fund’s semiannual report for the period ended June 30, 2011.

Performance Summary as of 6/30/11

Franklin Strategic Income Securities Fund – Class 4 delivered a +4.19% total return for the six-month period ended 6/30/11.

Performance reflects the Fund’s Class 4 operating expenses, but does not include any contract fees, expenses or sales charges. If they had been included, performance would be lower. These charges and deductions, particularly for variable life policies, can have a significant effect on contract values and insurance benefits. See the contract prospectus for a complete description of these expenses, including sales charges.

Franklin Strategic Income Securities Fund – Class 4

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

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Fund Goals and Main Investments: Franklin Strategic Income Securities Fund seeks a high level of current income, with capital appreciation over the long term as a secondary goal. The Fund normally invests primarily to predominantly in U.S. and foreign debt securities, including those in emerging markets.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. The Fund outperformed its benchmark, the Barclays Capital (BC) U.S. Aggregate Index, which produced a +2.72% total return over the same period.¹ The Fund also outperformed its peers as measured by the Lipper Multi-Sector Income Funds Classification Average, which posted a +3.18% total return.²

Economic and Market Overview

As consumer spending rose during the six-month reporting period, the U.S. economy expanded, although the pace of growth slowed. The Federal Reserve Board (Fed) announced in November it intended to buy $600 billion of longer term Treasury securities by the end of the second quarter of 2011. It sought to promote a stronger recovery and help maintain inflation levels the Fed believed consistent with its dual mandate to foster maximum employment and price stability. Despite the Fed’s actions, the economic recovery stalled. U.S. home prices fell sharply during the first quarter of 2011, and unemployment remained stubbornly high. After showing solid improvement during the year, manufacturing activity weakened partly because of auto supply-chain disruptions following Japan’s natural disasters.

Geopolitical instability in North Africa and the Middle East drove up oil prices for most of the period. However, investor concerns over weak economic data caused crude oil prices to drop from their six-month high of $114 per barrel on April 29 to $95 at period-end. Storms and droughts in several states reduced crop yields, pushing up grain prices. As oil and food prices rose, the pace of inflation accelerated during the period. Many developing economies, which have closed their output gaps and have a higher sensitivity to commodity prices, continued to tighten policy in the face of rising inflationary pressures. This policy

1. Source: © 2011 Morningstar.

2. Source: Lipper Inc.

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

Fund Risks: Because the Fund invests in bonds and other debt obligations, its share price and yield will be affected by interest rate movements. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in the Fund adjust to a rise in interest rates, the Fund’s share price may decline. High yield, lower rated (junk) bonds generally have greater price swings and higher default risks than investment-grade bonds. Bank loans and loan participations involve credit, interest rate and illiquidity risks. Foreign investing, especially in developing markets, involves additional risks, including currency fluctuations, economic instability, market volatility, and political and social instability. Mortgage- and asset-backed securities are subject to prepayment and extension risks. The value of convertible securities may rise and fall with the market value of the underlying stock or, like a debt security, vary with changes in interest rates and the credit quality of the issuer. The Fund may also use certain derivative instruments, which may be volatile and illiquid, may give rise to leverage and may involve a small investment relative to the risk assumed. The manager applies various techniques and analyses in making investment decisions for the Fund, but there can be no guarantee that these decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

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tightening included raising interest rates, allowing currency appreciation and implementing regulations. In contrast, the G-3 (U.S., eurozone and Japan) continued to struggle with weak labor markets and concerns regarding public sector balances. The eurozone joined the list of those raising interest rates from historically low levels by increasing its policy rate in the second quarter. Although the eurozone raised rates and the U.S. planned to end quantitative easing, the G-3 continued to supply liquidity to governments and the financial sector.

Despite turmoil in North Africa and the Middle East, the multiple crises triggered by Japan’s earthquake and headwinds facing the U.S. economy, generally favorable economic improvements and positive corporate earnings reports gave investors confidence. While equity and fixed income markets performed well overall for the six months under review, investors reacted to reports on the Greek debt crisis by seeking the perceived safe haven of U.S. Treasuries. At period-end, the Greek government approved an austerity bill to secure a bailout loan from international creditors, which helped relieve investor anxiety.

Investment Strategy

We allocate our investments among the various types of debt available based on our assessment of changing economic, global market, industry and issuer conditions. We use a top-down analysis of macroeconomic trends, combined with a bottom-up fundamental analysis of market sectors, industries and issuers, seeking to take advantage of varying sector reactions to economic events. For example, we may evaluate business cycles, yield curves, country risk, and the relative interest rates among currencies, and values between and within markets. In selecting debt securities, we generally conduct our own analysis of the security’s intrinsic value rather than simply relying on the coupon rate or rating. We may also enter into various transactions involving certain currency-, interest rate- or credit-related derivative instruments for hedging purposes, to enhance returns or to obtain exposure to various market sectors.

Manager’s Discussion

During the first half of 2011, market concerns included certain European countries’ debt crises, the expected end of the U.S. Fed’s second round of quantitative easing, political uprisings in North Africa and the Middle East, and the earthquake and subsequent nuclear disaster in Japan. In reaction to such concerns, U.S. Treasuries experienced some volatility, with the 10-year Treasury note yield rising from 3.30% at the

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beginning of the period to an intra-period high of 3.75% in February. The yield subsequently fell to a period-low 2.86% in June before ending the period at 3.18%. Despite this interest rate volatility, most financial market sectors experienced generally positive results for the period. For example, the Standard & Poor’s 500 Index delivered a +6.02% total return for the six months ended June 30, 2011.¹ In fixed income markets, the credit sectors (investment grade corporate bonds, high yield corporate bonds and leveraged bank loans) also posted positive return performance, supported by healthy credit fundamentals and strong demand for much of the period. U.S. dollar weakness continued, given a combination of superior growth prospects in certain developing countries and more aggressive short-term interest rate policies in some developed countries. Overall, the fixed income environment during the reporting period favored higher beta spread sectors and foreign currency investments. However, toward period-end renewed concerns regarding the process of fiscal restructuring for certain European countries dampened financial market momentum heading into the second half of 2011.

In this environment, Franklin Strategic Income Securities Fund provided positive results, outperforming the benchmark BC U.S. Aggregate Index and its peers as measured by the Lipper Multi-Sector Income Fund Classification Average. The Fund’s lower weighting in longer duration, U.S. interest rate-sensitive fixed income sectors (Treasury securities and U.S. agency bonds) positively impacted performance relative to the benchmark index, while the Fund’s exposure to credit sectors (below investment-grade and investment-grade securities) delivered strong performance during the period. Certain of the Fund’s non-U.S. dollar holdings also provided positive returns given currency appreciation relative to the dollar, as did the Fund’s municipal securities exposure. However, a lower weighting in emerging market, hard-currency sovereign bonds limited returns relative to peers.

The slight decline in longer term U.S. interest rates helped most Treasuries post returns modestly above their coupon income. Relative to similar-duration Treasuries, agency mortgage-backed securities (MBS) generally outperformed given the increase in current yield. Although core U.S. inflationary pressures were anticipated by many to remain relatively low over the near term, moderate economic growth and our longer term concerns regarding the impact of the fiscal deficit on interest rates led us to maintain a low exposure to Treasuries and agency debentures. We favored the current yield advantage of agency MBS,

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Portfolio Breakdown

Franklin Strategic Income Securities Fund

Based on Total Net Assets

	6/30/11		12/31/10
High Yield Corporate Bonds & Preferred Securities		28.3%		29.6%
International Government & Agency Bonds (non-$US)		24.3%		21.9%
Floating Rate Bank Loans		15.8%		15.7%
Mortgage-Backed Securities		6.2%		6.9%
Municipal Bonds		5.6%		5.8%
Investment Grade Corporate Bonds & Preferred Securities		5.5%		7.1%
International Government & Agency Bonds ($US)		3.7%		3.2%
Commercial Mortgage-Backed Securities		2.3%		3.6%
U.S. Treasury Securities		1.3%		1.3%
Asset-Backed Securities		1.1%		1.9%
Equities		0.5%		0.2%
Convertible Securities		0.3%		0.0%	*
Short-Term Investments & Other Net Assets**		5.1%		2.8%

*Rounds to less than 0.1% of total net assets.

**Includes unrealized gains/losses on forward currency contracts and credit default swap contracts. Does not include short-term foreign government securities.

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

although our exposure to that sector was also relatively low. Commercial MBS posted gains during the period following a very healthy rebound in calendar years 2009 and 2010. We took advantage of this positive performance by reducing commercial MBS exposure during the period. Conversely, negative news battered the municipal bond market over the past several quarters. Although such stories may continue to garner media attention, we remained comfortable with the longer term credit quality of the state and municipal obligations we held. In fact, municipal bonds rebounded sharply during the second half of the reporting period, providing one of the strongest sector returns for the Fund. During the period, the Fund added to its tax-exempt municipal bond positions, while taking gains on certain taxable, Build-America municipal bond holdings.

Corporate credit markets generally continued the positive relative performance that began in 2009. Supported by the global economy’s rebound, corporate earnings and cash flow growth improved, which supported many issuers’ credit fundamentals. In addition, a very accommodative new-issue market allowed many issuers to refinance their debt obligations at attractive rates. Largely as a result, default rates

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moved lower, ending the period in the very low single digits for both high yield corporate bonds and bank loans. Demand for the higher yield of below investment-grade securities (including high yield bonds and bank loans) provided ongoing price support. Although positive bank loan performance stalled in early 2011 as certain issuers sought to reprice their loan obligations at lower interest rate levels, corporate credit sectors generally were strong contributors to the Fund’s performance during the period. Overall, high yield corporate bond exposure, including to some derivative issues, remained relatively steady, while we took some gains from our investment-grade holdings and deployed the proceeds into the less interest rate-sensitive bank loan sector, including derivative issues.

The Fund incrementally added exposure to its non-U.S. dollar exposure during the period, given our view of greater fundamental and technical support for certain foreign currencies, particularly in various developing markets. With the dollar’s recent weakness, the Fund’s holdings in currencies and countries in the Asian region, particularly in South Korea, provided positive returns. However, the Japanese yen’s strength negatively impacted the Fund’s short forward currency position in that country. Similarly, euro strength offset gains we would have had from currencies of some non-eurozone European countries, such as those of Norway, Sweden and Poland, given our proxy short euro hedge against those holdings. However, our position in Hungarian forint-denominated securities outperformed the euro. Supported by strong fundamental credit trends, particularly relative to certain developed markets, the hard-currency, U.S. dollar emerging market performed well during the period. However, considering historically rich valuations, the Fund held a relatively small position in this sector during the period.

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

The foregoing information reflects our analysis, opinions and portfolio holdings as of June 30, 2011, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

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Fund Expenses

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

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

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

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

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

Actual Fund Expenses

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

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

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

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

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

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

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

Franklin Strategic Income Securities Fund – Class 4

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Hypothetical Example for Comparison with Other Mutual Funds

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

Class 4	Beginning Account Value 1/1/11		Ending Account Value 6/30/11		Fund-Level Expenses Incurred During Period* 1/1/11–6/30/11
Actual	$	1,000	$	1,041.90	$	4.71
Hypothetical (5% return before expenses)	$	1,000	$	1,020.18	$	4.66

*Expenses are calculated using the most recent six-month annualized expense ratio for the Fund’s Class 4 shares (0.93%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 181/365 to reflect the one-half year period.

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Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Franklin Strategic Income Securities Fund

	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31,
Class 1				2010			2009			2008			2007			2006
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	12.99		$	12.28		$	10.58		$	12.78		$	12.73		$	12.43
Income from investment operationsa:
Net investment incomeb		0.36			0.72			0.70			0.69			0.73			0.69
Net realized and unrealized gains (losses)		0.20			0.61			1.95			(1.99	)		0.04			0.32
Total from investment operations		0.56			1.33			2.65			(1.30	)		0.77			1.01
Less distributions from:
Net investment income and net foreign currency gains		(0.81	)		(0.62	)		(0.95	)		(0.87	)		(0.68	)		(0.63	)
Net realized gains		—			—			—			(0.03	)		(0.04	)		(0.08	)
Total distributions		(0.81	)		(0.62	)		(0.95	)		(0.90	)		(0.72	)		(0.71	)
Net asset value, end of period	$	12.74		$	12.99		$	12.28		$	10.58		$	12.78		$	12.73
Total returnc		4.33%			11.21%			26.11%			(11.03)%			6.20%			8.51%
Ratios to average net assetsd
Expenses		0.58%			0.59%	e		0.58%	e		0.61%	e		0.62%	e		0.62%	e
Net investment income		5.51%			5.71%			6.13%			5.83%			5.72%			5.51%
Supplemental data
Net assets, end of period (000’s)	$	1,155,500		$	1,195,149		$	1,173,313		$	903,358		$	1,086,850		$	902,071
Portfolio turnover rate		34.27%			56.46%			56.19%			47.68%			46.88%			47.88%
Portfolio turnover rate excluding mortgage dollar rollsf		34.27%			56.46%			56.19%			47.68%			46.43%			44.58%

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

^bBased on average daily shares outstanding.

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

^dRatios are annualized for periods less than one year.

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

^fSee Note 1(f) regarding mortgage dollar rolls.

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

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Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin Strategic Income Securities Fund

	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31,
Class 2				2010			2009			2008			2007			2006
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	12.72		$	12.05		$	10.41		$	12.60		$	12.56		$	12.27
Income from investment operationsa:
Net investment incomeb		0.34			0.68			0.66			0.65			0.69			0.65
Net realized and unrealized gains (losses)		0.20			0.59			1.91			(1.96	)		0.05			0.31
Total from investment operations		0.54			1.27			2.57			(1.31	)		0.74			0.96
Less distributions from:
Net investment income and net foreign currency gains		(0.79	)		(0.60	)		(0.93	)		(0.85	)		(0.66	)		(0.59	)
Net realized gains		—			—			—			(0.03	)		(0.04	)		(0.08	)
Total distributions		(0.79	)		(0.60	)		(0.93	)		(0.88	)		(0.70	)		(0.67	)
Net asset value, end of period	$	12.47		$	12.72		$	12.05		$	10.41		$	12.60		$	12.56
Total returnc		4.25%			10.91%			25.75%			(11.24)%			5.91%			8.24%
Ratios to average net assetsd
Expenses		0.83%			0.84%	e		0.83%	e		0.86%	e		0.87%	e		0.87%	e
Net investment income		5.26%			5.46%			5.88%			5.58%			5.47%			5.26%
Supplemental data
Net assets, end of period (000’s)	$	124,463		$	101,347		$	68,240		$	33,155		$	24,613		$	11,753
Portfolio turnover rate		34.27%			56.46%			56.19%			47.68%			46.88%			47.88%
Portfolio turnover rate excluding mortgage dollar rollsf		34.27%			56.46%			56.19%			47.68%			46.43%			44.58%

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

^bBased on average daily shares outstanding.

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

^dRatios are annualized for periods less than one year.

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

^fSee Note 1(f) regarding mortgage dollar rolls.

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

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Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin Strategic Income Securities Fund

	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31,
Class 4				2010			2009			2008a
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	12.88		$	12.20		$	10.54		$	12.84
Income from investment operationsb:
Net investment incomec		0.34			0.67			0.66			0.53
Net realized and unrealized gains (losses)		0.20			0.60			1.94			(1.93	)
Total from investment operations		0.54			1.27			2.60			(1.40	)
Less distributions from:
Net investment income and net foreign currency gains		(0.77	)		(0.59	)		(0.94	)		(0.87	)
Net realized gains		—			—			—			(0.03	)
Total distributions		(0.77	)		(0.59	)		(0.94	)		(0.90	)
Net asset value, end of period	$	12.65		$	12.88		$	12.20		$	10.54
Total returnd		4.19%			10.88%			25.52%			(11.69)%
Ratios to average net assetse
Expenses		0.93%			0.94%	f		0.93%	f		0.96%	f
Net investment income		5.16%			5.36%			5.78%			5.48%
Supplemental data
Net assets, end of period (000’s)	$	201,742		$	188,178		$	162,074		$	59,766
Portfolio turnover rate		34.27%			56.46%			56.19%			47.68%

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

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

^cBased on average daily shares outstanding.

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

^eRatios are annualized for periods less than one year.

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

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

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Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited)

Franklin Strategic Income Securities Fund	Country	Shares		Value
Common Stocks 0.5%
Consumer Durables & Apparel 0.0%†
a,bComfort Co. Inc.	United States		6,137	$	115,253
Consumer Services 0.1%
a,c,dTurtle Bay Resort	United States		1,901,449		1,948,985
Media 0.4%
aCharter Communications Inc., A	United States		7,456		404,563
aDex One Corp.	United States		40,000		101,200
aMGM Holdings Inc., A	United States		240,995		5,436,437
					5,942,200
Total Common Stocks (Cost $10,688,751)					8,006,438
Preferred Stocks (Cost $865,000) 0.1%
Diversified Financials 0.1%
GMAC Capital Trust I, 8.125%, pfd.	United States		34,600		885,760
		Principal Amount*
Convertible Bonds 0.3%
Materials 0.3%
eCemex SAB de CV, cvt., sub. note, 144A,
3.25%, 3/15/16	Mexico		2,000,000		1,985,200
3.75%, 3/15/18	Mexico		2,000,000		1,995,200
Total Convertible Bonds (Cost $3,994,108)					3,980,400
Corporate Bonds 34.5%
Automobiles & Components 1.0%
eExide Technologies, senior secured note, 144A, 8.625%, 2/01/18	United States		1,100,000		1,149,500
Ford Motor Credit Co. LLC, senior note,
7.00%, 4/15/15	United States		2,000,000		2,165,318
6.625%, 8/15/17	United States		1,000,000		1,063,788
5.00%, 5/15/18	United States		1,000,000		998,566
8.125%, 1/15/20	United States		1,200,000		1,393,806
5.75%, 2/01/21	United States		1,000,000		1,000,615
The Goodyear Tire & Rubber Co., senior note, 8.25%, 8/15/20	United States		4,000,000		4,340,000
eTRW Automotive Inc., senior note, 144A, 7.25%, 3/15/17	United States		2,500,000		2,787,500
					14,899,093
Banks 2.0%
eBanco do Brasil SA, sub. note, 144A, 5.875%, 1/26/22	Brazil		4,000,000		3,973,940
BB&T Capital Trust IV, junior sub. bond, 6.82%, 6/12/77	United States		3,000,000		3,048,750
HSBC USA Inc., sub. note, 5.00%, 9/27/20	United States		4,000,000		3,961,268
eLloyds TSB Bank PLC, senior note, 144A, 5.80%, 1/13/20	United Kingdom		4,000,000		3,998,060
Regions Bank, sub. note, 7.50%, 5/15/18	United States		100,000		104,660
Regions Financial Corp., senior note,
7.75%, 11/10/14	United States		2,500,000		2,649,845
5.75%, 6/15/15	United States		300,000		295,757
Royal Bank of Scotland Group PLC, senior note, 6.40%, 10/21/19	United Kingdom		4,000,000		4,115,300
UBS AG Stamford, senior note, 5.875%, 12/20/17	United States		3,000,000		3,293,400
fWells Fargo Capital XIII, pfd., 7.70% to 3/26/13, FRN thereafter, Perpetual	United States		2,000,000		2,050,000
fWells Fargo Capital XV, pfd., 9.75% to 9/26/13, FRN thereafter, Perpetual	United States		1,500,000		1,590,000
					29,080,980

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Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin Strategic Income Securities Fund	Country	Principal Amount*			Value
Corporate Bonds (continued)
Capital Goods 1.1%
eAbengoa Finance SAU, senior note, 144A, 8.875%, 11/01/17	Spain		4,000,000		$	4,099,980
The Manitowoc Co. Inc., senior note,
9.50%, 2/15/18	United States		2,500,000			2,728,125
8.50%, 11/01/20	United States		300,000			321,750
Meritor Inc., senior note, 10.625%, 3/15/18	United States		2,500,000			2,818,750
ePinafore LLC/Inc., senior secured note, 144A, 9.00%, 10/01/18	United States		300,000			324,750
RBS Global & Rexnord Corp., senior note, 8.50%, 5/01/18	United States		3,500,000			3,714,375
United Rentals North America Inc., senior sub. note, 8.375%, 9/15/20	United States		2,200,000			2,238,500
						16,246,230
Commercial & Professional Services 0.1%
e,gARAMARK Holdings Corp., senior note, 144A, PIK, 8.625%, 5/01/16	United States		700,000			715,750
Consumer Durables & Apparel 1.0%
Jarden Corp., senior sub. note, 7.50%,
5/01/17	United States		3,000,000			3,131,250
1/15/20	United States		500,000			522,500
KB Home, senior note, 6.25%, 6/15/15	United States		2,400,000			2,304,000
M/I Homes Inc., senior note, 8.625%, 11/15/18	United States		2,500,000			2,471,875
eShea Homes LP/Funding Corp., senior secured note, 144A, 8.625%, 5/15/19	United States		2,000,000			1,975,000
Visant Corp., senior note, 10.00%, 10/01/17	United States		3,900,000			4,056,000
						14,460,625
Consumer Services 2.4%
eCityCenter Holdings/Finance, senior secured note, 144A, 7.625%, 1/15/16	United States		1,200,000			1,245,000
CKE Restaurants Inc., senior secured note, 11.375%, 7/15/18	United States		2,400,000			2,634,000
eClubCorp Club Operations Inc., senior note, 144A, 10.00%, 12/01/18	United States		2,700,000			2,686,500
e,hFontainebleau Las Vegas, 144A, 11.00%, 6/15/15	United States		2,500,000			1,250
eGala Group Finance Ltd, senior secured bond, 144A, 8.875%, 9/01/18	United Kingdom		2,300,000	GBP		3,424,040
Harrah’s Operating Co. Inc., senior secured note, 11.25%, 6/01/17	United States		6,000,000			6,652,500
MGM Resorts International, senior note, 6.625%, 7/15/15	United States		4,500,000			4,241,250
Norwegian Cruise Line Ltd., senior secured note, 11.75%, 11/15/16	United States		1,300,000			1,503,125
Pinnacle Entertainment Inc.,
senior note, 8.625%, 8/01/17	United States		1,500,000			1,618,125
senior sub. note, 7.50%, 6/15/15	United States		1,000,000			1,022,500
Royal Caribbean Cruises Ltd., senior deb., 7.25%, 3/15/18	United States		2,100,000			2,252,250
eShingle Springs Tribal Gaming Authority, senior note, 144A, 9.375%, 6/15/15	United States		2,000,000			1,390,000
Starwood Hotels & Resorts Worldwide Inc., senior note,
6.75%, 5/15/18	United States		2,000,000			2,225,000
7.15%, 12/01/19	United States		500,000			561,250
hStation Casinos Inc.,
senior note, 6.00%, 4/01/12	United States		500,000			50
senior note, 7.75%, 8/15/16	United States		1,000,000			100
senior sub. note, 6.50%, 2/01/14	United States		300,000			30
senior sub. note, 6.875%, 3/01/16	United States		1,000,000			100
Universal City Development,
senior note, 8.875%, 11/15/15	United States		2,000,000			2,235,000
senior sub. note, 10.875%, 11/15/16	United States		400,000			478,000
						34,170,070
Diversified Financials 4.0%
Ally Financial Inc., senior note, 7.50%, 9/15/20	United States		1,500,000			1,575,000
Bank of America Corp.,
fpfd., sub. bond, M, 8.125% to 5/15/18, FRN thereafter, Perpetual,	United States		4,000,000			4,182,240
senior note, 5.65%, 5/01/18	United States		1,500,000			1,582,928

FSI-13

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin Strategic Income Securities Fund	Country	Principal Amount*			Value
Corporate Bonds (continued)
Diversified Financials (continued)
Capital One Capital VI, pfd., junior sub. bond, 8.875%, 5/15/40	United States		3,000,000		$	3,109,224
eCIT Group Inc.,
secured bond, 144A, 7.00%, 5/02/17	United States		5,500,000			5,500,000
secured note, 144A, 6.625%, 4/01/18	United States		300,000			314,250
Citigroup Inc.,
senior note, 6.125%, 11/21/17	United States		1,500,000			1,657,914
senior note, 5.375%, 8/09/20	United States		1,500,000			1,567,145
sub. note, 5.00%, 9/15/14	United States		3,000,000			3,145,173
General Electric Capital Corp.,
senior note, A, 8.50%, 4/06/18	United States		64,000,000	MXN		5,323,193
sub. note, 5.30%, 2/11/21	United States		1,800,000			1,875,227
GMAC Inc.,
senior note, 6.875%, 8/28/12	United States		2,000,000			2,075,000
sub. note, 8.00%, 12/31/18	United States		900,000			967,500
International Lease Finance Corp.,
senior note, 8.25%, 12/15/20	United States		800,000			866,000
esenior secured note, 144A, 6.75%, 9/01/16	United States		4,000,000			4,280,000
JPMorgan Chase & Co.,
6.00%, 1/15/18	United States		1,500,000			1,669,686
senior note, 4.25%, 10/15/20	United States		1,000,000			979,521
JPMorgan Chase Capital XXII, sub. bond, 6.45%, 2/02/37	United States		4,000,000			4,042,916
eKKR Group Finance Co., senior note, 144A, 6.375%, 9/29/20	United States		4,000,000			4,234,840
Merrill Lynch & Co. Inc., senior note, 6.40%, 8/28/17	United States		2,500,000			2,730,903
Moody’s Corp., senior note, 5.50%, 9/01/20	United States		3,000,000			3,077,406
Morgan Stanley, senior note,
6.00%, 4/28/15	United States		3,000,000			3,253,758
5.50%, 7/24/20	United States		500,000			506,669
TransUnion LLC/TransUnion FICO, senior note, 11.375%, 6/15/18	United States		1,000,000			1,135,000
						59,651,493
Energy 6.3%
Alpha Natural Resources Inc., senior note,
6.00%, 6/01/19	United States		1,200,000			1,203,000
6.25%, 6/01/21	United States		1,200,000			1,212,000
Anadarko Petroleum Corp., senior note, 8.70%, 3/15/19	United States		2,000,000			2,551,022
Antero Resources Finance, senior note, 9.375%, 12/01/17	United States		3,000,000			3,240,000
eArch Coal Inc., senior note, 144A,
7.00%, 6/15/19	United States		800,000			802,000
7.25%, 6/15/21	United States		1,100,000			1,106,875
Berry Petroleum Co., senior note, 6.75%, 11/01/20	United States		2,000,000			2,015,000
Chaparral Energy Inc., senior note,
9.875%, 10/01/20	United States		2,400,000			2,604,000
8.25%, 9/01/21	United States		1,000,000			1,012,500
eCHC Helicopter SA, senior secured note, 144A, 9.25%, 10/15/20	Canada		4,400,000			3,993,000
Chesapeake Energy Corp., senior note,
7.25%, 12/15/18	United States		300,000			328,500
6.625%, 8/15/20	United States		3,300,000			3,489,750
6.125%, 2/15/21	United States		1,500,000			1,520,625
Compagnie Generale de Geophysique-Veritas, senior note,
9.50%, 5/15/16	France		100,000			109,750
7.75%, 5/15/17	France		2,100,000			2,173,500
e144A, 6.50%, 6/01/21	France		1,000,000			969,000

FSI-14

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin Strategic Income Securities Fund	Country	Principal Amount*		Value
Corporate Bonds (continued)
Energy (continued)
CONSOL Energy Inc., senior note,
8.00%, 4/01/17	United States		1,000,000	$	1,095,000
8.25%, 4/01/20	United States		800,000		876,000
e144A, 6.375%, 3/01/21	United States		200,000		200,000
Copano Energy LLC, senior note, 7.75%, 6/01/18	United States		200,000		207,000
Crosstex Energy LP/Crosstex Energy Finance Corp., senior note, 8.875%, 2/15/18	United States		3,500,000		3,745,000
El Paso Corp.,
senior bond, 6.50%, 9/15/20	United States		2,300,000		2,524,576
senior note, 7.00%, 6/15/17	United States		1,000,000		1,135,874
Energy Transfer Equity LP, senior note, 7.50%, 10/15/20	United States		2,000,000		2,130,000
eEnergy XXI Gulf Coast Inc., senior note, 144A, 9.25%, 12/15/17	United States		2,500,000		2,668,750
iEnterprise Products Operating LLC, junior sub. note, FRN, 7.034%, 1/15/68	United States		2,000,000		2,105,246
eExpro Finance Luxembourg, senior secured note, 144A, 8.50%, 12/15/16	United Kingdom		4,000,000		3,880,000
eGaz Capital SA, senior note, 144A, 5.092%, 11/29/15	Russia		3,000,000		3,126,180
Holly Corp., senior note, 9.875%, 6/15/17	United States		1,900,000		2,128,000
Linn Energy Corp., senior note,
8.625%, 4/15/20	United States		3,000,000		3,270,000
e144A, 7.75%, 2/01/21	United States		1,000,000		1,045,000
MarkWest Energy Partners LP/Finance Corp., senior note,
6.75%, 11/01/20	United States		2,500,000		2,562,500
6.50%, 8/15/21	United States		600,000		597,000
Martin Midstream Partners LP, senior note, 8.875%, 4/01/18	United States		1,500,000		1,582,500
Offshore Group Investment Ltd., senior secured note,
11.50%, 8/01/15	United States		1,800,000		1,966,500
e144A, 11.50%, 8/01/15	United States		300,000		327,750
eOPTI Canada Inc., senior secured note, 144A,
9.00%, 12/15/12	Canada		1,500,000		1,515,000
9.75%, 8/15/13	Canada		1,200,000		1,197,000
Peabody Energy Corp., senior note, 6.50%, 9/15/20	United States		2,500,000		2,700,000
Petrohawk Energy Corp., senior note,
10.50%, 8/01/14	United States		1,500,000		1,695,000
7.25%, 8/15/18	United States		600,000		618,750
e144A, 6.25%, 6/01/19	United States		1,000,000		978,750
Petroleos de Venezuela SA, senior bond, zero cpn., 7/10/11	Venezuela		4,000,000		3,995,320
ePetroplus Finance Ltd., senior note, 144A, 6.75%, 5/01/14	Switzerland		2,100,000		2,068,500
Plains Exploration & Production Co., senior note,
7.75%, 6/15/15	United States		500,000		520,625
10.00%, 3/01/16	United States		500,000		565,000
7.625%, 6/01/18	United States		3,200,000		3,376,000
Quicksilver Resources Inc., senior note,
8.25%, 8/01/15	United States		3,500,000		3,705,625
9.125%, 8/15/19	United States		300,000		328,500
SandRidge Energy Inc., senior note,
8.75%, 1/15/20	United States		500,000		535,000
e144A, 8.00%, 6/01/18	United States		3,000,000		3,075,000
eW&T Offshore Inc., senior note, 144A, 8.50%, 6/15/19	United States		1,500,000		1,522,500
					93,899,968
Food & Staples Retailing 0.3%
Rite Aid Corp., senior secured note,
9.75%, 6/12/16	United States		2,000,000		2,217,500
8.00%, 8/15/20	United States		1,500,000		1,623,750
					3,841,250

FSI-15

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin Strategic Income Securities Fund	Country	Principal Amount*			Value
Corporate Bonds (continued)
Food, Beverage & Tobacco 1.3%
eBlue Merger Sub Inc., senior note, 144A, 7.625%, 2/15/19	United States		2,600,000		$	2,639,000
eBoparan Holdings Ltd., senior note, 144A, 9.75%, 4/30/18	United Kingdom		1,900,000	EUR		2,634,741
eCampofrio Food Group SA, senior note, 144A, 8.25%, 10/31/16	Spain		2,500,000	EUR		3,685,538
eCEDC Finance Corp. International Inc., senior secured note, 144A, 9.125%, 12/01/16	United States		1,700,000			1,559,750
eDean Foods Co., senior note, 144A, 9.75%, 12/15/18	United States		2,800,000			2,989,000
JBS USA LLC/Finance Inc., senior note, 11.625%, 5/01/14	Brazil		2,000,000			2,310,000
Pinnacle Foods Finance LLC, senior note, 9.25%, 4/01/15	United States		3,000,000			3,127,500
eRefresco Group BV, senior secured sub. bond, 144A, 7.375%, 5/15/18	Netherlands		600,000	EUR		886,209
						19,831,738
Health Care Equipment & Services 1.5%
Boston Scientific Corp., senior note, 6.00%, 1/15/20	United States		2,500,000			2,709,287
eCDRT Merger Sub Inc., senior note, 144A, 8.125%, 6/01/19	United States		1,000,000			1,002,500
Community Health Systems Inc., senior note, 8.875%, 7/15/15	United States		3,500,000			3,613,750
Coventry Health Care Inc., senior note,
6.30%, 8/15/14	United States		500,000			538,493
5.95%, 3/15/17	United States		2,000,000			2,139,300
DaVita Inc., senior note, 6.375%, 11/01/18	United States		1,000,000			1,015,000
eFresenius US Finance II, senior note, 144A, 9.00%, 7/15/15	Germany		700,000			795,375
HCA Inc.,
senior note, 6.50%, 2/15/16	United States		800,000			818,000
senior secured bond, 7.25%, 9/15/20	United States		300,000			323,625
gsenior secured note, PIK, 9.625%, 11/15/16	United States		2,000,000			2,132,500
e,jInventiv Health Inc., senior note, 144A, 10.00%, 8/15/18	United States		1,100,000			1,045,000
gUnited Surgical Partners International Inc., senior sub. note, PIK, 9.25%, 5/01/17	United States		3,000,000			3,150,000
Vanguard Health Holding Co. II LLC, senior note, 8.00%, 2/01/18	United States		2,500,000			2,593,750
Vanguard Health Systems Inc., zero cpn., 2/01/16	United States		600,000			398,250
						22,274,830
Insurance 0.1%
iMetLife Inc., junior sub. note, FRN, 6.40%, 12/15/66	United States		2,000,000			1,960,000
Materials 2.9%
eAleris International Inc., senior note, 144A, 7.625%, 2/15/18	United States		800,000			802,000
ArcelorMittal, senior note, 5.50%, 3/01/21	Luxembourg		4,000,000			3,987,860
eAtkore International Inc., senior secured note, 144A, 9.875%, 1/01/18	United States		1,200,000			1,266,000
eCemex SAB de CV, senior secured note, 144A, 9.00%, 1/11/18	Mexico		3,000,000			3,073,695
eEuramax International Inc., senior secured note, 144A, 9.50%, 4/01/16	United States		2,500,000			2,437,500
eFMG Resources August 2006 Pty. Ltd., senior note, 144A,
7.00%, 11/01/15	Australia		1,200,000			1,227,864
6.875%, 2/01/18	Australia		2,700,000			2,754,000
Huntsman International LLC, senior sub. note, 8.625%, 3/15/21	United States		500,000			546,250
eIneos Finance PLC, senior secured note, 144A, 9.25%, 5/15/15	United Kingdom		100,000	EUR		152,868
eIneos Group Holdings PLC, senior secured note, 144A, 8.50%, 2/15/16	United Kingdom		3,500,000			3,473,750
eKerling PLC, senior secured note, 144A, 10.625%, 1/28/17	United Kingdom		2,900,000	EUR		4,468,275
eKinove German Bondco GmbH, senior secured bond, 144A, 10.00%, 6/15/18	Germany		2,000,000	EUR		3,029,001
eMacDermid Inc., senior sub. note, 144A, 9.50%, 4/15/17	United States		3,400,000			3,553,000
NewPage Corp., senior secured note, 11.375%, 12/31/14	United States		4,000,000			3,750,000
Novelis Inc., senior note, 8.75%, 12/15/20	India		1,600,000			1,736,000
eReynolds Group Holdings Ltd., senior note, 144A, 8.25%, 2/15/21	New Zealand		500,000			470,000
eReynolds Group Issuer Inc./LLC/SA, senior note, 144A, 8.75%, 5/15/18	United States		4,000,000			3,950,000
Solo Cup Co., senior sub. note, 8.50%, 2/15/14	United States		1,500,000			1,406,250
Vulcan Materials Co., senior note, 7.50%, 6/15/21	United States		1,100,000			1,099,762
						43,184,075

FSI-16

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin Strategic Income Securities Fund	Country	Principal Amount*			Value
Corporate Bonds (continued)
Media 3.2%
eAMC Networks Inc., senior note, 144A, 7.75%, 7/15/21	United States		1,300,000		$	1,361,750
Cablevision Systems Corp., senior note, 8.625%, 9/15/17	United States		500,000			544,375
CCH II LLC/CCH II Capital Corp., senior note, 13.50%, 11/30/16	United States		1,500,000			1,773,750
CCO Holdings LLC/CCO Holdings Capital Corp., senior note,
8.125%, 4/30/20	United States		900,000			976,500
6.50%, 4/30/21	United States		2,500,000			2,478,125
eClear Channel Communications Inc., senior note, 144A, 9.00%, 3/01/21	United States		5,000,000			4,812,500
CSC Holdings Inc., senior deb., 7.625%, 7/15/18	United States		2,100,000			2,283,750
DIRECTV Holdings LLC/DIRECTV Financing Co. Inc., senior note, 4.60%, 2/15/21	United States		2,500,000			2,514,953
DISH DBS Corp., senior note,
7.75%, 5/31/15	United States		1,000,000			1,087,500
7.125%, 2/01/16	United States		4,000,000			4,240,000
Media General Inc., senior secured note, 11.75%, 2/15/17	United States		2,000,000			1,955,000
eMusketeer GmbH, senior secured note, 144A, 9.50%, 3/15/21	Germany		1,500,000	EUR		2,308,121
eMyriad International Holding BV, senior note, 144A, 6.375%, 7/28/17	South Africa		300,000			323,778
e,gRadio One Inc., senior sub. note, 144A, PIK, 15.00%, 5/24/16	United States		2,086,411			2,104,667
eSeat Pagine Gialle SpA, senior secured note, 144A, 10.50%, 1/31/17	Italy		2,600,000	EUR		3,416,464
Time Warner Inc.,
7.625%, 4/15/31	United States		2,500,000			3,007,705
6.10%, 7/15/40	United States		1,000,000			1,020,033
eUnivision Communications Inc., senior secured note, 144A,
6.875%, 5/15/19	United States		400,000			398,000
7.875%, 11/01/20	United States		2,000,000			2,060,000
eUPCB Finance Ltd., senior secured note, 144A, 6.375%, 7/01/20	Cayman Islands		2,000,000	EUR		2,746,584
WMG Acquisition Corp., senior secured note, 9.50%, 6/15/16	United States		2,500,000			2,650,000
eZiggo Bond Co., senior bond, 144A, 8.00%, 5/15/18	Netherlands		2,500,000	EUR		3,755,689
						47,819,244
Pharmaceuticals, Biotechnology & Life Sciences 0.4%
eEndo Pharmaceuticals Holdings Inc., senior note, 144A, 7.00%, 7/15/19	United States		900,000			927,000
eGiant Funding Corp., senior note, 144A, 8.25%, 2/01/18	Spain		1,500,000			1,541,250
eMylan Inc., senior note, 144A, 7.875%, 7/15/20	United States		3,500,000			3,858,750
						6,327,000
Real Estate 0.2%
Forest City Enterprises Inc., senior note, 7.625%, 6/01/15	United States		3,100,000			3,053,500
Retailing 0.8%
e,iEdcon Pty. Ltd., senior secured note, 144A, FRN, 4.721%, 6/15/14	South Africa		3,000,000	EUR		3,842,557
eMatalan Finance Ltd., senior secured note, 144A, 8.875%, 4/29/16	United Kingdom		2,000,000	GBP		3,065,567
eMichaels Stores Inc., senior note, 144A, 7.75%, 11/01/18	United States		4,000,000			4,030,000
ePetco Animal Supplies Inc., senior note, 144A, 9.25%, 12/01/18	United States		1,400,000			1,494,500
						12,432,624
Semiconductors & Semiconductor Equipment 0.7%
Advanced Micro Devices Inc., senior note,
8.125%, 12/15/17	United States		800,000			840,000
7.75%, 8/01/20	United States		2,000,000			2,070,000
Freescale Semiconductor Inc., senior note, 8.875%, 12/15/14	United States		2,000,000			2,095,000
senior note, 10.125%, 12/15/16	United States		100,000			108,125
esenior note, 144A, 8.05%, 2/01/20	United States		1,600,000			1,616,000
esenior note, 144A, 10.75%, 8/01/20	United States		2,000,000			2,270,000
esenior secured note, 144A, 9.25%, 4/15/18	United States		100,000			108,250

FSI-17

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin Strategic Income Securities Fund	Country	Principal Amount*			Value
Corporate Bonds (continued)
Semiconductors & Semiconductor Equipment (continued)
eNXP BV/NXP Funding LLC, senior secured note, 144A, 9.75%, 8/01/18	Netherlands		1,700,000		$	1,906,125
						11,013,500
Software & Services 0.4%
Sitel LLC/Finance Corp., senior note, 11.50%, 4/01/18	United States		2,500,000			2,300,000
SunGard Data Systems Inc.,
senior note, 7.625%, 11/15/20	United States		2,500,000			2,537,500
senior sub. note, 10.25%, 8/15/15	United States		800,000			830,000
						5,667,500
Technology Hardware & Equipment 0.4%
eCDW Escrow Corp., senior note, 144A, 8.50%, 4/01/19	United States		3,500,000			3,447,500
eCommScope Inc., senior note, 144A, 8.25%, 1/15/19	United States		2,500,000			2,587,500
						6,035,000
Telecommunication Services 2.5%
CenturyLink Inc., senior note, 6.45%, 6/15/21	United States		1,000,000			989,714
Centurytel Inc., senior note, 6.00%, 4/01/17	United States		3,000,000			3,132,090
Cricket Communications Inc., senior note, 7.75%, 10/15/20	United States		4,000,000			3,930,000
Crown Castle International Corp., senior bond, 7.125%, 11/01/19	United States		200,000			211,500
eDigicel Group Ltd., senior note, 144A,
8.875%, 1/15/15	Jamaica		3,000,000			3,082,500
8.25%, 9/01/17	Jamaica		300,000			312,750
eeAccess Ltd., senior note, 144A, 8.25%, 4/01/18	Japan		1,800,000			1,823,625
eEH Holding Corp., senior note, 144A, 7.625%, 6/15/21	United States		800,000			820,000
Frontier Communications Corp., senior note,
8.50%, 4/15/20	United States		3,000,000			3,285,000
8.75%, 4/15/22	United States		1,400,000			1,533,000
eIntegra Telecom Inc., senior secured note, 144A, 10.75%, 4/15/16	United States		2,700,000			2,733,750
Intelsat Jackson Holding SA, senior note,
11.25%, 6/15/16	Luxembourg		2,500,000			2,656,250
e144A, 7.50%, 4/01/21	Luxembourg		1,500,000			1,494,375
MetroPCS Wireless Inc., senior note, 7.875%, 9/01/18	United States		2,000,000			2,127,500
Sprint Nextel Corp., senior note, 8.375%, 8/15/17	United States		4,000,000			4,415,000
eWest Corp., senior note, 144A, 7.875%, 1/15/19	United States		4,000,000			3,890,000
e,gWind Acquisition Holdings Finance SA, senior secured note, 144A, PIK, 12.25%, 7/15/17	Italy		603,365	EUR		959,277
						37,396,331
Transportation 0.5%
eAmerican Airlines Inc., senior secured note, 144A, 7.50%, 3/15/16	United States		3,700,000			3,644,500
eCeva Group PLC, senior secured note, 144A,
11.625%, 10/01/16	United Kingdom		300,000			327,750
8.375%, 12/01/17	United Kingdom		500,000			508,125
11.50%, 4/01/18	United Kingdom		2,900,000			3,066,750
						7,547,125
Utilities 1.4%
eAES Corp., senior note, 144A, 7.375%, 7/01/21	United States		1,200,000			1,219,500
eCalpine Corp., senior secured note, 144A,
7.875%, 7/31/20	United States		1,100,000			1,155,000
7.50%, 2/15/21	United States		2,500,000			2,562,500
7.875%, 1/15/23	United States		500,000			515,625
CMS Energy Corp., senior note, 8.75%, 6/15/19	United States		2,000,000			2,449,980

FSI-18

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin Strategic Income Securities Fund	Country	Principal Amount*			Value
Corporate Bonds (continued)
Utilities (continued)
eInfinis PLC, senior note, 144A, 9.125%, 12/15/14	United Kingdom		600,000	GBP	$	1,005,670
eIntergen NV, senior secured note, 144A, 9.00%, 6/30/17	Netherlands		3,500,000			3,718,750
eKinder Morgan Finance Co. LLC, senior secured note, 144A, 6.00%, 1/15/18	United States		2,500,000			2,606,250
eTexas Competitive Electric Holdings Co. LLC/Texas Competitive Electric Holdings Finance Inc., senior secured note, 144A, 11.50%, 10/01/20	United States		2,500,000			2,468,750
secured note, B, 144A, 15.00%, 4/01/21	United States		2,130,000			1,757,250
Texas Competitive Electric Holdings Co. LLC, senior note, A, 10.25%, 11/01/15	United States		1,500,000			915,000
						20,374,275
Total Corporate Bonds (Cost $487,911,402)						511,882,201
i,kSenior Floating Rate Interests 15.8%
Automobiles & Components 0.6%
Federal-Mogul Corp.,
Term Loan B, 2.128%, 12/27/14	United States		6,800,467			6,450,726
Term Loan C, 2.128%, 12/27/15	United States		1,733,398			1,644,251
Key Safety Systems Inc., Term Loan B, 2.435% - 2.436%, 3/10/14	United States		1,604,349			1,505,079
						9,600,056
Capital Goods 1.2%
jGoodman Global Inc., Initial Term Loan, 5.75%, 10/28/16	United States		2,941,324			2,955,819
RBS Global Inc. (Rexnord),
Incremental Tranche B-2, 2.438%, 7/22/13	United States		2,296,797			2,276,700
Tranche B-1 Term B Loan, 2.688% - 2.813%, 7/22/13	United States		4,561,406			4,527,196
Sensus USA Inc., Second Lien Term Loan, 8.50%, 5/09/18	United States		1,026,077			1,045,957
Tomkins LLC and Tomkins Inc., Term B-1 Loan, 4.25%, 9/29/16	Netherlands		2,037,787			2,040,510
TransDigm Inc., Term Loan B, 4.00%, 2/14/17	United States		4,479,462			4,500,811
						17,346,993
Commercial & Professional Services 1.1%
ARAMARK Corp.,
jExtended Synthetic L/C, 3.286%, 7/26/16	United States		182,628			182,009
Synthetic L/C, 1.911%, 1/26/14	United States		91,726			89,891
Term Loan B, 2.121%, 1/26/14	United States		1,138,629			1,115,857
jTerm Loan B Extended, 3.496%, 7/26/16	United States		2,775,382			2,765,965
Brock Holdings III Inc., Second Lien Term Loan, 10.00%, 3/16/18	United States		2,047,000			2,098,052
jDiversey Inc., Tranche B Dollar Term Loan, 4.00%, 11/24/15	United States		2,832,988			2,836,530
bEnviroSolutions Real Property Holdings Inc., Second Lien Term Loan, 8.00%, 7/29/14	United States		670,585			674,642
Interactive Data Corp., Term B Loans, 4.75%, 2/11/18	United States		3,233,033			3,239,852
jKAR Auction Services Inc., Term Loan, 5.00%, 5/19/17	United States		3,318,318			3,331,279
						16,334,077
Consumer Durables & Apparel 0.0%†
b,gSleep Innovations Inc., Term Loan, PIK, 11.50%, 3/05/15	United States		718,566			718,566
Consumer Services 1.9%
jAmeristar Casinos Inc., B Term Loan, 4.00%, 4/14/18	United States		2,616,048			2,628,220
Burger King Holdings Inc., Tranche B Term Loan, 4.50%, 10/19/16	United States		8,234,343			8,224,758
DineEquity Inc., Term B-1 Loan, 4.25%, 10/19/17	United States		1,648,454			1,650,957
jPenn National Gaming Inc., Term B Facility Loan, 5.00%, 7/14/18	United States		732,800			735,314
Revel AC Inc., Tranche B Term Loan, 9.00%, 2/17/17	United States		1,407,936			1,330,499
d,gTurtle Bay Holdings LLC,
Term Loan A, PIK, 10.25%, 3/01/13	United States		1,960,891			1,941,282
Term Loan B, PIK, 3.00%, 2/09/15	United States		3,983,237			3,345,919
Visant Corp., Term Loan B, 5.25%, 12/22/16	United States		8,915,200			8,912,419
						28,769,368

FSI-19

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin Strategic Income Securities Fund	Country	Principal Amount*		Value
i,kSenior Floating Rate Interests (continued)
Diversified Financials 0.6%
jAsurion LLC, Second Lien Term Loan, 9.00%, 5/24/19	United States		2,814,806	$	2,832,837
MoneyGram Payment Systems Worldwide Inc., Term Loan, 4.50% - 5.50%, 11/18/17	United States		1,016,429		1,018,653
MSCI Inc., Term Loan B, 3.75%, 3/09/17	United States		2,596,739		2,614,052
TransUnion LLC, Term Loan, 4.75%, 2/10/18	United States		2,771,250		2,779,910
					9,245,452
Food & Staples Retailing 0.5%
SUPERVALU Inc., Term Loan B-2, 3.436%, 10/05/15	United States		6,953,446		6,858,233
Food, Beverage & Tobacco 0.5%
Dean Foods Co., 2016 Tranche B Term Loan, 3.50%, 4/02/16	United States		2,158,987		2,114,907
jDel Monte Foods Co., Initial Term Loan, 4.50%, 3/08/18	United States		5,092,088		5,086,517
					7,201,424
Health Care Equipment & Services 2.3%
Bausch & Lomb Inc.,
Delayed Draw Term Loan, 3.436%, 4/28/15	United States		1,283,716		1,277,619
Parent Term Loan, 3.436% - 3.496%, 4/28/15	United States		5,273,769		5,248,718
Community Health Systems Inc.,
Delayed Draw Term Loan, 2.504%, 7/25/14	United States		161,853		156,683
Extended Term Loan, 3.754%, 1/25/17	United States		5,377,169		5,256,166
Term Loan, 2.504%, 7/25/14	United States		3,147,054		3,046,537
DaVita Inc., Tranche B Term Loan, 4.50%, 10/20/16	United States		4,143,929		4,160,949
jHCA Inc., Tranche B-2 Term Loan, 3.496%, 3/31/17	United States		7,779,253		7,684,424
Universal Health Services Inc., New Tranche B Term Loan, 4.00%, 11/15/16	United States		7,420,587		7,449,445
					34,280,541
Materials 1.9%
American Rock Salt Co. LLC, Initial Loan, 5.50%, 4/25/17	United States		2,861,872		2,867,834
Anchor Glass Container Corp., Second Lien Term Loan, 10.00%, 9/02/16	United States		5,813,900		5,937,445
Celanese U.S. Holdings LLC, Term Loan C, 3.303%, 10/31/16	United States		1,782,946		1,792,351
Consolidated Container Co. LLC, Second Lien Term Loan, 5.688%, 9/28/14	United States		1,933,702		1,764,503
Graham Packaging Co. LP, Term Loan C, 6.75%, 4/05/14	United States		1,351,466		1,357,187
Nalco Co.,
Term Loan B-1, 4.50%, 10/05/17	United States		4,925,043		4,955,440
Term Loan C-1, 1.996%, 5/13/16	United States		589,354		586,407
Potters Industries Inc., Second Lien Term Loan, 10.25%, 11/06/17	United States		225,533		232,299
Reynolds Group Holdings Inc., U.S. Term Loan, 4.25%, 2/09/18	United States		2,100,580		2,091,974
Rockwood Specialties Group Inc., Term Loan, 3.75%, 2/10/18	United States		4,258,220		4,286,733
Walter Energy Inc., B Term Loan, 4.00%, 4/01/18	United States		2,077,775		2,082,099
					27,954,272
Media 2.3%
Cinemark USA Inc., Extended Term Loan, 3.44% - 3.52%, 4/30/16	United States		2,488,860		2,501,519
Clear Channel Communications Inc., jTranche A Term Loan, 5.65%, 5/13/14	United States		1,693,252		1,527,252
Tranche B Term Loan, 3.836%, 1/29/16	United States		5,477,638		4,631,173
CSC Holdings Inc. (Cablevision), Incremental Term Loan B-2, 1.936%, 3/29/16	United States		6,308,304		6,300,091
Hubbard Radio LLC, Second Lien Term Loan, 8.75%, 4/29/18	United States		798,716		813,691
R.H. Donnelley Inc., Term Loan B, 9.00%, 10/24/14	United States		6,543,376		4,523,108
Regal Cinemas Corp., Term Loan, 3.496%, 8/23/17	United States		2,113,686		2,115,762
Summit Entertainment LLC, Term Loan, 7.50%, 9/07/16	United States		6,043,044		6,001,498
jTWCC Holding Corp., Term Loan, 4.25%, 2/11/17	United States		2,123,301		2,134,583

FSI-20

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin Strategic Income Securities Fund	Country	Principal Amount*			Value
i,kSenior Floating Rate Interests (continued)
Media (continued)
Univision Communications Inc., Extended First Lien Term Loan, 4.436%, 3/31/17	United States		2,141,315		$	2,038,386
UPC Financing Partnership, Term Loan T, 3.691%, 12/31/16	Netherlands		1,491,092			1,492,491
						34,079,554
Pharmaceuticals, Biotechnology & Life Sciences 0.4%
Warner Chilcott Co. LLC, Term B-2 Loan, 4.25%, 3/15/18	Puerto Rico		1,185,925			1,187,870
Warner Chilcott Corp., Term B-1 Loan, 4.25%, 3/15/18	United States		2,371,850			2,375,740
WC Luxco S.A.R.L., Term B-3 Loan, 4.25%, 3/15/18	Luxembourg		1,630,647			1,633,322
						5,196,932
Retailing 0.2%
Dollar General Corp., Tranche B-1 Term Loan, 2.936% - 3.023%, 7/07/14	United States		2,725,120			2,729,592
Software & Services 1.1%
AVG Technologies NV, Term Loan, 7.50%, 3/15/16	Netherlands		6,763,438			6,563,240
Fidelity National Information Services Inc., Term Loan B, 5.25%, 7/18/16	United States		2,068,602			2,078,198
First Data Corp.,
Term Loan B-1, 2.936%, 9/24/14	United States		3,687,802			3,422,741
Term Loan B-2, 2.936%, 9/24/14	United States		328,445			304,838
Term Loan B-3, 2.936%, 9/24/14	United States		328,445			304,838
SunGard Data Systems Inc., Tranche B U.S. Term Loan, 3.845% - 3.893%, 2/28/16	United States		2,219,034			2,217,638
Vertafore Inc., Second Lien Term Loan, 9.75%, 10/27/17	United States		1,832,000			1,868,640
						16,760,133
Telecommunication Services 0.7%
Intelsat Jackson Holdings SA, Tranche B Term Loan, 5.25%, 4/02/18	Luxembourg		8,278,733			8,316,674
jSBA Senior Finance II LLC, Term Loan B, 5.00%, 6/30/18	United States		1,343,000			1,346,358
						9,663,032
Transportation 0.5%
Evergreen International Aviation Inc., Term Loan, 12.25%, 6/30/15	United States		1,190,000			1,206,101
Hertz Corp.,
Credit Linked Deposit, 3.75%, 3/11/18	United States		1,736,300			1,710,186
Tranche B Term Loan, 3.75%, 3/11/18	United States		3,900,225			3,886,207
						6,802,494
Total Senior Floating Rate Interests (Cost $231,353,665)						233,540,719
Foreign Government and Agency Securities 20.3%
eArab Republic of Egypt, 144A, 5.75%, 4/29/20	Egypt		3,560,000			3,583,122
The Export-Import Bank of Korea, senior note, 8.125%, 1/21/14	South Korea		2,770,000			3,179,572
i,lGovernment of Argentina, senior bond, FRN, 0.467%, 8/03/12	Argentina		30,000,000			7,348,500
Government of Australia, senior bond, 123, 5.75%, 4/15/12	Australia		20,350,000	AUD		21,997,839
Government of Hungary,
5.50%, 2/12/14	Hungary		1,119,700,000	HUF		5,959,851
5.50%, 2/12/16	Hungary		1,769,700,000	HUF		9,116,342
6.50%, 6/24/19	Hungary		206,000,000	HUF		1,074,468
7.50%, 11/12/20	Hungary		312,600,000	HUF		1,729,922
senior note, 6.25%, 1/29/20	Hungary		6,230,000			6,590,032
Government of Indonesia,
FR19, 14.25%, 6/15/13	Indonesia		35,480,000,000	IDR		4,759,589
FR20, 14.275%, 12/15/13	Indonesia		23,637,000,000	IDR		3,260,963
FR26, 11.00%, 10/15/14	Indonesia		1,800,000,000	IDR		238,045

FSI-21

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin Strategic Income Securities Fund	Country	Principal Amount*			Value
Foreign Government and Agency Securities (continued)
Government of Indonesia (continued)
FR34, 12.80%, 6/15/21	Indonesia		49,955,000,000	IDR	$	7,902,691
FR42, 10.25%, 7/15/27	Indonesia		2,000,000,000	IDR		269,230
FR44, 10.00%, 9/15/24	Indonesia		23,400,000,000	IDR		3,117,004
Government of Malaysia, senior bond,
3.833%, 9/28/11	Malaysia		31,790,000	MYR		10,567,114
2.711%, 2/14/12	Malaysia		490,000	MYR		162,417
3.718%, 6/15/12	Malaysia		12,650,000	MYR		4,224,371
2.509%, 8/27/12	Malaysia		18,275,000	MYR		6,025,357
3.461%, 7/31/13	Malaysia		6,400,000	MYR		2,132,931
3.814%, 2/15/17	Malaysia		11,400,000	MYR		3,812,788
4.24%, 2/07/18	Malaysia		600,000	MYR		204,499
Government of Mexico,
M, 9.00%, 6/20/13	Mexico		259,800	m MXN		2,375,969
M 10, 8.00%, 12/17/15	Mexico		350,000	m MXN		3,208,858
MI10, 8.00%, 12/19/13	Mexico		1,177,700	m MXN		10,660,656
Government of Poland,
4.75%, 4/25/12	Poland		44,240,000	PLN		16,140,979
6.25%, 10/24/15	Poland		9,100,000	PLN		3,450,117
5.75%, 4/25/14 - 9/23/22	Poland		12,310,000	PLN		4,534,336
senior note, 6.375%, 7/15/19	Poland		4,000,000			4,567,660
Strip, 1/25/13	Poland		1,330,000	PLN		450,746
eGovernment of Russia, 144A, 7.50%, 3/31/30	Russia		5,398,465			6,362,496
Government of Sri Lanka,
A, 12.00%, 7/15/11	Sri Lanka		14,460,000	LKR		132,305
A, 6.90%, 8/01/12	Sri Lanka		1,900,000	LKR		17,245
A, 8.50%, 1/15/13	Sri Lanka		50,900,000	LKR		470,289
A, 13.50%, 2/01/13	Sri Lanka		59,500,000	LKR		589,283
A, 7.00%, 3/01/14	Sri Lanka		7,020,000	LKR		62,263
A, 11.25%, 7/15/14	Sri Lanka		176,100,000	LKR		1,733,704
A, 11.75%, 3/15/15	Sri Lanka		1,160,000	LKR		11,587
A, 6.50%, 7/15/15	Sri Lanka		14,920,000	LKR		126,104
A, 11.00%, 8/01/15	Sri Lanka		200,400,000	LKR		1,965,425
B, 6.60%, 6/01/14	Sri Lanka		7,100,000	LKR		62,047
Government of Sweden, 5.50%, 10/08/12	Sweden		95,865,000	SEK		15,788,313
Government of the Philippines, senior bond,
5.75%, 2/21/12	Philippines		19,830,000	PHP		463,832
5.25%, 1/07/13	Philippines		34,600,000	PHP		806,911
8.75%, 3/03/13	Philippines		55,690,000	PHP		1,370,456
eGovernment of Ukraine, 144A, 7.75%, 9/23/20	Ukraine		4,000,000			4,152,960
Government of Venezuela, 10.75%, 9/19/13	Venezuela		5,500,000			5,487,625
eGovernment of Vietnam, 144A, 6.75%, 1/29/20	Vietnam		4,500,000			4,699,688
Korea Treasury Bond,
4.75%, 12/10/11	South Korea		18,681,350,000	KRW		17,612,965
5.25%, 9/10/12 - 3/10/13	South Korea		3,196,570,000	KRW		3,054,730
senior bond, 4.00%, 6/10/12	South Korea		31,013,880,000	KRW		29,186,616
senior bond, 4.25%, 12/10/12	South Korea		3,560,000,000	KRW		3,365,356
senior bond, 3.75%, 6/10/13	South Korea		393,000,000	KRW		368,652
jsenior bond, 3.00%, 12/10/13	South Korea		2,110,200,000	KRW		1,942,639
New South Wales Treasury Corp.,
6.00%, 5/01/12	Australia		280,000	AUD		303,110
5.50%, 8/01/13	Australia		860,000	AUD		931,797
senior note, 5.50%, 3/01/17	Australia		3,540,000	AUD		3,836,324

FSI-22

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin Strategic Income Securities Fund	Country	Principal Amount*			Value
Foreign Government and Agency Securities (continued)
Nota Do Tesouro Nacional,
10.00%, 1/01/12	Brazil		6,910	n BRL	$	4,373,882
10.00%, 1/01/14	Brazil		2,700	n BRL		1,634,336
10.00%, 1/01/17	Brazil		7,400	n BRL		4,289,633
oIndex Linked, 6.00%, 5/15/15	Brazil		3,890	n BRL		5,001,555
Queensland Treasury Corp.,
6.00%, 8/14/13	Australia		600,000	AUD		657,841
6.00%, 9/14/17	Australia		1,200,000	AUD		1,334,564
senior note, 6.00%, 8/21/13	Australia		2,705,000	AUD		2,955,355
United Kingdom Treasury Bond, 5.00%, 3/07/12	United Kingdom		6,979,000	GBP		11,535,517
Western Australia Treasury Corp.,
5.50%, 7/17/12	Australia		9,065,000	AUD		9,782,744
8.00%, 6/15/13	Australia		1,000,000	AUD		1,133,028
Total Foreign Government and Agency Securities (Cost $267,242,138)						300,249,145
U.S. Government and Agency Securities 1.3%
U.S. Treasury Bond,
4.50%, 2/15/16 - 5/15/17	United States		4,000,000			4,526,016
7.875%, 2/15/21	United States		2,600,000			3,644,469
7.125%, 2/15/23	United States		1,980,000			2,680,116
U.S. Treasury Note,
2.375%, 3/31/16	United States		4,800,000			4,963,877
4.625%, 2/15/17	United States		600,000			684,094
4.75%, 8/15/17	United States		2,900,000			3,333,640
Total U.S. Government and Agency Securities (Cost $18,597,408)						19,832,212
Asset-Backed Securities and Commercial Mortgage-Backed Securities 3.4%
Banks 1.4%
e,iBanc of America Large Loan, 2010-HLTN, 144A, FRN, 1.937%, 11/15/15	United States		4,388,941			4,076,507
Countrywide Asset-Backed Certificates, 2005-11, AF4, 5.21%, 3/25/34	United States		1,275,000			754,219
iGS Mortgage Securities Corp. II, 2006-GG6, A4, FRN, 5.553%, 4/10/38	United States		2,405,000			2,616,418
iHomebanc Mortgage Trust, 2005-4, A1, FRN, 0.456%, 10/25/35	United States		2,191,348			1,608,319
e,iWachovia Bank Commercial Mortgage Trust, 2007-WHL8, A1, 144A, FRN, 0.267%, 6/15/20	United States		6,654,404			6,034,247
Wells Fargo Mortgage Backed Securities Trust, i2004-W, A9, FRN, 2.762%, 11/25/34	United States		2,312,053			2,245,248
2007-3, 3A1, 5.50%, 4/25/37	United States		3,348,910			3,488,571
						20,823,529
Diversified Financials 2.0%
e,iARES CLO Funds, 2007-12A, B, 144A, FRN, 1.257%, 11/25/20	Cayman Islands		1,380,000			1,181,314
e,iArmstrong Loan Funding Ltd., 2008-1A, B, 144A, FRN, 1.273%, 8/01/16	Cayman Islands		5,361,142			5,182,992
e,iCent CDO Ltd., 2007-15A, A2B, 144A, FRN, 0.59%, 3/11/21	Cayman Islands		1,251,000			1,076,354
Citigroup Commercial Mortgage Trust, e,i144A, FRN, 0.257%, 4/15/22	United States		475,099			465,140
i2007-C6, AM, FRN, 5.698%, 6/10/17	United States		1,700,000			1,676,891
2008-C7, A4, 6.099%, 12/10/49	United States		8,700,000			9,646,398
iCitigroup/Deutsche Bank Commercial Mortgage Trust, 2005-CD1, AJ, FRN, 5.22%, 10/15/15	United States		1,150,000			1,086,761
e,iColumbus Nova CLO Ltd., 2007-2A, A2, 144A, FRN, 1.278%, 10/15/21	Cayman Islands		860,000			786,578
e,iCommercial Industrial Finance Corp., 2007-3A, A1J, 144A, FRN, 0.674%, 7/26/21	Cayman Islands		960,000			884,371

FSI-23

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin Strategic Income Securities Fund	Country	Principal Amount*		Value
Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued)
Diversified Financials (continued)
e,iCredit Suisse Mortgage Capital Certificates, 2006-TF2A, A2, 144A, FRN, 0.357%, 10/15/21	United States		756,195	$	713,445
e,iGleneagles CLO Ltd., 2005-1A, 144A, FRN, 0.673%, 11/01/17	Cayman Islands		1,000,000		855,030
JPMorgan Chase Commercial Mortgage Securities Corp., 2005-LDP2, AM, 4.78%, 7/15/42	United States		775,000		779,953
e,iMAPS CLO Fund LLC, 2005-1A, B, 144A, FRN, 0.747%, 12/21/17	United States		1,400,000		1,289,645
Residential Asset Securities Corp., 2004-KS1, AI4, 4.213%, 4/25/32	United States		71,205		70,483
e,iWestchester CLO Ltd., 2007-1A, A1A, 144A, FRN, 0.498%, 8/01/22	Cayman Islands		4,729,178		4,394,589
					30,089,944
Total Asset-Backed Securities and Commercial Mortgage-Backed Securities (Cost $48,167,449)					50,913,473
Mortgage-Backed Securities 6.2%
iFederal Home Loan Mortgage Corp. (FHLMC) Adjustable Rate 0.0%†
FHLMC, 2.473%, 1/01/33	United States		90,356		94,737
Federal Home Loan Mortgage Corp. (FHLMC) Fixed Rate 2.3%
FHLMC Gold 15 Year, 4.50%, 10/01/18 - 6/01/19	United States		1,314,981		1,402,220
FHLMC Gold 15 Year, 5.00%, 12/01/17 - 9/01/19	United States		1,538,348		1,663,330
FHLMC Gold 15 Year, 5.50%, 7/01/17 - 7/01/19	United States		392,949		426,352
FHLMC Gold 15 Year, 6.00%, 5/01/17	United States		15,127		16,561
FHLMC Gold 15 Year, 6.50%, 5/01/16	United States		5,001		5,400
FHLMC Gold 30 Year, 4.50%, 9/01/40 - 5/01/41	United States		9,555,328		9,888,449
FHLMC Gold 30 Year, 5.00%, 4/01/34 - 5/01/41	United States		10,422,486		11,090,875
FHLMC Gold 30 Year, 5.50%, 3/01/33 - 6/01/36	United States		4,118,645		4,483,740
FHLMC Gold 30 Year, 6.00%, 4/01/33 - 6/01/37	United States		4,029,265		4,447,298
FHLMC Gold 30 Year, 6.50%, 12/01/23 - 6/01/36	United States		286,643		324,609
FHLMC Gold 30 Year, 7.00%, 9/01/21 - 4/01/30	United States		71,066		82,529
FHLMC Gold 30 Year, 7.50%, 3/01/30 - 7/01/31	United States		2,103		2,460
					33,833,823
iFederal National Mortgage Association (FNMA) Adjustable Rate 0.0%†
FNMA, 2.441%, 12/01/34	United States		342,428		357,903
FNMA, 2.491%, 4/01/20	United States		64,925		65,719
					423,622
Federal National Mortgage Association (FNMA) Fixed Rate 3.6%
FNMA 15 Year, 4.50%, 6/01/19 - 3/01/20	United States		340,510		364,338
FNMA 15 Year, 5.00%, 10/01/17 - 6/01/18	United States		348,637		376,912
FNMA 15 Year, 5.50%, 11/01/13 - 11/01/18	United States		3,593,073		3,883,352
FNMA 15 Year, 6.00%, 4/01/16 - 7/01/16	United States		6,215		6,796
FNMA 15 Year, 7.00%, 5/01/12	United States		236		240
FNMA 30 Year, 4.50%, 4/01/39 - 5/01/41	United States		14,540,235		15,071,710
FNMA 30 Year, 5.00%, 4/01/34 - 11/01/40	United States		18,112,051		19,302,112
FNMA 30 Year, 5.50%, 8/01/33 - 9/01/35	United States		2,342,377		2,549,413
FNMA 30 Year, 6.00%, 6/01/34 - 5/01/38	United States		9,091,708		10,021,344
FNMA 30 Year, 6.50%, 6/01/28 - 10/01/37	United States		1,639,951		1,860,817
					53,437,034
Government National Mortgage Association (GNMA) Fixed Rate 0.3%
GNMA I SF 30 Year, 5.00%, 11/15/33 - 7/15/34	United States		1,110,658		1,211,106
GNMA I SF 30 Year, 5.50%, 12/15/32 - 6/15/36	United States		1,174,550		1,300,133
GNMA I SF 30 Year, 6.50%, 11/15/31 - 2/15/32	United States		6,776		7,732

FSI-24

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin Strategic Income Securities Fund	Country	Principal Amount*		Value
Mortgage-Backed Securities (continued)
Government National Mortgage Association (GNMA) Fixed Rate (continued)
GNMA I SF 30 Year, 7.00%, 10/15/28 - 6/15/32	United States		96,923	$	113,064
GNMA I SF 30 Year, 7.50%, 9/15/30	United States		2,010		2,367
GNMA II SF 30 Year, 5.00%, 9/20/33 - 11/20/33	United States		313,942		343,260
GNMA II SF 30 Year, 6.00%, 11/20/34	United States		346,208		384,760
GNMA II SF 30 Year, 6.50%, 4/20/31 - 2/20/34	United States		130,943		148,353
GNMA II SF 30 Year, 7.50%, 1/20/28 - 4/20/32	United States		32,800		38,530
					3,549,305
Total Mortgage-Backed Securities (Cost $88,354,987)					91,338,521
Municipal Bonds 5.6%
Bay Area Toll Authority Toll Bridge Revenue, Build America Bonds, Series S1, 7.043%, 4/01/50	United States		6,100,000		6,685,112
California State GO,
7.625%, 3/01/40	United States		2,400,000		2,765,304
5.25%, 11/01/40	United States		560,000		552,530
Refunding, 5.00%, 4/01/38	United States		10,000,000		9,614,400
Various Purpose, 6.00%, 4/01/38	United States		3,500,000		3,717,350
Various Purpose, 6.00%, 11/01/39	United States		160,000		170,432
Various Purpose, Refunding, 5.25%, 3/01/38	United States		2,335,000		2,311,697
Various Purpose, Refunding, NATL Insured, 4.50%, 12/01/32	United States		300,000		268,017
Various Purpose, Refunding, Series 1, AGMC Insured, 4.75%, 9/01/31	United States		290,000		280,842
California State Public Works Board Lease Revenue, Various Capital Projects, Series I, 6.125%, 11/01/29	United States		1,405,000		1,485,914
Chicago Waterworks Revenue, second lien, Refunding, 5.25%, 11/01/38	United States		1,895,000		1,900,552
Clovis USD, GO, Capital Appreciation, Election of 2004, Series A, NATL RE, FGIC Insured, zero cpn.,
8/01/25	United States		2,500,000		1,089,525
8/01/26	United States		1,290,000		525,907
8/01/27	United States		1,720,000		657,986
8/01/29	United States		1,720,000		567,669
Cook County GO, Build America Bonds, Series D, 6.229%, 11/15/34	United States		3,200,000		3,222,880
Detroit School District GO, Qualified School Construction Bonds, 6.645%, 5/01/29	United States		8,000,000		8,078,240
Illinois State GO,
5.877%, 3/01/19	United States		3,575,000		3,678,210
Build America Bonds, 7.35%, 7/01/35	United States		4,600,000		4,895,412
Metropolitan Water District of Southern California Waterworks Revenue, Authorization, Series C, 4.75%, 7/01/36	United States		1,790,000		1,797,088
eNew York City IDA, 144A, 11.00%, 3/01/29	United States		600,000		754,746
New York City Municipal Water Finance Authority Water and Sewer System Revenue, Second General Resolution, Build America Bonds, Series CC, 6.282%, 6/15/42	United States		4,500,000		4,635,990
New York City Transitional Finance Authority Revenue, sub. bond, Future Tax Secured, Series C, 5.00%, 11/01/39	United States		7,000,000		7,188,440
Poway USD, GO, Election of 2008, ID No. 2007-1, Series A, zero cpn.,
8/01/27	United States		370,000		139,353
8/01/30	United States		370,000		110,885
8/01/32	United States		460,000		116,633
8/01/33	United States		245,000		57,215
Puerto Rico Commonwealth GO, Public Improvement, Refunding, Series C, 5.75%, 7/01/36	United States		900,000		885,924
Puerto Rico Sales Tax FICO Sales Tax Revenue, first sub., Series A, 5.50%, 8/01/42	United States		6,180,000		6,188,096
Redondo Beach USD, GO, Build America Bonds, Election of 2008, Direct Payment to District, Series D, 6.461%, 8/01/40	United States		1,510,000		1,510,015
Salt River Project Agricultural Improvement and Power District Electric System Revenue, Series A, 5.00%, 1/01/38	United States		1,990,000		2,031,949

FSI-25

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin Strategic Income Securities Fund	Country	Principal Amount*			Value
Municipal Bonds (continued)
San Francisco City and County GO, Build America Bonds,
5.75%, 6/15/27	United States		1,700,000		$	1,768,612
5.93%, 6/15/28	United States		1,520,000			1,589,206
San Mateo County Community College District GO, Election of 2001, Series C, NATL Insured, zero cpn.,
9/01/30	United States		895,000			303,888
3/01/31	United States		245,000			78,011
Sonoma County Pension Obligation Revenue, Series A, 6.00%, 12/01/29	United States		2,100,000			2,030,427
Total Municipal Bonds (Cost $80,022,651)						83,654,457
Total Investments before Short Term Investments (Cost $1,237,197,559)						1,304,283,326
Short Term Investments 12.2%
Foreign Government and Agency Securities 6.9%
pBank of Negara Monetary Note, 7/19/11 - 3/29/12	Malaysia		35,120,000	MYR		11,479,252
pEgypt Treasury Bills, 7/12/11 - 2/21/12	Egypt		102,975,000	EGP		16,727,184
Government of Israel, 4.00%, 3/30/12	Israel		3,315,000	ILS		977,616
pSweden Treasury Bills, 9/21/11	Sweden		70,190,000	SEK		11,053,825
pIsrael Treasury Bills, 7/06/11 - 5/02/12	Israel		65,505,300	ILS		18,877,755
pMalaysia Treasury Bills, 7/08/11 - 3/23/12	Malaysia		2,080,000	MYR		680,715
pNorway Treasury Bills,
12/21/11	Norway		32,480,000	NOK		5,952,439
3/21/12	Norway		114,510,000	NOK		20,877,689
pPhilippine Treasury Bills, 7/13/11 - 1/11/12	Philippines		18,290,000	PHP		418,153
pSri Lanka Treasury Bills, 7/08/11 - 2/17/12	Sri Lanka		26,620,000	LKR		235,762
pUnited Kingdom Treasury Bills, 8/01/11 - 8/08/11	United Kingdom		1,389,000	GBP		2,228,105
United Kingdom Treasury Note,
9.00%, 7/12/11	United Kingdom		520,000	GBP		836,676
3.25%, 12/07/11	United Kingdom		4,968,000	GBP		8,069,219
j5.25%, 6/07/12	United Kingdom		1,800,000	GBP		3,011,522
Total Foreign Government and Agency Securities (Cost $101,738,733)						101,425,912
Total Investments before Money Market Funds (Cost $1,338,936,292)						1,405,709,238
		Shares
Money Market Funds (Cost $79,117,488) 5.3%
a,qInstitutional Fiduciary Trust Money Market Portfolio	United States		79,117,488			79,117,488
Total Investments (Cost $1,418,053,780) 100.2%						1,484,826,726
Other Assets, less Liabilities (0.2)%						(3,122,342	)
Net Assets 100.0%					$	1,481,704,384

FSI-26

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin Strategic Income Securities Fund

†Rounds to less than 0.1% of net assets.

