N-CSRS

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 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: 06/30/16

Item 1. Reports to Stockholders.

Semiannual Report June 30, 2016

Franklin Templeton

Variable Insurance Products Trust

Franklin Templeton Variable Insurance

Products Trust Semiannual Report

Table of Contents
Important Notes to Performance Information	i
Fund Summaries
Franklin Founding Funds Allocation VIP Fund	FFA-1
Franklin Global Real Estate VIP Fund	FGR-1
*Prospectus Supplement	FGR-7
Franklin Growth and Income VIP Fund	FGI-1
Franklin High Income VIP Fund	FH-1
Franklin Income VIP Fund	FI-1
Franklin Large Cap Growth VIP Fund	FLG-1
Franklin Mutual Global Discovery VIP Fund	MGD-1
Franklin Mutual Shares VIP Fund	MS-1
Franklin Rising Dividends VIP Fund	FRD-1
Franklin Small Cap Value VIP Fund	FSV-1
*Prospectus Supplement	FSV-6
Franklin Small-Mid Cap Growth VIP Fund	FSC-1
Franklin Strategic Income VIP Fund	FSI-1
Franklin U.S. Government Securities VIP Fund	FUS-1
Templeton Developing Markets VIP Fund	TD-1
Templeton Foreign VIP Fund	TF-1
*Prospectus Supplement	TF-6
Templeton Global Bond VIP Fund	TGB-1
Templeton Growth VIP Fund	TG-1
*Prospectus Supplement	TG-8
Index Descriptions	I-1
Shareholder Information	SI-1

*Not part of the semiannual report. Retain for your records.

Not FDIC Insured | May Lose Value | No Bank Guarantee

MASTER CLASS – 1

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

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.

Semiannual Report i

Franklin Founding Funds Allocation VIP Fund

This semiannual report for Franklin Founding Funds Allocation VIP Fund covers the period ended June 30, 2016.

Class 1 Performance Summary as of June 30, 2016

The Fund’s Class 1 shares delivered a +2.29% total return* for the six-month period ended June 30, 2016.

*The Fund has an expense reduction contractually guaranteed through at least 4/30/17. Fund investment results reflect the expense reduction, to the extent applicable; without this reduction, the results would have been lower.

Performance reflects the Fund’s Class 1 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.

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.

Semiannual Report FFA-1

FRANKLIN FOUNDING FUNDS ALLOCATION VIP FUND

Fund Goals and Main Investments

The Fund seeks capital appreciation, with income as a secondary goal. Under normal market conditions, the Fund invests equal portions in Class 1 shares of Franklin Income VIP Fund, Franklin Mutual Shares VIP Fund and Templeton Growth VIP Fund.

Fund Risks

All investments involve risks, including possible loss of principal. Because the Fund invests in underlying funds that may engage in a variety of investment strategies involving certain risks, the Fund may be subject to these same risks. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Bonds are affected by changes in interest rates and the creditworthiness of their issuers. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds adjust to a rise in interest rates, the Fund’s share price may decline. Higher yielding, lower rated corporate bonds entail a greater degree of credit risk compared to investment-grade securities. Foreign investing carries additional risks such as currency and market volatility and political or social instability, risks that are heightened in developing countries. Value securities may not increase in price as anticipated or may decline further in value. The Fund’s prospectus also includes a description of the main investment risks.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. In comparison, the Standard & Poor’s^® 500 Index (S&P 500^®) generated a +3.84% total return and the MSCI World Index produced a +1.02% total return for the same period.¹

Economic and Market Overview

The global economy expanded during the six months under review. An improvement in commodity prices including a rally in crude oil prices, accommodative monetary policy from various global central banks, finalization of the new debt deal for Greece and encouraging Chinese trade data toward period-end boosted market sentiment. However, global equity market volatility increased after the U.S. Federal Reserve’s (Fed’s) June decision to keep its federal funds target range unchanged, while providing a cautious stance on further interest rate hikes. In addition, global economic concerns and the U.K.’s historic

referendum to leave the European Union (EU), also known as the “Brexit,” contributed to volatile global stock markets.

Oil prices fell at the beginning of the review period, largely due to strong global supply, but recovered in the period’s second half amid oilfield outages and continued demand growth. Meanwhile, commodity prices increased for most of the review period as oversupply for a host of commodities shrank and the market appeared to be on the path of rebalancing after hitting a glut-induced bottom earlier in the year. Gold prices continued to rise following the Brexit referendum as some investors turned to safe haven investing. The U.S. dollar generally depreciated against most currencies during the period, which increased returns of many foreign assets in U.S. dollar terms. In this environment, global developed market stocks overall, as measured by the MSCI World Index, rose slightly during the period.

The U.S. economy grew moderately, as measured by gross domestic product (GDP) in 2016’s first and second quarters, driven by consumer spending and exports. A decline in private inventory investment and nonresidential fixed investment contributed to the moderation. The Fed maintained its target interest rate during the review period after raising it for the first time in nine years at its December meeting. The Fed kept its target rate unchanged in its June meeting mainly due to a substantial slowdown in job additions toward period-end. The Fed expects economic conditions to evolve in a manner that could warrant only gradual increases in the federal funds rate.

In Europe, slower U.K. economic growth continued in 2016’s first quarter as output slowed in construction, production and agriculture. Immediate effects of the Brexit materialized as U.K. stocks significantly declined and the pound sterling hit a three-decade low amid intensified selling. Credit rating agencies Standard & Poor’s and Fitch also downgraded the U.K.’s credit rating. In the eurozone, despite investors’ concerns about banking sector weakness, low corporate earnings and post-Brexit political repercussions, some regions benefited due to rising consumer spending resulting from a cheaper euro, low inflation and signs of sustained economic growth. The eurozone’s annual inflation rate remained in negative territory for most of the review period; however, it rose marginally above zero in June.

Japan’s economy posted mixed results, contracting in 2015’s fourth quarter stemming from declining private and household consumption. However, the economy expanded during 2016’s first quarter as private consumption increased and business investment decreased less than initially believed. The Bank of

1. Source: 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.

FFA-2 Semiannual Report

FRANKLIN FOUNDING FUNDS ALLOCATION VIP FUND

Japan (BOJ) took several actions during the review period. In January, to boost lending and support inflation, the BOJ introduced a negative interest rate on excess reserves held at the central bank by financial institutions. In April, the BOJ further reduced its GDP and inflation forecasts for fiscal year 2016, and decided against additional quantitative easing measures. However, after the U.K.’s vote in June to leave the EU, the BOJ hinted at carrying out flexible open market operations to stabilize its financial markets.

In emerging markets, economic growth generally moderated during the review period. Brazil’s economy witnessed its longest recession since the 1930s amid political and economic turmoil, while Russia’s economy continued to contract. The Bank of Russia reduced its key interest rate in an attempt to revive its economy. China’s economic growth slowed marginally in 2016’s first quarter compared to the previous quarter, but remained largely in line with the government’s target. The People’s Bank of China cut its cash reserve requirement ratio for the country’s banks and effectively devalued the renminbi against the U.S. dollar to the lowest level in more than five years. Overall, emerging market stocks, as measured by the MSCI Emerging Markets Index, rose for the six-month period.²

Investment Strategy

The Fund normally invests its assets in an equally weighted combination of Class 1 shares of Franklin Income VIP Fund, Franklin Mutual Shares VIP Fund and Templeton Growth VIP 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.

*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.

During the six months under review, Franklin Income VIP Fund – Class 1 and Franklin Mutual Shares VIP Fund – Class 1 outperformed the S&P 500. Templeton Growth VIP Fund – Class 1 underperformed the MSCI World Index.

Thank you for your participation in Franklin Founding Funds Allocation VIP Fund. We look forward to serving your future investment needs.

The foregoing information reflects our analysis, opinions and portfolio holdings as of June 30, 2016, 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.

2. Please see Index Descriptions following the Fund Summaries.

Semiannual Report FFA-3

FRANKLIN FOUNDING FUNDS ALLOCATION VIP FUND

Class 1 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 × $7.50 = $64.50.

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

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 1	Beginning Account Value 1/1/16		Ending Account Value 6/30/16		Expenses Paid During Period* 1/1/16–6/30/16		Expenses Paid During Period** 1/1/16–6/30/16
Actual	$	1,000	$	1,022.90	$	0.50	$	3.82
Hypothetical (5% return before expenses)	$	1,000	$	1,024.37	$	0.50	$	3.82

*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 1 shares (0.10%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 182/366 to reflect the one-half year period.

**Expenses are calculated using the most recent six-month annualized expense ratio including expenses of the underlying funds, net of expense waivers, for the Fund’s Class 1 shares (0.76%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 182/366 to reflect the one-half year period.

FFA-4 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Highlights

Franklin Founding Funds Allocation VIP Fund

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012			2011
Class 1
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$6.80			$7.47			$7.47			$8.55			$7.63			$7.73
Income from investment operationsa:
Net investment incomeb,c		0.16			0.26			0.22			0.30			0.26			0.25
Net realized and unrealized gains (losses)		(0.01	)		(0.68	)		0.02			1.42			0.90			(0.35	)
Total from investment operations		0.15			(0.42	)		0.24			1.72			1.16			(0.10	)
Less distributions from:
Net investment income		(0.29	)		(0.24	)		(0.23	)		(1.15	)		(0.24	)		(—	)d
Net realized gains		(0.23	)		(0.01	)		(0.01	)		(1.65	)		—			—
Total distributions		(0.52	)		(0.25	)		(0.24	)		(2.80	)		(0.24	)		(—	)d
Net asset value, end of period		$6.43			$6.80			$7.47			$7.47			$8.55			$7.63
Total returne		2.29%			(5.93)%			3.05%			24.14%			15.56%			(1.28)%
Ratios to average net assetsf
Expenses before waiver and payments by affiliatesg		0.12%			0.11%			0.11%			0.11%			0.11%			0.11%
Expenses net of waiver and payments by affiliatesg		0.10%			0.10%			0.10%			0.10%			0.10%			0.10%
Net investment incomec		4.90%			3.51%			2.88%			3.67%			4.06%			3.44%
Supplemental data
Net assets, end of period (000’s)		$1,035			$1,083			$1,114			$952			$767			$470
Portfolio turnover rate		0.10%			0.26%			4.80%			3.91%			28.46%	h		58.42%

^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’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.

^bBased on average daily shares outstanding.

^cRecognition 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.

^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 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.

^gDoes not include expenses of the Underlying Funds in which the Fund invests. The weighted average indirect expenses of the Underlying Funds was 0.66% for the period ended June 30, 2016.

^hExcludes 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.    |   Semiannual Report FFA-5

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL HIGHLIGHTS

Franklin Founding Funds Allocation VIP Fund (continued)

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012			2011
Class 2
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$6.75			$7.42			$7.42			$8.51			$7.59			$7.71
Income from investment operationsa:
Net investment incomeb,c		0.15			0.24			0.20			0.27			0.25			0.23
Net realized and unrealized gains (losses)		(—	)d		(0.68	)		0.02			1.42			0.89			(0.35	)
Total from investment operations		0.15			(0.44	)		0.22			1.69			1.14			(0.12	)
Less distributions from:
Net investment income		(0.27	)		(0.22	)		(0.21	)		(1.13	)		(0.22	)		(—	)d
Net realized gains		(0.23	)		(0.01	)		(0.01	)		(1.65	)		—			—
Total distributions		(0.50	)		(0.23	)		(0.22	)		(2.78	)		(0.22	)		(—	)d
Net asset value, end of period		$6.40			$6.75			$7.42			$7.42			$8.51			$7.59
Total returne		2.31%			(6.21)%			2.85%			23.77%			15.33%			(1.54)%
Ratios to average net assetsf
Expenses before waiver and payments by affiliatesg		0.37%			0.36%			0.36%			0.36%			0.36%			0.36%
Expenses net of waiver and payments by affiliatesg		0.35%			0.35%			0.35%			0.35%			0.35%			0.35%
Net investment incomec		4.65%			3.26%			2.63%			3.42%			3.81%			3.19%
Supplemental data
Net assets, end of period (000’s)		$462,197			$480,715			$557,704			$547,506			$472,686			$448,101
Portfolio turnover rate		0.10%			0.26%			4.80%			3.91%			28.46%	h		58.42%

^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’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.

^bBased on average daily shares outstanding.

^cRecognition 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.

^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 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.

^gDoes not include expenses of the Underlying Funds in which the Fund invests. The weighted average indirect expenses of the Underlying Funds was 0.66% for the period ended June 30, 2016.

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

FFA-6 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL HIGHLIGHTS

Franklin Founding Funds Allocation VIP Fund (continued)

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012			2011
Class 4
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$6.87			$7.54			$7.54			$8.49			$7.58			$7.71
Income from investment operationsa:
Net investment incomeb,c		0.15			0.23			0.20			0.26			0.30			0.24
Net realized and unrealized gains (losses)		(0.01	)		(0.68	)		0.02			1.43			0.83			(0.37	)
Total from investment operations		0.14			(0.45	)		0.22			1.69			1.13			(0.13	)
Less distributions from:
Net investment income		(0.26	)		(0.21	)		(0.21	)		(0.99	)		(0.22	)		(—	)d
Net realized gains		(0.23	)		(0.01	)		(0.01	)		(1.65	)		—			—
Total distributions		(0.49	)		(0.22	)		(0.22	)		(2.64	)		(0.22	)		(—	)d
Net asset value, end of period		$6.52			$6.87			$7.54			$7.54			$8.49			$7.58
Total returne		2.11%			(6.24)%			2.75%			23.68%			15.17%			(1.67)%
Ratios to average net assetsf
Expenses before waiver and payments by affiliatesg		0.47%			0.46%			0.46%			0.46%			0.46%			0.46%
Expenses net of waiver and payments by affiliatesg		0.45%			0.45%			0.45%			0.45%			0.45%			0.45%
Net investment incomec		4.55%			3.16%			2.53%			3.32%			3.71%			3.09%
Supplemental data
Net assets, end of period (000’s)		$518,950			$550,825			$702,324			$676,781			$493,813			$2,860,928
Portfolio turnover rate		0.10%			0.26%			4.80%			3.91%			28.46%	h		58.42%

^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’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.

^bBased on average daily shares outstanding.

^cRecognition 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.

^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 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.

^gDoes not include expenses of the Underlying Funds in which the Fund invests. The weighted average indirect expenses of the Underlying Funds was 0.66% for the period ended June 30, 2016.

^hExcludes 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.    |   Semiannual Report FFA-7

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Statement of Investments, June 30, 2016 (unaudited)

Franklin Founding Funds Allocation VIP Fund
		Shares		Value
	Investments in Underlying Fundsa
	Domestic Equity 33.7%
	Franklin Mutual Shares VIP Fund, Class 1		16,253,153	$	330,914,202
	Domestic Hybrid 33.4%
	Franklin Income VIP Fund, Class 1		22,323,253		328,151,825
	Foreign Equity 32.1%
	Templeton Growth VIP Fund, Class 1		25,696,831		315,557,091
	Total Investments in Underlying Funds (Cost $784,229,704) 99.2%				974,623,118
	Other Assets, less Liabilities 0.8%				7,558,183
	Net Assets 100.0%			$	982,181,301

^aSee Note 3(d) regarding investments in Underlying Funds.

FFA-8 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Statements

Statement of Assets and Liabilities

June 30, 2016 (unaudited)

	Franklin Founding Funds Allocation VIP Fund
Assets:
Investments in Securities:
Cost – Non-controlled affiliates (Note 3d)	$	784,229,704
Value – Non-controlled affiliates (Note 3d)	$	974,623,118
Cash		4,176,196
Receivables:
Investment securities sold		5,000,000
Capital shares sold		134,283
Other assets		451
Total assets		983,934,048
Liabilities:
Payables:
Capital shares redeemed		1,106,038
Administrative fees		68,260
Distribution fees		498,299
Accrued expenses and other liabilities		80,150
Total liabilities		1,752,747
Net assets, at value	$	982,181,301
Net assets consist of:
Paid-in capital	$	810,321,282
Undistributed net investment income		20,620,378
Net unrealized appreciation (depreciation)		190,393,414
Accumulated net realized gain (loss)		(39,153,773	)
Net assets, at value	$	982,181,301
Class 1:
Net assets, at value	$	1,035,040
Shares outstanding		160,873
Net asset value and maximum offering price per share	$	6.43
Class 2:
Net assets, at value	$	462,196,500
Shares outstanding		72,251,827
Net asset value and maximum offering price per share	$	6.40
Class 4:
Net assets, at value	$	518,949,761
Shares outstanding		79,613,340
Net asset value and maximum offering price per share	$	6.52

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report FFA-9

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Statement of Operations

for the six months ended June 30, 2016 (unaudited)

	Franklin Founding Funds Allocation VIP Fund
Investment income:
Dividends from Non-controlled affiliates (Note 3d)	$	24,362,675
Expenses:
Administrative fees (Note 3a)		486,881
Distribution fees: (Note 3b)
Class 2		570,343
Class 4		903,913
Reports to shareholders		47,234
Professional fees		16,921
Trustees’ fees and expenses		2,614
Other		7,077
Total expenses		2,034,983
Expenses waived/paid by affiliates (Note 3e)		(73,848	)
Net expenses		1,961,135
Net investment income		22,401,540
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Sale of investments in Non-controlled affiliates (Note 3d)		574,880
Realized gain distribution by Non-controlled affiliates (Note 3d)		12,581,004
Net realized gain (loss)		13,155,884
Net change in unrealized appreciation (depreciation) on investments		(16,032,961	)
Net realized and unrealized gain (loss)		(2,877,077	)
Net increase (decrease) in net assets resulting from operations	$	19,524,463

FFA-10 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Statements of Changes in Net Assets

	Franklin Founding Funds Allocation VIP Fund
	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31, 2015
Increase (decrease) in net assets:
Operations:
Net investment income	$	22,401,540		$	37,413,879
Net realized gain (loss)		13,155,884			35,400,605
Net change in unrealized appreciation (depreciation)		(16,032,961	)		(142,745,103	)
Net increase (decrease) in net assets resulting from operations		19,524,463			(69,930,619	)
Distributions to shareholders from:
Net investment income:
Class 1		(42,945	)		(36,795	)
Class 2		(18,199,649	)		(15,525,526	)
Class 4		(19,362,702	)		(17,645,320	)
Net realized gains:
Class 1		(33,890	)		(1,845	)
Class 2		(15,405,932	)		(848,940	)
Class 4		(17,041,268	)		(1,013,211	)
Total distributions to shareholders		(70,086,386	)		(35,071,637	)
Capital share transactions: (Note 2)
Class 1		5,200			76,918
Class 2		5,604,467			(28,851,107	)
Class 4		(5,489,399	)		(94,741,812	)
Total capital share transactions		120,268			(123,516,001	)
Net increase (decrease) in net assets		(50,441,655	)		(228,518,257	)
Net assets:
Beginning of period		1,032,622,956			1,261,141,213
End of period	$	982,181,301		$	1,032,622,956
Undistributed net investment income included in net assets:
End of period	$	20,620,378		$	35,824,134

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report FFA-11

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Notes to Financial Statements (unaudited)

Franklin Founding Funds Allocation VIP Fund

1. Organization and Significant Accounting Policies

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of nineteen separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Franklin Founding Funds Allocation VIP 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 accounting policies of the Underlying Funds are outlined in their respective shareholder reports. A copy of the Underlying Funds’ shareholder reports is available on the U.S. Securities and Exchange Commission (SEC) website at sec.gov or at the SEC’s Public Reference Room in Washington, D.C. The Underlying Funds’ shareholder reports are not covered by this report.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

The Fund’s investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Fund calculates the net asset value (NAV) per share as of 4 p.m. Eastern time each day the New York Stock Exchange (NYSE) is open for trading. Under compliance policies and procedures approved by the Trust’s Board of Trustees (the Board), the Fund’s administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The VC provides administration and oversight of the Fund’s valuation policies and procedures, which are approved annually by the Board. Investments in the Underlying Funds are valued at their closing NAV 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 if applicable, excise taxes. As a result, no provision for U.S. federal income taxes is required.

The Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of June 30, 2016, the Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on each tax jurisdiction’s 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 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 U.S. GAAP. 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

FFA-12 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Founding Funds Allocation VIP Fund (continued)

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.

d. Accounting Estimates

The preparation of financial statements in accordance with U.S. GAAP 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, 2016, 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, 2016						Year Ended December 31, 2015
	Shares			Amount			Shares			Amount
Class 1 Shares:
Shares sold		12,476		$	83,200			19,319		$	143,699
Shares issued in reinvestment of distributions		12,138			76,835			5,229			38,640
Shares redeemed		(22,971	)		(154,835	)		(14,405	)		(105,421	)
Net increase (decrease)		1,643		$	5,200			10,143		$	76,918
Class 2 Shares:
Shares sold		3,111,474		$	21,036,796			6,246,409		$	45,291,801
Shares issued in reinvestment of distributions		5,334,219			33,605,581			2,227,819			16,374,466
Shares redeemed		(7,372,913	)		(49,037,910	)		(12,470,063	)		(90,517,374	)
Net increase (decrease)		1,072,780		$	5,604,467			(3,995,835	)	$	(28,851,107	)
Class 4 Shares:
Shares sold		771,190		$	5,227,115			2,856,721		$	21,294,894
Shares issued in reinvestment of distributions		5,670,400			36,403,970			2,494,456			18,658,531
Shares redeemed		(7,059,820	)		(47,120,484	)		(18,324,962	)		(134,695,237	)
Net increase (decrease)		(618,230	)	$	(5,489,399	)		(12,973,785	)	$	(94,741,812	)

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

Semiannual Report FFA-13

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS

Franklin Founding Funds Allocation VIP Fund (continued)

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 the Fund’s investments in the Underlying Funds.

b. Distribution Fees

The Board has adopted distribution plans for Class 2 and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to 0.35% per year of its average daily net assets of each class. The Board has agreed to limit the current rate to 0.25% per year for Class 2. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.

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. Investments in Underlying Funds

The Fund invests in Underlying Funds which are managed by Franklin Advisers, Inc. (Advisers), an affiliate of FT Services. The Fund does not invest in 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, 2016, 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 Gain (Loss)			% of Underlying Fund Shares Outstanding Held at End of Period
Non-Controlled Affiliates
Franklin Income VIP Fund, Class 1		23,343,030		1,232,945		(2,252,722	)		22,323,253	$	328,151,825	$	16,820,344	$	(2,422,697	)		5.4%
Franklin Mutual Shares VIP Fund, Class 1		17,510,038		—		(1,256,885	)		16,253,153		330,914,202		—		(140,318	)		7.8%
Templeton Growth VIP Fund, Class 1		25,118,084		1,645,407		(1,066,660	)		25,696,831		315,557,091		7,542,331		15,718,899	a		23.9%
Total										$	974,623,118	$	24,362,675	$	13,155,884

^aIncludes realized gain distributions received.

e. Waiver and Expense Reimbursements

FT Services has contractually agreed in advance to waive or limit its fees and to assume as its own expense certain expenses otherwise payable by the Fund so that the expenses (excluding distribution fees and acquired fund fees and expenses) for each class of the Fund do not exceed 0.10%, based on the average net assets of each class (other than certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations, and liquidations) until April 30, 2017. Total expenses waived or paid are not subject to recapture subsequent to the Fund’s fiscal year end.

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, 2016, there were no credits earned.

FFA-14 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS

Franklin Founding Funds Allocation VIP Fund (continued)

5. Income Taxes

At June 30, 2016, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	836,104,895
Unrealized appreciation	$	190,393,414
Unrealized depreciation		(51,875,191	)
Net unrealized appreciation (depreciation)	$	138,518,223

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

6. Investment Transactions

Purchases and sales of Underlying Funds (excluding short term securities) for the period ended June 30, 2016, aggregated $1,000,000 and $70,798,834, respectively.

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 $2 billion (Global Credit Facility) which matures on February 10, 2017. 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 0.07% based upon the unused portion of the Global Credit Facility. Effective February 12, 2016, the annual commitment fee is 0.15%. These fees are reflected in other expenses in the Statement of Operations. During the period ended June 30, 2016, 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 financial instruments and are summarized in the following fair value hierarchy:

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

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

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

The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.

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, 2016, all of the Fund’s investments in financial instruments carried at fair value were valued using Level 1 inputs. For detailed categories, see the accompanying Statement of Investments.

9. 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.

Semiannual Report FFA-15

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Tax Information (unaudited)

Franklin Founding Funds Allocation VIP Fund

During the fiscal year ended December 31, 2015, the Fund, a qualified fund of funds under Section 852(g)(2) of Internal Revenue Code (Code), received an allocation of foreign taxes paid from one or more of its underlying funds. As shown in the table below, the Fund hereby reports to shareholders the foreign source income and foreign taxes paid by underlying funds, pursuant to Section 853 of the Code. This written statement will allow shareholders of record on June 14, 2016, to treat their proportionate share of foreign taxes paid by the underlying funds as having been paid directly by them. The shareholder shall consider these amounts as foreign taxes paid in the tax year in which they receive the Fund distribution.

The following table provides a detailed analysis of foreign tax paid and foreign source income as reported by the Fund, to Class 1, Class 2, and Class 4 shareholders of record.

Class	Foreign Tax Paid Per Share	Foreign Source Income Per Share
Class 1	$0.0039	$0.0675
Class 2	$0.0039	$0.0675
Class 4	$0.0039	$0.0675

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.

FFA-16 Semiannual Report

Franklin Global Real Estate VIP Fund

This semiannual report for Franklin Global Real Estate VIP Fund covers the period ended June 30, 2016.

Class 1 Performance Summary as of June 30, 2016

The Fund’s Class 1 shares delivered a +7.05% total return* for the six-month period ended June 30, 2016.

*The Fund has a fee waiver associated with any investment in a Franklin Templeton money fund and/or Franklin Templeton fund, as applicable, contractually guaranteed through at least the Fund’s current fiscal year-end. Fund investment results reflect the fee waiver, to the extent applicable; without this reduction, the results would have been lower.

Performance reflects the Fund’s Class 1 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.

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.

Semiannual Report FGR-1

FRANKLIN GLOBAL REAL ESTATE VIP FUND

Fund Goal and Main Investments

The Fund seeks high total return. Under normal market conditions, the Fund invests at least 80% of its net assets in investments of companies located anywhere in the world that operate in the real estate sector.

Fund Risks

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

What is a REIT?

A REIT is a type of real estate company that is dedicated to owning and usually operating income-producing real estate properties such as apartments, hotels, industrial properties, office buildings or shopping centers. Equity REITs generally receive income from rents received, are generally operated by experienced property management teams and typically concentrate on a specific geographic region or property type.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. In comparison, the FTSE EPRA/NAREIT Developed Index had a +9.38% total return for the same period.¹

Economic and Market Overview

The global economy expanded during the six months under review. An improvement in commodity prices including a rally in crude oil prices, accommodative monetary policy from various global central banks, finalization of the new debt deal for Greece and encouraging Chinese trade data toward period-end boosted market sentiment. However, global equity market

volatility increased after the U.S. Federal Reserve’s (Fed’s) June decision to keep its federal funds target range unchanged, while providing a cautious stance on further interest rate hikes. In addition, global economic concerns and the U.K.’s historic referendum to leave the European Union (EU), also known as the “Brexit,” contributed to volatile global stock markets.

Oil prices fell at the beginning of the review period, largely due to strong global supply, but recovered in the period’s second half amid oilfield outages and continued demand growth. Meanwhile, commodity prices increased for most of the review period as oversupply for a host of commodities shrank and the

1. Source: 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.

FGR-2 Semiannual Report

FRANKLIN GLOBAL REAL ESTATE VIP FUND

market appeared to be on the path of rebalancing after hitting a glut-induced bottom earlier in the year. Gold prices continued to rise following the Brexit referendum as some investors turned to safe haven investing. The U.S. dollar generally depreciated against most currencies during the period, which increased returns of many foreign assets in U.S. dollar terms. In this environment, global developed market stocks overall, as measured by the MSCI World Index, rose slightly during the period.²

The U.S. economy grew moderately, as measured by gross domestic product (GDP) in 2016’s first and second quarters, driven by consumer spending and exports. A decline in private inventory investment and nonresidential fixed investment contributed to the moderation. The Fed maintained its target interest rate during the review period after raising it for the first time in nine years at its December meeting. The Fed kept its target rate unchanged in its June meeting mainly due to a substantial slowdown in job additions toward period-end. The Fed expects economic conditions to evolve in a manner that could warrant only gradual increases in the federal funds rate.

In Europe, slower U.K. economic growth continued in 2016’s first quarter as output slowed in construction, production and agriculture. Immediate effects of the Brexit materialized as U.K. stocks significantly declined and the pound sterling hit a three-decade low amid intensified selling. Credit rating agencies Standard & Poor’s and Fitch also downgraded the U.K.’s credit rating. In the eurozone, despite investors’ concerns about banking sector weakness, low corporate earnings and post-Brexit political repercussions, some regions benefited due to rising consumer spending resulting from a cheaper euro, low inflation and signs of sustained economic growth. The eurozone’s annual inflation rate remained in negative territory for most of the review period; however, it rose marginally above zero in June.

Japan’s economy posted mixed results, contracting in 2015’s fourth quarter stemming from declining private and household consumption. However, the economy expanded during 2016’s first quarter as private consumption increased and business investment decreased less than initially believed. The Bank of Japan (BOJ) took several actions during the review period. In January, to boost lending and support inflation, the BOJ introduced a negative interest rate on excess reserves held at the central bank by financial institutions. In April, the BOJ further reduced its GDP and inflation forecasts for fiscal year 2016, and decided against additional quantitative easing measures. However, after the U.K.’s vote in June to leave the EU, the BOJ

Top 10 Countries
6/30/16
	% of Total Net Assets
U.S.		55.9%
Japan		11.1%
Hong Kong		6.5%
Australia		6.3%
U.K.		4.5%
France		4.1%
Germany		3.1%
Canada		1.9%
Singapore		1.9%
Sweden		1.6%

hinted at carrying out flexible open market operations to stabilize its financial markets.

In emerging markets, economic growth generally moderated during the review period. Brazil’s economy witnessed its longest recession since the 1930s amid political and economic turmoil, while Russia’s economy continued to contract. The Bank of Russia reduced its key interest rate in an attempt to revive its economy. China’s economic growth slowed marginally in 2016’s first quarter compared to the previous quarter, but remained largely in line with the government’s target. The People’s Bank of China cut its cash reserve requirement ratio for the country’s banks and effectively devalued the renminbi against the U.S. dollar to the lowest level in more than five years. Overall, emerging market stocks, as measured by the MSCI Emerging Markets Index, rose for the six-month period.²

Global Real Estate Market Overview

According to the FTSE EPRA/NAREIT Developed Index, in U.S. dollar terms, Canada outpaced the index and led global real estate markets. Australia, New Zealand and Germany also posted solid results. In contrast, some markets represented in the index lost value, including the U.K., Italy, the Guernsey Islands and Spain. At period-end, the U.S. was the index’s largest country weighting.

Investment Strategy

We seek to limit price volatility by investing across markets and property types and seek to provide a consistently high level of income in our pursuit of high total return. When selecting investments for the Fund’s portfolio, we apply a “bottom-up”

2. Please see Index Descriptions following the Fund Summaries.

Semiannual Report FGR-3

FRANKLIN GLOBAL REAL ESTATE VIP FUND

stock selection process that incorporates macro-level views in the evaluation process. Our portfolio construction process combines bottom-up analysis of individual stock and real estate market fundamentals and top-down macro overlays to provide country/regional, property type, and company size perspectives in identifying international/local cyclical and thematic trends that highlight investment opportunities.

Manager’s Discussion

During the six months under review, key contributors to the Fund’s performance relative to the FTSE EPRA/NAREIT Developed Index included an overweighting in the specialty sector, with holdings such as U.S.-based data center company CoreSite.³ Shares of CoreSite rose during the period, and significantly outperformed the specialty sector and the benchmark. The company reported strong financial results in its first quarter report with strong gains during the trailing one-year period. Investors also seemed encouraged by leasing demand for its new data centers as well as the company’s conservative debt level. An underweighting in the diversified sector also boosted results.⁴ We bought German residential property operator ADO Properties at the initial public offering, after we found the company attractive in relation to net asset value, asset quality and location in comparison to the German residential peer group. ADO Properties performed well in our internal analysis and based on analysts’ anticipation of potential further yield compression in German residential valuations, as indicated by transactions in the market. The company outperformed its peer group operationally, with stronger-than-average rental growth and projected 5% growth for the full year 2016. The projected growth seemed low to us after ADO Properties achieved 5.9% in the first quarter of 2016. Within the shopping center sector, the Fund’s investment in U.S.-based shopping center operator Regency Centers also supported returns.⁵ The stock generated solid returns during the reporting period that were well above the average for U.S. retail REITs and also outperformed the benchmark. Regency’s financial results for the first quarter of 2016 were positive, in our view, as operating profit grew faster than average among shopping center REITs. The company’s management team also raised the earnings guidance for the full year 2016.

In contrast, key detractors from the Fund’s relative performance included stock selection in the office space sector.⁶ Shares of

U.K.-based office REIT Derwent London lagged the overall property benchmark over the reporting period along with other U.K. property stocks after Britain unexpectedly voted to leave the European Union. This development unraveled amid political turmoil and effectively caused the British pound to decline versus the U.S. dollar during the period. Fundamentally, Derwent has been showing healthy demand, strong rental growth and low vacancy in the West End and fringes of London City. The company traded at what we considered an attractive discount, with a very conservative balance sheet. In our opinion, Derwent has one of the best management teams in the European property sector, and we believed the shares were oversold. The Fund’s positioning in the retail property sector also weighed on results.⁷ Shares of U.K.-based Land Securities Group also sold off over the reporting period due to the unexpected Brexit vote and its negative effect on the value of the British pound. The company traded at what we considered an attractive discount, much lower than its 10-year historical average. Land Securities

Top 10 Holdings
6/30/16
Company Sector/Industry, Country	% of Total Net Assets
Simon Property Group Inc. Retail REITs, U.S.		5.8%
Unibail-Rodamco SE Retail REITs, France		2.7%
Mitsui Fudosan Co. Ltd. Diversified Real Estate Activities, Japan		2.5%
Public Storage Specialized REITs, U.S.		2.4%
Ventas Inc. Health Care REITs, U.S.		2.2%
Prologis Inc. Industrial REITs, U.S.		2.2%
Boston Properties Inc. Office REITs, U.S.		2.1%
Welltower Inc. Health Care REITs, U.S.		2.1%
Mitsubishi Estate Co. Ltd. Diversified Real Estate Activities, Japan		2.0%
Scentre Group Retail REITs, Australia		2.0%

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).

3. Specialty holdings are in office REITs and specialized REITs in the SOI.

4. Diversified holdings are in diversified real estate activities, diversified real estate activities, diversified REITs, real estate development and real estate operating companies and residential REITs in the SOI.

5. Shopping center holdings are in diversified REITs, residential REITs and retail REITs in the SOI.

6. Office space holdings are in office REITs and real estate operating companies in the SOI.

7. Retail property holdings are in diversified REITs, real estate operating companies and retail REITs in the SOI.

FGR-4 Semiannual Report

FRANKLIN GLOBAL REAL ESTATE VIP FUND

had a conservative balance sheet featuring strong loan-to-value metrics with limited development risk that, along with a strong management team, made the company, in our opinion, well positioned to acquire assets if distressed properties became available in the U.K. Within the apartments sector, our overweighted position in Essex Property Trust, a West Coast apartment company, detracted from performance during the reporting period.⁸ Shares of Essex declined and underperformed the apartment sector which also underperformed the global benchmark. The company reported strong financial results in its first quarter report, but investors had growing concerns about decelerating rent growth rates, particularly in the San Francisco Bay Area, where supply also increased in some submarkets.

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, 2016, 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 significant investment in securities with non-U.S. currency exposure. However, one cannot expect the same result in future periods.

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

The foregoing information reflects our analysis, opinions and portfolio holdings as of June 30, 2016, 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.

8. Apartment holdings are in real estate operating companies, residential REITs and retail REITs in the SOI.

Semiannual Report FGR-5

FRANKLIN GLOBAL REAL ESTATE VIP FUND

Class 1 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 × $7.50 = $64.50.

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

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 1	Beginning Account Value 1/1/16		Ending Account Value 6/30/16		Fund-Level Expenses Incurred During Period* 1/1/16–6/30/16
Actual	$	1,000	$	1,070.50	$	5.77
Hypothetical (5% return before expenses)	$	1,000	$	1,019.29	$	5.62

*Expenses are calculated using the most recent six-month annualized expense ratio, net of expense waivers, for the Fund’s Class 1 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 182/366 to reflect the one-half year period.

FGR-6 Semiannual Report

SUPPLEMENT DATED JULY 18, 2016

TO THE PROSPECTUSES DATED MAY 1, 2016

OF

FRANKLIN GLOBAL REAL ESTATE VIP FUND

FRANKLIN SMALL CAP VALUE VIP FUND

(Series of Franklin Templeton Variable Insurance Products Trust)

IMPORTANT NOTICE REGARDING CHANGE IN INVESTMENT POLICY

The prospectus of Franklin Small Cap Value VIP Fund is amended as follows:

I.  The first paragraph under the “FUND SUMMARIES” – “Principal Investment Strategies” section, on page FSV-S1, is replaced with the following:

Under normal market conditions, the Fund invests at least 80% of its net assets in investments of small-capitalization (small-cap) companies. Small-cap companies are companies with market capitalizations (the total market value of a company’s outstanding stock) under $3.5 billion at the time of purchase. Effective September 30, 2016, the definition of small-cap companies will be revised to read as follows: Small-cap companies are companies with market capitalizations (the total market value of a company’s outstanding stock) not exceeding either: 1) the highest market capitalization in the Russell 2000 Index; or 2) the 12-month average of the highest market capitalization in the Russell 2000 Index, whichever is greater, at the time of purchase. As of May 31, 2016, the highest market capitalization in the Russell 2000 Index was $5.96 billion.

II.  The “Performance” section, on page FSV-S3, is revised to add the following:

	1 Year	5 Years	10 Years
Russell 2000 Value Index (index reflects no deduction for fees, expenses or taxes) 1	-7.47%	7.67%	5.58%

1. Performance figures as of December 31, 2015. The Russell 2000 Value Index is replacing the Russell 2500 Value Index as the Fund’s benchmark. The investment manager believes the composition of the Russell 2000 Value Index more accurately reflects the Fund’s holdings.

No one index is representative of the Fund’s portfolio.

III.  Effective September 30, 2016, the first paragraph under the “FUND DETAILS” – “Principal Investment Policies and Practices” section on page FSV D-1 is replaced with the following:

Under normal market conditions, the Fund invests at least 80% of its net assets in investments of small-capitalization (small-cap) companies. Shareholders will be given at least 60 days’ advance notice of any change to this 80% policy. Small-cap companies are companies with market capitalizations (the total market value of a company’s outstanding stock) under $3.5 billion at the time of purchase. Effective September 30, 2016, the definition of small-cap companies will be revised to read as follows: Under normal market conditions, the Fund invests at least 80% of its net assets in investments of small-capitalization (small-cap) companies. Small-cap companies are companies with market capitalizations (the total market value of a company’s outstanding stock) not exceeding either: 1) the highest market

FGR-7

capitalization in the Russell 2000 Index; or 2) the 12-month average of the highest market capitalization in the Russell 2000 Index, whichever is greater, at the time of purchase. As of May 31, 2016, the highest market capitalization in the Russell 2000 Index was $5.96 billion.

The prospectus of Franklin Global Real Estate VIP Fund is amended as follows:

The “FUND DETAILS” – “Management” section, on page FGR D-6, is revised to show the address of Franklin Templeton Institutional, LLC (FT Institutional) as 280 Park Avenue, New York, NY 10017.

Please keep this supplement with your prospectuses for future reference.

FGR-8

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Highlights

Franklin Global Real Estate VIP Fund

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012		2011
Class 1
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$15.93			$16.36			$14.29			$14.66			$11.47		$13.12
Income from investment operationsa:
Net investment incomeb		0.16			0.24			0.26			0.24			0.25		0.21
Net realized and unrealized gains (losses)		0.96			(0.12	)		1.92			0.13			2.94		(0.83	)
Total from investment operations		1.12			0.12			2.18			0.37			3.19		(0.62	)
Less distributions from net investment income and net foreign currency gains		(0.24	)		(0.55	)		(0.11	)		(0.74	)		—		(1.03	)
Net asset value, end of period		$16.81			$15.93			$16.36			$14.29			$14.66		$11.47
Total returnc		7.05%			0.83%			15.27%			2.61%			27.81%		(5.45)%
Ratios to average net assetsd
Expenses before waiver and payments by affiliates		1.12%			1.11%			1.10%			1.10%			1.11%		1.12%
Expenses net of waiver and payments by affiliates		1.12%	e		1.11%			1.10%	f		1.10%			1.07%		0.98%
Net investment income		1.99%			1.49%			1.66%			1.62%			1.92%		1.64%
Supplemental data
Net assets, end of period (000’s)		$31,716			$32,161			$35,686			$34,276			$38,329		$33,670
Portfolio turnover rate		13.82%			23.35%			16.67%			21.29%			22.29%		28.95%

^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’s shares in relation to income earned and/or fluctuating fair 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 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 waiver and payments by affiliates rounds to less than 0.01%.

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

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report FGR-9

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL HIGHLIGHTS

Franklin Global Real Estate VIP Fund (continued)

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012		2011
Class 2
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$15.52			$15.95			$13.93			$14.27			$11.20		$12.83
Income from investment operationsa:
Net investment incomeb		0.13			0.20			0.21			0.20			0.21		0.17
Net realized and unrealized gains (losses)		0.94			(0.12	)		1.88			0.13			2.86		(0.81	)
Total from investment operations		1.07			0.08			2.09			0.33			3.07		(0.64	)
Less distributions from net investment income and net foreign currency gains		(0.19	)		(0.51	)		(0.07	)		(0.67	)		—		(0.99	)
Net asset value, end of period		$16.40			$15.52			$15.95			$13.93			$14.27		$11.20
Total returnc		6.93%			0.57%			15.01%			2.32%			27.41%		(5.65)%
Ratios to average net assetsd
Expenses before waiver and payments by affiliates		1.37%			1.36%			1.35%			1.35%			1.36%		1.37%
Expenses net of waiver and payments by affiliates		1.37%	e		1.36%			1.35%	f		1.35%			1.32%		1.23%
Net investment income		1.74%			1.24%			1.41%			1.37%			1.67%		1.39%
Supplemental data
Net assets, end of period (000’s)		$284,040			$287,473			$333,554			$328,825			$344,044		$292,356
Portfolio turnover rate		13.82%			23.35%			16.67%			21.29%			22.29%		28.95%

^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’s shares in relation to income earned and/or fluctuating fair 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 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 waiver and payments by affiliates rounds to less than 0.01%.

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

FGR-10 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Statement of Investments, June 30, 2016 (unaudited)

Franklin Global Real Estate VIP Fund
		Country		Shares		Value
	Common Stocks 99.3%
	Diversified Real Estate Activities 8.7%
	CapitaLand Ltd.		Singapore		1,311,462	$	2,989,337
	City Developments Ltd.		Singapore		204,100		1,233,526
	Mitsubishi Estate Co. Ltd.		Japan		348,360		6,317,872
	Mitsui Fudosan Co. Ltd.		Japan		355,857		8,033,702
	New World Development Co. Ltd.		Hong Kong		2,558,000		2,591,482
	Sun Hung Kai Properties Ltd.		Hong Kong		291,533		3,494,586
	Tokyo Tatemono Co. Ltd.		Japan		158,207		1,871,982
	The Wharf Holdings Ltd.		Hong Kong		180,906		1,093,581
							27,626,068
	Diversified REITs 4.9%
	Activia Properties Inc.		Japan		309		1,627,654
a	Activia Properties Inc., 144A		Japan		98		516,214
	Hulic REIT Inc.		Japan		922		1,676,607
	Kenedix Office Investment Corp.		Japan		458		2,718,509
	Land Securities Group PLC		United Kingdom		262,881		3,641,960
	Spirit Realty Capital Inc.		United States		181,300		2,315,201
	United Urban Investment Corp.		Japan		885		1,586,188
	VEREIT Inc.		United States		127,900		1,296,906
							15,379,239
	Health Care REITs 6.6%
	HCP Inc.		United States		79,241		2,803,547
	OMEGA Healthcare Investors Inc.		United States		68,300		2,318,785
	Physicians Realty Trust		United States		90,200		1,895,102
	Ventas Inc.		United States		97,287		7,084,439
	Welltower Inc.		United States		87,164		6,639,282
							20,741,155
	Homebuilding 0.3%
	D.R. Horton Inc.		United States		32,680		1,028,766
	Hotel & Resort REITs 2.5%
	Hoshino Resorts REIT Inc.		Japan		104		1,302,077
	Host Hotels & Resorts Inc.		United States		204,467		3,314,410
	Summit Hotel Properties Inc.		United States		141,600		1,874,784
	Sunstone Hotel Investors Inc.		United States		125,112		1,510,102
							8,001,373
	Hotels, Resorts & Cruise Lines 0.6%
	Hilton Worldwide Holdings Inc.		United States		32,390		729,747
	Melia Hotels International SA		Spain		97,629		1,047,331
							1,777,078
	Industrial REITs 6.7%
	Duke Realty Corp.		United States		147,800		3,940,348
	First Industrial Realty Trust Inc.		United States		98,200		2,731,924
	Goodman Group		Australia		534,838		2,836,432
	Mapletree Logistics Trust		Singapore		1,508,730		1,120,192
	Nippon Prologis REIT Inc.		Japan		955		2,321,036
b	PLA Administradora Industrial S de RL de CV		Mexico		501,100		852,807
a,b	PLA Administradora Industrial S de RL de CV, 144A		Mexico		303,870		517,147
	Prologis Inc.		United States		138,564		6,795,178
							21,115,064

Semiannual Report FGR-11

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Global Real Estate VIP Fund (continued)

		Country		Shares		Value
	Common Stocks (continued)
	Office REITs 11.7%
	Alexandria Real Estate Equities Inc.		United States		36,107	$	3,737,797
	Boston Properties Inc.		United States		50,880		6,711,072
	Daiwa Office Investment Corp.		Japan		67		395,091
a	Daiwa Office Investment Corp., 144A		Japan		172		1,014,263
	Derwent London PLC		United Kingdom		60,999		2,125,311
	Dexus Property Group		Australia		343,335		2,309,964
	Great Portland Estates PLC		United Kingdom		251,726		2,102,856
	Highwoods Properties Inc.		United States		61,917		3,269,218
	Japan Real Estate Investment Corp.		Japan		478		2,934,418
	Kilroy Realty Corp.		United States		43,618		2,891,437
	Mack-Cali Realty Corp.		United States		87,500		2,362,500
	SL Green Realty Corp.		United States		19,193		2,043,479
	Vornado Realty Trust		United States		49,368		4,942,724
							36,840,130
	Real Estate Development 2.9%
	Cheung Kong Property Holdings Ltd.		Hong Kong		758,500		4,741,572
	China Overseas Land & Investment Ltd.		China		428,657		1,353,633
	China Resources Land Ltd.		China		456,000		1,063,821
	Sino Land Co. Ltd.		Hong Kong		1,194,288		1,948,803
							9,107,829
	Real Estate Operating Companies 7.0%
	ADO Properties SA		Germany		21,040		807,325
a	ADO Properties SA, 144A		Germany		40,981		1,572,481
	Deutsche Euroshop AG		Germany		33,797		1,541,596
a	Deutsche Euroshop AG, 144A		Germany		6,999		319,248
	Fabege AB		Sweden		75,020		1,266,609
c	First Capital Realty Inc.		Canada		89,600		1,536,674
	Global Logistic Properties Ltd.		Singapore		522,070		699,659
	Hemfosa Fastigheter AB		Sweden		157,732		1,613,145
b	Hispania Activos Inmobiliarios SOCIMI SA		Spain		81,971		955,329
	Hongkong Land Holdings Ltd.		Hong Kong		193,143		1,176,241
	Hufvudstaden AB, A		Sweden		135,616		2,118,123
	Hysan Development Co. Ltd.		Hong Kong		431,347		1,912,539
	Unite Group PLC		United Kingdom		151,949		1,256,174
	Vonovia SE		Germany		150,503		5,470,914
							22,246,057
	Residential REITs 10.0%
	Apartment Investment & Management Co., A		United States		80,005		3,533,021
	AvalonBay Communities Inc.		United States		25,567		4,612,031
	Canadian Apartment Properties REIT		Canada		103,700		2,661,320
	Education Realty Trust Inc.		United States		51,500		2,376,210
	Equity Lifestyle Properties Inc.		United States		50,200		4,018,510
	Equity Residential		United States		64,428		4,437,801
	Essex Property Trust Inc.		United States		6,405		1,460,916
	Invincible Investment Corp.		Japan		4,399		2,760,157
	Post Properties Inc.		United States		33,000		2,014,650
	UDR Inc.		United States		103,531		3,822,365
							31,696,981

FGR-12 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Global Real Estate VIP Fund (continued)

		Country		Shares		Value
	Common Stocks (continued)
	Retail REITs 29.1%
	British Land Co. PLC		United Kingdom		303,431	$	2,455,891
	Equity One Inc.		United States		77,300		2,487,514
	Eurocommercial Properties NV, IDR		Netherlands		39,855		1,700,915
	Federal Realty Investment Trust		United States		21,009		3,478,040
	General Growth Properties Inc.		United States		92,917		2,770,785
	Hammerson PLC		United Kingdom		350,553		2,514,759
	Kimco Realty Corp.		United States		147,369		4,624,439
	Klepierre		France		100,200		4,431,997
	Link REIT		Hong Kong		521,288		3,547,617
	The Macerich Co.		United States		16,464		1,405,861
	National Retail Properties Inc.		United States		65,000		3,361,800
	Realty Income Corp.		United States		83,503		5,791,768
	Regency Centers Corp.		United States		54,393		4,554,326
	Scentre Group		Australia		1,692,033		6,209,470
	Simon Property Group Inc.		United States		84,508		18,329,785
	Smart Real Estate Investment Trust		Canada		64,100		1,895,070
	Taubman Centers Inc.		United States		29,682		2,202,405
	Unibail-Rodamco SE		France		33,004		8,559,251
	Vicinity Centres		Australia		1,459,695		3,614,771
	Weingarten Realty Investors		United States		71,410		2,914,956
	Westfield Corp.		Australia		626,150		4,974,032
							91,825,452
	Specialized REITs 8.3%
	Coresite Realty Corp.		United States		34,487		3,058,652
	CubeSmart		United States		110,184		3,402,482
	CyrusOne Inc.		United States		39,000		2,170,740
	Digital Realty Trust Inc.		United States		47,243		5,149,015
	Extra Space Storage Inc.		United States		49,304		4,562,592
	Public Storage		United States		30,214		7,722,396
							26,065,877
	Total Common Stocks (Cost $195,715,530)						313,451,069
	Short Term Investments 1.0%
				Principal Amount
	Repurchase Agreements (Cost $1,721,221) 0.5%
d	Joint Repurchase Agreement, 0.382%, 7/01/16 (Maturity Value $1,721,239)		United States	$	1,721,221		1,721,221
	BNP Paribas Securities Corp. (Maturity Value $558,249) Deutsche Bank Securities Inc. (Maturity Value $172,107) HSBC Securities (USA) Inc. (Maturity Value $949,022) Merrill Lynch, Pierce, Fenner & Smith Inc. (Maturity Value $41,861)
	Collateralized by U.S. Government Agency Securities, 0.187% - 5.50%, 7/18/16 - 5/06/21; U.S. Government Agency Securities, Strips, 6/01/17; and U.S. Treasury Note, 0.75% - 3.25%, 11/30/16 - 9/30/20 (valued at $1,756,368)

Semiannual Report FGR-13

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Global Real Estate VIP Fund (continued)

		Country		Shares		Value
e	Investments from Cash Collateral Received for Loaned Securities 0.5%
	Money Market Funds (Cost $1,229,000) 0.4%
b,f	Institutional Fiduciary Trust Money Market Portfolio				1,229,000	$	1,229,000
				Principal Amount
	Repurchase Agreements (Cost $307,431) 0.1%
d	Joint Repurchase Agreement, 0.40%, 7/01/16 (Maturity Value $307,434)		United States	$	307,431		307,431
	BNP Paribas Securities Corp.
	Collateralized by gU.S. Treasury Bill, 10/27/16; U.S. Treasury Bond, 8.75% - 9.00%, 11/15/18 - 5/15/20; U.S. Treasury Note, 0.363% - 4.75%, 9/15/16 - 3/31/21; U.S. Treasury Note, Index Linked, 2.625%, 7/15/17; and U.S. Treasury Strips, 8/15/16 - 2/15/21 (valued at $313,580)
	Total Investments from Cash Collateral Received for Loaned Securities (Cost $1,536,431)						1,536,431
	Total Investments (Cost $198,973,182) 100.3%						316,708,721
	Other Assets, less Liabilities (0.3)%						(952,494	)
	Net Assets 100.0%					$	315,756,227

See Abbreviations on page FGR-25.

^aSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At June 30, 2016, the aggregate value of these securities was $3,939,353, representing 1.2% of net assets.

^bNon-income producing.

^cA portion or all of the security is on loan at June 30, 2016. See Note 1(d).

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

^eSee Note 1(d) regarding securities on loan.

^fSee Note 3(e) regarding investments in affiliated management investment companies.

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

FGR-14 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Statements

Statement of Assets and Liabilities

June 30, 2016 (unaudited)

	Franklin Global Real Estate VIP Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	195,715,530
Cost - Non-controlled affiliates (Note 3e)		1,229,000
Cost - Repurchase agreements		2,028,652
Total cost of investments	$	198,973,182
Value - Unaffiliated issuers	$	313,451,069
Value - Non-controlled affiliates (Note 3e)		1,229,000
Value - Repurchase agreements		2,028,652
Total value of investments (Includes securities loaned in the amount of $1,459,808)		316,708,721
Foreign currency, at value (cost $50,238)		50,789
Receivables:
Investment securities sold		1,338,440
Capital shares sold		6,412
Dividends		1,084,626
European Union tax reclaims		59,682
Other assets		141
Total assets		319,248,811
Liabilities:
Payables:
Investment securities purchased		1,139,626
Capital shares redeemed		325,407
Management fees		266,533
Distribution fees		116,497
Payable upon return of securities loaned		1,536,431
Accrued expenses and other liabilities		108,090
Total liabilities		3,492,584
Net assets, at value	$	315,756,227
Net assets consist of:
Paid-in capital	$	498,874,531
Distributions in excess of net investment income		(1,130,107	)
Net unrealized appreciation (depreciation)		117,740,515
Accumulated net realized gain (loss)		(299,728,712	)
Net assets, at value	$	315,756,227
Class 1:
Net assets, at value	$	31,716,093
Shares outstanding		1,886,767
Net asset value and maximum offering price per share	$	16.81
Class 2:
Net assets, at value	$	284,040,134
Shares outstanding		17,321,804
Net asset value and maximum offering price per share	$	16.40

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report FGR-15

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Statement of Operations

for the six months ended June 30, 2016 (unaudited)

	Franklin Global Real Estate VIP Fund
Investment income:
Dividends	$	4,728,344
Interest		3,133
Income from securities loaned (net of fees and rebates)		6,346
Total investment income		4,737,823
Expenses:
Management fees (Note 3a)		1,604,148
Distribution fees - Class 2 (Note 3c)		343,524
Custodian fees (Note 4)		9,886
Reports to shareholders		44,663
Professional fees		38,361
Trustees’ fees and expenses		771
Other		6,724
Total expenses		2,048,077
Expenses waived/paid by affiliates (Note 3e)		(501	)
Net expenses		2,047,576
Net investment income		2,690,247
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		10,126,494
Realized gain distributions from REITs		1,268,398
Foreign currency transactions		38,582
Net realized gain (loss)		11,433,474
Net change in unrealized appreciation (depreciation) on:
Investments		6,279,495
Translation of other assets and liabilities denominated in foreign currencies		6,851
Net change in unrealized appreciation (depreciation)		6,286,346
Net realized and unrealized gain (loss)		17,719,820
Net increase (decrease) in net assets resulting from operations	$	20,410,067

FGR-16 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Statements of Changes in Net Assets

	Franklin Global Real Estate VIP Fund
	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31, 2015
Increase (decrease) in net assets:
Operations:
Net investment income	$	2,690,247		$	4,420,691
Net realized gain (loss)		11,433,474			25,460,067
Net change in unrealized appreciation (depreciation)		6,286,346			(27,803,613	)
Net increase (decrease) in net assets resulting from operations		20,410,067			2,077,145
Distributions to shareholders from:
Net investment income:
Class 1		(442,226	)		(1,164,404	)
Class 2		(3,274,922	)		(10,130,962	)
Total distributions to shareholders		(3,717,148	)		(11,295,366	)
Capital share transactions: (Note 2)
Class 1		(2,109,365	)		(2,627,260	)
Class 2		(18,461,447	)		(37,760,478	)
Total capital share transactions		(20,570,812	)		(40,387,738	)
Net increase (decrease) in net assets		(3,877,893	)		(49,605,959	)
Net assets:
Beginning of period		319,634,120			369,240,079
End of period	$	315,756,227		$	319,634,120
Distributions in excess of net investment income included in net assets:
End of period	$	(1,130,107	)	$	(103,206	)

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report FGR-17

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Notes to Financial Statements (unaudited)

Franklin Global Real Estate VIP Fund

1. Organization and Significant Accounting Policies

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of nineteen separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Franklin Global Real Estate VIP 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, 2016, 60.46% of the Fund’s shares were held through one insurance company. Investment activities of these insurance company separate accounts could have a material impact on the Fund. The Fund offers two classes of shares: Class 1 and Class 2. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

The Fund’s investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Fund calculates the net asset value (NAV) per share as of 4 p.m. Eastern time each day the New York Stock Exchange (NYSE) is open for trading. Under compliance policies and procedures approved by the Trust’s Board of Trustees (the Board), the Fund’s administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The VC provides administration and oversight of the Fund’s valuation policies and procedures, which are approved annually by the Board. Among other things, these procedures allow the Fund to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

Equity securities listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded

or as of 4 p.m. Eastern time whichever is earlier. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the day that the value of the security is determined. Over-the-counter (OTC) securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.

Investments in open-end mutual funds are valued at the closing NAV. Repurchase agreements are valued at cost, which approximates fair value.

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

Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 4 p.m. Eastern time. In addition, trading in certain foreign markets may not take place on every NYSE business day. 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

FGR-18 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Global Real Estate VIP Fund (continued)

the NYSE. In order to minimize the potential for these differences, the VC monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depositary Receipts, futures contracts and exchange traded funds). These price movements are measured against 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.

When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the NYSE is closed, which could result in differences between the value of the Fund’s portfolio securities on the last business day and the last calendar day of the reporting period. Any significant security valuation changes due to an open foreign market are adjusted and reflected by the Fund for financial reporting purposes.

b. Foreign Currency Translation

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

The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments in 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 fair 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%. Repurchase agreements are subject to the terms of Master Repurchase Agreements (MRAs) with approved counterparties (sellers). The MRAs contain various provisions, including but not limited to events of default and maintenance of collateral for repurchase agreements. In the event of default by either the seller or the Fund, certain MRAs may permit the non-defaulting party to net and close-out all transactions, if any, traded under such agreements. The Fund may sell securities it holds as collateral and apply the proceeds towards the repurchase price and any other amounts owed by the seller to the Fund in the event of default by the seller. This could involve costs or delays in addition to a loss on the securities if their value falls below the repurchase price owed by the seller. The joint repurchase agreement held by the Fund at period end, as indicated in the Statement of Investments, had been entered into on June 30, 2016.

d. Securities Lending

The Fund participates in an agency based securities lending program to earn additional income. The Fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the fair value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the fair value of loaned securities, as determined at the

Semiannual Report FGR-19

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Global Real Estate VIP Fund (continued)

1. Organization and Significant Accounting Policies (continued)

d. Securities Lending (continued)

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 deposited into a joint cash account with other funds and is used to invest in a money market fund managed by Franklin Advisers, Inc., an affiliate of the Fund, and/or a joint repurchase agreement. The Fund may receive income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. Income from securities loaned, net of fees paid to the securities lending agent and/or third-party vendor, is reported separately in the Statement of Operations. 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. If the borrower defaults on its obligation to return the securities loaned, the Fund has the right to repurchase the securities in the open market using the collateral received. The securities lending agent has agreed to indemnify the Fund in the event of default by a third party borrower.

e. Income and Deferred Taxes

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

The Fund may be subject to foreign taxation related to income received, capital gains on the sale of securities and certain foreign currency transactions in the foreign jurisdictions in which it invests. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests. When a capital gain tax is determined to apply, the Fund records an estimated deferred tax liability in an amount that would be payable if the securities were disposed of on the valuation date. As a result of several court cases, in certain countries across the European Union, the Fund filed additional tax reclaims for previously withheld taxes on dividends earned in those countries (EU reclaims). These additional filings are subject to various administrative proceedings by the local jurisdictions’ tax authorities within the European Union, as well as a number of related judicial proceedings. Income recognized,

if any, for EU reclaims is reflected as other income in the Statement of Operations and any related receivable, if any, is reflected as European Union tax reclaims in the Statement of Assets and Liabilities. When uncertainty exists as to the ultimate resolution of these proceedings, the likelihood of receipt of these EU reclaims, and the potential timing of payment, no amounts are reflected in the financial statements.

The Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of June 30, 2016, the Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on each tax jurisdiction’s statute of limitation.

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. Dividend income is recorded on the ex-dividend date except for certain dividends from foreign securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Fund. 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 U.S. GAAP. 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

FGR-20 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Global Real Estate VIP Fund (continued)

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. For Real Estate Investment Trust (REIT) securities, the Fund records ROC estimates, if any, on the ex-dividend date and are adjusted once actual tax designations are known.

g. Accounting Estimates

The preparation of financial statements in accordance with U.S. GAAP 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. 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, 2016, 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, 2016						Year Ended December 31, 2015
	Shares			Amount			Shares			Amount
Class 1 Shares:
Shares sold		4,155		$	68,358			18,700		$	311,427
Shares issued in reinvestment of distributions		27,081			442,226			74,498			1,164,404
Shares redeemed		(163,843	)		(2,619,949	)		(255,495	)		(4,103,091	)
Net increase (decrease)		(132,607	)	$	(2,109,365	)		(162,297	)	$	(2,627,260	)
Class 2 Shares:
Shares sold		206,324		$	3,246,851			502,026		$	8,041,404
Shares issued in reinvestment of distributions		205,582			3,274,922			664,325			10,130,962
Shares redeemed		(1,617,022	)		(24,983,220	)		(3,555,406	)		(55,932,844	)
Net increase (decrease)		(1,205,116	)	$	(18,461,447	)		(2,389,055	)	$	(37,760,478	)

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

Semiannual Report FGR-21

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Global Real Estate VIP Fund (continued)

3. Transactions With Affiliates (continued)

a. Management Fees

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

Annualized Fee Rate	Net Assets
1.050%	Up to and including $500 million
0.950%	Over $500 million, up to and including $1 billion
0.900%	Over $1 billion, up to and including $1.5 billion
0.850%	Over $1.5 billion, up to and including $6.5 billion
0.830%	Over $6.5 billion, up to and including $11.5 billion
0.810%	Over $11.5 billion, up to and including $16.5 billion
0.790%	Over $16.5 billion, up to and including $19 billion
0.780%	Over $19 billion, up to and including $21.5 billion
0.770%	In excess of $21.5 billion

For the period ended June 30, 2016, the annualized effective investment management fee rate was 1.050% of the Fund’s average daily net assets.

b. Administrative Fees

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

c. Distribution Fees

The Board has adopted a distribution plan for Class 2 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s compensation distribution plan, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to 0.35% per year of its average daily net assets. The Board has agreed to limit the current rate to 0.25% per year for Class 2. The plan year, for purposes of monitoring compliance with the maximum annual plan rate, is February 1 through January 31.

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. Investments in Affiliated Management Investment Companies

The Fund invests in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Fund are waived on assets invested in the affiliated management investment companies, as noted in the Statement of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate.

FGR-22 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Global Real Estate VIP Fund (continued)

	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 Gain (Loss)		% of Affiliated Fund Shares Outstanding Held at End of Period
Non-Controlled Affiliates
Institutional Fiduciary Trust Money Market Portfolio		—		4,176,000		(2,947,000	)		1,229,000	$	1,229,000	$	—	$	—		—%a

^aRounds to less than 0.1%.

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, 2016, there were no credits earned.

5. Income Taxes

For tax purposes, capital losses may be carried over to offset future capital gains. Capital loss carryforwards with no expiration, if any, must be fully utilized before those losses with expiration dates.

At December 31, 2015, capital loss carryforwards were as follows:

Capital loss carryforwards subject to expiration:
2016	$	91,815,455
2017		207,448,609
2018		2,192,369
Total capital loss carryforwards	$	301,456,433

At June 30, 2016, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	214,182,571
Unrealized appreciation	$	121,901,115
Unrealized depreciation		(19,374,965	)
Net unrealized appreciation (depreciation)	$	102,526,150

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

6. Investment Transactions

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2016, aggregated $42,418,201 and $60,124,891, respectively.

At June 30, 2016, in connection with securities lending transactions, the Fund loaned equity investments and received $1,536,431 of cash collateral. The gross amount of recognized liability for such transactions is included in payable upon return of securities loaned in the Statement of Assets and Liabilities. The agreements can be terminated at any time.

Semiannual Report FGR-23

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Global Real Estate VIP Fund (continued)

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.

The Fund invests a large percentage of its total assets in REIT securities. Such concentration may subject the Fund to special risks associated with real estate securities. These securities may be more sensitive to economic or regulatory developments due to a variety of factors such as local, regional, national and global economic conditions, interest rates and tax considerations.

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 $2 billion (Global Credit Facility) which matures on February 10, 2017. 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 0.07% based upon the unused portion of the Global Credit Facility. Effective February 12, 2016, the annual commitment fee is 0.15%. These fees are reflected in other expenses in the Statement of Operations. During the period ended June 30, 2016, 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 financial instruments and are summarized in the following fair value hierarchy:

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

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

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

The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.

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

A summary of inputs used as of June 30, 2016, in valuing the Fund’s assets carried at fair value, is as follows:

	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities:
Equity Investmentsa	$	313,451,069	$	—	$	—	$	313,451,069
Short Term Investments		1,229,000		2,028,652		—		3,257,652
Total Investments in Securities	$	314,680,069	$	2,028,652	$	—	$	316,708,721

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

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Global Real Estate VIP Fund (continued)

10. Subsequent Events

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

Abbreviations

Selected Portfolio
IDR	International Depositary Receipt
REIT	Real Estate Investment Trust

Semiannual Report FGR-25

Franklin Growth and Income VIP Fund

This semiannual report for Franklin Growth and Income VIP Fund covers the period ended June 30, 2016.

Class 1 Performance Summary as of June 30, 2016

The Fund’s Class 1 shares delivered a +4.23% total return for the six-month period ended June 30, 2016.

Performance reflects the Fund’s Class 1 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.

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.

Semiannual Report FGI-1

FRANKLIN GROWTH AND INCOME VIP FUND

Fund Goals and Main Investments

The Fund seeks capital appreciation with current income as a secondary goal. Under normal market conditions, the Fund invests predominantly in equity securities, including securities convertible into common stock.

Fund Risks

All investments involve risks, including possible loss of principal. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Convertible securities are subject to the risks of stocks when the underlying stock price is high relative to the conversion price and debt securities when the underlying stock price is low relative to the conversion price. The Fund’s investment in foreign securities also involves special risks, including currency fluctuations and economic as well as political uncertainty. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. In comparison, the Fund’s benchmark, the Standard & Poor’s^® 500 Index (S&P 500^®), produced a +3.84% total return.¹ The Fund’s peers as measured by the Lipper VIP Equity Income Funds Classification Average posted a +5.43% return for the same period.²

Economic and Market Overview

For the six-month period ended June 30, 2016, the U.S. economy grew moderately, as measured by gross domestic product in 2016’s first and second quarters, driven by consumer spending and exports. A decline in private inventory investment and nonresidential fixed investment contributed to the moderation. Although the unemployment rate rose from 4.7% in May to 4.9% in June, the increase was due to additional people entering the labor force, and for the entire period under review, unemployment declined slightly.³ Home sales and prices rose amid relatively low mortgage rates. Monthly retail sales grew during most of the review period, and rose to the highest level in April in more than a year, due to a broad-based increase across most retail categories. Inflation, as measured by the Consumer

Price Index, remained subdued overall even though it spiked to the highest level in three years in April mainly due to a rebound in energy prices.

After raising its target range for the federal funds rate to 0.25%–0.50% at its December meeting, the Federal Reserve (Fed) maintained the rate through period-end. Although the Fed indicated a potential interest rate hike in June, subsequent reports showed job additions slowed substantially in May. Consequently, at its June meeting, the Fed kept the federal funds rate unchanged, and indicated that in determining the timing and size of future adjustments to the target range, it will assess realized and expected economic conditions relative to its objectives of maximum employment and 2.00% inflation. The Fed expects economic conditions to evolve in a manner that could warrant only gradual increases in the federal funds rate.

1. Source: Morningstar.

2. Source: Lipper, a Thomson Reuters Company.

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.

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U.S. equity markets rose for the period under review, as investors generally remained confident due to the Fed’s continued caution surrounding further interest rate increases, the European Central Bank expanding its quantitative easing measures and cutting its benchmark interest rate to zero, the People’s Bank of China introducing further easing measures and the Bank of Japan adopting a negative interest rate policy. The rally in crude oil prices near period-end also boosted investor confidence. However, the U.K.’s historic referendum to leave the European Union (also known as the “Brexit”), global economic growth concerns and China’s slowing economy weighed on market sentiment. Despite periods of volatility, the broad U.S. stock market ended the six-month period higher, as measured by the S&P 500.

Investment Strategy

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

Manager’s Discussion

During the period under review, sectors that rose in value among the Fund’s investments included industrials, energy and utilities. In contrast, declining sectors included financials, health care and consumer discretionary.

In industrials, aerospace defense company Lockheed Martin led results. The company operated well, delivering slightly increased guidance for sales and earnings during the period. Lockheed Martin also engaged in shareholder friendly actions including returning capital to its shareholders through dividends and share repurchases. Recent geopolitical developments improved investor sentiment about the U.S. defense sector, and the company is a leader in the sector. Waste disposal and trash pickup service provider Republic Services also helped Fund returns. The company benefited from increased waste volumes

Top 10 Holdings
6/30/16
Company Sector/Industry	% of Total Net Assets
Microsoft Corp. Information Technology		3.3%
JPMorgan Chase & Co. Financials		3.0%
General Electric Co. Industrials		2.6%
Wells Fargo & Co. Financials		2.6%
PepsiCo Inc. Consumer Staples		2.6%
Chevron Corp. Energy		2.5%
Cisco Systems Inc. Information Technology		2.2%
The Kraft Heinz Co. Consumer Staples		2.1%
U.S. Bancorp Financials		2.1%
Medtronic PLC Health Care		2.0%

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).

driven by strong performance from the commercial and industrial lines of business. A slight improvement in recycled commodity prices also positively affected the company. Industrial products and equipment manufacturer Illinois Tool Works posted strong earnings results for the fourth quarter of 2015, which were partially driven by excellent cost controls and strength in its consumer-facing businesses. The company also completed a medium-sized acquisition within its automotive original equipment manufacturer division that appeared attractive to us.

In the energy sector, multinational energy corporation Chevron recovered strongly as the company’s cash flow profile improved. The company provided updated earnings guidance related to capital spending for the next several years that gave investors a roadmap to cash flow neutrality, an important topic for all energy producers in a lower price environment. Anglo-Dutch multinational oil and gas company Royal Dutch Shell performed well during the period as it closed its acquisition of BG Group and announced further cost cutting and capital spending reduction measures. In addition, Shell held a Capital Markets Day in early June in which the management team provided additional information related to the integration of BG Group and a long-term outlook for cash flow generation that

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FRANKLIN GROWTH AND INCOME VIP FUND

was well received by investors. Exxon Mobil, among the more diverse and financially sound energy producers, in our analysis, typically holds up better during periods of declining commodity prices, and the past year was no exception as the company’s shares performed well. Although the shares’ recovery was muted recently, the limited downside the company experienced along with a moderate recovery was enough to make the stock a relatively strong performer, particularly in light of general market weakness.

The utilities sector was another major contributor during the period. Our convertible preferred stock position in clean energy company NextEra Energy benefited from the passage of a congressional spending bill that included multi-year extensions of solar and wind tax credits. The passage of this legislation surprised investors and was a positive event for renewables developers, of which NextEra is among the U.S.’s leading players. The legislation also helped provide greater clarity into the company’s earnings growth trajectory. Electric utility company Xcel Energy benefited from an increase in investor appetite for defensive oriented businesses with what they considered attractive dividend yields. The company increased its dividend for the third year in a row in early 2016. Dominion, another utility holding, also benefited much like Xcel did from investors seeking yield and perceived stability.

Notable individual contributors included Kraft Heinz in consumer staples. The company, an American food conglomerate that has over a dozen different high-value brands, was a major contributor. Kraft’s first-quarter earnings topped consensus expectations aided by a combination of strong organic sales growth and accelerated integration/savings benefits. Semiconductor producer Texas Instruments in information technology is a large high-performance analog company, and one of the larger embedded processor companies in the world. These were two of the more stable, diversified and profitable product areas within the semiconductor industry. The company also had meaningful exposure to end markets including the automotive, industrial and communications equipment industries, which outperformed the information technology sector during the period. Diversified Canadian communications and media company Rogers Communications in telecommunication services continued to execute well, particularly in its wireless division. Also, recent previews of their Internet protocol television product were favorable, and investor concerns over an aggressive fourth national wireless competitor abated.

In the financials sector, Morgan Stanley, MetLife and Wells Fargo detracted from Fund performance. Along with other capital market firms, Morgan Stanley suffered due to weak cyclical industry trading and investment banking activity. Shares of insurer MetLife fell amid equity market volatility and declining long-term interest rates. Like shares of many other banks, Wells Fargo’s shares declined due to concerns over rising credit costs and energy exposure, and cyclically weak trading revenue.

The health care sector also detracted from Fund performance. Pharmaceutical firm Allergan’s shares fell following the termination of its merger with Pfizer after the U.S. Treasury Department placed constraints on tax inversions.⁴ Generic drug manufacturer Teva Pharmaceutical Industries’ shares declined largely due to a delay in its acquisition of Allergan’s generics portfolio amid longer-than-anticipated deliberations with the U.S. Federal Trade Commission and the Food and Drug Administration.⁴ U.S. Pharmaceutical giant Eli Lilly and Company’s first quarter revenues were hit hard by unfavorable foreign exchange rates. The significant deterioration of the Venezuelan bolívar resulting from that country’s financial crisis had a strong negative effect on the company’s results.

Elsewhere, in the consumer discretionary sector, Starwood Hotels & Resorts detracted from the Fund’s performance.⁵ The hotel operator suffered as investors were disappointed by the initial acquisition price from Marriott and the lodging industry saw deteriorating metrics in late 2015 and early 2016, which led to investor concerns that lodging was nearing the late stages of its cycle. Car maker Ford Motor Company was hurt by investor concerns about a possible peak in U.S. auto sales that may have led the stock price to remain at a standstill despite record results. Sportswear maker NIKE underperformed during the period primarily because of a broader decline in North American retail spending driven by weakness at malls and sporting goods retailers as a result of a few bankruptcies.⁵ NIKE also faced higher than normal competitive pressures from Adidas and Under Armour. These issues, coupled with its premium valuation at the beginning of the year, caused the stock to perform poorly.

Although the IT sector contributed to results during the period, a number of sector positions were significant individual detractors. March quarterly results for Microsoft raised concerns about its margins and revenue growth. Consumer personal computer (PC) spending also remained under pressure, which created headwinds for the business as Microsoft seeks new

4. This holding is found in the convertible preferred stock section of the SOI.

5. Sold by period-end.

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ways to monetize its consumer PC base. Data storage products maker Seagate has been pressured by a faster-than-expected transition to next-generation storage technologies and a weak PC market due to economic challenges.⁵ Semiconductor manufacturer Intel suffered from a weaker global PC demand environment though other parts of its business were performing well.

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

The foregoing information reflects our analysis, opinions and portfolio holdings as of June 30, 2016, 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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FRANKLIN GROWTH AND INCOME VIP FUND

Class 1 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 × $7.50 = $64.50.

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

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 1	Beginning Account Value 1/1/16		Ending Account Value 6/30/16		Fund-Level Expenses Incurred During Period* 1/1/16–6/30/16
Actual	$	1,000	$	1,042.30	$	3.00
Hypothetical (5% return before expenses)	$	1,000	$	1,021.93	$	2.97

*Expenses are calculated using the most recent six-month annualized expense ratio for the Fund’s Class 1 shares (0.59%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 182/366 to reflect the one-half year period.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Highlights

Franklin Growth and Income VIP Fund

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012			2011
Class 1
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$15.94			$17.02			$15.97			$12.64			$11.60			$11.76
Income from investment operationsa:
Net investment incomeb		0.23			0.45			0.53	c		0.33			0.35			0.33
Net realized and unrealized gains (losses)		0.41			(0.54	)		0.95			3.40			1.08			(0.03	)
Total from investment operations		0.64			(0.09	)		1.48			3.73			1.43			0.30
Less distributions from:
Net investment income		(0.46	)		(0.61	)		(0.43	)		(0.40	)		(0.39	)		(0.46	)
Net realized gains		(1.24	)		(0.38	)		—			—			—			—
Total distributions		(1.70	)		(0.99	)		(0.43	)		(0.40	)		(0.39	)		(0.46	)
Net asset value, end of period		$14.88			$15.94			$17.02			$15.97			$12.64			$11.60
Total returnd		4.23%			(0.62)%			9.40%			29.96%			12.53%			2.64%
Ratios to average net assetse
Expenses		0.59%			0.58%			0.57%	f		0.58%	f		0.60%			0.59%
Net investment income		3.00%			2.74%			3.26%	c		2.29%			2.86%			2.80%
Supplemental data
Net assets, end of period (000’s)		$162,109			$144,663			$168,961			$175,860			$154,463			$156,830
Portfolio turnover rate		25.09%			48.81%			20.54%			35.16%			30.00%			32.93%

^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’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $0.12 per share related to income received in the form of special dividends paid in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 2.53%.

^dTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which 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.    |   Semiannual Report FGI-7

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL HIGHLIGHTS

Franklin Growth and Income VIP Fund (continued)

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012			2011
Class 2
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$15.68			$16.76			$15.73			$12.46			$11.44			$11.60
Income from investment operationsa:
Net investment incomeb		0.21			0.40			0.48	c		0.29			0.32			0.29
Net realized and unrealized gains (losses)		0.40			(0.54	)		0.94			3.35			1.05			(0.02	)
Total from investment operations		0.61			(0.14	)		1.42			3.64			1.37			0.27
Less distributions from:
Net investment income		(0.42	)		(0.56	)		(0.39	)		(0.37	)		(0.35	)		(0.43	)
Net realized gains		(1.24	)		(0.38	)		—			—			—			—
Total distributions		(1.66	)		(0.94	)		(0.39	)		(0.37	)		(0.35	)		(0.43	)
Net asset value, end of period		$14.63			$15.68			$16.76			$15.73			$12.46			$11.44
Total returnd		4.08%			(0.91)%			9.14%			29.60%			12.23%			2.41%
Ratios to average net assetse
Expenses		0.84%			0.83%			0.82%	f		0.83%	f		0.85%			0.84%
Net investment income		2.75%			2.49%			3.01%	c		2.04%			2.61%			2.55%
Supplemental data
Net assets, end of period (000’s)		$126,589			$124,691			$138,191			$150,966			$131,400			$129,309
Portfolio turnover rate		25.09%			48.81%			20.54%			35.16%			30.00%			32.93%

^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’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $0.12 per share related to income received in the form of special dividends paid in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 2.28%.

^dTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which 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%.

FGI-8 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Statement of Investments, June 30, 2016 (unaudited)

Franklin Growth and Income VIP Fund
		Country		Shares		Value
	Common Stocks 85.1%
	Consumer Discretionary 6.2%
	Ford Motor Co.		United States		295,000	$	3,708,150
	Lowe’s Cos. Inc.		United States		60,200		4,766,034
	Newell Brands Inc.		United States		56,000		2,719,920
	Nordstrom Inc.		United States		32,500		1,236,625
	Target Corp.		United States		79,700		5,564,654
							17,995,383
	Consumer Staples 10.6%
	Anheuser-Busch InBev NV, ADR		Belgium		30,600		4,029,408
	CVS Health Corp.		United States		56,000		5,361,440
	Kimberly-Clark Corp.		United States		23,000		3,162,040
	The Kraft Heinz Co.		United States		68,000		6,016,640
	PepsiCo Inc.		United States		69,900		7,405,206
	Reynolds American Inc.		United States		84,500		4,557,085
							30,531,819
	Energy 8.5%
	Anadarko Petroleum Corp.		United States		26,700		1,421,775
	BP PLC, ADR		United Kingdom		76,000		2,698,760
	Chevron Corp.		United States		68,500		7,180,855
	ConocoPhillips		United States		43,000		1,874,800
	Exxon Mobil Corp.		United States		50,744		4,756,743
	Royal Dutch Shell PLC, A, ADR		United Kingdom		57,300		3,164,106
	Schlumberger Ltd.		United States		43,300		3,424,164
							24,521,203
	Financials 17.2%
	Arthur J. Gallagher & Co.		United States		92,900		4,422,040
	BB&T Corp.		United States		84,000		2,991,240
	BlackRock Inc.		United States		16,200		5,548,986
	Host Hotels & Resorts Inc.		United States		189,000		3,063,690
	JPMorgan Chase & Co.		United States		140,970		8,759,876
	MetLife Inc.		United States		70,678		2,815,105
	Morgan Stanley		United States		156,000		4,052,880
	T. Rowe Price Group Inc.		United States		62,100		4,531,437
	U.S. Bancorp		United States		148,300		5,980,939
	Wells Fargo & Co.		United States		156,600		7,411,878
							49,578,071
	Health Care 7.6%
	AstraZeneca PLC, ADR		United Kingdom		89,900		2,714,081
	Eli Lilly & Co.		United States		73,100		5,756,625
	Johnson & Johnson		United States		19,600		2,377,480
	Medtronic PLC		United States		68,000		5,900,360
	Pfizer Inc.		United States		143,400		5,049,114
							21,797,660
	Industrials 14.4%
	Deere & Co.		United States		26,000		2,107,040
	General Electric Co.		United States		241,200		7,592,976
	Illinois Tool Works Inc.		United States		41,300		4,301,808
	Lockheed Martin Corp.		United States		23,000		5,707,910
	Nielsen Holdings PLC		United States		62,000		3,222,140

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Growth and Income VIP Fund (continued)

		Country		Shares		Value
	Common Stocks (continued)
	Industrials (continued)
	Raytheon Co.		United States		40,700	$	5,533,165
	Republic Services Inc.		United States		87,400		4,484,494
	United Parcel Service Inc., B		United States		36,700		3,953,324
	United Technologies Corp.		United States		46,300		4,748,065
							41,650,922
	Information Technology 12.5%
	Apple Inc.		United States		46,600		4,454,960
	Broadcom Ltd.		Singapore		6,500		1,010,100
	Cisco Systems Inc.		United States		218,008		6,254,649
	Intel Corp.		United States		132,800		4,355,840
	Microsoft Corp.		United States		184,400		9,435,748
	Oracle Corp.		United States		116,500		4,768,345
	Texas Instruments Inc.		United States		93,300		5,845,245
							36,124,887
	Materials 3.4%
	BASF SE		Germany		45,000		3,428,413
	The Dow Chemical Co.		United States		41,800		2,077,878
	International Paper Co.		United States		104,300		4,420,234
							9,926,525
	Telecommunication Services 1.7%
	Rogers Communications Inc., B		Canada		49,100		1,983,640
	Verizon Communications Inc.		United States		53,000		2,959,520
							4,943,160
	Utilities 3.0%
	Dominion Resources Inc.		United States		57,600		4,488,768
	Xcel Energy Inc.		United States		93,300		4,177,974
							8,666,742
	Total Common Stocks (Cost $192,052,292)						245,736,372
a	Equity-Linked Securities 5.3%
	Consumer Discretionary 1.0%
b	Bank of America Merrill Lynch into Dollar General Corp., 6.00%, 144A		United States		35,000		2,875,268
	Energy 1.3%
b	JPMorgan Chase & Co. into Anadarko Petroleum Co., 9.00%, 144A		United States		35,000		1,800,690
b	JPMorgan Chase & Co. into Schlumberger Ltd., 7.00%, 144A		United States		24,000		1,859,904
							3,660,594
	Financials 1.2%
b	Goldman Sachs Group Inc. into Charles Schwab Corp., 7.00%, 144A		United States		130,000		3,380,676
	Information Technology 1.8%
b	Barclays Bank PLC into Broadcom Ltd., 9.00%, 144A		Singapore		20,000		3,057,340
b	The Goldman Sachs International into Intel Corp., 7.00%, 144A		United States		69,000		2,279,553
							5,336,893
	Total Equity-Linked Securities (Cost $15,246,110)						15,253,431

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Growth and Income VIP Fund (continued)

		Country		Shares		Value
c	Convertible Preferred Stocks 6.2%
	Health Care 2.9%
	Allergan PLC, 5.50%, cvt. pfd.		United States		5,700	$	4,751,634
	Teva Pharmaceutical Industries Ltd., 4.42%, cvt. pfd.		Israel		4,300		3,556,100
							8,307,734
	Industrials 1.5%
	Stanley Black & Decker Inc., 6.25%, cvt. pfd.		United States		38,300		4,446,630
	Utilities 1.8%
	NextEra Energy Inc., 3.48%, cvt. pfd.		United States		80,000		5,182,400
	Total Convertible Preferred Stocks (Cost $17,953,793)						17,936,764
	Total Investments before Short Term Investments (Cost $225,252,195)						278,926,567
				Principal Amount
	Short Term Investments (Cost $9,847,047) 3.4%
	Repurchase Agreements
d	Joint Repurchase Agreement, 0.382%, 7/01/16 (Maturity Value $9,847,152)		United States	$	9,847,047		9,847,047
	BNP Paribas Securities Corp. (Maturity Value $3,193,727) Deutsche Bank Securities Inc. (Maturity Value $984,617) HSBC Securities (USA) Inc. (Maturity Value $5,429,325) Merrill Lynch, Pierce, Fenner & Smith Inc. (Maturity Value $239,483)
	Collateralized by U.S. Government Agency Securities, 0.187% - 5.50%, 7/18/16 - 5/06/21; U.S. Government Agency Securities, Strips, 6/01/17; and U.S. Treasury Note, 0.75% - 3.25%, 11/30/16 - 9/30/20 (valued at $10,048,127)
	Total Investments (Cost $235,099,242) 100.0%						288,773,614
	Other Assets, less Liabilities (0.0)%†						(75,394	)
	Net Assets 100.0%					$	288,698,220

See Abbreviations on page 21.

^†Rounds to less than 0.1% of net assets.

^aSee Note 1(d) regarding equity-linked securities.

^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, 2016, the aggregate value of these securities was $15,253,431, representing 5.3% of net assets.

^cVariable rate security. The rate shown represents the yield at period end.

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

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report FGI-11

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Statements

Statement of Assets and Liabilities

June 30, 2016 (unaudited)

	Franklin Growth and Income VIP Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	225,252,195
Cost - Repurchase agreements		9,847,047
Total cost of investments	$	235,099,242
Value - Unaffiliated issuers	$	278,926,567
Value - Repurchase agreements		9,847,047
Total value of investments		288,773,614
Receivables:
Capital shares sold		257,643
Dividends		496,334
Other assets		119
Total assets		289,527,710
Liabilities:
Payables:
Investment securities purchased		395,567
Capital shares redeemed		201,001
Management fees		125,205
Distribution fees		51,453
Accrued expenses and other liabilities		56,264
Total liabilities		829,490
Net assets, at value	$	288,698,220
Net assets consist of:
Paid-in capital	$	225,710,200
Undistributed net investment income		3,832,597
Net unrealized appreciation (depreciation)		53,671,960
Accumulated net realized gain (loss)		5,483,463
Net assets, at value	$	288,698,220
Class 1:
Net assets, at value	$	162,109,433
Shares outstanding		10,895,681
Net asset value and maximum offering price per share	$	14.88
Class 2:
Net assets, at value	$	126,588,787
Shares outstanding		8,650,021
Net asset value and maximum offering price per share	$	14.63

FGI-12 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Statement of Operations

for the six months ended June 30, 2016 (unaudited)

	Franklin Growth and Income VIP Fund
Investment income:
Dividends	$	4,882,413
Interest		11,713
Total investment income		4,894,126
Expenses:
Management fees (Note 3a)		737,401
Distribution fees - Class 2 (Note 3c)		149,964
Custodian fees (Note 4)		1,160
Reports to shareholders		36,439
Professional fees		19,224
Trustees’ fees and expenses		642
Other		5,829
Total expenses		950,659
Net investment income		3,943,467
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		5,395,762
Foreign currency transactions		(20,772	)
Net realized gain (loss)		5,374,990
Net change in unrealized appreciation (depreciation) on:
Investments		3,411,429
Translation of other assets and liabilities denominated in foreign currencies		(67	)
Net change in unrealized appreciation (depreciation)		3,411,362
Net realized and unrealized gain (loss)		8,786,352
Net increase (decrease) in net assets resulting from operations	$	12,729,819

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report FGI-13

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Statements of Changes in Net Assets

	Franklin Growth and Income VIP Fund
	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31, 2015
Increase (decrease) in net assets:
Operations:
Net investment income	$	3,943,467		$	7,562,301
Net realized gain (loss)		5,374,990			21,830,508
Net change in unrealized appreciation (depreciation)		3,411,362			(31,573,522	)
Net increase (decrease) in net assets resulting from operations		12,729,819			(2,180,713	)
Distributions to shareholders from:
Net investment income:
Class 1		(4,525,424	)		(5,633,682	)
Class 2		(3,230,836	)		(4,366,077	)
Net realized gains:
Class 1		(12,121,008	)		(3,526,285	)
Class 2		(9,525,503	)		(2,955,426	)
Total distributions to shareholders		(29,402,771	)		(16,481,470	)
Capital share transactions: (Note 2)
Class 1		26,165,418			(14,135,093	)
Class 2		9,851,154			(5,000,453	)
Total capital share transactions		36,016,572			(19,135,546	)
Net increase (decrease) in net assets		19,343,620			(37,797,729	)
Net assets:
Beginning of period		269,354,600			307,152,329
End of period	$	288,698,220		$	269,354,600
Undistributed net investment income included in net assets:
End of period	$	3,832,597		$	7,645,390

FGI-14 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Notes to Financial Statements (unaudited)

Franklin Growth and Income VIP Fund

1. Organization and Significant Accounting Policies

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of nineteen separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Franklin Growth and Income VIP 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, 2016, 68.61% of the Fund’s shares were held through one insurance company. Investment activities of these insurance company separate accounts could have a material impact on the Fund. The Fund offers two classes of shares: Class 1 and Class 2. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

The Fund’s investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Fund calculates the net asset value (NAV) per share as of 4 p.m. Eastern time each day the New York Stock Exchange (NYSE) is open for trading. Under compliance policies and procedures approved by the Trust’s Board of Trustees (the Board), the Fund’s administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The VC provides administration and oversight of the Fund’s valuation policies and procedures, which are approved annually by the Board. Among other things, these procedures allow the Fund to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

Equity securities listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded or as of 4 p.m. Eastern time whichever is earlier. The value is

then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the day that the value of the security is determined. Over-the-counter (OTC) securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.

Repurchase agreements are valued at cost, which approximates fair value.

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

Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 4 p.m. Eastern time. In addition, trading in certain foreign markets may not take place on every NYSE business day. 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 VC monitors price movements following the

Semiannual Report FGI-15

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Growth and Income VIP Fund (continued)

1. Organization and Significant Accounting Policies (continued)

a. Financial Instrument Valuation (continued)

close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depositary Receipts, futures contracts and exchange traded funds). These price movements are measured against 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.

When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the NYSE is closed, which could result in differences between the value of the Fund’s portfolio securities on the last business day and the last calendar day of the reporting period. Any significant security valuation changes due to an open foreign market are adjusted and reflected by the Fund for financial reporting purposes.

b. Foreign Currency Translation

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

The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments in 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 fair 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%. Repurchase agreements are subject to the terms of Master Repurchase Agreements (MRAs) with approved counterparties (sellers). The MRAs contain various provisions, including but not limited to events of default and maintenance of collateral for repurchase agreements. In the event of default by either the seller or the Fund, certain MRAs may permit the non-defaulting party to net and close-out all transactions, if any, traded under such agreements. The Fund may sell securities it holds as collateral and apply the proceeds towards the repurchase price and any other amounts owed by the seller to the Fund in the event of default by the seller. This could involve costs or delays in addition to a loss on the securities if their value falls below the repurchase price owed by the seller. The joint repurchase agreement held by the Fund at period end, as indicated in the Statement of Investments, had been entered into on June 30, 2016.

d. 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

FGI-16 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Growth and Income VIP Fund (continued)

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.

e. Income and Deferred Taxes

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

The Fund may be subject to foreign taxation related to income received, capital gains on the sale of securities and certain foreign currency transactions in the foreign jurisdictions in which it invests. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests. When a capital gain tax is determined to apply, the Fund records an estimated deferred tax liability in an amount that would be payable if the securities were disposed of on the valuation date. As a result of several court cases, in certain countries across the European Union, the Fund filed additional tax reclaims for previously withheld taxes on dividends earned in those countries (EU reclaims). These additional filings are subject to various administrative proceedings by the local jurisdictions’ tax authorities within the European Union, as well as a number of related judicial proceedings. Income recognized, if any, for EU reclaims is reflected as other income in the Statement of Operations and any related receivable, if any, is reflected as European Union tax reclaims in the Statement of Assets and Liabilities. When uncertainty exists as to the ultimate resolution of these proceedings, the likelihood of receipt of these EU reclaims, and the potential timing of payment, no amounts are reflected in the financial statements.

The Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of June 30, 2016, the Fund has determined

that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on each tax jurisdiction’s statute of limitation.

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. Dividend income is recorded on the ex-dividend date except for certain dividends from foreign securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Fund. 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 U.S. GAAP. 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 U.S. GAAP 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.

Semiannual Report FGI-17

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Growth and Income VIP Fund (continued)

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, 2016, 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, 2016						Year Ended December 31, 2015
	Shares			Amount			Shares			Amount
Class 1 Shares:
Shares sold		1,334,647		$	19,772,904			10,666		$	171,797
Shares issued in reinvestment of distributions		1,140,948			16,646,432			568,589			9,159,967
Shares redeemed		(656,960	)		(10,253,918	)		(1,429,423	)		(23,466,857	)
Net increase (decrease)		1,818,635		$	26,165,418			(850,168	)	$	(14,135,093	)
Class 2 Shares:
Shares sold		490,366		$	7,464,144			871,092		$	13,824,195
Shares issued in reinvestment of distributions		888,943			12,756,339			461,342			7,321,503
Shares redeemed		(681,012	)		(10,369,329	)		(1,627,140	)		(26,146,151	)
Net increase (decrease)		698,297		$	9,851,154			(294,706	)	$	(5,000,453	)

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

FGI-18 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Growth and Income VIP Fund (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

For the period ended June 30, 2016, the annualized effective investment management fee rate was 0.541% of the Fund’s average daily net assets.

b. Administrative Fees

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

c. Distribution Fees

The Board has adopted a distribution plan for Class 2 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s compensation distribution plan, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to 0.35% per year of its average daily net assets. The Board has agreed to limit the current rate to 0.25% per year for Class 2. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.

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, 2016, there were no credits earned.

5. Income Taxes

At June 30, 2016, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	235,085,565
Unrealized appreciation	$	60,482,902
Unrealized depreciation		(6,794,853	)
Net unrealized appreciation (depreciation)	$	53,688,049

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

Semiannual Report FGI-19

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Growth and Income VIP Fund (continued)

6. Investment Transactions

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2016, aggregated $71,066,572 and $67,480,836, respectively.

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 $2 billion (Global Credit Facility) which matures on February 10, 2017. 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 0.07% based upon the unused portion of the Global Credit Facility. Effective February 12, 2016, the annual commitment fee is 0.15%. These fees are reflected in other expenses in the Statement of Operations. During the period ended June 30, 2016, 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 financial instruments and are summarized in the following fair value hierarchy:

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

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

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

The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.

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

A summary of inputs used as of June 30, 2016, in valuing the Fund’s assets carried at fair value, is as follows:

	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities:
Equity Investmentsa,b	$	263,673,136	$	—	$	—	$	263,673,136
Equity-Linked Securities		—		15,253,431		—		15,253,431
Short Term Investments		—		9,847,047		—		9,847,047
Total Investments in Securities	$	263,673,136	$	25,100,478	$	—	$	288,773,614

^aIncludes common and convertible preferred stocks.

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

FGI-20 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Growth and Income VIP Fund (continued)

9. Subsequent Events

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

Abbreviations

Selected Portfolio
ADR	American Depositary Receipt

Semiannual Report FGI-21

Franklin High Income VIP Fund

This semiannual report for Franklin High Income VIP Fund covers the period ended June 30, 2016.

Class 1 Performance Summary as of June 30, 2016

The Fund’s Class 1 shares delivered a +8.28% total return for the six-month period ended June 30, 2016.

Performance reflects the Fund’s Class 1 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.

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.

Semiannual Report FH-1

FRANKLIN HIGH INCOME VIP FUND

Fund Goals and Main Investments

The Fund seeks a high level of current income with capital appreciation as a secondary goal. Under normal market conditions, the Fund invests predominantly in high yield, lower rated debt securities and preferred stocks.

Fund Risks

All investments involve risks, including possible loss of principal. The risks associated with higher yielding, lower rated securities include higher risk of default and loss of principal. Changes in the financial strength of a bond issuer or in a bond’s credit rating may affect its value. In addition, interest rate movements will affect the Fund’s share price and yield. 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. Investment in foreign securities also involves special risks, including currency fluctuations, and political and economic uncertainty. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

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 +9.19% total return for the period under review.¹ The Fund’s peers, as measured by the Lipper VIP High Yield Funds Classification Average, delivered a +6.52% total return.²

Economic and Market Overview

The U.S. economy grew moderately, as measured by gross domestic product in 2016’s first and second quarters, driven by consumer spending and exports. A decline in private inventory investment and nonresidential fixed investment contributed to the moderation. Although the unemployment rate rose from 4.7% in May to 4.9% in June, the increase was due to additional people entering the labor force, and for the entire period under review, unemployment declined slightly.³ Home sales and prices rose amid relatively low mortgage rates. Monthly retail sales grew during most of the review period, and rose to the highest level in April in more than a year, due to a broad-based increase across most retail categories. Inflation, as measured by

*Includes common and convertible preferred shares.

the Consumer Price Index, remained subdued overall even though it spiked to the highest level in three years in April mainly due to a rebound in energy prices.

After raising its target range for the federal funds rate to 0.25%–0.50% at its December meeting, the Federal Reserve (Fed) maintained the rate through-period end. Although the Fed hinted at an interest rate hike in June, subsequent reports showed job additions slowed substantially in May. Consequently, at its June meeting, the Fed kept the federal funds rates unchanged, and indicated that in determining the timing and size of future adjustments to the target range, it will assess realized and expected economic conditions relative to its objectives of maximum employment and 2.00% inflation. The Fed expects economic conditions to evolve in a manner that could warrant only gradual increases in the federal funds rate.

The 10-year Treasury yield, which moves inversely to price, declined during the period. It declined from a period high of 2.27% on December 31, 2015, and remained relatively low through period-end, reflecting investors’ concerns about global economic uncertainty. Negative interest rates in Japan and Europe, and central banks’ purchases of government bonds, also put downward pressure on U.S. yields. It touched a period low of 1.46% on June 27, 2016, and ended the period at 1.49%, after the Fed kept short-term interest rates unchanged and fears of Britain’s exit from the European Union (also known as the “Brexit”) boosted safe-haven buying by investors.

1. Source: Credit Suisse Group.

2. Source: Lipper, a Thomson Reuters Company.

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.

FH-2 Semiannual Report

FRANKLIN HIGH INCOME VIP FUND

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.

Manager’s Discussion

During the period, mixed U.S. economic data at the start of 2016, continued weak commodity prices and investor concerns about China’s growth rate weighed on financial markets. The prospect of the Fed increasing its target short-term interest rate and the Brexit caused further volatility. However, by period-end, dovish comments by the Fed reassured investors, and oil prices posted a notable recovery as a rebalancing of supply and demand led to investor hopes that a sustainable price recovery was underway. Other commodities also rebounded based on general increased optimism for global growth, allowing securities in the metals and mining industry to realize price gains.

The heavy combined weighting of the energy sector and metals and mining industry significantly affected the high yield corporate bond market’s performance during the period. The gain in commodity prices and change in investor sentiment drove the high yield market to stage a strong rally in the second half of the period. The Brexit caused temporary volatility, but markets quickly recovered based on analysts’ prevailing view that any negative impact would be largely confined to the U.K. Overall, spreads to comparable Treasuries narrowed almost 100 basis points by period-end.

Fundamentally, with the overall decline in commodity prices throughout 2015, earnings and credit quality trends for the energy sector and metals and mining industry were challenged going into 2016. As expected, default rates in commodity-related sectors rose as companies attempted to reduce debt on their balance sheets and strengthen liquidity in the face of lower cash flow and earnings prospects.

We feel the fundamental outlook for the remainder of the high yield corporate market continued to be supportive. Although

Top 10 Sectors/Industries
6/30/16
	% of Total Net Assets
Energy		13.7%
Materials		13.2%
Media		10.2%
Telecommunication Services		9.1%
Health Care Equipment & Services		5.6%
Banks		5.3%
Diversified Financials		4.3%
Pharmaceuticals, Biotechnology & Life Sciences		3.7%
Consumer Services		3.7%
Consumer Durables & Apparel		3.3%

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).

earnings growth and margin improvements may have already peaked and leverage ratios have ticked higher over the past few years, given the significant refinancing activity and earnings growth over the past several years, non-commodity high yield issuers have experienced below-average default rates. Spreads tightened during the period for many non-commodity related issuers, but given the prospect for more stable credit fundamentals, we still believed valuations to be relatively attractive across many of these industries.

In terms of the Fund’s performance, during the period the Fund underperformed the CS High Yield Index but outperformed the return of peer funds, as measured by the Lipper High Yield Funds Classification Average. The underperformance against the CS High Yield Index was primarily due to the Fund’s larger positioning in the energy sector as well as certain holdings in the media and health care sectors.⁴

During the period, we drew on our fundamental research process to make individual investment decisions and to overweight and underweight certain industries relative to our benchmark in an effort to potentially outperform. Overall, our industry exposure had a negative impact on relative returns during the period. For example, our overweighted position and security selection in the cable industry detracted from performance.⁵ Significant new issuance, merger and acquisition activity, a highly competitive landscape and potential spectrum sales caused volatility in the industry. Our overweighted position in large cap issuer Intelsat Jackson Holdings, a dominant player in the satellite market, also hurt Fund performance as the company’s highly leveraged balance sheet was pressured in the face of uncertain demand.

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

5. Cable is part of media in the SOI.

Semiannual Report FH-3

FRANKLIN HIGH INCOME VIP FUND

The normally defensive health care sector was another detractor, with poor performance driven mainly by developments in the pharmaceuticals industry. The Fund was overweighted in the sector as a whole, which dragged on relative performance. Our position in Valeant Pharmaceuticals International, a large cap issuer in the high yield market, experienced notable price declines driven mainly by questionable accounting and strategic practices. Finally, a combination of industry positioning and security selection in the energy sector also hampered returns. Although the energy sector posted a meaningful recovery as a whole, some more leveraged issuers preemptively moved to restructure their balance sheets when oil prices approached their lows. This trend pressured the recovery in their bond prices on a relative basis and our holdings in these types of situations hurt relative performance.

Some of the Fund’s industry weightings favorably impacted relative performance. The general rally in commodity prices spurred a recovery in the metals and mining industry, benefiting our overweighted position.⁶ The aerospace and defense industry and the information technology sector also produced positive results.⁷ The Fund’s weightings in these sectors roughly matched the benchmark index, and these positionings did not significantly affect performance. However, our ratings mix in information technology was a relative contributor and our security selection in aerospace and defense outperformed the index.

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

The foregoing information reflects our analysis, opinions and portfolio holdings as of June 30, 2016, 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.

6. Metals and mining is part of materials in the SOI.

7. The aerospace and defense sector is part of capital goods in the SOI. The information technology sector comprises software and services and technology, hardware and equipment in the SOI.

FH-4 Semiannual Report

FRANKLIN HIGH INCOME VIP FUND

Class 1 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 × $7.50 = $64.50.

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

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 1	Beginning Account Value 1/1/16		Ending Account Value 6/30/16		Fund-Level Expenses Incurred During Period* 1/1/16–6/30/16
Actual	$	1,000	$	1,082.80	$	3.16
Hypothetical (5% return before expenses)	$	1,000	$	1,021.83	$	3.07

*Expenses are calculated using the most recent six-month annualized expense ratio for the Fund’s Class 1 shares (0.61%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 182/366 to reflect the one-half year period.

Semiannual Report FH-5

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Highlights

Franklin High Income VIP Fund

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012			2011
Class 1
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$5.63			$6.62			$7.02			$7.01			$6.52			$6.63
Income from investment operationsa:
Net investment incomeb		0.17			0.39			0.42			0.46			0.48			0.50
Net realized and unrealized gains (losses)		0.29			(0.93	)		(0.38	)		0.09			0.51			(0.19	)
Total from investment operations		0.46			(0.54	)		0.04			0.55			0.99			0.31
Less distributions from net investment income		(0.42	)		(0.45	)		(0.44	)		(0.54	)		(0.50	)		(0.42	)
Net asset value, end of period		$5.67			$5.63			$6.62			$7.02			$7.01			$6.52
Total returnc		8.28%			(8.88)%			0.21%			8.17%			15.94%			4.63%
Ratios to average net assetsd
Expenses		0.61%	e		0.59%	e		0.57%	e		0.58%	e		0.58%			0.58%
Net investment income		6.09%			6.20%			6.00%			6.63%			7.15%			7.52%
Supplemental data
Net assets, end of period (000’s)		$26,977			$26,835			$34,552			$39,300			$42,166			$41,971
Portfolio turnover rate		12.24%			28.56%			39.46%			30.78%			37.03%			45.11%

^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’s shares in relation to income earned and/or fluctuating fair 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 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%.

FH-6 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL HIGHLIGHTS

Franklin High Income VIP Fund (continued)

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012			2011
Class 2
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$5.44			$6.41			$6.81			$6.82			$6.36			$6.47
Income from investment operationsa:
Net investment incomeb		0.16			0.36			0.39			0.43			0.46			0.47
Net realized and unrealized gains (losses)		0.29			(0.90	)		(0.37	)		0.08			0.48			(0.18	)
Total from investment operations		0.45			(0.54	)		0.02			0.51			0.94			0.29
Less distributions from net investment income		(0.41	)		(0.43	)		(0.42	)		(0.52	)		(0.48	)		(0.40	)
Net asset value, end of period		$5.48			$5.44			$6.41			$6.81			$6.82			$6.36
Total returnc		8.26%			(9.12)%			(0.02)%			7.83%			15.56%			4.56%
Ratios to average net assetsd
Expenses		0.86%	e		0.84%	e		0.82%	e		0.83%	e		0.83%			0.83%
Net investment income		5.84%			5.95%			5.75%			6.38%			6.90%			7.27%
Supplemental data
Net assets, end of period (000’s)		$212,063			$205,339			$261,944			$291,826			$281,851			$249,452
Portfolio turnover rate		12.24%			28.56%			39.46%			30.78%			37.03%			45.11%

^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’s shares in relation to income earned and/or fluctuating fair 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 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.    |   Semiannual Report FH-7

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL HIGHLIGHTS

Franklin High Income VIP Fund (continued)

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012			2011
Class 4
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$5.56			$6.54			$6.94			$6.94			$6.46			$6.57
Income from investment operationsa:
Net investment incomeb		0.16			0.37			0.39			0.43			0.46			0.47
Net realized and unrealized gains (losses)		0.29			(0.92	)		(0.38	)		0.08			0.49			(0.18	)
Total from investment operations		0.45			(0.55	)		0.01			0.51			0.95			0.29
Less distributions from net investment income		(0.40	)		(0.43	)		(0.41	)		(0.51	)		(0.47	)		(0.40	)
Net asset value, end of period		$5.61			$5.56			$6.54			$6.94			$6.94			$6.46
Total returnc		8.16%			(9.20)%			(0.15)%			7.72%			15.50%			4.39%
Ratios to average net assetsd
Expenses		0.96%	e		0.94%	e		0.92%	e		0.93%	e		0.93%			0.93%
Net investment income		5.74%			5.85%			5.65%			6.28%			6.80%			7.17%
Supplemental data
Net assets, end of period (000’s)		$22,798			$21,708			$25,740			$27,789			$27,664			$27,055
Portfolio turnover rate		12.24%			28.56%			39.46%			30.78%			37.03%			45.11%

^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’s shares in relation to income earned and/or fluctuating fair 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 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%.

FH-8 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Statement of Investments, June 30, 2016 (unaudited)

Franklin High Income VIP Fund
		Country		Shares		Value
	Common Stocks (Cost $334,368) 0.0%†
	Transportation 0.0%†
a,b	CEVA Holdings LLC		United Kingdom		224	$	78,498
	Convertible Preferred Stocks 0.1%
	Transportation 0.1%
a,b	CEVA Holdings LLC, cvt. pfd., A-1		United Kingdom		6		3,150
a,b	CEVA Holdings LLC, cvt. pfd., A-2		United Kingdom		486		169,928
	Total Convertible Preferred Stocks (Cost $731,855)						173,078
				Principal Amount*
	Corporate Bonds 92.6%
	Automobiles & Components 1.6%
	Fiat Chrysler Automobiles NV, senior note, 5.25%, 4/15/23		United Kingdom		3,000,000		2,987,774
	The Goodyear Tire & Rubber Co.,
	senior bond, 5.00%, 5/31/26		United States		1,000,000		1,021,250
	senior note, 5.125%, 11/15/23		United States		300,000		311,250
							4,320,274
	Banks 5.3%
c	Bank of America Corp., junior sub. bond, M, 8.125% to 5/15/18, FRN thereafter, Perpetual		United States		2,500,000		2,509,375
	CIT Group Inc., senior note,
	5.375%, 5/15/20		United States		1,000,000		1,045,000
	5.00%, 8/15/22		United States		2,700,000		2,754,000
c	Citigroup Inc., junior sub. bond, M, 6.30% to 5/15/24, FRN thereafter, Perpetual		United States		2,800,000		2,789,220
c	JPMorgan Chase & Co., junior sub. bond, R, 6.00% to 8/01/23, FRN thereafter, Perpetual		United States		2,500,000		2,559,375
	Royal Bank of Scotland Group PLC, sub. note, 6.125%, 12/15/22		United Kingdom		2,000,000		2,098,910
							13,755,880
	Capital Goods 1.3%
d	Bombardier Inc., senior bond, 144A, 7.50%, 3/15/25		Canada		600,000		522,000
	Navistar International Corp., senior bond, 8.25%, 11/01/21		United States		1,400,000		990,500
	TransDigm Inc.,
	senior sub. bond, 6.50%, 7/15/24		United States		1,000,000		1,010,000
	senior sub. bond, 6.50%, 5/15/25		United States		200,000		201,250
	d senior sub. bond, 144A, 6.375%, 6/15/26		United States		300,000		299,625
	senior sub. note, 6.00%, 7/15/22		United States		500,000		505,090
							3,528,465
	Commercial & Professional Services 1.6%
d	Acosta Inc., senior note, 144A, 7.75%, 10/01/22		United States		2,000,000		1,765,000
b,e	Goss Graphic Systems Inc., senior sub. note, 12.25%, 11/19/05		United States		1,912,374		191
	United Rentals North America Inc., senior bond, 5.75%, 11/15/24		United States		2,500,000		2,531,250
							4,296,441
	Consumer Durables & Apparel 3.3%
d	Hanesbrands Inc., senior bond, 144A, 4.875%, 5/15/26		United States		1,600,000		1,613,760
	KB Home,
	senior bond, 7.50%, 9/15/22		United States		2,100,000		2,173,500
	senior note, 7.00%, 12/15/21		United States		700,000		707,000
d	Newell Brands Inc., senior note, 144A, 5.00%, 11/15/23		United States		1,200,000		1,261,884

Semiannual Report FH-9

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin High Income VIP Fund (continued)

		Country		Principal Amount*		Value
	Corporate Bonds (continued)
	Consumer Durables & Apparel (continued)
d	Taylor Morrison Communities Inc./Monarch Communities Inc., senior note, 144A,
	5.25%, 4/15/21		United States		900,000	$	902,250
	5.875%, 4/15/23		United States		600,000		606,000
	5.625%, 3/01/24		United States		1,500,000		1,470,000
							8,734,394
	Consumer Services 3.7%
d	1011778 BC ULC/New Red Finance Inc.,
	secured note, second lien, 144A, 6.00%, 4/01/22		Canada		2,000,000		2,079,380
	senior secured note, first lien, 144A, 4.625%, 1/15/22		Canada		900,000		915,750
d	24 Hour Holdings III LLC, senior note, 144A, 8.00%, 6/01/22		United States		2,500,000		1,906,250
d,e	Fontainebleau Las Vegas, senior secured bond, first lien, 144A, 11.00%, 6/15/15		United States		1,700,000		3,358
d	International Game Technology PLC, senior secured bond, 144A, 6.50%, 2/15/25		United States		2,500,000		2,525,000
d	Wynn Las Vegas LLC/Wynn Las Vegas Capital Corp., senior bond, 144A, 5.50%, 3/01/25		United States		1,100,000		1,068,375
d	Wynn Macau Ltd., senior note, 144A, 5.25%, 10/15/21		Macau		1,200,000		1,161,000
							9,659,113
	Diversified Financials 4.3%
	AerCap Ireland Capital Ltd./AerCap Global Aviation Trust, senior note, 4.625%, 10/30/20		Netherlands		1,700,000		1,760,359
	Deutsche Bank AG, sub. bond, 4.296% to 5/24/23, FRN thereafter, 5/24/28		Germany		1,300,000		1,145,495
d	KFC Holding Co./Pizza Hut Holdings LLC/Taco Bell of America LLC, senior note, 144A,
	5.00%, 6/01/24		United States		1,000,000		1,027,500
	5.25%, 6/01/26		United States		1,000,000		1,027,500
d	Lincoln Finance Ltd., senior secured note, 144A, 7.375%, 4/15/21		Netherlands		1,600,000		1,662,000
	Navient Corp., senior note, 5.50%, 1/15/19		United States		3,500,000		3,528,875
d	OneMain Financial Holdings Inc., senior note, 144A, 7.25%, 12/15/21		United States		1,100,000		1,058,750
							11,210,479
	Energy 13.7%
	California Resources Corp.,
	d secured note, second lien, 144A, 8.00%, 12/15/22		United States		2,155,000		1,532,744
	senior bond, 6.00%, 11/15/24		United States		621,000		305,842
	senior note, 5.50%, 9/15/21		United States		184,000		93,840
	Calumet Specialty Products Partners LP/Calumet Finance Corp., senior note,
	7.75%, 4/15/23		United States		1,500,000		1,068,750
	d 144A, 11.50%, 1/15/21		United States		600,000		676,500
	CGG SA, senior note, 6.875%, 1/15/22		France		2,300,000		1,012,000
e,f	CHC Helicopter SA,
	senior note, 9.375%, 6/01/21		Canada		260,000		37,700
	senior secured note, first lien, 9.25%, 10/15/20		Canada		2,700,000		1,215,000
d	Cheniere Corpus Christi Holdings LLC, senior secured note, 144A, 7.00%, 6/30/24		United States		1,000,000		1,028,130
d	Chesapeake Energy Corp., secured note, second lien, 144A, 8.00%, 12/15/22		United States		1,830,000		1,560,075

FH-10 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin High Income VIP Fund (continued)

		Country		Principal Amount*			Value
	Corporate Bonds (continued)
	Energy (continued)
	CONSOL Energy Inc., senior note,
	5.875%, 4/15/22		United States		1,100,000		$	966,625
	8.00%, 4/01/23		United States		1,800,000			1,602,000
	CSI Compressco LP/CSI Compressco Finance Inc., senior note, 7.25%, 8/15/22		United States		700,000			577,500
	Energy Transfer Equity LP,
	senior note, first lien, 7.50%, 10/15/20		United States		2,600,000			2,769,000
	senior secured bond, first lien, 5.875%, 1/15/24		United States		400,000			391,000
	senior secured bond, first lien, 5.50%, 6/01/27		United States		500,000			472,500
e	Energy XXI Gulf Coast Inc., senior note,
	7.50%, 12/15/21		United States		1,000,000			115,000
	6.875%, 3/15/24		United States		500,000			57,500
d	EnQuest PLC, senior note, 144A, 7.00%, 4/15/22		United Kingdom		2,500,000			1,528,125
e	EPL Oil & Gas Inc., senior note, 8.25%, 2/15/18		United States		1,400,000			154,000
d	Ferrellgas LP/Ferrellgas Finance Corp., senior note, 144A, 6.75%, 6/15/23		United States		2,400,000			2,118,000
b,e	Goodrich Petroleum Corp., secured note, second lien, 144A, 8.875%, 3/15/18		United States		1,250	g		125,000
e	Halcon Resources Corp.,
	senior note, 8.875%, 5/15/21		United States		1,800,000			369,000
	d senior secured note, third lien, 144A, 13.00%, 2/15/22		United States		1,170,000			625,950
d,e	Linn Energy LLC/Finance Corp., senior secured note, second lien, 144A, 12.00%, 12/15/20		United States		1,800,000			625,500
	Martin Midstream Partners LP/Martin Midstream Finance Corp., senior note, 7.25%, 2/15/21		United States		1,100,000			1,023,000
	Memorial Resource Development Corp., senior note, 5.875%, 7/01/22		United States		1,100,000			1,100,000
e	Midstates Petroleum Co. Inc./LLC, senior note, 9.25%, 6/01/21		United States		1,500,000			22,500
d	Murray Energy Corp., secured note, second lien, 144A, 11.25%, 4/15/21		United States		1,200,000			342,000
d,e	Peabody Energy Corp., secured note, second lien, 144A, 10.00%, 3/15/22		United States		2,700,000			364,500
e	Penn Virginia Corp., senior note, 8.50%, 5/01/20		United States		1,200,000			468,000
	QEP Resources Inc., senior bond,
	5.375%, 10/01/22		United States		1,000,000			937,500
	5.25%, 5/01/23		United States		1,500,000			1,387,500
	Sabine Pass Liquefaction LLC,
	first lien, 5.625%, 2/01/21		United States		2,400,000			2,436,000
	first lien, 5.625%, 4/15/23		United States		900,000			907,875
	senior secured note, first lien, 5.75%, 5/15/24		United States		200,000			199,500
	Sanchez Energy Corp., senior note,
	7.75%, 6/15/21		United States		1,800,000			1,534,500
	6.125%, 1/15/23		United States		1,000,000			777,500
	Weatherford International Ltd., senior note,
	7.75%, 6/15/21		United States		1,000,000			977,500
	8.25%, 6/15/23		United States		1,300,000			1,238,250
	WPX Energy Inc., senior note, 8.25%, 8/01/23		United States		1,000,000			1,007,500
								35,750,906
	Food, Beverage & Tobacco 2.6%
	Cott Beverages Inc., senior note, 6.75%, 1/01/20		United States		1,100,000			1,150,875
d	Dole Food Co. Inc., senior secured note, 144A, 7.25%, 5/01/19		United States		500,000			500,000

Semiannual Report FH-11

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin High Income VIP Fund (continued)

		Country		Principal Amount*		Value
	Corporate Bonds (continued)
	Food, Beverage & Tobacco (continued)
d	JBS USA LLC/Finance Inc.,
	senior bond, 144A, 5.875%, 7/15/24		United States		1,500,000	$	1,460,625
	senior note, 144A, 8.25%, 2/01/20		United States		1,000,000		1,040,000
	Post Holdings Inc., senior note,
	7.375%, 2/15/22		United States		1,600,000		1,688,000
	d 144A, 6.75%, 12/01/21		United States		600,000		636,000
	d 144A, 6.00%, 12/15/22		United States		300,000		308,625
							6,784,125
	Health Care Equipment & Services 5.6%
d	Acadia Healthcare Co. Inc., senior note, 144A, 6.50%, 3/01/24		United States		700,000		712,250
	Alere Inc., senior sub. note, 6.50%, 6/15/20		United States		200,000		200,000
	CHS/Community Health Systems Inc., senior note,
	7.125%, 7/15/20		United States		700,000		652,463
	6.875%, 2/01/22		United States		2,300,000		2,024,000
	DaVita HealthCare Partners Inc., senior bond, 5.125%, 7/15/24		United States		2,000,000		2,025,950
	HCA Inc.,
	senior bond, 5.875%, 5/01/23		United States		1,000,000		1,068,750
	senior bond, 5.375%, 2/01/25		United States		1,500,000		1,541,250
	senior secured note, first lien, 5.00%, 3/15/24		United States		2,300,000		2,386,250
d	MPH Acquisition Holdings LLC, senior note, 144A, 7.125%, 6/01/24		United States		400,000		421,000
	Tenet Healthcare Corp., senior note,
	5.00%, 3/01/19		United States		200,000		194,500
	8.125%, 4/01/22		United States		3,000,000		3,089,400
	6.75%, 6/15/23		United States		300,000		288,375
							14,604,188
	Materials 13.2%
d	American Builders & Contractors Supply Co. Inc., senior note, 144A, 5.625%, 4/15/21		United States		2,100,000		2,178,750
	ArcelorMittal, senior note,
	6.50%, 3/01/21		France		1,900,000		1,961,702
	6.125%, 6/01/25		France		700,000		700,000
d	Ardagh Packaging Finance PLC/Ardagh MP Holdings USA Inc., senior note, 144A,
	7.00%, 11/15/20		Luxembourg		176,471		173,824
	6.75%, 1/31/21		Luxembourg		300,000		302,250
	6.00%, 6/30/21		Luxembourg		1,900,000		1,895,250
d	Barminco Finance Pty. Ltd., senior note, 144A, 9.00%, 6/01/18		Australia		1,600,000		1,329,504
d	Blue Cube Spinco Inc., senior bond, 144A, 10.00%, 10/15/25		United States		1,200,000		1,392,000
d	BlueScope Steel Ltd./BlueScope Steel Finance, senior note, 144A, 7.125%, 5/01/18		Australia		738,000		767,520
d	Cemex Finance LLC, senior secured note, first lien, 144A, 6.00%, 4/01/24		Mexico		1,700,000		1,652,553
d	Cemex SAB de CV, senior secured bond, first lien, 144A, 6.125%, 5/05/25		Mexico		1,400,000		1,364,244
	The Chemours Co.,
	senior bond, 7.00%, 5/15/25		United States		500,000		421,875
	senior note, 6.625%, 5/15/23		United States		1,800,000		1,539,000
d	CVR Partners LP/CVR Nitrogen Finance Corp., 144A, 9.25%, 6/15/23		United States		1,000,000		1,021,250
d	Eldorado Gold Corp., senior note, 144A, 6.125%, 12/15/20		Canada		1,600,000		1,608,000

FH-12 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin High Income VIP Fund (continued)

		Country		Principal Amount*		Value
	Corporate Bonds (continued)
	Materials (continued)
d	First Quantum Minerals Ltd., senior note, 144A,
	6.75%, 2/15/20		Canada		2,000,000	$	1,680,000
	7.00%, 2/15/21		Canada		1,836,000		1,484,865
d	FMG Resources (August 2006) Pty. Ltd., senior secured note, 144A, 9.75%, 3/01/22		Australia		1,000,000		1,110,000
d	NOVA Chemicals Corp., senior bond, 144A, 5.00%, 5/01/25		Canada		2,000,000		1,985,000
d	Owens-Brockway Glass Container Inc., senior note, 144A,
	5.00%, 1/15/22		United States		1,400,000		1,407,000
	5.875%, 8/15/23		United States		600,000		631,377
d	Platform Specialty Products Corp., senior note, 144A,
	10.375%, 5/01/21		United States		300,000		303,000
	6.50%, 2/01/22		United States		1,500,000		1,327,500
d	Rain CII Carbon LLC/CII Carbon Corp., second lien, 144A, 8.25%, 1/15/21		United States		1,200,000		978,000
d	Reynolds Group Issuer Inc./Reynolds Group Issuer LLC/Reynolds Group Issuer Luxembourg SA,
	first lien, 144A, 5.125%, 7/15/23		United States		1,200,000		1,216,500
	senior note, 144A, 7.00%, 7/15/24		United States		500,000		515,687
	Steel Dynamics Inc.,
	senior bond, 5.50%, 10/01/24		United States		800,000		820,000
	senior note, 5.125%, 10/01/21		United States		800,000		821,000
d	Summit Materials LLC/Summit Materials Finance Corp., senior note, 144A, 8.50%, 4/15/22		United States		1,800,000		1,914,750
e	Verso Paper Holdings LLC/Inc., senior secured note, first lien, 11.75%, 1/15/19		United States		451,000		77,798
							34,580,199
	Media 10.2%
d	Altice U.S. Finance I Corp., senior secured bond, 144A, 5.50%, 5/15/26		United States		1,500,000		1,503,750
	AMC Networks Inc., senior note, 5.00%, 4/01/24		United States		1,500,000		1,490,437
	CCO Holdings LLC/CCO Holdings Capital Corp., senior bond,
	5.25%, 9/30/22		United States		1,000,000		1,028,750
	d 144A, 5.375%, 5/01/25		United States		800,000		814,000
	d 144A, 5.75%, 2/15/26		United States		500,000		516,250
	Clear Channel Worldwide Holdings Inc.,
	senior note, 6.50%, 11/15/22		United States		1,000,000		1,005,000
	senior sub. note, 7.625%, 3/15/20		United States		1,100,000		1,052,150
	CSC Holdings LLC, senior note,
	6.75%, 11/15/21		United States		1,500,000		1,533,750
	5.25%, 6/01/24		United States		1,000,000		910,000
	DISH DBS Corp., senior note, 5.875%, 11/15/24		United States		3,500,000		3,281,250
	Gannett Co. Inc.,
	senior bond, 6.375%, 10/15/23		United States		2,000,000		2,132,500
	senior note, 5.125%, 7/15/20		United States		500,000		516,875
	iHeartCommunications Inc.,
	senior secured bond, first lien, 9.00%, 3/01/21		United States		2,500,000		1,771,875
	senior secured note, first lien, 9.00%, 9/15/22		United States		700,000		488,250
d	Radio One Inc., senior sub. note, 144A, 9.25%, 2/15/20		United States		800,000		712,000
d	Sirius XM Radio Inc., senior bond, 144A, 6.00%, 7/15/24		United States		2,500,000		2,590,625
d	Virgin Media Finance PLC, senior bond, 144A, 6.375%, 4/15/23		United Kingdom		1,700,000		1,708,500

Semiannual Report FH-13

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin High Income VIP Fund (continued)

		Country		Principal Amount*		Value
	Corporate Bonds (continued)
	Media (continued)
d	Virgin Media Secured Finance PLC, senior secured bond, first lien, 144A, 5.50%, 1/15/25		United Kingdom		1,100,000	$	1,084,875
d	WMG Acquisition Corp., senior note, 144A, 5.625%, 4/15/22		United States		2,500,000		2,565,625
							26,706,462
	Pharmaceuticals, Biotechnology & Life Sciences 3.7%
d	Concordia International Corp., senior note, 144A, 7.00%, 4/15/23		Canada		1,300,000		1,114,750
d	Endo Finance LLC/Endo Ltd./Endo Finco Inc.,
	senior bond, 144A, 6.00%, 2/01/25		United States		1,500,000		1,308,750
	senior note, 144A, 6.00%, 7/15/23		United States		700,000		619,500
	Horizon Pharma Inc., senior note, 6.625%, 5/01/23		United States		2,500,000		2,325,000
d	Jaguar Holding Co. II/Pharmaceutical Product Development LLC, senior note, 144A, 6.375%, 8/01/23		United States		900,000		922,500
d	Valeant Pharmaceuticals International, senior note, 144A, 6.375%, 10/15/20		United States		3,000,000		2,595,000
d	Valeant Pharmaceuticals International Inc.,
	senior bond, 144A, 6.125%, 4/15/25		United States		700,000		563,500
	senior note, 144A, 5.625%, 12/01/21		United States		300,000		249,000
							9,698,000
	Real Estate 1.1%
	Equinix Inc., senior bond, 5.375%, 4/01/23		United States		2,800,000		2,905,000
	Retailing 1.4%
d	Argos Merger Sub Inc., senior note, 144A, 7.125%, 3/15/23		United States		1,600,000		1,650,000
	Netflix Inc., senior bond, 5.875%, 2/15/25		United States		1,900,000		2,002,125
							3,652,125
	Semiconductors & Semiconductor Equipment 0.8%
d	Microsemi Corp., senior note, 144A, 9.125%, 4/15/23		United States		700,000		773,500
d	Qorvo Inc., senior bond, 144A, 7.00%, 12/01/25		United States		1,200,000		1,272,000
							2,045,500
	Software & Services 3.0%
d	BMC Software Finance Inc., senior note, 144A, 8.125%, 7/15/21		United States		3,000,000		2,265,000
d	First Data Corp.,
	second lien, 144A, 5.75%, 1/15/24		United States		2,900,000		2,885,500
	senior note, 144A, 7.00%, 12/01/23		United States		700,000		713,125
	Infor (U.S.) Inc., senior note, 6.50%, 5/15/22		United States		2,000,000		1,898,760
							7,762,385
	Technology Hardware & Equipment 3.0%
d	Blackboard Inc., senior note, 144A, 7.75%, 11/15/19		United States		2,000,000		1,690,000
d	CommScope Technologies Finance LLC, senior bond, 144A, 6.00%, 6/15/25		United States		1,600,000		1,648,000
d	Diamond 1 Finance Corp./Diamond 2 Finance Corp.,
	senior note, 144A, 5.875%, 6/15/21		United States		300,000		307,734
	senior note, 144A, 7.125%, 6/15/24		United States		300,000		313,801
	senior secured bond, first lien, 144A, 5.45%, 6/15/23		United States		700,000		726,873
	senior secured bond, first lien, 144A, 6.02%, 6/15/26		United States		500,000		519,703
d	Western Digital Corp., senior note, 144A, 10.50%, 4/01/24		United States		2,400,000		2,574,000
							7,780,111

FH-14 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin High Income VIP Fund (continued)

		Country		Principal Amount*		Value
	Corporate Bonds (continued)
	Telecommunication Services 9.1%
	CenturyLink Inc.,
	senior bond, 6.75%, 12/01/23		United States		300,000	$	295,875
	senior note, 6.45%, 6/15/21		United States		400,000		407,500
	senior note, 5.80%, 3/15/22		United States		2,500,000		2,436,725
d	Digicel Group Ltd., senior note, 144A, 8.25%, 9/30/20		Bermuda		1,500,000		1,257,120
d	Digicel Ltd., senior note, 144A, 6.00%, 4/15/21		Bermuda		2,200,000		1,894,750
	Intelsat Jackson Holdings SA,
	senior bond, 5.50%, 8/01/23		Luxembourg		1,500,000		960,000
	senior note, 7.50%, 4/01/21		Luxembourg		3,800,000		2,641,000
	Sprint Communications Inc., senior note,
	8.375%, 8/15/17		United States		1,500,000		1,545,000
	d 144A, 9.00%, 11/15/18		United States		3,000,000		3,206,250
	Sprint Corp., senior bond,
	7.875%, 9/15/23		United States		500,000		411,250
	7.125%, 6/15/24		United States		500,000		398,125
	T-Mobile USA Inc.,
	senior bond, 6.50%, 1/15/24		United States		900,000		950,625
	senior bond, 6.375%, 3/01/25		United States		1,600,000		1,678,000
	senior note, 6.542%, 4/28/20		United States		1,600,000		1,650,016
	senior note, 6.125%, 1/15/22		United States		200,000		210,500
	senior note, 6.00%, 4/15/24		United States		600,000		625,500
d	Wind Acquisition Finance SA,
	secured note, second lien, 144A, 7.375%, 4/23/21		Italy		3,000,000		2,859,015
	senior secured note, first lien, 144A, 4.75%, 7/15/20		Italy		500,000		492,500
							23,919,751
	Transportation 0.9%
d	Florida East Coast Holdings Corp.,
	secured note, first lien, 144A, 6.75%, 5/01/19		United States		900,000		900,000
	senior note, 144A, 9.75%, 5/01/20		United States		500,000		427,500
d	Stena International SA, senior secured bond, first lien, 144A, 5.75%, 3/01/24		Sweden		1,300,000		1,072,500
							2,400,000
	Utilities 3.2%
	Calpine Corp.,
	senior bond, 5.75%, 1/15/25		United States		1,200,000		1,171,500
	senior note, 5.375%, 1/15/23		United States		1,300,000		1,274,000
	d senior secured bond, first lien, 144A, 5.875%, 1/15/24		United States		400,000		418,000
d	InterGen NV, secured bond, 144A, 7.00%, 6/30/23		Netherlands		3,000,000		2,137,500
	NRG Yield Operating LLC, senior bond, 5.375%, 8/15/24		United States		2,000,000		2,000,000
	Talen Energy Supply LLC, senior bond, 6.50%, 6/01/25		United States		700,000		584,500
d,e	Texas Competitive Electric Holdings Co. LLC/Texas Competitive
	Electric Holdings Finance Inc., senior secured note, first lien, 144A, 11.50%, 10/01/20		United States		2,500,000		856,250
							8,441,750
	Total Corporate Bonds (Cost $273,011,528)						242,535,548
h,i	Senior Floating Rate Interests (Cost $1,515,654) 0.6%
	Household & Personal Products 0.6%
	Sun Products Corp., Tranche B Term Loan, 5.50%, 3/23/20		United States		1,524,607		1,527,466

Semiannual Report FH-15

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin High Income VIP Fund (continued)

		Country		Shares		Value
	Escrows and Litigation Trusts (Cost $ —) 0.0%
a,b	NewPage Corp., Litigation Trust		United States		2,500,000	$	—
	Total Investments before Short Term Investments (Cost $275,593,405)						244,314,590
				Principal Amount*
	Short Term Investments (Cost $6,138,978) 2.4%
	Repurchase Agreements 2.4%
j	Joint Repurchase Agreement, 0.382%, 7/01/16 (Maturity Value $6,139,043)		United States		6,138,978		6,138,978
	BNP Paribas Securities Corp. (Maturity Value $1,991,076) Deutsche Bank Securities Inc. (Maturity Value $613,843) HSBC Securities (USA) Inc. (Maturity Value $3,384,823) Merrill Lynch, Pierce, Fenner & Smith Inc. (Maturity Value $149,301)
	Collateralized by U.S. Government Agency Securities, 0.187% - 5.50%, 7/18/16 - 5/06/21; U.S. Government Agency Securities, Strips, 6/01/17; and U.S. Treasury Note, 0.75% - 3.25%, 11/30/16 - 9/30/20 (valued at $6,264,337)
	Total Investments (Cost $281,732,383) 95.7%						250,453,568
	Other Assets, less Liabilities 4.3%						11,385,555
	Net Assets 100.0%					$	261,839,123

See Abbreviations on page FH-26.

^†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, 2016, the aggregate value of these securities was $376,767, representing 0.1% of net assets.

^cPerpetual security with no stated maturity date.

^dSecurity 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, 2016, the aggregate value of these securities was $118,323,476, representing 45.2% of net assets.

^eSee Note 7 regarding defaulted securities.

^fAt June 30, 2016, pursuant to the Fund’s policies and the requirements of applicable securities law, the Fund is restricted from trading these securities at period end.

^gPrincipal amount is stated in 1,000 Units.

^hSee Note 1(d) regarding senior floating rate interests.

ⁱThe coupon rate shown represents the rate at period end.

^j See Note 1(c) regarding joint repurchase agreement.

FH-16 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Statements

Statement of Assets and Liabilities

June 30, 2016 (unaudited)

	Franklin High Income VIP Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	275,593,405
Cost - Repurchase agreements		6,138,978
Total cost of investments	$	281,732,383
Value - Unaffiliated issuers	$	244,314,590
Value - Repurchase agreements		6,138,978
Total value of investments		250,453,568
Receivables:
Investment securities sold		2,461,918
Capital shares sold		5,319,321
Interest		4,029,675
Other assets		114
Total assets		262,264,596
Liabilities:
Payables:
Capital shares redeemed		139,627
Management fees		115,850
Distribution fees		100,363
Trustees’ fees and expenses		23
Reports to shareholders		40,904
Professional fees		21,956
Accrued expenses and other liabilities		6,750
Total liabilities		425,473
Net assets, at value	$	261,839,123
Net assets consist of:
Paid-in capital	$	315,989,450
Undistributed net investment income		5,579,077
Net unrealized appreciation (depreciation)		(31,278,815	)
Accumulated net realized gain (loss)		(28,450,589	)
Net assets, at value	$	261,839,123
Class 1:
Net assets, at value	$	26,977,476
Shares outstanding		4,754,968
Net asset value and maximum offering price per share	$	5.67
Class 2:
Net assets, at value	$	212,063,417
Shares outstanding		38,690,817
Net asset value and maximum offering price per share	$	5.48
Class 4:
Net assets, at value	$	22,798,230
Shares outstanding		4,061,095
Net asset value and maximum offering price per share	$	5.61

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report FH-17

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Statement of Operations

for the six months ended June 30, 2016 (unaudited)

	Franklin High Income VIP Fund
Investment income:
Interest	$	8,351,258
Expenses:
Management fees (Note 3a)		684,216
Distribution fees: (Note 3c)
Class 2		251,137
Class 4		38,637
Custodian fees (Note 4)		1,079
Reports to shareholders		40,148
Professional fees		25,113
Trustees’ fees and expenses		669
Other		11,312
Total expenses		1,052,311
Expense reductions (Note 4)		(17	)
Net expenses		1,052,294
Net investment income		7,298,964
Realized and unrealized gains (losses):
Net realized gain (loss) from investments		(3,421,920	)
Net change in unrealized appreciation (depreciation) on investments		15,969,619
Net realized and unrealized gain (loss)		12,547,699
Net increase (decrease) in net assets resulting from operations	$	19,846,663

FH-18 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Statements of Changes in Net Assets

	Franklin High Income VIP Fund
	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31, 2015
Increase (decrease) in net assets:
Operations:
Net investment income	$	7,298,964		$	17,823,602
Net realized gain (loss)		(3,421,920	)		(8,895,014	)
Net change in unrealized appreciation (depreciation)		15,969,619			(34,561,954	)
Net increase (decrease) in net assets resulting from operations		19,846,663			(25,633,366	)
Distributions to shareholders from:
Net investment income:
Class 1		(1,890,311	)		(2,177,640	)
Class 2		(14,579,216	)		(17,219,440	)
Class 4		(1,529,698	)		(1,604,998	)
Total distributions to shareholders		(17,999,225	)		(21,002,078	)
Capital share transactions: (Note 2)
Class 1		(80,442	)		(2,896,859	)
Class 2		5,355,423			(18,609,864	)
Class 4		834,627			(212,162	)
Total capital share transactions		6,109,608			(21,718,885	)
Net increase (decrease) in net assets		7,957,046			(68,354,329	)
Net assets:
Beginning of period		253,882,077			322,236,406
End of period	$	261,839,123		$	253,882,077
Undistributed net investment income included in net assets:
End of period	$	5,579,077		$	16,279,338

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report FH-19

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Notes to Financial Statements (unaudited)

Franklin High Income VIP Fund

1. Organization and Significant Accounting Policies

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of nineteen separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Franklin High Income VIP 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, 2016, 85.09% of the Fund’s shares were held through one insurance company. Investment activities of these insurance company separate accounts could have a material impact on the Fund. The Fund offers three classes of shares: Class 1, Class 2, and Class 4. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

The Fund’s investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Fund calculates the net asset value (NAV) per share as of 4 p.m. Eastern time each day the New York Stock Exchange (NYSE) is open for trading. Under compliance policies and procedures approved by the Trust’s Board of Trustees (the Board), the Fund’s administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The VC provides administration and oversight of the Fund’s valuation policies and procedures, which are approved annually by the Board. Among other things, these procedures allow the Fund to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

Equity securities listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded or

as of 4 p.m. Eastern time whichever is earlier. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the day that the value of the security is determined. Over-the-counter (OTC) securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.

Debt securities generally trade in the OTC market rather than on a securities exchange. The Fund’s pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value. Securities denominated in a foreign currency are converted into their U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the date that the values of the foreign debt securities are determined.

Repurchase agreements are valued at cost, which approximates fair value.

The Fund has procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the VC convenes on a regular basis to review such financial instruments and considers a number of factors, including significant unobservable valuation inputs, when arriving at fair value. The VC primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the

FH-20 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin High Income VIP Fund (continued)

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

Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 4 p.m. Eastern time. In addition, trading in certain foreign markets may not take place on every NYSE business day. 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 VC monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depositary Receipts, futures contracts and exchange traded funds). These price movements are measured against 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.

When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the NYSE is closed, which could result in differences between the value of the Fund’s portfolio securities on the last business day and the last calendar day of the reporting period. Any significant security valuation changes due to an open foreign market are adjusted and reflected by the Fund for financial reporting purposes.

b. Foreign Currency Translation

Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Fund may enter into foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of securities, income and

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

The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments in 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 fair 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%. Repurchase agreements are subject to the terms of Master Repurchase Agreements (MRAs) with approved counterparties (sellers). The MRAs contain various provisions, including but not limited to events of default and maintenance of collateral for repurchase agreements. In the event of default by either the seller or the Fund, certain MRAs may permit the non-defaulting party to net

Semiannual Report FH-21

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin High Income VIP Fund (continued)

1. Organization and Significant Accounting Policies (continued)

c. Joint Repurchase Agreement (continued)

and close-out all transactions, if any, traded under such agreements. The Fund may sell securities it holds as collateral and apply the proceeds towards the repurchase price and any other amounts owed by the seller to the Fund in the event of default by the seller. This could involve costs or delays in addition to a loss on the securities if their value falls below the repurchase price owed by the seller. The joint repurchase agreement held by the Fund at period end, as indicated in the Statement of Investments, had been entered into on June 30, 2016.

d. 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 certain restrictions on resale.

e. Income and Deferred Taxes

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

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

The Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain

tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of June 30, 2016, the Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on each tax jurisdiction’s statute of limitation.

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. Facility fees are recognized as income over the expected term of the loan. 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 U.S. GAAP. 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 U.S. GAAP 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.

FH-22 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin High Income VIP Fund (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, 2016, 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, 2016						Year Ended December 31, 2015
	Shares			Amount			Shares			Amount
Class 1 Shares:
Shares sold		48,240		$	275,100			75,416		$	488,620
Shares issued in reinvestment of distributions		336,354			1,890,311			345,109			2,177,640
Shares redeemed		(395,202	)		(2,245,853	)		(874,142	)		(5,563,119	)
Net increase (decrease)		(10,608	)	$	(80,442	)		(453,617	)	$	(2,896,859	)
Class 2 Shares:
Shares sold		3,993,563		$	21,674,166			8,301,712		$	51,141,411
Shares issued in reinvestment of distributions		2,684,938			14,579,216			2,818,239			17,219,440
Shares redeemed		(5,704,303	)		(30,897,959	)		(14,249,319	)		(86,970,715	)
Net increase (decrease)		974,198		$	5,355,423			(3,129,368	)	$	(18,609,864	)
Class 4 Shares:
Shares sold		175,339		$	949,644			185,105		$	1,139,732
Shares issued in reinvestment of distributions		275,125			1,529,698			256,800			1,604,998
Shares redeemed		(290,428	)		(1,644,715	)		(474,184	)		(2,956,892	)
Net increase (decrease)		160,036		$	834,627			(32,279	)	$	(212,162	)

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

Semiannual Report FH-23

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin High Income VIP Fund (continued)

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

For the period ended June 30, 2016, the annualized effective investment management fee rate was 0.549% of the Fund’s average daily net assets.

b. Administrative Fees

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

c. Distribution Fees

The Board has adopted distribution plans for Class 2 and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to 0.35% per year of its average daily net assets of each class. The Board has agreed to limit the current rate to 0.25% per year for Class 2. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.

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, 2016, the custodian fees were reduced as noted in the Statement of Operations.

5. Income Taxes

For tax purposes, capital losses may be carried over to offset future capital gains. Capital loss carryforwards with no expiration, if any, must be fully utilized before those losses with expiration dates.

FH-24 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin High Income VIP Fund (continued)

At June 30, 2016, capital loss carryforwards were as follows:

Capital loss carryforwards subject to expiration:
2016	$	5,148,804
2017		10,621,353
Capital loss carryforwards not subject to expiration:
Short term		79,444
Long term		9,179,067
Total capital loss carryforwards	$	25,028,668

At June 30, 2016, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	282,994,655
Unrealized appreciation	$	4,038,847
Unrealized depreciation		(36,579,934	)
Net unrealized appreciation (depreciation)	$	(32,541,087	)

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

6. Investment Transactions

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2016, aggregated $29,309,337 and $33,186,100, respectively.

7. Credit Risk and Defaulted Securities

At June 30, 2016, the Fund had 95.5% 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, 2016, the aggregate value of these securities was $5,117,247, representing 2.0% 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 in the accompanying Statement of Investments.

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 $2 billion (Global Credit Facility) which matures on February 10, 2017. 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 0.07% based upon the unused portion of the Global Credit Facility. Effective February 12, 2016, the annual commitment fee is 0.15%. These fees are reflected in other expenses in the Statement of Operations. During the period ended June 30, 2016, the Fund did not use the Global Credit Facility.

Semiannual Report FH-25

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin High Income VIP Fund (continued)

9. Fair Value Measurements

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

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

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

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

The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.

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

A summary of inputs used as of June 30, 2016, in valuing the Fund’s assets carried at fair value, is as follows:

	Level 1		Level 2		Level 3			Total
Assets:
Investments in Securities
Equity Investmentsa,b	$	—	$	—	$	251,576		$	251,576
Corporate Bonds		—		242,384,499		151,049			242,535,548
Senior Floating Rate Interests		—		1,527,466		—			1,527,466
Escrows and Litigation Trusts		—		—		—	c		—
Short Term Investments		—		6,138,978		—			6,138,978
Total Investments in Securities	$	—	$	250,050,943	$	402,625		$	250,453,568

^aIncludes common and convertible preferred stocks.

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

^cIncludes securities determined to have no value at June 30, 2016.

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

10. Subsequent Events

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

Abbreviations

Selected Portfolio
FRN	Floating Rate Note

FH-26 Semiannual Report

Franklin Income VIP Fund

We are pleased to bring you Franklin Income VIP Fund’s semiannual report for the period ended June 30, 2016.

Class 1 Performance Summary as of June 30, 2016

The Fund’s Class 1 shares delivered a +5.84% total return* for the six-month period ended June 30, 2016.

*The Fund has a fee waiver associated with any investment in a Franklin Templeton money fund and/or Franklin Templeton fund, as applicable, contractually guaranteed through at least the Fund’s current fiscal year-end. Fund investment results reflect the fee waiver, to the extent applicable; without this reduction, the results would have been lower.

Performance reflects the Fund’s Class 1 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.

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.

Semiannual Report FI-1

FRANKLIN INCOME VIP FUND

Fund Goal and Main Investments

The Fund seeks to maximize income while maintaining prospects for capital appreciation. Under normal market conditions, the Fund invests in both equity and debt securities.

Fund Risks

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

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. For comparison, the Fund’s equity benchmark, the Standard & Poor’s^® 500 Index, produced a +3.84% total return, and its fixed income benchmark, the Barclays U.S. Aggregate Bond Index, had a +5.31% total return for the same period.¹

Economic and Market Overview

The U.S. economy grew moderately, as measured by gross domestic product in 2016’s first and second quarters, driven by consumer spending and exports. A decline in private inventory investment and nonresidential fixed investment contributed to the moderation. Although the unemployment rate rose from 4.7% in May to 4.9% in June, the increase was due to additional people entering the labor force, and for the entire period under

Portfolio Breakdown
6/30/16
	% of Total Net Assets
Equity*		53.3	%
Information Technology		8.5	%
Energy		8.3	%
Utilities		6.8	%
Industrials		6.5	%
Health Care		6.4	%
Financials		5.8	%
Consumer Discretionary		4.7	%
Materials		3.5	%
Telecommunication Services		1.6	%
Consumer Staples		1.2	%
Fixed Income		35.7	%
Health Care		5.8	%
Energy		5.3	%
Consumer Discretionary		5.2	%
Financials		4.0	%
Telecommunication Services		3.9	%
Information Technology		3.6	%
Industrials		3.1	%
Utilities		2.3	%
Materials		2.2	%
Consumer Staples		0.3	%
Short-Term Investments & Other Net Assets		11.0	%

*Includes convertible bonds.

review, unemployment declined slightly.² Home sales and prices rose amid relatively low mortgage rates. Monthly retail sales grew during most of the review period, and rose to the highest level in April in more than a year, due to a broad-based increase across most retail categories. Inflation, as measured by the Consumer Price Index, remained subdued overall even though it spiked to the highest level in three years in April mainly due to a rebound in energy prices.

After raising its target range for the federal funds rate to 0.25%–0.50% at its December meeting, the Federal Reserve (Fed) maintained the rate through-period end. Although the Fed hinted at an interest rate hike in June, subsequent reports showed job additions slowed substantially in May. Consequently, at its

1. Source: 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.

FI-2 Semiannual Report

FRANKLIN INCOME VIP FUND

June meeting, the Fed kept the federal funds rates unchanged, and indicated that in determining the timing and size of future adjustments to the target range, it will assess realized and expected economic conditions relative to its objectives of maximum employment and 2.00% inflation. The Fed expects economic conditions to evolve in a manner that could warrant only gradual increases in the federal funds rate.

The 10-year Treasury yield, which moves inversely to price, declined during the period. It declined from a period high of 2.27% on December 31, 2015, and remained relatively low through period-end, reflecting investors’ concerns about global economic uncertainty. Negative interest rates in Japan and Europe, and central banks’ purchases of government bonds, also put downward pressure on U.S. yields. It touched a period low of 1.46% on June 27, 2016, and ended the period at 1.49%, after the Fed kept short-term interest rates unchanged and fears of Britain’s exit from the European Union boosted safe-haven buying by investors.

Investment Strategy

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

Manager’s Discussion

During the six months under review, we shifted the Fund’s asset mix after finding what we considered attractive opportunities in the fixed income sector, while realizing gains in our equity positions. We strategically reduced our equity weighting from 62.7% to 53.3%, and increased our fixed income weighting from 24.2% to 35.7%. Our cash position fell from 13.1% to 11.0% of total net assets.

Top Five Equity Holdings
6/30/16
Company Sector/Industry	% of Total Net Assets
Royal Dutch Shell PLC (U.K.) Energy		2.8%
General Electric Co. Industrials		2.1%
Chevron Corp. Energy		1.9%
Pfizer Inc. Health Care		1.6%
Apple Inc. Information Technology		1.5%

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).

The utilities sector was a significant contributor to Fund results. PG&E, The Southern Company and Xcel Energy delivered positive performance. Utilities have performed well as investors sought their perceived earnings stability and relatively high dividend yields. We trimmed some of our utility positions after we found opportunities in other sectors.

Industrials was another equity contributor during the period, and our position in General Electric helped results. The company continued to streamline its operations by divesting non-core businesses in an effort to increase its focus on the areas where it is a market leader. Defense contractors Lockheed Martin³ and Raytheon were strong performers as they benefited from a strengthening budget outlook due to continued political instability abroad. Both companies surpassed consensus investor expectations during the reporting period.

In contrast, the equity consumer discretionary and financials sectors were major detractors during the period. In consumer discretionary, auto makers General Motors, Fiat Chrysler³ and Ford Motor hurt Fund performance. Among financials, our positions in insurer MetLife, banking and financial services provider Wells Fargo & Co. and financial services firm

JPMorganChase & Co. were detrimental to results.

Most fixed income sectors delivered positive returns during the period. Within fixed income, the communications sector was a major contributor.⁴ Sprint bonds performed well as the company significantly increased its liquidity, which could provide the capital necessary to continue to improve its competitive position in the marketplace. Mass media company

3. Not held at period-end.

4. Communications holdings are in consumer discretionary and telecommunication services in the fixed income section of the SOI.

Semiannual Report FI-3

FRANKLIN INCOME VIP FUND

Top Five Fixed Income and Senior Floating Rate Interests Holdings*
6/30/16
Issuer Sector/Industry	% of Total Net Assets
Weatherford International Ltd. Energy		1.6%
CHS/Community Health Systems Inc. Health Care		1.6%
DISH DBS Corp. Consumer Discretionary		1.5%
Citigroup Inc. Financials		1.3%
iHeartCommunications Inc. Consumer Discretionary		1.2%

*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).

iHeartCommunications also did well as the company continued to post solid operating results and reduce its debt load.

Another significant contributor in fixed income was the technology sector.⁵ Our positions in business service management software developer BMC Software and payment technology company First Data, along with a new position in data storage company Western Digital, were standout performers.

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

The foregoing information reflects our analysis, opinions and portfolio holdings as of June 30, 2016, 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.

5. Technology holdings are in information technology in the fixed income section of the SOI.

FI-4 Semiannual Report

FRANKLIN INCOME VIP FUND

Class 1 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 × $7.50 = $64.50.

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

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 1	Beginning Account Value 1/1/16		Ending Account Value 6/30/16		Fund-Level Expenses Incurred During Period* 1/1/16–6/30/16
Actual	$	1,000	$	1,058.40	$	2.25
Hypothetical (5% return before expenses)	$	1,000	$	1,022.68	$	2.21

*Expenses are calculated using the most recent six-month annualized expense ratio, net of expense waivers, for the Fund’s Class 1 shares (0.44%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 182/366 to reflect the one-half year period.

Semiannual Report FI-5

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Highlights

Franklin Income VIP Fund

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012			2011
Class 1
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$14.64			$16.48			$16.53			$15.47			$14.68			$15.16
Income from investment operationsa:
Net investment incomeb		0.33			0.71			0.72			0.81			0.91			0.96
Net realized and unrealized gains (losses)		0.51			(1.78	)		0.11			1.31			0.90			(0.54	)
Total from investment operations		0.84			(1.07	)		0.83			2.12			1.81			0.42
Less distributions from net investment income		(0.78	)		(0.77	)		(0.88	)		(1.06	)		(1.02	)		(0.90	)
Net asset value, end of period		$14.70			$14.64			$16.48			$16.53			$15.47			$14.68
Total returnc		5.84%			(6.84)%			4.92%			14.18%			12.91%			2.71%
Ratios to average net assetsd
Expenses before waiver and payments by affiliates		0.47%			0.46%			0.47%			0.47%			0.47%			0.47%
Expenses net of waiver and payments by affiliates		0.44%	e		0.46%	e,f		0.47%	e		0.47%	e		0.47%			0.47%	e
Net investment income		4.52%			4.47%			4.26%			5.07%			6.03%			6.35%
Supplemental data
Net assets, end of period (000’s)		$662,361			$604,228			$714,664			$695,004			$584,391			$1,300,935
Portfolio turnover rate		27.34%			31.53%			24.77%			21.71%			26.66%	g		28.65%

^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’s shares in relation to income earned and/or fluctuating fair 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 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%.

^fBenefit of waiver and payments by affiliates rounds to less than 0.01%.

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

FI-6 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL HIGHLIGHTS

Franklin Income VIP Fund (continued)

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012			2011
Class 2
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$14.20			$16.00			$16.07			$15.07			$14.32			$14.82
Income from investment operationsa:
Net investment incomeb		0.30			0.65			0.66			0.75			0.85			0.90
Net realized and unrealized gains (losses)		0.49			(1.73	)		0.11			1.27			0.88			(0.53	)
Total from investment operations		0.79			(1.08	)		0.77			2.02			1.73			0.37
Less distributions from net investment income		(0.74	)		(0.72	)		(0.84	)		(1.02	)		(0.98	)		(0.87	)
Net asset value, end of period		$14.25			$14.20			$16.00			$16.07			$15.07			$14.32
Total returnc		5.65%			(7.05)%			4.62%			13.94%			12.65%			2.38%
Ratios to average net assetsd
Expenses before waiver and payments by affiliates		0.72%			0.71%			0.72%			0.72%			0.72%			0.72%
Expenses net of waiver and payments by affiliates		0.69%	e		0.71%	e,f		0.72%	e		0.72%	e		0.72%			0.72%	e
Net investment income		4.27%			4.22%			4.01%			4.82%			5.78%			6.10%
Supplemental data
Net assets, end of period (000’s)		$4,921,752			$4,907,599			$6,022,804			$6,188,045			$6,182,997			$5,915,637
Portfolio turnover rate		27.34%			31.53%			24.77%			21.71%			26.66%	g		28.65%

^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’s shares in relation to income earned and/or fluctuating fair 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 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%.

^fBenefit of waiver and payments by affiliates 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.    |   Semiannual Report FI-7

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL HIGHLIGHTS

Franklin Income VIP Fund (continued)

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012			2011
Class 4
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$14.49			$16.31			$16.36			$15.32			$14.54			$15.04
Income from investment operationsa:
Net investment incomeb		0.30			0.65			0.66			0.75			0.85			0.90
Net realized and unrealized gains (losses)		0.50			(1.76	)		0.11			1.30			0.90			(0.54	)
Total from investment operations		0.80			(1.11	)		0.77			2.05			1.75			0.36
Less distributions from net investment income		(0.72	)		(0.71	)		(0.82	)		(1.01	)		(0.97	)		(0.86	)
Net asset value, end of period		$14.57			$14.49			$16.31			$16.36			$15.32			$14.54
Total returnc		5.61%			(7.15)%			4.52%			13.85%			12.56%			2.29%
Ratios to average net assetsd
Expenses before waiver and payments by affiliates		0.82%			0.81%			0.82%			0.82%			0.82%			0.82%
Expenses net of waiver and payments by affiliates		0.79%	e		0.81%	e,f		0.82%	e		0.82%	e		0.82%			0.82%	e
Net investment income		4.17%			4.12%			3.91%			4.72%			5.68%			6.00%
Supplemental data
Net assets, end of period (000’s)		$304,884			$306,023			$378,545			$397,652			$436,405			$431,435
Portfolio turnover rate		27.34%			31.53%			24.77%			21.71%			26.66%	g		28.65%

^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’s shares in relation to income earned and/or fluctuating fair 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 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%.

^fBenefit of waiver and payments by affiliates rounds to less than 0.01%.

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

FI-8 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Statement of Investments, June 30, 2016 (unaudited)

Franklin Income VIP Fund
		Country		Shares		Value
	Common Stocks 44.6%
	Consumer Discretionary 3.2%
	Ford Motor Co.		United States		4,643,943	$	58,374,363
	General Motors Co.		United States		2,224,426		62,951,257
	Nordstrom Inc.		United States		200,000		7,610,000
	Target Corp.		United States		839,100		58,585,962
							187,521,582
	Consumer Staples 1.2%
	The Coca-Cola Co.		United States		150,000		6,799,500
	PepsiCo Inc.		United States		584,000		61,868,960
							68,668,460
	Energy 7.8%
	Anadarko Petroleum Corp.		United States		500,000		26,625,000
	BP PLC, ADR		United Kingdom		1,800,000		63,918,000
	Chevron Corp.		United States		1,055,000		110,595,650
	Denbury Resources Inc.		United States		292,400		1,049,716
	Occidental Petroleum Corp.		United States		436,000		32,944,160
a	PetroQuest Energy Inc.		United States		12,250		40,792
a,b	Rex Energy Corp.		United States		75,000		43,527
	Royal Dutch Shell PLC, A, ADR		United Kingdom		3,021,748		166,860,925
a	Sanchez Energy Corp.		United States		14,825		104,668
	Total SA, B, ADR		France		1,192,900		57,378,490
							459,560,928
	Financials 3.3%
	Host Hotels & Resorts Inc.		United States		1,500,000		24,315,000
	JPMorgan Chase & Co.		United States		485,100		30,144,114
	MetLife Inc.		United States		1,145,108		45,609,652
	U.S. Bancorp		United States		1,000,000		40,330,000
	Wells Fargo & Co.		United States		1,100,000		52,063,000
							192,461,766
	Health Care 5.6%
	AstraZeneca PLC		United Kingdom		1,000,000		59,562,978
	Bristol-Myers Squibb Co.		United States		394,396		29,007,826
	Eli Lilly & Co.		United States		764,800		60,228,000
	Pfizer Inc.		United States		2,638,975		92,918,310
	Roche Holding AG		Switzerland		136,500		35,813,595
	Sanofi, ADR		France		1,208,292		50,567,020
							328,097,729
	Industrials 6.4%
a,c	CEVA Holdings LLC		United Kingdom		13,012		4,554,291
	Deere & Co.		United States		350,000		28,364,000
	General Electric Co.		United States		3,976,200		125,170,776
	Raytheon Co.		United States		480,000		65,256,000
	Republic Services Inc.		United States		527,300		27,055,763
	Union Pacific Corp.		United States		600,000		52,350,000
	United Technologies Corp.		United States		700,000		71,785,000
							374,535,830
	Information Technology 6.3%
	Analog Devices Inc.		United States		400,000		22,656,000
	Apple Inc.		United States		915,317		87,504,305

Semiannual Report FI-9

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Income VIP Fund (continued)

		Country		Shares		Value
	Common Stocks (continued)
	Information Technology (continued)
	Cisco Systems Inc.		United States		900,000	$	25,821,000
a	First Data Holdings Inc., B		United States		1,559,550		17,264,219
	Intel Corp.		United States		1,727,000		56,645,600
	Microsoft Corp.		United States		1,333,500		68,235,195
	QUALCOMM Inc.		United States		550,000		29,463,500
	Texas Instruments Inc.		United States		1,000,000		62,650,000
							370,239,819
	Materials 3.2%
	BASF SE		Germany		387,500		29,522,449
	The Dow Chemical Co.		United States		1,525,700		75,842,547
	The Mosaic Co.		United States		1,100,000		28,798,000
	Rio Tinto PLC, ADR		United Kingdom		1,800,000		56,340,000
							190,502,996
	Telecommunication Services 1.6%
	BCE Inc.		Canada		466,000		22,050,337
	Telstra Corp. Ltd.		Australia		3,446,331		14,292,637
	Verizon Communications Inc.		United States		1,075,000		60,028,000
							96,370,974
	Utilities 6.0%
	Dominion Resources Inc.		United States		862,056		67,180,024
	Duke Energy Corp.		United States		702,500		60,267,475
	PG&E Corp.		United States		935,300		59,784,376
	Public Service Enterprise Group Inc.		United States		923,500		43,044,335
	Sempra Energy		United States		368,300		41,993,566
	The Southern Co.		United States		888,200		47,634,166
	Xcel Energy Inc.		United States		810,964		36,314,968
							356,218,910
	Total Common Stocks (Cost $2,250,285,831)						2,624,178,994
d	Equity-Linked Securities 4.3%
	Consumer Discretionary 1.4%
e	Morgan Stanley into Ford Motors, 8.50%, 144A		United States		2,485,000		31,512,037
e	Royal Bank of Canada into Target Corp., 6.00%, 144A		United States		700,000		49,862,820
							81,374,857
	Financials 0.5%
e	Citigroup Inc. into Bank of America Corp., 7.50%, 144A		United States		2,100,000		28,004,130
	Health Care 0.5%
e	JPMorgan Chase & Co. into Merck & Co. Inc., 6.25%, 144A		United States		500,000		28,643,350
	Information Technology 1.9%
e	JPMorgan Chase & Co. into Oracle Corp., 6.00%, 144A		United States		700,000		28,880,180
e	Wells Fargo & Co. into Intel Corp., 7.00%, 144A		United States		1,700,000		55,578,950
e	Wells Fargo Bank N.A into Cisco Systems Inc., 7.25%, 144A		United States		1,050,000		29,731,800
							114,190,930
	Total Equity-Linked Securities (Cost $260,718,300)						252,213,267

FI-10 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Income VIP Fund (continued)

		Country		Shares		Value
	Convertible Preferred Stocks 3.7%
	Consumer Discretionary 0.1%
	Fiat Chrysler Automobiles NV, 7.875%, cvt. pfd.		United Kingdom		85,000	$	5,016,700
	Energy 0.0%†
	Sanchez Energy Corp., 6.50%, cvt. pfd., B		United States		54,200		1,198,497
	Financials 1.8%
	Bank of America Corp., 7.25%, cvt. pfd., L		United States		64,600		77,197,000
	FelCor Lodging Trust Inc., 7.80%, cvt. pfd., A		United States		167,325		4,214,917
a	FNMA, 5.375%, cvt. pfd.		United States		475		5,996,875
	Wells Fargo & Co., 7.50%, cvt. pfd., A		United States		15,000		19,488,000
							106,896,792
	Health Care 0.3%
	Allergan PLC, 5.50%, cvt. pfd.		United States		9,500		7,919,390
	Teva Pharmaceutical Industries Ltd., 7.00%, cvt. pfd.		Israel		15,000		12,405,000
							20,324,390
	Industrials 0.1%
a,c	CEVA Holdings LLC, cvt. pfd., A-1		United Kingdom		397		208,425
a,c	CEVA Holdings LLC, cvt. pfd., A-2		United Kingdom		14,711		5,148,815
							5,357,240
	Information Technology 0.3%
a,e	Mandatory Exchangeable Trust, 5.75%, cvt. pfd., 144A		China		150,000		15,335,250
	Materials 0.3%
	Alcoa Inc., 5.375%, cvt. pfd.		United States		500,000		16,435,000
	Utilities 0.8%
	Dominion Resources Inc., 6.375%, cvt. pfd., A		United States		162,000		8,398,080
	Dominion Resources Inc., 6.00%, cvt. pfd., B		United States		145,000		8,714,500
	NextEra Energy Inc., 6.371%, cvt. pfd.		United States		500,000		32,390,000
							49,502,580
	Total Convertible Preferred Stocks (Cost $240,666,204)						220,066,449
	Preferred Stocks (Cost $8,750,000) 0.2%
	Financials 0.2%
	Morgan Stanley, 6.375%, pfd., I		United States		350,000		9,467,500
				Principal Amount*
	Convertible Bonds 0.5%
	Energy 0.5%
	Cobalt International Energy Inc., cvt., senior bond, 3.125%, 5/15/24		United States		10,000,000		3,400,000
	Stone Energy Corp., cvt., senior note, 1.75%, 3/01/17		United States		10,000,000		4,643,750
	Weatherford International Ltd., cvt., senior note, 5.875%, 7/01/21		United States		22,000,000		23,966,250
	Total Convertible Bonds (Cost $39,520,943)						32,010,000
	Corporate Bonds 32.3%
	Consumer Discretionary 4.0%
e	24 Hour Holdings III LLC, senior note, 144A, 8.00%, 6/01/22		United States		500,000		381,250
e	Altice Luxembourg SA, senior secured note, 144A, 7.75%, 5/15/22		Luxembourg		3,000,000		3,041,250
e	Argos Merger Sub Inc., senior note, 144A, 7.125%, 3/15/23		United States		3,000,000		3,093,750

Semiannual Report FI-11

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Income VIP Fund (continued)

		Country		Principal Amount*		Value
	Corporate Bonds (continued)
	Consumer Discretionary (continued)
	CCO Holdings LLC/CCO Holdings Capital Corp.,
	senior bond, 5.125%, 2/15/23		United States		10,000,000	$	10,150,000
	e senior bond, 144A, 5.75%, 2/15/26		United States		5,000,000		5,162,500
	e senior note, 144A, 5.875%, 4/01/24		United States		5,000,000		5,225,000
	DISH DBS Corp.,
	senior bond, 5.00%, 3/15/23		United States		35,000,000		31,937,500
	e senior bond, 144A, 7.75%, 7/01/26		United States		15,000,000		15,525,000
	senior note, 5.875%, 7/15/22		United States		30,000,000		29,250,000
	senior note, 5.875%, 11/15/24		United States		9,400,000		8,812,500
	Dollar General Corp., senior bond, 3.25%, 4/15/23		United States		5,000,000		5,199,180
	Fiat Chrysler Automobiles NV, senior note, 5.25%, 4/15/23		United Kingdom		11,300,000		11,253,952
	iHeartCommunications Inc.,
	senior secured bond, first lien, 9.00%, 3/01/21		United States		19,400,000		13,749,750
	senior secured note, first lien, 9.00%, 12/15/19		United States		18,000,000		13,747,500
	senior secured note, first lien, 9.00%, 9/15/22		United States		12,200,000		8,509,500
e	International Game Technology PLC,
	senior secured bond, 144A, 6.50%, 2/15/25		United States		8,500,000		8,585,000
	senior secured note, 144A, 6.25%, 2/15/22		United States		8,500,000		8,691,250
	KB Home, senior bond, 7.50%, 9/15/22		United States		6,500,000		6,727,500
e	Shea Homes LP/Shea Homes Funding Corp.,
	senior bond, 144A, 6.125%, 4/01/25		United States		10,000,000		10,000,000
	senior note, 144A, 5.875%, 4/01/23		United States		5,000,000		4,975,000
e	Sirius XM Radio Inc., senior bond, 144A, 6.00%, 7/15/24		United States		10,000,000		10,362,500
e	Univision Communications Inc., senior secured note, first lien, 144A, 5.125%,
	5/15/23		United States		10,000,000		9,975,000
	2/15/25		United States		7,140,000		7,086,450
e	Virgin Media Secured Finance PLC, senior secured bond, first lien, 144A, 5.50%, 1/15/25		United Kingdom		7,000,000		6,903,750
							238,345,082
	Consumer Staples 0.3%
	Cott Beverages Inc., senior note, 5.375%, 7/01/22		United States		2,500,000		2,509,375
e	JBS USA LLC/Finance Inc., senior note, 144A, 7.25%, 6/01/21		United States		12,500,000		13,000,000
							15,509,375
	Energy 5.2%
	Antero Resources Corp., senior note, 5.375%, 11/01/21		United States		5,000,000		4,925,000
	Bill Barrett Corp., senior note,
	7.625%, 10/01/19		United States		30,000,000		24,600,000
	7.00%, 10/15/22		United States		16,358,000		11,859,550
	Calumet Specialty Products Partners LP/Calumet Finance Corp.,
	senior note, 6.50%, 4/15/21		United States		9,500,000		6,840,000
	Chesapeake Energy Corp.,
	e secured note, second lien, 144A, 8.00%, 12/15/22		United States		33,550,000		28,601,375
	senior note, 7.25%, 12/15/18		United States		10,000,000		8,750,000
	f senior note, FRN, 3.878%, 4/15/19		United States		10,000,000		7,575,000
e	Denbury Resources Inc., senior secured note, 144A, 9.00%, 5/15/21		United States		7,200,000		7,236,000
e,g	Energy XXI Gulf Coast Inc., senior secured note, second lien, 144A, 11.00%, 3/15/20		United States		26,516,000		10,738,980

FI-12 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Income VIP Fund (continued)

		Country		Principal Amount*		Value
	Corporate Bonds (continued)
	Energy (continued)
e	EnQuest PLC, senior note, 144A, 7.00%, 4/15/22		United Kingdom		11,000,000	$	6,723,750
	Ferrellgas LP/Ferrellgas Finance Corp., senior note, 6.50%, 5/01/21		United States		5,000,000		4,612,500
e	Halcon Resources Corp.,
	secured note, second lien, 144A, 8.625%, 2/01/20		United States		9,000,000		8,533,080
	g senior secured note, third lien, 144A, 13.00%, 2/15/22		United States		1,100,000		588,500
	Kinder Morgan Inc.,
	senior note, MTN, 7.75%, 1/15/32		United States		22,000,000		24,728,176
	e senior secured bond, first lien, 144A, 5.625%, 11/15/23		United States		7,000,000		7,511,700
e	McDermott International Inc., second lien, 144A, 8.00%, 5/01/21		United States		12,592,000		10,892,080
e	NGPL PipeCo LLC, secured note, 144A, 7.119%, 12/15/17		United States		3,750,000		3,928,125
e	PetroQuest Energy Inc., second lien, 144A, 10.00%, 2/15/21		United States		1,653,000		1,140,570
e	Rex Energy Corp., second lien, 144A, 1.00% to 10/01/17, 8.00% thereafter, 10/01/20		United States		5,000,000		1,125,000
e	Sabine Pass Liquefaction LLC, senior secured bond, 144A, 5.875%, 6/30/26		United States		15,000,000		15,000,000
	Sanchez Energy Corp., senior note, 7.75%, 6/15/21		United States		22,000,000		18,755,000
	Stone Energy Corp., senior bond, 7.50%, 11/15/22		United States		26,905,000		12,241,775
h	W&T Offshore Inc., senior note, 8.50%, 6/15/19		United States		45,000,000		11,250,000
	Weatherford International Ltd., senior note,
	i 5.125%, 9/15/20		United States		12,500,000		11,831,250
	7.75%, 6/15/21		United States		25,000,000		24,437,500
	i 4.50%, 4/15/22		United States		9,900,000		8,538,750
	8.25%, 6/15/23		United States		27,500,000		26,193,750
							309,157,411
	Financials 3.3%
j	Bank of America Corp., junior sub. bond,
	AA, 6.10% to 3/17/25, FRN thereafter, Perpetual		United States		8,000,000		8,130,000
	M, 8.125% to 5/15/18, FRN thereafter, Perpetual		United States		5,000,000		5,018,750
j	Citigroup Inc., junior sub. bond,
	5.35% to 5/15/23, FRN thereafter, Perpetual		United States		10,000,000		9,420,500
	5.90% to 2/15/23, FRN thereafter, Perpetual		United States		12,500,000		12,343,750
	5.95% to 1/30/23, FRN thereafter, Perpetual		United States		4,500,000		4,452,188
	M, 6.30% to 5/15/24, FRN thereafter, Perpetual		United States		16,800,000		16,735,320
	O, 5.875% to 3/27/20, FRN thereafter, Perpetual		United States		25,000,000		24,031,250
	Q, 5.95% to 8/15/20, FRN thereafter, Perpetual		United States		10,000,000		9,761,500
	Iron Mountain Inc., senior sub. bond, 5.75%, 8/15/24		United States		3,000,000		3,045,000
	iStar Inc., senior note, 5.00%, 7/01/19		United States		3,500,000		3,281,250
j	JPMorgan Chase & Co., junior sub. bond,
	I, 7.90% to 4/30/19, FRN thereafter, Perpetual		United States		50,000,000		51,062,500
	R, 6.00% to 8/01/23, FRN thereafter, Perpetual		United States		3,200,000		3,276,000
	V, 5.00% to 7/30/19, FRN thereafter, Perpetual		United States		10,000,000		9,575,000
j	Morgan Stanley, junior sub. bond, 5.55% to 7/15/20, FRN thereafter, Perpetual		United States		7,300,000		7,240,505
	Navient Corp., senior note, 6.125%, 3/25/24		United States		5,000,000		4,412,500
e	OneMain Financial Holdings Inc., senior note, 144A,
	6.75%, 12/15/19		United States		10,000,000		9,787,500
	7.25%, 12/15/21		United States		5,000,000		4,812,500
j	Wells Fargo & Co., junior sub. bond, S, 5.90% to 6/15/24, FRN thereafter, Perpetual		United States		7,900,000		8,137,000
							194,523,013

Semiannual Report FI-13

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Income VIP Fund (continued)

		Country		Principal Amount*		Value
	Corporate Bonds (continued)
	Health Care 5.5%
	CHS/Community Health Systems Inc., senior note,
	8.00%, 11/15/19		United States		49,800,000	$	48,866,250
	7.125%, 7/15/20		United States		15,000,000		13,981,350
	6.875%, 2/01/22		United States		33,500,000		29,480,000
e	Concordia International Corp., senior note, 144A, 9.50%, 10/21/22		Canada		5,000,000		4,687,500
	DaVita HealthCare Partners Inc., senior bond, 5.125%, 7/15/24		United States		5,000,000		5,064,875
e	Endo Finance LLC, senior note, 144A, 5.75%, 1/15/22		United States		17,500,000		15,879,500
e	Endo Finance LLC/Endo Ltd./Endo Finco Inc.,
	senior bond, 144A, 6.00%, 2/01/25		United States		10,000,000		8,725,000
	senior note, 144A, 6.00%, 7/15/23		United States		10,000,000		8,850,000
	HCA Inc.,
	senior bond, 5.875%, 5/01/23		United States		7,500,000		8,015,625
	senior note, 7.50%, 2/15/22		United States		25,000,000		28,487,500
	senior secured bond, first lien, 5.25%, 4/15/25		United States		5,000,000		5,237,500
	senior secured note, first lien, 5.00%, 3/15/24		United States		10,400,000		10,790,000
e	Mallinckrodt International Finance SA/Mallinckrodt CB LLC, senior note, 144A,
	5.75%, 8/01/22		United States		12,000,000		11,482,500
	5.625%, 10/15/23		United States		10,000,000		9,362,500
	5.50%, 4/15/25		United States		10,000,000		8,971,200
	Tenet Healthcare Corp., senior note,
	8.125%, 4/01/22		United States		35,000,000		36,043,000
	6.75%, 6/15/23		United States		23,200,000		22,301,000
e	Valeant Pharmaceuticals International, senior note, 144A, 6.375%, 10/15/20		United States		2,500,000		2,162,500
e	Valeant Pharmaceuticals International Inc.,
	senior bond, 144A, 6.125%, 4/15/25		United States		9,400,000		7,567,000
	senior note, 144A, 6.75%, 8/15/18		United States		8,325,000		8,051,274
	senior note, 144A, 5.375%, 3/15/20		United States		15,000,000		12,890,625
	senior note, 144A, 5.875%, 5/15/23		United States		12,500,000		10,156,250
e	Vizient Inc., senior note, 144A, 10.375%, 3/01/24		United States		5,000,000		5,375,000
							322,427,949
	Industrials 2.3%
	The ADT Corp., senior note, 3.50%, 7/15/22		United States		10,500,000		9,673,125
e	Algeco Scotsman Global Finance PLC, senior secured note, first lien, 144A, 8.50%, 10/15/18		United Kingdom		9,900,000		7,969,500
e	Bombardier Inc., senior bond, 144A,
	6.125%, 1/15/23		Canada		5,000,000		4,300,000
	7.50%, 3/15/25		Canada		11,000,000		9,570,000
e	CEVA Group PLC, senior note, first lien, 144A, 4.00%, 5/01/18		United Kingdom		12,691,882		11,359,234
	Hertz Corp., senior note, 6.75%, 4/15/19		United States		10,000,000		10,210,770
	Navistar International Corp., senior bond, 8.25%, 11/01/21		United States		5,675,000		4,015,063
e	Prime Security Services Borrower LLC/Prime Finance Inc., secured note, second lien, 144A, 9.25%, 5/15/23		United States		6,000,000		6,375,000
	TransDigm Inc.,
	senior sub. bond, 6.50%, 7/15/24		United States		10,000,000		10,100,000
	e senior sub. bond, 144A, 6.375%, 6/15/26		United States		6,200,000		6,192,250
	senior sub. note, 6.00%, 7/15/22		United States		7,700,000		7,778,386
	United Rentals North America Inc., senior bond, 6.125%, 6/15/23		United States		11,400,000		11,927,250

FI-14 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Income VIP Fund (continued)

		Country		Principal Amount*		Value
	Corporate Bonds (continued)
	Industrials (continued)
e	XPO Logistics Inc., senior note, 144A,
	7.875%, 9/01/19		United States		6,700,000	$	6,850,750
	6.50%, 6/15/22		United States		28,480,000		27,305,200
							133,626,528
	Information Technology 3.4%
e	BMC Software Finance Inc., senior note, 144A, 8.125%, 7/15/21		United States		16,500,000		12,457,500
e	CommScope Inc.,
	senior bond, 144A, 5.50%, 6/15/24		United States		10,000,000		10,187,500
	senior note, 144A, 5.00%, 6/15/21		United States		8,422,000		8,634,655
e	Diamond 1 Finance Corp./Diamond 2 Finance Corp.,
	senior note, 144A, 5.875%, 6/15/21		United States		3,600,000		3,692,808
	senior note, 144A, 7.125%, 6/15/24		United States		3,600,000		3,765,607
	senior secured bond, first lien, 144A, 5.45%, 6/15/23		United States		21,100,000		21,910,029
	senior secured bond, first lien, 144A, 6.02%, 6/15/26		United States		16,200,000		16,838,377
	senior secured note, first lien, 144A, 4.42%, 6/15/21		United States		21,400,000		22,018,974
e	First Data Corp.,
	second lien, 144A, 5.75%, 1/15/24		United States		5,000,000		4,975,000
	senior note, 144A, 7.00%, 12/01/23		United States		25,000,000		25,468,750
	senior secured note, first lien, 144A, 5.375%, 8/15/23		United States		5,000,000		5,096,300
e	Micron Technology Inc., senior secured note, 144A, 7.50%, 9/15/23		United States		5,000,000		5,358,000
e	Microsemi Corp., senior note, 144A, 9.125%, 4/15/23		United States		5,500,000		6,077,500
	NCR Corp., senior note,
	5.00%, 7/15/22		United States		5,500,000		5,417,500
	6.375%, 12/15/23		United States		7,000,000		7,175,000
e	Western Digital Corp.,
	senior note, 144A, 10.50%, 4/01/24		United States		30,000,000		32,175,000
	senior secured note, 144A, 7.375%, 4/01/23		United States		10,000,000		10,675,000
							201,923,500
	Materials 2.1%
e	Ardagh Packaging Finance PLC/Ardagh MP Holdings USA Inc., senior note, 144A,
	6.25%, 1/31/19		Luxembourg		7,500,000		7,659,375
	4.625%, 5/15/23		Luxembourg		15,000,000		14,887,500
	7.25%, 5/15/24		Luxembourg		10,200,000		10,480,500
e	Cemex Finance LLC, senior secured note, first lien, 144A, 6.00%, 4/01/24		Mexico		14,700,000		14,289,723
e	First Quantum Minerals Ltd., senior note, 144A, 7.00%, 2/15/21		Canada		2,000,000		1,617,500
e	FMG Resources (August 2006) Pty. Ltd., senior secured note, 144A, 9.75%, 3/01/22		Australia		27,000,000		29,970,000
e	Platform Specialty Products Corp., senior note, 144A, 6.50%, 2/01/22		United States		3,500,000		3,097,500
	Reynolds Group Issuer Inc./Reynolds Group Issuer LLC/Reynolds Group Issuer Luxembourg SA,
	first lien, 5.75%, 10/15/20		United States		12,500,000		12,942,750
	e first lien, 144A, 5.125%, 7/15/23		United States		4,300,000		4,359,125
	senior note, 9.875%, 8/15/19		United States		3,476,000		3,593,315
	e senior note, 144A, 7.00%, 7/15/24		United States		2,000,000		2,062,750
	senior secured note, first lien, 6.875%, 2/15/21		United States		7,900,000		8,137,000
	e,f senior secured note, first lien, 144A, FRN, 4.127%, 7/15/21		United States		7,600,000		7,638,000
							120,735,038

Semiannual Report FI-15

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Income VIP Fund (continued)

		Country		Principal Amount*		Value
	Corporate Bonds (continued)
	Telecommunication Services 3.9%
	Consolidated Communications Inc., senior note, 6.50%, 10/01/22		United States		15,000,000	$	13,537,500
	Frontier Communications Corp., senior note,
	9.25%, 7/01/21		United States		7,400,000		7,862,500
	10.50%, 9/15/22		United States		10,000,000		10,618,750
	7.125%, 1/15/23		United States		7,800,000		7,020,000
	Intelsat Jackson Holdings SA, senior bond, 5.50%, 8/01/23		Luxembourg		8,400,000		5,376,000
e	Neptune Finco Corp., senior bond, 144A, 10.875%, 10/15/25		United States		13,000,000		14,860,560
	Sprint Capital Corp., senior note, 6.90%, 5/01/19		United States		3,500,000		3,360,000
	Sprint Communications Inc.,
	11.50%, 11/15/21		United States		30,000,000		29,790,000
	senior note, 7.00%, 8/15/20		United States		7,500,000		6,740,625
	e senior note, 144A, 9.00%, 11/15/18		United States		11,900,000		12,718,125
	Sprint Corp.,
	senior bond, 7.875%, 9/15/23		United States		37,500,000		30,843,750
	senior bond, 7.125%, 6/15/24		United States		8,200,000		6,529,250
	senior note, 7.625%, 2/15/25		United States		15,000,000		11,943,750
	T-Mobile USA Inc.,
	senior bond, 6.625%, 4/01/23		United States		15,000,000		15,913,050
	senior note, 6.25%, 4/01/21		United States		12,000,000		12,562,440
	senior note, 6.633%, 4/28/21		United States		7,500,000		7,865,625
	senior note, 6.731%, 4/28/22		United States		5,000,000		5,276,500
e	Telecom Italia SpA, senior note, 144A, 5.303%, 5/30/24		Italy		5,000,000		5,025,000
e	Wind Acquisition Finance SA, secured note, second lien, 144A, 7.375%, 4/23/21		Italy		11,500,000		10,959,557
	Zayo Group LLC/Zayo Capital Inc., senior note, 6.375%, 5/15/25		United States		10,000,000		10,237,500
							229,040,482
	Utilities 2.3%
	Calpine Corp.,
	senior bond, 5.75%, 1/15/25		United States		15,000,000		14,643,750
	senior note, 5.375%, 1/15/23		United States		19,500,000		19,110,000
	senior note, 5.50%, 2/01/24		United States		5,000,000		4,850,000
	e senior secured bond, 144A, 5.25%, 6/01/26		United States		15,000,000		15,000,000
	Dynegy Inc., senior note,
	6.75%, 11/01/19		United States		38,000,000		38,285,000
	7.375%, 11/01/22		United States		20,000,000		19,400,000
	5.875%, 6/01/23		United States		8,000,000		7,080,000
e	InterGen NV, secured bond, 144A, 7.00%, 6/30/23		Netherlands		25,000,000		17,812,500
							136,181,250
	Total Corporate Bonds (Cost $1,957,294,074)						1,901,469,628
f,k	Senior Floating Rate Interests 3.4%
	Consumer Discretionary 1.2%
	Belk Inc., Closing Date Term Loan, 5.75%, 12/12/22		United States		24,937,500		19,950,000
	iHeartCommunications Inc.,
	Tranche D Term Loan, 7.21%, 1/30/19		United States		35,864,664		26,360,528
	Tranche E Term Loan, 7.96%, 7/30/19		United States		13,142,769		9,668,149
	Petco Animal Supplies Inc., Tranche B-1 Term Loans, 5.00%, 1/26/23		United States		14,962,500		14,925,094
							70,903,771

FI-16 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Income VIP Fund (continued)

		Country		Principal Amount*		Value
	Senior Floating Rate Interests (continued)
	Energy 0.1%
h	W&T Offshore Inc., Second Lien Term Loan, 9.00%, 5/15/20		United States		11,000,000	$	6,435,000
	Financials 0.7%
	First Eagle Investment Management, Initial Term Loans, 4.75%, 12/01/22		United States		39,800,000		39,169,846
	Health Care 0.3%
	Vizient Inc., Initial Term Loan, 6.25%, 2/10/23		United States		19,950,000		20,074,687
	Industrials 0.8%
	CEVA Group PLC, Pre-Funded L/C, 6.50%, 3/19/21		United States		5,382,266		4,453,825
	CEVA Intercompany BV, Dutch BV Term Loan, 6.50%, 3/19/21		Netherlands		5,585,714		4,622,179
	CEVA Logistics Canada ULC, Canadian Term Loan, 6.50%, 3/19/21		Canada		963,054		796,927
	CEVA Logistics U.S. Holdings Inc., U.S. Term Loan, 6.50%, 3/19/21		United States		7,704,434		6,375,419
	Commercial Barge Line Co., Initial Term Loan, 9.75%, 11/12/20		United States		9,875,000		9,233,125
	Navistar Inc., Tranche B Term Loans, 6.50%, 8/07/20		United States		6,050,616		5,737,999
	XPO Logistics Inc., First Lien Term Loan, 5.50%, 10/29/21		United States		14,925,000		14,962,313
							46,181,787
	Information Technology 0.2%
	Western Digital Corp., U.S. Term B Loan, 6.25%, 4/29/23		United States		10,000,000		10,056,250
	Materials 0.1%
l	FMG America Finance Inc. (Fortescue Metals Group), Loans, 5.75%, 6/30/19		Australia		8,802,754		8,445,142
	Total Senior Floating Rate Interests (Cost $218,314,553)						201,266,483
				Shares
	Escrows and Litigation Trusts (Cost $62,602) 0.0%
a,c	Motors Liquidation Co., Escrow Account, cvt. pfd., C		United States		1,400,000		—
	Total Investments before Short Term Investments (Cost $4,975,612,507)						5,240,672,321
	Short Term Investments 10.6%
	Money Market Funds (Cost $620,850,617) 10.5%
a,m	Institutional Fiduciary Trust Money Market Portfolio		United States		620,850,617		620,850,617
n	Investments from Cash Collateral Received for Loaned Securities 0.1%
	Money Market Funds (Cost $2,193,000) 0.1%
a,m	Institutional Fiduciary Trust Money Market Portfolio		United States		2,193,000		2,193,000
				Principal Amount*
	Repurchase Agreements (Cost $548,698) 0.0%†
o	Joint Repurchase Agreement, 0.40%, 7/01/16 (Maturity Value $548,704)		United States		548,698		548,698
	BNP Paribas Securities Corp.
	Collateralized by pU.S. Treasury Bill, 10/27/16; U.S. Treasury Bond, 8.75% - 9.00%, 11/15/18 - 5/15/20; U.S. Treasury Note, 0.363% - 4.75%, 9/15/16 - 3/31/21; U.S. Treasury Note, Index Linked, 2.625%, 7/15/17; and U.S. Treasury Strips, 8/15/16 - 2/15/21 (valued at $559,672)

Semiannual Report FI-17

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Income VIP Fund (continued)

	Country	Principal Amount*	Value
Total Investments from Cash Collateral Received for Loaned Securities (Cost $2,741,698)			$	2,741,698
Total Investments (Cost $5,599,204,822) 99.6%				5,864,264,636
Other Assets, less Liabilities 0.4%				24,732,606
Net Assets 100.0%			$	5,888,997,242

See Abbreviations on page FI-31.

^†Rounds to less than 0.1% of net assets.

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

^aNon-income producing.

^bSee Note 8 regarding restricted securities.

^cSecurity has been deemed illiquid because it may not be able to be sold within seven days. At June 30, 2016, the aggregate value of these securities was $9,911,531, representing 0.2% of net assets.

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

^eSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At June 30, 2016, the aggregate value of these securities was $1,052,026,875, representing 17.9% of net assets.

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

^gSee Note 7 regarding defaulted securities.

^hAt June 30, 2016, pursuant to the Fund’s policies and the requirements of applicable securities law, the Fund is restricted from trading these securities at period end.

ⁱA portion or all of the security is on loan at June 30, 2016. See Note 1(f).

^jPerpetual security with no stated maturity date.

^kSee Note 1(g) regarding senior floating rate interests.

^lSecurity purchased on a when-issued or delayed delivery basis. See Note 1(d)

^mSee Note 3(e) regarding investments in affiliated management investment companies.

ⁿSee Note 1(f) regarding securities on loan.

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

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

FI-18 Semiannual Report    |   The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Statements

Statement of Assets and Liabilities

June 30, 2016 (unaudited)

	Franklin Income VIP Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	4,975,612,507
Cost - Non-controlled affiliates (Note 3e)		623,043,617
Cost - Repurchase agreements		548,698
Total cost of investments	$	5,599,204,822
Value - Unaffiliated issuers	$	5,240,672,321
Value - Non-controlled affiliates (Note 3e)		623,043,617
Value - Repurchase agreements		548,698
Total value of investments (includes securities loaned in the amount of $2,678,775)		5,864,264,636
Cash		1,145,137
Receivables:
Investment securities sold		11,241,511
Capital shares sold		1,360,933
Dividends and interest		43,295,458
Other assets		2,596
Total assets		5,921,310,271
Liabilities:
Payables:
Investment securities purchased		14,792,929
Capital shares redeemed		10,003,701
Management fees		2,022,479
Distribution fees		2,206,106
Payable upon return of securities loaned		2,741,698
Accrued expenses and other liabilities		546,116
Total liabilities		32,313,029
Net assets, at value	$	5,888,997,242
Net assets consist of:
Paid-in capital	$	6,516,515,028
Undistributed net investment income		114,134,037
Net unrealized appreciation (depreciation)		265,056,283
Accumulated net realized gain (loss)		(1,006,708,106	)
Net assets, at value	$	5,888,997,242

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report FI-19

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Statement of Assets and Liabilities (continued)

June 30, 2016 (unaudited)

	Franklin Income VIP Fund
Class 1:
Net assets, at value	$	662,360,607
Shares outstanding		45,059,036
Net asset value and maximum offering price per share	$	14.70
Class 2:
Net assets, at value	$	4,921,752,376
Shares outstanding		345,275,478
Net asset value and maximum offering price per share	$	14.25
Class 4:
Net assets, at value	$	304,884,259
Shares outstanding		20,925,006
Net asset value and maximum offering price per share	$	14.57

FI-20 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Statement of Operations

for the six months ended June 30, 2016 (unaudited)

	Franklin Income VIP Fund
Investment income:
Dividends	$	63,556,036
Interest		76,102,592
Income from securities loaned (net of fees and rebates)		643,258
Total investment income		140,301,886
Expenses:
Management fees (Note 3a)		12,868,273
Distribution fees: (Note 3c)
Class 2		5,926,691
Class 4		520,427
Custodian fees (Note 4)		32,269
Reports to shareholders		240,681
Professional fees		74,421
Trustees’ fees and expenses		14,842
Other		62,152
Total expenses		19,739,756
Expense reductions (Note 4)		(209	)
Expenses waived/paid by affiliates (Note 3e)		(885,284	)
Net expenses		18,854,263
Net investment income		121,447,623
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		(53,085,640	)
Foreign currency transactions		466,935
Net realized gain (loss)		(52,618,705	)
Net change in unrealized appreciation (depreciation) on:
Investments		247,556,039
Translation of other assets and liabilities denominated in foreign currencies		6,414
Net change in unrealized appreciation (depreciation)		247,562,453
Net realized and unrealized gain (loss)		194,943,748
Net increase (decrease) in net assets resulting from operations	$	316,391,371

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report FI-21

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Statements of Changes in Net Assets

	Franklin Income VIP Fund
	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31, 2015
Increase (decrease) in net assets:
Operations:
Net investment income	$	121,447,623		$	280,263,160
Net realized gain (loss)		(52,618,705	)		(198,185,492	)
Net change in unrealized appreciation (depreciation)		247,562,453			(544,397,831	)
Net increase (decrease) in net assets resulting from operations		316,391,371			(462,320,163	)
Distributions to shareholders from:
Net investment income:
Class 1		(33,648,018	)		(32,196,540	)
Class 2		(243,664,291	)		(260,631,132	)
Class 4		(14,419,491	)		(15,803,892	)
Total distributions to shareholders		(291,731,800	)		(308,631,564	)
Capital share transactions: (Note 2)
Class 1		52,709,878			(31,781,112	)
Class 2		(3,067,770	)		(463,715,750	)
Class 4		(3,155,246	)		(31,713,868	)
Total capital share transactions		46,486,862			(527,210,730	)
Net increase (decrease) in net assets		71,146,433			(1,298,162,457	)
Net assets:
Beginning of period		5,817,850,809			7,116,013,266
End of period	$	5,888,997,242		$	5,817,850,809
Undistributed net investment income included in net assets:
End of period	$	114,134,037		$	284,418,214

FI-22 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Notes to Financial Statements (unaudited)

Franklin Income VIP Fund

1. Organization and Significant Accounting Policies

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of nineteen separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Franklin Income VIP 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 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. The Fund calculates the net asset value (NAV) per share as of 4 p.m. Eastern time each day the New York Stock Exchange (NYSE) is open for trading. Under compliance policies and procedures approved by the Trust’s Board of Trustees (the Board), the Fund’s administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The VC provides administration and oversight of the Fund’s valuation policies and procedures, which are approved annually by the Board. Among other things, these procedures allow the Fund to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

Equity securities listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded or as of 4 p.m. Eastern time whichever is earlier. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the day that the value of the security is determined. Over-the-counter (OTC) securities

are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.

Debt securities generally trade in the OTC market rather than on a securities exchange. The Fund’s pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value. Securities denominated in a foreign currency are converted into their U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the date that the values of the foreign debt securities are determined.

Investments in open-end mutual funds are valued at the closing NAV. Repurchase agreements are valued at cost, which approximates fair value.

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

Semiannual Report FI-23

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Income VIP Fund (continued)

1. Organization and Significant Accounting Policies (continued)

a. Financial Instrument Valuation (continued)

The VC employs various methods for calibrating these valuation approaches including a regular review of key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.

Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 4 p.m. Eastern time. In addition, trading in certain foreign markets may not take place on every NYSE business day. 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 VC monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depositary Receipts, futures contracts and exchange traded funds). These price movements are measured against 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.

When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the NYSE is closed, which could result in differences between the value of the Fund’s portfolio securities on the last business day and the last calendar day of the reporting period. Any significant security valuation changes due to an open foreign market are adjusted and reflected by the Fund for financial reporting purposes.

b. Foreign Currency Translation

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

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

The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments in 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 fair 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%. Repurchase agreements are subject to the terms of Master Repurchase Agreements (MRAs) with approved counterparties (sellers). The MRAs contain various provisions, including but not limited to events of default and maintenance of collateral for repurchase agreements. In the event of default by either the seller or the

FI-24 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Income VIP Fund (continued)

Fund, certain MRAs may permit the non-defaulting party to net and close-out all transactions, if any, traded under such agreements. The Fund may sell securities it holds as collateral and apply the proceeds towards the repurchase price and any other amounts owed by the seller to the Fund in the event of default by the seller. This could involve costs or delays in addition to a loss on the securities if their value falls below the repurchase price owed by the seller. The joint repurchase agreement held by the Fund at period end, as indicated in the Statement of Investments, had been entered into on June 30, 2016.

d. Securities Purchased on a When-Issued or Delayed Delivery Basis

The Fund purchases securities on a when-issued or 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. Equity-Linked Securities

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

f. Securities Lending

The Fund participates in an agency based securities lending program to earn additional income. The Fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the fair value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the fair 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 deposited into a

joint cash account with other funds and is used to invest in a money market fund managed by Franklin Advisers, Inc., an affiliate of the Fund, and/or a joint repurchase agreement. The Fund may receive income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. Income from securities loaned, net of fees paid to the securities lending agent and/or third-party vendor, is reported separately in the Statement of Operations. 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. If the borrower defaults on its obligation to return the securities loaned, the Fund has the right to repurchase the securities in the open market using the collateral received. The securities lending agent has agreed to indemnify the Fund in the event of default by a third party borrower.

g. Senior Floating Rate Interests

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 certain restrictions on resale.

h. Income and Deferred Taxes.

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

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

Semiannual Report FI-25

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Income VIP Fund (continued)

1. Organization and Significant Accounting Policies (continued)

h. Income and Deferred Taxes (continued)

certain countries across the European Union, the Fund filed additional tax reclaims for previously withheld taxes on dividends earned in those countries (EU reclaims). These additional filings are subject to various administrative proceedings by the local jurisdictions’ tax authorities within the European Union, as well as a number of related judicial proceedings. Income recognized, if any, for EU reclaims is reflected as other income in the Statement of Operations and any related receivable, if any, is reflected as European Union tax reclaims in the Statement of Assets and Liabilities. When uncertainty exists as to the ultimate resolution of these proceedings, the likelihood of receipt of these EU reclaims, and the potential timing of payment, no amounts are reflected in the financial statements.

The Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of June 30, 2016, the Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on each tax jurisdiction’s statute of limitation.

i. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Amortization of premium and accretion of discount on debt securities are included in interest income. Facility fees are recognized as income over the expected term of the loan. Dividend income is recorded on the ex-dividend date except for certain dividends from foreign securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Fund. 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 U.S. GAAP. 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.

j. Accounting Estimates

The preparation of financial statements in accordance with U.S. GAAP 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.

FI-26 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Income VIP Fund (continued)

2. Shares of Beneficial Interest

At June 30, 2016, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:

Shares of Beneficial Interest

	Six Months Ended June 30, 2016						Year Ended December 31, 2015
	Shares			Amount			Shares			Amount
Class 1 Shares:
Shares sold		4,785,593		$	67,213,855			1,738,174		$	27,618,019
Shares issued in reinvestment of distributions		2,331,810			33,648,018			2,040,338			32,196,540
Shares redeemed		(3,330,652	)		(48,151,995	)		(5,869,235	)		(91,595,671	)
Net increase (decrease)		3,786,751		$	52,709,878			(2,090,723	)	$	(31,781,112	)
Class 2 Shares:
Shares sold		13,766,595		$	198,995,920			21,413,080		$	334,630,165
Shares issued in reinvestment of distributions		17,417,033			243,664,291			17,001,378			260,631,132
Shares redeemed		(31,552,736	)		(445,727,981	)		(69,202,126	)		(1,058,977,047	)
Net increase (decrease)		(369,108	)	$	(3,067,770	)		(30,787,668	)	$	(463,715,750	)
Class 4 Shares:
Shares sold		973,176		$	13,969,897			2,745,531		$	43,147,056
Shares issued in reinvestment of distributions		1,008,356			14,419,491			1,010,479			15,803,892
Shares redeemed		(2,182,132	)		(31,544,634	)		(5,843,737	)		(90,664,816	)
Net increase (decrease)		(200,600	)	$	(3,155,246	)		(2,087,727	)	$	(31,713,868	)

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

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Income VIP Fund (continued)

3. Transactions With Affiliates (continued)

For the period ended June 30, 2016, the annualized effective investment management fee rate was 0.454% of the Fund’s average daily net assets.

b. Administrative Fees

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

c. Distribution Fees

The Board has adopted distribution plans for Class 2 and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to 0.35%, per year of its average daily net assets of each class. The Board has agreed to limit the current rate to 0.25% per year for Class 2. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.

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. Investments in Affiliated Management Investment Companies

The Fund invests in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Fund are waived on assets invested in the affiliated management investment companies, as noted in the Statement of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate.

	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 Gain (Loss)		% of Affiliated Fund Shares Outstanding Held at End of Period
Non-Controlled Affiliates
Institutional Fiduciary Trust Money Market Portfolio		589,053,827		665,929,014		(631,939,224	)		623,043,617	$	623,043,617	$	—	$	—		3.2%

f. Other Affiliated Transactions

At June 30, 2016, Franklin Templeton Variable Insurance Products Trust — Franklin Founding Funds Allocation VIP Fund owned 5.4% 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, 2016, the custodian fees were reduced as noted in the Statement of Operations.

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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Income VIP Fund (continued)

5. Income Taxes

For tax purposes, capital losses may be carried over to offset future capital gains. Capital loss carryforwards with no expiration, if any, must be fully utilized before those losses with expiration dates.

At December 31, 2015, capital loss carryforwards were as follows:

Capital loss carryforwards subject to expiration:
2016	$	51,901,081
2017		521,405,875
2018		157,561,044
Capital loss carryforwards not subject to expiration:
Short term		73,992,456
Long term		144,130,633
Total capital loss carryforwards	$	948,991,089

At June 30, 2016, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	5,592,883,388
Unrealized appreciation	$	666,310,350
Unrealized depreciation		(394,929,102	)
Net unrealized appreciation (depreciation)	$	271,381,248

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of bond discounts and premiums and equity-linked securities.

6. Investment Transactions

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2016, aggregated $1,358,778,213 and $1,379,809,114, respectively.

At June 30, 2016, in connection with securities lending transactions, the Fund loaned corporate bonds and received $2,741,698 of cash collateral. The gross amount of recognized liability for such transactions is included in payable upon return of securities loaned in the Statement of Assets and Liabilities. The agreements can be terminated at any time.

7. Credit Risk and Defaulted Securities

At June 30, 2016, the Fund had 32.7% of its portfolio invested in high yield, senior secured floating rate notes, or other securities rated below investment grade. These securities may be more sensitive to economic conditions causing greater price volatility and are potentially subject to a greater risk of loss due to default than higher rated securities.

The Fund held defaulted securities and/or other securities for which the income has been deemed uncollectible. At June 30, 2016, the aggregate value of these securities was $11,327,480, representing 0.2% 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 in the accompanying Statement of Investments.

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

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Income VIP Fund (continued)

8. Restricted Securities (continued)

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, 2016, 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
75,000	aRex Energy Corp. (Value is 0.0%b of Net Assets)		12/16/14	$	3,860,972	$	43,527

^a The Fund also invests in unrestricted securities or other investments in the issuer, valued at $1,125,000 as of June, 30, 2016.

^bRounds to less than 0.1% of net assets.

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 $2 billion (Global Credit Facility) which matures on February 10, 2017. 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 0.07% based upon the unused portion of the Global Credit Facility. Effective February 12, 2016, the annual commitment fee is 0.15%. These fees are reflected in other expenses in the Statement of Operations. During the period ended June 30, 2016, 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 financial instruments and are summarized in the following fair value hierarchy:

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

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

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

The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.

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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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Income VIP Fund (continued)

A summary of inputs used as of June 30, 2016, in valuing the Fund’s assets carried at fair value, is as follows:

	Level 1		Level 2		Level 3			Total
Assets:
Investments in Securities:
Equity Investments:a
Energy	$	459,517,401	$	1,198,497	$	43,527		$	460,759,425
Financials		302,829,183		5,996,875		—			308,826,058
Industrials		369,981,539		—		9,911,531			379,893,070
Information Technology		352,975,600		32,599,469		—			385,575,069
All Other Equity Investments b		1,318,659,321		—		—			1,318,659,321
Equity-Linked Securities		—		252,213,267		—			252,213,267
Convertible Bonds		—		32,010,000		—			32,010,000
Corporate Bonds				1,901,469,628					1,901,469,628
Senior Floating Rate Interests		—		201,266,483		—			201,266,483
Escrows and Litigation Trusts		—		—		—	c		—
Short Term Investments		623,043,617		548,698		—			623,592,315
Total Investments in Securities	$	3,427,006,661	$	2,427,302,917	$	9,955,058		$	5,864,264,636

^aIncludes common, preferred and convertible preferred stocks.

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

^cIncludes securities determined to have no value at June 30, 2016.

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

11. Subsequent Events

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

Abbreviations

Selected Portfolio
ADR	American Depositary Receipt
FNMA	Federal National Mortgage Association
FRN	Floating Rate Note
L/C	Letter of Credit
MTN	Medium Term Note

Semiannual Report FI-31

Franklin Large Cap Growth VIP Fund

This semiannual report for Franklin Large Cap Growth VIP Fund covers the period ended June 30, 2016.

Class 1 Performance Summary as of June 30, 2016

The Fund’s Class 1 shares had a -6.23% total return for the six-month period ended June 30, 2016.

Performance reflects the Fund’s Class 1 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.