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

^aNon-income producing.

^bSecurity has been deemed illiquid because it may not be able to be sold within seven days. At June 30, 2011, the aggregate value of these securities was $1,508,461, representing 0.10% of net assets.

^cSee Note 1(e) regarding investment in FT Holdings Corporation III.

^dAt June 30, 2011, pursuant to the Fund’s policies and the requirements of applicable securities law, the Fund may be restricted from trading these securities for a limited or extended period of time due to ownership limits and/or potential possession of material non-public information.

^eSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At June 30, 2011, the aggregate value of these securities was $262,599,604, representing 17.72% of net assets.

^fPerpetual security with no stated maturity date.

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

^hSee Note 8 regarding defaulted securities.

ⁱThe coupon rate shown represents the rate at period end.

^jA portion or all of the security purchased on a delayed delivery basis. See Note 1(c).

^kSee Note 1(g) regarding senior floating rate interests.

^lThe principal amount is stated in original face, and scheduled paydowns are reflected in the market price on ex-date.

^mPrincipal amount is stated in 100 Mexican Peso Units.

ⁿPrincipal amount is stated in 1,000 Brazilian Real Units.

^oRedemption price at maturity is adjusted for inflation. See Note 1(j).

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

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

FSI-27

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin Strategic Income Securities Fund

At June 30, 2011, the Fund had the following forward exchange contracts outstanding. See Note 1(d).

Forward Exchange Contracts
Currency	Counterparty		Type		Quantity		Contract Amount*			Settlement Date		Unrealized Appreciation		Unrealized Depreciation
Euro		DBAB		Sell		1,485,071		1,870,595			7/07/11	$	—	$	(282,557	)
Indian Rupee		JPHQ		Buy		192,280,000		4,000,000			7/14/11		297,024		—
Euro		DBAB		Sell		1,056,111		1,384,562			8/08/11		—		(145,232	)
Chilean Peso		JPHQ		Buy		1,543,470,600		2,982,552			8/18/11		299,717		—
Japanese Yen		UBSW		Sell		32,055,000		377,220			8/18/11		—		(21,060	)
Japanese Yen		DBAB		Sell		19,550,000		230,068			8/18/11		—		(12,839	)
Japanese Yen		JPHQ		Sell		15,928,000		186,467			8/18/11		—		(11,437	)
Chilean Peso		JPHQ		Buy		509,866,000		983,822			8/19/11		100,307		—
Japanese Yen		HSBC		Sell		15,854,000		186,546			8/19/11		—		(10,439	)
Euro		BZWS		Sell		2,124,000		2,728,809			8/22/11		—		(346,476	)
Euro		UBSW		Sell		1,750,000		2,253,510			8/22/11		—		(280,270	)
Japanese Yen		BZWS		Sell		15,895,000		187,119			8/22/11		—		(10,379	)
Japanese Yen		DBAB		Sell		15,915,000		187,588			8/22/11		—		(10,158	)
Japanese Yen		MSCO		Sell		12,500,000		147,156			8/22/11		—		(8,159	)
Euro		UBSW		Sell		1,750,000		2,249,835			8/23/11		—		(283,865	)
Japanese Yen		FBCO		Sell		31,524,000		370,871			8/23/11		—		(20,823	)
Japanese Yen		CITI		Sell		31,757,000		374,480			8/23/11		—		(20,109	)
Japanese Yen		DBAB		Sell		15,708,000		185,538			8/23/11		—		(9,638	)
Japanese Yen		JPHQ		Sell		31,689,000		373,471			8/24/11		—		(20,275	)
Japanese Yen		BZWS		Sell		31,584,000		373,175			8/24/11		—		(19,267	)
Euro		BZWS		Sell		2,785,000		3,524,418			8/25/11		—		(507,530	)
Euro		DBAB		Sell		993,304		1,275,551			8/25/11		—		(162,491	)
Japanese Yen		DBAB		Sell		660,099,000		7,771,673			8/25/11		—		(430,322	)
Japanese Yen		BZWS		Sell		12,568,000		148,103			8/25/11		—		(8,060	)
Japanese Yen		HSBC		Sell		100,248,000		1,199,235			8/26/11		—		(46,394	)
Japanese Yen		UBSW		Sell		34,903,000		415,794			8/26/11		—		(17,892	)
Japanese Yen		JPHQ		Sell		15,991,000		188,831			8/26/11		—		(9,865	)
United States Dollar		UBSW		Buy		3,000,000		2,370,230	EUR		8/26/11		—		(431,361	)
Japanese Yen		BZWS		Sell		37,600,000		446,588			8/30/11		—		(20,622	)
Japanese Yen		JPHQ		Sell		15,743,000		185,561			9/01/11		—		(10,061	)
Philippine Peso		DBAB		Buy		21,010,000		466,930			10/04/11		13,686		—
Philippine Peso		HSBC		Buy		16,853,000		373,963			10/04/11		11,560		—
Euro		UBSW		Sell		2,850,000		3,899,028			10/05/11		—		(222,186	)
Philippine Peso		HSBC		Buy		25,126,000		561,375			10/05/11		13,355		—
Philippine Peso		DBAB		Buy		25,119,000		560,905			10/05/11		13,665		—
Philippine Peso		JPHQ		Buy		6,636,000		148,244			10/06/11		3,536		—
Euro		BZWS		Sell		2,749,000		3,825,508			10/07/11		—		(149,400	)
Philippine Peso		DBAB		Buy		20,621,000		463,539			10/07/11		8,073		—
Philippine Peso		HSBC		Buy		16,532,000		372,771			10/11/11		5,211		—
Philippine Peso		CITI		Buy		8,254,000		186,624			10/11/11		2,092		—
Philippine Peso		JPHQ		Buy		8,232,000		185,828			10/11/11		2,385		—
Philippine Peso		DBAB		Buy		16,501,000		372,660			10/11/11		4,613		—
Philippine Peso		DBAB		Buy		4,913,000		111,492			10/12/11		829		—
Euro		DBAB		Sell		595,343		823,419			10/13/11		—		(37,250	)
Philippine Peso		HSBC		Buy		8,192,000		184,525			10/13/11		2,745		—
Philippine Peso		JPHQ		Buy		18,311,000		413,201			10/13/11		5,392		—
Japanese Yen		DBAB		Sell		382,080,000		4,725,379			10/20/11		—		(24,279	)
Philippine Peso		JPHQ		Buy		237,550,000		5,353,601			10/21/11		73,584		—
Japanese Yen		JPHQ		Sell		270,990,000		3,355,498			10/25/11		—		(13,368	)
Euro		BZWS		Sell		1,993,000		2,780,235			10/26/11		—		(99,780	)

FSI-28

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin Strategic Income Securities Fund

Forward Exchange Contracts (continued)
Currency	Counterparty		Type		Quantity		Contract Amount*		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
Euro		UBSW		Sell		2,679,000		3,731,177		10/27/11	$	—	$	(140,028	)
Japanese Yen		JPHQ		Sell		360,360,000		4,441,076		10/31/11		—		(39,086	)
Euro		UBSW		Sell		1,480,440		2,005,404		11/17/11		—		(132,419	)
Philippine Peso		JPHQ		Buy		191,280,000		4,322,712		11/25/11		35,942		—
Japanese Yen		BOFA		Sell		620,288,000		7,491,401		11/28/11		—		(222,525	)
Euro		UBSW		Sell		3,920,000		5,143,236		12/01/11		—		(514,881	)
Japanese Yen		BZWS		Sell		257,790,000		3,082,875		12/05/11		—		(123,242	)
Euro		DBAB		Sell		3,210,000		4,245,546		12/08/11		—		(386,719	)
Euro		DBAB		Sell		2,870,000		3,822,697		12/09/11		—		(318,791	)
Euro		UBSW		Sell		3,400,000		4,491,128		12/12/11		—		(414,692	)
Euro		DBAB		Sell		1,410,000		1,858,380		12/12/11		—		(176,093	)
Japanese Yen		UBSW		Sell		351,760,000		4,208,159		12/12/11		—		(166,971	)
Euro		CITI		Sell		3,868,000		5,157,398		12/15/11		—		(423,158	)
Euro		DBAB		Sell		486,875		649,092		12/15/11		—		(53,347	)
British Pound		DBAB		Sell		600,000		943,620		12/16/11		—		(17,316	)
Euro		UBSW		Sell		2,137,312		2,847,413		12/19/11		—		(235,798	)
Chilean Peso		DBAB		Buy		2,449,000,000		4,829,994		1/10/12		291,164		—
Indian Rupee		HSBC		Buy		139,650,000		2,922,159		1/10/12		101,080		—
Japanese Yen		HSBC		Sell		183,560,000		2,246,756		1/10/12		—		(37,132	)
Euro		UBSW		Sell		3,940,000		5,100,035		1/11/12		—		(579,320	)
Euro		DBAB		Sell		2,187,000		2,834,111		1/11/12		—		(318,363	)
Euro		BZWS		Sell		1,691,484		2,188,781		1/11/12		—		(249,427	)
Euro		JPHQ		Sell		1,802,953		2,331,669		1/13/12		—		(267,040	)
Japanese Yen		BZWS		Sell		460,675,000		5,577,179		1/13/12		—		(154,867	)
Philippine Peso		JPHQ		Buy		35,843,000		814,151		1/13/12		—		(174	)
Philippine Peso		HSBC		Buy		5,750,000		130,732		1/17/12		—		(184	)
Euro		BZWS		Sell		2,912,410		3,881,369		1/19/12		—		(315,615	)
Japanese Yen		DBAB		Sell		271,680,000		3,293,490		1/19/12		—		(87,231	)
Euro		DBAB		Sell		2,000,000		2,716,500		1/26/12		—		(164,953	)
Euro		BZWS		Sell		1,007,118		1,357,595		1/26/12		—		(93,387	)
Euro		DBAB		Sell		1,587,264		2,146,426		1/27/12		—		(140,311	)
Euro		DBAB		Sell		3,014,151		4,103,767		2/02/12		—		(237,770	)
Chilean Peso		BZWS		Buy		486,100,000		981,227		2/08/12		31,922		—
Chilean Peso		DBAB		Buy		725,000,000		1,472,081		2/08/12		38,993		—
Chilean Peso		JPHQ		Buy		482,900,000		976,049		2/08/12		30,431		—
Indian Rupee		HSBC		Buy		186,760,000		3,883,552		2/08/12		142,916		—
Chilean Peso		BZWS		Buy		1,001,200,000		2,020,789		2/09/12		65,716		—
Euro		UBSW		Sell		2,151,000		2,920,563		2/13/12		—		(176,548	)
Euro		DBAB		Sell		1,250,438		1,690,529		2/14/12		—		(109,849	)
Singapore Dollar		DBAB		Buy		1,158,000		905,912		2/24/12		37,716		—
Singapore Dollar		DBAB		Buy		722,000		566,230		2/27/12		22,122		—
Singapore Dollar		DBAB		Buy		723,000		566,295		2/29/12		22,879		—
Euro		UBSW		Sell		2,581,000		3,523,246		3/01/12		—		(190,858	)
Japanese Yen		UBSW		Sell		95,700,000		1,177,209		3/01/12		—		(14,362	)
Japanese Yen		JPHQ		Sell		85,800,000		1,055,610		3/01/12		—		(12,694	)
Japanese Yen		HSBC		Sell		85,800,000		1,056,000		3/01/12		—		(12,304	)
Euro		DBAB		Sell		1,500,000		2,101,800		3/15/12		—		(55,702	)
Singapore Dollar		HSBC		Buy		1,113,000		872,284		3/19/12		34,805		—
Singapore Dollar		DBAB		Buy		973,400		763,050		3/19/12		30,266		—
Singapore Dollar		JPHQ		Buy		1,394,000		1,089,999		3/19/12		46,104		—
Singapore Dollar		HSBC		Buy		837,000		653,676		3/21/12		28,483		—

FSI-29

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin Strategic Income Securities Fund

Forward Exchange Contracts (continued)
Currency	Counterparty		Type		Quantity		Contract Amount*		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
Singapore Dollar		DBAB		Buy		1,048,000		817,536		3/21/12	$	36,588	$	—
Euro		DBAB		Sell		714,000		999,343		4/05/12		—		(26,887	)
British Pound		DBAB		Sell		1,089,000		1,762,547		4/11/12		21,293		—
Indian Rupee		DBAB		Buy		20,841,000		444,845		4/11/12		682		—
Indian Rupee		DBAB		Buy		44,691,000		957,391		4/13/12		—		(2,230	)
Chilean Peso		MSCO		Buy		116,230,000		236,120		4/16/12		4,271		—
Indian Rupee		JPHQ		Buy		30,019,000		641,432		4/16/12		—		(70	)
Indian Rupee		JPHQ		Buy		29,466,000		625,871		4/18/12		3,532		—
Euro		DBAB		Sell		1,888,220		2,692,035		4/19/12		—		(20,571	)
Indian Rupee		DBAB		Buy		10,360,000		219,352		4/19/12		1,915		—
Indian Rupee		JPHQ		Buy		14,719,000		312,373		4/19/12		1,994		—
Chilean Peso		MSCO		Buy		104,150,000		210,404		4/20/12		4,904		—
Euro		DBAB		Sell		1,001,008		1,416,527		4/23/12		—		(21,315	)
Indian Rupee		DBAB		Buy		20,931,000		444,489		4/26/12		2,194		—
Singapore Dollar		DBAB		Buy		6,168,500		5,000,000		4/26/12		28,248		—
Chilean Peso		JPHQ		Buy		234,301,000		475,159		4/27/12		8,824		—
Indian Rupee		JPHQ		Buy		17,801,000		377,540		4/27/12		2,304		—
Chilean Peso		CITI		Buy		377,668,000		776,296		4/30/12		3,567		—
Indian Rupee		JPHQ		Buy		14,829,000		314,841		4/30/12		1,477		—
Chilean Peso		DBAB		Buy		1,554,000,000		3,233,458		5/04/12		—		(25,995	)
Euro		DBAB		Sell		180,000		264,204		5/04/12		5,752		—
Philippine Peso		JPHQ		Buy		91,360,000		2,135,228		5/04/12		—		(74,778	)
British Pound		DBAB		Sell		913,406		1,489,364		5/10/12		29,557		—
Euro		DBAB		Sell		600,000		844,476		5/10/12		—		(16,849	)
Singapore Dollar		DBAB		Buy		3,707,640		3,000,000		5/10/12		22,481		—
Euro		DBAB		Sell		429,000		605,386		5/11/12		—		(10,440	)
British Pound		DBAB		Sell		2,287,500		3,700,489		5/17/12		45,015		—
Indian Rupee		DBAB		Buy		28,359,000		594,279		6/01/12		8,441		—
Indian Rupee		HSBC		Buy		32,771,000		694,154		6/04/12		2,097		—
Euro		DBAB		Sell		1,053,792		1,505,279		6/06/12		—		(6,061	)
Singapore Dollar		JPHQ		Buy		4,945,200		4,000,000		6/06/12		31,862		—
Euro		DBAB		Sell		2,000,000		2,831,300		6/07/12		—		(36,982	)
Indian Rupee		DBAB		Buy		20,889,000		440,510		6/07/12		3,145		—
Indian Rupee		HSBC		Buy		5,576,000		118,412		6/08/12		2		—
Euro		DBAB		Sell		937,500		1,350,563		6/11/12		6,243		—
Indian Rupee		DBAB		Buy		5,655,000		120,038		6/11/12		12		—
Indian Rupee		HSBC		Buy		14,080,000		298,938		6/13/12		—		(101	)
Indian Rupee		DBAB		Buy		14,156,000		299,852		6/18/12		427		—
Indian Rupee		DBAB		Buy		12,894,000		272,083		6/20/12		1,364		—
Euro		DBAB		Sell		242,890		340,313		6/27/12		—		(7,782	)
Euro		UBSW		Sell		4,274,000		5,999,841		6/29/12		—		(124,982	)
Unrealized appreciation (depreciation)												2,096,504		(10,662,044	)
Net unrealized appreciation (depreciation)													$	(8,565,540	)

*In U.S. dollars unless otherwise indicated.

FSI-30

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Franklin Strategic Income Securities Fund

At June 30, 2011, the Fund had the following credit default swap contracts outstanding. See Note 1(d).

Credit Default Swap Contracts
Description	Counter- partya		Notional Amountb		Periodic Payment Rate		Expiration Date		Upfront Premiums Paid (Received)		Unrealized Appreciation		Unrealized Depreciation			Market Value			Ratingc
Contracts to Sell Protectiond
Traded Index
CDX.NA.HY.16		CITI		9,000,000		5.00%		6/20/16	$	56,250	$	85,050	$	—		$	141,300		Non Investment Grade
CDX.NA.HY.16		FBCO		11,000,000		5.00%		6/20/16		68,750		103,950		—			172,700		Non Investment Grade
LCDX.NA.16		BZWS		16,000,000		2.50%		6/20/16		19,559		—		(384,448	)		(364,889	)	Non Investment Grade
LCDX.NA.16		FBCO		2,000,000		2.50%		6/20/16		3,667		—		(49,278	)		(45,611	)	Non Investment Grade
LCDX.NA.16		GSCO		7,000,000		2.50%		6/20/16		—		—		(159,639	)		(159,639	)	Non Investment Grade
Unrealized appreciation (depreciation)												189,000		(593,365	)
Net unrealized appreciation (depreciation)													$	(404,365	)

^aPositions are generally not collateralized if the market value is under $250,000. Collateral requirements may be net of current positions at the individual counterparty for the fund. The table below summarizes the cash and/or securities held as collateral for each applicable counterparty at period end:

Counterparty	Collateral Posted (Received)
BZWS	$	280,000
CITI		255,000
GSCO		110,000
Total collateral for credit default swaps	$	645,000

^bIn U.S. dollars unless otherwise indicated. For contracts to sell protection, the notional amount is equal to the maximum potential amount of the future payments and no recourse provisions have been entered into in association with the contracts.

^cBased on Standard and Poor’s (S&P) Rating for single name swaps and internal ratings for index swaps. Internal ratings based on mapping into equivalent ratings from external vendors.

^dThe fund enters contracts to sell protection to create a long credit position. Performance triggers include failure to pay or bankruptcy for traded index swaps.

See Abbreviations on page FSI-46.

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

FSI-31

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

June 30, 2011 (unaudited)

	Franklin Strategic Income Securities Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	1,338,936,292
Cost - Sweep Money Fund (Note 7)		79,117,488
Total cost of investments	$	1,418,053,780
Value - Unaffiliated issuers	$	1,405,709,238
Value - Sweep Money Fund (Note 7)		79,117,488
Total value of investments		1,484,826,726
Cash		1,258,850
Foreign currency, at value (cost $136,534)		137,097
Receivables:
Investment securities sold		8,868,141
Capital shares sold		913,960
Interest		17,468,405
Due from brokers		645,000
Swaps (premiums paid $148,750)		148,226
Unrealized appreciation on forward exchange contracts		2,096,504
Unrealized appreciation on swap contracts		189,000
Other assets		380
Total assets		1,516,552,289
Liabilities:
Payables:
Investment securities purchased		19,048,572
Capital shares redeemed		2,811,301
Affiliates		817,528
Due to brokers		468,865
Unrealized depreciation on forward exchange contracts		10,662,044
Unrealized depreciation on swap contracts		593,365
Unrealized depreciation on unfunded loan commitments (Note 9)		3,519
Accrued expenses and other liabilities		442,711
Total liabilities		34,847,905
Net assets, at value	$	1,481,704,384
Net assets consist of:
Paid-in capital	$	1,378,340,985
Undistributed net investment income		35,183,760
Net unrealized appreciation (depreciation)		57,880,688
Accumulated net realized gain (loss)		10,298,951
Net assets, at value	$	1,481,704,384

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

FSI-32

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Assets and Liabilities (continued)

June 30, 2011 (unaudited)

	Franklin Strategic Income Securities Fund
Class 1:
Net assets, at value	$	1,155,500,248
Shares outstanding		90,691,027
Net asset value and maximum offering price per share	$	12.74
Class 2:
Net assets, at value	$	124,462,585
Shares outstanding		9,983,225
Net asset value and maximum offering price per share	$	12.47
Class 4:
Net assets, at value	$	201,741,551
Shares outstanding		15,952,312
Net asset value and maximum offering price per share	$	12.65

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

FSI-33

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the six months ended June 30, 2011 (unaudited)

	Franklin Strategic Income Securities Fund
Investment income:
Dividends	$	14,070
Interest		44,731,828
Total investment income		44,745,898
Expenses:
Management fees (Note 3a)		2,493,284
Administrative fees (Note 3b)		1,468,215
Distribution fees: (Note 3c)
Class 2		137,845
Class 4		335,766
Unaffiliated transfer agent fees		642
Custodian fees (Note 4)		145,223
Reports to shareholders		75,864
Professional fees		53,954
Trustees’ fees and expenses		3,218
Other		40,025
Total expenses		4,754,036
Net investment income		39,991,862
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		28,574,453
Foreign currency transactions		1,009,615
Swap contracts		365,497
Net realized gain (loss)		29,949,565
Net change in unrealized appreciation (depreciation) on:
Investments		1,337,192
Translation of other assets and liabilities denominated in foreign currencies		(9,175,063	)
Net change in unrealized appreciation (depreciation)		(7,837,871	)
Net realized and unrealized gain (loss)		22,111,694
Net increase (decrease) in net assets resulting from operations	$	62,103,556

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

FSI-34

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets

	Franklin Strategic Income Securities Fund
	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31, 2010
Increase (decrease) in net assets:
Operations:
Net investment income	$	39,991,862		$	82,801,087
Net realized gain (loss) from investments, foreign currency transactions and swap contracts		29,949,565			57,948,653
Net change in unrealized appreciation (depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies		(7,837,871	)		13,730,001
Net increase (decrease) in net assets resulting from operations		62,103,556			154,479,741
Distributions to shareholders from and net foreign currency gains:
Net investment income:
Class 1		(69,631,166	)		(57,255,268	)
Class 2		(7,304,903	)		(3,841,288	)
Class 4		(11,235,444	)		(8,302,315	)
Total distributions to shareholders		(88,171,513	)		(69,398,871	)
Capital share transactions: (Note 2)
Class 1		(19,836,628	)		(48,613,654	)
Class 2		25,958,532			28,343,361
Class 4		16,975,927			16,237,324
Total capital share transactions		23,097,831			(4,032,969	)
Net increase (decrease) in net assets		(2,980,126	)		81,047,901
Net assets:
Beginning of period		1,484,674,510			1,403,626,609
End of period	$	1,481,704,384		$	1,484,674,510
Undistributed net investment income included in net assets:
End of period	$	35,183,760		$	83,363,411

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

FSI-35

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited)

Franklin Strategic Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment company, consisting of twenty separate funds. The Franklin Strategic Income Securities Fund (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. At June 30, 2011, 92.71% of the Fund’s shares were held through one insurance company. The Fund offers three classes of shares: Class 1, Class 2, and Class 4. Each class of shares differs by its initial sales load, contingent deferred sales charges, distribution fees, voting rights on matters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

The Fund’s investments in securities and other financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Under procedures approved by the Trust’s Board of Trustees, the Fund may utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

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

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

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

The Fund has procedures to determine the fair value of securities and other financial instruments for which market prices are not readily available or which may not be reliably priced. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.

FSI-36

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Strategic Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

b. Foreign Currency Translation

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

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

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

c. Securities Purchased on a Delayed Delivery Basis

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

d. Derivative Financial Instruments

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

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

The Fund entered into credit default swap contracts primarily to manage and/or gain exposure to credit risk. A credit default swap is an agreement between the Fund and a counterparty whereby the buyer of the contract receives credit protection and the seller of the contract guarantees the credit worthiness of a referenced debt obligation. In the event of a default of the underlying referenced debt obligation, the buyer is entitled to receive the notional amount of the credit default swap contract (or other agreed upon amount) from the seller. Over the term of the contract, the buyer pays the seller a periodic stream of payments, provided that no event of default has occurred. Such periodic payments are accrued daily as an unrealized appreciation or depreciation until the payments are made, at which time they are realized. Payments received or paid to initiate a credit default

FSI-37

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Strategic Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

d. Derivative Financial Instruments (continued)

swap contract are reflected on the Statement of Assets and Liabilities and represent compensating factors between stated terms of the credit default swap agreement and prevailing market conditions (credit spreads and other relevant factors). These upfront payments are amortized over the term of the contract as a realized gain or loss on the Statement of Operations. Pursuant to the terms of the credit default swap contract, cash or securities may be required to be deposited as collateral. Unrestricted cash may be invested according to the Fund’s investment objectives.

See Note 10 regarding other derivative information.

e. FT HOLDINGS CORPORATION III

The Fund invests in certain securities through its investment in FT Holdings Corporation III, a Delaware Corporation and a wholly-owned subsidiary (Subsidiary) of the Fund. The Subsidiary has the ability to invest in securities consistent with the investment objective of the Fund. At June 30, 2011, all Subsidiary investments as well as any other assets and liabilities are reflected in the Fund’s Statement of Investments and Statement of Assets and Liabilities. All income and expenses of the Subsidiary during the period ended June 30, 2011, have been included in the Fund’s Statement of Operations.

f. Mortgage Dollar Rolls

The Fund enters into mortgage dollar rolls, typically on a TBA basis. Mortgage dollar rolls are agreements between the Fund and a financial institution to simultaneously sell and repurchase mortgage-backed securities at a future date. Gains or losses are realized on the initial sale, and the difference between the repurchase price and the sale price is recorded as an unrealized gain or loss to the fund upon entering into the mortgage dollar roll. In addition, the Fund may invest the cash proceeds that are received from the initial sale. During the period between the sale and repurchase, the Fund is not entitled to principal and interest paid on the mortgage backed securities. The risks of mortgage dollar roll transactions include the potential inability of the counterparty to fulfill its obligations.

g. Senior Floating Rate Interests

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

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

h. Income Taxes

It is the Fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and excise taxes. As a result, no provision for U.S. federal income taxes is required. The Fund files U.S. income tax returns as well as tax returns in certain other jurisdictions. The Fund records a provision for taxes in its financial statements including penalties and interest, if any, for a tax position taken on a tax return (or expected to be taken) when it fails to meet the more likely than not (a greater than 50% probability) threshold and based on the technical merits, the tax position may not be sustained upon examination by the tax authorities. As of June 30, 2011, and for all open tax years, the Fund has determined that no provision for income tax is required in the Fund’s financial statements. Open tax years are those that remain subject to examination and are based on each tax jurisdiction statute of limitation.

FSI-38

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Strategic Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

h. Income Taxes (continued)

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

i. Security Transactions, Investment Income, Expenses and Distributions

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

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

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

Inflation-indexed bonds are adjusted for inflation through periodic increases or decreases in the security’s interest accruals, face amount, or principal redemption value, by amounts corresponding to the rate of inflation as measured by an index. Any increase or decrease in the face amount or principal redemption value will be included as interest income on the Statement of Operations.

j. Accounting Estimates

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

k. Guarantees and Indemnifications

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

FSI-39

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Strategic Income Securities Fund

2. SHARES OF BENEFICIAL INTEREST

At June 30, 2011, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:

	Six Months Ended June 30, 2011						Year Ended December 31, 2010
Class 1 Shares:	Shares			Amount			Shares			Amount
Shares sold		1,226,775		$	16,272,518			4,513,968		$	56,940,927
Shares issued in reinvestment of distributions		5,474,148			69,631,166			4,747,535			57,255,268
Shares redeemed		(7,990,687	)		(105,740,312	)		(12,820,410	)		(162,809,849	)
Net increase (decrease)		(1,289,764	)	$	(19,836,628	)		(3,558,907	)	$	(48,613,654	)
Class 2 Shares:
Shares sold		2,255,130		$	29,332,186			3,451,058		$	42,785,482
Shares issued in reinvestment of distributions		586,739			7,304,903			324,982			3,841,288
Shares redeemed		(823,350	)		(10,678,557	)		(1,474,432	)		(18,283,409	)
Net increase (decrease)		2,018,519		$	25,958,532			2,301,608		$	28,343,361
Class 4 Shares:
Shares sold		1,423,879		$	18,428,624			2,251,182		$	28,170,784
Shares issued on reinvestment of distributions		889,584			11,235,444			693,015			8,302,315
Shares redeemed		(966,811	)		(12,688,141	)		(1,626,043	)		(20,235,775	)
Net increase (decrease)		1,346,652		$	16,975,927			1,318,154		$	16,237,324

3. TRANSACTIONS WITH AFFILIATES

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

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

a. Management Fees

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

Annualized Fee Rate	Net Assets
0.425%	Up to and including $500 million
0.325%	Over $500 million, up to and including $1 billion
0.280%	Over $1 billion, up to and including $1.5 billion
0.235%	Over $1.5 billion, up to and including $6.5 billion
0.215%	Over $6.5 billion, up to and including $11.5 billion
0.200%	Over $11.5 billion, up to and including $16.5 billion
0.190%	Over $16.5 billion, up to and including $19 billion
0.180%	Over $19 billion, up to and including $21.5 billion
0.170%	In excess of $21.5 billion

FSI-40

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Strategic Income Securities Fund

3. TRANSACTIONS WITH AFFILIATES (continued)

b. Administrative Fees

The Fund pays an administrative fee to FT Services of 0.20% per year of the average daily net assets of the Fund.

c. Distribution Fees

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

e. Transfer Agent Fees

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

4. EXPENSE OFFSET ARRANGEMENT

The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses. During the period ended June 30, 2011, there were no credits earned.

5. INCOME TAXES

For tax purposes, capital losses may be carried over to offset future capital gains, if any. At December 31, 2010, the Fund had tax basis capital losses of $19,427,750 expiring in 2017.

Under the Regulated Investment Company Modernization Act of 2010, the Fund will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. Post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered short-term as under previous law. Any post-enactment capital losses generated will be required to be utilized prior to the losses incurred in pre-enactment tax years.

At June 30, 2011, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	1,421,370,261
Unrealized appreciation	$	80,529,591
Unrealized depreciation		(17,073,126	)
Net unrealized appreciation (depreciation)	$	63,456,465

Net investment income (loss) differs for financial statement and tax purposes primarily due to differing treatments of defaulted securities, foreign currency transactions, mortgage dollar rolls, paydown losses, payments-in-kind, bond discounts and premiums, tax straddles, non-deductible expenses and inflation related adjustments on foreign securities.

Net realized gains (losses) differ for financial statement and tax purposes primarily due to differing treatments of defaulted securities, wash sales, foreign currency transactions, mortgage dollar rolls, paydown losses, payments-in-kind, bond discounts and premiums, tax straddles and inflation related adjustments on foreign securities.

FSI-41

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Strategic Income Securities Fund

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2011, aggregated $468,898,927 and $585,691,196, respectively.

7. INVESTMENTS IN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO

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

8. CREDIT RISK AND DEFAULTED SECURITIES

At June 30, 2011, the Fund had 54.49% of its portfolio invested in high yield securities, senior secured floating rate notes, or other securities rated below investment grade. These securities may be more sensitive to economic conditions causing greater price volatility and are potentially subject to a greater risk of loss due to default than higher rated securities.

The Fund held defaulted securities and/or other securities for which the income has been deemed uncollectible. At June 30, 2011, the aggregate value of these securities represents less than 0.05% of the Fund’s net assets. The Fund discontinues accruing income on securities for which income has been deemed uncollectible and provides an estimate for losses on interest receivable. The securities have been identified on the accompanying Statement of Investments.

9. UNFUNDED LOAN COMMITMENTS

The Fund enters into certain credit agreements, all or a portion of which may be unfunded. The Fund is obligated to fund these loan commitments at the borrowers’ discretion. Funded portions of credit agreements are presented on the Statement of Investments.

At June 30, 2011, unfunded commitments were as follows:

Borrower	Unfunded Commitment
EnviroSolutions Real Property Holdings Inc., Revolver, FRN, 6.50%, 7/29/13	$	703,908

Unfunded loan commitments and funded portions of credit agreements are marked to market daily and any unrealized appreciation or depreciation is included in the Statement of Assets and Liabilities and Statement of Operations.

10. OTHER DERIVATIVE INFORMATION

At June 30, 2011, the Fund has invested in derivative contracts which are reflected on the Statement of Assets and Liabilities as follows:

	Asset Derivatives			Liability Derivatives
Derivative Contracts Not Accounted for as Hedging Instruments	Statement of Assets and Liabilities Location	Fair Value Amount		Statement of Assets and Liabilities Location	Fair Value Amount
Foreign exchange contracts	Unrealized appreciation on forward exchange contracts	$	2,096,504	Unrealized depreciation on forward exchange contracts	$	10,662,044
Credit contracts	Unrealized appreciation on swap contracts		189,000	Unrealized depreciation on swap contracts		593,365

FSI-42

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Strategic Income Securities Fund

10. OTHER DERIVATIVE INFORMATION (continued)

For the period ended June 30, 2011, the effect of derivative contracts on the Fund’s Statement of Operations was as follows:

Derivative Contracts Not Accounted for as Hedging Instruments	Statement of Operations Locations	Realized Gain (Loss) for the Period		Change in Unrealized Appreciation (Depreciation) for the Period
Foreign exchange contracts	Net realized gain (loss) from foreign currency transactions / Net change in unrealized appreciation (depreciation) on translation of other assets and liabilities denominated in foreign currencies	$	428,265	$(9,052,183)
Credit contracts	Net realized gain (loss) from swap contracts / Net change in unrealized appreciation (depreciation) on investments		365,497	(404,365)

For the period ended June 30, 2011, the average month end market value of derivatives represented 0.80% of average month end net assets. The average month end number of open derivative contracts for the period was 151.

See Note 1(d) regarding derivative financial instruments.

11. CREDIT FACILITY

The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $750 million (Global Credit Facility) which matures on January 20, 2012. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests.

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.08% based upon the unused portion of the Global Credit Facility, which is reflected in other expenses on the Statement of Operations. During the period ended June 30, 2011, the Fund did not use the Global Credit Facility.

12. FAIR VALUE MEASUREMENTS

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

• Level 1 – quoted prices in active markets for identical securities

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

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

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

FSI-43

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Strategic Income Securities Fund

12. FAIR VALUE MEASUREMENTS (continued)

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

The following is a summary of the inputs used as of June 30, 2011, in valuing the Fund’s assets and liabilities carried at fair value:

	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities:
Equity Investmentsa
Consumer Durables & Apparel	$	—	$	—	$	115,253	$	115,253
Media		505,763		5,436,437		—		5,942,200
Other Equity Investmentsb		2,834,745		—		—		2,834,745
Convertible Bonds		—		3,980,400		—		3,980,400
Corporate Bonds		—		511,882,201		—		511,882,201
Senior Floating Rate Interests		—		232,822,153		718,566		233,540,719
Foreign Government and Agency Securities		—		300,249,145		—		300,249,145
U.S. Government and Agency Securities		—		19,832,212		—		19,832,212
Asset-Backed Securities and Commercial Mortgage-Backed Securities		—		50,913,473		—		50,913,473
Mortgage-Backed Securities		—		91,338,521		—		91,338,521
Municipal Bonds		—		83,654,457		—		83,654,457
Short Term Investments		79,117,488		101,425,912		—		180,543,400
Total Investments in Securities	$	82,457,996	$	1,401,534,911	$	833,819	$	1,484,826,726
Forward Exchange Contracts		—		2,096,504		—		2,096,504
Swaps		—		189,000		—		189,000
Liabilities:
Swaps		—		593,365		—		593,365
Forward Exchange Contracts		—		10,662,044		—		10,662,044
Unfunded Loan Commitments		—		3,519		—		3,519

^aIncludes common, preferred and convertible preferred stock.

^bFor detailed industry descriptions, see the accompanying Statement of Investments.

FSI-44

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Strategic Income Securities Fund

12. FAIR VALUE MEASUREMENTS (continued)

At June 30, 2011, the reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining fair value, is as follows:

	Balance at Beginning of Period		Purchases		Sales			Transfers Into Level 3		Transfers Out of Level 3a			Cost Basis Adjustments		Net Realized Gain (Loss)		Net Unrealized Gain (Loss)			Balance at End of Period		Net Change in Unrealized Appreciation (Depreciation) on Assets Held at Period End
Assets
Investments in Securities:
Equity Investments:b
Consumer Services	$	1,901,449	$	—	$	—		$	—	$	(1,901,449	)	$	—	$	—	$	—		$	—	$	—
Consumer Durables & Apparel		—c		—		—			—		—			—		—		115,253			115,253		115,253
Senior Floating Rate Interests		835,411		38,254		(155,892	)		—		—			—		35,823		(35,030	)		718,566		(179,642	)
Total	$	2,736,860	$	38,254	$	(155,892	)	$	—	$	(1,901,449	)	$	—	$	35,823	$	80,223		$	833,819	$	(64,389	)

^aThe investment was transferred out of Level 3 as a result of the availability of a quoted price in an active market for identical securities and other significant observable valuation inputs.

^bIncludes common and preferred stocks as well as other equity investments.

^cIncludes securities determined to have no value.

13. NEW ACCOUNTING PRONOUNCEMENTS

In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (IFRS). The amendments in the ASU will improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRS and include new guidance for certain fair value measurement principles and disclosure requirements. The ASU is effective for interim and annual periods beginning after December 15, 2011. The Fund is currently evaluating the impact, if any, of applying this provision.

14. SUBSEQUENT EVENTS

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

FSI-45

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Strategic Income Securities Fund

ABBREVIATIONS
Counterparty	Currency	Selected Portfolio
BOFA - Bank of America Corp.	AUD - Australian Dollar	AGMC - Assured Guaranty Municipal Corp.
BZWS - Barclays Bank PLC	BRL - Brazilian Real	CDO - Collateralized Debt Obligation
CITI - Citigroup, Inc.	EGP - Egyptian Pound	CLO - Collateralized Loan Obligation
DBAB - Deutsche Bank AG	EUR - Euro	FGIC - Financial Guaranty Insurance Co.
FBCO - Credit Suisse Group AG	GBP - British Pound	FICO - Financing Corp.
GSCO - The Goldman Sachs Group, Inc.	HUF - Hungarian Forint	FRN - Floating Rate Note
HSBC - HSBC Bank USA, NA	IDR - Indonesian Rupiah	GO - General Obligation
JPHQ - JP Morgan Chase & Co.	ILS - New Israeli Shekel	ID - Improvement District
MSCO - Morgan Stanley	KRW - South Korean Won	IDA - Industrial Development Authority/Agency
UBSW - UBS AG	LKR - Sri Lankan Rupee	L/C - Letter of Credit
	MXN - Mexican Peso	NATL - National Public Financial Guarantee Corp.
	MYR - Malaysian Ringgit	NATL RE - National Public Financial Guarantee
	NOK - Norwegian Krone	Corp. Reinsured
	PHP - Philippine Peso	PIK - Payment-In-Kind
	PLN - Polish Zloty	SBA - Small Business Administration
	SEK - Swedish Krona	SF - Single Family
		USD - Unified/Union School District

FSI-46

FRANKLIN TEMPLETON VIP FOUNDING FUNDS ALLOCATION FUND

We are pleased to bring you Franklin Templeton VIP Founding Funds Allocation Fund’s semiannual report for the period ended June 30, 2011.

Performance Summary as of 6/30/11

Franklin Templeton VIP Founding Funds Allocation Fund – Class 4 delivered a +6.37% total return* for the six-month period ended 6/30/11.

*The administrator has contractually agreed to waive or assume certain expenses so that common expenses of the Fund (excluding Rule 12b-1 fees and acquired fund fees and expenses) do not exceed 0.10% (other than certain nonroutine expenses), until 4/30/12. If the administrator had not waived fees, the Fund’s total returns would have been lower.

Performance reflects the Fund’s Class 4 operating expenses, but does not include any contract fees, expenses or sales charges. If they had been included, performance would be lower. These charges and deductions, particularly for variable life policies, can have a significant effect on contract values and insurance benefits. See the contract prospectus for a complete description of these expenses, including sales charges.

Franklin Templeton VIP Founding Funds Allocation Fund – Class 4

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

FFA-1

Fund Goals and Main Investments: Franklin Templeton VIP Founding Funds Allocation Fund seeks capital appreciation, with income as a secondary goal. The Fund normally invests equal portions in Class 1 shares of Franklin Income Securities Fund, Mutual Shares Securities Fund and Templeton Growth Securities Fund.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. The Fund outperformed the Standard & Poor’s 500 Index’s (S&P 500’s) +6.02% total return and the MSCI World Index’s +5.62% total return for the same period.¹

Economic and Market Overview

The global economy expanded despite geopolitical and inflationary pressures during the six-month period ended June 30, 2011. In the U.S., business activity increased and consumer spending stayed above pre-recession levels. The U.S. was a key engine in a sustained global manufacturing expansion as international trade volume continued to increase, albeit at a moderate pace. The U.S. financial system appeared closer to a full recovery, although the country still faced challenges dealing with persistent unemployment, housing market weakness and massive debt. During the period, signs emerged of a global economic slowdown. Officials at the U.S. Federal Reserve Board (Fed) cut their growth forecast for the world’s largest economy, and manufacturing slowed in most major regions of the world. Japan’s earthquake, an early surge in commodity prices and a fading inventory restocking cycle were all blamed for declining economic leading indicators. Some monetary policy tightening in most parts of the world was also thought to inhibit growth and cool the commodities rally.

Inflation at the consumer, producer and trade levels rose across much of the world, but in the U.S. it remained relatively contained. As a result, the Federal Reserve Board (Fed) maintained its accommodative monetary policy while ending its second round of quantitative easing on June 30. The Fed said, however, it would continue to purchase Treasuries with proceeds from maturing debt in an effort to support economic growth. This move deviated from many other central banks around the world that raised interest rates to dampen inflation pressures.

1. Source: © 2011 Morningstar. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

Fund Risks: Because the Fund invests in underlying funds that may engage in a variety of investment strategies involving certain risks, this Fund may be subject to those same risks. Investments in stocks may offer the potential for long-term gains but can be subject to short-term price fluctuations. Because the underlying funds invest in bonds and other debt obligations, the Fund’s share price and yield will be affected by interest rate movements. Bond prices generally move in the opposite direction from interest rates. Thus, as prices of bonds in the Fund adjust to a rise in interest rates, the Fund’s share price may decline. High yield, lower rated (junk) bonds generally have greater price swings and higher default risks than investment-grade bonds. Foreign investing, especially in developing markets, involves additional risks, including currency fluctuations, economic instability, market volatility, and political and social instability. Smaller and midsize company securities can increase the risk of greater price fluctuations, particularly over the short term. Underlying funds may use certain derivative instruments that may be volatile and illiquid, may give rise to leverage and may involve a small investment relative to the risk assumed. The manager applies various techniques and analyses in making investment decisions for the Fund, but there can be no guarantee that these decisions will produce the desired results. These and other risks are described more fully in the Fund’s and underlying funds’ prospectuses.

FFA-2

Continued corporate profit strength and still favorable economic growth prospects in some regions of the world supported equities. Global stock markets made gains in the first half of 2011, though the positive momentum from the previous year waned as investors weathered international events that included revolutions and civil unrest across the Middle East and North Africa, the multiple crises triggered by Japan’s earthquake and tsunami, and sovereign debt worries and credit downgrades in Europe. The dollar declined during the period against most currencies, however, broadly reflecting divergent interest rate and/or economic growth expectations.

Investment Strategy

The Fund invests its assets in an equally weighted combination of Class 1 shares of Franklin Income Securities Fund, Mutual Shares Securities Fund and Templeton Growth Securities Fund. These underlying funds, in turn, invest in a variety of U.S. and foreign equity securities and, to a lesser extent, fixed income and money market securities. As market conditions affect the underlying funds, we rebalance the Fund’s allocations seeking to maintain equal weightings of approximately 33 ¹/3% of total net assets in each underlying fund whenever the actual allocations exceed plus or minus 3% of the fixed allocation percentages.

Manager’s Discussion

The Fund’s performance can be attributed largely to its allocation among the underlying funds and their investments in domestic and foreign equities, fixed income securities, and short-term investments and other net assets.

During the period under review, Franklin Income Securities Fund – Class 1 underperformed the S&P 500, and Mutual Shares Securities Fund – Class 1 performed comparably to the S&P 500. Templeton Growth Securities Fund – Class 1 outperformed the MSCI World Index.

Thank you for your participation in Franklin Templeton VIP Founding Funds Allocation Fund. We look forward to serving your future investment needs.

The foregoing information reflects our analysis, opinions and portfolio holdings as of June 30, 2011, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

*The asset allocation is based on the Statement of Investments (SOI), which classifies each underlying fund into a broad asset class.

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

FFA-3

Fund Expenses

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

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

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

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

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

Actual Fund Expenses

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

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

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

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

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

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

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

Franklin Templeton VIP Founding Funds Allocation Fund – Class 4

FFA-4

Hypothetical Example for Comparison with Other Mutual Funds

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

Class 4	Beginning Account Value 1/1/11		Ending Account Value 6/30/11		Fund-Level Expenses Incurred During Period* 1/1/11–6/30/11		Fund-Level Expenses Incurred During Period** 1/1/11–6/30/11
Actual	$	1,000	$	1,063.70	$	2.30	$	5.72
Hypothetical (5% return before expenses)	$	1,000	$	1,022.56	$	2.26	$	5.59

*Expenses are calculated using the most recent six-month annualized expense ratio excluding expenses of the underlying funds, net of expense waivers, for the Fund’s Class 4 shares (0.45%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 181/365 to reflect the one-half year period.

**Expenses are calculated using the most recent six-month annualized expense ratio including expenses of the underlying funds, net of expense waivers, for the Fund’s Class 4 shares (1.12%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 181/365 to reflect the one-half year period.

FFA-5

Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Franklin Templeton VIP Founding Funds Allocation Fund

	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31,
Class 1				2010			2009			2008			2007a
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	7.73		$	7.15		$	5.61		$	9.33		$	10.00
Income from investment operationsb:
Net investment income (loss)c,d		0.19			0.24			0.26			0.28			(0.19	)
Net realized and unrealized gains (losses)		0.32			0.52			1.46			(3.64	)		(0.48	)
Total from investment operations		0.51			0.76			1.72			(3.36	)		(0.67	)
Less distributions from:
Net investment income		—	e		(0.18	)		(0.18	)		(0.19	)		—
Net realized gains		—			—	e		—			(0.17	)		—
Total distributions		—	e		(0.18	)		(0.18	)		(0.36	)		—
Net asset value, end of period	$	8.24		$	7.73		$	7.15		$	5.61		$	9.33
Total returnf		6.61%			10.64%			30.47%			(35.75)%			(6.70)%
Ratios to average net assetsg
Expenses before waiver and payments by affiliatesh		0.11%			0.11%			0.12%			0.13%			0.41%
Expenses net of waiver and payments by affiliatesh		0.10%			0.10%			0.10%			0.13%			0.41%
Net investment income (loss)d		4.97%			3.04%			4.16%			3.81%			(0.41)%
Supplemental data
Net assets, end of period (000’s)	$	512		$	437		$	629		$	339		$	466
Portfolio turnover rate		0.36%			17.81%			4.23%			22.09%			0.04%

^aFor the period July 2, 2007 (commencement of operations) to December 31, 2007.

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

^cBased on average daily shares outstanding.

^dRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds in which the Fund invests.

^eAmount rounds to less than $0.01 per share.

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

^gRatios are annualized for periods less than one year.

^hDoes not include expenses of the Underlying Funds in which the Fund invests. The annualized weighted average expense ratio of the Underlying Funds was 0.67% for the period ended June 30, 2011.

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

FFA-6

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin Templeton VIP Founding Funds Allocation Fund

	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31,
Class 2				2010			2009			2008			2007a
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	7.71		$	7.14		$	5.61		$	9.31		$	10.00
Income from investment operationsb:
Net investment income (loss)c,d		0.18			0.21			0.26			0.27			(0.03	)
Net realized and unrealized gains (losses)		0.32			0.52			1.44			(3.63	)		(0.66	)
Total from investment operations		0.50			0.73			1.70			(3.36	)		(0.69	)
Less distributions from:
Net investment income		—	e		(0.16	)		(0.17	)		(0.17	)		—
Net realized gains		—			—	e		—			(0.17	)		—
Total distributions		—	e		(0.16	)		(0.17	)		(0.34	)		—
Net asset value, end of period	$	8.21		$	7.71		$	7.14		$	5.61		$	9.31
Total returnf		6.50%			10.25%			30.25%			(35.87)%			(6.90)%
Ratios to average net assetsg
Expenses before waiver and payments by affiliatesh		0.36%			0.36%			0.37%			0.38%			0.66%
Expenses net of waiver and payments by affiliatesh		0.35%			0.35%			0.35%			0.38%			0.66%
Net investment income (loss)d		4.72%			2.79%			3.91%			3.56%			(0.66)%
Supplemental data
Net assets, end of period (000’s)	$	503,189		$	488,057		$	474,176		$	338,320		$	131,710
Portfolio turnover rate		0.36%			17.81%			4.23%			22.09%			0.04%

^aFor the period July 2, 2007 (commencement of operations) to December 31, 2007.

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

^cBased on average daily shares outstanding.

^dRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds in which the Fund invests.

^eAmount rounds to less than $0.01 per share.

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

^gRatios are annualized for periods less than one year.

^hDoes not include expenses of the Underlying Funds in which the Fund invests. The annualized weighted average expense ratio of the Underlying Funds was 0.67% for the period ended June 30, 2011.

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

FFA-7

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin Templeton VIP Founding Funds Allocation Fund

	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31,
Class 4				2010			2009			2008a
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	7.71		$	7.14		$	5.62		$	8.65
Income from investment operationsb:
Net investment incomec,d		0.19			0.19			0.23			0.19
Net realized and unrealized gains (losses)		0.30			0.54			1.46			(2.87	)
Total from investment operations		0.49			0.73			1.69			(2.68	)
Less distributions from:
Net investment income		—	e		(0.16	)		(0.17	)		(0.18	)
Net realized gains		—			—	e		—			(0.17	)
Total distributions		—	e		(0.16	)		(0.17	)		(0.35	)
Net asset value, end of period	$	8.20		$	7.71		$	7.14		$	5.62
Total returnf		6.37%			10.24%			30.06%			(30.81)%
Ratios to average net assetsg
Expenses before waiver and payments by affiliatesh		0.46%			0.46%			0.47%			0.48%
Expenses net of waiver and payments by affiliatesh		0.45%			0.45%			0.45%			0.48%
Net investment incomed		4.62%			2.69%			3.81%			3.46%
Supplemental data
Net assets, end of period (000’s)	$	3,834,125		$	3,036,272		$	1,424,479		$	263,001
Portfolio turnover rate		0.36%			17.81%			4.23%			22.09%

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

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

^cBased on average daily shares outstanding.

^dRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds in which the Fund invests.

^eAmount rounds to less than $0.01 per share.

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

^gRatios are annualized for periods less than one year.

^hDoes not include expenses of the Underlying Funds in which the Fund invests. The annualized weighted average expense ratio of the Underlying Funds was 0.67% for the period ended June 30, 2011.

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

FFA-8

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited)

Franklin Templeton VIP Founding Funds Allocation Fund	Shares		Value
Investments in Underlying Fundsa
Domestic Equity 33.1%
Mutual Shares Securities Fund, Class 1		84,153,255	$	1,438,179,133
Domestic Hybrid 33.0%
Franklin Income Securities Fund, Class 1		94,870,849		1,431,601,108
Foreign Equity 33.5%
Templeton Growth Securities Fund, Class 1		121,340,450		1,452,445,188
Total Investments in Underlying Funds (Cost $3,746,382,744) 99.6%				4,322,225,429
Other Assets, less Liabilities 0.4%				15,600,803
Net Assets 100.0%			$	4,337,826,232

^aSee Note 6 regarding investments in Underlying Funds.

FFA-9

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

June 30, 2011 (unaudited)

	Franklin Templeton VIP Founding Funds Allocation Fund
Assets:
Investments in Underlying Funds: (Note 6)
Cost	$	3,746,382,744
Value	$	4,322,225,429
Cash		15,208,801
Receivables:
Investment securities sold		320,372
Capital shares sold		3,140,291
Other assets		901
Total assets		4,340,895,794
Liabilities:
Payables:
Capital shares redeemed		293,966
Affiliates		2,740,614
Accrued expenses and other liabilities		34,982
Total liabilities		3,069,562
Net assets, at value	$	4,337,826,232
Net assets consist of:
Paid-in capital	$	3,849,672,067
Undistributed net investment income		92,910,956
Net unrealized appreciation (depreciation)		575,842,685
Accumulated net realized gain (loss)		(180,599,476	)
Net assets, at value	$	4,337,826,232
Class 1:
Net assets, at value	$	512,342
Shares outstanding		62,159
Net asset value and maximum offering price per share	$	8.24
Class 2:
Net assets, at value	$	503,189,210
Shares outstanding		61,263,167
Net asset value and maximum offering price per share	$	8.21
Class 4:
Net assets, at value	$	3,834,124,680
Shares outstanding		467,315,466
Net asset value and maximum offering price per share	$	8.20

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

FFA-10

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the six months ended June 30, 2011 (unaudited)

	Franklin Templeton VIP Founding Funds Allocation Fund
Investment income:
Dividends from Underlying Funds (Note 6)	$	101,711,002
Expenses:
Administrative fees (Note 3a)		2,004,517
Distribution fees: (Note 3b)
Class 2		626,660
Class 4		6,146,331
Unaffiliated transfer agent fees		1,395
Reports to shareholders		107,610
Professional fees		25,505
Trustees’ fees and expenses		5,138
Other		24,633
Total expenses		8,941,789
Expenses waived/paid by affiliates (Note 3d)		(164,280	)
Net expenses		8,777,509
Net investment income		92,933,493
Realized and unrealized gains (losses):
Net realized gain (loss) from sale of investments in Underlying Funds (Note 6)		(204,661	)
Net change in unrealized appreciation (depreciation) on investments in Underlying Funds		143,750,828
Net realized and unrealized gain (loss)		143,546,167
Net increase (decrease) in net assets resulting from operations	$	236,479,660

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

FFA-11

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets

	Franklin Templeton VIP Founding Funds Allocation Fund
	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31, 2010
Increase (decrease) in net assets:
Operations:
Net investment income	$	92,933,493		$	69,934,841
Net realized gain (loss) from Underlying Funds		(204,661	)		(102,829,602	)
Net change in unrealized appreciation (depreciation) on investments in Underlying Funds		143,750,828			305,671,809
Net increase (decrease) in net assets resulting from operations		236,479,660			272,777,048
Distributions to shareholders from:
Net investment income:
Class 1		(68	)		(19,195	)
Class 2		(73,496	)		(9,975,426	)
Class 4		(555,926	)		(59,699,243	)
Net realized gains:
Class 1		—			(64	)
Class 2		—			(37,379	)
Class 4		—			(225,645	)
Total distributions to shareholders		(629,490	)		(69,956,952	)
Capital share transactions: (Note 2)
Class 1		46,268			(249,343	)
Class 2		(16,361,229	)		(22,011,518	)
Class 4		593,525,176			1,444,922,739
Total capital share transactions		577,210,215			1,422,661,878
Net increase (decrease) in net assets		813,060,385			1,625,481,974
Net assets:
Beginning of period		3,524,765,847			1,899,283,873
End of period	$	4,337,826,232		$	3,524,765,847
Undistributed net investment income included in net assets:
End of period	$	92,910,956		$	606,953

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

FFA-12

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited)

Franklin Templeton VIP Founding Funds Allocation Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment company, consisting of twenty separate funds. The Franklin Templeton VIP Founding Funds Allocation Fund (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. The Fund invests primarily in other funds of the Trust (Underlying Funds). Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. The Fund offers three classes of shares: Class 1, Class 2 and Class 4. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

Net asset value per share is calculated as of the close of trading of the NYSE. Investments in the Underlying Funds are valued at their closing net asset value each trading day.

b. Income Taxes

It is the Fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and excise taxes. As a result, no provision for U.S. federal income taxes is required. The Fund files U.S. income tax returns as well as tax returns in certain other jurisdictions. The Fund records a provision for taxes in its financial statements including penalties and interest, if any, for a tax position taken on a tax return (or expected to be taken) when it fails to meet the more likely than not (a greater than 50% probability) threshold and based on the technical merits, the tax position may not be sustained upon examination by the tax authorities. As of June 30, 2011, and for all open tax years, the Fund has determined that no provision for income tax is required in the Fund’s financial statements. Open tax years are those that remain subject to examination and are based on each tax jurisdiction statute of limitation.

c. Security Transactions, Investment Income, Expenses and Distributions

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

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

The Fund indirectly bears its proportionate share of expenses from the Underlying Funds. Since the Underlying Funds have varied expense levels and the Fund may own different proportions of the Underlying Funds at different times, the amount of expenses incurred indirectly by the Fund will vary.

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

FFA-13

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Templeton VIP Founding Funds Allocation Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

d. Accounting Estimates

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

e. Guarantees and Indemnifications

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

2. SHARES OF BENEFICIAL INTEREST

At June 30, 2011, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:

	Six Months Ended June 30, 2011						Year Ended December 31, 2010
Class 1 Shares:	Shares			Amount			Shares			Amount
Shares sold		7,288		$	59,401			28,887		$	212,938
Shares issued in reinvestment of distributions		9			68			2,512			19,259
Shares redeemed		(1,636	)		(13,201	)		(62,828	)		(481,540	)
Net increase (decrease)		5,661		$	46,268			(31,429	)	$	(249,343	)
Class 2 Shares:
Shares sold		3,166,531		$	25,484,468			5,965,854		$	43,444,607
Shares issued in reinvestment of distributions		9,187			73,496			1,309,697			10,012,805
Shares redeemed		(5,174,745	)		(41,919,193	)		(10,412,128	)		(75,468,930	)
Net increase (decrease)		(1,999,027	)	$	(16,361,229	)		(3,136,577	)	$	(22,011,518	)
Class 4 Shares:
Shares sold		82,932,605		$	669,289,405			260,520,140		$	1,895,056,899
Shares issued on reinvestment of distributions		69,578			555,926			7,836,782			59,924,888
Shares redeemed		(9,485,700	)		(76,320,155	)		(73,968,871	)		(510,059,048	)
Net increase (decrease)		73,516,483		$	593,525,176			194,388,051		$	1,444,922,739

3. TRANSACTIONS WITH AFFILIATES

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

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

FFA-14

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Templeton VIP Founding Funds Allocation Fund

3. TRANSACTIONS WITH AFFILIATES (continued)

a. Administrative Fees

The Fund pays an administrative fee to FT Services of 0.10% per year of the average daily net assets of the Fund for administrative services including monitoring and rebalancing the percentage of each Fund’s investment in the Underlying Funds.

b. Distribution Fees

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

c. Transfer Agent Fees

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

d. Waiver and Expense Reimbursements

FT Services has contractually agreed in advance to waive or limit its fees and to assume as its own expense certain expenses otherwise payable by the Fund so that the common expenses (i.e. a combination of administrative fees and other expenses, but excluding distribution fees and acquired fund fees and expenses) for each class of the Fund do not exceed 0.10% (other than certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations, and liquidations) until April 30, 2012.

4. INCOME TAXES

At June 30, 2011, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	3,926,991,090
Unrealized appreciation	$	395,234,339
Unrealized depreciation		—
Net unrealized appreciation (depreciation)	$	395,234,339

Net realized gains (losses) differ for financial statement and tax purposes primarily due to differing treatments of wash sales.

5. INVESTMENT TRANSACTIONS

Purchases and sales of Underlying Funds (excluding short term securities) for the period ended June 30, 2011, aggregated $697,711,001 and $14,310,540, respectively.

FFA-15

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Templeton VIP Founding Funds Allocation Fund

6. INVESTMENTS IN UNDERLYING FUNDS

The Fund invests primarily in the Underlying Funds which are managed by affiliates of the Fund’s administrative manager, FT Services. The Fund does not invest in the Underlying Funds for the purpose of exercising a controlling influence over the management or policies. Investments in Underlying Funds for the period ended June 30, 2011, were as follows:

Underlying Funds	Number of Shares Held at Beginning of Period		Gross Additions		Gross Reductions		Number of Shares Held at End of Period		Value at End  of Period		Investment Income		Realized Capital Gain (Loss)			% of  Underlying Fund Shares Outstanding Held at End of Period
Franklin Income Securities Fund, Class 1		77,056,138		18,241,551		426,840		94,870,849	$	1,431,601,108	$	80,509,469	$	(116,046	)		16.40%
Mutual Shares Securities Fund, Class 1		72,027,638		12,288,839		163,222		84,153,255		1,438,179,133		—		(5,702	)		23.58%
Templeton Growth Securities Fund, Class 1		104,073,430		17,671,638		404,618		121,340,450		1,452,445,188		21,201,533		(82,913	)		44.31%
Total									$	4,322,225,429	$	101,711,002	$	(204,661	)

7. CREDIT FACILITY

The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $750 million (Global Credit Facility) which matures on January 20, 2012. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests.

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.08% based upon the unused portion of the Global Credit Facility, which is reflected in other expenses on the Statement of Operations. During the period ended June 30, 2011, the Fund did not use the Global Credit Facility.

8. FAIR VALUE MEASUREMENTS

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

• Level 1 – quoted prices in active markets for identical securities

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

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

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

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

FFA-16

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Franklin Templeton VIP Founding Funds Allocation Fund

8. FAIR VALUE MEASUREMENTS (continued)

At June 30, 2011, all of the Fund’s investments in Underlying Funds carried at fair value were in Level 1 inputs. For detailed categories, see the accompanying Statement of Investments.

9. NEW ACCOUNTING PRONOUNCEMENTS

In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (IFRS). The amendments in the ASU will improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRS and include new guidance for certain fair value measurement principles and disclosure requirements. The ASU is effective for interim and annual periods beginning after December 15, 2011. The Fund is currently evaluating the impact, if any, of applying this provision.

10. SUBSEQUENT EVENTS

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

Subsequent to June 30, 2011, the Fund received net redemptions representing approximately 19% of the Fund’s outstanding shares as of June 30, 2011.

FFA-17

MUTUAL GLOBAL DISCOVERY SECURITIES FUND

This semiannual report for Mutual Global Discovery Securities Fund covers the period ended June 30, 2011.

Performance Summary as of 6/30/11

Mutual Global Discovery Securities Fund – Class 4 delivered a +5.23% total return for the six-month period ended 6/30/11.

Performance reflects the Fund’s Class 4 operating expenses, but does not include any contract fees, expenses or sales charges. If they had been included, performance would be lower. These charges and deductions, particularly for variable life policies, can have a significant effect on contract values and insurance benefits. See the contract prospectus for a complete description of these expenses, including sales charges.

Mutual Global Discovery Securities Fund – Class 4

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

Current performance may differ from figures shown.

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Fund Goal and Main Investments: Mutual Global Discovery Securities Fund seeks capital appreciation. The Fund normally invests primarily in U.S. and foreign equity securities that the manager believes are undervalued.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. In comparison, the MSCI World Index generated a +5.62% total return, and the Standard & Poor’s 500 Index posted a +6.02% total return for the same period.¹

Economic and Market Overview

Global stock markets rose in the first half of 2011, though the positive momentum from the previous year waned as European sovereign debt turmoil escalated and signs emerged of an economic slowdown. Furthermore, geopolitical unrest sweeping the Middle East and North Africa roiled oil markets, and a devastating earthquake and tsunami in Japan severely disrupted global supply chains during the period. While the market recovered from these interferences, economic growth concerns persisted. Officials at the U.S. Federal Reserve Board (Fed) cut their growth forecast for the world’s largest economy, and manufacturing slowed in most major regions of the world. Japan’s earthquake, an early surge in commodity prices and a fading inventory restocking cycle were all blamed for declining economic leading indicators. Nascent monetary policy tightening in most parts of the world was also thought to inhibit growth and cool the commodities rally. Asian and emerging market policymakers tightened aggressively as inflation reached post-crisis highs in many regions, while the European Central Bank raised interest rates for the first time in two years, deviating from the extraordinarily accommodative path of the Fed, which undertook a second round of quantitative easing during the reporting period.

Amid concerns of sustained accommodative monetary policy and declining economic growth rates in the U.S., politicians debated whether to raise the nation’s debt ceiling. Sovereign debt concerns continued to plague Europe, with Greece, Ireland, Portugal and Spain subject to rating downgrades in the first half of 2011. At period-end, European politicians were working to pass painful austerity budgets despite fierce popular resistance, and discussions were ongoing about restructuring debt payments of the region’s most troubled sovereigns. Despite these

1. Source: © 2011 Morningstar. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

Fund Risks: The Fund’s investments in stocks may offer the potential for long-term gains but can be subject to short-term price fluctuations. Foreign investing, especially in developing markets, involves additional risks, including currency fluctuations, economic instability, market volatility, and political and social instability. Investments in companies involved in mergers, liquidations, reorganizations and distressed bankruptcy, which may include defaulted debt, involve higher credit and other risks. Smaller and midsize company securities involve special risks, such as relatively small revenues, limited product lines and small market share. The Fund’s investment in certain hedging and derivative instruments may involve a small investment relative to the risk assumed. The manager applies various techniques and analyses in making investment decisions for the Fund, but there can be no guarantee that these decisions will produce the desired results The Fund’s prospectus also includes a description of the main investment risks.

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challenges, continued corporate profit strength and still favorable economic growth prospects in some regions of the world supported stock prices. Equity market leadership rotated toward defensive sectors as risk aversion increased, buoying even U.S. Treasuries toward period-end as near-term demand for perceived safe havens outweighed longer term concerns about the deteriorating U.S. credit profile. The dollar ultimately declined, however, against most currencies, broadly reflecting divergent interest rate and/or economic growth expectations.

Investment Strategy

At Mutual Series, we are committed to our distinctive value approach to investing. Our major investment strategy is investing in undervalued stocks. When selecting undervalued equities, we are attracted to fundamentally strong companies with healthy balance sheets, high-quality assets, substantial free cash flow and shareholder-oriented management teams and whose stocks are trading at discounts to our assessment of the companies’ intrinsic or business value. We also look for asset rich companies whose shares may be trading at depressed levels due to concerns over short-term earnings disappointments, litigation, management strategy or other perceived negatives. While the vast majority of our undervalued equity investments are made in publicly traded companies globally, we may invest occasionally in privately held companies as well.

We complement this more traditional investment strategy with two others. One is distressed investing, which is complex and can take many forms. The most common distressed investment the Fund undertakes is the purchase of financially troubled or bankrupt companies’ debt at a substantial discount to face value. After the financially distressed company is reorganized, often in bankruptcy court, the old debt is typically replaced with new securities issued by the financially stronger company.

The other piece of our investment strategy is participating in arbitrage situations, another highly specialized field. When companies announce proposed mergers or takeovers, commonly referred to as “deals,” the target company may trade at a discount to the bid it ultimately accepts. One form of arbitrage involves purchasing the target company’s stock when it is trading below the value we believe it would receive in a deal. In keeping with our commitment to a relatively conservative investment approach, we typically focus our arbitrage efforts on announced deals, and eschew rumored deals or other situations we consider relatively risky.

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In addition, it is our practice to hedge the Fund’s currency exposure when we deem it advantageous for our shareholders.

Manager’s Discussion

As stock markets advanced unevenly in the first half of 2011, several Fund investments increased in value. Three particularly strong performers were U.S. managed health care provider UnitedHealth Group, U.S. cigarette maker Lorillard and U.K.-based British American Tobacco (BAT).