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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FRANKLIN LARGE CAP GROWTH VIP FUND

Fund Goal and Main Investments

The Fund seeks capital appreciation. Under normal market conditions, the Fund invests at least 80% of its net assets in investments of large capitalization companies. For this Fund, large capitalization companies are those with market capitalization values within those of the top 50% of companies in the Russell 1000^® Index at the time of purchase.¹

Fund Risks

All investments involve risks, including possible loss of principal. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. The Fund may focus on particular sectors of the market from time to time, which can carry greater risks of adverse developments in such sectors. Smaller or midsized companies can be particularly sensitive to changing economic conditions, and their prospects for growth are less certain than those of larger, more established companies. Investments in foreign securities may involve special risks including currency fluctuations and economic and political uncertainty. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. In comparison, the Fund’s benchmark, the Standard & Poor’s^® 500 Index (S&P 500^®), generated a +3.84% total return.²

Economic and Market Overview

For the six-month period ended June 30, 2016, the U.S. economy grew moderately, as measured by gross domestic product in 2016’s first and second quarters, driven by consumer spending and exports. A decline in private inventory investment and nonresidential fixed investment contributed to the moderation. Although the unemployment rate rose from 4.7% in May to 4.9% in June, the increase was due to additional people entering the labor force, and for the entire period under review, unemployment declined slightly.³ Home sales and prices rose amid relatively low mortgage rates. Monthly retail sales grew during most of the review period, and rose to the highest level

in April in more than a year, due to a broad-based increase across most retail categories. Inflation, as measured by the Consumer Price Index, remained subdued overall even though it spiked to the highest level in three years in April mainly due to a rebound in energy prices.

After raising its target range for the federal funds rate to 0.25%–0.50% at its December meeting, the Federal Reserve (Fed) maintained the rate through period-end. Although the Fed indicated a potential interest rate hike in June, subsequent reports showed job additions slowed substantially in May. Consequently, at its June meeting, the Fed kept the federal funds rate unchanged, and indicated that in determining the timing and size of future adjustments to the target range, it will assess realized and expected economic conditions relative to its objectives of maximum employment and 2.00% inflation. The Fed expects economic conditions to evolve in a manner that could warrant only gradual increases in the federal funds rate.

U.S. equity markets rose for the period under review, as investors generally remained confident due to the Fed’s continued caution surrounding further interest rate increases, the European Central Bank expanding its quantitative easing measures and cutting its benchmark interest rate to zero, the People’s Bank of China introducing further easing measures and the Bank of Japan adopting a negative interest rate policy. The rally in crude oil prices near period-end also boosted investor confidence. However, the U.K.’s historic referendum to leave the European Union (also known as the “Brexit”), global economic growth concerns and China’s slowing economy weighed on market sentiment. Despite periods of volatility, the broad U.S. stock market ended the six-month period higher, as measured by the S&P 500.

Investment Strategy

We are a research driven, fundamental investor, pursuing a growth strategy. As a “bottom-up” investor focusing primarily on individual securities, we seek companies that have identifiable drivers of future earnings growth and that present, in our opinion, the best trade-off between that potential earnings growth, business and financial risk, and valuation.

Manager’s Discussion

Looking back on the key factors impacting the Fund’s returns during the six months under review, we would like to remind

1. Please see Index Descriptions following the Fund Summaries.

2. Source: 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.

3. Source: Bureau of Labor Statistics.

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FRANKLIN LARGE CAP GROWTH VIP FUND

shareholders that our investment strategy is primarily bottom-up and driven by individual stock selection. However, we recognize that a sector-based discussion can be a helpful way to organize a portfolio review of key performance drivers. We employed our long-held strategy: bottom-up, individual-company, fundamental research aimed at opportunistically finding what we believed to be outstanding large-cap companies across all sectors, at valuations we believed understated their fair worth, with future growth potential being a key driver of estimated worth.

For the six months ended June 30, 2016, some sectors represented in the Fund’s portfolio contributed to absolute performance. Fund performance relative to the Fund’s benchmark, the S&P 500, was aided by stock selection in the materials sector and an underweighting in the financials sector. In materials, select positions contributed to the Fund’s relative performance with a notable standout in construction materials manufacturer Martin Marietta Materials. Martin Marietta Materials experienced boosted performance as a stronger residential construction environment and the passage of a federal highway bill in December 2015 supported strong demand for cement and

other construction materials. The company has enjoyed solid profit margins and meaningful pricing growth for its products. In addition, Martin Marietta sold its California cement plant, which contributed to margin expansion, and purchased additional assets in Colorado, which led the company to benefit from the Denver metropolitan area’s strong housing environment. Share buybacks also supported the company’s share price, as did disciplined capital allocation, in our view.

Within the financials sector, key contributors included relatively significantly weighted positions in Equinix and American Tower. Data center provider Equinix benefited from the rising adoption of cloud computing technology. The company also acquired data center and colocation center company TelecityGroup, which we believe could provide Equinix with a dominant position in the European market. Shares of American Tower, a real estate investment trust that leases antenna space to different providers, increased during the period after concerns that telecommunication company clients, such as AT&T and Sprint, may discontinue the company’s services were alleviated. Near the beginning of the period, investors were concerned that American Tower would face a hard negotiation with AT&T, who was vocal about cutting costs associated with the company. A popular technology news site also disclosed that Sprint was considering alternative structures as well, but this turned out to be untrue and American Tower retained its interests.

Key contributors from other sectors included Diamondback Energy and Edwards Lifesciences. Texas-based oil and natural gas provider Diamondback Energy weathered the volatility of oil prices in the first quarter of 2016 and benefited later during the period when oil prices recovered slightly. Similar to its competitors, the company reduced drilling and spending due to lower oil prices, but Diamondback was able to raise capital through equity issuance, kept its leverage ratios low and maintained its production growth through the downturn of the cycle. The company’s terrestrial location in the Permian Basin of West Texas also provided relatively low U.S. oil drilling costs, providing an advantageous position for Diamondback during a period where oil prices declined to historic lows. Shares of medical devices company Edwards Lifesciences rose due to the company’s greater-than-expected sales and profits in 2015’s fourth quarter as well as company management’s higher guidance for 2016 sales and profits. In addition, the company released data showing low mortality and stroke rates in studies of its transcatheter heart valves in patients deemed to be under intermediate risk for potential traditional surgical valve replacement procedures.

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FRANKLIN LARGE CAP GROWTH VIP FUND

Conversely, detractors from the Fund’s relative performance included stock selection in the health care, information technology (IT) and consumer discretionary sectors along with an overweighted position in IT. In health care, some holdings that detracted included pharmaceutical firm Allergan and biopharmaceutical company Celgene. Allergan’s shares fell following news that Pfizer canceled its planned acquisition of Allergan after the U.S. government issued new rules related to mergers that could result in the reduction of a company’s tax rate. Shares of the Fund’s largest biotechnology position, Celgene, declined during the period due primarily to the general decline of the health care sector. Additionally, a lack of fundamental catalysts further deterred the company’s performance.

In IT and consumer discretionary, some detractors included network security solutions provider Palo Alto Networks and coffee and tea manufacturer and retailer Starbucks. Palo Alto Networks experienced difficulties during the period when investors became concerned about slowing product growth. The company appeared to be more focused on selling subscriptions than comparables, which may be attributed to the competitive security space in 2015. Shares of Starbucks delivered solid results on an absolute basis during the period, but fell moderately short of investor expectations. The company’s premium valuation declined slightly as its recent quarters failed to outperform expectations. Nonetheless, we believe Starbucks should continue to be a core holding due to its consistent growth profile.

Key detractors from other sectors included financial services provider Charles Schwab, research-based biopharmaceutical company Gilead Sciences and commercial real estate services and investment firm CBRE Group. Shares of Charles Schwab declined due primarily to its dependence on the historically low U.S. interest rates and the Fed’s policies surrounding rate increases. Gilead underperformed due to weak first quarter 2016 results, management turnover and new management’s inability to execute on a strategy that we believe would return the company to growth. In particular, the company did not make any medium or large sized acquisitions that would bolster growth. CBRE was negatively impacted by concerns of slowing commercial real estate transactions. However, the company continued to obtain market share and outpace the industry. We believe a strong balance sheet will allow the company to navigate a prolonged downturn in commercial real estate activity.

Top 10 Holdings
6/30/16
Company Sector/Industry	% of Total Net Assets
Facebook Inc. Information Technology		4.7%
Alphabet Inc. Information Technology		4.4%
Visa Inc. Information Technology		3.9%
Allergan PLC Health Care		3.5%
SBA Communications Corp. Telecommunication Services		3.4%
Celgene Corp. Health Care		3.4%
Amazon.com Inc. Consumer Discretionary		3.4%
MasterCard Inc. Information Technology		3.3%
Apple Inc. Information Technology		2.5%
Monster Beverage Corp. Consumer Staples		2.5%

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).

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

The foregoing information reflects our analysis, opinions and portfolio holdings as of June 30, 2016, 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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FRANKLIN LARGE CAP GROWTH VIP FUND

Class 1 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 × $7.50 = $64.50.

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

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 1	Beginning Account Value 1/1/16		Ending Account Value 6/30/16		Fund-Level Expenses Incurred During Period* 1/1/16–6/30/16
Actual	$	1,000	$	937.70	$	3.85
Hypothetical (5% return before expenses)	$	1,000	$	1,020.89	$	4.02

*Expenses are calculated using the most recent six-month annualized expense ratio for the Fund’s Class 1 shares (0.80%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 182/366 to reflect the one-half year period.

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Financial Highlights

Franklin Large Cap Growth VIP Fund

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012			2011
Class 1
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$18.42			$23.26			$20.91			$16.43			$14.75			$15.07
Income from investment operationsa:
Net investment income (loss)b		(0.02	)		(0.06	)		0.11			0.24			0.21			0.15
Net realized and unrealized gains (losses)		(1.13	)		1.56			2.54			4.48			1.65			(0.33	)
Total from investment operations		(1.15	)		1.50			2.65			4.72			1.86			(0.18	)
Less distributions from:
Net investment income		—			(0.13	)		(0.30	)		(0.24	)		(0.18	)		(0.14	)
Net realized gains		(0.27	)		(6.21	)		—			—			—			—
Total distributions		(0.27	)		(6.34	)		(0.30	)		(0.24	)		(0.18	)		(0.14	)
Net asset value, end of period		$17.00			$18.42			$23.26			$20.91			$16.43			$14.75
Total returnc		(6.23)%			5.89%			12.74%			28.92%			12.65%			(1.22)%
Ratios to average net assetsd
Expenses		0.80%			0.78%			0.79%			0.79%			0.80%			0.80%
Net investment income (loss)		(0.23)%			(0.27)%			0.50%			1.27%			1.31%			0.99%
Supplemental data
Net assets, end of period (000’s)		$42,266			$47,864			$54,971			$54,291			$46,756			$48,666
Portfolio turnover rate		17.35%			23.23%			93.53%			28.27%			33.88%			56.61%

^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’s shares in relation to income earned and/or fluctuating fair 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 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.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL HIGHLIGHTS

Franklin Large Cap Growth VIP Fund (continued)

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012			2011
Class 2
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$18.09			$22.94			$20.62			$16.20			$14.54			$14.86
Income from investment operationsa:
Net investment income (loss)b		(0.04	)		(0.11	)		0.06			0.19			0.17			0.11
Net realized and unrealized gains (losses)		(1.11	)		1.54			2.50			4.42			1.62			(0.33	)
Total from investment operations		(1.15	)		1.43			2.56			4.61			1.79			(0.22	)
Less distributions from:
Net investment income		—			(0.07	)		(0.24	)		(0.19	)		(0.13	)		(0.10	)
Net realized gains		(0.27	)		(6.21	)		—			—			—			—
Total distributions		(0.27	)		(6.28	)		(0.24	)		(0.19	)		(0.13	)		(0.10	)
Net asset value, end of period		$16.67			$18.09			$22.94			$20.62			$16.20			$14.54
Total returnc		(6.34)%			5.62%			12.46%			28.63%			12.37%			(1.51)%
Ratios to average net assetsd
Expenses		1.05%			1.03%			1.04%			1.04%			1.05%			1.05%
Net investment income (loss)		(0.48)%			(0.52)%			0.25%			1.02%			1.06%			0.74%
Supplemental data
Net assets, end of period (000’s)		$188,608			$223,807			$256,098			$285,477			$278,989			$293,226
Portfolio turnover rate		17.35%			23.23%			93.53%			28.27%			33.88%			56.61%

^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’s shares in relation to income earned and/or fluctuating fair 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 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.

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report FLG-7

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Statement of Investments, June 30, 2016 (unaudited)

Franklin Large Cap Growth VIP Fund
		Shares		Value
	Common Stocks 98.5%
	Consumer Discretionary 14.0%
a	Amazon.com Inc.		10,869	$	7,778,074
a	Buffalo Wild Wings Inc.		8,868		1,232,209
a	Charter Communications Inc., A		13,227		3,024,221
	Delphi Automotive PLC (United Kingdom)		16,539		1,035,341
	Lowe’s Cos. Inc.		36,621		2,899,285
	Newell Brands Inc.		25,144		1,221,244
	NIKE Inc., B		41,227		2,275,730
a	The Priceline Group Inc.		1,890		2,359,495
	Starbucks Corp.		87,516		4,998,914
a	Under Armour Inc., A		32,912		1,320,759
	The Walt Disney Co.		42,894		4,195,891
					32,341,163
	Consumer Staples 6.9%
	Constellation Brands Inc., A		32,850		5,433,390
a	Monster Beverage Corp.		35,565		5,715,651
	Reynolds American Inc.		44,868		2,419,731
a	WhiteWave Foods Co., A		48,482		2,275,745
					15,844,517
	Energy 3.1%
	Anadarko Petroleum Corp.		42,990		2,289,217
a	Diamondback Energy Inc.		27,704		2,526,882
	Halliburton Co.		52,730		2,388,142
					7,204,241
	Financials 9.3%
a	Affiliated Managers Group Inc.		13,296		1,871,678
	American Tower Corp.		30,987		3,520,433
	BlackRock Inc.		6,351		2,175,408
a	CBRE Group Inc.		93,603		2,478,608
	The Charles Schwab Corp.		127,404		3,224,595
	Equinix Inc.		8,973		3,479,101
	Moody’s Corp.		18,739		1,756,032
a	Signature Bank		24,559		3,067,910
					21,573,765
	Health Care 16.2%
a,b	Acerta Pharma BV (Netherlands)		9,780,975		520,348
a	Allergan PLC		34,867		8,057,415
a	Biogen Inc.		11,954		2,890,716
a	Celgene Corp.		79,073		7,798,970
a	Edwards Lifesciences Corp.		41,620		4,150,762
a	Envision Healthcare Holdings Inc.		78,387		1,988,678
	Gilead Sciences Inc.		41,454		3,458,093
a	Heron Therapeutics Inc.		58,452		1,055,058
a	Illumina Inc.		13,708		1,924,329
a	Impax Laboratories Inc.		30,480		878,434
a	Incyte Corp.		16,260		1,300,475
	Medtronic PLC		26,784		2,324,048
a	Regeneron Pharmaceuticals Inc.		3,065		1,070,390
					37,417,716

FLG-8 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Large Cap Growth VIP Fund (continued)

		Shares		Value
	Common Stocks (continued)
	Industrials 4.2%
	Allegiant Travel Co.		10,149	$	1,537,573
	General Electric Co.		80,230		2,525,640
	Hexcel Corp.		40,001		1,665,642
a	IHS Inc., A		19,155		2,214,510
	Raytheon Co.		4,231		575,204
	Roper Technologies Inc.		7,010		1,195,626
					9,714,195
	Information Technology 37.4%
a	Adobe Systems Inc.		38,070		3,646,725
a	Alphabet Inc., A		7,970		5,607,134
a	Alphabet Inc., C		6,546		4,530,487
	Apple Inc.		61,315		5,861,714
	Broadcom Ltd. (Singapore)		16,639		2,585,701
a	BroadSoft Inc.		31,077		1,275,089
a	Cognizant Technology Solutions Corp., A		39,049		2,235,165
a	Electronic Arts Inc.		58,172		4,407,111
a	Facebook Inc., A		94,714		10,823,916
a	Fiserv Inc.		22,573		2,454,362
	MasterCard Inc., A		85,879		7,562,505
	Microsoft Corp.		92,891		4,753,233
a	Mobileye NV (Israel)		31,229		1,440,906
	NVIDIA Corp.		18,034		847,778
a	NXP Semiconductors NV (Netherlands)		47,622		3,730,708
a	Palo Alto Networks Inc.		17,547		2,151,964
a	Red Hat Inc.		32,895		2,388,177
a	Salesforce.com Inc.		37,264		2,959,134
a	ServiceNow Inc.		31,383		2,083,831
a	Tyler Technologies Inc.		22,699		3,784,150
a	ViaSat Inc.		22,618		1,614,925
	Visa Inc., A		120,007		8,900,919
	Xilinx Inc.		12,575		580,085
					86,225,719
	Materials 3.2%
a	Axalta Coating Systems Ltd.		80,389		2,132,720
	Ecolab Inc.		20,671		2,451,581
	Martin Marietta Materials Inc.		14,291		2,743,872
					7,328,173
	Telecommunication Services 4.2%
a	SBA Communications Corp.		73,501		7,933,698
a	T-Mobile U.S. Inc.		42,405		1,834,864
					9,768,562
	Total Common Stocks (Cost $164,978,391)				227,418,051

Semiannual Report FLG-9

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Large Cap Growth VIP Fund (continued)

		Principal Amount		Value
	Short Term Investments (Cost $4,941,497) 2.1%
	Repurchase Agreements 2.1%
c	Joint Repurchase Agreement, 0.382%, 7/01/16 (Maturity Value $4,941,549)	$	4,941,497	$	4,941,497
	BNP Paribas Securities Corp. (Maturity Value $1,602,693) Deutsche Bank Securities Inc. (Maturity Value $494,106) HSBC Securities (USA) Inc. (Maturity Value $2,724,572) Merrill Lynch, Pierce, Fenner & Smith Inc. (Maturity Value $120,178)
	Collateralized by U.S. Government Agency Securities, 0.187% - 5.50%, 7/18/16 - 5/06/21; U.S. Government Agency Securities, Strips, 6/01/17; and U.S. Treasury Note, 0.75% - 3.25%, 11/30/16 - 9/30/20 (valued at $5,042,403)
	Total Investments (Cost $169,919,888) 100.6%				232,359,548
	Other Assets, less Liabilities (0.6)%				(1,485,859	)
	Net Assets 100.0%			$	230,873,689

^aNon-income producing.

^bSee Note 7 regarding restricted securities.

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

FLG-10 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Statements

Statement of Assets and Liabilities

June 30, 2016 (unaudited)

	Franklin Large Cap Growth VIP Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	164,978,391
Cost - Repurchase agreements		4,941,497
Total cost of investments	$	169,919,888
Value - Unaffiliated issuers	$	227,418,051
Value - Repurchase agreements		4,941,497
Total value of investments		232,359,548
Receivables:
Investment securities sold		819,435
Capital shares sold		463,211
Dividends		70,916
Other assets		114
Total assets		233,713,224
Liabilities:
Payables:
Investment securities purchased		2,189,564
Capital shares redeemed		372,621
Management fees		144,375
Distribution fees		80,521
Accrued expenses and other liabilities		52,454
Total liabilities		2,839,535
Net assets, at value	$	230,873,689
Net assets consist of:
Paid-in capital	$	165,158,178
Undistributed net investment income (loss)		(515,999	)
Net unrealized appreciation (depreciation)		62,403,868
Accumulated net realized gain (loss)		3,827,642
Net assets, at value	$	230,873,689
Class 1:
Net assets, at value	$	42,265,876
Shares outstanding		2,485,663
Net asset value and maximum offering price per share	$	17.00
Class 2:
Net assets, at value	$	188,607,813
Shares outstanding		11,314,459
Net asset value and maximum offering price per share	$	16.67

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report FLG-11

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Statement of Operations

for the six months ended June 30, 2016 (unaudited)

	Franklin Large Cap Growth VIP Fund
Investment income:
Dividends	$	669,515
Interest		4,475
Total investment income		673,990
Expenses:
Management fees (Note 3a)		892,171
Distribution fees - Class 2 (Note 3c)		243,482
Custodian fees (Note 4)		1,218
Reports to shareholders		29,694
Professional fees		17,684
Trustees’ fees and expenses		671
Other		5,069
Total expenses		1,189,989
Net investment income (loss)		(515,999	)
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		4,318,281
Foreign currency transactions		(2,434	)
Net realized gain (loss)		4,315,847
Net change in unrealized appreciation (depreciation) on investments		(21,317,538	)
Net realized and unrealized gain (loss)		(17,001,691	)
Net increase (decrease) in net assets resulting from operations	$	(17,517,690	)

FLG-12 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Statements of Changes in Net Assets

	Franklin Large Cap Growth VIP Fund
	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31, 2015
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	(515,999	)	$	(1,428,248	)
Net realized gain (loss)		4,315,847			3,534,624
Net change in unrealized appreciation (depreciation)		(21,317,538	)		15,220,871
Net increase (decrease) in net assets resulting from operations		(17,517,690	)		17,327,247
Distributions to shareholders from:
Net investment income:
Class 1		—			(286,901	)
Class 2		—			(675,379	)
Net realized gains:
Class 1		(673,017	)		(13,634,161	)
Class 2		(3,070,097	)		(63,414,142	)
Total distributions to shareholders		(3,743,114	)		(78,010,583	)
Capital share transactions: (Note 2)
Class 1		(1,942,011	)		3,730,750
Class 2		(17,594,143	)		17,554,979
Total capital share transactions		(19,536,154	)		21,285,729
Net increase (decrease) in net assets		(40,796,958	)		(39,397,607	)
Net assets:
Beginning of period		271,670,647			311,068,254
End of period	$	230,873,689		$	271,670,647
Undistributed net investment income (loss) included in net assets:
End of period	$	(515,999	)	$	—

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report FLG-13

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Notes to Financial Statements (unaudited)

Franklin Large Cap Growth VIP Fund

1. Organization and Significant Accounting Policies

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of nineteen separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Franklin Large Cap Growth VIP 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, 2016, 47.66% of the Fund’s shares were held through one insurance company. Investment activities of these insurance company separate accounts could have a material impact on the Fund. The Fund offers two classes of shares: Class 1 and Class 2. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

The Fund’s investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Fund calculates the net asset value (NAV) per share as of 4 p.m. Eastern time each day the New York Stock Exchange (NYSE) is open for trading. Under compliance policies and procedures approved by the Trust’s Board of Trustees (the Board), the Fund’s administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The VC provides administration and oversight of the Fund’s valuation policies and procedures, which are approved annually by the Board. Among other things, these procedures allow the Fund to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

Equity securities listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded or as of 4 p.m. Eastern time whichever is earlier. The value is then converted into its U.S. dollar equivalent at the foreign exchange

rate in effect at 4 p.m. Eastern time on the day that the value of the security is determined. Over-the-counter (OTC) securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.

Repurchase agreements are valued at cost, which approximates fair value.

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

Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 4 p.m. Eastern time. In addition, trading in certain foreign markets may not take place on every NYSE business day. 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 VC monitors price movements following the close of trading in foreign stock markets through a series of country

FLG-14 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Large Cap Growth VIP Fund (continued)

specific market proxies (such as baskets of American Depositary 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.

When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the NYSE is closed, which could result in differences between the value of the Fund’s portfolio securities on the last business day and the last calendar day of the reporting period. Any significant security valuation changes due to an open foreign market are adjusted and reflected by the Fund for financial reporting purposes.

b. Foreign Currency Translation

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

The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments in 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 fair 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%. Repurchase agreements are subject to the terms of Master Repurchase Agreements (MRAs) with approved counterparties (sellers). The MRAs contain various provisions, including but not limited to events of default and maintenance of collateral for repurchase agreements. In the event of default by either the seller or the Fund, certain MRAs may permit the non-defaulting party to net and close-out all transactions, if any, traded under such agreements. The Fund may sell securities it holds as collateral and apply the proceeds towards the repurchase price and any other amounts owed by the seller to the Fund in the event of default by the seller. This could involve costs or delays in addition to a loss on the securities if their value falls below the repurchase price owed by the seller. The joint repurchase agreement held by the Fund at period end, as indicated in the Statement of Investments, had been entered into on June 30, 2016.

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 if applicable, excise taxes. As a result, no provision for U.S. federal income taxes is required.

The Fund may be subject to foreign taxation related to income received, capital gains on the sale of securities and certain foreign currency transactions in the foreign jurisdictions in which it invests. Foreign taxes, if any, are recorded based on the

Semiannual Report FLG-15

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Large Cap Growth VIP Fund (continued)

1. Organization and Significant Accounting Policies (continued)

d. Income and Deferred Taxes (continued)

tax regulations and rates that exist in the foreign markets in which the Fund invests. When a capital gain tax is determined to apply, the Fund records an estimated deferred tax liability in an amount that would be payable if the securities were disposed of on the valuation date.

The Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of June 30, 2016, the Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on each tax jurisdiction’s 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 except for certain dividends from foreign securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Fund. 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 U.S. GAAP. 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 U.S. GAAP 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.

FLG-16 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Large Cap Growth VIP Fund (continued)

2. Shares of Beneficial Interest

At June 30, 2016, 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, 2016						Year Ended December 31, 2015
	Shares			Amount			Shares			Amount
Class 1 Shares:
Shares sold		4,983		$	83,004			5,480		$	124,849
Shares issued in reinvestment of distributions		39,404			673,017			740,482			13,921,062
Shares redeemed		(157,123	)		(2,698,032	)		(510,479	)		(10,315,161	)
Net increase (decrease)		(112,736	)	$	(1,942,011	)		235,483		$	3,730,750
Class 2 Shares:
Shares sold		315,688		$	5,299,478			700,609		$	14,776,651
Shares issued in reinvestment of distributions		183,399			3,070,097			3,468,048			64,089,521
Shares redeemed		(1,558,860	)		(25,963,718	)		(2,958,403	)		(61,311,193	)
Net increase (decrease)		(1,059,773	)	$	(17,594,143	)		1,210,254		$	17,554,979

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 $500 million
0.625%	Over $500 million, up to and including $1 billion
0.500%	In excess of $1 billion

For the period ended June 30, 2016, the annualized effective investment management fee rate was 0.750% of the Fund’s average daily net assets.

b. Administrative Fees

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

Semiannual Report FLG-17

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Large Cap Growth VIP Fund (continued)

3. Transactions With Affiliates (continued)

c. Distribution Fees

The Board has adopted a distribution plan for Class 2 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s compensation distribution plan, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to 0.35% per year of its average daily net assets. The Board has agreed to limit the current rate to 0.25% per year for Class 2. The plan year, for purposes of monitoring compliance with the maximum annual plan rate, is February 1 through January 31.

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, 2016, there were no credits earned.

5. Income Taxes

At June 30, 2016, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	170,249,970
Unrealized appreciation	$	67,732,234
Unrealized depreciation		(5,622,656	)
Net unrealized appreciation (depreciation)	$	62,109,578

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

6. Investment Transactions

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2016, aggregated $41,580,516 and $66,836,376, respectively.

7. 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, 2016, 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
9,780,975	Acerta Pharma BV (Value is 0.2% of Net Assets)		5/06/15	$	562,683	$	520,348

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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Large Cap Growth VIP Fund (continued)

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 $2 billion (Global Credit Facility) which matures on February 10, 2017. 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 0.07% based upon the unused portion of the Global Credit Facility. Effective February 12, 2016, the annual commitment fee is 0.15%. These fees are reflected in other expenses in the Statement of Operations. During the period ended June 30, 2016, 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 financial instruments and are summarized in the following fair value hierarchy:

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

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

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

The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.

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

A summary of inputs used as of June 30, 2016, in valuing the Fund’s assets carried at fair value, is as follows:

	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities:
Equity Investments:a
Health Care	$	36,897,368	$	—	$	520,348	$	37,417,716
All Other Equity Investmentsb		190,000,335		—		—		190,000,335
Short Term Investments		—		4,941,497		—		4,941,497
Total Investments in Securities	$	226,897,703	$	4,941,497	$	520,348	$	232,359,548
Receivables:
Investment Securities Sold	$	—	$	—	$	819,435	$	819,435

^aIncludes common stocks.

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

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Large Cap Growth VIP Fund (continued)

9. Fair Value Measurements (continued)

A reconciliation of assets in which Level 3 inputs are used in determining fair value is presented when there are significant Level 3 financial instruments at the end of the period. At June 30, 2016, the reconciliation of assets is as follows:

	Balance at Beginning of Period		Purchases (Sales)			Transfers Into (Out of) Level 3			Cost Basis Adjustments		Net Realized Gain (Loss)		Net Unrealized Appreciation (Depreciation)			Balance at End of Period		Net Change in Unrealized Appreciation (Depreciation) on Assets Held at Period End
Assets:
Investments in Securities:
Equity Investments:a
Health Care	$	2,694,736	$	(2,277,653	)	$	—		$	—	$	1,589,929	$	(1,486,664	)	$	520,348	$	(649,948	)
Receivables:
Investment Securities Sold	$	—	$	—		$	813,595	b	$	—	$	—	$	5,840		$	819,435	$	5,840

^aIncludes common stocks.

^bThe receivable was transferred into Level 3 as a result of it being discounted to reflect the current fair value.

Significant unobservable valuation inputs developed by the VLOC for material Level 3 financial instruments and impact to fair value as a result of changes in unobservable valuation inputs as of June 30, 2016, are as follows:

Description	Fair Value at End of Period		Valuation Technique	Unobservable Inputs	Amount			Impact to Fair Value if Input Increasesa
Assets:
Investments in Securities:
Equity Investments:b
Health Care	$	520,348	Probability Weighted Discounted Cash Flow Model	Free Cash Flowc	$	3,000 (mil	)		Increase
				Discount for lack of marketability		12.5%			Decreased
Receivables:
Investment Securities Sold	$	819,435	Discounted Cash Flow Model	Discount Rate		1.2%			Decrease

^aRepresents the directional change in the fair value of the Level 3 financial instruments that would result from a significant and reasonable increase in the corresponding input. A significant and reasonable decrease in input would have the opposite effect. Significant impacts, if any, to fair value and/or net assets have been indicated.

^bIncludes common stocks.

^cIncludes probability assumptions for various outcomes of contingent payments for clinical trials and regulatory approvals.

^dRepresents a significant impact to fair value and net assets.

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.

FLG-20 Semiannual Report

Franklin Mutual Global Discovery VIP Fund

This semiannual report for Franklin Mutual Global Discovery VIP Fund covers the period ended June 30, 2016.

Class 1 Performance Summary as of June 30, 2016

The Fund’s Class 1 shares had a -0.40% total return* for the six-month period ended June 30, 2016.

*The Fund has a fee waiver associated with any investment in a Franklin Templeton money fund and/or Franklin Templeton fund, as applicable, contractually guaranteed through at least the Fund’s current fiscal year-end. Fund investment results reflect the fee waiver, to the extent applicable; without this reduction, the results would have been lower.

Performance reflects the Fund’s Class 1 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.

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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FRANKLIN MUTUAL GLOBAL DISCOVERY VIP FUND

Fund Goal and Main Investments

The Fund seeks capital appreciation. Under normal market conditions, the Fund invests primarily in U.S. and foreign equity securities that the investment manager believes are undervalued.

Fund Risks

All investments involve risks, including possible loss of principal. Value securities may not increase in price as anticipated, or may decline further in value. The Fund’s investments in foreign securities involve certain risks including currency fluctuations, and economic and political uncertainties. Smaller company stocks have exhibited greater price volatility than larger company stocks, particularly over the short term. The Fund’s investments in companies engaged in mergers, reorganizations or liquidations also involve special risks as pending deals may not be completed on time or on favorable terms. The Fund may invest in lower rated bonds, which entail higher credit risk. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. In comparison, the Fund’s benchmark, the MSCI World Index, posted a +1.02% total return, and the Standard & Poor’s^® 500 Index generated a +3.84% total return for the same period.¹

Economic and Market Overview

The global economy expanded during the six months under review. An improvement in commodity prices including a rally in crude oil prices, accommodative monetary policy from various global central banks, finalization of the new debt deal for Greece and encouraging Chinese trade data toward period-end boosted market sentiment. However, global equity market volatility increased after the U.S. Federal Reserve’s (Fed’s) June decision to keep its federal funds target range unchanged, while providing a cautious stance on further interest rate hikes. In addition, global economic concerns and the U.K.’s historic referendum to leave the European Union (EU), also known as the “Brexit,” contributed to volatile global stock markets.

Oil prices fell at the beginning of the review period, largely due to a strong global supply, but recovered in the period’s second half amid oilfield outages and continued demand growth. Meanwhile, commodity prices increased for most of the review period as oversupply for a host of commodities shrank and the market appeared to be on the path of rebalancing after hitting a glut-induced bottom earlier in the year. Gold prices continued to rise following the Brexit referendum as some investors turned to safe haven investing. The U.S. dollar generally depreciated against most currencies during the period, which increased returns of many foreign assets in U.S. dollar terms. In this environment, global developed market stocks overall, as measured by the MSCI World Index, rose slightly during the period.²

The U.S. economy grew moderately, as measured by gross domestic product (GDP) in 2016’s first and second quarters, driven by consumer spending and exports. A decline in private inventory investment and non-residential fixed investment contributed to the moderation. The Fed maintained its target interest rate during the review period after raising it for the first time in nine years at its December 2015 meeting. The Fed kept its target rate unchanged in its June meeting mainly due to a substantial slowdown in job additions toward period-end. The Fed expects economic conditions to evolve in a manner that could warrant only gradual increases in the federal funds rate.

In Europe, slower U.K. economic growth continued in 2016’s first quarter as output slowed in construction, production and agriculture. Immediate effects of the Brexit materialized as U.K. stocks significantly declined and the pound sterling hit a three-decade low amid intensified selling. Credit rating agencies Standard & Poor’s and Fitch also downgraded the U.K.’s credit rating. In the eurozone, despite investors’ concerns about banking sector weakness, low corporate earnings and post-Brexit political repercussions, some regions benefited due to rising consumer spending resulting from a cheaper euro, low inflation and signs of sustained economic growth. The eurozone’s annual inflation rate remained in negative territory for most of the review period; however, it rose marginally above zero in June.

Japan’s economy posted mixed results, contracting in 2015’s fourth quarter stemming from declining private and household consumption. However, the economy expanded during 2016’s first quarter as private consumption increased and business investment decreased less than anticipated. The Bank of Japan (BOJ) took several actions during the review period. In January,

1. Source: 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. Please see Index Descriptions following the Fund Summaries.

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FRANKLIN MUTUAL GLOBAL DISCOVERY VIP FUND

to boost lending and support inflation, the BOJ introduced a negative interest rate on excess reserves held at the central bank by financial institutions. In April, the BOJ further reduced its GDP and inflation forecasts for fiscal year 2016, and decided against additional quantitative easing measures. However, after the U.K.’s vote in June to leave the EU, the BOJ hinted at carrying out flexible open market operations to stabilize its financial markets.

In emerging markets, economic growth generally moderated during the review period. Brazil’s economy witnessed its longest recession since the 1930s amid political and economic turmoil, while Russia’s economy continued to contract. The Bank of Russia reduced its key interest rate in an attempt to revive its economy. China’s economic growth slowed marginally in 2016’s first quarter compared to the previous quarter, but remained largely in line with the government’s target. The People’s Bank of China cut its cash reserve requirement ratio for the country’s banks and effectively devalued the renminbi against the U.S. dollar to the lowest level in more than five years. Overall, emerging market stocks, as measured by the MSCI Emerging Markets Index, rose for the six-month period under review.²

Investment Strategy

At Franklin 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 what we believe are 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

*Figures are stated as a percentage of total and may not equal 100% or may be negative due to rounding, use of any derivatives, unsettled trades or other factors.

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.

What is meant by “hedge”?

To hedge an investment is to take a position intended to offset potential losses/gains that may be incurred by a companion financial instrument.

Manager’s Discussion

Economic and political uncertainty influenced markets during the six months under review. The year 2016 began with severe economic uncertainty. Brent oil prices plunged below US$30 per barrel as fears of a global recession spread. Global equity markets dropped from the start of the year, continuing a downward move from mid-2015 highs, before bottoming in mid-February. Commodity and equity prices rose over the following four months, before a late June surprise: the Brexit, ending a 43-year relationship with the rest of Europe. Uncertainty about the future status of the U.K. as well as implications for the EU and the global economy weighed on markets at the end of the period.

Equity prices are typically forward looking, reflecting investors’ beliefs about how various factors and events will play out in the future. Global equity prices at period-end were down from mid-2015 highs, reflecting increased uncertainty among investors regarding the consequences of Brexit in addition to long-standing concerns about China, commodity prices, interest rates and geopolitical events.

Following the momentous decision by U.K. voters on June 23 to leave the EU, we believe it is probable that the U.K. will face a heightened risk of an economic slowdown, as businesses will likely put investment decisions on hold while waiting for greater clarity. The negative impact on the rest of the EU will likely be less severe, although economic growth in the region was already running at a modest pace before the vote, and we do not believe the region will be immune. Among the region’s equity markets, we believe that financial and domestically oriented cyclical stocks were being perceived by some investors as more vulnerable. Those stocks that were viewed as defensive, as well as stocks with what we consider attractive dividend yields, will likely remain in favor among many investors, in our view, causing them to trade at even higher valuation multiples. Within the U.K., large multinational companies that generate most of their earnings abroad should benefit from the

Top 10 Sectors/Industries
6/30/16
	% of Total Net Assets
Banks		13.6%
Insurance		8.4%
Pharmaceuticals		7.8%
Oil, Gas & Consumable Fuels		7.0%
Software		6.4%
Tobacco		5.3%
Media		4.5%
Health Care Equipment & Supplies		4.2%
Food & Staples Retailing		4.1%
Communications Equipment		2.6%

precipitous fall of the British pound that followed the Brexit vote. In this respect, the Fund’s exposure to U.K. equities was predominantly through a number of these global companies. Also, the Fund has only a modest exposure to European financials, particularly in banks.

Although the Brexit vote is clearly a negative surprise, we do not believe it will usher in a new global financial crisis similar to the one experienced eight years ago. While markets reacted brutally to the U.K.’s decision to leave the EU, we have not seen any systemic shock like the one that followed the fall of Lehman Brothers in 2008. We also believe that, eventually, the U.K. and the EU will come to an acceptable agreement concerning trade relations.

Three of the Fund’s top 10 positions at period-end were in health care.³ Merck, Medtronic and Switzerland-based Novartis are global companies that meet important customer needs with products protected by intellectual property. This focus on innovation that improves the lives of customers gives us confidence in the sustainability of their businesses. In addition, we feel that each has strong financial characteristics, including the ability to invest in research and development and acquisitions, while also providing material returns to shareholders, and trading at valuations that are attractive from our perspective as value investors.

The Fund also featured two information technology firms among its larger positions: Microsoft and Symantec.⁴ Microsoft features a strong global business based on innovation and meeting customer needs, including its fast-growing cloud business,

3. The health care sector comprises health care equipment and supplies, health care providers and services, and pharmaceuticals in the SOI.

4. The information technology sector comprises communications equipment, Internet software and services, IT services, semiconductors and semiconductor equipment, and software in the SOI.

MGD-4 Semiannual Report

FRANKLIN MUTUAL GLOBAL DISCOVERY VIP FUND

while also returning excess capital to shareholders through dividends and share buybacks. Symantec also competes through innovation in providing security software to individuals and enterprises. Following a restructuring of its activities, the company is now focused on the fast-growing market for web-related security, while also returning capital to shareholders. In our view, these firms, like the health care firms mentioned previously, share these positive attributes as well as valuations that we, as value investors, find compelling.

Merger and acquisition (M&A) activity continued to be strong in the first half of 2016, helping to support valuations. Although deal volumes remained near historical highs, regulators globally continued to be more aggressive in their scrutiny of potentially negative effects of high concentration. We were disappointed to see regulators successfully sue to block the merger of Office Depot and Staples. Less surprising was the collapse of Halliburton’s attempt to acquire Baker Hughes (a Fund holding) on antitrust grounds, or the largest failure, Pfizer’s withdrawn attempt to acquire Allergan in the face of the U.S. Treasury Department’s new rules on tax inversions. We continue to be active in this space and work to ensure the potential rewards are big enough to outweigh the clear risks that exist in the current environment.

Turning to Fund performance, top contributors included British American Tobacco, oil and gas company Royal Dutch Shell and medical technology company Stryker.

Shares of U.K.-based British American Tobacco rose as many equity market investors showed a preference for defensive stocks (perceived to be less sensitive to economic conditions and/or having an attractive dividend yield, such as consumer staples) amid tepid global economic conditions, the low interest-rate environment and the late June U.K. referendum result in favor of leaving the EU. In our view, British American Tobacco remains an attractive position given the current management team, its portfolio of brands and track record of returning capital to shareholders.

Royal Dutch Shell is a U.K.-based oil and gas exploration and production company. Improved crude oil prices during the period helped many energy sector stocks, including Royal Dutch Shell. In January, company shareholders approved the acquisition of BG Group and both companies released quarterly results indicating strong cash flow and results in their natural gas operations. In June, investors reacted favorably to Royal Dutch Shell’s strategy update, which included an upward

revision to synergies related to the BG Group acquisition, including a lower cost base, a limit on capital spending, and an implicit lower oil-price breakeven point. The company also reiterated its intention to dispose of US$30 billion in assets through 2018, maintain its dividend, eliminate the scrip dividend, and buy back US$25 billion of its shares over time. Shares of Royal Dutch Shell did not follow the broad equity market decline after the June U.K. Brexit referendum result. The company is a U.S. dollar-based business that reports and declares its dividends in U.S. dollars, with some level of British pound-based costs, resulting in what we consider a more attractive valuation in its local market, given the decline in the pound.

U.S.-based medical technology company Stryker announced solid quarterly results in January and May that reflected strong organic growth, market share gains in many of its business segments and operating margin leverage that drove earnings growth. Along with the earnings results in May, Stryker raised its sales and earnings guidance for 2016. Beyond earnings, Stryker announced two strategic acquisitions in February. In our view, the deals were priced at full valuation but involved good-quality assets that offer Stryker the potential to enhance the value of existing assets and drive further value for Stryker shareholders.

During the period under review, Fund investments that detracted from performance included insurer NN Group, bank holding company Barclays and financial services company Citigroup.

NN Group is a Netherlands-based insurer spun out of ING Groep in 2014. Shares of NN Group followed the broad-based decline of European financial stocks in late June following the U.K.’s vote to leave the EU. In our view, the outcome had negative implications for the insurance sector by increasing economic uncertainty, adding immediate downward pressure on global interest rates and increasing the possibility that the U.S. Fed will further delay its next interest rate hike. Shares of NN Group also declined in January and early February as Europe’s financial sector was hurt by the potentially detrimental effect of the European Central Bank’s negative interest rate policy.

Shares of U.K.-based bank Barclays dropped sharply in late June after the U.K. Brexit vote. Investors feared the decision could lead to an increase in bad loans and reduced investment banking revenues if the U.K. economy slips into recession. Barclays’ stock had already significantly declined in January and early February as Europe’s financial sector was hindered by

Semiannual Report MGD-5

FRANKLIN MUTUAL GLOBAL DISCOVERY VIP FUND

Top 10 Equity Holdings
6/30/16
Company Sector/Industry, Country	% of Total Net Assets
Microsoft Corp.		3.1%
Software, U.S.
Merck & Co. Inc.		2.8%
Pharmaceuticals, U.S.
Medtronic PLC		2.3%
Health Care Equipment & Supplies, U.S.
Royal Dutch Shell, PLC		2.2%
Oil, Gas & Consumable Fuels, U.K.
British American Tobacco PLC		1.9%
Tobacco, U.K.
Wells Fargo & Co.		1.9%
Banks, U.S.
Chubb Ltd.		1.8%
Insurance, U.S.
Vodafone Group PLC		1.7%
Wireless Telecommunication Services, U.K.
American International Group Inc.		1.7%
Insurance, U.S.
Novartis AG		1.7%
Pharmaceuticals, Switzerland

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

the detrimental effects of low interest rates, ongoing concerns about the health of the global economy, and challenging conditions in capital markets. In addition, the bank’s share price was negatively impacted by a disappointing strategic update in early March that included limited downsizing of the investment banking unit and a dividend cut to fund an accelerated rundown of its non-core activities.

Citigroup is a U.S.-based diversified financial services company. Shares of the lender followed the broad-based decline of global financial stocks in late June after the U.K. Brexit vote. The stock also dropped sharply in January and early February, driven by ongoing investor concerns about global economic health (an area of particular relevance for Citigroup given its significant presence outside the U.S.), scaled back expectations regarding potential interest rate hikes by the U.S. Fed, concerns regarding financial sector exposure to energy companies and the

challenging conditions for capital market operations. Citigroup’s stock price was further impacted in mid-January by a weak set of quarterly results, including soft revenue and higher credit costs, due in part to a US$250 million charge to cover potential future losses in its oil and gas portfolio. However, we continue to view Citigroup as a cheaply valued bank with best-in-class capital levels that is focused on controlling costs, scaling back its non-core activities and returning excess capital to shareholders.

During the period, the Fund held currency forwards and futures to somewhat hedge the currency risk of the portfolio’s non-U.S. dollar investments. The currency forwards had a positive impact on the Fund’s performance, and currency futures had a negligible impact.

What is a currency forward?

A currency forward is an agreement between the Fund and a counterparty to buy or sell a foreign currency in exchange for another currency at a specific exchange rate on a future date.

What is a future?

A future is an agreement between the Fund and a counterparty made through a U.S. or foreign futures exchange to buy or sell an underlying instrument or asset at a specific price on a future date.

Thank you for your participation in Franklin Mutual Global Discovery VIP Fund. We look forward to serving your future investment needs.

The foregoing information reflects our analysis, opinions and portfolio holdings as of June 30, 2016, 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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Class 1 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 × $7.50 = $64.50.

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

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 1	Beginning Account Value 1/1/16		Ending Account Value 6/30/16		Fund-Level Expenses Incurred During Period* 1/1/16–6/30/16
Actual	$	1,000	$	996.00	$	4.96
Hypothetical (5% return before expenses)	$	1,000	$	1,019.89	$	5.02

*Expenses are calculated using the most recent six-month annualized expense ratio, net of expense waivers, for the Fund’s Class 1 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 182/366 to reflect the one-half year period.

Semiannual Report MGD-7

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Highlights

Franklin Mutual Global Discovery VIP Fund

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012			2011
Class 1
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$19.85			$22.61			$23.31			$20.55			$19.66			$21.16
Income from investment operationsa:
Net investment incomeb		0.29			0.37			0.68	c		0.46			0.43			0.52
Net realized and unrealized gains (losses)		(0.37	)		(1.17	)		0.76			5.03			2.21			(1.09	)
Total from investment operations		(0.08	)		(0.80	)		1.44			5.49			2.64			(0.57	)
Less distributions from:
Net investment income		—			(0.69	)		(0.57	)		(0.58	)		(0.64	)		(0.50	)
Net realized gains		—			(1.27	)		(1.57	)		(2.15	)		(1.11	)		(0.43	)
Total distributions		—			(1.96	)		(2.14	)		(2.73	)		(1.75	)		(0.93	)
Net asset value, end of period		$19.77			$19.85			$22.61			$23.31			$20.55			$19.66
Total returnd		(0.40)%			(3.39)%			5.98%			27.95%			13.63%			(2.73)%
Ratios to average net assetse
Expensesf		1.00%	g,h		1.02%	g,h		1.00%	g		0.97%	g		0.99%			0.97%	g
Expenses incurred in connection with securities sold short		—%	i		0.02%			0.03%			—%	i		—%	i		—%	i
Net investment income		3.03%			1.71%			2.85%	c		2.13%			2.12%			2.34%
Supplemental data
Net assets, end of period (000’s)		$2,754			$2,632			$2,313			$2,465			$1,136			$974
Portfolio turnover rate		8.70%			21.88%			22.18%			15.58%			25.63%			26.17%	j

^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’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $0.34 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.40%.

^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 and/or interest expense on securities sold short and security borrowing fees, if any. See below for the ratios of such expenses to average net assets for the periods presented. See Note 1(g).

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

^hBenefit of waiver and payments by affiliates rounds to less than 0.01%.

ⁱRounds to less than 0.01%.

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

MGD-8 Semiannual Report   |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL HIGHLIGHTS

Franklin Mutual Global Discovery VIP Fund (continued)

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012			2011
Class 2
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$19.37			$22.11			$22.84			$20.17			$19.30			$20.80
Income from investment operationsa:
Net investment incomeb		0.26			0.32			0.60	c		0.42			0.38			0.43
Net realized and unrealized gains (losses)		(0.36	)		(1.16	)		0.75			4.92			2.15			(1.04	)
Total from investment operations		(0.10	)		(0.84	)		1.35			5.34			2.53			(0.61	)
Less distributions from:
Net investment income		—			(0.63	)		(0.51	)		(0.52	)		(0.55	)		(0.46	)
Net realized gains		—			(1.27	)		(1.57	)		(2.15	)		(1.11	)		(0.43	)
Total distributions		—			(1.90	)		(2.08	)		(2.67	)		(1.66	)		(0.89	)
Net asset value, end of period		$19.27			$19.37			$22.11			$22.84			$20.17			$19.30
Total returnd		(0.52)%			(3.65)%			5.71%			27.61%			13.36%			(2.96)%
Ratios to average net assetse
Expensesf		1.25%	g,h		1.27%	g,h		1.25%	g		1.22%	g		1.24%			1.22%	g
Expenses incurred in connection with securities sold short		—%	i		0.02%			0.03%			—%	i		—%i			—%	i
Net investment income		2.78%			1.46%			2.60%	c		1.88%			1.87%			2.09%
Supplemental data
Net assets, end of period (000’s)		$597,645			$629,366			$685,711			$684,780			$660,465			$712,161
Portfolio turnover rate		8.70%			21.88%			22.18%			15.58%			25.63%			26.17%	j

^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’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $0.34 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.15%.

^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 and/or interest expense on securities sold short and security borrowing fees, if any. See below for the ratios of such expenses to average net assets for the periods presented. See Note 1(g).

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

^hBenefit of waiver and payments by affiliates rounds to less than 0.01%.

ⁱRounds to less than 0.01%.

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

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report MGD-9

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL HIGHLIGHTS

Franklin Mutual Global Discovery VIP Fund (continued)

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012			2011
Class 4
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$19.66			$22.39			$23.10			$20.38			$19.50			$21.02
Income from investment operationsa:
Net investment incomeb		0.25			0.30			0.61	c		0.40			0.36			0.40
Net realized and unrealized gains (losses)		(0.37	)		(1.17	)		0.73			4.97			2.19			(1.05	)
Total from investment operations		(0.12	)		(0.87	)		1.34			5.37			2.55			(0.65	)
Less distributions from:
Net investment income		—			(0.59	)		(0.48	)		(0.50	)		(0.56	)		(0.44	)
Net realized gains		—			(1.27	)		(1.57	)		(2.15	)		(1.11	)		(0.43	)
Total distributions		—			(1.86	)		(2.05	)		(2.65	)		(1.67	)		(0.87	)
Net asset value, end of period		$19.54			$19.66			$22.39			$23.10			$20.38			$19.50
Total returnd		(0.61)%			(3.74)%			5.60%			27.52%			13.27%			(3.08)%
Ratios to average net assetse
Expensesf		1.35%	g,h		1.37%	g,h		1.35%	g		1.32%	g		1.34%			1.32%	g
Expenses incurred in connection with securities sold short		—%	i		0.02%			0.03%			—%	i		—%	i		—%	i
Net investment income		2.68%			1.36%			2.50%	c		1.78%			1.77%			1.99%
Supplemental data
Net assets, end of period (000’s)		$45,021			$49,054			$59,961			$70,354			$62,346			$66,695
Portfolio turnover rate		8.70%			21.88%			22.18%			15.58%			25.63%			26.17%	j

^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’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $0.34 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.05%.

^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 and/or interest expense on securities sold short and security borrowing fees, if any. See below for the ratios of such expenses to average net assets for the periods presented. See Note 1(g).

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

^hBenefit of waiver and payments by affiliates rounds to less than 0.01%.

ⁱRounds to less than 0.01%.

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

MGD-10 Semiannual Report   |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Statement of Investments, June 30, 2016 (unaudited)

Franklin Mutual Global Discovery VIP Fund
		Country		Shares/Units		Value
	Common Stocks and Other Equity Interests 86.3%
	Aerospace & Defense 0.6%
	B/E Aerospace Inc.		United States		65,840	$	3,040,163
a	KLX Inc.		United States		32,920		1,020,520
							4,060,683
	Auto Components 0.7%
	Cie Generale des Etablissements Michelin, B		France		30,800		2,913,028
a,b	International Automotive Components Group Brazil LLC		Brazil		424,073		6,981
a,b,c	International Automotive Components Group North America LLC		United States		4,052,916		1,788,009
							4,708,018
	Automobiles 1.3%
	General Motors Co.		United States		214,110		6,059,313
	Hyundai Motor Co.		South Korea		20,953		2,462,942
							8,522,255
	Banks 13.6%
	Barclays PLC		United Kingdom		2,052,511		3,793,230
d	BNP Paribas SA		France		117,870		5,201,139
	Capital Bank Financial Corp., A		United States		78,494		2,260,627
e	Capital Bank Financial Corp., B, 144A, non-voting		United States		269,922		7,773,754
	CIT Group Inc.		United States		174,912		5,581,442
	Citigroup Inc.		United States		229,050		9,709,429
	Citizens Financial Group Inc.		United States		310,923		6,212,242
a	Commerzbank AG		Germany		276,968		1,790,418
	HSBC Holdings PLC		United Kingdom		586,355		3,642,619
	JPMorgan Chase & Co.		United States		131,280		8,157,739
	KB Financial Group Inc.		South Korea		56,047		1,585,034
	PNC Financial Services Group Inc.		United States		105,531		8,589,168
	Societe Generale SA		France		118,614		3,714,005
	Standard Chartered PLC		United Kingdom		374,211		2,817,201
	SunTrust Banks Inc.		United States		111,578		4,583,624
	Wells Fargo & Co.		United States		256,320		12,131,626
							87,543,297
	Beverages 1.3%
	PepsiCo Inc.		United States		76,807		8,136,933
	Chemicals 0.3%
	Syngenta AG		Switzerland		4,660		1,785,991
	Communications Equipment 2.6%
	Cisco Systems Inc.		United States		359,180		10,304,874
	Nokia Corp., ADR		Finland		519,486		2,955,876
	Nokia OYJ, A		Finland		611,269		3,463,630
							16,724,380
	Construction Materials 0.5%
a	LafargeHolcim Ltd., B		Switzerland		78,676		3,267,621
	Consumer Finance 0.4%
a	Ally Financial Inc.		United States		151,600		2,587,812
	Diversified Financial Services 0.4%
	Voya Financial Inc.		United States		101,650		2,516,854

Semiannual Report MGD-11

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Mutual Global Discovery VIP Fund (continued)

		Country		Shares/Units		Value
	Common Stocks and Other Equity Interests (continued)
	Diversified Telecommunication Services 0.9%
	China Telecom Corp. Ltd., H		China		13,642,104	$	6,083,906
a,f,g	Global Crossing Holdings Ltd., Contingent Distribution		United States		2,236,777		—
							6,083,906
	Energy Equipment & Services 1.3%
	Baker Hughes Inc.		United States		178,964		8,076,645
	Food & Staples Retailing 4.1%
	CVS Health Corp.		United States		46,236		4,426,635
	Empire Co. Ltd., A		Canada		252,979		3,761,107
	Metro AG		Germany		226,924		6,918,987
a	Rite Aid Corp.		United States		391,098		2,929,324
	Walgreens Boots Alliance Inc.		United States		102,904		8,568,816
							26,604,869
	Health Care Equipment & Supplies 4.8%
	Medtronic PLC		United States		168,500		14,620,745
	St. Jude Medical Inc.		United States		103,840		8,099,520
	Stryker Corp.		United States		69,848		8,369,886
							31,090,151
	Health Care Providers & Services 0.4%
	Cigna Corp.		United States		20,116		2,574,647
	Hotels, Restaurants & Leisure 1.7%
	Accor SA		France		233,913		9,006,625
	Sands China Ltd.		Hong Kong		648,800		2,165,886
							11,172,511
	Independent Power & Renewable Electricity Producers 0.7%
	NRG Energy Inc.		United States		299,277		4,486,162
	Industrial Conglomerates 1.8%
	Jardine Strategic Holdings Ltd.		Hong Kong		103,903		3,135,793
	Koninklijke Philips NV		Netherlands		328,294		8,160,512
							11,296,305
	Insurance 8.4%
a	Alleghany Corp.		United States		2,730		1,500,353
	The Allstate Corp.		United States		98,929		6,920,084
	American International Group Inc.		United States		204,833		10,833,617
	China Pacific Insurance Group Co. Ltd., H		China		845,908		2,845,697
	Chubb Ltd.		United States		88,840		11,612,276
	MetLife Inc.		United States		100,526		4,003,951
	NN Group NV		Netherlands		323,882		8,913,625
	XL Group PLC		Ireland		235,290		7,837,510
							54,467,113
	Internet Software & Services 0.4%
a	LinkedIn Corp., A		United States		13,756		2,603,323
	IT Services 0.7%
	Xerox Corp.		United States		503,738		4,780,474
	Machinery 0.7%
	Caterpillar Inc.		United States		58,695		4,449,668

MGD-12 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Mutual Global Discovery VIP Fund (continued)

		Country		Shares/Units		Value
	Common Stocks and Other Equity Interests (continued)
	Marine 1.3%
	A.P. Moeller-Maersk AS, B		Denmark		6,595	$	8,567,811
	Media 4.5%
	CBS Corp., B		United States		91,632		4,988,446
a	Charter Communications Inc., A		United States		30,386		6,947,455
a	DISH Network Corp., A		United States		90,990		4,767,876
a	Liberty Global PLC LiLAC, C		United Kingdom		10,735		348,784
a	Liberty Global PLC, C		United Kingdom		86,040		2,465,046
	Time Warner Inc.		United States		66,132		4,863,347
	Twenty-First Century Fox Inc., B		United States		170,160		4,636,860
							29,017,814
	Metals & Mining 1.1%
	Freeport-McMoRan Inc., B		United States		186,260		2,074,937
	ThyssenKrupp AG		Germany		242,203		4,841,686
							6,916,623
	Multiline Retail 0.3%
	Macy’s Inc.		United States		58,280		1,958,791
	Oil, Gas & Consumable Fuels 7.0%
	Anadarko Petroleum Corp.		United States		29,831		1,588,501
	Apache Corp.		United States		70,011		3,897,512
	BP PLC		United Kingdom		1,028,014		6,005,958
	China Shenhua Energy Co. Ltd., H		China		2,009,534		3,693,515
	CONSOL Energy Inc.		United States		219,381		3,529,840
	Kinder Morgan Inc.		United States		296,590		5,552,165
	Marathon Oil Corp.		United States		444,196		6,667,382
	Royal Dutch Shell PLC, A (EUR Traded)		United Kingdom		327,191		8,959,297
	Royal Dutch Shell PLC, A (GBP Traded)		United Kingdom		179,410		4,898,138
a,b,c	Warrior Met Coal LLC, A		United States		1,841		185,603
a,b,c	Warrior Met Coal LLC, B		United States		4,306		434,115
							45,412,026
	Paper & Forest Products 0.0%†
a	Verso Corp.		United States		36,624		732
	Pharmaceuticals 7.8%
	Eli Lilly & Co.		United States		133,748		10,532,655
	GlaxoSmithKline PLC		United Kingdom		262,323		5,612,244
	Merck & Co. Inc.		United States		316,208		18,216,743
	Novartis AG, ADR		Switzerland		129,601		10,693,378
	Teva Pharmaceutical Industries Ltd., ADR		Israel		100,252		5,035,658
							50,090,678
	Semiconductors & Semiconductor Equipment 0.2%
	SK Hynix Inc.		South Korea		53,632		1,507,432
	Software 6.4%
a	Check Point Software Technologies Ltd.		Israel		95,512		7,610,396
	Microsoft Corp.		United States		386,252		19,764,515
	Open Text Corp.		Canada		86,150		5,096,634
	Symantec Corp.		United States		425,161		8,732,807
							41,204,352

Semiannual Report MGD-13

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Mutual Global Discovery VIP Fund (continued)

		Country		Shares/Units			Value
	Common Stocks and Other Equity Interests (continued)
	Specialty Retail 0.8%
	Kingfisher PLC		United Kingdom		1,151,830		$	4,953,117
	Technology Hardware, Storage & Peripherals 2.3%
	EMC Corp.		United States		299,800			8,145,566
	Hewlett Packard Enterprise Co.		United States		190,760			3,485,185
	HP Inc.		United States		190,760			2,394,038
	Lenovo Group Ltd.		China		1,500,454			903,160
								14,927,949
	Tobacco 5.3%
	Altria Group Inc.		United States		131,874			9,094,031
	British American Tobacco PLC		United Kingdom		188,332			12,161,833
	Philip Morris International Inc.		United States		41,509			4,222,296
	Reynolds American Inc.		United States		159,669			8,610,949
								34,089,109
	Wireless Telecommunication Services 1.7%
	Vodafone Group PLC		United Kingdom		3,618,505			10,983,918
	Total Common Stocks and Other Equity Interests (Cost $493,160,569)							557,169,970
	Preferred Stocks 1.7%
	Automobiles 0.8%
h	Volkswagen AG, 0.157%, pfd.		Germany		40,296			4,843,885
	Diversified Financial Services 0.9%
a,b	Hightower Holding LLC, pfd., A, Series 2		United States		2,172,000			5,821,394
	Total Preferred Stocks (Cost $12,871,859)							10,665,279
				Principal Amount*
	Corporate Bonds, Notes and Senior Floating Rate Interests 3.7%
e	Avaya Inc., senior note, 144A, 10.50%, 3/01/21		United States		1,270,000			285,750
i,j	Belk Inc., Closing Date Term Loan, 5.75%, 12/12/22		United States		1,945,125			1,556,100
	iHeartCommunications Inc.,
	senior secured note, first lien, 9.00%, 12/15/19		United States		5,184,000			3,959,280
	i,jTranche D Term Loan, 7.21%, 1/30/19		United States		6,889,154			5,063,528
	i,jTranche E Term Loan, 7.96%, 7/30/19		United States		2,213,881			1,628,586
e	Valeant Pharmaceuticals International,
	senior bond, 144A, 6.75%, 8/15/21		United States		487,000			417,602
	senior bond, 144A, 7.25%, 7/15/22		United States		241,000			207,911
	senior note, 144A, 6.375%, 10/15/20		United States		2,995,000			2,590,675
i,j,k	Veritas Software Corp.,
	Term B1, 6.625%, 6/15/23		United States		20,948	EUR		19,840
	Term Loan B1, 6.625%, 1/27/23		United States		2,004,775			1,754,178
	Term Loan B2, 8.625%, 1/27/23		United States		1,935,027			1,661,705
e	Veritas U.S. Inc./Veritas Bermuda Ltd., senior note, 144A, 10.50%, 2/01/24		United States		2,419,000			2,068,245
e	Western Digital Corp., senior note, 144A, 10.50%, 4/01/24		United States		2,318,000			2,486,055
	Total Corporate Bonds, Notes and Senior Floating Rate Interests (Cost $27,363,872)							23,699,455

MGD-14 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Mutual Global Discovery VIP Fund (continued)

		Country		Principal Amount*		Value
	Corporate Bonds, Notes and Senior Floating Rate Interests in Reorganization 0.8%
b,l	Broadband Ventures III LLC, secured promissory note, 5.00%, 2/01/12		United States		595	$	—
i,j,l	Caesars Entertainment Operating Co. Inc., Term B-7 Loans, 1.50%, 3/01/17		United States		1,176,090		1,188,831
i,j,l	Texas Competitive Electric Holdings Co. LLC, Term Loans, 3.50%, 10/10/17		United States		5,912,264		1,983,074
e,l	Texas Competitive Electric Holdings Co. LLC/Texas Competitive Electric Holdings Finance Inc., senior secured note, first lien, 144A, 11.50%, 10/01/20		United States		5,895,000		2,019,037
e,l,m	Walter Energy Inc., second lien, 144A, PIK, 11.50%, 4/01/20		United States		801,340		280
	Total Corporate Bonds, Notes and Senior Floating Rate Interests in Reorganization (Cost $12,095,094)						5,191,222
				Shares
	Companies in Liquidation 0.1%
a	Adelphia Recovery Trust		United States		5,379,562		11,297
a,f	Adelphia Recovery Trust, Arahova Contingent Value Vehicle, Contingent Distribution		United States		386,774		3,868
a,f,g	Century Communications Corp., Contingent Distribution		United States		1,074,000		—
a,b	FIM Coinvestor Holdings I, LLC		United States		2,077,368		—
a,n	Lehman Brothers Holdings Inc., Bankruptcy Claim		United States		17,348,669		542,146
a,g	NewPage Corp., Litigation Trust		United States		4,854,000		—
a,f,g	Tribune Media Litigation Trust, Contingent Distribution		United States		56,925		—
	Total Companies in Liquidation (Cost $1,632,483)						557,311
				Principal Amount*
	Municipal Bonds (Cost $2,115,492) 0.2%
	Puerto Rico Commonwealth GO, Refunding, Series A, 8.00%, 7/01/35		United States		2,261,000		1,512,044
	Total Investments before Short Term Investments (Cost $549,239,369)						598,795,281
	Short Term Investments 7.5%
	U.S. Government and Agency Securities 6.7%
o	FHLB, 7/01/16		United States		11,900,000		11,900,000
o,p	U.S. Treasury Bill, 7/07/16 - 12/08/16		United States		31,000,000		30,982,921
	Total U.S. Government and Agency Securities (Cost $42,871,955)						42,882,921
	Total Investments before Money Market Funds and Repurchase Agreements (Cost $592,111,324)						641,678,202
				Shares
q	Investments from Cash Collateral Received for Loaned Securities 0.8%
	Money Market Funds (Cost $4,344,000) 0.7%
a,r	Institutional Fiduciary Trust Money Market Portfolio		United States		4,344,000		4,344,000

Semiannual Report MGD-15

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Mutual Global Discovery VIP Fund (continued)

		Country		Principal Amount*		Value
	Investments from Cash Collateral Received for Loaned Securities (continued)
	Repurchase Agreements (Cost $1,086,324) 0.1%
s	Joint Repurchase Agreement, 0.40%, 7/01/16 (Maturity Value 1,086,336)		United States		1,086,324	$	1,086,324
	BNP Paribas Securities Corp.
	Collateralized by oU.S. Treasury Bill, 10/27/16; U.S. Treasury Bond, 8.75% - 9.00%, 11/15/18 - 5/15/20; U.S. Treasury Note, 0.363% - 4.75%, 9/15/16 - 3/31/21; U.S. Treasury Note, Index Linked, 2.625%, 7/15/17; and U.S. Treasury Strips, 8/15/16 - 2/15/21 (valued at $1,108,051)
	Total Investments from Cash Collateral Received for Loaned Securities (Cost $5,430,324)						5,430,324
	Total Investments (Cost $597,541,648) 100.3%						647,108,526
	Securities Sold Short (0.6)%						(3,554,567	)
	Other Assets, less Liabilities 0.3%						1,866,113
	Net Assets 100.0%					$	645,420,072
				Shares
t	Securities Sold Short (Proceeds $3,486,096) (0.6)%
	Common Stocks (0.6)%
	Health Care Equipment & Supplies (0.6)%
	Abbott Laboratories		United States		90,424	$	(3,554,567	)

^†Rounds to less than 0.1% of net assets.

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

^aNon-income producing.

^bSee Note 8 regarding restricted securities.

^cAt June 30, 2016, pursuant to the Fund’s policies and the requirements of applicable securities law, the Fund is restricted from trading this security at period end.

^dA portion or all of the security is on loan at June 30, 2016. See Note 1(h).

^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, 2016, the aggregate value of these securities was $17,849,309, representing 2.8% of net assets.

^fContingent distributions represent the right to receive additional distributions, if any, during the reorganization of the underlying company. Shares represent total underlying principal of debt securities.

^gSecurity has been deemed illiquid because it may not be able to be sold within seven days. At June 30, 2016, the aggregate value of these securities was $-.

^hVariable rate security. The rate shown represents the yield at period end.

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

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

^kSecurity purchased on a when-issued or delayed delivery basis. See Note 1(d).

^lSee Note 7 regarding credit risk and defaulted securities.

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

ⁿBankruptcy claims represent the right to receive distributions, if any, during the liquidation of the underlying pool of assets. Shares represent amount of allowed unsecured claims.

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

^pA portion or all of the security has been segregated as collateral for securities sold short and open forward contracts. At June 30, 2016, the aggregate value of these securities and/or cash pledged amounted to $5,374,722, representing 0.8% of net assets.

^qSee Note 1(h) regarding securities on loan.

^rSee Note 3(e) regarding investments in affiliated management investment companies.

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

^tSee Note 1(g) regarding securities sold short.

MGD-16 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Mutual Global Discovery VIP Fund (continued)

At June 30, 2016 , the Fund had the following futures contracts outstanding. See Note 1(d).

Futures Contracts
Description	Type		Number of Contracts		Notional Value		Expiration Date		Unrealized Appreciation		Unrealized Depreciation
Currency Contracts
EUR/USD		Short		207	$	28,740,656		9/19/16	$	802,876		—
GBP/USD		Short		219		18,133,200		9/19/16		1,725,498		—
Total Futures Contracts					$	46,873,856			$	2,528,374		—
Net unrealized appreciation (depreciation)									$	2,528,374

At June, 30, 2016 the Fund had the following forward exchange contracts outstanding. See Note 1(d).

Forward Exchange Contracts
Currency	Counterpartya		Type		Quantity		Contract Amount		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
OTC Forward Exchange Contracts
South Korean Won		BOFA		Buy		203,895,016	$	174,909		7/12/16	$	2,402	$	(459	)
South Korean Won		BOFA		Sell		2,460,910,507		2,141,843		7/12/16		7,390		(64	)
South Korean Won		FBCO		Sell		1,958,645,921		1,706,881		7/12/16		8,012		—
South Korean Won		HSBC		Buy		202,880,750		172,291		7/12/16		3,682		—
South Korean Won		HSBC		Sell		2,263,081,028		1,969,641		7/12/16		9,993		(3,279	)
Canadian Dollar		HSBC		Buy		83,520		64,125		7/19/16		519		—
Canadian Dollar		HSBC		Sell		170,991		130,596		7/19/16		—		(1,750	)
Canadian Dollar		SSBT		Buy		578,177		446,271		7/19/16		2,107		(872	)
Canadian Dollar		SSBT		Sell		5,350,408		4,176,476		7/19/16		35,506		(221	)
British Pound		BOFA		Buy		1,168,799		1,657,685		8/19/16		—		(98,482	)
British Pound		BOFA		Sell		87,210		116,861		8/19/16		622		(101	)
British Pound		BONY		Sell		52,452		70,658		8/19/16		686		—
British Pound		FBCO		Sell		25,065		33,872		8/19/16		434		—
British Pound		HSBC		Sell		149,357		199,942		8/19/16		881		(184	)
British Pound		SSBT		Buy		57,587		81,039		8/19/16		—		(4,217	)
British Pound		SSBT		Sell		15,088,998		21,954,930		8/19/16		1,826,109		(230	)
Euro		BOFA		Buy		1,239,103		1,380,666		8/19/16		6,260		(9,036	)
Euro		BOFA		Sell		17,838		20,208		8/19/16		372		—
Euro		BONY		Buy		1,354,681		1,510,659		8/19/16		5,025		(9,271	)
Euro		FBCO		Buy		1,885,685		2,096,660		8/19/16		10,708		(10,476	)
Euro		HSBC		Buy		1,332,250		1,484,817		8/19/16		6,289		(9,636	)
Euro		SSBT		Buy		1,500,925		1,673,164		8/19/16		7,238		(11,366	)
Euro		SSBT		Sell		42,127,397		48,151,109		8/19/16		1,305,204		—
Total Forward Exchange Contracts											$	3,239,439	$	(159,644	)
Net unrealized appreciation (depreciation)											$	3,079,795

^aMay be comprised of multiple contracts with the same counterparty, currency and settlement date.

See Abbreviations on page MGD-34.

Semiannual Report MGD-17

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Statements

Statement of Assets and Liabilities

June 30, 2016 (unaudited)

	Franklin Mutual Global Discovery VIP Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	592,111,324
Cost - Non-controlled affiliates (Note 3e)		4,344,000
Cost - Repurchase agreements		1,086,324
Total cost of investments	$	597,541,648
Value - Unaffiliated issuers	$	641,678,202
Value - Non-controlled affiliates (Note 3e)		4,344,000
Value - Repurchase agreements		1,086,324
Total value of investments (includes securities loaned in the amount of $5,201,095)		647,108,526
Cash		382,648
Restricted cash (Note 1e)		3,400,000
Foreign currency, at value (cost and $558,534)		554,999
Receivables:
Investment securities sold		3,144,833
Capital shares sold		47,895
Dividends and interest		2,591,334
European Union tax reclaims		295,461
Due from brokers		5,061,455
Variation margin		330,769
Unrealized appreciation on OTC forward exchange contracts		3,239,439
Other assets		103,577
Total assets		666,260,936
Liabilities:
Payables:
Investment securities purchased		7,117,834
Capital shares redeemed		229,641
Management fees		496,718
Distribution fees		277,424
Securities sold short, at value (proceeds $3,486,096)		3,554,567
Payable upon return of securities loaned		5,430,324
Due to brokers		3,400,000
Unrealized depreciation on OTC forward exchange contracts		159,644
Accrued expenses and other liabilities		174,712
Total liabilities		20,840,864
Net assets, at value	$	645,420,072
Net assets consist of:
Paid-in capital	$	507,790,976
Undistributed net investment income		19,021,183
Net unrealized appreciation (depreciation)		55,053,830
Accumulated net realized gain (loss)		63,554,083
Net assets, at value	$	645,420,072

MGD-18 Semiannual Report   |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Statement of Assets and Liabilities (continued)

June 30, 2016 (unaudited)

	Franklin Mutual Global Discovery VIP Fund
Class 1:
Net assets, at value	$	2,754,446
Shares outstanding		139,328
Net asset value and maximum offering price per share	$	19.77
Class 2:
Net assets, at value	$	597,644,787
Shares outstanding		31,014,267
Net asset value and maximum offering price per share	$	19.27
Class 4:
Net assets, at value	$	45,020,839
Shares outstanding		2,303,695
Net asset value and maximum offering price per share	$	19.54

The accompanying notes are an integral part of these financial statements.    |   Annual Report MGD-19

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Statement of Operations

for the six months ended June 30, 2016 (unaudited)

	Franklin Mutual Global Discovery VIP Fund
Investment income:
Dividends (net of foreign taxes of $591,941)	$	11,213,920
Interest		1,416,949
Income from securities loaned (net of fees and rebates)		231,423
Total investment income		12,862,292
Expenses:
Management fees (Note 3a)		3,003,533
Distribution fees: (Note 3c)
Class 2		739,006
Class 4		79,762
Custodian fees (Note 4)		14,338
Reports to shareholders		73,761
Professional fees		69,711
Trustees’ fees and expenses		1,639
Dividends on securities sold short		10,364
Other		18,135
Total expenses		4,010,249
Expense reductions (Note 4)		(588	)
Expenses waived/paid by affiliates (Note 3e)		(6,619	)
Net expenses		4,003,042
Net investment income		8,859,250
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		17,460,328
Foreign currency transactions		(1,249,979	)
Futures contracts		(430,004	)
Securities sold short		(125,155	)
Net realized gain (loss)		15,655,190
Net change in unrealized appreciation (depreciation) on:
Investments		(33,204,832	)
Translation of other assets and liabilities denominated in foreign currencies		2,231,725
Futures contracts		1,985,026
Net change in unrealized appreciation (depreciation)		(28,988,081	)
Net realized and unrealized gain (loss)		(13,332,891	)
Net increase (decrease) in net assets resulting from operations	$	(4,473,641	)

MGD-20 Semiannual Report   |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Statements of Changes in Net Assets

	Franklin Mutual Global Discovery VIP Fund
	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31, 2015
Increase (decrease) in net assets:
Operations:
Net investment income	$	8,859,250		$	10,694,516
Net realized gain (loss)		15,655,190			57,004,189
Net change in unrealized appreciation (depreciation)		(28,988,081	)		(93,151,143	)
Net increase (decrease) in net assets resulting from operations		(4,473,641	)		(25,452,438	)
Distributions to shareholders from:
Net investment income:
Class 1		—			(79,470	)
Class 2		—			(18,967,567	)
Class 4		—			(1,406,194	)
Net realized gains:
Class 1		—			(146,560	)
Class 2		—			(38,175,344	)
Class 4		—			(3,020,502	)
Total distributions to shareholders		—			(61,795,637	)
Capital share transactions: (Note 2)
Class 1		128,335			643,019
Class 2		(27,582,757	)		24,374,278
Class 4		(3,704,488	)		(4,702,254	)
Total capital share transactions		(31,158,910	)		20,315,043
Net increase (decrease) in net assets		(35,632,551	)		(66,933,032	)
Net assets:
Beginning of period		681,052,623			747,985,655
End of period	$	645,420,072		$	681,052,623
Undistributed net investment income included in net assets:
End of period	$	19,021,183		$	10,161,933

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report MGD-21

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Notes to Financial Statements (unaudited)

Franklin Mutual Global Discovery VIP Fund

1. Organization and Significant Accounting Policies

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of nineteen separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Franklin Mutual Global Discovery VIP 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, 2016, 51.94% of the Fund’s shares were held through one insurance company. Investment activities of these insurance company separate accounts could have a material impact on the Fund. The Fund offers three classes of shares: Class 1, Class 2 and Class 4. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

The Fund’s investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Fund calculates the net asset value (NAV) per share as of 4 p.m. Eastern time each day the New York Stock Exchange (NYSE) is open for trading. Under compliance policies and procedures approved by the Trust’s Board of Trustees (the Board), the Fund’s administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The VC provides administration and oversight of the Fund’s valuation policies and procedures, which are approved annually by the Board. Among other things, these procedures allow the Fund to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

Equity securities 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 as of 4 p.m. Eastern time whichever is earlier. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the day that the value of the security is determined. Over-the-counter (OTC) securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.

Debt securities generally trade in the OTC market rather than on a securities exchange. The Fund’s pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value. Securities denominated in a foreign currency are converted into their U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the date that the values of the foreign debt securities are determined.

Investments in open-end mutual funds are valued at the closing NAV. Repurchase agreements are valued at cost, which approximates fair value.

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

The Fund has procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the VC convenes on a regular basis to review such financial instruments and considers a

MGD-22 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Mutual Global Discovery VIP Fund (continued)

number of factors, including significant unobservable valuation inputs, when arriving at fair value. The VC primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. The VC employs various methods for calibrating these valuation approaches including a regular review of key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.

Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 4 p.m. Eastern time. In addition, trading in certain foreign markets may not take place on every NYSE business day. 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 VC monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depositary Receipts, futures contracts and exchange traded funds). These price movements are measured against 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.

When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the NYSE is closed, which could result in differences between the value of the Fund’s portfolio securities on the last business day and the last calendar day of the reporting period. Any significant security valuation changes due to an open foreign market are

adjusted and reflected by the Fund for financial reporting purposes.

b. Foreign Currency Translation

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

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

Semiannual Report MGD-23

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Mutual Global Discovery VIP Fund (continued)

1. Organization and Significant Accounting Policies (continued)

c. Joint Repurchase Agreement (continued)

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%. Repurchase agreements are subject to the terms of Master Repurchase Agreements (MRAs) with approved counterparties (sellers). The MRAs contain various provisions, including but not limited to events of default and maintenance of collateral for repurchase agreements. In the event of default by either the seller or the Fund, certain MRAs may permit the non-defaulting party to net and close-out all transactions, if any, traded under such agreements. The Fund may sell securities it holds as collateral and apply the proceeds towards the repurchase price and any other amounts owed by the seller to the Fund in the event of default by the seller. This could involve costs or delays in addition to a loss on the securities if their value falls below the repurchase price owed by the seller. The joint repurchase agreement held by the Fund at period end, as indicated in the Statement of Investments, had been entered into on June 30, 2016.

d. Securities Purchased on a When-Issued or Delayed Delivery Basis

The Fund purchases securities on a when-issued or 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 in 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.

Derivative counterparty credit risk is managed through a formal evaluation of the creditworthiness of all potential counterparties. The Fund attempts to reduce its exposure to counterparty credit risk on OTC derivatives, whenever possible, by entering into International Swaps and Derivatives Association (ISDA) master agreements with certain counterparties. These agreements contain various provisions, including but not limited to collateral requirements, events of default, or early termination. Termination events applicable to the counterparty include certain deteriorations in the credit quality of the counterparty. Termination events applicable to the Fund include failure of the Fund to maintain certain net asset levels and/or limit the decline in net assets over various periods of time. In the event of default or early termination, the ISDA master agreement gives the non-defaulting party the right to net and close-out all transactions traded, whether or not arising under the ISDA agreement, to one net amount payable by one counterparty to the other. However, absent an event of default or early termination, OTC derivative assets and liabilities are presented gross and not offset in the Statement of Assets and Liabilities. Early termination by the counterparty may result in an immediate payment by the Fund of any net liability owed to that counterparty under the ISDA agreement. At June 30, 2016, the Fund had OTC derivatives in a net liability position for such contracts of $94,656.

Collateral requirements differ by type of derivative. Collateral or initial margin requirements are set by the broker or exchange clearing house for exchange traded and centrally cleared derivatives. Initial margin deposited is held at the exchange and can be in the form of cash and/or securities. For OTC derivatives traded under an ISDA master agreement, posting of collateral is required by either the Fund or the applicable counterparty if the total net exposure of all OTC derivatives with the applicable counterparty exceeds the minimum transfer amount, which typically ranges from $100,000 to $250,000, and can vary depending on the counterparty and the type of the agreement. Generally, collateral is determined at the close of Fund business each day and any additional collateral required due to changes in derivative values may be delivered by the Fund or the counterparty within a few business days. Collateral pledged

MGD-24 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Mutual Global Discovery VIP Fund (continued)

and/or received by the Fund for OTC derivatives, if any, is held in segregated accounts with the Fund’s custodian/counterparty broker and can be in the form of cash and/or securities. Unrestricted cash may be invested according to the Fund’s investment objectives. To the extent that the amounts due to the Fund from its counterparties are not subject to collateralization or are not fully collateralized, the Fund bears the risk of loss from counterparty non-performance.

The Fund entered into exchange traded futures contracts primarily to manage exposure to certain foreign currencies. A futures contract is an agreement between the Fund and a counterparty to buy or sell an asset for a specified price on a future date. Required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable in the Statement of Assets and Liabilities.

The Fund entered into OTC forward exchange contracts primarily to manage exposure to certain foreign currencies. A forward exchange contract is an agreement between the Fund and a counterparty to buy or sell a foreign currency at a specific exchange rate on a future date.

See Note 9 regarding other derivative information.

f. Restricted Cash

At June 30, 2016, the Fund held restricted cash in connection with investments in certain derivative securities. Restricted cash is held in a segregated account with the Fund’s custodian and is reflected in the Statement of Assets and Liabilities.

g. 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 fair 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 to the extent necessary to meet margin requirements until the short position is closed out. A deposit must also be maintained with the Fund’s custodian/counterparty 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 and/or interest due on securities sold short. Such dividends and/or interest and any security borrowing fees are recorded as an expense to the Fund.

h. Securities Lending

The Fund participates in an agency based securities lending program to earn additional income. The Fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the fair value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the fair 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 deposited into a joint cash account with other funds and is used to invest in a money market fund managed by Franklin Advisers, Inc., an affiliate of the Fund, and/or a joint repurchase agreement. The Fund may receive income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. Income from securities loaned, net of fees paid to the securities lending agent and/or third-party vendor, is reported separately in the Statement of Operations. 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. If the borrower defaults on its obligation to return the securities loaned, the Fund has the right to repurchase the securities in the open market using the collateral received. The securities lending agent has agreed to indemnify the Fund in the event of default by a third party borrower.

i. 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 certain restrictions on resale.

Semiannual Report MGD-25

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Mutual Global Discovery VIP Fund (continued)

1. Organization and Significant Accounting Policies (continued)

j. Income and Deferred Taxes

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

The Fund may be subject to foreign taxation related to income received, capital gains on the sale of securities and certain foreign currency transactions in the foreign jurisdictions in which it invests. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests. When a capital gain tax is determined to apply, the Fund records an estimated deferred tax liability in an amount that would be payable if the securities were disposed of on the valuation date. As a result of several court cases, in certain countries across the European Union, the Fund filed additional tax reclaims for previously withheld taxes on dividends earned in those countries (EU reclaims). These additional filings are subject to various administrative proceedings by the local jurisdictions’ tax authorities within the European Union, as well as a number of related judicial proceedings. Income recognized, if any, for EU reclaims is reflected as other income in the Statement of Operations and any related receivable, if any, is reflected as European Union tax reclaims in the Statement of Assets and Liabilities. When uncertainty exists as to the ultimate resolution of these proceedings, the likelihood of receipt of these EU reclaims, and the potential timing of payment, no amounts are reflected in the financial statements.

The Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of June 30, 2016, the Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that

remain subject to examination and are based on each tax jurisdiction’s statute of limitation.

k. 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 and dividends declared on securities sold short are recorded on the ex-dividend date except for certain dividends from foreign securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Fund. 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 U.S. GAAP. 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.

l. Accounting Estimates

The preparation of financial statements in accordance with U.S. GAAP 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.

MGD-26 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Mutual Global Discovery VIP Fund (continued)

m. 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, 2016, 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, 2016						Year Ended December 31, 2015
	Shares			Amount			Shares			Amount
Class 1 Shares:
Shares sold		13,955		$	266,819			29,371		$	659,819
Shares issued in reinvestment of distributions		—			—			11,573			226,030
Shares redeemed		(7,227	)		(138,484	)		(10,639	)		(242,830	)
Net increase (decrease)		6,728		$	128,335			30,305		$	643,019
Class 2 Shares:
Shares sold		754,545		$	14,161,497			2,941,446		$	64,431,215
Shares issued in reinvestment of distributions		—			—			2,996,482			57,142,910
Shares redeemed		(2,228,840	)		(41,744,254	)		(4,457,652	)		(97,199,847	)
Net increase (decrease)		(1,474,295	)	$	(27,582,757	)		1,480,276		$	24,374,278
Class 4 Shares:
Shares sold		79,340		$	1,477,095			121,580		$	2,592,251
Shares issued in reinvestment of distributions		—			—			228,652			4,426,697
Shares redeemed		(271,273	)		(5,181,583	)		(532,685	)		(11,721,202	)
Net increase (decrease)		(191,933	)	$	(3,704,488	)		(182,453	)	$	(4,702,254	)

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

Semiannual Report MGD-27

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Mutual Global Discovery VIP Fund (continued)

3. Transactions With Affiliates (continued)

a. Management Fees

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

Annualized Fee Rate	Net Assets
0.950%	Up to and including $200 million
0.935%	Over $200 million, up to and including $700 million
0.900%	Over $700 million, up to and including $1.2 billion
0.875%	Over $1.2 billion, up to and including $4 billion
0.845%	Over $4 billion, up to and including $7 billion
0.825%	Over $7 billion, up to and including $10 billion
0.805%	In excess of $10 billion

For the period ended June 30, 2016, the annualized effective investment management fee rate was 0.940% of the Fund’s average daily net assets.

b. Administrative Fees

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

c. Distribution Fees

The Board has adopted a distribution plans for Class 2 and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to 0.35% per year of its average daily net assets of each class. The Board has agreed to limit the current rate to 0.25% per year for Class 2. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.

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. Investments in Affiliated Management Investment Companies

The Fund invests in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Fund are waived on assets invested in the affiliated management investment companies, as noted in the Statement of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate.

	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 Gain (Loss)		% of Affiliated Fund Shares Outstanding Held at End of Period
Non-Controlled Affiliates
Institutional Fiduciary Trust Money Market Portfolio		—		74,008,000		(69,664,000	)		4,344,000	$	4,344,000	$	—	$	—		—%a

^a Amount rounds to less than 0.1%.

MGD-28 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Mutual Global Discovery VIP Fund (continued)

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, 2016, the custodian fees were reduced as noted in the Statement of Operations.

5. Income Taxes

At June 30, 2016, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	597,705,934
Unrealized appreciation	$	127,653,884
Unrealized depreciation		(78,251,292	)
Net unrealized appreciation (depreciation)	$	49,402,592

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of foreign currency transactions.

6. Investment Transactions

Purchases and sales of investments (excluding short term securities and securities sold short) for the period ended June 30, 2016, aggregated $53,520,394 and $96,425,420, respectively.

At June 30, 2016, in connection with securities lending transactions, the Fund loaned equity investments and received $5,430,324 of cash collateral. The gross amount of recognized liability for such transactions is included in payable upon return of securities loaned in the Statement of Assets and Liabilities. The agreements can be terminated at any time.

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, 2016, the aggregate long value of distressed company securities for which interest recognition has been discontinued was $5,191,222, representing 0.8% of the Fund’s net assets. For information as to specific securities, see the accompanying Statement of Investments.

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.

Semiannual Report MGD-29

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Mutual Global Discovery VIP Fund (continued)

8. Restricted Securities (continued)

At June 30, 2016, 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/ Units	Issuer	Acquisition Date		Cost		Value
595	Broadband Ventures III LLC, secured promissory note, 5.00%, 2/01/12		7/01/10 - 11/30/12	$	595	$	—
2,077,368	FIM Coinvestor Holdings I, LLC		11/20/06 - 6/02/09		—		—
2,172,000	Hightower Holding LLC, pfd., A, Series 2		6/10/10 - 5/10/12		5,430,000		5,821,394
424,073	International Automotive Components Group Brazil LLC		4/13/06 - 12/26/08		281,629		6,981
4,052,916	International Automotive Components Group North America LLC		1/12/06 - 3/18/13		3,247,714		1,788,009
1,841	Warrior Met Coal LLC, A		9/19/14 - 12/04/14		2,420,000		185,603
4,306	Warrior Met Coal LLC, B		03/31/16 - 06/23/16		344,500		434,115
	Total Restricted Securities (Value is 1.3% of Net Assets)			$	11,724,438	$	8,236,102

9. Other Derivative Information

At June 30, 2016, the Fund’s investments in derivative contracts are reflected in 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			Statement of Assets and Liabilities Location	Fair Value
Foreign exchange contracts	Variation margin		2,528,374	a	Variation margin		—
	Unrealized appreciation on OTC forward exchange contracts		3,239,439		Unrealized depreciation on OTC forward exchange contracts		159,644
Totals		$	5,767,813			$	159,644

^aThis amount reflects the cumulative appreciation (depreciation) of futures contracts as reported in the Statement of Investments. Only the variation margin receivable/payable at year end is separately reported within the Statement of Assets and Liabilities. Prior variation margin movements were recorded to cash upon receipt or payment.

For the period ended June 30, 2016, the effect of derivative contracts in the Fund’s Statement of Operations was as follows:

Derivative Contracts Not Accounted for as Hedging Instruments	Statement of Operations Locations	Net Realized Gain (Loss) for the Period			Statement of Operations Locations	Net Change in Unrealized Appreciation (Depreciation) for the Period
	Net realized gain (loss) from:				Net change in unrealized appreciation (depreciation) on:
Foreign exchange contracts	Foreign currency transactions		(1,201,867	)a	Translation of other assets and liabilities denominated in foreign currencies		2,253,295	a
	Futures contracts		(430,004	)	Futures contracts		1,985,026
Totals		$	(1,631,871	)		$	4,238,321

^aForward exchange contracts are included in net realized gain (loss) from foreign currency transactions and net change in unrealized appreciation (depreciation) on translation of other assets and liabilities denominated in foreign currencies in the Statement of Operations.

MGD-30 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Mutual Global Discovery VIP Fund (continued)

For the period ended June, 30 2016, the average month end fair value of derivatives represented 0.5% of average month end net assets. The average month end number of open derivative contracts for the period was 51.

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 $2 billion (Global Credit Facility) which matures on February 10, 2017. 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 0.07% based upon the unused portion of the Global Credit Facility. Effective February 12, 2016, the annual commitment fee is 0.15%. These fees are reflected in other expenses in the Statement of Operations. During the period ended June 30, 2016, 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 financial instruments and are summarized in the following fair value hierarchy:

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

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

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

The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.

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.

Semiannual Report MGD-31

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Mutual Global Discovery VIP Fund (continued)

11. Fair Value Measurements (continued)

A summary of inputs used as of June 30, 2016, in valuing the Fund’s assets and liabilities carried at fair value, is as follows:

	Level 1		Level 2		Level 3			Total
Assets:
Investments in Securities:
Equity Investments:a
Auto Components	$	2,913,028	$	—	$	1,794,990		$	4,708,018
Banks		79,769,543		7,773,754		—			87,543,297
Diversified Financial Services		2,516,854		—		5,821,394			8,338,248
Oil, Gas & Consumable Fuels		44,792,308		—		619,718			45,412,026
All Other Equity Investmentsb		421,833,660		—		—	c		421,833,660
Corporate Bonds, Notes and Senior Floating Rate Interests		—		23,699,455		—			23,699,455
Corporate Notes and Senior Floating Rate Interests in Reorganization		—		5,191,222		—	c		5,191,222
Companies in Liquidation		11,297		546,014		—	c		557,311
Municipal Bonds		—		1,512,044		—			1,512,044
Short Term Investments		35,326,921		12,986,324		—			48,313,245
Total Investments in Securities	$	587,163,611	$	51,708,813	$	8,236,102		$	647,108,526
Other Financial Instruments:
Futures Contracts	$	2,528,374	$	—	$	—		$	2,528,375
Forward Exchange Contracts		—		3,239,439		—			3,239,439
Total Other Financial Instruments	$	2,528,374	$	3,239,439	$	—		$	5,767,814
Liabilities:
Other Financial Instruments:
Securities Sold Short	$	3,554,567	$	—	$	—		$	3,554,567
Forward Exchange Contracts		—		159,644		—			159,644
Total Other Financial Instruments	$	3,554,567	$	159,644	$	—		$	3,714,211

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

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

^cIncludes securities determined to have no value at June 30, 2016.

MGD-32 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Mutual Global Discovery VIP Fund (continued)

A reconciliation of assets in which Level 3 inputs are used in determining fair value is presented when there are significant Level 3 financial instruments at the end of the period. At June 30, 2016, the reconciliation of assets is as follows:

	Balance at Beginning of Period			Purchases		Sales		Transfers Into Level 3a		Transfers Out of Level 3b			Cost Basis Adjustments		Net Realized Gain (Loss)		Net Unrealized Appreciation (Depreciation)			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	$	2,192,388		$	—	$	—	$	—	$	—		$	—	$	—	$	(397,398	)	$	1,794,990		$	(397,398	)
Diversified Financial Services		5,157,849			—		—		—		—			—		—		663,545			5,821,394			663,545
Oil, Gas & Consumable Fuels		—			344,500		—		221,058		—			—		—		54,160			619,718			54,160
Corporate Bonds and Notes in Reorganization		2,053	d		—		—		—		(280	)		—		—		(1,773	)		—	d		—
Total Investments in Securities	$	7,352,290		$	344,500	$	—	$	221,058	$	(280	)	$	—	$	—	$	318,534		$	8,236,102		$	320,307

^aThe investments were transferred into Level 3 as result of the unavailability of other significant observable valuation inputs. May include amounts related to a corporate action.

^bThe investments were transferred out of Level 3 as a result of the availability of other significant observable valuation inputs.

^cIncludes common and preferred stocks as well as other equity investments.

^dIncludes securities determined to have no value.

Significant unobservable valuation inputs developed by the VC for material Level 3 financial instruments and impact to fair value as a result of changes in unobservable valuation inputs as of June 30, 2016, are as follows:

Description	Fair Value at End of Year		Valuation Technique	Unobservable Input	Amount/ Range		Impact to Fair Value if Input Increasesa
Assets:
Investments in Securities
Equity Investments:b
Auto Components	$	1,788,009	Market comparables	Discount for lack of marketability Average EV / EBITDA multiple		10% 3.2x		Decrease Increase	c  d
Diversified Financial Services		5,821,394	Discounted Cash Flow Model	Cost of Equity Long-term revenue growth rate Adjusted EBITDA margin		17% 6.2% - 24.3% 12.5% - 21.5%		Decrease Increase Increase	d  d  d
All Other Investmentse		626,699
Total	$	8,236,102

^aRepresents the directional change in the fair value of the Level 3 financial instruments that would result from a significant and reasonable increase in the corresponding input. A significant and reasonable decrease in input would have the opposite effect. Significant impacts, if any, to fair value and/or net assets have been indicated.

^bIncludes common and preferred stocks.

^cRepresents a significant impact to fair value but not net assets.

^dRepresents a significant impact to fair value and net assets.

^eIncludes fair value of immaterial financial instruments developed using various valuation techniques and unobservable inputs. May also include financial instruments with values derived using prior transaction prices or third party pricing information without adjustment for which such inputs are also unobservable.

Semiannual Report MGD-33

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Mutual Global Discovery VIP Fund (continued)

11. Fair Value Measurements (continued)

Abbreviations List

EBITDA	Earnings before interest, taxes, depreciation and amortization
EV	Enterprise value

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
BOFA	Bank of America N.A.	EUR	Euro	ADR	American Depositary Receipt
BONY	Bank of New York Mellon	GBP	British Pound	FHLB	Federal Home Loan Bank
FBCO	Credit Suisse Group AG	USD	United States Dollar	GO	General Obligation
HSBC	HSBC Bank USA, N.A.			PIK	Payment-In-Kind
SSBT	State Street Bank and Trust Co.

MGD-34 Semiannual Report

Franklin Mutual Shares VIP Fund

We are pleased to bring you Franklin Mutual Shares VIP Fund’s semiannual report for the period ended June 30, 2016.

Class 1 Performance Summary as of June 30, 2016

The Fund’s Class 1 shares delivered a +4.52% total return* for the six-month period ended June 30, 2016.

*The Fund has a fee waiver associated with any investment in a Franklin Templeton money fund and/or Franklin Templeton fund, as applicable, contractually guaranteed through at least the Fund’s current fiscal year-end. Fund investment results reflect the fee waiver, to the extent applicable; without this reduction, the results would have been lower.

Performance reflects the Fund’s Class 1 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.

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.

Semiannual Report MS-1

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Fund Goals and Main Investments

The Fund seeks capital appreciation, with income as a secondary goal, by investing primarily in equity securities of companies the Fund’s managers believe are at prices below their intrinsic value. The Fund may invest up to 35% of its assets in foreign securities.

Fund Risks

All investments involve risks, including possible loss of principal. Value securities may not increase in price as anticipated or may decline further in value. The Fund’s investments in foreign securities involve special risks including currency fluctuations, and economic and political uncertainties. The Fund may also invest in companies engaged in mergers, reorganizations or liquidations, which involve special risks as pending deals may not be completed on time or on favorable terms, as well as lower rated bonds, which entail higher credit risk. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. In comparison, the Fund’s benchmark, the Standard & Poor’s^® 500 Index, generated a +3.84% total return for the period under review.¹

Economic and Market Overview

The global economy expanded during the six months under review. An improvement in commodity prices including a rally in crude oil prices, accommodative monetary policy from various global central banks, finalization of the new debt deal for Greece and encouraging Chinese trade data toward period-end boosted market sentiment. However, global equity market volatility increased after the U.S. Federal Reserve’s (Fed’s) June decision to keep its federal funds target range unchanged, while providing a cautious stance on further interest rate hikes. In addition, global economic concerns and the U.K.’s historic referendum to leave the European Union (EU), also known as the “Brexit,” contributed to volatile global stock markets.

Oil prices fell at the beginning of the review period, largely due to a strong global supply, but recovered in the period’s second half amid oilfield outages and continued demand growth. Meanwhile, commodity prices increased for most of the review period as oversupply for a host of commodities shrank and the market appeared to be on the path of rebalancing after hitting a glut-induced bottom earlier in the year. Gold prices continued to rise following the Brexit referendum as some investors turned to safe haven investing. The U.S. dollar generally depreciated against most currencies during the period, which increased returns of many foreign assets in U.S. dollar terms. In this environment, global developed market stocks overall, as measured by the MSCI World Index, rose slightly during the period.²

The U.S. economy grew moderately, as measured by gross domestic product (GDP) in 2016’s first and second quarters, driven by consumer spending and exports. A decline in private inventory investment and non-residential fixed investment contributed to the moderation. The Fed maintained its target interest rate during the review period after raising it for the first time in nine years at its December 2015 meeting. The Fed kept its target rate unchanged in its June meeting mainly due to a substantial slowdown in job additions toward period-end. The Fed expects economic conditions to evolve in a manner that could warrant only gradual increases in the federal funds rate.

In Europe, slower U.K. economic growth continued in 2016’s first quarter as output slowed in construction, production and agriculture. Immediate effects of the Brexit materialized as U.K. stocks significantly declined and the pound sterling hit a three-decade low amid intensified selling. Credit rating agencies Standard & Poor’s and Fitch also downgraded the U.K.’s credit rating. In the eurozone, despite investors’ concerns about banking sector weakness, low corporate earnings and post-Brexit political repercussions, some regions benefited due to rising consumer spending resulting from a cheaper euro, low inflation and signs of sustained economic growth. The eurozone’s annual inflation rate remained in negative territory for most of the review period; however, it rose marginally above zero in June.

Japan’s economy posted mixed results, contracting in 2015’s fourth quarter stemming from declining private and household consumption. However, the economy expanded during 2016’s

1. Source: 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. Please see Index Descriptions following the Fund Summaries.

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first quarter as private consumption increased and business investment decreased less than anticipated. The Bank of Japan (BOJ) took several actions during the review period. In January, to boost lending and support inflation, the BOJ introduced a negative interest rate on excess reserves held at the central bank by financial institutions. In April, the BOJ further reduced its GDP and inflation forecasts for fiscal year 2016, and decided against additional quantitative easing measures. However, after the U.K.’s vote in June to leave the EU, the BOJ hinted at carrying out flexible open market operations to stabilize its financial markets.

In emerging markets, economic growth generally moderated during the review period. Brazil’s economy witnessed its longest recession since the 1930s amid political and economic turmoil, while Russia’s economy continued to contract. The Bank of Russia reduced its key interest rate in an attempt to revive its economy. China’s economic growth slowed marginally in 2016’s first quarter compared to the previous quarter, but remained largely in line with the government’s target. The People’s Bank of China cut its cash reserve requirement ratio for the country’s banks and effectively devalued the renminbi against the U.S. dollar to the lowest level in more than five years. Overall, emerging market stocks, as measured by the MSCI Emerging Markets Index, rose for the six-month period under review.²

Investment Strategy

At Franklin 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 what we believe are 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

*Figures are stated as a percentage of total and may not equal 100% or may be negative due to rounding, use of any derivatives, unsettled trades or other factors.

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.

What is meant by “hedge”?

To hedge an investment is to take a position intended to offset potential losses/gains that may be incurred by a companion financial instrument.

Manager’s Discussion

Economic and political uncertainty influenced markets during the six months under review. The year 2016 began with severe economic uncertainty. Brent oil prices plunged below US$30 per barrel as fears of a global recession spread. Global equity markets dropped from the start of the year, continuing a downward move from mid-2015 highs, before bottoming in mid-February. Commodity and equity prices rose over the following four months, before a late June surprise: the Brexit, ending a 43-year relationship with the rest of the EU. Uncertainty about the future status of the U.K. as well as implications for the EU and the global economy weighed on markets at the end of the period.