Shares of UnitedHealth rose sharply in value during the first half of 2011. In January, its share price was fueled by a combination of the company’s announcement of better-than-expected fourth quarter 2010 earnings and, more significantly, its higher revenue guidance for 2011. Other positive catalysts included the company’s ongoing efforts to increase shareholder value through share buybacks and dividends. In our view, UnitedHealth’s long-term earnings growth is supported by a diversified business mix and a growing percentage of earnings generated by its increasingly successful health care services business. Although there was no specific catalyst for the continued increase in the company’s stock price in the second quarter, we believe many investors may have recognized the low earnings multiple at which the company’s shares had been trading. In addition, investors seemed to become more comfortable with the implications of pending U.S. health care reforms on the company’s business model.

Lorillard, another key contributor for the period, was spun out of Loews Corporation in May 2008. Lorillard is the third-largest U.S. cigarette manufacturer and the country’s oldest continuously operating tobacco company. Its flagship premium brand, Newport, is the country’s top selling menthol brand, generating approximately 90% of the company’s revenues. Lorillard shares appreciated during the first half of the year, with some of the biggest gains coming in March 2011. Prior to March, the shares were under pressure as many investors grew concerned that a report being produced by the Tobacco Products Scientific Advisory Committee (TPSAC) would recommend that the Food and Drug Administration (FDA) ban menthol cigarettes. However, the findings and recommendations of the TPSAC report regarding the effects of menthol cigarettes were less harsh than anticipated. A sharp relief rally in Lorillard shares followed TPSAC’s release of the final report. Also during the period under review, the company announced that it would be expanding its share buyback program from $1 billion to $1.4 billion. While we

Top 10 Sectors/Industries

Mutual Global Discovery Securities Fund

Based on Equity Securities

6/30/11

	% of Total Net Assets
Tobacco		11.3%
Pharmaceuticals		6.1%
Commercial Banks		6.0%
Insurance		4.4%
Food Products		4.4%
Media		4.4%
Industrial Conglomerates		4.2%
Oil, Gas & Consumable Fuels		4.1%
Diversified Financial Services		3.1%
Automobiles		2.9%

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think Lorillard does not have the extensive cost-saving opportunities that we believe BAT might enjoy (outlined below), we view the shares as an attractive investment because the industry has pricing power, we feel Newport is a well-positioned brand and Lorillard management is shareholder friendly and continues to return excess cash to shareholders through dividends and buybacks. Like BAT, Lorillard shares have been a solid investment for the Fund.

BAT is the world’s second-largest publicly traded tobacco company, with a presence in more than 180 countries. During the period under review, the stock performed well. In February, the company reported full-year 2010 operating results that exceeded market expectations. In addition, BAT management reported it had delivered on its five-year goal to realize £800 million in cost savings two years ahead of schedule. In May, the company held an investor relations day during which its top executives discussed further cost-cutting opportunities. Management believes it can continue to grow operating margins for the next six to seven years aided by price increases and cost-cutting programs. Management explained that cost savings will come from myriad opportunities including simplifying its business structure, improvements in procurement, a reduction in logistics costs, further rationalization of manufacturing facilities, and the standardization and consolidation of back-office centers and processes. The company also reaffirmed its goal to grow medium-term earnings per share in the high single-digit range, although management also mentioned it would likely exceed that goal in 2011. At period-end, we continued to believe BAT was an attractive investment due to the industry’s pricing power, the company’s additional cost savings opportunities and a shareholder friendly management team that often has returned excess cash to shareholders through dividends and share buybacks.

In contrast, several Fund investments decreased in value. Among the largest detractors from Fund performance were Japanese video game software and console maker Nintendo, U.S. network equipment provider Cisco Systems and U.S.-based Bank of America.

Nintendo’s share price deteriorated after the company reported sales of its new handheld console, the Nintendo 3DS, were slower than anticipated. In particular, sales of this new gaming device were weak in its home market of Japan, where the March 11 earthquake and tsunami hurt consumer sentiment, and in other parts of the world due to a lack of compelling software titles at launch date and the console’s relatively high initial sales price. At period-end, net cash accounted for more than 50% of Nintendo’s market capitalization, and we believe the company

Top 10 Holdings

Mutual Global Discovery Securities Fund

6/30/11

Company Sector/Industry, Country	% of Total Net Assets
British American Tobacco PLC		3.3%
Tobacco, U.K.
Nestle SA		2.7%
Food Products, Switzerland
Imperial Tobacco Group PLC		2.4%
Tobacco, U.K.
Jardine Strategic Holdings Ltd.		2.3%
Industrial Conglomerates, Hong Kong
Vodafone Group PLC		2.1%
Wireless Telecommunication Services, U.K.
Lorillard Inc.		2.0%
Tobacco, U.S.
Royal Dutch Shell PLC		2.0%
Oil, Gas & Consumable Fuels, U.K.
CVS Caremark Corp.		1.9%
Food & Staples Retailing, U.S.
Pfizer Inc.		1.9%
Pharmaceuticals, U.S.
Pernod Ricard SA		1.8%
Beverages, France

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

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can successfully leverage its software intellectual property in the next gaming console cycle. With this in mind, we continued to hold Nintendo in the portfolio at period-end.

Cisco Systems is a relatively new addition to the portfolio, initiated in early 2011. Early in the first quarter, Cisco issued lower-than-expected earnings guidance citing economic pressures such as subdued spending by government agencies, a key revenue stream, and missteps in its consumer-focused businesses. In mid-May, Cisco shares declined further when the company confirmed it had completed another disappointing quarter. However, management announced significant cost realignment and an exit from certain consumer markets, both of which we believe should improve financial results. Cisco’s competitive position remained strong, its balance sheet appeared overcapitalized to us at period-end, and the company announced it would begin paying a dividend as well as continuing to buy back stock. For these reasons, along with management’s commitment to repair the company’s current cost structure, we found Cisco’s valuation appealing.

Bank of America detracted from performance during the six-month period largely due to concerns about potential mortgage losses, particularly from Countrywide Financial, a mortgage-finance company it acquired in 2008. In addition, uncertainty regarding the systemically important financial institutions (SIFI) capital surcharge, a potential additional capital requirement for large banks, weighed on Bank of America’s share price. While potential regulatory and other risks to the company’s business prospects remained, we think they were priced into the stock at period-end. In our view, Bank of America has leading positions across all of its businesses, its capital position is adequate and the need to raise further capital is unlikely. Furthermore, its credit costs continued to decline, and the mortgage loss issue appeared manageable to us.

Finally, investors should note that we maintained our currency hedging posture of being more hedged than not to the U.S. dollar, largely through the use of forward currency exchange contracts. Certain currencies strengthened in relation to the U.S. dollar in the first six months of 2011, and so our hedging strategy hindered Fund performance during the reporting period.

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Thank you for your participation in Mutual Global Discovery Securities Fund. We look forward to serving your future investment needs.

The foregoing information reflects our analysis, opinions and portfolio holdings as of June 30, 2011, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

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Fund Expenses

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

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

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

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

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

Actual Fund Expenses

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

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

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

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

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

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

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

Mutual Global Discovery Securities Fund – Class 4

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Hypothetical Example for Comparison with Other Mutual Funds

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

Class 4	Beginning Account Value 1/1/11		Ending Account Value 6/30/11		Fund-Level Expenses Incurred During Period* 1/1/11–6/30/11
Actual	$	1,000	$	1,052.30	$	6.67
Hypothetical (5% return before expenses)	$	1,000	$	1,018.30	$	6.56

*Expenses are calculated using the most recent six-month annualized expense ratio for the Fund’s Class 4 shares (1.31%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 181/365 to reflect the one-half year period.

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Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Mutual Global Discovery Securities Fund

	Six Months Ended June 30, 2011 (unaudited)		Year Ended December 31,
Class 1			2010			2009			2008			2007			2006
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	21.16	$	19.14		$	16.12		$	24.08		$	22.05		$	18.85
Income from investment operationsa:
Net investment incomeb		0.31		0.38			0.19	c		0.37			0.47			0.52
Net realized and unrealized gains (losses)		0.85		1.94			3.57			(6.95	)		2.22			3.69
Total from investment operations		1.16		2.32			3.76			(6.58	)		2.69			4.21
Less distributions from:
Net investment income		—		(0.30	)		(0.26	)		(0.52	)		(0.38	)		(0.25	)
Net realized gains		—		—			(0.48	)		(0.86	)		(0.28	)		(0.76	)
Total distributions		—		(0.30	)		(0.74	)		(1.38	)		(0.66	)		(1.01	)
Net asset value, end of period	$	22.32	$	21.16		$	19.14		$	16.12		$	24.08		$	22.05
Total returnd		5.48%		12.24%			23.63%			(28.29)%			12.17%			23.32%
Ratios to average net assetse
Expensesf		0.96%		1.00%	g		1.06%	g		0.98%	g		0.97%	g		1.03%	g
Expenses incurred in connection with securities sold short		—%		0.02%			0.09%			0.01%			—%	h		0.03%
Net investment income		2.82%		1.93%			1.07%	c		1.82%			1.96%			2.44%
Supplemental data
Net assets, end of period (000’s)	$	81,063	$	84,213		$	86,755		$	81,320		$	142,751		$	146,229
Portfolio turnover rate		15.55%		49.31%			43.35%			22.76%			28.20%			19.83%

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

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $(0.03) per share related to an adjustment for uncollectible interest. Excluding the effect of this adjustment, the ratio of net investment income to average net assets would have been 1.26%.

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

^eRatios are annualized for periods less than one year.

^fIncludes dividend expense on securities sold short and borrowing fees, if any. See below for the ratios of such expenses to average net assets for the periods presented. See Note 1(d).

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

^hRounds to less than 0.01%.

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

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Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Mutual Global Discovery Securities Fund

	Six Months Ended June 30, 2011 (unaudited)		Year Ended December 31,
Class 2			2010			2009			2008			2007			2006
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	20.80	$	18.81		$	15.85		$	23.69		$	21.73		$	18.60
Income from investment operationsa:
Net investment incomeb		0.28		0.33			0.14	c		0.32			0.40			0.43
Net realized and unrealized gains (losses)		0.82		1.91			3.50			(6.84	)		2.18			3.68
Total from investment operations		1.10		2.24			3.64			(6.52	)		2.58			4.11
Less distributions from:
Net investment income		—		(0.25	)		(0.20	)		(0.46	)		(0.34	)		(0.22	)
Net realized gains		—		—			(0.48	)		(0.86	)		(0.28	)		(0.76	)
Total distributions		—		(0.25	)		(0.68	)		(1.32	)		(0.62	)		(0.98	)
Net asset value, end of period	$	21.90	$	20.80		$	18.81		$	15.85		$	23.69		$	21.73
Total returnd		5.29%		11.96%			23.31%			(28.45)%			11.85%			23.06%
Ratios to average net assetse
Expensesf		1.21%		1.25%	g		1.31%	g		1.23%	g		1.22%	g		1.28%	g
Expenses incurred in connection with securities sold short		—%		0.02%			0.09%			0.01%			—%	h		0.03%
Net investment income		2.57%		1.68%			0.82%	c		1.57%			1.71%			2.19%
Supplemental data
Net assets, end of period (000’s)	$	1,334,732	$	1,351,223		$	1,309,852		$	1,113,720		$	1,867,484		$	1,365,575
Portfolio turnover rate		15.55%		49.31%			43.35%			22.76%			28.20%			19.83%

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

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $(0.03) per share related to an adjustment for uncollectible interest. Excluding the effect of this adjustment, the ratio of net investment income to average net assets would have been 1.01%.

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

^eRatios are annualized for periods less than one year.

^fIncludes dividend expense on securities sold short and borrowing fees, if any. See below for the ratios of such expenses to average net assets for the periods presented. See Note 1(d).

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

^hRounds to less than 0.01%.

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

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Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Mutual Global Discovery Securities Fund

	Six Months Ended June 30, 2011 (unaudited)		Year Ended December 31,
Class 4			2010			2009			2008a
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	21.02	$	19.02		$	16.07		$	22.50
Income from investment operationsb:
Net investment incomec		0.27		0.31			0.11	d		0.09
Net realized and unrealized gains (losses)		0.83		1.94			3.56			(5.14	)
Total from investment operations		1.10		2.25			3.67			(5.05	)
Less distributions from:
Net investment income		—		(0.25	)		(0.24	)		(0.52	)
Net realized gains		—		—			(0.48	)		(0.86	)
Total distributions		—		(0.25	)		(0.72	)		(1.38	)
Net asset value, end of period	$	22.12	$	21.02		$	19.02		$	16.07
Total returne		5.23%		11.87%			23.19%			(23.48)%
Ratios to average net assetsf
Expensesg		1.31%		1.35%	h		1.41%	h		1.33%	h
Expenses incurred in connection with securities sold short		—%		0.02%			0.09%			0.01%
Net investment income		2.47%		1.58%			0.72%	d		1.47%
Supplemental data
Net assets, end of period (000’s)	$	76,333	$	70,613		$	59,178		$	23,981
Portfolio turnover rate		15.55%		49.31%			43.35%			22.76%

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

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

^cBased on average daily shares outstanding.

^dNet investment income per share includes approximately $(0.03) per share related to an adjustment for uncollectible interest. Excluding the effect of this adjustment, the ratio of net investment income to average net assets would have been 0.91%.

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

^fRatios are annualized for periods less than one year.

^gIncludes 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 periods presented. See Note 1(d).

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

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

MGD-12

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited)

Mutual Global Discovery Securities Fund	Country	Shares/ Rights		Value
Common Stocks and Other Equity Interests 91.8%
Airlines 0.0%
a,b,cNorthwest Airlines Corp., Contingent Distribution	United States		8,167,000	$	—
Auto Components 0.2%
a,b,cCollins & Aikman Products Co., Contingent Distribution	United States		218,708		2,187
a,b,cDana Holding Corp., Contingent Distribution	United States		2,673,000		—
a,dIACNA Investor LLC	United States		47,271		473
a,dInternational Automotive Components Group Brazil LLC	Brazil		424,073		534,900
d,eInternational Automotive Components Group North America, LLC	United States		3,000,220		2,804,846
					3,342,406
Automobiles 2.0%
Daimler AG (EUR Traded)	Germany		323,994		24,286,027
Daimler AG (USD Traded)	Germany		2,800		209,883
aGeneral Motors Co.	United States		168,060		5,102,301
					29,598,211
Beverages 2.7%
Coca-Cola Enterprises Inc.	United Kingdom		170,820		4,984,528
Dr. Pepper Snapple Group Inc.	United States		191,410		8,025,821
fPernod Ricard SA	France		275,378		27,143,101
					40,153,450
Biotechnology 1.2%
aAmgen Inc.	United States		215,320		12,563,922
aCephalon Inc.	United States		60,050		4,797,995
					17,361,917
Capital Markets 2.9%
Morgan Stanley	United States		718,000		16,521,180
aUBS AG (CHF Traded)	Switzerland		1,445,336		26,352,285
					42,873,465
Chemicals 1.1%
a,b,cDow Corning Corp., Contingent Distribution	United States		300,000		—
Linde AG	Germany		97,340		17,065,955
					17,065,955
Commercial Banks 6.0%
a,d,gThe Bankshares Inc.	United States		800,000		2,694,072
Barclays PLC	United Kingdom		3,900,124		16,053,562
BNP Paribas	France		155,716		12,019,950
aCIT Group Inc.	United States		130,472		5,774,691
a,dElephant Capital Holdings Ltd.	Japan		1,903		—
Intesa Sanpaolo SpA	Italy		5,899,704		15,707,818
a,dNCB Warrant Holdings Ltd., A	Japan		9,306		—
PNC Financial Services Group Inc.	United States		242,430		14,451,252
Wells Fargo & Co.	United States		802,340		22,513,660
					89,215,005
Commercial Services & Supplies 0.4%
aComdisco Holding Co. Inc.	United States		44		274
a,b,cComdisco Holding Co. Inc., Contingent Distribution	United States		1,863,000		—
Edenred	France		192,246		5,865,648
					5,865,922

MGD-13

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Mutual Global Discovery Securities Fund	Country	Shares/ Rights		Value
Common Stocks and Other Equity Interests (continued)
Communications Equipment 0.8%
Cisco Systems Inc.	United States		636,250	$	9,931,862
aMotorola Solutions Inc.	United States		47,699		2,196,062
					12,127,924
Computers & Peripherals 0.8%
a,b,cDecisionOne Corp., Contingent Distribution	United States		33,639		—
Hewlett-Packard Co.	United States		343,240		12,493,936
					12,493,936
Construction & Engineering 0.7%
Vinci SA	France		158,174		10,131,540
Construction Materials 0.5%
CRH PLC	Ireland		337,406		7,471,448
Containers & Packaging 0.7%
Rexam PLC	United Kingdom		1,657,079		10,179,030
Diversified Financial Services 2.9%
Bank of America Corp.	United States		1,311,930		14,378,753
Deutsche Boerse AG	Germany		247,739		18,825,157
a,b,cMarconi Corp., Contingent Distribution	United Kingdom		1,739,100		32,518
a,hNorth American Financial Holdings Inc., A, 144A	United States		84,454		1,446,275
a,hNorth American Financial Holdings Inc., B, 144A, non-voting	United States		263,962		4,520,349
NYSE Euronext Inc.	United States		123,422		4,229,672
					43,432,724
Diversified Telecommunication Services 1.5%
AboveNet Inc.	United States		38,361		2,702,916
Cable & Wireless Communication PLC	United Kingdom		3,585,816		2,330,725
a,b,cGlobal Crossing Holdings Ltd., Contingent Distribution	United States		2,236,777		—
Telefonica SA	Spain		743,937		18,188,910
					23,222,551
Electric Utilities 2.9%
Brookfield Infrastructure Partners LP	Canada		254,871		6,384,519
a,b,cCalpine Corp., Contingent Distribution	United States		1,400,000		—
E.ON AG	Germany		585,820		16,680,461
Exelon Corp.	United States		459,650		19,691,406
a,dPrime AET&D Holdings No. 1 Pty. Ltd.	Australia		1,361,600		—
					42,756,386
Electrical Equipment 0.6%
fAlstom SA	France		149,906		9,243,261
Energy Equipment & Services 1.4%
Ensco PLC, ADR	United States		152,704		8,139,123
aPetroleum Geo-Services ASA	Norway		11,710		165,792
Seadrill Ltd.	Bermuda		124,443		4,381,357
Transocean Ltd.	United States		117,343		7,575,664
					20,261,936
Food & Staples Retailing 2.9%
CVS Caremark Corp.	United States		765,292		28,759,673
Koninklijke Ahold NV	Netherlands		1,032,646		13,875,758
					42,635,431

MGD-14

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Mutual Global Discovery Securities Fund	Country	Shares/ Rights		Value
Common Stocks and Other Equity Interests (continued)
Food Products 4.4%
Farmer Brothers Co.	United States		60,060	$	609,008
Kraft Foods Inc., A	United States		695,676		24,508,666
Lotte Confectionery Co. Ltd.	South Korea		42		66,956
Nestle SA	Switzerland		653,031		40,581,434
					65,766,064
Health Care Equipment & Supplies 1.8%
aBoston Scientific Corp.	United States		883,480		6,104,847
Medtronic Inc.	United States		404,120		15,570,744
aZimmer Holdings Inc.	United States		93,887		5,933,658
					27,609,249
Health Care Providers & Services 2.0%
Rhoen-Klinikum AG	Germany		608,573		14,685,169
UnitedHealth Group Inc.	United States		301,789		15,566,277
					30,251,446
Hotels, Restaurants & Leisure 1.6%
Accor SA	France		278,320		12,445,184
Ladbrokes PLC	United Kingdom		4,875,840		11,929,571
					24,374,755
Independent Power Producers & Energy Traders 0.9%
aNRG Energy Inc.	United States		580,167		14,260,505
Industrial Conglomerates 4.2%
Jardine Matheson Holdings Ltd.	Hong Kong		398,522		22,851,252
Jardine Strategic Holdings Ltd.	Hong Kong		1,097,650		33,588,090
Koninklijke Philips Electronics NV	Netherlands		254,720		6,541,759
					62,981,101
Insurance 4.4%
ACE Ltd.	United States		356,360		23,455,615
aAlleghany Corp.	United States		4,230		1,409,055
American International Group Inc.	United States		443,920		13,015,735
E-L Financial Corp. Ltd.	Canada		8,478		4,058,079
a,dImagine Group Holdings Ltd.	Bermuda		172,409		2,100,183
MetLife Inc.	United States		106,300		4,663,381
a,dOlympus Re Holdings Ltd.	United States		2,140		595
PartnerRe Ltd.	Bermuda		151,240		10,412,874
Zurich Financial Services AG	Switzerland		27,980		7,074,867
					66,190,384
IT Services 0.0%†
Glodyne Technoserve Ltd.	India		2,218		17,175
Machinery 1.6%
Schindler Holding AG, PC	Switzerland		138,017		16,776,091
Stanley Black & Decker Inc.	United States		93,467		6,734,297
					23,510,388
Marine 1.4%
A.P. Moller - Maersk AS, B	Denmark		2,494		21,509,447

MGD-15

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Mutual Global Discovery Securities Fund	Country	Shares/ Rights		Value
Common Stocks and Other Equity Interests (continued)
Media 4.4%
Daekyo Co. Ltd.	South Korea		5,820	$	31,145
Eutelsat Communications	France		520,271		23,388,602
News Corp., A	United States		357,500		6,327,750
Time Warner Cable Inc.	United States		105,970		8,269,899
Time Warner Inc.	United States		222,200		8,081,414
Viacom Inc., B	United States		222,432		11,344,032
Vivendi SA	France		282,930		7,867,329
					65,310,171
Metals & Mining 1.3%
ThyssenKrupp AG	Germany		372,096		19,239,261
Multi-Utilities 1.8%
GDF Suez	France		630,284		23,064,951
Hera SpA	Italy		1,864,274		3,947,077
					27,012,028
Office Electronics 1.4%
Xerox Corp.	United States		2,010,717		20,931,564
Oil, Gas & Consumable Fuels 4.1%
BP PLC	United Kingdom		769,413		5,661,082
Marathon Oil Corp.	United States		173,570		9,143,668
Murphy Oil Corp.	United States		120,518		7,913,212
Royal Dutch Shell PLC, A	United Kingdom		828,027		29,394,688
Total SA, B	France		27,532		1,592,230
The Williams Cos. Inc.	United States		225,950		6,834,988
					60,539,868
Pharmaceuticals 6.1%
Eli Lilly & Co.	United States		539,140		20,233,924
Merck & Co. Inc.	United States		707,040		24,951,442
Novartis AG, ADR	Switzerland		201,264		12,299,243
Pfizer Inc.	United States		1,342,441		27,654,285
aSanofi, Contingent Value rts., 12/31/20	France		207,050		498,990
Teva Pharmaceutical Industries Ltd., ADR	Israel		116,220		5,604,128
					91,242,012
Real Estate Investment Trusts (REITs) 1.3%
The Link REIT	Hong Kong		5,510,376		18,835,866
Real Estate Management & Development 0.9%
cCanary Wharf Group PLC	United Kingdom		487,324		2,356,314
Great Eagle Holdings Ltd.	Hong Kong		1,613,524		5,359,925
Swire Pacific Ltd., B	Hong Kong		1,949,472		5,586,562
					13,302,801
Software 2.6%
Microsoft Corp.	United States		806,798		20,976,748
Nintendo Co. Ltd.	Japan		47,500		8,891,684
aSymantec Corp.	United States		431,550		8,510,166
					38,378,598

MGD-16

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Mutual Global Discovery Securities Fund	Country	Shares/ Rights		Value
Common Stocks and Other Equity Interests (continued)
Tobacco 11.3%
Altria Group Inc.	United States		604,821	$	15,973,323
British American Tobacco PLC	United Kingdom		1,112,353		48,758,692
Imperial Tobacco Group PLC	United Kingdom		1,082,017		35,954,833
Lorillard Inc.	United States		279,918		30,474,673
Philip Morris International Inc.	United States		204,981		13,686,581
Reynolds American Inc.	United States		629,900		23,337,795
					168,185,897
Wireless Telecommunication Services 2.1%
Vodafone Group PLC	United Kingdom		12,007,170		31,863,452
Total Common Stocks and Other Equity Interests (Cost $1,088,177,856)					1,370,744,530
Preferred Stocks 1.1%
Automobiles 0.9%
Volkswagen AG, pfd.	Germany		66,093		13,646,377
Diversified Financial Services 0.2%
a,dHightower Holding LLC, pfd., A, Series 2	United States		1,114,214		2,461,489
Total Preferred Stocks (Cost $8,478,218)					16,107,866
		Principal Amount*
Corporate Bonds, Notes and Senior Floating Rate Interests 3.1%
dBroadband Ventures III LLC, secured promissory note, 5.00%, 2/01/12	United States		825		825
iCIT Group Inc., Term Loan Tranche 3, 6.25%, 8/11/15	United States		1,242,135		1,251,895
Clear Channel Communications Inc.,
iDelayed Draw 2 Term Loan, 3.836%, 1/29/16	United States		1,509,000		1,246,811
jsenior note, PIK, 11.00%, 8/01/16	United States		3,187,000		2,836,430
iTranche B Term Loan, 3.836%, 1/29/16	United States		8,869,000		7,443,042
iTranche C Term Loan, 3.836%, 1/29/16	United States		1,802,075		1,504,733
NewPage Corp., senior secured note, 11.375%, 12/31/14	United States		7,734,000		7,250,625
hOPTI Canada Inc., senior secured note, 144A,
9.00%, 12/15/12	Canada		825,000		833,250
f9.75%, 8/15/13	Canada		2,215,000		2,209,462
Realogy Corp.,
iExtended First Lien Term Loan, 4.518%, 10/10/16	United States		10,563,406		9,427,840
iExtended Synthetic Letter of Credit, 3.221%, 10/10/16	United States		856,631		764,543
hsenior secured note, 144A, 7.875%, 2/15/19	United States		653,000		649,735
iTexas Competitive Electric Holdings Co. LLC, Extended Term Loan, 4.69%, 10/10/17	United States		12,912,264		10,106,171
hTexas Competitive Electric Holdings Co. LLC/Texas Competitive Electric Holdings
Finance Inc., secured note, B, 144A, 11.50%, 10/01/20	United States		949,000		937,138
Total Corporate Bonds, Notes and Senior Floating Rate Interests (Cost $48,316,257)					46,462,500

MGD-17

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Mutual Global Discovery Securities Fund	Country	Shares		Value
Companies in Liquidation 0.0%†
aAdelphia Recovery Trust	United States		5,379,562	$	538
a,bAdelphia Recovery Trust, Arahova Contingent Value Vehicle, Contingent Distribution	United States		386,774		15,471
a,b,cCentury Communications Corp., Contingent Distribution	United States		1,074,000		—
a,dFIM Coinvestor Holdings I, LLC	United States		2,077,368		—
Total Companies in Liquidation (Cost $497,457)					16,009
Total Investments before Short Term Investments (Cost $1,145,469,788)					1,433,330,905
		Principal Amount*
Short Term Investments 6.0%
U.S. Government and Agency Securities 2.5%
kFHLB, 7/01/11	United States		10,000,000		10,000,000
k,lU.S. Treasury Bills, 7/07/11 - 11/17/11	United States		26,500,000		26,498,602
Total U.S. Government and Agency Securities (Cost $36,493,956)					36,498,602
Total Investments before Money Market Funds (Cost $1,181,963,744)					1,469,829,507
		Shares
mInvestments from Cash Collateral Received for Loaned Securities 3.5%
Money Market Funds 3.5%
aBNY Institutional Cash Reserve Fund, Series B	United States		31,953		25,563
nBNY Mellon Overnight Government Fund, 0.05%	United States		52,503,026		52,503,026
Total Money Market Funds (Cost $52,534,979)					52,528,589
Total Investments (Cost $1,234,498,723) 102.0%					1,522,358,096
Other Assets, less Liabilities (2.0)%					(30,230,305	)
Net Assets 100.0%				$	1,492,127,791

†Rounds to less than 0.1% of net assets.

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

^aNon-income producing.

^bContingent distributions represent the right to receive additional distributions, if any, during the reorganization of the underlying company.

^cSecurity has been deemed illiquid because it may not be able to be sold within seven days. At June 30, 2011, the aggregate value of these securities was $2,391,019, representing 0.16% of net assets.

^dSee Note 9 regarding restricted securities.

^eAt June 30, 2011, pursuant to the Fund’s policies and the requirements of applicable securities law, the Fund may be restricted from trading this security for a limited or extended period of time due to ownership limits and/or potential possession of material non-public information.

^fA portion or all of the security is on loan at June 30, 2011. See Note 1(e).

^gSee Note 12 regarding holdings of 5% voting securities.

^hSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At June 30, 2011, the aggregate value of these securities was $10,596,209, representing 0.71% of net assets.

ⁱThe coupon rate shown represents the rate at period end.

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

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

^lSecurity or a portion of the security has been segregated as collateral for open future contracts. At June 30, 2011, the value of this security amounted to $460,877, representing 0.03% of net assets.

^mSee Note 1(e) regarding securities on loan.

ⁿThe rate shown is the annualized seven-day yield at period end.

MGD-18

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Mutual Global Discovery Securities Fund

At June 30, 2011, the Fund had the following futures contracts outstanding. See Note 1(c).

Futures Contracts

Description	Type		Number of Contracts		Notional Value		Expiration Date		Unrealized Appreciation		Unrealized Depreciation
EUR/USD		Short		86	$	15,574,600		9/19/11	$	29,034	$	—
GBP/USD		Short		50		5,015,938		9/19/11		102,402		—
Unrealized appreciation (depreciation)										131,436		—
Net unrealized appreciation (depreciation)									$	131,436

At June 30, 2011, the Fund had the following forward exchange contracts outstanding. See Note 1(c).

Forward Exchange Contracts

Currency	Counterparty		Type		Quantity		Contract Amount		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
British Pound		BZWS		Sell		18,916,015	$	30,284,541		7/15/11	$	—	$	(68,002	)
British Pound		SSBT		Buy		2,700,000		4,361,769		7/15/11		—		(29,363	)
British Pound		SSBT		Sell		15,000,000		24,420,000		7/15/11		351,076		—
British Pound		DBAB		Sell		829,950		1,349,466		7/15/11		17,732		—
Euro		BOFA		Sell		18,430,398		26,552,757		7/15/11		—		(162,829	)
Euro		DBAB		Sell		5,080,000		7,227,612		7/15/11		—		(136,048	)
Euro		BZWS		Sell		17,850,398		25,739,818		7/15/11		—		(135,036	)
Canadian Dollar		BOFA		Sell		3,182,146		3,340,467		7/29/11		42,486		—
Euro		DBAB		Sell		23,432,810		32,322,254		7/29/11		—		(1,631,178	)
Euro		BOFA		Sell		19,253,124		27,116,577		7/29/11		—		(780,617	)
Euro		DBAB		Buy		357,348		505,112		7/29/11		12,675		—
Swiss Franc		BOFA		Sell		20,374,793		23,314,787		8/10/11		—		(923,796	)
Swiss Franc		DBAB		Sell		19,089,697		21,791,891		8/10/11		—		(917,896	)
Swiss Franc		SSBT		Sell		13,438,180		15,375,492		8/10/11		—		(611,049	)
Swiss Franc		DBAB		Buy		934,100		1,124,649		8/10/11		—		(13,411	)
Swiss Franc		DBAB		Buy		1,169,880		1,378,530		8/10/11		13,201		—
Swiss Franc		BOFA		Buy		1,234,991		1,460,018		8/10/11		9,172		—
British Pound		BZWS		Buy		504,000		815,774		8/12/11		—		(7,351	)
British Pound		BOFA		Sell		16,004,745		26,167,758		8/12/11		495,898		—
British Pound		BZWS		Sell		9,657,755		15,790,430		8/12/11		299,240		—
Euro		SSBT		Sell		15,983,432		22,661,310		8/18/11		—		(483,621	)
Euro		HSBC		Sell		15,983,432		22,680,490		8/18/11		—		(464,441	)
Euro		DBAB		Sell		10,000,000		14,350,000		8/18/11		—		(130,577	)
Euro		BOFA		Sell		1,500,000		2,124,309		8/18/11		—		(47,777	)
Euro		DBAB		Buy		318,500		453,888		8/18/11		7,318		—
Euro		BZWS		Sell		21,648,358		30,451,662		8/31/11		—		(883,779	)
Euro		BOFA		Sell		18,496,832		26,154,521		8/31/11		—		(619,169	)
Euro		DBAB		Sell		560,000		801,578		8/31/11		—		(9,007	)
Euro		DBAB		Buy		266,407		387,670		8/31/11		—		(2,053	)
Euro		BZWS		Buy		230,194		334,847		8/31/11		—		(1,647	)
Euro		DBAB		Sell		11,673,232		16,739,274		9/15/11		—		(150,490	)
Euro		HSBC		Sell		10,809,631		15,498,849		9/15/11		—		(141,388	)
Euro		DBAB		Buy		190,934		272,720		9/15/11		3,539		—
British Pound		BOFA		Buy		490,000		794,290		9/16/11		—		(8,661	)
British Pound		SSBT		Sell		31,073,061		50,605,587		9/16/11		785,400		—
Japanese Yen		DBAB		Sell		157,431,290		1,910,000		10/20/11		—		(47,038	)
Japanese Yen		BZWS		Sell		128,248,820		1,563,767		10/20/11		—		(30,502	)
Japanese Yen		HSBC		Sell		64,467,680		780,000		10/20/11		—		(21,401	)
Japanese Yen		BOFA		Sell		36,535,840		440,000		10/20/11		—		(14,179	)
Japanese Yen		DBAB		Buy		51,400,000		640,682		10/20/11		—		(1,726	)
Japanese Yen		DBAB		Buy		27,750,000		342,801		10/20/11		2,161		—
Japanese Yen		BOFA		Buy		4,700,000		58,163		10/20/11		264		—
Unrealized appreciation (depreciation)												2,040,162		(8,474,032	)
Net unrealized appreciation (depreciation)													$	(6,433,870	)

See Abbreviations on page MGD-34.

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

MGD-19

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

June 30, 2011 (unaudited)

	Mutual Global Discovery Securities Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	1,226,498,723
Cost - Non-controlled affiliated issuers		8,000,000
Total cost of investments	$	1,234,498,723
Value - Unaffiliated issuers	$	1,519,664,024
Value - Non-controlled affiliated issuers		2,694,072
Total value of investments (includes securities loaned in the amount of $34,041,354)		1,522,358,096
Cash		793,922
Foreign currency, at value (cost $5,368,610)		5,374,257
Receivables:
Investment securities sold (includes securities loaned in the amount of $18,428,474)		20,067,490
Capital shares sold		215,920
Dividends and interest		5,514,322
Unrealized appreciation on forward exchange contracts		2,040,162
Other assets		113,706
Total assets		1,556,477,875
Liabilities:
Payables:
Investment securities purchased		151,738
Capital shares redeemed		799,278
Affiliates		1,722,480
Variation margin		105,112
Payable upon return of securities loaned		52,534,979
Unrealized depreciation on forward exchange contracts		8,474,032
Accrued expenses and other liabilities		562,465
Total liabilities		64,350,084
Net assets, at value	$	1,492,127,791
Net assets consist of:
Paid-in capital	$	1,135,704,849
Undistributed net investment income		42,102,868
Net unrealized appreciation (depreciation)		282,031,653
Accumulated net realized gain (loss)		32,288,421
Net assets, at value	$	1,492,127,791

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

MGD-20

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Assets and Liabilities (continued)

June 30, 2011 (unaudited)

	Mutual Global Discovery Securities Fund
Class 1:
Net assets, at value	$	81,063,164
Shares outstanding		3,631,948
Net asset value and maximum offering price per share	$	22.32
Class 2:
Net assets, at value	$	1,334,732,003
Shares outstanding		60,934,428
Net asset value and maximum offering price per share	$	21.90
Class 4:
Net assets, at value	$	76,332,624
Shares outstanding		3,450,094
Net asset value and maximum offering price per share	$	22.12

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

MGD-21

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the six months ended June 30, 2011 (unaudited)

	Mutual Global Discovery Securities Fund
Investment income:
Dividends (net of foreign taxes of $1,642,768)	$	26,209,927
Interest		1,586,978
Income from securities loaned		781,469
Total investment income		28,578,374
Expenses:
Management fees (Note 3a)		6,042,614
Administrative fees (Note 3b)		851,632
Distribution fees: (Note 3c)
Class 2		1,691,229
Class 4		130,028
Unaffiliated transfer agent fees		1,263
Custodian fees (Note 4)		108,229
Reports to shareholders		154,134
Professional fees		93,530
Trustees’ fees and expenses		2,871
Other		25,535
Total expenses		9,101,065
Net investment income		19,477,309
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments (net of foreign taxes of $723,733)		40,131,592
Foreign currency transactions		(33,564,553	)
Futures contracts		(335,115	)
Net realized gain (loss)		6,231,924
Net change in unrealized appreciation (depreciation) on:
Investments		53,442,713
Translation of other assets and liabilities denominated in foreign currencies		(798,321	)
Change in deferred taxes on unrealized appreciation		734,375
Net change in unrealized appreciation (depreciation)		53,378,767
Net realized and unrealized gain (loss)		59,610,691
Net increase (decrease) in net assets resulting from operations	$	79,088,000

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

MGD-22

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets

	Mutual Global Discovery Securities Fund
	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31, 2010
Increase (decrease) in net assets:
Operations:
Net investment income	$	19,477,309		$	24,486,967
Net realized gain (loss) from investments, written options, foreign currency transactions, futures contracts and securities sold short		6,231,924			99,792,243
Net change in unrealized appreciation (depreciation) on investments, translation of other assets and liabilities denominated in foreign currencies and deferred taxes		53,378,767			38,245,944
Net increase (decrease) in net assets resulting from operations		79,088,000			162,525,154
Distributions to shareholders from:
Net investment income:
Class 1		—			(1,245,461	)
Class 2		—			(16,267,624	)
Class 4		—			(816,963	)
Total distributions to shareholders		—			(18,330,048	)
Capital share transactions: (Note 2)
Class 1		(7,641,385	)		(10,957,474	)
Class 2		(87,336,078	)		(87,938,794	)
Class 4		1,967,806			4,965,152
Total capital share transactions		(93,009,657	)		(93,931,116	)
Net increase (decrease) in net assets		(13,921,657	)		50,263,990
Net assets:
Beginning of period		1,506,049,448			1,455,785,458
End of period	$	1,492,127,791		$	1,506,049,448
Undistributed net investment income included in net assets:
End of period	$	42,102,868		$	22,625,559

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

MGD-23

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited)

Mutual Global Discovery Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment company, consisting of twenty separate funds. The Mutual Global Discovery Securities Fund (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. At June 30, 2011, 54.83% of the Fund’s shares were held through one insurance company. The Fund offers three classes of shares: Class 1, Class 2, and Class 4. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

The Fund’s investments in securities and other financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Under procedures approved by the Trust’s Board of Trustees, the Fund may utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

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

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

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

The Fund has procedures to determine the fair value of securities and other financial instruments for which market prices are not readily available or which may not be reliably priced. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.

MGD-24

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual Global Discovery Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

a. Financial Instrument Valuation (continued)

Trading in securities on foreign securities stock exchanges and over-the-counter markets may be completed before the daily close of business on the NYSE. Occasionally, events occur between the time at which trading in a foreign security is completed and the close of the NYSE that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund’s portfolio securities as determined at the foreign market close and the latest indications of value at the close of the NYSE. In order to minimize the potential for these differences, the investment manager monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depository Receipts, 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 may call into question the reliability of the values of the foreign securities held by the Fund. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services.

b. Foreign Currency Translation

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

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

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

c. Derivative Financial Instruments

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

The Fund entered into futures contracts primarily to manage interest rate and/or foreign exchange rate risk. A futures contract is an agreement between the Fund and a counterparty to buy or sell an underlying instrument for a specified price on a future date. Required initial margin deposits of cash or securities are pledged by the Fund. Subsequent payments, known as variation margin, are made or received by the Fund, depending on fluctuations in the value of the underlying security. Such variation margin is accounted for as unrealized appreciation or depreciation until the contract is closed, at which time the gains or losses are realized.

MGD-25

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual Global Discovery Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

c. Derivative Financial Instruments (continued)

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

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

See Note 11 regarding other derivative information.

d. Securities Sold Short

The Fund is engaged in selling securities short, which obligates the Fund to replace a borrowed security with the same security at current market value. The Fund incurs a loss if the price of the security increases between the date of the short sale and the date on which the Fund replaces the borrowed security. The Fund realizes a gain if the price of the security declines between those dates. Gains are limited to the price at which the Fund sold the security short, while losses are potentially unlimited in size.

The Fund is required to establish a margin account with the broker lending the security sold short. While the short sale is outstanding, the broker retains the proceeds of the short sale and the Fund must maintain a deposit with broker consisting of cash and/or securities having a value equal to a specified percentage of the value of the securities sold short. The Fund is obligated to pay fees for borrowing the securities sold short and is required to pay the counterparty any dividends or interest due on securities sold short. Such dividends or interest and any security borrowing fees are recorded as an expense to the Fund.

e. Securities Lending

The Fund participates in an agency based security lending program. The Fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the market value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the market value of loaned securities, as determined at the close of Fund business each day; any additional collateral required due to changes in security values is delivered to the Fund on the next business day. The collateral is invested in a non-registered money fund managed by the Fund’s custodian on the Fund’s behalf. The Fund receives income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. The Fund bears the market risk with respect to the collateral investment, securities loaned, and the risk that the agent may default on its obligations to the Fund. The securities lending agent has agreed to indemnify the Fund in the event of default by a third party borrower.

f. Income and Deferred Taxes

It is the Fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and excise taxes. As a result, no provision for U.S. federal income taxes is required. The Fund files U.S. income tax returns as well as tax returns in certain other jurisdictions. The Fund records a provision for taxes in its financial statements including penalties and interest, if any, for a tax position taken on a tax return (or expected to be taken) when it fails to meet the more likely than not (a

MGD-26

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual Global Discovery Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

f. Income and Deferred Taxes (continued)

greater than 50% probability) threshold and based on the technical merits, the tax position may not be sustained upon examination by the tax authorities. As of June 30, 2011, and for all open tax years, the Fund has determined that no provision for income tax is required in the Fund’s financial statements. Open tax years are those that remain subject to examination and are based on each tax jurisdiction statute of limitation.

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

g. Security Transactions, Investment Income, Expenses and Distributions

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

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

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

h. Accounting Estimates

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

i. Guarantees and Indemnifications

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

MGD-27

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual Global Discovery Securities Fund

2. SHARES OF BENEFICIAL INTEREST

At June 30, 2011, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:

	Six Months Ended June 30, 2011						Year Ended December 31, 2010
Class 1 Shares:	Shares			Amount			Shares			Amount
Shares sold		119,048		$	2,688,296			105,161		$	2,092,188
Shares issued in reinvestment of distributions		—			—			63,093			1,245,461
Shares redeemed		(466,031	)		(10,329,681	)		(722,443	)		(14,295,123	)
Net increase (decrease)		(346,983	)	$	(7,641,385	)		(554,189	)	$	(10,957,474	)
Class 2 Shares:
Shares sold		1,139,852		$	24,446,643			3,059,169		$	60,514,460
Shares issued in reinvestment of distributions		—			—			837,674			16,267,624
Shares redeemed		(5,177,512	)		(111,782,721	)		(8,564,469	)		(164,720,878	)
Net increase (decrease)		(4,037,660	)	$	(87,336,078	)		(4,667,626	)	$	(87,938,794	)
Class 4 Shares:
Shares sold		262,051		$	5,716,421			535,481		$	10,579,920
Shares issued on reinvestment of distributions		—			—			41,618			816,963
Shares redeemed		(171,795	)		(3,748,615	)		(327,974	)		(6,431,731	)
Net increase (decrease)		90,256		$	1,967,806			249,125		$	4,965,152

3. TRANSACTIONS WITH AFFILIATES

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

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

a. Management Fees

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

Annualized Fee Rate	Net Assets
0.800%	Up to and including $4 billion
0.770%	Over $4 billion, up to and including $7 billion
0.750%	Over $7 billion, up to and including $10 billion
0.730%	In excess of $10 billion

MGD-28

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual Global Discovery Securities Fund

3. TRANSACTIONS WITH AFFILIATES (continued)

b. Administrative Fees

The Fund pays an administrative fee to FT Services based on the Fund’s average daily net assets as follows:

Annualized Fee Rate	Net Assets
0.150%	Up to and including $200 million
0.135%	Over $200 million, up to and including $700 million
0.100%	Over $700 million, up to and including $1.2 billion
0.075%	In excess of $1.2 billion

c. Distribution Fees

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

d. Transfer Agent Fees

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

4. EXPENSE OFFSET ARRANGEMENT

The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses. During the period ended June 30, 2011, there were no credits earned.

5. INCOME TAXES

At June 30, 2011, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	1,236,778,135
Unrealized appreciation	$	334,746,253
Unrealized depreciation		(49,166,292	)
Net unrealized appreciation (depreciation)	$	285,579,961

Net investment income differs for financial statement and tax purposes primarily due to differing treatments of foreign currency transactions, passive foreign investment company shares, pass-through entity income, bond discounts and premiums, and certain corporate actions.

Net realized gains (losses) differ for financial statement and tax purposes primarily due to differing treatments of wash sales, foreign currency transactions, passive foreign investment company shares, foreign capital gains tax, pass-through entity income, futures transactions, bond discounts and premiums, tax straddles, and certain corporate actions.

MGD-29

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual Global Discovery Securities Fund

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2011, aggregated $225,331,365 and $234,110,038, respectively.

7. CREDIT RISK AND DEFAULTED SECURITIES

The Fund may purchase the pre-default or defaulted debt of distressed companies. Distressed companies are financially troubled and are about to be or are already involved in financial restructuring or bankruptcy. Risks associated with purchasing these securities include the possibility that the bankruptcy or other restructuring process takes longer than expected, or that distributions in restructuring are less than anticipated, either or both of which may result in unfavorable consequences to the Fund. If it becomes probable that the income on debt securities, including those of distressed companies, will not be collected, the Fund discontinues accruing income and recognizes an adjustment for uncollectible interest. At June 30, 2011, the Fund did not hold any distressed company securities for which interest recognition has been discontinued.

8. CONCENTRATION OF RISK

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

9. RESTRICTED SECURITIES

The Fund invests in securities that are restricted under the Securities Act of 1933 (1933 Act) or which are subject to legal, contractual, or other agreed upon restrictions on resale. Restricted securities are often purchased in private placement transactions, and cannot be sold without prior registration unless the sale is pursuant to an exemption under the 1933 Act. Disposal of these securities may require greater effort and expense, and prompt sale at an acceptable price may be difficult. The Fund may have registration rights for restricted securities. The issuer generally incurs all registration costs.

At June 30, 2011, the Fund held investments in restricted securities, excluding certain securities exempt from registration under the 1933 Act deemed to be liquid, as follows:

Principal Amount/ Shares		Issuer	Acquisition Dates	Cost		Value
	800,000	The Bankshares Inc.	3/22/07	$	8,000,000	$	2,694,072
	825	Broadband Ventures III LLC, secured promissory note, 5.00%, 2/01/12	7/01/10		825		825
	1,903	Elephant Capital Holdings Ltd.	8/23/04 - 3/10/08		294,226		—
	2,077,368	FIM Coinvestor Holdings I, LLC	11/20/06 - 6/02/09		—		—
	1,114,214	Hightower Holding LLC, pfd., A, Series 2	6/10/10 - 3/31/11		2,785,536		2,461,489
	47,271	IACNA Investor LLC	7/24/08		17,613		473
	172,409	Imagine Group Holdings Ltd.	8/31/04		1,765,727		2,100,183
	424,073	International Automotive Components Group Brazil LLC	4/13/06 - 12/26/08		281,629		534,900
	3,000,220	International Automotive Components Group North America, LLC	1/12/06 - 10/10/07		3,599,443		2,804,846
	9,306	NCB Warrant Holdings Ltd., A	12/16/05 - 3/10/08		87,597		—
	2,140	Olympus Re Holdings Ltd.	12/19/01		202,484		595
	1,361,600	Prime AET&D Holdings No. 1 Pty. Ltd.	10/13/10		—		—
		Total Restricted Securities (0.71% of Net Assets)				$	10,597,383

MGD-30

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual Global Discovery Securities Fund

10. UNFUNDED CAPITAL COMMITMENTS

The Fund enters into certain capital commitments and may be obligated to perform on such agreements at a future date. The Fund monitors these commitments and assesses the probability of required performance. For any agreements whose probability of performance is determined to be greater than remote, the Fund assesses the fair value of the commitment. In instances where the probability of performance is greater than remote and the performance under the commitment would result in an unrealized loss, the Fund recognizes such losses on the Statement of Assets and Liabilities and the Statement of Operations.

At June 30, 2011, the Fund had aggregate unfunded capital commitments of $2,644,464, for which no depreciation has been recognized.

11. OTHER DERIVATIVE INFORMATION

At June 30, 2011, the Fund has invested in derivative contracts which are reflected on the Statement of Assets and Liabilities as follows:

	Asset Derivatives				Liability Derivatives
Derivative Contracts Not Accounted for as Hedging Instruments	Statement of Assets and Liabilities Location	Fair Value Amount			Statement of Assets and Liabilities Location	Fair Value Amount
Foreign exchange contracts	Unrealized appreciation on forward exchange contracts/Net assets consist of – net unrealized appreciation (depreciation)	$	2,171,598	a	Unrealized depreciation on forward exchange contracts	$	8,474,032

^aIncludes cumulative appreciation (depreciation) of futures contracts as reported in the Statement of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities.

For the period ended June 30, 2011, the effect of derivative contracts on the Fund’s Statement of Operations was as follows:

Derivative Contracts Not Accounted for as Hedging Instruments	Statement of Operations Locations	Realized Gain (Loss) for the Period			Change in Unrealized Appreciation (Depreciation) for the Period
Foreign exchange contracts	Net realized gain (loss) from foreign currency transactions and futures contracts/Net change in unrealized appreciation (depreciation) on translation of other assets and liabilities denominated in foreign currencies	$	(33,911,940	)	$(1,164,601)

For the period ended June 30, 2011, the average month end market value of derivatives represented 1.06% of average month end net assets. The average month end number of open derivative contracts for the period was 90.

See Note 1(c) regarding derivative financial instruments.

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual Global Discovery Securities Fund

12. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES

The 1940 Act defines “affiliated companies” to include investments in portfolio companies in which a fund owns 5% or more of the outstanding voting securities. Investments in “affiliated companies” for the Fund for the period ended June 30, 2011, were as shown below.

Name of Issuer	Number of Shares Held at Beginning of Period	Gross Additions		Gross Reductions	Number of Shares Held at End of Period		Value at End of Period		Investment Income		Realized Capital Gain (Loss)
Non-Controlled Affiliates
The Bankshares Inc. (0.18% of Net Assets)	800,000		—	—		800,000	$	2,694,072	$	—	$	—

13. CREDIT FACILITY

The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $750 million (Global Credit Facility) which matures on January 20, 2012. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests.

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.08% based upon the unused portion of the Global Credit Facility, which is reflected in other expenses on the Statement of Operations. During the period ended June 30, 2011, the Fund did not use the Global Credit Facility.

14. FAIR VALUE MEASUREMENTS

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

• Level 1 – quoted prices in active markets for identical securities

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

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

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

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

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual Global Discovery Securities Fund

14. FAIR VALUE MEASUREMENTS (continued)

The following is a summary of the inputs used as of June 30, 2011, in valuing the Fund’s assets and liabilities carried at fair value:

	Level 1		Level 2		Level 3			Total
Assets:
Investments in Securities:
Equity Investments:a
Auto Components	$	—	$	—	$	3,342,406	b	$	3,342,406
Commercial Banks		86,520,933		—		2,694,072	b		89,215,005
Commercial Services & Supplies		5,865,648		274		—	b		5,865,922
Diversified Financial Services		37,433,582		5,966,624		2,494,007			45,894,213
Insurance		64,089,606		—		2,100,778			66,190,384
Real Estate Management & Development		10,946,487		—		2,356,314			13,302,801
Other Equity Investmentsc		1,163,041,665		—		—	b		1,163,041,665
Corporate Bonds, Notes and Senior Floating Rate Interests		—		46,461,675		825			46,462,500
Companies in Liquidation		—		16,009		—	b		16,009
Short Term Investments		26,498,602		62,528,589		—			89,027,191
Total Investments in Securities	$	1,394,396,523	$	114,973,171	$	12,988,402		$	1,522,358,096
Forward Exchange Contracts		—		2,040,162		—			2,040,162
Futures Contracts		131,436		—		—			131,436
Liabilities:
Forward Exchange Contracts		—		8,474,032		—			8,474,032

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

^bIncludes securities determined to have no value at June 30, 2011.

^cFor detailed industry descriptions, see the accompanying Statement of Investments.

At June 30, 2011, the reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining fair value, is as follows:

	Balance at Beginning of Period			Purchases		Sales			Transfers Into Level 3		Transfers Out of Level 3a			Cost  Basis Adjustmentsb			Net Realized Gain (Loss)			Net Unrealized Gain (Loss)			Balance at End of Period			Net Change in Unrealized Appreciation (Depreciation) on Assets Held at Period End
Assets:
Investments in Securities:
Equity Investments:c
Auto Compo nents	$	4,555,503	d	$	—	$	—		$	—	$	—		$	(6,389	)	$	6,389		$	(1,213,097	)	$	3,342,406	d	$	(1,213,097	)
Commercial Banks		2,905,224	d		—		—			—		—			—			—			(211,152	)		2,694,072	d		(211,152	)
Consumer Finance		4,924,234			—		(4,924,234	)		—		—			—			(1,136,557	)		1,136,557			—			—
Diversified Financial Services		1,158,855	d		1,392,768		—			—		—			—			—			(57,616	)		2,494,007			(57,616	)
Diversified Telecomm unication Services		—	d		—		—			—		—			(49	)		49			—			—	d		—
Electric Utilities		6,878,803	d		—		(6,475,783	)		—		—			—			—			(403,020	)		—	d		—
Insurance		2,143,167			—		—			—		—			—			—			(42,389	)		2,100,778			(42,389	)
IT Services		19,161			—		—			—		(17,139	)		—			—			(2,022	)		—			—
Real Estate Management & Development		2,112,892			—		—			—		—			—			—			243,422			2,356,314			243,422
Corporate Bonds, Notes and Senior Floating Rate Interests		4,251,178			—		(4,250,353	)		—		—			—			(901,265	)		901,265			825			—
Companies in Liquidation		—	d		—		—			—		—			(4,203	)		4,203			—			—	d		—
Total	$	28,949,017		$	1,392,768	$	(15,650,370	)	$	—	$	(17,139	)	$	(10,641	)	$	(2,027,181	)	$	351,948		$	12,988,402		$	(1,280,832	)

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual Global Discovery Securities Fund

14. FAIR VALUE MEASUREMENTS (continued)

^aThe investment was transferred out of Level 3 as a result of the availability of a quoted price in an active market for identical securities.

^bMay include accretion, amortization, partnership adjustments, and/or other cost basis adjustments.

^cIncludes common and preferred stocks as well as other equity investments.

^dIncludes securities determined to have no value.

15. NEW ACCOUNTING PRONOUNCEMENTS

In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (IFRS). The amendments in the ASU will improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRS and include new guidance for certain fair value measurement principles and disclosure requirements. The ASU is effective for interim and annual periods beginning after December 15, 2011. The Fund is currently evaluating the impact, if any, of applying this provision.

16. SUBSEQUENT EVENTS

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

ABBREVIATIONS
Counterparty	Currency	Selected Portfolio
BOFA - Bank of America Corp.	CHF - Swiss Franc	ADR - American Depository Receipt
BZWS - Barclays Bank PLC	EUR - Euro	FHLB - Federal Home Loan Bank
DBAB - Deutsche Bank AG	GBP - British Pound	PC - Participation Certificate
HSBC - HSBC Bank USA, N.A.	USD - United States Dollar	PIK - Payment-In-Kind
SSBT - State Street Bank and Trust Co.

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MUTUAL INTERNATIONAL SECURITIES FUND

We are pleased to bring you Mutual International Securities Fund’s semiannual report for the period ended June 30, 2011.

Performance Summary as of 6/30/11

Mutual International Securities Fund – Class 4 delivered a +3.24% total return* for the six-month period ended 6/30/11.

*The investment manager and administrator have contractually agreed to waive or assume certain expenses so that common expenses of the Fund (excluding Rule 12b-1 fees and acquired fund fees and other expenses) do not exceed 0.95% (other than certain nonroutine expenses), until 4/30/12. If the manager and administrator had not waived fees, the Fund’s total returns would have been lower.

Performance reflects the Fund’s Class 4 operating expenses, but does not include any contract fees, expenses or sales charges. If they had been included, performance would be lower. These charges and deductions, particularly for variable life policies, can have a significant effect on contract values and insurance benefits. See the contract prospectus for a complete description of these expenses, including sales charges.

Mutual International Securities Fund – Class 4

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

Current performance may differ from figures shown.

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Fund Goals and Main Investments: Mutual International Securities Fund seeks capital appreciation, which may occasionally be short term, with income as a secondary goal. The fund normally invests at least 80% of its net assets in securities of non-U.S. issuers.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. The Fund outperformed its benchmark, the MSCI Europe, Australasia, Far East Index Net Return (Local Currency), which posted a total return of +0.18% for the same period.¹

Economic and Market Overview

Global stock markets rose in the first half of 2011, though the positive momentum from the previous year waned as European sovereign debt turmoil escalated and signs emerged of an economic slowdown. Furthermore, geopolitical unrest sweeping the Middle East and North Africa roiled oil markets, and a devastating earthquake and tsunami in Japan severely disrupted global supply chains during the period. While the market recovered from these interferences, economic growth concerns persisted. Officials at the U.S. Federal Reserve Board (Fed) cut their growth forecast for the world’s largest economy, and manufacturing slowed in most major regions of the world. Japan’s earthquake, an early surge in commodity prices and a fading inventory restocking cycle were all blamed for declining economic leading indicators. Nascent monetary policy tightening in most parts of the world was also thought to inhibit growth and cool the commodities rally. Asian and emerging market policymakers tightened aggressively as inflation reached post-crisis highs in many regions, while the European Central Bank raised interest rates for the first time in two years, deviating from the extraordinarily accommodative path of the Fed, which undertook a second round of quantitative easing during the reporting period.

Amid concerns of sustained accommodative monetary policy and declining economic growth rates in the U.S., politicians debated whether to raise the nation’s debt ceiling. Sovereign debt concerns continued to plague Europe, with Greece, Ireland, Portugal and Spain subject to rating downgrades in the first half of 2011. At period-end, European politicians were working to pass painful austerity budgets despite fierce popular resistance, and discussions were ongoing about restructuring

1. Source: © 2011 Morningstar. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

Fund Risks: The Fund’s investments in stocks may offer the potential for long-term gains but can be subject to short-term price fluctuations. Foreign investing, especially in developing markets, involves additional risks, including currency fluctuations, economic instability, market volatility, and political and social instability. Investments in companies involved in mergers, liquidations, reorganizations and distressed bankruptcy, which may include defaulted debt, involve higher credit and other risks. Smaller and midsize company securities involve special risks, such as relatively small revenues, limited product lines and small market share. The Fund’s investment in certain hedging and derivative instruments may involve a small investment relative to the risk assumed. The manager applies various techniques and analyses in making investment decisions for the Fund, but there can be no guarantee that these decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

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debt payments of the region’s most troubled sovereigns. Despite these challenges, continued corporate profit strength and still favorable economic growth prospects in some regions of the world supported stock prices. Equity market leadership rotated toward defensive sectors as risk aversion increased, buoying even U.S. Treasuries toward period-end as near-term demand for perceived safe havens outweighed longer term concerns about the deteriorating U.S. credit profile. The dollar ultimately declined, however, against most currencies, broadly reflecting divergent interest rate and/or economic growth expectations.

Investment Strategy

At Mutual Series, we are committed to our distinctive value approach to investing. Our major investment strategy is investing in undervalued stocks in Asia and Europe. When selecting undervalued equities, we are attracted to fundamentally strong companies with healthy balance sheets, high-quality assets, substantial free cash flow and shareholder- oriented management teams and whose stocks are trading at discounts to our assessment of the companies’ intrinsic or business value. We also look for asset rich companies whose shares may be trading at depressed levels due to concerns over short-term earnings disappointments, litigation, management strategy or other perceived negatives. While the vast majority of our undervalued equity investments are made in publicly traded companies internationally, we may invest occasionally in privately held companies as well.

We complement this more traditional investment strategy with two others. One is distressed investing, which is complex and can take many forms. The most common distressed investment the Fund undertakes is the purchase of financially troubled or bankrupt companies’ debt at a substantial discount to face value. After the financially distressed company is reorganized, often in bankruptcy court, the old debt is typically replaced with new securities issued by the financially stronger company.

The other piece of our investment strategy is participating in arbitrage situations, another highly specialized field. When companies announce proposed mergers or takeovers, commonly referred to as “deals,” the target company may trade at a discount to the bid it ultimately accepts. One form of arbitrage involves purchasing the target company’s stock when it is trading below the value we believe it would receive in a deal. In keeping with our commitment to a relatively conservative investment approach, we typically focus our arbitrage efforts on announced deals,

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and eschew rumored deals or other situations we consider relatively risky.

In addition, it is our practice to hedge the Fund’s currency exposure when we deem it advantageous for our shareholders.

Manager’s Discussion

During the six months under review, Fund performance benefited from several investments. Three of the largest contributors during the period were U.K.-based holding company Resolution Ltd., an acquisition and consolidation vehicle that buys and restructures financial services firms in western Europe; French insurance conglomerate AXA; and ThyssenKrupp, a German steel and engineering company.

Early in 2011, shares of Resolution and AXA lost value along with most other capital market-sensitive life insurers. However, Resolution created value through attention to its Friends Provident operating business, which markets life insurance and a variety of pension and disability plans throughout the U.K. In AXA’s case, the accretive acquisition of the majority of the company’s U.K. life insurance business seemed to us an encouraging sign that it was executing its strategy to consolidate the U.K. life insurance industry. AXA shareholders benefited considerably from the U.K. sale, as well as a better articulation of management’s increased focus on profitability, earnings and cash flow.

ThyssenKrupp’s performance was enhanced by the company’s May 2011 announcement regarding the details surrounding an anticipated restructuring of its portfolio of businesses. The market reacted positively to the news, bolstering the company’s stock price for the remainder of the Fund’s semiannual period. We believe ThyssenKrupp’s pending restructuring stands to be a meaningful catalyst in streamlining its disparate businesses, a move that holds the potential to unlock shareholder value.

Despite the Fund’s positive performance the first half of 2011, there were a few disappointments in the portfolio. Among the top detractors were Japanese video game software and console maker Nintendo; Royal TNT Post (TNT), the postal service for the Netherlands; and Koninklijke Philips Electronics (Philips), a Netherlands-based diversified manufacturer.

Nintendo’s share price deteriorated after the company reported sales of its new handheld console, the Nintendo 3DS, were slower than anticipated. In particular, sales of this new gaming device were weak in its

Top 10 Sectors/Industries

Mutual International Securities Fund

Based on Equity Securities

6/30/11

	% of Total Net Assets
Insurance		9.9%
Commercial Banks		8.8%
Construction & Engineering		5.1%
Industrial Conglomerates		4.7%
Media		4.0%
Food Products		3.9%
Automobiles		3.5%
Pharmaceuticals		3.5%
Food & Staples Retailing		3.2%
Diversified Financial Services		3.1%

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home market of Japan, where the March 11 earthquake and tsunami hurt consumer sentiment, and in other parts of the world due to a lack of compelling software titles at launch date and the console’s relatively high initial sales price. At period-end, cash accounted for more than 50% of Nintendo’s market capitalization, and we believe the company can successfully leverage its software intellectual property in the next gaming console cycle. With this in mind, we continued to hold Nintendo in the portfolio at period-end.

TNT is Europe’s second-largest express package carrier and the Netherlands’ primary postal operator. During the first four months of 2011, its share price declined following the announcement of disappointing operating results. Specifically, execution issues in its Brazil operations led to operating losses in that division, and a lack of pricing power in its European operations led to lower profits compared with analysts’ expectations. TNT’s stock price decline continued into the spring following the announcement of lower first-quarter profits. In late May, the company split into two separately traded companies, TNT Express and PostNL, a traditional mail operator. Shares in both of the spun-off entities declined as investors’ expectations faded that there would be a bid for TNT Express. For PostNL, the market became concerned that despite its high dividend yield, the company will need to sell assets (namely a stake in TNT Express) in the near term to fund those dividend payments.

Philips’ share price declined in March when the company reported a reduction in profits for the first quarter due to losses within its consumer electronics division, stemming primarily from lackluster television sales. Its share price came under additional pressure in June after management warned the company would not meet analysts’ profit expectations for the second quarter, either. Philips’ health care division continued to generate strong results, but performance in the consumer and lighting divisions were comparatively weak. The consumer division has suffered from faltering western European demand, especially for its higher priced products. Meanwhile, Philips’ lighting division has been negatively affected by reduced construction activity and the company’s inability to fully pass on rising raw material costs. We continued to favor our investment in Philips due to its strong balance sheet with virtually no net debt, as well as a newly appointed CEO and CFO.

Finally, investors should note that we maintained our currency hedging posture of being more hedged than not to the U.S. dollar, largely through the use of forward currency exchange contracts. Certain

Top 10 Holdings

Mutual International Securities Fund

6/30/11

Company Sector/Industry, Country	% of Total Net Assets
China Fishery Group Ltd.		1.8%
Food Products, China
ThyssenKrupp AG		1.7%
Metals & Mining, Germany
Resolution Ltd.		1.7%
Insurance, U.K.
Aozora Bank Ltd.		1.5%
Commercial Banks, Japan
Rexam PLC		1.5%
Containers & Packaging, U.K.
Vinci SA		1.4%
Construction & Engineering, France
Boart Longyear Group		1.4%
Construction & Engineering, Australia
Nestle SA		1.3%
Food Products, Switzerland
KHD Humboldt Wedag International AG		1.3%
Construction & Engineering, Germany
Porsche Automobile Holding SE		1.3%
Automobiles, Germany

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

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currencies strengthened in relation to the U.S. dollar in the first six months of 2011, and so our hedging strategy hindered Fund performance during the reporting period.

Thank you for your continued participation in Mutual International Securities Fund. We look forward to serving your future investment needs.

The foregoing information reflects our analysis, opinions and portfolio holdings as of June 30, 2011, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

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Fund Expenses

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

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

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

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

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

Actual Fund Expenses

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

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

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

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

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

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

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

Mutual International Securities Fund – Class 4

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Hypothetical Example for Comparison with Other Mutual Funds

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

Class 4	Beginning Account Value 1/1/11		Ending Account Value 6/30/11		Fund-Level Expenses Incurred During Period* 1/1/11–6/30/11
Actual	$	1,000	$	1,032.40	$	6.55
Hypothetical (5% return before expenses)	$	1,000	$	1,018.35	$	6.51

*Expenses are calculated using the most recent six-month annualized expense ratio, net of expense waivers, for the Fund’s Class 4 shares (1.30%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 181/365 to reflect the one-half year period.

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Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Mutual International Securities Fund

	Six Months Ended June 30, 2011 (unaudited)		Year Ended December 31,
Class 2			2010			2009a
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	12.04	$	11.82		$	10.00
Income from investment operationsb:
Net investment incomec		0.18		0.25			0.08
Net realized and unrealized gains (losses)		0.22		1.51			2.30
Total from investment operations		0.40		1.76			2.38
Less distributions from:
Net investment income		—		(0.67	)		(0.13	)
Net realized gains		—		(0.87	)		(0.43	)
Total distributions		—		(1.54	)		(0.56	)
Net asset value, end of period	$	12.44	$	12.04		$	11.82
Total returnd		3.32%		15.49%			23.91%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		4.86%		4.97%			8.61%	f
Expenses net of waiver and payments by affiliates		1.20%		1.20%	g		1.21%	f,g
Expenses incurred in connection with securities sold short		—		—			0.01%
Net investment income		3.01%		2.07%			1.27%
Supplemental data
Net assets, end of period (000’s)	$	1,244	$	1,204		$	1,182
Portfolio turnover rate		44.01%		41.11%			41.84%

^aFor the period June 15, 2009 (commencement of operations) to December 31, 2009.

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

^cBased on average daily shares outstanding.

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

^eRatios are annualized for periods less than one year.

^fIncludes dividend expense on securities sold short and borrowing fees, if any. See below for the ratios of such expenses to average net assets for the period presented. See Note 1(d).

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

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

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Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Mutual International Securities Fund

	Six Months Ended June 30, 2011 (unaudited)		Year Ended December 31,
Class 4			2010			2009a
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	12.04	$	11.81		$	10.00
Income from investment operationsb:
Net investment incomec		0.18		0.24			0.07
Net realized and unrealized gains (losses)		0.21		1.51			2.29
Total from investment operations		0.39		1.75			2.36
Less distributions from:
Net investment income		—		(0.65	)		(0.12	)
Net realized gains		—		(0.87	)		(0.43	)
Total distributions		—		(1.52	)		(0.55	)
Net asset value, end of period	$	12.43	$	12.04		$	11.81
Total returnd		3.24%		15.49%			23.76%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		4.96%		5.07%			8.71%	f
Expenses net of waiver and payments by affiliates		1.30%		1.30%	g		1.31%	f,g
Expenses incurred in connection with securities sold short		—		—			0.01%
Net investment income		2.91%		1.97%			1.17%
Supplemental data
Net assets, end of period (000’s)	$	1,243	$	1,204		$	1,181
Portfolio turnover rate		44.01%		41.11%			41.84%

^aFor the period June 15, 2009 (commencement of operations) to December 31, 2009.

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

^cBased on average daily shares outstanding.

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

^eRatios are annualized for periods less than one year.

^fIncludes dividend expense on securities sold short and borrowing fees, if any. See below for the ratios of such expenses to average net assets for the period presented. See Note 1(d).

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

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

MI-10

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited)

Mutual International Securities Fund	Country	Shares		Value
Common Stocks 90.8%
Air Freight & Logistics 1.7%
PostNL NV	Netherlands		900	$	7,638
Sinotrans Ltd., H	China		103,980		24,586
TNT Express NV	Netherlands		900		9,334
					41,558
Automobiles 1.2%
Daimler AG (EUR Traded)	Germany		404		30,283
Beverages 2.2%
Asahi Breweries Ltd.	Japan		683		13,702
Foster’s Group Ltd.	Australia		3,800		20,987
Pernod Ricard SA	France		200		19,713
					54,402
Capital Markets 2.8%
F&C Asset Management PLC	United Kingdom		19,390		23,316
Mirae Asset Securities Co. Ltd.	South Korea		570		23,959
aUBS AG (CHF Traded)	Switzerland		1,253		22,846
					70,121
Chemicals 2.6%
Linde AG	Germany		179		31,383
Yingde Gases Group Co. Ltd.	China		35,500		32,709
					64,092
Commercial Banks 8.8%
Aozora Bank Ltd.	Japan		16,000		36,967
Barclays PLC	United Kingdom		4,971		20,462
BNP Paribas	France		261		20,147
Hana Financial Group Inc.	South Korea		810		28,316
Intesa Sanpaolo SpA	Italy		8,176		21,768
Intesa Sanpaolo SpA, di Risp	Italy		3,977		8,587
KB Financial Group Inc.	South Korea		253		11,974
KB Financial Group Inc., ADR	South Korea		120		5,736
Korea Exchange Bank	South Korea		3,020		27,172
Societe Generale, A	France		294		17,446
Woori Finance Holdings Co. Ltd.	South Korea		1,500		19,611
					218,186
Commercial Services & Supplies 1.0%
Edenred	France		813		24,806
Construction & Engineering 5.1%
Boart Longyear Group	Australia		7,955		34,039
Henderson Investment Ltd.	Hong Kong		291,605		25,856
aKHD Humboldt Wedag International AG	Germany		3,790		33,328
Vinci SA	France		540		34,589
					127,812
Construction Materials 1.8%
CRH PLC	Ireland		992		21,967
SA des Ciments Vicat	France		261		21,918
					43,885
Containers & Packaging 1.5%
Rexam PLC	United Kingdom		5,985		36,764

MI-11

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Mutual International Securities Fund	Country	Shares		Value
Common Stocks (continued)
Diversified Financial Services 3.1%
Deutsche Boerse AG	Germany		183	$	13,906
First Pacific Co. Ltd.	Hong Kong		27,752		24,892
Guoco Group Ltd.	Hong Kong		563		6,895
aOsaka Securities Exchange Co. Ltd.	Japan		7		31,172
					76,865
Diversified Telecommunication Services 1.5%
Telecom Italia SpA	Italy		11,739		13,661
Telefonica SA	Spain		997		24,376
					38,037
Electric Utilities 1.1%
E.ON AG	Germany		927		26,395
a,bPrime AET&D Holdings No. 1 Pty. Ltd.	Australia		6,987		—
					26,395
Electrical Equipment 0.3%
Alstom SA	France		118		7,276
Energy Equipment & Services 0.4%
aDockwise Ltd.	Norway		410		11,267
Food & Staples Retailing 3.2%
FamilyMart Co. Ltd.	Japan		725		26,567
Koninklijke Ahold NV	Netherlands		1,794		24,106
Lawson Inc.	Japan		556		29,110
					79,783
Food Products 3.9%
China Fishery Group Ltd.	China		31,605		44,257
Nestle SA	Switzerland		537		33,371
People’s Food Holdings Ltd.	China		31,000		19,181
					96,809
Hotels, Restaurants & Leisure 2.9%
Accor SA	France		493		22,045
Ladbrokes PLC	United Kingdom		7,896		19,319
REXLot Holdings Ltd.	Hong Kong		324,568		31,281
					72,645
Household Durables 2.2%
aBerkeley Group Holdings PLC	United Kingdom		1,204		24,869
Skyworth Digital Holdings Ltd.	Hong Kong		48,000		28,806
					53,675
Industrial Conglomerates 4.7%
aGallant Venture Ltd.	Singapore		38,000		12,684
Jardine Matheson Holdings Ltd.	Hong Kong		473		27,122
Jardine Strategic Holdings Ltd.	Hong Kong		364		11,138
Koninklijke Philips Electronics NV	Netherlands		536		13,766
Shanghai Industrial Holdings Ltd.	China		7,000		25,772
Shun Tak Holdings Ltd.	Hong Kong		42,000		25,475
					115,957

MI-12

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Mutual International Securities Fund	Country	Shares		Value
Common Stocks (continued)
Insurance 9.9%
ACE Ltd.	United States		400	$	26,328
Ageas	Belgium		9,870		26,780
AXA SA	France		1,237		28,109
Catlin Group Ltd.	United Kingdom		3,861		24,929
Hiscox Ltd.	United Kingdom		3,863		25,958
Lancashire Holdings Ltd.	United Kingdom		2,305		24,156
Resolution Ltd.	United Kingdom		8,811		41,567
RSA Insurance Group PLC	United Kingdom		12,020		26,033
Zurich Financial Services AG	Switzerland		93		23,516
					247,376
Machinery 0.5%
aKUKA AG	Germany		510		13,719
Marine 1.0%
A.P. Moller-Maersk AS, B	Denmark		3		25,873
Media 4.0%
aAustar United Communications Ltd.	Australia		18,623		26,861
Eutelsat Communications	France		283		12,722
Sinomedia Holding Ltd.	China		59,017		20,704
aVisionChina Media Inc., ADR	China		5,560		15,735
Vivendi SA	France		830		23,080
					99,102
Metals & Mining 1.7%
ThyssenKrupp AG	Germany		826		42,708
Multi-Utilities 2.9%
GDF Suez	France		798		29,203
Hera SpA	Italy		9,780		20,706
Iren SpA	Italy		11,997		21,573
					71,482
Multiline Retail 1.5%
Marks & Spencer Group PLC	United Kingdom		1,424		8,265
New World Department Store China	China		36,000		28,312
					36,577
Oil, Gas & Consumable Fuels 2.0%
Royal Dutch Shell PLC, A	United Kingdom		681		24,175
Total SA, B	France		430		24,868
					49,043
Pharmaceuticals 3.5%
Novartis AG	Switzerland		445		27,257
Roche Holding AG	Switzerland		168		28,113
Sanofi	France		390		31,355
					86,725
Real Estate Investment Trusts (REITs) 0.6%
The Link REIT	Hong Kong		4,500		15,382
Real Estate Management & Development 2.6%
Franshion Properties China Ltd.	China		114,390		29,106
Parkway Life REIT	Singapore		13,000		19,474
Renhe Commercial Holdings Co. Ltd.	China		82,000		15,701
					64,281

MI-13

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Mutual International Securities Fund	Country	Shares		Value
Common Stocks (continued)
Software 1.7%
Nintendo Co. Ltd.	Japan		100	$	18,719
Polaris Software Lab Ltd.	India		6,060		24,407
					43,126
Tobacco 1.9%
British American Tobacco PLC	United Kingdom		591		25,906
Imperial Tobacco Group PLC	United Kingdom		620		20,602
					46,508
Trading Companies & Distributors 3.0%
Mitsubishi Corp.	Japan		800		19,874
Mitsui & Co. Ltd.	Japan		1,300		22,349
Seven Group Holdings Ltd.	Australia		3,150		32,531
					74,754
Water Utilities 1.0%
Guangdong Investment Ltd.	China		46,000		24,709
Wireless Telecommunication Services 1.0%
Vodafone Group PLC	United Kingdom		9,586		25,438
Total Common Stocks (Cost $1,942,380)					2,257,421
Preferred Stocks 2.3%
Automobiles 2.3%
Porsche Automobile Holding SE, pfd.	Germany		417		33,199
Volkswagen AG, pfd.	Germany		116		23,951
Total Preferred Stocks (Cost $38,648)					57,150
Total Investments before Short Term Investments (Cost $1,981,028)					2,314,571
Short Term Investments (Cost $12,696) 0.5%
cInvestments from Cash Collateral Received for Loaned Securities (Cost $12,696) 0.5%
Money Market Funds 0.5%
dBNY Mellon Overnight Government Fund, 0.05%	United States		12,696		12,696
Total Investments (Cost $1,993,724) 93.6%					2,327,267
Other Assets, less Liabilities 6.4%					159,783
Net Assets 100.0%				$	2,487,050

^aNon-income producing.

^bSee Note 8 regarding restricted securities.

^cSee Note 1(e) regarding securities on loan.

^dThe rate shown is the annualized seven-day yield at period end.

MI-14

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Mutual International Securities Fund

At June 30, 2011, the Fund had the following forward exchange contracts outstanding. See Note 1(c).

Forward Exchange Contracts

Currency	Counterparty		Type		Quantity		Contract Amount		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
Swiss Franc		SSBT		Sell		89,635	$	102,557		8/10/11	$	—	$	(4,076	)
Swiss Franc		DBAB		Buy		3,258		3,888		8/10/11		—		(12	)
Swiss Franc		DBAB		Buy		2,830		3,359		8/10/11		8		—
British Pound		BOFA		Sell		172,556		282,129		8/12/11		5,347		—
British Pound		DBAB		Sell		4,000		6,501		8/12/11		85		—
Australian Dollar		DBAB		Sell		73,000		77,833		8/23/11		—		(324	)
Euro		DBAB		Sell		482,637		692,150		9/15/11		—		(6,168	)
Euro		BZWS		Sell		43,000		61,988		9/15/11		—		(246	)
Euro		DBAB		Buy		29,301		41,418		9/15/11		977		—
British Pound		BZWS		Buy		4,750		7,700		9/16/11		—		(84	)
Japanese Yen		BOFA		Sell		9,062,045		110,072		10/20/11		—		(2,579	)
Japanese Yen		DBAB		Sell		1,461,200		17,716		10/20/11		—		(448	)
Japanese Yen		SSBT		Sell		677,000		8,154		10/20/11		—		(262	)
Japanese Yen		DBAB		Buy		171,128		2,130		10/20/11		—		(3	)
Japanese Yen		SSBT		Buy		373,000		4,565		10/20/11		71		—
Japanese Yen		DBAB		Buy		10,000		123		10/20/11		2		—
Japanese Yen		DBAB		Sell		1,169,000		14,571		10/20/11		64		—
Unrealized appreciation (depreciation)												6,554		(14,202	)
Net unrealized appreciation (depreciation)													$	(7,648	)

See Abbreviations on page MI-27.

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

MI-15

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

June 30, 2011 (unaudited)

	Mutual International Securities Fund
Assets:
Investments in securities:
Cost	$	1,993,724
Value	$	2,327,267
Cash		12,446
Foreign currency, at value (cost $158,788)		159,332
Receivables:
Investment securities sold (includes securities loaned in the amount of $13,101)		24,274
Dividends and interest		7,433
Affiliates		30,816
Unrealized appreciation on forward exchange contracts		6,554
Total assets		2,568,122
Liabilities:
Payables:
Investment securities purchased		20,492
Professional fees		26,083
Pricing fees		3,829
Payable upon return of securities loaned		12,696
Unrealized depreciation on forward exchange contracts		14,202
Accrued expenses and other liabilities		3,770
Total liabilities		81,072
Net assets, at value	$	2,487,050
Net assets consist of:
Paid-in capital	$	1,997,280
Distributions in excess of net investment income		(4,288	)
Net unrealized appreciation (depreciation)		326,975
Accumulated net realized gain (loss)		167,083
Net assets, at value	$	2,487,050
Class 2:
Net assets, at value	$	1,244,073
Shares outstanding		100,000
Net asset value and maximum offering price per share	$	12.44
Class 4:
Net assets, at value	$	1,242,977
Shares outstanding		100,000
Net asset value and maximum offering price per share	$	12.43

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

MI-16

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the six months ended June 30, 2011 (unaudited)

	Mutual International Securities Fund
Investment income:
Dividends (net of foreign taxes of $4,511)	$	51,137
Income from securities loaned		609
Total investment income		51,746
Expenses:
Management fees (Note 3a)		9,842
Administrative fees (Note 3b)		3,076
Distribution fees: (Note 3c)
Class 2		1,538
Class 4		2,152
Custodian fees (Note 4)		813
Reports to shareholders		6,179
Registration and filing fees		588
Professional fees		27,150
Pricing fees		8,507
Other		513
Total expenses		60,358
Expenses waived/paid by affiliates (Note 3e)		(44,979	)
Net expenses		15,379
Net investment income		36,367
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		156,604
Foreign currency transactions		(66,398	)
Net realized gain (loss)		90,206
Net change in unrealized appreciation (depreciation) on:
Investments		(45,166	)
Translation of other assets and liabilities denominated in foreign currencies		(2,357	)
Net change in unrealized appreciation (depreciation)		(47,523	)
Net realized and unrealized gain (loss)		42,683
Net increase (decrease) in net assets resulting from operations	$	79,050

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

MI-17

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets

	Mutual International Securities Fund
	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31, 2010
Increase (decrease) in net assets:
Operations:
Net investment income	$	36,367		$	48,399
Net realized gain (loss) from investments, foreign currency transactions and securities sold short		90,206			250,886
Net change in unrealized appreciation (depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies		(47,523	)		52,674
Net increase (decrease) in net assets resulting from operations		79,050			351,959
Distributions to shareholders from:
Net investment income:
Class 2		—			(66,680	)
Class 4		—			(65,490	)
Net realized gains:
Class 2		—			(87,300	)
Class 4		—			(87,300	)
Total distributions to shareholders		—			(306,770	)
Net increase (decrease) in net assets		79,050			45,189
Net assets:
Beginning of period		2,408,000			2,362,811
End of period	$	2,487,050		$	2,408,000
Distributions in excess of net investment income included in net assets:
End of period	$	(4,288	)	$	(40,655	)

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

MI-18

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited)

Mutual International Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

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

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

The Fund’s investments in securities and other financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Under procedures approved by the Trust’s Board of Trustees, the Fund may utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

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

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

The Fund has procedures to determine the fair value of securities and other financial instruments for which market prices are not readily available or which may not be reliably priced. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.

Trading in securities on foreign securities stock exchanges and over-the-counter markets may be completed before the daily close of business on the NYSE. Occasionally, events occur between the time at which trading in a foreign security is completed and the close of the NYSE that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund’s portfolio securities as determined at the foreign market close and the latest indications of value at the close of the NYSE. In order to minimize the potential for these differences, the investment manager monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depository Receipts, 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 may call into question the reliability of the values of the foreign securities held by the Fund. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services.

MI-19

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual International Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

b. Foreign Currency Translation

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

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

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

c. Derivative Financial Instruments

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

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

See Note 9 regarding other derivative information.

d. Securities Sold Short

The Fund is engaged in selling securities short, which obligates the Fund to replace a borrowed security with the same security at current market value. The Fund incurs a loss if the price of the security increases between the date of the short sale and the date on which the Fund replaces the borrowed security. The Fund realizes a gain if the price of the security declines between those dates. Gains are limited to the price at which the Fund sold the security short, while losses are potentially unlimited in size.

The Fund is required to establish a margin account with the broker lending the security sold short. While the short sale is outstanding, the broker retains the proceeds of the short sale and the Fund must maintain a deposit with broker consisting of cash and/or securities having a value equal to a specified percentage of the value of the securities sold short. The Fund is obligated to pay fees for borrowing the securities sold short and is required to pay the counterparty any dividends or interest due on securities sold short. Such dividends or interest and any security borrowing fees are recorded as an expense to the Fund.

MI-20

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual International Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

e. Securities Lending

The Fund participates in an agency based security lending program. The Fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the market value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the market value of loaned securities, as determined at the close of Fund business each day; any additional collateral required due to changes in security values is delivered to the Fund on the next business day. The collateral is invested in a non-registered money fund managed by the Fund’s custodian on the Fund’s behalf. The Fund receives income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. The Fund bears the market risk with respect to the collateral investment, securities loaned, and the risk that the agent may default on its obligations to the Fund. The securities lending agent has agreed to indemnify the Fund in the event of default by a third party borrower.

f. Income Taxes

It is the Fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and excise taxes. As a result, no provision for U.S. federal income taxes is required. The Fund files U.S. income tax returns as well as tax returns in certain other jurisdictions. The Fund records a provision for taxes in its financial statements including penalties and interest, if any, for a tax position taken on a tax return (or expected to be taken) when it fails to meet the more likely than not (a greater than 50% probability) threshold and based on the technical merits, the tax position may not be sustained upon examination by the tax authorities. As of June 30, 2011, and for all open tax years, the Fund has determined that no provision for income tax is required in the Fund’s financial statements. Open tax years are those that remain subject to examination and are based on each tax jurisdiction statute of limitation.

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

g. Security Transactions, Investment Income, Expenses and Distributions

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

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

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

MI-21

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual International Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

h. Accounting Estimates

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

i. Guarantees and Indemnifications

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

2. SHARES OF BENEFICIAL INTEREST

At June 30, 2011, there were an unlimited number of shares authorized (without par value). During the period ended June 30, 2011 and the year ended December 31, 2010, there were no transactions in the Fund’s shares.

3. TRANSACTIONS WITH AFFILIATES

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

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

a. Management Fees

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

Annualized Fee Rate	Net Assets
0.800%	Up to and including $4 billion
0.770%	Over $4 billion, up to and including $7 billion
0.750%	Over $7 billion, up to and including $10 billion
0.730%	In excess of $10 billion

b. Administrative Fees

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

MI-22

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual International Securities Fund

3. TRANSACTIONS WITH AFFILIATES (continued)

c. Distribution Fees

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

d. Transfer Agent Fees

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

e. Waiver and Expense Reimbursements

FT Services and Franklin Mutual have contractually agreed in advance to waive or limit their respective fees and to assume as their own expense certain expenses otherwise payable by the fund so that the common expenses (i.e. a combination of management fees, administrative fees, and other expenses, but excluding distribution fees and acquired fund fees and expenses) for each class of the Fund do not exceed 0.95% (other than certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations, and liquidations) until April 30, 2012.

f. Other Affiliated Transactions

At June 30, 2011, Franklin Advisers owned 100% of the Fund’s outstanding shares.

4. EXPENSE OFFSET ARRANGEMENT

The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses. During the period ended June 30, 2011, there were no credits earned.

5. INCOME TAXES

At June 30, 2011, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	2,051,828
Unrealized appreciation	$	367,672
Unrealized depreciation		(92,233	)
Net unrealized appreciation (depreciation)	$	275,439

Net investment income differs for financial statement and tax purposes primarily due to differing treatments of foreign currency transactions, passive foreign investment company shares, and corporate actions.

Net realized gains (losses) differ for financial statement and tax purposes primarily due to differing treatments of wash sales, foreign currency transactions and passive foreign investment company shares.

MI-23

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual International Securities Fund

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2011, aggregated $1,025,377 and $1,075,183, respectively.

7. CONCENTRATION OF RISK

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

8. RESTRICTED SECURITIES

The Fund invests in securities that are restricted under the Securities Act of 1933 (1933 Act) or which are subject to legal, contractual, or other agreed upon restrictions on resale. Restricted securities are often purchased in private placement transactions, and cannot be sold without prior registration unless the sale is pursuant to an exemption under the 1933 Act. Disposal of these securities may require greater effort and expense, and prompt sale at an acceptable price may be difficult. The Fund may have registration rights for restricted securities. The issuer generally incurs all registration costs.

At June 30, 2011, the Fund held an investment in a restricted security, excluding certain securities exempt from registration under the 1933 Act deemed to be liquid, as follows:

Shares		Issuer	Acquisition Date		Cost		Value
	6,987	Prime AET&H Holdings No.1 Pty. Ltd. (0.00% of Net Assets)		10/13/10	$	—	$	—

9. OTHER DERIVATIVE INFORMATION

At June 30, 2011, the Fund has invested in derivative contracts which are reflected on the Statement of Assets and Liabilities as follows:

	Asset Derivatives			Liability Derivatives
Derivative Contracts Not Accounted for as Hedging Instruments	Statement of Assets and Liabilities Location	Fair Value Amount		Statement of Assets and Liabilities Location	Fair Value Amount
Foreign exchange contracts	Unrealized appreciation on forward exchange contracts	$	6,554	Unrealized depreciation on forward exchange contracts	$	14,202

For the period ended June 30, 2011, the effect of derivative contracts on the Fund’s Statement of Operations was as follows:

Derivative Contracts Not Accounted for as Hedging Instruments	Statement of Operations Locations	Realized Gain (Loss) for the Period			Change in Unrealized Appreciation (Depreciation) for the Period
Foreign exchange contracts	Net realized gain (loss) from foreign currency transactions / Net change in unrealized appreciation (depreciation) on translation of other assets and liabilities denominated in foreign currencies	$	(69,018	)	$(3,260)

MI-24

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual International Securities Fund

9. OTHER DERIVATIVE INFORMATION (continued)

MI-25

For the period ended June 30, 2011, the average month end market value of derivatives represented 1.34% of average month end net assets. The average month end number of open derivative contracts for the period was 21.

See Note 1(c) regarding derivative financial instruments.

10. CREDIT FACILITY

The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $750 million (Global Credit Facility) which matures on January 20, 2012. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests.

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.08% based upon the unused portion of the Global Credit Facility, which is reflected in other expenses on the Statement of Operations. During the period ended June 30, 2011, the Fund did not use the Global Credit Facility.

11. FAIR VALUE MEASUREMENTS

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

• Level 1 – quoted prices in active markets for identical securities

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

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

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

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

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual International Securities Fund

11. FAIR VALUE MEASUREMENTS (continued)

The following is a summary of the inputs used as of June 30, 2011, in valuing the Fund’s assets and liabilities carried at fair value:

	Level 1		Level 2		Level 3			Total
Assets:
Investments in Securities:
Equity Investmentsa,b	$	2,314,571	$	—	$	—	c	$	2,314,571
Short Term Investments		—		12,696		—			12,696
Total Investments in Securities	$	2,314,571	$	12,696	$	—		$	2,327,267
Forward Exchange Contracts		—		6,554		—			6,554
Liabilities:
Forward Exchange Contracts		—		14,202		—			14,202

^aIncludes common and preferred stock.

^bFor detailed industry descriptions, see the accompanying Statement of Investments.

^cIncludes securities determined to have no value at June 30, 2011.

At June 30, 2011, the reconciliation of assets in which significant unobservable inputs (level 3) were used in determining fair value, is as follows:

	Balance at Beginning of Period		Purchases		Sales			Transfers Into Level 3		Transfers Out of Level 3		Cost Basis Adjustments		Net Realized Gain (Loss)		Net Unrealized Gain (Loss)			Balance at End of Period		Net Change in Unrealized Appreciation (Depreciation) on Assets Held at Period End
Assets:
Equity Investments-Electric Utilities	$	35,298a	$	—	$	(27,071	)	$	—	$	—	$	—	$	—	$	(8,227	)	$	—a	$	—

^aIncludes securities determined to have no value.

12. NEW ACCOUNTING PRONOUNCEMENTS

In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (IFRS). The amendments in the ASU will improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRS and include new guidance for certain fair value measurement principles and disclosure requirements. The ASU is effective for interim and annual periods beginning after December 15, 2011. The Fund is currently evaluating the impact, if any, of applying this provision.

MI-26

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual International Securities Fund

13. SUBSEQUENT EVENTS

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

ABBREVIATIONS
Counterparty	Selected Portfolio
BOFA - Bank of America Corp.	ADR - American Depository Receipt
BZWS - Barclays Bank PLC
DBAB - Deutsche Bank AG
SSBT - State Street Bank and Trust Co.

MI-27

MUTUAL SHARES SECURITIES FUND

This semiannual report for Mutual Shares Securities Fund covers the period ended June 30, 2011.

Performance Summary as of 6/30/11

Mutual Shares Securities Fund – Class 4 delivered a +5.68% total return for the six-month period ended 6/30/11.

Performance reflects the Fund’s Class 4 operating expenses, but does not include any contract fees, expenses or sales charges. If they had been included, performance would be lower. These charges and deductions, particularly for variable life policies, can have a significant effect on contract values and insurance benefits. See the contract prospectus for a complete description of these expenses, including sales charges.

Mutual Shares Securities Fund – Class 4

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

Current performance may differ from figures shown.

MS-1

Fund Goals and Main Investments: Mutual Shares Securities Fund seeks capital appreciation, with income as a secondary goal. The Fund normally invests primarily in U.S. and foreign equity securities that the manager believes are undervalued.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. The Fund underperformed its benchmark, the Standard & Poor’s 500 Index, which delivered a +6.02% total return for the period under review.¹

Economic and Market Overview

The global economy expanded despite geopolitical and inflationary pressures during the six-month period ended June 30, 2011. In the U.S., business activity increased and consumer spending stayed above pre-recession levels. The U.S. was a key engine in a sustained global manufacturing expansion as international trade volume continued to increase, albeit at a moderate pace. The U.S. financial system appeared closer to a full recovery, although the country still faced challenges dealing with persistent unemployment, housing market weakness and massive debt. During the period, signs emerged of a global economic slowdown. Officials at the U.S. Federal Reserve Board (Fed) cut their growth forecast for the world’s largest economy, and manufacturing growth slowed in most major regions of the world. Japan’s earthquake, an early surge in commodity prices and a fading inventory restocking cycle were all blamed for declining economic leading indicators. Some monetary policy tightening in most parts of the world was also thought to inhibit growth and cool the commodities rally.

Inflation at the consumer, producer and trade levels rose across much of the world, but in the U.S. it remained relatively contained. As a result, the Fed maintained its accommodative monetary policy while ending its second round of quantitative easing on June 30. The Fed said, however, it would continue to purchase Treasuries with proceeds from maturing debt in an effort to support economic growth. This move deviated from many other central banks around the world that raised interest rates to dampen inflation pressures.

Continued corporate profit strength and still favorable economic growth prospects in some regions of the world supported equities.

1. Source: © 2011 Morningstar. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

Fund Risks: The Fund’s investments in stocks may offer the potential for long-term gains but can be subject to short-term price fluctuations. Investments in companies involved in mergers, liquidations, reorganizations and distressed bankruptcy, which may include defaulted debt, involve higher credit and other risks. Foreign investing involves additional risks, including currency fluctuations, economic instability, market volatility, and political and social instability. Smaller and midsize company securities involve special risks, such as relatively small revenues, limited product lines and small market share. The Fund’s investment in certain hedging and derivative instruments may involve a small investment relative to the risk assumed. The manager applies various techniques and analyses in making investment decisions for the Fund, but there can be no guarantee that these decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

MS-2

Global stock markets made gains in the first half of 2011, though the positive momentum from the previous year waned as investors weathered international events that included revolutions and civil unrest across the Middle East and North Africa, the multiple crises triggered by Japan’s earthquake and tsunami, and sovereign debt worries and credit downgrades in Europe. The dollar declined during the period against most currencies, however, broadly reflecting divergent interest rate and/or economic growth expectations.

Investment Strategy

At Mutual Series, we are committed to our distinctive value approach to investing. Our major investment strategy is investing in undervalued stocks. When selecting undervalued equities, we are attracted to fundamentally strong companies with healthy balance sheets, high-quality assets, substantial free cash flow and shareholder-oriented management teams and whose stocks are trading at discounts to our assessment of the companies’ intrinsic or business value. We also look for asset rich companies whose shares may be trading at depressed levels due to concerns over short-term earnings disappointments, litigation, management strategy or other perceived negatives. While the vast majority of our undervalued equity investments are made in publicly traded companies globally, we may invest occasionally in privately held companies as well.

We complement this more traditional investment strategy with two others. One is distressed investing, which is complex and can take many forms. The most common distressed investment the Fund undertakes is the purchase of financially troubled or bankrupt companies’ debt at a substantial discount to face value. After the financially distressed company is reorganized, often in bankruptcy court, the old debt is typically replaced with new securities issued by the financially stronger company.

The other piece of our investment strategy is participating in arbitrage situations, another highly specialized field. When companies announce proposed mergers or takeovers, commonly referred to as “deals,” the target company may trade at a discount to the bid it ultimately accepts. One form of arbitrage involves purchasing the target company’s stock when it is trading below the value we believe it would receive in a deal. In keeping with our commitment to a relatively conservative investment approach, we typically focus our arbitrage efforts on announced deals, and eschew rumored deals or other situations we consider relatively risky.

MS-3

In addition, it is our practice to hedge the Fund’s currency exposure when we deem it advantageous for our shareholders.

Manager’s Discussion

As stock markets advanced unevenly in the first half of 2011, several Fund investments increased in value. Three particularly strong performers were UnitedHealth Group, a U.S. managed health care provider; Marathon Oil, a U.S.-based oil and gas exploration and production company with interests worldwide; and U.K.-based British American Tobacco (BAT).

Shares of UnitedHealth rose sharply in value during the first half of 2011. In January, its share price was fueled by a combination of the company’s announcement of better-than-expected fourth quarter 2010 earnings and, more significantly, its higher revenue guidance for 2011. Other positive catalysts included the company’s ongoing efforts to increase shareholder value through share buybacks and dividends. In our view, UnitedHealth’s long-term earnings growth is supported by a diversified business mix and a growing percentage of earnings generated by its increasingly successful health care services business. Although there was no specific catalyst for the continued increase in the company’s stock price in the second quarter, we believe many investors may have recognized the low earnings multiple at which the company’s shares had been trading. In addition, investors seemed to become more comfortable with the implications of pending U.S. health care reforms on the company’s business model.

The value of our investment in Marathon Oil surged in early 2011, initially driven by management’s announced plans to spin off its downstream operations (refining and selling) to shareholders to become a pure-play exploration and production company. Investors pushed Marathon shares higher as they began to recognize the value of the underlying businesses. The share price showed continuing strength in the spring as the July spin-off date approached, oil prices rose, and refining margins improved considerably, driven primarily by the company’s strong Midwestern refining system, which benefited from recent investments and widening crude oil price differentials in a land-locked market.

BAT is the world’s second-largest publicly traded tobacco company, with a presence in more than 180 countries. During the period under review, the stock performed well. In February, the company reported full-year 2010 operating results that exceeded market expectations. In

Top 10 Sectors/Industries

Mutual Shares Securities Fund

Based on Equity Securities

6/30/11

	% of Total Net Assets
Tobacco		8.2%
Pharmaceuticals		6.3%
Media		6.1%
Oil, Gas & Consumable Fuels		4.9%
Food & Staples Retailing		4.8%
Insurance		4.7%
Food Products		4.6%
Beverages		3.9%
Commercial Banks		3.6%
Health Care Providers & Services		3.4%

MS-4

addition, BAT management reported it had delivered on its five-year goal to realize £800 million in cost savings two years ahead of schedule. In May, the company held an investor relations day during which its top executives discussed further cost-cutting opportunities. Management believes it can continue to grow operating margins for the next six to seven years aided by price increases and cost-cutting programs. Management explained that cost savings will come from myriad opportunities including simplifying its business structure, improvements in procurement, a reduction in logistics costs, further rationalization of manufacturing facilities, and the standardization and consolidation of back-office centers and processes. The company also reaffirmed its goal to grow medium-term earnings per share in the high single-digit range, although management also mentioned it would likely exceed that goal in 2011. At period-end, we continued to believe BAT was an attractive investment due to the industry’s pricing power, the company’s additional cost savings opportunities and a shareholder friendly management team that often has returned excess cash to shareholders through dividends and share buybacks.

In contrast, some of the Fund’s investments lost value. Key detractors included Community Health Systems, a U.S. hospital management company operating in small cities and rural areas; Japanese video game software and console maker Nintendo; and U.S. network equipment provider Cisco Systems.

Community Health Systems reported earnings ahead of expectations and reaffirmed its 2011 earnings-per-share forecasts. However, rival hospital operator Tenet Healthcare filed a lawsuit during the period alleging that Community Health had engaged in inappropriate patient admissions practices and had therefore made false statements in proxy documents relating to the company’s proposed offer to acquire Tenet Healthcare. The disclosure of the lawsuit, combined with subsequent government investigations, led to a significant decline in Community Health shares that continued for the rest of the reporting period. In May, after increasing its offer for Tenet Healthcare and changing it to an all-cash bid, Community Health withdrew the previous proposal to acquire Tenet that had been announced in late 2010.

Nintendo’s share price deteriorated after the company reported sales of its new handheld console, the Nintendo 3DS, were slower than anticipated. In particular, sales of this new gaming device were weak in its home market of Japan, where the March 11 earthquake and tsunami hurt consumer sentiment, and in other parts of the world due to a lack

Top 10 Holdings

Mutual Shares Securities Fund

6/30/11

Company Sector/Industry, Country	% of Total Net Assets
British American Tobacco PLC, ord. & ADR		2.6%
Tobacco, U.K.
CVS Caremark Corp.		2.6%
Food & Staples Retailing, U.S.
Kraft Foods Inc., A		2.3%
Food Products, U.S.
Marathon Oil Corp.		2.0%
Oil, Gas & Consumable Fuels, U.S.
Pfizer Inc.		1.9%
Pharmaceuticals, U.S.
Microsoft Corp.		1.9%
Software, U.S.
UnitedHealth Group Inc.		1.8%
Health Care Providers & Services, U.S.
Merck & Co. Inc.		1.8%
Pharmaceuticals, U.S.
Xerox Corp.		1.7%
Office Electronics, U.S.
Altria Group Inc.		1.7%
Tobacco, U.S.

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

MS-5

of compelling software titles at launch date and the console’s relatively high initial sales price. At period-end, cash accounted for more than 50% of Nintendo’s market capitalization, and we believe the company can successfully leverage its software intellectual property in the next gaming console cycle. With this in mind, we continued to hold Nintendo in the portfolio at period-end.

Cisco Systems is a relatively new addition to the portfolio, initiated in early 2011. Early in the first quarter, Cisco issued lower-than-expected earnings guidance citing economic pressures such as subdued spending by government agencies, a key revenue stream, and missteps in its consumer-focused businesses. In mid-May, Cisco shares declined further when the company confirmed it had completed another disappointing quarter. However, management announced significant cost realignment and an exit from certain consumer markets, both of which we believe should improve financial results. Cisco’s competitive position remained strong, its balance sheet appeared overcapitalized to us at period-end, and the company announced it would begin paying a dividend as well as continuing to buy back stock. For these reasons, along with management’s commitment to repair the company’s current cost structure, we found Cisco’s valuation appealing.

Finally, investors should note that we maintained our currency hedging posture of being more hedged than not to the U.S. dollar, largely through the use of forward currency exchange contracts. Certain currencies strengthened in relation to the U.S. dollar in the first six months of 2011, and so our hedging strategy hindered Fund performance during the reporting period.

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

The foregoing information reflects our analysis, opinions and portfolio holdings as of June 30, 2011, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

MS-6

Fund Expenses

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

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

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

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

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

Actual Fund Expenses

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

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

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

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

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

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

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

Mutual Shares Securities Fund – Class 4

MS-7

Hypothetical Example for Comparison with Other Mutual Funds

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

Class 4	Beginning Account Value 1/1/11		Ending Account Value 6/30/11		Fund-Level Expenses Incurred During Period* 1/1/11–6/30/11
Actual	$	1,000	$	1,056.80	$	5.46
Hypothetical (5% return before expenses)	$	1,000	$	1,019.49	$	5.36

*Expenses are calculated using the most recent six-month annualized expense ratio for the Fund’s Class 4 shares (1.07%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 181/365 to reflect the one-half year period.

MS-8

Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Mutual Shares Securities Fund

	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31,
Class 1				2010			2009			2008			2007			2006
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	16.14		$	14.75		$	11.92		$	20.42		$	20.67		$	18.35
Income from investment operationsa:
Net investment incomeb		0.22c			0.40	d		0.23	e		0.34			0.54			0.40
Net realized and unrealized gains (losses)		0.73			1.27			2.89			(7.54	)		0.31			2.86
Total from investment operations		0.95			1.67			3.12			(7.20	)		0.85			3.26
Less distributions from:
Net investment income		—			(0.28	)		(0.29	)		(0.57	)		(0.35	)		(0.29	)
Net realized gains		—			—			—			(0.73	)		(0.75	)		(0.65	)
Total distributions		—			(0.28	)		(0.29	)		(1.30	)		(1.10	)		(0.94	)
Net asset value, end of period	$	17.09		$	16.14		$	14.75		$	11.92		$	20.42		$	20.67
Total returnf		5.89%			11.47%			26.35%			(36.93)%			3.72%			18.66%
Ratios to average net assetsg
Expensesh		0.72%			0.74%	i		0.78%	i		0.73%	i		0.72%	i		0.81%	i
Expenses incurred in connection with securities sold short		—%			0.02%			0.06%			—%	j		—%	j		0.07%
Net investment income		2.63%	c		2.66%	d		1.85%	e		2.16%			2.58%			2.02%
Supplemental data
Net assets, end of period (000’s)	$	1,579,343		$	1,301,520		$	767,553		$	319,703		$	272,509		$	259,943
Portfolio turnover rate		14.64%			32.05%			49.33%			44.11%			41.73%	k		19.75%

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

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $0.02 per share related to interest income received that had previously been deemed uncollectible. Excluding this amount, the ratio of net investment income to average net assets would have been 2.36%.

^dNet investment income per share includes approximately $0.11 per share received in the form of a special dividend paid in connection with a corporate real estate investment trust (REIT) conversion. Excluding this non-recurring amount, the ratio of the net investment income to average net assets would have been 1.93%.

^eNet investment income per share includes approximately $(0.03) per share related to an adjustment for uncollectible interest. Excluding the effect of this adjustment, the ratio of net investment income to average net assets would have been 2.08%.

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

^gRatios are annualized for periods less than one year.

^hIncludes 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 periods presented. See Note 1(d).

ⁱBenefit of expense reduction rounds to less than 0.01%.

^jRounds to less than 0.01%.

^kExcludes the value of portfolio securities delivered as a result of redemption in-kind.

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

MS-9

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Mutual Shares Securities Fund

	Six Months Ended June 30, 2011 (unaudited)		Year Ended December 31,
Class 2			2010			2009			2008			2007			2006
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	15.95	$	14.58		$	11.78		$	20.19		$	20.46		$	18.18
Income from investment operationsa:
Net investment incomeb		0.20c		0.36	d		0.20	e		0.32			0.48			0.34
Net realized and unrealized gains (losses)		0.72		1.25			2.85			(7.49	)		0.31			2.84
Total from investment operations		0.92		1.61			3.05			(7.17	)		0.79			3.18
Less distributions from:
Net investment income		—		(0.24	)		(0.25	)		(0.51	)		(0.31	)		(0.25	)
Net realized gains		—		—			—			(0.73	)		(0.75	)		(0.65	)
Total distributions		—		(0.24	)		(0.25	)		(1.24	)		(1.06	)		(0.90	)
Net asset value, end of period	$	16.87	$	15.95		$	14.58		$	11.78		$	20.19		$	20.46
Total returnf		5.77%		11.19%			26.05%			(37.11)%			3.48%			18.38%
Ratios to average net assetsg
Expensesh		0.97%		0.99%	i		1.03%	i		0.98%	i		0.97%	i		1.06%	i
Expenses incurred in connection with securities sold short		—%		0.02%			0.06%			—%	j		—%	j		0.07%
Net investment income		2.38%c		2.41%	d		1.60%	e		1.91%			2.33%			1.77%
Supplemental data
Net assets, end of period (000’s)	$	4,288,322	$	4,188,821		$	3,953,435		$	3,303,761		$	5,925,551		$	5,140,878
Portfolio turnover rate		14.64%		32.05%			49.33%			44.11%			41.73%	k		19.75%

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

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $0.02 per share related to interest income received that had previously been deemed uncollectible. Excluding this amount, the ratio of net investment income to average net assets would have been 2.11%.

^dNet investment income per share includes approximately $0.11 per share received in the form of a special dividend paid in connection with a corporate REIT conversion. Excluding this non-recurring amount, the ratio of the net investment income to average net assets would have been 1.68%.

^eNet investment income per share includes approximately $(0.03) per share related to an adjustment for uncollectible interest. Excluding the effect of this adjustment, the ratio of net investment income to average net assets would have been 1.83%.

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

^gRatios are annualized for periods less than one year.

^hIncludes 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 periods presented. See Note 1(d).

ⁱBenefit of expense reduction rounds to less than 0.01%.

^jRounds to less than 0.01%.

^kExcludes the value of portfolio securities delivered as a result of redemption in-kind.

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

MS-10

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Mutual Shares Securities Fund

	Six Months Ended June 30, 2011 (unaudited)		Year Ended December 31,
Class 4			2010			2009			2008a
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	16.03	$	14.66		$	11.88		$	18.91
Income from investment operationsb:
Net investment incomec		0.19d		0.35	e		0.19	f		0.17
Net realized and unrealized gains (losses)		0.72		1.26			2.87			(5.90	)
Total from investment operations		0.91		1.61			3.06			(5.73	)
Less distributions from:
Net investment income		—		(0.24	)		(0.28	)		(0.57	)
Net realized gains		—		—			—			(0.73	)
Total distributions		—		(0.24	)		(0.28	)		(1.30	)
Net asset value, end of period	$	16.94	$	16.03		$	14.66		$	11.88
Total returng		5.68%		11.06%			25.94%			(32.12)%
Ratios to average net assetsh
Expensesi		1.07%		1.09%	j		1.13%	j		1.08%	j
Expenses incurred in connection with securities sold short		—%		0.02%			0.06%			—%	k
Net investment income		2.28%d		2.31%	e		1.50%	f		1.81%
Supplemental data
Net assets, end of period (000’s)	$	173,808	$	167,274		$	141,446		$	57,266
Portfolio turnover rate		14.64%		32.05%			49.33%			44.11%

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

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

^cBased on average daily shares outstanding.

^dNet investment income per share includes approximately $0.02 per share related to interest income received that had previously been deemed uncollectible. Excluding this amount, the ratio of net investment income to average net assets would have been 2.01%.

^eNet investment income per share includes approximately $0.11 per share received in the form of a special dividend paid in connection with a corporate REIT conversion. Excluding this non-recurring amount, the ratio of the net investment income to average net assets would have been 1.58%.

^fNet investment income per share includes approximately $(0.03) per share related to an adjustment for uncollectible interest. Excluding the effect of this adjustment, the ratio of net investment income to average net assets would have been 1.73%.

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

^hRatios are annualized for periods less than one year.

ⁱIncludes dividend expense on securities sold short and borrowing fees, if any. See below for the ratios of such expenses to average net assets for the periods presented. See Note 1(d).

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

^kRounds to less than 0.01%.

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

MS-11

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited)

Mutual Shares Securities Fund	Country	Shares/Rights		Value
Common Stocks and Other Equity Interests 88.3%
Aerospace & Defense 0.4%
aGenCorp Inc.	United States		494,180	$	3,172,636
aHuntington Ingalls Industries Inc.	United States		638,442		22,026,249
					25,198,885
Air Freight & Logistics 0.4%
PostNL NV	Netherlands		1,225,295		10,398,194
TNT Express NV	Netherlands		1,225,295		12,708,115
					23,106,309
Airlines 0.0%
a,b,cNorthwest Airlines Corp., Contingent Distribution	United States		27,670,000		—
Auto Components 0.2%
a,b,cCollins & Aikman Products Co., Contingent Distribution	United States		929,505		9,295
a,b,cDana Holding Corp., Contingent Distribution	United States		10,339,000		—
a,dIACNA Investor LLC	United States		168,957		1,690
a,dInternational Automotive Components Group Brazil LLC	Brazil		1,730,515		2,182,768
d,eInternational Automotive Components Group North America, LLC	United States		11,387,027		10,645,504
					12,839,257
Automobiles 1.4%
Daimler AG (EUR Traded)	Germany		575,677		43,151,745
aGeneral Motors Co.	United States		1,329,590		40,366,352
					83,518,097
Beverages 3.9%
Brown-Forman Corp., A	United States		1,759		126,648
Coca-Cola Enterprises Inc.	United Kingdom		1,211,330		35,346,609
Dr. Pepper Snapple Group Inc.	United States		1,296,514		54,362,832
Foster’s Group Ltd.	Australia		3,560,630		19,664,861
PepsiCo Inc.	United States		677,058		47,685,195
fPernod Ricard SA	France		792,451		78,109,280
					235,295,425
Biotechnology 1.4%
aAmgen Inc.	United States		1,165,850		68,027,348
aCephalon Inc.	United States		236,970		18,933,903
					86,961,251
Building Products 0.8%
aOwens Corning Inc.	United States		1,293,251		48,302,925
Capital Markets 1.7%
Morgan Stanley	United States		2,582,478		59,422,819
aUBS AG (CHF Traded)	Switzerland		2,389,048		43,558,641
					102,981,460
Chemicals 1.3%
a,b,cDow Corning Corp., Contingent Distribution	United States		650,000		25,000
Linde AG	Germany		455,240		79,814,108
					79,839,108
Commercial Banks 3.6%
Barclays PLC	United Kingdom		11,141,292		45,859,420
aCIT Group Inc.	United States		517,223		22,892,290
a,dElephant Capital Holdings Ltd.	Japan		11,728		—

MS-12

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Mutual Shares Securities Fund	Country	Shares/Rights		Value
Common Stocks and Other Equity Interests (continued)
Commercial Banks (continued)
a,dFirst Southern Bancorp Inc.	United States		140,952	$	1,665,869
aGuaranty Bancorp	United States		1,288,316		1,726,343
a,dNCB Warrant Holdings Ltd., A	Japan		57,295		—
PNC Financial Services Group Inc.	United States		1,091,270		65,050,605
aState Bank Financial Corp.	United States		433,000		7,088,210
Wells Fargo & Co.	United States		2,629,460		73,782,648
					218,065,385
Commercial Services & Supplies 0.0%†
aComdisco Holding Co. Inc.	United States		180		1,121
a,b,cComdisco Holding Co. Inc., Contingent Distribution	United States		7,473,000		—
					1,121
Communications Equipment 1.0%
Cisco Systems Inc.	United States		2,643,550		41,265,815
aMotorola Solutions Inc.	United States		405,474		18,668,023
					59,933,838
Computers & Peripherals 1.1%
a,b,cDecisionOne Corp., Contingent Distribution	United States		167,652		—
Hewlett-Packard Co.	United States		1,779,263		64,765,173
					64,765,173
Consumer Finance 0.3%
a,dAlly Financial Inc.	United States		1,376		10,461,096
a,dCerberus CG Investor I LLC	United States		16,365,671		2,495,765
a,dCerberus CG Investor II LLC	United States		16,365,425		2,495,727
a,dCerberus CG Investor III LLC	United States		8,183,816		1,248,032
					16,700,620
Diversified Financial Services 2.1%
Bank of America Corp.	United States		4,328,920		47,444,963
a,gBond Street Holdings LLC, A, 144A	United States		477,632		10,269,088
Deutsche Boerse AG	Germany		500,640		38,042,564
a,b,cMarconi Corp., Contingent Distribution	United Kingdom		9,945,700		185,913
NYSE Euronext Inc.	United States		888,040		30,433,131
					126,375,659
Diversified Telecommunication Services 1.4%
AboveNet Inc.	United States		131,103		9,237,517
Cable & Wireless Communication PLC	United Kingdom		20,212,409		13,137,752
a,b,cGlobal Crossing Holdings Ltd., Contingent Distribution	United States		9,005,048		—
Telefonica SA	Spain		2,577,369		63,015,462
					85,390,731
Electric Utilities 2.7%
Brookfield Infrastructure Partners LP	Canada		1,090,066		27,306,153
a,b,cCalpine Corp., Contingent Distribution	United States		4,555,000		—
E.ON AG	Germany		2,156,953		61,416,426
Entergy Corp.	United States		319,190		21,794,293
Exelon Corp.	United States		1,196,059		51,239,168
a,dPrime AET&D Holdings No. 1 Pty. Ltd.	Australia		4,709,226		—
					161,756,040

MS-13

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Mutual Shares Securities Fund	Country	Shares/Rights		Value
Common Stocks and Other Equity Interests (continued)
Electrical Equipment 0.1%
Alstom SA	France		131,610	$	8,115,123
Electronic Equipment, Instruments & Components 0.7%
TE Connectivity Ltd.	United States		1,199,372		44,088,915
Energy Equipment & Services 1.7%
Ensco PLC, ADR	United States		390,875		20,833,637
aExterran Holding Inc.	United States		613,890		12,173,439
Transocean Ltd.	United States		1,037,787		66,999,529
					100,006,605
Food & Staples Retailing 4.8%
fCarrefour SA	France		531,251		21,817,549
CVS Caremark Corp.	United States		4,127,273		155,102,919
The Kroger Co.	United States		2,826,498		70,097,150
Wal-Mart Stores Inc.	United States		781,682		41,538,582
					288,556,200
Food Products 4.6%
General Mills Inc.	United States		1,253,560		46,657,503
Kraft Foods Inc., A	United States		3,883,322		136,809,434
Nestle SA	Switzerland		1,570,453		97,592,970
					281,059,907
Health Care Equipment & Supplies 2.0%
aBoston Scientific Corp.	United States		4,521,950		31,246,674
Medtronic Inc.	United States		1,691,120		65,158,854
aZimmer Holdings Inc.	United States		391,631		24,751,079
					121,156,607
Health Care Providers & Services 3.4%
aCommunity Health Systems Inc.	United States		1,277,022		32,793,925
aCoventry Health Care Inc.	United States		603,600		22,013,292
aTenet Healthcare Corp.	United States		6,379,987		39,811,119
UnitedHealth Group Inc.	United States		2,164,589		111,649,500
					206,267,836
Hotels, Restaurants & Leisure 0.1%
a,d,hGLCP Harrah’s Investment LP	United States		5,565,600		1,336,857
Thomas Cook Group PLC	United Kingdom		1,474,171		3,147,826
					4,484,683
Independent Power Producers & Energy Traders 0.8%
aNRG Energy Inc.	United States		1,951,380		47,964,920
Industrial Conglomerates 0.9%
Koninklijke Philips Electronics NV	Netherlands		958,590		24,618,660
Orkla ASA	Norway		3,238,639		30,682,917
					55,301,577
Insurance 4.7%
ACE Ltd.	United States		939,785		61,856,649
aAlleghany Corp.	United States		24,779		8,254,133
American International Group Inc.	United States		1,888,540		55,371,993
aCNO Financial Group Inc.	United States		964,957		7,632,810
MetLife Inc.	United States		649,210		28,480,843

MS-14

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Mutual Shares Securities Fund	Country	Shares/Rights		Value
Common Stocks and Other Equity Interests (continued)
Insurance (continued)
Old Republic International Corp.	United States		2,329,142	$	27,367,418
a,dOlympus Re Holdings Ltd.	United States		16,280		4,524
White Mountains Insurance Group Ltd.	United States		140,935		59,215,250
Zurich Financial Services AG	Switzerland		137,066		34,657,744
					282,841,364
IT Services 0.0%†
Glodyne Technoserve Ltd.	India		11,058		85,630
Leisure Equipment & Products 0.7%
Mattel Inc.	United States		1,509,886		41,506,766
Machinery 0.6%
Federal Signal Corp.	United States		930,921		6,106,842
Stanley Black & Decker Inc.	United States		436,490		31,449,104
					37,555,946
Marine 1.1%
A.P. Moller - Maersk AS, B	Denmark		7,669		66,141,118
Media 6.1%
British Sky Broadcasting Group PLC	United Kingdom		4,160,735		56,542,268
News Corp., A	United States		4,342,369		76,859,931
Time Warner Cable Inc.	United States		964,069		75,235,945
Time Warner Inc.	United States		1,929,216		70,165,586
Viacom Inc., B	United States		964,552		49,192,152
Virgin Media Inc.	United Kingdom		1,324,299		39,636,269
					367,632,151
Metals & Mining 1.3%
ThyssenKrupp AG	Germany		1,476,769		76,356,490
Multi-Utilities 0.7%
GDF Suez	France		1,100,662		40,278,217
Office Electronics 1.7%
Xerox Corp.	United States		9,760,804		101,609,970
Oil, Gas & Consumable Fuels 4.9%
BP PLC	United Kingdom		4,211,280		30,985,183
Marathon Oil Corp.	United States		2,325,884		122,527,569
Murphy Oil Corp.	United States		518,902		34,071,105
Royal Dutch Shell PLC, A	United Kingdom		2,313,887		82,142,234
The Williams Cos. Inc.	United States		884,304		26,750,196
					296,476,287
Paper & Forest Products 2.4%
Domtar Corp.	United States		203,789		19,302,894
International Paper Co.	United States		2,508,784		74,811,939
MeadWestvaco Corp.	United States		1,464,799		48,792,455
					142,907,288
Pharmaceuticals 6.3%
Eli Lilly & Co.	United States		2,461,070		92,363,957
Merck & Co. Inc.	United States		3,007,790		106,144,909
Novartis AG, ADR	Switzerland		746,058		45,591,604
Pfizer Inc.	United States		5,598,414		115,327,329
aSanofi, Contingent Value rts., 12/31/20	France		849,460		2,047,199

MS-15

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Mutual Shares Securities Fund	Country	Shares/Rights		Value
Common Stocks and Other Equity Interests (continued)
Pharmaceuticals (continued)
Teva Pharmaceutical Industries Ltd., ADR	Israel		461,170	$	22,237,617
					383,712,615
Real Estate Investment Trusts (REITs) 1.4%
Alexander’s Inc.	United States		49,326		19,582,422
Weyerhaeuser Co.	United States		3,122,690		68,262,003
					87,844,425
Real Estate Management & Development 0.2%
cCanary Wharf Group PLC	United Kingdom		1,535,898		7,426,390
aForestar Group Inc.	United States		320,853		5,271,615
					12,698,005
Semiconductors & Semiconductor Equipment 0.9%
aLSI Corp.	United States		7,984,446		56,849,256
Software 2.8%
Microsoft Corp.	United States		4,335,303		112,717,878
Nintendo Co. Ltd.	Japan		123,923		23,197,561
aSymantec Corp.	United States		1,739,900		34,310,828
					170,226,267
Tobacco 8.2%
Altria Group Inc.	United States		3,812,114		100,677,931
British American Tobacco PLC	United Kingdom		3,534,227		154,918,705
British American Tobacco PLC, ADR	United Kingdom		4,218		371,184
Imperial Tobacco Group PLC	United Kingdom		2,931,169		97,401,144
Japan Tobacco Inc.	Japan		2,843		10,929,862
Lorillard Inc.	United States		405,204		44,114,559
Philip Morris International Inc.	United States		648,530		43,302,348
Reynolds American Inc.	United States		1,129,732		41,856,571
					493,572,304
Wireless Telecommunication Services 1.5%
Vodafone Group PLC	United Kingdom		33,562,610		89,065,168
Total Common Stocks and Other Equity Interests (Cost $4,655,043,649)					5,335,392,924
Convertible Preferred Stocks (Cost $241,000) 0.0%†
Commercial Banks 0.0%†
a,dFirst Southern Bancorp Inc., cvt. pfd., C	United States		241		985,129
		Principal Amount*
Corporate Bonds, Notes and Senior Floating Rate Interests 3.3%
i,jBoston Generating LLC, Revolver, 6.50%, 12/21/13	United States		9,108		3,108
Synthetic Letter of Credit, 6.878%, 12/21/13	United States		17,059		5,821
Term Loan B, 6.50%, 12/21/13	United States		535,469		182,729
dBroadband Ventures III LLC, secured promissory note, 5.00%, 2/01/12	United States		2,432		2,432
i,jCIT Group Inc., Term Loan Tranche 3, 6.25%, 8/11/15	United States		11,079,747		11,166,801
Clear Channel Communications Inc., i,jDelayed Draw 2 Term Loan, 3.836%, 1/29/16	United States		5,945,000		4,912,056
ksenior note, PIK, 11.00%, 8/01/16	United States		12,556,000		11,174,840

MS-16

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Mutual Shares Securities Fund	Country	Principal Amount*			Value
Corporate Bonds, Notes and Senior Floating Rate Interests (continued)
Clear Channel Communications Inc. (continued)
i,jTranche B Term Loan, 3.836%, 1/29/16	United States		35,406,000		$	29,713,423
i,jTranche C Term Loan, 3.836%, 1/29/16	United States		6,902,668			5,763,728
gOPTI Canada Inc., senior secured note, 144A, 9.00%, 12/15/12	Canada		3,143,000			3,174,430
f9.75%, 8/15/13	Canada		8,435,000			8,413,912
Realogy Corp., i,jExtended First Lien Term Loan, 4.518%, 10/10/16	United States		38,503,226			34,364,129
i,j,lExtended Revolver, 3.44%, 4/10/16	United States		2,218,314			1,927,160
i,jExtended Synthetic Letter of Credit, 3.221%, 10/10/16	United States		3,488,079			3,113,111
Second Lien Term Loan, 13.50%, 10/15/17	United States		1,642,000			1,743,257
gsenior secured note, 144A, 7.875%, 2/15/19	United States		2,218,000			2,206,910
i,jTexas Competitive Electric Holdings Co. LLC, Extended Term Loan, 4.69%, 10/10/17	United States		90,618,405			70,925,213
gTexas Competitive Electric Holdings Co. LLC/Texas Competitive Electric Holdings Finance Inc., senior secured note, 144A, 11.50%, 10/01/20	United States		6,672,000			6,588,600
Total Corporate Bonds, Notes and Senior Floating Rate Interests (Cost $199,177,269)						195,381,660
		Shares
Companies in Liquidation 0.0%†
aAdelphia Recovery Trust	United States		29,283,354			2,928
a,bAdelphia Recovery Trust, Arahova Contingent Value Vehicle, Contingent Distribution	United States		1,955,453			78,218
a,d,e,hCB FIM Coinvestors LLC	United States		6,400,507			—
a,b,cCentury Communications Corp., Contingent Distribution	United States		5,487,000			—
a,dFIM Coinvestor Holdings I, LLC	United States		8,006,950			—
a,b,cTropicana Litigation Trust	United States		18,305,000			—
		Principal Amount*
c,mPeregrine Investments Holdings Ltd., 1/15/98	Hong Kong		5,000,000	JPY		—
c,mPIV Investment Finance (Cayman) Ltd., 12/01/00	Hong Kong		12,200,000			—
Total Companies in Liquidation (Cost $2,791,061)						81,146
Total Investments before Short Term Investments (Cost $4,857,252,979)						5,531,840,859
Short Term Investments 9.3%
U.S. Government and Agency Securities 7.9%
nFHLB, 7/01/11 - 7/11/11	United States		65,000,000			64,999,920
nU.S. Treasury Bills, 11/17/11	United States		65,000,000			64,988,235
o7/07/11 - 12/22/11	United States		344,900,000			344,869,819
Total U.S. Government and Agency Securities (Cost $474,786,185)						474,857,974
Total Investments before Money Market Funds (Cost $5,332,039,164)						6,006,698,833

MS-17

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Mutual Shares Securities Fund	Country	Shares		Value
pInvestments from Cash Collateral Received for Loaned Securities (Cost $87,091,445) 1.4%
Money Market Funds 1.4%
qBNY Mellon Overnight Government Fund, 0.05%	United States		87,091,445	$	87,091,445
Total Investments (Cost $5,419,130,609) 100.9%					6,093,790,278
Other Assets, less Liabilities (0.9)%					(52,317,872	)
Net Assets 100.0%				$	6,041,472,406

†Rounds to less than 0.1% of net assets.

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

^aNon-income producing.

^bContingent distributions represent the right to receive additional distributions, if any, during the reorganization of the underlying company.

^cSecurity has been deemed illiquid because it may not be able to be sold within seven days. At June 30, 2011, the aggregate value of these securities was $7,646,598, representing 0.13% of net assets.

^dSee Note 9 regarding restricted securities.

^eAt June 30, 2011, pursuant to the Fund’s policies and the requirements of applicable securities law, the Fund may be restricted from trading these securities for a limited or extended period of time due to ownership limits and/or potential possession of material non-public information.

^fA portion or all of the security is on loan at June 30, 2011. See Note 1(e).

^gSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At June 30, 2011, the aggregate value of these securities was $30,652,940, representing 0.51% of net assets.

^hSee Note 13 regarding holdings of 5% voting securities.

ⁱThe coupon rate shown represents the rate at period end.

^jSee Note 1(f) regarding senior floating rate interests.

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

^lSee Note 10 regarding unfunded loan commitments.

^mSee Note 7 regarding credit risk and defaulted securities.

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

^oSecurity or a portion of the security has been segregated as collateral for open future contracts. At June 30, 2011, the aggregate value of this security amounted to $636,968, representing 0.01% of net assets.

^pSee Note 1(e) regarding securities on loan.

^qThe rate shown is the annualized seven-day yield at period end.

MS-18

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Mutual Shares Securities Fund

At June 30, 2011, the Fund had the following futures contracts outstanding. See Note 1(c).

Futures Contracts

Description	Type		Number of Contracts		Notional Value		Expiration Date		Unrealized Appreciation		Unrealized Depreciation
EUR/USD		Short		111	$	20,102,100		9/19/11	$	127,240	$	—
GBP/USD		Short		126		12,640,163		9/19/11		258,812		—
Unrealized appreciation (depreciation)										386,052		—
Net unrealized appreciation (depreciation)									$	386,052

At June 30, 2011, the Fund had the following forward exchange contracts outstanding. See Note 1(c).

Forward Exchange Contracts

Currency	Counterparty		Type		Quantity		Contract Amount		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
British Pound		BOFA		Sell		33,450,932	$	53,554,942		7/15/11	$	—	$	(120,253	)
British Pound		SSBT		Sell		45,000,000		73,260,000		7/15/11		1,053,229		—
British Pound		DBAB		Sell		1,861,100		3,026,074		7/15/11		39,763		—
Euro		BZWS		Sell		32,944,493		47,596,062		7/15/11		—		(158,276	)
Euro		BOFA		Sell		32,944,493		47,598,204		7/15/11		—		(156,135	)
Euro		DBAB		Sell		2,420,000		3,448,481		7/15/11		—		(59,404	)
Euro		BOFA		Buy		92,275		130,035		7/15/11		3,722		—
Euro		DBAB		Sell		39,677,814		54,596,673		7/29/11		—		(2,895,280	)
Euro		BZWS		Sell		30,871,126		43,372,059		7/29/11		—		(1,359,268	)
Euro		DBAB		Buy		13,954,619		19,724,854		7/29/11		494,967		—
Swiss Franc		BZWS		Sell		27,017,354		30,915,842		8/10/11		—		(1,224,971	)
Swiss Franc		DBAB		Sell		25,313,293		28,896,453		8/10/11		—		(1,217,147	)
Swiss Franc		SSBT		Sell		17,819,277		20,388,189		8/10/11		—		(810,262	)
Swiss Franc		DBAB		Buy		1,560,000		1,878,228		8/10/11		—		(22,396	)
Swiss Franc		BOFA		Sell		4,121,617		4,902,601		8/10/11		—		(622	)
Swiss Franc		DBAB		Buy		1,505,126		1,773,633		8/10/11		16,918		—
Swiss Franc		BZWS		Buy		1,607,066		1,900,023		8/10/11		11,801		—
British Pound		BOFA		Buy		1,848,000		2,991,173		8/12/11		—		(26,952	)
British Pound		DBAB		Sell		7,000,000		11,391,100		8/12/11		162,991		—
British Pound		BZWS		Sell		42,986,539		70,282,991		8/12/11		1,331,913		—
British Pound		BOFA		Sell		25,939,399		42,410,918		8/12/11		803,717		—
Euro		SSBT		Sell		28,758,497		40,773,797		8/18/11		—		(870,165	)
Euro		HSBC		Sell		28,758,497		40,808,307		8/18/11		—		(835,654	)
Euro		DBAB		Sell		13,000,000		18,655,000		8/18/11		—		(169,749	)
Euro		DBAB		Buy		1,588,250		2,263,383		8/18/11		36,494		—
Euro		BZWS		Buy		4,900,000		6,939,409		8/18/11		156,073		—
Norwegian Krone		BZWS		Sell		214,126,262		38,445,951		8/19/11		—		(1,122,696	)
Norwegian Krone		HAND		Buy		7,078,315		1,315,783		8/19/11		—		(7,773	)
Norwegian Krone		HAND		Buy		23,117,394		4,212,727		8/19/11		59,164		—
Norwegian Krone		DBAB		Buy		30,710,182		5,648,491		8/19/11		26,480		—
Australian Dollar		BZWS		Sell		9,144,031		9,556,780		8/23/11		—		(179,478	)
Australian Dollar		DBAB		Sell		7,958,176		8,317,553		8/23/11		—		(156,048	)
Australian Dollar		DBAB		Buy		69,513		74,115		8/23/11		309		—
Euro		BOFA		Sell		42,060,105		59,163,846		8/31/11		—		(1,717,075	)
Euro		BZWS		Sell		37,157,077		52,572,998		8/31/11		—		(1,210,916	)
Euro		DBAB		Buy		1,122,487		1,633,420		8/31/11		—		(8,650	)
Euro		BOFA		Buy		969,988		1,410,973		8/31/11		—		(6,941	)
Euro		DBAB		Sell		760,000		1,099,386		8/31/11		—		(2,573	)
Euro		SSBT		Buy		108,984		159,545		8/31/11		—		(1,792	)
Euro		HSBC		Sell		30,306,682		43,453,721		9/15/11		—		(396,407	)

MS-19

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Mutual Shares Securities Fund

Forward Exchange Contracts (continued)

Currency	Counterparty		Type		Quantity		Contract Amount		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
Euro		DBAB		Sell		28,659,919	$	41,101,190		9/15/11	$	—	$	(366,269	)
Euro		BZWS		Sell		584,230		846,403		9/15/11		—		(348	)
Euro		DBAB		Buy		804,562		1,149,191		9/15/11		14,914		—
British Pound		BZWS		Buy		1,800,000		2,917,800		9/16/11		—		(31,817	)
British Pound		SSBT		Sell		84,265,623		137,234,993		9/16/11		2,129,890		—
Japanese Yen		BOFA		Sell		1,889,485,796		22,960,903		10/20/11		—		(527,404	)
Japanese Yen		DBAB		Sell		468,004,435		5,695,000		10/20/11		—		(122,790	)
Japanese Yen		HSBC		Sell		156,205,120		1,890,000		10/20/11		—		(51,795	)
Japanese Yen		BZWS		Sell		88,018,160		1,060,000		10/20/11		—		(34,159	)
Japanese Yen		DBAB		Buy		231,344,368		2,881,017		10/20/11		—		(7,904	)
Japanese Yen		BOFA		Buy		89,103,679		1,111,981		10/20/11		—		(4,328	)
Japanese Yen		BZWS		Buy		51,320,790		639,953		10/20/11		—		(1,981	)
Japanese Yen		BOFA		Buy		359,530,635		4,397,462		10/20/11		71,885		—
Japanese Yen		DBAB		Buy		202,414,034		2,502,014		10/20/11		14,207		—
Japanese Yen		SSBT		Buy		39,329,874		487,946		10/20/11		966		—
Japanese Yen		BZWS		Buy		36,000,000		445,500		10/20/11		2,017		—
Unrealized appreciation (depreciation)												6,431,420		(15,885,678	)
Net unrealized appreciation (depreciation)													$	(9,454,258	)

See Abbreviations on page MS-37.

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

MS-20

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

June 30, 2011 (unaudited)

	Mutual Shares Securities Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	5,413,562,676
Cost - Non-controlled affiliated issuers (Note 13)		5,567,933
Total cost of investments	$	5,419,130,609
Value - Unaffiliated issuers	$	6,092,453,421
Value - Non-controlled affiliated issuers (Note 13)		1,336,857
Total value of investments (includes securities loaned in the amount of $82,627,615)		6,093,790,278
Cash		1,135,265
Foreign currency, at value (cost $35,679,628)		35,664,588
Receivables:
Investment securities sold (includes securities loaned in the amount of $5,377,189)		19,678,611
Capital shares sold		938,968
Dividends and interest		16,003,082
Unrealized appreciation on forward exchange contracts		6,431,420
Other assets		329,270
Total assets		6,173,971,482
Liabilities:
Payables:
Investment securities purchased		18,565,560
Capital shares redeemed		3,743,824
Affiliates		5,249,503
Variation margin		140,663
Payable upon return of securities loaned		87,091,445
Unrealized depreciation on forward exchange contracts		15,885,678
Unrealized depreciation on unfunded loan commitments (Note 10)		641,280
Accrued expenses and other liabilities		1,181,123
Total liabilities		132,499,076
Net assets, at value	$	6,041,472,406
Net assets consist of:
Paid-in capital	$	5,699,074,393
Undistributed net investment income		187,226,371
Net unrealized appreciation (depreciation)		665,360,368
Accumulated net realized gain (loss)		(510,188,726	)
Net assets, at value	$	6,041,472,406

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

MS-21

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Assets and Liabilities (continued)

June 30, 2011 (unaudited)

	Mutual Shares Securities Fund
Class 1:
Net assets, at value	$	1,579,342,522
Shares outstanding		92,392,189
Net asset value and maximum offering price per share	$	17.09
Class 2:
Net assets, at value	$	4,288,321,615
Shares outstanding		254,209,197
Net asset value and maximum offering price per share	$	16.87
Class 4:
Net assets, at value	$	173,808,269
Shares outstanding		10,259,616
Net asset value and maximum offering price per share	$	16.94

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

MS-22

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the six months ended June 30, 2011 (unaudited)

	Mutual Shares Securities Fund
Investment income:
Dividends (net of foreign taxes of $3,315,817)	$	82,832,371
Interest		14,647,118
Income from securities loaned		1,880,014
Total investment income		99,359,503
Expenses:
Management fees (Note 3a)		17,613,088
Administrative fees (Note 3b)		2,504,776
Distribution fees: (Note 3c)
Class 2		5,351,399
Class 4		299,955
Unaffiliated transfer agent fees		1,706
Custodian fees (Note 4)		202,401
Reports to shareholders		425,819
Professional fees		857,120
Trustees’ fees and expenses		11,093
Other		62,246
Total expenses		27,329,603
Net investment income		72,029,900
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		84,985,119
Foreign currency transactions		(73,056,202	)
Futures contracts		(630,415	)
Net realized gain (loss)		11,298,502
Net change in unrealized appreciation (depreciation) on:
Investments		242,114,394
Translation of other assets and liabilities denominated in foreign currencies		2,521,441
Net change in unrealized appreciation (depreciation)		244,635,835
Net realized and unrealized gain (loss)		255,934,337
Net increase (decrease) in net assets resulting from operations	$	327,964,237

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

MS-23

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets

	Mutual Shares Securities Fund
	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31, 2010
Increase (decrease) in net assets:
Operations:
Net investment income	$	72,029,900		$	125,525,670
Net realized gain (loss) from investments, foreign currency transactions, futures contracts and securities sold short		11,298,502			126,268,882
Net change in unrealized appreciation (depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies		244,635,835			300,848,655
Net increase (decrease) in net assets resulting from operations		327,964,237			552,643,207
Distributions to shareholders from:
Net investment income:
Class 1		—			(18,628,775	)
Class 2		—			(62,378,105	)
Class 4		—			(2,455,400	)
Total distributions to shareholders		—			(83,462,280	)
Capital share transactions: (Note 2)
Class 1		198,330,308			440,450,926
Class 2		(139,537,389	)		(125,986,124	)
Class 4		(2,899,965	)		11,534,796
Total capital share transactions		55,892,954			325,999,598
Net increase (decrease) in net assets		383,857,191			795,180,525
Net assets:
Beginning of period		5,657,615,215			4,862,434,690
End of period	$	6,041,472,406		$	5,657,615,215
Undistributed net investment income included in net assets:
End of period	$	187,226,371		$	115,196,471

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

MS-24

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited)

Mutual Shares Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

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

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

The Fund’s investments in securities and other financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Under procedures approved by the Trust’s Board of Trustees, the Fund may utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

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

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

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

The Fund has procedures to determine the fair value of securities and other financial instruments for which market prices are not readily available or which may not be reliably priced. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.

MS-25

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual Shares Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

a. Financial Instrument Valuation (continued)

Trading in securities on foreign securities stock exchanges and over-the-counter markets may be completed before the daily close of business on the NYSE. Occasionally, events occur between the time at which trading in a foreign security is completed and the close of the NYSE that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund’s portfolio securities as determined at the foreign market close and the latest indications of value at the close of the NYSE. In order to minimize the potential for these differences, the investment manager monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depository Receipts, 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 may call into question the reliability of the values of the foreign securities held by the Fund. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services.

b. Foreign Currency Translation

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

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

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

c. Derivative Financial Instruments

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

The Fund entered into futures contracts primarily to manage foreign exchange rate risk. A futures contract is an agreement between the Fund and a counterparty to buy or sell an underlying instrument for a specified price on a future date. Required initial margin deposits of cash or securities are pledged by the Fund. Subsequent payments, known as variation margin, are made or received by the Fund, depending on fluctuations in the value of the underlying security. Such variation margin is accounted for as unrealized appreciation or depreciation until the contract is closed, at which time the gains or losses are realized.

MS-26

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual Shares Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

c. Derivative Financial Instruments (continued)

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

See Note 12 regarding other derivative information.

d. Securities Sold Short

The Fund is engaged in selling securities short, which obligates the Fund to replace a borrowed security with the same security at current market value. The Fund incurs a loss if the price of the security increases between the date of the short sale and the date on which the Fund replaces the borrowed security. The Fund realizes a gain if the price of the security declines between those dates. Gains are limited to the price at which the Fund sold the security short, while losses are potentially unlimited in size.