Equity prices are typically forward looking, reflecting investors’ beliefs about how various factors and events will play out in the future. Global equity prices at period-end were down from mid-2015 highs, reflecting increased uncertainty among investors regarding the consequences of the Brexit in addition to long-standing concerns about China, commodity prices, interest rates and geopolitical events.

Following the momentous decision by U.K. voters on June 23 to leave the EU, we believe it is probable that the U.K. will face a heightened risk of an economic slowdown, as businesses will likely put investment decisions on hold while waiting for greater clarity. The negative impact on the rest of the EU will likely be less severe, although economic growth in the region was already running at a modest pace before the vote, and we do not believe the region will be immune. Among the region’s equity markets, we believe that financial and domestically oriented cyclical stocks were being perceived by some investors as more vulnerable. Those stocks that were viewed as defensive, as well as stocks with what we consider attractive dividend yields, will likely remain in favor among many investors, in our view, causing them to trade at even higher valuation multiples. Within the U.K., large multinational companies that generate most of their earnings abroad should benefit from the precipitous fall of the British pound that followed the Brexit vote. In this respect, the Fund’s exposure to U.K. equities was

Top 10 Sectors/Industries
Based on Equity Securities
6/30/16
	% of Total Net Assets
Insurance		10.2%
Banks		8.9%
Pharmaceuticals		8.1%
Oil, Gas & Consumable Fuels		6.6%
Media		6.4%
Software		6.4%
Tobacco		6.3%
Health Care Equipment & Supplies		5.6%
Food & Staples Retailing		3.9%
Technology Hardware, Storage & Peripherals		3.4%

predominantly through a number of these global companies. Also, the Fund has only a modest exposure to European financials, particularly in banks.

Although the Brexit vote is clearly a negative surprise, we do not believe it will usher in a new global financial crisis similar to the one experienced eight years ago. While markets reacted brutally to the U.K.’s decision to leave the EU, we have not seen any systemic shock like the one that followed the fall of Lehman Brothers in 2008. We also believe that, eventually, the U.K. and the EU will come to an acceptable agreement concerning trade relations.

Three of the Fund’s larger positions at period-end were in health care.³ Merck, Medtronic and Switzerland-based Novartis are global companies that meet important customer needs with products protected by intellectual property. This focus on innovation that improves the lives of customers gives us confidence in the sustainability of their businesses. In addition, we feel that each has strong financial characteristics, including the ability to invest in research and development and acquisitions, while also providing material returns to shareholders, and trading at valuations that are attractive from our perspective as value investors.

The Fund also featured three information technology firms among its larger positions: Microsoft, Symantec and Samsung Electronics.⁴ Microsoft features a strong global business based on innovation and meeting customer needs, including its fast-growing cloud business, while also returning excess capital to shareholders through dividends and share buybacks. Symantec

3. The health care sector comprises health care equipment and supplies, health care providers and services, and pharmaceuticals in the SOI.

4. The information technology sector comprises communications equipment; Internet software and services; IT services; software; and technology hardware, storage and peripherals in the SOI.

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also competes through innovation in providing security software to individuals and enterprises. Following a restructuring of its activities, the company is now focused on the fast-growing market for web-related security, while also returning capital to shareholders. South Korea-based Samsung Electronics, another meaningful position of the Fund in this sector, competes in more capital intensive commodity markets such as memory semiconductors and smartphones. In these areas, we believe that Samsung has advantages of scale and expertise relative to many of its competitors. In our view, these firms, like the health care firms mentioned previously, share these positive attributes as well as valuations that we, as value investors, find compelling.

Merger and acquisition (M&A) activity continued to be strong in the first half of 2016, helping to support valuations. Although deal volumes remained near historical highs, regulators globally continued to be more aggressive in their scrutiny of potentially negative effects of high concentration. We were disappointed to see regulators successfully sue to block the merger of Office Depot and Staples. Less surprising was the collapse of Halliburton’s attempt to acquire Baker Hughes (a Fund holding) on antitrust grounds, or the largest failure, Pfizer’s withdrawn attempt to acquire Allergan in the face of the U.S. Treasury Department’s new rules on tax inversions. We continue to be active in this space and work to ensure the potential rewards are big enough to outweigh the clear risks that exist in the current environment.

Credit spreads widened dramatically across industries and geographies during the period under review. This was particularly apparent in subinvestment-grade credit, which created additional challenges for sectors, including energy, metals and mining that were already experiencing distress. The precipitous decline in commodity prices globally over the past two years resulted in heightened bankruptcy activity. Dislocations in debt capital markets created some unique opportunities, in our view, especially in stressed and event-driven credit situations where we feel that the yield reached attractive levels and that cheap enterprise valuation protected the downside. By the end of the period, credit spreads had tightened materially from their intra-period highs. Although the current environment seems less attractive to us than a few months ago, volatility remained at heightened levels. In our experience, we believe that patience will be rewarded and the increase in global risk premiums will result in more opportunities.

Turning to Fund performance, top contributors included British American Tobacco, medical technology company Stryker and White Mountains Insurance Group.

Shares of U.K.-based British American Tobacco rose as many equity market investors showed a preference for defensive stocks (perceived to be less sensitive to economic conditions and/or having an attractive dividend yield, such as consumer staples) amid tepid global economic conditions, the low interest-rate environment and the late June U.K. referendum result in favor of leaving the EU. In our view, British American Tobacco remains an attractive position given the current management team, its portfolio of brands and track record of returning capital to shareholders.

U.S.-based medical technology company Stryker announced solid quarterly results in January and May that reflected strong organic growth, market share gains in many of its business segments and operating margin leverage that drove earnings growth. Along with the earnings results in May, Stryker raised its sales and earnings guidance for 2016. Beyond earnings, Stryker announced two strategic acquisitions in February. In our view, the deals were priced at full valuation but involved good-quality assets that offer Stryker the potential to enhance the value of existing assets and drive further value for Stryker shareholders.

White Mountains Insurance Group is a U.S.-based company that invests capital primarily in companies associated with the insurance and reinsurance industry. The insurer’s stock price rallied in February due in part to solid quarterly results and the authorization of a significant stock buyback program near the end of February.

During the period under review, Fund investments that detracted from performance included pharmaceutical services provider Teva Pharmaceutical Industries, global insurer American International Group (AIG) and bank holding company Barclays.

Shares of Israel-based Teva Pharmaceutical Industries followed the broad-based retreat in global financial markets in January and early February. The stock slid further in March after the company announced a delay in the closing of its acquisition of Allergan’s generics unit. Teva has been working to obtain approval from the U.S. Federal Trade Commission, including multiple asset sales agreements in June, in an effort to close the deal in July 2016. In our view, a delay of three to four months will delay the potential realization of synergies but not have a meaningful impact on the expected medium-term value of the deal. Heightened concerns around generic price deflation were also a significant drag on the stock price despite Teva’s management stating that the company did not experience the sharp price declines affecting some competitors.

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Shares of U.S.-based insurer AIG declined as investors were frustrated by the January announcement of a US$3.6 billion reserve shortfall and uncertainty regarding the company’s ability to hit its financial targets. Management is under pressure from activist investors, most notably Carl Icahn, to show rapid improvement or spin off non-core assets to simplify the company. The stock also participated in the global equity market sell-off in late June as investors reacted negatively to the U.K. referendum result in favor of leaving the EU.

Shares of U.K.-based bank Barclays dropped sharply in late June after the U.K. Brexit vote. Investors feared the decision could lead to an increase in bad loans and reduced investment banking revenues if the U.K. economy slips into recession. Barclays’ stock had already significantly declined in January and early February as Europe’s financial sector was hindered by the detrimental effects of low interest rates, ongoing concerns about the health of the global economy, and challenging conditions in capital markets. In addition, the bank’s share price was negatively impacted by a disappointing strategic update in early March that included limited downsizing of the investment banking unit and a dividend cut to fund an accelerated rundown of its non-core activities.

During the period, the Fund held currency forwards and futures to somewhat hedge the currency risk of the portfolio’s non-U.S. dollar investments. The currency forwards had a positive impact on the Fund’s performance, and currency futures had a negligible impact.

What is a currency forward?

A currency forward is an agreement between the Fund and a counterparty to buy or sell a foreign currency in exchange for another currency at a specific exchange rate on a future date.

What is a future?

A future is an agreement between the Fund and a counterparty made through a U.S. or foreign futures exchange to buy or sell an underlying instrument or asset at a specific price on a future date.

Top 10 Equity Holdings
6/30/16
Company Sector/Industry, Country	% of Total Net Assets
Medtronic PLC Health Care Equipment & Supplies, U.S.		3.4%
Microsoft Corp. Software, U.S.		3.4%
Merck & Co. Inc. Pharmaceuticals, U.S.		3.3%
Eli Lilly & Co. Pharmaceuticals, U.S.		2.1%
White Mountains Insurance Group Ltd. Insurance, U.S.		2.0%
PNC Financial Services Group Inc. Banks, U.S.		1.9%
British American Tobacco PLC Tobacco, U.K.		1.9%
Royal Dutch Shell PLC Oil, Gas & Consumable Fuels, U.K.		1.9%
American International Group Inc. Insurance, U.S.		1.8%
Symantec Corp. Software, U.S.		1.7%

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).

Thank you for your participation in Franklin Mutual Shares VIP Fund. We look forward to serving your future investment needs.

The foregoing information reflects our analysis, opinions and portfolio holdings as of June 30, 2016, 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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Class 1 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 × $7.50 = $64.50.

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

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 1	Beginning Account Value 1/1/16		Ending Account Value 6/30/16		Fund-Level Expenses Incurred During Period* 1/1/16–6/30/16
Actual	$	1,000	$	1,045.20	$	3.61
Hypothetical (5% return before expenses)	$	1,000	$	1,021.33	$	3.57

*Expenses are calculated using the most recent six-month annualized expense ratio, net of expense waivers, for the Fund’s Class 1 shares (0.71%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 182/366 to reflect the one-half year period.

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Financial Highlights

Franklin Mutual Shares VIP Fund

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012			2011
Class 1
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$19.48			$22.91			$21.92			$17.45			$15.57			$16.14
Income from investment operationsa:
Net investment incomeb		0.31	c		0.44			0.62	d		0.42			0.35			0.38	e
Net realized and unrealized gains (losses)		0.57			(1.54	)		1.01			4.52			1.92			(0.53	)
Total from investment operations		0.88			(1.10	)		1.63			4.94			2.27			(0.15	)
Less distributions from:
Net investment income		—			(0.77	)		(0.52	)		(0.47	)		(0.39	)		(0.42	)
Net realized gains		—			(1.56	)		(0.12	)		—			—			—
Total distributions		—			(2.33	)		(0.64	)		(0.47	)		(0.39	)		(0.42	)
Net asset value, end of period		$20.36			$19.48			$22.91			$21.92			$17.45			$15.57
Total returnf		4.52%			(4.69)%			7.38%			28.53%			14.61%			(0.79)%
Ratios to average net assetsg
Expensesh		0.71%	i,j		0.73%	i,j		0.73%	i		0.71%	i		0.71%			0.73%	i
Expenses incurred in connection with securities sold short		—%	k		0.02%			0.03%			—%	k		—%	k		—%	k
Net investment income		3.29%	c		2.00%			2.83%	d		2.08%			2.06%			2.28%	e
Supplemental data
Net assets, end of period (000’s)		$573,679			$643,438			$656,463			$552,163			$449,343			$1,170,781
Portfolio turnover rate		13.90%			19.88%			21.33%			24.05%			34.07%	l		41.02%

^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’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $0.06 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 2.69%.

^dNet investment income per share includes approximately $0.23 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.79%.

^eNet investment income per share includes approximately $0.02 per share related to income received that had previously been deemed uncollectible. Excluding this amount, the ratio of net investment income to average net assets would have been 2.14%.

^fTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which 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 and/or interest expense on securities sold short and security borrowing fees, if any. See below for the ratios of such expenses to average net assets for the periods presented. See Note 1(f).

ⁱBenefit of expense reduction rounds to less than 0.01%.

^jBenefit of waiver and payments by affiliates rounds to less than 0.01%.

^kRounds to less than 0.01%.

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

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL HIGHLIGHTS

Franklin Mutual Shares VIP Fund (continued)

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012			2011
Class 2
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$19.20			$22.60			$21.63			$17.23			$15.38			$15.95
Income from investment operationsa:
Net investment incomeb		0.29	c		0.38			0.58	d		0.36			0.30			0.32	e
Net realized and unrealized gains (losses)		0.55			(1.51	)		0.97			4.46			1.90			(0.51	)
Total from investment operations		0.84			(1.13	)		1.55			4.82			2.20			(0.19	)
Less distributions from:
Net investment income		—			(0.71	)		(0.46	)		(0.42	)		(0.35	)		(0.38	)
Net realized gains		—			(1.56	)		(0.12	)		—			—			—
Total distributions		—			(2.27	)		(0.58	)		(0.42	)		(0.35	)		(0.38	)
Net asset value, end of period		$20.04			$19.20			$22.60			$21.63			$17.23			$15.38
Total returnf		4.37%			(4.94)%			7.12%			28.26%			14.24%			(1.04)%
Ratios to average net assetsg
Expensesh		0.96%	i,j		0.98%	i,j		0.98%	i		0.96%	i		0.96%			0.98%	i
Expenses incurred in connection with securities sold short		—%	k		0.02%			0.03%			—%	k		—%	k		—%	k
Net investment income		3.04%	c		1.75%			2.58%	d		1.83%			1.81%			2.03%	e
Supplemental data
Net assets, end of period (000’s)		$3,497,123			$3,353,505			$4,218,342			$4,558,547			$4,069,803			$3,913,220
Portfolio turnover rate		13.90%			19.88%			21.33%			24.05%			34.07%	l		41.02%

^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’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $0.06 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 2.44%.

^dNet investment income per share includes approximately $0.23 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.54%.

^eNet investment income per share includes approximately $0.02 per share related to income received that had previously been deemed uncollectible. Excluding this amount, the ratio of net investment income to average net assets would have been 1.89%.

^fTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which 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 and/or interest expense on securities sold short and security borrowing fees, if any. See below for the ratios of such expenses to average net assets for the periods presented. See Note 1(f).

ⁱBenefit of expense reduction rounds to less than 0.01%.

^jBenefit of waiver and payments by affiliates rounds to less than 0.01%.

^kRounds to less than 0.01%.

^lExcludes 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.    |   Semiannual Report MS-9

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL HIGHLIGHTS

Franklin Mutual Shares VIP Fund (continued)

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012			2011
Class 4
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$19.32			$22.72			$21.74			$17.31			$15.45			$16.03
Income from investment operationsa:
Net investment incomeb		0.28	c		0.36			0.57	d		0.34			0.28			0.30	e
Net realized and unrealized gains (losses)		0.56			(1.52	)		0.96			4.49			1.91			(0.51	)
Total from investment operations		0.84			(1.16	)		1.53			4.83			2.19			(0.21	)
Less distributions from:
Net investment income		—			(0.68	)		(0.43	)		(0.40	)		(0.33	)		(0.37	)
Net realized gains		—			(1.56	)		(0.12	)		—			—			—
Total distributions		—			(2.24	)		(0.55	)		(0.40	)		(0.33	)		(0.37	)
Net asset value, end of period		$20.16			$19.32			$22.72			$21.74			$17.31			$15.45
Total returnf		4.35%			(5.05)%			7.04%			28.05%			14.20%			(1.12)%
Ratios to average net assetsg
Expensesh		1.06%	i,j		1.08%	i,j		1.08%	i		1.06%	i		1.06%			1.08%	i
Expenses incurred in connection with securities sold short		—%	k		0.02%			0.03%			—%	k		—%	k		—%	k
Net investment income		2.94%	c		1.65%			2.48%	d		1.73%			1.71%			1.93%e
Supplemental data
Net assets, end of period (000’s)		$124,453			$130,978			$158,020			$188,153			$165,015			$162,049
Portfolio turnover rate		13.90%			19.88%			21.33%			24.05%			34.07%	l		41.02%

^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’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $0.06 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 2.34%.

^dNet investment income per share includes approximately $0.23 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.44%.

^eNet investment income per share includes approximately $0.02 per share related to income received that had previously been deemed uncollectible. Excluding this amount, the ratio of net investment income to average net assets would have been 1.79%.

^fTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which 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 and/or interest expense on securities sold short and security borrowing fees, if any. See below for the ratios of such expenses to average net assets for the periods presented. See Note 1(f).

ⁱBenefit of expense reduction rounds to less than 0.01%.

^jBenefit of waiver and payments by affiliates rounds to less than 0.01%.

^kRounds to less than 0.01%.

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

MS-10 Semiannual Report   |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Statement of Investments, June 30, 2016 (unaudited)

Franklin Mutual Shares VIP Fund
		Country		Shares/Units		Value
	Common Stocks and Other Equity Interests 86.7%
	Aerospace & Defense 1.1%
	B/E Aerospace Inc.		United States		403,812	$	18,646,019
	Huntington Ingalls Industries Inc.		United States		128,388		21,573,036
a	KLX Inc.		United States		224,586		6,962,166
							47,181,221
	Auto Components 0.2%
a,b	International Automotive Components Group Brazil LLC		Brazil		1,730,515		28,490
a,b,c	International Automotive Components Group North America LLC		United States		15,382,424		6,786,202
							6,814,692
	Automobiles 1.2%
	General Motors Co.		United States		1,770,350		50,100,905
	Banks 8.9%
	Barclays PLC		United Kingdom		10,534,300		19,468,360
	CIT Group Inc.		United States		1,024,773		32,700,506
	Citigroup Inc.		United States		970,749		41,150,050
	Citizens Financial Group Inc.		United States		1,937,906		38,719,362
	Columbia Banking System Inc.		United States		86,923		2,439,059
a	FCB Financial Holdings Inc., A		United States		493,723		16,786,582
	Guaranty Bancorp		United States		209,583		3,500,036
	JPMorgan Chase & Co.		United States		1,010,070		62,765,750
	PNC Financial Services Group Inc.		United States		997,559		81,191,327
	State Bank Financial Corp.		United States		352,200		7,167,270
	SunTrust Banks Inc.		United States		820,282		33,697,185
	Wells Fargo & Co.		United States		698,860		33,077,044
							372,662,531
	Beverages 1.2%
	PepsiCo Inc.		United States		469,472		49,735,864
	Chemicals 0.3%
a,d,e	Dow Corning Corp., Contingent Distribution		United States		100,000		—
	FMC Corp.		United States		265,145		12,278,865
							12,278,865
	Communications Equipment 2.5%
	Cisco Systems Inc.		United States		2,331,170		66,881,267
	Nokia Corp., ADR		Finland		3,299,845		18,776,118
	Nokia OYJ, A		Finland		3,670,248		20,796,707
							106,454,092
	Construction Materials 0.5%
a	LafargeHolcim Ltd., B		Switzerland		547,060		22,720,841
	Consumer Finance 0.4%
a	Ally Financial Inc.		United States		943,970		16,113,568
	Containers & Packaging 1.9%
	International Paper Co.		United States		1,163,335		49,302,137
	WestRock Co.		United States		742,632		28,866,106
							78,168,243
	Diversified Financial Services 0.6%
	Voya Financial Inc.		United States		959,810		23,764,896

Semiannual Report MS-11

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Mutual Shares VIP Fund (continued)

		Country		Shares/Units		Value
	Common Stocks and Other Equity Interests (continued)
	Diversified Telecommunication Services 0.7%
a,d,e	Global Crossing Holdings Ltd., Contingent Distribution		United States		9,005,048	$	—
	Koninklijke KPN NV		Netherlands		8,378,890		30,271,984
							30,271,984
	Electrical Equipment 0.1%
a	Sensata Technologies Holding NV		United States		78,547		2,740,505
	Energy Equipment & Services 1.2%
	Baker Hughes Inc.		United States		1,088,065		49,104,373
	Food & Staples Retailing 3.9%
	CVS Health Corp.		United States		431,273		41,290,077
	The Kroger Co.		United States		1,298,210		47,761,146
a	Rite Aid Corp.		United States		2,439,970		18,275,375
	Walgreens Boots Alliance Inc.		United States		654,058		54,463,410
							161,790,008
	Health Care Equipment & Supplies 6.1%
	Medtronic PLC		United States		1,650,202		143,188,028
	St. Jude Medical Inc.		United States		647,790		50,527,620
	Stryker Corp.		United States		507,821		60,852,190
							254,567,838
	Health Care Providers & Services 0.4%
	Cigna Corp.		United States		142,154		18,194,290
	Household Products 0.2%
	Energizer Holdings Inc.		United States		196,162		10,100,381
	Independent Power & Renewable Electricity Producers 0.4%
	NRG Energy Inc.		United States		1,162,434		17,424,886
	Insurance 10.2%
a	Alleghany Corp.		United States		108,258		59,496,432
	The Allstate Corp.		United States		613,700		42,928,315
	American International Group Inc.		United States		1,447,756		76,571,815
	Chubb Ltd.		United States		492,785		64,411,927
	MetLife Inc.		United States		1,019,123		40,591,669
	White Mountains Insurance Group Ltd.		United States		100,879		84,940,118
	XL Group PLC		Ireland		1,746,940		58,190,571
							427,130,847
	Internet Software & Services 0.4%
a	LinkedIn Corp., A		United States		86,421		16,355,174
	IT Services 0.8%
	Xerox Corp.		United States		3,596,839		34,134,002
	Machinery 1.8%
	Caterpillar Inc.		United States		622,346		47,180,050
	CNH Industrial NV		United Kingdom		888,427		6,389,990
	CNH Industrial NV, special voting		United Kingdom		1,844,814		13,268,780
	Federal Signal Corp.		United States		757,221		9,753,007
							76,591,827

MS-12 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Mutual Shares VIP Fund (continued)

		Country		Shares/Units		Value
	Common Stocks and Other Equity Interests (continued)
	Marine 0.8%
	A.P. Moeller-Maersk AS, B		Denmark		25,629	$	33,295,592
	Media 6.4%
	CBS Corp., B		United States		971,977		52,914,428
a	Charter Communications Inc., A		United States		244,513		55,905,452
a	DISH Network Corp., A		United States		559,965		29,342,166
	Relx PLC		United Kingdom		2,868,050		52,621,789
	Time Warner Inc.		United States		396,698		29,173,171
	Twenty-First Century Fox Inc., B		United States		1,768,325		48,186,856
							268,143,862
	Metals & Mining 1.0%
	Freeport-McMoRan Inc., B		United States		1,660,406		18,496,923
	ThyssenKrupp AG		Germany		1,147,037		22,929,498
							41,426,421
	Multiline Retail 0.5%
	Macy’s Inc.		United States		677,570		22,773,128
	Oil, Gas & Consumable Fuels 6.6%
	Anadarko Petroleum Corp.		United States		175,487		9,344,683
	Apache Corp.		United States		355,280		19,778,437
	BP PLC		United Kingdom		4,322,322		25,252,268
	CONSOL Energy Inc.		United States		1,236,955		19,902,606
	Kinder Morgan Inc.		United States		2,649,790		49,604,069
	Marathon Oil Corp.		United States		3,204,744		48,103,207
	Royal Dutch Shell PLC, A (EUR Traded)		United Kingdom		1,916,196		52,470,172
	Royal Dutch Shell PLC, A (GBP Traded)		United Kingdom		1,048,110		28,614,834
a,b,c	Warrior Met Coal LLC, A		United States		12,324		1,242,461
a,b,c	Warrior Met Coal LLC, B		United States		28,821		2,905,629
	The Williams Cos. Inc.		United States		845,109		18,279,708
							275,498,074
	Personal Products 0.3%
a	Edgewell Personal Care Co.		United States		171,722		14,495,054
	Pharmaceuticals 8.1%
	Eli Lilly & Co.		United States		1,132,890		89,215,088
	Merck & Co. Inc.		United States		2,381,018		137,170,447
	Novartis AG, ADR		Switzerland		868,321		71,645,166
	Teva Pharmaceutical Industries Ltd., ADR		Israel		844,197		42,404,015
							340,434,716
	Real Estate Investment Trusts (REITs) 0.4%
	Alexander’s Inc.		United States		40,126		16,420,763
	Real Estate Management & Development 0.0%†
a	Forestar Group Inc.		United States		161,671		1,922,268
	Software 6.4%
	CA Inc.		United States		1,584,119		52,006,627
	Microsoft Corp.		United States		2,773,357		141,912,677
	Symantec Corp.		United States		3,540,461		72,721,069
							266,640,373

Semiannual Report MS-13

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Mutual Shares VIP Fund (continued)

		Country		Shares/Units			Value
	Common Stocks and Other Equity Interests (continued)
	Specialty Retail 0.3%
a	Office Depot Inc.		United States		3,432,180		$	11,360,516
	Technology Hardware, Storage & Peripherals 3.4%
	EMC Corp.		United States		1,779,400			48,346,298
	Hewlett Packard Enterprise Co.		United States		1,418,347			25,913,199
	HP Inc.		United States		1,418,347			17,800,255
	Samsung Electronics Co. Ltd.		South Korea		41,741			51,599,602
								143,659,354
	Tobacco 6.3%
	Altria Group Inc.		United States		822,008			56,685,672
	British American Tobacco PLC		United Kingdom		1,256,027			81,109,906
	Imperial Brands PLC		United Kingdom		1,103,817			59,660,613
	Philip Morris International Inc.		United States		187,960			19,119,291
	Reynolds American Inc.		United States		889,694			47,981,197
								264,556,679
	Wireless Telecommunication Services 1.2%
	Vodafone Group PLC		United Kingdom		17,026,844			51,684,731
	Total Common Stocks and Other Equity Interests (Cost $2,943,882,019)							3,636,713,364
				Principal Amount*
	Corporate Bonds, Notes and Senior Floating Rate Interests 4.5%
	Avaya Inc.,
	fsenior note, 144A, 10.50%, 3/01/21		United States		22,449,000			5,051,025
	fsenior secured note, 144A, 7.00%, 4/01/19		United States		12,923,000			9,272,253
	g,hTerm B-3 Loan, 5.134%, 10/26/17		United States		12,791,927			9,932,931
	g,hTerm B-6 Loan, 6.50%, 3/30/18		United States		6,741,721			4,986,770
	g,hTerm B-7 Loan, 6.25%, 5/29/20		United States		6,441,346			4,578,721
	g,hBelk Inc., Closing Date Term Loan, 5.75%, 12/12/22		United States		11,827,358			9,461,886
	iHeartCommunications Inc.,
	senior secured note, first lien, 9.00%, 12/15/19		United States		26,449,000			20,200,424
	g,hTranche D Term Loan, 7.21%, 1/30/19		United States		34,746,619			25,538,765
	g,hTranche E Term Loan, 7.96%, 7/30/19		United States		11,168,253			8,215,646
	g,hToys R Us-Delaware Inc.,
	FILO Loans, 8.25%, 10/24/19		United States		2,560,000			2,486,784
	Term B-4 Loan, 9.75%, 4/24/20		United States		21,350,214			18,539,095
	f Valeant Pharmaceuticals International,
	senior bond, 144A, 6.75%, 8/15/21		United States		2,964,000			2,541,630
	senior bond, 144A, 7.25%, 7/15/22		United States		1,460,000			1,259,542
	senior note, 144A, 6.375%, 10/15/20		United States		18,159,000			15,707,535
	g,h,iVeritas Software Corp.,
	Term B1, 6.625%, 6/15/23		United States		130,673	EUR		123,767
	Term Loan B1, 6.625%, 1/27/23		United States		12,657,595			11,075,396
	Term Loan B2, 8.625%, 1/27/23		United States		12,220,990			10,494,775
	f Veritas U.S. Inc./Veritas Bermuda Ltd., senior note, 144A, 10.50%, 2/01/24		United States		15,122,000			12,929,310
	f Western Digital Corp., senior note, 144A, 10.50%, 4/01/24		United States		14,089,000			15,110,453
	Total Corporate Bonds, Notes and Senior Floating Rate Interests (Cost $225,180,826)							187,506,708

MS-14 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Mutual Shares VIP Fund (continued)

		Country		Principal Amount*		Value
	Corporate Bonds, Notes and Senior Floating Rate Interests in Reorganization 1.7%
b,j	Broadband Ventures III LLC, secured promissory note, 5.00%, 2/01/12		United States		1,754	$	—
g,h,j	Caesars Entertainment Operating Co. Inc.,
	Term B-5-B Loans, 1.50%, 3/01/17		United States		3,251,752		3,208,396
	Term B-6-B Loans, 1.50%, 3/01/17		United States		15,503,483		15,542,242
	Term B-7 Loans, 1.50%, 3/01/17		United States		9,850,500		9,957,210
j	Samson Investment Co., senior note, 9.75%, 2/15/20		United States		16,690,000		375,525
g,h,j	Texas Competitive Electric Holdings Co. LLC, Term Loans, 3.50%, 10/10/17		United States		90,618,405		30,394,954
f,j	Texas Competitive Electric Holdings Co. LLC/Texas Competitive Electric Holdings Finance Inc., senior secured note, first lien, 144A, 11.50%, 10/01/20		United States		39,308,000		13,462,990
f,j,k	Walter Energy Inc., second lien, 144A, PIK, 11.50%, 4/01/20		United States		5,419,860		1,897
	Total Corporate Bonds, Notes and Senior Floating Rate Interests in Reorganization (Cost $151,787,519)						72,943,214
				Shares
	Companies in Liquidation 0.1%
a	Adelphia Recovery Trust		United States		29,283,354		61,495
a,d	Adelphia Recovery Trust, Arahova Contingent Value Vehicle, Contingent Distribution		United States		1,955,453		19,555
a,b,c,l	CB FIM Coinvestors LLC		United States		6,400,507		—
a,d,e	Century Communications Corp., Contingent Distribution		United States		5,487,000		—
a,b	FIM Coinvestor Holdings I, LLC		United States		8,006,950		—
a,m	Lehman Brothers Holdings Inc., Bankruptcy Claim		United States		144,058,799		4,501,837
a,d,e	Tribune Media Litigation Trust, Contingent Distribution		United States		394,052		—
a,d,e	Tropicana Litigation Trust, Contingent Distribution		United States		18,305,000		—
	Total Companies in Liquidation (Cost $11,547,282)						4,582,887
				Principal Amount*
	Municipal Bonds (Cost $17,936,522) 0.3%
	Puerto Rico Commonwealth GO, Refunding, Series A, 8.00%, 7/01/35		United States		20,409,000		13,648,519
	Total Investments before Short Term Investments (Cost $3,350,334,168)						3,915,394,692
	Short Term Investments 6.7%
	U.S. Government and Agency Securities 6.7%
n	FHLB, 7/01/16		United States		20,000,000		20,000,000
n,o	U.S. Treasury Bill, 7/07/16 - 12/08/16		United States		259,200,000		259,061,072
	Total U.S. Government and Agency Securities (Cost $278,985,270)						279,061,072
	Total Investments (Cost $3,629,319,438) 100.0%						4,194,455,764

Semiannual Report MS-15

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Mutual Shares VIP Fund (continued)

		Country		Principal Amount*		Value
	Securities Sold Short (0.5)%					$	(22,174,574	)
	Other Assets, less Liabilities 0.5%						22,974,164
	Net Assets 100.0%					$	4,195,255,354
				Shares
p	Securities Sold Short (Proceeds $21,743,820) (0.5)%
	Common Stocks (0.5)%
	Health Care Equipment & Supplies (0.5)%
	Abbott Laboratories		United States		564,095	$	(22,174,574	)

^†Rounds to less than 0.1% of net assets.

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

^aNon-income producing.

^bSee Note 8 regarding restricted securities.

^cAt June 30, 2016, pursuant to the Fund’s policies and the requirements of applicable securities law, the Fund is restricted from trading these securities at period end.

^dContingent distributions represent the right to receive additional distributions, if any, during the reorganization of the underlying company. Shares represent total underlying principal of debt securities.

^eSecurity has been deemed illiquid because it may not be able to be sold within seven days. At June 30, 2016, the aggregate value of these securities was $-.

^fSecurity 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, 2016, the aggregate value of these securities was $75,336,635, representing 1.8% of net assets.

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

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

ⁱSecurity purchased on a when-issued or delayed delivery basis. See Note 1(c).

^jSee Note 7 regarding credit risk and defaulted securities.

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

^lSee Note 10 regarding holdings of 5% voting securities.

^mBankruptcy claims represent the right to receive distributions, if any, during the liquidation of the underlying pool of assets. Shares represent amount of allowed unsecured claims.

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

^oA portion or all of the security has been segregated as collateral for securities sold short and open forward contracts. At June 30, 2016, the aggregate value of these securities and/or cash pledged amounted to $33,235,061, representing 0.8% of net assets.

^pSee Note 1(f) regarding securities sold short.

MS-16 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Mutual Shares VIP Fund (continued)

At June 30, 2016, the Fund had the following futures contracts outstanding. See Note 1(d).

Futures Contracts
Description	Type		Number of Contracts		Notional Value		Expiration Date		Unrealized Appreciation		Unrealized Depreciation
Currency Contracts
EUR/USD		Short		497	$	69,005,344		9/19/16	$	1,926,039	$	—
GBP/USD		Short		1,349		111,697,200		9/19/16		10,629,372		—
Total Futures Contracts									$	12,555,411	$	—
Net unrealized appreciation (depreciation)									$	12,555,411

At June 30, 2016, the Fund had the following forward exchange contracts outstanding. See Note 1(d).

Forward Exchange Contracts
Currency	Counterpartya		Type		Quantity		Contract Amount		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
OTC Forward Exchange Contracts
South Korean Won		BOFA		Sell		12,942,780,859	$	11,220,901		7/12/16	$	33,133	$	(38,398	)
South Korean Won		FBCO		Sell		9,054,928,438		7,891,005		7/12/16		37,042		—
South Korean Won		HSBC		Sell		36,293,597,203		31,573,074		7/12/16		156,317		(63,180	)
British Pound		BOFA		Buy		4,483,316		6,353,843		8/19/16		—		(373,001	)
British Pound		BOFA		Sell		1,356,985		1,817,068		8/19/16		8,622		(1,802	)
British Pound		BONY		Sell		1,897,833		2,550,433		8/19/16		18,683		—
British Pound		FBCO		Sell		347,504		469,600		8/19/16		6,022		—
British Pound		HSBC		Sell		4,479,387		5,994,889		8/19/16		22,575		(3,286	)
British Pound		SSBT		Sell		102,928,697		149,011,570		8/19/16		11,750,243		(47,793	)
Euro		BOFA		Buy		2,951,888		3,282,507		8/19/16		8,370		(8,360	)
Euro		BOFA		Sell		1,408,000		1,569,212		8/19/16		3,507		—
Euro		BONY		Buy		1,516,875		1,691,941		8/19/16		5,711		(10,878	)
Euro		BONY		Sell		491,475		546,486		8/19/16		—		(37	)
Euro		FBCO		Buy		1,860,238		2,074,960		8/19/16		7,347		(13,712	)
Euro		HSBC		Buy		1,326,645		1,474,820		8/19/16		7,147		(6,729	)
Euro		HSBC		Sell		1,084,139		1,205,963		8/19/16		394		—
Euro		SSBT		Buy		1,840,384		2,051,318		8/19/16		8,226		(13,027	)
Euro		SSBT		Sell		74,262,081		84,862,540		8/19/16		2,282,682		—
Total Forward Exchange Contracts											$	14,356,021	$	(580,203	)
Net unrealized appreciation (depreciation)											$	13,775,818

^aMay be comprised of multiple contracts with the same counterparty, currency and settlement date.

See Abbreviations on page MS-32.

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report MS-17

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Statements

Statement of Assets and Liabilities

June 30, 2016 (unaudited)

	Franklin Mutual Shares VIP Fund
Assets:
Investments in securities:
Cost	$	3,629,319,438
Value	$	4,194,455,764
Cash		377,405
Restricted cash (Note 1e)		14,230,000
Foreign currency, at value (cost $1,829,635)		1,818,195
Receivables:
Investment securities sold		13,211,093
Capital shares sold		152,485
Dividends and interest		15,769,792
European Union tax reclaims		1,176,537
Due from brokers		29,107,255
Variation margin		1,740,831
Unrealized appreciation on OTC forward exchange contracts		14,356,021
Other assets		1,965
Total assets		4,286,397,343
Liabilities:
Payables:
Investment securities purchased		47,351,119
Capital shares redeemed		2,367,018
Management fees		2,320,697
Distribution fees		1,491,134
Securities sold short, at value (proceeds $21,743,820)		22,174,574
Due to brokers		14,230,000
Unrealized depreciation on OTC forward exchange contracts		580,203
Accrued expenses and other liabilities		627,244
Total liabilities		91,141,989
Net assets, at value	$	4,195,255,354
Net assets consist of:
Paid-in capital	$	3,073,799,095
Undistributed net investment income		137,448,740
Net unrealized appreciation (depreciation)		590,764,634
Accumulated net realized gain (loss)		393,242,885
Net assets, at value	$	4,195,255,354

MS-18 Semiannual Report   |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Statement of Assets and Liabilities (continued)

June 30, 2016 (unaudited)

	Franklin Mutual Shares VIP Fund
Class 1:
Net assets, at value	$	573,679,228
Shares outstanding		28,182,444
Net asset value and maximum offering price per share	$	20.36
Class 2:
Net assets, at value	$	3,497,122,865
Shares outstanding		174,515,262
Net asset value and maximum offering price per share	$	20.04
Class 4:
Net assets, at value	$	124,453,261
Shares outstanding		6,174,619
Net asset value and maximum offering price per share	$	20.16

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report MS-19

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Statement of Operations

for the six months ended June 30, 2016 (unaudited)

	Franklin Mutual Shares VIP Fund
Investment income:
Dividends	$	64,649,928
Interest		13,823,664
Income from securities loaned (net of fees and rebates)		348,125
Total investment income		78,821,717
Expenses:
Management fees (Note 3a)		13,574,515
Distribution fees: (Note 3c)
Class 2		4,065,160
Class 4		216,451
Custodian fees (Note 4)		48,568
Reports to shareholders		198,500
Professional fees		91,752
Trustees’ fees and expenses		10,526
Dividends on securities sold short		65,460
Other		45,146
Total expenses		18,316,078
Expense reductions (Note 4)		(3,132	)
Expenses waived/paid by affiliates (Note 3e)		(6,015	)
Net expenses		18,306,931
Net investment income		60,514,786
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		75,479,023
Foreign currency transactions		1,084,479
Futures contracts		2,138,093
Securities sold short		(763,869	)
Net realized gain (loss)		77,937,726
Net change in unrealized appreciation (depreciation) on:
Investments		1,901,159
Translation of other assets and liabilities denominated in foreign currencies		8,436,769
Futures contracts		9,293,172
Net change in unrealized appreciation (depreciation)		19,631,100
Net realized and unrealized gain (loss)		97,568,826
Net increase (decrease) in net assets resulting from operations	$	158,083,612

MS-20 Semiannual Report   |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Statements of Changes in Net Assets

	Franklin Mutual Shares VIP Fund
	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31, 2015
Increase (decrease) in net assets:
Operations:
Net investment income	$	60,514,786		$	84,027,000
Net realized gain (loss)		77,937,726			361,237,169
Net change in unrealized appreciation (depreciation)		19,631,100			(663,206,334	)
Net increase (decrease) in net assets resulting from operations		158,083,612			(217,942,165	)
Distributions to shareholders from:
Net investment income:
Class 1		—			(22,253,593	)
Class 2		—			(115,505,343	)
Class 4		—			(4,240,573	)
Net realized gains:
Class 1		—			(44,812,385	)
Class 2		—			(254,851,880	)
Class 4		—			(9,773,474	)
Total distributions to shareholders		—			(451,437,248	)
Capital share transactions: (Note 2)
Class 1		(86,685,734	)		85,321,567
Class 2		7,573,914			(314,542,720	)
Class 4		(11,637,728	)		(6,302,871	)
Total capital share transactions		(90,749,548	)		(235,524,024	)
Net increase (decrease) in net assets		67,334,064			(904,903,437	)
Net assets:
Beginning of period		4,127,921,290			5,032,824,727
End of period	$	4,195,255,354		$	4,127,921,290
Undistributed net investment income included in net assets:
End of period	$	137,448,740		$	77,363,379

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report MS-21

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Notes to Financial Statements (unaudited)

Franklin Mutual Shares VIP Fund

1. Organization and Significant Accounting Policies

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of nineteen separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Franklin Mutual Shares VIP 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 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. The Fund calculates the net asset value (NAV) per share as of 4 p.m. Eastern time each day the New York Stock Exchange (NYSE) is open for trading. Under compliance policies and procedures approved by the Trust’s Board of Trustees (the Board), the Fund’s administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The VC provides administration and oversight of the Fund’s valuation policies and procedures, which are approved annually by the Board. Among other things, these procedures allow the Fund to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

Equity securities 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 as of 4 p.m. Eastern time whichever is earlier. The value is then converted into its U.S. dollar equivalent at the foreign exchange

rate in effect at 4 p.m. Eastern time on the day that the value of the security is determined. Over-the-counter (OTC) securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.

Debt securities generally trade in the OTC market rather than on a securities exchange. The Fund’s pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value. Securities denominated in a foreign currency are converted into their U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the date that the values of the foreign debt securities are determined.

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

The Fund has procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the VC convenes on a regular basis to review such financial instruments and considers a number of factors, including significant unobservable valuation inputs, when arriving at fair value. The VC primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated

MS-22 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Mutual Shares VIP Fund (continued)

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

Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 4 p.m. Eastern time. In addition, trading in certain foreign markets may not take place on every NYSE business day. 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 VC monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depositary Receipts, futures contracts and exchange traded funds). These price movements are measured against 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.

When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the NYSE is closed, which could result in differences between the value of the Fund’s portfolio securities on the last business day and the last calendar day of the reporting period. Any significant security valuation changes due to an open foreign market are adjusted and reflected by the Fund for financial reporting purposes.

b. Foreign Currency Translation

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

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

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

The Fund purchases securities on a when-issued or 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

Semiannual Report MS-23

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Mutual Shares VIP Fund (continued)

1. Organization and Significant Accounting Policies (continued)

d. Derivative Financial Instruments (continued)

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 in 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.

Derivative counterparty credit risk is managed through a formal evaluation of the creditworthiness of all potential counterparties. The Fund attempts to reduce its exposure to counterparty credit risk on OTC derivatives, whenever possible, by entering into International Swaps and Derivatives Association (ISDA) master agreements with certain counterparties. These agreements contain various provisions, including but not limited to collateral requirements, events of default, or early termination. Termination events applicable to the counterparty include certain deteriorations in the credit quality of the counterparty. Termination events applicable to the Fund include failure of the Fund to maintain certain net asset levels and/or limit the decline in net assets over various periods of time. In the event of default or early termination, the ISDA master agreement gives the non-defaulting party the right to net and close-out all transactions traded, whether or not arising under the ISDA agreement, to one net amount payable by one counterparty to the other. However, absent an event of default or early termination, OTC derivative assets and liabilities are presented gross and not offset in the Statement of Assets and Liabilities. Early termination by the counterparty may result in an immediate payment by the Fund of any net liability owed to that counterparty under the ISDA agreement. At June 30, 2016, the Fund had OTC derivatives in a net liability position of $367,929 and the aggregate value of collateral pledged for such contracts was $189,850.

Collateral requirements differ by type of derivative. Collateral or initial margin requirements are set by the broker or exchange clearing house for exchange traded and centrally cleared derivatives. Initial margin deposited is held at the exchange and can be in the form of cash and/or securities. For OTC derivatives traded under an ISDA master agreement, posting of collateral is required by either the Fund or the applicable

counterparty if the total net exposure of all OTC derivatives with the applicable counterparty exceeds the minimum transfer amount, which typically ranges from $100,000 to $250,000, and can vary depending on the counterparty and the type of the agreement. Generally, collateral is determined at the close of Fund business each day and any additional collateral required due to changes in derivative values may be delivered by the Fund or the counterparty within a few business days. Collateral pledged and/or received by the Fund for OTC derivatives, if any, is held in segregated accounts with the Fund’s custodian/counterparty broker and can be in the form of cash and/or securities. Unrestricted cash may be invested according to the Fund’s investment objectives. To the extent that the amounts due to the Fund from its counterparties are not subject to collateralization or are not fully collateralized, the Fund bears the risk of loss from counterparty non-performance.

At June 30, 2016, the Fund received $315,449 in United Kingdom Treasury Bonds as collateral for derivatives.

The Fund entered into exchange traded futures contracts primarily to manage exposure to certain foreign currencies. A futures contract is an agreement between the Fund and a counterparty to buy or sell an asset for a specified price on a future date. Required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable in the Statement of Assets and Liabilities.

The Fund entered into OTC forward exchange contracts primarily to manage exposure to certain foreign currencies. A forward exchange contract is an agreement between the Fund and a counterparty to buy or sell a foreign currency at a specific exchange rate on a future date.

See Note 9 regarding other derivative information.

e. Restricted Cash

At June 30, 2016, the Fund held restricted cash in connection with investments in certain derivative securities. Restricted cash is held in a segregated account with the Fund’s custodian and is reflected in the Statement of Assets and Liabilities.

f. Securities Sold Short

The Fund is engaged in selling securities short, which obligates the Fund to replace a borrowed security with the same security at current fair value. The Fund incurs a loss if the price of the security increases between the date of the short sale and the date

MS-24 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Mutual Shares VIP Fund (continued)

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 to the extent necessary to meet margin requirements until the short position is closed out. A deposit must also be maintained with the Fund’s custodian/counterparty 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 and/or interest due on securities sold short. Such dividends and/or interest and any security borrowing fees are recorded as an expense to the Fund.

g. Securities Lending

The Fund participates in an agency based securities lending program to earn additional income. The Fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the fair value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the fair 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 deposited into a joint cash account with other funds and is used to invest in a money market fund managed by Franklin Advisers, Inc., an affiliate of the Fund, and/or a joint repurchase agreement. The Fund may receive income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. Income from securities loaned, net of fees paid to the securities lending agent and/or third-party vendor, is reported separately in the Statement of Operations. 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. If the borrower defaults on its obligation to return the securities loaned, the Fund has the right to repurchase the securities in the open market using the collateral received. The securities lending agent has agreed to indemnify the Fund in the event of default by a third party borrower. At June 30, 2016, the Fund had no securities on loan.

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

i. Income and Deferred Taxes

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

The Fund may be subject to foreign taxation related to income received, capital gains on the sale of securities and certain foreign currency transactions in the foreign jurisdictions in which it invests. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests. When a capital gain tax is determined to apply, the Fund records an estimated deferred tax liability in an amount that would be payable if the securities were disposed of on the valuation date. As a result of several court cases, in certain countries across the European Union, the Fund filed additional tax reclaims for previously withheld taxes on dividends earned in those countries (EU reclaims). These additional filings are subject to various administrative proceedings by the local jurisdictions’ tax authorities within the European Union, as well as a number of related judicial proceedings. Income recognized, if any, for EU reclaims is reflected as other income in the Statement of Operations and any related receivable, if any, is reflected as European Union tax reclaims in the Statement of Assets and Liabilities. When uncertainty exists as to the ultimate resolution of these proceedings, the likelihood of receipt of these EU reclaims, and the potential timing of payment, no amounts are reflected in the financial statements.

The Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain

Semiannual Report MS-25

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Mutual Shares VIP Fund (continued)

1. Organization and Significant Accounting Policies (continued)

i. Income and Deferred Taxes (continued)

tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of June 30, 2016, the Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on each tax jurisdiction’s statute of limitation.

j. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Amortization of premium and accretion of discount on debt securities are included in interest income. Dividend income and dividends declared on securities sold short are recorded on the ex-dividend date except for certain dividends from foreign securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Fund. 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 U.S. GAAP. 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 U.S. GAAP 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.

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.

MS-26 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Mutual Shares VIP Fund (continued)

2. Shares of Beneficial Interest

At June 30, 2016, 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, 2016						Year Ended December 31, 2015
	Shares			Amount			Shares			Amount
Class 1 Shares:
Shares sold		1,416,640		$	27,184,561			5,200,808		$	114,565,674
Shares issued in reinvestment of distributions		—			—			3,480,331			67,065,978
Shares redeemed		(6,268,532	)		(113,870,295	)		(4,296,684	)		(96,310,085	)
Net increase (decrease)		(4,851,892	)	$	(86,685,734	)		4,384,455		$	85,321,567
Class 2 Shares:
Shares sold		16,366,410		$	322,602,853			8,995,477		$	199,602,688
Shares issued in reinvestment of distributions		—			—			19,482,232			370,357,223
Shares redeemed		(16,526,753	)		(315,028,939	)		(40,426,538	)		(884,502,631	)
Net increase (decrease)		(160,343	)	$	7,573,914			(11,948,829	)	$	(314,542,720	)
Class 4 Shares:
Shares sold		121,047		$	2,291,311			465,090		$	9,850,242
Shares issued in reinvestment of distributions		—			—			732,186			14,014,047
Shares redeemed		(725,906	)		(13,929,039	)		(1,372,567	)		(30,167,160	)
Net increase (decrease)		(604,859	)	$	(11,637,728	)		(175,291	)	$	(6,302,871	)

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
0.750%	Up to and including $200 million
0.735%	Over $200 million, up to and including $700 million
0.700%	Over $700 million, up to and including $1.2 billion
0.675%	Over $1.2 billion, up to and including $5 billion
0.645%	Over $5 billion, up to and including $10 billion
0.625%	Over $10 billion, up to and including $15 billion
0.605%	Over $15 billion, up to and including $20 billion
0.585%	In excess of $20 billion

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Mutual Shares VIP Fund (continued)

3. Transactions With Affiliates (continued)

a. Management Fees (continued)

For the period ended June 30, 2016, the annualized effective investment management fee rate was 0.689% of the Fund’s average daily net assets.

b. Administrative Fees

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

c. Distribution Fees

The Board has adopted distribution plans for Class 2 and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to 0.35% per year of its average daily net assets of each class. The Board has agreed to limit the current rate to 0.25% per year for Class 2. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.

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. Investments in Affiliated Management Investment Companies

The Fund invests in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Fund are waived on assets invested in the affiliated management investment companies, as noted in the Statement of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate.

	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 Gain (Loss)		% of Affiliated Fund Shares Outstanding Held at End of Period
Non-Controlled Affiliates
Institutional Fiduciary Trust Money Market Portfolio		—		50,978,000		(50,978,000	)		—	$	—	$	—	$	—		—%

f. Other Affiliated Transactions

At June 30, 2016, Franklin Templeton Variable Insurance Products Trust – Franklin Founding Funds Allocation VIP Fund owned 7.8% 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, 2016, 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)

Franklin Mutual Shares VIP Fund (continued)

5. Income Taxes

At June 30, 2016, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	3,657,681,618
Unrealized appreciation	$	1,018,936,970
Unrealized depreciation		(482,162,824	)
Net unrealized appreciation (depreciation)	$	536,774,146

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of foreign currency transactions.

6. Investment Transactions

Purchases and sales of investments (excluding short term securities and securities sold short) for the period ended June 30, 2016, aggregated $547,316,857 and $526,557,935, 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, 2016, the aggregate long value of distressed company securities for which interest recognition has been discontinued was $72,943,214, representing 1.7% of the Fund’s net assets. For information as to specific securities, see the accompanying Statement of Investments.

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.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Mutual Shares VIP Fund (continued)

8. Restricted Securities (continued)

At June 30, 2016, 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/ Units	Issuer	Acquisition Dates		Cost		Value
1,754	Broadband Ventures III LLC, secured promissory note, 5.00%, 2/01/12		7/01/10 - 11/30/12	$	1,754	$	—
6,400,507	CB FIM Coinvestors LLC		1/15/09 - 6/02/09		—		—
8,006,950	FIM Coinvestor Holdings I, LLC		11/20/06 - 6/02/09		—		—
1,730,515	International Automotive Components Group Brazil LLC		4/13/06 - 12/26/08		1,149,241		28,490
15,382,424	International Automotive Components Group North America LLC		1/12/06 - 3/18/13		12,591,586		6,786,202
12,324	Warrior Met Coal LLC, A		9/19/14 - 12/04/14		16,187,328		1,242,461
28,821	Warrior Met Coal LLC, B		3/31/16 - 6/23/16		2,305,674		2,905,629
	Total Restricted Securities (Value is 0.3% of Net Assets)			$	32,235,583	$	10,962,782

9. Other Derivative Information

At June 30, 2016, the Fund’s investments in derivative contracts are reflected in 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			Statement of Assets and Liabilities Location	Fair Value
Foreign exchange contracts	Variation margin	$	12,555,411	a	Variation margin	$	—
	Unrealized appreciation on OTC forward exchange contracts		14,356,021		Unrealized depreciation on OTC forward exchange contracts	$	580,203
Totals		$	26,911,432			$	580,203

^aThis amount reflects the cumulative appreciation (depreciation) of futures contracts as reported in the Statement of Investments. Only the variation margin receivable/payable at period end is separately reported within the Statement of Assets and Liabilities. Prior variation margin movements were recorded to cash upon receipt or payment.

For the period ended June 30, 2016, the effect of derivative contracts in the Fund’s Statement of Operations was as follows:

Derivative Contracts Not Accounted for as Hedging Instruments	Statement of Operations Locations	Net Realized Gain (Loss) for the Period			Statement of Operations Locations	Net Change in Unrealized Appreciation (Depreciation) for the Period
	Net realized gain (loss) from:				Net change in unrealized appreciation (depreciation) on:
Foreign exchange contracts	Foreign currency transactions		1,396,057	a	Translation of other assets and liabilities denominated in foreign currencies		8,627,990	a
	Futures contracts		2,138,093		Futures contracts		9,293,172
Totals		$	3,534,150			$	17,921,162

^aForward exchange contracts are included in net realized gain (loss) from foreign currency transactions and net change in unrealized appreciation (depreciation) on translation of other assets and liabilities denominated in foreign currencies in the Statement of Operations.

MS-30 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Mutual Shares VIP Fund (continued)

For the period ended June, 30 2016, the average month end fair value of derivatives represented 0.4% of average month end net assets. The average month end number of open derivative contracts for the period was 39.

See Note 1(d) regarding derivative financial instruments.

10. 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, 2016, 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 Gain (Loss)
Non-Controlled Affiliates
CB FIM Coinvestors LLC (Value is 0.0% of Net Assets)		6,400,507		—		—		6,400,507	$	—	$	—	$	—

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 $2 billion (Global Credit Facility) which matures on February 10, 2017. 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 0.07% based upon the unused portion of the Global Credit Facility. Effective February 12, 2016, the annual commitment fee is 0.15%. These fees are reflected in other expenses in the Statement of Operations. During the period ended June 30, 2016, 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 financial instruments and are summarized in the following fair value hierarchy:

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

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

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

The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.

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.

Semiannual Report MS-31

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Mutual Shares VIP Fund (continued)

12. Fair Value Measurements (continued)

A summary of inputs used as of June 30, 2016, in valuing the Fund’s assets and liabilities carried at fair value, is as follows:

	Level 1		Level 2		Level 3			Total
Assets:
Investments in Securities:
Equity Investments:a
Auto Components	$	—	$	—	$	6,814,692		$	6,814,692
Machinery		63,323,047		13,268,780		—			76,591,827
Oil, Gas & Consumable Fuels		271,349,984		—		4,148,090			275,498,074
All other Equity Investmentsb		3,277,808,771		—		—	c		3,277,808,771
Corporate Bonds, Notes and Senior Floating Rate Interests		—		187,506,708		—			187,506,708
Corporate Bonds, Notes and Senior Floating Rate Interests in Reorganization		—		72,943,214		—	c		72,943,214
Companies in Liquidation		61,495		4,521,392		—	c		4,582,887
Municipal Bonds		—		13,648,519		—			13,648,519
Short Term Investments		259,061,072		20,000,000		—			279,061,072
Total Investments in Securities	$	3,871,604,369	$	311,888,613	$	10,962,782		$	4,194,455,764
Other Financial Instruments:
Futures Contracts	$	12,555,411	$	—	$	—		$	12,555,411
Forward Exchange Contracts		—		14,356,021		—			14,356,021
Total Other Financial Instruments	$	12,555,411	$	14,356,021	$	—		$	26,911,432
Liabilities:
Other Financial Instruments:
Securities Sold Short	$	22,174,574	$	—	$	—		$	22,174,574
Forward Exchange Contracts		—		580,203		—			580,203
Total Other Financial Instruments	$	22,174,574	$	580,203	$	—		$	22,754,777

^aIncludes common stocks as well as other equity investments.

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

^cIncludes securities determined to have no value at June 30, 2016.

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

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.	CAD	Canadian Dollar	ADR	American Depositary Receipt
BONY	Bank of New York Mellon	EUR	Euro	FHLB	Federal Home Loan Bank
FBCO	Credit Suisse Group AG	GBP	British Pound	GO	General Obligation
HSBC	HSBC Bank USA, N.A.			PIK	Payment-In-Kind
SSBT	State Street Bank and Trust Co., N.A.
BOFA	Bank of America Corp.

MS-32 Semiannual Report

Franklin Rising Dividends VIP Fund

We are pleased to bring you Franklin Rising Dividends VIP Fund’s semiannual report for the period ended June 30, 2016.

Class 1 Performance Summary as of June 30, 2016

The Fund’s Class 1 shares delivered a +10.08% total return* for the six-month period ended June 30, 2016.

*The Fund has a fee waiver associated with any investment in a Franklin Templeton money fund and/or Franklin Templeton fund, as applicable, contractually guaranteed through at least the Fund’s current fiscal year-end. Fund investment results reflect the fee waiver, to the extent applicable; without this reduction, the results would have been lower.

Performance reflects the Fund’s Class 1 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.

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.

Semiannual Report FRD-1

FRANKLIN RISING DIVIDENDS VIP FUND

Fund Goal and Main Investments

The Fund seeks long-term capital appreciation, with preservation of capital as an important consideration. Under normal market conditions, the Fund invests at least 80% of its net assets in equity securities of financially sound companies that have paid consistently rising dividends.

Fund Risks

All investments involve risks, including possible loss of principal. Value securities may not increase in price as anticipated or may decline further in value. While smaller and midsized companies may offer substantial opportunities for capital growth, they also involve heightened risks and should be considered speculative. Historically, smaller- and midsized-company securities have been more volatile in price than larger company securities, especially over the short term. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. In comparison, the Standard & Poor’s^® 500 Index (S&P 500^®) rose +3.84% 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

For the six-month period ended June 30, 2016, the U.S. economy grew moderately, as measured by gross domestic product in 2016’s first and second quarters, driven by consumer spending and exports. A decline in private inventory investment and nonresidential fixed investment contributed to the moderation. Although the unemployment rate rose from 4.7% in May to 4.9% in June, the increase was due to additional people entering the labor force, and for the entire period under review, unemployment declined slightly.² Home sales and prices rose amid relatively low mortgage rates. Monthly retail sales grew during most of the review period, and rose to the highest level in April in more than a year, due to a broad-based increase across most retail categories. Inflation, as measured by the

Consumer Price Index, remained subdued overall even though it spiked to the highest level in three years in April mainly due to a rebound in energy prices.

After raising its target range for the federal funds rate to 0.25%–0.50% at its December meeting, the Federal Reserve (Fed) maintained the rate through period-end. Although the Fed indicated a potential interest rate hike in June, subsequent reports showed job additions slowed substantially in May. Consequently, at its June meeting, the Fed kept the federal funds rate unchanged, and indicated that in determining the timing and size of future adjustments to the target range, it will assess realized and expected economic conditions relative to its objectives of maximum employment and 2.00% inflation. The Fed expects economic conditions to evolve in a manner that could warrant only gradual increases in the federal funds rate.

U.S. equity markets rose for the period under review, as investors generally remained confident due to the Fed’s continued caution surrounding further interest rate increases, the European Central Bank expanding its quantitative easing measures and cutting its benchmark interest rate to zero, the People’s Bank of China introducing further easing measures and the Bank of Japan adopting a negative interest rate policy. The rally in crude oil prices near period-end also boosted investor confidence. However, the U.K.’s historic referendum to leave the European Union, also known as the “Brexit”, global economic growth concerns and China’s slowing economy weighed on market sentiment. Despite periods of volatility, the broad U.S. stock market ended the six-month period higher, as measured by the S&P 500.

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.

1. Source: 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.

FRD-2 Semiannual Report

FRANKLIN RISING DIVIDENDS VIP FUND

Manager’s Discussion

During the six-month period ended June 30, 2016, some holdings that contributed to absolute performance included Albemarle, Stryker and West Pharmaceutical Services. Shares of Albemarle, a specialty and fine chemicals producer, rebounded strongly over the period, as general economic concerns waned and the company continued to report solid results over the period. Although the company’s 2016 outlook was more cautious than expected, the stock was supported by ongoing strength in a key business and expectations for a significant improvement in free cash flow generation. In addition, Albemarle reported that it had signed a memorandum of understanding with the Chilean government to significantly increase lithium production over a longer timeline. The company has 22 consecutive years of dividend increases. Medical products manufacturer Stryker experienced a share price increase due to strong quarterly results. Revenue growth was solid across all segments. In our analysis, future growth drivers include the rollout of Stryker-branded implants on its robotic surgery platform, greater penetration in Europe and expansion in the trauma, extremities and neurotechnology categories. The company has 23 consecutive years of dividend increases. Shares of West Pharmaceuticals, a manufacturer of packaging components for the pharmaceutical industry, increased due to solid earnings reports. Biotechnology firms have also been embracing the company’s high-value products. Additionally, the new chief executive officer reorganized marketing efforts around customer groups, rather than by product lines, which we believe is a more effective strategy. The company has 23 consecutive years of dividend increases.

Conversely, some holdings that detracted from absolute performance included Roper Technologies, Perrigo and Abbott Laboratories. Roper Technologies, a diversified industrial company, experienced an abrupt decline in share price early in the period, caused by concerns related to the company’s exposure to challenged oil and gas markets, weaker-than-expected quarterly results and broader industrial market weakness. However, management commented that these headwinds are manageable and are expected to be more than offset by strong growth in the majority of the business over the coming year. The company has 23 consecutive years of dividend increases. Shares of Perrigo, a specialty pharmaceuticals manufacturer, fell due to news of the departure of its chief executive officer and a concurrent reduction in guidance. Margins for the company’s prescriptions segment were hurt by an unusual spike in approvals for competitor drugs. We believe margins will likely recover as Perrigo’s own drugs gain approval and with new management’s focus on improving operational

Semiannual Report FRD-3

FRANKLIN RISING DIVIDENDS VIP FUND

efficiency at its recently acquired, underperforming European subsidiary. The company has 14 consecutive years of dividend increases. Abbott, a diversified healthcare products company, experienced a share price decline partially due to the announcement that it would acquire St. Jude Medical, a cardiovascular devices manufacturer. We believe investors may have regarded the deal as diluting Abbott’s growth rate and emerging markets focus. However, in our view, management’s track record suggests a strong likelihood of delivering on promised synergies. The acquisition also expanded Abbott’s product base, which we believe may position it well in an environment where its hospital clients are consolidating their purchasing power. The company has 44 consecutive years of dividend increases.

During the period, the Fund did not initiate any new positions. However, we added to several holdings including Microsoft, a software and hardware services provider (11 years of consecutive dividend increases); the aforementioned Perrigo; and General Dynamics, an aerospace and defense company (19 years). Positions we exited included Knowles, which we received as a spinoff from Dover; California Resources, which we received as a spinoff from Occidental Petroleum; and Teleflex. We also reduced several holdings including the aforementioned West Pharmaceutical, Wal-Mart and Johnson & Johnson.

Our 10 largest positions on June 30, 2016, represented 30.9% of the Fund’s total net assets. It is interesting to note how these 10 companies would respond to the Fund’s screening criteria based on a simple average of statistical measures. On average, these 10 companies have raised their dividends 30 years in a row and by 341% over the past 10 years. Their most recent year-over-year dividend increases averaged 9.4% with a yield of 2.0% on June 30, 2016, and a dividend payout ratio of 38.4%, based on estimates of calendar year 2016 operating earnings. The average price/earnings ratio was 19.7 times calendar year 2016 estimates versus 17.8 for that of the unmanaged S&P 500.

Top 10 Holdings
6/30/16
Company Sector/Industry	% of Total Net Assets
Praxair Inc. Materials		3.3%
Roper Technologies Inc. Industrial Conglomerates		3.3%
Microsoft Corp. Software & Services		3.3%
Albemarle Corp. Materials		3.3%
Dover Corp. Machinery		3.1%
Medtronic PLC Health Care Equipment & Services		3.1%
Air Products and Chemicals Inc. Materials		3.0%
Stryker Corp. Health Care Equipment & Services		2.9%
Becton, Dickinson and Co. Health Care Equipment & Services		2.9%
United Technologies Corp. Aerospace & Defense		2.7%

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

The foregoing information reflects our analysis, opinions and portfolio holdings as of June 30, 2016, 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.

FRD-4 Semiannual Report

FRANKLIN RISING DIVIDENDS VIP FUND

Class 1 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 × $7.50 = $64.50.

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

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 1	Beginning Account Value 1/1/16		Ending Account Value 6/30/16		Fund-Level Expenses Incurred During Period* 1/1/16–6/30/16
Actual	$	1,000	$	1,100.80	$	3.29
Hypothetical (5% return before expenses)	$	1,000	$	1,021.73	$	3.17

*Expenses are calculated using the most recent six-month annualized expense ratio, net of expenses waivers, for the Fund’s Class 1 shares (0.63%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 182/366 to reflect the one-half year period.

Semiannual Report FRD-5

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Highlights

Franklin Rising Dividends VIP Fund

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012			2011
Class 1
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$25.26			$29.63			$28.14			$22.03			$20.01			$19.15
Income from investment operationsa:
Net investment incomeb		0.22			0.45			0.45			0.40			0.41			0.36
Net realized and unrealized gains (losses)		2.28			(1.33	)		2.03			6.16			2.00			0.83
Total from investment operations		2.50			(0.88	)		2.48			6.56			2.41			1.19
Less distributions from:
Net investment income		(0.44	)		(0.48	)		(0.44	)		(0.45	)		(0.39	)		(0.33	)
Net realized gains		(3.18	)		(3.01	)		(0.55	)		—			—			—
Total distributions		(3.62	)		(3.49	)		(0.99	)		(0.45	)		(0.39	)		(0.33	)
Net asset value, end of period		$24.14			$25.26			$29.63			$28.14			$22.03			$20.01
Total returnc		10.08%			(3.42)%			9.01%			30.05%			12.18%			6.29%
Ratios to average net assetsd
Expenses before waiver and payments by affiliates		0.64%			0.63%			0.62%			0.61%			0.63%			0.63%
Expenses net of waiver and payments by affiliates		0.63%			0.63%	e		0.62%	e		0.61%			0.63%			0.63%
Net investment income		1.67%			1.65%			1.58%			1.59%			1.96%			1.87%
Supplemental data
Net assets, end of period (000’s)		$173,216			$143,376			$160,480			$168,380			$141,455			$140,297
Portfolio turnover rate		3.71%			4.74%			8.61%			0.07%			11.19%			12.76%

^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’s shares in relation to income earned and/or fluctuating fair 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 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 waiver and payments by affiliates rounds to less than 0.01%.

FRD-6 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL HIGHLIGHTS

Franklin Rising Dividends VIP Fund (continued)

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012			2011
Class 2
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$24.72			$29.06			$27.62			$21.64			$19.65			$18.82
Income from investment operationsa:
Net investment incomeb		0.18			0.37			0.37			0.33			0.35			0.31
Net realized and unrealized gains (losses)		2.23			(1.29	)		1.99			6.04			1.98			0.81
Total from investment operations		2.41			(0.92	)		2.36			6.37			2.33			1.12
Less distributions from:
Net investment income		(0.37	)		(0.41	)		(0.37	)		(0.39	)		(0.34	)		(0.29	)
Net realized gains		(3.18	)		(3.01	)		(0.55	)		—			—			—
Total distributions		(3.55	)		(3.42	)		(0.92	)		(0.39	)		(0.34	)		(0.29	)
Net asset value, end of period		$23.58			$24.72			$29.06			$27.62			$21.64			$19.65
Total returnc		9.93%			(3.65)%			8.72%			29.69%			11.96%			6.00%
Ratios to average net assetsd
Expenses before waiver and payments by affiliates		0.89%			0.88%			0.87%			0.86%			0.88%			0.88%
Expenses net of waiver and payments by affiliates		0.88%			0.88%	e		0.87%	e		0.86%			0.88%			0.88%
Net investment income		1.42%			1.40%			1.33%			1.34%			1.71%			1.62%
Supplemental data
Net assets, end of period (000’s)		$1,513,384			$1,310,783			$1,667,816			$1,752,012			$1,550,084			$1,523,396
Portfolio turnover rate		3.71%			4.74%			8.61%			0.07%			11.19%			12.76%

^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’s shares in relation to income earned and/or fluctuating fair 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 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 waiver and payments by affiliates rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report FRD-7

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL HIGHLIGHTS

Franklin Rising Dividends VIP Fund (continued)

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012			2011
Class 4
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$24.81			$29.19			$27.76			$21.78			$19.83			$19.04
Income from investment operationsa:
Net investment incomeb		0.16			0.35			0.35			0.32			0.35			0.31
Net realized and unrealized gains (losses)		2.25			(1.31	)		2.00			6.07			1.96			0.80
Total from investment operations		2.41			(0.96	)		2.35			6.39			2.31			1.11
Less distributions from:
Net investment income		(0.36	)		(0.41	)		(0.37	)		(0.41	)		(0.36	)		(0.32	)
Net realized gains		(3.18	)		(3.01	)		(0.55	)		—			—			—
Total distributions		(3.54	)		(3.42	)		(0.92	)		(0.41	)		(0.36	)		(0.32	)
Net asset value, end of period		$23.68			$24.81			$29.19			$27.76			$21.78			$19.83
Total returnc		9.90%			(3.75)%			8.62%			29.57%			11.78%			5.89%
Ratios to average net assetsd
Expenses before waiver and payments by affiliates		0.99%			0.98%			0.97%			0.96%			0.98%			0.98%
Expenses net of waiver and payments by affiliates		0.98%			0.98%	e		0.97%	e		0.96%			0.98%			0.98%
Net investment income		1.32%			1.30%			1.23%			1.24%			1.61%			1.52%
Supplemental data
Net assets, end of period (000’s)		$24,216			$20,453			$15,503			$12,028			$6,432			$3,020
Portfolio turnover rate		3.71%			4.74%			8.61%			0.07%			11.19%			12.76%

^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’s shares in relation to income earned and/or fluctuating fair 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 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 waiver and payments by affiliates rounds to less than 0.01%.

FRD-8 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Statement of Investments, June 30, 2016 (unaudited)

Franklin Rising Dividends VIP Fund
		Shares		Value
	Common Stocks 97.5%
	Aerospace & Defense 5.7%
	General Dynamics Corp.		157,911	$	21,987,528
	Honeywell International Inc.		251,900		29,301,008
	United Technologies Corp.		453,011		46,456,278
					97,744,814
	Automobiles & Components 2.6%
	Johnson Controls Inc.		1,015,500		44,946,030
	Commercial & Professional Services 4.0%
	ABM Industries Inc.		779,288		28,428,426
	Brady Corp., A		204,079		6,236,654
	Cintas Corp.		194,675		19,103,458
	Matthews International Corp., A		251,442		13,990,233
					67,758,771
	Consumer Durables & Apparel 2.4%
	Leggett & Platt Inc.		332,800		17,009,408
	NIKE Inc., B		445,100		24,569,520
					41,578,928
	Consumer Services 1.8%
	McDonald’s Corp.		207,045		24,915,795
	Yum! Brands Inc.		72,900		6,044,868
					30,960,663
	Diversified Financials 0.3%
	State Street Corp.		110,500		5,958,160
	Energy 7.4%
	Chevron Corp.		290,700		30,474,081
	EOG Resources Inc.		33,600		2,802,912
	Exxon Mobil Corp.		358,500		33,605,790
	Occidental Petroleum Corp.		370,790		28,016,892
	Schlumberger Ltd.		398,000		31,473,840
					126,373,515
	Food & Staples Retailing 4.4%
	CVS Health Corp.		203,000		19,435,220
	Wal-Mart Stores Inc.		381,800		27,879,036
	Walgreens Boots Alliance Inc.		326,000		27,146,020
					74,460,276
	Food, Beverage & Tobacco 6.1%
	Archer-Daniels-Midland Co.		713,000		30,580,570
	Bunge Ltd.		307,700		18,200,455
	McCormick & Co. Inc.		208,900		22,283,363
	PepsiCo Inc.		308,500		32,682,490
					103,746,878
	Health Care Equipment & Services 12.9%
	Abbott Laboratories		641,800		25,229,158
	Becton, Dickinson and Co.		295,400		50,096,886
	DENTSPLY SIRONA Inc.		4,000		248,160
	Medtronic PLC		602,000		52,235,540
	Stryker Corp.		420,200		50,352,566

Semiannual Report FRD-9

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Rising Dividends VIP Fund (continued)

	Shares		Value
Common Stocks (continued)
Health Care Equipment & Services (continued)
West Pharmaceutical Services Inc.		567,318	$	43,048,090
				221,210,400
Household & Personal Products 2.9%
Colgate-Palmolive Co.		191,000		13,981,200
The Procter & Gamble Co.		415,300		35,163,451
				49,144,651
Industrial Conglomerates 3.9%
Carlisle Cos. Inc.		101,061		10,680,127
Roper Technologies Inc.		333,043		56,803,814
				67,483,941
Insurance 5.3%
Aflac Inc.		276,200		19,930,592
Arthur J. Gallagher & Co.		660,000		31,416,000
Erie Indemnity Co., A		277,385		27,555,426
Old Republic International Corp.		449,208		8,665,222
RLI Corp.		41,300		2,840,614
				90,407,854
Machinery 7.8%
Donaldson Co. Inc.		350,068		12,028,337
Dover Corp.		771,976		53,513,376
Hillenbrand Inc.		888,300		26,684,532
Pentair PLC (United Kingdom)		704,800		41,082,792
				133,309,037
Materials 12.2%
Air Products and Chemicals Inc.		364,000		51,702,560
Albemarle Corp.		706,700		56,048,377
Bemis Co. Inc.		147,499		7,594,723
Ecolab Inc.		115,600		13,710,160
Nucor Corp.		447,055		22,088,988
Praxair Inc.		506,460		56,921,039
				208,065,847
Media 0.9%
John Wiley & Sons Inc., A		310,700		16,212,326
Pharmaceuticals, Biotechnology & Life Sciences 6.3%
AbbVie Inc.		300,800		18,622,528
Johnson & Johnson		381,800		46,312,340
Perrigo Co. PLC		208,500		18,904,695
Pfizer Inc.		669,700		23,580,137
Roche Holding AG, ADR (Switzerland)		25,000		823,750
				108,243,450
Retailing 2.3%
The Gap Inc.		556,300		11,804,686
Ross Stores Inc.		174,300		9,881,067
Target Corp.		100,800		7,037,856
Tiffany & Co.		161,500		9,793,360
				38,516,969

FRD-10 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Rising Dividends VIP Fund (continued)

		Shares		Value
	Common Stocks (continued)
	Semiconductors & Semiconductor Equipment 2.9%
	Linear Technology Corp.		375,000	$	17,448,750
	QUALCOMM Inc.		210,300		11,265,771
	Texas Instruments Inc.		347,200		21,752,080
					50,466,601
	Software & Services 4.6%
	Accenture PLC, A		202,000		22,884,580
	Microsoft Corp.		1,107,900		56,691,243
					79,575,823
	Trading Companies & Distributors 0.4%
	W.W. Grainger Inc.		28,100		6,385,725
	Transportation 0.4%
	United Parcel Service Inc., B		55,900		6,021,548
	Total Common Stocks (Cost $997,198,060)				1,668,572,207
	Short Term Investments (Cost $42,377,646) 2.5%
	Money Market Funds 2.5%
a,b	Institutional Fiduciary Trust Money Market Portfolio		42,377,646		42,377,646
	Total Investments (Cost $1,039,575,706) 100.0%				1,710,949,853
	Other Assets, less Liabilities (0.0)%†				(133,591	)
	Net Assets 100.0%			$	1,710,816,262

See Abbreviations on page FRD-20.

^†Rounds to less than 0.1% of net assets.

^aNon-income producing.

^bSee Note 3(e) regarding investments in affiliated management investment companies.

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report FRD-11

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Statements

Statement of Assets and Liabilities

June 30, 2016 (unaudited)

	Franklin Rising Dividends VIP Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	997,198,060
Cost - Non-controlled affiliates (Note 3e)		42,377,646
Total cost of investments	$	1,039,575,706
Value - Unaffiliated issuers	$	1,668,572,207
Value - Non-controlled affiliates (Note 3e)		42,377,646
Total value of investments		1,710,949,853
Receivables:
Capital shares sold		727,638
Dividends		2,080,600
Other assets		662
Total assets		1,713,758,753
Liabilities:
Payables:
Capital shares redeemed		1,322,632
Management fees		834,652
Distribution fees		632,986
Accrued expenses and other liabilities		152,221
Total liabilities		2,942,491
Net assets, at value	$	1,710,816,262
Net assets consist of:
Paid-in capital	$	999,791,522
Undistributed net investment income		11,352,134
Net unrealized appreciation (depreciation)		671,374,147
Accumulated net realized gain (loss)		28,298,459
Net assets, at value	$	1,710,816,262
Class 1:
Net assets, at value	$	173,215,641
Shares outstanding		7,176,527
Net asset value and maximum offering price per share	$	24.14
Class 2:
Net assets, at value	$	1,513,384,354
Shares outstanding		64,177,767
Net asset value and maximum offering price per share	$	23.58
Class 4:
Net assets, at value	$	24,216,267
Shares outstanding		1,022,765
Net asset value and maximum offering price per share	$	23.68

FRD-12 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Statement of Operations

for the six months ended June 30, 2016 (unaudited)

	Franklin Rising Dividends VIP Fund
Investment income:
Dividends	$	17,805,404
Expenses:
Management fees (Note 3a)		4,796,393
Distribution fees: (Note 3c)
Class 2		1,710,039
Class 4		36,700
Custodian fees (Note 4)		6,285
Reports to shareholders		95,519
Professional fees		26,737
Trustees’ fees and expenses		3,792
Other		14,814
Total expenses		6,690,279
Expenses waived/paid by affiliates (Note 3e)		(68,753	)
Net expenses		6,621,526
Net investment income		11,183,878
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		28,396,610
Foreign currency transactions		(295	)
Net realized gain (loss)		28,396,315
Net change in unrealized appreciation (depreciation) on investments		111,088,473
Net realized and unrealized gain (loss)		139,484,788
Net increase (decrease) in net assets resulting from operations	$	150,668,666

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report FRD-13

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Statements of Changes in Net Assets

	Franklin Rising Dividends VIP Fund
	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31, 2015
Increase (decrease) in net assets:
Operations:
Net investment income	$	11,183,878		$	23,865,895
Net realized gain (loss)		28,396,315			200,231,316
Net change in unrealized appreciation (depreciation)		111,088,473			(288,246,073	)
Net increase (decrease) in net assets resulting from operations		150,668,666			(64,148,862	)
Distributions to shareholders from:
Net investment income:
Class 1		(2,718,521	)		(2,507,451	)
Class 2		(20,665,957	)		(22,189,853	)
Class 4		(304,600	)		(275,517	)
Net realized gains:
Class 1		(19,761,965	)		(15,606,236	)
Class 2		(177,746,238	)		(164,222,373	)
Class 4		(2,696,441	)		(2,002,122	)
Total distributions to shareholders		(223,893,722	)		(206,803,552	)
Capital share transactions: (Note 2)
Class 1		35,543,569			6,114,953
Class 2		269,153,106			(112,317,852	)
Class 4		4,732,993			7,967,834
Total capital share transactions		309,429,668			(98,235,065	)
Net increase (decrease) in net assets		236,204,612			(369,187,479	)
Net assets:
Beginning of period		1,474,611,650			1,843,799,129
End of period	$	1,710,816,262		$	1,474,611,650
Undistributed net investment income included in net assets:
End of period	$	11,352,134		$	23,857,334

FRD-14 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Notes to Financial Statements (unaudited)

Franklin Rising Dividends VIP Fund

1. Organization and Significant Accounting Policies

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of nineteen separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Franklin Rising Dividends VIP 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 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. The Fund calculates the net asset value (NAV) per share as of 4 p.m. Eastern time each day the New York Stock Exchange (NYSE) is open for trading. Under compliance policies and procedures approved by the Trust’s Board of Trustees (the Board), the Fund’s administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The VC provides administration and oversight of the Fund’s valuation policies and procedures, which are approved annually by the Board. Among other things, these procedures allow the Fund to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

Equity securities listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded or as of 4 p.m. Eastern time whichever is earlier. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the day that the value of the security is determined. Over-the-counter (OTC)

securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.

Investments in open-end mutual funds are valued at the closing NAV.

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

Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 4 p.m. Eastern time. In addition, trading in certain foreign markets may not take place on every NYSE business day. 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 VC monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depositary Receipts, futures contracts and exchange traded funds).

Semiannual Report FRD-15

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Rising Dividends VIP Fund (continued)

1. Organization and Significant Accounting Policies (continued)

a. Financial Instrument Valuation (continued)

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.

When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the NYSE is closed, which could result in differences between the value of the Fund’s portfolio securities on the last business day and the last calendar day of the reporting period. Any significant security valuation changes due to an open foreign market are adjusted and reflected by the Fund for financial reporting purposes.

b. Foreign Currency Translation

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

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

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

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

The Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of June 30, 2016, the Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on each tax jurisdiction’s statute of limitation.

d. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Estimated expenses are accrued daily. Dividend income is recorded on the ex-dividend date except for certain dividends from foreign securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Fund.

FRD-16 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Rising Dividends VIP Fund (continued)

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 U.S. GAAP. 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.

e. Accounting Estimates

The preparation of financial statements in accordance with U.S. GAAP 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, 2016, 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, 2016						Year Ended December 31, 2015
	Shares			Amount			Shares			Amount
Class 1 Shares:
Shares sold		1,036,049		$	25,362,123			379,085		$	9,885,431
Shares issued in reinvestment of distributions		944,162			22,480,486			689,257			18,113,687
Shares redeemed		(480,135	)		(12,299,040	)		(808,697	)		(21,884,165	)
Net increase (decrease)		1,500,076		$	35,543,569			259,645		$	6,114,953
Class 2 Shares:
Shares sold		7,138,983		$	182,931,863			4,959,597		$	130,929,237
Shares issued in reinvestment of distributions		8,526,523			198,412,195			7,239,310			186,412,226
Shares redeemed		(4,512,098	)		(112,190,952	)		(16,563,559	)		(429,659,315	)
Net increase (decrease)		11,153,408		$	269,153,106			(4,364,652	)	$	(112,317,852	)
Class 4 Shares:
Shares sold		160,992		$	4,041,048			322,291		$	8,758,972
Shares issued in reinvestment of distributions		128,469			3,001,041			88,076			2,277,639
Shares redeemed		(91,042	)		(2,309,096	)		(117,097	)		(3,068,777	)
Net increase (decrease)		198,419		$	4,732,993			293,270		$	7,967,834

Semiannual Report FRD-17

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Rising Dividends VIP Fund (continued)

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

For the period ended June 30, 2016, the annualized effective investment management fee rate was 0.620% of the Fund’s average daily net assets.

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 the Fund’s average daily net assets, and is not an additional expense of the Fund.

c. Distribution Fees

The Board has adopted distribution plans for Class 2 and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to 0.35% per year of its average daily net assets of each class. The Board has agreed to limit the current rate to 0.25% per year for Class 2. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.

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. Investments in Affiliated Management Investment Companies

The Fund invests in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Fund are waived on assets invested in the affiliated management investment companies, as noted in the Statement of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate. Prior to January 1, 2014, the waiver was accounted for as a reduction to management fees.

FRD-18 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Rising Dividends VIP Fund (continued)

	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 Gain (Loss)		% of Affiliated Fund Shares Outstanding Held at End of Period
Non-Controlled Affiliates
Institutional Fiduciary Trust Money Market Portfolio		292,061		171,295,976		(129,210,391	)		42,377,646	$	42,377,646	$	—	$	—		0.2%

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, 2016, there were no credits earned.

5. Income Taxes

At June 30, 2016, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	1,039,627,088
Unrealized appreciation	$	703,297,133
Unrealized depreciation		(31,974,368	)
Net unrealized appreciation (depreciation)	$	671,322,765

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

6. Investment Transactions

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2016, aggregated $135,059,575 and $56,433,669, respectively.

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 $2 billion (Global Credit Facility) which matures on February 10, 2017. 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 0.07% based upon the unused portion of the Global Credit Facility. Effective February 12, 2016, the annual commitment fee is 0.15%. These fees are reflected in other expenses in the Statement of Operations. During the period ended June 30, 2016, the Fund did not use the Global Credit Facility.

Semiannual Report FRD-19

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Rising Dividends VIP Fund (continued)

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 financial instruments and are summarized in the following fair value hierarchy:

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

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

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

The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.

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, 2016, all of the Fund’s investments in financial instruments carried at fair value were valued using Level 1 inputs. For detailed categories, see the accompanying Statement of Investments.

9. Subsequent Events

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

Abbreviations

Selected Portfolio
ADR	American Depositary Receipt

FRD-20 Semiannual Report

Franklin Small Cap Value VIP Fund

We are pleased to bring you Franklin Small Cap Value VIP Fund’s semiannual report for the period ended June 30, 2016.

Class 1 Performance Summary as of June 30, 2016

The Fund’s Class 1 shares delivered a +11.34% total return* for the six-month period ended June 30, 2016.

*The Fund has a fee waiver associated with any investment in a Franklin Templeton money fund and/or Franklin Templeton fund, as applicable, contractually guaranteed through at least the Fund’s current fiscal year-end. Fund investment results reflect the fee waiver, to the extent applicable; without this reduction, the results would have been lower.

Performance reflects the Fund’s Class 1 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.

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.

Semiannual Report FSV-1

FRANKLIN SMALL CAP VALUE VIP FUND

Fund Goal and Main Investments

The Fund seeks long-term total return. Under normal market conditions, the Fund invests at least 80% of its net assets in investments of small capitalization companies. For this Fund, small capitalization companies are those with market capitalizations under $3.5 billion at the time of purchase. The Fund generally invests in equity securities of companies that the manager believes are undervalued and have the potential for capital appreciation.

Fund Risks

All investments involve risks, including possible loss of principal. The Fund’s investments in smaller company stocks carry special risks as such stocks have historically exhibited greater price volatility than large-company stocks, particularly over the short term. Additionally, smaller companies often have relatively small revenues, limited product lines and a small market share. In addition, the Fund may invest up to 25% of its total assets in foreign securities, which involve special risks, including currency fluctuations and economic and political uncertainty. The Fund also may invest in equity real estate investment trusts (REITs). The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. For comparison, the Fund’s benchmark, the Russell 2500^TM Value Index, posted a +7.84% total return 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

For the six-month period ended June 30, 2016, the U.S. economy grew moderately, as measured by gross domestic product in 2016’s first and second quarters, driven by consumer spending and exports. A decline in private inventory investment and nonresidential fixed investment contributed to the moderation. Although the unemployment rate rose from 4.7% in May to 4.9% in June, the increase was due to additional people entering the labor force, and for the entire period under review,

unemployment declined slightly.² Home sales and prices rose amid relatively low mortgage rates. Monthly retail sales grew during most of the review period, and rose to the highest level in April in more than a year, due to a broad-based increase across most retail categories. Inflation, as measured by the Consumer Price Index, remained subdued overall even though it spiked to the highest level in three years in April mainly due to a rebound in energy prices.

After raising its target range for the federal funds rate to 0.25%–0.50% at its December meeting, the Federal Reserve (Fed) maintained the rate through period-end. Although the Fed indicated a potential interest rate hike in June, subsequent reports showed job additions slowed substantially in May. Consequently, at its June meeting, the Fed kept the federal funds rate unchanged, and indicated that in determining the timing and size of future adjustments to the target range, it will assess realized and expected economic conditions relative to its objectives of maximum employment and 2.00% inflation. The Fed expects economic conditions to evolve in a manner that could warrant only gradual increases in the federal funds rate.

U.S. equity markets rose for the period under review, as investors generally remained confident due to the Fed’s continued caution surrounding further interest rate increases, the European Central Bank expanding its quantitative easing measures and cutting its benchmark interest rate to zero, the People’s Bank of China introducing further easing measures and the Bank of Japan adopting a negative interest rate policy. The rally in crude oil prices near period-end also boosted investor confidence. However, the U.K.’s historic referendum to leave the European Union (also known as the “Brexit”), global economic growth concerns and China’s slowing economy weighed on market sentiment. Despite periods of volatility, the broad U.S. stock market ended the six-month period higher, as measured by the Standard & Poor’s^® 500 Index.³

Investment Strategy

We generally invest in stocks that we believe are undervalued and have the potential for capital appreciation. We consider a stock price a “value” when it trades at less than the price at which we believe it would trade if the market reflected all factors relating to the company’s worth. Accordingly, we invest in companies that we believe have, for example, stock prices that are low relative to current or historical or future earnings, book

1. Source: 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.

3. Please see Index Descriptions following the Fund Summaries.

FSV-2 Semiannual Report

FRANKLIN SMALL CAP VALUE VIP FUND

value, cash flow or sales; recent sharp price declines but the potential for good long-term earnings prospects; and valuable intangibles not reflected in the stock price. Companies in which we may invest include those that may be considered out of favor, such as companies attempting to recover from bankruptcy, business setbacks, adverse events or cyclical downturns, or that may be considered potential takeover targets.

Manager’s Discussion

For the six-month period ended June 30, 2016, some contributors to absolute Fund performance included Axiall (sold by period-end), Universal Forest Products and Astec Industries. Axiall, a chemical and building products manufacturer, was the subject of an all cash takeover offer by Westlake Chemical at a premium to Axiall’s then share price. Universal Forest Products, a building and construction infrastructure products manufacturer and distributor, finished with a strong year of sales and earnings growth due to continued unit growth in its retail, industrial and construction end markets and well received new product introductions. Astec Industries, a leading manufacturer of road paving and construction related equipment, benefited from optimism related to additional funding directed to federal transportation spending, strong sales of its recently developed line of wood pellet making equipment and increased profitability due to better product mix and increased overhead absorption.

Detractors from absolute Fund performance included AAR, Bristow Group (sold by period-end) and Invacare. Shares of AAR, a provider of aerospace maintenance, repair and supply chain products and services to commercial and government customers, benefited from strong commercial demand due to growth in air travel. In addition, lower fuel prices are incentivizing airlines to increase utilization of older aircraft, which should result in demand for maintenance services. However, these positive developments were offset by continued uncertainty regarding the company’s military airlift business due to reduced activity in the Middle East and pricing pressure due to a global surplus of helicopters. Bristow Group, a provider of helicopter transportation services to the offshore oil and gas industry, along with search and rescue operations to government entities, reported weak earnings and cut its dividend as weak energy prices and pricing pressures caused by a global surplus of helicopters affected both revenues and profitability. Invacare, a medical equipment manufacturer and distributor, saw its share price negatively impacted by the issuance of a convertible bond, a competitive pricing

Semiannual Report FSV-3

FRANKLIN SMALL CAP VALUE VIP FUND

Top 10 Holdings
6/30/16
Company Sector/Industry	% of Total Net Assets
Maple Leaf Foods Inc. (Canada) Food, Beverage & Tobacco		2.8%
LTC Properties Inc. Real Estate		2.7%
IDACORP Inc. Utilities		2.6%
Spire Inc. Utilities		2.4%
Astec Industries Inc. Machinery		2.4%
Sensient Technologies Corp. Materials		2.4%
Drew Industries Inc. Automobiles & Components		2.2%
Universal Forest Products Inc. Building Products		2.1%
AAR Corp. Aerospace & Defense		2.1%
Carlisle Cos. Inc. Industrial Conglomerates		2.0%

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

environment and ongoing expenses related to U.S. Food and Drug Administration compliance issues at one of its plants.

During the period, we initiated several positions including Cubic, a transit and defense systems provider; Spirit Airlines, an airline operator; and Brinker International, a restaurant operator. The Fund also added to holdings including Lakeland Financial, a bank; Esterline Technologies, a specialized manufacturing company serving the aerospace and defense markets; and Brandywine Realty, a real estate investment trust; among several others. Conversely, we exited some positions including the aforementioned Axiall, StanCorp Financial and Ingram Micro. We reduced our positions in Regal Beloit, La-Z-Boy and Teleflex, among others.

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

The foregoing information reflects our analysis, opinions and portfolio holdings as of June 30, 2016, 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.

FSV-4 Semiannual Report

FRANKLIN SMALL CAP VALUE VIP FUND

Class 1 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 × $7.50 = $64.50.

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

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 1	Beginning Account Value 1/1/16		Ending Account Value 6/30/16		Fund-Level Expenses Incurred During Period* 1/1/16–6/30/16
Actual	$	1,000	$	1,113.40	$	3.36
Hypothetical (5% return before expenses)	$	1,000	$	1,021.68	$	3.22

*Expenses are calculated using the most recent six-month annualized expense ratio, net of expenses waivers, for the Fund’s Class 1 shares (0.64%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 182/366 to reflect the one-half year period.

Semiannual Report FSV-5

SUPPLEMENT DATED JULY 18, 2016

TO THE PROSPECTUSES DATED MAY 1, 2016

OF

FRANKLIN GLOBAL REAL ESTATE VIP FUND

FRANKLIN SMALL CAP VALUE VIP FUND

(Series of Franklin Templeton Variable Insurance Products Trust)

IMPORTANT NOTICE REGARDING CHANGE IN INVESTMENT POLICY

The prospectus of Franklin Small Cap Value VIP Fund is amended as follows:

I.  The first paragraph under the “FUND SUMMARIES” – “Principal Investment Strategies” section, on page FSV-S1, is replaced with the following:

Under normal market conditions, the Fund invests at least 80% of its net assets in investments of small-capitalization (small-cap) companies. Small-cap companies are companies with market capitalizations (the total market value of a company’s outstanding stock) under $3.5 billion at the time of purchase. Effective September 30, 2016, the definition of small-cap companies will be revised to read as follows: Small-cap companies are companies with market capitalizations (the total market value of a company’s outstanding stock) not exceeding either: 1) the highest market capitalization in the Russell 2000 Index; or 2) the 12-month average of the highest market capitalization in the Russell 2000 Index, whichever is greater, at the time of purchase. As of May 31, 2016, the highest market capitalization in the Russell 2000 Index was $5.96 billion.

II.  The “Performance” section, on page FSV-S3, is revised to add the following:

	1 Year		5 Years		10 Years
Russell 2000 Value Index (index reflects no deduction for fees, expenses or taxes) 1		-7.47%		7.67%		5.58%

1. Performance figures as of December 31, 2015. The Russell 2000 Value Index is replacing the Russell 2500 Value Index as the Fund’s benchmark. The investment manager believes the composition of the Russell 2000 Value Index more accurately reflects the Fund’s holdings.

No one index is representative of the Fund’s portfolio.

III.  Effective September 30, 2016, the first paragraph under the “FUND DETAILS” – “Principal Investment Policies and Practices” section on page FSV D-1 is replaced with the following:

Under normal market conditions, the Fund invests at least 80% of its net assets in investments of small-capitalization (small-cap) companies. Shareholders will be given at least 60 days’ advance notice of any change to this 80% policy. Small-cap companies are companies with market capitalizations (the total market value of a company’s outstanding stock) under $3.5 billion at the time of purchase. Effective September 30, 2016, the definition of small-cap companies will be revised to read as follows: Under normal market conditions, the Fund invests at least 80% of its net assets in investments of small-capitalization (small-cap) companies. Small-cap companies are companies with market capitalizations (the total market value of a company’s outstanding stock) not exceeding either: 1) the highest market capitalization in the Russell 2000 Index; or 2) the 12-month average of the highest market capitalization

FSV-6

in the Russell 2000 Index, whichever is greater, at the time of purchase. As of May 31, 2016, the highest market capitalization in the Russell 2000 Index was $5.96 billion.

The prospectus of Franklin Global Real Estate VIP Fund is amended as follows:

The “FUND DETAILS” – “Management” section, on page FGR D-6, is revised to show the address of Franklin Templeton Institutional, LLC (FT Institutional) as 280 Park Avenue, New York, NY 10017.

Please keep this supplement with your prospectuses for future reference.

FSV-7

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Highlights

Franklin Small Cap Value VIP Fund

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012			2011
Class 1
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$18.12			$22.81			$24.54			$18.58			$15.82			$16.55
Income from investment operationsa:
Net investment incomeb		0.08			0.21			0.19			0.19			0.29	c		0.16
Net realized and unrealized gains (losses)		1.93			(1.53	)		0.06			6.45			2.64			(0.74	)
Total from investment operations		2.01			(1.32	)		0.25			6.64			2.93			(0.58	)
Less distributions from:
Net investment income		(0.21	)		(0.20	)		(0.20	)		(0.32	)		(0.17	)		(0.15	)
Net realized gains		(2.92	)		(3.17	)		(1.78	)		(0.36	)		—			—
Total distributions		(3.13	)		(3.37	)		(1.98	)		(0.68	)		(0.17	)		(0.15	)
Net asset value, end of period		$17.00			$18.12			$22.81			$24.54			$18.58			$15.82
Total returnd		11.34%			(7.18)%			0.88%			36.50%			18.75%			(3.53)%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		0.67%			0.65%			0.63%			0.63%			0.67%			0.66%
Expenses net of waiver and payments by affiliates		0.64%			0.64%	f		0.63%	f,g		0.63%			0.67%			0.66%
Net investment income		0.88%			1.04%			0.82%			0.90%			1.70%	c		1.02%
Supplemental data
Net assets, end of period (000’s)		$49,070			$45,897			$57,843			$62,408			$40,133			$39,374
Portfolio turnover rate		18.06%			27.05%			19.45%			10.44%			5.84%			14.39%

^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’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $0.10 per share related to income received in the form of special dividends in connection with certain fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.10%.

^dTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which 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%.

^gBenefit of waiver and payments by affiliates rounds to less than 0.01%.

FSV-8 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL HIGHLIGHTS

Franklin Small Cap Value VIP Fund (continued)

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012			2011
Class 2
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$17.68			$22.32			$24.07			$18.23			$15.53			$16.25
Income from investment operationsa:
Net investment incomeb		0.06			0.16			0.13			0.14			0.24	c		0.12
Net realized and unrealized gains (losses)		1.88			(1.49	)		0.05			6.34			2.59			(0.73	)
Total from investment operations		1.94			(1.33	)		0.18			6.48			2.83			(0.61	)
Less distributions from:
Net investment income		(0.16	)		(0.14	)		(0.15	)		(0.28	)		(0.13	)		(0.11	)
Net realized gains		(2.92	)		(3.17	)		(1.78	)		(0.36	)		—			—
Total distributions		(3.08	)		(3.31	)		(1.93	)		(0.64	)		(0.13	)		(0.11	)
Net asset value, end of period		$16.54			$17.68			$22.32			$24.07			$18.23			$15.53
Total returnd		11.22%			(7.39)%			0.57%			36.24%			18.39%			(3.76)%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		0.92%			0.90%			0.88%			0.88%			0.92%			0.91%
Expenses net of waiver and payments by affiliates		0.89%			0.89%	f		0.88%	f,g		0.88%			0.92%			0.91%
Net investment income		0.63%			0.79%			0.57%			0.65%			1.45%	c		0.77%
Supplemental data
Net assets, end of period (000’s)		$1,243,228			$1,172,173			$1,445,325			$1,606,802			$1,286,573			$1,211,168
Portfolio turnover rate		18.06%			27.05%			19.45%			10.44%			5.84%			14.39%

^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’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $0.10 per share related to income received in the form of special dividends in connection with certain fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 0.85%.

^dTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which 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%.

^gBenefit of waiver and payments by affiliates rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report FSV-9

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL HIGHLIGHTS

Franklin Small Cap Value VIP Fund (continued)

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012			2011
Class 4
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$17.96			$22.63			$24.37			$18.44			$15.71			$16.44
Income from investment operationsa:
Net investment incomeb		0.05			0.14			0.11			0.12			0.22	c		0.11
Net realized and unrealized gains (losses)		1.92			(1.52	)		0.05			6.42			2.63			(0.75	)
Total from investment operations		1.97			(1.38	)		0.16			6.54			2.85			(0.64	)
Less distributions from:
Net investment income		(0.14	)		(0.12	)		(0.12	)		(0.25	)		(0.12	)		(0.09	)
Net realized gains		(2.92	)		(3.17	)		(1.78	)		(0.36	)		—			—
Total distributions		(3.06	)		(3.29	)		(1.90	)		(0.61	)		(0.12	)		(0.09	)
Net asset value, end of period		$16.87			$17.96			$22.63			$24.37			$18.44			$15.71
Total returnd		11.20%			(7.52)%			0.48%			36.12%			18.27%			(3.87)%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		1.02%			1.00%			0.98%			0.98%			1.02%			1.01%
Expenses net of waiver and payments by affiliates		0.99%			0.99%	f		0.98%	f,g		0.98%			1.02%			1.01%
Net investment income		0.53%			0.69%			0.47%			0.55%			1.35%	c		0.67%
Supplemental data
Net assets, end of period (000’s)		$27,397			$26,128			$30,452			$35,936			$32,424			$34,284
Portfolio turnover rate		18.06%			27.05%			19.45%			10.44%			5.84%			14.39%

^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’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $0.10 per share related to income received in the form of special dividends in connection with certain fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 0.75%.

^dTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which 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%.

^gBenefit of waiver and payments by affiliates rounds to less than 0.01%.