The Fund is required to establish a margin account with the broker lending the security sold short. While the short sale is outstanding, the broker retains the proceeds of the short sale and the Fund must maintain a deposit with broker consisting of cash and/or securities having a value equal to a specified percentage of the value of the securities sold short. The Fund is obligated to pay fees for borrowing the securities sold short and is required to pay the counterparty any dividends or interest due on securities sold short. Such dividends or interest and any security borrowing fees are recorded as an expense to the Fund.

e. Securities Lending

The Fund participates in an agency based security lending program. The Fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the market value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the market value of loaned securities, as determined at the close of Fund business each day; any additional collateral required due to changes in security values is delivered to the Fund on the next business day. The collateral is invested in a non-registered money fund managed by the Fund’s custodian on the Fund’s behalf. The Fund receives income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. The Fund bears the market risk with respect to the collateral investment, securities loaned, and the risk that the agent may default on its obligations to the Fund. The securities lending agent has agreed to indemnify the Fund in the event of default by a third party borrower.

f. Senior Floating Rate Interests

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

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

g. Income Taxes

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

MS-27

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual Shares Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

g. Income Taxes (continued)

returns in certain other jurisdictions. The Fund records a provision for taxes in its financial statements including penalties and interest, if any, for a tax position taken on a tax return (or expected to be taken) when it fails to meet the more likely than not (a greater than 50% probability) threshold and based on the technical merits, the tax position may not be sustained upon examination by the tax authorities. As of June 30, 2011, and for all open tax years, the Fund has determined that no provision for income tax is required in the Fund’s financial statements. Open tax years are those that remain subject to examination and are based on each tax jurisdiction statute of limitation.

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

h. Security Transactions, Investment Income, Expenses and Distributions

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

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

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

i. Accounting Estimates

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

j. Guarantees and Indemnifications

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

MS-28

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual Shares Securities Fund

2. SHARES OF BENEFICIAL INTEREST

At June 30, 2011, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:

	Six Months Ended June 30, 2011						Year Ended December 31, 2010
Class 1 Shares:	Shares			Amount			Shares			Amount
Shares sold		12,990,815		$	218,913,005			37,999,296		$	576,826,047
Shares issued in reinvestment of distributions		—			—			1,260,404			18,628,775
Shares redeemed		(1,215,089	)		(20,582,697	)		(10,669,332	)		(155,003,896	)
Net increase (decrease)		11,775,726		$	198,330,308			28,590,368		$	440,450,926
Class 2 Shares:
Shares sold		11,241,447		$	187,341,289			24,723,011		$	370,497,941
Shares issued in reinvestment of distributions		—			—			4,269,549			62,378,105
Shares redeemed		(19,616,350	)		(326,878,678	)		(37,538,246	)		(558,862,170	)
Net increase (decrease)		(8,374,903	)	$	(139,537,389	)		(8,545,686	)	$	(125,986,124	)
Class 4 Shares:
Shares sold		205,216		$	3,443,958			1,277,647		$	19,039,058
Shares issued on reinvestment of distributions		—			—			167,148			2,455,400
Shares redeemed		(382,057	)		(6,343,923	)		(654,528	)		(9,959,662	)
Net increase (decrease)		(176,841	)	$	(2,899,965	)		790,267		$	11,534,796

3. TRANSACTIONS WITH AFFILIATES

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

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

a. Management Fees

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

Annualized Fee Rate	Net Assets
0.600%	Up to and including $5 billion
0.570%	Over $5 billion, up to and including $10 billion
0.550%	Over $10 billion, up to and including $15 billion
0.530%	Over $15 billion, up to and including $20 billion
0.510%	In excess of $20 billion

MS-29

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual Shares Securities Fund

3. TRANSACTIONS WITH AFFILIATES (continued)

b. Administrative Fees

The Fund pays an administrative fee to FT Services based on the Fund’s average daily net assets as follows:

Annualized Fee Rate	Net Assets
0.150%	Up to and including $200 million
0.135%	Over $200 million, up to and including $700 million
0.100%	Over $700 million, up to and including $1.2 billion
0.075%	In excess of $1.2 billion

c. Distribution Fees

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

d. Transfer Agent Fees

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

e. Other Affiliated Transactions

At June 30, 2011, Franklin Templeton Variable Insurance Products Trust – Franklin Templeton VIP Founding Funds Allocation Fund owned 18.08% of the Fund’s outstanding shares.

4. EXPENSE OFFSET ARRANGEMENT

The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses. During the period ended June 30, 2011, there were no credits earned.

5. INCOME TAXES

For tax purposes, capital losses may be carried over to offset future capital gains, if any. At December 31, 2010, the Fund had tax basis capital losses of $510,953,703 expiring in 2017.

Under the Regulated Investment Company Modernization Act of 2010, the Fund will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. Post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered short-term as under previous law. Any post-enactment capital losses generated will be required to be utilized prior to the losses incurred in pre-enactment tax years.

MS-30

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual Shares Securities Fund

5. INCOME TAXES (continued)

At June 30, 2011, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	5,453,377,217
Unrealized appreciation	$	994,370,950
Unrealized depreciation		(353,957,889	)
Net unrealized appreciation (depreciation)	$	640,413,061

Net investment income differs for financial statement and tax purposes primarily due to differing treatments of foreign currency transactions, passive foreign investment company shares, pass-through entity income, bond discounts and premiums, and corporate actions.

Net realized gains (losses) differ for financial statement and tax purposes primarily due to differing treatments of wash sales, foreign currency transactions, pass-through entity income, bond discounts and premiums, and corporate actions.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2011, aggregated $943,791,516 and $800,718,291, respectively.

7. CREDIT RISK AND DEFAULTED SECURITIES

The Fund may purchase the pre-default or defaulted debt of distressed companies. Distressed companies are financially troubled and are about to be or are already involved in financial restructuring or bankruptcy. Risks associated with purchasing these securities include the possibility that the bankruptcy or other restructuring process takes longer than expected, or that distributions in restructuring are less than anticipated, either or both of which may result in unfavorable consequences to the Fund. If it becomes probable that the income on debt securities, including those of distressed companies, will not be collected, the Fund discontinues accruing income and recognizes an adjustment for uncollectible interest.

At June 30, 2011, the aggregate value of distressed company securities for which interest recognition has been discontinued was $0. For information as to specific securities, see the accompanying Statement of Investments.

8. CONCENTRATION OF RISK

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

9. RESTRICTED SECURITIES

The Fund invests in securities that are restricted under the Securities Act of 1933 (1933 Act) or which are subject to legal, contractual, or other agreed upon restrictions on resale. Restricted securities are often purchased in private placement transactions, and cannot be sold without prior registration unless the sale is pursuant to an exemption under the 1933 Act. Disposal of these securities may require greater effort and expense, and prompt sale at an acceptable price may be difficult. The Fund may have registration rights for restricted securities. The issuer generally incurs all registration costs.

MS-31

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual Shares Securities Fund

9. RESTRICTED SECURITIES (continued)

At June 30, 2011, the Fund held investments in restricted securities, excluding certain securities exempt from registration under the 1933 Act deemed to be liquid, as follows:

Principal Amount/ Shares		Issuer	Acquisition Dates	Cost		Value
	1,376	Ally Financial Inc.	11/20/06 - 6/02/09	$	6,501,522	$	10,461,096
	2,432	Broadband Ventures III LLC, secured promissory note, 5.00%, 2/01/12	7/01/10		2,432		2,432
	6,400,507	CB FIM Coinvestors LLC	1/15/09 - 6/02/09		—		—
	16,365,671	Cerberus CG Investor I LLC	7/26/07 - 4/28/10		8,338,044		2,495,765
	16,365,425	Cerberus CG Investor II LLC	7/26/07 - 4/28/10		8,337,906		2,495,727
	8,183,816	Cerberus CG Investor III LLC	7/26/07 - 4/28/10		4,169,573		1,248,032
	11,728	Elephant Capital Holdings Ltd.	8/29/03 - 3/10/08		1,813,542		—
	8,006,950	FIM Coinvestor Holdings I, LLC	11/20/06 - 6/02/09		—		—
	140,952	First Southern Bancorp Inc.	1/27/10 - 7/07/10		2,974,087		1,665,869
	241	First Southern Bancorp Inc., cvt. pfd., C	1/27/10 - 7/07/10		241,000		985,129
	5,565,600	GLCP Harrah’s Investment LP	1/15/08		5,567,933		1,336,857
	168,957	IACNA Investor LLC	7/24/08		62,949		1,690
	1,730,515	International Automotive Components Group Brazil LLC	4/13/06 - 12/26/08		1,149,241		2,182,768
	11,387,027	International Automotive Components Group North America, LLC	1/12/06 - 10/10/07		13,926,539		10,645,504
	57,295	NCB Warrant Holdings Ltd., A	12/16/05 - 3/10/08		539,528		—
	16,280	Olympus Re Holdings Ltd.	12/19/01		1,540,390		4,524
	4,709,226	Prime AET&D Holdings No. 1 Pty. Ltd.	10/13/10		—		—
		Total Restricted Securities (0.55% of Net Assets)				$	33,525,393

10. UNFUNDED LOAN COMMITMENTS

The Fund enters into certain credit agreements, all or a portion of which may be unfunded. The Fund is obligated to fund these loan commitments at the borrowers’ discretion. Funded portions of credit agreements are presented on the Statement of Investments.

At June 30, 2011, unfunded commitments were as follows:

Borrower	Unfunded Commitment
Realogy Corp., Extended Revolver, 3.44%, 4/10/16	$	5,815,049

Unfunded loan commitments and funded portions of credit agreements are marked to market daily and any unrealized appreciation or depreciation is included in the Statement of Assets and Liabilities and Statement of Operations.

11. UNFUNDED CAPITAL COMMITMENTS

The Fund enters into certain capital commitments and may be obligated to perform on such agreements at a future date. The Fund monitors these commitments and assesses the probability of required performance. For any agreements whose probability of performance is determined to be greater than remote, the Fund assesses the fair value of the commitment. In instances where the probability of performance is greater than remote and the performance under the commitment would result in an unrealized loss, the Fund recognizes such losses on the Statement of Assets and Liabilities and the Statement of Operations.

At June 30, 2011, the Fund had aggregate unfunded capital commitments of $329,837, for which no depreciation has been recognized.

MS-32

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual Shares Securities Fund

12. OTHER DERIVATIVE INFORMATION

At June 30, 2011, the Fund has invested in derivative contracts which are reflected on the Statement of Assets and Liabilities as follows:

	Asset Derivatives			Liability Derivatives
Derivative Contracts Not Accounted for as Hedging Instruments	Statement of Assets and Liabilities Location	Fair Value Amount		Statement of Assets and Liabilities Location	Fair Value Amount
Foreign exchange contracts	Unrealized appreciation on forward exchange contracts / Net assets consists of net unrealized appreciation (depreciation)	$	6,817,472a	Unrealized depreciation on forward exchange contracts	$	15,885,678

^aIncludes cumulative appreciation (depreciation) of futures contracts as reported in the Statement of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities.

For the period ended June 30, 2011, the effect of derivative contracts on the Fund’s Statement of Operations was as follows:

Derivative Contracts Not Accounted for as Hedging Instruments	Statement of Operations Locations	Realized Gain (Loss) for the Period			Change in Unrealized Appreciation (Depreciation) for the Period
Foreign exchange contracts	Net realized gain (loss) from foreign currency transactions and futures contracts / Net change in unrealized appreciation (depreciation) on translation of other assets and liabilities denominated in foreign currencies	$	(72,779,047	)	$	2,594,949

For the period ended June 30, 2011, the average month end market value of derivatives represented 0.55% of average month end net assets. The average month end number of open derivative contracts for the period was 105.

See Note 1(c) regarding derivative financial instruments.

13. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES

The 1940 Act defines “affiliated companies” to include investments in portfolio companies in which a fund owns 5% or more of the outstanding voting securities. Investments in “affiliated companies” for the Fund for the period ended June 30, 2011, were as shown below.

Name of Issuer	Number of Shares Held at Beginning of Period		Gross Additions		Gross Reductions		Number of Shares Held at End of Period		Value at End of Period		Investment Income		Realized Capital Gain (Loss)
Non-Controlled Affiliates
CB FIM Coinvestors LLC		6,400,507		—		—		6,400,507	$	—	$	—	$	—
GLCP Harrah’s Investment LP		5,565,600		—		—		5,565,600		1,336,857		—		—
Total Affiliated Securities (0.02% of Net Assets)									$	1,336,857	$	—	$	—

MS-33

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual Shares Securities Fund

14. CREDIT FACILITY

The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $750 million (Global Credit Facility) which matures on January 20, 2012. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests.

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.08% based upon the unused portion of the Global Credit Facility, which is reflected in other expenses on the Statement of Operations. During the period ended June 30, 2011, the Fund did not use the Global Credit Facility.

15. FAIR VALUE MEASUREMENTS

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

• Level 1 – quoted prices in active markets for identical securities

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

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

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

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

MS-34

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual Shares Securities Fund

15. FAIR VALUE MEASUREMENTS (continued)

The following is a summary of the inputs used as of June 30, 2011, in valuing the Fund’s assets and liabilities carried at fair value:

	Level 1		Level 2		Level 3			Total
Assets:
Investments in Securities:
Equity Investments:a
Auto Components	$	—	$	—	$	12,839,257	b	$	12,839,257
Chemicals		79,814,108		—		25,000			79,839,108
Commercial Banks		216,399,516		—		2,650,998	b		219,050,514
Commercial Services & Supplies		—		1,121		—	b		1,121
Consumer Finance		—		—		16,700,620			16,700,620
Diversified Financial Services		115,920,658		10,269,088		185,913			126,375,659
Hotels, Restaurants & Leisure		3,147,826		—		1,336,857			4,484,683
Insurance		282,836,840		—		4,524			282,841,364
Real Estate Management & Development		5,271,615		—		7,426,390			12,698,005
Other Equity Investmentsc		4,581,547,722		—		—	b		4,581,547,722
Corporate Bonds, Notes and Senior Floating Rate Interests		—		195,379,228		2,432			195,381,660
Companies in Liquidation		—		81,146		—	b		81,146
Short Term Investments		409,858,054		152,091,365		—			561,949,419
Total Investments in Securities	$	5,694,796,339	$	357,821,948	$	41,171,991		$	6,093,790,278
Forward Exchange Contracts		—		6,431,420		—			6,431,420
Futures Contracts		386,052		—		—			386,052
Liabilities:
Forward Exchange Contracts		—		15,885,678		—			15,885,678
Unfunded Loan Commitments		—		641,280		—			641,280

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

^bIncludes securities determined to have no value at June 30, 2011.

^cFor detailed industry descriptions, see the accompanying Statement of Investments.

MS-35

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual Shares Securities Fund

15. FAIR VALUE MEASUREMENTS (continued)

At June 30, 2011, the reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining fair value, is as follows:

	Balance at Beginning of Period			Purchases		Sales			Transfers Into Level 3		Transfers Out of Level 3a			Cost  Basis Adjustmentsb			Net Realized Gain (Loss)		Net Unrealized Gain (Loss)			Balance at End of Period			Net Change in Unrealized Appreciation (Depreciation) on Assets Held at  Period End
Assets:
Investments in Securities:
Equity Investments:c
Auto Components	$	17,504,881	d	$	—	$	—		$	—	$	—		$	(27,152	)	$	27,152	$	(4,665,624	)	$	12,839,257	d	$	(4,665,624	)
Chemicals		25,000			—		—			—		—			—			—		—			25,000			—
Commercial Banks		2,688,630	d		—		—			—		—			—			—		(37,632	)		2,650,998	d		(37,632	)
Consumer Finance		28,388,621			—		—			—		—			(2,066,915	)		—		(9,621,086	)		16,700,620			(9,621,086	)
Diversified Financial Services		—	d		—		—			—		—			—			—		185,913			185,913			185,913
Diversified Telecommunication Services		—	d		—		—			—		—			(194	)		194		—			—	d		—
Electric Utilities		23,791,010	d		—		(22,079,951	)		—		—			—			—		(1,711,059	)		—			—
Hotels, Restaurants & Leisure		2,369,832			—		—			—		—			—			—		(1,032,975	)		1,336,857			(1,032,975	)
Insurance		6,186			—		—			—		—			—			—		(1,662	)		4,524			(1,662	)
IT Services		95,515			—		—			—		(51,270	)		—			—		(44,245	)		—			—
Real Estate Management & Development		6,659,198			—		—			—		—			—			—		767,192			7,426,390			767,192
Corporate Bonds, Notes and Senior Floating Rate Interests		15,986,080			—		(19,390,824	)		—		—			—			—		3,407,176			2,432			—
Total	$	97,514,953		$	—	$	(41,470,775	)	$	—	$	(51,270	)	$	(2,094,261	)	$	27,346	$	(12,754,002	)	$	41,171,991		$	(14,405,874	)

^aThe investment was transferred out of Level 3 as a result of the availability of a quoted price in an active market for identical securities.

^bMay include accretion, amortization, partnership adjustments, and/or other cost basis adjustments.

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

^dIncludes securities determined to have no value.

16. NEW ACCOUNTING PRONOUNCEMENTS

In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (IFRS). The amendments in the ASU will improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRS and include new guidance for certain fair value measurement principles and disclosure requirements. The ASU is effective for interim and annual periods beginning after December 15, 2011. The Fund is currently evaluating the impact, if any, of applying this provision.

MS-36

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Mutual Shares Securities Fund

17. SUBSEQUENT EVENTS

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

ABBREVIATIONS
Counterparty	Currency	Selected Portfolio
BOFA - Bank of America Corp.	CHF - Swiss Franc	ADR - American Depository Receipt
BZWS - Barclays Bank PLC	EUR - Euro	FHLB - Federal Home Loan Bank
DBAB - Deutsche Bank AG	GBP - British Pound	PIK - Payment-In-Kind
HAND - Svenska Handelsbanken	JPY - Japanese Yen
HSBC - HSBC Bank USA, N.A.	USD - United States Dollar
SSBT - State Street Bank and Trust Co.

MS-37

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

We are pleased to bring you Templeton Developing Markets Securities Fund’s semiannual report for the period ended June 30, 2011.

Performance Summary as of 6/30/11

Templeton Developing Markets Securities Fund – Class 4 delivered a +1.08% total return for the six-month period ended 6/30/11.

Performance reflects the Fund’s Class 4 operating expenses, but does not include any contract fees, expenses or sales charges. If they had been included, performance would be lower. These charges and deductions, particularly for variable life policies, can have a significant effect on contract values and insurance benefits. See the contract prospectus for a complete description of these expenses, including sales charges.

Templeton Developing Markets Securities Fund Class 4

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

Current performance may differ from figures shown.

TD-1

Fund Goal and Main Investments: Franklin Templeton Developing Markets Securities Fund seeks long-term capital appreciation. The Fund normally invests at least 80% of its net assets in emerging market investments.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. In comparison, the MSCI Emerging Markets Index generated a +1.03% total return, and the Standard & Poor’s International Finance Corporation Investable Composite Index posted a +0.70% total return for the same period.¹ Please note that index performance numbers are for reference and we do not attempt to track an index but rather undertake investments on the basis of fundamental research.

Economic and Market Overview

During the first six months of 2011, global markets experienced heightened volatility. Although the year started on a positive note, markets quickly declined following political instability and riots in the Middle East and North Africa. Investors grew increasingly worried that contagion from the region could spread further and subsequently derail the global economic recovery. On the economic front, rising inflationary pressures and the implementation of monetary tightening measures in some emerging markets further fueled slower global economic growth concerns. The correction in stock prices was, however, short-lived as investors focused on the long-term opportunities and prospects of the wider emerging market asset class. This led investment into emerging markets to turn positive in April, after two consecutive months of net outflows.

Markets, however, fell again in May as focus shifted to debt restructuring issues in the eurozone. Investors adopted a more risk-averse position over Greece’s credit rating downgrade and concerns the debt crisis could spread to larger economies such as Spain. The postponed disbursement of European Union (EU) funds to Greece coupled with that country’s political uncertainty further heightened market volatility in June. However, the survival of Prime Minister George Papandreou in a vote of confidence, the passing of austerity measures in Greece and the EU’s promises of a second bailout in July led markets to turn around. Within this environment, emerging markets ended the first half of the year with a slightly positive return.

1. Source: © 2011 Morningstar. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

Fund Risks: The Fund’s investments in stocks may offer the potential for long-term gains but can be subject to short-term price fluctuations. Investing in emerging or developing markets is subject to all the risks of foreign investing generally as well as additional, heightened risks, including currency fluctuations, economic instability, market volatility, political and social instability, the relatively smaller size and lesser liquidity of these markets, and less government supervision and regulation of business and industry practices. The Fund may have significant investments in one or more countries or in particular sectors or industries from time to time, and may carry greater risk of adverse developments in a country, sector or industry than a fund that invests more broadly. Smaller and midsize company securities can increase the risk of greater price fluctuations, particularly over the short term. The manager applies various techniques and analyses in making investment decisions for the Fund, but there can be no guarantee that these decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

TD-2

Investment Strategy

We employ a fundamental research, value-oriented, long-term investment approach. We focus on the market price of a company’s securities relative to our evaluation of its long-term earnings, asset value and cash flow potential. We also consider a company’s profit and loss outlook, balance sheet strength, cash flow trends and asset value in relation to the current price. Our analysis considers the company’s corporate governance behavior as well as its position in its sector, the economic framework and political environment. We invest in securities without regard to benchmark comparisons.

Manager’s Discussion

During the six-month reporting period, key contributors to Fund performance included Astra International, Indonesia’s leading car and motorcycle company, Gazprom, a major Russian global gas producer, and President Chain Store, operator of leading, global convenience store chain 7-Eleven in Taiwan. Astra recorded significantly higher net income in the first quarter of 2011 due to greater domestic demand for motor vehicles and higher profits from its heavy equipment and palm oil businesses. The company profited from Indonesia’s robust economic growth, higher incomes and affordable credit. Gazprom benefited from higher earnings due to strong demand and expectations of greater European demand in 2011. In our analysis, Gazprom is well positioned to gain from the long-term trend in rising commodity prices and supply shocks in regions such as the Middle East. President Chain Store also showed solid corporate results, superior brand franchise and higher domestic demand, which supported its share price performance. Our analysis indicates a strong growth outlook for President Chain Store as it could be a beneficiary of Taiwan’s domestic recovery and rising Chinese tourism.

In contrast, three notable detractors were from India. The Indian market was one of the worst emerging market performers in the first half of 2011. The major domestic factors leading to the market correction were concerns of easing gross domestic product growth, higher inflation and interest rates, as well as uncertainty surrounding the implementation of a tax policy on Mauritius fund flows into India’s stock market. Weighing on Fund performance were Hindalco Industries, a major Indian producer of aluminum, Sesa Goa, India’s leading iron ore producer, and Infosys, one of the top information technology consulting companies in India. Weakening commodity prices during the period also adversely affected the share prices of Hindalco and Sesa Goa, while a stronger

TD-3

Indian rupee impacted Infosys. Taking a longer term view, however, our analysis shows Hindalco and Sesa Goa could benefit from global demand for metals supporting higher commodity prices. In addition, in our view Infosys is well positioned to benefit from the outsourcing trend of services to Indian consulting companies.

It is also important to recognize the effect of currency movements on the Fund’s performance. In general, if the value of the U.S. dollar goes up compared with a foreign currency, an investment traded in that foreign currency will go down in value because it will be worth fewer U.S. dollars. This can have a negative effect on Fund performance. Conversely, when the U.S. dollar weakens in relation to a foreign currency, an investment traded in that foreign currency will increase in value, which can contribute to Fund performance. For the six months ended June 30, 2011, the U.S. dollar declined in value relative to most currencies. As a result, the Fund’s performance was positively affected by the portfolio’s predominant investment in securities with non-U.S. currency exposure. However, one cannot expect the same result in future periods.

During the past six months, we increased the Fund’s holdings in Singapore, Australia, Indonesia and Thailand as we searched for attractive investment opportunities. We added to our holdings in construction, Internet software and services, industrial machinery, and industrial conglomerates companies. Key purchases included Australia’s BHP Billiton, a major diversified natural resources company with significant sales in emerging markets, SembCorp Marine, Singapore’s premier global marine and offshore engineering group, and Tencent Holdings, China’s leading provider of Internet and mobile phone value-added services.

Conversely, the Fund reduced its investments in Brazil, India, Mexico, South Africa and China via China H shares to focus on attractively valued stocks within our investment universe.² We trimmed our holdings primarily in catalog retail, marine, wireless telecommunication services, coal and consumable fuels, and diversified metals and mining companies. In addition, we identified and reduced several holdings that had reached their target prices by the end of the reporting period including Brazilian cosmetics company Natura Cosmeticos, Russian wireless service provider Mobile Telesystems, and Chinese coal producer China Coal Energy. The Fund eliminated its positions in China Coal Energy and Mobile Telesystems by period-end.

2. “China-H” denotes shares of China-incorporated, Hong Kong Stock Exchange-listed companies with most businesses in China.

Top 10 Holdings

Templeton Developing Markets

Securities Fund

6/30/11

Company Sector/Industry, Country	% of Total Net Assets
Vale SA, ADR, pfd., A		6.5%
Metals & Mining, Brazil
Tata Consultancy Services Ltd.		6.4%
IT Services, India
AmBev (Companhia de Bebidas das Americas), ord. & IDR		4.9%
Beverages, Brazil
Norilsk Nickel (Mining and Metallurgical Co. Norilsk Nickel), ADR		4.5%
Metals & Mining, Russia
Itau Unibanco Holding SA, ADR		4.3%
Commercial Banks, Brazil
Gazprom, ADR		4.1%
Oil, Gas & Consumable Fuels, Russia
PT Astra International Tbk		3.7%
Automobiles, Indonesia
LUKOIL Holdings, ADR		3.2%
Oil, Gas & Consumable Fuels, Russia
Sberbank RF		2.9%
Commercial Banks, Russia
President Chain Store Corp.		2.7%
Food & Staples Retailing, Taiwain

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

TD-4

Thank you for your participation in Templeton Developing Markets Securities Fund. We look forward to serving your future investment needs.

The foregoing information reflects our analysis, opinions and portfolio holdings as of June 30, 2011, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

Top 10 Countries

Templeton Developing Markets

Securities Fund

6/30/11

	% of Total Net Assets
Brazil		21.3%
Russia		17.6%
India		14.6%
China		11.3%
Indonesia		6.7%
Thailand		4.2%
U.K.		4.1%
Turkey		3.5%
Taiwan		3.0%
Hong Kong		2.2%

TD-5

Fund Expenses

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

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

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

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

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

Actual Fund Expenses

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

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

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

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

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

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

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

Templeton Developing Markets Securities Fund Class 4

TD-6

Hypothetical Example for Comparison with Other Mutual Funds

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

Class 4	Beginning Account Value 1/1/11		Ending Account Value 6/30/11		Fund-Level Expenses Incurred During Period* 1/1/11–6/30/11
Actual	$	1,000	$	1,001.80	$	8.87
Hypothetical (5% return before expenses)	$	1,000	$	1,015.97	$	8.90

*Expenses are calculated using the most recent six-month annualized expense ratio for the Fund’s Class 4 shares (1.78%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 181/365 to reflect the one-half year period.

TD-7

SUPPLEMENT DATED JULY 15, 2011

TO THE PROSPECTUS

DATED MAY 1, 2011

OF

TEMPLETON DEVELOPING MARKETS SECURITIES FUND – CLASS 4

(a series of Franklin Templeton Variable Insurance Products Trust (the “Trust”)).

The prospectus is amended as follows:

1.  On page TD-S1 of the Fund Summary, under “Fees and Expenses of the Fund,” the “Annual Fund Operating Expenses” table and “Example” are replaced with the following:

ANNUAL FUND OPERATING EXPENSES	(expenses that you pay each year as a percentage of the value of your investment)
	Class 4
Management fees1		1.11%
Distribution and service (12b-1) fees		0.35%
Other expenses		0.26%
Acquired fund fees and expenses1		0.01%
Total annual Fund operating expenses		1.73%
Fee waiver and/or expense reimbursement1		-0.01%
Total annual Fund operating expenses after fee waiver and/or expense reimbursement1,2		1.72%

1. Restated to reflect the decrease in the investment management fee effective May 1, 2011. The investment manager has contractually agreed in advance to reduce its fee 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 agreement may not be terminated during the term set forth above. Total annual Fund operating expenses differ from the ratio of expenses to average net assets shown in the Financial Highlights, which do not reflect the decrease in management fee and the acquired fund fees and expenses.

2. Total annual Fund operating expenses differ from the ratio of expenses to average net assets shown in the Financial Highlights, which reflect the operating expenses of the Fund and do not include acquired fund fees and expenses.

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 the investment manager and/or administrator 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	$	175	$	544	$	938	$	2,041

TD-8

2.  The text under the heading “Portfolio Turnover” on page TD-S1 of the Fund Summary is replaced with the following:

The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 24.41% of the average value of its portfolio.

Please keep this supplement for future reference.

TD-9

Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Templeton Developing Markets Securities Fund

	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31,
Class 1				2010			2009			2008			2007			2006
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	11.40		$	9.86		$	6.11		$	16.16		$	13.92		$	10.99
Income from investment operationsa:
Net investment incomeb		0.08			0.09			0.12			0.16			0.32			0.24
Net realized and unrealized gains (losses)		0.05			1.63			4.02			(7.40	)		3.51			2.84
Total from investment operations		0.13			1.72			4.14			(7.24	)		3.83			3.08
Less distributions from:
Net investment income		(0.13	)		(0.18	)		(0.36	)		(0.37	)		(0.38	)		(0.15	)
Net realized gains		—			—			(0.03	)		(2.44	)		(1.21	)		—
Total distributions		(0.13	)		(0.18	)		(0.39	)		(2.81	)		(1.59	)		(0.15	)
Redemption feesc		—			—			—			—			—			—
Net asset value, end of period	$	11.40		$	11.40		$	9.86		$	6.11		$	16.16		$	13.92
Total returnd		1.20%			17.83%			73.32%			(52.62)%			29.09%			28.43%
Ratios to average net assetse
Expenses		1.43%			1.49%	f		1.45%	f		1.52%	f		1.48%	f		1.47%	f
Net investment income		1.47%			0.87%			1.64%			1.52%			2.07%			1.93%
Supplemental data
Net assets, end of period (000’s)	$	309,910		$	347,242		$	325,927		$	234,213		$	753,843		$	749,120
Portfolio turnover rate		4.70%			24.41%			56.58%	g		75.11%	g		98.32%			53.65%

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

^bBased on average daily shares outstanding.

^cAmount rounds to less than $0.01 per share.

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

^eRatios are annualized for periods less than one year.

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

^gExcludes the value of portfolio securities delivered as a result of redemptions in-kind.

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

TD-10

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Templeton Developing Markets Securities Fund

	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31,
Class 2				2010			2009			2008			2007			2006
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	11.30		$	9.78		$	6.04		$	15.99		$	13.79		$	10.90
Income from investment operationsa:
Net investment incomeb		0.07			0.06			0.11			0.15			0.27			0.20
Net realized and unrealized gains (losses)		0.05			1.62			3.98			(7.33	)		3.49			2.82
Total from investment operations		0.12			1.68			4.09			(7.18	)		3.76			3.02
Less distributions from:
Net investment income		(0.10	)		(0.16	)		(0.32	)		(0.33	)		(0.35	)		(0.13	)
Net realized gains		—			—			(0.03	)		(2.44	)		(1.21	)		—
Total distributions		(0.10	)		(0.16	)		(0.35	)		(2.77	)		(1.56	)		(0.13	)
Redemption feesc		—			—			—			—			—			—
Net asset value, end of period	$	11.32		$	11.30		$	9.78		$	6.04		$	15.99		$	13.79
Total returnd		1.12%			17.58%			72.59%			(52.70)%			28.78%			28.09%
Ratios to average net assetse
Expenses		1.68%			1.74%	f		1.70%	f		1.77%	f		1.73%	f		1.72%	f
Net investment income		1.22%			0.62%			1.39%			1.27%			1.82%			1.68%
Supplemental data
Net assets, end of period (000’s)	$	366,156		$	392,546		$	435,947		$	264,186		$	1,090,549		$	857,514
Portfolio turnover rate		4.70%			24.41%			56.58%	g		75.11%	g		98.32%			53.65%

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

^bBased on average daily shares outstanding.

^cAmount rounds to less than $0.01 per share.

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

^eRatios are annualized for periods less than one year.

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

^gExcludes the value of portfolio securities delivered as a result of redemptions in-kind.

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

TD-11

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Templeton Developing Markets Securities Fund

	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31,
Class 3				2010			2009			2008			2007			2006
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	11.23		$	9.73		$	6.02		$	15.96		$	13.78		$	10.90
Income from investment operationsa:
Net investment incomeb		0.07			0.06			0.10			0.11			0.24			0.20
Net realized and unrealized gains (losses)		0.05			1.60			3.97			(7.27	)		3.52			2.83
Total from investment operations		0.12			1.66			4.07			(7.16	)		3.76			3.03
Less distributions from:
Net investment income		(0.10	)		(0.16	)		(0.33	)		(0.34	)		(0.37	)		(0.15	)
Net realized gains		—			—			(0.03	)		(2.44	)		(1.21	)		—
Total distributions		(0.10	)		(0.16	)		(0.36	)		(2.78	)		(1.58	)		(0.15	)
Redemption feesc		—			—			—			—			—			—
Net asset value, end of period	$	11.25		$	11.23		$	9.73		$	6.02		$	15.96		$	13.78
Total returnd		1.13%			17.51%			72.63%			(52.67)%			28.70%			28.17%
Ratios to average net assetse
Expenses		1.68%			1.74%	f		1.70%	f		1.77%	f		1.73%	f		1.72%	f
Net investment income		1.22%			0.62%			1.39%			1.27%			1.82%			1.68%
Supplemental data
Net assets, end of period (000’s)	$	60,517		$	66,484		$	66,718		$	32,953		$	100,961		$	43,372
Portfolio turnover rate		4.70%			24.41%			56.58%	g		75.11%	g		98.32%			53.65%

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

^bBased on average daily shares outstanding.

^cAmount rounds to less than $0.01 per share.

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

^eRatios are annualized for periods less than one year.

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

^gExcludes the value of portfolio securities delivered as a result of redemptions in-kind.

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

TD-12

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Templeton Developing Markets Securities Fund

	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31,
Class 4				2010			2009			2008a
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	11.30		$	9.80		$	6.09		$	14.88
Income from investment operationsb:
Net investment income (loss)c		0.06			0.05			0.09			(0.33	)
Net realized and unrealized gains (losses)		0.06			1.61			4.00			(5.65	)
Total from investment operations		0.12			1.66			4.09			(5.98	)
Less distributions from:
Net investment income		(0.10	)		(0.16	)		(0.35	)		(0.37	)
Net realized gains		—			—			(0.03	)		(2.44	)
Total distributions		(0.10	)		(0.16	)		(0.38	)		(2.81	)
Redemption feesd		—			—			—			—
Net asset value, end of period	$	11.32		$	11.30		$	9.80		$	6.09
Total returne		1.08%			17.41%			72.45%			(48.66)%
Ratios to average net assetsf
Expenses		1.78%			1.84%	g		1.80%	g		1.87%	g
Net investment income		1.12%			0.52%			1.29%			1.17%
Supplemental data
Net assets, end of period (000’s)	$	33,809		$	37,198		$	26,362		$	7,208
Portfolio turnover rate		4.70%			24.41%			56.58%	h		75.11%	h

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

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

^cBased on average daily shares outstanding.

^dAmount rounds to less than $0.01 per share.

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

^fRatios are annualized for periods less than one year.

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

^hExcludes the value of portfolio securities delivered as a result of redemptions in-kind.

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

TD-13

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited)

Templeton Developing Markets Securities Fund	Industry	Shares		Value
Common Stocks 89.6%
Australia 1.0%
BHP Billiton Ltd.	Metals & Mining		166,062	$	7,800,118
Brazil 11.8%
Companhia de Bebidas das Americas (AmBev)	Beverages		1,356,585		37,358,324
Companhia de Bebidas das Americas (AmBev), IDR	Beverages		5,765		158,759
Itau Unibanco Holding SA, ADR	Commercial Banks		1,419,474		33,428,613
aItausa - Investimentos Itau SA, IDR	Commercial Banks		10,108		77,682
Natura Cosmeticos SA	Personal Products		277,532		6,931,857
Souza Cruz SA	Tobacco		995,350		12,659,804
					90,615,039
China 11.3%
bAluminum Corp. of China Ltd., H	Metals & Mining		6,214,000		5,238,390
Anta Sports Products Ltd.	Textiles, Apparel & Luxury Goods		2,131,000		3,800,980
Changsha Zoomlion Heavy Industry Science and Technology Development Co. Ltd., H	Machinery		2,475,720		4,708,537
CNOOC Ltd.	Oil, Gas & Consumable Fuels		7,181,000		16,794,963
Golden Eagle Retail Group Ltd.	Multiline Retail		1,234,000		3,139,808
Great Wall Motor Co. Ltd., H	Automobiles		3,354,000		5,516,908
Guangzhou Automobile Group Co. Ltd., H	Automobiles		9,006,396		10,995,054
Inner Mongolia Yitai Coal Co. Ltd., B	Oil, Gas & Consumable Fuels		1,019,967		5,959,667
PetroChina Co. Ltd., H	Oil, Gas & Consumable Fuels		13,880,000		20,262,383
Tencent Holdings Ltd.	Internet Software & Services		130,600		3,547,896
Travelsky Technology Ltd., H	IT Services		1,967,000		1,238,577
Yantai Changyu Pioneer Wine Co. Ltd., B	Beverages		532,200		5,954,102
					87,157,265
Hong Kong 2.2%
Dairy Farm International Holdings Ltd.	Food & Staples Retailing		1,014,733		8,320,811
VTech Holdings Ltd.	Communications Equipment		724,000		8,624,641
					16,945,452
India 14.6%
Coal India Ltd.	Oil, Gas & Consumable Fuels		759,353		6,676,453
Grasim Industries Ltd.	Chemicals		40,253		1,888,184
Hindalco Industries Ltd.	Metals & Mining		1,732,548		7,026,466
Infosys Ltd.	IT Services		238,290		15,523,288
National Aluminium Co. Ltd.	Metals & Mining		2,244,416		4,163,963
Oil & Natural Gas Corp. Ltd.	Oil, Gas & Consumable Fuels		1,826,624		11,212,271
Sesa Goa Ltd.	Metals & Mining		1,076,310		6,804,411
Tata Chemicals Ltd.	Chemicals		1,172,718		9,773,526
Tata Consultancy Services Ltd.	IT Services		1,857,283		49,120,412
					112,188,974
Indonesia 6.7%
PT Astra International Tbk	Automobiles		3,806,000		28,201,633
PT Bank Central Asia Tbk	Commercial Banks		15,933,532		14,212,268
PT Bank Rakyat Indonesia (Persero) Tbk	Commercial Banks		12,208,000		9,252,259
					51,666,160
Mexico 1.9%
America Movil SAB de CV, L, ADR	Wireless Telecommunication Services		189,267		10,197,706
Kimberly Clark de Mexico SAB de CV, A	Household Products		650,871		4,280,546
					14,478,252

TD-14

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Templeton Developing Markets Securities Fund	Industry	Shares		Value
Common Stocks (continued)
Nigeria 0.1%
Nigerian Breweries PLC	Beverages		1,586,265	$	900,790
Pakistan 1.7%
MCB Bank Ltd.	Commercial Banks		2,533,287		5,858,502
Oil & Gas Development Co. Ltd.	Oil, Gas & Consumable Fuels		4,258,312		7,571,432
					13,429,934
Qatar 0.1%
Industries Qatar	Industrial Conglomerates		10,230		382,624
Russia 17.6%
aGazprom, ADR	Oil, Gas & Consumable Fuels		1,703,600		24,787,380
aGazprom, ADR (London Stock Exchange)	Oil, Gas & Consumable Fuels		470,200		6,860,218
cLUKOIL Holdings, ADR	Oil, Gas & Consumable Fuels		75,208		4,794,510
cLUKOIL Holdings, ADR (London Stock Exchange)	Oil, Gas & Consumable Fuels		317,168		20,156,027
aMining and Metallurgical Co. Norilsk Nickel, ADR	Metals & Mining		1,316,100		34,310,727
Sberbank RF	Commercial Banks		6,061,420		22,306,026
TNK-BP	Oil, Gas & Consumable Fuels		5,340,274		16,759,500
dUralkali, GDR, Reg S	Chemicals		122,196		5,489,655
					135,464,043
Singapore 1.9%
Keppel Corp. Ltd.	Industrial Conglomerates		790,557		7,131,297
SembCorp Marine Ltd.	Machinery		1,778,000		7,671,904
					14,803,201
South Africa 1.2%
Remgro Ltd.	Diversified Financial Services		504,061		8,319,511
Tiger Brands Ltd.	Food Products		25,250		737,529
					9,057,040
South Korea 1.2%
SK Innovation Co. Ltd.	Oil, Gas & Consumable Fuels		48,967		9,201,390
Sweden 0.5%
Oriflame Cosmetics SA, SDR	Personal Products		75,287		3,705,108
Taiwan 3.0%
President Chain Store Corp.	Food & Staples Retailing		3,628,075		20,912,910
Uni-President China Holdings Ltd.	Food Products		3,767,000		2,333,272
					23,246,182
Thailand 4.2%
Kasikornbank PCL, fgn.	Commercial Banks		2,759,300		11,220,316
PTT Exploration and Production PCL, fgn.	Oil, Gas & Consumable Fuels		2,021,223		11,243,628
PTT PCL, fgn.	Oil, Gas & Consumable Fuels		938,100		10,223,276
					32,687,220
Turkey 3.5%
Akbank TAS	Commercial Banks		2,712,311		12,532,240
Tupras-Turkiye Petrol Rafinerileri AS	Oil, Gas & Consumable Fuels		600,504		14,724,039
					27,256,279
United Arab Emirates 1.0%
Emaar Properties PJSC	Real Estate Management & Development		8,942,377		7,352,567

TD-15

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Templeton Developing Markets Securities Fund	Industry	Shares		Value
Common Stocks (continued)
United Kingdom 4.1%
Anglo American PLC	Metals & Mining		316,849	$	15,691,092
Antofagasta PLC	Metals & Mining		704,479		15,755,166
					31,446,258
Vietnam 0.0%†
Petrovietnam Fertilizer and Chemical JSC	Chemicals		217,810		343,883
Total Common Stocks (Cost $399,485,124)					690,127,779
Preferred Stocks 10.6%
Brazil 9.5%
Banco Bradesco SA, ADR, pfd.	Commercial Banks		582,431		11,934,011
Itausa - Investimentos Itau SA, pfd.	Commercial Banks		1,018,810		7,823,197
Petroleo Brasileiro SA, ADR, pfd.	Oil, Gas & Consumable Fuels		130,588		4,006,440
Vale SA, ADR, pfd., A	Metals & Mining		1,717,475		49,738,076
					73,501,724
Chile 1.1%
Embotelladora Andina SA, pfd., A	Beverages		1,918,947		8,212,034
Total Preferred Stocks (Cost $34,455,712)					81,713,758
Total Investments before Short Term Investments (Cost $433,940,836)					771,841,537
eInvestments from Cash Collateral Received for Loaned Securities (Cost $4,194,000) 0.5%
Money Market Funds 0.5%
United States 0.5%
fBNY Mellon Overnight Government Fund, 0.05%			4,194,000		4,194,000
Total Investments (Cost $438,134,836) 100.7%					776,035,537
Other Assets, less Liabilities (0.7)%					(5,643,547	)
Net Assets 100.0%				$	770,391,990

See Abbreviations on page TD-27.

†Rounds to less than 0.1% of net assets.

^aNon-income producing.

^bA portion or all of the security is on loan at June 30, 2011. See Note 1(c).

^cAt June 30,2011, pursuant to the Fund’s policies and the requirements of applicable securities law, the Fund may be restricted from trading these securities for a limited or extended period of time due to ownership limits and/or potential possession of material non-public information.

^dSecurity was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. This security has been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At June 30, 2011, the value of this security was $5,489,655, representing 0.71% of net assets.

^eSee Note 1(c) regarding securities on loan.

^fThe rate shown is the annualized seven-day yield at period end.

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

TD-16

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

June 30, 2011 (unaudited)

	Templeton Developing Markets Securities Fund
Assets:
Investments in securities:
Cost	$	438,134,836
Value (includes securities loaned in the amount of $3,928,371)	$	776,035,537
Foreign currency, at value (cost $407,859)		407,864
Receivables:
Investment securities sold		1,460,083
Capital shares sold		120,371
Dividends and interest		2,622,298
Foreign tax		51,726
Other assets		217
Total assets		780,698,096
Liabilities:
Payables:
Investment securities purchased		1,357,869
Capital shares redeemed		2,367,420
Affiliates		974,341
Funds advanced by custodian		1,058,070
Payable upon return of securities loaned		4,194,000
Accrued expenses and other liabilities		354,406
Total liabilities		10,306,106
Net assets, at value	$	770,391,990
Net assets consist of:
Paid-in capital	$	587,441,133
Distributions in excess of net investment income		(2,379,872	)
Net unrealized appreciation (depreciation)		337,901,879
Accumulated net realized gain (loss)		(152,571,150	)
Net assets, at value	$	770,391,990

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

TD-17

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Assets and Liabilities (continued)

June 30, 2011 (unaudited)

	Templeton Developing Markets Securities Fund
Class 1:
Net assets, at value	$	309,910,041
Shares outstanding		27,178,783
Net asset value and maximum offering price per share	$	11.40
Class 2:
Net assets, at value	$	366,155,982
Shares outstanding		32,339,010
Net asset value and maximum offering price per share	$	11.32
Class 3:
Net assets, at value	$	60,517,340
Shares outstanding		5,377,835
Net asset value and maximum offering price per sharea	$	11.25
Class 4:
Net assets, at value	$	33,808,627
Shares outstanding		2,985,862
Net asset value and maximum offering price per share	$	11.32

^aRedemption price is equal to net asset value less redemption fees retained by the Fund.

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

TD-18

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the six months ended June 30, 2011 (unaudited)

	Templeton Developing Markets Securities Fund
Investment income:
Dividends (net of foreign taxes of $1,214,070)	$	11,485,071
Interest		22,148
Income from securities loaned		14,616
Total investment income		11,521,835
Expenses:
Management fees (Note 3a)		4,718,273
Administrative fees (Note 3b)		533,743
Distribution fees: (Note 3c)
Class 2		465,234
Class 3		77,298
Class 4		63,919
Unaffiliated transfer agent fees		1,447
Custodian fees (Note 4)		270,747
Reports to shareholders		112,393
Professional fees		28,299
Trustees’ fees and expenses		1,631
Other		14,673
Total expenses		6,287,657
Net investment income		5,234,178
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		20,407,170
Foreign currency transactions		127,417
Net realized gain (loss)		20,534,587
Net change in unrealized appreciation (depreciation) on:
Investments		(18,382,970	)
Translation of other assets and liabilities denominated in foreign currencies		19,816
Change in deferred taxes on unrealized appreciation		53,321
Net change in unrealized appreciation (depreciation)		(18,309,833	)
Net realized and unrealized gain (loss)		2,224,754
Net increase (decrease) in net assets resulting from operations	$	7,458,932

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

TD-19

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets

	Templeton Developing Markets Securities Fund
	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31, 2010
Increase (decrease) in net assets:
Operations:
Net investment income	$	5,234,178		$	5,592,076
Net realized gain (loss) from investments and foreign currency transactions		20,534,587			49,761,078
Net change in unrealized appreciation (depreciation) on investments, translation of other assets and liabilities denominated in foreign currencies and deferred taxes		(18,309,833	)		68,457,067
Net increase (decrease) in net assets resulting from operations		7,458,932			123,810,221
Distributions to shareholders from:
Net investment income:
Class 1		(3,575,470	)		(5,483,924	)
Class 2		(3,331,863	)		(5,656,521	)
Class 3		(556,039	)		(947,886	)
Class 4		(314,405	)		(471,295	)
Total distributions to shareholders		(7,777,777	)		(12,559,626	)
Capital share transactions: (Note 2)
Class 1		(37,035,335	)		(22,233,537	)
Class 2		(26,553,617	)		(97,764,544	)
Class 3		(5,886,229	)		(9,001,736	)
Class 4		(3,309,847	)		6,238,252
Total capital share transactions		(72,785,028	)		(122,761,565	)
Redemption fees		25,916			26,367
Net increase (decrease) in net assets		(73,077,957	)		(11,484,603	)
Net assets:
Beginning of period		843,469,947			854,954,550
End of period	$	770,391,990		$	843,469,947
Undistributed net investment income (distributions in excess of net investment income) included in net assets:
End of period	$	(2,379,872	)	$	163,727

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

TD-20

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited)

Templeton Developing Market Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment company, consisting of twenty separate funds. The Templeton Developing Markets Securities (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. The Fund offers four classes of shares: Class 1, Class 2, Class 3, and Class 4. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

The Fund’s investments in securities and other financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Under procedures approved by the Trust’s Board of Trustees, the Fund may utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

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

The Fund has procedures to determine the fair value of securities and other financial instruments for which market prices are not readily available or which may not be reliably priced. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.

Trading in securities on foreign securities stock exchanges and over-the-counter markets may be completed before the daily close of business on the NYSE. Occasionally, events occur between the time at which trading in a foreign security is completed and the close of the NYSE that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund’s portfolio securities as determined at the foreign market close and the latest indications of value at the close of the NYSE. In order to minimize the potential for these differences, the investment manager monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depository Receipts, 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 may call into question the reliability of the values of the foreign securities held by the Fund. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services.

b. Foreign Currency Translation

Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Fund may enter into foreign currency

TD-21

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Developing Market Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

b. Foreign Currency Translation (continued)

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

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

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

c. Securities Lending

The Fund participates in an agency based security lending program. The Fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the market value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the market value of loaned securities, as determined at the close of Fund business each day; any additional collateral required due to changes in security values is delivered to the Fund on the next business day. The collateral is invested in a non-registered money fund managed by the Fund’s custodian on the Fund’s behalf. The Fund receives income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. The Fund bears the market risk with respect to the collateral investment, securities loaned, and the risk that the agent may default on its obligations to the Fund. The securities lending agent has agreed to indemnify the Fund in the event of default by a third party borrower.

d. Income and Deferred Taxes

It is the Fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and excise taxes. As a result, no provision for U.S. federal income taxes is required. The Fund files U.S. income tax returns as well as tax returns in certain other jurisdictions. The Fund records a provision for taxes in its financial statements including penalties and interest, if any, for a tax position taken on a tax return (or expected to be taken) when it fails to meet the more likely than not (a greater than 50% probability) threshold and based on the technical merits, the tax position may not be sustained upon examination by the tax authorities. As of June 30, 2011, and for all open tax years, the Fund has determined that no provision for income tax is required in the Fund’s financial statements. Open tax years are those that remain subject to examination and are based on each tax jurisdiction statute of limitation.

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

TD-22

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Developing Market Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

e. Security Transactions, Investment Income, Expenses and Distributions

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

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

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

f. Accounting Estimates

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

g. Redemption Fees

Redemptions and exchanges of interests in an insurance company subaccount that invests in Class 3 shares of the Fund will be subject to a 1.0% short term trading fee if the interest in the subaccount has been held for less than 60 days. Such fees are retained by the Fund and accounted for as an addition to paid-in capital, allocated to each class of shares based upon the relative proportion of net assets of each class.

h. Guarantees and Indemnifications

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

TD-23

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Developing Market Securities Fund

2. SHARES OF BENEFICIAL INTEREST

At June 30, 2011, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:

	Six Months Ended June 30, 2011						Year Ended December 31, 2010
Class 1 Shares:	Shares			Amount			Shares			Amount
Shares sold		1,842,420		$	20,496,589			4,235,745		$	44,045,245
Shares issued in reinvestment of distributions		324,453			3,575,470			603,956			5,483,924
Shares redeemed		(5,450,810	)		(61,107,394	)		(7,418,014	)		(71,762,706	)
Net increase (decrease)		(3,283,937	)	$	(37,035,335	)		(2,578,313	)	$	(22,233,537	)
Class 2 Shares:
Shares sold		3,188,055		$	35,975,742			9,770,557		$	97,538,996
Shares issued in reinvestment of distributions		304,558			3,331,863			627,805			5,656,521
Shares redeemed		(5,885,349	)		(65,861,222	)		(20,231,375	)		(200,960,061	)
Net increase (decrease)		(2,392,736	)	$	(26,553,617	)		(9,833,013	)	$	(97,764,544	)
Class 3 Shares:
Shares sold		637,604		$	7,230,771			1,343,547		$	13,467,640
Shares issued in reinvestment of distributions		51,154			556,039			105,791			947,886
Shares redeemed		(1,228,743	)		(13,673,039	)		(2,390,224	)		(23,417,262	)
Net increase (decrease)		(539,985	)	$	(5,886,229	)		(940,886	)	$	(9,001,736	)
Class 4 Shares:
Shares sold		327,116		$	3,668,307			1,189,893		$	11,893,157
Shares issued on reinvestment of distributions		28,739			314,405			52,250			471,295
Shares redeemed		(660,667	)		(7,292,559	)		(641,932	)		(6,126,200	)
Net increase (decrease)		(304,812	)	$	(3,309,847	)		600,211		$	6,238,252

3. TRANSACTIONS WITH AFFILIATES

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

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

TD-24

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Developing Market Securities Fund

3. TRANSACTIONS WITH AFFILIATES (continued)

a. Management Fees

Effective May 1, 2011, the Fund pays an investment management fee to TAML based on the average daily net assets of the Fund as follows:

Annualized Fee Rate	Net Assets
1.100%	Up to and including $1 billion
1.050%	Over $1 billion, up to and including $5 billion
1.000%	Over $5 billion, up to and including $10 billion
0.950%	Over $10 billion, up to and including $15 billion
0.900%	Over $15 billion, up to and including $20 billion
0.850%	In excess of $20 billion

Prior to May 1, 2011, the Fund paid an investment management fee to TAML based on the average daily net assets of the Fund as follows:

Annualized Fee Rate	Net Assets
1.250%	Up to and including $500 million
1.200%	Over $500 million, up to and including $3 billion
1.150%	Over $3 billion, up to and including $4 billion
1.100%	Over $4 billion, up to and including $15 billion
1.050%	Over $15 billion, up to and including $20 billion
1.000%	In excess of $20 billion

b. Administrative Fees

The Fund pays an administrative fee to FT Services based on the Fund’s average daily net assets as follows:

Annualized Fee Rate	Net Assets
0.150%	Up to and including $200 million
0.135%	Over $200 million, up to and including $700 million
0.100%	Over $700 million, up to and including $1.2 billion
0.075%	In excess of $1.2 billion

c. Distribution Fees

The Trust’s Board of Trustees has adopted distribution plans for Class 2, Class 3, and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to 0.25%, 0.35%, and 0.35% per year of its average daily net assets of Class 2, Class 3, and Class 4, respectively. The Board of Trustees has agreed to limit the current rate to 0.25% per year for Class 3.

d. Transfer Agent Fees

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

4. EXPENSE OFFSET ARRANGEMENT

The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses. During the period ended June 30, 2011, there were no credits earned.

TD-25

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Developing Market Securities Fund

5. INCOME TAXES

For tax purposes, capital losses may be carried over to offset future capital gains, if any. At December 31, 2010, the Fund had tax basis capital losses of $166,405,957 expiring in 2017.

Under the Regulated Investment Company Modernization Act of 2010, the Fund will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. Post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered short-term as under previous law. Any post-enactment capital losses generated will be required to be utilized prior to the losses incurred in pre-enactment tax years.

At June 30, 2011, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	452,361,264
Unrealized appreciation	$	332,029,941
Unrealized depreciation		(8,355,668	)
Net unrealized appreciation (depreciation)	$	323,674,273

Net investment income differs for financial statement and tax purposes primarily due to differing treatments of foreign currency transactions, passive foreign investment company shares, and corporate actions.

Net realized gains (losses) differ for financial statement and tax purposes primarily due to differing treatments of wash sales, foreign currency transactions, passive foreign investment company shares, and corporate actions.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2011, aggregated $37,796,019 and $100,495,194, respectively.

7. CONCENTRATION OF RISK

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

8. CREDIT FACILITY

The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $750 million (Global Credit Facility) which matures on January 20, 2012. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests.

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.08% based upon the unused portion of the Global Credit Facility, which is reflected in other expenses on the Statement of Operations. During the period ended June 30, 2011, the Fund did not use the Global Credit Facility.

TD-26

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Developing Market Securities Fund

9. FAIR VALUE MEASUREMENTS

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

• Level 1 – quoted prices in active markets for identical securities

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

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

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

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

The following is a summary of the inputs used as of June 30, 2011, in valuing the Fund’s assets carried at fair value:

	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities:
Equity Investmentsa,b	$	771,841,537	$	—	$	—	$	771,841,537
Short Term Investments		—		4,194,000		—		4,194,000
Total Investments in Securities	$	771,841,537	$	4,194,000	$	—	$	776,035,537

^aIncludes common and preferred stocks.

^bFor detailed country descriptions, see the accompanying Statement of Investments.

10. NEW ACCOUNTING PRONOUNCEMENTS

In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (IFRS). The amendments in the ASU will improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRS and include new guidance for certain fair value measurement principles and disclosure requirements. The ASU is effective for interim and annual periods beginning after December 15, 2011. The Fund is currently evaluating the impact, if any, of applying this provision.

11. SUBSEQUENT EVENTS

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

ABBREVIATIONS

Selected Portfolio

ADR - American Depository Receipt

GDR - Global Depository Receipt

IDR - International Depository Receipt

SDR - Swedish Depository Receipt

TD-27

Franklin Templeton Variable Insurance Products Trust

Tax Designation (unaudited)

Templeton Developing Markets Securities Fund

At December 31, 2010, more than 50% of the Fund’s total assets were invested in securities of foreign issuers. In most instances, foreign taxes were withheld from income paid to the Fund on these investments. As shown in the table below, the Fund designates to shareholders the foreign source income and foreign taxes paid, pursuant to Section 853 of the Internal Revenue Code. This designation will allow shareholders of record on June 14, 2011, to treat their proportionate share of foreign taxes paid by the Fund as having been paid directly by them. The shareholder shall consider these amounts as foreign taxes paid in the tax year in which they receive the Fund distribution.

The following table provides a detailed analysis of foreign tax paid and foreign source income as designated by the Fund, to Class 1, Class 2, Class 3, and Class 4 shareholders of record.

Class	Foreign Tax Paid Per Share		Foreign Source Income Per Share
Class 1	$	0.0279	$	0.1512
Class 2	$	0.0279	$	0.1247
Class 3	$	0.0279	$	0.1255
Class 4	$	0.0279	$	0.1215

Foreign Tax Paid Per Share (Column 1) is the amount per share available to you, as a tax credit (assuming you held your shares in the Fund for a minimum of 16 days during the 31-day period beginning 15 days before the ex-dividend date of the Fund’s distribution to which the foreign taxes relate), or, as a tax deduction.

Foreign Source Income Per Share (Column 2) is the amount per share of income dividends attributable to foreign securities held by the Fund, plus any foreign taxes withheld on these dividends.

TD-28

TEMPLETON FOREIGN SECURITIES FUND

We are pleased to bring you Templeton Foreign Securities Fund’s semiannual report for the period ended June 30, 2011.

Performance Summary as of 6/30/11

Templeton Foreign Securities Fund – Class 4 delivered a +5.97% total return for the six-month period ended 6/30/11.

Performance reflects the Fund’s Class 4 operating expenses, but does not include any contract fees, expenses or sales charges. If they had been included, performance would be lower. These charges and deductions, particularly for variable life policies, can have a significant effect on contract values and insurance benefits. See the contract prospectus for a complete description of these expenses, including sales charges.

Templeton Foreign Securities Fund – Class 4

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

Current performance may differ from figures shown.

TF-1

Fund Goal and Main Investments: Templeton Foreign Securities Fund seeks long-term capital growth. The Fund normally invests at least 80% of its net assets in investments of issuers located outside the U.S., including those in emerging markets.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. The Fund outperformed its benchmark, the MSCI Europe, Australasia, Far East (EAFE) Index, which produced a +5.35% total return for the same period.¹ Please note, index performance information is provided for reference and we do not attempt to track the index but rather undertake investments on the basis of fundamental research.

Economic and Market Overview

Global stock markets rose in the first half of 2011, though the positive momentum from the previous year waned as European sovereign debt turmoil escalated and signs emerged of an economic slowdown. Furthermore, geopolitical unrest sweeping the Middle East and North Africa roiled oil markets, and a devastating earthquake and tsunami in Japan severely disrupted global supply chains during the period. While the market recovered from these interferences, economic growth concerns persisted. Officials at the U.S. Federal Reserve Board (Fed) cut their growth forecast for the world’s largest economy, and manufacturing slowed in most major regions of the world. Japan’s earthquake, an early surge in commodity prices and a fading inventory restocking cycle were all blamed for declining economic leading indicators. Nascent monetary policy tightening in most parts of the world was also thought to inhibit growth and cool the commodities rally. Asian and emerging market policymakers tightened aggressively as inflation reached post-crisis highs in many regions, while the European Central Bank raised interest rates for the first time in two years, deviating from the extraordinarily accommodative path of the Fed, which undertook a second round of quantitative easing during the reporting period.

Amid concerns of sustained accommodative monetary policy and declining economic growth rates in the U.S., politicians debated whether to raise the nation’s debt ceiling. Sovereign debt concerns continued to plague Europe, with Greece, Ireland, Portugal and Spain subject to rating downgrades in the first half of 2011. At period-end,

1. Source: © 2011 Morningstar. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

Fund Risks: The Fund’s investments in stocks may offer the potential for long-term gains but can be subject to short-term price fluctuations. Foreign investing, especially in emerging or developing markets, involves additional risks, including currency fluctuations, economic instability, market volatility, and political and social instability. The Fund may have significant investments in one or more countries or in particular sectors, such as technology and financial services, from time to time, and may carry greater risk of adverse developments in a country or sector than a fund that invests more broadly. Smaller and midsize company securities can increase the risk of greater price fluctuations, particularly over the short term. The manager applies various techniques and analyses in making investment decisions for the Fund, but there can be no guarantee that these decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

TF-2

European politicians were working to pass painful austerity budgets despite fierce popular resistance, and discussions were ongoing about restructuring debt payments of the region’s most troubled sovereigns. Despite these challenges, continued corporate profit strength and still favorable economic growth prospects in some regions of the world supported stock prices. Equity market leadership rotated toward defensive sectors as risk aversion increased, buoying even U.S. Treasuries toward period-end as near-term demand for perceived safe havens outweighed longer term concerns about the deteriorating U.S. credit profile. The dollar ultimately declined, however, against most currencies, broadly reflecting divergent interest rate and/or economic growth expectations.

Investment Strategy

Our investment philosophy is bottom up, value oriented and long term. In choosing investments, we generally focus on the market price of a company’s securities relative to our evaluation of the company’s potential long-term earnings, asset value and cash flow. Among factors we consider are a company’s historical value measures, including price/earnings ratio, profit margins and liquidation value. We do in-depth research to construct a bargain list from which we buy.

Manager’s Discussion

During the six months under review, our stock selection in the financials sector benefited the Fund’s performance relative to the benchmark MSCI EAFE Index.² Within the sector, overweighted positions in diversified financial services company ING Groep (Netherlands), life assurance and pension products provider Aviva (U.K.) and insurance and asset management company AXA (France) delivered strong returns. Our overweighting and stock selection in the health care sector also aided performance, and major contributors included relatively large positions in pharmaceutical companies Merck KGaA (Germany), Roche Holding (Switzerland) and Sanofi (France).³ Other positions that helped relative results included telecommunication and Internet services provider China Telecom⁴ (China) in the telecommunication services sector and business software solutions company SAP (Germany) in the information technology sector.⁵

2. The financials sector comprises capital markets, commercial banks, diversified financial services, insurance, and real estate management and development in the SOI.

3. The health care sector comprises life sciences tools and services and pharmaceuticals in the SOI.

4. Not an index component.

5. The telecommunication services sector comprises diversified telecommunication services and wireless telecommunication services in the SOI. The information technology sector comprises communications equipment; computers and peripherals; electronic equipment, instruments and components; semiconductors and semiconductor equipment; and software in the SOI.

TF-3

In contrast, our overweighted allocation in the information technology sector detracted from relative performance, largely due to positions in electronic manufacturing services provider Flextronics International⁴ (Singapore), electronics and microchip maker Samsung Electronics⁴ (South Korea), and video game hardware and software manufacturer Nintendo (Japan). Stock selection in the industrials sector also hindered relative results, largely due to our position in Hays⁴ (U.K.), a provider of business-to-business services including distribution, recruitment and office support.⁶ Other key detractors were commercial bank KB Financial Group⁴ (South Korea) and oil and gas producer Reliance Industries⁴ (India).

It is also important to recognize the effect of currency movements on the Fund’s performance. In general, if the value of the U.S. dollar goes up compared with a foreign currency, an investment traded in that foreign currency will go down in value because it will be worth fewer U.S. dollars. This can have a negative effect on Fund performance. Conversely, when the U.S. dollar weakens in relation to a foreign currency, an investment traded in that foreign currency will increase in value, which can contribute to Fund performance. For the six months ended June 30, 2011, the U.S. dollar declined in value relative to most currencies. As a result, the Fund’s performance was positively affected by the portfolio’s investment predominantly in securities with non-U.S. currency exposure. However, one cannot expect the same result in future periods.

From a geographic perspective, our stock selection in Europe boosted the Fund’s relative performance, as our investments in France, the Netherlands, Norway, Russia⁴ and the U.K. generally outperformed. Our decision to underweight Japan and our stock selection in Asia were also beneficial, particularly stocks in China⁴ and Hong Kong. In contrast, the Fund’s overweighting and stock selection in North America hindered results due to the underperformance of our investments in Canada⁴ and Bermuda.

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

6. The industrials sector comprises aerospace and defense, commercial services and supplies, electrical equipment, industrial conglomerates, and professional services in the SOI.

The foregoing information reflects our analysis, opinions and portfolio holdings as of June 30, 2011, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

Top 10 Holdings

Templeton Foreign Securities Fund

6/30/11

Company Sector/Industry, Country	% of Total Net Assets
Sanofi		3.2%
Pharmaceuticals, France
Vodafone Group PLC		2.8%
Wireless Telecommunication Services, U.K.
Roche Holding AG		2.7%
Pharmaceuticals, Switzerland
ING Groep NV		2.5%
Diversified Financial Services, Netherlands
Taiwan Semiconductor Manufacturing Co. Ltd.		2.4%
Semiconductors & Semiconductor Equipment, Taiwan
Samsung Electronics Co. Ltd.		2.4%
Semiconductors & Semiconductor Equipment, South Korea
Aviva PLC		2.3%
Insurance, U.K.
Statoil ASA		2.2%
Oil, Gas & Consumable Fuels, Norway
Tesco PLC		2.1%
Food & Staples Retailing, U.K.
GlaxoSmithKline PLC		2.1%
Pharmaceuticals, U.K.

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

TF-4

Fund Expenses

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

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

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

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

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

Actual Fund Expenses

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

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

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

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

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

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

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

Templeton Foreign Securities Fund – Class 4

TF-5

Hypothetical Example for Comparison with Other Mutual Funds

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

Class 4	Beginning Account Value 1/1/11		Ending Account Value 6/30/11		Fund-Level Expenses Incurred During Period* 1/1/11–6/30/11
Actual	$	1,000	$	1,059.70	$	5.77
Hypothetical (5% return before expenses)	$	1,000	$	1,019.19	$	5.66

*Expenses are calculated using the most recent six-month annualized expense ratio for the Fund’s Class 4 shares (1.13%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 181/365 to reflect the one-half year period.

TF-6

Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Templeton Foreign Securities Fund

	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31,
Class 1				2010			2009			2008			2007			2006
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	14.54		$	13.68		$	10.95		$	20.57		$	19.00		$	15.84
Income from investment operationsa:
Net investment incomeb		0.30			0.28			0.25			0.45			0.45			0.46
Net realized and unrealized gains (losses)		0.59			0.86			3.39			(8.01	)		2.46			2.94
Total from investment operations		0.89			1.14			3.64			(7.56	)		2.91			3.40
Less distributions from:
Net investment income		(0.28	)		(0.28	)		(0.43	)		(0.45	)		(0.44	)		(0.24	)
Net realized gains		—			—			(0.48	)		(1.61	)		(0.90	)		—
Total distributions		(0.28	)		(0.28	)		(0.91	)		(2.06	)		(1.34	)		(0.24	)
Redemption feesc		—			—			—			—			—			—
Net asset value, end of period	$	15.15		$	14.54		$	13.68		$	10.95		$	20.57		$	19.00
Total returnd		6.16%			8.67%			37.34%			(40.23)%			15.79%			21.70%
Ratios to average net assetse
Expenses		0.78%			0.78%	f		0.78%	f		0.77%	f		0.75%	f		0.75%	f
Net investment income		3.98%			2.10%			2.28%			2.82%			2.22%			2.63%
Supplemental data
Net assets, end of period (000’s)	$	319,477		$	321,282		$	318,173		$	262,725		$	531,377		$	594,991
Portfolio turnover rate		11.67%			19.16%			22.50%			18.27%			26.74%			18.97%	g

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

^bBased on average daily shares outstanding.

^cAmount rounds to less than $0.01 per share.

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

^eRatios are annualized for periods less than one year.

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

^gExcludes the value of portfolio securities delivered as a result of redemption in-kind.

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

TF-7

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Templeton Foreign Securities Fund

	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31,
Class 2				2010			2009			2008			2007			2006
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	14.29		$	13.45		$	10.76		$	20.25		$	18.73		$	15.63
Income from investment operationsa:
Net investment incomeb		0.28			0.25			0.22			0.40			0.38			0.40
Net realized and unrealized gains (losses)		0.57			0.84			3.34			(7.89	)		2.44			2.91
Total from investment operations		0.85			1.09			3.56			(7.49	)		2.82			3.31
Less distributions from:
Net investment income		(0.24	)		(0.25	)		(0.39	)		(0.39	)		(0.40	)		(0.21	)
Net realized gains		—			—			(0.48	)		(1.61	)		(0.90	)		—
Total distributions		(0.24	)		(0.25	)		(0.87	)		(2.00	)		(1.30	)		(0.21	)
Redemption feesc		—			—			—			—			—			—
Net asset value, end of period	$	14.90		$	14.29		$	13.45		$	10.76		$	20.25		$	18.73
Total returnd		6.02%			8.41%			37.04%			(40.38)%			15.46%			21.44%
Ratios to average net assetse
Expenses		1.03%			1.03%	f		1.03%	f		1.02%	f		1.00%	f		1.00%	f
Net investment income		3.73%			1.85%			2.03%			2.57%			1.97%			2.38%
Supplemental data
Net assets, end of period (000’s)	$	2,065,643		$	2,090,757		$	2,010,268		$	1,702,038		$	3,255,154		$	2,941,374
Portfolio turnover rate		11.67%			19.16%			22.50%			18.27%			26.74%			18.97%	g

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

^bBased on average daily shares outstanding.

^cAmount rounds to less than $0.01 per share.

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

^eRatios are annualized for periods less than one year.

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

^gExcludes the value of portfolio securities delivered as a result of redemption in-kind.

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

TF-8

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Templeton Foreign Securities Fund

	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31,
Class 3				2010			2009			2008			2007			2006
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	14.24		$	13.37		$	10.70		$	20.18		$	18.68		$	15.60
Income from investment operationsa:
Net investment incomeb		0.27			0.25			0.25			0.39			0.37			0.37
Net realized and unrealized gains (losses)		0.58			0.84			3.30			(7.84	)		2.45			2.94
Total from investment operations		0.85			1.09			3.55			(7.45	)		2.82			3.31
Less distributions from:
Net investment income		(0.24	)		(0.22	)		(0.40	)		(0.42	)		(0.42	)		(0.23	)
Net realized gains		—			—			(0.48	)		(1.61	)		(0.90	)		—
Total distributions		(0.24	)		(0.22	)		(0.88	)		(2.03	)		(1.32	)		(0.23	)
Redemption feesc		—			—			—			—			—			—
Net asset value, end of period	$	14.85		$	14.24		$	13.37		$	10.70		$	20.18		$	18.68
Total returnd		6.03%			8.41%			37.20%			(40.39)%			15.45%			21.46%
Ratios to average net assetse
Expenses		1.03%			1.03%	f		1.03%	f		1.02%	f		1.00%	f		1.00%	f
Net investment income		3.73%			1.85%			2.03%			2.57%			1.97%			2.38%
Supplemental data
Net assets, end of period (000’s)	$	108,767		$	108,766		$	115,364		$	271,061		$	313,505		$	150,417
Portfolio turnover rate		11.67%			19.16%			22.50%			18.27%			26.74%			18.97%	g

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

^bBased on average daily shares outstanding.