FSV-10 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Statement of Investments, June 30, 2016 (unaudited)

Franklin Small Cap Value VIP Fund
		Shares		Value
	Common Stocks 90.5%
	Aerospace & Defense 4.2%
	AAR Corp.		1,209,300	$	28,225,062
	Cubic Corp.		397,200		15,951,552
a	Esterline Technologies Corp.		185,900		11,533,236
					55,709,850
	Automobiles & Components 4.2%
	Drew Industries Inc.		335,700		28,480,788
	Gentex Corp.		440,700		6,808,815
	Thor Industries Inc.		251,900		16,308,006
	Winnebago Industries Inc.		149,000		3,415,080
					55,012,689
	Banks 6.1%
	BNC Bancorp.		327,646		7,440,841
	Chemical Financial Corp.		591,154		22,044,132
	Columbia Banking System Inc.		453,000		12,711,180
	EverBank Financial Corp.		783,400		11,641,324
	Lakeland Financial Corp.		362,200		17,027,022
	Peoples Bancorp Inc.		257,000		5,600,030
	TrustCo Bank Corp. NY		684,300		4,386,363
					80,850,892
	Building Products 5.7%
a	Armstrong Flooring Inc.		240,600		4,078,170
a	Gibraltar Industries Inc.		496,800		15,683,976
	Griffon Corp.		436,600		7,361,076
	Insteel Industries Inc.		82,400		2,355,816
	Simpson Manufacturing Co. Inc.		433,400		17,322,998
	Universal Forest Products Inc.		306,888		28,445,449
					75,247,485
	Commercial & Professional Services 2.5%
a	Huron Consulting Group Inc.		171,300		10,349,946
	McGrath RentCorp		488,218		14,934,588
	MSA Safety Inc.		153,113		8,043,026
					33,327,560
	Construction & Engineering 3.2%
	Argan Inc.		12,200		508,984
	EMCOR Group Inc.		338,000		16,649,880
	Granite Construction Inc.		561,900		25,594,545
					42,753,409
	Consumer Durables & Apparel 3.7%
a	BRP Inc. (Canada)		824,200		13,184,904
	Brunswick Corp.		49,900		2,261,468
a	Crocs Inc.		1,318,000		14,867,040
	Hooker Furniture Corp.		179,000		3,846,710
	La-Z-Boy Inc.		296,500		8,248,630
a	M/I Homes Inc.		376,300		7,085,729
					49,494,481
	Consumer Services 0.8%
	Brinker International Inc.		246,300		11,214,039

Semiannual Report FSV-11

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Small Cap Value VIP Fund (continued)

		Shares		Value
	Common Stocks (continued)
	Electrical Equipment 2.0%
	EnerSys		280,110	$	16,658,142
	Regal Beloit Corp.		167,500		9,220,875
					25,879,017
	Energy 4.9%
	Energen Corp.		280,107		13,503,958
a	Helix Energy Solutions Group Inc.		599,600		4,053,296
	Hunting PLC (United Kingdom)		2,086,200		13,352,348
a	Natural Gas Services Group Inc.		51,800		1,186,220
a	Oil States International Inc.		567,900		18,672,552
a	Unit Corp.		940,700		14,637,292
					65,405,666
	Food, Beverage & Tobacco 4.5%
	AGT Food and Ingredients Inc. (Canada)		116,600		3,202,642
	Dairy Crest Group PLC (United Kingdom)		484,804		3,474,602
	GrainCorp Ltd. (Australia)		408,300		2,628,275
a	Landec Corp.		848,600		9,130,936
	Maple Leaf Foods Inc. (Canada)		1,704,400		36,393,775
a	Omega Protein Corp.		222,700		4,451,773
					59,282,003
	Health Care Equipment & Services 5.5%
	Hill-Rom Holdings Inc.		407,400		20,553,330
	Invacare Corp.		213,300		2,587,329
	STERIS PLC		357,500		24,578,125
	Teleflex Inc.		141,900		25,160,289
					72,879,073
	Industrial Conglomerates 2.0%
	Carlisle Cos. Inc.		245,400		25,933,872
	Insurance 6.5%
	Arthur J. Gallagher & Co.		168,200		8,006,320
	Aspen Insurance Holdings Ltd.		466,400		21,631,632
	Endurance Specialty Holdings Ltd.		116,300		7,810,708
	The Hanover Insurance Group Inc.		183,200		15,502,384
	Old Republic International Corp.		877,800		16,932,762
	Validus Holdings Ltd.		317,800		15,441,902
					85,325,708
	Machinery 6.7%
	Astec Industries Inc.		561,900		31,550,685
	Franklin Electric Co. Inc.		134,464		4,444,035
	Hillenbrand Inc.		277,500		8,336,100
b	Lindsay Corp.		132,800		9,011,808
	Mueller Industries Inc.		692,700		22,083,276
	Mueller Water Products Inc., A		860,100		9,822,342
	Watts Water Technologies Inc., A		55,000		3,204,300
					88,452,546
	Materials 8.5%
	A Schulman Inc.		4,766		116,386
	AptarGroup Inc.		65,000		5,143,450
	Carpenter Technology Corp.		164,800		5,426,864

FSV-12 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Small Cap Value VIP Fund (continued)

		Shares		Value
	Common Stocks (continued)
	Materials (continued)
a	Detour Gold Corp. (Canada)		700,700	$	17,526,990
	H.B. Fuller Co.		513,640		22,595,024
	Minerals Technologies Inc.		106,100		6,026,480
	OceanaGold Corp. (Australia)		2,871,800		10,957,336
	RPM International Inc.		147,900		7,387,605
	Sensient Technologies Corp.		443,800		31,527,552
	Stepan Co.		86,600		5,155,298
					111,862,985
	Pharmaceuticals, Biotechnology & Life Sciences 1.9%
	Gerresheimer AG (Germany)		336,000		25,729,351
	Real Estate 4.2%
	Brandywine Realty Trust		1,151,700		19,348,560
	LTC Properties Inc.		689,800		35,683,354
					55,031,914
	Retailing 3.1%
	Caleres Inc.		430,400		10,419,984
	The Cato Corp., A		366,200		13,813,064
a	Genesco Inc.		174,708		11,235,471
a	West Marine Inc.		610,700		5,123,773
					40,592,292
	Semiconductors & Semiconductor Equipment 2.7%
	Cohu Inc.		736,000		7,985,600
	MKS Instruments Inc.		458,400		19,738,704
a	Photronics Inc.		840,800		7,491,528
					35,215,832
	Software & Services 0.7%
	Mentor Graphics Corp.		408,900		8,693,214
	Telecommunication Services 0.1%
a	ORBCOMM Inc.		175,900		1,750,205
	Transportation 1.7%
a	SAIA Inc.		368,000		9,251,520
a	Spirit Airlines Inc.		284,600		12,770,002
					22,021,522
	Utilities 5.1%
	Connecticut Water Service Inc.		29,200		1,641,040
	IDACORP Inc.		412,689		33,572,250
	Spire Inc.		452,000		32,019,680
					67,232,970
	Total Common Stocks (Cost $903,759,714)				1,194,898,575
		Principal Amount
	Corporate Bonds (Cost $9,106,623) 0.6%
	Energy 0.6%
	Unit Corp., senior sub. note, 6.625%, 5/15/21	$	9,632,000		7,488,880
	Total Investments before Short Term Investments (Cost $912,866,337)				1,202,387,455

Semiannual Report FSV-13

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Small Cap Value VIP Fund (continued)

		Shares		Value
	Short Term Investments 9.4%
	Money Market Funds (Cost $118,437,435) 9.0%
a,c	Institutional Fiduciary Trust Money Market Portfolio		118,437,435	$	118,437,435
d	Investments from Cash Collateral Received for Loaned Securities 0.4%
	Money Market Funds (Cost $4,833,000) 0.3%
a,c	Institutional Fiduciary Trust Money Market Portfolio		4,833,000		4,833,000
		Principal Amount
	Repurchase Agreements (Cost $1,208,821) 0.1%
e	Joint Repurchase Agreement, 0.40%, 7/01/16 (Maturity Value $1,208,834)	$	1,208,821		1,208,821
	BNP Paribas Securities Corp.
	Collateralized by fU.S. Treasury Bill, 10/27/16; U.S. Treasury Bond, 8.75% - 9.00%, 11/15/18 - 5/15/20; U.S. Treasury Note, 0.363% - 4.75%, 9/15/16 - 3/31/21; U.S. Treasury Note, Index Linked, 2.625%, 7/15/17; and U.S. Treasury Strips, 8/15/16 - 2/15/21 (valued at $1,232,998)
	Total Investments from Cash Collateral Received for Loaned Securities (Cost $6,041,821)				6,041,821
	Total Investments (Cost $1,037,345,593) 100.5%				1,326,866,711
	Other Assets, less Liabilities (0.5)%				(7,171,548	)
	Net Assets 100.0%			$	1,319,695,163

^aNon-income producing.

^bA portion or all of the security is on loan at June 30, 2016. See Note 1(d).

^cSee Note 3(e) regarding investments in affiliated management investment companies.

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

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

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

FSV-14 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Statements

Statement of Assets and Liabilities

June 30, 2016 (unaudited)

	Franklin Small Cap Value VIP Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	912,866,337
Cost - Non-controlled affiliates (Note 3e)		123,270,435
Cost - Repurchase agreements		1,208,821
Total cost of investments	$	1,037,345,593
Value - Unaffiliated issuers	$	1,202,387,455
Value - Non-controlled affiliates (Note 3e)		123,270,435
Value - Repurchase agreements		1,208,821
Total value of investments (Includes securities loaned in the amount of $5,835,960)		1,326,866,711
Receivables:
Investment securities sold		1,683,518
Capital shares sold		295,150
Dividends and interest		732,797
Other assets		550
Total assets		1,329,578,726
Liabilities:
Payables:
Investment securities purchased		1,377,885
Capital shares redeemed		1,124,980
Management fees		647,235
Distribution fees		521,659
Payable upon return of securities loaned		6,041,821
Accrued expenses and other liabilities		169,983
Total liabilities		9,883,563
Net assets, at value	$	1,319,695,163
Net assets consist of:
Paid-in capital	$	989,821,505
Undistributed net investment income		4,257,803
Net unrealized appreciation (depreciation)		289,513,430
Accumulated net realized gain (loss)		36,102,425
Net assets, at value	$	1,319,695,163
Class 1:
Net assets, at value	$	49,069,903
Shares outstanding		2,886,310
Net asset value and maximum offering price per share	$	17.00
Class 2:
Net assets, at value	$	1,243,228,035
Shares outstanding		75,171,623
Net asset value and maximum offering price per share	$	16.54
Class 4:
Net assets, at value	$	27,397,225
Shares outstanding		1,623,966
Net asset value and maximum offering price per share	$	16.87

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report FSV-15

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Statement of Operations

for the six months ended June 30, 2016 (unaudited)

	Franklin Small Cap Value VIP Fund
Investment income:
Dividends	$	8,917,088
Interest		360,339
Income from securities loaned (net of fees and rebates)		90,055
Total investment income		9,367,482
Expenses:
Management fees (Note 3a)		3,909,296
Distribution fees: (Note 3c)
Class 2		1,445,260
Class 4		44,858
Custodian fees (Note 4)		8,581
Reports to shareholders		125,666
Professional fees		25,171
Trustees’ fees and expenses		3,150
Other		11,641
Total expenses		5,573,623
Expenses waived/paid by affiliates (Note 3e)		(147,166	)
Net expenses		5,426,457
Net investment income		3,941,025
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		37,653,256
Foreign currency transactions		(102,440	)
Net realized gain (loss)		37,550,816
Net change in unrealized appreciation (depreciation) on:
Investments		92,102,341
Translation of other assets and liabilities denominated in foreign currencies		(7,306	)
Net change in unrealized appreciation (depreciation)		92,095,035
Net realized and unrealized gain (loss)		129,645,851
Net increase (decrease) in net assets resulting from operations	$	133,586,876

FSV-16 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Statements of Changes in Net Assets

	Franklin Small Cap Value VIP Fund
	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,2015
Increase (decrease) in net assets:
Operations:
Net investment income	$	3,941,025		$	11,196,499
Net realized gain (loss)		37,550,816			195,958,536
Net change in unrealized appreciation (depreciation)		92,095,035			(310,285,782	)
Net increase (decrease) in net assets resulting from operations		133,586,876			(103,130,747	)
Distributions to shareholders from:
Net investment income:
Class 1		(515,096	)		(483,179	)
Class 2		(10,103,275	)		(8,399,662	)
Class 4		(189,568	)		(155,331	)
Net realized gains:
Class 1		(7,134,342	)		(7,665,840	)
Class 2		(185,669,944	)		(193,180,034	)
Class 4		(4,020,473	)		(4,250,502	)
Total distributions to shareholders		(207,632,698	)		(214,134,548	)
Capital share transactions: (Note 2)
Class 1		5,767,197			(165,713	)
Class 2		141,046,017			25,699,762
Class 4		2,730,004			2,309,001
Total capital share transactions		149,543,218			27,843,050
Net increase (decrease) in net assets		75,497,396			(289,422,245	)
Net assets:
Beginning of period		1,244,197,767			1,533,620,012
End of period	$	1,319,695,163		$	1,244,197,767
Undistributed net investment income included in net assets:
End of period	$	4,257,803		$	11,124,717

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report FSV-17

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Notes to Financial Statements (unaudited)

Franklin Small Cap Value VIP Fund

1. Organization and Significant Accounting Policies

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of nineteen separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Franklin Small Cap Value VIP 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 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. The Fund calculates the net asset value (NAV) per share as of 4 p.m. Eastern time each day the New York Stock Exchange (NYSE) is open for trading. Under compliance policies and procedures approved by the Trust’s Board of Trustees (the Board), the Fund’s administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The VC provides administration and oversight of the Fund’s valuation policies and procedures, which are approved annually by the Board. Among other things, these procedures allow the Fund to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

Equity securities listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded or as of 4 p.m. Eastern time whichever is earlier. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the day that the value of the security is determined. Over-the-counter (OTC) securities

are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.

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

Investments in open-end mutual funds are valued at the closing NAV. Repurchase agreements are valued at cost, which approximates fair value.

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

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Small Cap Value VIP Fund (continued)

Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 4 p.m. Eastern time. In addition, trading in certain foreign markets may not take place on every NYSE business day. 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 VC monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depositary Receipts, futures contracts and exchange traded funds). These price movements are measured against 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.

When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the NYSE is closed, which could result in differences between the value of the Fund’s portfolio securities on the last business day and the last calendar day of the reporting period. Any significant security valuation changes due to an open foreign market are adjusted and reflected by the Fund for financial reporting purposes.

b. Foreign Currency Translation

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

event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Board.

The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments in 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 fair 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%. Repurchase agreements are subject to the terms of Master Repurchase Agreements (MRAs) with approved counterparties (sellers). The MRAs contain various provisions, including but not limited to events of default and maintenance of collateral for repurchase agreements. In the event of default by either the seller or the Fund, certain MRAs may permit the non-defaulting party to net and close-out all transactions, if any, traded under such agreements. The Fund may sell securities it holds as collateral and apply the proceeds towards the repurchase price and any other amounts owed by the seller to the Fund in the event of default by the seller. This could involve costs or delays in addition to a loss on the securities if their value falls below the repurchase price owed by the seller. The joint repurchase agreement held

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Small Cap Value VIP Fund (continued)

1. Organization and Significant Accounting Policies (continued)

c. Joint Repurchase Agreement (continued)

by the Fund at period end, as indicated in the Statement of Investments, had been entered into on June 30, 2016.

d. Securities Lending

The Fund participates in an agency based securities lending program to earn additional income. The Fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the fair value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the fair 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 deposited into a joint cash account with other funds and is used to invest in a money market fund managed by Franklin Advisers, Inc., an affiliate of the Fund, and/or a joint repurchase agreement. The Fund may receive income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. Income from securities loaned, net of fees paid to the securities lending agent and/or third-party vendor, is reported separately in the Statement of Operations. 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. If the borrower defaults on its obligation to return the securities loaned, the Fund has the right to repurchase the securities in the open market using the collateral received. The securities lending agent has agreed to indemnify the Fund in the event of default by a third party borrower.

e. Income and Deferred Taxes

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

The Fund may be subject to foreign taxation related to income received, capital gains on the sale of securities and certain foreign currency transactions in the foreign jurisdictions in which it invests. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which

the Fund invests. When a capital gain tax is determined to apply, the Fund records an estimated deferred tax liability in an amount that would be payable if the securities were disposed of on the valuation date.

The Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of June 30, 2016, the Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on each tax jurisdiction’s statute of limitation.

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 for certain dividends from foreign securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Fund. 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 U.S. GAAP. 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.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Small Cap Value VIP Fund (continued)

g. Accounting Estimates

The preparation of financial statements in accordance with U.S. GAAP 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. 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, 2016, 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, 2016						Year Ended December 31, 2015
	Shares			Amount			Shares			Amount
Class 1 Shares:
Shares sold		69,382		$	1,262,552			97,924		$	2,017,340
Shares issued in reinvestment of distributions		456,683			7,649,438			407,044			8,149,019
Shares redeemed		(173,182	)		(3,144,793	)		(507,751	)		(10,332,072	)
Net increase (decrease)		352,883		$	5,767,197			(2,783	)	$	(165,713	)
Class 2 Shares:
Shares sold		2,756,238		$	49,544,180			3,551,318		$	71,764,155
Shares issued in reinvestment of distributions		12,018,000			195,773,219			10,305,710			201,579,696
Shares redeemed		(5,914,169	)		(104,271,382	)		(12,288,306	)		(247,644,089	)
Net increase (decrease)		8,860,069		$	141,046,017			1,568,722		$	25,699,762
Class 4 Shares:
Shares sold		122,353		$	2,213,903			220,435		$	4,535,105
Shares issued in reinvestment of distributions		253,312			4,210,041			221,510			4,405,833
Shares redeemed		(206,169	)		(3,693,940	)		(332,844	)		(6,631,937	)
Net increase (decrease)		169,496		$	2,730,004			109,101		$	2,309,001

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

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Small Cap Value VIP Fund (continued)

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
0.750%	Up to and including $200 million
0.635%	Over $200 million, up to and including $700 million
0.600%	Over $700 million, up to and including $1.2 billion
0.575%	Over $1.2 billion, up to and including $1.3 billion
0.475%	In excess of $1.3 billion

For the period ended June 30, 2016, the effective management fee rate was 0.637% of the Fund’s average daily net assets.

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 the Fund’s average daily net assets, and is not an additional expense of the Fund.

c. Distribution Fees

The Board has adopted distribution plans for Class 2 and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to 0.35% per year of its average daily net assets of each class. The Board has agreed to limit the current rate to 0.25% per year for Class 2. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.

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. Investments in Affiliated Management Investment Companies

The Fund invests in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Fund are waived on assets invested in the affiliated management investment companies, as noted in the Statement of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate. Prior to January 1, 2014, the waiver was accounted for as a reduction to management fees.

	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 Gain (Loss)		% of Affiliated Fund Shares Outstanding Held at End of Period
Non-Controlled Affiliates
Institutional Fiduciary Trust Money Market Portfolio	103,357,618		156,371,810		(136,458,993	)		123,270,435	$	123,270,435	$	—	$	—		0.6%

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Small Cap Value VIP Fund (continued)

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, 2016, there were no credits earned.

5. Income taxes

At June 30, 2016, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	1,040,055,242
Unrealized appreciation	$	349,012,578
Unrealized depreciation		(62,201,109	)
Net unrealized appreciation (depreciation)	$	286,811,469

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

6. Investment Transactions

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2016, aggregated $207,892,601 and $277,013,252, respectively.

At June 30, 2016, in connection with securities lending transactions, the Fund loaned equity investments and received $6,041,821 of cash collateral. The gross amount of recognized liability for such transactions is included in payable upon return of securities loaned in the Statement of Assets and Liabilities. The agreements can be terminated at any time.

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 $2 billion (Global Credit Facility) which matures on February 10, 2017. 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 0.07% based upon the unused portion of the Global Credit Facility. Effective February 12, 2016, the annual commitment fee is 0.15%. These fees are reflected in other expenses in the Statement of Operations. During the period ended June 30, 2016, 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 financial instruments and are summarized in the following fair value hierarchy:

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

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

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

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Small Cap Value VIP Fund (continued)

8. Fair Value Measurements (continued)

The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.

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

A summary of inputs used as of June 30, 2016, in valuing the Fund’s assets carried at fair value, is as follows:

	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities
Equity Investmentsa	$	1,194,898,575	$	—	$	—	$	1,194,898,575
Corporate Bonds		—		7,488,880		—		7,488,880
Short Term Investments		123,270,435		1,208,821		—		124,479,256
Total Investments in Securities	$	1,318,169,010	$	8,697,701	$	—	$	1,326,866,711

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

9. Subsequent Events

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

FSV-24 Semiannual Report

Franklin Small-Mid Cap Growth VIP Fund

This semiannual report for Franklin Small-Mid Cap Growth VIP Fund covers the period ended June 30, 2016.

Class 1 Performance Summary as of June 30, 2016

The Fund’s Class 1 shares had a -0.53% total return* for the six-month period ended June 30, 2016.

*The Fund has a fee waiver associated with any investment in a Franklin Templeton money fund and/or Franklin Templeton fund, as applicable, contractually guaranteed through at least the Fund’s current fiscal year-end. Fund investment results reflect the fee waiver, to the extent applicable; without this reduction, the results would have been lower.

Performance reflects the Fund’s Class 1 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.

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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FRANKLIN SMALL-MID CAP GROWTH VIP FUND

Fund Goal and Main Investments

The Fund seeks long-term capital growth. Under normal market conditions, the Fund invests at least 80% of its net assets in equity securities of small-capitalization and mid-capitalization companies. For this Fund, small cap companies are those within the market capitalization range of companies in the Russell 2500^TM Index at the time of purchase, and midcap companies are those within the market capitalization range of companies in the Russell Midcap^® Index at the time of purchase.¹

Fund Risks

All investments involve risks, including possible loss of principal. Growth stock prices reflect projections of future earnings or revenues, and can, therefore, fall dramatically if the company fails to meet those projections. Smaller, midsized and relatively new or unseasoned companies can be particularly sensitive to changing economic conditions, and their prospects for growth are less certain than those of larger, more established companies. Historically, these securities have experienced more price volatility than larger company stocks, especially over the short term. To the extent the Fund focuses on particular countries, regions, industries, sectors or types of investment from time to time, it may be subject to greater risks of adverse developments in such areas of focus than a fund that invests in a wider variety of countries, regions, industries, sectors or investments. From time to time, the trading market for a particular security or type of security in which the Fund invests may become less liquid or even illiquid. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. In comparison, the Fund’s narrow benchmark, the Russell Midcap^® Growth Index, generated a +2.15% total return, and its broad benchmark, the Standard & Poor’s^® 500 Index (S&P 500^®), produced a +3.84% total return for the same period.²

Economic and Market Overview

For the six-month period ended June 30, 2016, the U.S. economy grew moderately, as measured by gross domestic product in 2016’s first and second quarters, driven by consumer spending and exports. A decline in private inventory investment and nonresidential fixed investment contributed to the moderation. Although the unemployment rate rose from 4.7% in May to 4.9% in June, the increase was due to additional people entering the labor force, and for the entire period under review, unemployment declined slightly.³ Home sales and prices rose amid relatively low mortgage rates. Monthly retail sales grew during most of the review period, and rose to the highest level in April in more than a year, due to a broad-based increase across most retail categories. Inflation, as measured by the Consumer Price Index, remained subdued overall even though it spiked to the highest level in three years in April mainly due to a rebound in energy prices.

After raising its target range for the federal funds rate to 0.25%–0.50% at its December meeting, the Federal Reserve (Fed) maintained the rate through period-end. Although the Fed indicated a potential interest rate hike in June, subsequent reports showed job additions slowed substantially in May. Consequently, at its June meeting, the Fed kept the federal funds rate unchanged, and indicated that in determining the timing and size of future adjustments to the target range, it will assess realized and expected economic conditions relative to its objectives of maximum employment and 2.00% inflation. The Fed expects economic conditions to evolve in a manner that could warrant only gradual increases in the federal funds rate.

U.S. equity markets rose for the period under review, as investors generally remained confident due to the Fed’s continued caution surrounding further interest rate increases, the European Central Bank expanding its quantitative easing measures and cutting its benchmark interest rate to zero, the People’s Bank of China introducing further easing measures and the Bank of Japan adopting a negative interest rate policy. The rally in crude oil prices near period-end also boosted investor confidence. However, the U.K.’s historic referendum to leave the European Union (also known as the “Brexit”), global economic growth concerns and China’s slowing economy weighed on market sentiment. Despite periods of volatility, the broad U.S. stock market ended the six-month period higher, as measured by the S&P 500.

1. Please see Index Descriptions following the Fund Summaries.

2. Source: 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.

3. Bureau of Labor Statistics.

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FRANKLIN SMALL-MID CAP GROWTH VIP FUND

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

For the six-month period ended June 30, 2016, some sectors represented in the Fund’s portfolio contributed to absolute performance. Relative to the Fund’s narrow benchmark, the Russell Midcap^® Growth Index, key contributors included an overweighted position in energy and stock selection in the materials and consumer staples sectors. In energy, the Fund’s holding in natural gas provider EQT benefited from a sharp rebound in natural gas prices following a record warm winter that caused prices to decrease. The company also had a strong balance sheet and large cash position, which enabled EQT to add to its Marcellus Shale position through acquisitions at what we considered attractive values. In the materials and consumer staples sectors, positions in construction materials manufacturer Martin Marietta Materials and private label packaged food company TreeHouse Foods aided the Fund’s relative performance. Martin Marietta Materials experienced boosted performance as a stronger residential construction environment and the passage of a federal highway bill in December 2015 supported strong demand for cement and other construction materials. The company has enjoyed solid profit margins and meaningful pricing growth for its products. In addition, Martin Marietta sold its California cement plant, which contributed to margin expansion, and purchased additional assets in Colorado, which led the company to benefit from the Denver metropolitan area’s strong housing environment. Share buybacks also supported the company’s share price, as did disciplined capital allocation, in

our view. TreeHouse serves an array of customers including Wal-Mart, Safeway and Whole Foods, and near the beginning of the period, expanded its base by acquiring ConAgra’s private brands business at what we believed was an attractive price. In our analysis, this acquisition will benefit TreeHouse for many years. Additionally, during the period the company was able to double its revenue base, broaden its portfolio and ultimately increase its value proposition to retailers. We further believe there are substantial cost and revenue synergies, which are not fully appreciated in consensus expectations.

Other notable contributors to the Fund’s relative performance included oil and natural gas provider Concho Resources and geospatial information products and services provider DigitalGlobe. Concho Resources improved drilling efficiencies during the period. This improvement along with the company’s overall operational performance supported 2017 guidance for double-digit production growth, well above the market’s perceived value. The company continued to be relatively conservative in drilling its

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FRANKLIN SMALL-MID CAP GROWTH VIP FUND

Permian oil acreage on the western side of the basin, traditionally drilling shorter horizontal wells and using smaller hydraulic fracturing activities than its peers. However, the company began to move toward bigger and longer horizontal wells, which can provide more upside to reserves and production in the long term. Shares of DigitalGlobe increased due to strong revenue and earnings per share. This period, however, did follow a year of underperformance for the company, but we believe management has improved its ability to set reasonable and achievable expectations. The company renewed two of its three largest contracts, captured new contracts and the increased global threat environment provided further upside potential to revenue and profitability due to some shorter cycle sales. In the first quarter of 2016, management increased its focus on costs and being more capital efficient.

In contrast, key detractors from the Fund’s relative performance included an overweighted position in the health care sector along with stock selection in the health care, industrials and financials sectors. In health care, shares of specialty pharmaceuticals manufacturer Perrigo fell due to news of the departure of its chief executive officer and a concurrent reduction in guidance. Margins for the company’s prescriptions segment were hurt by an unusual spike in approvals for competitor drugs. We believe margins will likely recover as Perrigo’s own drugs gain approval and with new management’s focus on improving operational efficiency at its recently acquired, underperforming European subsidiary.

Within industrials, Robert Half International (RHI), a specialized staffing company, generally met expectations during the period. However, earnings guidance consistently declined due to slowing growth in the demand for the company’s temporary staffing services, which management attributed to a cautious approach to hiring by clients amid global economic uncertainty. Moreover, we believe the lower-than-expected U.S. May nonfarm payroll report and the Brexit contributed to greater economic uncertainty, which could further extend the cautious hiring approach of RHI’s clients. In the financials sector, shares of financial advisory and asset management company Lazard, which is heavily tied to the U.K. and Europe in general, was negatively impacted by the Brexit.

Top 10 Holdings
6/30/16
Company Sector/Industry	% of Total Net Assets
Constellation Brands Inc Consumer Staples		2.2%
Electronic Arts Inc. Information Technology		2.0%
Intercontinental Exchange Inc. Financials		1.9%
Roper Technologies Inc. Industrials		1.8%
Equinix Inc. Financials		1.8%
Monster Beverage Corp. Consumer Staples		1.8%
Edwards Lifesciences Corp. Health Care		1.6%
NXP Semiconductors NV (Netherlands) Information Technology		1.6%
The Cooper Cos. Inc. Health Care		1.5%
Willis Towers Watson PLC Financials		1.5%

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).

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

The foregoing information reflects our analysis, opinions and portfolio holdings as of June 30, 2016, 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.

FSC-4 Semiannual Report

FRANKLIN SMALL-MID CAP GROWTH VIP FUND

Class 1 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 × $7.50 = $64.50.

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

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 1	Beginning Account Value 1/1/16		Ending Account Value 6/30/16		Fund-Level Expenses Incurred During Period* 1/1/16–6/30/16
Actual	$	1,000	$	994.70	$	4.12
Hypothetical (5% return before expenses)	$	1,000	$	1,020.74	$	4.17

*Expenses are calculated using the most recent six-month annualized expense ratio, net of expense waivers, for the Fund’s Class 1 shares (0.83%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 182/366 to reflect the one-half year period.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Highlights

Franklin Small-Mid Cap Growth VIP Fund

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012			2011
Class 1
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$19.09			$24.95			$28.38			$21.87			$21.19			$22.21
Income from investment operationsa:
Net investment income (loss)b		(0.01	)		—	c,d		(0.07	)		(0.09	)		(0.01	)e		(0.05	)
Net realized and unrealized gains (losses)		(0.09	)		(0.03	)		2.04			8.19			2.27			(0.97	)
Total from investment operations		(0.10	)		(0.03	)		1.97			8.10			2.26			(1.02	)
Less distributions from net realized gains		(2.06	)		(5.83	)		(5.40	)		(1.59	)		(1.58	)		—
Net asset value, end of period		$16.93			$19.09			$24.95			$28.38			$21.87			$21.19
Total returnf		(0.53)%			(2.44)%			7.78%			38.50%			11.12%			(4.59)%
Ratios to average net assetsg
Expenses before waiver and payments by affiliates		0.84%			0.81%			0.80%			0.80%			0.80%			0.79%
Expenses net of waiver and payments by affiliates		0.83%	h		0.81%	i		0.80%	i		0.80%	h		0.80%			0.79%
Net investment income (loss)		(0.08)%			0.01%	d		(0.29)%			(0.35)%			(0.03)%	e		(0.21)%
Supplemental data
Net assets, end of period (000’s)		$81,189			$87,866			$99,803			$98,020			$75,977			$76,384
Portfolio turnover rate		14.04%			37.85%			48.73%			42.77%			41.44%			45.00%

^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’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.

^bBased on average daily shares outstanding.

^cAmount rounds to less than $0.01 per share.

^dNet investment income per share includes approximately $0.05 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been (0.24)%.

^eNet investment income per share includes approximately $0.03 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been (0.16)%.

^fTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which 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.

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

ⁱBenefit of waiver and payments by affiliates rounds to less than 0.01%.

FSC-6 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL HIGHLIGHTS

Franklin Small-Mid Cap Growth VIP Fund (continued)

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012			2011
Class 2
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$17.69			$23.56			$27.16			$21.04			$20.49			$21.54
Income from investment operationsa:
Net investment income (loss)b		(0.03	)		(0.05	)c		(0.13	)		(0.14	)		(0.06	)d		(0.10	)
Net realized and unrealized gains (losses)		(0.08	)		0.01			1.93			7.85			2.19			(0.95	)
Total from investment operations		(0.11	)		(0.04	)		1.80			7.71			2.13			(1.05	)
Less distributions from net realized gains		(2.06	)		(5.83	)		(5.40	)		(1.59	)		(1.58	)		—
Net asset value, end of period		$15.52			$17.69			$23.56			$27.16			$21.04			$20.49
Total returne		(0.63)%			(2.66)%			7.47%			38.15%			10.85%			(4.87)%
Ratios to average net assetsf
Expenses before waiver and payments by affiliates		1.09%			1.06%			1.05%			1.05%			1.05%			1.04%
Expenses net of waiver and payments by affiliates		1.08%	g		1.06%	h		1.05%	h		1.05%	g		1.05%			1.04%
Net investment income (loss)		(0.33)%			(0.24)%	c		(0.54)%			(0.60)%			(0.28)%	d		(0.46)%
Supplemental data
Net assets, end of period (000’s)		$447,066			$478,649			$582,772			$660,806			$670,193			$717,086
Portfolio turnover rate		14.04%			37.85%			48.73%			42.77%			41.44%			45.00%

^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’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $0.05 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been (0.49)%.

^dNet investment income per share includes approximately $0.03 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been (0.41)%.

^eTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which 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%.

^hBenefit of waiver and payments by affiliates rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report FSC-7

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL HIGHLIGHTS

Franklin Small-Mid Cap Growth VIP Fund (continued)

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012			2011
Class 4
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$18.23			$24.14			$27.72			$21.47			$20.90			$21.98
Income from investment operationsa:
Net investment income (loss)b		(0.04	)		(0.07	)c		(0.16	)		(0.17	)		(0.09	)d		(0.12	)
Net realized and unrealized gains (losses)		(0.09	)		(0.01	)		1.98			8.01			2.24			(0.96	)
Total from investment operations		(0.13	)		(0.08	)		1.82			7.84			2.15			(1.08	)
Less distributions from net realized gains		(2.06	)		(5.83	)		(5.40	)		(1.59	)		(1.58	)		—
Net asset value, end of period		$16.04			$18.23			$24.14			$27.72			$21.47			$20.90
Total returne		(0.73)%			(2.77)%			7.39%			37.99%			10.79%			(4.91)%
Ratios to average net assetsf
Expenses before waiver and payments by affiliates		1.19%			1.16%			1.15%			1.15%			1.15%			1.14%
Expenses net of waiver and payments by affiliates		1.18%	g		1.16%	h		1.15%	h		1.15%	g		1.15%			1.14%
Net investment income (loss)		(0.43)%			(0.34)%	c		(0.64)%			(0.70)%			(0.38)%	d		(0.56)%
Supplemental data
Net assets, end of period (000’s)		$13,845			$15,105			$16,384			$19,132			$12,000			$12,664
Portfolio turnover rate		14.04%			37.85%			48.73%			42.77%			41.44%			45.00%

^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’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $0.05 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been (0.59)%.

^dNet investment income per share includes approximately $0.03 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been (0.51)%.

^eTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which 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%.

^hBenefit of waiver and payments by affiliates rounds to less than 0.01%.

FSC-8 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Statement of Investments, June 30, 2016 (unaudited)

Franklin Small-Mid Cap Growth VIP Fund
		Shares		Value
	Common Stocks 96.2%
	Consumer Discretionary 16.4%
	Advance Auto Parts Inc.		21,200	$	3,426,555
a	Buffalo Wild Wings Inc.		30,500		4,237,975
	Delphi Automotive PLC (United Kingdom)		62,900		3,937,540
	Dick’s Sporting Goods Inc.		142,600		6,425,556
a	Dollar Tree Inc.		82,000		7,727,680
a	Global Eagle Entertainment Inc.		299,100		1,986,024
a	Grand Canyon Education Inc.		105,500		4,211,560
	Hanesbrands Inc.		210,500		5,289,865
a	IMAX Corp. (Canada)		141,000		4,156,680
	L Brands Inc.		91,300		6,128,969
b	Marriott International Inc., A		62,800		4,173,688
	Newell Brands Inc.		91,616		4,449,789
a	Norwegian Cruise Line Holdings Ltd.		107,400		4,278,816
a	NVR Inc.		2,300		4,094,782
a	O’Reilly Automotive Inc.		15,700		4,256,270
	Polaris Industries Inc.		40,300		3,294,928
	Ross Stores Inc.		71,600		4,059,004
	Tractor Supply Co.		60,100		5,479,918
a,b	Under Armour Inc., A		58,176		2,334,603
a	Under Armour Inc., C		51,036		1,857,700
a,b	Zoe’s Kitchen Inc.		88,700		3,217,149
					89,025,051
	Consumer Staples 6.9%
	Constellation Brands Inc., A		73,200		12,107,280
a	Monster Beverage Corp.		60,300		9,690,813
	Pinnacle Foods Inc.		38,300		1,772,907
a	TreeHouse Foods Inc.		65,600		6,733,840
a	WhiteWave Foods Co., A		150,200		7,050,388
					37,355,228
	Energy 3.0%
	Cabot Oil & Gas Corp., A		184,900		4,759,326
a	Concho Resources Inc.		50,400		6,011,208
	EQT Corp.		34,600		2,679,078
a	Matador Resources Co.		5,100		100,980
	Superior Energy Services Inc.		143,000		2,632,630
					16,183,222
	Financials 10.9%
a	Affiliated Managers Group Inc.		42,800		6,024,956
	Arthur J. Gallagher & Co.		105,200		5,007,520
a	CBRE Group Inc.		150,500		3,985,240
	Equinix Inc.		25,225		9,780,489
	Intercontinental Exchange Inc.		39,208		10,035,680
	Lazard Ltd. LP, A		143,400		4,270,452
	Moody’s Corp.		37,100		3,476,641
a	Signature Bank		56,500		7,057,980
a	SVB Financial Group		12,000		1,141,920
	Willis Towers Watson PLC		66,400		8,254,184
					59,035,062

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Small-Mid Cap Growth VIP Fund (continued)

		Shares		Value
	Common Stocks (continued)
	Health Care 19.6%
a,b	Acadia Pharmaceuticals Inc.		38,970	$	1,264,966
a	Akorn Inc.		175,100		4,987,723
a	BioMarin Pharmaceutical Inc.		31,047		2,415,457
a,b	Celldex Therapeutics Inc.		137,000		601,430
a	Cerner Corp.		87,700		5,139,220
	The Cooper Cos. Inc.		48,200		8,269,674
a	DaVita HealthCare Partners Inc.		79,400		6,139,208
	DENTSPLY SIRONA Inc.		75,100		4,659,204
a	DexCom Inc.		79,027		6,269,212
a	Edwards Lifesciences Corp.		89,500		8,925,835
a	Envision Healthcare Holdings Inc.		77,943		1,977,414
a,b	Heron Therapeutics Inc.		83,742		1,511,543
a	Hologic Inc.		195,600		6,767,760
a	Impax Laboratories Inc.		96,700		2,786,894
a	Incyte Corp.		35,800		2,863,284
a	Insulet Corp.		60,985		1,844,186
a	Mallinckrodt PLC		94,326		5,733,134
a	Medivation Inc.		49,794		3,002,578
a	Mettler-Toledo International Inc.		18,600		6,787,512
a	Neurocrine Biosciences Inc.		25,615		1,164,202
a	Nevro Corp.		71,900		5,303,344
a,b	Penumbra Inc.		26,569		1,580,856
	Perrigo Co. PLC		29,090		2,637,590
a	Pfenex Inc.		159,200		1,332,504
a	Quintiles Transnational Holdings Inc.		124,200		8,112,744
a,b	Revance Therapeutics Inc.		109,200		1,485,120
a	SciClone Pharmaceuticals Inc.		81,342		1,062,327
a,b	TherapeuticsMD Inc.		175,000		1,487,500
					106,112,421
	Industrials 14.9%
	Acuity Brands Inc.		15,800		3,917,768
	Allegiant Travel Co.		12,492		1,892,538
	AMETEK Inc.		174,600		8,071,758
	B/E Aerospace Inc.		108,600		5,014,605
a	DigitalGlobe Inc.		235,100		5,028,789
	Dun & Bradstreet Corp.		48,900		5,957,976
a	Genesee & Wyoming Inc.		112,200		6,614,190
a	HD Supply Holdings Inc.		211,000		7,347,020
	Hexcel Corp.		120,200		5,005,128
a	IHS Inc., A		60,500		6,994,405
	J.B. Hunt Transport Services Inc.		37,000		2,994,410
	Robert Half International Inc.		155,000		5,914,800
	Roper Technologies Inc.		57,370		9,785,027
a	Sensata Technologies Holding NV		68,400		2,386,476
a	Verisk Analytics Inc.		46,100		3,737,788
					80,662,678
	Information Technology 20.9%
a	2U Inc.		170,700		5,020,287
a	Alliance Data Systems Corp.		18,600		3,644,112
	Analog Devices Inc.		20,000		1,132,800

FSC-10 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Small-Mid Cap Growth VIP Fund (continued)

		Shares		Value
	Common Stocks (continued)
	Information Technology (continued)
a	ANSYS Inc.		35,800	$	3,248,850
a	Atlassian Corp. PLC (Australia)		57,400		1,486,660
a	Bottomline Technologies (de) Inc.		95,400		2,053,962
	Cognex Corp.		125,200		5,396,120
a	CoStar Group Inc.		37,600		8,221,616
	CSRA Inc.		212,400		4,976,532
a	Electronic Arts Inc.		146,300		11,083,688
	Fidelity National Information Services Inc.		69,200		5,098,656
a	FleetCor Technologies Inc.		38,900		5,567,757
a	GoDaddy Inc., A		133,300		4,157,627
a	Integrated Device Technology Inc.		40,000		805,200
	Intersil Corp., A		383,800		5,196,652
	Lam Research Corp.		41,300		3,471,678
	Microchip Technology Inc.		56,000		2,842,560
a	NXP Semiconductors NV (Netherlands)		110,068		8,622,727
a	Palo Alto Networks Inc.		44,400		5,445,216
a	Proofpoint Inc.		38,200		2,410,038
a	Red Hat Inc.		80,200		5,822,520
a	ServiceNow Inc.		70,800		4,701,120
a	Vantiv Inc., A		117,500		6,650,500
a	ViaSat Inc.		54,452		3,887,873
a	Workday Inc., A		35,400		2,643,318
					113,588,069
	Materials 2.8%
a	Axalta Coating Systems Ltd.		268,800		7,131,264
	Martin Marietta Materials Inc.		42,600		8,179,200
					15,310,464
	Telecommunication Services 0.8%
a	SBA Communications Corp.		41,800		4,511,892
	Total Common Stocks (Cost $393,093,579)				521,784,087
	Preferred Stocks 0.3%
	Consumer Discretionary 0.3%
a,c	DraftKings Inc., pfd., D		115,528		440,462
a,c	DraftKings Inc., pfd., D-1		284,105		1,083,178
	Total Preferred Stocks (Cost $2,800,003)				1,523,640
	Total Investments before Short Term Investments (Cost $395,893,582)				523,307,727
	Short Term Investments 5.3%
	Money Market Funds (Cost $12,543,362) 2.3%
a,d	Institutional Fiduciary Trust Money Market Portfolio		12,543,362		12,543,362

Semiannual Report FSC-11

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Small-Mid Cap Growth VIP Fund (continued)

		Shares		Value
e	Investments from Cash Collateral Received for Loaned Securities (Cost $15,832,625) 3.0%
	Money Market Funds 3.0%
a,d	Institutional Fiduciary Trust Money Market Portfolio		15,832,625	$	15,832,625
	Total Investments (Cost $424,269,569) 101.8%				551,683,714
	Other Assets, less Liabilities (1.8)%				(9,583,463	)
	Net Assets 100.0%			$	542,100,251

^aNon-income producing.

^bA portion or all of the security is on loan at June 30, 2016. See Note 1(c).

^cSee Note 7 regarding restricted securities.

^dSee Note 3(e) regarding investments in affiliated management investment companies.

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

FSC-12 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Statements

Statement of Assets and Liabilities

June 30, 2016 (unaudited)

	Franklin Small-Mid Cap Growth VIP Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	395,893,582
Cost - Non-controlled affiliates (Note 3e)		28,375,987
Total cost of investments	$	424,269,569
Value - Unaffiliated issuers	$	523,307,727
Value - Non-controlled affiliates (Note 3e)		28,375,987
Total value of investments (includes securities loaned in the amount of $15,819,120)		551,683,714
Receivables:
Investment securities sold		7,518,557
Capital shares sold		94,175
Dividends and interest		348,175
Due from custodian		76,823
Other assets		246
Total assets		559,721,690
Liabilities:
Payables:
Investment securities purchased		345,979
Capital shares redeemed		391,506
Management fees		346,915
Distribution fees		194,501
Payable upon return of securities loaned		16,180,800
Accrued expenses and other liabilities		161,738
Total liabilities		17,621,439
Net assets, at value	$	542,100,251
Net assets consist of:
Paid-in capital	$	411,627,629
Undistributed net investment income (loss)		(793,998	)
Net unrealized appreciation (depreciation)		127,414,145
Accumulated net realized gain (loss)		3,852,475
Net assets, at value	$	542,100,251
Class 1:
Net assets, at value	$	81,189,094
Shares outstanding		4,794,490
Net asset value and maximum offering price per share	$	16.93
Class 2:
Net assets, at value	$	447,065,712
Shares outstanding		28,810,093
Net asset value and maximum offering price per share	$	15.52
Class 4:
Net assets, at value	$	13,845,445
Shares outstanding		862,966
Net asset value and maximum offering price per share	$	16.04

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report FSC-13

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Statement of Operations

for the six months ended June 30, 2016 (unaudited)

	Franklin Small-Mid Cap Growth VIP Fund
Investment income:
Dividends	$	1,836,503
Income from securities loaned (net of fees and rebates)		148,426
Total investment income		1,984,929
Expenses:
Management fees (Note 3a)		2,108,719
Distribution fees: (Note 3c)
Class 2		547,142
Class 4		24,059
Custodian fees (Note 4)		2,526
Reports to shareholders		103,068
Professional fees		21,432
Trustees’ fees and expenses		1,502
Other		6,613
Total expenses		2,815,061
Expense reductions (Note 4)		(24	)
Expenses waived/paid by affiliates (Note 3e)		(36,110	)
Net expenses		2,778,927
Net investment income (loss)		(793,998	)
Realized and unrealized gains (losses):
Net realized gain (loss) from investments		4,815,924
Net change in unrealized appreciation (depreciation) on investments		(9,384,738	)
Net realized and unrealized gain (loss)		(4,568,814	)
Net increase (decrease) in net assets resulting from operations	$	(5,362,812	)

FSC-14 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Statements of Changes in Net Assets

	Franklin Small-Mid Cap Growth VIP Fund
	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31, 2015
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	(793,998	)	$	(1,403,843	)
Net realized gain (loss)		4,815,924			63,022,161
Net change in unrealized appreciation (depreciation)		(9,384,738	)		(74,279,798	)
Net increase (decrease) in net assets resulting from operations		(5,362,812	)		(12,661,480	)
Distributions to shareholders from:
Net realized gains:
Class 1		(8,833,462	)		(22,509,343	)
Class 2		(52,547,749	)		(135,758,632	)
Class 4		(1,581,894	)		(4,098,814	)
Total distributions to shareholders		(62,963,105	)		(162,366,789	)
Capital share transactions: (Note 2)
Class 1		2,842,337			12,480,207
Class 2		25,516,987			41,958,103
Class 4		446,499			3,251,391
Total capital share transactions		28,805,823			57,689,701
Net increase (decrease) in net assets		(39,520,094	)		(117,338,568	)
Net assets:
Beginning of period		581,620,345			698,958,913
End of period	$	542,100,251		$	581,620,345
Undistributed net investment income (loss) included in net assets:
End of period	$	(793,998	)	$	—

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report FSC-15

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Notes to Financial Statements (unaudited)

Franklin Small-Mid Cap Growth VIP Fund

1. Organization and Significant Accounting Policies

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of nineteen separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Franklin Small-Mid Cap Growth VIP 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 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. The Fund calculates the net asset value (NAV) per share as of 4 p.m. Eastern time each day the New York Stock Exchange (NYSE) is open for trading. Under compliance policies and procedures approved by the Trust’s Board of Trustees (the Board), the Fund’s administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The VC provides administration and oversight of the Fund’s valuation policies and procedures, which are approved annually by the Board. Among other things, these procedures allow the Fund to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

Equity securities listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded or as of 4 p.m. Eastern time whichever is earlier. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the day that the

value of the security is determined. Over-the-counter [(OTC)] securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.

Investments in open-end mutual funds are valued at the closing NAV.

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

Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 4 p.m. Eastern time. In addition, trading in certain foreign markets may not take place on every NYSE business day. 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 VC 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

FSC-16 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Small-Mid Cap Growth VIP Fund (continued)

Depositary 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.

When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the NYSE is closed, which could result in differences between the value of the Fund’s portfolio securities on the last business day and the last calendar day of the reporting period. Any significant security valuation changes due to an open foreign market are adjusted and reflected by the Fund for financial reporting purposes.

b. Foreign Currency Translation

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

The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments in 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 securities lending program to earn additional income. The Fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the fair value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the fair 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 deposited into a joint cash account with other funds and is used to invest in a money market fund managed by Franklin Advisers, Inc., an affiliate of the Fund, and/or uninvested cash as included in due from custodian in the Statement of Assets and Liabilities. The Fund may receive income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. Income from securities loaned, net of fees paid to the securities lending agent and/or third-party vendor, is reported separately in the Statement of Operations. The Fund bears the market risk with respect to the collateral investment, securities loaned, and the risk that the Fund has the right to repurchase the securities in the open market using the collateral received. 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 if applicable, excise taxes. As a result, no provision for U.S. federal income taxes is required.

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

Semiannual Report FSC-17

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Small-Mid Cap Growth VIP Fund (continued)

1. Organization and Significant Accounting Policies (continued)

d. Income and Deferred Taxes (continued)

The Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of June 30, 2016, the Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax returns). Open tax years are those that remain subject to examination and are based on each tax jurisdiction’s 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. Dividend income is recorded on the ex-dividend date except for certain dividends from foreign securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Fund. 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 U.S. GAAP. 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 U.S. GAAP 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.

FSC-18 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Small-Mid Cap Growth VIP Fund (continued)

2. Shares of Beneficial Interest

At June 30, 2016, 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, 2016						Year Ended December 31, 2015
	Shares			Amount			Shares			Amount
Class 1 Shares:
Shares sold		76,632		$	1,376,820			195,710		$	4,581,670
Shares issued in reinvestment of distributions		521,764			8,833,462			1,062,262			22,509,343
Shares redeemed		(406,483	)		(7,367,945	)		(655,587	)		(14,610,806	)
Net increase (decrease)		191,913		$	2,842,337			602,385		$	12,480,207
Class 2 Shares:
Shares sold		644,220		$	10,808,921			1,198,268		$	26,202,656
Shares issued in reinvestment of distributions		3,385,809			52,547,749			6,905,322			135,758,632
Shares redeemed		(2,279,883	)		(37,839,683	)		(5,776,970	)		(120,003,185	)
Net increase (decrease)		1,750,146		$	25,516,987			2,326,620		$	41,958,103
Class 4 Shares:
Shares sold		61,135		$	1,034,422			239,982		$	5,202,958
Shares issued in reinvestment of distributions		98,560			1,581,894			202,211			4,098,814
Shares redeemed		(125,457	)		(2,169,817	)		(292,263	)		(6,050,381	)
Net increase (decrease)		34,238		$	446,499			149,930		$	3,251,391

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
0.800%	Up to and including $500 million
0.700%	Over $500 million, up to and including $1 billion
0.650%	Over $1 billion, up to and including $1.5 billion
0.600%	Over $1.5 billion, up to and including $6.5 billion
0.575%	Over $6.5 billion, up to and including $11.5 billion
0.550%	Over $11.5 billion, up to and including $16.5 billion
0.540%	Over $16.5 billion, up to and including $19 billion
0.530%	Over $19 billion, up to and including $21.5 billion
0.520%	In excess of $21.5 billion

Semiannual Report FSC-19

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Small-Mid Cap Growth VIP Fund (continued)

3. Transactions With Affiliates (continued)

a. Management Fees (continued)

For the period ended June 30, 2016, the annualized effective investment management fee rate was 0.793% of the Fund’s average daily net assets.

b. Administrative Fees

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

c. Distribution Fees

The Board has adopted distribution plans for Class 2 and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to per year of its average daily net assets of each class. The Board has agreed to limit the current rate to 0.25% per year for Class 2. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.

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. Investments in Affiliated Management Investment Companies

The Fund invests in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Fund are waived on assets invested in the affiliated management investment companies, as noted in the Statement of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate. Prior to January 1, 2014, the waiver was accounted for as a reduction to management fees.

	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 Gain (Loss)		% of Affiliated Fund Shares Outstanding Held at End of Year
Non-Controlled Affiliates
Institutional Fiduciary Trust Money Market Portfolio		33,143,168		148,397,175		(153,164,356	)		28,375,987	$	28,375,987	$	—	$	—		0.1%

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, 2016, the custodian fees were reduced as noted in the Statement of Operations.

FSC-20 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Small-Mid Cap Growth VIP Fund (continued)

5. Income Taxes

At June 30, 2016, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	425,102,628
Unrealized appreciation	$	153,725,600
Unrealized depreciation		(27,144,514	)
Net unrealized appreciation (depreciation)	$	126,581,086

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

6. Investment Transactions

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2016, aggregated $74,960,730 and $115,974,275, respectively.

At June 30, 2016, in connection with securities lending transactions, the Fund loaned equity investments and received $16,180,800 of cash collateral. The gross amount of recognized liability for such transactions is included in payable upon return of securities loaned in the Statement of Assets and Liabilities. The agreements can be terminated at any time.

7. 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, 2016, 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
115,528	DraftKings Inc., pfd., D		8/07/15	$	622,222	$	440,462
284,105	DraftKings Inc., pfd., D-1		8/07/15		2,177,781		1,083,178
	Total Restricted Securities (Value is 0.3% of Net Assets)			$	2,800,003	$	1,523,640

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 $2 billion (Global Credit Facility) which matures on February 10, 2017. 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 0.07% based upon the unused portion of the Global Credit Facility. Effective February 12, 2016, the annual commitment fee is 0.15%. These fees are reflected in other expenses in the Statement of Operations. During the period ended June 30, 2016, the Fund did not use the Global Credit Facility.

Semiannual Report FSC-21

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Small-Mid Cap Growth VIP Fund (continued)

9. Fair Value Measurements

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

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

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

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

The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.

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

A summary of inputs used as of June 30, 2016, in valuing the Fund’s assets carried at fair value, is as follows:

	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities:
Equity Investments:a
Consumer Discretionary	$	89,025,051	$	—	$	1,523,640	$	90,548,691
All Other Equity Investmentsb		432,759,036		—		—		432,759,036
Short Term Investments		28,375,987		—		—		28,375,987
Total Investments in Securities	$	550,160,074	$	—	$	1,523,640	$	551,683,714

^aIncludes common and preferred stocks.

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

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.

FSC-22 Semiannual Report

Franklin Strategic Income VIP Fund

This semiannual report for Franklin Strategic Income VIP Fund covers the period ended June 30, 2016.

Class 1 Performance Summary as of June 30, 2016

The Fund’s Class 1 shares delivered a +4.32% total return* for the six-month period ended June 30, 2016.

*The Fund has a fee waiver associated with any investment in a Franklin Templeton money fund and/or Franklin Templeton fund as applicable, contractually guaranteed through at least the Fund’s current fiscal year-end. Fund investment results reflect the fee waiver, to the extent applicable; without this reduction, the results would have been lower.

Performance reflects the Fund’s Class 1 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.

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.

Semiannual Report FSI-1

FRANKLIN STRATEGIC INCOME VIP FUND

Fund Goals and Main Investments

The Fund seeks a high level of current income, with capital appreciation over the long term as a secondary goal. Under normal market conditions, the Fund invests primarily to predominantly in U.S. and foreign debt securities, including those in emerging markets.

Fund Risks

All investments involve risks, including possible loss of principal. 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. Changes in the financial strength of a bond issuer or in a bond’s credit rating may affect its value. High yields reflect the higher credit risks associated with certain lower rated securities held in the portfolio. Floating rate loans and high yield corporate bonds are rated below investment grade and are subject to greater risk of default, which could result in loss of principal—a risk that may be heightened in a slowing economy. The risks of foreign securities include currency fluctuations and political uncertainty. Investments in developing markets involve heightened risks related to the same factors, in addition to those associated with their relatively small size and lesser liquidity. Investing in derivative securities and the use of foreign currency techniques involve special risks as such may not achieve the anticipated benefits and/or may result in losses to the Fund. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. For comparison, the Fund’s benchmark, the Barclays U.S. Aggregate Bond Index, had a +5.31% total return for the period under review.¹ The Fund’s peers, as measured by the Lipper Multi-Sector Income Funds Classification Average, produced a +4.32% return.²

Economic and Market Overview

The U.S. economy grew moderately, as measured by gross domestic product in 2016’s first and second quarters, driven by consumer spending and exports. A decline in private inventory

investment and nonresidential fixed investment contributed to the moderation. Although the unemployment rate rose from 4.7% in May to 4.9% in June, the increase was due to additional people entering the labor force, and for the entire period under review, unemployment declined slightly.³ Home sales remained strong and prices rose through most of the period amid relatively low mortgage rates. Monthly retail sales grew during most of the review period, and rose to the highest level in April in more than a year, due to a broad-based increase across most retail categories. Inflation, as measured by the Consumer Price Index, remained subdued overall even though it spiked to the highest level in three years in April mainly due to a rebound in energy prices.

After raising its target range for the federal funds rate to 0.25%–0.50% at its December meeting, the Federal Reserve (Fed) maintained the rate through-period end. Although the Fed hinted at an interest rate hike in June, subsequent reports showed job additions slowed substantially in May. Consequently, at its June meeting, the Fed kept the federal funds rate unchanged, and indicated that in determining the timing and size of future adjustments to the target range, it will assess realized and expected economic conditions relative to its objectives of maximum employment and 2.00% inflation. The Fed expects economic conditions to evolve in a manner that could warrant only gradual increases in the federal funds rate.

The 10-year Treasury yield, which moves inversely to price, declined during the period. It declined from a period high of 2.27% on December 31, 2015, and remained relatively low through period-end, reflecting investors’ concerns about global economic uncertainty. Negative interest rates in Japan and Europe, and central banks’ purchases of government bonds, also put downward pressure on U.S. yields. It touched a period low of 1.46% on June 27, 2016, and ended the period at 1.49%, after the Fed kept short-term interest rates unchanged and fears of Britain’s exit from the European Union boosted safe-haven buying by investors.

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

1. Source: Morningstar.

2. Source: Lipper, a Thomson Reuters Company.

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.

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FRANKLIN STRATEGIC INCOME VIP FUND

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.

What is the yield curve?

The yield curve is a line that plots the interest rates, at a set point in time, of bonds having equal credit quality but differing maturity dates. The most frequently reported yield curve compares three-month, two-year and 30-year U.S. Treasury debt.

Manager’s Discussion

The Fund allocated assets across the broad fixed income markets on a global basis. During the period, we maintained large allocations to credit-sensitive securities, primarily noninvestment-grade credit, with a smaller exposure to investment-grade corporate bonds. The Fund also held positions in select non-U.S. dollar global government bonds. Conversely, the Fund sought to maintain a relatively low sensitivity to U.S. interest rates, with its sector exposure favoring the spread sectors of the fixed income market.

During the period, most spread sectors posted strong positive returns and delivered positive absolute performance. Corporate credit, both investment grade and below investment grade, was among the strongest performers during a period that largely lacked volatility until the end. Hard-currency emerging market issues also benefited results.

The Fund’s overweighted exposure to corporate credit in general, particularly noninvestment-grade corporate bonds, was a major contributor to absolute performance. The Fund’s position in non-U.S. dollar denominated bonds was also additive to our results as were our positions in municipal bonds and agency mortgage-backed securities. In contrast, our currency positions detracted from performance, mostly driven by our short Japanese yen exposure, as the yen strengthened versus the U.S. dollar during the period.

Asset Allocation*
Based on Total Net Assets
	6/30/16			12/31/15
High Yield Corporate Bonds & Preferred Securities		28.0%			29.3%
Floating Rate Loans		20.7%			20.0%
Investment-Grade Corporate Bonds		13.6%			10.1%
International Government & Agency Bonds (Non-$US)		10.2%			13.4%
Mortgage-Backed Securities		9.5%			3.9%
U.S. Treasury Securities		4.3%			4.0%
Commercial Mortgage-Backed Securities		2.8%			4.1%
International Government & Agency Bonds ($US)		2.3%			2.3%
Municipal Bonds		1.0%			2.6%
Equity		0.7%			1.0%
Asset-Backed Securities		0.4%			0.2%
Convertibles		0.0%	**		0.0%	**
Others		0.0%			1.8%
Short-Term Investments & Other Net Assets		6.4%			7.4%

*Figures reflect certain derivatives held in the portfolio (or their underlying reference assets) and may not total 100% or may be negative due to rounding, use of any derivatives, unsettled trades or other factors. The breakdown may not match the Statement of Investments (SOI).

**Rounds to less than 0.1%.

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

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FRANKLIN STRATEGIC INCOME VIP FUND

The portfolio utilized derivatives, including currency forwards and credit derivatives. Currency forwards are typically used to take long and short positions in currencies and as a tool to hedge currency risk. Credit derivatives can be used to hedge against credit risk or to otherwise enhance Fund returns by taking long or short positions in individual credits or baskets of credits in various sectors including in the corporate, municipal, sovereign and securitized markets.

What is a currency forward?

A currency forward is an agreement between the Fund and a counterparty to buy or sell a foreign currency in exchange for another currency at a specific exchange rate on a future date.

What is a credit derivative?

A credit derivative is a contract agreement between the Fund and a counterparty that is principally used by the Fund to gain or increase exposure to certain high yield securities or segments of the high yield bond market and/or to hedge against credit risk.

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

The foregoing information reflects our analysis, opinions and portfolio holdings as of June 30, 2016, 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.

FSI-4 Semiannual Report

FRANKLIN STRATEGIC INCOME VIP FUND

Class 1 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 × $7.50 = $64.50.

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

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 1	Beginning Account Value 1/1/16		Ending Account Value 6/30/16		Fund-Level Expenses Incurred During Period* 1/1/16–6/30/16
Actual	$	1,000	$	1,043.20	$	3.05
Hypothetical (5% return before expenses)	$	1,000	$	1,021.88	$	3.02

*Expenses are calculated using the most recent six-month annualized expense ratio, net of expense waivers, for the Fund’s Class 1 shares (0.60%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 182/366 to reflect the one-half year period.

Semiannual Report FSI-5

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Consolidated Financial Highlights

Franklin Strategic Income VIP Fund

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012			2011
Class 1
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$10.55			$11.90			$12.64			$13.17			$12.55			$12.99
Income from investment operationsa:
Net investment incomeb		0.24			0.53			0.54			0.59			0.65			0.69
Net realized and unrealized gains (losses)		0.21			(0.91	)		(0.25	)		(0.15	)		0.92			(0.32	)
Total from investment operations		0.45			(0.38	)		0.29			0.44			1.57			0.37
Less distributions from:
Net investment income and net foreign currency gains		(0.39	)		(0.77	)		(0.78	)		(0.80	)		(0.93	)		(0.81	)
Net realized gains		—			(0.20	)		(0.25	)		(0.17	)		(0.02	)		—
Total distributions		(0.39	)		(0.97	)		(1.03	)		(0.97	)		(0.95	)		(0.81	)
Net asset value, end of period		$10.61			$10.55			$11.90			$12.64			$13.17			$12.55
Total returnc		4.32%			(3.62)%			2.12%			3.52%			13.12%			2.78%
Ratios to average net assetsd
Expenses before waiver and payments by affiliates		0.67%	e		0.63%			0.63%			0.60%			0.58%			0.60%
Expenses net of waiver and payments by affiliates		0.60%	e,f		0.62%	f		0.62%	f		0.60%	f		0.58%			0.60%	f
Net investment income		4.48%			4.71%			4.34%			4.58%			5.04%			5.36%
Supplemental data
Net assets, end of period (000’s)		$417,298			$441,658			$574,850			$705,493			$1,019,537			$1,043,690
Portfolio turnover rate		56.48%			85.85%			55.64%			48.06%			49.98%			55.65%
Portfolio turnover rate excluding mortgage dollar rollsg		30.10%			51.47%			48.86%			47.01%			48.75%			55.65%

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

^eRatios are adjusted to exclude the effects of annualization for non-recurring expenses.

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

^gSee Note 1(h) regarding mortgage dollar rolls.

FSI-6 Semiannual Report    |    The accompanying notes are an integral part of these consolidated financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

CONSOLIDATED FINANCIAL HIGHLIGHTS

Franklin Strategic Income VIP Fund (continued)

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012			2011
Class 2
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$10.21			$11.55			$12.30			$12.84			$12.27			$12.72
Income from investment operationsa:
Net investment incomeb		0.22			0.49			0.49			0.54			0.60			0.64
Net realized and unrealized gains (losses)		0.20			(0.89	)		(0.24	)		(0.13	)		0.89			(0.30	)
Total from investment operations		0.42			(0.40	)		0.25			0.41			1.49			0.34
Less distributions from:
Net investment income and net foreign currency gains		(0.36	)		(0.74	)		(0.75	)		(0.78	)		(0.90	)		(0.79	)
Net realized gains		—			(0.20	)		(0.25	)		(0.17	)		(0.02	)		—
Total distributions		(0.36	)		(0.94	)		(1.00	)		(0.95	)		(0.92	)		(0.79	)
Net asset value, end of period		$10.27			$10.21			$11.55			$12.30			$12.84			$12.27
Total returnc		4.19%			(3.87)%			1.86%			3.32%			12.75%			2.57%
Ratios to average net assetsd
Expenses before waiver and payments by affiliates		0.92%	e		0.88%			0.88%			0.85%			0.83%			0.85%
Expenses net of waiver and payments by affiliates		0.85%	e,f		0.87%	f		0.87%	f		0.85%	f		0.83%			0.85%	f
Net investment income		4.23%			4.46%			4.09%			4.33%			4.79%			5.11%
Supplemental data
Net assets, end of period (000’s)		$202,076			$202,192			$206,571			$175,307			$158,451			$123,749
Portfolio turnover rate		56.48%			85.85%			55.64%			48.06%			49.98%			55.65%
Portfolio turnover rate excluding mortgage dollar rollsg		30.10%			51.47%			48.86%			47.01%			48.75%			55.65%

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

^eRatios are adjusted to exclude the effects of annualization for non-recurring expenses.

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

^gSee Note 1(h) regarding mortgage dollar rolls.

The accompanying notes are an integral part of these consolidated financial  statements.    |   Semiannual Report FSI-7

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

CONSOLIDATED FINANCIAL HIGHLIGHTS

Franklin Strategic Income VIP Fund (continued)

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012			2011
Class 4
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$10.44			$11.78			$12.51			$13.04			$12.44			$12.88
Income from investment operationsa:
Net investment incomeb		0.22			0.49			0.49			0.54			0.60			0.64
Net realized and unrealized gains (losses)		0.22			(0.91	)		(0.25	)		(0.14	)		0.91			(0.31	)
Total from investment operations		0.44			(0.42	)		0.24			0.40			1.51			0.33
Less distributions from:
Net investment income and net foreign currency gains		(0.35	)		(0.72	)		(0.72	)		(0.76	)		(0.89	)		(0.77	)
Net realized gains		—			(0.20	)		(0.25	)		(0.17	)		(0.02	)		—
Total distributions		(0.35	)		(0.92	)		(0.97	)		(0.93	)		(0.91	)		(0.77	)
Net asset value, end of period		$10.53			$10.44			$11.78			$12.51			$13.04			$12.44
Total returnc		4.20%			(3.98)%			1.75%			3.17%			12.67%			2.46%
Ratios to average net assetsd
Expenses before waiver and payments by affiliates		1.02%	e		0.98%			0.98%			0.95%			0.93%			0.95%
Expenses net of waiver and payments by affiliates		0.95%	e,f		0.97%	f		0.97%	f		0.95%	f		0.93%			0.95%	f
Net investment income		4.13%			4.36%			3.99%			4.23%			4.69%			5.01%
Supplemental data
Net assets, end of period (000’s)		$86,558			$92,965			$113,986			$134,970			$196,479			$188,786
Portfolio turnover rate		56.48%			85.85%			55.64%			48.06%			49.98%			55.65%
Portfolio turnover rate excluding mortgage dollar rollsg		30.10%			51.47%			48.86%			47.01%			48.75%			55.65%

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

^eRatios are adjusted to exclude the effects of annualization for non-recurring expenses.

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

^gSee Note 1(h) regarding mortgage dollar rolls.

FSI-8 Semiannual Report    |    The accompanying notes are an integral part of these consolidated  financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Consolidated Statement of Investments, June 30, 2016 (unaudited)

Franklin Strategic Income VIP Fund
		Country		Shares/Units		Value
	Common Stocks and Other Equity Interests 0.7%
	Consumer Services 0.7%
a,b,c	Turtle Bay Resort		United States		1,901,449	$	4,943,766
	Energy 0.0%†
a,d	Warrior Met Coal LLC, A		United States		1,499		151,124
	Health Care Equipment & Services 0.0%†
a	New Millennium Holdco Inc.		United States		9,504		32,670
	Transportation 0.0%†
a,e	CEVA Holdings LLC		United Kingdom		224		78,498
	Total Common Stocks and Other Equity Interests (Cost $5,469,402)						5,206,058
	Management Investment Companies 8.0%
	Diversified Financials 8.0%
f	Franklin Lower Tier Floating Rate Fund		United States		3,089,922		30,652,026
f	Franklin Middle Tier Floating Rate Fund		United States		2,637,222		25,554,680
	Total Management Investment Companies (Cost $56,622,547)						56,206,706
	Convertible Preferred Stocks 0.0%†
	Transportation 0.0%†
a,e	CEVA Holdings LLC, cvt. pfd., A-1		United Kingdom		6		3,150
a,e	CEVA Holdings LLC, cvt. pfd., A-2		United Kingdom		486		169,928
	Total Convertible Preferred Stocks (Cost $731,856)						173,078
				Principal Amount*
	Corporate Bonds 41.7%
	Automobiles & Components 0.7%
	Fiat Chrysler Automobiles NV, senior note, 5.25%, 4/15/23		United Kingdom		3,500,000		3,485,738
	The Goodyear Tire & Rubber Co.,
	senior bond, 5.00%, 5/31/26		United States		1,000,000		1,021,250
	senior note, 5.125%, 11/15/23		United States		400,000		415,000
							4,921,988
	Banks 4.3%
	Bank of America Corp., senior note,
	5.65%, 5/01/18		United States		1,500,000		1,608,174
	3.50%, 4/19/26		United States		3,800,000		3,939,008
	CIT Group Inc., senior note,
	5.375%, 5/15/20		United States		1,000,000		1,045,000
	5.00%, 8/15/22		United States		2,500,000		2,550,000
	Citigroup Inc.,
	senior note, 3.875%, 10/25/23		United States		3,000,000		3,224,772
	senior note, 3.30%, 4/27/25		United States		300,000		308,026
	senior note, 3.40%, 5/01/26		United States		3,100,000		3,187,854
	sub. bond, 5.50%, 9/13/25		United States		500,000		561,758
	sub. note, 4.05%, 7/30/22		United States		300,000		317,550

Semiannual Report FSI-9

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Strategic Income VIP Fund (continued)

		Country		Principal Amount*		Value
	Corporate Bonds (continued)
	Banks (continued)
	JPMorgan Chase & Co.,
	g junior sub. bond, R, 6.00% to 8/01/23, FRN thereafter, Perpetual		United States		1,500,000	$	1,535,625
	g junior sub. bond, X, 6.10% to 10/01/24, FRN thereafter, Perpetual		United States		500,000		516,250
	senior bond, 3.30%, 4/01/26		United States		400,000		414,649
	senior note, 4.25%, 10/15/20		United States		1,000,000		1,090,696
	sub. note, 3.375%, 5/01/23		United States		1,000,000		1,021,221
	sub. note, 3.875%, 9/10/24		United States		1,000,000		1,036,445
	Royal Bank of Scotland Group PLC, sub. note, 6.125%, 12/15/22		United Kingdom		700,000		734,619
	Wells Fargo & Co.,
	g junior sub. bond, S, 5.90% to 6/15/24, FRN thereafter, Perpetual		United States		1,500,000		1,545,000
	senior note, 2.60%, 7/22/20		United States		700,000		719,882
	senior note, 3.00%, 4/22/26		United States		5,000,000		5,103,080
							30,459,609
	Capital Goods 0.4%
h	Bombardier Inc., senior bond, 144A, 7.50%, 3/15/25		Canada		500,000		435,000
e	Erickson Air-Crane Inc., Purchase Price Notes, 6.00%, 11/02/20		United States		136,004		102,346
	Navistar International Corp., senior bond, 8.25%, 11/01/21		United States		1,400,000		990,500
	TransDigm Inc.,
	senior sub. bond, 6.50%, 7/15/24		United States		500,000		505,000
	senior sub. bond, 6.50%, 5/15/25		United States		200,000		201,250
	h senior sub. bond, 144A, 6.375%, 6/15/26		United States		400,000		399,500
	senior sub. note, 6.00%, 7/15/22		United States		400,000		404,072
							3,037,668
	Commercial & Professional Services 0.1%
	United Rentals North America Inc., senior bond, 5.875%, 9/15/26		United States		700,000		698,250
	Consumer Durables & Apparel 0.7%
h	Hanesbrands Inc., senior bond, 144A, 4.875%, 5/15/26		United States		1,500,000		1,512,900
	KB Home, senior note,
	4.75%, 5/15/19		United States		1,000,000		1,007,500
	7.00%, 12/15/21		United States		1,200,000		1,212,000
	Toll Brothers Finance Corp., senior bond, 5.625%, 1/15/24		United States		1,100,000		1,146,750
							4,879,150
	Consumer Services 1.7%
h	1011778 BC ULC/New Red Finance Inc., secured note, second lien, 144A, 6.00%, 4/01/22		Canada		2,000,000		2,079,380
h,i	Fontainebleau Las Vegas, senior secured bond, first lien, 144A, 11.00%, 6/15/15		United States		2,500,000		4,937
h	International Game Technology PLC, senior secured bond, 144A, 6.50%, 2/15/25		United States		3,300,000		3,333,000
h	KFC Holding Co./Pizza Hut Holdings LLC/Taco Bell of America LLC, senior note, 144A,
	5.00%, 6/01/24		United States		900,000		924,750
	5.25%, 6/01/26		United States		800,000		822,000
	Marriott International Inc., senior bond, 3.75%, 10/01/25		United States		3,000,000		3,212,886
	MGM Resorts International, senior note, 6.75%, 10/01/20		United States		200,000		219,500
h	Wynn Las Vegas LLC/Wynn Las Vegas Capital Corp., senior bond, 144A, 5.50%, 3/01/25		United States		700,000		679,875
h	Wynn Macau Ltd., senior note, 144A, 5.25%, 10/15/21		Macau		1,300,000		1,257,750
							12,534,078

FSI-10 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Strategic Income VIP Fund (continued)

		Country		Principal Amount*			Value
	Corporate Bonds (continued)
	Diversified Financials 2.8%
	AerCap Ireland Capital Ltd./AerCap Global Aviation Trust, senior note,
	4.25%, 7/01/20		Netherlands		1,300,000		$	1,331,720
	4.625%, 10/30/20		Netherlands		500,000			517,753
	5.00%, 10/01/21		Netherlands		1,100,000			1,150,847
	Capital One Financial Corp., senior note, 3.20%, 2/05/25		United States		800,000			809,342
	Deutsche Bank AG, sub. bond, 4.296% to 5/24/23, FRN thereafter, 5/24/28		Germany		2,700,000			2,379,105
	E*TRADE Financial Corp., senior note,
	5.375%, 11/15/22		United States		700,000			742,000
	4.625%, 9/15/23		United States		800,000			814,000
	The Goldman Sachs Group Inc., senior note, 3.50%, 1/23/25		United States		3,000,000			3,089,472
h	Lincoln Finance Ltd., senior secured note, 144A, 6.875%, 4/15/21		Netherlands		600,000	EUR		714,969
	Morgan Stanley,
	senior note, 3.875%, 1/27/26		United States		3,200,000			3,413,779
	sub. bond, 3.95%, 4/23/27		United States		1,000,000			1,010,883
	Navient Corp., senior note,
	8.45%, 6/15/18		United States		1,000,000			1,085,000
	5.50%, 1/15/19		United States		1,500,000			1,512,375
	5.875%, 3/25/21		United States		700,000			663,684
	6.125%, 3/25/24		United States		500,000			441,250
								19,676,179
	Energy 5.3%
	Access Midstream Partner LP/ACMP Finance Corp., senior note, 6.125%, 7/15/22		United States		600,000			616,073
	Apache Corp., senior bond, 2.625%, 1/15/23		United States		1,900,000			1,885,516
i	BreitBurn Energy Partners LP/BreitBurn Finance Corp., senior bond, 7.875%, 4/15/16		United States		2,300,000			494,500
h	California Resources Corp., secured note, second lien, 144A, 8.00%, 12/15/22		United States		716,000			509,255
h	Calumet Specialty Products Partners LP/Calumet Finance Corp., senior note, 144A, 11.50%, 1/15/21		United States		800,000			902,000
	CGG SA, senior note,
	6.50%, 6/01/21		France		1,800,000			801,000
	6.875%, 1/15/22		France		200,000			88,000
c,i	CHC Helicopter SA,
	senior note, 9.375%, 6/01/21		Canada		260,000			37,700
	senior secured note, first lien, 9.25%, 10/15/20		Canada		2,205,000			992,250
h	Cheniere Corpus Christi Holdings LLC, senior secured note, 144A, 7.00%, 6/30/24		United States		800,000			822,504
h	Chesapeake Energy Corp., secured note, second lien, 144A, 8.00%, 12/15/22		United States		755,000			643,638
	Clayton Williams Energy Inc., senior note, 7.75%, 4/01/19		United States		1,300,000			988,000
	CONSOL Energy Inc., senior note, 5.875%, 4/15/22		United States		2,500,000			2,196,875
	Energy Transfer Equity LP, senior note, first lien, 7.50%, 10/15/20		United States		1,900,000			2,023,500
	Energy Transfer Partners LP, senior note, 5.20%, 2/01/22		United States		1,000,000			1,054,889
i	Energy XXI Gulf Coast Inc.,
	senior note, 9.25%, 12/15/17		United States		1,500,000			172,500
	senior note, 6.875%, 3/15/24		United States		800,000			92,000
	h senior secured note, second lien, 144A, 11.00%, 3/15/20		United States		700,000			283,500
h	EnQuest PLC, senior note, 144A, 7.00%, 4/15/22		United Kingdom		1,100,000			672,375

Semiannual Report FSI-11

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Strategic Income VIP Fund (continued)

		Country		Principal Amount*		Value
	Corporate Bonds (continued)
	Energy (continued)
	Freeport-McMoRan Oil & Gas LLC/FCX Oil & Gas Inc., senior note, 6.875%, 2/15/23		United States		672,000	$	651,840
h,j	Gaz Capital SA, (OJSC Gazprom), loan participation, senior note, 144A, 3.85%, 2/06/20		Russia		1,500,000		1,518,577
i	Halcon Resources Corp.,
	senior note, 8.875%, 5/15/21		United States		1,400,000		287,000
	h senior secured note, third lien, 144A, 13.00%, 2/15/22		United States		1,000,000		535,000
h	Kinder Morgan Finance Co. LLC, senior secured note, 144A, 6.00%, 1/15/18		United States		2,000,000		2,105,168
	Kinder Morgan Inc., senior note, 6.50%, 9/15/20		United States		1,500,000		1,654,812
h,i	Linn Energy LLC/Finance Corp., senior secured note, second lien, 144A, 12.00%, 12/15/20		United States		2,000,000		695,000
h	LUKOIL International Finance BV, senior note, 144A, 4.563%, 4/24/23		Russia		2,500,000		2,537,225
	Martin Midstream Partners LP/Martin Midstream Finance Corp., senior note, 7.25%, 2/15/21		United States		2,000,000		1,860,000
i	Midstates Petroleum Co. Inc./LLC, senior note, 9.25%, 6/01/21		United States		1,500,000		22,500
	PBF Holding Co. LLC, first lien, 8.25%, 2/15/20		United States		1,000,000		1,042,500
h,i	Peabody Energy Corp., secured note, second lien, 144A, 10.00%, 3/15/22		United States		3,000,000		405,000
i	Penn Virginia Corp., senior note, 8.50%, 5/01/20		United States		1,500,000		585,000
	Regency Energy Partners LP/Regency Energy Finance Corp., senior note,
	5.875%, 3/01/22		United States		200,000		212,639
	5.00%, 10/01/22		United States		500,000		513,774
	Sabine Pass Liquefaction LLC,
	first lien, 5.625%, 2/01/21		United States		2,000,000		2,030,000
	first lien, 5.625%, 4/15/23		United States		900,000		907,875
	senior secured note, first lien, 5.75%, 5/15/24		United States		300,000		299,250
	Sanchez Energy Corp., senior note,
	7.75%, 6/15/21		United States		900,000		767,250
	6.125%, 1/15/23		United States		300,000		233,250
c	W&T Offshore Inc., senior note, 8.50%, 6/15/19		United States		2,000,000		500,000
	Weatherford International Ltd., senior note,
	7.75%, 6/15/21		United States		800,000		782,000
	8.25%, 6/15/23		United States		1,000,000		952,500
	WPX Energy Inc., senior note, 8.25%, 8/01/23		United States		900,000		906,750
							37,280,985
	Food & Staples Retailing 0.8%
h	Cencosud SA, senior note, 144A,
	4.875%, 1/20/23		Chile		1,500,000		1,544,288
	5.15%, 2/12/25		Chile		1,500,000		1,543,725
	Walgreens Boots Alliance Inc., senior note, 3.80%, 11/18/24		United States		2,500,000		2,654,522
							5,742,535
	Food, Beverage & Tobacco 1.1%
	Anheuser-Busch InBev Finance Inc., senior note, 3.30%, 2/01/23		Belgium		1,300,000		1,369,673
h	JBS USA LLC/Finance Inc., senior note, 144A,
	8.25%, 2/01/20		United States		2,500,000		2,600,000
	5.75%, 6/15/25		United States		500,000		472,500
h	Post Holdings Inc., senior note, 144A,
	6.75%, 12/01/21		United States		1,700,000		1,802,000

FSI-12 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Strategic Income VIP Fund (continued)

		Country		Principal Amount*		Value
	Corporate Bonds (continued)
	Food, Beverage & Tobacco (continued)
h	Post Holdings Inc., senior note, 144A, (continued)
	6.00%, 12/15/22		United States		500,000	$	514,375
	7.75%, 3/15/24		United States		1,000,000		1,101,250
							7,859,798
	Health Care Equipment & Services 1.9%
	Alere Inc., senior sub. note, 6.50%, 6/15/20		United States		900,000		900,000
	CHS/Community Health Systems Inc.,
	senior note, 8.00%, 11/15/19		United States		1,500,000		1,471,875
	senior note, 6.875%, 2/01/22		United States		400,000		352,000
	senior secured note, first lien, 5.125%, 8/15/18		United States		121,000		123,269
	DaVita HealthCare Partners Inc.,
	senior bond, 5.125%, 7/15/24		United States		500,000		506,487
	senior bond, 5.00%, 5/01/25		United States		900,000		894,375
	senior note, 5.75%, 8/15/22		United States		1,500,000		1,575,000
	HCA Inc.,
	senior bond, 5.875%, 5/01/23		United States		1,500,000		1,603,125
	senior note, 7.50%, 2/15/22		United States		700,000		797,650
	senior secured bond, first lien, 5.875%, 3/15/22		United States		1,000,000		1,090,000
	senior secured bond, first lien, 5.25%, 4/15/25		United States		600,000		628,500
h	MPH Acquisition Holdings LLC, senior note, 144A, 7.125%, 6/01/24		United States		400,000		421,000
	Stryker Corp., senior bond, 3.50%, 3/15/26		United States		500,000		531,782
	Tenet Healthcare Corp., senior note,
	5.00%, 3/01/19		United States		500,000		486,250
	5.50%, 3/01/19		United States		1,200,000		1,188,000
	8.125%, 4/01/22		United States		1,000,000		1,029,800
							13,599,113
	Insurance 1.1%
	MetLife Inc., senior note,
	3.60%, 4/10/24		United States		2,400,000		2,534,844
	3.00%, 3/01/25		United States		300,000		304,233
h	Nippon Life Insurance Co., sub. bond, 144A, 5.10% to 10/16/24, FRN thereafter, 10/16/44		Japan		3,500,000		3,784,847
	Prudential Financial Inc., 3.50%, 5/15/24		United States		800,000		833,075
							7,456,999
	Materials 5.0%
	ArcelorMittal, senior note,
	6.50%, 3/01/21		France		2,700,000		2,787,682
	6.125%, 6/01/25		France		300,000		300,000
h	Ardagh Packaging Finance PLC/Ardagh MP Holdings USA Inc., senior note, 144A,
	7.00%, 11/15/20		Luxembourg		105,882		104,294
	6.75%, 1/31/21		Luxembourg		200,000		201,500
	6.00%, 6/30/21		Luxembourg		1,300,000		1,296,750
h	Barminco Finance Pty. Ltd., senior note, 144A, 9.00%, 6/01/18		Australia		1,500,000		1,246,410
h	Cemex Finance LLC, senior secured note, first lien, 144A, 6.00%, 4/01/24		Mexico		1,000,000		972,090
h	Cemex SAB de CV,
	first lien, 144A, 5.70%, 1/11/25		Mexico		1,500,000		1,427,130
	secured note, 144A, 5.875%, 3/25/19		Mexico		1,000,000		1,025,200

Semiannual Report FSI-13

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Strategic Income VIP Fund (continued)

		Country		Principal Amount*			Value
	Corporate Bonds (continued)
	Materials (continued)
h	Ceramtec Group GmbH, senior note, 144A, 8.25%, 8/15/21		Germany		1,200,000	EUR	$	1,410,917
	The Chemours Co.,
	senior bond, 7.00%, 5/15/25		United States		500,000			421,875
	senior note, 6.625%, 5/15/23		United States		2,000,000			1,710,000
h	First Quantum Minerals Ltd., senior note, 144A,
	6.75%, 2/15/20		Canada		700,000			588,000
	7.00%, 2/15/21		Canada		825,000			667,219
h	FMG Resources (August 2006) Pty. Ltd., senior secured note, 144A, 9.75%, 3/01/22		Australia		1,700,000			1,887,000
	Freeport-McMoRan Inc., senior note, 4.55%, 11/14/24		United States		2,500,000			2,200,000
h	Glencore Finance Canada Ltd., senior bond, 144A, 4.95%, 11/15/21		Switzerland		1,000,000			1,001,165
h	Glencore Funding LLC, senior note, 144A,
	4.125%, 5/30/23		Switzerland		600,000			552,811
	4.625%, 4/29/24		Switzerland		250,000			234,250
h	INVISTA Finance LLC, senior secured note, 144A, 4.25%, 10/15/19		United States		3,000,000			2,940,000
	Novelis Inc., senior note, 8.75%, 12/15/20		Canada		1,600,000			1,668,720
h	Owens-Brockway Glass Container Inc., senior note, 144A,
	5.00%, 1/15/22		United States		1,400,000			1,407,000
	5.875%, 8/15/23		United States		700,000			736,606
	Reynolds Group Issuer Inc./Reynolds Group Issuer LLC/Reynolds Group Issuer Luxembourg SA,
	first lien, 5.75%, 10/15/20		United States		700,000			724,794
	h first lien, 144A, 5.125%, 7/15/23		United States		700,000			709,625
	h senior note, 144A, 8.25%, 2/15/21		United States		1,000,000			1,046,300
	h senior note, 144A, 7.00%, 7/15/24		United States		300,000			309,413
h	Sealed Air Corp.,
	senior bond, 144A, 5.125%, 12/01/24		United States		1,000,000			1,031,250
	senior bond, 144A, 5.50%, 9/15/25		United States		400,000			417,500
	senior note, 144A, 4.875%, 12/01/22		United States		1,000,000			1,032,500
	Steel Dynamics Inc.,
	senior bond, 5.50%, 10/01/24		United States		1,000,000			1,025,000
	senior note, 5.125%, 10/01/21		United States		1,000,000			1,026,250
h	U.S. Coatings Acquisition Inc./Flash Dutch 2 BV, 144A, 5.75%, 2/01/21		United States		1,000,000	EUR		1,155,735
i	Verso Paper Holdings LLC/Inc., senior secured note, first lien, 11.75%, 1/15/16		United States		451,000			77,798
								35,342,784
	Media 4.1%
	21st Century Fox America Inc., senior note, 3.00%, 9/15/22		United States		500,000			522,824
h	Altice U.S. Finance I Corp., senior secured bond, 144A, 5.50%, 5/15/26		United States		1,200,000			1,203,000
	AMC Networks Inc., senior note, 5.00%, 4/01/24		United States		1,100,000			1,092,987
	CCO Holdings LLC/CCO Holdings Capital Corp., senior bond,
	5.25%, 9/30/22		United States		2,700,000			2,777,625
	h144A, 5.375%, 5/01/25		United States		900,000			915,750
	Clear Channel Worldwide Holdings Inc.,
	senior note, 6.50%, 11/15/22		United States		1,000,000			1,005,000
	senior sub. note, 7.625%, 3/15/20		United States		200,000			183,500
	senior sub. note, 7.625%, 3/15/20		United States		500,000			478,250

FSI-14 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Strategic Income VIP Fund (continued)

		Country		Principal Amount*			Value
	Corporate Bonds (continued)
	Media (continued)
	CSC Holdings LLC, senior note,
	6.75%, 11/15/21		United States		2,500,000		$	2,556,250
	5.25%, 6/01/24		United States		200,000			182,000
	DISH DBS Corp., senior note,
	6.75%, 6/01/21		United States		500,000			519,375
	5.875%, 7/15/22		United States		500,000			487,500
	5.875%, 11/15/24		United States		500,000			468,750
	Gannett Co. Inc.,
	senior bond, 6.375%, 10/15/23		United States		1,000,000			1,066,250
	h senior bond, 144A, 5.50%, 9/15/24		United States		300,000			310,125
	senior note, 5.125%, 7/15/20		United States		1,000,000			1,033,750
	iHeartCommunications Inc.,
	senior secured bond, first lien, 9.00%, 3/01/21		United States		2,400,000			1,701,000
	senior secured note, first lien, 9.00%, 9/15/22		United States		700,000			488,250
h	Sirius XM Radio Inc., senior bond, 144A,
	6.00%, 7/15/24		United States		1,700,000			1,761,625
	5.375%, 4/15/25		United States		800,000			798,500
	Time Warner Cable Inc., senior note, 4.00%, 9/01/21		United States		1,300,000			1,382,545
h	Unitymedia Hessen GmbH & Co. KG/Unitymedia NRW GmbH, senior secured note, first lien, 144A, 5.625%, 4/15/23		Germany		640,000	EUR		751,893
h	Unitymedia KabelBW GmbH, senior bond, 144A, 6.125%, 1/15/25		Germany		1,700,000			1,717,170
h	Univision Communications Inc., senior secured note, first lien, 144A, 5.125%, 2/15/25		United States		2,500,000			2,481,250
h	Virgin Media Finance PLC, senior bond, 144A, 6.375%, 10/15/24		United Kingdom		900,000	GBP		1,200,954
h	Virgin Media Secured Finance PLC, senior secured bond, first lien, 144A, 5.50%, 1/15/25		United Kingdom		1,900,000			1,873,875
								28,959,998
	Pharmaceuticals, Biotechnology & Life Sciences 3.1%
	AbbVie Inc., senior note, 3.60%, 5/14/25		United States		2,500,000			2,624,522
	Actavis Funding SCS, senior bond, 3.80%, 3/15/25		United States		2,200,000			2,293,232
	Baxalta Inc., senior note, 4.00%, 6/23/25		United States		2,500,000			2,610,692
	Biogen Inc., senior note, 3.625%, 9/15/22		United States		1,500,000			1,594,682
h	Endo Finance LLC/Endo Ltd./Endo Finco Inc.,
	senior bond, 144A, 6.00%, 2/01/25		United States		1,200,000			1,047,000
	senior note, 144A, 6.00%, 7/15/23		United States		700,000			619,500
	Gilead Sciences Inc., senior bond, 3.65%, 3/01/26		United States		3,000,000			3,267,981
	Grifols Worldwide Operations Ltd., senior note, 5.25%, 4/01/22		United States		800,000			818,000
h	Jaguar Holding Co. II/Pharmaceutical Product Development LLC, senior note, 144A, 6.375%, 8/01/23		United States		1,400,000			1,435,000
h	Valeant Pharmaceuticals International, senior note, 144A, 6.375%, 10/15/20		United States		2,400,000			2,076,000
h	Valeant Pharmaceuticals International Inc.,
	senior bond, 144A, 6.125%, 4/15/25		United States		300,000			241,500
	senior note, 144A, 5.50%, 3/01/23		United States		400,000			323,250
	Zoetis Inc., senior bond, 3.25%, 2/01/23		United States		2,500,000			2,551,518
								21,502,877
	Real Estate 0.6%
	American Tower Corp., senior bond, 3.375%, 10/15/26		United States		1,400,000			1,411,018
	Equinix Inc., senior bond,
	5.375%, 4/01/23		United States		2,500,000			2,593,750

Semiannual Report FSI-15

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Strategic Income VIP Fund (continued)

		Country		Principal Amount*			Value
	Corporate Bonds (continued)
	Real Estate (continued)
	Equinix Inc., senior bond, (continued)
	5.875%, 1/15/26		United States		200,000		$	209,000
								4,213,768
	Retailing 0.8%
h	Argos Merger Sub Inc., senior note, 144A, 7.125%, 3/15/23		United States		1,400,000			1,443,750
h	Dollar Tree Inc., senior note, 144A, 5.75%, 3/01/23		United States		900,000			960,750
h,i	Edcon Ltd., secured note, 144A, 9.50%, 3/01/18		South Africa		1,800,000	EUR		609,363
	Netflix Inc., senior bond, 5.875%, 2/15/25		United States		2,300,000			2,423,625
								5,437,488
	Semiconductors & Semiconductor Equipment 0.2%
h	Qorvo Inc., senior bond, 144A, 7.00%, 12/01/25		United States		1,400,000			1,484,000
	Software & Services 0.7%
h	BMC Software Finance Inc., senior note, 144A, 8.125%, 7/15/21		United States		2,600,000			1,963,000
h	First Data Corp.,
	second lien, 144A, 5.75%, 1/15/24		United States		2,100,000			2,089,500
	senior note, 144A, 7.00%, 12/01/23		United States		700,000			713,125
								4,765,625
	Technology Hardware & Equipment 0.5%
h,k	CommScope Holdings Co. Inc., senior note, 144A, PIK, 6.625%, 6/01/20		United States		92,000			95,198
h	CommScope Technologies Finance LLC, senior bond, 144A, 6.00%, 6/15/25		United States		1,000,000			1,030,000
h	Diamond 1 Finance Corp./Diamond 2 Finance Corp., senior note, 144A,
	5.875%, 6/15/21		United States		300,000			307,734
	7.125%, 6/15/24		United States		200,000			209,200
h	Western Digital Corp., senior note, 144A, 10.50%, 4/01/24		United States		2,000,000			2,145,000
								3,787,132
	Telecommunication Services 3.5%
	AT&T Inc., senior bond, 3.40%, 5/15/25		United States		1,900,000			1,948,060
	CenturyLink Inc.,
	senior bond, 6.75%, 12/01/23		United States		700,000			690,375
	senior bond, 5.625%, 4/01/25		United States		900,000			804,375
	senior note, 6.00%, 4/01/17		United States		500,000			514,375
	senior note, 6.45%, 6/15/21		United States		500,000			509,375
h	Digicel Group Ltd., senior note, 144A, 8.25%, 9/30/20		Bermuda		1,200,000			1,005,696
h	Digicel Ltd., senior note, 144A,
	6.00%, 4/15/21		Bermuda		1,000,000			861,250
	6.75%, 3/01/23		Bermuda		300,000			256,826
	Intelsat Jackson Holdings SA,
	senior bond, 6.625%, 12/15/22		Luxembourg		1,600,000			1,088,000
	senior note, 7.25%, 10/15/20		Luxembourg		1,000,000			717,500
	senior note, 7.50%, 4/01/21		Luxembourg		500,000			347,500
h	Millicom International Cellular SA, senior note, 144A, 6.625%, 10/15/21		Luxembourg		2,200,000			2,266,990
	Sprint Communications Inc., senior note,
	8.375%, 8/15/17		United States		1,200,000			1,236,000
	6.00%, 11/15/22		United States		500,000			395,950

FSI-16 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Strategic Income VIP Fund (continued)

		Country		Principal Amount*			Value
	Corporate Bonds (continued)
	Telecommunication Services (continued)
	Sprint Communications Inc., senior note, (continued)
	h 144A, 9.00%, 11/15/18		United States		1,500,000		$	1,603,125
	h 144A, 7.00%, 3/01/20		United States		800,000			841,592
	Sprint Corp., senior bond, 7.875%, 9/15/23		United States		500,000			411,250
	T-Mobile USA Inc.,
	senior bond, 6.50%, 1/15/24		United States		500,000			528,125
	senior bond, 6.375%, 3/01/25		United States		1,300,000			1,363,375
	senior note, 6.542%, 4/28/20		United States		1,400,000			1,443,764
	senior note, 6.125%, 1/15/22		United States		200,000			210,500
	senior note, 6.00%, 4/15/24		United States		200,000			208,500
	Verizon Communications Inc., senior note, 5.15%, 9/15/23		United States		2,000,000			2,333,726
h	Wind Acquisition Finance SA, senior secured note, 144A,
	4.00%, 7/15/20		Italy		1,200,000	EUR		1,320,938
	7.00%, 4/23/21		Italy		1,500,000	EUR		1,632,459
								24,539,626
	Transportation 0.3%
h	Florida East Coast Holdings Corp.,
	secured note, first lien, 144A, 6.75%, 5/01/19		United States		900,000			900,000
	senior note, 144A, 9.75%, 5/01/20		United States		400,000			342,000
h	Stena International SA, senior secured bond, first lien, 144A, 5.75%, 3/01/24		Sweden		900,000			742,500
								1,984,500
	Utilities 2.0%
	Calpine Corp.,
	senior bond, 5.75%, 1/15/25		United States		1,200,000			1,171,500
	senior note, 5.375%, 1/15/23		United States		1,300,000			1,274,000
g,h	EDF SA, sub. note, 144A, 5.25% to 1/29/23, FRN thereafter, Perpetual		France		3,000,000			2,879,745
	Exelon Corp., senior bond, 3.95%, 6/15/25		United States		1,800,000			1,928,786
h	InterGen NV, secured bond, 144A, 7.00%, 6/30/23		Netherlands		2,500,000			1,781,250
	Sempra Energy,
	senior bond, 3.55%, 6/15/24		United States		700,000			735,237
	senior note, 3.75%, 11/15/25		United States		1,100,000			1,177,866
	The Southern Co., senior bond, 3.25%, 7/01/26		United States		2,100,000			2,187,692
h,i	Texas Competitive Electric Holdings Co. LLC/Texas Competitive Electric Holdings Finance Inc., senior secured note, first lien, 144A, 11.50%, 10/01/20		United States		3,000,000			1,027,500
								14,163,576
	Total Corporate Bonds (Cost $315,755,484)							294,327,726
l,m	Senior Floating Rate Interests 11.1%
	Automobiles & Components 0.3%
	TI Group Automotive Systems LLC, Initial U.S. Term Loan, 4.50%, 6/25/22		United States		2,120,934			2,083,818
	Capital Goods 0.3%
	Doncasters U.S. Finance LLC, Second Lien Term Loan, 9.50%, 10/09/20		United States		76,701			71,572
n	Leidos (Abacus Innovations Corp.), B Term Loan, 5.25%, 8/31/23		United States		161,767			161,868
	Sensus USA Inc., Term Loan, 6.50%, 4/05/23		United States		1,780,000			1,766,650

Semiannual Report FSI-17

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Strategic Income VIP Fund (continued)

		Country		Principal Amount*		Value
l,m	Senior Floating Rate Interests (continued)
	Capital Goods (continued)
	Ventia Pty. Ltd., Term B Loans, 5.50%, 5/21/22		Australia		42,394	$	42,765
							2,042,855
	Commercial & Professional Services 0.1%
	Kar Auction Services Inc., Tranche B-3 Term Loan, 4.25%, 3/09/23		United States		888,834		894,574
	Consumer Durables & Apparel 0.1%
n	Prime Security Services Borrower LLC, Term Loan B, 4.75%, 5/02/22		United States		672,857		674,539
	Consumer Services 0.9%
n	Affinity Gaming LLC, Initial Term Loan, 6.50%, 6/22/23		United States		558,303		558,478
c,e	Fitness International LLC, Term B Loan, 5.50%, 7/01/20		United States		3,919,925		3,890,525
n	KFC Holding Co./Pizza Hut Holdings LLC/Taco Bell of America LLC (Yum Brands), Term B Loans, 5.25%, 6/16/23		United States		320,000		321,100
n	Travelport Finance Luxembourg S.A.R.L., Term Loan B, 6.50%, 9/02/21		Luxembourg		500,000		496,875
c,k	Turtle Bay Holdings LLC, Term Loan B, PIK, 3.25%, 6/30/17		United States		1,173,614		1,158,948
							6,425,926
	Diversified Financials 0.3%
	First Eagle Investment Management, Initial Term Loans, 4.75%, 12/01/22		United States		880,187		866,251
	Guggenheim Partners Investment Management Holdings LLC, Initial Term Loan, 4.25%, 7/22/20		United States		917,876		918,019
							1,784,270
	Energy 1.6%
c,e	Bowie Resource Holdings LLC,
	First Lien Initial Term Loan, 8.75%, 8/16/20		United States		2,964,578		2,490,245
	Second Lien Initial Term Loan, 12.50%, 2/16/21		United States		1,248,332		1,017,391
n	Fieldwood Energy LLC, Loans, 3.875%, 10/01/18		United States		3,706,974		3,243,602
c	Foresight Energy LLC, Term Loans, 7.50%, 8/21/20		United States		1,372,000		1,131,900
	McDermott Finance LLC, Term Loan, 8.25%, 4/16/19		United States		148,504		148,690
	OSG Bulk Ships Inc., Initial Term Loan, 5.25%, 8/05/19		United States		1,074,903		1,041,312
	OSG International Inc., Initial Term Loan, 5.75%, 8/05/19		United States		1,958,429		1,938,845
							11,011,985
	Health Care Equipment & Services 0.3%
	Community Health Systems Inc., 2018 Term F Loans, 3.924%, 12/31/18		United States		1,968,070		1,955,770
	Cotiviti Corp., Second Lien Initial Term Loan, 8.00%, 5/13/22		United States		27,678		27,713
	New Millennium Holdco Inc., Closing Date Term Loan, 7.50%, 12/18/20		United States		323,713		237,524
	Team Health Inc., Tranche B Term Loan, 3.75%, 11/23/22		United States		107,221		107,279
							2,328,286
	Materials 1.1%
n	The Chemours Co. LLC, Tranche B Term Loan, 3.75%, 5/12/22		United States		3,239,023		3,136,453
	Cyanco Intermediate Corp., Initial Term Loan, 5.50%, 5/01/20		United States		181,753		174,634
	FMG America Finance Inc. (Fortescue Metals Group), Loans, 4.25%, 6/30/19		Australia		1,794,164		1,721,276
	Huntsman International LLC, Extended Term Loan B, 3.46% - 3.557%, 4/19/19		United States		374,700		373,763
	Novelis Inc., Initial Term Loan, 4.00%, 6/02/22		Canada		794,039		788,381

FSI-18 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Strategic Income VIP Fund (continued)

		Country		Principal Amount*		Value
l,m	Senior Floating Rate Interests (continued)
	Materials (continued)
	OCI Beaumont LLC, Term B-3 Loan, 7.75%, 8/20/19		United States		1,741,027	$	1,741,027
							7,935,534
	Media 1.4%
n	Charter Communications Operating LLC (CCO Safari), Term A Loan, 4.50%, 5/18/21		United States		1,020,000		1,009,800
	CSC Holdings Inc. (Cablevision), Initial Term Loans, 5.00%, 10/09/22		United States		1,880,685		1,888,208
	Radio One Inc., Term Loan B, 5.14%, 12/31/18		United States		6,799,164		6,782,166
							9,680,174
	Pharmaceuticals, Biotechnology & Life Sciences 1.5%
n	Endo Luxembourg Finance Co. I S.A.R.L. and Endo LLC, 2015 Incremental Term B Loans, 3.75%, 9/25/22		United States		2,787,868		2,749,782
	Grifols Worldwide Operations USA Inc., US Tranche B Term Loan, 3.46%, 2/27/21		United States		2,738,822		2,741,624
	Valeant Pharmaceuticals International Inc.,
	nSeries C-2 Tranche B Term Loan, 4.75%, 12/11/19		United States		675,627		657,891
	Series D-2 Tranche B Term Loan, 4.50%, 2/13/19		United States		1,299,537		1,265,424
	Series F-1 Tranche B Term Loan, 5.00%, 4/01/22		United States		3,317,217		3,230,601
							10,645,322
	Retailing 0.6%
	Ascena Retail Group Inc., Tranche B Term Loan, 5.25%, 8/21/22		United States		3,700,559		3,536,347
	PetSmart Inc., Term Loans, 4.25%, 3/10/22		United States		349,118		348,265
							3,884,612
	Semiconductors & Semiconductor Equipment 0.8%
	Avago Technologies Cayman Finance Ltd., Term B-1 Dollar Loans, 4.25%, 2/01/23		United States		2,835,743		2,839,092
	MACOM Technology Solutions Holdings Inc., Initial Term Loan, 4.50%, 5/07/21		United States		513,128		515,694
n	MKS Instruments Inc., Tranche B-1 Term Loans, 4.25%, 4/29/23		United States		549,856		551,116
	ON Semiconductor Corp., Closing Date Term Loans, 5.25%, 3/31/23		United States		1,758,635		1,770,882
							5,676,784
	Software & Services 0.7%
	Match Group Inc., Term B-1 Loans, 5.50%, 11/16/22		United States		398,817		402,805
	MoneyGram International Inc., Term Loan, 4.25%, 3/27/20		United States		5,087,411		4,842,580
							5,245,385
	Technology Hardware & Equipment 0.5%
	Ciena Corp., Term Loan, 3.75%, 7/15/19		United States		226,374		225,384
	Dell International LLC, Term B-2 Loan, 4.00%, 4/29/20		United States		1,337,611		1,336,942
	Western Digital Corp., U.S. Term B Loan, 6.25%, 4/29/23		United States		1,641,833		1,651,069
n	Zebra Technologies Corp., Refinancing Term Loan, 4.00%, 10/27/21		United States		385,821		387,187
							3,600,582
	Telecommunication Services 0.2%
	Intelsat Jackson Holdings SA, Tranche B-2 Term Loan, 3.75%, 6/30/19		Luxembourg		559,178		508,153
	Windstream Corp., Tranche B-5 Term Loan, 3.50%, 8/08/19		United States		563,930		562,051
							1,070,204

Semiannual Report FSI-19

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Strategic Income VIP Fund (continued)

		Country		Principal Amount*			Value
l,m	Senior Floating Rate Interests (continued)
	Transportation 0.2%
n	The Hertz Corp., Term Loan B, 5.25%, 6/17/23		United States		333,319		$	333,893
	Navios Maritime Midstream Partners LP, Initial Term Loan, 5.50%, 6/18/20		Marshall Islands		1,292,085			1,240,401
	Navios Maritime Partners LP, Initial Term Loan, 5.25%, 6/27/18		Marshall Islands		61,049			53,265
								1,627,559
	Utilities 0.2%
	Calpine Corp., Term Loan (B6), 4.00%, 1/15/23		United States		632,118			628,957
n	EFS Cogen Holdings I LLC (Linden), Term Loan B, 6.75%, 6/30/23		United States		181,098			181,550
n	NRG Energy Inc., Term Loan B, 5.25%, 6/20/23		United States		870,000			863,475
								1,673,982
	Total Senior Floating Rate Interests (Cost $79,583,519)							78,286,391
	Foreign Government and Agency Securities 11.7%
	Government of Hungary, senior note, 6.25%, 1/29/20		Hungary		1,500,000			1,669,057
	Government of Indonesia,
	6.125%, 5/15/28		Indonesia		34,000,000,000	IDR		2,267,096
	FR34, 12.80%, 6/15/21		Indonesia		17,235,000,000	IDR		1,601,207
	senior bond, FR53, 8.25%, 7/15/21		Indonesia		46,000,000,000	IDR		3,626,037
	senior bond, FR70, 8.375%, 3/15/24		Indonesia		26,500,000,000	IDR		2,118,495
	Government of Malaysia,
	senior bond, 3.814%, 2/15/17		Malaysia		2,500,000	MYR		625,096
	senior bond, 4.24%, 2/07/18		Malaysia		1,800,000	MYR		456,165
	senior note, 3.172%, 7/15/16		Malaysia		32,500,000	MYR		8,071,378
	senior note, 3.394%, 3/15/17		Malaysia		16,000,000	MYR		3,992,035
	senior note, 4.012%, 9/15/17		Malaysia		23,400,000	MYR		5,891,106
	Government of Mexico,
	7.25%, 12/15/16		Mexico		930,330	o MXN		5,155,013
	7.75%, 12/14/17		Mexico		345,000	o MXN		1,976,363
	senior note, 8.50%, 12/13/18		Mexico		1,405,000	o MXN		8,310,105
	senior note, M, 5.00%, 6/15/17		Mexico		750,000	o MXN		4,125,023
h	Government of Serbia, senior note, 144A,
	4.875%, 2/25/20		Serbia		4,000,000			4,132,660
	7.25%, 9/28/21		Serbia		200,000			229,513
	Government of Sri Lanka,
	A, 6.40%, 8/01/16		Sri Lanka		19,500,000	LKR		133,617
	B, 6.40%, 10/01/16		Sri Lanka		16,000,000	LKR		109,076
	Government of the Philippines, senior note, 2.875%, 5/22/17		Philippines		77,000,000	PHP		1,643,149
h	Government of Ukraine, 144A,
	7.75%, 9/01/22		Ukraine		500,000			485,638
	7.75%, 9/01/23		Ukraine		969,000			937,532
	7.75%, 9/01/24		Ukraine		969,000			930,807
	7.75%, 9/01/25		Ukraine		969,000			926,863
	7.75%, 9/01/26		Ukraine		969,000			922,997
	7.75%, 9/01/27		Ukraine		969,000			919,581
	a,p VRI, GDP Linked Securities, 5/31/40		Ukraine		1,952,000			641,720
q	Government of Uruguay, senior bond, Index Linked, 4.375%, 12/15/28		Uruguay		193,402,842	UYU		5,699,379
	Nota Do Tesouro Nacional,
	10.00%, 1/01/21		Brazil		5,000	r BRL		1,454,115

FSI-20 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Strategic Income VIP Fund (continued)

		Country		Principal Amount*			Value
	Foreign Government and Agency Securities (continued)
	Nota Do Tesouro Nacional, (continued)
	10.00%,1/01/23		Brazil		4,000	r BRL	$	1,136,570
	sIndex Linked, 6.00%, 8/15/16		Brazil		1,604	r BRL		1,442,889
	sIndex Linked, 6.00%, 8/15/18		Brazil		5,525	r BRL		4,946,158
	sIndex Linked, 6.00%, 5/15/23		Brazil		3,350	r BRL		2,975,643
	senior note, 10.00%, 1/01/17		Brazil		7,500	r BRL		2,294,065
q	Uruguay Notas del Tesoro, 18, Index Linked, 2.25%, 8/23/17		Uruguay		30,349,593	UYU		957,103
	Total Foreign Government and Agency Securities (Cost $92,839,860)							82,803,251
	U.S. Government and Agency Securities 4.3%
	U.S. Treasury Bond,
	7.875%, 2/15/21		United States		900,000			1,181,004
	6.50%, 11/15/26		United States		2,400,000			3,557,390
	qIndex Linked, 0.625%, 1/15/24		United States		4,880,214			5,115,553
	U.S. Treasury Note,
	4.625%, 2/15/17		United States		600,000			615,668
	3.75%, 11/15/18		United States		7,000,000			7,516,250
	2.75%, 2/15/24		United States		4,000,000			4,417,344
	qIndex Linked, 2.125%, 1/15/19		United States		779,956			837,118
	qIndex Linked, 0.625%, 7/15/21		United States		1,698,247			1,789,594
	qIndex Linked, 0.125%, 7/15/24		United States		5,057,578			5,115,300
	Total U.S. Government and Agency Securities (Cost $29,224,581)							30,145,221
	Asset-Backed Securities and Commercial Mortgage-Backed Securities 6.0%
	Banks 2.5%
	Banc of America Commercial Mortgage Trust, 2006-4, AJ, 5.695%, 7/10/46		United States		1,807,000			1,763,154
l	Bear Stearns Adjustable Rate Mortgage Trust, 2004-4, A6, FRN, 2.977%, 6/25/34		United States		1,634,821			1,623,410
	Bear Stearns Commercial Mortgage Securities Trust,
	l2006-PW11, AJ, FRN, 5.429%, 3/11/39		United States		1,000,000			962,266
	2006-PW13, AJ, 5.611%, 9/11/41		United States		2,310,000			2,311,541
l	CD Mortgage Trust, 2006-CD3, AJ, FRN, 5.688%, 10/15/48		United States		2,700,000			1,622,295
	Citigroup Commercial Mortgage Trust,
	2006-C5, AJ, 5.482%, 10/15/49		United States		1,667,000			1,492,074
	l2007-C6, AM, FRN, 5.712%, 12/10/49		United States		1,700,000			1,707,817
	CSAIL Commercial Mortgage Trust, 2015-C1, A4, 3.505%, 4/15/50		United States		915,000			991,765
l	CWABS Asset-Backed Certificates Trust, 2005-11, AF4, FRN, 5.21%, 3/25/34		United States		1,275,000			1,275,535
l	Greenwich Capital Commercial Funding Corp., 2006-GG7, AJ, FRN, 5.773%, 7/10/38		United States		1,560,000			1,441,838
	JP Morgan Chase Commercial Mortgage Securities Trust,
	2006-CB17, AM, 5.464%, 12/12/43		United States		760,000			741,827
	l2006-LDP7, AJ, FRN, 5.988%, 4/17/45		United States		635,000			478,342
l	Merrill Lynch Mortgage Investors Trust, 2005-A6, 2A3, FRN, 0.833%, 8/25/35		United States		251,535			242,543
l	Morgan Stanley Capital I Trust, 2006-HQ8, AJ, FRN, 5.421%, 3/12/44		United States		79,193			79,093
	Wells Fargo Mortgage Backed Securities Trust,
	l2004-W, A9, FRN, 2.766%, 11/25/34		United States		864,206			875,515

Semiannual Report FSI-21

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Strategic Income VIP Fund (continued)

		Country		Principal Amount*		Value
	Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued)
	Banks (continued)
	Wells Fargo Mortgage Backed Securities Trust, (continued)
	2007-3, 3A1, 5.50%, 4/25/22		United States		198,389	$	203,376
							17,812,391
	Diversified Financials 3.5%
h,l	Atrium X, 10A, C, 144A, FRN, 3.233%, 7/16/25		United States		1,400,000		1,345,736
h,l	Atrium XI, 11A, C, 144A, FRN, 3.838%, 10/23/25		Cayman Islands		1,820,000		1,808,461
	Banc of America Commercial Mortgage Trust, 2015-UBS7,
	A3, 3.441%, 9/15/48		United States		1,050,000		1,135,627
	A4, 3.705%, 9/15/48		United States		1,170,000		1,288,498
h,l	BCAP LLC Trust, 2009-RR1, 2A2, 144A, FRN, 2.896%, 5/26/35		United States		440,000		412,999
h,l	Catamaran CLO Ltd., 2013-1A, C, 144A, FRN, 3.234%, 1/27/25		United States		1,130,000		1,078,235
h,l	Cent CDO Ltd., 2007-15A, A2B, 144A, FRN, 0.996%, 3/11/21		United States		1,251,000		1,177,792
h,l	Cent CLO LP, 2013-17A, D, 144A, FRN, 3.637%, 1/30/25		United States		784,314		764,918
h,l	CIFC Funding Ltd., 2007-3A, A1J, 144A, FRN, 1.036%, 7/26/21		United States		960,000		948,355
h	Core Industrial Trust, 2015-CALW, A, 144A, 3.04%, 2/10/34		United States		1,410,000		1,486,331
h,l	CT CDO IV Ltd., 2006-4A, A1, 144A, FRN, 0.758%, 10/20/43		United States		21,284		21,238
h,l	Cumberland Park CLO Ltd., 2015-2A,
	B, 144A, FRN, 2.734%, 7/20/26		United States		1,080,000		1,077,991
	C, 144A, FRN, 3.484%, 7/20/26		United States		190,000		185,814
h,l	Eaton Vance CDO Ltd., 2014-1A,
	B, 144A, FRN, 2.678%, 7/15/26		United States		426,000		419,504
	C, 144A, FRN, 3.628%, 7/15/26		United States		167,100		161,724
h,l	Eleven Madison Trust Mortgage Trust, 2015-11MD, A, 144A, FRN, 3.555%, 9/10/35		United States		1,350,000		1,472,160
l	FHLMC Structured Agency Credit Risk Debt Notes,
	2014-DN1, M2, FRN, 2.653%, 2/25/24		United States		1,500,000		1,521,069
	2014-HQ2, M2, FRN, 2.653%, 9/25/24		United States		1,000,000		1,001,237
	2015-HQ1, M2, FRN, 2.653%, 3/25/25		United States		1,000,000		1,004,720
h	G-Force LLC, 2005-RRA, C, 144A, 5.20%, 8/22/36		United States		2,000,000		1,935,460
l	Impac Secured Assets Trust, 2007-2, FRN, 0.703%, 4/25/37		United States		260,144		242,513
h,l	Invitation Homes Trust, 2015-SFR1, A, 144A, FRN, 1.896%, 3/17/32		United States		1,443,976		1,446,434
l	MortgageIT Trust, 2004-1, A2, FRN, 1.353%, 11/25/34		United States		315,540		299,456
h,l	Newcastle CDO Ltd., 2004-5A, 1, 144A, FRN, 0.98%, 12/24/39		United States		4,628		4,619
l	Opteum Mortgage Acceptance Corp. Trust, 2005-4, 1APT, FRN, 0.763%, 11/25/35		United States		500,881		470,402
l	Structured Asset Securities Corp., 2005-2XS, 2A2, FRN, 1.946%, 2/25/35		United States		300,701		287,980
l	Thornburg Mortgage Securities Trust, 2005-1, A3, FRN, 2.537%, 4/25/45		United States		246,796		247,413
h,l	Voya CLO Ltd.,
	2013-1A, B, 144A, FRN, 3.528%, 4/15/24		United States		270,000		264,789
	2013-2A, B, 144A, FRN, 3.318%, 4/25/25		United States		1,080,000		1,041,422
							24,552,897
	Total Asset-Backed Securities and Commercial Mortgage-Backed Securities (Cost $41,999,135)						42,365,288
	Mortgage-Backed Securities 7.9%
l	Federal Home Loan Mortgage Corp. (FHLMC) Adjustable Rate 0.0%†
	FHLMC, 2.688%, 1/01/33		United States		48,274		50,398

FSI-22 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Strategic Income VIP Fund (continued)

		Country		Principal Amount*		Value
	Mortgage-Backed Securities (continued)
	Federal Home Loan Mortgage Corp. (FHLMC) Fixed Rate 3.0%
	FHLMC Gold 15 Year, 5.50%, 7/01/17 - 7/01/19		United States		43,932	$	45,746
	FHLMC Gold 15 Year, 6.00%, 5/01/17		United States		1,005		1,017
n	FHLMC Gold 30 Year, 3.00%, 7/01/46		United States		5,750,000		5,959,936
n	FHLMC Gold 30 Year, 3.50%, 7/01/46		United States		5,448,000		5,744,150
n	FHLMC Gold 30 Year, 4.00%, 7/01/46		United States		7,635,000		8,171,900
	FHLMC Gold 30 Year, 5.00%, 4/01/34 - 8/01/35		United States		335,427		371,927
	FHLMC Gold 30 Year, 5.50%, 3/01/33 - 1/01/35		United States		254,078		285,021
	FHLMC Gold 30 Year, 6.00%, 4/01/33 - 2/01/36		United States		257,253		295,373
	FHLMC Gold 30 Year, 6.50%, 11/01/27 - 6/01/36		United States		46,687		53,991
	FHLMC Gold 30 Year, 7.00%, 9/01/21 - 4/01/30		United States		21,201		23,230
	FHLMC Gold 30 Year, 7.50%, 8/01/30 - 7/01/31		United States		1,105		1,200
							20,953,491
l	Federal National Mortgage Association (FNMA) Adjustable Rate 0.0%†
	FNMA, 2.522% - 2.53%, 12/01/34 - 4/01/20		United States		139,563		147,278
	Federal National Mortgage Association (FNMA) Fixed Rate 3.4%
	FNMA 15 Year, 2.50%, 7/01/22 - 6/01/27		United States		462,076		479,614
	FNMA 15 Year, 4.50%, 6/01/19 - 3/01/20		United States		72,297		74,329
	FNMA 15 Year, 5.00%, 10/01/17 - 6/01/18		United States		37,997		39,079
	FNMA 15 Year, 5.50%, 1/01/17 - 11/01/18		United States		165,262		169,129
n	FNMA 30 Year, 3.00%, 7/01/46		United States		5,750,000		5,967,422
n	FNMA 30 Year, 3.50%, 7/01/46		United States		6,327,000		6,675,232
n	FNMA 30 Year, 4.00%, 7/01/46		United States		8,100,000		8,683,612
n	FNMA 30 Year, 4.50%, 7/01/46		United States		1,620,000		1,768,489
	FNMA 30 Year, 5.00%, 4/01/30		United States		90,806		100,812
	FNMA 30 Year, 6.50%, 6/01/28 - 10/01/37		United States		244,557		284,386
							24,242,104
	Government National Mortgage Association (GNMA) Fixed Rate 1.5%
	GNMA I SF 30 Year, 5.00%, 11/15/33 - 7/15/34		United States		335,582		379,891
	GNMA I SF 30 Year, 6.50%, 2/15/32		United States		2,049		2,339
	GNMA I SF 30 Year, 7.00%, 10/15/28 - 6/15/32		United States		17,722		18,125
	GNMA I SF 30 Year, 7.50%, 9/15/30		United States		1,443		1,734
n	GNMA II SF 30 Year, 3.00%, 7/01/46		United States		4,400,000		4,599,031
n	GNMA II SF 30 Year, 3.50%, 7/01/46		United States		4,770,000		5,062,163
	GNMA II SF 30 Year, 5.00%, 9/20/33 - 11/20/33		United States		95,437		107,424
	GNMA II SF 30 Year, 6.00%, 11/20/34		United States		112,692		132,880
	GNMA II SF 30 Year, 6.50%, 4/20/31 - 2/20/34		United States		53,970		64,632
	GNMA II SF 30 Year, 7.50%, 1/20/28 - 4/20/32		United States		12,636		15,010
							10,383,229
	Total Mortgage-Backed Securities (Cost $55,266,212)						55,776,500
	Municipal Bonds 1.0%
	Illinois State GO, Build America Bonds, 7.35%, 7/01/35		United States		1,000,000		1,111,660
	New York City HDC Capital Fund Grant Program Revenue, New York City Housing Authority Program, Series B1, 5.00%, 7/01/33		United States		500,000		599,150

Semiannual Report FSI-23

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Strategic Income VIP Fund (continued)

		Country		Principal Amount*		Value
	Municipal Bonds (continued)
	Port Authority of New York and New Jersey Revenue, Consolidated, One Hundred Ninety-First Series, 4.823%, 6/01/45		United States		2,415,000	$	2,668,020
	Puerto Rico Electric Power Authority Power Revenue,
	Series A, 6.75%, 7/01/36		United States		3,465,000		2,286,900
	Series XX, 5.25%, 7/01/40		United States		165,000		108,900
	Total Municipal Bonds (Cost $7,293,734)						6,774,630
				Shares
	Escrows and Litigation Trusts (Cost $—) 0.0%
	Materials 0.0%
a,e	NewPage Corp., Litigation Trust		United States		2,500,000		—
	Total Investments before Short Term Investments (Cost $684,786,330)						652,064,849
	Short Term Investments (Cost $104,709,404) 14.8%
	Money Market Funds 14.8%
a,f	Institutional Fiduciary Trust Money Market Portfolio		United States		104,709,404		104,709,404
	Total Investments (Cost $789,495,734) 107.2%						756,774,253
	Other Assets, less Liabilities (7.2)%						(50,842,338	)
	Net Assets 100.0%					$	705,931,915

^†Rounds to less than 0.1% of net assets.

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

^aNon-income producing.

^bThe security is owned by FT Holdings Corporation III, a wholly-owned subsidiary of the Fund. See Note 1(g).

^cAt June 30, 2016, pursuant to the Fund’s policies and the requirements of applicable securities law, the Fund is restricted from trading these securities at period end.

^dSee Note 8 regarding restricted securities.

^eSecurity has been deemed illiquid because it may not be able to be sold within seven days. At June 30, 2016, the aggregate value of these securities was $7,752,083, representing 1.1% of net assets.

^fSee Note 3(e) regarding investments in affiliated management investment companies.

^gPerpetual security with no stated maturity date.

^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, 2016, the aggregate value of these securities was $137,428,129, representing 19.5% of net assets.

ⁱSee Note 7 regarding defaulted securities.

^jSee Note 1(f) regarding loan participation notes.

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

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

^mSee Note 1(i) regarding senior floating rate interests.

ⁿA portion or all of the security purchased on a when-issued, delayed delivery or to-be-announced (TBA) basis. See Note 1(c).

^oPrincipal amount is stated in 100 Mexican Peso Units.

^pThe principal represents the notional amount. See Note 1(d) regarding value recovery instruments.

^qPrincipal amount of security is adjusted for inflation. See Note 1(k).

^rPrincipal amount is stated in 1,000 Brazilian Real Units.

^sRedemption price at maturity is adjusted for inflation. See Note 1(k).

FSI-24 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Strategic Income VIP Fund (continued)

At June 30, 2016, the Fund had the following forward exchange contracts outstanding. See Note 1(d).

Forward Exchange Contracts
Currency	Counterpartya		Type		Quantity		Contract Amount		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
OTC Forward Exchange Contracts
Australian Dollar		DBAB		Sell		8,308,345	$	5,802,542		8/18/16	$	—	$	(383,192	)
Chilean Peso		BZWS		Buy		477,650,000		647,705		8/18/16		70,672		—
Chilean Peso		BZWS		Sell		477,650,000		709,469		8/18/16		—		(8,908	)
Chilean Peso		DBAB		Buy		454,000,000		623,416		8/18/16		59,391		—
Chilean Peso		DBAB		Sell		454,000,000		670,804		8/18/16		—		(12,004	)
Chilean Peso		JPHQ		Buy		234,301,000		323,085		8/18/16		29,300		—
Chilean Peso		JPHQ		Sell		234,301,000		348,533		8/18/16		—		(3,852	)
Chilean Peso		MSCO		Buy		220,380,000		303,805		8/18/16		27,643		—
Chilean Peso		MSCO		Sell		220,380,000		327,946		8/18/16		—		(3,501	)
Euro		BZWS		Sell		299,944		334,112		8/18/16		3,604		(3,019	)
Euro		DBAB		Buy		1,289,108		1,462,493		8/18/16		—		(29,050	)
Euro		DBAB		Sell		3,531,984		4,031,451		8/18/16		104,007		—
Euro		HSBC		Sell		142,717		162,622		8/18/16		3,925		—
Euro		JPHQ		Buy		1,062,400		1,206,378		8/18/16		—		(25,027	)
Euro		JPHQ		Sell		7,087,804		7,848,994		8/18/16		57,724		(90,121	)
Indian Rupee		CITI		Buy		4,537,000		65,849		8/18/16		794		—
Indian Rupee		DBAB		Buy		301,181,000		4,393,596		8/18/16		30,384		—
Indian Rupee		HSBC		Buy		144,338,000		2,094,283		8/18/16		25,865		—
Japanese Yen		BZWS		Sell		136,513,000		1,164,191		8/18/16		—		(159,717	)
Japanese Yen		CITI		Sell		127,820,000		1,090,170		8/18/16		—		(149,433	)
Japanese Yen		DBAB		Buy		1,324,000,000		11,733,532		8/18/16		1,106,665		—
Japanese Yen		DBAB		Sell		2,059,291,000		18,221,995		8/18/16		—		(1,749,078	)
Japanese Yen		GSCO		Sell		42,760,000		364,691		8/18/16		—		(49,997	)
Japanese Yen		HSBC		Sell		413,980,000		3,603,788		8/18/16		—		(411,004	)
Japanese Yen		JPHQ		Sell		566,799,000		5,016,492		8/18/16		—		(480,343	)
Australian Dollar		DBAB		Sell		1,950,000		1,403,025		10/20/16		—		(45,581	)
British Pound		DBAB		Sell		687,472		1,004,878		10/20/16		87,088		—
British Pound		JPHQ		Sell		250,000		360,156		10/20/16		26,401		—
Euro		BZWS		Sell		2,261,311		2,564,440		10/20/16		43,686		—
Euro		CITI		Sell		1,058,200		1,198,832		10/20/16		19,223		—
Euro		DBAB		Buy		576,388		655,353		10/20/16		—		(12,835	)
Euro		DBAB		Sell		6,800,000		7,761,470		10/20/16		181,297		—
Euro		GSCO		Sell		369,000		419,405		10/20/16		8,070		—
Euro		JPHQ		Sell		6,561,135		7,435,275		10/20/16		121,372		—
Japanese Yen		BZWS		Sell		60,047,000		544,496		10/20/16		—		(39,375	)
Japanese Yen		CITI		Sell		31,757,000		287,547		10/20/16		—		(21,244	)
Japanese Yen		DBAB		Sell		27,184,000		246,234		10/20/16		—		(18,091	)
Japanese Yen		HSBC		Sell		147,626,000		1,337,059		10/20/16		—		(98,392	)
Japanese Yen		JPHQ		Sell		366,653,000		3,320,591		10/20/16		—		(244,583	)
Euro		CITI		Sell		1,073,000		1,209,808		12/15/16		11,008		—
Euro		JPHQ		Sell		1,230,591		1,398,321		12/15/16		23,454		—
Indian Rupee		DBAB		Buy		96,375,000		1,399,782		12/15/16		—		(11,191	)
Japanese Yen		DBAB		Sell		405,702,500		3,856,744		12/15/16		—		(97,476	)
Japanese Yen		JPHQ		Sell		425,150,000		4,037,243		12/15/16		—		(106,523	)
Japanese Yen		MSCO		Sell		12,500,000		118,568		12/15/16		—		(3,265	)
Total Forward Exchange Contracts											$	2,041,573	$	(4,256,802	)
Net unrealized appreciation (depreciation)													$	(2,215,229	)

^aMay be comprised of multiple contracts with the same counterparty, currency and settlement date.

Semiannual Report FSI-25

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Strategic Income VIP Fund (continued)

At June 30, 2016, the Fund had the following credit default swap contracts outstanding. See Note 1(d).

Credit Default Swap Contracts

Description	Periodic Payment Rate			Counterparty / Exchange		Notional Amounta		Expiration Date		Unamortized Upfront Payments (Receipts)		Unrealized Appreciation		Unrealized Depreciation		Value		Ratingb
Centrally Cleared Swap Contracts
Contracts to Sell Protectionc
Traded Index
CDX.NA.HY.26		5.00	%		ICE	$	12,100,000		6/20/21	$	347,130	$	64,218	$	—	$	411,348		Non Investment Grade
OTC Swap Contracts
Contracts to Sell Protectionc
Traded Index
MCDX.NA.26		1.00	%		CITI		2,100,000		6/20/21		5,636		1,619		—		7,255		Investment Grade
MCDX.NA.26		1.00	%		GSCO		10,000,000		6/20/21		24,461		10,084		—		34,545		Investment Grade
Total OTC Swap Contracts											30,097		11,703		—		41,800
Total Credit Default Swap Contracts										$	377,227	$	75,921	$	—	$	453,148
Net unrealized appreciation (depreciation)												$	75,921

^aFor 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.

^bBased on internal ratings for index swaps. Internal ratings based on mapping into equivalent ratings from external vendors.

^cThe Fund enters contracts to sell protection to create a long credit position. Performance triggers include failure to pay or bankruptcy of the underlying securities for traded index swaps.

See Note 9 regarding other derivative information.

See Abbreviations on page FSI-44.

FSI-26 Semiannual Report   |    The accompanying notes are an integral part of these consolidated financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Consolidated Financial Statements

Consolidated Statement of Assets and Liabilities

June 30, 2016 (unaudited)

	Franklin Strategic Income VIP Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	628,163,783
Cost - Non-controlled affiliates (Note 3e)		161,331,951
Total cost of investments	$	789,495,734
Value - Unaffiliated issuers	$	595,858,143
Value - Non-controlled affiliates (Note 3e)		160,916,110
Total value of investments		756,774,253
Cash		991,647
Restricted Cash (Note 1e)		56,000
Foreign currency, at value (cost $15,794)		15,994
Receivables:
Investment securities sold		1,638,134
Capital shares sold		187,293
Dividends and interest		5,227,831
Due from brokers		2,601,571
Variation margin		59,964
OTC swap contracts (upfront payments $31,271)		30,097
Unrealized appreciation on OTC forward exchange contracts		2,041,573
Unrealized appreciation on OTC swap contracts		11,703
Other assets		334
Total assets		769,636,394
Liabilities:
Payables:
Investment securities purchased		58,393,757
Capital shares redeemed		316,049
Management fees		295,436
Distribution fees		134,436
Due to brokers		56,000
Unrealized depreciation on OTC forward exchange contracts		4,256,802
Deferred tax		52,292
Accrued expenses and other liabilities		199,707
Total liabilities		63,704,479
Net assets, at value	$	705,931,915
Net assets consist of:
Paid-in capital	$	757,767,362
Undistributed net investment income		13,248,509
Net unrealized appreciation (depreciation)		(34,861,315	)
Accumulated net realized gain (loss)		(30,222,641	)
Net assets, at value	$	705,931,915

The accompanying notes are an integral part of these consolidated financial statements.    |   Semiannual Report FSI-27

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statement of Assets and Liabilities (continued)

June 30, 2016 (unaudited)

	Franklin Strategic Income VIP Fund
Class 1:
Net assets, at value	$	417,297,638
Shares outstanding		39,318,343
Net asset value and maximum offering price per share	$	10.61
Class 2:
Net assets, at value	$	202,076,361
Shares outstanding		19,670,006
Net asset value and maximum offering price per share	$	10.27
Class 4:
Net assets, at value	$	86,557,916
Shares outstanding		8,219,183
Net asset value and maximum offering price per share	$	10.53

FSI-28 Semiannual Report    |    The accompanying notes are an integral part of these consolidated financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statement of Operations

for the six months ended June 30, 2016 (unaudited)

	Franklin Strategic Income VIP Fund
Investment income:
Dividends:
Unaffiliated issuers	$	1,521,849
Non-controlled affiliates (Note 3e)		1,053,032
Interest		15,424,708
Total investment income		17,999,589
Expenses:
Management fees (Note 3a)		2,105,551
Distribution fees: (Note 3c)
Class 2		246,406
Class 4		154,951
Custodian fees (Note 4)		41,507
Reports to shareholders		89,215
Professional fees		46,166
Trustees’ fees and expenses		1,858
Other		117,667
Total expenses		2,803,321
Expense reductions (Note 4)		(546	)
Expenses waived/paid by affiliates (Note 3e)		(259,879	)
Net expenses		2,542,896
Net investment income		15,456,693
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments:
Unaffiliated issuers		(11,436,886	)
Non-controlled affiliates (Note 3e)		(40,253	)
Foreign currency transactions		(2,874,372	)
Swap contracts		173,507
Net realized gain (loss)		(14,178,004	)
Net change in unrealized appreciation (depreciation) on:
Investments		31,055,144
Translation of other assets and liabilities denominated in foreign currencies		(2,744,114	)
Swap contracts		33,313
Change in deferred taxes on unrealized appreciation		(46,106	)
Net change in unrealized appreciation (depreciation)		28,298,237
Net realized and unrealized gain (loss)		14,120,233
Net increase (decrease) in net assets resulting from operations	$	29,576,926

The accompanying notes are an integral part of these consolidated financial statements.    |   Semiannual Report FSI-29

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statements of Changes in Net Assets

	Franklin Strategic Income VIP Fund
	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31, 2015
Increase (decrease) in net assets:
Operations:
Net investment income	$	15,456,693		$	38,231,958
Net realized gain (loss)		(14,178,004	)		(11,348,194	)
Net change in unrealized appreciation (depreciation)		28,298,237			(55,936,500	)
Net increase (decrease) in net assets resulting from operations		29,576,926			(29,052,736	)
Distributions to shareholders from:
Net investment income and net foreign currency gains:
Class 1		(15,028,685	)		(33,228,366	)
Class 2		(6,934,919	)		(13,693,486	)
Class 4		(2,790,452	)		(6,782,412	)
Net realized gains:
Class 1		—			(8,524,986	)
Class 2		—			(3,636,551	)
Class 4		—			(1,855,841	)
Total distributions to shareholders		(24,754,056	)		(67,721,642	)
Capital share transactions: (Note 2)
Class 1		(27,179,498	)		(74,671,750	)
Class 2		(1,330,842	)		21,200,703
Class 4		(7,196,285	)		(8,346,246	)
Total capital share transactions		(35,706,625	)		(61,817,293	)
Net increase (decrease) in net assets		(30,883,755	)		(158,591,671	)
Net assets:
Beginning of period		736,815,670			895,407,341
End of period	$	705,931,915		$	736,815,670
Undistributed net investment income included in net assets:
End of period	$	13,248,509		$	23,766,482

FSI-30 Semiannual Report    |    The accompanying notes are an integral part of these consolidated financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Notes to Consolidated Financial Statements (unaudited)

Franklin Strategic Income VIP Fund

1. Organization and Significant Accounting Policies

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of nineteen separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Franklin Strategic Income VIP 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, 2016, 72.20% of the Fund’s shares were held through one insurance company. Investment activities of these insurance company separate accounts could have a material impact on the Fund. The Fund offers three classes of shares: Class 1, Class 2 and Class 4. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

The Fund’s investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Fund calculates the net asset value (NAV) per share as of 4 p.m. Eastern time each day the New York Stock Exchange (NYSE) is open for trading. Under compliance policies and procedures approved by the Trust’s Board of Trustees (the Board), the Fund’s administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The VC provides administration and oversight of the Fund’s valuation policies and procedures, which are approved annually by the Board. Among other things, these procedures allow the Fund to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

Equity securities 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 as of 4 p.m. Eastern time whichever is earlier. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the day that the value of the security is determined. Over-the-counter (OTC) securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.

Debt securities generally trade in the OTC market rather than on a securities exchange. The Fund’s pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value. Securities denominated in a foreign currency are converted into their U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the date that the values of the foreign debt securities are determined.

Investments in open-end mutual funds are valued at the closing NAV.

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

The Fund has procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the VC convenes on a regular basis to review such financial instruments and considers a number of factors, including significant unobservable

Semiannual Report FSI-31

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Strategic Income VIP Fund (continued)

1. Organization and Significant Accounting Policies (continued)

a. Financial Instrument Valuation (continued)

valuation inputs, when arriving at fair value. The VC primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. The VC employs various methods for calibrating these valuation approaches including a regular review of key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.

Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 4 p.m. Eastern time. In addition, trading in certain foreign markets may not take place on every NYSE business day. 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 VC monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depositary Receipts, futures contracts and exchange traded funds). These price movements are measured against 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.

When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the NYSE is closed, which could result in differences between the value of the Fund’s portfolio securities on the last business day

and the last calendar day of the reporting period. Any significant security valuation changes due to an open foreign market are adjusted and reflected by the Fund for financial reporting purposes.

b. Foreign Currency Translation

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

The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments in the Consolidated 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 When-Issued or Delayed Delivery and TBA Basis

The Fund purchases securities on a when issued or delayed delivery and to-be-announced (TBA) basis, with payment and delivery scheduled for a future date. These transactions are subject to market fluctuations and are subject to the risk that the value at delivery may be more or less than the trade date purchase price.

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Franklin Strategic Income VIP Fund (continued)

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 in the Consolidated Statement of Assets and Liabilities. Realized gain and loss and unrealized appreciation and depreciation on these contracts for the period are included in the Consolidated Statement of Operations.

Derivative counterparty credit risk is managed through a formal evaluation of the creditworthiness of all potential counterparties. The Fund attempts to reduce its exposure to counterparty credit risk on OTC derivatives, whenever possible, by entering into International Swaps and Derivatives Association (ISDA) master agreements with certain counterparties. These agreements contain various provisions, including but not limited to collateral requirements, events of default, or early termination. Termination events applicable to the counterparty include certain deteriorations in the credit quality of the counterparty. Termination events applicable to the Fund include failure of the Fund to maintain certain net asset levels and/or limit the decline in net assets over various periods of time. In the event of default or early termination, the ISDA master agreement gives the non-defaulting party the right to net and close-out all transactions traded, whether or not arising under the ISDA agreement, to one net amount payable by one counterparty to the other. However, absent an event of default or early termination, OTC derivative assets and liabilities are presented gross and not offset in the Consolidated Statement of Assets and Liabilities. Early termination by the counterparty may result in an immediate payment by the Fund of any net liability owed to that counterparty under the ISDA agreement.

Collateral requirements differ by type of derivative. Collateral or initial margin requirements are set by the broker or exchange clearing house for exchange traded and centrally cleared derivatives. Initial margin deposited is held at the exchange and can be in the form of cash and/or securities. For OTC derivatives traded under an ISDA master agreement, posting of collateral is required by either the Fund or the applicable counterparty if the total net exposure of all OTC derivatives with the applicable counterparty exceeds the minimum transfer amount, which typically ranges from $100,000 to $250,000, and can vary depending on the counterparty and the type of the agreement. Generally, collateral is determined at the close of Fund business each day and any additional collateral required due to changes in derivative values may be delivered by the Fund or the counterparty within a few business days. Collateral pledged and/or received by the Fund for OTC derivatives, if any, is held in segregated accounts with the Fund’s custodian/counterparty broker and can be in the form of cash and/or securities. Unrestricted cash may be invested according to the Fund’s investment objectives. To the extent that the amounts due to the Fund from its counterparties are not subject to collateralization or are not fully collateralized, the Fund bears the risk of loss from counterparty non-performance.

The Fund entered into OTC forward exchange contracts primarily to manage and/or gain exposure to certain foreign currencies. A forward exchange contract is an agreement between the Fund and a counterparty to buy or sell a foreign currency at a specific exchange rate on a future date.

The Fund entered into credit default swap contracts primarily to manage 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. These agreements may be privately negotiated in the over-the-counter market (OTC credit default swaps) or may be executed in a multilateral trade facility platform, such as a registered exchange (centrally cleared credit default swaps). The underlying referenced debt obligation may be a single issuer of corporate or sovereign debt, a credit index, a basket of issuers or indices, or a tranche of a credit index or basket of issuers or indices. In the event of a default of the underlying referenced debt obligation, the buyer is entitled to receive the notional amount of the credit default swap contract from the seller in exchange for the referenced debt obligation, a net

Semiannual Report FSI-33

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Strategic Income VIP Fund (continued)

1. Organization and Significant Accounting Policies (continued)

d. Derivative Financial Instruments (continued)

settlement amount equal to the notional amount of the credit default swap less the recovery value of the referenced debt obligation, or other agreed upon amount. For centrally cleared credit default swaps, required initial margins are pledged by the Fund,

and the daily change in fair value is accounted for as a variation margin payable or receivable in the Consolidated Statement of Assets and Liabilities. 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. Upfront payments and receipts are reflected in the Consolidated 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 and receipts are amortized over the term of the contract as a realized gain or loss in the Consolidated Statement of Operations.

The Fund invests in value recovery instruments (VRI) primarily to gain exposure to growth risk. Periodic payments from VRI are dependent on established benchmarks for underlying variables. VRI has a notional amount, which is used to calculate amounts of payments to holders. Payments are recorded upon receipt as realized gains in the Consolidated Statement of Operations. The risks of investing in VRI include growth risk, liquidity, and the potential loss of investment.

See Note 9 regarding other derivative information.

e. Restricted Cash

At June 30, 2016, the Fund held restricted cash in connection with investments in certain derivative securities. Restricted cash is held in a segregated account with the Fund’s custodian and is reflected in the Consolidated Statement of Assets and Liabilities.

f. Loan Participation Notes

The Fund invests in loan participation notes (Participations). Participations are loans originally issued to a borrower by one or more financial institutions (the Lender) and subsequently sold to other investors, such as the Fund. Participations typically result in the Fund having a contractual relationship only with the

Lender and not with the borrower. The Fund has the right to receive from the Lender any payments of principal, interest and fees which the Lender received from the borrower. The Fund generally has no rights to either enforce compliance by the borrower with the terms of the loan agreement or to any collateral relating to the original loan. As a result, the Fund assumes the credit risk of both the borrower and the Lender that is selling the Participation. The Participations may also involve interest rate risk and liquidity risk, including the potential default or insolvency of the borrower and/or the Lender.

g. Investments in FT Holdings Corporation III (FT Subsidiary)

The Fund invests in certain financial instruments through its investment in FT Subsidiary. FT Subsidiary is a Delaware Corporation, is a wholly-owned subsidiary of the Fund, and is able to invest in certain financial instruments consistent with the investment objective of the Fund. At June 30, 2016, FT Subsidiary’s investment, Turtle Bay Resort, as well as any other assets and liabilities of FT Subsidiary are reflected in the Fund’s Consolidated Statement of Investments and Consolidated Statement of Assets and Liabilities. The financial statements have been consolidated and include the accounts of the Fund and FT Subsidiary. All intercompany transactions and balances have been eliminated. At June 30, 2016, the net assets of FT Subsidiary were $4,946,757, representing less than 1% of the Fund’s consolidated net assets. The Fund’s investment in FT Subsidiary is limited to 25% of consolidated assets.

h. 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 where the Fund sells (or buys) mortgage-backed securities for delivery on a specified date and simultaneously contracts to repurchase (or sell) substantially similar (same type, coupon, and maturity) securities at a future date and at a predetermined price. 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. Transactions in mortgage dollar rolls are accounted for as purchases and sales and may result in an increase to the Fund’s portfolio turnover rate. The risks of mortgage dollar roll transactions include the potential inability of the counterparty to fulfill its obligations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Strategic Income VIP Fund (continued)

i. 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 certain restrictions on resale.

j. Income and Deferred Taxes

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

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

The Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of June 30, 2016, the Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on each tax jurisdiction’s statute of limitation.

k. 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. Paydown gains and losses are recorded as an adjustment to 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 U.S. GAAP. 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 in the Consolidated Statement of Operations.

l. Accounting Estimates

The preparation of financial statements in accordance with U.S. GAAP 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.

Semiannual Report FSI-35

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Strategic Income VIP Fund (continued)

1. Organization and Significant Accounting Policies (continued)

m. 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, 2016, 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, 2016						Year Ended December 31, 2015
	Shares			Amount			Shares			Amount
Class 1 Shares:
Shares sold		218,687		$	2,335,020			342,063		$	3,944,392
Shares issued in reinvestment of distributions		1,427,226			15,028,685			3,778,584			41,753,352
Shares redeemed		(4,200,110	)		(44,543,203	)		(10,556,150	)		(120,369,494	)
Net increase (decrease)		(2,554,197	)	$	(27,179,498	)		(6,435,503	)	$	(74,671,750	)
Class 2 Shares:
Shares sold		1,375,480		$	14,106,061			4,486,606		$	49,551,393
Shares issued in reinvestment of distributions		679,894			6,934,919			1,618,117			17,330,037
Shares redeemed		(2,194,026	)		(22,371,822	)		(4,183,880	)		(45,680,727	)
Net increase (decrease)		(138,652	)	$	(1,330,842	)		1,920,843		$	21,200,703
Class 4 Shares:
Shares sold		81,563		$	853,837			512,101		$	6,000,050
Shares issued in reinvestment of distributions		267,029			2,790,452			788,162			8,638,254
Shares redeemed		(1,032,538	)		(10,840,574	)		(2,071,680	)		(22,984,550	)
Net increase (decrease)		(683,946	)	$	(7,196,285	)		(771,417	)	$	(8,346,246	)

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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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Strategic Income VIP Fund (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 $500 million
0.525%	Over $500 million, up to and including $1 billion
0.480%	Over $1 billion, up to and including $1.5 billion
0.435%	Over $1.5 billion, up to and including $6.5 billion
0.415%	Over $6.5 billion, up to and including $11.5 billion
0.400%	Over $11.5 billion, up to and including $16.5 billion
0.390%	Over $16.5 billion, up to and including $19 billion
0.380%	Over $19 billion, up to and including $21.5 billion
0.370%	In excess of $21.5 billion

For the period ended June 30, 2016, the annualized effective investment management fee rate was 0.595% of the Fund’s average daily net assets.

b. Administrative Fees

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

c. Distribution Fees

The Board has adopted distribution plans for Class 2 and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to 0.25% and 0.35% per year of its average daily net assets of Class 2 and Class 4, respectively. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.

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. Investments in Affiliated Management Investment Companies

The Fund invests in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Fund are waived on assets invested in the affiliated management investment companies, as noted in the Consolidated Statement of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate. Prior to January 1, 2014, the waiver was accounted for as a reduction to management fees.

Semiannual Report FSI-37

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Strategic Income VIP Fund (continued)

3. Transactions with Affiliates (continued)

e. Investments in Affiliated Management Investment Companies (continued)

	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 Gain (Loss)			% of Affiliated Fund Shares Outstanding Held at End of Period
Non-Controlled Affiliates
Franklin Lower Tier Floating Rate Fund		3,135,765		46,063		(91,906	)		3,089,922	$	30,652,026	$	257,407	$	(7,353	)		7.1%
Franklin Middle Tier Floating Rate Fund		2,704,835		26,387		(94,000	)		2,637,222		25,554,680		795,625		(32,900	)		7.4%
Institutional Fiduciary Trust Money Market Portfolio		63,296,131		106,708,771		(65,295,498	)		104,709,404		104,709,404		—		—			0.5%
Total										$	160,916,110	$	1,053,032	$	(40,253	)

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, 2016, the custodian fees were reduced as noted in the Consolidated Statement of Operations.

5. Income Taxes

For tax purposes, capital losses may be carried over to offset future capital gains, if any. At December 31, 2015, the capital loss carryforwards were as follows:

Capital loss carryforwards:
Short term	$	1,542,457
Long term		15,007,905
Total capital loss carryforwards	$	16,550,362

At June 30, 2016, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	791,055,209
Unrealized appreciation	$	21,540,419
Unrealized depreciation		(55,821,375	)
Net unrealized appreciation (depreciation)	$	(34,280,956	)

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of foreign currency transactions and bond discounts and premiums.

6. Investment Transactions

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2016, aggregated $430,620,784 and $473,133,896, respectively.

7. Credit Risk and Defaulted Securities

At June 30, 2016, the Fund had 49.3% of its portfolio invested in high yield, senior secured floating rate notes, or other securities rated below investment grade. These securities may be more sensitive to economic conditions causing greater price volatility and are potentially subject to a greater risk of loss due to default than higher rated securities.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Strategic Income VIP Fund (continued)

The Fund held defaulted securities and/or other securities for which the income has been deemed uncollectible. At June 30, 2016, the aggregate value of these securities was $6,321,548, representing 0.9% 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 in the accompanying Consolidated Statement of Investments.

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, 2016, the Fund held investments in restricted securities, excluding certain securities exempt from registration under the 1933 Act deemed to be liquid, as follows:

Units	Issuer	Acquisition Date		Cost		Value
1,499	Warrior Met Coal LLC, A (Value is 0.0%a of Net Assets)		3/31/16	$	2,911,693	$	151,124

^aRounds to less than 0.1% of net assets.

9. Other Derivative Information

At June 30, 2016, the Fund’s investments in derivative contracts are reflected in the Consolidated Statement of Assets and Liabilities as follows:

	Asset Derivatives				Liability Derivatives
Derivative Contracts Not Accounted for as Hedging Instruments	Consolidated Statement of Assets and Liabilities Location	Fair Value			Consolidated Statement of Assets and Liabilities Location	Fair Value
Foreign exchange contracts	Unrealized appreciation on OTC forward exchange contracts	$	2,041,573		Unrealized depreciation on OTC forward exchange contracts	$	4,256,802
Credit contracts	Variation margin		64,218	a	Variation margin		—
	OTC swap contracts (upfront payments)		30,097		OTC swap contracts (upfront receipts)		—
	Unrealized appreciation on OTC swap contracts		11,703		Unrealized depreciation on OTC swap contracts		—
Value recovery instruments	Investments in securities, at value		641,720
Totals		$	2,789,311			$	4,256,802

^aThis amount reflects the cumulative appreciation (depreciation) of centrally cleared swap contracts as reported in the Consolidated Statement of Investments. Only the variation margin receivable/payable at period end is separately reported within the Consolidated Statement of Assets and Liabilities. Prior variation margin movements were recorded to cash upon receipt or payment.

Semiannual Report FSI-39

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Strategic Income VIP Fund (continued)

9. Other Derivative Information (continued)

For the period ended June 30, 2016, the effect of derivative contracts in the Fund’s Consolidated Statement of Operations was as follows:

Derivative Contracts Not Accounted for as Hedging Instruments	Consolidated Statement of Operations Locations	Net Realized Gain (Loss) for the Period			Consolidated Statement of Operations Locations	Net Change in Unrealized Appreciation (Depreciation) for the Period
	Net realized gain (loss) from:				Net change in unrealized appreciation (depreciation) on:
Foreign exchange contracts	Foreign currency transactions	$	(3,157,029	)a	Translation of other assets and liabilities denominated in foreign currencies	$	(2,759,069	)a
Credit contracts	Swap contracts		173,507		Swap contracts		33,313
Value recovery instruments	Investments		—		Investments		(146,400	)
Totals		$	(2,983,522	)		$	(2,872,156	)

^aForward exchange contracts are included in net realized gain (loss) from foreign currency transactions and net change in unrealized appreciation (depreciation) on translation of other assets and liabilities denominated in foreign currencies in the Consolidated Statement of Operations.

At June 30, 2016, the Fund’s OTC derivative assets and liabilities are as follows:

	Gross and Net Amounts of Assets and Liabilities Presented in the Consolidated Statement of Assets and Liabilities
	Assetsa		Liabilitiesa
Derivatives
Forward exchange contracts	$	2,041,573	$	4,256,802
Swap contracts		41,800		—
Total	$	2,083,373	$	4,256,802

^aAbsent an event of default or early termination, OTC derivative assets and liabilities are presented gross and not offset in the Consolidated Statement of Assets and Liabilities.

FSI-40 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Strategic Income VIP Fund (continued)

At June 30, 2016, the Fund’s OTC derivative assets, which may be offset against the Fund’s OTC derivative liabilities and collateral received from the counterparty, are as follows:

			Amounts Not Offset in the Consolidated Statement of Assets and Liabilities
	Gross and Net Amounts of Assets Presented in the Consolidated Statement of Assets and Liabilities		Financial Instruments Available for Offset			Financial Instruments Collateral Received		Cash Collateral Receiveda			Net Amount (Not less than zero)
Counterparty
BZWS	$	117,962	$	(117,962	)	$	—	$	—		$	—
CITI		38,280		(38,280	)		—		—			—
DBAB		1,568,832		(1,568,832	)		—		—			—
GSCO		42,615		(42,615	)		—		—			—
HSBC		29,790		(29,790	)		—		—			—
JPHQ		258,251		(258,251	)		—		—			—
MSCO		27,643		(6,766	)		—		(20,877	)		—
Total	$	2,083,373	$	(2,062,496	)	$	—	$	(20,877	)	$	—

^aIn some instances, the collateral amount disclosed in the table above was adjusted due to the requirement to limit collateral amounts to avoid the effect of overcollateralization. Actual collateral received and/or pledged may be more than the amounts disclosed herein.

At June 30, 2016, the Fund’s OTC derivative liabilities, which may be offset against the Fund’s OTC derivative assets and collateral pledged to the counterparty, are as follows:

			Amounts Not Offset in the Consolidated Statement of Assets and Liabilities
	Gross and Net Amounts of Liabilities Presented in the Consolidated Statement of Assets and Liabilities		Financial Instruments Available for Offset			Financial Instruments Collateral Pledged		Cash Collateral Pledgeda			Net Amount (Not less than zero)
Counterparty
BZWS	$	211,019	$	(117,962	)	$	—	$	—		$	93,057
CITI		170,677		(38,280	)		—		—			132,397
DBAB		2,358,498		(1,568,832	)		—		(780,000	)		9,666
GSCO		49,997		(42,615	)		—		—			7,382
HSBC		509,396		(29,790	)		—		(330,000	)		149,606
JPHQ		950,449		(258,251	)		—		(692,198	)		—
MSCO		6,766		(6,766	)		—		—			—
Total	$	4,256,802	$	(2,062,496	)	$	—	$	(1,802,198	)	$	392,108

^aIn some instances, the collateral amounts disclosed in the table above were adjusted due to the requirement to limit collateral amounts to avoid the effect of overcollateralization. Actual collateral received and/or pledged may be more than the amounts disclosed herein.

For the period ended June, 30 2016, the average month end fair value of derivatives represented 0.7% of average month end net assets. The average month end number of open derivative contracts for the period was 56.

See Note 1(d) regarding derivative financial instruments.

See Abbreviations on page FSI-44.

Semiannual Report FSI-41

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Strategic Income VIP Fund (continued)

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 $2 billion (Global Credit Facility) which matures on February 10, 2017. 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 0.07% based upon the unused portion of the Global Credit Facility. Effective February 12, 2016, the annual commitment fee is 0.15%. These fees are reflected in other expenses in the Consolidated Statement of Operations. During the period ended June 30, 2016, 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 financial instruments and are summarized in the following fair value hierarchy:

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

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

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

The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.

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.

FSI-42 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Strategic Income VIP Fund (continued)

A summary of inputs used as of June 30, 2016, in valuing the Fund’s assets and liabilities carried at fair value, is as follows:

	Level 1		Level 2		Level 3			Total
Assets:
Investments in Securities:
Equity Investments:a
Consumer Services	$	—	$	4,943,766	$	—		$	4,943,766
Energy		—		—		151,124			151,124
Health Care Equipment & Services		—		32,670		—			32,670
Transportation		—		—		251,576			251,576
Management Investment Companies		56,206,706		—		—			56,206,706
Corporate Bonds		—		294,197,943		129,783			294,327,726
Senior Floating Rate Interests		—		78,286,391		—			78,286,391
Foreign Government and Agency Securities		—		82,803,251		—			82,803,251
U.S. Government and Agency Securities		—		30,145,221		—			30,145,221
Asset-Backed Securities and Commercial Mortgage-Backed Securities		—		42,365,288		—			42,365,288
Mortgage-Backed Securities		—		55,776,500		—			55,776,500
Municipal Bonds		—		6,774,630		—			6,774,630
Escrows and Litigation Trusts		—		—		—	b		—
Short Term Investments		104,709,404		—		—			104,709,404
Total Investments in Securities	$	160,916,110	$	595,325,660	$	532,483		$	756,774,253
Other Financial Instruments:
Forward Exchange Contracts	$	—	$	2,041,573	$	—		$	2,041,573
Swap Contracts		—		75,921		—			75,921
Total Other Financial Instruments	$	—	$	2,117,494	$	—		$	2,117,494
Liabilities:
Other Financial Instruments:
Forward Exchange Contracts	$	—	$	4,256,802	$	—		$	4,256,802

^aIncludes common and convertible preferred stocks and management investment companies as well as other equity investments.

^bIncludes securities determined to have no value at June 30, 2016.    

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

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.

Semiannual Report FSI-43

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Strategic Income VIP Fund (continued)

Abbreviations

Counterparty/Exchange		Currency		Selected Portfolio
BZWS	Barclays Bank PLC	BRL	Brazilian Real	CDO	Collateralized Debt Obligation
CITI	Citigroup, Inc.	EUR	Euro	CLO	Collateralized Loan Obligation
DBAB	Deutsche Bank AG	GBP	British Pound	FRN	Floating Rate Note
GSCO	The Goldman Sachs Group, Inc.	IDR	Indonesian Rupiah	GDP	Gross Domestic Product
HSBC	HSBC Bank USA, N.A.	LKR	Sri Lankan Rupee	GO	General Obligation
ICE	Intercontinental Exchange	MXN	Mexican Peso	HDC	Housing Development Corp.
JPHQ	JP Morgan Chase & Co.	MYR	Malaysian Ringgit	PIK	Payment-In-Kind
MSCO	Morgan Stanley	PHP	Philippine Peso	SF	Single Family
		UYU	Uruguayan Peso	VRI	Value Recovery Instrument

FSI-44 Semiannual Report

Franklin U.S. Government Securities VIP Fund

This semiannual report for Franklin U.S. Government Securities VIP Fund covers the period ended June 30, 2016.

Class 1 Performance Summary as of June 30, 2016

The Fund’s Class 1 shares delivered a +2.43% total return for the six-month period ended June 30, 2016.

Performance reflects the Fund’s Class 1 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.

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.

Semiannual Report FUS-1

FRANKLIN U.S. GOVERNMENT SECURITIES VIP FUND

Fund Goal and Main Investments

The Fund seeks income. Under normal market conditions, the Fund invests at least 80% of its net assets in U.S. government securities.

Fund Risks

All investments involve risks, including possible loss of principal. The Fund’s share price and yield will be affected by interest rate movements and mortgage prepayments. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in the Fund adjust to a rise in interest rates, the Fund’s share price may decline. Changes in the financial strength of a bond issuer or in a bond’s credit rating may affect its value. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. In comparison, the Fund’s primary benchmark, the Barclays U.S. Government Index: Intermediate Component, delivered a +3.55% total return.¹ The Fund’s secondary benchmark, the Lipper VIP General U.S. Government Funds Classification Average, produced a +4.83% total return.² Funds in the Lipper average may allocate as much as 35% of their investments in asset types other than U.S. government and agency mortgage-backed securities.

Economic and Market Overview

The U.S. economy grew moderately, as measured by gross domestic product in 2016’s first and second quarters, driven by consumer spending and exports. A decline in private inventory investment and nonresidential fixed investment contributed to the moderation. Although the unemployment rate rose from 4.7% in May to 4.9% in June, the increase was due to additional people entering the labor force, and for the entire period under review, unemployment declined slightly.³ Home sales remained strong and prices rose through most of the period amid relatively low mortgage rates. Monthly retail sales grew during most of the review period, and rose to the highest level in April in more than a year, due to a broad-based increase across most

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).

retail categories. Inflation, as measured by the Consumer Price Index, remained subdued overall even though it spiked to the highest level in three years in April mainly due to a rebound in energy prices.

After raising its target range for the federal funds rate to 0.25%–0.50% at its December meeting, the Federal Reserve (Fed) maintained the rate through-period end. Although the Fed hinted at an interest rate hike in June, subsequent reports showed job additions slowed substantially in May. Consequently, at its June meeting, the Fed kept the federal funds rates unchanged, and indicated that in determining the timing and size of future adjustments to the target range, it will assess realized and expected economic conditions relative to its objectives of maximum employment and 2.00% inflation. The Fed expects economic conditions to evolve in a manner that could warrant only gradual increases in the federal funds rate.

The 10-year Treasury yield, which moves inversely to price, declined during the period. It declined from a period high of 2.27% on December 31, 2015, and remained relatively low through period-end, reflecting investors’ concerns about global economic uncertainty. Negative interest rates in Japan and Europe, and central banks’ purchases of government bonds also put downward pressure on U.S. yields. It touched a period low of 1.46% on June 27, 2016, and ended the period at 1.49%, after the Fed kept short-term interest rates unchanged and fears of Britain’s exit from the European Union boosted safe-haven buying by investors.

1. Source: Morningstar.

2. Source: Lipper, a Thomson Reuters Company.

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.

FUS-2 Semiannual Report

FRANKLIN U.S. GOVERNMENT SECURITIES VIP FUND

Investment Strategy

Using our straightforward investment approach, we seek to produce current income with a high degree of credit safety from a conservatively managed portfolio of U.S. government securities. Analyzing securities using proprietary and nonproprietary research, we seek to identify attractive investment opportunities.

Manager’s Discussion

The overall mortgage market provided mixed results during the period as Treasuries outperformed mortgage-backed securities (MBS). Volatility moved off of recent low levels over the period and MBS could not keep pace with the rally in Treasuries. Agency MBS valuations remained relatively full, but the Fed’s continued reinvestment of principal proceeds back into agency MBS and moderate supply have provided positive technical support for the sector. Without the Fed’s support, MBS is more vulnerable to supply shocks until alternative demand sources emerge. Banks, mortgage real estate investment trusts, overseas investors and domestic money managers are possible sources, but would need to increase their allocation to the sector to compensate for the Fed’s reduced presence in the MBS sector. As we move closer to the Fed ceasing reinvestment, coupled with tight spreads, we believe MBS could experience higher basis volatility. Although recent lower mortgage rates could increase prepayment speeds, our overall prepayment expectations remained anchored and we feel they could moderate with mortgage rates staying range bound and underwriting standards remaining tight.

The Fund maintains a consistent and disciplined approach to our investment strategy. The Fund’s investment process and strategy have not changed, and the team continues to look for strong cash flow fundamentals and valuations seeking to uncover opportunities across the agency mortgage and agency debenture universe. The Fund emphasizes agency pass-throughs and invests in other agency securities for diversification purposes.

Within the agency mortgage pass-through sector, Freddie Mac MBS, Fannie Mae MBS and Ginnie Mae (GNMA) MBS had negative excess returns but positive total returns during the period.

During the period, we were more weighted toward GNMA IIs (pools of mortgages from multiple issuers) than GNMA Is (pools of mortgages from single issuers). Over the period, we increased exposure to GNMA II 3.5% and 4.0% coupons, while reducing the exposure to 4.5% coupons. At period-end, our heaviest exposures were in 3.5% and 4.0% coupons. Based on excess returns over Treasuries, GNMAs produced negative returns, with lower-coupon GNMAs providing better performance than higher coupon securities.

The Fund’s selection within U.S. agency securities was a contributor during the period, while our defensive U.S. yield curve positioning was a detractor as yield curve movements had a negative impact relative to the benchmark.

Thank you for your participation in Franklin U.S. Government Securities VIP Fund. We look forward to serving your future investment needs

The foregoing information reflects our analysis, opinions and portfolio holdings as of June 30, 2016, 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.

Semiannual Report FUS-3

FRANKLIN U.S. GOVERNMENT SECURITIES VIP FUND

Class 1 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 × $7.50 = $64.50.

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

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 1	Beginning Account Value 1/1/16		Ending Account Value 6/30/16		Fund-Level Expenses Incurred During Period* 1/1/16–6/30/16
Actual	$	1,000	$	1,024.30	$	2.47
Hypothetical (5% return before expenses)	$	1,000	$	1,022.43	$	2.46

*Expenses are calculated using the most recent six-month annualized expense ratio for the Fund’s Class 1 shares (0.49%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 182/366 to reflect the one-half year period.

FUS-4 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Highlights

Franklin U.S. Government Securities VIP Fund

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012			2011
Class 1
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$12.74			$13.00			$12.91			$13.57			$13.67			$13.34
Income from investment operationsa:
Net investment incomeb		0.12			0.21			0.24			0.24			0.32			0.42
Net realized and unrealized gains (losses)		0.19			(0.12	)		0.22			(0.51	)		(0.03	)		0.36
Total from investment operations		0.31			0.09			0.46			(0.27	)		0.29			0.78
Less distributions from net investment income		(0.35	)		(0.35	)		(0.37	)		(0.39	)		(0.39	)		(0.45	)
Net asset value, end of period		$12.70			$12.74			$13.00			$12.91			$13.57			$13.67
Total returnc		2.43%			0.71%			3.64%			(1.99)%			2.12%			5.96%
Ratios to average net assetsd
Expenses		0.49%			0.50%	e		0.49%	e		0.49%	e		0.50%			0.51%
Net investment income		1.85%			1.64%			1.84%			1.84%			2.36%			3.11%
Supplemental data
Net assets, end of period (000’s)		$78,545			$79,620			$90,656			$99,947			$126,536			$136,628
Portfolio turnover rate		47.79%			61.91%			42.88%			69.47%			45.89%			37.89%
Portfolio turnover rate excluding mortgage dollar rollsf		47.79%			61.91%			42.88%			67.80%			45.89%			37.89%

^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’s shares in relation to income earned and/or fluctuating fair 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 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(d) regarding mortgage dollar rolls.

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report FUS-5

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL HIGHLIGHTS

Franklin U.S. Government Securities VIP Fund (continued)

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012			2011
Class 2
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$12.47			$12.73			$12.65			$13.31			$13.42			$13.11
Income from investment operationsa:
Net investment incomeb		0.10			0.18			0.20			0.21			0.28			0.38
Net realized and unrealized gains (losses)		0.19			(0.12	)		0.22			(0.50	)		(0.03	)		0.35
Total from investment operations		0.29			0.06			0.42			(0.29	)		0.25			0.73
Less distributions from net investment income		(0.32	)		(0.32	)		(0.34	)		(0.37	)		(0.36	)		(0.42	)
Net asset value, end of period		$12.44			$12.47			$12.73			$12.65			$13.31			$13.42
Total returnc		2.31%			0.47%			3.38%			(2.24)%			1.89%			5.68%
Ratios to average net assetsd
Expenses		0.74%			0.75%	e		0.74%	e		0.74%	e		0.75%			0.76%
Net investment income		1.60%			1.39%			1.59%			1.59%			2.11%			2.86%
Supplemental data
Net assets, end of period (000’s)		$1,353,724			$1,311,974			$1,369,037			$1,267,994			$1,206,089			$894,699
Portfolio turnover rate		47.79%			61.91%			42.88%			69.47%			45.89%			37.89%
Portfolio turnover rate excluding mortgage dollar rollsf		47.79%			61.91%			42.88%			67.80%			45.89%			37.89%

^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’s shares in relation to income earned and/or fluctuating fair 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 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(d) regarding mortgage dollar rolls.

FUS-6 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Statement of Investments, June 30, 2016 (unaudited)

Franklin U.S. Government Securities VIP Fund
		Principal Amount*		Value
	Foreign Government and Agency Securities (Cost $1,739,797) 0.1%
a	International Bank for Reconstruction and Development, Principal Strip, 7/15/17 (Supranational)		1,761,000	$	1,742,322
	Mortgage-Backed Securities 77.0%
b	Federal Home Loan Mortgage Corp. (FHLMC) Adjustable Rate 2.0%
	FHLMC, 2.711% - 2.713%, 5/01/37 - 6/01/37		9,718,618		10,191,381
	FHLMC, 2.799%, 4/01/40		11,294,459		11,958,224
	FHLMC, 2.911% - 3.035%, 3/01/36 - 5/01/38		5,857,032		6,195,145
					28,344,750
	Federal Home Loan Mortgage Corp. (FHLMC) Fixed Rate 6.4%
	FHLMC Gold 15 Year, 4.50%, 3/01/25 - 4/01/25		1,810,743		1,910,687
	FHLMC Gold 30 Year, 3.00%, 5/01/43		582,437		605,198
	FHLMC Gold 30 Year, 3.00%, 6/01/46		44,000,000		45,661,294
	FHLMC Gold 30 Year, 3.50%, 3/01/32 - 5/01/43		5,796,660		6,210,782
	FHLMC Gold 30 Year, 3.50%, 9/01/45		9,146,281		9,659,941
	FHLMC Gold 30 Year, 4.00%, 9/01/40 - 12/01/41		9,837,275		10,568,486
	FHLMC Gold 30 Year, 4.50%, 5/01/40 - 7/01/41		4,147,692		4,554,464
	FHLMC Gold 30 Year, 5.00%, 9/01/33 - 4/01/40		6,304,161		6,970,410
	FHLMC Gold 30 Year, 5.50%, 7/01/33 - 5/01/38		1,946,488		2,194,543
	FHLMC Gold 30 Year, 6.00%, 1/01/24 - 8/01/35		1,287,688		1,479,837
	FHLMC Gold 30 Year, 6.50%, 12/01/23 - 5/01/35		651,425		749,189
	FHLMC Gold 30 Year, 7.00%, 4/01/24 - 6/01/32		250,956		282,704
	FHLMC Gold 30 Year, 7.50%, 12/01/22 - 5/01/24		4,768		5,018
	FHLMC Gold 30 Year, 8.00%, 9/01/21 - 5/01/22		4,811		5,418
	FHLMC Gold 30 Year, 8.50%, 10/01/21 - 7/01/31		427,325		545,336
	FHLMC PC 30 Year, 8.00%, 1/01/17 - 5/01/17		846		847
	FHLMC PC 30 Year, 8.50%, 9/01/20		234		237
					91,404,391
b	Federal National Mortgage Association (FNMA) Adjustable Rate 6.3%
	FNMA, 1.638% - 2.461%, 12/01/16 - 10/01/44		11,481,416		12,088,845
	FNMA, 2.462% - 2.582%, 10/01/19 - 12/01/40		12,446,230		13,053,370
	FNMA, 2.586% - 2.598%, 4/01/27 - 8/01/36		9,995,301		10,527,258
	FNMA, 2.603%, 10/01/35		9,526,114		10,079,664
	FNMA, 2.605% - 2.85%, 9/01/18 - 12/01/40		12,513,432		13,117,167
	FNMA, 2.857% - 2.888%, 9/01/26 - 12/01/38		2,480,581		2,625,354
	FNMA, 2.895%, 9/01/37		26,504,988		28,026,257
	FNMA, 2.912% - 7.22%, 8/01/18 - 3/01/47		1,479,763		1,531,757
					91,049,672
	Federal National Mortgage Association (FNMA) Fixed Rate 8.1%
	FNMA 15 Year, 2.64%, 7/01/25		2,500,000		2,605,923
	FNMA 15 Year, 2.77%, 4/01/25		3,500,000		3,669,938
	FNMA 15 Year, 2.99%, 11/01/24		3,000,000		3,212,875
	FNMA 15 Year, 3.14%, 10/01/25		4,000,000		4,310,225
	FNMA 15 Year, 3.28%, 7/01/27		4,000,000		4,295,459
	FNMA 15 Year, 3.51%, 8/01/23		3,000,000		3,313,199
	FNMA 15 Year, 5.50%, 11/01/16 - 1/01/25		1,978,251		2,171,023
	FNMA 15 Year, 6.00%, 8/01/17 - 9/01/17		34,659		35,123
	FNMA 30 Year, 3.00%, 12/01/42		272,650		283,279
	FNMA 30 Year, 3.50%, 7/01/45		46,031,444		48,607,435
	FNMA 30 Year, 4.00%, 1/01/41 - 7/01/41		11,556,396		12,431,986
	FNMA 30 Year, 4.50%, 8/01/40 - 6/01/41		11,496,753		12,604,187

Semiannual Report FUS-7

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin U.S. Government Securities VIP Fund (continued)

		Principal Amount*		Value
	Mortgage-Backed Securities (continued)
	Federal National Mortgage Association (FNMA) Fixed Rate (continued)
	FNMA 30 Year, 5.00%, 3/01/34 - 7/01/41		7,791,940	$	8,677,799
	FNMA 30 Year, 5.50%, 12/01/32 - 8/01/35		2,767,505		3,130,326
	FNMA 30 Year, 6.00%, 1/01/24 - 8/01/38		3,468,581		3,977,629
	FNMA 30 Year, 6.50%, 1/01/24 - 9/01/36		617,900		711,650
	FNMA 30 Year, 7.50%, 4/01/23 - 8/01/25		21,243		22,466
	FNMA 30 Year, 8.00%, 3/01/22 - 2/01/25		106,932		111,189
	FNMA 30 Year, 8.50%, 3/01/20 - 6/01/21		699		747
	FNMA 30 Year, 9.00%, 10/01/26		91,990		99,661
	FNMA GL 30 Year, 8.00%, 8/01/19		7,483		7,537
	FNMA PL 30 Year, 5.50%, 4/01/34		1,468,497		1,638,022
					115,917,678
	Government National Mortgage Association (GNMA) Fixed Rate 54.2%
	GNMA I SF 30 Year, 3.00%, 7/15/42		661,843		695,499
	GNMA I SF 30 Year, 4.50%, 1/15/39 - 3/15/40		12,322,600		13,658,759
	GNMA I SF 30 Year, 4.50%, 3/15/40 - 4/15/41		11,925,712		13,222,567
	GNMA I SF 30 Year, 4.50%, 6/15/41		1,060,458		1,170,967
	GNMA I SF 30 Year, 5.00%, 6/15/30 - 9/15/39		12,633,680		14,212,712
	GNMA I SF 30 Year, 5.00%, 9/15/39 - 1/15/40		8,686,946		9,828,176
	GNMA I SF 30 Year, 5.00%, 2/15/40 - 6/15/40		12,633,560		14,301,649
	GNMA I SF 30 Year, 5.00%, 9/15/40		1,349,021		1,511,497
	GNMA I SF 30 Year, 5.50%, 12/15/28 - 10/15/39		8,463,017		9,646,439
	GNMA I SF 30 Year, 6.00%, 11/15/23 - 11/15/38		4,379,041		5,062,948
	GNMA I SF 30 Year, 6.50%, 5/15/23 - 9/15/38		2,239,519		2,590,026
	GNMA I SF 30 Year, 7.00%, 9/15/22 - 1/15/32		601,653		643,280
	GNMA I SF 30 Year, 7.50%, 2/15/17 - 8/15/33		646,699		760,693
	GNMA I SF 30 Year, 8.00%, 3/15/17 - 5/15/24		165,868		172,332
	GNMA I SF 30 Year, 8.50%, 6/15/22 - 12/15/24		59,561		62,560
	GNMA I SF 30 Year, 9.00%, 4/15/17 - 5/15/20		11,014		11,066
	GNMA I SF 30 Year, 9.50%, 8/15/16 - 12/15/20		36,955		37,816
	GNMA I SF 30 Year, 10.00%, 11/15/17 - 8/15/21		20,957		21,667
	GNMA II SF 30 Year, 3.00%, 12/20/42 - 2/20/45		3,876,290		4,058,374
	GNMA II SF 30 Year, 3.00%, 9/20/45		14,137,459		14,799,413
	GNMA II SF 30 Year, 3.50%, 12/20/40 - 7/20/42		3,564,826		3,799,141
	GNMA II SF 30 Year, 3.50%, 8/20/42		11,057,975		11,787,408
	GNMA II SF 30 Year, 3.50%, 9/20/42		31,547,715		33,628,761
	GNMA II SF 30 Year, 3.50%, 10/20/42		9,614,843		10,249,093
	GNMA II SF 30 Year, 3.50%, 11/20/42		18,770,107		20,008,291
	GNMA II SF 30 Year, 3.50%, 12/20/42		14,034,618		14,960,432
	GNMA II SF 30 Year, 3.50%, 1/20/43		23,568,009		25,122,712
	GNMA II SF 30 Year, 3.50%, 3/20/43		8,728,576		9,304,386
	GNMA II SF 30 Year, 3.50%, 4/20/43		11,038,578		11,766,786
	GNMA II SF 30 Year, 3.50%, 5/20/43		19,826,535		21,130,637
	GNMA II SF 30 Year, 3.50%, 6/20/43		9,036,333		9,631,374
	GNMA II SF 30 Year, 3.50%, 8/20/43		448,055		477,504
	GNMA II SF 30 Year, 3.50%, 2/20/46		31,118,439		33,082,794
	GNMA II SF 30 Year, 3.50%, 3/20/46		158,653,681		168,709,486
	GNMA II SF 30 Year, 3.50%, 5/20/46		4,987,781		5,303,762
c	GNMA II SF 30 Year, 3.50%, 7/01/46		10,110,000		10,729,238
	GNMA II SF 30 Year, 4.00%, 11/20/39 - 1/20/41		12,247,573		13,202,529
	GNMA II SF 30 Year, 4.00%, 2/20/41 - 9/20/41		7,781,403		8,385,298

FUS-8 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin U.S. Government Securities VIP Fund (continued)

		Principal Amount*		Value
	Mortgage-Backed Securities (continued)
	Government National Mortgage Association (GNMA) Fixed Rate (continued)
	GNMA II SF 30 Year, 4.00%, 11/20/41 - 12/20/41		12,174,215	$	13,110,185
	GNMA II SF 30 Year, 4.00%, 2/20/44		3,757,703		4,052,374
	GNMA II SF 30 Year, 4.00%, 2/20/46		21,605,803		23,138,744
	GNMA II SF 30 Year, 4.00%, 3/20/46		15,097,633		16,195,172
	GNMA II SF 30 Year, 4.00%, 4/20/46		31,329,447		33,561,513
	GNMA II SF 30 Year, 4.00%, 5/20/46		72,289,531		77,439,831
	GNMA II SF 30 Year, 4.50%, 10/20/39 - 5/20/41		12,300,453		13,433,437
	GNMA II SF 30 Year, 4.50%, 6/20/41 - 7/20/41		11,514,107		12,577,337
	GNMA II SF 30 Year, 4.50%, 9/20/41 -10/20/41		10,935,467		11,945,283
	GNMA II SF 30 Year, 4.50%, 3/20/42 - 2/20/44		9,764,347		10,593,460
	GNMA II SF 30 Year, 4.50%, 10/20/44		5,402,470		5,808,547
	GNMA II SF 30 Year, 5.00%, 9/20/33 - 6/20/40		8,974,862		10,053,790
	GNMA II SF 30 Year, 5.00%, 8/20/41 - 6/20/44		11,307,201		12,440,160
	GNMA II SF 30 Year, 5.50%, 5/20/34 - 6/20/38		7,112,983		7,981,148
	GNMA II SF 30 Year, 6.00%, 11/20/23 - 7/20/39		4,446,868		5,186,783
	GNMA II SF 30 Year, 6.50%, 12/20/27 - 4/20/34		653,803		774,828
	GNMA II SF 30 Year, 7.00%, 5/20/32		11,253		13,822
	GNMA II SF 30 Year, 7.50%, 11/20/17 - 5/20/33		121,345		137,304
	GNMA II SF 30 Year, 8.00%, 8/20/26		7,589		9,346
	GNMA II SF 30 Year, 9.50%, 4/20/25		2,378		2,390
					776,203,526
	Total Mortgage-Backed Securities (Cost $1,086,325,168)				1,102,920,017
	U.S. Government and Agency Securities 19.8%
	Federal Agricultural Mortgage Corp.,
	1.41%, 3/06/20		10,000,000		10,093,750
	2.66%, 4/12/22		7,000,000		7,465,493
	4.30%, 5/13/19		1,010,000		1,108,261
d	Federal Agricultural Mortgage Corp. Guaranteed Trust 07-1, 144A, 5.125%, 4/19/17		13,000,000		13,468,923
	FHLB,
	2.625%, 9/12/25		20,000,000		21,392,360
	4.75%, 12/16/16		17,000,000		17,330,293
	5.25%, 6/05/17		9,000,000		9,387,216
	FICO,
	1P, Strip, 5/11/18		10,000,000		9,852,300
	12, Strip, 6/06/18		4,627,000		4,560,279
	13P, Strip, 12/27/18		2,500,000		2,451,628
	15P, Strip, 3/07/19		1,798,000		1,756,596
	16, Strip, 4/05/17		12,367,000		12,303,792
	A-P, Strip, 2/08/18		1,000,000		988,396
	B-P, Strip, 4/06/18		1,405,000		1,387,873
	D-P, Strip, 9/26/19		7,605,000		7,379,253
	E-P, Strip, 11/02/18		8,896,000		8,739,404
	Israel Government Agency for International Development Bond,
	5.50%, 9/18/23		12,000,000		15,189,108
	7-Z, U.S. Government Guaranteed, Strip, 8/15/22		5,619,000		5,058,331
	U.S. Government Guaranteed, Strip, 5/01/17		5,000,000		4,974,860
	New Valley Generation IV, secured bond, 4.687%, 1/15/22		2,253,572		2,464,919

Semiannual Report FUS-9

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin U.S. Government Securities VIP Fund (continued)

		Principal Amount*		Value
	U.S. Government and Agency Securities (continued)
	Overseas Private Investment Corp., A, zero cpn.,
	2/19/18		682,174	$	720,236
	11/15/20		2,575,000		3,115,971
	Private Export Funding Corp.,
	secured bond, 2.80%, 5/15/22		9,000,000		9,655,740
	secured note, LL, 2.25%, 3/15/20		1,700,000		1,764,263
	senior secured note, MM, 2.30%, 9/15/20		3,500,000		3,603,922
	SBA,
	bFRN, 3.375%, 3/25/18		132,652		133,075
	PC, 1996-20L, 1, 6.70%, 12/01/16		16,676		16,914
	PC, 1997-20G, 1, 6.85%, 7/01/17		43,868		44,743
	PC, 1998-20I, 1, 6.00%, 9/01/18		195,556		203,952
	Tunisia Government Agency for International Development Bonds, 1.686%, 7/16/19		7,000,000		7,116,970
	TVA,
	1.875%, 8/15/22		6,000,000		6,153,654
	5.88%, 4/01/36		5,000,000		7,264,055
	Strip, 11/01/18		2,644,000		2,592,772
	Strip, 6/15/19		5,973,000		5,819,804
	Strip, 6/15/20		6,138,000		5,826,460
	U.S. Treasury Bond,
	2.50%, 2/15/46		4,000,000		4,169,064
	eIndex Linked, 1.75%, 1/15/28		9,135,176		10,695,829
	eIndex Linked, 2.00%, 1/15/26		13,258,219		15,618,288
	eIndex Linked, 3.625%, 4/15/28		7,395,306		10,248,275
	U.S. Treasury Note,
	0.875%, 11/30/16		2,500,000		2,505,478
	1.25%, 1/31/19		10,000,000		10,150,000
	1.75%, 10/31/18		3,000,000		3,077,226
	eIndex Linked, 0.125%, 4/15/19		10,209,274		10,429,682
	Ukraine Government Agency for International Development Bonds, 1.844%, 5/16/19		5,000,000		5,108,540
	Total U.S. Government and Agency Securities (Cost $274,672,430)				283,387,948
	Total Investments before Short Term Investments (Cost $1,362,737,395)				1,388,050,287
	Short Term Investments (Cost $52,859,736) 3.7%
	Repurchase Agreements 3.7%
f	Joint Repurchase Agreement, 0.382%, 7/01/16 (Maturity Value $52,860,297)		52,859,736		52,859,736
	BNP Paribas Securities Corp. (Maturity Value $17,144,180) Deutsche Bank Securities Inc. (Maturity Value $5,285,501) HSBC Securities (USA) Inc. (Maturity Value $29,145,053) Merrill Lynch, Pierce, Fenner & Smith Inc. (Maturity Value $1,285,563)
	Collateralized by U.S. Government Agency Securities, 0.187% - 5.50%, 7/18/16 - 5/06/21; U.S. Government Agency Securities, Strips, 6/01/17; and U.S. Treasury Note, 0.75% - 3.25%, 11/30/16 - 9/30/20 (valued at $53,939,146)
	Total Investments (Cost $1,415,597,131) 100.6%				1,440,910,023
	Other Assets, less Liabilities (0.6)%				(8,640,720	)
	Net Assets 100.0%			$	1,432,269,303

FUS-10 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin U.S. Government Securities VIP Fund (continued)

See Abbreviations on page FUS-20.

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

^aA supranational organization is an entity formed by two or more central governments through international treaties.

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

^cSecurity purchased on a to-be-announced (TBA) basis. See Note 1(c).

^dSecurity 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, 2016, the value of this security was $13,468,923, representing 0.9% of net assets.

^ePrincipal amount of security is adjusted for inflation. See Note 1(f).

^fSee Note 1(b) regarding joint repurchase agreement.

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report FUS-11

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Statements

Statement of Assets and Liabilities

June 30, 2016 (unaudited)

	Franklin U.S. Government Securities VIP Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	1,362,737,395
Cost - Repurchase agreements		52,859,736
Total cost of investments	$	1,415,597,131
Value - Unaffiliated issuers	$	1,388,050,287
Value - Repurchase agreements		52,859,736
Total value of investments		1,440,910,023
Receivables:
Investment securities sold		426,634
Capital shares sold		364,326
Interest		4,452,934
Other assets		674
Total assets		1,446,154,591
Liabilities:
Payables:
Investment securities purchased		10,702,337
Capital shares redeemed		1,911,759
Management fees		544,330
Distribution fees		557,600
Accrued expenses and other liabilities		169,262
Total liabilities		13,885,288
Net assets, at value	$	1,432,269,303
Net assets consist of:
Paid-in capital	$	1,452,546,349
Undistributed net investment income		5,620,453
Net unrealized appreciation (depreciation)		25,312,892
Accumulated net realized gain (loss)		(51,210,391	)
Net assets, at value	$	1,432,269,303
Class 1:
Net assets, at value	$	78,544,997
Shares outstanding		6,183,195
Net asset value and maximum offering price per share	$	12.70
Class 2:
Net assets, at value	$	1,353,724,306
Shares outstanding		108,821,880
Net asset value and maximum offering price per share	$	12.44

FUS-12 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Statement of Operations

for the six months ended June 30, 2016 (unaudited)

	Franklin U.S. Government Securities VIP Fund
Investment income:
Interest	$	21,607,335
Paydown gain (loss)		(5,128,192	)
Total investment income		16,479,143
Expenses:
Management fees (Note 3a)		3,291,904
Distribution fees - Class 2 (Note 3c)		1,662,825
Custodian fees (Note 4)		6,282
Reports to shareholders		91,515
Professional fees		29,283
Trustees’ fees and expenses		3,167
Other		55,546
Total expenses		5,140,522
Net investment income		11,338,621
Realized and unrealized gains (losses):
Net realized gain (loss) from investments		2,072,441
Net change in unrealized appreciation (depreciation) on investments		18,688,466
Net realized and unrealized gain (loss)		20,760,907
Net increase (decrease) in net assets resulting from operations	$	32,099,528

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report FUS-13

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Statements of Changes in Net Assets

	Franklin U.S. Government Securities VIP Fund
	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31, 2015
Increase (decrease) in net assets:
Operations:
Net investment income	$	11,338,621		$	20,148,189
Net realized gain (loss)		2,072,441			(225,412	)
Net change in unrealized appreciation (depreciation)		18,688,466			(12,815,304	)
Net increase (decrease) in net assets resulting from operations		32,099,528			7,107,473
Distributions to shareholders from:
Net investment income:
Class 1		(2,105,837	)		(2,296,272	)
Class 2		(33,509,224	)		(33,598,882	)
Total distributions to shareholders		(35,615,061	)		(35,895,154	)
Capital share transactions: (Note 2)
Class 1		(857,367	)		(9,377,525	)
Class 2		45,047,617			(29,933,456	)
Total capital share transactions		44,190,250			(39,310,981	)
Net increase (decrease) in net assets		40,674,717			(68,098,662	)
Net assets:
Beginning of period		1,391,594,586			1,459,693,248
End of period	$	1,432,269,303		$	1,391,594,586
Undistributed net investment income included in net assets:
End of period	$	5,620,453		$	29,896,893

FUS-14 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Notes to Financial Statements (unaudited)

Franklin U.S. Government Securities VIP Fund

1. Organization and Significant Accounting Policies

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of nineteen separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Franklin U.S. Government Securities VIP Fund (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. The Fund offers two classes of shares: Class 1 and Class 2. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

The Fund’s investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Fund calculates the net asset value per share as of 4 p.m. Eastern time each day the New York Stock Exchange is open for trading. Under compliance policies and procedures approved by the Trust’s Board of Trustees (the Board), the Fund’s administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The VC provides administration and oversight of the Fund’s valuation policies and procedures, which are approved annually by the Board. Among other things, these procedures allow the Fund to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

Debt securities generally trade in the over-the-counter market rather than on a securities exchange. The Fund’s pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics

such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value.

Repurchase agreements are valued at cost, which approximates fair value.

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

b. 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 fair 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%. Repurchase agreements are subject to the terms of Master Repurchase

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin U.S. Government Securities VIP Fund (continued)

1. Organization and Significant Accounting Policies (continued)

b. Joint Repurchase Agreement (continued)

Agreements (MRAs) with approved counterparties (sellers). The MRAs contain various provisions, including but not limited to events of default and maintenance of collateral for repurchase agreements. In the event of default by either the seller or the Fund, certain MRAs may permit the non-defaulting party to net and close-out all transactions, if any, traded under such agreements. The Fund may sell securities it holds as collateral and apply the proceeds towards the repurchase price and any other amounts owed by the seller to the Fund in the event of default by the seller. This could involve costs or delays in addition to a loss on the securities if their value falls below the repurchase price owed by the seller. The joint repurchase agreement held by the Fund at period end, as indicated in the Statement of Investments, had been entered into on June 30, 2016.

c. Securities Purchased on a TBA Basis

The Fund purchases securities on a to-be-announced (TBA) basis, with payment and delivery scheduled for a future date. These transactions are subject to market fluctuations and are subject to the risk that the value at delivery may be more or less than the trade date purchase price. Sufficient assets have been segregated for these securities.

d. 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 where the Fund sells (or buys) mortgage-backed securities for delivery on a specified date and simultaneously contracts to repurchase (or sell) substantially similar (same type, coupon, and maturity) securities at a future date and at a predetermined price. 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. Transactions in mortgage dollar rolls are accounted for as purchases and sales and may result in an increase to the Fund’s portfolio turnover

rate. The risks of mortgage dollar roll transactions include the potential inability of the counterparty to fulfill its obligations.

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 if applicable, excise taxes. As a result, no provision for U.S. federal income taxes is required.

The Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of June 30, 2016, the Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on each tax jurisdiction’s statute of limitation.

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. Paydown gains and losses are recorded separately in the Statement of Operations. 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 U.S. GAAP. 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.

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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin U.S. Government Securities VIP Fund (continued)

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

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 in the Statement of Operations.

g. Accounting Estimates

The preparation of financial statements in accordance with U.S. GAAP 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. 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, 2016, 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, 2016						Year Ended December 31, 2015
	Shares			Amount			Shares			Amount
Class 1 Shares:
Shares sold		211,841		$	2,728,835			250,539		$	3,217,512
Shares issued in reinvestment of distributions		166,207			2,105,837			181,380			2,296,272
Shares redeemed		(442,184	)		(5,692,039	)		(1,156,708	)		(14,891,309	)
Net increase (decrease)		(64,136	)	$	(857,367	)		(724,789	)	$	(9,377,525	)
Class 2 Shares:
Shares sold		11,551,533		$	145,430,505			11,683,320		$	147,121,730
Shares issued in reinvestment of distributions		2,700,179			33,509,224			2,709,587			33,598,882
Shares redeemed		(10,623,033	)		(133,892,112	)		(16,725,979	)		(210,654,068	)
Net increase (decrease)		3,628,679		$	45,047,617			(2,333,072	)	$	(29,933,456	)

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

Franklin U.S. Government Securities VIP Fund (continued)

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

For the period ended June 30, 2016, the annualized effective investment management fee rate was 0.468% of the Fund’s average daily net assets.

b. Administrative Fees

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

c. Distribution Fees

The Board has adopted a distribution plan for Class 2 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s compensation distribution plan, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to 0.35% per year of its average daily net assets. The Board has agreed to limit the current rate to 0.25% per year for Class 2. The plan year, for purposes of monitoring compliance with the maximum annual plan rate, is February 1 through January 31.

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, 2016, there were no credits earned.

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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin U.S. Government Securities VIP Fund (continued)

5. Income Taxes

For tax purposes, capital losses may be carried over to offset future capital gains. Capital loss carryforwards with no expiration, if any, must be fully utilized before those losses with expiration dates.

At December 31, 2015, capital loss carryforwards were as follows:

Capital loss carryforwards subject to expiration:
2016	$	841,479
2017		401,851
2018		426,637
Capital loss carryforwards not subject to expiration:
Short term		22,577,474
Long term		28,868,019
Total capital loss carryforwards	$	53,115,460

At June 30, 2016, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	1,422,488,373
Unrealized appreciation	$	28,504,599
Unrealized depreciation		(10,082,949	)
Net unrealized appreciation (depreciation)	$	18,421,650

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of paydown losses and bond discounts and premiums.

6. Investment Transactions

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2016, aggregated $680,130,391 and $654,699,261, respectively.

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 $2 billion (Global Credit Facility) which matures on February 10, 2017. 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 0.07% based upon the unused portion of the Global Credit Facility. Effective February 12, 2016, the annual commitment fee is 0.15%. These fees are reflected in other expenses in the Statement of Operations. During the period ended June 30, 2016, the Fund did not use the Global Credit Facility.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin U.S. Government Securities VIP Fund (continued)

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 financial instruments and are summarized in the following fair value hierarchy:

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

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

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

The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.

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, 2016, all of the Fund’s investments in financial instruments carried at fair value were valued using Level 2 inputs.

9. 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
FHLB	Federal Home Loan Bank
FICO	Financing Corp.
FRN	Floating Rate Note
GL	Government Loan
PC	Participation Certificate
PL	Project Loan
SBA	Small Business Administration
SF	Single Family
TVA	Tennessee Valley Authority

FUS-20 Semiannual Report

Templeton Developing Markets VIP Fund

We are pleased to bring you Templeton Developing Markets VIP Fund’s semiannual report for the period ended June 30, 2016.

Class 1 Performance Summary as of June 30, 2016

The Fund’s Class 1 shares delivered a +10.65% total return* for the six-month period ended June 30, 2016.

*The Fund has a fee waiver associated with any investment in a Franklin Templeton money fund and/or other Franklin Templeton fund, as applicable, contractually guaranteed through at least the Fund’s current fiscal year-end. Fund investment results reflect the fee waiver, to the extent applicable; without this reduction, the results would have been lower.

Performance reflects the Fund’s Class 1 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.

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

The Fund seeks long-term capital appreciation. Under normal market conditions, the Fund invests at least 80% of its net assets in emerging market investments.

Fund Risks

All investments involve risks, including possible loss of principal. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments. Investments in developing markets, of which frontier markets are a subset, involve heightened risks related to the same factors, in addition to those associated with these markets’ smaller size, lesser liquidity and lack of established legal, political, business and social frameworks to support securities markets. Because these frameworks are typically even less developed in frontier markets, as well as various factors including the increased potential for extreme price volatility, illiquidity, trade barriers and exchange controls, the risks associated with developing markets are magnified in frontier markets. The Fund is designed for the aggressive portion of a well-diversified portfolio. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. In comparison, the MSCI Emerging Markets (EM) Index generated a +6.60% total return, and the Standard & Poor’s^®/International Finance Corporation Investable Composite Index produced a +6.11% total return for the same period.¹ Please note index performance numbers are for reference and we do not attempt to track an index but rather undertake investments on the basis of fundamental research.

Economic and Market Overview

The global economy grew moderately during the six months under review amid a generally weak recovery in developed markets and slowing growth in emerging markets. Nonetheless, emerging market economies overall continued to grow faster than developed market economies. India’s economy expanded in 2016’s first quarter at the fastest annual rate in one and a half years, driven by private spending. China’s economy grew in 2016’s first half at an annual rate that was within the government’s targeted range, aided by fiscal and monetary

stimulus measures. Russia’s economy remained in recession in 2016’s first quarter amid declines in manufacturing, construction and wholesale and retail trade, as did Brazil’s economy, amid weakness in investment and domestic consumption.

Several emerging market central banks, including those of Mexico and South Africa, raised their benchmark interest rates to control inflation and support their currencies, while some, including South Korea and Hungary, lowered their benchmark interest rates to promote economic growth. The Reserve Bank of India cut its benchmark interest rate to a five-year low and took steps to increase monetary liquidity. The Bank of Russia reduced its key interest rate in June, citing lower inflation expectations amid an economic recession. Although the People’s Bank of China (PBOC) left its benchmark interest rate unchanged, it employed other monetary easing measures that included cutting the cash reserve requirement ratio for the country’s banks in February and effectively devaluing the renminbi against the U.S. dollar to the lowest level in more than five years.

Emerging market stocks recovered from the heightened volatility in early 2016 caused by a plunge in China’s domestic market on January 4, which triggered the country’s new circuit-breaker system and halted trading. Further hurting stocks were a collapse in crude oil prices and investor concerns about global economic growth. However, emerging market stocks began to rebound in late January as crude oil prices rose and the PBOC implemented monetary stimulus measures. Further bolstering investor sentiment during the period were monetary easing measures by other major central banks, notably the Bank of Japan and the European

1. Source: 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.

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Central Bank (ECB); the finalization of a new debt deal for Greece; and a price increase in most commodities. Although the U.K.’s referendum vote to leave the European Union led to stock declines globally, emerging market stocks overall rebounded by period-end as many investors grew optimistic that the Bank of England and the ECB would introduce additional monetary easing measures. In this environment, emerging market stocks, as measured by the MSCI EM Index, generated a +6.60% total return, with all major regions posting positive returns.¹

Investment Strategy

We employ a fundamental research, value-oriented, long-term investment approach. We focus on the market price of a company’s securities relative to our evaluation of its long-term earnings, asset value and cash flow potential. We also consider a company’s profit and loss outlook, balance sheet strength, cash flow trends and asset value in relation to the current price. Our analysis considers the company’s corporate governance behavior as well as its position in its sector, the economic framework and political environment. We invest in securities without regard to benchmark comparisons.

Manager’s Discussion

During the six months under review, key contributors to the Fund’s absolute performance included our investments in Banco Bradesco, Itau Unibanco Holding and TSMC (Taiwan Semiconductor Manufacturing Co.).

Banco Bradesco and Itau Unibanco, two of Brazil’s largest financial conglomerates, provide a full range of banking and financial services. The initiation of impeachment proceedings against President Dilma Rousseff, which led to her suspension for up to 180 days, boosted investor confidence about the Brazilian market overall as many investors grew optimistic about the takeover of Vice President Michel Temer as acting president. Although both companies reported weaker-than-expected first quarter 2016 net income, largely due to higher loan-loss provisions, their stocks participated in the Brazilian stock market’s substantial rally in 2016’s first half. Other favorable factors included the Brazilian real’s appreciation, an improvement in business sentiment and some positive economic data.

TSMC is the world’s largest independent integrated circuit foundry. Its better-than-expected first quarter 2016 revenues and agreement with Apple to be the exclusive supplier of processors for the next-generation iPhones, leading to higher

revenue growth expectations for 2016’s second half, supported share price performance. Additionally, development of technologies in other areas, such as mobile computing and high-performance computing devices, led many investors to adopt a positive view on the company.

In contrast, key detractors from the Fund’s absolute performance included our positions in Brilliance China Automotive Holdings, China Life Insurance and Baidu.

Chinese shares experienced substantial weakness in early January, as the effect of growth concerns were exacerbated by uncertainty about the country’s foreign exchange policy. This uncertainty resulted in the renminbi’s devaluation, and Chinese authorities’ equity market intervention, which further rattled investor confidence. The renminbi continued to weaken against the U.S. dollar during the period, reaching the lowest level in more than five years. A rebound in Chinese stocks in the latter part of the reporting period failed to completely offset earlier declines.

Brilliance China Automotive is a major Chinese automobile manufacturer with a joint venture with German luxury automobile manufacturer BMW for the production and sale of BMW 3-series and 5-series vehicles in China. Reduced earnings in 2016’s first quarter, resulting from lower sales and higher-than-expected selling expenses, hurt the company’s share price. Investor sentiment, however, improved later in the period due to expectations that new product launches could drive sales and profitability in 2016’s second half.

China Life Insurance is one of China’s largest life insurance companies. Disappointing earnings in 2016’s first quarter, due mainly to lower investment income combined with concerns

Top 10 Countries
6/30/16
	% of Total Net Assets
China		17.7%
South Korea		12.5%
India		10.3%
Taiwan		9.9%
South Africa		8.5%
Brazil		8.2%
U.K.		5.2%
Thailand		4.7%
Russia		3.3%
Hong Kong		3.2%

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TEMPLETON DEVELOPING MARKETS VIP FUND

about a lower interest rate environment and the renminbi’s depreciation, hurt the company’s stock price. Further dampening market sentiment were worries that the company’s recent acquisitions of commercial banks might raise its risk profile.

Baidu is China’s leading Internet search engine and online marketing solutions provider, with the largest website in China and among the largest globally. The company also operates an e-commerce platform with an online payment tool; develops and markets web application software; and provides a variety of services and products, including entertainment products and human resource related services. Its shares fell after the company was criticized for misleading users with search results, leading the Chinese government to institute new Internet regulations, which prompted the company to lower its second quarter 2016 revenue outlook.

In the past six months, we increased the Fund’s investments notably in South Korea, Russia, Taiwan and Saudi Arabia² as we continued to invest in opportunities we considered more attractive. In sector terms, we increased investments largely in information technology (IT), energy, materials and consumer discretionary.³ Key purchases included an additional investment in South Korea-based Samsung Electronics, a leading global electronics manufacturer, as well as new positions in Alibaba Group Holding, China’s largest e-commerce company, and Saudi Basic Industries,² one of the world’s largest petrochemical producers and one of the Middle East’s largest steel manufacturers.

Conversely, we reduced the Fund’s investments largely in South Africa, India and China, primarily through China H shares, as we sought to focus on opportunities we considered to be more attractively valued within our investment universe.⁴ We also conducted some sales in Thailand. In sector terms, some of the largest sales were in consumer staples, telecommunication services and financials.⁵ Key sales included reducing the Fund’s

holdings in Belgium-listed Anheuser-Busch InBev, a global brewer; and Tata Consultancy Services, an Indian IT consulting and services firm. We also closed the Fund’s position in China Construction Bank, a Chinese financial and banking services provider.

Thank you for your participation in Templeton Developing Markets VIP Fund. We look forward to serving your future investment needs.

Top 10 Holdings
6/30/16
Company Sector/Industry, Country	% of Total Net Assets
Taiwan Semiconductor Manufacturing Co. Ltd. Semiconductors & Semiconductor Equipment, Taiwan		5.9	%
Samsung Electronics Co. Ltd. Technology Hardware, Storage & Peripherals, South Korea		5.3	%
Unilever PLC Personal Products, U.K.		5.2	%
Naspers Ltd. Media, South Africa		5.0	%
Tencent Holdings Ltd. Internet Software & Services, China		4.0	%
Itau Unibanco Holding SA Banks, Brazil		3.0	%
Brilliance China Automotive Holdings Ltd. Automobiles, China		3.1	%
Banco Bradesco SA Banks, Brazil		2.8	%
China Mobile Ltd. Wireless Telecommunication Services, China		2.1	%
Hon Hai Precision Industry Co. Ltd. Electronic Equipment, Instruments & Components, Taiwan		2.1	%

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).

2. Investments were made through participatory notes, which are equity access products structured as debt obligations and are issued or backed by banks and broker-dealers and designed to replicate equity market exposure in frontier markets where direct investment is either impossible or difficult due to local investment restrictions.

3. The IT sector comprises electronic equipment, instruments and components; Internet software and services; IT services; semiconductors and semiconductor equipment; software; and technology hardware, storage and peripherals in the SOI. The energy sector comprises oil, gas and consumable fuels in the SOI. The materials sector comprises chemicals, construction materials, metals and mining, and paper and forest products in the SOI. The consumer discretionary sector comprises auto components; automobiles; distributors; hotels, restaurants and leisure; Internet and catalog retail; media; and textiles, apparel and luxury goods in the SOI.

4. “China H” denotes shares of China-incorporated, Hong Kong Stock Exchange-listed companies with most businesses in China.

5. The consumer staples sector comprises beverages, food and staples retailing, food products and personal products in the SOI. The telecommunication services sector comprises diversified telecommunication services and wireless telecommunication services in the SOI. The financials sector comprises banks, capital markets, diversified financial services, insurance, and real estate management and development in the SOI.

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The foregoing information reflects our analysis, opinions and portfolio holdings as of June 30, 2016, 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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Class 1 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 × $7.50 = $64.50.

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

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 1	Beginning Account Value 1/1/16		Ending Account Value 6/30/16		Fund-Level Expenses Incurred During Period* 1/1/16–6/30/16
Actual	$	1,000	$	1,106.50	$	7.11
Hypothetical (5% return before expenses)	$	1,000	$	1,018.12	$	6.81

*Expenses are calculated using the most recent six-month annualized expense ratio, net of expense waivers, for the Fund’s Class 1 shares (1.36%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 182/366 to reflect the one-half year period.