^cAmount rounds to less than $0.01 per share.

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

^eRatios are annualized for periods less than one year.

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

^gExcludes the value of portfolio securities delivered as a result of redemption in-kind.

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

TF-9

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Templeton Foreign Securities Fund

	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31,
Class 4				2010			2009			2008
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	14.43		$	13.59		$	10.91		$	18.90
Income from investment operationsb:
Net investment incomec		0.28			0.17			0.21			0.15
Net realized and unrealized gains (losses)		0.57			0.92			3.37			(6.08	)
Total from investment operations		0.85			1.09			3.58			(5.93	)
Less distributions from:
Net investment income		(0.25	)		(0.25	)		(0.42	)		(0.45	)
Net realized gains		—			—			(0.48	)		(1.61	)
Total distributions		(0.25	)		(0.25	)		(0.90	)		(2.06	)
Redemption feesd		—			—			—			—
Net asset value, end of period	$	15.03		$	14.43		$	13.59		$	10.91
Total returne		5.97%			8.38%			36.84%			(35.15)%
Ratios to average net assetsf
Expenses		1.13%			1.13%	g		1.13%	g		1.12%	g
Net investment income		3.63%			1.75%			1.93%			2.47%
Supplemental data
Net assets, end of period (000’s)	$	363,438		$	305,505		$	48,501		$	14,287
Portfolio turnover rate		11.67%			19.16%			22.50%			18.27%

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

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

^cBased on average daily shares outstanding.

^dAmount rounds to less than $0.01 per share.

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

^fRatios are annualized for periods less than one year.

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

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

TF-10

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited)

Templeton Foreign Securities Fund	Country	Shares/Units		Value
Common Stocks and Other Equity Interests 95.7%
Aerospace & Defense 0.7%
BAE Systems PLC	United Kingdom		3,909,200	$	19,985,429
Automobiles 1.8%
aMazda Motor Corp.	Japan		5,453,000		14,292,069
Toyota Motor Corp., ADR	Japan		440,460		36,302,713
					50,594,782
Capital Markets 2.7%
Credit Suisse Group AG	Switzerland		748,380		29,105,645
KKR & Co., LP	United States		1,155,000		18,849,600
Nomura Holdings Inc.	Japan		5,636,100		27,723,689
					75,678,934
Commercial Banks 6.4%
BNP Paribas	France		430,520		33,232,480
DBS Group Holdings Ltd.	Singapore		2,993,520		35,728,245
HSBC Holdings PLC	United Kingdom		1,865,200		18,468,039
KB Financial Group Inc., ADR	South Korea		1,220,681		58,348,552
UniCredit SpA	Italy		10,439,019		22,101,690
United Overseas Bank Ltd.	Singapore		985,000		15,781,812
					183,660,818
Commercial Services & Supplies 1.4%
Downer EDI Ltd.	Australia		4,000,712		15,874,345
G4S PLC	United Kingdom		5,045,810		22,646,113
					38,520,458
Communications Equipment 0.8%
Telefonaktiebolaget LM Ericsson, B, ADR	Sweden		1,675,840		24,098,579
Computers & Peripherals 1.8%
Compal Electronics Inc.	Taiwan		28,536,431		34,879,677
Lite-On Technology Corp.	Taiwan		11,743,407		15,414,024
					50,293,701
Construction Materials 0.5%
CRH PLC	Ireland		659,820		14,610,917
Containers & Packaging 0.7%
Rexam PLC	United Kingdom		3,021,290		18,559,043
Diversified Financial Services 2.5%
aING Groep NV	Netherlands		5,880,644		72,392,633
Diversified Telecommunication Services 9.2%
China Telecom Corp. Ltd., H	China		69,378,357		44,845,072
France Telecom SA	France		2,164,143		46,023,641
Singapore Telecommunications Ltd.	Singapore		20,651,000		53,128,030
Telefonica SA, ADR	Spain		1,813,382		44,409,725
Telekom Austria AG	Austria		1,711,400		21,839,724
Telenor ASA	Norway		3,226,804		52,396,604
					262,642,796
Electric Utilities 2.0%
E.ON AG	Germany		917,590		26,127,180
Iberdrola SA	Spain		3,537,921		31,485,979
					57,613,159

TF-11

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Templeton Foreign Securities Fund	Country	Shares/Units		Value
Common Stocks and Other Equity Interests (continued)
Electronic Equipment, Instruments & Components 1.1%
aFlextronics International Ltd.	Singapore		4,961,670	$	31,853,921
Energy Equipment & Services 1.1%
Aker Solutions ASA	Norway		1,617,940		32,252,821
Food & Staples Retailing 2.1%
Tesco PLC	United Kingdom		9,326,670		60,169,114
Food Products 0.9%
Nestle SA	Switzerland		407,850		25,345,103
Hotels, Restaurants & Leisure 0.8%
bAutogrill SpA	Italy		1,655,033		21,720,418
Industrial Conglomerates 3.5%
Hutchison Whampoa Ltd.	Hong Kong		3,794,709		40,961,937
Koninklijke Philips Electronics NV	Netherlands		801,670		20,588,616
Siemens AG	Germany		285,414		39,133,596
					100,684,149
Insurance 11.1%
ACE Ltd.	United States		377,449		24,843,693
aAIA Group Ltd.	Hong Kong		11,111,000		38,551,354
Aviva PLC	United Kingdom		9,269,960		65,319,042
AXA SA	France		2,547,968		57,899,647
Muenchener Rueckversicherungs-Gesellschaft AG	Germany		249,150		38,063,471
NKSJ Holdings Inc.	Japan		4,218,000		27,716,564
PartnerRe Ltd.	Bermuda		196,480		13,527,648
aSwiss Re Ltd.	Switzerland		917,340		51,507,637
					317,429,056
Life Sciences Tools & Services 0.5%
Lonza Group AG	Switzerland		175,440		13,729,724
Media 2.1%
Reed Elsevier NV	Netherlands		2,017,693		27,079,738
Vivendi SA	France		1,178,959		32,782,874
					59,862,612
Metals & Mining 0.5%
POSCO	South Korea		34,202		14,873,222
Multi-Utilities 0.9%
GDF Suez	France		697,431		25,522,165
Multiline Retail 0.5%
Marks & Spencer Group PLC	United Kingdom		2,350,320		13,641,541
Oil, Gas & Consumable Fuels 10.7%
BP PLC	United Kingdom		4,406,715		32,423,127
Gazprom, ADR	Russia		2,623,000		38,164,650
Reliance Industries Ltd.	India		998,145		20,074,724
Royal Dutch Shell PLC, B	United Kingdom		1,292,973		46,124,114
Sasol, ADR	South Africa		372,840		19,719,508
Statoil ASA	Norway		2,455,740		62,193,686
Talisman Energy Inc.	Canada		1,506,600		30,955,501
Total SA, B	France		979,926		56,671,066
					306,326,376

TF-12

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Templeton Foreign Securities Fund	Country	Shares/Units		Value
Common Stocks and Other Equity Interests (continued)
Pharmaceuticals 10.3%
GlaxoSmithKline PLC	United Kingdom		2,772,585	$	59,370,410
Merck KGaA	Germany		405,300		44,069,182
Novartis AG	Switzerland		360,330		22,070,641
Roche Holding AG	Switzerland		468,100		78,332,148
Sanofi	France		1,127,925		90,681,019
					294,523,400
Professional Services 1.4%
Adecco SA	Switzerland		318,420		20,412,510
Hays PLC	United Kingdom		11,353,070		18,776,268
					39,188,778
Real Estate Management & Development 1.0%
Cheung Kong (Holdings) Ltd.	Hong Kong		1,973,922		28,866,556
Semiconductors & Semiconductor Equipment 5.9%
Infineon Technologies AG	Germany		1,103,225		12,387,575
Samsung Electronics Co. Ltd.	South Korea		89,088		68,965,968
Siliconware Precision Industries Co.	Taiwan		14,515,000		18,623,514
Taiwan Semiconductor Manufacturing Co. Ltd.	Taiwan		27,781,526		69,650,370
					169,627,427
Software 2.8%
Nintendo Co. Ltd.	Japan		166,400		31,148,972
SAP AG, ADR	Germany		370,760		22,486,594
Trend Micro Inc.	Japan		868,100		26,839,338
					80,474,904
Specialty Retail 2.8%
Kingfisher PLC	United Kingdom		11,166,186		47,892,834
USS Co. Ltd.	Japan		431,520		33,393,821
					81,286,655
Textiles, Apparel & Luxury Goods 0.2%
Yue Yuen Industrial Holdings Ltd.	Hong Kong		2,093,000		6,643,377
Trading Companies & Distributors 0.8%
Itochu Corp.	Japan		2,102,500		21,754,953
Wireless Telecommunication Services 4.2%
China Mobile Ltd.	China		2,340,000		21,680,728
Mobile TeleSystems, ADR	Russia		914,865		17,400,732
Vodafone Group PLC, ADR	United Kingdom		2,996,800		80,074,496
					119,155,956
Total Common Stocks and Other Equity Interests (Cost $2,398,995,849)					2,733,583,477
Preferred Stocks (Cost $2,178,441) 1.2%
Metals & Mining 1.2%
Vale SA, ADR, pfd., A	Brazil		1,210,222		35,048,029
Total Investments before Short Term Investments (Cost $2,401,174,290)					2,768,631,506

TF-13

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Templeton Foreign Securities Fund	Country	Shares/Units		Value
Short Term Investments 3.3%
Money Market Funds (Cost $80,534,394) 2.8%
a,cInstitutional Fiduciary Trust Money Market Portfolio	United States		80,534,394	$	80,534,394
dInvestments from Cash Collateral Received for Loaned Securities (Cost $12,457,015) 0.5%
Money Market Funds 0.5%
eBNY Mellon Overnight Government Fund, 0.05%	United States		12,457,015		12,457,015
Total Investments (Cost $2,494,165,699) 100.2%					2,861,622,915
Other Assets, less Liabilities (0.2)%					(4,297,400	)
Net Assets 100.0%				$	2,857,325,515

See Abbreviations on page TF-25.

^aNon-income producing.

^bA portion or all of the security is on loan at June 30, 2011. See Note 1(c).

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

^dSee Note 1(c) regarding securities on loan.

^eThe rate shown is the annualized seven-day yield at period end.

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

TF-14

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

June 30, 2011 (unaudited)

	Templeton Foreign Securities Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	2,413,631,305
Cost - Sweep Money Fund (Note 7)		80,534,394
Total cost of investments	$	2,494,165,699
Value - Unaffiliated issuers	$	2,781,088,521
Value - Sweep Money Fund (Note 7)		80,534,394
Total value of investments (includes securities loaned in the amount $12,018,634)		2,861,622,915
Cash		1,652,499
Receivables:
Capital shares sold		596,367
Dividends		13,192,332
Other assets		724
Total assets		2,877,064,837
Liabilities:
Payables:
Capital shares redeemed		3,838,837
Affiliates		2,836,079
Payable upon return of securities loaned		12,457,015
Accrued expenses and other liabilities		607,391
Total liabilities		19,739,322
Net assets, at value	$	2,857,325,515
Net assets consist of:
Paid-in capital	$	2,609,256,192
Undistributed net investment income		53,463,787
Net unrealized appreciation (depreciation)		367,819,795
Accumulated net realized gain (loss)		(173,214,259	)
Net assets, at value	$	2,857,325,515

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

TF-15

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Assets and Liabilities (continued)

June 30, 2011 (unaudited)

	Templeton Foreign Securities Fund
Class 1:
Net assets, at value	$	319,476,897
Shares outstanding		21,085,114
Net asset value and maximum offering price per share	$	15.15
Class 2:
Net assets, at value	$	2,065,643,225
Shares outstanding		138,608,418
Net asset value and maximum offering price per share	$	14.90
Class 3:
Net assets, at value	$	108,767,171
Shares outstanding		7,324,953
Net asset value and maximum offering price per sharea	$	14.85
Class 4:
Net assets, at value	$	363,438,222
Shares outstanding		24,182,943
Net asset value and maximum offering price per share	$	15.03

^aRedemption price is equal to net asset value less redemption fees retained by the fund.

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

TF-16

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the six months ended June 30, 2011 (unaudited)

	Templeton Foreign Securities Fund
Investment income:
Dividends (net of foreign taxes of $7,409,801)	$	65,444,900
Income from securities loaned		3,193,310
Total investment income		68,638,210
Expenses:
Management fees (Note 3a)		9,160,229
Administrative fees (Note 3b)		1,366,364
Distribution fees: (Note 3c)
Class 2		2,640,889
Class 3		138,214
Class 4		589,614
Unaffiliated transfer agent fees		3,174
Custodian fees (Note 4)		284,486
Reports to shareholders		321,977
Professional fees		37,595
Trustees’ fees and expenses		5,121
Other		29,049
Total expenses		14,576,712
Net investment income		54,061,498
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		92,741,145
Foreign currency transactions		214,920
Net realized gain (loss)		92,956,065
Net change in unrealized appreciation (depreciation) on:
Investments		21,751,629
Translation of other assets and liabilities denominated in foreign currencies		173,398
Net change in unrealized appreciation (depreciation)		21,925,027
Net realized and unrealized gain (loss)		114,881,092
Net increase (decrease) in net assets resulting from operations	$	168,942,590

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

TF-17

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets

	Templeton Foreign Securities Fund
	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31, 2010
Increase (decrease) in net assets:
Operations:
Net investment income	$	54,061,498		$	47,212,887
Net realized gain (loss) from investments and foreign currency transactions		92,956,065			35,915,484
Net change in unrealized appreciation (depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies		21,925,027			171,263,300
Net increase (decrease) in net assets resulting from operations		168,942,590			254,391,671
Distributions to shareholders from:
Net investment income:
Class 1		(5,782,491	)		(6,186,591	)
Class 2		(33,309,204	)		(35,909,578	)
Class 3		(1,749,311	)		(1,738,264	)
Class 4		(5,966,192	)		(1,159,055	)
Total distributions to shareholders		(46,807,198	)		(44,993,488	)
Capital share transactions: (Note 2)
Class 1		(15,547,422	)		(16,391,025	)
Class 2		(116,087,783	)		(56,686,127	)
Class 3		(4,751,771	)		(13,133,254	)
Class 4		45,264,268			210,807,534
Total capital share transactions		(91,122,708	)		124,597,128
Redemption fees		2,672			9,228
Net increase (decrease) in net assets		31,015,356			334,004,539
Net assets:
Beginning of period		2,826,310,159			2,492,305,620
End of period	$	2,857,325,515		$	2,826,310,159
Undistributed net investment income included in net assets:
End of period	$	53,463,787		$	46,209,487

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

TF-18

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited)

Templeton Foreign Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment company, consisting of twenty separate funds. The Templeton Foreign Securities Fund (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. The Fund offers four classes of shares: Class 1, Class 2, Class 3, and Class 4.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

The Fund’s investments in securities and other financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Under procedures approved by the Trust’s Board of Trustees, the Fund may utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

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

The Fund has procedures to determine the fair value of securities and other financial instruments for which market prices are not readily available or which may not be reliably priced. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.

Trading in securities on foreign securities stock exchanges and over-the-counter markets may be completed before the daily close of business on the NYSE. Occasionally, events occur between the time at which trading in a foreign security is completed and the close of the NYSE that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund’s portfolio securities as determined at the foreign market close and the latest indications of value at the close of the NYSE. In order to minimize the potential for these differences, the investment manager monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depository Receipts, 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 may call into question the reliability of the values of the foreign securities held by the Fund. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services.

b. Foreign Currency Translation

Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Fund may enter into foreign currency

TF-19

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Foreign Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

b. Foreign Currency Translation (continued)

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

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

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

c. Securities Lending

The Fund participates in an agency based security lending program. The Fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the market value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the market value of loaned securities, as determined at the close of Fund business each day; any additional collateral required due to changes in security values is delivered to the Fund on the next business day. The collateral is invested in a money market fund managed by the Fund’s custodian on the Fund’s behalf. The Fund receives income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. The Fund bears the market risk with respect to the collateral investment, securities loaned, and the risk that the agent may default on its obligations to the Fund. The securities lending agent has agreed to indemnify the Fund in the event of default by a third party borrower.

d. Income Taxes

It is the Fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and excise taxes. As a result, no provision for U.S. federal income taxes is required. The Fund files U.S. income tax returns as well as tax returns in certain other jurisdictions. The Fund records a provision for taxes in its financial statements including penalties and interest, if any, for a tax position taken on a tax return (or expected to be taken) when it fails to meet the more likely than not (a greater than 50% probability) threshold and based on the technical merits, the tax position may not be sustained upon examination by the tax authorities. As of June 30, 2011, and for all open tax years, the Fund has determined that no provision for income tax is required in the Fund’s financial statements. Open tax years are those that remain subject to examination and are based on each tax jurisdiction statute of limitation.

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

TF-20

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Foreign Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

e. Security Transactions, Investment Income, Expenses and Distributions

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

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

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

f. Accounting Estimates

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

g. Redemption Fees

Redemptions and exchanges of interests in an insurance company subaccount that invests in Class 3 shares of the Fund will be subject to a 1.0% short term trading fee if the interest in the subaccount has been held for less than 60 days. Such fees are retained by the Fund and accounted for as an addition to paid-in capital, allocated to each class of shares based upon the relative proportion of net assets of each class.

h. Guarantees and Indemnifications

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

TF-21

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Foreign Securities Fund

2. SHARES OF BENEFICIAL INTEREST

At June 30, 2011, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:

	Six Months Ended June 30, 2011						Year Ended December 31, 2010
Class 1 Shares:	Shares			Amount			Shares			Amount
Shares sold		360,037		$	5,500,124			1,834,739		$	24,009,210
Shares issued in reinvestment of distributions		392,832			5,782,491			500,533			6,186,591
Shares redeemed		(1,757,208	)		(26,830,037	)		(3,507,687	)		(46,586,826	)
Net increase (decrease)		(1,004,339	)	$	(15,547,422	)		(1,172,415	)	$	(16,391,025	)
Class 2 Shares:
Shares sold		6,101,254		$	91,105,850			24,359,823		$	304,453,001
Shares issued in reinvestment of distributions		2,300,359			33,309,203			2,950,664			35,909,578
Shares redeemed		(16,069,753	)		(240,502,836	)		(30,526,296	)		(397,048,706	)
Net increase (decrease)		(7,668,140	)	$	(116,087,783	)		(3,215,809	)	$	(56,686,127	)
Class 3 Shares:
Shares sold		366,841		$	5,465,038			488,049		$	6,145,010
Shares issued in reinvestment of distributions		121,227			1,749,311			143,421			1,738,264
Shares redeemed		(800,456	)		(11,966,120	)		(1,625,745	)		(21,016,528	)
Net increase (decrease)		(312,388	)	$	(4,751,771	)		(994,275	)	$	(13,133,254	)
Class 4 Shares:
Shares sold		4,488,433		$	67,795,298			19,836,996		$	240,414,850
Shares issued on reinvestment of distributions		408,643			5,966,192			94,309			1,159,055
Shares redeemed		(1,885,338	)		(28,497,222	)		(2,328,115	)		(30,766,371	)
Net increase (decrease)		3,011,738		$	45,264,268			17,603,190		$	210,807,534

3. TRANSACTIONS WITH AFFILIATES

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

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

a. Management Fees

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

Annualized Fee Rate	Net Assets
0.750%	Up to and including $200 million
0.675%	Over $200 million, up to and including $1.3 billion
0.600%	Over $1.3 billion, up to and including $10 billion
0.580%	Over $10 billion, up to and including $15 billion
0.560%	Over $15 billion, up to and including $20 billion
0.540%	In excess of $20 billion

TF-22

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Foreign Securities Fund

3. TRANSACTIONS WITH AFFILIATES (continued)

b. Administrative Fees

The Fund pays an administrative fee to FT Services based on the Fund’s average daily net assets as follows:

Fee Rate	Net Assets
0.150%	Up to and including $200 million
0.135%	Over $200 million, up to and including $700 million
0.100%	Over $700 million, up to and including $1.2 billion
0.075%	In excess of $1.2 billion

c. Distribution Fees

The Trust’s Board of Trustees has adopted distribution plans for Class 2, Class 3, and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to 0.25%, 0.35%, and 0.35% per year of its average daily net assets of Class 2, Class 3, and Class 4, respectively. The Board of Trustees has agreed to limit the current rate to 0.25% per year for Class 3.

e. Transfer Agent Fees

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

4. EXPENSE OFFSET ARRANGEMENT

The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses. During the period ended June 30, 2011, there were no credits earned.

5. INCOME TAXES

For tax purposes, capital losses may be carried over to offset future capital gains, if any. At December 31, 2010, the Fund had tax basis capital losses of $265,728,291 expiring in 2017.

Under the Regulated Investment Company Modernization Act of 2010, the Fund will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. Post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered short-term as under previous law. Any post-enactment capital losses generated will be required to be utilized prior to the losses incurred in pre-enactment tax years.

At June 30, 2011, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	2,494,607,736
Unrealized appreciation	$	512,240,125
Unrealized depreciation		(145,224,946	)
Net unrealized appreciation (depreciation)	$	367,015,179

TF-23

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Foreign Securities Fund

5. INCOME TAXES (continued)

Net investment income differs for financial statement and tax purposes primarily due to differing treatments of foreign currency transactions and pass-through entity income.

Net realized gains (losses) differ for financial statement and tax purposes primarily due to differing treatments of wash sales, foreign currency transactions and pass-through entity income.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2011, aggregated $332,560,124 and $427,908,723, respectively.

7. INVESTMENTS IN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO

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

8. CONCENTRATION OF RISK

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

9. CREDIT FACILITY

The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $750 million (Global Credit Facility) which matures on January 20, 2012. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests.

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.08% based upon the unused portion of the Global Credit Facility, which is reflected in other expenses on the Statement of Operations. During the period ended June 30, 2011, the Fund did not use the Global Credit Facility.

10. FAIR VALUE MEASUREMENTS

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

• Level 1 – quoted prices in active markets for identical securities

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

TF-24

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Foreign Securities Fund

10. FAIR VALUE MEASUREMENTS (continued)

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

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

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

The following is a summary of the inputs used as of June 30, 2011, in valuing the Fund’s assets and liabilities carried at fair value:

	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities
Equity Investmentsa,b	$	2,768,631,506	$	—	$	—	$	2,768,631,506
Short Term Investments		80,534,394		12,457,015		—		92,991,409
Total Investments in Securities	$	2,849,165,900	$	12,457,015	$	—	$	2,861,622,915

^aIncludes common and preferred stock as well as other equity investments.

^bFor detailed industry descriptions, see the accompanying Statement of Investments.

11. NEW ACCOUNTING PRONOUNCEMENTS

In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (IFRS). The amendments in the ASU will improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRS and include new guidance for certain fair value measurement principles and disclosure requirements. The ASU is effective for interim and annual periods beginning after December 15, 2011. The Fund is currently evaluating the impact, if any, of applying this provision.

12. SUBSEQUENT EVENTS

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

ABBREVIATIONS

Selected Portfolio

ADR - American Depository Receipt

TF-25

Franklin Templeton Variable Insurance Products Trust

Tax Designation (unaudited)

Templeton Foreign Securities Fund

At December 31, 2010, more than 50% of the Fund’s total assets were invested in securities of foreign issuers. In most instances, foreign taxes were withheld from income paid to the Fund on these investments. As shown in the table below, the Fund designates to shareholders the foreign source income and foreign taxes paid, pursuant to Section 853 of the Internal Revenue Code (Code). This designation will allow shareholders of record on June 14, 2011, to treat their proportionate share of foreign taxes paid by the Fund as having been paid directly by them. The shareholder shall consider these amounts as foreign taxes paid in the tax year in which they receive the Fund distribution.

The following table provides a detailed analysis of foreign tax paid, and foreign source income as designated by the Fund, to Class 1 , Class 2, Class 3, and Class 4 shareholders of record.

Class	Foreign Tax Paid Per Share		Foreign Source Income Per Share
Class 1	$	0.0382	$	0.3182
Class 2	$	0.0382	$	0.2831
Class 3	$	0.0382	$	0.2821
Class 4	$	0.0382	$	0.2942

Foreign Tax Paid Per Share (Column 1) is the amount per share available to you, as a tax credit (assuming you held your shares in the Fund for a minimum of 16 days during the 3 1-day period beginning 15 days before the ex-dividend date of the Fund’s distribution to which the foreign taxes relate), or, as a tax deduction.

Foreign Source Income Per Share (Column 2) is the amount per share of income dividends attributable to foreign securities held by the Fund, plus any foreign taxes withheld on these dividends.

TF-26

TEMPLETON GLOBAL BOND SECURITIES FUND

We are pleased to bring you Templeton Global Bond Securities Fund’s semiannual report for the period ended June 30, 2011.

Performance Summary as of 6/30/11

Templeton Global Bond Securities Fund – Class 4 delivered a +5.27% total return for the six-month period ended 6/30/11.

Performance reflects the Fund’s Class 4 operating expenses, but does not include any contract fees, expenses or sales charges. If they had been included, performance would be lower. These charges and deductions, particularly for variable life policies, can have a significant effect on contract values and insurance benefits. See the contract prospectus for a complete description of these expenses, including sales charges.

Templeton Global Bond Securities Fund – Class 4

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

TGB-1

Fund Goal and Main Investments: Templeton Global Bond Securities Fund seeks high current income, consistent with preservation of capital, with capital appreciation as a secondary consideration. The Fund normally invests at least 80% of its net assets in bonds, which include debt securities of any maturity, such as bonds, notes, bills and debentures.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. The Fund outperformed its benchmarks, the J.P. Morgan Global Government Bond Index, which posted a +3.89% total return in U.S. dollar terms, and the Citigroup World Government Bond Index, which produced a +4.00% total return for the same period.¹

Economic and Market Overview

The global economy continued to experience a healthy recovery during the first half of 2011 despite weaker economic activity toward the end of the period. During the reporting period, many policymakers in developing economies continued to tighten policy in response to growth and rising commodity prices. In contrast, the G-3 (U.S., eurozone and Japan) struggled with economic growth that was not as robust as in previous recoveries. Labor markets remained weak, and concerns regarding public sector balances led to periods of market volatility. Worries over sovereign risks in the eurozone, combined with political unrest in the Middle East and the earthquake in Japan, also contributed to periods of high volatility in financial markets.

Global growth was solid in the first quarter of 2011. Many developing economies closed their output gaps and without policy action would have been at risk of overheating. This prompted many policymakers in these economies to continue raising interest rates, tightening fiscal policies and implementing regulations to keep growth at sustainable levels. Many countries increasingly used currency appreciation to try to control inflation from commodity and other import prices. The recovery was not as strong within the G-3. Even as parts of the eurozone, particularly Germany, showed relatively strong recoveries, Greece and, more broadly, southern Europe continued to lag with contractions in several economic indicators.

1. Source: © 2011 Morningstar. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

Fund Risks: Because the Fund invests in bonds and other debt obligations, its share price and yield will be affected by interest rate movements. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in the Fund adjust to a rise in interest rates, the Fund’s share price may decline. High yield, lower rated (junk) bonds generally have greater price swings and higher default risks than investment-grade bonds. Foreign investing, especially in emerging or developing markets, involves additional risks, including currency fluctuations, economic instability, market volatility, and political and social instability. The Fund’s investment in certain hedging and derivative instruments may involve a small investment relative to the risk assumed. As a nondiversified fund, the Fund may be more sensitive to economic, business, political or other changes affecting similar issuers or securities, which may result in greater fluctuation in the value of the Fund’s shares. The manager applies various techniques and analyses in making investment decisions for the Fund, but there can be no guarantee that these decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

TGB-2

In early 2011, risk assets and commodities experienced periods of volatility in response to global events. Commodity prices, particularly for energy, rose in the first quarter due to unrest in the Middle East and North Africa. Regimes throughout the region faced unprecedented popular uprisings that brought down governments in Tunisia and Egypt and sparked violent confrontations in Libya, Yemen and elsewhere in the region. The March earthquake in Japan led to risk aversion globally and a disruption of supply chains. The disaster prompted Japanese policymakers to ease monetary policy.

Economic activity slowed in the second quarter, which relieved some of the upward pressure on commodity prices. This slowdown showed signs of being more transitory, reflecting in part supply-chain disruptions resulting from the earthquake in Japan. Early signs from Japan indicated that activity started slowly recovering late in the period. In the U.S., housing and consumer confidence data worsened, and already sluggish labor markets showed signs of further weakness. Many other countries experienced slowdowns in activity as well, particularly within manufacturing sectors. However, even though manufacturing numbers were lower in most economies, they remained solidly in expansionary territory, particularly in many of the countries that were quick to recover from the crisis. In many emerging markets, moderating economic growth helped policymakers who had tightened fiscal and monetary policies to prevent overheating. Despite higher interest rates in the eurozone and the planned end of quantitative easing in the U.S., the G-3 continued to supply liquidity to governments and the financial sector.

In the period’s second half, investors exhibited heightened risk aversion as attention returned to highly indebted eurozone nations. Portugal became the third eurozone country to seek official aid from the International Monetary Fund (IMF) and European Union (EU), and the EU struggled to agree upon a coordinated course of action to provide continued assistance to Greece. The period ended with Greece’s government winning a vote of confidence and gaining parliamentary approval for budget cuts, which were needed for disbursement of the next round of funds from the EU and IMF.

Investment Strategy

We allocate the Fund’s assets among issuers, geographic regions, and currencies based upon our assessment of relative interest rates among currencies, our outlook for changes in interest rates and currencies, and

*The Fund’s supranational investments were denominated in the Mexican peso, Norwegian krone and U.S. dollar.

TGB-3

credit risks. In considering these factors, we may evaluate a country’s changing market, economic and political conditions, such as inflation rate, growth prospects, global trade patterns and government policies. We seek to manage the Fund’s exposure to various currencies and may utilize forward currency exchange contracts.

Manager’s Discussion

The Fund’s total return was influenced by various factors, including interest rate developments, currency movements and exposure to sovereign debt markets. During the period under review, each of these sources of return benefited absolute and relative results.

Interest Rate Strategy

The Fund’s duration exposure was a major contributor to relative performance during the six months under review. Although the prospect of higher interest rates is generally a challenge for many fixed income investors, the Fund was somewhat cushioned from rising yields with an average duration of less than half that of the benchmark index, no exposure to U.S. Treasuries or Japanese government bonds, and minimal exposure to eurozone government bonds. Actively managed global fixed income investing in a rising interest rate environment can also offer an opportunity to pursue relatively high yields without taking much duration or credit risk. We favored short maturity bonds in places like Australia, Israel and South Korea where yields between about 3% and 5% were available on bonds with less than two years of duration and strong creditworthiness, in our assessment.

This strategy contributed to relative performance over the period because of some select, overweighted exposures. In addition, long duration, local government bonds in Indonesia, Mexico and Brazil were significant contributors.

Currency Strategy

The Fund’s diverse, actively managed currency exposure provided strong returns during the period. Global currency markets increasingly reflected the underlying strengths of their respective economies. The U.S. dollar fell 5.62% against its major trading partners over the period, a broad-based decline against most currencies outside the Middle East and Africa.² In the Americas, we concentrated the Fund’s currency exposure in a few emerging Latin American economies, which benefited relative performance. The Chilean peso, Mexican peso and Brazilian

2. Source: Federal Reserve H10 Report.

What is a forward currency exchange contract?

A forward currency exchange contract is an agreement between the Fund and a counterparty to buy or sell a foreign currency for a specific exchange rate on a future date.

What is duration?

Duration is a measure of a bond’s price sensitivity to interest rate changes. In general, a portfolio of securities with a lower duration can be expected to be less sensitive to interest rate changes than a portfolio with a higher duration.

TGB-4

real each appreciated against the U.S. dollar as their domestically led recoveries outpaced that of the U.S. In addition, these economies benefited from high prices for the commodities they exported.

The Fund’s exposure to Asia-Pacific region currencies also contributed to results. The currencies of emerging Asian economies and those of more developed economies, such as South Korea and Australia, appreciated as the region again had the world’s strongest growth. Although China’s economy led, with robust domestic demand despite steps by policymakers to tighten policy, the country’s demand and investment had a positive impact throughout the region. For example, Australia was one of the first developed economies to recover from the global financial crisis not only because it had not gone through a housing bubble and had much better government finances, but also because it has close links with China, which is Australia’s largest trading partner. Chinese demand supported prices for Australia’s commodity exports, and the Australian dollar appreciated against the U.S. dollar. The Fund experienced similar benefits from currencies of regional emerging market countries closely integrated with China, such as Malaysia and Indonesia.

The Fund’s European currency exposure was a major detractor from relative performance. The Fund’s significantly underweighted euro exposure, through the use of forward currency exchange contracts, detracted from relative performance, but this was partially offset by overweighted exposure to currencies from non-eurozone European countries such as the Norwegian krone, Swedish krona and Polish zloty.

Global Sovereign Debt Strategy

Sovereign credit exposure benefited performance as the broadly supportive risk environment led to yield spread tightening in most credits. Despite sovereign credits’ significant tightening since the financial crisis, we found opportunities we considered attractive as we felt relative fundamentals continued to favor emerging markets. The enhanced resilience of such economies and the significant challenges facing highly indebted non-eurozone European countries drove a reevaluation of traditional perceptions of sovereign risk. This situation, in conjunction with developed economies’ low interest rates, brought new investors to the asset class and pushed credit spreads lower for some of the largest, traditional emerging markets. We were selective in our sovereign credit exposure as the period progressed, but we managed to benefit from these positions. Specifically, exposures in Hungary and Indonesia were

Currency Breakdown

Templeton Global Bond Securities Fund

6/30/11

	% of Total Net Assets
Americas		53.1%
U.S. Dollar		35.5%
Mexican Peso		7.7%
Chilean Peso		5.8%
Brazilian Real		3.9%
Peruvian Nuevo Sol		0.2%
Asia Pacific		38.0%
South Korean Won		14.1%
Malaysian Ringgit		10.8%
Australian Dollar		10.5%
Indonesian Rupiah		6.2%
Philippine Peso		4.9%
Indian Rupee		4.3%
Singapore Dollar		4.1%
Sri Lankan Rupee		1.6%
Japanese Yen*		-18.5%
Middle East & Africa		5.8%
New Israeli Shekel		4.2%
Egyptian Pound		1.6%
Europe		3.1%
Swedish Krona		9.5%
Polish Zloty		9.4%
Norwegian Krone		7.7%
British Pound		5.8%
Euro*		-29.3%

*Holding is a negative percentage because of the Fund’s holdings of forward currency exchange contracts.

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

TGB-5

top contributing sovereign credit positions, and positions in Russia, Lithuania and Venezuela also helped performance.

Thank you for your participation in Templeton Global Bond Securities Fund. We look forward to serving your future investment needs.

The foregoing information reflects our analysis, opinions and portfolio holdings as of June 30, 2011, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

TGB-6

Fund Expenses

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

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

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

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

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

Actual Fund Expenses

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

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

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

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

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

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

In this illustration, the estimated expenses incurred this period at the Fund level are $64.50.

Templeton Global Bond Securities Fund – Class 4

TGB-7

Hypothetical Example for Comparison with Other Mutual Funds

Information in the second line (Hypothetical) of the table can help you compare ongoing expenses of the Fund with those of other mutual funds offered through the Contract. This information may not be used to estimate the actual ending account balance or expenses you incurred during the period. The hypothetical “Ending Account Value” is based on the Fund’s actual expense ratio and an assumed 5% annual rate of return before expenses, which does not represent the Fund’s actual return. The figure under the heading “Fund-Level Expenses Incurred During Period” shows the hypothetical expenses your account would have incurred under this scenario. You can compare this figure with the 5% hypothetical examples that appear in shareholder reports of other funds offered through a Contract.

Class 4	Beginning Account Value 1/1/11		Ending Account Value 6/30/11		Fund-Level Expenses Incurred During Period* 1/1/11–6/30/11
Actual	$	1,000	$	1,052.70	$	4.58
Hypothetical (5% return before expenses)	$	1,000	$	1,020.33	$	4.51

*Expenses are calculated using the most recent six-month annualized expense ratio for the Fund’s Class 4 shares (0.90%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 181/365 to reflect the one-half year period.

TGB-8

Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Templeton Global Bond Securities Fund

	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31,
Class 1				2010			2009			2008			2007			2006
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	19.94		$	17.72		$	17.42		$	17.00		$	15.73		$	14.36
Income from investment operationsa:
Net investment incomeb		0.48			1.00			0.99			0.80			0.77			0.61
Net realized and unrealized gains (losses)		0.60			1.58			2.01			0.27			0.97			1.24
Total from investment operations		1.08			2.58			3.00			1.07			1.74			1.85
Less distributions from:
Net investment income and net foreign currency gains		(1.15	)		(0.31	)		(2.70	)		(0.65	)		(0.47	)		(0.48	)
Net realized gains		(0.13	)		(0.05	)		—			—			—			—
Total distributions		(1.28	)		(0.36	)		(2.70	)		(0.65	)		(0.47	)		(0.48	)
Redemption feesc		—			—			—			—			—			—
Net asset value, end of period	$	19.74		$	19.94		$	17.72		$	17.42		$	17.00		$	15.73
Total returnd		5.43%			14.71%			18.98%			6.46%			11.27%			13.14%
Ratios to average net assetse
Expenses before expense reduction		0.55%			0.55%			0.54%			0.58%			0.64%			0.80%
Expenses net of expense reduction		0.55%			0.55%	f		0.54%	f		0.58%	f		0.64%	f		0.72%
Net investment income		4.72%			5.27%			5.73%			4.66%			4.70%			4.09%
Supplemental data
Net assets, end of period (000’s)	$	291,254		$	272,232		$	195,662		$	220,588		$	137,700		$	75,843
Portfolio turnover rate		23.86%			8.77%			20.84%			28.46%			47.33%			30.65%

^aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.

^bBased on average daily shares outstanding.

^cAmount rounds to less than $0.01 per share.

^dTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which the Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle. Total return is not annualized for periods less than one year.

^eRatios are annualized for periods less than one year.

^fBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

TGB-9

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Templeton Global Bond Securities Fund

	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31,
Class 2				2010			2009			2008			2007			2006
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	19.49		$	17.34		$	17.10		$	16.72		$	15.50		$	14.19
Income from investment operationsa:
Net investment incomeb		0.44			0.93			0.93			0.74			0.72			0.57
Net realized and unrealized gains (losses)		0.59			1.54			1.98			0.27			0.96			1.21
Total from investment operations		1.03			2.47			2.91			1.01			1.68			1.78
Less distributions from:
Net investment income and net foreign currency gains		(1.11	)		(0.27	)		(2.67	)		(0.63	)		(0.46	)		(0.47	)
Net realized gains		(0.13	)		(0.05	)		—			—			—			—
Total distributions		(1.24	)		(0.32	)		(2.67	)		(0.63	)		(0.46	)		(0.47	)
Redemption feesc		—			—			—			—			—			—
Net asset value, end of period	$	19.28		$	19.49		$	17.34		$	17.10		$	16.72		$	15.50
Total returnd		5.30%			14.45%			18.68%			6.21%			11.00%			12.77%
Ratios to average net assetse
Expenses before expense reduction		0.80%			0.80%			0.79%			0.83%			0.89%			1.05%
Expenses net of expense reduction		0.80%			0.80%	f		0.79%	f		0.83%	f		0.89%	f		0.97%
Net investment income		4.47%			5.02%			5.48%			4.41%			4.45%			3.84%
Supplemental data
Net assets, end of period (000’s)	$	1,757,266		$	1,490,794		$	1,262,783		$	793,881		$	480,649		$	205,768
Portfolio turnover rate		23.86%			8.77%			20.84%			28.46%			47.33%			30.65%

^aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.

^bBased on average daily shares outstanding.

^cAmount rounds to less than $0.01 per share.

^dTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which the Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle. Total return is not annualized for periods less than one year.

^eRatios are annualized for periods less than one year.

^fBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

TGB-10

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Templeton Global Bond Securities Fund

	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31,
Class 3				2010			2009			2008			2007			2006
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	19.48		$	17.33		$	17.08		$	16.70		$	15.49		$	14.18
Income from investment operationsa:
Net investment incomeb		0.44			0.93			0.93			0.74			0.72			0.58
Net realized and unrealized gains (losses)		0.58			1.54			1.98			0.27			0.95			1.21
Total from investment operations		1.02			2.47			2.91			1.01			1.67			1.79
Less distributions from:
Net investment income and net foreign currency gains		(1.10	)		(0.27	)		(2.66	)		(0.63	)		(0.46	)		(0.48	)
Net realized gains		(0.13	)		(0.05	)		—			—			—			—
Total distributions		(1.23	)		(0.32	)		(2.66	)		(0.63	)		(0.46	)		(0.48	)
Redemption feesc		—			—			—			—			—			—
Net asset value, end of period	$	19.27		$	19.48		$	17.33		$	17.08		$	16.70		$	15.49
Total returnd		5.29%			14.38%			18.69%			6.21%			11.03%			12.84%
Ratios to average net assetse
Expenses before expense reduction		0.80%			0.80%			0.79%			0.83%			0.89%			1.05%
Expenses net of expense reduction		0.80%			0.80%	f		0.79%	f		0.83%	f		0.89%	f		0.97%
Net investment income		4.47%			5.02%			5.48%			4.41%			4.45%			3.84%
Supplemental data
Net assets, end of period (000’s)	$	202,111		$	183,380		$	143,264		$	128,155		$	91,162		$	35,572
Portfolio turnover rate		23.86%			8.77%			20.84%			28.46%			47.33%			30.65%

^aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.

^bBased on average daily shares outstanding.

^cAmount rounds to less than $0.01 per share.

^dTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which the Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle. Total return is not annualized for periods less than one year.

^eRatios are annualized for periods less than one year.

^fBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

TGB-11

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Templeton Global Bond Securities Fund

	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31,
Class 4				2010			2009			2008a
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	19.78		$	17.61		$	17.37		$	18.00
Income from investment operationsb:
Net investment incomec		0.44			0.93			0.93			0.66
Net realized and unrealized gains (losses)		0.60			1.56			2.00			(0.64	)
Total from investment operations		1.04			2.49			2.93			0.02
Less distributions from:
Net investment income and net foreign currency gains		(1.09	)		(0.27	)		(2.69	)		(0.65	)
Net realized gains		(0.13	)		(0.05	)		—			—
Total distributions		(1.22	)		(0.32	)		(2.69	)		(0.65	)
Redemption feesd		—			—			—			—
Net asset value, end of period	$	19.60		$	19.78		$	17.61		$	17.37
Total returne		5.27%			14.28%			18.58%			0.26%
Ratios to average net assetsf
Expensesg		0.90%			0.90%			0.89%			0.93%
Net investment income		4.37%			4.92%			5.38%			4.31%
Supplemental data
Net assets, end of period (000’s)	$	165,765		$	150,891		$	108,910		$	43,069
Portfolio turnover rate		23.86%			8.77%			20.84%			28.46%

^aFor the period February 29, 2008 (effective date) to December 31, 2008.

^bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.

^cBased on average daily shares outstanding.

^dAmount rounds to less than $0.01 per share.

^eTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which the Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle. Total return is not annualized for periods less than one year.

^fRatios are annualized for periods less than one year.

^gBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

TGB-12

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited)

Templeton Global Bond Securities Fund	Principal Amount*			Value
Foreign Government and Agency Securities 72.4%
Argentina 1.1%
a,bGovernment of Argentina, senior bond, FRN, 0.467%, 8/03/12		107,485,000		$	26,328,451
Australia 8.1%
Government of Australia, senior bond, 123, 5.75%, 4/15/12		43,700,000	AUD		47,238,602
New South Wales Treasury Corp.,
6.00%, 5/01/12		10,590,000	AUD		11,464,037
6.00%, 5/01/12 (London Exchange)		13,180,000	AUD		14,268,508
5.50%, 8/01/13		3,710,000	AUD		4,019,727
senior note, 5.50%, 3/01/17		32,225,000	AUD		34,922,470
Queensland Treasury Corp.,
6.00%, 8/14/13		24,450,000	AUD		26,807,013
6.00%, 9/14/17		13,160,000	AUD		14,635,719
senior note, 6.00%, 8/21/13		7,830,000	AUD		8,554,686
Western Australia Treasury Corp.,
5.50%, 7/17/12		26,480,000	AUD		28,576,621
8.00%, 6/15/13		4,350,000	AUD		4,928,672
					195,416,055
Brazil 3.9%
Nota Do Tesouro Nacional,
10.00%, 1/01/12		38,245	c BRL		24,208,266
10.00%, 1/01/14		7,100	c BRL		4,297,700
10.00%, 1/01/17		22,490	c BRL		13,037,005
dIndex Linked, 6.00%, 5/15/15		29,822	c BRL		38,343,544
dIndex Linked, 6.00%, 5/15/45		10,825	c BRL		14,664,632
					94,551,147
Hungary 2.3%
Government of Hungary, senior note,
3.50%, 7/18/16		1,055,000	EUR		1,410,996
4.375%, 7/04/17		5,380,000	EUR		7,260,557
5.75%, 6/11/18		13,795,000	EUR		19,837,680
6.25%, 1/29/20		6,420,000			6,791,012
3.875%, 2/24/20		3,120,000	EUR		3,890,817
6.375%, 3/29/21		14,820,000			15,672,150
					54,863,212
Indonesia 7.8%
Government of Indonesia,
FR20, 14.275%, 12/15/13		14,267,000,000	IDR		1,968,277
FR31, 11.00%, 11/15/20		167,351,000,000	IDR		24,017,345
FR34, 12.80%, 6/15/21		207,810,000,000	IDR		32,874,752
FR35, 12.90%, 6/15/22		66,582,000,000	IDR		10,555,031
FR36, 11.50%, 9/15/19		30,075,000,000	IDR		4,363,356
FR37, 12.00%, 9/15/26		8,230,000,000	IDR		1,260,909
FR39, 11.75%, 8/15/23		5,491,000,000	IDR		818,147
FR40, 11.00%, 9/15/25		61,856,000,000	IDR		8,834,014
FR42, 10.25%, 7/15/27		88,574,000,000	IDR		11,923,380
FR43, 10.25%, 7/15/22		68,340,000,000	IDR		9,305,721
FR44, 10.00%, 9/15/24		4,454,000,000	IDR		593,296
FR46, 9.50%, 7/15/23		226,780,000,000	IDR		29,392,162
FR47, 10.00%, 2/15/28		61,737,000,000	IDR		8,102,043
FR48, 9.00%, 9/15/18		16,920,000,000	IDR		2,156,928
FR49, 9.00%, 9/15/13		35,030,000,000	IDR		4,326,153
esenior bond, 144A, 8.50%, 10/12/35		9,119,000			12,244,309

TGB-13

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Templeton Global Bond Securities Fund	Principal Amount*			Value
Foreign Government and Agency Securities (continued)
Indonesia (continued)
Government of Indonesia (continued)
esenior bond, 144A, 6.625%, 2/17/37		2,240,000		$	2,480,509
esenior bond, 144A, 7.75%, 1/17/38		10,980,000			13,682,178
esenior note, 144A, 11.625%, 3/04/19		6,410,000			9,448,981
					188,347,491
Iraq 0.3%
Government of Iraq,
e144A, 5.80%, 1/15/28		5,055,000			4,593,681
fReg S, 5.80%, 1/15/28		3,440,000			3,126,065
					7,719,746
Israel 0.1%
Government of Israel, 5.00%, 3/31/13		8,880,000	ILS		2,699,202
Lithuania 1.6%
eGovernment of Lithuania, 144A,
6.75%, 1/15/15		19,480,000			21,507,381
7.375%, 2/11/20		12,690,000			14,677,127
6.125%, 3/09/21		3,240,000			3,450,503
					39,635,011
Malaysia 2.5%
Government of Malaysia, senior bond,
3.833%, 9/28/11		3,860,000	MYR		1,283,078
2.711%, 2/14/12		720,000	MYR		238,654
3.718%, 6/15/12		50,265,000	MYR		16,785,613
2.509%, 8/27/12		24,825,000	MYR		8,184,925
3.702%, 2/25/13		23,300,000	MYR		7,798,034
3.461%, 7/31/13		12,600,000	MYR		4,199,207
3.814%, 2/15/17		18,885,000	MYR		6,316,184
4.24%, 2/07/18		44,360,000	MYR		15,119,304
					59,924,999
Mexico 7.0%
Government of Mexico,
M, 9.00%, 6/20/13		2,982,300	g MXN		27,274,261
M 10, 8.00%, 12/17/15		726,000	g MXN		6,656,088
M 10, 7.25%, 12/15/16		250,000	g MXN		2,226,173
M 10, 7.75%, 12/14/17		4,473,000	g MXN		40,829,938
MI10, 9.00%, 12/20/12		265,000	g MXN		2,392,585
MI10, 8.00%, 12/19/13		9,939,900	g MXN		89,976,954
					169,355,999
Norway 0.4%
Government of Norway, 6.50%, 5/15/13		49,400,000	NOK		9,815,980
Peru 0.2%
Government of Peru, 7.84%, 8/12/20		11,090,000	PEN		4,458,325
Philippines 0.3%
Government of the Philippines, senior bond,
5.75%, 2/21/12		134,520,000	PHP		3,146,481
5.25%, 1/07/13		61,770,000	PHP		1,440,547
8.75%, 3/03/13		160,310,000	PHP		3,945,013
					8,532,041

TGB-14

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Templeton Global Bond Securities Fund	Principal Amount*			Value
Foreign Government and Agency Securities (continued)
Poland 8.3%
Government of Poland,
4.75%, 4/25/12		58,025,000	PLN	$	21,170,440
5.25%, 4/25/13		18,510,000	PLN		6,804,502
5.00%, 10/24/13		6,190,000	PLN		2,263,671
5.75%, 4/25/14		92,590,000	PLN		34,434,723
6.25%, 10/24/15		44,730,000	PLN		16,958,651
5.75%, 9/23/22		48,750,000	PLN		17,633,593
senior note, 6.375%, 7/15/19		27,200,000			31,060,088
Strip, 7/25/12		4,110,000	PLN		1,426,931
Strip, 10/25/12		79,825,000	PLN		27,374,268
Strip, 1/25/13		88,905,000	PLN		30,130,519
Strip, 7/25/13		37,390,000	PLN		12,376,994
					201,634,380
Qatar 0.6%
eGovernment of Qatar, senior note, 144A, 6.55%, 4/09/19		12,060,000			14,039,408
Russia 3.0%
eGovernment of Russia, 144A, 7.50%, 3/31/30		61,274,005			72,216,011
South Africa 1.6%
Government of South Africa,
5.25%, 5/16/13		3,590,000	EUR		5,423,235
4.50%, 4/05/16		1,874,000	EUR		2,782,886
6.875%, 5/27/19		21,215,000			25,264,413
senior note, 6.50%, 6/02/14		805,000			902,506
senior note, 5.875%, 5/30/22		3,485,000			3,866,995
					38,240,035
South Korea 13.3%
The Export-Import Bank of Korea, senior note, 4.625%, 2/20/17		230,000	EUR		341,388
KDICB Redemption Fund Bond, senior bond,
07-1, 5.57%, 9/14/12		6,600,000,000	KRW		6,312,309
08-1, 5.28%, 2/15/13		880,000,000	KRW		842,612
Korea Treasury Bond,
4.75%, 12/10/11		77,103,490,000	KRW		72,693,949
5.25%, 9/10/12		28,539,000,000	KRW		27,257,941
5.25%, 3/10/13		6,483,790,000	KRW		6,223,576
5.00%, 9/10/16		2,806,000,000	KRW		2,741,708
senior bond, 4.00%, 6/10/12		132,027,650,000	KRW		124,248,898
senior bond, 4.25%, 12/10/12		23,404,000,000	KRW		22,124,379
senior bond, 3.75%, 6/10/13		47,488,000,000	KRW		44,545,905
senior bond, 3.00%, 12/10/13		15,159,610,000	KRW		13,955,855
					321,288,520
Sri Lanka 1.5%
Government of Sri Lanka,
A, 12.00%, 7/15/11		115,200,000	LKR		1,054,044
A, 6.90%, 8/01/12		14,600,000	LKR		132,514
A, 8.50%, 1/15/13		694,400,000	LKR		6,415,882
A, 13.50%, 2/01/13		674,300,000	LKR		6,678,215
A, 7.00%, 3/01/14		43,380,000	LKR		384,754
A, 11.25%, 7/15/14		773,000,000	LKR		7,610,181
A, 11.75%, 3/15/15		8,520,000	LKR		85,107

TGB-15

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Templeton Global Bond Securities Fund	Principal Amount*			Value
Foreign Government and Agency Securities (continued)
Sri Lanka (continued)
Government of Sri Lanka (continued)
A, 6.50%, 7/15/15		106,480,000	LKR	$	899,970
A, 11.00%, 8/01/15		1,349,700,000	LKR		13,237,198
B, 6.60%, 6/01/14		56,800,000	LKR		496,377
					36,994,242
hSupranational 1.5%
Corporacion Andina De Fomento, 8.125%, 6/04/19		9,880,000			12,022,972
European Investment Bank, senior note, 4.50%, 5/15/13		33,700,000	NOK		6,395,768
Inter-American Development Bank, senior note, 7.50%, 12/05/24		200,000,000	MXN		17,346,965
					35,765,705
Sweden 3.4%
Government of Sweden, 5.50%, 10/08/12		481,950,000	SEK		79,373,882
Kommuninvest I Sverige AB, senior note, 1.75%, 10/08/12		24,400,000	SEK		3,809,541
					83,183,423
Ukraine 0.7%
eGovernment of Ukraine, senior note, 144A, 7.95%, 2/23/21		16,330,000			17,030,067
United Arab Emirates 0.6%
eEmirate of Abu Dhabi, 144A, 6.75%, 4/08/19		11,840,000			14,060,000
United Kingdom 0.6%
United Kingdom Treasury Bond, 5.00%, 3/07/12		8,752,000	GBP		14,466,090
Venezuela 1.1%
Government of Venezuela, 10.75%, 9/19/13		13,570,000			13,539,466
Petroleos de Venezuela SA, senior bond, zero cpn., 7/10/11		12,205,000			12,190,720
					25,730,186
Vietnam 0.6%
eGovernment of Vietnam, 144A, 6.75%, 1/29/20		13,110,000			13,691,756
Total Foreign Government and Agency Securities (Cost $1,521,804,537)					1,749,987,482
Municipal Bonds 1.5%
United States 1.5%
Alabama State University Revenue, General Tuition and Fee, Assured Guaranty, 5.00%, 9/01/29		175,000			182,119
Bay Area Toll Authority Toll Bridge Revenue, Build America Bonds, Series S1, 6.793%, 4/01/30		3,460,000			3,722,441
Bexar County Revenue, Venue Project, Refunding, Series A, BHAC Insured, 5.25%, 8/15/47		1,450,000			1,519,064
California State GO,
7.625%, 3/01/40		1,320,000			1,520,917
Refunding, 5.125%, 4/01/33		4,725,000			4,736,624
Refunding, 5.00%, 4/01/38		1,985,000			1,908,458
Various Purpose, 6.00%, 4/01/38		11,650,000			12,373,465
Illinois Municipal Electricity Agency Power Supply Revenue, Series A, BHAC Insured, 5.00%, 2/01/35		2,155,000			2,143,104
Los Angeles Community College District GO, Election of 2008, Series D, 6.68%, 8/01/36		1,700,000			1,703,859
Los Angeles USD, GO, Series KRY, 5.25%, 7/01/26		765,000			813,417
North Carolina Eastern Municipal Power Agency Power System Revenue, Refunding, Series A, Assured Guaranty, 5.25%, 1/01/19		2,400,000			2,672,736
Philadelphia GO, Refunding, Series A, Assured Guaranty, 5.00%, 8/01/24		500,000			505,940
Tarrant County Cultural Education Facilities Finance Corp. Revenue, Christus Health, Refunding, Series A, Assured Guaranty, 6.25%, 7/01/28		1,500,000			1,653,240
Total Municipal Bonds (Cost $33,788,334)					35,455,384
Total Investments before Short Term Investments (Cost $1,555,592,871)					1,785,442,866

TGB-16

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Templeton Global Bond Securities Fund	Principal Amount*			Value
Short Term Investments 25.4%
Foreign Government and Agency Securities 17.5%
Egypt 1.6%
iEgypt Treasury Bills, 7/12/11 - 2/21/12		240,250,000	EGP	$	39,368,126
Israel 3.9%
Government of Israel, 4.00%, 3/30/12		26,865,000	ILS		7,922,671
iIsrael Treasury Bills, 7/06/11 - 5/02/12		302,472,900	ILS		87,626,797
					95,549,468
Malaysia 4.4%
iBank of Negara Monetary Note, 7/28/11 - 3/29/12		317,655,000	MYR		104,011,563
iMalaysia Treasury Bills, 7/08/11 - 3/23/12		3,780,000	MYR		1,236,553
					105,248,116
Norway 2.3%
iNorway Treasury Bills,
12/21/11		68,140,000	NOK		12,487,659
3/21/12		240,230,000	NOK		43,799,206
					56,286,865
Philippines 0.2%
iPhilippine Treasury Bills, 7/13/11 - 2/22/12		175,620,000	PHP		4,015,686
Poland 0.1%
Government of Poland, Strip, 1/25/12		5,580,000	PLN		1,983,578
Sri Lanka 0.1%
iSri Lanka Treasury Bills, 7/08/11 - 2/17/12		188,660,000	LKR		1,668,879
Sweden 1.2%
iSweden Treasury Bills,
9/21/11		166,200,000	SEK		26,173,896
12/21/11		16,190,000	SEK		2,536,848
					28,710,744
United Kingdom 3.7%
iUnited Kingdom Treasury Bills,
7/25/11		22,170,000	GBP		35,568,890
8/01/11 - 8/08/11		7,181,000	GBP		11,519,434
United Kingdom Treasury Note,
9.00%, 7/12/11		4,320,000	GBP		6,950,848
3.25%, 12/07/11		18,942,000	GBP		30,766,335
5.25%, 6/07/12		3,277,000	GBP		5,482,644
					90,288,151
Total Foreign Government and Agency Securities (Cost $420,348,381)					423,119,613
Total Investments before Repurchase Agreements (Cost $1,975,941,252)					2,208,562,479

TGB-17

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Templeton Global Bond Securities Fund	Principal Amount*		Value
Repurchase Agreements (Cost $191,085,986) 7.9%
United States 7.9%
jJoint Repurchase Agreement, 0.005%, 7/01/11 (Maturity Value $191,086,013)		191,085,986	$	191,085,986
Barclays Capital Inc. (Maturity Value $16,374,161)
BNP Paribas Securities Corp. (Maturity Value $43,663,154)
Credit Suisse Securities (USA) LLC (Maturity Value $32,746,410)
Deutsche Bank Securities Inc. (Maturity Value $21,892,725)
HSBC Securities (USA) Inc. (Maturity Value $16,374,160)
Merrill Lynch, Pierce, Fenner & Smith Inc. (Maturity Value $10,914,833)
Morgan Stanley & Co. LLC (Maturity Value $16,374,160)
UBS Securities LLC (Maturity Value $32,746,410)
Collateralized by U.S. Government Agency Securities, 0.75% - 5.375%, 10/15/11 - 9/13/19; iU.S. Government Agency Discount Notes, 9/28/11 – 12/28/11; iU.S. Treasury Bills, 8/04/11 - 8/25/11; U.S. Treasury Bonds, 7.25% 11.25%, 2/15/15 - 5/15/16; and U.S. Treasury Notes, 0.375% - 5.00%, 7/31/11 - 6/30/16 (valued at $195,394,959)
Total Investments (Cost $2,167,027,238) 99.3%				2,399,648,465
Other Assets, less Liabilities 0.7%				16,747,886
Net Assets 100.0%			$	2,416,396,351

See Abbreviations on page TGB-38.

*The principal amount is stated in U.S. dollars unless otherwise indicated.

^aThe coupon rate shown represents the rate at period end.

^bThe principal amount is stated in original face, and scheduled paydowns are reflected in the market price on ex-date.

^cPrincipal amount is stated in 1,000 Brazilian Real Units.

^dRedemption price at maturity is adjusted for inflation. See Note 1(f).

^eSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At June 30, 2011, the aggregate value of these securities was $213,121,911, representing 8.82% of net assets.

^fSecurity was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. This security has been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At June 30, 2011, the value of this security was $3,126,065, representing 0.13% of net assets.

^gPrincipal amount is stated in 100 Mexican Peso Units.

^hA supranational organization is an entity formed by two or more central governments through international treaties.

ⁱThe security is traded on a discount basis with no stated coupon rate.

^jSee Note 1(c) regarding joint repurchase agreement.

TGB-18

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Templeton Global Bond Securities Fund

At June 30, 2011, the Fund had the following forward exchange contracts outstanding. See Note 1(d).

Forward Exchange Contracts

Currency	Counterparty		Type		Quantity		Contract Amount*			Settlement Date		Unrealized Appreciation		Unrealized Depreciation
Indian Rupee		DBAB		Buy		79,423,000		1,637,588			7/11/11	$	138,334	$	—
Indian Rupee		JPHQ		Buy		127,745,000		2,632,289			7/12/11		223,592		—
Indian Rupee		DBAB		Buy		40,128,000		829,948			7/12/11		67,158		—
Malaysian Ringgit		DBAB		Buy		18,006,622		5,559,659			7/12/11		398,222		—
Malaysian Ringgit		DBAB		Buy		13,610,000		4,207,760			7/13/11		295,053		—
Indian Rupee		CITI		Buy		19,711,000		408,349			7/18/11		31,818		—
Malaysian Ringgit		DBAB		Buy		11,455,000		2,778,014	EUR		7/18/11		—		(238,133	)
Malaysian Ringgit		DBAB		Buy		2,637,000		813,763			7/18/11		58,338		—
Indian Rupee		JPHQ		Buy		19,711,000		407,673			7/20/11		32,329		—
Malaysian Ringgit		DBAB		Buy		12,933,000		3,082,647	EUR		7/20/11		—		(191,288	)
Malaysian Ringgit		DBAB		Buy		4,160,000		1,279,252			7/20/11		96,318		—
Malaysian Ringgit		DBAB		Buy		16,628,000		3,962,661	EUR		7/25/11		—		(246,243	)
Malaysian Ringgit		DBAB		Buy		5,058,000		1,555,111			7/25/11		116,747		—
Malaysian Ringgit		JPHQ		Buy		16,628,000		3,979,799	EUR		7/27/11		—		(271,608	)
Malaysian Ringgit		JPHQ		Buy		5,318,000		1,638,526			7/27/11		119,000		—
Malaysian Ringgit		HSBC		Buy		3,005,000		926,268			7/29/11		66,688		—
Malaysian Ringgit		HSBC		Buy		6,100,000		1,897,297			8/08/11		116,772		—
Malaysian Ringgit		JPHQ		Buy		1,100,000		341,827			8/09/11		21,337		—
South Korean Won		HSBC		Buy		21,363,430,000		19,122,297			8/09/11		847,880		—
Polish Zloty		DBAB		Buy		59,155,000		14,545,119	EUR		8/12/11		403,203		—
New Zealand Dollar		HSBC		Sell		2,945,715		2,217,269			8/15/11		—		(214,954	)
New Zealand Dollar		HSBC		Buy		2,945,715		2,325,348			8/15/11		106,876		—
Japanese Yen		UBSW		Sell		758,781,000		8,929,251			8/18/11		—		(498,508	)
Japanese Yen		DBAB		Sell		461,885,000		5,435,540			8/18/11		—		(303,324	)
Japanese Yen		JPHQ		Sell		377,047,000		4,414,037			8/18/11		—		(270,726	)
Japanese Yen		HSBC		Sell		375,298,000		4,415,946			8/19/11		—		(247,113	)
Euro		UBSW		Sell		6,270,000		8,074,004			8/22/11		—		(1,004,168	)
Euro		UBSW		Buy		6,270,000		8,938,199			8/22/11		139,974		—
Japanese Yen		BZWS		Sell		376,247,000		4,429,249			8/22/11		—		(245,686	)
Japanese Yen		DBAB		Sell		376,727,000		4,440,441			8/22/11		—		(240,458	)
Japanese Yen		MSCO		Sell		300,000,000		3,531,739			8/22/11		—		(195,814	)
Euro		UBSW		Sell		6,274,000		8,065,980			8/23/11		—		(1,017,696	)
Euro		UBSW		Buy		6,274,000		8,943,587			8/23/11		140,089		—
Japanese Yen		FBCO		Sell		746,218,000		8,779,035			8/23/11		—		(492,911	)
Japanese Yen		CITI		Sell		751,731,000		8,864,439			8/23/11		—		(476,008	)
Japanese Yen		DBAB		Sell		371,821,000		4,391,829			8/23/11		—		(228,141	)
Indian Rupee		HSBC		Buy		143,891,000		2,979,171			8/24/11		211,095		—
Indian Rupee		DBAB		Buy		124,700,000		2,577,511			8/24/11		187,264		—
Japanese Yen		JPHQ		Sell		750,133,000		8,840,695			8/24/11		—		(479,952	)
Japanese Yen		BZWS		Sell		747,636,000		8,833,546			8/24/11		—		(456,075	)
Euro		BZWS		Sell		7,656,600		9,689,427			8/25/11		—		(1,395,315	)
Japanese Yen		DBAB		Sell		685,950,000		8,081,836			8/25/11		—		(441,368	)
Japanese Yen		BZWS		Sell		337,439,000		3,976,420			8/25/11		—		(216,395	)
United States Dollar		CITI		Buy		7,760,297		6,137,727	EUR		8/25/11		—		(1,125,517	)
Euro		UBSW		Sell		9,307,428		11,777,806			8/26/11		—		(1,696,475	)
Euro		HSBC		Sell		8,279,000		10,443,296			8/26/11		—		(1,542,138	)
Euro		UBSW		Buy		9,307,428		13,266,808			8/26/11		207,472		—
Japanese Yen		HSBC		Sell		2,493,199,000		29,825,345			8/26/11		—		(1,153,841	)
Japanese Yen		UBSW		Sell		937,086,000		11,163,361			8/26/11		—		(480,379	)
Japanese Yen		JPHQ		Sell		751,903,000		8,880,234			8/26/11		—		(462,519	)
Swedish Krona		UBSW		Buy		30,000,000		3,154,541	EUR		8/26/11		159,389		—

TGB-19

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Templeton Global Bond Securities Fund

Forward Exchange Contracts (continued)

Currency	Counterparty		Type		Quantity		Contract Amount*			Settlement Date		Unrealized Appreciation		Unrealized Depreciation
United States Dollar		UBSW		Buy		16,993,151		13,425,892	EUR		8/26/11	$	—	$	(2,443,392	)
United States Dollar		HSBC		Buy		14,772,566		11,710,875	EUR		8/26/11		—		(2,181,163	)
United States Dollar		JPHQ		Buy		11,099,031		8,794,794	EUR		8/26/11		—		(1,633,115	)
Euro		JPHQ		Sell		4,095,317		5,170,338			8/29/11		—		(757,853	)
Euro		JPHQ		Sell		2,095,000		2,647,452			8/29/11		—		(385,173	)
Malaysian Ringgit		JPHQ		Buy		8,340,000		2,611,555			8/29/11		137,564		—
Japanese Yen		BZWS		Sell		890,300,000		10,574,388			8/30/11		—		(488,290	)
Indian Rupee		DBAB		Buy		88,183,000		1,811,855			9/01/11		140,338		—
Japanese Yen		JPHQ		Sell		372,662,000		4,392,527			9/01/11		—		(238,155	)
Indian Rupee		DBAB		Buy		25,000,000		511,876			9/27/11		39,063		—
Japanese Yen		JPHQ		Sell		172,207,000		2,055,712			9/30/11		—		(84,564	)
Philippine Peso		HSBC		Buy		49,600,000		1,097,709			9/30/11		37,262		—
Philippine Peso		HSBC		Buy		39,700,000		878,562			10/03/11		29,669		—
Philippine Peso		HSBC		Buy		156,866,000		3,480,806			10/04/11		107,601		—
Philippine Peso		DBAB		Buy		195,560,000		4,346,164			10/04/11		127,392		—
Euro		UBSW		Sell		6,370,000		8,714,670			10/05/11		—		(496,604	)
Philippine Peso		HSBC		Buy		233,867,000		5,225,144			10/05/11		124,307		—
Philippine Peso		DBAB		Buy		233,811,000		5,220,977			10/05/11		127,193		—
Philippine Peso		JPHQ		Buy		61,767,000		1,379,836			10/06/11		32,910		—
Philippine Peso		DBAB		Buy		191,936,000		4,314,526			10/07/11		75,141		—
Philippine Peso		JPHQ		Buy		76,627,000		1,729,768			10/11/11		22,202		—
Philippine Peso		DBAB		Buy		153,588,000		3,468,642			10/11/11		42,935		—
Philippine Peso		CITI		Buy		76,826,000		1,737,044			10/11/11		19,476		—
Philippine Peso		HSBC		Buy		153,878,000		3,469,706			10/11/11		48,502		—
Malaysian Ringgit		DBAB		Buy		11,434,805		3,645,721			10/12/11		111,926		—
Philippine Peso		DBAB		Buy		45,732,000		1,037,807			10/12/11		7,714		—
Malaysian Ringgit		DBAB		Buy		4,934,783		1,573,040			10/13/11		48,488		—
Philippine Peso		HSBC		Buy		76,252,000		1,717,581			10/13/11		25,554		—
Philippine Peso		JPHQ		Buy		194,374,000		4,386,190			10/13/11		57,237		—
Euro		HSBC		Sell		3,762,000		5,229,932			10/17/11		—		(207,973	)
Philippine Peso		JPHQ		Buy		108,152,000		2,463,767			10/17/11		7,867		—
Euro		HSBC		Sell		3,753,000		5,264,333			10/18/11		—		(160,389	)
Norwegian Krone		BZWS		Buy		30,824,000		3,765,775	EUR		10/18/11		229,421		—
Euro		HSBC		Sell		5,054,000		7,058,416			10/19/11		—		(246,584	)
Norwegian Krone		BZWS		Buy		30,949,000		3,765,727	EUR		10/19/11		252,258		—
Philippine Peso		HSBC		Buy		154,149,000		3,493,699			10/19/11		28,593		—
Philippine Peso		DBAB		Buy		41,880,000		950,954			10/19/11		6,001		—
Philippine Peso		JPHQ		Buy		84,061,000		1,894,460			10/21/11		26,039		—
Philippine Peso		DBAB		Buy		167,411,000		3,771,877			10/21/11		52,877		—
Chilean Peso		CITI		Buy		921,291,798		1,849,984			10/25/11		93,014		—
Indian Rupee		DBAB		Buy		208,500,000		4,488,698			10/26/11		82,925		—
Indian Rupee		HSBC		Buy		213,392,000		4,601,941			10/26/11		76,944		—
Philippine Peso		HSBC		Buy		154,149,000		3,489,745			10/26/11		30,702		—
Philippine Peso		DBAB		Buy		165,158,000		3,744,145			10/26/11		27,724		—
Philippine Peso		JPHQ		Buy		82,631,000		1,873,634			10/26/11		13,488		—
Indian Rupee		DBAB		Buy		440,314,000		9,473,193			10/27/11		179,558		—
Indian Rupee		HSBC		Buy		317,880,000		6,876,055			10/27/11		92,646		—
Norwegian Krone		BZWS		Buy		61,766,000		7,531,521	EUR		10/27/11		476,346		—
Philippine Peso		HSBC		Buy		40,030,000		911,637			10/27/11		2,497		—
Chilean Peso		BZWS		Buy		199,342,000		393,568			10/28/11		26,704		—
Chilean Peso		DBAB		Buy		398,486,000		787,133			10/28/11		52,994		—
Philippine Peso		DBAB		Buy		146,355,000		3,332,312			10/28/11		9,635		—
Philippine Peso		HSBC		Buy		26,680,000		607,745			10/28/11		1,480		—

TGB-20

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Templeton Global Bond Securities Fund

Forward Exchange Contracts (continued)