TD-6 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Highlights

Templeton Developing Markets VIP Fund

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012			2011
Class 1
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$6.37			$9.27			$10.26			$10.58			$9.50			$11.40
Income from investment operationsa:
Net investment incomeb		0.03			0.06			0.15	c		0.13			0.19			0.17
Net realized and unrealized gains (losses)		0.65			(1.63	)		(0.97	)		(0.22	)		1.06			(1.94	)
Total from investment operations		0.68			(1.57	)		(0.82	)		(0.09	)		1.25			(1.77	)
Less distributions from:
Net investment income		(0.08	)		(0.20	)		(0.17	)		(0.23	)		(0.17	)		(0.13	)
Net realized gains		—			(1.13	)		—			—			—			—
Total distributions		(0.08	)		(1.33	)		(0.17	)		(0.23	)		(0.17	)		(0.13	)
Redemption fees		—			—			—	d		—	d		—	d		—	d
Net asset value, end of period		$6.97			$6.37			$9.27			$10.26			$10.58			$9.50
Total returne		10.65%			(19.42)%			(8.09)%			(0.73)%			13.40%			(15.67)%
Ratios to average net assetsf
Expenses before waiver and payments by affiliates		1.38%			1.33%			1.36%			1.35%			1.35%			1.40%
Expenses net of waiver and payments by affiliates		1.36%			1.32%			1.36%	g		1.35%			1.35%			1.40%
Net investment income		1.09%			0.74%			1.51%	c		1.25%			1.93%			1.57%
Supplemental data
Net assets, end of period (000’s)		$81,400			$77,000			$114,487			$145,707			$203,568			$232,544
Portfolio turnover rate		11.14%			71.69%			82.87%			44.59%			24.45%			14.90%

^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’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $0.04 per share related to income received in the form of special dividends in connection with certain fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.11%.

^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 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 waiver and payments by affiliates rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report TD-7

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL HIGHLIGHTS

Templeton Developing Markets VIP Fund (continued)

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012			2011
Class 2
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$6.32			$9.20			$10.19			$10.50			$9.42			$11.30
Income from investment operationsa:
Net investment incomeb		0.03			0.04			0.12	c		0.10			0.17			0.14
Net realized and unrealized gains (losses)		0.64			(1.61	)		(0.96	)		(0.21	)		1.05			(1.92	)
Total from investment operations		0.67			(1.57	)		(0.84	)		(0.11	)		1.22			(1.78	)
Less distributions from:
Net investment income		(0.06	)		(0.18	)		(0.15	)		(0.20	)		(0.14	)		(0.10	)
Net realized gains		—			(1.13	)		—			—			—			—
Total distributions		(0.06	)		(1.31	)		(0.15	)		(0.20	)		(0.14	)		(0.10	)
Redemption fees		—			—			—	d		—	d		—	d		—	d
Net asset value, end of period		$6.93			$6.32			$9.20			$10.19			$10.50			$9.42
Total returne		10.58%			(19.60)%			(8.39)%			(0.92)%			13.16%			(15.86)%
Ratios to average net assetsf
Expenses before waiver and payments by affiliates		1.63%			1.58%			1.61%			1.60%			1.60%			1.65%
Expenses net of waiver and payments by affiliates		1.61%			1.57%			1.61%	g		1.60%			1.60%			1.65%
Net investment income		0.84%			0.49%			1.26%	c		1.00%			1.68%			1.32%
Supplemental data
Net assets, end of period (000’s)		$209,100			$192,120			$250,813			$274,683			$291,638			$295,223
Portfolio turnover rate		11.14%			71.69%			82.87%			44.59%			24.45%			14.90%

^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’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $0.04 per share related to income received in the form of special dividends in connection with certain fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 0.86%.

^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 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 waiver and payments by affiliates rounds to less than 0.01%.

TD-8 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL HIGHLIGHTS

Templeton Developing Markets VIP Fund (continued)

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012			2011
Class 4
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$6.34			$9.22			$10.20			$10.50			$9.42			$11.30
Income from investment operationsa:
Net investment incomeb		0.02			0.03			0.12	c		0.10			0.16			0.13
Net realized and unrealized gains (losses)		0.64			(1.62	)		(0.97	)		(0.21	)		1.04			(1.91	)
Total from investment operations		0.66			(1.59	)		(0.85	)		(0.11	)		1.20			(1.78	)
Less distributions from:
Net investment income		(0.04	)		(0.16	)		(0.13	)		(0.19	)		(0.12	)		(0.10	)
Net realized gains		—			(1.13	)		—			—			—			—
Total distributions		(0.04	)		(1.29	)		(0.13	)		(0.19	)		(0.12	)		(0.10	)
Redemption fees		—			—			—	d		—	d		—	d		—	d
Net asset value, end of period		$6.96			$6.34			$9.22			$10.20			$10.50			$9.42
Total returne		10.49%			(19.70)%			(8.48)%			(1.07)%			13.06%			(15.88)%
Ratios to average net assetsf
Expenses before waiver and payments by affiliates		1.73%			1.68%			1.71%			1.70%			1.70%			1.75%
Expenses net of waiver and payments by affiliates		1.71%			1.67%			1.71%	g		1.70%			1.70%			1.75%
Net investment income		0.74%			0.39%			1.16%	c		0.90%			1.58%			1.22%
Supplemental data
Net assets, end of period (000’s)		$6,872			$7,109			$11,106			$15,225			$23,341			$24,380
Portfolio turnover rate		11.14%			71.69%			82.87%			44.59%			24.45%			14.90%

^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’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $0.04 per share related to income received in the form of special dividends in connection with certain fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 0.76%.

^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 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 waiver and payments by affiliates rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report TD-9

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Statement of Investments, June 30, 2016 (unaudited)

Templeton Developing Markets VIP Fund
		Industry		Shares		Value
	Common Stocks 86.8%
	Argentina 0.3%
a	Grupo Clarin SA, B, GDR, Reg S		Media		9,190	$	182,881
	MercadoLibre Inc.		Internet Software & Services		5,600		787,753
							970,634
	Belgium 1.4%
	Anheuser-Busch InBev NV		Beverages		31,970		4,173,048
	Brazil 2.4%
	CETIP SA - Mercados Organizados		Capital Markets		160,600		2,190,045
	Duratex SA		Paper & Forest Products		175,743		465,189
	M Dias Branco SA		Food Products		72,900		2,404,120
	Mahle-Metal Leve SA Industria e Comercio		Auto Components		132,600		947,674
	Totvs SA		Software		112,200		1,067,074
							7,074,102
	Cambodia 1.1%
	NagaCorp Ltd.		Hotels, Restaurants & Leisure		4,824,000		3,208,352
	China 17.7%
b	Alibaba Group Holding Ltd., ADR		Internet Software & Services		36,690		2,917,956
b	Baidu Inc., ADR		Internet Software & Services		33,200		5,482,980
	Brilliance China Automotive Holdings Ltd.		Automobiles		8,909,300		9,083,330
	China Life Insurance Co. Ltd., H		Insurance		855,000		1,831,564
	China Mobile Ltd.		Wireless Telecommunication Services		550,500		6,297,247
	China Petroleum and Chemical Corp., H		Oil, Gas & Consumable Fuels		8,024,000		5,781,330
	COSCO Pacific Ltd.		Transportation Infrastructure		1,046,200		1,038,318
	Dah Chong Hong Holdings Ltd.		Distributors		1,746,100		821,461
	NetEase Inc., ADR		Internet Software & Services		20,103		3,884,302
	Poly Culture Group Corp. Ltd., H		Media		229,200		529,983
	Tencent Holdings Ltd.		Internet Software & Services		522,100		11,863,997
	Uni-President China Holdings Ltd.		Food Products		3,563,300		2,994,505
							52,526,973
	Hong Kong 3.2%
	Dairy Farm International Holdings Ltd.		Food & Staples Retailing		454,133		3,060,856
	MGM China Holdings Ltd.		Hotels, Restaurants & Leisure		2,612,800		3,381,154
	Sands China Ltd.		Hotels, Restaurants & Leisure		936,000		3,124,645
							9,566,655
	Hungary 1.0%
	Richter Gedeon Nyrt		Pharmaceuticals		145,180		2,884,456
	India 10.3%
	Bajaj Holdings and Investment Ltd.		Diversified Financial Services		25,190		621,374
	Biocon Ltd.		Biotechnology		476,812		5,235,454
	Dr. Reddy’s Laboratories Ltd.		Pharmaceuticals		84,890		4,252,687
	Glenmark Pharmaceuticals Ltd.		Pharmaceuticals		91,248		1,080,113
	ICICI Bank Ltd.		Banks		1,348,450		4,805,206
	Infosys Ltd.		IT Services		183,099		3,175,707
	Oil & Natural Gas Corp. Ltd.		Oil, Gas & Consumable Fuels		722,700		2,315,722
	Reliance Industries Ltd.		Oil, Gas & Consumable Fuels		206,000		2,957,536
	Tata Chemicals Ltd.		Chemicals		238,500		1,520,661
	Tata Consultancy Services Ltd.		IT Services		97,300		3,680,039
b	Tata Motors Ltd., A		Automobiles		252,016		1,089,208
							30,733,707

TD-10 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Templeton Developing Markets VIP Fund (continued)

		Industry		Shares		Value
	Common Stocks (continued)
	Indonesia 3.1%
	Astra International Tbk PT		Automobiles		10,115,100	$	5,665,222
	Bank Danamon Indonesia Tbk PT		Banks		5,707,000		1,529,066
	Semen Indonesia (Persero) Tbk PT		Construction Materials		2,764,700		1,956,476
							9,150,764
	Mexico 0.6%
	America Movil SAB de CV, L, ADR		Wireless Telecommunication Services		82,000		1,005,320
	Nemak SAB de CV		Auto Components		652,700		764,463
b	Telesites SAB de CV		Diversified Telecommunication Services		82,000		50,690
							1,820,473
	Nigeria 0.0%†
	Nigerian Breweries PLC		Beverages		167,352		79,635
	Pakistan 1.0%
	Habib Bank Ltd.		Banks		1,550,000		2,915,036
	Peru 0.1%
b	Compania de Minas Buenaventura SA, ADR		Metals & Mining		29,800		356,110
	Philippines 0.4%
b	Bloomberry Resorts Corp.		Hotels, Restaurants & Leisure		9,038,300		1,274,135
	Russia 3.3%
	LUKOIL PJSC, ADR		Oil, Gas & Consumable Fuels		41,300		1,725,101
	LUKOIL PJSC, ADR (London Stock Exchange).		Oil, Gas & Consumable Fuels		38,600		1,612,322
a,b	Mail.ru Group Ltd., GDR, Reg S		Internet Software & Services		170,359		3,100,534
b	Yandex NV, A		Internet Software & Services		150,078		3,279,204
							9,717,161
	Singapore 0.1%
	DBS Group Holdings Ltd.		Banks		25,196		294,828
	South Africa 8.5%
	Massmart Holdings Ltd.		Food & Staples Retailing		190,769		1,632,387
	MTN Group Ltd.		Wireless Telecommunication Services		317,596		3,082,568
	Naspers Ltd., N		Media		97,448		14,823,942
	Remgro Ltd.		Diversified Financial Services		331,043		5,725,189
							25,264,086
	South Korea 12.5%
	Daelim Industrial Co. Ltd.		Construction & Engineering		38,487		2,537,443
	Fila Korea Ltd.		Textiles, Apparel & Luxury Goods		33,470		2,639,297
	Hankook Tire Co. Ltd.		Auto Components		21,600		955,636
	Hanon Systems		Auto Components		196,951		1,793,974
	Hyundai Development Co.		Construction & Engineering		113,940		3,909,231
	iMarketkorea Inc.		Trading Companies & Distributors		70,490		709,340
	Interpark Holdings Corp.		Internet & Catalog Retail		112,922		583,839
	KT Skylife Co. Ltd.		Media		176,060		2,474,254
	Samsung Electronics Co. Ltd.		Technology Hardware, Storage & Peripherals		12,667		15,658,757
	SK Hynix Inc.		Semiconductors & Semiconductor Equipment		185,090		5,202,315
	Youngone Corp.		Textiles, Apparel & Luxury Goods		22,200		797,300
							37,261,386
	Taiwan 9.9%
	Catcher Technology Co. Ltd.		Technology Hardware, Storage & Peripherals		308,000		2,271,386

Semiannual Report TD-11

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Templeton Developing Markets VIP Fund (continued)

		Industry		Shares		Value
	Common Stocks (continued)
	Taiwan (continued)
	Hon Hai Precision Industry Co. Ltd.		Electronic Equipment, Instruments & Components		2,455,000	$	6,289,008
	Largan Precision Co. Ltd.		Electronic Equipment, Instruments & Components		14,000		1,280,236
	Pegatron Corp.		Technology Hardware, Storage & Peripherals		973,800		2,050,105
	Taiwan Semiconductor Manufacturing Co. Ltd.		Semiconductors & Semiconductor Equipment		3,483,000		17,574,523
							29,465,258
	Thailand 4.7%
	Kasikornbank PCL, fgn.		Banks		604,100		2,967,177
	Kiatnakin Bank PCL, fgn.		Banks		1,009,800		1,250,749
	Land and Houses PCL, fgn.		Real Estate Management & Development		4,853,900		1,250,791
	PTT Exploration and Production PCL, fgn.		Oil, Gas & Consumable Fuels		584,500		1,393,846
	Siam Commercial Bank PCL, fgn.		Banks		306,400		1,212,688
	Thai Beverage PCL, fgn.		Beverages		8,564,600		5,786,677
							13,861,928
	United Kingdom 5.2%
	Unilever PLC		Personal Products		321,139		15,325,519
	Total Common Stocks (Cost $240,029,348)						257,924,246
c	Participatory Notes 1.0%
	Saudi Arabia 1.0%
d	Deutsche Bank AG/London, Samba Financial Group, 144A, 9/27/16		Banks		143,055		762,766
d	HSBC Bank PLC,
	Saudi Basic Industries Corp., 144A, 10/31/16		Chemicals		102,390		2,211,064
	Savola Al-Azizia United Co., 144A, 2/06/17		Food Products		2,500		24,394
	Total Participatory Notes (Cost $3,135,038)						2,998,224
	Preferred Stocks 5.8%
	Brazil 5.8%
e	Banco Bradesco SA, 4.4%, ADR, pfd.		Banks		1,054,850		8,238,378
e	Itau Unibanco Holding SA, 3.8%, ADR, pfd.		Banks		964,711		9,106,872
	Total Preferred Stocks (Cost $13,340,627)						17,345,250
	Total Investments before Short Term Investments (Cost $256,505,013)						278,267,720

TD-12 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Templeton Developing Markets VIP Fund (continued)

		Shares		Value
	Short Term Investments (Cost $19,660,526) 6.6%
	Money Market Funds 6.6%
	United States 6.6%
b,f	Institutional Fiduciary Trust Money Market Portfolio		19,660,526	$	19,660,526
	Total Investments (Cost $276,165,539) 100.2%				297,928,246
	Other Assets, less Liabilities (0.2)%				(555,483	)
	Net Assets 100.0%			$	297,372,763

See Abbreviations on page TD-24.

^†Rounds to less than 0.1% of net assets.

^aSecurity 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. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At June 30, 2016, the aggregate value of these securities was $3,283,415, representing 1.1% of net assets.

^bNon-income producing.

^cSee Note 1(c) regarding Participatory Notes.

^dSecurity 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, 2016, the aggregate value of these securities was $2,998,224, representing 1.0% of net assets.

^eVariable rate security. The rate shown represents the yield at period end.

^fSee Note 3(e) regarding investments in affiliated management investment companies.

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report TD-13

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Statements

Statement of Assets and Liabilities

June 30, 2016 (unaudited)

	Templeton Developing Markets VIP Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	256,505,013
Cost - Non-controlled affiliates (Note 3e)		19,660,526
Total cost of investments	$	276,165,539
Value - Unaffiliated issuers	$	278,267,720
Value - Non-controlled affiliates (Note 3e)		19,660,526
Total value of investments		297,928,246
Cash		66,447
Foreign currency, at value (cost $145,410)		145,191
Receivables:
Investment securities sold		631,136
Capital shares sold		48,269
Dividends		942,318
Foreign tax		51,726
Other assets		122
Total assets		299,813,455
Liabilities:
Payables:
Investment securities purchased		1,404,468
Capital shares redeemed		356,909
Management fees		290,870
Distribution fees		86,818
Deferred tax		181,511
Accrued expenses and other liabilities		120,116
Total liabilities		2,440,692
Net assets, at value	$	297,372,763
Net assets consist of:
Paid-in capital	$	324,511,157
Distributions in excess of net investment income		(4,380,311	)
Net unrealized appreciation (depreciation)		21,535,884
Accumulated net realized gain (loss)		(44,293,967	)
Net assets, at value	$	297,372,763

TD-14 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Statement of Assets and Liabilities (continued)

June 30, 2016 (unaudited)

	Templeton Developing Markets VIP Fund
Class 1:
Net assets, at value	$	81,400,243
Shares outstanding		11,675,684
Net asset value and maximum offering price per share	$	6.97
Class 2:
Net assets, at value	$	209,100,296
Shares outstanding		30,194,223
Net asset value and maximum offering price per share	$	6.93
Class 4:
Net assets, at value	$	6,872,224
Shares outstanding		987,522
Net asset value and maximum offering price per share	$	6.96

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report TD-15

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Statement of Operations

for the six months ended June 30, 2016 (unaudited)

	Templeton Developing Markets VIP Fund
Investment income:
Dividends (net of foreign taxes of $512,365)	$	3,333,470
Expenses:
Management fees (Note 3a)		1,695,727
Distribution fees: (Note 3c)
Class 2		238,127
Class 4		11,849
Custodian fees (Note 4)		36,749
Reports to shareholdersr		107,600
Professional fees		32,423
Trustees’ fees and expenses		747
Other		9,497
Total expenses		2,132,719
Expenses waived/paid by affiliates (Note 3e)		(35,065	)
Net expenses		2,097,654
Net investment income		1,235,816
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		3,017,201
Foreign currency transactions		17,003
Net realized gain (loss)		3,034,204
Net change in unrealized appreciation (depreciation) on:
Investments		23,613,299
Translation of other assets and liabilities denominated in foreign currencies		(5,840	)
Change in deferred taxes on unrealized appreciation		(61,659	)
Net change in unrealized appreciation (depreciation)		23,545,800
Net realized and unrealized gain (loss)		26,580,004
Net increase (decrease) in net assets resulting from operations	$	27,815,820

TD-16 Semiannual Report   |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Statements of Changes in Net Assets

	Templeton Developing Markets VIP Fund
	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31, 2015
Increase (decrease) in net assets:
Operations:
Net investment income	$	1,235,816		$	1,869,006
Net realized gain (loss)		3,034,204			(40,238,876	)
Net change in unrealized appreciation (depreciation)		23,545,800			(29,184,006	)
Net increase (decrease) in net assets resulting from operations		27,815,820			(67,553,876	)
Distributions to shareholders from:
Net investment income:
Class 1		(875,960	)		(2,280,023	)
Class 2		(1,674,699	)		(4,605,588	)
Class 4		(44,436	)		(178,865	)
Net realized gains:
Class 1		—			(12,555,712	)
Class 2		—			(29,329,089	)
Class 4		—			(1,242,906	)
Total distributions to shareholders		(2,595,095	)		(50,192,183	)
Capital share transactions: (Note 2)
Class 1		(2,381,952	)		(3,228,881	)
Class 2		(833,043	)		21,548,017
Class 4		(862,694	)		(748,959	)
Total capital share transactions		(4,077,689	)		17,570,177
Net increase (decrease) in net assets		21,143,036			(100,175,882	)
Net assets:
Beginning of period		276,229,727			376,405,609
End of period	$	297,372,763		$	276,229,727
Distributions in excess of net investment income included in net assets:
End of period	$	(4,380,311	)	$	(3,021,032	)

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report TD-17

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Notes to Financial Statements (unaudited)

Templeton Developing Markets VIP Fund

1. Organization and Significant Accounting Policies

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of nineteen separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Templeton Developing Markets VIP 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 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. The Fund calculates the net asset value (NAV) per share as of 4 p.m. Eastern time each day the New York Stock Exchange (NYSE) is open for trading. Under compliance policies and procedures approved by the Trust’s Board of Trustees (the Board), the Fund’s administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The VC provides administration and oversight of the Fund’s valuation policies and procedures, which are approved annually by the Board. Among other things, these procedures allow the Fund to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

Equity securities listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded or as of 4 p.m. Eastern time whichever is earlier. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the day that the value of the security is determined. Over-the-counter (OTC)

securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.

Investments in open-end mutual funds are valued at the closing NAV.

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

Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 4 p.m. Eastern time. In addition, trading in certain foreign markets may not take place on every NYSE business day. 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 VC monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depositary Receipts, futures contracts and exchange traded funds).

TD-18 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Developing Markets VIP Fund (continued)

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.

When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the NYSE is closed, which could result in differences between the value of the Fund’s portfolio securities on the last business day and the last calendar day of the reporting period. Any significant security valuation changes due to an open foreign market are adjusted and reflected by the Fund for financial reporting purposes.

b. Foreign Currency Translation

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

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

The Fund invests in Participatory Notes (P-Notes). P-notes are promissory notes that are designed to offer a return linked to the performance of a particular underlying equity security or market. P-Notes are issued by banks or broker-dealers and allow the Fund to gain exposure to common stocks in markets where direct investment is not allowed. Income received from P-Notes is recorded as dividend income in the Statement of Operations. P-Notes may contain various risks including the potential inability of the counterparty to fulfill their obligations under the terms of the contract. These securities may be more volatile and less liquid than other investments held by the Fund.

d. Securities Lending

The Fund participates in an agency based securities lending program to earn additional income. The Fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the fair value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the fair 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 deposited into a joint cash account with other funds and is used to invest in a money market fund managed by Franklin Advisers, Inc., an affiliate of the Fund. The Fund may receive income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. Income from securities loaned, net of fees paid to the securities lending agent and/or third-party vendor, is reported separately in the Statement of Operations. 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. If the borrower defaults on its obligation to return the securities loaned, the Fund has the right to repurchase the securities in the open market using the collateral received. The securities lending agent has agreed to indemnify the Fund in the event of default by a third party borrower. At June 30, 2016, the Fund had no securities on loan.

e. 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

Semiannual Report TD-19

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Developing Markets VIP Fund (continued)

1. Organization and Significant Accounting Policies (continued)

e. Income and Deferred Taxes (continued)

distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and if applicable, excise taxes. As a result, no provision for U.S. federal income taxes is required.

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

The Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of June 30, 2016, the Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on each tax jurisdiction’s statute of limitation.

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. Estimated expenses are accrued daily. Dividend income is recorded on the ex-dividend date except for certain dividends from foreign securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Fund. 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 U.S. GAAP. 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 U.S. GAAP 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. 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-20 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Developing Markets VIP Fund (continued)

2. Shares of Beneficial Interest

At June 30, 2016, 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, 2016						Year Ended December 31, 2015
	Shares			Amount			Shares			Amount
Class 1 Shares:
Shares sold		778,391		$	5,167,288			1,121,738		$	9,288,141
Shares issued in reinvestment of distributions		130,351			875,960			1,921,727			14,835,735
Shares redeemed		(1,315,296	)		(8,425,200	)		(3,309,863	)		(27,352,757	)
Net increase (decrease)		(406,554	)	$	(2,381,952	)		(266,398	)	$	(3,228,881	)
Class 2 Shares:
Shares sold		3,196,718		$	20,939,741			4,635,193		$	35,599,642
Shares issued in reinvestment of distributions		251,079			1,674,699			4,430,114			33,934,677
Shares redeemed		(3,648,421	)		(23,447,483	)		(5,930,164	)		(47,986,302	)
Net increase (decrease)		(200,624	)	$	(833,043	)		3,135,143		$	21,548,017
Class 4 Shares:
Shares sold		29,812		$	196,593			96,241		$	723,497
Shares issued in reinvestment of distributions		6,622			44,436			184,886			1,421,771
Shares redeemed		(169,843	)		(1,103,723	)		(364,639	)		(2,894,227	)
Net increase (decrease)		(133,409	)	$	(862,694	)		(83,512	)	$	(748,959	)

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 trustees 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

a. Management Fees

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

Annualized Fee Rate	Net Assets
1.250%	Up to and including $200 million
1.235%	Over $200 million, up to and including $700 million
1.200%	Over $700 million, up to and including $1 billion
1.150%	Over $1 billion, up to and including $1.2 billion
1.125%	Over $1.2 billion, up to and including $5 billion
1.075%	Over $5 billion, up to and including $10 billion
1.025%	Over $10 billion, up to and including $15 billion
0.975%	Over $15 billion, up to and including $20 billion
0.925%	In excess of $20 billion

Semiannual Report TD-21

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Developing Markets VIP Fund (continued)

3. Transactions With Affiliates (continued)

a. Management Fees (continued)

For the period ended June 30, 2016, the annualized effective investment management fee rate was 1.245% of the Fund’s average daily net assets.

b. Administrative Fees

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

c. Distribution Fees

The Board has adopted distribution plans for Class 2 and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to 0.25% and 0.35% per year of its average daily net assets of Class 2 and Class 4, respectively. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.

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. Investments in Affiliated Management Investment Companies

The Fund invests in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Fund are waived on assets invested in the affiliated management investment companies, as noted in the Statement of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate. Prior to January 1, 2014, the waiver was accounted for as a reduction to management fees.

	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 Gain (Loss)		% of Affiliated Fund  Shares Outstanding Held at End of Period
Non-Controlled Affiliates
Institutional Fiduciary Trust Money Market Portfolio	36,108,301		25,230,444		(41,678,219	)		19,660,526	$	19,660,526	$	—	$	—		0.1%

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, 2016, there were no credits earned.

5. Income Taxes

For tax purposes, capital losses may be carried over to offset future capital gains, if any.

TD-22 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Developing Markets VIP Fund (continued)

At December 31, 2015, capital loss carryforwards were as follows:

Capital loss carryforwards not subject to expiration:
Short term	$	22,864,241
Long term		18,453,194
Total capital loss carryforwards	$	41,317,435

At June 30, 2016, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	286,569,446
Unrealized appreciation	$	43,397,312
Unrealized depreciation		(32,038,512	)
Net unrealized appreciation (depreciation)	$	11,358,800

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

6. Investment Transactions

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2016, aggregated $38,758,493 and $28,055,332, 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 $2 billion (Global Credit Facility) which matures on February 10, 2017. 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 0.07% based upon the unused portion of the Global Credit Facility. Effective February 12, 2016, the annual commitment fee is 0.15%. These fees are reflected in other expenses in the Statement of Operations. During the period ended June 30, 2016, 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 financial instruments and are summarized in the following fair value hierarchy:

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

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

Semiannual Report TD-23

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Developing Markets VIP Fund (continued)

9. Fair Value Measurements (continued)

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

The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.

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

A summary of inputs used as of June 30, 2016, in valuing the Fund’s assets carried at fair value, is as follows:

	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities
Equity Investments:a
Russia	$	7,992,060	$	1,725,101	$	—	$	9,717,161
All Other Equity Investmentsb		265,552,335		—		—		265,552,335
Participatory Notes		—		2,998,224		—		2,998,224
Short Term Investments		19,660,526		—		—		19,660,526
Total Investments in Securities	$	293,204,921	$	4,723,325	$	—	$	297,928,246

^aIncludes common and preferred stocks.

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

10. Subsequent Events

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

Abbreviations

Selected Portfolio
ADR	American Depositary Receipt
GDR	Global Depositary Receipt

TD-24 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Tax Information (unaudited)

Templeton Developing Markets VIP Fund

At December 31, 2015, more than 50% of the Fund’s total assets were invested in securities of foreign issuers. In most instances, foreign taxes were withheld from income paid to the Fund on these investments. As shown in the table below, the Fund hereby reports to shareholders the foreign source income and foreign taxes paid, pursuant to Section 853 of the Internal Revenue Code. This written statement will allow shareholders of record on June 14, 2016, to treat their proportionate share of foreign taxes paid by the Fund as having been paid directly by them. The shareholder shall consider these amounts as foreign taxes paid in the tax year in which they receive the Fund distribution.

The following table provides a detailed analysis of foreign tax paid, and foreign source income as reported by the Fund, to Class 1, Class 2, and Class 4 shareholders of record.

Class	Foreign Tax Paid Per Share	Foreign Source Income Per Share
Class 1	$0.0167	$0.1053
Class 2	$0.0167	$0.0864
Class 4	$0.0167	$0.0739

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.

Semiannual Report TD-25

Templeton Foreign VIP Fund

This semiannual report for Templeton Foreign VIP Fund covers the period ended June 30, 2016.

Class 1 Performance Summary as of June 30, 2016

The Fund’s Class 1 shares had a -2.34% total return* for the six-month period ended June 30, 2016.

*The Fund has a fee waiver associated with any investment in a Franklin Templeton money fund and/or Franklin Templeton fund, as appli- cable, contractually guaranteed through at least the Fund’s current fiscal year-end. Fund investment results reflect the fee waiver, to the extent applicable; without this reduction, the results would have been lower.

Performance reflects the Fund’s Class 1 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.

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.

Semiannual Report TF-1

TEMPLETON FOREIGN VIP FUND

Fund Goal and Main Investments

The Fund seeks long-term capital growth. Under normal market conditions, the Fund invests at least 80% of its net assets in investments of issuers located outside the U.S., including those in emerging markets.

Fund Risks

All investments involve risks, including possible loss of principal. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments; investments in emerging markets involve heightened risks related to the same factors. In addition, smaller company stocks have historically experienced more price volatility than larger company stocks, especially over the short term. To the extent the Fund focuses on particular countries, regions, industries, sectors or types of investment from time to time, it may be subject to greater risks of adverse developments in such areas of focus than a fund that invests in a wider variety of countries, regions, industries, sectors or investments. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. In comparison, the Fund’s new benchmark, the MSCI All Country World (ACW) ex USA Index, had a -0.67% total return for the same period, while its old benchmark, the MSCI EAFE Index, had a -4.04% total return.¹ We believe the new index better represents the Fund’s investable universe and is more in line with the Fund’s mandates. 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

The global economy expanded during the six months under review. An improvement in commodity prices including a rally in crude oil prices, accommodative monetary policy from various global central banks, finalization of the new debt deal for Greece and encouraging Chinese trade data toward period-end boosted market sentiment. However, global equity market volatility increased after the U.S. Federal Reserve’s (Fed’s) June

decision to keep its federal funds target range unchanged, while providing a cautious stance on further interest rate hikes. In addition, global economic concerns and the U.K.’s historic referendum to leave the European Union (EU), also known as the “Brexit”, contributed to volatile global stock markets.

Oil prices fell at the beginning of the review period, largely due to strong global supply, but recovered in the period’s second half amid oilfield outages and continued demand growth. Meanwhile, commodity prices increased for most of the review period as oversupply for a host of commodities shrank and the market appeared to be on the path of rebalancing after hitting a glut-induced bottom earlier in the year. Gold prices continued to rise following the Brexit referendum as some investors turned to safe haven investing. The U.S. dollar generally depreciated against most currencies during the period, which increased returns of many foreign assets in U.S. dollar terms. In this environment, global developed market stocks overall, as measured by the MSCI World Index, rose slightly during the period.²

The U.S. economy grew moderately, as measured by gross domestic product (GDP) in 2016’s first and second quarters, driven by consumer spending and exports. A decline in private inventory investment and nonresidential fixed investment contributed to the moderation. The Fed maintained its target interest rate during the review period after raising it for the first time in nine years at its December meeting. The Fed kept its target rate unchanged in its June meeting mainly due to a substantial slowdown in job additions toward period-end. The Fed expects economic conditions to evolve in a manner that could warrant only gradual increases in the federal funds rate.

1. Source: 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. Please see Index Descriptions following the Fund Summaries.

TF-2 Semiannual Report

TEMPLETON FOREIGN VIP FUND

In Europe, slower U.K. economic growth continued in 2016’s first quarter as output slowed in construction, production and agriculture. Immediate effects of the Brexit materialized as U.K. stocks significantly declined and the pound sterling hit a three-decade low amid intensified selling. Credit rating agencies Standard & Poor’s and Fitch also downgraded the U.K.’s credit rating. In the eurozone, despite investors’ concerns about banking sector weakness, low corporate earnings and post-Brexit political repercussions, some regions benefited due to rising consumer spending resulting from a cheaper euro, low inflation and signs of sustained economic growth. The eurozone’s annual inflation rate remained in negative territory for most of the review period; however, it rose marginally above zero in June.

Japan’s economy posted mixed results, contracting in 2015’s fourth quarter stemming from declining private and household consumption. However, the economy expanded during 2016’s first quarter as private consumption increased and business investment decreased less than initially believed. The Bank of Japan (BOJ) took several actions during the review period. In January, to boost lending and support inflation, the BOJ introduced a negative interest rate on excess reserves held at the central bank by financial institutions. In April, the BOJ further reduced its GDP and inflation forecasts for fiscal year 2016, and decided against additional quantitative easing measures. However, after the U.K.’s vote in June to leave the EU, the BOJ hinted at carrying out flexible open market operations to stabilize its financial markets.

In emerging markets, economic growth generally moderated during the review period. Brazil’s economy witnessed its longest recession since the 1930s amid political and economic turmoil, while Russia’s economy continued to contract. The Bank of Russia reduced its key interest rate in an attempt to revive its economy. China’s economic growth slowed marginally in 2016’s first quarter compared to the previous quarter, but remained largely in line with the government’s target. The People’s Bank of China cut its cash reserve requirement ratio for the country’s banks and effectively devalued the renminbi against the U.S. dollar to the lowest level in more than five years. Overall, emerging market stocks, as measured by the MSCI Emerging Markets Index, rose for the six-month period.²

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

For the six-month period ended June 30, 2016, the Fund underperformed its benchmark, the MSCI ACW ex USA Index. However, the Fund had several notable contributors to its relative resulted including stock selection in the materials sector, particularly in metals and mining.³ In metals and mining, precious metals streaming company Silver Wheaton (Canada) and gold, copper and nickel extractor Barrick Gold (Canada) helped the Fund’s performance. Shares of Silver Wheaton increased during the period on news of strong earnings in the first quarter of 2016 following record sales and production volumes for the 2015 calendar year. In 2016, operating cash flows and revenues continued to improve relative to prior periods and at period end the company’s stock price nearly doubled. Additionally, in May 2016, new management was elected during Silver Wheaton’s 2016 Annual and Special Meeting of Shareholders.

An overweighted position in energy and stock selection in the information technology (IT) sectors also aided relative performance.⁴ Within both sectors, some of the Fund’s largest relative contributors included oil and gas drilling company Precision Drilling (Canada) and multinational electronics company Samsung Electronics (Korea). Other individual contributors included Glencore (Switzerland), Posco Daewoo (South Korea) and Subsea 7 (U.K.). Despite recent difficulties surrounding the volatility of oil prices and demand, Precision’s share price increased during the period under review. The company, however, continued to report lesser earnings in both the first and second quarters of 2016, compared to the respective 2015 quarters, which was primarily attributed to contract cancellations and lack of demand for oil drillings in North America. Nonetheless, in 2016 investors began to recognize the long-term value of the organization and potential rebound, which has continued to drive the share price since the beginning of the period. Shares

3. The materials sector comprises chemicals, construction materials, and metals and mining in the SOI.

4. The energy sector comprises energy equipment and services and oil, gas and consumable fuels in the SOI. The information technology sector comprises electronic equipment, instruments and components; Internet software and services; semiconductors and semiconductor equipment; and technology hardware, storage and peripherals in the SOI.

Semiannual Report TF-3

TEMPLETON FOREIGN VIP FUND

of Samsung Electronics increased after consecutive reported earnings in 2015’s fourth quarter and 2016’s first quarter. Strong sales of Samsung’s new flagship mobile phone models—the Galaxy S7 and the Galaxy S7 Edge—boosted its first quarter’s operating performance.

In contrast, stock selection in the financials sector and specifically an overweighting in banks weighed on relative results.⁵ Within the financials sector, the Fund’s position in Credit Suisse (Switzerland), AXA (France) and Aegon (Netherlands) hindered results. Shares of Credit Suisse, a financial services provider, declined during the period surrounding investor uncertainty stemming partially from the events surrounding the Brexit. The company nonetheless has been combatting these effects by implementing significant cost-savings initiatives. Further, in May 2016, the company announced a change in management, which the company expects to strengthen the international wealth management division’s investment capabilities.

An overweighted position in the health care sector and an underweighted position in the consumer staples sector along with stock selection in both sectors impacted relative results.⁶ Within health care, positions in pharmaceutical manufacturer Teva Pharmaceutical Industries (Israel), QIAGEN (Netherlands) and MorphoSys (Germany) hurt relative results. Teva’s shares declined largely due to a delay in its acquisition of Allergan’s generics portfolio amid longer-than-anticipated deliberations with the U.S. Federal Trade Commission and the FDA. Among individual holdings, general goods retailer Marks and Spencer (U.K.), automobile manufacturer Nissan Motor (Japan) and financial services provider Aviva (U.K.) detracted from the Fund’s relative returns. Shares of Marks and Spencer declined during the period on continued news of disappointing sales in its clothing retail division. The company restructured its strategic vision in early 2016, focusing on customer retention, sales growth and continued support of its growth food sales division, but these efforts yielded little turnaround by the end of the period.

From a geographic perspective, stock selection in North America and Asia, specifically in Canada, South Korea and Japan, contributed to the Fund’s relative performance. Although the Fund’s overall position in Europe detracted, some investments, such as those in Spain and Ireland contributed. Conversely, stock selection in the eurozone (including the U.K.), an overweighted allocation in Israel and an underweighted allocation in Brazil hindered returns.

Top 10 Holdings
6/30/16
Company Sector/Industry, Country	% of Total Net Assets
Samsung Electronics Co. Ltd. Technology Hardware, Storage & Peripherals, South Korea		4.3%
Silver Wheaton Corp. Metals & Mining, Canada		2.7%
BP PLC Oil, Gas & Consumable Fuels, U.K.		2.4%
Hana Financial Group Inc. Banks, South Korea		2.0%
Teva Pharmaceutical Industries Ltd., ADR Pharmaceuticals, Israel		1.9%
Royal Dutch Shell PLC Oil, Gas & Consumable Fuels, U.K.		1.9%
BNP Paribas SA Banks, France		1.9%
Nissan Motor Co. Ltd. Automobiles, Japan		1.9%
SoftBank Group Corp. Wireless Telecommunication Services, Japan		1.9%
Roche Holding AG Pharmaceuticals, Switzerland		1.8%

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

Thank you for your participation in Templeton Foreign VIP Fund. We look forward to serving your future investment needs.

The foregoing information reflects our analysis, opinions and portfolio holdings as of June 30, 2016, 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.

5. The financials sector comprises banks, capital markets, diversified financial services and insurance in the SOI.

6. The health care sector comprises health care equipment and supplies, health care providers and services, life sciences tools and services and pharmaceuticals in the SOI. The consumer staples sector comprises beverages and food and staples retailing in the SOI.

TF-4 Semiannual Report

TEMPLETON FOREIGN VIP FUND

Class 1 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 × $7.50 = $64.50.

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

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 1	Beginning Account Value 1/1/16		Ending Account Value 6/30/16		Fund-Level Expenses Incurred During Period* 1/1/16–6/30/16
Actual	$	1,000	$	976.60	$	3.83
Hypothetical (5% return before expenses)	$	1,000	$	1,020.98	$	3.92

*Expenses are calculated using the most recent six-month annualized expense ratio, net of expense waivers, for the Fund’s Class 1 shares (0.78%), 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 182/366 to reflect the one-half year period.

Semiannual Report TF-5

SUPPLEMENT DATED JUNE 27, 2016

TO THE PROSPECTUSES DATED MAY 1, 2016

OF

TEMPLETON FOREIGN VIP FUND

TEMPLETON GROWTH VIP FUND

(Series of Franklin Templeton Variable Insurance Products Trust)

Effective June 30, 2016, the prospectus is amended as follows:

I.  The benchmark for the Templeton Foreign VIP Fund has changed from the MSCI EAFE Index to the MSCI ACWI EX USA Index. The “Fund Summary – Performance – Average Annual Total Returns” table on page TF-S4 is revised to add the following:

	1 Year	5 Years	10 Years
MSCI All Country World ex-US Index (index reflects no deduction for fees, expenses or taxes)1	-5.25%	1.51%	3.38%

1. Performance figures as of December 31, 2015. The MSCI All Country World ex-US Index is replacing the MSCI EAFE Index as the Fund’s benchmark. The investment manager believes the composition of the MSCI All Country World ex-US Index more accurately reflects the Fund’s holdings.

II.  The benchmark for the Templeton Growth VIP Fund has changed from the MSCI World Index to the MSCI ACWI Index. The “Fund Summary – Performance – Average Annual Total Returns” table on page TG-S3 is revised to add the following:

	1 Year	5 Years	10 Years
MSCI All Country World Index (index reflects no deduction for fees, expenses or taxes)1	-1.84%	6.66%	5.31%

1. Performance figures as of December 31, 2015. The MSCI All Country World Index is replacing the MSCI World Index as the Fund’s benchmark. The investment manager believes the composition of the MSCI All Country World Index more accurately reflects the Fund’s holdings.

Please keep this supplement with your prospectus for future reference.

TF-6

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Highlights

Templeton Foreign VIP Fund

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012			2011
Class 1
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$13.46			$15.34			$17.56			$14.63			$12.78			$14.54
Income from investment operationsa:
Net investment incomeb		0.23			0.31			0.53	c		0.34			0.38			0.42
Net realized and unrealized gains (losses)		(0.55	)		(1.16	)		(2.39	)		3.00			1.91			(1.90	)
Total from investment operations		(0.32	)		(0.85	)		(1.86	)		3.34			2.29			(1.48	)
Less distributions from:
Net investment income		(0.29	)		(0.53	)		(0.36	)		(0.41	)		(0.44	)		(0.28	)
Net realized gains		(0.23	)		(0.50	)		—			—			—			—
Total distributions		(0.52	)		(1.03	)		(0.36	)		(0.41	)		(0.44	)		(0.28	)
Redemption fees		—			—			—	d		—	d		—	d		—	d
Net asset value, end of period		$12.62			$13.46			$15.34			$17.56			$14.63			$12.78
Total returne		(2.34)%			(6.31)%			(10.89)%			23.27%			18.60%			(10.44)%
Ratios to average net assetsf
Expenses before waiver and payments by affiliates		0.80%			0.78%			0.77%			0.78%			0.79%			0.79%
Expenses net of waiver and payments by affiliates		0.78%			0.78%	g		0.77%	g		0.78%			0.79%			0.79%	h
Net investment income		3.63%			2.05%			3.11%	c		2.16%			2.84%			2.92%
Supplemental data
Net assets, end of period (000’s)		$199,506			$214,172			$248,355			$298,468			$265,924			$254,292
Portfolio turnover rate		9.77%			15.15%			25.71%			23.61%			12.53%			21.09%

^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’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $0.16 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding these amounts, the ratio of net investment income to average net assets would have been 2.13%.

^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 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 waiver and payments by affiliates rounds to less than 0.01%.

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

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report TF-7

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL HIGHLIGHTS

Templeton Foreign VIP Fund (continued)

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012			2011
Class 2
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$13.20			$15.05			$17.24			$14.37			$12.56			$14.29
Income from investment operationsa:
Net investment incomeb		0.21			0.27			0.48	c		0.30			0.34			0.37
Net realized and unrealized gains (losses)		(0.54	)		(1.13	)		(2.35	)		2.94			1.87			(1.86	)
Total from investment operations		(0.33	)		(0.86	)		(1.87	)		3.24			2.21			(1.49	)
Less distributions from:
Net investment income		(0.26	)		(0.49	)		(0.32	)		(0.37	)		(0.40	)		(0.24	)
Net realized gains		(0.23	)		(0.50	)		—			—			—			—
Total distributions		(0.49	)		(0.99	)		(0.32	)		(0.37	)		(0.40	)		(0.24	)
Redemption fees		—			—			—	d		—	d		—	d		—	d
Net asset value, end of period		$12.38			$13.20			$15.05			$17.24			$14.37			$12.56
Total returne		(2.51)%			(6.49)%			(11.13)%			22.97%			18.23%			(10.63)%
Ratios to average net assetsf
Expenses before waiver and payments by affiliates		1.05%			1.03%			1.02%			1.03%			1.04%			1.04%
Expenses net of waiver and payments by affiliates		1.03%			1.03%	g		1.02%	g		1.03%			1.04%			1.04%	h
Net investment income		3.38%			1.80%			2.86%	c		1.91%			2.59%			2.67%
Supplemental data
Net assets, end of period (000’s)		$1,426,801			$1,456,854			$1,645,571			$1,873,586			$1,744,231			$1,679,412
Portfolio turnover rate		9.77%			15.15%			25.71%			23.61%			12.53%			21.09%

^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’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $0.16 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding these amounts, the ratio of net investment income to average net assets would have been 1.88%.

^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 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 waiver and payments by affiliates rounds to less than 0.01%.

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

TF-8 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL HIGHLIGHTS

Templeton Foreign VIP Fund (continued)

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012			2011
Class 4
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$13.29			$15.16			$17.37			$14.48			$12.66			$14.43
Income from investment operationsa:
Net investment incomeb		0.21			0.25			0.46	c		0.28			0.33			0.36
Net realized and unrealized gains (losses)		(0.55	)		(1.14	)		(2.36	)		2.97			1.89			(1.88	)
Total from investment operations		(0.34	)		(0.89	)		(1.90	)		3.25			2.22			(1.52	)
Less distributions from:
Net investment income		(0.24	)		(0.48	)		(0.31	)		(0.36	)		(0.40	)		(0.25	)
Net realized gains		(0.23	)		(0.50	)		—			—			—			—
Total distributions		(0.47	)		(0.98	)		(0.31	)		(0.36	)		(0.40	)		(0.25	)
Redemption fees		—			—			—	d		—	d		—	d		—	d
Net asset value, end of period		$12.48			$13.29			$15.16			$17.37			$14.48			$12.66
Total returne		(2.52)%			(6.65)%			(11.22)%			22.86%			18.14%			(10.74)%
Ratios to average net assetsf
Expenses before waiver and payments by affiliates		1.15%			1.13%			1.12%			1.13%			1.14%			1.14%
Expenses net of waiver and payments by affiliates		1.13%			1.13%	g		1.12%	g		1.13%			1.14%			1.14%	h
Net investment income		3.28%			1.70%			2.76%	c		1.81%			2.49%			2.57%
Supplemental data
Net assets, end of period (000’s)		$465,647			$472,189			$503,143			$513,098			$416,277			$353,346
Portfolio turnover rate		9.77%			15.15%			25.71%			23.61%			12.53%			21.09%

^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’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $0.16 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding these amounts, the ratio of net investment income to average net assets would have been 1.78%.

^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 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 waiver and payments by affiliates rounds to less than 0.01%.

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

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report TF-9

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Statement of Investments, June 30, 2016 (unaudited)

Templeton Foreign VIP Fund
		Country		Shares		Value
	Common Stocks 94.6%
	Aerospace & Defense 1.2%
	BAE Systems PLC		United Kingdom		3,520,780	$	24,599,746
	Airlines 0.7%
	Deutsche Lufthansa AG		Germany		1,235,150		14,436,153
	Auto Components 3.0%
	Cie Generale des Etablissements Michelin, B		France		308,070		29,136,902
	Hyundai Mobis Co. Ltd.		South Korea		121,198		26,495,043
	Sumitomo Rubber Industries Ltd.		Japan		485,500		6,407,519
							62,039,464
	Automobiles 3.6%
	Hero Motocorp Ltd.		India		199,386		9,387,598
	Hyundai Motor Co.		South Korea		102,386		12,035,067
	Nissan Motor Co. Ltd.		Japan		4,424,800		39,327,271
	Toyota Motor Corp., ADR		Japan		136,317		13,630,337
							74,380,273
	Banks 12.7%
	Bangkok Bank PCL, fgn.		Thailand		3,061,900		14,123,798
	Barclays PLC		United Kingdom		10,039,930		18,554,718
	BNP Paribas SA		France		918,660		40,536,848
	Hana Financial Group Inc.		South Korea		2,065,805		41,665,914
	HSBC Holdings PLC		United Kingdom		4,928,400		30,109,901
	ING Groep NV, IDR		Netherlands		1,388,234		14,143,648
	KB Financial Group Inc., ADR		South Korea		1,216,406		34,618,915
	Societe Generale SA		France		400,690		12,546,281
	Standard Chartered PLC		United Kingdom		2,939,781		22,131,778
	UniCredit SpA		Italy		7,093,840		15,511,401
	United Overseas Bank Ltd.		Singapore		1,574,400		21,532,055
							265,475,257
	Beverages 0.8%
	Suntory Beverage & Food Ltd.		Japan		386,100		17,272,157
	Building Products 1.0%
	Compagnie de Saint-Gobain		France		539,170		20,559,809
	Capital Markets 1.6%
	Credit Suisse Group AG		Switzerland		1,208,852		12,768,430
	GAM Holding AG		Switzerland		654,050		6,935,168
	UBS Group AG		Switzerland		1,130,080		14,552,920
							34,256,518
	Chemicals 0.8%
	Johnson Matthey PLC		United Kingdom		420,711		15,712,939
	Construction & Engineering 1.5%
a	Carillion PLC		United Kingdom		3,835,100		11,955,883
	Sinopec Engineering Group Co. Ltd.		China		21,447,000		19,184,525
							31,140,408
	Construction Materials 1.1%
	CRH PLC		Ireland		829,830		23,947,815
	Diversified Financial Services 0.4%
	Deutsche Boerse AG		Germany		109,190		8,912,713

TF-10 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Templeton Foreign VIP Fund (continued)

		Country		Shares		Value
	Common Stocks (continued)
	Diversified Telecommunication Services 3.0%
	China Telecom Corp. Ltd., H		China		53,618,357	$	23,911,930
	Telefonica SA, ADR		Spain		2,390,332		22,660,347
	Telenor ASA		Norway		948,934		15,608,363
							62,180,640
	Electrical Equipment 1.2%
	ABB Ltd.		Switzerland		1,255,890		24,600,570
	Electronic Equipment, Instruments & Components 1.1%
	Kingboard Chemical Holdings Ltd.		Hong Kong		11,646,000		23,086,503
	Energy Equipment & Services 7.1%
	Ensign Energy Services Inc.		Canada		2,009,500		11,275,346
	Petrofac Ltd.		United Kingdom		2,312,160		23,924,345
	Precision Drilling Corp.		Canada		4,296,000		22,775,018
	SBM Offshore NV		Netherlands		2,879,260		33,508,326
b	Subsea 7 SA		United Kingdom		2,173,050		21,118,505
	Technip SA		France		315,910		17,116,701
	Tenaris SA		Italy		1,320,175		19,063,920
							148,782,161
	Food & Staples Retailing 1.8%
	Metro AG		Germany		500,660		15,265,287
b	Tesco PLC		United Kingdom		9,230,860		21,527,442
							36,792,729
	Health Care Equipment & Supplies 0.7%
	Getinge AB, B		Sweden		737,270		15,054,154
	Health Care Providers & Services 1.9%
	Shanghai Pharmaceuticals Holding Co. Ltd., H		China		6,579,500		14,484,576
	Sinopharm Group Co. Ltd.		China		5,173,200		24,637,620
							39,122,196
	Household Durables 0.4%
	Haier Electronics Group Co. Ltd.		China		5,826,000		8,905,949
	Industrial Conglomerates 1.2%
	Siemens AG		Germany		238,364		24,290,366
	Insurance 6.3%
	Aegon NV		Netherlands		4,546,720		17,814,610
	Aviva PLC		United Kingdom		3,272,090		17,185,876
	AXA SA		France		1,317,458		26,036,474
	China Life Insurance Co. Ltd., H		China		5,057,000		10,833,007
	Chubb Ltd.		United States		190,979		24,962,865
	Muenchener Rueckversicherungs-Gesellschaft AG		Germany		69,590		11,605,523
	NN Group NV		Netherlands		463,600		12,758,833
	Swiss Re AG		Switzerland		133,120		11,558,160
							132,755,348
	Internet Software & Services 0.7%
b	Baidu Inc., ADR		China		85,110		14,055,917
	Life Sciences Tools & Services 1.2%
b	MorphoSys AG		Germany		195,900		8,117,005
b	QIAGEN NV		Netherlands		829,071		17,939,832
							26,056,837

Semiannual Report TF-11

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Templeton Foreign VIP Fund (continued)

		Country		Shares		Value
	Common Stocks (continued)
	Metals & Mining 5.8%
	Barrick Gold Corp.		Canada		1,328,790	$	28,369,666
	Glencore PLC		Switzerland		10,884,600		22,183,924
	HudBay Minerals Inc.		Canada		2,956,000		14,115,409
	Silver Wheaton Corp.		Canada		2,430,900		57,212,034
							121,881,033
	Multiline Retail 0.6%
	Marks & Spencer Group PLC		United Kingdom		2,982,260		12,673,251
	Oil, Gas & Consumable Fuels 9.5%
	BP PLC		United Kingdom		8,425,285		49,222,976
	Eni SpA		Italy		1,623,262		26,161,259
	Kunlun Energy Co. Ltd.		China		9,276,000		7,651,838
	LUKOIL PJSC, ADR		Russia		160,535		6,705,547
	PTT Exploration and Production PCL, fgn.		Thailand		4,120,100		9,825,125
	Royal Dutch Shell PLC, A		United Kingdom		16,803		458,745
	Royal Dutch Shell PLC, B		United Kingdom		1,461,343		40,179,199
	Suncor Energy Inc.		Canada		922,000		25,574,243
	Total SA, B		France		695,596		33,492,690
							199,271,622
	Pharmaceuticals 10.4%
	Bayer AG		Germany		216,810		21,658,343
	GlaxoSmithKline PLC		United Kingdom		1,330,855		28,472,848
	Merck KGaA		Germany		238,710		24,124,258
	Novartis AG		Switzerland		166,850		13,700,469
	Roche Holding AG		Switzerland		144,650		37,951,916
	Sanofi		France		455,845		37,906,909
	Teva Pharmaceutical Industries Ltd., ADR		Israel		809,648		40,668,619
	UCB SA		Belgium		164,360		12,259,389
							216,742,751
	Semiconductors & Semiconductor Equipment 1.4%
a	GCL-Poly Energy Holdings Ltd.		China		141,417,000		18,592,031
	Infineon Technologies AG		Germany		764,445		11,009,232
							29,601,263
	Specialty Retail 0.5%
	Kingfisher PLC		United Kingdom		2,345,266		10,085,148
	Technology Hardware, Storage & Peripherals 6.0%
	CANON Inc.		Japan		533,600		15,048,269
	Konica Minolta Inc.		Japan		883,700		6,332,007
	Quanta Computer Inc.		Taiwan		7,299,000		13,825,151
	Samsung Electronics Co. Ltd.		South Korea		73,014		90,258,818
							125,464,245
	Trading Companies & Distributors 2.0%
	ITOCHU Corp.		Japan		1,944,700		23,340,166
	Posco Daewoo Corp.		South Korea		869,005		18,846,509
							42,186,675

TF-12 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Templeton Foreign VIP Fund (continued)

		Country		Shares		Value
	Common Stocks (continued)
	Wireless Telecommunication Services 3.4%
	China Mobile Ltd.		China		1,370,500	$	15,677,342
	SoftBank Group Corp.		Japan		691,900		38,783,918
	Vodafone Group PLC, ADR		United Kingdom		562,353		17,371,084
							71,832,344
	Total Common Stocks (Cost $2,075,756,553)						1,978,154,954
	Short Term Investments 4.9%
	Money Market Funds (Cost $96,144,526) 4.6%
b,c	Institutional Fiduciary Trust Money Market Portfolio		United States		96,144,526		96,144,526
d	Investments from Cash Collateral Received for Loaned Securities (Cost $7,952,392) 0.3%
	Money Market Funds 0.3%
b,c	Institutional Fiduciary Trust Money Market Portfolio		United States		7,952,392		7,952,392
	Total Investments (Cost $2,179,853,471) 99.5%						2,082,251,872
	Other Assets, less Liabilities 0.5%						9,702,033
	Net Assets 100.0%					$	2,091,953,905

See Abbreviations on page TF-23.

^aA portion or all of the security is on loan at June 30, 2016. See Note 1(c).

^bNon-income producing.

^cSee Note 3(e) regarding investments in affiliated management investment companies.

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

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report TF-13

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Statements

Statements of Assets and Liabilities

June 30, 2016 (unaudited)

	Templeton Foreign VIP Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	2,075,756,553
Cost - Non-controlled affiliates (Note 3e)		104,096,918
Total cost of investments	$	2,179,853,471
Value - Unaffiliated issuers	$	1,978,154,954
Value - Non-controlled affiliates (Note 3e)		104,096,918
Total value of investments (includes securities loaned in the amount $7,113,392)		2,082,251,872
Cash		390,128
Foreign currency, at value (cost and $832,589)		832,971
Receivables:
Capital shares sold		12,368,417
Dividends		7,050,048
European Union tax reclaims		911,264
Other assets		929
Total assets		2,103,805,629
Liabilities:
Payables:
Investment securities purchased		837,392
Capital shares redeemed		477,473
Management fees		1,271,163
Distribution fees		876,960
Payable upon return of securities loaned		7,952,392
Deferred tax		33,155
Accrued expenses and other liabilities		403,189
Total liabilities		11,851,724
Net assets, at value	$	2,091,953,905
Net assets consist of:
Paid-in capital	$	2,217,200,126
Undistributed net investment income		35,402,855
Net unrealized appreciation (depreciation)		(97,800,662	)
Accumulated net realized gain (loss)		(62,848,414	)
Net assets, at value	$	2,091,953,905
Class 1:
Net assets, at value	$	199,506,011
Shares outstanding		15,809,200
Net asset value and maximum offering price per share	$	12.62
Class 2:
Net assets, at value	$	1,426,800,919
Shares outstanding		115,215,844
Net asset value and maximum offering price per share	$	12.38
Class 4:
Net assets, at value	$	465,646,975
Shares outstanding		37,304,306
Net asset value and maximum offering price per share	$	12.48

TF-14 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Statements of Operations

for the six months ended June 30, 2016 (unaudited)

	Templeton Foreign VIP Fund
Investment income:
Dividends (net of foreign taxes of $4,947,590)	$	44,477,165
Income from securities loaned (net of fees and rebates)		630,762
Total investment income		45,107,927
Expenses:
Management fees (Note 3a)		7,750,108
Distribution fees: (Note 3c)
Class 2		1,740,923
Class 4		792,740
Custodian fees (Note 4)		109,911
Reports to shareholders		176,552
Professional fees		81,601
Trustees’ fees and expenses		5,210
Other		27,294
Total expenses		10,684,339
Expenses waived/paid by affiliates (Note 3e)		(179,099	)
Net expenses		10,505,240
Net investment income		34,602,687
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		(58,413,743	)
Foreign currency transactions		229,870
Net realized gain (loss)		(58,183,873	)
Net change in unrealized appreciation (depreciation) on:
Investments		(31,139,542	)
Translation of other assets and liabilities denominated in foreign currencies		(32,859	)
Change in deferred taxes on unrealized appreciation		55,339
Net change in unrealized appreciation (depreciation)		(31,117,062	)
Net realized and unrealized gain (loss)		(89,300,935	)
Net increase (decrease) in net assets resulting from operations	$	(54,698,248	)

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report TF-15

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Statements of Changes in Net Assets

	Templeton Foreign VIP Fund
	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31, 2015
Increase (decrease) in net assets:
Operations:
Net investment income	$	34,602,687		$	42,572,642
Net realized gain (loss)		(58,183,873	)		36,800,340
Net change in unrealized appreciation (depreciation)		(31,117,062	)		(219,790,040	)
Net increase (decrease) in net assets resulting from operations		(54,698,248	)		(140,417,058	)
Distributions to shareholders from:
Net investment income:
Class 1		(4,469,747	)		(8,346,614	)
Class 2		(28,417,976	)		(51,791,116	)
Class 4		(8,605,853	)		(15,312,865	)
Net realized gains:
Class 1		(3,504,221	)		(7,826,999	)
Class 2		(25,453,391	)		(52,898,439	)
Class 4		(8,118,929	)		(16,028,658	)
Total distributions to shareholders		(78,570,117	)		(152,204,691	)
Capital share transactions: (Note 2)
Class 1		(1,643,566	)		(4,016,954	)
Class 2		61,864,384			11,936,472
Class 4		21,786,823			30,848,243
Total capital share transactions		82,007,641			38,767,761
Net increase (decrease) in net assets		(51,260,724	)		(253,853,988	)
Net assets:
Beginning of period		2,143,214,629			2,397,068,617
End of period	$	2,091,953,905		$	2,143,214,629
Undistributed net investment income included in net assets:
End of period	$	35,402,855		$	42,293,744

TF-16 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Notes to Financial Statements (unaudited)

Templeton Foreign VIP Fund

1. Organization and Significant Accounting Policies

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of nineteen separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Templeton Foreign VIP 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 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. The Fund calculates the net asset value (NAV) per share as of 4 p.m. Eastern time each day the New York Stock Exchange (NYSE) is open for trading. Under compliance policies and procedures approved by the Trust’s Board of Trustees (the Board), the Fund’s administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The VC provides administration and oversight of the Fund’s valuation policies and procedures, which are approved annually by the Board. Among other things, these procedures allow the Fund to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

Equity securities listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded or as of 4 p.m. Eastern time whichever is earlier. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the day that the value of the security is determined. Over-the-counter (OTC)

securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.

Investments in open-end mutual funds are valued at the closing NAV.

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

Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 4 p.m. Eastern time. In addition, trading in certain foreign markets may not take place on every NYSE business day. 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 VC monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depositary Receipts, futures contracts and exchange traded funds).

Semiannual Report TF-17

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Foreign VIP Fund (continued)

1. Organization and Significant Accounting Policies (continued)

a. Financial Instrument Valuation (continued)

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.

When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the NYSE is closed, which could result in differences between the value of the Fund’s portfolio securities on the last business day and the last calendar day of the reporting period. Any significant security valuation changes due to an open foreign market are adjusted and reflected by the Fund for financial reporting purposes.

b. Foreign Currency Translation

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

The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments in 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 securities lending program to earn additional income. The Fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the fair value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the fair 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 deposited into a joint cash account with other funds and is used to invest in a money market fund managed by Franklin Advisers, Inc., an affiliate of the Fund. The Fund may receive income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. Income from securities loaned, net of fees paid to the securities lending agent and/or third-party vendor, is reported separately in the Statement of Operations. 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. If the borrower defaults on its obligation to return the securities loaned, the Fund has the right to repurchase the securities in the open market using the collateral received. 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 if applicable, excise taxes. As a result, no provision for U.S. federal income taxes is required.

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

TF-18 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Foreign VIP Fund (continued)

an amount that would be payable if the securities were disposed of on the valuation date. As a result of several court cases, in certain countries across the European Union, the Fund filed additional tax reclaims for previously withheld taxes on dividends earned in those countries (EU reclaims). These additional filings are subject to various administrative proceedings by the local jurisdictions’ tax authorities within the European Union, as well as a number of related judicial proceedings. Income recognized, if any, for EU reclaims is reflected as other income in the Statement of Operations and any related receivable, if any, is reflected as European Union tax reclaims in the Statement of Assets and Liabilities. When uncertainty exists as to the ultimate resolution of these proceedings, the likelihood of receipt of these EU reclaims, and the potential timing of payment, no amounts are reflected in the financial statements.

The Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of June 30, 2016, the Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on each tax jurisdiction’s 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 except for certain dividends from foreign securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Fund. 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 U.S. GAAP. 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 U.S. GAAP 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 invested in Class 3 shares of the Fund were subject to a 1.0% short term trading fee if the interest in the subaccount had been held for less than 60 days. Such fees were 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. There were no redemption fees for the period.

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.

Semiannual Report TF-19

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Foreign VIP Fund (continued)

2. Shares of Beneficial Interest

At June 30, 2016, 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, 2016						Year Ended December 31, 2015
	Shares			Amount			Shares			Amount
Class 1 Shares:
Shares sold		187,606		$	2,408,488			454,466		$	6,842,816
Shares issued in reinvestment of distributions		633,861			7,973,968			1,057,790			16,173,612
Shares redeemed		(924,389	)		(12,026,022	)		(1,792,103	)		(27,033,382	)
Net increase (decrease)		(102,922	)	$	(1,643,566	)		(279,847	)	$	(4,016,954	)
Class 2 Shares:
Shares sold		8,819,370		$	113,983,326			14,594,828		$	213,082,680
Shares issued in reinvestment of distributions		4,365,589			53,871,367			6,974,654			104,689,555
Shares redeemed		(8,362,774	)		(105,990,309	)		(20,492,400	)		(305,835,763	)
Net increase (decrease)		4,822,185		$	61,864,384			1,077,082		$	11,936,472
Class 4 Shares:
Shares sold		2,906,866		$	36,677,027			5,690,434		$	80,692,209
Shares issued on reinvestment of distributions		1,344,436			16,724,782			2,072,852			31,341,523
Shares redeemed		(2,473,404	)		(31,614,986	)		(5,429,602	)		(81,185,489	)
Net increase (decrease)		1,777,898		$	21,786,823			2,333,684		$	30,848,243

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
0.900%	Up to and including $200 million
0.810%	Over $200 million, up to and including $700 million
0.775%	Over $700 million, up to and including $1.2 billion
0.750%	Over $1.2 billion, up to and including $1.3 billion
0.675%	Over $1.3 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

TF-20 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Foreign VIP Fund (continued)

For the period ended June 30, 2016, the annualized effective investment management fee rate was 0.758% of the Fund’s average daily net assets.

b. Administrative Fees

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

c. Distribution Fees

The Board has adopted distribution plans for Class 2 and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to 0.25% and 0.35% per year of its average daily net assets of Class 2 and Class 4, respectively. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.

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. Investments in Affiliated Management Investment Companies

The Fund invests in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Fund are waived on assets invested in the affiliated management investment companies, as noted in the Statement of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate. Prior to January 1, 2014, the waiver was accounted for as a reduction to management fees.

	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 Gain (Loss)		% of Affiliated Fund Shares Outstanding Held at End of Period
Non-Controlled Affiliates
Institutional Fiduciary Trust Money Market Portfolio		71,421,269		685,470,192		(652,794,543	)		104,096,918	$	104,096,918	$	—	$	—		0.5%

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, 2016, there were no credits earned.

5. Income Taxes

At June 30, 2016, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	2,184,560,139
Unrealized appreciation	$	267,302,947
Unrealized depreciation		(369,611,214	)
Net unrealized appreciation (depreciation)	$	(102,308,267	)

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

Semiannual Report TF-21

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Foreign VIP Fund (continued)

6. Investment Transactions

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2016, aggregated $199,100,919 and $194,372,981, respectively.

At June 30, 2016, in connection with securities lending transactions, the Fund loaned equity investments and received $7,952,392 of cash collateral. The gross amount of recognized liability for such transactions is included in payable upon return of securities loaned in the Statement of Assets and Liabilities. The agreements can be terminated at any time.

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 $2 billion (Global Credit Facility) which matures on February 10, 2017. 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 0.07% based upon the unused portion of the Global Credit Facility. Effective February 12, 2016, the annual commitment fee is 0.15%. These fees are reflected in other expenses in the Statement of Operations. During the period ended June 30, 2016, 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 financial instruments and are summarized in the following fair value hierarchy:

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

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

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

The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.

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

A summary of inputs used as of June 30, 2016, in valuing the Fund’s assets carried at fair value were valued using Level 1 inputs. For detailed categories, see the accompanying Statement of Investments.

TF-22 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Foreign VIP Fund (continued)

10. Subsequent Events

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

Abbreviations

Selected Portfolio
ADR	American Depositary Receipt
IDR	International Depositary Receipt

Semiannual Report TF-23

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Tax Information (unaudited)

Templeton Foreign VIP Fund

At December 31, 2015, more than 50% of the Fund’s total assets were invested in securities of foreign issuers. In most instances, foreign taxes were withheld from income paid to the Fund on these investments. As shown in the table below, the Fund hereby reports to shareholders the foreign source income and foreign taxes paid, pursuant to Section 853 of the Internal Revenue Code. This written statement will allow shareholders of record on June 14, 2016, to treat their proportionate share of foreign taxes paid by the Fund as having been paid directly by them. The shareholder shall consider these amounts as foreign taxes paid in the tax year in which they receive the Fund distribution.

The following table provides a detailed analysis of foreign tax paid, and foreign source income as reported by the Fund, to Class 1, Class 2, and Class 4 shareholders of record.

Class	Foreign Tax Paid Per Share	Foreign Source Income Per Share
Class 1	$0.0241	$0.3139
Class 2	$0.0241	$0.2779
Class 4	$0.0241	$0.2651

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.

TF-24 Semiannual Report

Templeton Global Bond VIP Fund

This semiannual report for Templeton Global Bond VIP Fund covers the period ended June 30, 2016.

Class 1 Performance Summary as of June 30, 2016

The Fund’s Class 1 shares had a -1.69% total return* for the six-month period ended June 30, 2016.

*The Fund has a fee waiver associated with any investment in a Franklin Templeton money fund and/or Franklin Templeton fund, as applicable, contractually guaranteed through at least the Fund’s current fiscal year-end. Fund investment results reflect the fee waiver, to the extent applicable; without this reduction, the results would have been lower.

Performance reflects the Fund’s Class 1 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.

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.

Semiannual Report TGB-1

TEMPLETON GLOBAL BOND VIP FUND

Fund Goal and Main Investments

The Fund seeks high current income, consistent with preservation of capital, with capital appreciation as a secondary consideration. Under normal market conditions, the Fund invests at least 80% of its net assets in bonds, which include debt securities of any maturity, such as bonds, notes, bills and debentures.

Fund Risks

All investments involve risks, including possible loss of principal. Currency rates may fluctuate significantly over short periods of time, and can reduce returns. Derivatives, including currency management strategies, involve costs and can create economic leverage in the portfolio that may result in significant volatility and cause the Fund to participate in losses (as well as enable gains) on an amount that exceeds the Fund’s initial investment. The Fund may not achieve the anticipated benefits and may realize losses when a counterparty fails to perform as promised. Foreign securities involve special risks, including currency fluctuations and economic and political uncertainties. Investments in emerging markets involve heightened risks related to the same factors, in addition to those associated with these markets’ smaller size and lesser liquidity. Sovereign debt securities are subject to various risks in addition to those relating to debt securities and foreign securities generally, including, but not limited to, the risk that a government entity may be unwilling or unable to pay interest and repay principal on its sovereign debt, or otherwise meet its obligations when due. Investments in lower rated bonds include higher risk of default and loss of principal. Changes in interest rates will affect the value of the Fund’s portfolio and its share price and yield. Bond prices generally move in the opposite direction of interest rates. As prices of bonds in the Fund adjust to a rise in interest rates, the Fund’s share price may decline. The markets for particular securities or types of securities are or may become relatively illiquid. Reduced liquidity will have an adverse impact on the security’s value and on the Fund’s ability to sell such securities when necessary to meet the Fund’s liquidity needs or in response to a specific market event. The Fund is also nondiversified, which involves the risk of greater price fluctuation than a more diversified portfolio. Changes in the financial strength of a bond issuer or in a bond’s credit rating may affect its value. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. For comparison, the Fund’s benchmarks, the J.P. Morgan (JPM) Global Government Bond Index (GGBI) posted a +10.58% total return and the Citigroup World Government Bond Index, posted a +10.74% total return for the same period.¹

Economic and Market Overview

Global markets experienced periods of heightened volatility during the six-month period, as declines in oil prices and concerns about economic conditions in China and growth across the globe appeared at times to have negative effects on investor sentiment. Despite the near-term volatility, our medium-term investment convictions remained intact and we held the view that global market fundamentals would eventually re-emerge. During the second half of the period, a number of emerging markets recovered from the extraordinarily low valuation levels of January and February to achieve what we viewed as compelling positive appreciation for the full six-month period.

*Figures are stated as a percentage of total and may not equal 100% or may be negative due to rounding, use of any derivatives, unsettled trades or other factors.

**The Fund’s euro area investments were in Slovenia and Portugal.

***The Fund’s supranational investment was denominated in the Mexican peso.

1. Source: 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.

TGB-2 Semiannual Report

TEMPLETON GLOBAL BOND VIP FUND

During the first two months of the year, markets appeared to regard emerging economies as being in near-crisis condition, reacting as if conditions were worse than the 2008 global financial crisis or the Asian financial crisis of 1997 and 1998. However, several emerging market economies were in far better shape, in our assessment, with larger foreign reserves and more diversified, growing economies. We were focused on the opportunities in specific emerging market currencies and believed that fears of a systemic crisis across the asset class were exaggerated. Over the final weeks of February, risk appetites returned and several local-currency markets rallied, creating a positive trend for global markets that largely carried into March and April, and through much of the remaining months of the period.

The U.S. Federal Reserve (Fed) passed on raising rates at its January, March, April and June meetings, while indicating that rate hikes would likely be more gradual than previously envisioned. The 10-year U.S. Treasury yield declined from 2.27% at the beginning of the period to 1.78% by the end of March. The result of the Fed’s dovishness was an implicit easing of policy, as markets essentially eliminated previously priced-in rate hikes for 2016. Consequently, the U.S. dollar weakened as the Japanese yen and euro notably strengthened. We believed the periods of yen and euro strength would prove temporary as we expected fundamentals to ultimately re-emerge in the currency valuations. Given U.S. labor market strength and underlying inflation pressures, we anticipated that the Fed would ultimately have to make a firmer commitment to rate hikes that would fortify the divergences in monetary policies between the easings of the European Central Bank and the Bank of Japan and the tightening of the Fed.

In May, market expectations for U.S. interest rate hikes increased sharply after hawkish-sounding comments were released in the Fed meeting minutes on May 18. However, those sentiments proved temporary, as the 10-year Treasury yield declined to 1.60% on June 15, the same day that the Fed announced rates would remain unchanged at 0.25%. Yields temporarily surged higher in the weeks after the Fed’s meeting due to growing expectations for a rate hike in the second half of 2016. However, the U.K.’s June 23 referendum vote to leave the European Union quickly altered global market sentiments—risk aversion escalated sharply, driving yields significantly lower as investors sought perceived safe havens amid the growing uncertainties surrounding the Brexit. Nonetheless, a number

of emerging market currencies rallied in the final weeks of the period, culminating in positive appreciations in a select number of markets such as Brazil, Indonesia and Malaysia.

Investment Strategy

We invest selectively in bonds around the world based upon our assessment of changing market, political and economic conditions. While seeking opportunities, we monitor various factors including changes in interest rates, currency exchange rates and credit risks. We seek to manage the Fund’s exposure to various currencies and may utilize currency forward contracts.

What is a currency forward contract?

A currency forward contract is an agreement between the Fund and a counterparty to buy or sell a foreign currency in exchange for another currency at a specific exchange rate on a future date.

Manager’s Discussion

Overall, we continued to position our strategies for rising rates by maintaining low portfolio duration and aiming at a negative correlation with U.S. Treasury returns. We also continued to actively seek select duration exposures that we believe can offer positive real yields without taking undue interest-rate risk, favoring countries that we believe have solid underlying fundamentals and prudent fiscal, monetary and financial policies. When investing globally, investment opportunities may take time to materialize, which may require weathering short-term volatility as the longer term investing theses develop. During the period, we shifted out of markets that we were previously contrarian on to reallocate to positions that we believe have fundamentally attractive valuations for the medium term ahead. We also maintained our exposures to several of our strongest investment convictions and added to those types of positions as prices became cheaper during periods of heightened volatility. Despite the persistence of volatility during the period, we remained encouraged by the vast set of what we considered fundamentally attractive valuations across the global bond and currency markets. We were positioned for depreciation of the euro and the Japanese yen, rising U.S. Treasury yields, and currency appreciation in select emerging markets. During the period, we used currency forward contracts to actively manage exposure to currencies. We also used interest rate swaps to tactically manage duration exposures.

Semiannual Report TGB-3

TEMPLETON GLOBAL BOND VIP FUND

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.

What is an interest rate swap?

An interest rate swap is an agreement between two parties to exchange interest rate obligations, generally one based on an interest rate fixed to maturity and the other based on an interest rate that changes in accordance with changes in a designated benchmark (for example, LIBOR, prime, commercial paper or other benchmarks).

During the period, the Fund’s negative absolute performance was primarily attributable to currency positions. Interest rate strategies contributed to absolute return while sovereign credit exposures had a largely neutral effect. Among currencies, the Fund’s net-negative positions in the Japanese yen and the euro detracted from absolute performance. However, currency positions in Asia ex-Japan and Latin America contributed. The Fund maintained a defensive approach regarding interest rates in developed and emerging markets. Select duration exposures in Latin America and Asia ex-Japan contributed to absolute performance, while negative duration exposure to U.S. Treasuries detracted.

Relative to the JPM GGBI benchmark, the Fund’s underperformance was primarily attributable to interest rate strategies followed by currency positions. Sovereign credit exposures had a largely neutral effect on relative return. The Fund maintained a defensive approach regarding interest rates in developed and emerging markets. Select underweighted duration exposures in Europe detracted from relative performance, as did underweighted duration exposures in Japan and the U.S. However, select duration exposures in Latin America and Asia ex-Japan contributed to relative return. Among currencies, the Fund’s underweighted positions in the Japanese yen and the euro detracted from relative performance. However, overweighted currency positions in Asia ex-Japan and Latin America contributed to relative return, as did underweighted exposure to the British pound.

Thank you for your participation in Templeton Global Bond VIP Fund. We look forward to serving your future investment needs.

The foregoing information reflects our analysis, opinions and portfolio holdings as of June 30, 2016, 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.

Currency Breakdown*
6/30/16
	% of Total Net Assets
Americas		139.5%
U.S. Dollar		103.6%
Mexican Peso		21.3%
Brazilian Real		9.4%
Chilean Peso		3.0%
Peruvian Nuevo Sol		0.1%
Asia Pacific		2.4%
Malaysian Ringgit		14.4%
Indonesian Rupiah		9.7%
Indian Rupee		6.8%
Philippine Peso		2.7%
Sri Lankan Rupee		1.2%
Singapore Dollar		0.1%
Japanese Yen		-32.5%
Europe		-33.0%
Polish Zloty		3.1%
Euro		-36.1%
Australia & New Zealand		-8.9%
Australian Dollar		-8.9%

*Figures are stated as a percentage of total and may not equal 100% or may be negative due to rounding, use of any derivatives, unsettled trades or other factors.

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).

TGB-4 Semiannual Report

TEMPLETON GLOBAL BOND VIP FUND

Class 1 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 × $7.50 = $64.50.

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

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 1	Beginning Account Value 1/1/16		Ending Account Value 6/30/16		Fund-Level Expenses Incurred During Period* 1/1/16–6/30/16
Actual	$	1,000	$	983.10	$	2.37
Hypothetical (5% return before expenses)	$	1,000	$	1,022.48	$	2.41

*Expenses are calculated using the most recent six-month annualized expense ratio, net of expense waivers, for the Fund’s Class 1 shares (0.48%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 182/366 to reflect the one-half year period.

Semiannual Report TGB-5

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Highlights

Templeton Global Bond VIP Fund

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012			2011
Class 1
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$16.34			$18.56			$19.15			$20.01			$18.61			$19.94
Income from investment operationsa:
Net investment incomeb		0.29			0.52			0.58			0.64			0.72			0.87
Net realized and unrealized gains (losses)		(0.57	)		(1.22	)		(0.16	)		(0.30	)		1.99			(0.92	)
Total from investment operations		(0.28	)		(0.70	)		0.42			0.34			2.71			(0.05	)
Less distributions from:
Net investment income and net foreign currency gains		—			(1.43	)		(1.01	)		(0.96	)		(1.28	)		(1.15	)
Net realized gains		(0.01	)		(0.09	)		—			(0.24	)		(0.03	)		(0.13	)
Total distributions		(0.01	)		(1.52	)		(1.01	)		(1.20	)		(1.31	)		(1.28	)
Redemption fees		—			—			—	c		—	c		—	c		—	c
Net asset value, end of period		$16.05			$16.34			$18.56			$19.15			$20.01			$18.61
Total returnd		(1.69)%			(4.10)%			2.12%			1.89%			15.31%			(0.61)%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		0.52%			0.52%			0.51%			0.51%			0.55%			0.56%
Expenses net of waiver and payments by affiliatesf		0.48%			0.52%	g		0.51%			0.51%			0.55%			0.56%
Net investment income		3.70%			2.99%			3.08%			3.26%			3.71%			4.40%
Supplemental data
Net assets, end of period (000’s)		$278,297			$292,802			$323,491			$280,963			$307,142			$269,819
Portfolio turnover rate		26.80%			51.58%			39.14%			34.39%			43.26%			34.18%

^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’s shares in relation to income earned and/or fluctuating fair 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 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%.

^gBenefit of waiver and payments by affiliates rounds to less than 0.01%.

TGB-6 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL HIGHLIGHTS

Templeton Global Bond VIP Fund (continued)

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012			2011
Class 2
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$15.80			$17.99			$18.60			$19.47			$18.15			$19.49
Income from investment operationsa:
Net investment incomeb		0.26			0.46			0.52			0.57			0.65			0.79
Net realized and unrealized gains (losses)		(0.56	)		(1.17	)		(0.17	)		(0.27	)		1.94			(0.89	)
Total from investment operations		(0.30	)		(0.71	)		0.35			0.30			2.59			(0.10	)
Less distributions from:
Net investment income and net foreign currency gains		—			(1.39	)		(0.96	)		(0.93	)		(1.24	)		(1.11	)
Net realized gains		(0.01	)		(0.09	)		—			(0.24	)		(0.03	)		(0.13	)
Total distributions		(0.01	)		(1.48	)		(0.96	)		(1.17	)		(1.27	)		(1.24	)
Redemption fees		—			—			—	c		—	c		—	c		—	c
Net asset value, end of period		$15.49			$15.80			$17.99			$18.60			$19.47			$18.15
Total returnd		(1.88)%			(4.30)%			1.83%			1.63%			15.07%			(0.87)%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		0.77%			0.77%			0.76%			0.76%			0.80%			0.81%
Expenses net of waiver and payments by affiliatesf		0.73%			0.77%	g		0.76%			0.76%			0.80%			0.81%
Net investment income		3.45%			2.74%			2.83%			3.01%			3.46%			4.15%
Supplemental data
Net assets, end of period (000’s)		$2,845,200			$2,971,667			$3,177,638			$2,826,039			$2,418,229			$1,812,814
Portfolio turnover rate		26.80%			51.58%			39.14%			34.39%			43.26%			34.18%

^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’s shares in relation to income earned and/or fluctuating fair 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 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%.

^gBenefit of waiver and payments by affiliates rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report TGB-7

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL HIGHLIGHTS

Templeton Global Bond VIP Fund (continued)

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012			2011
Class 4
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$16.18			$18.38			$18.97			$19.82			$18.44			$19.78
Income from investment operationsa:
Net investment incomeb		0.26			0.46			0.51			0.56			0.64			0.79
Net realized and unrealized gains (losses)		(0.57	)		(1.21	)		(0.18	)		(0.28	)		1.98			(0.91	)
Total from investment operations		(0.31	)		(0.75	)		0.33			0.28			2.62			(0.12	)
Less distributions from:
Net investment income and net foreign currency gains		—			(1.36	)		(0.92	)		(0.89	)		(1.21	)		(1.09	)
Net realized gains		(0.01	)		(0.09	)		—			(0.24	)		(0.03	)		(0.13	)
Total distributions		(0.01	)		(1.45	)		(0.92	)		(1.13	)		(1.24	)		(1.22	)
Redemption fees		—			—			—	c		—	c		—	c		—	c
Net asset value, end of period		$15.86			$16.18			$18.38			$18.97			$19.82			$18.44
Total returnd		(1.89)%			(4.39)%			1.69%			1.54%			14.97%			(0.96)%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		0.87%			0.87%			0.86%			0.86%			0.90%			0.91%
Expenses net of waiver and payments by affiliatesf		0.83%			0.87%	g		0.86%			0.86%			0.90%			0.91%
Net investment income		3.35%			2.64%			2.73%			2.91%			3.36%			4.05%
Supplemental data
Net assets, end of period (000’s)		$96,735			$103,045			$111,199			$118,145			$163,241			$151,695
Portfolio turnover rate		26.80%			51.58%			39.14%			34.39%			43.26%			34.18%

^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’s shares in relation to income earned and/or fluctuating fair 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 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%.

^gBenefit of waiver and payments by affiliates rounds to less than 0.01%.

TGB-8 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Statement of Investments, June 30, 2016 (unaudited)

Templeton Global Bond VIP Fund
		Principal Amount*			Value
	Foreign Government and Agency Securities 73.1%
	Brazil 9.4%
	Letra Tesouro Nacional, Strip,
	7/01/16		1,190a	BRL	$	370,384
	10/01/16		4,700a	BRL		1,414,899
	1/01/17		46,660a	BRL		13,610,764
	1/01/18		28,770a	BRL		7,476,406
	1/01/19		38,960a	BRL		9,069,720
	7/01/19		102,840a	BRL		22,653,959
	Nota Do Tesouro Nacional,
	10.00%, 1/01/21		6,620a	BRL		1,925,248
	10.00%, 1/01/23		402,350a	BRL		114,324,685
	10.00%, 1/01/25		48,340a	BRL		13,540,807
	10.00%, 1/01/27		26,400a	BRL		7,283,180
	b Index Linked, 6.00%, 8/15/16		14,388a	BRL		12,942,824
	b Index Linked, 6.00%, 5/15/17		202a	BRL		181,350
	b Index Linked, 6.00%, 8/15/18		15,665a	BRL		14,023,811
	b Index Linked, 6.00%, 5/15/19		8,578a	BRL		7,698,535
	b Index Linked, 6.00%, 8/15/20		1,090a	BRL		971,979
	b Index Linked, 6.00%, 8/15/22		18,770a	BRL		16,711,621
	b Index Linked, 6.00%, 5/15/23		5,716a	BRL		5,077,246
	b Index Linked, 6.00%, 8/15/24		3,110a	BRL		2,793,389
	b Index Linked, 6.00%, 5/15/45		10,825a	BRL		9,704,744
	senior note, 10.00%, 1/01/17		113,220a	BRL		34,631,210
	senior note, 10.00%, 1/01/19		21,390a	BRL		6,364,291
						302,771,052
	Colombia 2.1%
	Government of Colombia, senior bond,
	7.75%, 4/14/21		2,386,000,000	COP		841,625
	4.375%, 3/21/23		362,000,000	COP		106,348
	9.85%, 6/28/27		576,000,000	COP		232,217
	Titulos De Tesoreria B,
	5.00%, 11/21/18		2,882,000,000	COP		950,301
	7.75%, 9/18/30		71,450,000,000	COP		24,741,106
	senior bond, 11.25%, 10/24/18		5,135,000,000	COP		1,921,086
	senior bond, 7.00%, 5/04/22		7,908,000,000	COP		2,699,847
	senior bond, 10.00%, 7/24/24		17,731,000,000	COP		7,056,364
	senior bond, 7.50%, 8/26/26		47,952,000,000	COP		16,323,369
	senior bond, 6.00%, 4/28/28		25,729,000,000	COP		7,737,907
	senior note, 7.00%, 9/11/19		4,056,000,000	COP		1,397,178
	senior note, B, 11.00%, 7/24/20		9,167,000,000	COP		3,595,649
						67,602,997
	India 4.6%
	Government of India,
	senior bond, 7.80%, 5/03/20		270,800,000	INR		4,078,219
	senior bond, 8.35%, 5/14/22		212,700,000	INR		3,265,328
	senior bond, 9.15%, 11/14/24		2,409,000,000	INR		39,009,150
	senior bond, 8.33%, 7/09/26		1,482,000,000	INR		23,004,175
	senior bond, 8.15%, 11/24/26		2,159,000,000	INR		33,031,960
	senior bond, 8.28%, 9/21/27		217,800,000	INR		3,362,982
	senior bond, 8.60%, 6/02/28		747,500,000	INR		11,819,469
	senior note, 7.28%, 6/03/19		28,000,000	INR		416,333

Semiannual Report TGB-9

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Templeton Global Bond VIP Fund (continued)

		Principal Amount*			Value
	Foreign Government and Agency Securities (continued)
	India (continued)
	senior note, 7.16%, 5/20/23		133,700,000	INR	$	1,939,313
	senior note, 8.83%, 11/25/23		1,805,900,000	INR		28,516,766
						148,443,695
	Indonesia 5.8%
	Government of Indonesia,
	7.875%, 4/15/19		187,065,000,000	IDR		14,420,111
	6.125%, 5/15/28		37,000,000	IDR		2,467
	8.375%, 3/15/34		81,180,000,000	IDR		6,528,195
	FR31, 11.00%, 11/15/20		243,080,000,000	IDR		20,973,404
	FR34, 12.80%, 6/15/21		392,506,000,000	IDR		36,465,535
	FR35, 12.90%, 6/15/22		71,229,000,000	IDR		6,825,049
	FR36, 11.50%, 9/15/19		49,810,000,000	IDR		4,229,845
	FR39, 11.75%, 8/15/23		5,491,000,000	IDR		513,775
	FR40, 11.00%, 9/15/25		46,856,000,000	IDR		4,379,729
	FR43, 10.25%, 7/15/22		147,832,000,000	IDR		12,766,417
	FR44, 10.00%, 9/15/24		4,454,000,000	IDR		389,862
	FR46, 9.50%, 7/15/23		226,780,000,000	IDR		19,180,916
	FR47, 10.00%, 2/15/28		12,000,000	IDR		1,083
	FR48, 9.00%, 9/15/18		16,920,000,000	IDR		1,325,427
	FR61, 7.00%, 5/15/22		244,849,000,000	IDR		18,249,012
	senior bond, 5.625%, 5/15/23		258,951,000,000	IDR		17,790,944
	senior bond, 7.00%, 5/15/27		25,000,000	IDR		1,828
	senior bond, 9.00%, 3/15/29		20,350,000,000	IDR		1,718,873
	senior bond, FR53, 8.25%, 7/15/21		90,288,000,000	IDR		7,117,123
	senior bond, FR56, 8.375%, 9/15/26		42,188,000,000	IDR		3,416,549
	senior bond, FR70, 8.375%, 3/15/24		136,475,000,000	IDR		10,910,248
	senior note, 8.50%, 10/15/16		3,358,000,000	IDR		255,890
						187,462,282
	Lithuania 0.4%
c	Government of Lithuania, 144A, 7.375%, 2/11/20		10,170,000			12,020,940
	Malaysia 4.1%
	Government of Malaysia,
	3.314%, 10/31/17		153,634,000	MYR		38,373,215
	senior bond, 3.814%, 2/15/17		63,785,000	MYR		15,948,705
	senior bond, 4.24%, 2/07/18		44,360,000	MYR		11,241,942
	senior note, 3.394%, 3/15/17		125,470,000	MYR		31,305,037
	senior note, 4.012%, 9/15/17		147,790,000	MYR		37,207,119
						134,076,018
	Mexico 19.6%
	Government of Mexico,
	7.25%, 12/15/16		18,216,300d	MXN		100,937,589
	7.75%, 12/14/17		33,461,300d	MXN		191,685,973
	senior note, 8.50%, 12/13/18		55,958,000d	MXN		330,972,871
e	Mexican Udibonos, Index Linked,
	3.50%, 12/14/17		610,890f	MXN		3,458,462
	4.00%, 6/13/19		419,299f	MXN		2,428,177
	2.50%, 12/10/20		330,219f	MXN		1,828,220
						631,311,292

TGB-10 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Templeton Global Bond VIP Fund (continued)

		Principal Amount*			Value
	Foreign Government and Agency Securities (continued)
	Peru 0.1%
	Government of Peru, senior bond, 7.84%, 8/12/20		11,090,000	PEN	$	3,691,942
	Philippines 1.4%
	Government of the Philippines,
	senior bond, 9.125%, 9/04/16		31,840,000	PHP		682,949
	senior note, 2.875%, 5/22/17		101,890,000	PHP		2,174,291
	senior note, 5.875%, 1/31/18		32,450,000	PHP		718,705
	senior note, 5.00%, 8/18/18		64,060,000	PHP		1,417,038
	senior note, 3.875%, 11/22/19		764,340,000	PHP		16,708,779
	senior note, 3.375%, 8/20/20		731,340,000	PHP		15,834,992
	senior note, 5-72, 2.125%, 5/23/18		352,258,000	PHP		7,449,464
						44,986,218
	Poland 3.1%
	Government of Poland,
	4.75%, 10/25/16		215,845,000	PLN		55,265,733
	5.75%, 9/23/22		48,750,000	PLN		14,760,339
	g FRN, 1.75%, 1/25/17		59,279,000	PLN		15,053,642
	g FRN, 1.75%, 1/25/21		60,135,000	PLN		15,040,801
						100,120,515
	Portugal 2.4%
	Government of Portugal,
	c 144A, 5.125%, 10/15/24		28,820,000			29,000,557
	h Reg S, 3.875%, 2/15/30		41,530,000	EUR		48,381,443
	h senior bond, Reg S, 4.95%, 10/25/23		284,900	EUR		365,856
	h senior bond, Reg S, 5.65%, 2/15/24		712,400	EUR		941,738
						78,689,594
	Serbia 1.4%
c	Government of Serbia, senior note, 144A,
	5.25%, 11/21/17		4,590,000			4,743,008
	4.875%, 2/25/20		6,700,000			6,922,205
	7.25%, 9/28/21		29,750,000			34,140,059
						45,805,272
	Slovenia 0.1%
c	Government of Slovenia, senior note, 144A, 5.50%, 10/26/22		2,027,000			2,306,979
	South Korea 13.0%
	Korea Monetary Stabilization Bond, senior note,
	2.46%, 8/02/16		49,449,700,000	KRW		42,943,519
	1.56%, 8/09/16		33,975,300,000	KRW		29,483,154
	2.22%, 10/02/16		9,647,500,000	KRW		8,389,786
	1.61%, 11/09/16		33,034,700,000	KRW		28,695,117
	2.07%, 12/02/16		36,552,800,000	KRW		31,821,142
	1.57%, 1/09/17		2,940,100,000	KRW		2,554,865
	1.96%, 2/02/17		16,503,100,000	KRW		14,378,201
	1.70%, 8/02/17		9,221,100,000	KRW		8,038,830
	1.56%, 10/02/17		54,756,600,000	KRW		47,689,839
	1.49%, 2/02/18		11,176,000,000	KRW		9,733,243
	Korea Treasury Bond, senior note,
	5.00%, 9/10/16		2,806,000,000	KRW		2,451,305

Semiannual Report TGB-11

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Templeton Global Bond VIP Fund (continued)

		Principal Amount*			Value
	Foreign Government and Agency Securities (continued)
	South Korea (continued)
	3.00%, 12/10/16		54,968,060,000	KRW	$	48,052,254
	2.00%, 12/10/17		49,196,500,000	KRW		43,141,744
	1.75%, 12/10/18		12,303,900,000	KRW		10,806,520
	1.50%, 6/10/19		32,658,800,000	KRW		28,548,955
	2.75%, 9/10/19		1,850,000,000	KRW		1,679,675
	2.00%, 3/10/21		64,648,810,000	KRW		57,923,032
	1.375%, 9/10/21		2,884,000,000	KRW		2,513,351
						418,844,532
	Sri Lanka 1.2%
	Government of Sri Lanka,
	8.25%, 3/01/17		41,710,000	LKR		283,016
	8.00%, 6/15/17		40,210,000	LKR		269,694
	10.60%, 7/01/19		1,071,930,000	LKR		7,208,465
	10.60%, 9/15/19		704,060,000	LKR		4,712,123
	8.00%, 11/01/19		40,210,000	LKR		249,202
	9.25%, 5/01/20		153,220,000	LKR		972,179
	11.20%, 7/01/22		69,990,000	LKR		464,018
	A, 6.40%, 8/01/16		109,200,000	LKR		748,258
	A, 5.80%, 1/15/17		112,300,000	LKR		755,579
	A, 7.50%, 8/15/18		63,830,000	LKR		408,106
	A, 8.00%, 11/15/18		512,300,000	LKR		3,287,617
	A, 9.00%, 5/01/21		861,720,000	LKR		5,311,460
	A, 11.00%, 8/01/21		575,640,000	LKR		3,813,123
	B, 6.40%, 10/01/16		119,100,000	LKR		811,931
	B, 8.50%, 7/15/18		146,350,000	LKR		956,991
	C, 8.50%, 4/01/18		483,480,000	LKR		3,184,198
	D, 8.50%, 6/01/18		633,000,000	LKR		4,150,244
						37,586,204
i	Supranational 0.4%
	Inter-American Development Bank, senior note, 7.50%, 12/05/24		200,000,000	MXN		12,312,321
	Ukraine 4.0%
c	Government of Ukraine, 144A,
	7.75%, 9/01/19		4,249,000			4,206,510
	7.75%, 9/01/20		14,822,000			14,553,722
	7.75%, 9/01/21		14,769,000			14,418,605
	7.75%, 9/01/22		14,769,000			14,344,760
	7.75%, 9/01/23		14,769,000			14,289,377
	7.75%, 9/01/24		14,769,000			14,186,880
	7.75%, 9/01/25		14,769,000			14,126,770
	7.75%, 9/01/26		14,658,000			13,962,111
	7.75%, 9/01/27		14,658,000			13,910,442
	j,kVRI, GDP Linked Securities, 5/31/40		29,978,000			9,855,268
						127,854,445
	Total Foreign Government and Agency Securities (Cost $2,455,652,659)					2,355,886,298

TGB-12 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Templeton Global Bond VIP Fund (continued)

		Principal Amount*			Value
	Quasi-Sovereign and Corporate Bonds 0.1%
	South Korea 0.0%†
	The Export-Import Bank of Korea, senior note, 4.625%, 2/20/17		230,000	EUR	$	262,687
	Ukraine 0.1%
c,l	Ukreximbank, (BIZ Finance PLC), loan participation, senior note, 144A, 9.75%, 1/22/25		2,480,000			2,368,400
	Total Quasi-Sovereign and Corporate Bonds (Cost $2,474,227)					2,631,087
	Total Investments before Short Term Investments (Cost $2,458,126,886)					2,358,517,385
	Short Term Investments 23.8%
	Foreign Government and Agency Securities 3.1%
	Malaysia 0.3%
m	Bank of Negara Monetary Note, 9/15/16		15,520,000	MYR		3,832,081
m	Malaysia Treasury Bill, 1/20/17		16,710,000	MYR		4,098,898
						7,930,979
	Mexico 1.3%
m	Mexico Treasury Bill, 8/18/16 - 3/30/17		74,675,640n	MXN		40,110,408
	Philippines 1.0%
m	Philippine Treasury Bill, 7/06/16 - 6/07/17		1,587,780,000	PHP		33,529,477
	South Korea 0.5%
	Korea Monetary Stabilization Bond, senior note,
	1.57%, 7/09/16		5,579,800,000	KRW		4,840,835
	1.52%, 9/09/16		8,119,500,000	KRW		7,047,210
	1.53%, 10/08/16		5,289,000,000	KRW		4,591,575
						16,479,620
	Total Foreign Government and Agency Securities (Cost $99,521,036)					98,050,484
	Total Investments before Money Market Funds and Repurchase Agreements (Cost $2,557,647,922)					2,456,567,869
		Shares
	Money Market Funds (Cost $409,277,955) 12.7%
	United States 12.7%
j,o	Institutional Fiduciary Trust Money Market Portfolio		409,277,955			409,277,955
		Principal Amount*
	Repurchase Agreements (Cost $256,694,916) 8.0%
	United States 8.0%
p	Joint Repurchase Agreement, 0.382%, 7/01/16 (Maturity Value $256,697,640)		256,694,916			256,694,916
	BNP Paribas Securities Corp. (Maturity Value $83,254,745)
	Deutsche Bank Securities Inc. (Maturity Value $25,667,197)
	HSBC Securities (USA) Inc. (Maturity Value $141,532,811)
	Merrill Lynch, Pierce, Fenner & Smith Inc. (Maturity Value $6,242,887)
	Collateralized by U.S. Government Agency Securities, 0.187% - 5.50%, 7/18/16 - 5/06/21; U.S. Government Agency Securities, Strips, 6/01/17; and U.S. Treasury Note, 0.75% - 3.25%, 11/30/16 - 9/30/20 (valued at $261,936,697)

Semiannual Report TGB-13

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Templeton Global Bond VIP Fund (continued)

	Value
Total Investments (Cost $3,223,620,793) 97.0%	$	3,122,540,740
Other Assets, less Liabilities 3.0%		97,691,358
Net Assets 100.0%	$	3,220,232,098

^†Rounds to less than 0.1% of net assets.

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

^aPrincipal amount is stated in 1,000 Brazilian Real Units.

^bRedemption price at maturity is adjusted for inflation. See Note 1(h).

^cSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At June 30, 2016, the aggregate value of these securities was $219,356,593, representing 6.8% of net assets.

^dPrincipal amount is stated in 100 Mexican Peso Units.

^ePrincipal amount of security is adjusted for inflation. See Note 1(h).

^fPrincipal amount is stated in Unidad de Inversion Units.

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

^hSecurity 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. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At June 30, 2016, the aggregate value of these securities was $49,689,037, representing 1.5% of net assets.

ⁱA supranational organization is an entity formed by two or more central governments through international treaties.

^jNon-income producing.

^kThe principal represents the notional amount. See Note 1(d) regarding value recovery instruments.

^lSee Note 1(f) regarding loan participation notes.

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

ⁿPrincipal amount is stated in 10 Mexican Peso Units.

^oSee Note 3(e) regarding investments in affiliated management investment companies.

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

TGB-14 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Templeton Global Bond VIP Fund (continued)

At June 30, 2016, the Fund had the following forward exchange contracts outstanding. See Note 1(d).