Currency	Counterparty		Type		Quantity		Contract Amount*			Settlement Date		Unrealized Appreciation		Unrealized Depreciation
Philippine Peso		HSBC		Buy		52,110,000		1,185,126			10/31/11	$	4,514	$	—
Philippine Peso		DBAB		Buy		26,150,000		607,843			11/04/11		—		(11,033	)
Norwegian Krone		UBSW		Buy		47,173,200		5,682,902	EUR		11/07/11		459,839		—
Japanese Yen		CITI		Sell		341,992,119		4,230,534			11/08/11		—		(21,620	)
Japanese Yen		BZWS		Sell		335,950,000		4,156,254			11/10/11		—		(20,861	)
Japanese Yen		BZWS		Sell		429,663,000		5,357,394			11/14/11		14,857		—
Japanese Yen		UBSW		Sell		340,600,700		4,246,521			11/14/11		11,407		—
Philippine Peso		DBAB		Buy		48,500,000		1,126,545			11/14/11		—		(20,477	)
Japanese Yen		DBAB		Sell		796,770,000		9,733,480			11/16/11		—		(173,961	)
Japanese Yen		JPHQ		Sell		397,873,000		4,862,190			11/16/11		—		(85,164	)
Euro		UBSW		Sell		4,794,427		6,494,531			11/17/11		—		(428,839	)
Japanese Yen		BZWS		Sell		986,239,000		11,990,310			11/17/11		—		(273,210	)
Japanese Yen		UBSW		Sell		317,836,000		3,860,044			11/17/11		—		(92,130	)
Japanese Yen		HSBC		Sell		207,909,000		2,515,231			11/17/11		—		(70,041	)
Euro		DBAB		Sell		933,877		1,259,295			11/18/11		—		(89,222	)
Japanese Yen		BZWS		Sell		1,107,834,000		13,360,275			11/21/11		—		(415,801	)
Norwegian Krone		MSCO		Buy		15,002,870		1,807,891	EUR		11/25/11		143,432		—
Euro		DBAB		Sell		1,300,570		1,737,236			11/28/11		—		(140,183	)
Japanese Yen		BOFA		Sell		859,147,000		10,376,172			11/28/11		—		(308,214	)
Norwegian Krone		UBSW		Buy		75,812,000		9,179,975	EUR		11/28/11		658,946		—
Norwegian Krone		MSCO		Buy		23,130,000		2,781,921	EUR		11/28/11		228,268		—
Japanese Yen		BZWS		Sell		1,251,786,000		15,116,363			11/29/11		—		(451,056	)
Japanese Yen		CITI		Sell		310,702,000		3,754,253			11/29/11		—		(109,689	)
Japanese Yen		DBAB		Sell		770,370,000		9,205,042			12/01/11		—		(375,604	)
Norwegian Krone		UBSW		Buy		23,030,000		2,791,515	EUR		12/01/11		195,542		—
Euro		DBAB		Sell		5,440,000		7,078,800			12/02/11		—		(773,029	)
Euro		HSBC		Sell		2,155,292		2,824,079			12/06/11		—		(286,365	)
Euro		UBSW		Sell		1,343,551		1,789,315			12/07/11		—		(149,590	)
Euro		BZWS		Sell		5,095,000		6,732,533			12/12/11		—		(618,983	)
Malaysian Ringgit		JPHQ		Buy		13,361,013		4,220,289			12/16/11		150,165		—
Japanese Yen		CITI		Sell		286,112,008		3,445,887			12/28/11		—		(113,323	)
Japanese Yen		BZWS		Sell		285,057,504		3,434,883			12/28/11		—		(111,209	)
Japanese Yen		JPHQ		Sell		285,510,329		3,463,124			12/28/11		—		(88,602	)
Swedish Krona		DBAB		Buy		136,332,733		15,020,408	EUR		1/05/12		—		(346,212	)
Euro		CITI		Sell		5,040,000		6,519,290			1/10/12		—		(745,917	)
Japanese Yen		BZWS		Sell		277,330,000		3,353,446			1/10/12		—		(97,146	)
Japanese Yen		UBSW		Sell		138,650,000		1,676,805			1/10/12		—		(48,304	)
Japanese Yen		CITI		Sell		138,680,000		1,677,960			1/10/12		—		(47,523	)
Euro		UBSW		Sell		13,846,000		17,922,609			1/11/12		—		(2,035,853	)
Euro		DBAB		Sell		9,460,000		12,259,119			1/11/12		—		(1,377,097	)
Euro		BZWS		Sell		1,726,000		2,233,444			1/11/12		—		(254,517	)
Japanese Yen		DBAB		Sell		139,110,000		1,682,491			1/12/12		—		(48,391	)
Japanese Yen		HSBC		Sell		139,250,000		1,687,572			1/12/12		—		(45,051	)
Chilean Peso		MSCO		Buy		2,254,600,000		4,442,999			1/13/12		270,034		—
Euro		JPHQ		Sell		937,000		1,211,775			1/13/12		—		(138,782	)
Japanese Yen		BZWS		Sell		394,150,000		4,771,792			1/13/12		—		(132,503	)
Japanese Yen		HSBC		Sell		397,130,000		4,811,539			1/13/12		—		(129,835	)
Japanese Yen		UBSW		Sell		313,510,000		3,797,176			1/13/12		—		(103,739	)
Philippine Peso		JPHQ		Buy		374,905,000		8,515,730			1/13/12		—		(1,816	)
Philippine Peso		HSBC		Buy		60,160,000		1,367,801			1/17/12		—		(1,920	)
Euro		DBAB		Sell		4,856,000		6,438,109			1/18/12		—		(559,960	)
Philippine Peso		DBAB		Buy		66,125,000		1,484,121			1/18/12		17,101		—
Philippine Peso		HSBC		Buy		115,942,000		2,602,806			1/18/12		29,401		—
Philippine Peso		DBAB		Buy		41,372,000		931,592			1/19/12		7,612		—
Philippine Peso		JPHQ		Buy		165,119,000		3,670,535			1/19/12		77,906		—
British Pound		BZWS		Buy		906,238		1,435,872			1/24/12		14,768		—

TGB-21

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Templeton Global Bond Securities Fund

Forward Exchange Contracts (continued)

Currency	Counterparty		Type		Quantity		Contract Amount*			Settlement Date		Unrealized Appreciation		Unrealized Depreciation
British Pound		DBAB		Buy		903,679		1,430,452			1/24/12	$	16,092	$	—
British Pound		CITI		Buy		603,463		953,634			1/24/12		12,345		—
British Pound		DBAB		Buy		474,519		755,031			1/26/12		4,523		—
Japanese Yen		BZWS		Sell		1,079,470,000		13,122,660			1/26/12		—		(311,326	)
Japanese Yen		UBSW		Sell		944,420,000		11,488,596			1/26/12		—		(264,695	)
Japanese Yen		DBAB		Sell		897,860,782		10,935,263			1/26/12		—		(238,599	)
Philippine Peso		HSBC		Buy		154,149,000		3,423,251			1/26/12		74,703		—
British Pound		MSCO		Buy		358,395		564,198			1/27/12		9,471		—
British Pound		JPHQ		Buy		119,423		190,002			1/27/12		1,154		—
British Pound		BZWS		Buy		601,378		945,862			1/27/12		16,740		—
Chilean Peso		DBAB		Buy		2,227,910,000		4,404,290			1/27/12		245,542		—
Euro		CITI		Sell		4,998,400		6,758,487			1/27/12		—		(442,597	)
Japanese Yen		HSBC		Sell		1,162,462,488		14,183,290			1/27/12		—		(283,738	)
British Pound		JPHQ		Buy		237,230		373,367			1/30/12		6,342		—
Chilean Peso		DBAB		Buy		5,127,860,000		10,218,932			1/30/12		479,687		—
Chilean Peso		JPHQ		Buy		675,370,000		1,337,102			1/30/12		71,971		—
British Pound		MSCO		Buy		116,956		185,153			1/31/12		2,043		—
Chilean Peso		DBAB		Buy		3,093,470,000		6,161,677			1/31/12		291,716		—
Euro		DBAB		Sell		31,205,000		42,438,800			1/31/12		—		(2,511,449	)
British Pound		CITI		Buy		391,619		619,451			2/01/12		7,355		—
British Pound		MSCO		Buy		450,886		710,738			2/01/12		10,927		—
British Pound		BZWS		Buy		48,594		76,617			2/01/12		1,160		—
Euro		UBSW		Sell		5,540,000		7,543,763			2/01/12		—		(436,238	)
Philippine Peso		HSBC		Buy		99,500,000		2,237,354			2/03/12		19,433		—
Philippine Peso		DBAB		Buy		155,800,000		3,505,772			2/03/12		27,972		—
Indian Rupee		JPHQ		Buy		21,500,000		445,873			2/06/12		17,790		—
Philippine Peso		HSBC		Buy		84,800,000		1,916,384			2/06/12		6,647		—
Philippine Peso		JPHQ		Buy		60,500,000		1,362,613			2/07/12		9,280		—
Singapore Dollar		DBAB		Buy		6,207,000		4,860,459			2/07/12		196,972		—
Singapore Dollar		HSBC		Buy		6,206,000		4,860,284			2/07/12		196,331		—
Australian Dollar		UBSW		Buy		10,557,970		10,238,591			2/08/12		766,009		—
Australian Dollar		MSCO		Buy		10,560,886		10,268,877			2/08/12		738,762		—
Euro		CITI		Sell		6,572,000		8,878,181			2/08/12		—		(586,100	)
Euro		UBSW		Sell		4,929,000		6,676,084			2/08/12		—		(422,126	)
Euro		HSBC		Sell		1,200,000		1,621,680			2/08/12		—		(106,430	)
Norwegian Krone		UBSW		Buy		72,121,400		9,100,722	EUR		2/08/12		55,835		—
Singapore Dollar		DBAB		Buy		12,363,000		9,721,129			2/08/12		352,238		—
Australian Dollar		BZWS		Buy		3,351,000		265,734,300	JPY		2/09/12		184,611		—
Australian Dollar		CITI		Buy		3,351,000		265,901,850	JPY		2/09/12		182,525		—
Australian Dollar		DBAB		Buy		3,351,000		265,995,678	JPY		2/09/12		181,357		—
Euro		BZWS		Sell		800,000		1,078,400			2/09/12		—		(73,634	)
Euro		HSBC		Sell		600,000		806,880			2/09/12		—		(57,146	)
Euro		JPHQ		Sell		300,000		405,840			2/09/12		—		(26,173	)
Euro		DBAB		Sell		180,000		242,431			2/09/12		—		(16,776	)
Norwegian Krone		UBSW		Buy		100,802,700		12,673,686	EUR		2/09/12		143,790		—
Norwegian Krone		DBAB		Buy		144,025,000		18,112,935	EUR		2/09/12		198,229		—
Polish Zloty		DBAB		Buy		17,528,000		4,407,896	EUR		2/09/12		—		(93,595	)
Singapore Dollar		BZWS		Buy		1,717,028		1,347,894			2/09/12		51,148		—
Chilean Peso		DBAB		Buy		1,145,000,000		2,326,290			2/10/12		59,624		—
Euro		BZWS		Sell		612,000		829,872			2/10/12		—		(51,404	)
Japanese Yen		HSBC		Sell		413,563,000		5,052,077			2/10/12		—		(95,791	)
Japanese Yen		MSCO		Sell		394,373,000		4,826,319			2/10/12		—		(82,680	)
Polish Zloty		BZWS		Buy		17,528,000		4,405,238	EUR		2/10/12		—		(90,106	)
Chilean Peso		DBAB		Buy		1,058,220,000		2,149,980			2/13/12		54,354		—

TGB-22

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Templeton Global Bond Securities Fund

Forward Exchange Contracts (continued)

Currency	Counterparty		Type		Quantity		Contract Amount*			Settlement Date		Unrealized Appreciation		Unrealized Depreciation
Chilean Peso		BZWS		Buy		1,142,900,000		2,319,196			2/13/12	$	61,531	$	—
Euro		UBSW		Sell		657,000		892,055			2/13/12		—		(53,925	)
Singapore Dollar		HSBC		Buy		6,117,200		4,803,595			2/13/12		180,846		—
British Pound		BZWS		Buy		2,562,230		4,082,606			2/14/12		17,637		—
Chilean Peso		DBAB		Buy		1,130,600,000		2,305,465			2/14/12		49,374		—
Chilean Peso		MSCO		Buy		1,963,430,000		4,038,733			2/14/12		50,743		—
Malaysian Ringgit		DBAB		Buy		97,443,480		31,603,632			2/14/12		148,378		—
Polish Zloty		DBAB		Buy		17,528,000		4,365,194	EUR		2/14/12		—		(33,811	)
Singapore Dollar		HSBC		Buy		4,404,400		3,458,582			2/14/12		130,251		—
Japanese Yen		JPHQ		Sell		144,920,000		1,765,595			2/15/12		—		(38,439	)
Japanese Yen		DBAB		Sell		123,057,280		1,497,958			2/15/12		—		(33,917	)
Chilean Peso		MSCO		Buy		3,554,470,000		7,382,077			2/16/12		19,574		—
Euro		JPHQ		Sell		1,971,000		2,636,410			2/16/12		—		(201,240	)
Euro		UBSW		Sell		1,971,000		2,637,533			2/16/12		—		(200,117	)
Euro		DBAB		Sell		2,038,000		2,734,629			2/17/12		—		(199,381	)
Malaysian Ringgit		HSBC		Buy		4,899,000		1,582,569			2/17/12		13,474		—
Singapore Dollar		DBAB		Buy		7,334,000		5,736,544			2/17/12		239,518		—
Singapore Dollar		HSBC		Buy		7,334,000		5,736,724			2/17/12		239,338		—
Singapore Dollar		BZWS		Buy		4,886,000		3,824,209			2/17/12		157,117		—
Chilean Peso		DBAB		Buy		1,455,470,000		3,009,657			2/21/12		19,424		—
Chilean Peso		JPHQ		Buy		1,055,800,000		2,167,411			2/21/12		29,889		—
Euro		UBSW		Sell		2,038,000		2,728,495			2/21/12		—		(205,118	)
Chilean Peso		JPHQ		Buy		1,792,000,000		3,719,772			2/22/12		9,263		—
Japanese Yen		HSBC		Sell		385,460,000		4,651,662			2/22/12		—		(147,199	)
Chilean Peso		DBAB		Buy		1,435,490,000		2,965,643			2/23/12		21,179		—
Japanese Yen		JPHQ		Sell		385,700,000		4,652,313			2/23/12		—		(149,604	)
Singapore Dollar		DBAB		Buy		9,547,000		7,468,688			2/24/12		310,949		—
Chilean Peso		DBAB		Buy		2,094,920,000		4,297,757			2/27/12		59,167		—
Chilean Peso		CITI		Buy		2,285,090,000		4,709,098			2/27/12		43,332		—
Chilean Peso		MSCO		Buy		2,254,540,000		4,646,859			2/27/12		42,034		—
Euro		DBAB		Sell		5,346,000		7,284,299			2/27/12		—		(409,470	)
Singapore Dollar		DBAB		Buy		5,952,000		4,667,869			2/27/12		182,370		—
Chilean Peso		JPHQ		Buy		593,800,000		1,223,069			2/28/12		11,751		—
Chilean Peso		MSCO		Buy		1,559,200,000		3,181,392			2/28/12		60,997		—
Chilean Peso		DBAB		Buy		790,050,000		1,632,200			2/29/12		10,540		—
Chilean Peso		BZWS		Buy		2,006,200,000		4,086,779			2/29/12		84,683		—
Euro		DBAB		Sell		3,252,140		4,444,049			2/29/12		—		(235,996	)
Singapore Dollar		DBAB		Buy		5,960,000		4,668,212			2/29/12		188,604		—
Chilean Peso		BZWS		Buy		1,004,500,000		2,043,328			3/01/12		45,078		—
Chilean Peso		DBAB		Buy		1,253,970,000		2,553,390			3/01/12		53,676		—
Euro		DBAB		Sell		1,530,900		2,087,306			3/01/12		—		(115,686	)
Japanese Yen		UBSW		Sell		447,200,000		5,501,021			3/01/12		—		(67,111	)
Japanese Yen		JPHQ		Sell		401,100,000		4,934,793			3/01/12		—		(59,343	)
Japanese Yen		HSBC		Sell		400,800,000		4,932,923			3/01/12		—		(57,477	)
Chilean Peso		DBAB		Buy		1,253,970,000		2,553,390			3/02/12		53,381		—
Chilean Peso		DBAB		Buy		1,328,230,000		2,706,255			3/05/12		53,952		—
Euro		DBAB		Sell		1,536,000		2,099,251			3/05/12		—		(110,780	)
Chilean Peso		DBAB		Buy		1,320,220,000		2,682,556			3/07/12		60,385		—
Euro		UBSW		Sell		6,915,000		9,567,248			3/08/12		—		(381,197	)
Euro		MSCO		Sell		5,225,000		7,228,526			3/08/12		—		(288,556	)
Euro		HSBC		Sell		1,844,000		2,548,408			3/08/12		—		(104,511	)
Chilean Peso		DBAB		Buy		1,284,460,000		2,629,396			3/09/12		38,645		—

TGB-23

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Templeton Global Bond Securities Fund

Forward Exchange Contracts (continued)

Currency	Counterparty		Type		Quantity		Contract Amount*			Settlement Date		Unrealized Appreciation		Unrealized Depreciation
Chilean Peso		MSCO		Buy		662,100,000		1,346,279			3/12/12	$	28,548	$	—
Chilean Peso		DBAB		Buy		2,600,220,000		5,301,695			3/15/12		95,740		—
Australian Dollar		CITI		Buy		16,742,000		15,737,313			3/19/12		1,626,031		—
Japanese Yen		CITI		Sell		407,702,000		5,074,644			3/19/12		—		(2,977	)
Japanese Yen		MSCO		Sell		244,700,000		3,044,896			3/19/12		—		(2,659	)
Japanese Yen		UBSW		Sell		330,530,000		4,114,396			3/19/12		—		(2,106	)
Singapore Dollar		DBAB		Buy		7,978,100		6,254,047			3/19/12		248,064		—
Singapore Dollar		JPHQ		Buy		11,426,000		8,934,240			3/19/12		377,892		—
Singapore Dollar		HSBC		Buy		9,120,000		7,147,559			3/19/12		285,194		—
Australian Dollar		DBAB		Buy		8,192,166		7,679,992			3/21/12		814,094		—
Chilean Peso		JPHQ		Buy		1,065,000,000		2,137,481			3/21/12		71,706		—
Singapore Dollar		DBAB		Buy		8,589,700		6,700,757			3/21/12		299,889		—
Singapore Dollar		HSBC		Buy		6,864,000		5,360,615			3/21/12		233,577		—
Australian Dollar		DBAB		Buy		537,776		503,606			3/22/12		53,920		—
Japanese Yen		UBSW		Sell		242,774,840		3,005,643			3/23/12		—		(18,104	)
Euro		DBAB		Sell		2,736,000		3,829,333			3/26/12		—		(104,485	)
British Pound		MSCO		Buy		2,852,773		4,545,238			3/29/12		17,152		—
British Pound		DBAB		Buy		2,853,149		4,545,238			3/29/12		17,753		—
British Pound		BZWS		Buy		5,722,896		9,090,477			3/30/12		61,902		—
Chilean Peso		DBAB		Buy		1,252,750,000		2,510,018			3/30/12		85,978		—
New Israeli Shekel		MSCO		Buy		9,296,110		2,596,996			3/30/12		100,186		—
British Pound		FBCO		Buy		3,431,879		5,454,285			4/02/12		33,904		—
Chilean Peso		DBAB		Buy		1,330,940,000		2,656,408			4/02/12		100,674		—
Euro		DBAB		Sell		3,712,000		5,214,432			4/04/12		—		(121,000	)
Euro		DBAB		Sell		2,488,000		3,482,304			4/05/12		—		(93,690	)
Euro		HSBC		Sell		8,692,000		12,212,434			4/10/12		—		(278,369	)
Euro		DBAB		Sell		7,243,000		10,201,041			4/10/12		—		(207,482	)
Euro		UBSW		Sell		4,346,000		6,102,436			4/10/12		—		(142,966	)
Indian Rupee		DBAB		Buy		159,915,000		3,413,340			4/11/12		5,233		—
Euro		UBSW		Sell		3,907,000		5,569,722			4/12/12		—		(44,425	)
Indian Rupee		DBAB		Buy		342,913,000		7,346,037			4/13/12		—		(17,113	)
Chilean Peso		MSCO		Buy		2,645,530,000		5,374,363			4/16/12		97,204		—
Euro		HSBC		Sell		6,919,000		9,915,481			4/16/12		—		(25,357	)
Indian Rupee		JPHQ		Buy		230,330,000		4,921,581			4/16/12		—		(535	)
Indian Rupee		JPHQ		Buy		226,092,000		4,802,294			4/18/12		27,101		—
Indian Rupee		DBAB		Buy		79,271,000		1,678,404			4/19/12		14,655		—
Indian Rupee		JPHQ		Buy		112,941,000		2,396,880			4/19/12		15,298		—
Malaysian Ringgit		JPHQ		Buy		4,069,213		1,329,330			4/19/12		—		(8,965	)
Chilean Peso		MSCO		Buy		2,370,410,000		4,788,707			4/20/12		111,619		—
Japanese Yen		UBSW		Sell		261,900,000		3,188,653			4/20/12		—		(74,801	)
Japanese Yen		CITI		Sell		261,800,000		3,189,299			4/20/12		—		(72,909	)
Euro		DBAB		Sell		4,545,000		6,425,948			4/23/12		—		(102,462	)
Malaysian Ringgit		JPHQ		Buy		11,659,000		3,812,498			4/23/12		—		(30,472	)
Indian Rupee		DBAB		Buy		160,601,000		3,410,512			4/26/12		16,835		—
Chilean Peso		JPHQ		Buy		1,501,938,000		3,045,910			4/27/12		56,563		—
Indian Rupee		JPHQ		Buy		136,582,000		2,896,755			4/27/12		17,675		—
Chilean Peso		CITI		Buy		2,420,966,000		4,976,292			4/30/12		22,864		—
Indian Rupee		JPHQ		Buy		113,782,000		2,415,754			4/30/12		11,330		—
Indian Rupee		DBAB		Buy		71,377,981		1,505,547			4/30/12		17,016		—
Swedish Krona		BZWS		Buy		122,773,200		13,607,901	EUR		4/30/12		—		(485,468	)
Euro		MSCO		Sell		1,259,000		1,851,970			5/07/12		44,434		—
Euro		DBAB		Sell		2,045,000		2,991,017			5/07/12		55,026		—
Euro		BZWS		Sell		1,259,000		1,850,818			5/07/12		43,282		—
Euro		FBCO		Sell		1,731,000		2,537,646			5/07/12		52,463		—
Euro		UBSW		Sell		629,000		902,238			5/09/12		—		(750	)
Euro		DBAB		Sell		1,259,000		1,816,422			5/09/12		9,012		—

TGB-24

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Templeton Global Bond Securities Fund

Forward Exchange Contracts (continued)

Currency	Counterparty		Type		Quantity		Contract Amount*			Settlement Date		Unrealized Appreciation		Unrealized Depreciation
Japanese Yen		CITI		Sell		733,721,000		9,128,949			5/10/12	$	—	$	(16,784	)
Chilean Peso		MSCO		Buy		1,150,200,000		2,368,958			5/11/12		3,176		—
Japanese Yen		UBSW		Sell		733,361,000		9,122,540			5/11/12		—		(18,859	)
Japanese Yen		DBAB		Sell		490,555,000		6,101,962			5/11/12		—		(12,843	)
Euro		DBAB		Sell		1,812,000		2,538,521			5/18/12		—		(61,955	)
Euro		DBAB		Sell		2,642,000		3,691,346			5/21/12		—		(99,901	)
Euro		UBSW		Sell		1,812,000		2,531,002			5/21/12		—		(69,203	)
Chilean Peso		MSCO		Buy		420,740,000		852,512			5/22/12		14,127		—
Indian Rupee		DBAB		Buy		217,594,000		4,559,807			6/01/12		64,766		—
Indian Rupee		HSBC		Buy		251,448,000		5,326,160			6/04/12		16,094		—
Euro		DBAB		Sell		785,200		1,123,692			6/06/12		—		(2,435	)
Euro		UBSW		Sell		1,057,200		1,517,505			6/07/12		1,331		—
Euro		DBAB		Sell		2,033,100		2,927,969			6/07/12		12,216		—
Indian Rupee		DBAB		Buy		160,277,000		3,379,945			6/07/12		24,130		—
Indian Rupee		HSBC		Buy		42,784,000		908,558			6/08/12		15		—
Polish Zloty		DBAB		Buy		30,704,000		7,583,856	EUR		6/08/12		—		(34,251	)
Polish Zloty		CITI		Buy		5,990,000		1,480,328	EUR		6/08/12		—		(7,836	)
Euro		DBAB		Sell		16,210,600		23,377,407			6/11/12		132,358		—
Indian Rupee		DBAB		Buy		43,392,000		921,078			6/11/12		92		—
Swedish Krona		MSCO		Buy		55,369,800		6,074,660	EUR		6/11/12		—		(137,303	)
Swedish Krona		DBAB		Buy		41,300,000		4,531,649	EUR		6/11/12		—		(103,269	)
Euro		DBAB		Sell		6,935,000		9,949,645			6/13/12		5,954		—
Indian Rupee		HSBC		Buy		108,000,000		2,292,994			6/13/12		—		(780	)
Swedish Krona		MSCO		Buy		27,990,100		3,064,681	EUR		6/13/12		—		(60,806	)
Swedish Krona		BZWS		Buy		24,372,000		2,664,986	EUR		6/13/12		—		(47,866	)
Euro		DBAB		Sell		1,448,000		2,068,989			6/14/12		—		(7,141	)
Swedish Krona		MSCO		Buy		21,992,000		2,398,444	EUR		6/14/12		—		(34,237	)
Indian Rupee		DBAB		Buy		108,614,000		2,300,657			6/18/12		3,278		—
Indian Rupee		DBAB		Buy		98,937,000		2,087,719			6/20/12		10,468		—
Indian Rupee		JPHQ		Buy		79,054,000		1,669,567			6/22/12		6,573		—
Indian Rupee		DBAB		Buy		119,627,000		2,538,773			6/25/12		—		(3,249	)
Indian Rupee		HSBC		Buy		80,337,000		1,702,416			6/27/12		—		(40	)
Malaysian Ringgit		JPHQ		Buy		14,772,000		4,766,853			6/29/12		2,817		—
Swedish Krona		UBSW		Buy		302,991,000		32,586,637	EUR		6/29/12		168,310		—
Unrealized appreciation (depreciation)													22,618,204		(48,338,114	)
Net unrealized appreciation (depreciation)														$	(25,719,910	)

*In U.S. dollars unless otherwise indicated.

At June 30, 2011, the Fund had the following interest rate swap contracts outstanding. See Note 1(d).

Interest Rate Swap Contracts

Counterparty	Pay/Receive Floating Rate		Fixed Rate		Floating Rate	Notional Amount*		Expiration Date		Unrealized Appreciation		Unrealized Depreciation
JPHQ		Receive		3.558%	3-month USD BBA LIBOR		3,240,000		3/4/21	$	—	$	(98,040	)
DBAB		Receive		3.523%	3-month USD BBA LIBOR		14,630,000		3/28/21		—		(487,771	)
CITI		Receive		4.347%	3-month USD BBA LIBOR		7,460,000		2/25/41		—		(462,306	)
JPHQ		Receive		4.349%	3-month USD BBA LIBOR		7,460,000		2/25/41		—		(384,750	)
JPHQ		Receive		4.320%	3-month USD BBA LIBOR		5,600,000		2/28/41		—		(325,694	)
JPHQ		Receive		4.299%	3-month USD BBA LIBOR		1,870,000		3/1/41		—		(98,769	)
Unrealized appreciation (depreciation)											—		(1,857,330	)
Net unrealized appreciation (depreciation)												$	(1,857,330	)

*In U.S. Dollars unless otherwise indicated.

The accompanying notes are an integral part of these financial statements.

TGB-25

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

June 30, 2011 (unaudited)

	Templeton Global Bond Securities Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	1,975,941,252
Cost - Repurchase agreements		191,085,986
Total cost of investments	$	2,167,027,238
Value - Unaffiliated issuers	$	2,208,562,479
Value - Repurchase agreements		191,085,986
Total value of investments		2,399,648,465
Foreign currency, at value (cost $10,874,041)		10,923,473
Receivables:
Capital shares sold		1,573,669
Interest		27,020,047
Due from brokers		11,917,000
Unrealized appreciation on forward exchange contracts		22,618,204
Other assets		537
Total assets		2,473,701,395
Liabilities:
Payables:
Capital shares redeemed		4,199,569
Affiliates		1,787,119
Unrealized depreciation on forward exchange contracts		48,338,114
Unrealized depreciation on swap contracts		1,857,330
Accrued expenses and other liabilities		1,122,912
Total liabilities		57,305,044
Net assets, at value	$	2,416,396,351
Net assets consist of:
Paid-in capital	$	2,113,086,314
Undistributed net investment income		22,804,966
Net unrealized appreciation (depreciation)		205,708,999
Accumulated net realized gain (loss)		74,796,072
Net assets, at value	$	2,416,396,351

The accompanying notes are an integral part of these financial statements.

TGB-26

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Assets and Liabilities (continued)

June 30, 2011 (unaudited)

	Templeton Global Bond Securities Fund
Class 1:
Net assets, at value	$	291,254,073
Shares outstanding		14,753,773
Net asset value and maximum offering price per share	$	19.74
Class 2:
Net assets, at value	$	1,757,266,464
Shares outstanding		91,154,316
Net asset value and maximum offering price per share	$	19.28
Class 3:
Net assets, at value	$	202,111,008
Shares outstanding		10,485,915
Net asset value and maximum offering price per sharea	$	19.27
Class 4:
Net assets, at value	$	165,764,806
Shares outstanding		8,458,875
Net asset value and maximum offering price per share	$	19.60

^aRedemption price is equal to net asset value less redemption fees retained by the Fund.

The accompanying notes are an integral part of these financial statements.

TGB-27

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the six months ended June 30, 2011 (unaudited)

	Templeton Global Bond Securities Fund
Investment income:
Interest (net of foreign taxes of $2,283,349)	$	58,283,832
Expenses:
Management fees (Note 3a)		5,098,431
Distribution fees: (Note 3c)
Class 2		1,991,157
Class 3		234,378
Class 4		275,327
Unaffiliated transfer agent fees		1,662
Custodian fees (Note 4)		646,579
Reports to shareholders		239,989
Professional fees		35,786
Trustees' fees and expenses		3,877
Other		21,717
Total expenses		8,548,903
Net investment income		49,734,929
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		40,892,757
Foreign currency transactions		34,658,636
Futures contracts		3,393
Swap contracts		(464,772	)
Net realized gain (loss)		75,090,014
Net change in unrealized appreciation (depreciation) on:
Investments		39,232,551
Translation of other assets and liabilities denominated in foreign currencies		(47,662,121	)
Net change in unrealized appreciation (depreciation)		(8,429,570	)
Net realized and unrealized gain (loss)		66,660,444
Net increase (decrease) in net assets resulting from operations	$	116,395,373

The accompanying notes are an integral part of these financial statements.

TGB-28

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets

	Templeton Global Bond Securities Fund
	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31, 2010
Increase (decrease) in net assets:
Operations:
Net investment income	$	49,734,929		$	93,415,601
Net realized gain (loss) from investments, foreign currency transactions, futures contracts and swap contracts		75,090,014			26,725,973
Net change in unrealized appreciation (depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies		(8,429,570	)		123,023,722
Net increase (decrease) in net assets resulting from operations		116,395,373			243,165,296
Distributions to shareholders from:
Net investment income and net foreign currency gains:
Class 1		(15,683,467	)		(3,860,853	)
Class 2		(93,946,669	)		(17,334,382	)
Class 3		(10,753,201	)		(2,167,994	)
Class 4		(8,615,701	)		(1,885,595	)
Net realized gains:
Class 1		(1,762,080	)		(610,541	)
Class 2		(10,925,216	)		(3,135,836	)
Class 3		(1,252,885	)		(394,847	)
Class 4		(1,020,280	)		(338,834	)
Total distributions to shareholders		(143,959,499	)		(29,728,882	)
Capital share transactions (Note 2)
Class 1		21,845,503			48,911,860
Class 2		287,500,724			75,615,219
Class 3		20,981,651			21,722,929
Class 4		16,329,709			26,968,281
Total capital share transactions		346,657,587			173,218,289
Redemption fees		5,389			23,708
Net increase (decrease) in net assets		319,098,850			386,678,411
Net assets:
Beginning of period		2,097,297,501			1,710,619,090
End of period	$	2,416,396,351		$	2,097,297,501
Undistributed net investment income included in net assets:
End of period	$	22,804,966		$	102,069,075

The accompanying notes are an integral part of these financial statements.

TGB-29

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited)

Templeton Global Bond Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment company, consisting of twenty separate funds. The Templeton Global Bond Securities Fund (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. The Fund offers four classes of shares: Class 1, Class 2, Class 3, and Class 4. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

The following summarizes the Fund's significant accounting policies.

a. Financial Instrument Valuation

The Fund's investments in securities and other financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Under procedures approved by the Trust's Board of Trustees, the Fund may utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

Debt securities generally trade in the over-the-counter market rather than on a securities exchange. The Fund's pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, option-adjusted spreads, credit spreads, estimated default rates, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value. Securities denominated in a foreign currency are converted into their U.S. dollar equivalent at the foreign exchange rate in effect at the close of the NYSE on the date that the values of the foreign debt securities are determined. Repurchase agreements are valued at cost, which approximates market value.

Certain derivative financial instruments (derivatives) trade in the over-the-counter market. The Fund’s pricing services use various techniques including industry standard option pricing models and proprietary discounted cash flow models to determine the fair value of those instruments. The Fund’s net benefit or obligation under the derivative contract, as measured by the fair market value of the contract, is included in net assets.

The Fund has procedures to determine the fair value of securities and other financial instruments for which market prices are not readily available or which may not be reliably priced. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.

Trading in securities on foreign securities stock exchanges and over-the-counter markets may be completed before the daily close of business on the NYSE. Occasionally, events occur between the time at which trading in a foreign security is completed and the close of the NYSE that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund’s portfolio securities as determined at the foreign market close and the latest indications of value at the close of the NYSE. In order to minimize the potential for these differences, the investment manager monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depository Receipts, futures contracts and exchange traded funds). These price movements

TGB-30

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Global Bond Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

a. Financial Instrument Valuation (continued)

are measured against established trigger thresholds for each specific market proxy to assist in determining if an event has occurred that may call into question the reliability of the values of the foreign securities held by the Fund. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services.

b. Foreign Currency Translation

Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Fund may enter into foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. Portfolio securities and assets and liabilities denominated in foreign currencies contain risks that those currencies will decline in value relative to the U.S. dollar. Occasionally, events may impact the availability or reliability of foreign exchange rates used to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Trust’s Board of Trustees.

The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments on the Statement of Operations.

Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period.

c. Joint Repurchase Agreement

The Fund enters into a joint repurchase agreement whereby its uninvested cash balance is deposited into a joint cash account with other funds managed by the investment manager or an affiliate of the investment manager and is used to invest in one or more repurchase agreements. The value and face amount of the joint repurchase agreement are allocated to the funds based on their pro-rata interest. A repurchase agreement is accounted for as a loan by the fund to the seller, collateralized by securities which are delivered to the fund’s custodian. The market value, including accrued interest, of the initial collateralization is required to be at least 102% of the dollar amount invested by the funds, with the value of the underlying securities marked to market daily to maintain coverage of at least 100%. The joint repurchase agreement held by the Fund at period end had been entered into on June 30, 2011.

d. Derivative Financial Instruments

The Fund invested in derivatives in order to manage risk or gain exposure to various other investments or markets. Derivatives are financial contracts based on an underlying or notional amount, require no initial investment or an initial net investment that is smaller than would normally be required to have a similar response to changes in market factors, and require or permit net settlement. Derivatives contain various risks including the potential inability of the counterparty to fulfill their obligations under the terms of the contract, the potential for an illiquid secondary market, and/or the potential for market movements which expose the Fund to gains or losses in excess of the amounts shown on the Statement of Assets and Liabilities. Realized gain and loss and unrealized appreciation and depreciation on these contracts for the period are included in the Statement of Operations.

TGB-31

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Global Bond Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

d. Derivative Financial Instruments (continued)

The Fund entered into futures contracts primarily to manage interest rate and/or foreign exchange rate risk. A futures contract is an agreement between the Fund and a counterparty to buy or sell an underlying financial instrument for a specified price on a future date. Required initial margin deposits of cash or securities are pledged by the Fund. Subsequent payments, known as variation margin, are made or received by the Fund, depending on fluctuations in the value of the underlying security. Such variation margin is accounted for as unrealized appreciation or depreciation until the contract is closed, at which time the gains or losses are realized.

The Fund entered into forward exchange contracts primarily to manage and/or gain exposure to certain foreign currencies. A forward exchange contract is an agreement between the Fund and a counterparty to buy or sell a foreign currency for a specific exchange rate on a future date. Pursuant to the terms of the forward exchange contracts, cash or securities may be required to be deposited as collateral. Unrestricted cash may be invested according to the Fund’s investment objectives.

The Fund entered into interest rate swap contracts primarily to manage interest rate risk. An interest rate swap is an agreement between the Fund and a counterparty to exchange cash flows based on the difference between two interest rates, applied to a notional principal amount. Over the term of the contract, contractually required payments to be paid and to be received are accrued daily and recorded as unrealized depreciation and appreciation until the payments are made, at which time they are realized. Pursuant to the terms of the interest rate swap contract, cash or securities may be required to be deposited as collateral. Unrestricted cash may be invested according to the Fund’s investment objectives.

See Note 9 regarding other derivative information.

e. Income Taxes

It is the Fund's policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and excise taxes. As a result, no provision for U.S. federal income taxes is required. The Fund files U.S. income tax returns as well as tax returns in certain other jurisdictions. The Fund records a provision for taxes in its financial statements including penalties and interest, if any, for a tax position taken on a tax return (or expected to be taken) when it fails to meet the more likely than not (a greater than 50% probability) threshold and based on the technical merits, the tax position may not be sustained upon examination by the tax authorities. As of June 30, 2011, and for all open tax years, the Fund has determined that no provision for income tax is required in the Fund's financial statements. Open tax years are those that remain subject to examination and are based on each tax jurisdiction statute of limitation.

The Fund may be subject to foreign taxation related to income received, capital gains on the sale of securities and certain foreign currency transactions in the foreign jurisdictions in which it invests. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests. When a capital gain tax is determined to apply the Fund records an estimated deferred tax liability for unrealized gains on these securities in an amount that would be payable if the securities were disposed of on the valuation date.

f. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Amortization of premium and accretion of discount on debt securities are included in interest income. Distributions to shareholders are recorded on the ex-dividend date and are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with accounting principles generally accepted in the United States of America. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.

TGB-32

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Global Bond Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

f. Security Transactions, Investment Income, Expenses and Distributions (continued)

Common expenses incurred by the Trust are allocated among the funds based on the ratio of net assets of each fund to the combined net assets of the Trust. Fund specific expenses are charged directly to the fund that incurred the expense.

Realized and unrealized gains and losses and net investment income, not including class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions, by class, are generally due to differences in class specific expenses.

Inflation-indexed bonds are adjusted for inflation through periodic increases or decreases in the security's interest accruals, face amount, or principal redemption value, by amounts corresponding to the rate of inflation as measured by an index. Any increase or decrease in the face amount or principal redemption value will be included as interest income on the Statement of Operations.

g. Accounting Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

h. Redemption Fees

Redemptions and exchanges of interests in an insurance company subaccount that invests in Class 3 shares of the Fund will be subject to a 1.0% short term trading fee if the interest in the subaccount has been held for less than 60 days. Such fees are retained by the Fund and accounted for as an addition to paid-in capital, allocated to each class of shares based upon the relative proportion of net assets of each class.

i. Guarantees and Indemnifications

Under the Trust's organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust, on behalf of the Fund, enters into contracts with service providers that contain general indemnification clauses. The Trust's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.

2. SHARES OF BENEFICIAL INTEREST

At June 30, 2011, there were an unlimited number of shares authorized (without par value). Transactions in the Fund's shares were as follows:

	Six Months Ended June 30, 2011						Year Ended December 31, 2010
Class 1 Shares:	Shares			Amount			Shares			Amount
Shares sold		1,183,367		$	24,027,973			4,522,323		$	85,300,049
Shares issued in reinvestment of distributions		889,172			17,445,546			243,806			4,471,394
Shares redeemed		(972,226	)		(19,628,016	)		(2,152,653	)		(40,859,583	)
Net increase (decrease)		1,100,313		$	21,845,503			2,613,476		$	48,911,860

TGB-33

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Global Bond Securities Fund

2. SHARES OF BENEFICIAL INTEREST (continued)

	Six Months Ended June 30, 2011						Year Ended December 31, 2010
Class 2 Shares:	Shares			Amount			Shares			Amount
Shares sold		13,321,166		$	264,665,255			23,116,184		$	432,400,311
Shares issued in reinvestment of distributions		5,473,480			104,871,884			1,140,402			20,470,218
Shares redeemed		(4,143,657	)		(82,036,415	)		(20,598,509	)		(377,255,310	)
Net increase (decrease)		14,650,989		$	287,500,724			3,658,077		$	75,615,219
Class 3 Shares:
Shares sold		1,078,647		$	21,430,695			2,390,123		$	44,722,862
Shares issued in reinvestment of distributions		626,622			12,006,087			142,856			2,562,841
Shares redeemed		(632,520	)		(12,455,131	)		(1,387,144	)		(25,562,774	)
Net increase (decrease)		1,072,749		$	20,981,651			1,145,835		$	21,722,929
Class 4 Shares:
Shares sold		678,360		$	13,617,725			1,871,353		$	34,938,015
Shares issued on reinvestment of distributions		494,660			9,635,982			122,020			2,224,429
Shares redeemed		(342,579	)		(6,923,998	)		(549,061	)		(10,194,163	)
Net increase (decrease)		830,441		$	16,329,709			1,444,312		$	26,968,281

3. TRANSACTIONS WITH AFFILIATES

Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton Investments. Certain officers and trustees of the Fund are also officers and/or directors of the following subsidiaries:

Subsidiary	Affiliation
Franklin Advisers, Inc. (Advisers)	Investment manager
Franklin Templeton Services, LLC (FT Services)	Administrative manager
Franklin Templeton Distributors, Inc. (Distributors)	Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services)	Transfer agent

a. Management Fees

The Fund pays an investment management fee to Advisers based on the average daily net assets of the Fund as follows:

Annualized Fee Rate	Net Assets
0.625%	Up to and including $100 million
0.500%	Over $100 million, up to and including $250 million
0.450%	Over $250 million, up to and including $7.5 billion
0.440%	Over $7.5 billion, up to and including $10 billion
0.430%	Over $10 billion, up to and including $12.5 billion
0.420%	Over $12.5 billion, up to and including $15 billion
0.400%	In excess of $15 billion

b. Administrative Fees

Under an agreement with Advisers, FT Services provides administrative services to the Fund. The fee is paid by Advisers based on average daily net assets, and is not an additional expense of the Fund.

TGB-34

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Global Bond Securities Fund

3. TRANSACTIONS WITH AFFILIATES (continued)

c. Distribution Fees

The Trust's Board of Trustees has adopted distribution plans for Class 2, Class 3, and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund's compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund's shares up to 0.25%, 0.35%, and 0.35% per year of its average daily net assets of Class 2, Class 3, and Class 4, respectively. The Board of Trustees has agreed to limit the current rate to 0.25% per year for Class 3.

d. Transfer Agent Fees

Investor Services, under terms of an agreement, performs shareholder servicing for the Fund and is not paid by the Fund for the services.

4. EXPENSE OFFSET ARRANGEMENT

The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses. During the period ended June 30, 2011, there were no credits earned.

5. INCOME TAXES

For tax purposes, realized capital losses occurring subsequent to October 31 may be deferred and treated as occurring on the first day of the following fiscal year. At December 31, 2010, the Fund deferred realized capital losses of $1,905,817.

At June 30, 2011, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	2,177,035,599
Unrealized appreciation	$	234,025,218
Unrealized depreciation		(11,412,352	)
Net unrealized appreciation (depreciation)	$	222,612,866

Net investment income differs for financial statement and tax purposes primarily due to differing treatments of foreign currency transactions, bond discounts and premiums, swaps, tax straddles, and inflation related adjustments on foreign securities.

Net realized gains (losses) differ for financial statement and tax purposes primarily due to differing treatments of foreign currency transactions, financial futures transactions, bond discounts and premiums, swaps, and tax straddles.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2011, aggregated $484,979,649 and $421,746,627, respectively.

7. CREDIT RISK

At June 30, 2011, the Fund had 15.40% of its portfolio invested in high yield or other securities rated below investment grade. These securities may be more sensitive to economic conditions causing greater price volatility and are potentially subject to a greater risk of loss due to default than higher rated securities.

TGB-35

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Global Bond Securities Fund

8. CONCENTRATION OF RISK

Investing in foreign securities may include certain risks and considerations not typically associated with investing in U.S. securities, such as fluctuating currency values and changing local and regional economic, political and social conditions, which may result in greater market volatility. In addition, certain foreign securities may not be as liquid as U.S. securities.

9. OTHER DERIVATIVE INFORMATION

At June 30, 2011, the Fund has invested in derivative contracts which are reflected on the Statement of Assets and Liabilities as follows:

	Asset Derivatives			Liability Derivatives
Derivative Contracts Not Accounted for as Hedging Instruments	Statement of Assets and Liabilities Location	Fair Value Amount		Statement of Assets and Liabilities Location	Fair Value Amount
Interest rate contracts	Unrealized appreciation on swap contracts	$	—	Unrealized depreciation on swap contracts	$	1,857,330
Foreign exchange contracts	Unrealized appreciation on forward exchange contracts		22,618,204	Unrealized depreciation on forward exchange contracts		48,338,114

For the period ended June 30, 2011, the effect of derivative contracts on the Fund’s Statement of Operations was as follows:

Derivative Contracts Not Accounted for as Hedging Instruments	Statement of Operations Locations	Realized Gain (Loss) for the Period			Change in Unrealized Appreciation (Depreciation) for the Period
Interest rate contracts	Net realized gain (loss) from futures and swap contracts / Net change in unrealized appreciation (depreciation) on investments	$	(461,379	)	$	(1,860,382	)
Foreign exchange contracts	Net realized gain (loss) from foreign currency transactions / Net change in unrealized appreciation (depreciation) on translation of other assets and liabilities denominated in foreign currencies		31,169,870			(47,228,665	)

For the period ended June 30, 2011, the average month end market value of derivatives represented 2.95% of average month end net assets. The average month end number of open derivative contracts for the period was 381.

See Note 1(d) regarding derivative financial instruments.

10. CREDIT FACILITY

The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $750 million (Global Credit Facility) which matures on January 20, 2012. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests.

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation

TGB-36

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Global Bond Securities Fund

10. CREDIT FACILITY (continued)

and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.08% based upon the unused portion of the Global Credit Facility, which is reflected in other expenses on the Statement of Operations. During the period ended June 30, 2011, the Fund did not use the Global Credit Facility.

11. FAIR VALUE MEASUREMENTS

The Fund follows a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Fund’s own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund’s investments and are summarized in the following fair value hierarchy:

• Level 1 – quoted prices in active markets for identical securities

• Level 2 – other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speed, credit risk, etc.)

• Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.

For movements between the levels within the fair value hierarchy, the Fund has adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.

The following is a summary of the inputs used as of June 30, 2011, in valuing the Fund’s assets and liabilities carried at fair value:

	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities:
Foreign Government and Agency Securities	$	—	$	1,737,796,762	$	—		1,737,796,762
Corporate Bonds				12,190,720				12,190,720
Municipal Bonds		—		35,455,384		—		35,455,384
Short Term Investments		—		614,205,599		—		614,205,599
Total Investments in Securities	$	—	$	2,399,648,465	$	—		2,399,648,465
Forward Exchange Contracts		—		22,618,204		—		22,618,204
Liabilities:
Swaps		—		1,857,330		—		1,857,330
Forward Exchange Contracts		—		48,338,114		—		48,338,114

12. NEW ACCOUNTING PRONOUNCEMENTS

In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (IFRS). The amendments in the ASU will improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRS and include new guidance for certain fair value measurement principles and disclosure requirements. The ASU is effective for interim and annual periods beginning after December 15, 2011. The Fund is currently evaluating the impact, if any, of applying this provision.

TGB-37

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Global Bond Securities Fund

13. SUBSEQUENT EVENTS

The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure.

ABBREVIATIONS
Counterparty	Currency	Selected Portfolio
BOFA - Bank of America Corp.	AUD - Australian Dollar	BHAC - Berkshire Hathaway Assurance Corp.
BZWS - Barclays Bank PLC	BRL - Brazilian Real	FRN - Floating Rate Note
CITI - Citigroup, Inc.	EGP - Egyptian Pound	GO - General Obligation
DBAB - Deutsche Bank AG	EUR - Euro	USD - Unified/Union School District
FBCO - Credit Suisse Group AG	GBP - British Pound
HSBC - HSBC Bank USA, N.A.	IDR - Indonesian Rupiah
JPHQ - JP Morgan Chase & Co.	ILS - New Israeli Shekel
MSCO - Morgan Stanley	KRW - South Korean Won
UBSW - UBS AG	LKR - Sri Lankan Rupee
	MXN - Mexican Peso
	MYR - Malaysian Ringgit
	NOK - Norwegian Krone
	PEN - Peruvian Nuevo Sol
	PHP - Philippine Peso
	PLN - Polish Zloty
	SEK - Swedish Krona

TGB-38

Franklin Templeton Variable Insurance Products Trust

Tax Designation (unaudited)

Templeton Global Bond Securities Fund

At December 31, 2010, more than 50% of the Fund’s total assets were invested in securities of foreign issuers. In most instances, foreign taxes were withheld from income paid to the Fund on these investments. As shown in the table below, the Fund designates to shareholders the foreign source income and foreign taxes paid, pursuant to Section 853 of the Internal Revenue Code. This designation will allow shareholders of record on June 14, 2011, to treat their proportionate share of foreign taxes paid by the Fund as having been paid directly by them. The shareholder shall consider these amounts as foreign taxes paid in the tax year in which they receive the Fund distribution.

The following table provides a detailed analysis of foreign tax paid and foreign source income as designated by the Fund, to Class 1, Class 2, Class 3, and Class 4 shareholders of record.

Class	Foreign Tax Paid Per Share		Foreign Source Income Per Share
Class 1	$	0.0148	$	0.9287
Class 2	$	0.0148	$	0.8980
Class 3	$	0.0148	$	0.8963
Class 4	$	0.0148	$	0.8823

Foreign Tax Paid Per Share (Column 1) is the amount per share available to you, as a tax credit (assuming you held your shares in the Fund for a minimum of 16 days during the 31-day period beginning 15 days before the ex-dividend date of the Fund’s distribution to which the foreign taxes relate), or, as a tax deduction.

Foreign Source Income Per Share (Column 2) is the amount per share of income dividends attributable to foreign securities held by the Fund, plus any foreign taxes withheld on these dividends.

TGB-39

TEMPLETON GROWTH SECURITIES FUND

We are pleased to bring you Templeton Growth Securities Fund’s semiannual report for the period ended June 30, 2011.

Performance Summary as of 6/30/11

Templeton Growth Securities Fund – Class 4 delivered a total return of +8.53% for the six-month period ended 6/30/11.

Performance reflects the Fund’s Class 4 operating expenses, but does not include any contract fees, expenses or sales charges. If they had been included, performance would be lower. These charges and deductions, particularly for variable life policies, can have a significant effect on contract values and insurance benefits. See the contract prospectus for a complete description of these expenses, including sales charges.

Templeton Growth Securities Fund – Class 4

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares.

Current performance may differ from figures shown.

TG-1

Fund Goal and Main Investments: Templeton Growth Securities Fund seeks long-term capital growth. The Fund normally invests primarily in equity securities of companies located anywhere in the world, including those in the U.S. and in emerging markets.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. The Fund outperformed the +5.62% total return of the MSCI World Index for the period under review.¹

Economic and Market Overview

Global stock markets rose in the first half of 2011, though the positive momentum from the previous year waned as European sovereign debt turmoil escalated and signs emerged of an economic slowdown. Furthermore, geopolitical unrest sweeping the Middle East and North Africa roiled oil markets, and a devastating earthquake and tsunami in Japan severely disrupted global supply chains during the period. While the market recovered from these interferences, economic growth concerns persisted. Officials at the U.S. Federal Reserve Board (Fed) cut their growth forecast for the world’s largest economy, and manufacturing slowed in most major regions of the world. Japan’s earthquake, an early surge in commodity prices and a fading inventory restocking cycle were all blamed for declining economic leading indicators. Nascent monetary policy tightening in most parts of the world was also thought to inhibit growth and cool the commodities rally. Asian and emerging market policymakers tightened aggressively as inflation reached post-crisis highs in many regions, while the European Central Bank raised interest rates for the first time in two years, deviating from the extraordinarily accommodative path of the Fed, which undertook a second round of quantitative easing during the reporting period.

Amid concerns of sustained accommodative monetary policy and declining economic growth rates in the U.S., politicians debated whether to raise the nation’s debt ceiling. Sovereign debt concerns continued to plague Europe, with Greece, Ireland, Portugal and Spain subject to rating downgrades in the first half of 2011. At period-end, European politicians were working to pass painful austerity budgets despite fierce popular resistance, and discussions were ongoing about restructuring

1. Source: © 2011 Morningstar. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

Fund Risks: The Fund’s investments in stocks may offer the potential for long-term gains but can be subject to short-term price fluctuations. Foreign investing, especially in emerging or developing markets, involves additional risks, including currency fluctuations, economic instability, market volatility, and political and social instability. The Fund may have significant investments in one or more countries or in particular sectors, such as financial services, from time to time and may be at greater risk of adverse developments in a country or sector than a fund that invests more broadly. Because the Fund may invest in bonds and other debt obligations, its share price and yield may be affected by interest rate movements. The manager applies various techniques and analyses in making investment decisions for the Fund, but there can be no guarantee that these decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

TG-2

debt payments of the region’s most troubled sovereigns. Despite these challenges, continued corporate profit strength and still favorable economic growth prospects in some regions of the world supported stock prices. Equity market leadership rotated toward defensive sectors as risk aversion increased, buoying even U.S. Treasuries toward period-end as near-term demand for perceived safe havens outweighed longer term concerns about the deteriorating U.S. credit profile. The dollar ultimately declined, however, against most currencies, broadly reflecting divergent interest rate and/or economic growth expectations.

Investment Strategy

Our investment philosophy is bottom up, value oriented and long term. In choosing investments, we will focus on the market price of a company’s securities relative to our evaluation of the company’s potential long-term earnings, asset value and cash flow. Among factors we may consider are a company’s historical value measures, including price/earnings ratio, profit margins and liquidation value. We do in-depth research to construct a bargain list from which we buy.

Manager’s Discussion

Despite gathering market headwinds, during the first half of 2011, most of the Fund’s sector groups and major regions delivered absolute gains. As signs of an economic slowdown emerged during the period, market leadership transitioned from economically sensitive, cyclical sectors such as materials and information technology, to defensive, counter-cyclical sectors such as health care and consumer staples. In this environment, a number of the Fund’s overweighted sectors and regions, including health care and Europe, were strong contributors.

The Fund’s overweighted position and stock selection in the health care sector benefited performance relative to the benchmark index.² French pharmaceuticals manufacturer Sanofi was a top contributor, finding support in broker upgrades, positive clinical trials and early success with the integration of recently acquired biotechnology firm Genzyme. Major U.S. pharmaceutical manufacturer Pfizer and U.S. biotechnology firm Biogen Idec were also strong performers. Although investors’ rotation into defensive sectors largely drove health care’s outperformance during the period, we continued to believe that select sector stocks remained fundamentally undervalued and traded at levels that ignored the progress companies have made by prioritizing emerging market

2. The health care sector comprises biotechnology, health care providers and services, health care equipment and supplies, life sciences tools and services, and pharmaceuticals in the SOI.

TG-3

growth, restructuring their cost bases, diversifying away from patent-exposed products and directing robust cash flows to productive uses such as shareholder returns and mergers and acquisitions.

Many consumer discretionary companies also generated robust cash flows and began to return more of that cash to shareholders.³ During the period, the diverse sector was a major contributor to absolute and relative performance, primarily due to stock selection. Among media stocks, U.S. cable operators Comcast and Time Warner Cable were strong performers, growing earnings and raising their dividends during the period as demand for their bundled services drove broadband market share gains and supported operating results. Elsewhere in the media industry, content producer Viacom also delivered strong returns, supported by growing content demand and affiliate fees from traditional cable operators and new web-based services such as Netflix and Hulu. The Fund’s automotive industry holdings also drove consumer discretionary sector outperformance. Shares of Hyundai Motor surged during the period as South Korea’s largest auto manufacturer boosted profitability and increased capacity to meet demand arising from production stoppages at earthquake-stricken Japanese competitors.⁴ The Fund’s Hyundai stake has been a very successful investment and we liquidated the position during the period to realize a gain as shares looked fairly valued to us.

While the Fund’s overweighted positions in the consumer discretionary and health care sectors were long-standing, so too has been our underweighted position in the financials sector, a result of what we believed was poor balance sheet transparency and limited valuation opportunities in recent years.⁵ Yet, we began to believe there are some increasingly compelling value propositions in the sector, which, after enjoying a liquidity-fueled rebound as governments intervened to avert systemic bankruptcy, was recently one of the market’s main laggards. Such weakness created what we considered attractive opportunities among select stocks, notably among European banks and insurers whose valuations were indiscriminately depressed due to the debt crisis in some regional countries. In the banking and diversified financials industries, balance sheets were repaired and business models realigned to focus on core areas of profitability. Yet we believe the market remained concerned about economic headwinds, and valuations

3. The consumer discretionary sector comprises auto components; automobiles; hotels, restaurants and leisure; media; multiline retail and specialty retail in the SOI.

4. This holding is not an index component.

5. The financials sector comprises capital markets, commercial banks, consumer finance, diversified financial services, insurance, and real estate management and development in the SOI.

Top 10 Holdings

Templeton Growth Securities Fund 6/30/11

Company Sector/Industry, Country	% of Total Net Assets
Pfizer Inc.		2.2%
Pharmaceuticals, U.S.
Sanofi		2.1%
Pharmaceuticals, France
Comcast Corp.		2.1%
Media, U.S.
Vodafone Group PLC		2.1%
Wireless Telecommunication Services, U.K.
Microsoft Corp.		2.0%
Software, U.S.
Amgen Inc.		1.9%
Biotechnology, U.S.
Siemens AG		1.7%
Industrial Conglomerates, Germany
GlaxoSmithKline PLC		1.6%
Pharmaceuticals, U.K.
News Corp.		1.6%
Media, U.S.
Royal Dutch Shell PLC		1.5%
Oil, Gas & Consumable Fuels, U.K.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).

TG-4

ignored growth opportunities inherent in a wave of industry restructuring and expansion focused on underleveraged markets and underserved consumers. Dutch financial services conglomerate ING Groep, whose ongoing restructuring initiatives began to generate positive operating results during the period, was a top performer and is an excellent example of the type of values we found in the sector. Similarly, in the insurance industry, many firms — such as French life insurer AXA, another top sector performer — divested underpriced businesses, rebuilt significant excess capital and avoided risk assets, and we continued to find what we considered attractive valuation opportunities in the insurance industry as well.

Stock selection and underweighting in the materials sector helped relative results, as did stock selection in the energy sector.⁶ Both sectors also delivered absolute gains despite heightened commodity price volatility and investors’ rotation out of cyclically leveraged stocks. We found few long-term value opportunities among metals and mining stocks given historically high current valuations and profit levels, and we largely avoided the industry. Energy stock performance is also closely correlated to the price of industrial commodities, yet we found what we considered significantly more attractive valuation opportunities in this cyclical sector. Tightening oil fundamentals and the increasing cost and complexity of extracting oil and gas from the ground could improve the market environment for energy producers and oilfield services providers, and we will seek to use near-term volatility to uncover select opportunities in the energy sector.

The Fund’s information technology stocks outperformed those of the benchmark index as weakness among hardware holdings such as Cisco Systems and Japanese tech firms such as film manufacturer Konica Minolta Holdings and video game developer Nintendo was nearly offset by the strength of software holdings.⁷ Notably, shares of information technology consultant Accenture rallied on strong earnings results and company management’s forecast that global expansion and heightened regulation could increase demand for its services. We believe sector valuations remained attractive and businesses targeting productivity-enhancing investments in an uncertain economic climate

6. The materials sector comprises construction materials, and metals and mining in the SOI. The energy sector comprises energy equipment and services; and oil, gas and consumable fuels in the SOI.

7. The information technology sector comprises communications equipment; computers and peripherals; electronic equipment, instruments and components; IT services; semiconductors and semiconductor equipment; and software in the SOI.

TG-5

will help support tech demand, particularly after an extended period of modest corporate spending on technology.

We found fewer opportunities in the consumer staples sector, where we believe elevated valuations did not adequately protect investors from risks associated with rising input costs and increasing price competition.⁸ Most of the Fund’s consumer staples holdings delivered absolute gains, but our stock selection and underweighted position dampened relative performance during a period when the sector benefited from investors’ defensive rotation. The industrials sector, in contrast, was negatively impacted by investors’ rotation into defensive sectors, and the Fund’s nearly even-weighted holdings were relative detractors.⁹ Netherlands-based Koninklijke Philips Electronics, which missed earnings targets and forecast near-term headwinds based on supply-chain disruptions related to the Japanese earthquake, was a sector laggard. Shares were weak in recent quarters due to the introduction of a new management team and cyclical pressures on the company’s health care and lighting divisions; yet, such concerns appeared to us discounted in the company’s share price, while investors appeared to largely ignore the potential for structural improvements in each of its divisions.

Another sector that hindered relative performance was our overweighted telecommunication services position.¹⁰ The sector’s performance was largely attributable to weakness at Turkish incumbent mobile operator Turkcell Iletisim Hizmetleri,which declined due to weaker-than-expected earnings, an ongoing shareholder dispute and concerns about escalating geopolitical turmoil in the Mediterranean region.⁴ Nonetheless, we remained favorable toward the stock, which we regarded as low valued, and continued to find what we considered attractive opportunities in the global telecommunications sector at large in light of the modest valuations, generous dividend yields and significant emerging market growth exposure of select stocks, in our view.

From a geographic perspective, Europe and the U.S. were significant relative contributors to Fund performance, largely due to stock selection in the U.S. and overweighting and stock selection in Europe.

8. The consumer staples sector comprises food and staples retailing, and food products in the SOI.

9. The industrials sector comprises aerospace and defense, air freight and logistics, airlines, commercial services and supplies, construction and engineering, electrical equipment, industrial conglomerates, machinery, professional services, road and rail, and trading companies and distributors in the SOI.

10. The telecommunications services sector comprises diversified telecommunication services and wireless telecommunication services in the SOI.

TG-6

Also aiding Fund performance was stock selection in Asia, as well as an underweighting in Japan.

It is important to recognize the effect of currency movements on the Fund’s performance. In general, if the value of the U.S. dollar goes up compared with a foreign currency, an investment traded in that foreign currency will go down in value because it will be worth fewer U.S. dollars. This can have a negative effect on Fund performance. Conversely, when the U.S. dollar weakens in relation to a foreign currency, an investment traded in that foreign currency will increase in value, which can contribute to Fund performance. For the six months ended June 30, 2011, the U.S. dollar declined in value relative to most currencies. As a result, the Fund’s performance was positively affected by the portfolio’s substantial investment in securities with non-U.S. currency exposure. However, one cannot expect the same result in future periods.

At Templeton, we continued to find long-term opportunities we feel are attractive in regions and sectors around the world, particularly those impaired by negative sentiment. After a two-year market rally, global equities were no longer indiscriminately cheap; however, we think selective values remained for disciplined investors with long-term horizons. While a gathering economic slowdown certainly posed a threat to equity performance in the near term, we were not surprised to see lead indicators moderating at this stage of the economic cycle. We would note that we believe the depressed valuation profile of Templeton’s core holdings could provide downside support in the event of further retrenchment. Over the longer term, we see excellent potential for growth opportunities in the global marketplace and believe that high-quality large cap stocks with robust and diversified cash flows remained among the market’s cheapest.

Thank you for your participation in Templeton Growth Securities Fund. We look forward to serving your future investment needs.

The foregoing information reflects our analysis, opinions and portfolio holdings as of June 30, 2011, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

TG-7

Fund Expenses

As an investor in a variable insurance contract (Contract) that indirectly provides for investment in an underlying mutual fund, you can incur transaction and/or ongoing expenses at both the Fund level and the Contract level.

• Transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes.

• Ongoing expenses can include management fees, distribution and service (12b-1) fees, contract fees, annual maintenance fees, mortality and expense risk fees and other fees and expenses. All mutual funds and Contracts have some types of ongoing expenses.

The expenses shown in the table are meant to highlight ongoing expenses at the Fund level only and do not include ongoing expenses at the Contract level, or transaction expenses at either the Fund or Contract levels. While the Fund does not have transaction expenses, if the transaction and ongoing expenses at the Contract level were included, the expenses shown below would be higher. You should consult your Contract prospectus or disclosure document for more information.

The table shows Fund-level ongoing expenses and can help you understand these expenses and compare them with those of other mutual funds offered through the Contract. The table assumes a $1,000 investment held for the six months indicated. Please refer to the Fund prospectus for additional information on operating expenses.

Actual Fund Expenses

The first line (Actual) of the table provides actual account values and expenses. The “Ending Account Value” is derived from the Fund’s actual return, which includes the effect of ongoing Fund expenses, but does not include the effect of ongoing Contract expenses.

You can estimate the Fund-level expenses you incurred during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:

1. Divide your account value by $1,000.

If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6.

2. Multiply the result by the number under the heading “Fund-Level Expenses Incurred During Period.”

If Fund-Level Expenses Incurred During Period were $7.50, then 8.6 x $7.50 = $64.50.

In this illustration, the estimated expenses incurred this period at the Fund level are $64.50.

Templeton Growth Securities Fund – Class 4

TG-8

Hypothetical Example for Comparison with Other Mutual Funds

Information in the second line (Hypothetical) of the table can help you compare ongoing expenses of the Fund with those of other mutual funds offered through the Contract. This information may not be used to estimate the actual ending account balance or expenses you incurred during the period. The hypothetical “Ending Account Value” is based on the Fund’s actual expense ratio and an assumed 5% annual rate of return before expenses, which does not represent the Fund’s actual return. The figure under the heading “Fund-Level Expenses Incurred During Period” shows the hypothetical expenses your account would have incurred under this scenario. You can compare this figure with the 5% hypothetical examples that appear in shareholder reports of other funds offered through a Contract.

Class 4	Beginning Account Value 1/1/11		Ending Account Value 6/30/11		Fund-Level Expenses Incurred During Period* Actual 1/1/11–6/30/11
Actual	$	1,000	$	1,085.30	$	5.79
Hypothetical (5% return before expenses)	$	1,000	$	1,019.24	$	5.61

*Expenses are calculated using the most recent six-month annualized expense ratio for the Fund’s Class 4 shares (1.12%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 181/365 to reflect the one-half year period.

TG-9

Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Templeton Growth Securities Fund

	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31,
Class 1				2010			2009			2008			2007			2006
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	11.19		$	10.56		$	8.34		$	15.68		$	16.16		$	13.98
Income from investment operationsa:
Net investment incomeb		0.17			0.17			0.17			0.29			0.27			0.29
Net realized and unrealized gains (losses)		0.79			0.62			2.36			(6.50	)		0.19			2.67
Total from investment operations		0.96			0.79			2.53			(6.21	)		0.46			2.96
Less distributions from:
Net investment income		(0.18	)		(0.16	)		(0.31	)		(0.26	)		(0.25	)		(0.23	)
Net realized gains		—			—			—			(0.87	)		(0.69	)		(0.55	)
Total distributions		(0.18	)		(0.16	)		(0.31	)		(1.13	)		(0.94	)		(0.78	)
Net asset value, end of period	$	11.97		$	11.19		$	10.56		$	8.34		$	15.68		$	16.16
Total returnc		8.63%			7.74%			31.33%			(42.13)%			2.55%			22.20%
Ratios to average net assetsd
Expenses before expense reduction		0.77%			0.77%			0.79%			0.78%			0.77%			0.78%
Expenses net of expense reduction		0.77%	e		0.77%	e		0.79%	e		0.78%	e		0.76%			0.78%	e
Net investment income		2.86%			1.71%			2.00%			2.64%			1.64%			1.93%
Supplemental data
Net assets, end of period (000’s)	$	1,639,428		$	1,348,622		$	824,575		$	371,700		$	406,538		$	413,871
Portfolio turnover rate		9.72%	f		9.61%			14.95%			18.37%			20.45%			20.29%	f

^aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.

^bBased on average daily shares outstanding.

^cTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which the Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle. Total return is not annualized for periods less than one year.

^dRatios are annualized for periods less than one year.

^eBenefit of expense reduction rounds to less than 0.01%.

^fExcludes the value of portfolio securities delivered as a result of a redemption in-kind.

The accompanying notes are an integral part of these financial statements.

TG-10

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Templeton Growth Securities Fund

	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31,
Class 2				2010			2009			2008			2007			2006
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	11.01		$	10.40		$	8.20		$	15.44		$	15.93		$	13.81
Income from investment operationsa:
Net investment incomeb		0.15			0.15			0.16			0.29			0.22			0.24
Net realized and unrealized gains (losses)		0.79			0.60			2.32			(6.44	)		0.20			2.63
Total from investment operations		0.94			0.75			2.48			(6.15	)		0.42			2.87
Less distributions from:
Net investment income		(0.15	)		(0.14	)		(0.28	)		(0.22	)		(0.22	)		(0.20	)
Net realized gains		—			—			—			(0.87	)		(0.69	)		(0.55	)
Total distributions		(0.15	)		(0.14	)		(0.28	)		(1.09	)		(0.91	)		(0.75	)
Net asset value, end of period	$	11.80		$	11.01		$	10.40		$	8.20		$	15.44		$	15.93
Total returnc		8.58%			7.39%			31.10%			(42.32)%			2.35%			21.81%
Ratios to average net assetsd
Expenses before expense reduction		1.02%			1.02%			1.04%			1.03%			1.02%			1.03%
Expenses net of expense reduction		1.02%	e		1.02%	e		1.04%	e		1.03%	e		1.01%			1.03%	e
Net investment income		2.61%			1.46%			1.75%			2.39%			1.39%			1.68%
Supplemental data
Net assets, end of period (000’s)	$	1,550,927		$	1,626,885		$	1,718,894		$	1,513,557		$	3,182,203		$	2,821,818
Portfolio turnover rate		9.72%f			9.61%			14.95%			18.37%			20.45%			20.29%	f

^aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.

^bBased on average daily shares outstanding.

^cTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which the Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle. Total return is not annualized for periods less than one year.

^dRatios are annualized for periods less than one year.

^eBenefit of expense reduction rounds to less than 0.01%.

^fExcludes the value of portfolio securities delivered as a result of a redemption in-kind.

The accompanying notes are an integral part of these financial statements.

TG-11

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Templeton Growth Securities Fund

	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31,
Class 4				2010			2009			2008a
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	11.11		$	10.50		$	8.31		$	14.08
Income from investment operationsb:
Net investment incomec		0.15			0.14			0.14			0.09
Net realized and unrealized gains (losses)		0.79			0.61			2.36			(4.73	)
Total from investment operations		0.94			0.75			2.50			(4.64	)
Less distributions from:
Net investment income		(0.14	)		(0.14	)		(0.31	)		(0.26	)
Net realized gains		—			—			—			(0.87	)
Total distributions		(0.14	)		(0.14	)		(0.31	)		(1.13	)
Net asset value, end of period	$	11.91		$	11.11		$	10.50		$	8.31
Total returnd		8.53%			7.31%			30.98%			(35.79)%
Ratios to average net assetse
Expensesf		1.12%			1.12%			1.14%			1.13%
Net investment income		2.51%			1.36%			1.65%			2.29%
Supplemental data
Net assets, end of period (000’s)	$	64,909		$	60,569		$	56,218		$	24,877
Portfolio turnover rate		9.72%	g		9.61%			14.95%			18.37%

^aFor the period February 29, 2008 (effective date) to December 31, 2008.

^bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.

^cBased on average daily shares outstanding.

^dTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which the Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle. Total return is not annualized for periods less than one year.

^eRatios are annualized for periods less than one year.

^fBenefit of expense reduction rounds to less than 0.01%.

^gExcludes the value of portfolio securities delivered as a result of a redemption in-kind.

The accompanying notes are an integral part of these financial statements.

TG-12

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited)

Templeton Growth Securities Fund	Country	Shares		Value
Common Stocks 95.3%
Aerospace & Defense 0.3%
BAE Systems PLC	United Kingdom		2,203,809	$	11,266,773
aBAE Systems PLC, 144A	United Kingdom		377		1,927
					11,268,700
Air Freight & Logistics 2.0%
Deutsche Post AG	Germany		753,314		14,496,392
FedEx Corp.	United States		157,810		14,968,278
United Parcel Service Inc., B	United States		491,100		35,815,923
					65,280,593
Airlines 0.9%
Deutsche Lufthansa AG	Germany		806,124		17,511,632
bInternational Consolidated Airlines Group SA	United Kingdom		2,676,290		10,899,013
					28,410,645
Auto Components 0.8%
Compagnie Generale des Etablissements Michelin, B	France		258,072		25,238,957
Automobiles 2.0%
bMazda Motor Corp.	Japan		6,772,000		17,749,109
Nissan Motor Co. Ltd.	Japan		1,809,400		18,924,474
Toyota Motor Corp.	Japan		702,100		28,779,951
					65,453,534
Biotechnology 2.3%
bAmgen Inc.	United States		1,033,710		60,316,979
bBiogen Idec Inc.	United States		147,610		15,782,461
					76,099,440
Capital Markets 1.8%
Credit Suisse Group AG	Switzerland		391,996		15,245,325
Morgan Stanley	United States		593,320		13,652,293
Nomura Holdings Inc.	Japan		3,459,000		17,014,645
bUBS AG	Switzerland		700,659		12,774,860
					58,687,123
Commercial Banks 3.8%
DBS Group Holdings Ltd.	Singapore		1,906,000		22,748,482
HSBC Holdings PLC	United Kingdom		2,467,624		24,432,863
ICICI Bank Ltd., ADR	India		306,200		15,095,660
Intesa Sanpaolo SpA	Italy		5,569,481		14,828,607
KB Financial Group Inc.	South Korea		595,044		28,162,813
UniCredit SpA	Italy		8,377,550		17,737,109
					123,005,534
Commercial Services & Supplies 0.1%
bRentokil Initial PLC	United Kingdom		2,761,340		4,214,522

TG-13

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Templeton Growth Securities Fund	Country	Shares		Value
Common Stocks (continued)
Communications Equipment 2.6%
bBrocade Communications Systems Inc.	United States		2,757,190	$	17,811,448
Cisco Systems Inc.	United States		1,954,030		30,502,408
Telefonaktiebolaget LM Ericsson, B	Sweden		2,422,581		34,928,091
					83,241,947
Computers & Peripherals 1.0%
bDell Inc.	United States		1,006,930		16,785,523
Seagate Technology	United States		990,888		16,012,750
					32,798,273
Construction & Engineering 0.2%
Carillion PLC	United Kingdom		788,930		4,763,296
Construction Materials 1.0%
CRH PLC	Ireland		1,537,069		34,036,536
Consumer Finance 1.0%
American Express Co.	United States		637,570		32,962,369
Diversified Financial Services 3.0%
Bank of America Corp.	United States		1,205,300		13,210,088
Citigroup Inc.	United States		439,420		18,297,449
bING Groep NV	Netherlands		4,012,279		49,392,455
JPMorgan Chase & Co.	United States		434,210		17,776,557
					98,676,549
Diversified Telecommunication Services 4.1%
France Telecom SA	France		1,631,460		34,695,364
KT Corp., ADR	South Korea		839,501		16,319,900
Singapore Telecommunications Ltd.	Singapore		16,293,000		41,916,372
Telefonica SA	Spain		1,200,988		29,363,593
Telekom Austria AG	Austria		512,129		6,535,442
Telenor ASA	Norway		205,011		3,328,953
					132,159,624
Electrical Equipment 0.5%
cAlstom SA	France		282,195		17,400,251
Electronic Equipment, Instruments & Components 1.0%
bFlextronics International Ltd.	Singapore		1,795,060		11,524,285
TE Connectivity Ltd.	United States		590,638		21,711,853
					33,236,138
Energy Equipment & Services 3.1%
Baker Hughes Inc.	United States		392,860		28,505,921
Halliburton Co.	United States		665,650		33,948,150
Noble Corp.	United States		604,890		23,838,715
SBM Offshore NV	Netherlands		552,865		14,623,687
					100,916,473

TG-14

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Templeton Growth Securities Fund	Country	Shares		Value
Common Stocks (continued)
Food & Staples Retailing 2.0%
CVS Caremark Corp.	United States		959,390	$	36,053,876
Tesco PLC	United Kingdom		4,559,350		29,413,719
					65,467,595
Food Products 1.3%
Nestle SA	Switzerland		468,151		29,092,400
Unilever NV	Netherlands		372,730		12,218,329
					41,310,729
Health Care Equipment & Supplies 1.3%
Covidien PLC	United States		290,868		15,482,904
Medtronic Inc.	United States		718,180		27,671,475
					43,154,379
Health Care Providers & Services 0.5%
Quest Diagnostics Inc.	United States		258,160		15,257,256
Hotels, Restaurants & Leisure 0.7%
Compass Group PLC	United Kingdom		2,392,572		23,067,831
Industrial Conglomerates 4.5%
General Electric Co.	United States		1,819,420		34,314,261
Koninklijke Philips Electronics NV	Netherlands		1,203,241		30,901,825
Siemens AG	Germany		402,466		55,182,793
Tyco International Ltd.	United States		523,578		25,880,461
					146,279,340
Insurance 6.0%
ACE Ltd.	United States		253,230		16,667,599
bAIA Group Ltd.	Hong Kong		4,310,600		14,956,302
Aviva PLC	United Kingdom		5,310,492		37,419,390
AXA SA	France		914,986		20,792,006
Muenchener Rueckversicherungs-Gesellschaft AG	Germany		192,637		29,429,792
Progressive Corp.	United States		1,065,400		22,778,252
RenaissanceRe Holdings Ltd.	United States		226,430		15,838,778
bSwiss Re Ltd.	Switzerland		494,332		27,756,201
Torchmark Corp.	United States		126,697		8,126,346
					193,764,666
IT Services 1.7%
Accenture PLC, A	United States		723,627		43,721,543
bSAIC Inc.	United States		711,490		11,967,262
					55,688,805
Life Sciences Tools & Services 0.4%
Lonza Group AG	Switzerland		174,647		13,667,665

TG-15

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Templeton Growth Securities Fund	Country	Shares		Value
Common Stocks (continued)
Machinery 0.2%
bNavistar International Corp.	United States		138,080	$	7,795,997
Media 9.5%
Comcast Corp., Special A	United States		2,767,322		67,052,212
News Corp., A	United States		2,900,232		51,334,107
Pearson PLC	United Kingdom		1,096,488		20,703,500
Reed Elsevier NV	Netherlands		529,505		7,106,560
Time Warner Cable Inc.	United States		431,770		33,695,331
Time Warner Inc.	United States		590,340		21,470,666
Viacom Inc., B	United States		881,788		44,971,188
Vivendi SA	France		1,553,352		43,193,481
The Walt Disney Co.	United States		503,560		19,658,982
					309,186,027
Metals & Mining 0.4%
Alcoa Inc.	United States		810,780		12,858,971
Multiline Retail 0.4%
Target Corp.	United States		271,200		12,721,992
Office Electronics 0.4%
Konica Minolta Holdings Ltd.	Japan		1,688,300		14,029,845
Oil, Gas & Consumable Fuels 7.0%
BP PLC	United Kingdom		5,428,147		39,938,481
Chevron Corp.	United States		322,660		33,182,354
Eni SpA	Italy		1,014,315		23,990,525
Gazprom, ADR	Russia		1,402,740		20,409,867
Royal Dutch Shell PLC, A	United Kingdom		16,649		592,582
Royal Dutch Shell PLC, B	United Kingdom		1,386,931		49,475,870
Statoil ASA	Norway		793,092		20,085,724
Total SA, B	France		684,566		39,589,811
					227,265,214
Pharmaceuticals 10.8%
Bristol-Myers Squibb Co.	United States		275,310		7,972,978
GlaxoSmithKline PLC	United Kingdom		2,495,101		53,428,540
Merck & Co. Inc.	United States		996,091		35,152,051
Merck KGaA	Germany		228,497		24,844,993
Novartis AG	Switzerland		808,393		49,515,033
Pfizer Inc.	United States		3,415,963		70,368,838
Roche Holding AG	Switzerland		249,478		41,747,805
Sanofi	France		854,497		68,698,414
					351,728,652
Professional Services 0.9%
Adecco SA	Switzerland		141,340		9,060,687
Hays PLC	United Kingdom		3,935,963		6,509,490
Randstad Holding NV	Netherlands		301,421		13,932,744
					29,502,921

TG-16

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Templeton Growth Securities Fund	Country	Shares		Value
Common Stocks (continued)
Real Estate Management & Development 1.0%
Cheung Kong (Holdings) Ltd.	Hong Kong		1,581,833	$	23,132,663
Swire Pacific Ltd., A	Hong Kong		565,046		8,314,038
					31,446,701
Road & Rail 0.4%
East Japan Railway Co.	Japan		233,070		13,317,458
Semiconductors & Semiconductor Equipment 2.5%
Samsung Electronics Co. Ltd.	South Korea		58,710		45,449,354
Taiwan Semiconductor Manufacturing Co. Ltd.	Taiwan		14,281,625		35,805,105
					81,254,459
Software 4.9%
Microsoft Corp.	United States		2,504,479		65,116,454
Nintendo Co. Ltd.	Japan		63,900		11,961,655
Oracle Corp.	United States		1,437,470		47,307,138
SAP AG	Germany		595,763		35,974,701
					160,359,948
Specialty Retail 1.9%
The Home Depot Inc.	United States		376,990		13,654,578
Inditex SA	Spain		143,666		13,091,913
Kingfisher PLC	United Kingdom		7,778,598		33,363,147
					60,109,638
Trading Companies & Distributors 1.2%
Itochu Corp.	Japan		2,322,840		24,034,852
Wolseley PLC	United Kingdom		490,655		15,997,091
					40,031,943
Wireless Telecommunication Services 3.9%
China Mobile Ltd.	China		856,000		7,931,069
bSprint Nextel Corp.	United States		5,177,840		27,908,558
bTurkcell Iletisim Hizmetleri AS, ADR	Turkey		1,743,960		23,630,658
Vodafone Group PLC	United Kingdom		25,224,948		66,939,497
					126,409,782
Total Common Stocks (Cost $2,862,553,628)					3,103,528,318
Preferred Stocks 0.8%
Metals & Mining 0.5%
Vale SA, ADR, pfd., A	Brazil		515,880		14,939,885
Oil, Gas & Consumable Fuels 0.3%
Petroleo Brasileiro SA, ADR, pfd.	Brazil		374,650		11,494,262
Total Preferred Stocks (Cost $21,935,721)					26,434,147
Non-Registered Mutual Funds (Cost $11,910,000) 0.5%
Diversified Financial Services 0.5%
b,d,e,fTempleton China Opportunities Fund, Ltd., Reg D	China		1,192,192		15,260,060
Total Investments before Short Term Investments (Cost $2,896,399,349)					3,145,222,525

TG-17

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, June 30, 2011 (unaudited) (continued)

Templeton Growth Securities Fund	Country	Principal Amount		Value
Short Term Investments 3.5%
Time Deposits 0.8%
Paribas Corp., 0.04%, 7/01/11	United States	$	25,000,000		25,000,000
U.S. Government and Agency Securities 2.1%
gFHLB, 8/31/11 - 9/14/11	United States		35,000,000		34,999,030
gFNMA, 8/31/11 - 9/28/11	United States		35,000,000		34,999,085
Total U.S. Government and Agency Securities					69,998,115
		Shares
hInvestments from Cash Collateral Received for Loaned Securities 0.6%
Money Market Funds 0.6%
iBNY Mellon Overnight Government Fund, 0.05%	United States		16,928,388		16,928,388
Total Short Term Investments (Cost $111,918,405)					111,926,503
Total Investments (Cost $3,008,317,754) 100.1%					3,257,149,028
Other Assets, less Liabilities (0.1)%					(1,885,776	)
Net Assets 100.0%				$	3,255,263,252

See Abbreviations on page TG-30.

^aSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. This security has been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At June 30, 2011, the value of this security was $1,927, representing less than 0.01% of net assets.

^bNon-income producing.

^cA portion or all of the security is on loan at June 30, 2011. See Note 1(d).

^dSee Note 1(c) regarding investment in Templeton China Opportunities Fund, Ltd.

^eSee Note 8 regarding restricted securities.

^fSee Note 9 regarding holdings of 5% voting securities.

^gThe security is traded on a discount basis with no stated coupon rate.

^hSee Note 1(d) regarding securities on loan.

ⁱThe rate shown is the annualized seven-day yield at period end.

The accompanying notes are an integral part of these financial statements.

TG-18

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

June 30, 2011 (unaudited)

	Templeton Growth Securities Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	2,996,407,754
Cost - Non-controlled affiliated issuers (Note 9)		11,910,000
Total cost of investments	$	3,008,317,754
Value - Unaffiliated issuers	$	3,241,888,968
Value - Non-controlled affiliated issuers (Note 9)		15,260,060
Total value of investments (includes securities loaned in the amount $16,332,003)		3,257,149,028
Cash		1,207,155
Receivables:
Investment securities sold		14,207,717
Capital shares sold		119,335
Dividends		9,887,934
Other assets		778
Total assets		3,282,571,947
Liabilities:
Payables:
Investment securities purchased		5,220,186
Capital shares redeemed		1,972,159
Affiliates		2,612,902
Payable upon return of securities loaned		16,928,388
Accrued expenses and other liabilities		575,060
Total liabilities		27,308,695
Net assets, at value	$	3,255,263,252
Net assets consist of:
Paid-in capital	$	3,296,413,934
Undistributed net investment income		40,971,861
Net unrealized appreciation (depreciation)		249,057,214
Accumulated net realized gain (loss)		(331,179,757	)
Net assets, at value	$	3,255,263,252
Class 1:
Net assets, at value	$	1,639,427,903
Shares outstanding		136,945,055
Net asset value and maximum offering price per share	$	11.97
Class 2:
Net assets, at value	$	1,550,926,769
Shares outstanding		131,429,638
Net asset value and maximum offering price per share	$	11.80
Class 4:
Net assets, at value	$	64,908,580
Shares outstanding		5,452,070
Net asset value and maximum offering price per share	$	11.91

The accompanying notes are an integral part of these financial statements.

TG-19

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the six months ended June 30, 2011 (unaudited)

	Templeton Growth Securities Fund
Investment income:
Dividends (net of foreign taxes of $5,073,115)	$	55,851,358
Interest		62,423
Income from securities loaned		2,288,184
Total investment income		58,201,965
Expenses:
Management fees (Note 3a)		11,759,459
Distribution fees: (Note 3c)
Class 2		2,028,377
Class 4		110,521
Unaffiliated transfer agent fees		2,354
Custodian fees (Note 4)		186,902
Reports to shareholders		351,658
Professional fees		61,867
Trustees’ fees and expenses		6,522
Other		34,298
Total expenses		14,541,958
Expense reductions (Note 4)		(75	)
Net expenses		14,541,883
Net investment income		43,660,082
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments (includes gains from a redemption in-kind of $9,941,638) (Note 11)		130,313,335
Foreign currency transactions		275,183
Net realized gain (loss)		130,588,518
Net change in unrealized appreciation (depreciation) on:
Investments		92,698,112
Translation of other assets and liabilities denominated in foreign currencies		(41,043	)
Net change in unrealized appreciation (depreciation)		92,657,069
Net realized and unrealized gain (loss)		223,245,587
Net increase (decrease) in net assets resulting from operations	$	266,905,669

The accompanying notes are an integral part of these financial statements.

TG-20

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets

	Templeton Growth Securities Fund
	Six Months Ended June 30, 2011 (unaudited)			Year Ended December 31, 2010
Increase (decrease) in net assets:
Operations:
Net investment income	$	43,660,082		$	41,851,542
Net realized gain (loss) from investments and foreign currency transactions		130,588,518			(42,734,201	)
Net change in unrealized appreciation (depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies		92,657,069			206,309,126
Net increase (decrease) in net assets resulting from operations		266,905,669			205,426,467
Distributions to shareholders from:
Net investment income:
Class 1		(23,962,804	)		(15,588,191	)
Class 2		(19,367,342	)		(21,721,910	)
Class 4		(766,075	)		(762,562	)
Total distributions to shareholders		(44,096,221	)		(38,072,663	)
Capital share transactions: (Note 2)
Class 1		192,054,002			446,712,026
Class 2		(195,666,983	)		(178,452,057	)
Class 4		(9,942	)		774,782
Total capital share transactions		(3,622,923	)		269,034,751
Net increase (decrease) in net assets		219,186,525			436,388,555
Net assets:
Beginning of period		3,036,076,727			2,599,688,172
End of period	$	3,255,263,252		$	3,036,076,727
Undistributed net investment income included in net assets:
End of period	$	40,971,861		$	41,408,000

The accompanying notes are an integral part of these financial statements.

TG-21

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited)

Templeton Growth Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment company, consisting of twenty separate funds. The Templeton Growth Securities Fund (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. The Fund offers three classes of shares: Class 1, Class 2, and Class 4. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

The Fund’s investments in securities and other financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Under procedures approved by the Trust’s Board of Trustees, the Fund may utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

Equity securities listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded, or the NYSE, whichever is earlier. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at the close of the NYSE on the day that the value of the security is determined. Over-the-counter securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.

Debt securities generally trade in the over-the-counter market rather than on a securities exchange. The Fund’s pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, option-adjusted spreads, credit spreads, estimated default rates, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value. Investments in non-registered money market funds are valued at the net asset value. Time deposits are valued at cost, which approximates market value.

The Fund has procedures to determine the fair value of securities and other financial instruments for which market prices are not readily available or which may not be reliably priced. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.

Trading in securities on foreign securities stock exchanges and over-the-counter markets may be completed before the daily close of business on the NYSE. Occasionally, events occur between the time at which trading in a foreign security is completed and the close of the NYSE that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund’s portfolio securities as determined at the foreign market close and the latest indications of value at the close of the NYSE. In order to minimize the potential for these differences, the investment manager monitors price movements following the close of trading in foreign stock markets through a series of country specific market

TG-22

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Growth Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

a. Financial Instrument Valuation (continued)

proxies (such as baskets of American Depository Receipts, 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 may call into question the reliability of the values of the foreign securities held by the Fund. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services.

b. Foreign Currency Translation

Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Fund may enter into foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. Portfolio securities and assets and liabilities denominated in foreign currencies contain risks that those currencies will decline in value relative to the U.S. dollar. Occasionally, events may impact the availability or reliability of foreign exchange rates used to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Trust’s Board of Trustees.

The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments on the Statement of Operations.

Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period.

c. Investment in Templeton China Opportunities Fund, Ltd.

The Fund invests in Templeton China Opportunities Fund, Ltd. (China Fund), a private offering of unregistered shares in a Cayman Islands Exempt Company. The China Fund investment objective is to seek capital growth primarily through investments in A-shares of Chinese companies listed on the Shanghai and Shenzhen stock exchanges. Chinese A-shares are traded in Chinese Renminbi and are only available as an investment to domestic (Chinese) investors and holders of a Qualified Foreign Institutional Investors license. The China Fund is managed by Templeton Investment Counsel, LLC (an affiliate of the investment manager). No additional management or administrative fees are incurred on assets invested in the China Fund.

The China Fund may be subject to certain restrictions and administrative processes relating to its ability to repatriate cash balances, investment proceeds and earnings associated with its investment, as such activities are subject to approval by agencies of the Chinese government and thus the Fund may incur delays in redeeming its investment in the China Fund. The Fund’s investment in the China Fund is valued based upon the fair value of the China Fund’s portfolio securities and other assets and liabilities.

d. Securities Lending

The Fund participates in an agency based security lending program. The Fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the market value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the market value of loaned securities, as determined at the close of Fund business each day; any additional collateral required due to changes in security values is delivered to the Fund on the next business

TG-23

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Growth Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

d. Securities Lending (continued)

day. The collateral is invested in a money market fund managed by the Fund’s custodian on the Fund’s behalf. The Fund receives income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. The Fund bears the market risk with respect to the collateral investment, securities loaned, and the risk that the agent may default on its obligations to the Fund. The securities lending agent has agreed to indemnify the Fund in the event of default by a third party borrower.

e. Income Taxes

It is the Fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and excise taxes. As a result, no provision for U.S. federal income taxes is required. The Fund files U.S. income tax returns as well as tax returns in certain other jurisdictions. The Fund records a provision for taxes in its financial statements including penalties and interest, if any, for a tax position taken on a tax return (or expected to be taken) when it fails to meet the more likely than not (a greater than 50% probability) threshold and based on the technical merits, the tax position may not be sustained upon examination by the tax authorities. As of June 30, 2011, and for all open tax years, the Fund has determined that no provision for income tax is required in the Fund’s financial statements. Open tax years are those that remain subject to examination and are based on each tax jurisdiction statute of limitation.

The Fund may be subject to foreign taxation related to income received, capital gains on the sale of securities and certain foreign currency transactions in the foreign jurisdictions in which it invests. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests. When a capital gain tax is determined to apply the Fund records an estimated deferred tax liability for unrealized gains on these securities in an amount that would be payable if the securities were disposed of on the valuation date.

f. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Amortization of premium and accretion of discount on debt securities are included in interest income. Dividend income is recorded on the ex-dividend date except that certain dividends from foreign securities are recognized as soon as the Fund is notified of the ex-dividend date. Distributions to shareholders are recorded on the ex-dividend date and are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with accounting principles generally accepted in the United States of America. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.

Common expenses incurred by the Trust are allocated among the funds based on the ratio of net assets of each fund to the combined net assets of the Trust. Fund specific expenses are charged directly to the fund that incurred the expense.

Realized and unrealized gains and losses and net investment income, not including class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions, by class, are generally due to differences in class specific expenses.

g. Accounting Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

TG-24

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Growth Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

h. Guarantees and Indemnifications

Under the Trust’s organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust, on behalf of the Fund, enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.

2. SHARES OF BENEFICIAL INTEREST

At June 30, 2011, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:

	Six Months Ended June 30, 2011						Year Ended December 31, 2010
Class 1 Shares:	Shares			Amount			Shares			Amount
Shares sold		16,146,214		$	189,857,050			56,324,674		$	579,159,138
Shares issued in reinvestment of distributions		2,081,912			23,962,804			1,592,257			15,588,191
Shares redeemed in-kind (Note 11)		(62,046	)		(778,675	)		—			—
Shares redeemed		(1,767,228	)		(20,987,177	)		(15,424,906	)		(148,035,303	)
Net increase (decrease)		16,398,852		$	192,054,002			42,492,025		$	446,712,026
Class 2 Shares:
Shares sold		3,620,129		$	42,172,599			7,805,671		$	79,205,936
Shares issued in reinvestment of distributions		1,706,374			19,367,342			2,250,975			21,721,910
Shares redeemed in-kind (Note 11)		(7,322,431	)		(90,358,797	)		—			—
Shares redeemed		(14,277,159	)		(166,848,127	)		(27,579,182	)		(279,379,903	)
Net increase (decrease)		(16,273,087	)	$	(195,666,983	)		(17,522,536	)	$	(178,452,057	)
Class 4 Shares:
Shares sold		248,066		$	2,908,129			792,359		$	8,038,832
Shares issued on reinvestment of distributions		66,906			766,075			78,292			762,562
Shares redeemed		(314,152	)		(3,684,146	)		(772,020	)		(8,026,612	)
Net increase (decrease)		820		$	(9,942	)		98,631		$	774,782

3. TRANSACTIONS WITH AFFILIATES

Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton Investments. Certain officers and trustees of the Fund are also officers and/or directors of the following subsidiaries:

Subsidiary	Affiliation
Templeton Global Advisors Limited (TGAL)	Investment manager
Franklin Templeton Services, LLC (FT Services)	Administrative manager
Franklin Templeton Distributors, Inc. (Distributors)	Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services)	Transfer agent

TG-25

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Growth Securities Fund

3. TRANSACTIONS WITH AFFILIATES (continued)

a. Management Fees

The Fund pays an investment management fee to TGAL based on the average daily net assets of the Fund as follows:

Annualized Fee Rate	Net Assets
1.000%	Up to and including $100 million
0.900%	over $100 million, up to and including $250 million
0.800%	over $250 million, up to and including $500 million
0.750%	over $500 million, up to and including $1 billion
0.700%	over $1 billion, up to and including $5 billion
0.675%	over $5 billion, up to and including $10 billion
0.655%	over $10 billion, up to and including $15 billion
0.635%	over $15 billion, up to and including $20 billion
0.615%	In excess of $20 billion

b. Administrative Fees

Under an agreement with TGAL, FT Services provides administrative services to the Fund. The fee is paid by TGAL based on average daily net assets, and is not an additional expense of the Fund.

c. Distribution Fees

The Trust’s Board of Trustees has adopted distribution plans for Class 2 and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to 0.35% per year of its average daily net assets of each class. The Board of Trustees has agreed to limit the current rate to 0.25% per year for Class 2.

e. Transfer Agent Fees

Investor Services, under terms of an agreement, performs shareholder servicing for the Fund and is not paid by the Fund for the services.

g. Other Affiliated Transactions

At June 30, 2011, Franklin Templeton Variable Insurance Products Trust – Franklin Templeton VIP Founding Funds Allocation Fund owned 44.3% of the Fund’s outstanding shares.

4. EXPENSE OFFSET ARRANGEMENT

The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses. During the period ended June 30, 2011, the custodian fees were reduced as noted in the Statement of Operations.

TG-26

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Growth Securities Fund

5. INCOME TAXES

For tax purposes, capital losses may be carried over to offset future capital gains, if any. At December 31, 2010, the capital loss carryforwards were as follows:

Capital loss carryforwards expiring in:
2016	$	103,613,248
2017		294,580,232
2018		55,299,629
	$	453,493,110

Under the Regulated Investment Company Modernization Act of 2010, the Fund will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. Post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered short-term as under previous law. Any post-enactment capital losses generated will be required to be utilized prior to the losses incurred in pre-enactment tax years.

At June 30, 2011, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	3,020,098,804
Unrealized appreciation	$	517,350,018
Unrealized depreciation		(280,299,794	)
Net unrealized appreciation (depreciation)	$	237,050,224

Net investment income differs for financial statement and tax purposes primarily due to differing treatments of passive foreign investment company shares and foreign currency transactions.

Net realized gains (losses) differ for financial statement and tax purposes primarily due to differing treatments of wash sales and foreign currency transactions.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2011, aggregated $445,639,869 and $313,468,817, respectively. Sales of investments excludes redemptions in-kind of $86,085,875.

7. CONCENTRATION OF RISK

Investing in foreign securities may include certain risks and considerations not typically associated with investing in U.S. securities, such as fluctuating currency values and changing local and regional economic, political and social conditions, which may result in greater market volatility. In addition, certain foreign securities may not be as liquid as U.S. securities.

8. RESTRICTED SECURITIES

The Fund invests in securities that are restricted under the Securities Act of 1933 (1933 Act) or which are subject to legal, contractual, or other agreed upon restrictions on resale. Restricted securities are often purchased in private placement transactions, and cannot be sold without prior registration unless the sale is pursuant to an exemption under the 1933 Act. Disposal of these securities may require greater effort and expense, and prompt sale at an acceptable price may be difficult. The Fund may have registration rights for restricted securities. The issuer generally incurs all registration costs.

TG-27

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Growth Securities Fund

8. RESTRICTED SECURITIES (continued)

At June 30, 2011, the Fund held investments in restricted securities, excluding certain securities exempt from registration under the 1933 Act deemed to be liquid, as follows:

Shares		Issuer	Acquisition Date		Cost		Value
	1,192,192	Templeton China Opportunities Fund Ltd., Reg D (0.47% of Net Assets)		3/17/10	$	11,910,000	$	15,260,060

9. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES

The 1940 Act defines “affiliated companies” to include investments in portfolio companies in which a fund owns 5% or more of the outstanding voting securities. Investments in “affiliated companies” for the Fund for the period ended June 30, 2011, were as shown below.

Name of Issuer	Number of Shares Held at Beginning of Period		Gross Additions		Gross Reductions		Number of Shares Held at End of Period		Value at End of Period		Investment Income		Realized Capital Gain (Loss)
Non-Controlled Affiliates
Templeton China Opportunities Fund Ltd., Reg D		1,192,192		—		—		1,192,192	$	15,260,060	$	—	$	—
Total Affiliated Securities (0.47% of Net Assets)

10. CREDIT FACILITY

The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $750 million (Global Credit Facility) which matures on January 20, 2012. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests.

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.08% based upon the unused portion of the Global Credit Facility, which is reflected in other expenses on the Statement of Operations. During the period ended June 30, 2011, the Fund did not use the Global Credit Facility.

11. REDEMPTION IN-KIND

During the period ended June 30, 2011, the Fund realized $9,941,638 of net gains resulting from a redemption in-kind in which a shareholder redeemed fund shares for securities held by the Fund rather than for cash. Because such gains are not taxable to the Fund, and are not distributed to remaining shareholders they will be reclassified from accumulated net realized gains to paid-in capital.

TG-28

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Growth Securities Fund

12. FAIR VALUE MEASUREMENTS

The Fund follows a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Fund’s own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund’s investments and are summarized in the following fair value hierarchy:

• Level 1 – quoted prices in active markets for identical securities

• Level 2 – other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speed, credit risk, etc.)

• Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.

For movements between the levels within the fair value hierarchy, the Fund has adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.

The following is a summary of the inputs used as of June 30, 2011, in valuing the Fund’s assets and liabilities carried at fair value:

	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities
Equity Investments:
Diversified Financial Services	$	98,676,549	$	—	$	15,260,060	$	113,936,609
Other Equity Investmentsa,b		3,031,285,916		—		—		3,031,285,916
Short Term Investments		—		111,926,503		—		111,926,503
Total Investments in Securities	$	3,129,962,465	$	111,926,503	$	15,260,060	$	3,257,149,028

^aIncludes common preferred stocks as well as other equity investments

^bFor detailed industry descriptions, see the accompanying Statement of Investments.

At June 30, 2011, the reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining fair value, is as follows:

	Balance at Beginning of Period		Purchases (Sales)		Transfers Into (Out of) Level 3		Net Realized Gain (Loss)		Net Unrealized Gain (Loss)		Balance at End of Period		Net Change in Unrealized Appreciation (Depreciation) on Assets Held at Period End
Assets
Equity Investments-Diversified Financial Services	$	14,592,433	$	—	$	—	$	—	$	667,627	$	15,260,060	$	667,627

13. NEW ACCOUNTING PRONOUNCEMENTS

In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (IFRS). The amendments in the ASU will improve the comparability

TG-29

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (unaudited) (continued)

Templeton Growth Securities Fund

13. NEW ACCOUNTING PRONOUNCEMENTS (continued)

of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRS and include new guidance for certain fair value measurement principles and disclosure requirements. The ASU is effective for interim and annual periods beginning after December 15, 2011. The Fund is currently evaluating the impact, if any, of applying this provision.

14. SUBSEQUENT EVENTS

The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure.

ABBREVIATIONS
Currency	Selected Portfolio
CHF - Swiss Franc	ADR - American Depository Receipt
	FHLB - Federal Home Loan Bank
	FNMA - Federal National Mortgage Association

TG-30

Franklin Templeton Variable Insurance Products Trust

Tax Designation (unaudited)

Templeton Growth Securities Fund

At December 31, 2010, more than 50% of the Fund’s total assets were invested in securities of foreign issuers. In most instances, foreign taxes were withheld from income paid to the Fund on these investments. As shown in the table below, the Fund designates to shareholders the foreign source income and foreign taxes paid, pursuant to Section 853 of the Internal Revenue Code. This designation will allow shareholders of record on June 14, 2011, to treat their proportionate share of foreign taxes paid by the Fund as having been paid directly by them. The shareholder shall consider these amounts as foreign taxes paid in the tax year in which they receive the Fund distribution.

The following table provides a detailed analysis of foreign tax paid, and foreign source income as designated by the Fund, to Class 1, Class 2, and Class 4 shareholders of record.

Class	Foreign Tax Paid Per Share		Foreign Source Income Per Share
Class 1	$	0.0172	$	0.1440
Class 2	$	0.0172	$	0.1217
Class 4	$	0.0172	$	0.1171

Foreign Tax Paid Per Share (Column 1) is the amount per share available to you, as a tax credit (assuming you held your shares in the Fund for a minimum of 16 days during the 31-day period beginning 15 days before the ex-dividend date of the Fund’s distribution to which the foreign taxes relate), or, as a tax deduction.

Foreign Source Income Per Share (Column 2) is the amount per share of income dividends attributable to foreign securities held by the Fund, plus any foreign taxes withheld on these dividends.

TG-31

INDEX DESCRIPTIONS

The indexes are unmanaged and include reinvested distributions.

For indexes sourced by Morningstar: © 2011 Morningstar. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.

Russell^® is a trademark and Russell^TM is a servicemark of the Frank Russell Company.

Barclays Capital (BC) U.S. Aggregate Index is a market capitalization-weighted index representing the U.S. investment-grade, fixed-rate, taxable bond market with index components for government and corporate, mortgage pass-through and asset-backed securities. All issues included are SEC registered, taxable, dollar denominated and nonconvertible, must have at least one year to final maturity and must be rated investment grade (Baa3/BBB-/BBB- or higher) using the middle rating of Moody’s, Standard & Poor’s and Fitch, respectively. STANDARD & POOR’S^®, S&P^® and S&P 500^® are registered trademarks of Standard & Poor’s Financial Services LLC. Standard & Poor’s does not sponsor, endorse, sell or promote any S&P index-based product.

Barclays Capital (BC) U.S. Government Index: Intermediate Component is the intermediate component of the BC U.S. Government Index, which includes public obligations of the U.S. Treasury with at least one year to final maturity and publicly issued debt of U.S. government agencies, quasi-federal corporations, and corporate or foreign debt guaranteed by the U.S. government.

Citigroup World Government Bond Index is a market capitalization-weighted index consisting of investment-grade world government bond markets.

Credit Suisse (CS) High Yield Index is designed to mirror the investable universe of the U.S. dollar-denominated high yield debt market.

FTSE EPRA/NAREIT Developed Index is a free float-adjusted index designed to measure the performance of publicly traded real estate securities in the North American, European and Asian real estate markets. FTSE^® is a trademark of London Stock Exchange Plc and The Financial Times Limited and is used by FTSE under license. All rights in and to the FTSE MPF Index series (including currency adjusted indices) are vested in FTSE. All information is provided for information purposes only. Every effort is made to ensure that all information given in this publication is accurate, but no responsibility or liability can be accepted by FTSE for any errors or for any loss arising from use of this publication.

J.P. Morgan (JPM) Global Government Bond Index (GGBI) tracks total returns for liquid, fixed-rate, domestic government bonds with maturities greater than one year issued by developed countries globally.

Lipper Multi-Sector Income Funds Classification Average is calculated by averaging the total returns of all funds within the Lipper Multi-Sector Income Funds classification in the Lipper Open-End underlying funds universe. Lipper Multi-Sector Income Funds are defined as funds that seek current income by allocating assets among different fixed income securities sectors (not primarily in one sector except for defensive purposes), including U.S. and foreign governments, with a significant portion rated below investment grade. For the six-month period ended 6/30/11, there were 189 funds in this category. Lipper calculations do not include contract fees, expenses or sales charges, and may have been different if such charges had been considered.

Lipper VIP Equity Income Funds Classification Average is an equally weighted average calculation of performance figures for all funds within the Lipper Equity Income Funds classification in the Lipper VIP underlying funds universe. Lipper Equity Income Funds seek relatively high current income and growth of income through investing 60% or more of their portfolios in equities. For the six-month period ended 6/30/11, there were 65 funds in this category. Lipper calculations do not include contract fees, expenses or sales charges, and may have been different if such charges had been considered.

Lipper VIP General U.S. Government Funds Classification Average is an equally weighted average calculation of performance figures for all funds within the Lipper General U.S. Government Funds classification in the Lipper VIP underlying funds universe. Lipper General U.S. Government Funds invest primarily in U.S. government and agency issues. For the six-month period ended 6/30/11, there were 75 funds in this category. Lipper calculations do not include contract fees, expenses or sales charges, and may have been different if such charges had been considered.

Lipper VIP High Current Yield Funds Classification Average is an equally weighted average calculation of performance figures for all funds within the Lipper High Current Yield Funds Classification in the Lipper VIP underlying funds universe. Lipper High Current Yield Funds aim at high (relative) current yield from fixed income securities, have no quality or maturity

I-1

restrictions, and tend to invest in lower grade debt issues. For the six-month period ended 6/30/11, there were 122 funds in this category. Lipper calculations do not include contract fees, expenses or sales charges, and may have been different if such charges had been considered.

MSCI Emerging Markets (EM) Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global emerging markets.

MSCI Europe, Australasia, Far East (EAFE) Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed markets excluding the U.S. and Canada.

MSCI Europe, Australasia, Far East (EAFE) Index Net Return (Local Currency) is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance of global developed markets excluding the U.S. and Canada. The index is calculated in local currency and includes reinvested daily net dividends.

MSCI World Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed markets.

Russell 1000^® Growth Index is market capitalization weighted and measures performance of those Russell 1000 Index companies with higher price-to-book ratios and higher forecasted growth values.

Russell 1000 Index is market capitalization weighted and measures performance of the largest companies in the Russell 3000 Index, which represents the majority of the U.S. market’s total capitalization.

Russell 1000 Value Index is market capitalization weighted and measures performance of those Russell 1000 Index companies with lower price-to-book ratios and lower forecasted growth values.

Russell 2500™ Index is market capitalization weighted and measures performance of the smallest companies in the Russell 3000 Index, which represent a modest amount of the Russell 3000 Index’s total market capitalization.

Russell 2500 Value Index is market capitalization weighted and measures performance of those Russell 2500 Index companies with lower price-to-book ratios and lower forecasted growth values.

Russell 3000^® Growth Index is market capitalization weighted and measures performance of those Russell 3000 Index companies with higher price-to-book ratios and higher forecasted growth values.

Russell 3000 Index is market capitalization weighted and measures performance of the largest U.S. companies based on total market capitalization and represents the majority of the investable U.S. equity market.

Russell Midcap^® Growth Index is market capitalization weighted and measures performance of those Russell Midcap Index companies with higher price-to-book ratios and higher forecasted growth values.

Russell Midcap Index is market capitalization weighted and measures performance of the smallest companies in the Russell 1000 Index, which represent a modest amount of the Russell 1000 Index’s total market capitalization.

Standard & Poor’s 500 Index (S&P 500) is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance.

Standard & Poor’s Global REIT Index is designed to measure performance of the investable universe of publicly traded real estate investment trusts. Index constituents generally derive the majority of their revenue from real estate development, management, rental, and/or direct investment in physical property and with local REIT or property trust tax status.

Standard & Poor’s/International Finance Corporation Investable (S&P/IFCI) Composite Index is a free float-adjusted, market capitalization-weighted index designed to measure equity performance in global emerging markets.

I-2

Franklin Templeton Variable Insurance Products Trust

Shareholder Information

Board Review of Investment Management Agreement

At a meeting held April 19, 2011, the Board of Trustees (Board), including a majority of non-interested or independent Trustees, approved renewal of the investment management agreement for each of the separate funds within the Trust (Fund(s)). In reaching this decision, the Board took into account information furnished throughout the year at regular Board meetings, as well as information prepared specifically in connection with the annual renewal review process. Information furnished and discussed throughout the year included investment performance reports and related financial information for each Fund, as well as periodic reports on expenses, shareholder services, legal, compliance, pricing, brokerage commissions and execution and other services provided by the Investment Manager (Manager) and its affiliates. Information furnished specifically in connection with the renewal process included reports prepared by Lipper, Inc. (Lipper), an independent organization, as well as additional material, including a Fund profitability analysis prepared by management. The Lipper reports compared a Fund’s investment performance and expenses with those of other mutual funds deemed comparable to the Fund as selected by Lipper. The Fund profitability analysis discussed the profitability to Franklin Templeton Investments from its overall U.S. fund operations, as well as on an individual fund-by-fund basis. Additional material accompanying such profitability analysis included information on a fund-by-fund basis listing portfolio managers and other accounts they manage, as well as information on management fees charged by the Manager and its affiliates to U.S. mutual funds and other accounts, including management’s explanation of differences where relevant. Such material also included a memorandum prepared by management describing project initiatives and capital investments relating to the services provided to the Funds by the Franklin Templeton Investments organization, as well as a memorandum relating to economies of scale.

In considering such materials, the independent Trustees received assistance and advice from and met separately with independent counsel. While the investment management agreements for all Funds were considered at the same Board meeting, the Board dealt with each Fund separately. In approving continuance of the investment management agreement for each Fund, the Board, including a majority of independent Trustees, determined that the existing management fee structure was fair and reasonable and that continuance of the investment management agreement was in the best interests of each Fund and its shareholders. While attention was given to all information furnished, the following discusses some primary factors relevant to the Board’s decision.

NATURE, EXTENT AND QUALITY OF SERVICE.    The Board was satisfied with the nature and quality of the overall services provided by the Manager and its affiliates to the Funds and their shareholders. In addition to investment performance and expenses discussed later, the Board’s opinion was based, in part, upon periodic reports furnished it showing that the investment policies and restrictions for each Fund were consistently complied with as well as other reports periodically furnished the Board covering matters such as the compliance of portfolio managers and other management personnel with the code of ethics adopted throughout the Franklin Templeton fund complex, the adherence to fair value pricing procedures established by the Board, and the accuracy of net asset value calculations. Favorable consideration was given to management’s continuous efforts and expenditures in establishing back-up systems and recovery procedures to function in the event of a natural disaster, it being noted that such systems and procedures had functioned smoothly during the Florida hurricanes and blackouts experienced in previous years. Among other factors taken into account by the Board were the Manager’s best execution trading policies, including a favorable report by an independent portfolio trading analytical firm. Consideration was also given to the experience of each Fund’s portfolio management team, the number of accounts managed and general method of compensation. In this latter respect, the Board noted that a primary factor in management’s determination of a portfolio manager’s bonus compensation was the relative investment performance of the funds he or she managed and that a portion of such bonus was required to be invested in a predesignated list of funds within such person’s fund management area so as to be aligned with the interests of shareholders. Particular attention was given to management’s conservative approach and diligent risk management procedures, including continuous monitoring of counterparty credit risk and attention given to derivatives and other complex instruments. The Board also took into account, among other things, management’s efforts in establishing a global credit facility for the benefit of the Funds and other accounts managed by Franklin Templeton Investments to provide a source of cash for temporary and emergency purposes or to meet unusual redemption requests as well as the strong financial position of the Manager’s parent company and its commitment to the mutual fund business as evidenced by its subsidization of money market funds.

INVESTMENT PERFORMANCE.    The Board placed significant emphasis on the investment performance of each of the Funds in view of its importance to shareholders. While consideration was given to performance reports and discussions with portfolio

SI-1

Franklin Templeton Variable Insurance Products Trust

Shareholder Information (continued)

Board Review of Investment Management Agreement (continued)

managers at Board meetings throughout the year, particular attention in assessing performance was given to the Lipper reports furnished for the agreement renewals of all Funds. The Lipper reports prepared for each of the individual Funds showed the investment performance of Class 1 shares for those having such class of shares and Class 2 shares for those Funds that did not have Class 1 shares, in comparison to a performance universe selected by Lipper. Comparative performance for each Fund was shown for the one-year period ended January 31, 2011, and previous periods ended that date of up to 10 years unless otherwise noted. Performance was shown on a total return basis for each Fund and in certain cases, as indicated, on an income return basis as well. The following summarizes the performance results for each of the Funds and the Board’s view of such performance.

Franklin Flex Cap Growth Securities Fund – The performance universe for this Fund, which has been in operation for only five full years, consisted of the Fund and all multi-cap growth funds underlying variable insurance products as selected by Lipper. The Lipper report showed the Fund’s comparative total return for the one-year period to be in the second-lowest quintile of its performance universe, and on an annualized basis to be in the middle quintile of such universe for its previous three- and five-year periods. In discussing the one-year performance, management pointed out that it largely reflected portfolio stock selections within the health care, consumer discretionary, materials and financials sectors and discussed steps being taken to improve performance. The Board found the Fund’s performance as set forth in the Lipper report to be acceptable and did not warrant any change in portfolio management, noting that the Fund’s actual total return for the one-year period as shown in the Lipper report exceeded 23%.

Franklin Global Real Estate Securities Fund – The performance universe for this Fund consisted of the Fund and all real estate funds underlying variable insurance products as selected by Lipper. The Lipper report showed the Fund’s total return to be in the second-lowest quintile of such universe for the one-year period, and on an annualized basis to also be in the lowest quintile of such universe for the previous three-, five- and 10-year periods. The Board noted that on May 1, 2007, the Fund had changed portfolio managers and also had adopted a global investment mandate and that management had taken steps to improve the Fund’s performance, including the appointment of an additional portfolio manager in 2010. The Board intends to continue monitoring the Fund’s results, but was satisfied with the efforts being made by management to improve performance.

Franklin Growth and Income Securities Fund – The performance universe for this Fund consisted of the Fund and all equity income funds underlying variable insurance products as selected by Lipper. The Lipper report showed the Fund’s income return during the one-year period to be in the highest or best performing quintile of its performance universe, and on an annualized basis in each of the previous three-, five- and 10-year periods to also be in the highest quintile of such universe. The Lipper report showed the Fund’s total return for the one-year period to also be in the highest quintile of its performance universe, and on an annualized basis for the previous three-year period to be in the second-highest quintile of such universe, and for each of the previous five- and 10-year periods to be in the middle quintile of such performance universe. The Board was satisfied with the Fund’s performance as shown in the Lipper report.

Franklin High Income Securities Fund – The performance universe for this Fund consisted of the Fund and all high current yield funds underlying variable insurance products as selected by Lipper. The Lipper report showed the Fund’s income return for the one-year period to be in the second-lowest quintile of such universe, and on an annualized basis to also be in the second-lowest quintile for the previous three- and five-year periods, but to be in the highest quintile of such universe for the previous 10-year period. The Lipper report showed the Fund’s total return to be in the middle quintile of its performance universe for the one-year period, and, on an annualized basis to be in the second-highest quintile of such universe for the previous three-year period, and to be in the middle quintile of such universe for each of the previous five- and 10-year periods. In discussing the Fund’s performance with the Board, management pointed out, among other things, the Fund’s somewhat higher quality, lower risk bias, including its underweighted positioning at the start of 2010 in the financials industry, which was a top performer during the first quarter of 2010. The Board believed the Fund’s performance was acceptable and did not warrant any change in portfolio management, noting the Fund’s actual income and total returns for the one-year period as shown in the Lipper report were 7.36% and 15%, respectively, and that its income return for each of the one-year and annualized three- and five-year periods was in each case within 68 basis points or less of the performance universe median.

SI-2

Franklin Templeton Variable Insurance Products Trust

Shareholder Information (continued)

Board Review of Investment Management Agreement (continued)

Franklin Income Securities Fund – The performance universe for this Fund consisted of the Fund and all mixed-asset target allocation moderate funds underlying variable insurance products as selected by Lipper. The Lipper report showed the Fund’s income return to be in the highest or best performing quintile of such universe for the one-year period and to also be in the highest quintile of such universe for each of the previous three-, five- and 10-year periods on an annualized basis. The Lipper report showed the Fund’s total return to be in the second-highest quintile of its performance universe for the one-year period and on an annualized basis to be in the highest quintile of such universe for each of the previous three-, five- and 10-year periods. The Board was satisfied with the Fund’s performance as shown in the Lipper report.

Franklin Large Cap Growth Securities Fund – The performance universe for this Fund consisted of the Fund and all large-cap core funds underlying variable insurance products as selected by Lipper. The Lipper report showed the Fund’s comparative total return to be in the second-lowest quintile of such universe for the one-year period, but on an annualized basis to be in the highest or best performing quintile of such universe for the previous three-year period, the second-highest quintile of such universe for the previous five-year period, and the second-lowest quintile of such universe for the previous 10-year period. In reviewing the Fund’s one-year performance, management pointed out, among other things, that it reflected the Fund’s overweighted position in the health care industry and discussed with the Board steps being taken to position the Fund to benefit from a continuing recovery of the U.S. economy. The Board believed the Fund’s overall performance as set forth in the Lipper report to be acceptable, noting that its one-year return exceeded 18%.

Franklin Large Cap Value Securities Fund – The performance universe for this Fund, which has been in operation for only five full years, consisted of the Fund and all large-cap value funds underlying variable insurance products as selected by Lipper. The Lipper report showed the Fund’s total return to be in the upper half of such universe for the one-year period and to be in the second-highest quintile of such universe on an annualized basis for its previous three- and five-year periods. The Board was satisfied with the Fund’s performance as set forth in the Lipper report.

Franklin Rising Dividends Securities Fund – The performance universe for this Fund consisted of the Fund and all multi-cap core funds underlying variable insurance products as selected by Lipper. The Lipper report showed the Fund’s comparative total return to be in the upper half of the performance universe for the one-year period, and on an annualized basis to be in the highest or second-highest quintile of such universe for each of the three-, five- and 10-year periods. The Board was satisfied with the Fund’s performance as set forth in the Lipper report.

Franklin Small Cap Value Securities Fund – The performance universe for this Fund consisted of the Fund and all small-cap value funds underlying variable insurance products as selected by Lipper. The Lipper report showed the Fund’s total return for the one-year period to be in the highest or best performing quintile of such performance universe, and on an annualized basis to be in the middle quintile of such universe for each of the previous three- and 10-year periods, and the second-highest quintile for the previous five-year period. The Board found the Fund’s performance as set forth in the Lipper report to be satisfactory.

Franklin Small-Mid Cap Growth Securities Fund – The performance universe for this Fund consisted of the Fund and all mid-cap growth funds underlying variable insurance products as selected by Lipper. The Lipper report showed the Fund’s total return for the one-year period to be in the upper half of such universe, and on an annualized basis to be in the second-highest performing quintile of such universe for the previous three-year period, and to be in the middle quintile of such universe for each of the previous five- and 10-year periods. The Board found the Fund’s investment performance as set forth in the Lipper report to be satisfactory.

Franklin Strategic Income Securities Fund – The performance universe for this Fund consisted of the Fund and all general bond funds underlying variable insurance products as selected by Lipper. The Lipper report showed the Fund’s income return to be in the second-highest quintile of such performance universe for the one-year period, and on an annualized basis to also be in the second-highest quintiles of such universe during the previous three- and five-year periods, and in the lowest quintile of such universe for the previous 10-year period. The Lipper report showed the Fund’s total return to be in the second-highest quintile of such universe during the one-year period, and on an annualized basis to be in either the highest or second-highest quintile of such universe for each of the previous three-, five- and 10-year periods. The Board was satisfied with the Fund’s performance as shown in the Lipper report.

SI-3

Franklin Templeton Variable Insurance Products Trust

Shareholder Information (continued)

Board Review of Investment Management Agreement (continued)

Franklin Templeton VIP Founding Funds Allocation Fund – The performance universe for this Fund consisted of the Fund and all mixed-asset target allocation growth funds underlying variable insurance products as selected by Lipper. The Fund has been in existence for only three full years and the Lipper report showed its income return to be in the highest quintile of such performance universe for the one-year period, and to be in the second-highest quintile of such universe for each of the previous two years. The Lipper report showed the Fund’s total return for the one-year period to be in the second-lowest quintile of such universe and to be in the highest quintile of such universe for the previous year and lowest quintile of such universe for the year before that. The Fund’s performance, which reflects those of the three underlying funds in which it invests, was discussed with management and the Board believed that no change in investment strategy or portfolio management was warranted, noting the Fund’s short period of operations, as well as the fact that the Fund’s total return for the one-year period was nearly 16% as shown in the Lipper report.

Franklin U.S. Government Fund – The performance universe for this Fund consisted of the Fund and all general U.S. government funds underlying variable insurance products as selected by Lipper. The Lipper report showed the Fund’s income return for the one-year period to be in the second-highest quintile of such universe and on an annualized basis to be in the highest or second-highest quintile of such universe for each of the previous three-, five- and 10-year periods. The Lipper report showed the Fund’s total return to also be in the second-highest quintile of such universe for the one-year period, as well as for each of the previous three-, five- and 10-year periods on an annualized basis. The Board was satisfied with the Fund’s performance as shown in the Lipper report.

Mutual Global Discovery Securities Fund – The performance universe for this Fund consisted of the Fund and all global core funds underlying variable insurance products as selected by Lipper. The Lipper report showed the Fund’s total return to be in the lowest quintile of such universe for the one-year period, but on an annualized basis to be in the highest or best performing quintile of such universe for each of the previous three-, five- and 10-year periods. In discussing the Fund’s performance during the one-year period, management explained that it reflected the Fund’s relatively high cash position, which hurt performance in a rising market, as well as other factors such as the Fund’s portfolio being underweighted in the materials and energy sectors. The Board found the Fund’s overall performance as set forth in the Lipper report to be satisfactory, noting the Fund’s total return for the one-year period exceeded 15%.

Mutual International Securities Fund – The performance universe for this Fund consisted of the Fund and all other international core funds underlying variable insurance products as selected by Lipper. The Fund has been in existence for one full year at the date of the Lipper report, which showed its total return during such year to be in the highest or best performing quintile of such universe. The Board was pleased with such performance, but did not believe it to be particularly meaningful in view of the Fund’s short period of operations.

Mutual Shares Securities Fund – The performance universe for this Fund consisted of the Fund and all large-cap value funds underlying variable insurance products as selected by Lipper. The Lipper report showed the Fund’s income return for the one-year period to be in the highest or best performing quintile of such universe, and on an annualized basis to be in the second-highest quintile for each of the previous three-, five- and 10-year periods. The Lipper report showed the Fund’s total return for the one-year period to be in the lowest quintile of the performance universe, but on an annualized basis to be in the upper half of such universe for the previous three-year period, the second-highest quintile of such universe for the previous five-year period, and the highest quintile of such universe for the previous 10-year period. In discussing the Fund’s total return for the one-year period, management explained that it reflected the Fund’s relatively high cash position, which hurt performance in a rising market, as well as other factors, such as the Fund’s portfolio being underweighted in certain sectors such as industrials, energy, and high-multiple technology stocks. The Board was satisfied with the Fund’s overall performance as shown in the Lipper report, noting that its total return for the one-year period exceeded 15%.

Templeton Developing Markets Securities Fund – The performance universe for this Fund consisted of the Fund and all emerging markets funds underlying variable insurance products as selected by Lipper. The Lipper report showed the Fund’s comparative total return for the one-year period to be in the second-lowest quintile of such performance universe and on an annualized basis to be in the highest quintile of such universe during the previous three-year period, and the second-lowest

SI-4

Franklin Templeton Variable Insurance Products Trust

Shareholder Information (continued)

Board Review of Investment Management Agreement (continued)

quintile of such universe during each of the previous five- and 10-year periods. The Board had discussed with management steps being taken to improve the Fund’s investment portfolio process and noted that investment flexibility had been limited by significant net redemptions during the one-year period. The Board also noted that the Fund’s total return as shown in the Lipper report for the one-year period exceeded 20% and was within 90 basis points of the performance universe median during such period. While intending to continuously monitor future performance, the Board believed the Fund’s performance as set forth in the Lipper report did not warrant any change in portfolio management or overall investment approach.

Templeton Foreign Securities Fund – The performance universe for this Fund consisted of the Fund and all international core funds underlying variable insurance products as selected by Lipper. The Lipper report showed the Fund’s comparative total return for the one-year period to be in the second-highest quintile of such performance universe and on an annualized basis to be in the highest or best performing quintile of such universe in each of the previous three- and five-year periods, and the second-highest quintile of such universe for the previous 10-year period. The Board was satisfied with the Fund’s investment performance as set forth in the Lipper report.

Templeton Global Bond Securities Fund – The performance universe for this Fund consisted of the Fund and all global income funds underlying variable insurance products as selected by Lipper. The Lipper report showed the Fund’s income return for the one-year period to be in the second-lowest quintile of such performance universe, but on an annualized basis to be in the highest or best performing quintile of such universe for each of the previous three-, five- and 10-year periods. The Lipper report showed the Fund’s total return for the one-year period to be in the highest or best performing quintile of its performance universe and on an annualized basis to also be in the highest quintile of such universe during each of the previous three-, five- and 10-year periods. Management discussed the Fund’s income return for the one-year period, pointing out that underperformance was primarily due to mark to market losses on currency forwards held in the Fund’s portfolio during the prior year that offset regular income such as bond coupons. The Board was satisfied with the Fund’s performance as set forth in the Lipper report, noting such explanation of one-year income return performance.

Templeton Growth Securities Fund – The performance universe for this Fund consisted of the Fund and all global value funds underlying variable insurance products as selected by Lipper. The Lipper report showed the Fund’s total return for the one-year period to be in the middle quintile of such performance universe and on an annualized basis to be in the middle quintiles of such universe for each of the previous three- and five-year periods, and to be in the second-highest quintile of such universe for the previous 10-year period. The Board noted steps taken by management to improve performance, including changes in the Fund’s portfolio managers that had taken place in recent years and found the Fund’s performance as shown in the Lipper report to be acceptable.

COMPARATIVE EXPENSES.    Consideration was given to expense comparison information contained in the Lipper reports furnished for each Fund that compared its management fees and total expense ratio with those of a group of other funds selected by Lipper as its appropriate Lipper expense group. Lipper expense data is based upon information taken from each fund’s most recent annual report, which reflects historical asset levels that may be quite different from those currently existing, particularly in a period of market volatility. While recognizing such inherent limitation and the fact that expense ratios generally increase as assets decline and decrease as assets grow, the Board believed the independent analysis conducted by Lipper to be an appropriate measure of comparative expenses. In reviewing comparative costs, Lipper provides information on each Fund’s contractual investment management fee rate in comparison with the contractual investment management fee rate that would have been charged by other funds within its Lipper expense group assuming they were similar in size to the Fund, as well as the actual total expense ratio of the Fund in comparison with those of its Lipper expense group. The Lipper contractual investment management fee analysis includes administrative charges at the fund level as being part of a management fee, and actual total expenses, for comparative consistency, are shown by Lipper for the same class of shares for all funds within a particular Lipper expense group. The results of such comparisons showed that both the contractual investment management fee rates and actual total expense ratios of the following Funds were in the least expensive quintile of their respective Lipper expense group: Franklin Income Securities Fund, Franklin Small Cap Value Securities Fund, Franklin Growth and Income Securities Fund, Franklin High Income Securities Fund, Franklin Strategic Income Securities Fund, Templeton Global Bond Securities Fund and Franklin U.S. Government Fund. The Board was satisfied with the comparative contractual investment management fees and expenses of these

SI-5

Franklin Templeton Variable Insurance Products Trust

Shareholder Information (continued)

Board Review of Investment Management Agreement (continued)

Funds as shown in their Lipper reports. The contractual investment management fee rates and actual total expense ratio of each of Franklin Rising Dividends Securities Fund, Franklin Small-Mid Cap Growth Securities Fund and Franklin Templeton VIP Founding Funds Allocation Fund were below the medians of their Lipper expense groups. The contractual investment management fee rate of Templeton Foreign Securities Fund was at the median of its Lipper expense group, but its actual total expense ratio was below the median of such group. The Board was satisfied with the comparative contractual investment management fees and expenses of these Funds as shown in their Lipper reports. The contractual investment management fee rates for Mutual International Securities Fund, Templeton Growth Securities Fund, Franklin Global Real Estate Securities Fund and Franklin Large Cap Value Securities Fund were in the most expensive quintiles of their Lipper expense groups, but in each case their actual total expense ratios were at or below the medians of such groups. The Board was satisfied with the comparative expenses of these Funds as shown in their Lipper reports, noting that, with the exception of Templeton Growth Securities Fund, the expenses of these Funds were subsidized through fee waivers. The contractual investment management fee rate and actual total expense ratio of Franklin Flex Cap Growth Securities Fund were both within 20 basis points above the median of its Lipper expense group, while its actual total expense ratio, excluding 12b-1 fees, was below the median of such expenses for the expense group. The Board found the comparative expenses of this Fund as shown in its Lipper report to be acceptable, noting its expenses were subsidized through fee waivers. The contractual investment management fee rate and actual expense ratio for Franklin Large Cap Growth Securities Fund were in each case above, but within 10 basis points of the medians of its Lipper expense group. The Board found the comparative expenses of this Fund as shown in its Lipper reports to be acceptable. The contractual investment management fee rate and actual total expense ratio of Templeton Developing Markets Securities Fund were each in the most expensive quintile of its Lipper expense group. While acknowledging cost factors relating to the Fund’s operations, such as the quality and experience of its portfolio managers and research staff and the depth of its physical presence and coverage in developing markets geographical areas, the Board believed it appropriate to reduce the Fund’s investment management fee and negotiated with the Manager downward revisions in such fee as discussed under “Economies of Scale.” The contractual investment management fee rates and total expense ratios of both Mutual Global Discovery Securities Fund and Mutual Shares Securities Fund were in the most expensive quintiles of their Lipper expense groups, but the actual total expense ratio of Mutual Global Discovery Securities Fund was within 11 basis points of its expense group median, and the actual total expense ratio of Mutual Shares Securities Fund was within nine basis points of its expense group median. In discussing these comparative expenses, management stated its view that the expenses of these Funds were at an appropriate level in view of their superior investment performance, the quality and experience of their portfolio managers and the research-driven, fundamental value strategy employed in their portfolio selections. The Board found the comparative expenses of these Funds to be acceptable noting the points raised by management.

MANAGEMENT PROFITABILITY.    The Board also considered the level of profits realized by the Manager and its affiliates in connection with the operation of each Fund. In this respect, the Board reviewed the Fund profitability analysis that addresses the overall profitability of Franklin Templeton’s U.S. fund business, as well as its profits in providing management and other services to each of the individual funds during the 12-month period ended September 30, 2010, being the most recent fiscal year-end for Franklin Resources, Inc., the Manager’s parent. In reviewing the analysis, specific attention was given to the methodology followed in allocating costs to each Fund, it being recognized that allocation methodologies are inherently subjective and various allocation methodologies may each be reasonable while producing different results. In this respect, the Board noted that, while being continuously refined and reflecting changes in the Manager’s own cost accounting, the allocation methodology was consistent with that followed in profitability report presentations for the Funds made in prior years and that the Funds’ independent registered public accounting firm had been engaged by the Manager to review the reasonableness of the allocation methodologies solely for use by the Funds’ Board in reference to the profitability analysis. In reviewing and discussing such analysis, management discussed with the Board its belief that costs incurred in establishing the infrastructure necessary for the type of mutual fund operations conducted by the Manager and its affiliates may not be fully reflected in the expenses allocated to each Fund in determining its profitability, as well as the fact that the level of profits, to a certain extent, reflected operational cost savings and efficiencies initiated by management. The Board also took into account management’s expenditures in improving shareholder services provided the Funds, as well as the need to meet additional regulatory and compliance requirements resulting from the Sarbanes-Oxley Act and recent SEC and other regulatory requirements. In addition, the Board considered a third-party study comparing the profitability of the Manager’s parent on an overall basis to other publicly held managers broken

SI-6

Franklin Templeton Variable Insurance Products Trust

Shareholder Information (continued)

Board Review of Investment Management Agreement (continued)

down to show profitability from management operations exclusive of distribution expenses, as well as profitability including distribution expenses. The Board also considered the extent to which the Manager and its affiliates might derive ancillary benefits from Fund operations, including potential benefits resulting from allocation of fund brokerage and the use of commission dollars to pay for research. Based upon its consideration of all these factors, the Board determined that the level of profits realized by the Manager and its affiliates from providing services to each Fund was not excessive in view of the nature, quality and extent of services provided.

ECONOMIES OF SCALE.    The Board also considered whether economies of scale are realized by the Manager as the Funds grow larger and the extent to which this is reflected in the level of management fees charged. While recognizing that any precise determination is inherently subjective, the Board noted that based upon the Fund profitability analysis, it appears that as some funds get larger, at some point economies of scale do result in the Manager realizing a larger profit margin on management services provided such a fund. The Board also noted that economies of scale are shared with a fund and its shareholders through management fee breakpoints so that as a fund grows in size, its effective management fee rate declines. In the case of Franklin Templeton VIP Founding Funds Allocation Fund, the management fees of the underlying funds in which it invests have management fee breakpoints that extend beyond their existing asset sizes, and in the case of each of the other Funds, their management fees contain breakpoints that extend beyond their existing asset sizes. To the extent economies of scale may be realized by the Manager and its affiliates, the Board believed the schedule of investment management fees provides a sharing of benefits for each Fund and its shareholders. The current management advisory fee schedule for Templeton Developing Markets Securities Fund, reflecting reductions implemented effective May 1, 2010, provides a rate of 1.25% on the first $500 million of Fund net assets; 1.20% on the next $2.5 billion of Fund net assets; 1.15% on the next $1 billion of Fund net assets; 1.10% on the next $11 billion of Fund net assets; 1.05% on the next $5 billion of Fund net assets; and 1.00% on net assets in excess of $20 billion. The Board negotiated with management downward revisions in such fee effective May 1, 2011, so as to be at a rate of 1.10% on the first $1 billion of Fund net assets; 1.05% on the next $4 billion of Fund net assets; 1.00% on the next $5 billion of Fund net assets; 0.95% on the next $5 billion of Fund net assets; 0.90% on the next $5 billion of Fund net assets; and 0.85% on Fund net assets in excess of $20 billion. The Fund is also charged a separate fee for administrative services that starts at 0.15% on the first $200 million of Fund net assets, and declines through breakpoints to a fixed rate of 0.075% after net assets reach the $1.2 billion level. At the end of 2010, the Fund’s net assets were approximately $843 million, and to the extent economies of scale may be realized by the Manager and its affiliates, the Board believes the schedules of management advisory and administrative fees provide a sharing of benefits with this Fund and its shareholders.

Proxy Voting Policies and Procedures

The Trust’s investment manager has established Proxy Voting Policies and Procedures (Policies) that the Trust uses to determine how to vote proxies relating to portfolio securities. Shareholders may view the Trust’s complete Policies online at franklintempleton.com. Alternatively, shareholders may request copies of the Policies free of charge by calling the Proxy Group collect at (954) 527-7678 or by sending a written request to: Franklin Templeton Companies, LLC, 300 S.E. 2nd Street, Fort Lauderdale, FL 33301, Attention: Proxy Group. Copies of the Trust’s proxy voting records are also made available online at franklintempleton.com and posted on the U.S. Securities and Exchange Commission’s website at sec.gov and reflect the most recent 12-month period ended June 30.

Quarterly Statement of Investments

The Trust files a complete statement of investments with the U.S. Securities and Exchange Commission for the first and third quarters for each fiscal year on Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission’s website at sec.gov. The filed form may also be viewed and copied at the Commission’s Public Reference Room in Washington, DC. Information regarding the operations of the Public Reference Room may be obtained by calling (800) SEC-0330.

SI-7

VALUE BLEND GROWTH SECTOR GLOBAL INTERNATIONAL HYBRID ASSET  ALLOCATION FIXED INCOME

< GAIN FROM OUR PERSPECTIVE^® >

Semiannual Report

FRANKLIN TEMPLETON

VARIABLE INSURANCE PRODUCTS TRUST

Investment Managers

Franklin Advisers, Inc.

Franklin Advisory Services, LLC

Franklin Mutual Advisers, LLC

Franklin Templeton Institutional, LLC

Templeton Asset Management, Ltd.

Templeton Global Advisors Limited

Templeton Investment Counsel, LLC

Fund Administrator

Franklin Templeton Services, LLC

Distributor

Franklin Templeton Distributors, Inc.

Franklin Templeton Variable Insurance Products Trust (FTVIP) shares are not offered to the public; they are offered and sold only to: (1) insurance company separate accounts (Separate Account) to serve as the underlying investment vehicle for variable contracts; (2) certain qualified plans; and (3) other mutual funds (funds of funds).

Authorized for distribution to investors in Separate Accounts only when accompanied or preceded by the current prospectus for the applicable contract, which includes the Separate Account and the FTVIP prospectuses. Investors should carefully consider a fund’s investment goals, risks, charges and expenses before investing. The prospectus contains this and other information; please read it carefully before investing.

To ensure the highest quality of service, telephone calls to or from our service departments may be monitored, recorded and accessed. These calls can be identified by the presence of a regular beeping tone.

© 2011 Franklin Templeton Investments. All rights reserved. FTVIP S 08/11

Item 2. Code of Ethics.

(a) The Registrant has adopted a code of ethics that applies to its principal executive officers and principal financial and accounting officer.

(c) N/A

(d) N/A

(f) Pursuant to Item 12(a)(1), the Registrant is attaching as an exhibit a copy of its code of ethics that applies to its principal executive officers and principal financial and accounting officer.

Item 3. Audit Committee Financial Expert.

(a) (1)   The Registrant has an audit committee financial expert serving on its audit committee.

(2) The audit committee financial expert is John B. Wilson and he is “Independent” as defined under the relevant Securities and Exchange Commission Rules and Releases.

Item 4. Principal Accountant Fees and Services. N/A

Item 5. Audit Committee of Listed Registrants. N/A

Item 6. Schedule of Investments. N/A

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. N/A

Item 8. Portfolio Managers of Closed-End Management Investment Companies. N/A

Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers. N/A

Item 10. Submission of Matters to a vote of Security Holders.

There have been no changes to the procedures by which shareholders may recommend nominees to the Registrant’s Board of Trustees that would require disclosure herein.

Item 11. Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures. The Registrant maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Registrant’s filings under the Securities Exchange Act of 1934 and the Investment Company Act of 1940 is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission. Such information is accumulated and communicated to the Registrant’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. The Registrant’s management, including the principal executive officer and the principal financial officer, recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Within 90 days prior to the filing date of this Shareholder Report on Form N-CSR, the Registrant had carried out an evaluation, under the supervision and with the participation of the Registrant’s management, including the Registrant’s principal executive officer and the Registrant’s principal financial officer, of the effectiveness of the design and operation of the Registrant’s disclosure controls and procedures. Based on such evaluation, the Registrant’s principal executive officer and principal financial officer concluded that the Registrant’s disclosure controls and procedures are effective.

(b) Changes in Internal Controls. There have been no significant changes in the Registrant’s internal controls or in other factors that could significantly affect the internal controls subsequent to the date of their evaluation in connection with the preparation of this Shareholder Report on Form N-CSR.

Item 12. Exhibits.

(a) (1) Code of Ethics

(a) (2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and Gaston Gardey, Chief Financial Officer and Chief Accounting Officer

(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and Gaston Gardey, Chief Financial Officer and Chief Accounting Officer

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

By	/s/ LAURA F. FERGERSON
	Laura F. Fergerson
	Chief Executive Officer –
	Finance and Administration
Date August 25, 2011

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By	/s/ LAURA F. FERGERSON
	Laura F. Fergerson
	Chief Executive Officer –
	Finance and Administration
Date August 25, 2011

By	/s/ GASTON GARDEY
	Gaston Gardey
	Chief Financial Officer and
	Chief Accounting Officer
Date August 25, 2011