Forward Exchange Contracts
Currency	Counterpartya		Type		Quantity		Contract Amount*			Settlement Date		Unrealized Appreciation		Unrealized Depreciation
OTC Forward Exchange Contracts
Chilean Peso		MSCO		Buy		1,967,876,500		2,822,138			7/05/16	$	149,633	$	—
Chilean Peso		MSCO		Sell		1,967,876,500		2,914,293			7/05/16		—		(57,477	)
Malaysian Ringgit		JPHQ		Buy		5,661,200		1,476,193			7/05/16		—		(70,731	)
Malaysian Ringgit		JPHQ		Sell		5,661,200		1,380,780			7/05/16		—		(24,681	)
Euro		BZWS		Buy		16,339,700		18,128,897			7/06/16		11,417		—
Euro		BZWS		Sell		16,339,700		18,109,435			7/06/16		66,567		(97,446	)
Chilean Peso		DBAB		Buy		3,166,824,000		4,654,219			7/07/16		127,220		—
Chilean Peso		DBAB		Sell		3,166,824,000		4,772,907			7/07/16		—		(8,532	)
Euro		DBAB		Sell		2,285,618		2,467,942			7/07/16		—		(69,643	)
Japanese Yen		DBAB		Sell		770,370,000		6,512,224			7/07/16		—		(948,800	)
Japanese Yen		JPHQ		Sell		1,415,975,000		11,849,064			7/07/16		—		(1,864,636	)
Chilean Peso		DBAB		Buy		1,148,389,500		1,679,055			7/11/16		54,185		—
Chilean Peso		DBAB		Sell		1,148,389,500		1,730,806			7/11/16		—		(2,435	)
Chilean Peso		MSCO		Buy		4,089,449,500		6,036,667			7/11/16		135,454		—
Euro		BZWS		Sell		8,485,276		9,677,525			7/11/16		255,423		—
Japanese Yen		BZWS		Sell		1,689,110,000		15,816,599			7/11/16		—		(544,439	)
Malaysian Ringgit		HSBC		Buy		4,010,000		1,032,016			7/11/16		—		(36,633	)
Chilean Peso		DBAB		Buy		1,148,389,500		1,689,181			7/14/16		43,565		—
Euro		JPHQ		Sell		3,907,000		4,452,788			7/14/16		113,945		—
Euro		DBAB		Sell		19,913,000		22,085,343			7/15/16		175,066		(204,545	)
Euro		JPHQ		Sell		29,033,000		31,700,842			7/15/16		—		(542,398	)
Japanese Yen		BZWS		Sell		1,089,820,000		9,271,907			7/15/16		—		(1,285,604	)
Japanese Yen		JPHQ		Sell		708,450,000		6,021,982			7/15/16		—		(841,050	)
Malaysian Ringgit		JPHQ		Buy		1,700,000		383,574			7/15/16		38,367		—
Chilean Peso		DBAB		Buy		1,231,460,000		1,817,519			7/18/16		39,862		—
Chilean Peso		MSCO		Buy		2,285,090,000		3,316,483			7/18/16		130,061		—
Euro		BZWS		Sell		1,161,439		1,306,125			7/18/16		16,119		—
Euro		GSCO		Sell		3,095,000		3,472,466			7/18/16		34,860		—
Euro		HSBC		Sell		6,919,000		7,821,065			7/18/16		136,155		—
Euro		MSCO		Sell		9,679,000		10,685,616			7/18/16		—		(64,817	)
Indian Rupee		JPHQ		Buy		82,107,000		1,218,838			7/18/16		—		(6,332	)
Euro		BZWS		Sell		30,339,000		33,233,341			7/19/16		—		(465,344	)
Japanese Yen		HSBC		Sell		536,380,000		4,567,074			7/19/16		—		(629,693	)
Japanese Yen		SCNY		Sell		707,660,000		6,072,094			7/19/16		—		(784,136	)
Malaysian Ringgit		JPHQ		Buy		25,688,213		6,142,186			7/19/16		233,009		—
Euro		BZWS		Sell		8,551,980		9,552,391			7/20/16		53,025		—
Euro		HSBC		Sell		12,569,000		14,251,486			7/20/16		290,097		—
Indian Rupee		DBAB		Buy		491,655,000		7,302,787			7/20/16		—		(44,865	)
Malaysian Ringgit		DBAB		Buy		11,455,000		2,644,275	EUR		7/20/16		—		(94,423	)
Chilean Peso		DBAB		Buy		1,801,070,000		2,612,897			7/21/16		102,838		—
Euro		BZWS		Sell		2,638,000		2,892,343			7/21/16		—		(38,003	)
Euro		UBSW		Sell		678,250		773,724			7/21/16		20,309		—
Chilean Peso		BZWS		Buy		3,010,700,000		4,416,135			7/22/16		123,104		—
Euro		BZWS		Sell		2,771,748		3,148,674			7/22/16		69,642		—
Euro		MSCO		Sell		12,182,000		13,316,753			7/22/16		—		(215,776	)
Malaysian Ringgit		DBAB		Buy		12,933,000		2,660,126	EUR		7/22/16		254,385		—
Chilean Peso		DBAB		Buy		3,444,155,000		5,060,841			7/25/16		130,440		—
Euro		BZWS		Sell		744,197		836,232			7/25/16		9,438		—
Euro		DBAB		Sell		1,759,000		1,939,720			7/25/16		—		(14,507	)
Euro		JPHQ		Sell		28,236,000		30,741,663			7/25/16		—		(628,174	)
Indian Rupee		DBAB		Buy		79,271,000		1,179,663			7/25/16		—		(10,468	)
Japanese Yen		CITI		Sell		913,412,000		7,426,235			7/25/16		—		(1,425,089	)
Japanese Yen		JPHQ		Sell		1,407,000,000		11,437,165			7/25/16		—		(2,197,222	)
Malaysian Ringgit		HSBC		Buy		14,613,000		3,376,776			7/25/16		249,278		—

Semiannual Report TGB-15

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Templeton Global Bond VIP Fund (continued)

Forward Exchange Contracts
Currency	Counterpartya		Type		Quantity		Contract Amount*			Settlement Date		Unrealized Appreciation		Unrealized Depreciation
OTC Forward Exchange Contracts (continued)
Chilean Peso		JPHQ		Buy		337,685,000		502,867			7/26/16	$	6,068	$	—
Malaysian Ringgit		HSBC		Buy		7,209,825		1,664,510			7/26/16		124,484		—
Euro		DBAB		Sell		9,260,000		10,267,408			7/27/16		77,536		(98,639	)
Indian Rupee		DBAB		Buy		229,138,000		3,401,440			7/27/16		—		(22,984	)
Malaysian Ringgit		DBAB		Buy		16,628,000		3,850,411	EUR		7/27/16		—		(152,228	)
Malaysian Ringgit		JPHQ		Buy		9,715,000		2,481,481			7/27/16		—		(70,931	)
Chilean Peso		DBAB		Buy		3,155,970,500		4,674,343			7/28/16		81,211		—
Euro		BOFA		Sell		25,428,600		28,887,907			7/28/16		633,888		—
Euro		CITI		Sell		10,044,053		11,332,905			7/28/16		186,148		(13,310	)
Euro		GSCO		Sell		11,263,000		12,418,809			7/28/16		—		(95,644	)
Chilean Peso		MSCO		Buy		1,967,876,500		2,908,135			7/29/16		56,866		—
Euro		BOFA		Sell		39,711,800		44,736,002			7/29/16		630,289		(20,188	)
Euro		BZWS		Sell		30,572,361		33,792,253			7/29/16		—		(178,330	)
Euro		CITI		Sell		4,998,400		5,466,595			7/29/16		—		(87,394	)
Euro		DBAB		Sell		57,063,000		62,503,957			7/29/16		—		(901,789	)
Euro		GSCO		Sell		30,376,000		33,605,273			7/29/16		—		(147,123	)
Euro		HSBC		Sell		25,974,891		28,819,142			7/29/16		—		(42,947	)
Euro		JPHQ		Sell		11,263,000		12,561,511			7/29/16		46,591		—
Indian Rupee		DBAB		Buy		609,812,988		9,032,794			7/29/16		—		(44,729	)
Indian Rupee		HSBC		Buy		679,529,000		10,064,711			7/29/16		—		(49,097	)
Indian Rupee		JPHQ		Buy		358,075,000		5,307,960			7/29/16		—		(30,274	)
Japanese Yen		BZWS		Sell		1,079,470,000		8,837,430			7/29/16		—		(1,624,360	)
Japanese Yen		DBAB		Sell		897,860,782		7,617,123			7/29/16		—		(1,084,583	)
Malaysian Ringgit		HSBC		Buy		3,005,000		701,038			7/29/16		44,545		—
Malaysian Ringgit		JPHQ		Buy		17,021,000		4,322,245			7/29/16		—		(99,091	)
Malaysian Ringgit		JPHQ		Buy		16,628,000		3,780,122	EUR		7/29/16		—		(74,650	)
Chilean Peso		MSCO		Buy		1,941,852,000		2,777,447			8/03/16		147,010		—
Euro		BOFA		Sell		32,701,000		37,465,536			8/03/16		1,123,050		—
Chilean Peso		MSCO		Buy		2,286,905,000		3,437,714			8/04/16		6,087		—
Euro		BZWS		Sell		16,622,598		18,460,333			8/05/16		—		(14,655	)
Euro		HSBC		Sell		11,263,000		12,433,226			8/05/16		—		(84,901	)
Euro		JPHQ		Sell		5,724,900		6,320,433			8/05/16		—		(42,439	)
Indian Rupee		HSBC		Buy		240,033,500		3,570,344			8/05/16		—		(36,719	)
Chilean Peso		DBAB		Buy		3,166,824,000		4,762,141			8/08/16		4,993		—
Malaysian Ringgit		DBAB		Buy		143,249,150		32,381,471	EUR		8/08/16		—		(461,907	)
Malaysian Ringgit		HSBC		Buy		21,208,085		5,290,119			8/08/16		—		(29,590	)
Malaysian Ringgit		JPHQ		Buy		1,100,000		274,794			8/08/16		—		(1,946	)
Chilean Peso		DBAB		Buy		760,285,000		1,122,192			8/09/16		22,189		—
Euro		CITI		Sell		6,421,600		7,364,227			8/09/16		225,975		—
Euro		GSCO		Sell		2,990,000		3,420,620			8/09/16		96,935		—
Indian Rupee		DBAB		Buy		457,757,494		6,785,060			8/09/16		—		(50,837	)
Indian Rupee		JPHQ		Buy		60,607,000		898,807			8/09/16		—		(7,197	)
Euro		CITI		Sell		7,698,954		8,456,146			8/10/16		—		(102,325	)
Indian Rupee		DBAB		Buy		39,609,000		586,600			8/10/16		—		(3,998	)
Japanese Yen		CITI		Sell		751,731,000		6,085,265			8/10/16		—		(1,203,106	)
Malaysian Ringgit		HSBC		Buy		1,320,000		316,965			8/10/16		10,434		—
South Korean Won		HSBC		Buy		21,363,430,000		18,182,416			8/10/16		340,909		—
South Korean Won		HSBC		Sell		21,363,430,000		17,707,680			8/10/16		—		(815,646	)
Euro		BOFA		Sell		2,643,000		3,022,648			8/11/16		84,475		—
Euro		DBAB		Sell		4,845,000		5,348,614			8/11/16		—		(37,482	)
Euro		JPHQ		Sell		6,343,900		6,981,462			8/11/16		—		(70,933	)
Euro		MSCO		Sell		4,572,000		5,225,407			8/11/16		142,801		—
Malaysian Ringgit		HSBC		Buy		2,230,000		535,993			8/11/16		17,096		—
Euro		GSCO		Sell		2,279,000		2,603,062			8/12/16		69,448		—
Euro		SCNY		Sell		629,000		718,708			8/12/16		19,435		—
Malaysian Ringgit		HSBC		Buy		6,100,000		1,427,234			8/12/16		85,656		—

TGB-16 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Templeton Global Bond VIP Fund (continued)

Forward Exchange Contracts
Currency	Counterpartya		Type		Quantity		Contract Amount*			Settlement Date		Unrealized Appreciation		Unrealized Depreciation
OTC Forward Exchange Contracts (continued)
South Korean Won		HSBC		Buy		11,980,000,000		1,262,275,045	JPY		8/12/16	$	—	$	(1,852,044	)
Euro		DBAB		Sell		7,243,000		8,300,116			8/15/16		247,034		—
Euro		MSCO		Sell		1,962,500		2,215,790			8/15/16		33,797		—
Euro		SCNY		Sell		4,346,000		4,971,172			8/15/16		139,100		—
Chilean Peso		MSCO		Buy		2,572,200,000		3,735,785			8/16/16		133,452		—
Euro		JPHQ		Sell		3,942,000		4,456,687			8/16/16		73,640		—
Euro		MSCO		Sell		5,391,000		6,165,687			8/16/16		171,520		—
Indian Rupee		DBAB		Buy		239,338,000		3,544,031			8/16/16		—		(27,251	)
Indian Rupee		HSBC		Buy		402,232,000		5,955,666			8/16/16		—		(45,357	)
Japanese Yen		JPHQ		Sell		1,518,680,000		13,576,704			8/16/16		—		(1,150,524	)
Chilean Peso		DBAB		Buy		2,509,219,500		3,674,090			8/17/16		100,070		—
Euro		MSCO		Sell		1,962,500		2,200,335			8/17/16		18,183		—
Singapore Dollar		BZWS		Buy		4,886,000		3,473,377			8/17/16		152,637		—
Singapore Dollar		BZWS		Sell		4,886,000		3,453,858			8/17/16		—		(172,157	)
Singapore Dollar		HSBC		Buy		3,667,000		2,607,181			8/17/16		114,185		—
Chilean Peso		MSCO		Buy		2,572,200,000		3,699,091			8/18/16		169,450		—
Euro		BZWS		Sell		7,066,000		7,910,210			8/18/16		53,065		—
Japanese Yen		DBAB		Sell		838,612,000		6,811,781			8/18/16		—		(1,321,106	)
Euro		DBAB		Sell		5,073,398		5,755,922			8/19/16		114,275		—
Euro		UBSW		Sell		3,245,000		3,687,245			8/19/16		78,786		—
Chilean Peso		MSCO		Buy		3,307,630,000		4,732,961			8/22/16		239,863		—
Euro		DBAB		Sell		3,964,000		4,421,366			8/22/16		12,893		—
Euro		JPHQ		Sell		23,160,581		26,068,128			8/22/16		310,611		—
Japanese Yen		HSBC		Sell		1,621,372,000		13,158,351			8/22/16		—		(2,567,865	)
Japanese Yen		JPHQ		Sell		1,135,828,000		9,216,653			8/22/16		—		(1,800,114	)
Chilean Peso		JPHQ		Buy		931,485,000		1,319,290			8/23/16		81,016		—
Euro		DBAB		Sell		3,887,000		4,368,599			8/23/16		45,602		—
Indian Rupee		JPHQ		Buy		378,455,000		5,551,579			8/23/16		2,729		—
Euro		GSCO		Sell		4,454,000		5,017,609			8/24/16		63,832		—
Japanese Yen		BZWS		Sell		376,247,000		3,069,400			8/24/16		—		(580,186	)
Japanese Yen		DBAB		Sell		371,821,000		3,310,962			8/24/16		—		(295,692	)
Euro		BOFA		Sell		2,680,925		3,004,237			8/26/16		22,271		—
Euro		JPHQ		Sell		4,730,771		5,297,574			8/26/16		35,586		—
Euro		SCNY		Sell		13,581,483		15,820,526			8/26/16		713,982		—
Japanese Yen		JPHQ		Sell		1,135,833,000		9,641,146			8/26/16		—		(1,377,138	)
Euro		DBAB		Sell		9,808,244		10,968,903			8/29/16		58,099		—
Euro		JPHQ		Sell		17,833,294		20,419,019			8/29/16		581,057		—
Japanese Yen		DBAB		Sell		685,950,000		5,766,709			8/29/16		—		(888,096	)
Japanese Yen		JPHQ		Sell		751,903,000		6,318,592			8/29/16		—		(976,062	)
Malaysian Ringgit		JPHQ		Buy		8,340,000		1,972,564			8/30/16		94,798		—
Chilean Peso		CITI		Buy		3,039,493,000		4,371,170			8/31/16		194,841		—
Chilean Peso		DBAB		Buy		1,359,282,000		1,944,888			8/31/16		97,064		—
Euro		BZWS		Sell		13,673,773		15,143,840			8/31/16		—		(68,240	)
Euro		DBAB		Sell		1,058,312		1,196,951			8/31/16		19,578		—
Euro		SCNY		Sell		11,263,000		12,662,653			8/31/16		132,559		—
Japanese Yen		BZWS		Sell		1,576,550,000		14,065,037			8/31/16		—		(1,231,363	)
Japanese Yen		JPHQ		Sell		372,662,000		3,118,471			8/31/16		—		(497,264	)
Euro		HSBC		Sell		18,537,726		20,481,036			9/01/16		—		(143,020	)
Japanese Yen		HSBC		Sell		1,247,125,000		11,075,710			9/01/16		—		(1,024,997	)
Chilean Peso		DBAB		Buy		4,798,143,500		6,901,883			9/02/16		304,744		—
Euro		DBAB		Sell		1,732,000		1,894,115			9/02/16		—		(32,890	)
Chilean Peso		DBAB		Buy		1,271,380,000		1,818,856			9/06/16		90,032		—
Chilean Peso		MSCO		Buy		1,941,852,000		2,769,524			9/06/16		146,029		—
Euro		DBAB		Sell		13,545,300		14,936,912			9/06/16		45,436		(181,297	)
Euro		JPHQ		Sell		20,765,000		23,527,472			9/06/16		420,850		—
Indian Rupee		JPHQ		Buy		139,661,000		2,032,911			9/06/16		12,185		—

Semiannual Report TGB-17

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Templeton Global Bond VIP Fund (continued)

Forward Exchange Contracts
Currency	Counterpartya		Type		Quantity		Contract Amount*			Settlement Date		Unrealized Appreciation		Unrealized Depreciation
OTC Forward Exchange Contracts (continued)
South Korean Won		GSCO		Sell		44,346,000,000		37,075,495			9/07/16	$	—	$	(1,362,823	)
Euro		GSCO		Sell		2,033,100		2,315,091			9/08/16		52,542		—
Chilean Peso		JPHQ		Buy		612,933,000		892,721			9/09/16		27,311		—
Euro		CITI		Sell		31,404,613		35,772,995			9/09/16		822,758		—
Euro		HSBC		Sell		3,999,292		4,555,573			9/09/16		104,756		—
Euro		MSCO		Sell		5,225,000		5,955,836			9/09/16		140,927		—
Euro		SCNY		Sell		2,400,751		2,734,600			9/09/16		62,800		—
Japanese Yen		BZWS		Sell		1,712,605,900		15,172,051			9/09/16		—		(1,451,075	)
Chilean Peso		DBAB		Buy		1,866,989,500		2,749,009			9/12/16		52,655		—
Chilean Peso		JPHQ		Buy		1,792,000,000		2,617,166			9/13/16		71,728		—
Euro		GSCO		Sell		8,105,300		9,207,621			9/13/16		185,777		—
Australian Dollar		CITI		Sell		28,906,000		20,823,304			9/14/16		—		(677,069	)
Indian Rupee		CITI		Buy		69,318,000		1,026,857			9/14/16		—		(13,059	)
Indian Rupee		DBAB		Buy		258,123,000		3,822,912			9/14/16		—		(47,778	)
Malaysian Ringgit		HSBC		Buy		796,554,000		192,404,348			9/14/16		4,956,588		—
Euro		BOFA		Sell		17,769,000		20,039,345			9/15/16		259,450		—
Euro		CITI		Sell		861,168		972,216			9/15/16		13,590		—
Euro		JPHQ		Sell		541,000		609,623			9/16/16		7,375		—
Japanese Yen		CITI		Sell		286,112,008		2,532,682			9/16/16		—		(245,282	)
South Korean Won		CITI		Sell		11,790,000,000		9,730,131			9/19/16		—		(488,078	)
South Korean Won		HSBC		Sell		35,487,000,000		29,068,644			9/19/16		—		(1,687,387	)
Chilean Peso		DBAB		Buy		1,757,372,000		2,526,412			9/20/16		108,890		—
Chilean Peso		JPHQ		Buy		1,501,938,000		2,172,471			9/20/16		79,789		—
Japanese Yen		BZWS		Sell		981,707,504		8,158,168			9/20/16		—		(1,375,278	)
Japanese Yen		CITI		Sell		1,866,452,000		16,830,045			9/23/16		—		(1,297,649	)
Japanese Yen		MSCO		Sell		575,230,000		5,189,124			9/23/16		—		(397,729	)
Japanese Yen		BZWS		Sell		983,714,840		8,775,137			9/26/16		—		(780,352	)
Japanese Yen		DBAB		Sell		725,287,000		6,536,355			9/26/16		—		(508,850	)
South Korean Won		HSBC		Sell		35,125,000,000		30,192,977			9/26/16		—		(247,313	)
Malaysian Ringgit		HSBC		Buy		20,347,000		5,046,254			9/28/16		—		(7,124	)
Philippine Peso		JPHQ		Buy		123,740,000		2,651,382			9/28/16		—		(35,591	)
South Korean Won		HSBC		Sell		35,292,000,000		30,115,198			9/28/16		—		(469,245	)
Chilean Peso		DBAB		Buy		1,407,243,000		2,044,371			9/30/16		63,992		—
Euro		DBAB		Sell		14,880,000		16,867,968			10/03/16		292,069		—
Australian Dollar		GSCO		Sell		127,700,540		97,063,903			10/06/16		2,152,181		—
Japanese Yen		JPHQ		Sell		1,415,975,000		12,775,637			10/06/16		—		(984,554	)
Euro		JPHQ		Sell		6,370,000		7,197,399			10/07/16		100,262		—
Japanese Yen		JPHQ		Sell		1,415,975,000		11,884,369			10/07/16		—		(1,876,403	)
Euro		DBAB		Sell		18,880,000		21,406,750			10/11/16		368,218		—
Japanese Yen		HSBC		Sell		2,816,800,000		23,703,454			10/11/16		—		(3,675,479	)
Chilean Peso		DBAB		Buy		1,148,389,500		1,717,475			10/12/16		1,100		—
Euro		HSBC		Sell		8,692,000		9,857,684			10/13/16		171,160		—
Japanese Yen		BZWS		Sell		1,426,300,000		12,005,387			10/13/16		—		(1,859,235	)
Japanese Yen		DBAB		Sell		1,406,600,000		11,843,058			10/13/16		—		(1,830,066	)
Malaysian Ringgit		DBAB		Buy		60,000,000		12,390,550	EUR		10/17/16		1,039,478		—
South Korean Won		HSBC		Sell		60,991,000,000		52,676,081			10/18/16		—		(177,368	)
Japanese Yen		JPHQ		Sell		652,895,000		5,559,439			10/19/16		—		(788,759	)
Japanese Yen		BZWS		Sell		735,200,000		6,190,767			10/24/16		—		(959,204	)
Euro		BZWS		Sell		5,604,306		6,239,134			10/27/16		—		(9,916	)
Malaysian Ringgit		JPHQ		Buy		7,468,000		1,900,496			10/31/16		—		(53,055	)
South Korean Won		HSBC		Sell		15,755,000,000		13,644,827			11/02/16		—		(7,712	)
Euro		DBAB		Sell		224,556		250,110			11/04/16		—		(360	)
Euro		DBAB		Sell		15,875,000		17,454,563			11/09/16		—		(256,004	)
Japanese Yen		CITI		Sell		341,992,119		2,841,410			11/09/16		—		(486,781	)
Euro		CITI		Sell		5,658,426		6,115,910			11/14/16		—		(198,046	)
Euro		JPHQ		Sell		8,969,211		9,693,161			11/14/16		—		(315,135	)

TGB-18 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Templeton Global Bond VIP Fund (continued)

Forward Exchange Contracts
Currency	Counterpartya		Type		Quantity		Contract Amount*		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
OTC Forward Exchange Contracts (continued)
Japanese Yen		CITI		Sell		796,524,000		6,545,517		11/14/16	$	—	$	(1,207,715	)
Japanese Yen		GSCO		Sell		490,555,000		4,525,332		11/14/16		—		(249,649	)
Japanese Yen		HSBC		Sell		413,563,000		3,395,845		11/14/16		—		(629,708	)
Japanese Yen		JPHQ		Sell		335,950,000		2,756,377		11/14/16		—		(513,704	)
Japanese Yen		SCNY		Sell		366,681,000		3,382,728		11/14/16		—		(186,483	)
South Korean Won		CITI		Sell		11,823,000,000		10,113,340		11/14/16		—		(131,677	)
Australian Dollar		JPHQ		Sell		100,287,000		73,349,912		11/16/16		—		(1,080,926	)
Japanese Yen		CITI		Sell		366,680,000		3,022,295		11/16/16		—		(547,208	)
Japanese Yen		MSCO		Sell		300,000,000		2,471,475		11/16/16		—		(448,922	)
Japanese Yen		SCNY		Sell		340,600,700		3,146,084		11/16/16		—		(169,547	)
South Korean Won		CITI		Sell		13,902,000,000		11,881,036		11/16/16		—		(165,456	)
Euro		DBAB		Sell		2,768,730		3,008,834		11/17/16		—		(81,026	)
South Korean Won		HSBC		Sell		48,866,000,000		41,653,667		11/17/16		—		(690,078	)
Euro		DBAB		Sell		2,240,000		2,430,960		11/18/16		—		(68,946	)
Japanese Yen		DBAB		Sell		796,770,000		6,561,180		11/18/16		—		(1,195,758	)
South Korean Won		HSBC		Sell		26,952,000,000		22,962,300		11/18/16		—		(392,311	)
Australian Dollar		CITI		Sell		13,307,000		9,632,937		11/21/16		—		(241,515	)
Japanese Yen		CITI		Sell		2,094,073,000		18,183,218		11/21/16		—		(2,206,170	)
Malaysian Ringgit		HSBC		Buy		4,326,000		1,067,489		11/21/16		1,916		—
South Korean Won		DBAB		Sell		13,920,000,000		11,832,609		11/23/16		—		(229,318	)
Japanese Yen		HSBC		Sell		207,909,000		1,911,631		11/25/16		—		(113,062	)
South Korean Won		HSBC		Sell		35,277,000,000		29,594,799		11/25/16		—		(973,230	)
Euro		DBAB		Sell		837,570		904,626		11/28/16		—		(30,502	)
Japanese Yen		BOFA		Sell		1,085,075,000		9,933,219		11/28/16		—		(634,972	)
Japanese Yen		SCNY		Sell		937,086,000		8,597,316		11/28/16		—		(529,521	)
Malaysian Ringgit		HSBC		Buy		3,317,000		809,716		11/30/16		10,009		—
Euro		GSCO		Sell		463,000		496,405		12/02/16		—		(20,607	)
South Korean Won		HSBC		Sell		42,561,000,000		35,916,456		12/02/16		—		(962,767	)
Japanese Yen		HSBC		Sell		2,052,400,000		19,199,252		12/09/16		—		(799,593	)
Australian Dollar		JPHQ		Sell		29,260,000		20,823,728		12/12/16		—		(872,818	)
Japanese Yen		CITI		Sell		2,595,800,000		24,453,268		12/12/16		—		(843,744	)
Australian Dollar		JPHQ		Sell		43,169,000		31,855,053		12/13/16		—		(154,028	)
Japanese Yen		DBAB		Sell		595,700,000		5,630,541		12/13/16		—		(175,017	)
Japanese Yen		HSBC		Sell		1,798,900,000		16,986,780		12/13/16		—		(544,894	)
Japanese Yen		JPHQ		Sell		1,666,680,000		15,731,782		12/13/16		—		(511,306	)
Australian Dollar		CITI		Sell		29,097,000		21,477,078		12/14/16		—		(97,105	)
Australian Dollar		JPHQ		Sell		14,544,000		10,411,759		12/14/16		—		(371,996	)
Euro		MSCO		Sell		1,412,000		1,567,461		12/14/16		—		(10,019	)
Malaysian Ringgit		JPHQ		Buy		13,361,013		3,270,350		12/14/16		29,963		—
Euro		JPHQ		Sell		5,095,000		5,670,378		12/15/16		—		(21,964	)
South Korean Won		CITI		Sell		8,844,000,000		7,525,528		12/15/16		—		(137,631	)
Japanese Yen		HSBC		Sell		1,455,540,000		13,828,045		12/16/16		—		(359,121	)
South Korean Won		DBAB		Sell		13,919,000,000		11,838,099		12/20/16		—		(222,335	)
Malaysian Ringgit		JPHQ		Buy		5,661,200		1,373,578		1/05/17		23,649		—
Japanese Yen		GSCO		Sell		329,010,000		2,808,307		1/10/17		—		(401,832	)
Japanese Yen		JPHQ		Sell		1,415,975,000		12,041,525		1/10/17		—		(1,774,092	)
Euro		BZWS		Sell		6,181,000		6,804,230		1/11/17		—		(108,846	)
Euro		CITI		Sell		5,040,000		5,555,718		1/13/17		—		(81,662	)
Euro		SCNY		Sell		15,572,000		17,132,314		1/13/17		—		(285,400	)
Japanese Yen		CITI		Sell		138,680,000		1,190,938		1/17/17		—		(162,533	)
Japanese Yen		SCNY		Sell		415,980,000		3,561,503		1/17/17		—		(498,326	)
Euro		JPHQ		Sell		27,973,000		30,980,237		1/19/17		—		(315,729	)
Japanese Yen		JPHQ		Sell		652,895,000		5,639,417		1/19/17		—		(733,131	)
Euro		DBAB		Sell		6,791,000		7,496,824		1/23/17		—		(102,088	)
Euro		JPHQ		Sell		300,000		331,089		1/23/17		—		(4,601	)
Japanese Yen		DBAB		Sell		858,140,000		7,434,611		1/23/17		—		(942,549	)

Semiannual Report TGB-19

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Templeton Global Bond VIP Fund (continued)

Forward Exchange Contracts
Currency	Counterpartya		Type		Quantity		Contract Amount*		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
OTC Forward Exchange Contracts (continued)
Euro		GSCO		Sell		4,711,000		5,169,804		1/27/17	$	—	$	(102,485	)
Japanese Yen		GSCO		Sell		944,420,000		8,062,147		1/27/17		—		(1,158,742	)
Japanese Yen		JPHQ		Sell		490,100,000		4,183,918		1/27/17		—		(601,196	)
Japanese Yen		DBAB		Sell		8,368,505,770		71,452,406		1/30/17		—		(10,263,615	)
Japanese Yen		HSBC		Sell		1,162,462,488		9,927,092		1/31/17		—		(1,424,466	)
Euro		BZWS		Sell		7,003,000		7,935,274		2/08/17		94,202		—
Japanese Yen		JPHQ		Sell		1,719,500,000		14,857,666		2/08/17		—		(1,938,750	)
Japanese Yen		SCNY		Sell		1,720,000,000		14,894,096		2/08/17		—		(1,907,204	)
Euro		CITI		Sell		6,572,000		7,450,118		2/09/17		91,335		—
Euro		GSCO		Sell		2,045,000		2,308,396		2/09/17		18,574		—
Japanese Yen		BZWS		Sell		1,720,220,000		14,916,280		2/09/17		—		(1,887,836	)
Japanese Yen		CITI		Sell		366,860,000		3,181,787		2/09/17		—		(401,917	)
Japanese Yen		JPHQ		Sell		1,723,960,000		14,912,633		2/09/17		—		(1,928,018	)
Euro		DBAB		Sell		1,738,000		1,957,544		2/10/17		11,399		—
Euro		HSBC		Sell		1,800,000		2,025,432		2/10/17		9,861		—
Euro		BZWS		Sell		6,341,000		7,266,152		2/13/17		164,905		—
Euro		GSCO		Sell		2,038,000		2,324,074		2/16/17		41,461		—
Euro		SCNY		Sell		657,000		748,606		2/16/17		12,748		—
Japanese Yen		CITI		Sell		2,056,230,000		18,507,416		2/16/17		—		(1,584,627	)
Japanese Yen		GSCO		Sell		1,205,250,280		10,779,075		2/16/17		—		(997,788	)
Japanese Yen		HSBC		Sell		1,035,240,000		9,188,657		2/16/17		—		(926,985	)
Japanese Yen		JPHQ		Sell		1,034,700,000		9,137,311		2/16/17		—		(973,054	)
Malaysian Ringgit		HSBC		Buy		4,899,000		1,146,904		2/21/17		59,811		—
Euro		BZWS		Sell		9,798,000		11,006,583		2/22/17		29,971		—
Japanese Yen		BZWS		Sell		343,460,000		3,106,268		2/27/17		—		(251,250	)
Japanese Yen		HSBC		Sell		1,131,678,000		10,219,095		2/27/17		—		(843,705	)
Euro		BOFA		Sell		2,694,506		3,004,590		2/28/17		—		(14,755	)
Euro		DBAB		Sell		1,530,900		1,708,714		2/28/17		—		(6,745	)
Euro		DBAB		Sell		2,579,651		2,881,651		3/01/17		—		(9,107	)
Japanese Yen		DBAB		Sell		229,660,000		2,063,933		3/01/17		—		(181,303	)
Japanese Yen		JPHQ		Sell		848,300,000		7,609,846		3/03/17		—		(684,090	)
Japanese Yen		HSBC		Sell		400,800,000		3,569,012		3/06/17		—		(350,128	)
Euro		DBAB		Sell		1,536,000		1,702,687		3/07/17		—		(18,963	)
Malaysian Ringgit		JPHQ		Buy		14,772,000		3,578,142		3/20/17		56,341		—
Malaysian Ringgit		HSBC		Buy		36,880,000		8,974,328		3/22/17		98,813		—
Japanese Yen		JPHQ		Sell		285,510,329		2,593,756		3/24/17		—		(200,045	)
Philippine Peso		JPHQ		Buy		17,950,000		377,061		3/29/17		—		(231	)
Japanese Yen		JPHQ		Sell		172,207,000		1,537,617		3/31/17		—		(147,982	)
Malaysian Ringgit		HSBC		Buy		7,790,000		1,927,979		3/31/17		—		(12,219	)
Malaysian Ringgit		JPHQ		Buy		3,956,000		1,010,447		4/11/17		—		(38,007	)
Japanese Yen		CITI		Sell		261,800,000		2,460,526		4/13/17		—		(103,523	)
Japanese Yen		BOFA		Sell		700,840,000		6,516,817		4/18/17		—		(348,699	)
Japanese Yen		JPHQ		Sell		1,233,160,000		11,517,702		4/20/17		—		(563,571	)
Japanese Yen		JPHQ		Sell		917,650,000		8,509,247		4/21/17		—		(481,376	)
South Korean Won		HSBC		Sell		46,898,000,000		41,144,010		4/25/17		510,334		—
South Korean Won		HSBC		Sell		13,067,000,000		11,402,766		4/26/17		81,179		—
Indonesian Rupiah		JPHQ		Buy		1,721,000,000,000		122,316,987		5/03/17		1,237,891		—
Japanese Yen		BOFA		Sell		1,105,661,700		10,312,085		5/18/17		—		(533,720	)
Japanese Yen		CITI		Sell		1,104,534,000		10,296,525		5/18/17		—		(538,217	)
Japanese Yen		BOFA		Sell		1,102,846,375		10,244,741		5/19/17		—		(573,933	)
Japanese Yen		HSBC		Sell		1,106,730,400		10,280,821		5/19/17		—		(575,955	)
Japanese Yen		BOFA		Sell		1,105,842,500		10,234,033		5/22/17		—		(615,496	)
Japanese Yen		JPHQ		Sell		715,709,000		6,644,716		5/22/17		—		(377,175	)
Malaysian Ringgit		HSBC		Buy		298,500		72,224		5/23/17		1,025		—
Japanese Yen		CITI		Sell		1,370,500,000		12,982,646		6/08/17		—		(473,748	)
Japanese Yen		CITI		Sell		310,702,000		2,980,098		6/16/17		—		(71,660	)

TGB-20 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Templeton Global Bond VIP Fund (continued)

Forward Exchange Contracts
Currency	Counterpartya		Type		Quantity		Contract Amount*		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
OTC Forward Exchange Contracts (continued)
Japanese Yen		JPHQ		Sell		702,800,000		6,738,029		6/16/17	$	—	$	(164,969	)
Japanese Yen		DBAB		Sell		1,453,310,000		13,915,662		6/19/17		—		(360,875	)
Japanese Yen		CITI		Sell		1,086,780,000		10,588,528		6/20/17		—		(87,896	)
Philippine Peso		JPHQ		Buy		251,010,000		5,332,696		6/21/17		—		(82,395	)
Japanese Yen		DBAB		Sell		1,455,820,000		14,145,161		6/22/17		—		(157,963	)
Total Forward Exchange Contracts											$	26,393,217	$	(121,021,815	)
Net unrealized appreciation (depreciation)													$	(94,628,598	)

^aMay be comprised of multiple contracts with the same counterparty, currency and settlement date.

*In U.S. dollars unless otherwise indicated.

See Abbreviations on page TGB-37.

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report TGB-21

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Templeton Global Bond VIP Fund (continued)

At June 30, 2016, the Fund had the following interest rate swap contracts outstanding. See Note 1(d).

Interest Rate Swap Contracts
Description	Counterparty / Exchange		Notional Amount		Expiration Date		Unrealized Appreciation		Unrealized Depreciation
Centrally Cleared Swap Contracts
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 0.926%		LCH	$	183,490,000		10/17/17	$	—	$	(660,008	)
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 2.775%		CME		13,090,000		10/04/23		—		(1,542,641	)
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 2.795%		CME		13,090,000		10/04/23		—		(1,561,802	)
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 2.765%		CME		13,090,000		10/07/23		—		(1,532,664	)
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 2.731%		LCH		34,000,000		7/07/24		—		(4,349,405	)
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 1.914%		LCH		114,670,000		1/22/25		—		(6,871,359	)
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 1.970%		LCH		143,340,000		1/23/25		—		(9,263,673	)
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 1.973%		LCH		84,590,000		1/27/25		—		(5,486,360	)
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 1.937%		LCH		21,150,000		1/29/25		—		(1,304,134	)
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 1.942%		LCH		17,910,000		1/30/25		—		(1,108,943	)
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 1.817%		LCH		28,210,000		2/03/25		—		(1,438,799	)
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 3.668%		CME		6,370,000		10/04/43		—		(2,731,909	)
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 3.687%		CME		6,370,000		10/04/43		—		(2,759,338	)
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 3.675%		CME		6,370,000		10/07/43		—		(2,740,936	)
Total Centrally Cleared Swap Contracts								—		(43,351,971	)
OTC Swap Contracts
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 3.558%		JPHQ		3,240,000		3/04/21		—		(423,880	)
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 3.523%		DBAB		14,630,000		3/28/21		—		(1,885,719	)
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 4.347%		CITI		7,460,000		2/25/41		—		(4,120,780	)
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 4.349%		JPHQ		7,460,000		2/25/41		—		(4,125,040	)
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 4.320%		JPHQ		5,600,000		2/28/41		—		(3,069,988	)
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 4.299%		JPHQ		1,870,000		3/01/41		—		(1,013,233	)
Total OTC Swap Contracts								—		(14,638,640	)
Total Interest Rate Swap Contracts								—		(57,990,611	)
Net unrealized appreciation (depreciation)									$	(57,990,611	)

See Abbreviations on page TGB-37.

TGB-22 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Statements

Statement of Assets and Liabilities

June 30, 2016 (unaudited)

	Templeton Global Bond VIP Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	2,557,647,922
Cost - Non-controlled affiliates (Note 3e)		409,277,955
Cost - Repurchase agreements		256,694,916
Total cost of investments	$	3,223,620,793
Value - Unaffiliated issuers	$	2,456,567,869
Value - Non-controlled affiliates (Note 3e)		409,277,955
Value - Repurchase agreements		256,694,916
Total value of investments		3,122,540,740
Cash		29,974,182
Restricted cash (Note 1e)		1,600,000
Foreign currency, at value (cost $4,964,407)		4,990,093
Receivables:
Investment securities sold		6,752,572
Capital shares sold		3,131,452
Interest		33,722,605
Due from brokers		135,469,596
Variation margin		841,495
Unrealized appreciation on OTC forward exchange contracts		26,393,217
Other assets		1,549
Total assets		3,365,417,501
Liabilities:
Payables:
Capital shares redeemed		1,655,124
Management fees		1,084,565
Distribution fees		1,233,441
Due to Brokers		1,600,000
Unrealized depreciation on OTC forward exchange contracts		121,021,815
Unrealized depreciation on OTC swap contracts		14,638,640
Deferred tax		2,704,577
Accrued expenses and other liabilities		1,247,241
Total liabilities		145,185,403
Net assets, at value	$	3,220,232,098
Net assets consist of:
Paid-in capital	$	3,609,495,955
Undistributed net investment income		16,213,348
Net unrealized appreciation (depreciation)		(254,899,959	)
Accumulated net realized gain (loss)		(150,577,246	)
Net assets, at value	$	3,220,232,098

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report TGB-23

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Statement of Assets and Liabilities (continued)

June 30, 2016 (unaudited)

	Templeton Global Bond VIP Fund
Class 1:
Net assets, at value	$	278,296,990
Shares outstanding		17,342,308
Net asset value and maximum offering price per share	$	16.05
Class 2:
Net assets, at value	$	2,845,199,990
Shares outstanding		183,652,651
Net asset value and maximum offering price per share	$	15.49
Class 4:
Net assets, at value	$	96,735,118
Shares outstanding		6,099,715
Net asset value and maximum offering price per share	$	15.86

TGB-24 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Statement of Operations

for the six months ended June 30, 2016 (unaudited)

	Templeton Global Bond VIP Fund
Investment income:
Interest (net of foreign taxes $2,033,094)	$	62,874,141
Inflation principal adjustments		4,162,464
Total investment income		67,036,605
Expenses:
Management fees (Note 3a)		7,336,218
Distribution fees: (Note 3c)
Class 2		3,537,960
Class 4		171,420
Custodian fees (Note 4)		636,673
Reports to shareholders		213,242
Professional fees		70,147
Trustees’ fees and expenses		7,898
Other		82,559
Total expenses		12,056,117
Expense reductions (Note 4)		(16,136	)
Expenses waived/paid by affiliates (Note 3e)		(629,909	)
Net expenses		11,410,072
Net investment income		55,626,533
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		(80,174,616	)
Foreign currency transactions		(65,130,361	)
Swap contracts		(5,253,316	)
Net realized gain (loss)		(150,558,293	)
Net change in unrealized appreciation (depreciation) on:
Investments		190,576,925
Translation of other assets and liabilities denominated in foreign currencies		(114,540,381	)
Swap contracts		(42,663,972	)
Change in deferred taxes on unrealized appreciation		(1,318,225	)
Net change in unrealized appreciation (depreciation)		32,054,347
Net realized and unrealized gain (loss)		(118,503,946	)
Net increase (decrease) in net assets resulting from operations	$	(62,877,413	)

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report TGB-25

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Statements of Changes in Net Assets

	Templeton Global Bond VIP Fund
	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31, 2015
Increase (decrease) in net assets:
Operations:
Net investment income	$	55,626,533		$	97,606,372
Net realized gain (loss)		(150,558,293	)		69,448,149
Net change in unrealized appreciation (depreciation)		32,054,347			(322,119,799	)
Net increase (decrease) in net assets resulting from operations		(62,877,413	)		(155,065,278	)
Distributions to shareholders from:
Net investment income and net foreign currency gains:
Class 1		—			(24,254,176	)
Class 2		—			(245,964,961	)
Class 4		—			(8,346,133	)
Net realized gains:
Class 1		(230,623	)		(1,526,914	)
Class 2		(2,445,769	)		(15,975,209	)
Class 4		(81,295	)		(550,981	)
Total distributions to shareholders		(2,757,687	)		(296,618,374	)
Capital share transactions: (Note 2)
Class 1		(9,159,882	)		8,052,024
Class 2		(68,229,811	)		193,114,598
Class 4		(4,257,897	)		5,703,235
Total capital share transactions		(81,647,590	)		206,869,857
Net increase (decrease) in net assets		(147,282,690	)		(244,813,795	)
Net assets:
Beginning of period		3,367,514,788			3,612,328,583
End of period	$	3,220,232,098		$	3,367,514,788
Undistributed net investment income (distributions in excess of net investment income) included in net assets:
End of period	$	16,213,348		$	(39,413,185	)

TGB-26 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Notes to Financial Statements (unaudited)

Templeton Global Bond VIP Fund

1. Organization and Significant Accounting Policies

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of nineteen separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Templeton Global Bond VIP 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 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. The Fund calculates the net asset value (NAV) per share as of 4 p.m. Eastern time each day the New York Stock Exchange (NYSE) is open for trading. Under compliance policies and procedures approved by the Trust’s Board of Trustees (the Board), the Fund’s administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The VC provides administration and oversight of the Fund’s valuation policies and procedures, which are approved annually by the Board. Among other things, these procedures allow the Fund to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

Debt securities generally trade in the over-the-counter (OTC) market rather than on a securities exchange. The Fund’s pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics

such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value. Securities denominated in a foreign currency are converted into their U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the date that the values of the foreign debt securities are determined.

Investments in open-end mutual funds are valued at the closing NAV. Repurchase agreements are valued at cost, which approximates fair value.

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

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

Semiannual Report TGB-27

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Global Bond VIP Fund (continued)

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 Board.

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

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%. Repurchase agreements are subject to the terms of Master Repurchase Agreements (MRAs) with approved counterparties (sellers). The MRAs contain various provisions, including but not limited to events of default and maintenance of collateral for repurchase agreements. In the event of default by either the seller or the Fund, certain MRAs may permit the non-defaulting party to net and close-out all transactions, if any, traded under such agreements. The Fund may sell securities it holds as collateral and apply the proceeds towards the repurchase price and any other amounts owed by the seller to the Fund in the event of default by the seller. This could involve costs or delays in addition to a loss on the securities if their value falls below the repurchase price owed by the seller. The joint repurchase agreement held by the Fund at period end, as indicated in the Statement of Investments, had been entered into on June 30, 2016.

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 in 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.

Derivative counterparty credit risk is managed through a formal evaluation of the creditworthiness of all potential counterparties. The Fund attempts to reduce its exposure to counterparty credit risk on OTC derivatives, whenever possible, by entering into International Swaps and Derivatives Association (ISDA) master agreements with certain counterparties. These agreements contain various provisions, including but not limited to collateral requirements, events of default, or early termination. Termination events applicable to the counterparty include

TGB-28 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Global Bond VIP Fund (continued)

certain deteriorations in the credit quality of the counterparty. Termination events applicable to the Fund include failure of the Fund to maintain certain net asset levels and/or limit the decline in net assets over various periods of time. In the event of default or early termination, the ISDA master agreement gives the non-defaulting party the right to net and close-out all transactions traded, whether or not arising under the ISDA agreement, to one net amount payable by one counterparty to the other. However, absent an event of default or early termination, OTC derivative assets and liabilities are presented gross and not offset in the Statement of Assets and Liabilities. Early termination by the counterparty may result in an immediate payment by the Fund of any net liability owed to that counterparty under the ISDA agreement.

Collateral requirements differ by type of derivative. Collateral or initial margin requirements are set by the broker or exchange clearing house for exchange traded and centrally cleared derivatives. Initial margin deposited is held at the exchange and can be in the form of cash and/or securities. For OTC derivatives traded under an ISDA master agreement, posting of collateral is required by either the Fund or the applicable counterparty if the total net exposure of all OTC derivatives with the applicable counterparty exceeds the minimum transfer amount, which typically ranges from $100,000 to $250,000, and can vary depending on the counterparty and the type of the agreement. Generally, collateral is determined at the close of Fund business each day and any additional collateral required due to changes in derivative values may be delivered by the Fund or the counterparty within a few business days. Collateral pledged and/or received by the Fund for OTC derivatives, if any, is held in segregated accounts with the Fund’s custodian/counterparty broker and can be in the form of cash and/or securities. Unrestricted cash may be invested according to the Fund’s investment objectives. To the extent that the amounts due to the Fund from its counterparties are not subject to collateralization or are not fully collateralized, the Fund bears the risk of loss from counterparty non-performance.

The Fund entered into OTC forward exchange contracts primarily to manage and/or gain exposure to certain foreign currencies. A forward exchange contract is an agreement between the Fund and a counterparty to buy or sell a foreign currency at a specific exchange rate on a future date.

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 amount. These agreements may be privately negotiated in the over-the-counter market (OTC interest rate swaps) or may be executed on a registered exchange (centrally cleared interest rate swaps). For centrally cleared interest rate swaps, required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable in the Statement of Assets and Liabilities. 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.

The Fund invests in value recovery instruments (VRI) primarily to gain exposure to growth risk. Periodic payments from VRI are dependent on established benchmarks for underlying variables. VRI has a notional amount, which is used to calculate amounts of payments to holders. Payments are recorded upon receipt as realized gains in the Statement of Operations. The risks of investing in VRI include growth risk, liquidity, and the potential loss of investment.

See Note 9 regarding other derivative information.

e. Restricted Cash

At June 30, 2016, the Fund held restricted cash in connection with investments in certain derivative securities. Restricted cash is held in a segregated account with the Fund’s counterparty broker and is reflected in the Statement of Assets and Liabilities.

f. Loan Participation Notes

The Fund invests in loan participation notes (Participations). Participations are loans originally issued to a borrower by one or more financial institutions (the Lender) and subsequently sold to other investors, such as the Fund. Participations typically result in the Fund having a contractual relationship only with the Lender and not with the borrower. The Fund has the right to receive from the Lender any payments of principal, interest and fees which the Lender received from the borrower. The Fund generally has no rights to either enforce compliance by the borrower with the terms of the loan agreement or to any collateral relating to the original loan. As a result, the Fund assumes the credit risk of both the borrower and the Lender that is selling the Participation. The Participations may also involve interest rate risk and liquidity risk, including the potential default or insolvency of the borrower and/or the Lender.

Semiannual Report TGB-29

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Global Bond VIP Fund (continued)

1. Organization and Significant Accounting Policies (continued)

g. Income and Deferred Taxes

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

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

The Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of June 30, 2016, the Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on each tax jurisdiction’s 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. 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 U.S. GAAP. 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 inflation principal adjustments in the Statement of Operations.

i. Accounting Estimates

The preparation of financial statements in accordance with U.S. GAAP 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.

TGB-30 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Global Bond VIP Fund (continued)

2. Shares of Beneficial Interest

At June 30, 2016, 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, 2016						Year Ended December 31, 2015
	Shares			Amount			Shares			Amount
Class 1 Shares:
Shares sold		1,095,974		$	17,496,721			3,348,667		$	58,944,948
Shares issued in reinvestment of distributions		14,671			230,623			1,514,753			25,781,090
Shares redeemed		(1,684,007	)		(26,887,226	)		(4,380,221	)		(76,674,014	)
Net increase (decrease)		(573,362	)	$	(9,159,882	)		483,199		$	8,052,024
Class 2 Shares:
Shares sold		6,966,062		$	107,599,786			15,666,500		$	268,873,539
Shares issued in reinvestment of distributions		161,118			2,445,769			15,904,078			261,940,170
Shares redeemed		(11,574,219	)		(178,275,366	)		(20,123,134	)		(337,699,111	)
Net increase (decrease)		(4,447,039	)	$	(68,229,811	)		11,447,444		$	193,114,598
Class 4 Shares:
Shares sold		376,857		$	5,953,469			1,068,838		$	18,598,516
Shares issued in reinvestment of distributions		5,231			81,295			527,080			8,897,114
Shares redeemed		(651,097	)		(10,292,661	)		(1,276,578	)		(21,792,395	)
Net increase (decrease)		(269,009	)	$	(4,257,897	)		319,340		$	5,703,235

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

For the period ended June 30, 2016, the effective management fee rate was 0.458% of the Fund’s average daily net assets.

Semiannual Report TGB-31

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Global Bond VIP Fund (continued)

3. Transactions with Affiliates (continued)

b. Administrative Fees

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

c. Distribution Fees

The Board has adopted distribution plans for Class 2 and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to 0.25% and 0.35% per year of its average daily net assets of Class 2 and Class 4, respectively. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.

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. Investments in Affiliated Management Investment Companies

The Fund invests in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Fund are waived on assets invested in the affiliated management investment companies, as noted in the Statement of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate.

	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 Gain (Loss)		% of Affiliated Fund Shares Outstanding Held at End of Period
Non-Controlled Affiliates
Institutional Fiduciary Trust Money Market Portfolio		420,632,565		339,715,815		(351,070,425	)		409,277,955	$	409,277,955	$	—	$	—		2.1%

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, 2016, the custodian fees were reduced as noted in the Statement of Operations.

5. Income Taxes

At June 30, 2016, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	3,242,512,437
Unrealized appreciation	$	74,103,507
Unrealized depreciation		(194,075,204	)
Net unrealized appreciation (depreciation)	$	(119,971,697	)

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of foreign currency transactions and inflation related adjustments on foreign securities.

6. Investment Transactions

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2016, aggregated $819,373,666 and $596,492,510, respectively.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Global Bond VIP Fund (continued)

7. Credit Risk

At June 30, 2016, the Fund had 19.1% of its portfolio invested in high yield or other securities rated below investment grade. These securities may be more sensitive to economic conditions causing greater price volatility and are potentially subject to a greater risk of loss due to default than higher rated securities.

8. Concentration of Risk

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, 2016, the Fund’s investments in derivative contracts are reflected in 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			Statement of Assets and Liabilities Location	Fair Value
Interest rate contracts	Variation margin	$	—	a	Variation margin	$	43,351,971	a
	Unrealized appreciation on OTC swap contracts		—		Unrealized depreciation on OTC swap contracts		14,638,640
Foreign exchange contracts	Unrealized appreciation on OTC forward exchange contracts		26,393,217		Unrealized depreciation on OTC forward exchange contracts		121,021,815
Value Recovery Instruments	Investments in securities, at value		9,855,268
Totals		$	36,248,485			$	179,012,426

^aThis amount reflects the cumulative appreciation (depreciation) of centrally cleared swaps contracts as reported in the Statement of Investments. Only the variation margin receivable/payable at period end is separately reported within the Statement of Assets and Liabilities. Prior variation margin movements were recorded to cash upon receipt or payment.

For the period ended June 30, 2016, the effect of derivative contracts in the Fund’s Statement of Operations was as follows:

Derivative Contracts Not Accounted for as Hedging Instruments	Statement of Operations Locations	Net Realized Gain (Loss) for the Period			Statement of Operations Locations	Net Change in Unrealized Appreciation (Depreciation) for the Period
	Net realized gain (loss) from:				Net change in unrealized appreciation (depreciation) on:
Interest rate contracts	Swap contracts	$	(5,253,316	)	Swap contracts	$	(42,663,972	)
Foreign exchange contracts	Foreign currency transactions		(59,110,552	)a	Translation of other assets and liabilities denominated in foreign currencies		(116,352,198	)a
Value Recovery Instruments	Investments		—		Investments		(2,248,351	)
Totals		$	(64,363,868	)		$	(161,264,521	)

^aForward exchange contracts are included in net realized gain (loss) from foreign currency transactions and net change in unrealized appreciation (depreciation) on translation of other assets and liabilities denominated in foreign currencies in the Statement of Operations.

Semiannual Report TGB-33

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Global Bond VIP Fund (continued)

9. Other Derivative Information (continued)

At June 30, 2016, the Fund’s OTC derivative assets and liabilities are as follows:

	Gross and Net Amounts of Assets and Liabilities Presented in the Statement of Assets and Liabilities
	Assetsa		Liabilitiesa
Derivatives
Forward Exchange Contracts	$	26,393,217	$	121,021,815
Swap Contracts		—		14,638,640
Total	$	26,393,217	$	135,660,455

^aAbsent an event of default or early termination, OTC derivative assets and liabilities are presented gross and not offset in the Statement of Assets and Liabilities.

At June 30, 2016, the Fund’s OTC derivative assets, which may be offset against the Fund’s OTC derivative liabilities and collateral received from the counterparty, are as follows:

			Amounts Not Offset in the Statement of Assets and Liabilities
	Gross and Net Amounts of Assets Presented in the Statement of Assets and Liabilities		Financial Instruments Available for Offset			Financial Instruments Collateral Received		Cash Collateral Received		Net Amount (Not less than zero)
Counterparty
BOFA	$	2,753,423	$	(2,741,763	)	$	—	$	630,000	$	641,660
BZWS		1,099,515		(1,099,515	)		—		—		—
CITI		1,534,647		(1,534,647	)		—		—		—
DBAB		4,186,118		(4,186,118	)		—		—		—
GSCO		2,715,610		(2,715,610	)		—		590,000		590,000
HSBC		7,418,291		(7,418,291	)		—		—		—
JPHQ		3,684,761		(3,684,761	)		—		—		—
MSCO		1,821,133		(1,194,740	)		—		380,000		1,006,393
SCNY		1,080,624		(1,080,624	)		—		—		—
UBSW		99,095		—			—		—		99,095
Total	$	26,393,217	$	(25,656,069	)	$	—	$	1,600,000	$	2,337,148

TGB-34 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Global Bond VIP Fund (continued)

At June 30, 2016, the Fund’s OTC derivative liabilities, which may be offset against the Fund’s OTC derivative assets and collateral pledged to the counterparty, are as follows:

			Amounts Not Offset in the Statement of Assets and Liabilities
	Gross and Net Amounts of Liabilities Presented in the Statement of Assets and Liabilities		Financial Instruments Available for Offset			Financial Instruments Collateral Pledged		Cash Collateral Pledgeda			Net Amount (Not less than zero)
Counterparty
BOFA	$	2,741,763	$	(2,741,763	)	$	—	$	—		$	—
BZWS		14,983,119		(1,099,515	)		—		(13,840,000	)		43,604
CITI		19,441,972		(1,534,647	)		—		(17,907,325	)		—
DBAB		25,578,613		(4,186,118	)		—		(21,392,495	)		—
GSCO		4,536,693		(2,715,610	)		—		—			1,821,083
HSBC		23,228,359		(7,418,291	)		—		(13,830,000	)		1,980,068
JPHQ		39,594,579		(3,684,761	)		—		(35,909,818	)		—
MSCO		1,194,740		(1,194,740	)		—		—			—
SCNY		4,360,617		(1,080,624	)		—		(3,279,993	)		—
UBSW		—		—			—		—			—
Total	$	135,660,455	$	(25,656,069	)	$	—	$	(106,159,631	)	$	3,844,755

^aIn some instances, the collateral amounts disclosed in the table above were adjusted due to the requirement to limit collateral amounts to avoid the effect of overcollateralization. Actual collateral received and/or pledged may be more than the amounts disclosed herein.

For the period ended June, 30 2016, the average month end fair value of derivatives represented 5.6% of average month end net assets. The average month end number of open derivative contracts for the period was 402.

See Note 1(d) regarding derivative financial instruments.

See Abbreviations on page TGB-37

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 $2 billion (Global Credit Facility) which matures on February 10, 2017. 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 0.07% based upon the unused portion of the Global Credit Facility. Effective February 12, 2016, the annual commitment fee is 0.15%. These fees are reflected in other expenses in the Statement of Operations. During the period ended June 30, 2016, the Fund did not use the Global Credit Facility.

Semiannual Report TGB-35

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Global Bond VIP Fund (continued)

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 financial instruments and are summarized in the following fair value hierarchy:

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

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

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

The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.

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

A summary of inputs used as of June 30, 2016, in valuing the Fund’s assets and liabilities carried at fair value, is as follows:

	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities:
Foreign Government and Agency Securitiesa	$	—	$	2,355,886,298	$	—	$	2,355,886,298
Quasi-Sovereign and Corporate Bondsa		—		2,631,087		—		2,631,087
Short Term Investments		409,277,955		354,745,400		—		764,023,355
Total Investments in Securities	$	409,277,955	$	2,713,262,785	$	—	$	3,122,540,740
Other Financial Instruments
Forward Exchange Contracts	$	—	$	26,393,217	$	—	$	26,393,217
Liabilities:
Other Financial Instruments
Forward Exchange Contracts	$	—	$	121,021,815	$	—	$	121,021,815
Swap Contracts		—		57,990,611		—		57,990,611
Total Other Financial Instruments	$	—	$	179,012,426	$	—	$	179,012,426

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

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.

TGB-36 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Global Bond VIP Fund (continued)

Abbreviations

Counterparty/Exchange		Currency		Selected Portfolio
BOFA	Bank of America Corp.	BRL	Brazilian Real	BBA	British Bankers Association
BZWS	Barclays Bank PLC	COP	Colombian Peso	FRN	Floating Rate Note
CITI	Citigroup, Inc.	EUR	Euro	GDP	Gross Domestic Product
CME	Chicago Mercantile Exchange	IDR	Indonesian Rupiah	LIBOR	London InterBank Offered Rate
DBAB	Deutsche Bank AG	INR	Indian Rupee	VRI	Value Recovery Instrument
GSCO	Goldman Sachs Group, Inc.	JPY	Japanese Yen
HSBC	HSBC Bank USA N.A.	KRW	South Korean Won
JPHQ	JP Morgan Chase & Co.	LKR	Sri Lankan Rupee
LCH	London Clearing House	MXN	Mexican Peso
MSCO	Morgan Stanley	MYR	Malaysian Ringgit
SCNY	Standard Chartered Bank	PEN	Peruvian Nuevo Sol
UBSW	UBS AG	PHP	Philippine Peso
		PLN	Polish Zloty

Semiannual Report TGB-37

Templeton Growth VIP Fund

This semiannual report for Templeton Growth VIP Fund covers the period ended June 30, 2016.

Class 1 Performance Summary as of June 30, 2016

The Fund’s Class 1 shares had a -3.12% total return* for the six-month period ended June 30, 2016.

*The Fund has a fee waiver associated with any investment in a Franklin Templeton money fund and/or Franklin Templeton fund, as applicable, contractually guaranteed through at least the Fund’s current fiscal year-end. Fund investment results reflect the fee waiver, to the extent applicable; without this reduction, the results would have been lower.

Performance reflects the Fund’s Class 1 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.

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.

Semiannual Report TG-1

TEMPLETON GROWTH VIP FUND

Fund Goal and Main Investments

The Fund seeks long-term capital growth. Under normal market conditions, the Fund invests predominantly in equity securities of companies located anywhere in the world, including emerging markets.

Fund Risks

All investments involve risks, including possible loss of principal. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments; investments in emerging markets involve heightened risks related to the same factors. In addition, smaller and midsized-company stocks have historically experienced more price volatility than larger company stocks, especially over the short term. Value securities may not increase in price as anticipated or may decline further in value. To the extent the Fund focuses on particular countries, regions, industries, sectors or types of investments from time to time, it may be subject to greater risks of adverse developments in such areas of focus than a fund that invests in a wider variety of countries, regions, industries, sectors or investments. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. For comparison, the Fund’s new benchmark, the MSCI All Country World Index (ACWI) returned +1.58%, while its old benchmark, the MSCI World Index returned +1.02% for the period under review.¹ We believe the new index better represents the Fund’s investable universe and is more in line with the Fund’s mandates.

Economic and Market Overview

The global economy expanded during the six months under review. An improvement in commodity prices including a rally in crude oil prices, accommodative monetary policy from various global central banks, finalization of the new debt deal for Greece and encouraging Chinese trade data toward period-end boosted market sentiment. However, global equity market volatility increased after the U.S. Federal Reserve’s (Fed’s) June decision to keep its federal funds target range unchanged, while providing a cautious stance on further interest rate hikes. In

addition, global economic concerns and the U.K.’s historic referendum to leave the European Union (EU), also known as the “Brexit,” contributed to volatile global stock markets.

Oil prices fell at the beginning of the review period, largely due to strong global supply, but recovered in the period’s second half amid oilfield outages and continued demand growth. Meanwhile, commodity prices increased for most of the review period as oversupply for a host of commodities shrank and the market appeared to be on the path of rebalancing after hitting a glut-induced bottom earlier in the year. Gold prices continued to rise following the Brexit referendum as some investors turned to safe haven investing. The U.S. dollar generally depreciated against most currencies during the period, which increased returns of many foreign assets in U.S. dollar terms. In this environment, global developed market stocks overall, as measured by the MSCI World Index, rose slightly during the period.

The U.S. economy grew moderately, as measured by gross domestic product (GDP) in 2016’s first and second quarters, driven by consumer spending and exports. A decline in private inventory investment and nonresidential fixed investment contributed to the moderation. The Fed maintained its target interest rate during the review period after raising it for the first time in nine years at its December meeting. The Fed kept its target rate unchanged in its June meeting mainly due to a substantial slowdown in job additions toward period-end. The Fed expects economic conditions to evolve in a manner that could warrant only gradual increases in the federal funds rate.

1. Source: 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.

TG-2 Semiannual Report

TEMPLETON GROWTH VIP FUND

In Europe, slower U.K. economic growth continued in 2016’s first quarter as output slowed in construction, production and agriculture. Immediate effects of the Brexit materialized as U.K. stocks significantly declined and the pound sterling hit a three-decade low amid intensified selling. Credit rating agencies Standard & Poor’s and Fitch also downgraded the U.K.’s credit rating. In the eurozone, despite investors’ concerns about banking sector weakness, low corporate earnings and post-Brexit political repercussions, some regions benefited due to rising consumer spending resulting from a cheaper euro, low inflation and signs of sustained economic growth. The eurozone’s annual inflation rate remained in negative territory for most of the review period; however, it rose marginally above zero in June.

Japan’s economy posted mixed results, contracting in 2015’s fourth quarter stemming from declining private and household consumption. However, the economy expanded during 2016’s first quarter as private consumption increased and business investment decreased less than initially believed. The Bank of Japan (BOJ) took several actions during the review period. In January, to boost lending and support inflation, the BOJ introduced a negative interest rate on excess reserves held at the central bank by financial institutions. In April, the BOJ further reduced its GDP and inflation forecasts for fiscal year 2016, and decided against additional quantitative easing measures. However, after the U.K.’s vote in June to leave the EU, the BOJ hinted at carrying out flexible open market operations to stabilize its financial markets.

In emerging markets, economic growth generally moderated during the review period. Brazil’s economy witnessed its longest recession since the 1930s amid political and economic turmoil, while Russia’s economy continued to contract. The Bank of Russia reduced its key interest rate in an attempt to revive its economy. China’s economic growth slowed marginally in 2016’s first quarter compared to the previous quarter, but remained largely in line with the government’s target. The People’s Bank of China cut its cash reserve requirement ratio for the country’s banks and effectively devalued the renminbi against the U.S. dollar to the lowest level in more than five years. Overall, emerging market stocks, as measured by the MSCI Emerging Markets Index, rose for the six-month period.²

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

Top 10 Holdings
6/30/16
Company Sector/Industry	% of Total Net Assets
Samsung Electronics Co. Ltd. Technology Hardware, Storage & Peripherals, South Korea		4.3%
Royal Dutch Shell PLC Oil, Gas & Consumable Fuels, U.K.		2.8%
Citigroup Inc. Banks, U.S.		2.4%
Teva Pharmaceutical Industries Ltd. Pharmaceuticals, Israel		2.3%
Microsoft Corp. Software, U.S.		2.3%
Amgen Inc. Biotechnology, U.S.		2.2%
Total SA Oil, Gas & Consumable Fuels, France		2.0%
Oracle Corp. Software, U.S.		1.9%
BP PLC Oil, Gas & Consumable Fuels, U.K.		1.7%
Cisco Systems Inc. Communications Equipment, U.S.		1.7%

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).

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

Global equities finished the period slightly higher during the period under review, recouping losses early in the period and weathering late volatility related to the U.K.’s Brexit referendum. Investors also evaluated modest economic improvements and sustained policy resolve against continued global deflationary pressures, Chinese financial volatility and mounting uncertainty about the future of Europe. The Fund trailed its benchmark, the MSCI ACWI, during the period as the increasingly uncertain, low-conviction environment continued to primarily favor expensive momentum stocks, pressuring the Fund’s value-oriented holdings.

At the sector level, stock selection and an overweighted allocation in the financials sector was among the Fund’s largest

2. Please see Index Descriptions following the Fund Summaries.

Semiannual Report TG-3

TEMPLETON GROWTH VIP FUND

relative detractors, pressured by European banks that faltered in the wake of the U.K.’s Brexit vote.³ Moreover, the European financials sector accounted for most of the Fund’s biggest detractors. We maintained exposure to select European banks in recent quarters based on their historically cheap valuations and our view that they are showing solid restructuring and recapitalization progress in a stabilizing regulatory environment. We were also encouraged by European banks’ ability to adjust business models to increase fee-based income and manage the margin challenges associated with a low-to-negative interest rate environment. We believe European banks today are far better capitalized and supported by policymakers than they were in the crises of 2008 and 2011, and have passed stress tests that subject their balance sheets to highly adverse conditions. The major tail risk for the sector is a potential eurozone breakup; while we believe this remains a low probability event, we will continue to monitor and assess the situation as it would likely require a broad portfolio repositioning before the risk is fully priced.

In health care, stock selection and a slightly overweighted allocation also detracted from the Fund’s relative returns.⁴ Additionally, the sector held one of the Fund’s largest detractors, U.S. biotechnology firm Allergan. Pfizer cancelled its planned acquisition of Allergan after the U.S. government issued new rules related to mergers that could result in the reduction of a company’s tax rate. Nonetheless, we believe these events will eventually support the stock given Allergan’s double-digit organic growth potential and robust free cash flow yield. The company is also in the process of selling its generics business to Israeli pharmaceuticals firm Teva Pharmaceutical Industries (also a detractor from the Fund’s returns), which should increase cash flow and provide flexibility to support earnings growth over and above the currently healthy sales growth expectations.

In 2015, the Fund reduced holdings in health care to realize profits throughout the year. However, opportunities began to resurface in 2016 as the market reacted to fears of political interference with drug pricing and corporate tax strategy. We believe such fears are generally overstated, but nonetheless have attempted to address these concerns within the Fund by focusing our investments on what we consider well-run, highly innovative companies capable of dealing with pricing and

competitive pressures on a case-by-case basis. Within health care, we continue to favor firms we believe have sound business models, solid product portfolios, attractive research and development pipelines, and the ability to grow revenues, increase cash flows and generate high capital returns for shareholders through dividends and buybacks. We see little direct threat to our pharmaceuticals holdings from Brexit and will continue using volatility to selectively increase exposure where warranted.

The Fund’s stock selection and an underweighted allocation in industrials also detracted, pressured by German airline Deutsche Lufthansa.⁵ Shares of Deutsche Lufthansa declined after management highlighted the need to reduce fares and curb capacity to remain competitive with discount airlines. Management has continued to aggressively restructure to preserve profitability in this environment, though cost-cutting efforts have met stiff resistance from labor unions. Encouragingly, the company reported some recent progress in labor negotiations—though a breakthrough has remained elusive—and management bolstered its credibility with investors through a sensible strategic vision and restructuring initiatives. Although, in our analysis, the stock remained cheap, we recognized that this is a cyclical industry that will need to closely manage supply after a period of strong demand. Further, even though longer term cyclical risks were beginning to increase, a number of shorter term catalysts existed, including progress with labor negotiations and restructuring initiatives, and we will continue to monitor Lufthansa closely should future strength create opportunities.

Stock selection and an underweighting in the defensive consumer staples sector also detracted from the Fund’s relative returns during a period of rising risk aversion.⁶ Investors seeking safety and quality in an uncertain environment crowded into consumer staples, bidding up valuations to near-record levels relative to more cyclical parts of the market. We found scarce long-term value in a competitive, commoditized, low-margin industry trading at what we considered historically high valuations.

Turning to the Fund’s relative contributors, stock selection and an overweighting in the energy sector aided returns.⁷ Most of the Fund’s biggest contributors during the period were in the sector, led by U.S. oilfield services firm Halliburton, U.K. oil

3. The financials sector comprises banks, capital markets, consumer finance and insurance in the SOI.

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

5. The industrials sector comprises aerospace and defense, air freight and logistics, airlines, commercial services and supplies, construction and engineering, industrial conglomerates and machinery in the SOI.

6. The consumer staples sector comprises food and staples retailing in the SOI.

7. The energy sector comprises energy equipment and services and oil, gas and consumable fuels in the SOI.

TG-4 Semiannual Report

TEMPLETON GROWTH VIP FUND

and gas producer Royal Dutch Shell and U.S. oil and gas exploration and production firm Apache. We believe the energy sector exemplifies how the Fund has been able to successfully adapt to changing circumstances to position the portfolio for positive long-term performance. In 2014, the Fund’s energy holdings were slightly overweighted as Saudi Arabia declined to cut output in a bid to protect market share, eventually pushing oil prices significantly lower. Although our long-term oil price assumptions were already below the market’s, we used these events to reassess our forecasts and reduced our price target even further, ensuring that companies in the Fund are those we believe have the financial capacity to sustain a period of low energy prices over a longer term.

Over the past year we continued to see value in select energy stocks, and we added to our exposure during the lows of the first quarter of 2016. At period-end, the Fund was significantly overweighted in energy. This is a sector that we believed would be generally insulated—even during events similar to Brexit. We continued to believe a modest downturn in global gross domestic product and a somewhat softer demand from the U.K. or the eurozone are unlikely to materially impact oil prices. At the stock level, earnings recovered from trough levels as companies slashed capital expenditures and focused on harvesting growth from the previous investment cycle.

Stock selection and an underweighted allocation in the information technology sector also supported the Fund’s relative returns, led by South Korean semiconductor and consumer electronics manufacturer Samsung Electronics.⁸ Shares of the company increased as analysts upgraded earnings forecasts following strong sales of the Galaxy S7 smartphone, better-than-expected semiconductor pricing, growing memory storage demand and an indication by Apple that it may use Samsung as its primary vendor for new iPhone displays. The stock also benefited from an intergenerational leadership transition that supports deployment of the company’s cash holdings. Management recently announced a share repurchase and treasury stock cancellation plan and targeted an increase in capital investment in 2016. Although we believe Samsung, given its maturity, is unlikely to generate the rate of growth it has achieved in the past, with its improving cash flow dynamics, more generous shareholder returns, industry leading technology, market share, profitability and research and development capabilities, we believe Samsung remains an attractive investment over the Fund’s long-term horizon. More generally, every major

tier in the technology sector—computer, storage, networking, database, apps—is being disrupted by a new set of technologies and our approach is to identify mature tech companies that we believe offer value in their ability to adapt to change as well as new tech entrants we expect to emerge as winners.

Other key contributors to Fund performance included stock selection and underweighted allocations in the consumer discretionary and materials sectors.⁹ In consumer discretionary, U.S. cable operator Comcast surged to a record high after reporting the biggest gain in video subscribers in nearly a decade, demonstrating remarkable resilience in the face of cord-cutting trends. U.S. clothing retailer Michael Kors Holdings, also a contribitor in the consumer discretionary sector, reported strong sales growth during an otherwise lackluster holiday retail period and achieved significant progress with an accessories revamp and strengthened e-commerce platform. Within the materials sector, Swiss miner and commodities trader Glencore was among the Fund’s top contributors, surging after overhauling its balance sheet and delivering on profit targets in its resilient marketing business. The stock doubled year-to-date during the period, and was no longer an outright bargain in our analyis, although we expect shares could trade higher over our investment horizon as underlying commodity fundamentals improve and investors begin to recognize the value in Glencore’s diverse array of businesses.

From a regional standpoint, stock selection and an overweighting in Europe and stock selection and an underweighting in the U.S. detracted from relative performance. Nonetheless, we continued to find investment opportunities we feel are attractive in Europe, where multinational corporations with diverse revenue streams and strong operating leverage traded at what we considered depressed valuations. Conversely, in Asia, stock selection and an underweighted allocation in Japan and stock selection and an overweighted allocation in South Korea contributed to the Fund’s relative returns.

Despite the Brexit setback and accompanying uncertainty, we remained both disciplined in our analysis and thoughtful in our response to changing circumstances. The opportunities for long-term investors today in equity markets are both highly compelling and largely specific to value. Few times in history has the gap between the market’s cheapest and most expensive stocks been so wide. We remain focused on identifying undervalued

8. The information technology sector comprises communications equipment; Internet software and services; software; and technology hardware, storage and peripherals in the SOI.

9. The consumer discretionary sector comprises auto components; automobiles; media; specialty retail; and textiles, apparel and luxury goods in the SOI. The materials sector comprises chemicals, construction materials, and metals and mining in the SOI.

Semiannual Report TG-5

TEMPLETON GROWTH VIP FUND

securities capable of generating superior investment returns over a long-term horizon.

Thank you for your participation in Templeton Growth VIP Fund. We look forward to serving your future investment needs.

The foregoing information reflects our analysis, opinions and portfolio holdings as of June 30, 2016, 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-6 Semiannual Report

TEMPLETON GROWTH VIP FUND

Class 1 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 × $7.50 = $64.50.

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

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 1	Beginning Account Value 1/1/16		Ending Account Value 6/30/16		Fund-Level Expenses Incurred During Period* 1/1/16–6/30/16
Actual	$	1,000	$	968.80	$	4.01
Hypothetical (5% return before expenses)	$	1,000	$	1,020.79	$	4.12

*Expenses are calculated using the most recent six-month annualized expense ratio, net of expense waivers, for the Fund’s Class 1 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 182/366 to reflect the one-half year period.

Semiannual Report TG-7

SUPPLEMENT DATED JUNE 27, 2016

TO THE PROSPECTUSES DATED MAY 1, 2016

OF

TEMPLETON FOREIGN VIP FUND

TEMPLETON GROWTH VIP FUND

(Series of Franklin Templeton Variable Insurance Products Trust)

Effective June 30, 2016, the prospectus is amended as follows:

I.  The benchmark for the Templeton Foreign VIP Fund has changed from the MSCI EAFE Index to the MSCI ACWI EX USA Index. The “Fund Summary – Performance – Average Annual Total Returns” table on page TF-S4 is revised to add the following:

	1 Year		5 Years		10 Years
MSCI All Country World ex-US Index (index reflects no deduction for fees, expenses or taxes)1		-5.25%		1.51%		3.38%

1. Performance figures as of December 31, 2015. The MSCI All Country World ex-US Index is replacing the MSCI EAFE Index as the Fund’s benchmark. The investment manager believes the composition of the MSCI All Country World ex-US Index more accurately reflects the Fund’s holdings.

II.  The benchmark for the Templeton Growth VIP Fund has changed from the MSCI World Index to the MSCI ACWI Index. The “Fund Summary – Performance – Average Annual Total Returns” table on page TG-S3 is revised to add the following:

	1 Year		5 Years		10 Years
MSCI All Country World Index (index reflects no deduction for fees, expenses or taxes)1		-1.84%		6.66%		5.31%

1. Performance figures as of December 31, 2015. The MSCI All Country World Index is replacing the MSCI World Index as the Fund’s benchmark. The investment manager believes the composition of the MSCI All Country World Index more accurately reflects the Fund’s holdings.

Please keep this supplement with your prospectus for future reference.

TG-8

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Highlights

Templeton Growth VIP Fund

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012			2011
Class 1
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$13.54			$14.85			$15.47			$12.16			$10.27			$11.19
Income from investment operationsa:
Net investment incomeb		0.18			0.28			0.38	c		0.22			0.27			0.25
Net realized and unrealized gains (losses)		(0.61	)		(1.17	)		(0.75	)		3.49			1.88			(0.99	)
Total from investment operations		(0.43	)		(0.89	)		(0.37	)		3.71			2.15			(0.74	)
Less distributions from:
Net investment income		(0.31	)		(0.42	)		(0.25	)		(0.40	)		(0.26	)		(0.18	)
Net realized gains		(0.52	)		—			—			—			—			—
Total distributions		(0.83	)		(0.42	)		(0.25	)		(0.40	)		(0.26	)		(0.18	)
Net asset value, end of period		$12.28			$13.54			$14.85			$15.47			$12.16			$10.27
Total returnd		(3.12)%			(6.24)%			(2.53)%			31.05%			21.40%			(6.80)%
Ratios to average net assetse
Expenses		0.82%	f		0.80%	f		0.78%			0.78%	g		0.78%	g		0.78%	g
Net investment income		2.78%			1.96%			2.46%	c		1.62%			2.31%			2.22%
Supplemental data
Net assets, end of period (000’s)		$431,610			$468,548			$572,860			$588,409			$476,954			$1,200,682
Portfolio turnover rate		11.45%			20.92%			17.46%			11.60%			18.73%	h		42.13%	h

^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’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $0.09 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.88%.

^dTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which 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 waiver and payments by affiliates rounds to less than 0.01%.

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

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

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report TG-9

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL HIGHLIGHTS

Templeton Growth VIP Fund (continued)

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012			2011
Class 2
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$13.32			$14.61			$15.23			$11.97			$10.11			$11.01
Income from investment operationsa:
Net investment incomeb		0.16			0.25			0.34	c		0.19			0.21			0.21
Net realized and unrealized gains (losses)		(0.60	)		(1.16	)		(0.75	)		3.44			1.88			(0.96	)
Total from investment operations		(0.44	)		(0.91	)		(0.41	)		3.63			2.09			(0.75	)
Less distributions from:
Net investment income		(0.27	)		(0.38	)		(0.21	)		(0.37	)		(0.23	)		(0.15	)
Net realized gains		(0.52	)		—			—			—			—			—
Total distributions		(0.79	)		(0.38	)		(0.21	)		(0.37	)		(0.23	)		(0.15	)
Net asset value, end of period		$12.09			$13.32			$14.61			$15.23			$11.97			$10.11
Total returnd		(3.26)%			(6.49)%			(2.81)%			30.82%			21.07%			(6.97)%
Ratios to average net assetse
Expenses		1.07%	f		1.05%	f		1.03%			1.03%	g		1.03%	g		1.03%	g
Net investment income		2.53%			1.71%			2.21%	c		1.37%			2.06%			1.97%
Supplemental data
Net assets, end of period (000’s)		$833,994			$921,895			$1,171,896			$1,450,304			$1,352,554			$1,254,193
Portfolio turnover rate		11.45%			20.92%			17.46%			11.60%			18.73%	h		42.13%	h

^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’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $0.09 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.63%.

^dTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which 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 waiver and payments by affiliates rounds to less than 0.01%.

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

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

TG-10 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL HIGHLIGHTS

Templeton Growth VIP Fund (continued)

	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31,
				2015			2014			2013			2012			2011
Class 4
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$13.44			$14.73			$15.35			$12.07			$10.19			$11.11
Income from investment operationsa:
Net investment incomeb		0.15			0.23			0.33	c		0.17			0.20			0.20
Net realized and unrealized gains (losses)		(0.61	)		(1.16	)		(0.76	)		3.47			1.90			(0.98	)
Total from investment operations		(0.46	)		(0.93	)		(0.43	)		3.64			2.10			(0.78	)
Less distributions from:
Net investment income		(0.25	)		(0.36	)		(0.19	)		(0.36	)		(0.22	)		(0.14	)
Net realized gains		(0.52	)		—			—			—			—			—
Total distributions		(0.77	)		(0.36	)		(0.19	)		(0.36	)		(0.22	)		(0.14	)
Net asset value, end of period		$12.21			$13.44			$14.73			$15.35			$12.07			$10.19
Total returnd		(3.36)%			(6.54)%			(2.88)%			30.64%			21.02%			(7.14)%
Ratios to average net assetse
Expenses		1.17%	f		1.15%	f		1.13%			1.13%	g		1.13%	g		1.13%	g
Net investment income		2.43%			1.61%			2.11%	c		1.27%			1.96%			1.87%
Supplemental data
Net assets, end of period (000’s)		$44,232			$47,777			$59,989			$72,683			$67,158			$56,170
Portfolio turnover rate		11.45%			20.92%			17.46%			11.60%			18.73%	h		42.13%	h

^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’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $0.09 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.53%.

^dTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which 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 waiver and payments by affiliates rounds to less than 0.01%.

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

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

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report TG-11

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Statement of Investments, June 30, 2016 (unaudited)

Templeton Growth VIP Fund
		Country		Shares		Value
	Common Stocks 98.3%
	Aerospace & Defense 1.2%
	BAE Systems PLC		United Kingdom		2,319,032	$	16,203,114
	Air Freight & Logistics 0.7%
	United Parcel Service Inc., B		United States		89,100		9,597,852
	Airlines 1.6%
	Deutsche Lufthansa AG		Germany		1,844,334		21,556,158
	Auto Components 1.2%
	Cie Generale des Etablissements Michelin, B		France		166,359		15,734,041
	Automobiles 3.5%
	Hero Motocorp Ltd.		India		220,820		10,396,765
	Hyundai Motor Co.		South Korea		178,330		20,961,982
	Nissan Motor Co. Ltd.		Japan		1,696,510		15,078,446
							46,437,193
	Banks 16.6%
	Bangkok Bank PCL, NVDR		Thailand		913,600		4,123,166
	Barclays PLC		United Kingdom		5,731,140		10,591,676
	BNP Paribas SA		France		428,187		18,894,206
	Citigroup Inc.		United States		737,470		31,261,353
	Credit Agricole SA		France		1,783,136		14,962,690
	DBS Group Holdings Ltd.		Singapore		932,690		10,913,758
	HSBC Holdings PLC		United Kingdom		3,242,064		19,807,285
	ING Groep NV, IDR		Netherlands		1,475,166		15,029,332
	JPMorgan Chase & Co.		United States		335,530		20,849,834
	KB Financial Group Inc.		South Korea		657,984		18,608,080
	Standard Chartered PLC		United Kingdom		2,883,083		21,704,934
	SunTrust Banks Inc.		United States		478,520		19,657,602
	UniCredit SpA		Italy		4,892,781		10,698,562
							217,102,478
	Biotechnology 3.1%
	Amgen Inc.		United States		184,830		28,121,884
	Gilead Sciences Inc.		United States		141,830		11,831,459
							39,953,343
	Capital Markets 2.5%
	Credit Suisse Group AG		Switzerland		1,308,590		13,821,906
	Morgan Stanley		United States		528,920		13,741,342
	UBS Group AG		Switzerland		451,380		5,812,772
							33,376,020
	Chemicals 1.0%
	Akzo Nobel NV		Netherlands		204,762		12,811,524
	Commercial Services & Supplies 0.6%
a	Serco Group PLC		United Kingdom		4,886,178		7,257,966
	Communications Equipment 2.4%
	Cisco Systems Inc.		United States		778,890		22,346,354
	Ericsson, B		Sweden		1,155,432		8,784,010
							31,130,364
	Construction & Engineering 0.6%
b	FLSmidth & Co. A/S		Denmark		216,580		7,689,518

TG-12 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Templeton Growth VIP Fund (continued)

		Country		Shares		Value
	Common Stocks (continued)
	Construction Materials 1.2%
	CRH PLC		Ireland		552,471	$	15,943,595
	Consumer Finance 1.4%
	Capital One Financial Corp.		United States		286,660		18,205,777
	Diversified Telecommunication Services 3.0%
	China Telecom Corp. Ltd., ADR		China		179,195		8,061,983
	Singapore Telecommunications Ltd.		Singapore		4,679,470		14,349,193
	Telefonica SA		Spain		1,787,635		16,786,209
							39,197,385
	Energy Equipment & Services 2.4%
	Baker Hughes Inc.		United States		301,680		13,614,818
	Halliburton Co.		United States		375,850		17,022,247
	Technip SA		France		16,050		869,624
							31,506,689
	Food & Staples Retailing 2.6%
	Metro AG		Germany		587,740		17,920,384
a	Tesco PLC		United Kingdom		6,655,808		15,522,120
							33,442,504
	Health Care Equipment & Supplies 1.9%
	Getinge AB, B		Sweden		925,050		18,888,392
	Medtronic PLC		United States		74,440		6,459,159
							25,347,551
	Industrial Conglomerates 2.3%
	Siemens AG		Germany		164,562		16,769,609
a	Toshiba Corp.		Japan		4,835,860		12,942,452
							29,712,061
	Insurance 3.9%
	Aegon NV		Netherlands		3,053,986		11,965,894
	American International Group Inc.		United States		312,040		16,503,796
	AXA SA		France		474,608		9,379,516
	China Life Insurance Co. Ltd., H		China		6,041,230		12,941,405
							50,790,611
	Internet Software & Services 1.4%
a	Alphabet Inc., A		United States		25,760		18,122,933
	Life Sciences Tools & Services 0.6%
a	QIAGEN NV		Netherlands		385,000		8,330,813
	Machinery 0.5%
a	Navistar International Corp.		United States		598,440		6,995,764
	Media 3.7%
	Comcast Corp., A		United States		297,202		19,374,598
	Sky PLC		United Kingdom		1,074,857		12,153,658
	Twenty-First Century Fox Inc., A		United States		641,182		17,343,973
							48,872,229
	Metals & Mining 2.4%
	Glencore PLC		Switzerland		8,733,900		17,800,578
	MMC Norilsk Nickel PJSC, ADR		Russia		1,040,760		13,831,701
							31,632,279

Semiannual Report TG-13

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Templeton Growth VIP Fund (continued)

		Country		Shares		Value
	Common Stocks (continued)
	Oil, Gas & Consumable Fuels 11.8%
	Apache Corp.		United States		305,930	$	17,031,123
	BP PLC		United Kingdom		3,841,161		22,441,184
a	Chesapeake Energy Corp.		United States		2,179,440		9,328,003
	Eni SpA		Italy		866,889		13,971,194
	Galp Energia SGPS SA, B		Portugal		1,110,730		15,410,684
	Kunlun Energy Co. Ltd.		China		17,103,030		14,108,410
	Royal Dutch Shell PLC, A		United Kingdom		15,359		419,322
	Royal Dutch Shell PLC, B		United Kingdom		1,303,219		35,831,626
	Total SA, B		France		544,729		26,228,500
							154,770,046
	Pharmaceuticals 8.7%
a	Allergan PLC		United States		93,324		21,566,243
	Eli Lilly & Co.		United States		175,170		13,794,638
	Merck KGaA		Germany		166,284		16,804,818
	Roche Holding AG		Switzerland		45,563		11,954,394
	Sanofi		France		227,717		18,936,366
	Teva Pharmaceutical Industries Ltd., ADR		Israel		609,830		30,631,761
							113,688,220
	Software 4.2%
	Microsoft Corp.		United States		584,689		29,918,536
	Oracle Corp.		United States		627,880		25,699,128
							55,617,664
	Specialty Retail 0.3%
	Kingfisher PLC		United Kingdom		871,388		3,747,156
	Technology Hardware, Storage & Peripherals 6.5%
	Apple Inc.		United States		70,200		6,711,120
	Hewlett Packard Enterprise Co.		United States		677,340		12,375,002
	HP Inc.		United States		677,340		8,500,617
	Samsung Electronics Co. Ltd.		South Korea		46,020		56,889,238
							84,475,977
	Textiles, Apparel & Luxury Goods 1.2%
a	Michael Kors Holdings Ltd.		United States		313,480		15,510,990
	Wireless Telecommunication Services 3.3%
	SoftBank Group Corp.		Japan		346,820		19,440,726
a	Turkcell Iletisim Hizmetleri AS, ADR		Turkey		1,653,543		15,129,918
	Vodafone Group PLC		United Kingdom		2,681,677		8,140,191
							42,710,835
	Total Common Stocks (Cost $1,270,383,846)						1,287,470,650
	Preferred Stocks (Cost $13,187,730) 0.6%
	Oil, Gas & Consumable Fuels 0.6%
a	Petroleo Brasileiro SA, ADR, pfd.		Brazil		1,315,652		7,643,938
	Total Investments before Short Term Investments (Cost $1,283,571,576)						1,295,114,588

TG-14 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Templeton Growth VIP Fund (continued)

		Country		Principal Amount		Value
	Short Term Investments 1.1%
	Time Deposits Cost ($12,500,000) 1.0%
	Royal Bank of Canada, 0.30%, 7/01/16		United States	$	12,500,000	$	12,500,000
	Total Investments before Money Market Funds (Cost $1,296,071,576)						1,307,614,588
				Shares
c	Investments from Cash Collateral Received for Loaned Securities (Cost $1,890,000) 0.1%
	Money Market Funds 0.1%
a,d	Institutional Fiduciary Trust Money Market Portfolio		United States		1,890,000		1,890,000
	Total Investments (Cost $1,297,961,576) 100.0%						1,309,504,588
	Other Assets, less Liabilities 0.0%†						331,365
	Net Assets 100.0%					$	1,309,835,953

See Abbreviations on page TG-25.

^†Rounds to less than 0.1% of net assets.

^aNon-income producing.

^bA portion or all of the security is on loan at June 30, 2016. See Note 1(c).

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

^dSee Note 3(e) regarding investments in affiliated management investment companies.

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report TG-15

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Statements

Statement of Assets and Liabilities

June 30, 2016 (unaudited)

	Templeton Growth VIP Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	1,296,071,576
Cost - Non-controlled affiliates (Note 3e)		1,890,000
Total cost of investments	$	1,297,961,576
Value - Unaffiliated issuers	$	1,307,614,588
Value - Non-controlled affiliates (Note 3e)		1,890,000
Total value of investments (Includes securities loaned in the amount of $1,775,214)		1,309,504,588
Cash		609,409
Receivables:
Investment securities sold		710,810
Capital shares sold		170,327
Dividends and interest		2,692,729
European Union tax reclaims		776,715
Other assets		614
Total assets		1,314,465,192
Liabilities:
Payables:
Investment securities purchased		869,326
Capital shares redeemed		164,874
Management fees		849,147
Distribution fees		382,255
Trustees’ fees and expenses		113
Payable upon return of securities loaned		1,890,000
Deferred tax		183,091
Accrued expenses and other liabilities		290,433
Total liabilities		4,629,239
Net assets, at value	$	1,309,835,953
Net assets consist of:
Paid-in capital	$	1,278,199,035
Undistributed net investment income		17,326,375
Net unrealized appreciation (depreciation)		11,297,284
Accumulated net realized gain (loss)		3,013,259
Net assets, at value	$	1,309,835,953
Class 1:
Net assets, at value	$	431,609,518
Shares outstanding		35,152,726
Net asset value and maximum offering price per share	$	12.28
Class 2:
Net assets, at value	$	833,994,449
Shares outstanding		68,958,905
Net asset value and maximum offering price per share	$	12.09
Class 4:
Net assets, at value	$	44,231,986
Shares outstanding		3,621,488
Net asset value and maximum offering price per share	$	12.21

TG-16 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Statement of Operations

for the six months ended June 30, 2016 (unaudited)

	Templeton Growth VIP Fund
Investment income:
Dividends (net of foreign taxes of $2,484,424)	$	23,319,623
Interest		23,655
Income from securities loaned (net of fees and rebates)		577,010
Total investment income		23,920,288
Expenses:
Management fees (Note 3a)		5,202,717
Distribution fees: (Note 3c)
Class 2		1,060,850
Class 4		78,194
Custodian fees (Note 4)		54,578
Reports to shareholders		116,592
Professional fees		68,020
Trustees’ fees and expenses		3,707
Other		21,283
Total expenses		6,605,941
Expenses waived/paid by affiliates (Note 3e)		(31,099	)
Net expenses		6,574,842
Net investment income		17,345,446
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		14,146,163
Foreign currency transactions		(103,604	)
Net realized gain (loss)		14,042,559
Net change in unrealized appreciation (depreciation) on:
Investments		(77,916,782	)
Translation of other assets and liabilities denominated in foreign currencies		13,821
Change in deferred taxes on unrealized appreciation		(87,409	)
Net change in unrealized appreciation (depreciation)		(77,990,370	)
Net realized and unrealized gain (loss)		(63,947,811	)
Net increase (decrease) in net assets resulting from operations	$	(46,602,365	)

The accompanying notes are an integral part of these financial statements.    |   Semiannual Report TG-17

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Statements of Changes in Net Assets

	Templeton Growth VIP Fund
	Six Months Ended June 30, 2016 (unaudited)			Year Ended December 31, 2015
Increase (decrease) in net assets:
Operations:
Net investment income	$	17,345,446		$	29,759,073
Net realized gain (loss)		14,042,559			131,046,091
Net change in unrealized appreciation (depreciation)		(77,990,370	)		(259,448,984	)
Net increase (decrease) in net assets resulting from operations		(46,602,365	)		(98,643,820	)
Distributions to shareholders from:
Net investment income:
Class 1		(10,324,588	)		(15,123,132	)
Class 2		(17,569,557	)		(28,110,279	)
Class 4		(854,329	)		(1,358,156	)
Net realized gains:
Class 1		(17,221,955	)		—
Class 2		(33,791,595	)		—
Class 4		(1,749,579	)		—
Total distributions to shareholders		(81,511,603	)		(44,591,567	)
Capital share transactions: (Note 2)
Class 1		4,902,712			(58,388,439	)
Class 2		(5,619,491	)		(157,221,222	)
Class 4		447,131			(7,679,959	)
Total capital share transactions		(269,648	)		(223,289,620	)
Net increase (decrease) in net assets		(128,383,616	)		(366,525,007	)
Net assets:
Beginning of period		1,438,219,569			1,804,744,576
End of period	$	1,309,835,953		$	1,438,219,569
Undistributed net investment income included in net assets:
End of period	$	17,326,375		$	28,729,403

TG-18 Semiannual Report    |    The accompanying notes are an integral part of these financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Notes to Financial Statements (unaudited)

Templeton Growth VIP Fund

1. Organization and Significant Accounting Policies

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of nineteen separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Templeton Growth VIP 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 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. The Fund calculates the net asset value (NAV) per share as of 4 p.m. Eastern time each day the New York Stock Exchange (NYSE) is open for trading. Under compliance policies and procedures approved by the Trust’s Board of Trustees (the Board), the Fund’s administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The VC provides administration and oversight of the Fund’s valuation policies and procedures, which are approved annually by the Board. Among other things, these procedures allow the Fund to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

Equity securities listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded or as of 4 p.m. Eastern time whichever is earlier. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the day that the value of the security is determined. Over-the-counter (OTC)

securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.

Investments in open-end mutual funds are valued at the closing NAV. Time deposits are valued at cost, which approximates fair value.

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

Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 4 p.m. Eastern time. In addition, trading in certain foreign markets may not take place on every NYSE business day. 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 VC monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depositary

Semiannual Report TG-19

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Growth VIP Fund (continued)

1. Organization and Significant Accounting Policies (continued)

a. Financial Instrument Valuation (continued)

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.

When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the NYSE is closed, which could result in differences between the value of the Fund’s portfolio securities on the last business day and the last calendar day of the reporting period. Any significant security valuation changes due to an open foreign market are adjusted and reflected by the Fund for financial reporting purposes.

b. Foreign Currency Translation

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

The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments in 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 securities lending program to earn additional income. The Fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the fair value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the fair 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 deposited into a joint cash account with other funds and is used to invest in a money market fund managed by Franklin Advisers, Inc., an affiliate of the Fund. The Fund may receive income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. Income from securities loaned, net of fees paid to the securities lending agent and/or third-party vendor, is reported separately in the Statement of Operations. 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. If the borrower defaults on its obligation to return the securities loaned, the Fund has the right to repurchase the securities in the open market using the collateral received. 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 if applicable, excise taxes. As a result, no provision for U.S. federal income taxes is required.

The Fund may be subject to foreign taxation related to income received, capital gains on the sale of securities and certain foreign currency transactions in the foreign jurisdictions in which it invests. Foreign taxes, if any, are recorded based on the

TG-20 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Growth VIP Fund (continued)

tax regulations and rates that exist in the foreign markets in which the Fund invests. When a capital gain tax is determined to apply, the Fund records an estimated deferred tax liability in an amount that would be payable if the securities were disposed of on the valuation date. As a result of several court cases, in certain countries across the European Union, the Fund filed additional tax reclaims for previously withheld taxes on dividends earned in those countries (EU reclaims). These additional filings are subject to various administrative proceedings by the local jurisdictions’ tax authorities within the European Union, as well as a number of related judicial proceedings. Income recognized, if any, for EU reclaims is reflected as other income in the Statement of Operations and any related receivable, if any, is reflected as European Union tax reclaims in the Statement of Assets and Liabilities. When uncertainty exists as to the ultimate resolution of these proceedings, the likelihood of receipt of these EU reclaims, and the potential timing of payment, no amounts are reflected in the financial statements.

The Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of June 30, 2016, the Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on each tax jurisdiction’s 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 except for certain dividends from foreign securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Fund. 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 U.S. GAAP. 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 U.S. GAAP 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.

Semiannual Report TG-21

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Growth VIP Fund (continued)

2. Shares of Beneficial Interest

At June 30, 2016, 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, 2016						Year Ended December 31, 2015
	Shares			Amount			Shares			Amount
Class 1 Shares:
Shares sold		53,442		$	681,940			326,516		$	4,799,095
Shares issued in reinvestment of distributions		2,252,375			27,546,543			1,016,340			15,123,132
Shares redeemed		(1,760,451	)		(23,325,771	)		(5,310,550	)		(78,310,666	)
Net increase (decrease)		545,366		$	4,902,712			(3,967,694	)	$	(58,388,439	)
Class 2 Shares:
Shares sold		2,201,679		$	27,977,357			2,945,698		$	42,909,317
Shares issued in reinvestment of distributions		4,262,336			51,361,152			1,917,482			28,110,279
Shares redeemed		(6,706,636	)		(84,958,000	)		(15,863,936	)		(228,240,818	)
Net increase (decrease)		(242,621	)	$	(5,619,491	)		(11,000,756	)	$	(157,221,222	)
Class 4 Shares:
Shares sold		237,607		$	2,869,898			307,977		$	4,289,876
Shares issued in reinvestment of distributions		213,961			2,603,908			91,767			1,358,156
Shares redeemed		(386,137	)		(5,026,675	)		(916,167	)		(13,327,991	)
Net increase (decrease)		65,431		$	447,131			(516,423	)	$	(7,679,959	)

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

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

TG-22 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS

Templeton Growth VIP Fund (continued)

For the period ended June 30, 2016, the effective management fee rate was 0.783% of the Fund’s average daily net assets.

b. Administrative Fees

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

c. Distribution Fees

The Board has adopted distribution plans for Class 2 and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to 0.35% per year of its average daily net assets of each class. The Board has agreed to limit the current rate to 0.25% per year for Class 2. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.

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. Investments in Affiliated Management Investment Companies

The Fund invests in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Fund are waived on assets invested in the affiliated management investment companies, as noted in the Statement of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate.

	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 Gain (Loss)		% of Affiliated Fund Shares Outstanding Held at End of Period
Non-Controlled Affiliates
Institutional Fiduciary Trust Money Market Portfolio		8,864,598		260,839,711		(267,814,309	)		1,890,000	$	1,890,000	$	—	$	—		0.0%a

^aRounds to less than 0.1%

f. Other Affiliated Transactions

At June 30, 2016, Franklin Templeton Variable Insurance Products Trust — Franklin Founding Funds Allocation VIP Fund owned 23.9% 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, 2016, there were no credits earned.

Semiannual Report TG-23

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Growth VIP Fund (continued)

5. Income Taxes

At June 30, 2016, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	1,316,201,155
Unrealized appreciation	$	230,477,139
Unrealized depreciation		(237,173,706	)
Net unrealized appreciation (depreciation)	$	(6,696,567	)

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

6. Investment Transactions

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2016, aggregated $152,491,978 and $211,775,101, respectively.

At June 30, 2016, in connection with securities lending transactions, the Fund loaned equity investments and received $1,890,000 of cash collateral. The gross amount of recognized liability for such transactions is included in payable upon return of securities loaned in the Statement of Assets and Liabilities. The agreements can be terminated at any time.

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 $2 billion (Global Credit Facility) which matures on February 10, 2017. 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 0.07% based upon the unused portion of the Global Credit Facility. Effective February 12, 2016, the annual commitment fee is 0.15%. These fees are reflected in other expenses in the Statement of Operations. During the period ended June 30, 2016, 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 financial instruments and are summarized in the following fair value hierarchy:

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

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

TG-24 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS

Templeton Growth VIP Fund (continued)

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

The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.

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

A summary of inputs used as of June 30, 2016, in valuing the Fund’s assets carried at fair value, is as follows:

	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities
Equity Investmentsa,b	$	1,295,114,588	$	—	$	—	$	1,295,114,588
Short Term Investments		1,890,000		12,500,000		—		14,390,000
Total Investments in Securities	$	1,297,004,588	$	12,500,000	$	—	$	1,309,504,588

^aIncludes common and preferred stocks.

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

10. Subsequent Events

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

Abbreviations

ADR	American Depositary Receipt
IDR	International Depositary Receipt

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Tax Information (unaudited)

Templeton Growth VIP Fund

At December 31, 2015, more than 50% of the Fund’s total assets were invested in securities of foreign issuers. In most instances, foreign taxes were withheld from income paid to the Fund on these investments. As shown in the table below, the Fund hereby reports to shareholders the foreign source income and foreign taxes paid, pursuant to Section 853 of the Internal Revenue Code. This written statement will allow shareholders of record on June 14, 2016, to treat their proportionate share of foreign taxes paid by the Fund as having been paid directly by them. The shareholder shall consider these amounts as foreign taxes paid in the tax year in which they receive the Fund distribution.

The following table provides a detailed analysis of foreign tax paid, and foreign source income as reported by the Fund, to Class 1, Class 2, and Class 4 shareholders of record.

Class	Foreign Tax Paid Per Share	Foreign Source Income Per Share
Class 1	$0.0227	$0.2591
Class 2	$0.0227	$0.2276
Class 4	$0.0227	$0.2146

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.

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Index Descriptions

The indexes are unmanaged and include reinvestment of any income or distributions. They do not reflect any fees, expenses or sales charges.

For Russell Indexes: Russell Investment Group is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell^® is a trademark of Russell Investment Group.

See www.franklintempletondatasources.com for additional data provider information.

Barclays U.S. Aggregate Bond Index is a market capitalization-weighted index representing the U.S. investment-grade, fixed-rate, taxable bond market with index components for government and corporate, mortgage pass-through and asset-backed securities. All issues included are SEC registered, taxable, dollar denominated and nonconvertible, must have at least one year to final maturity and must be rated investment grade (Baa3/BBB-/BBB- or higher) using the middle rating of Moody’s, Standard & Poor’s and Fitch, respectively.

Barclays U.S. Government Index: Intermediate Component is the intermediate component of the Barclays U.S. Government Index, which includes public obligations of the U.S. Treasury with at least one year to final maturity and publicly issued debt of U.S. government agencies, quasi-federal corporations, and corporate or foreign debt guaranteed by the U.S. government.

Bloomberg Commodity Index comprises exchange-traded futures on physical commodities, which are weighted to account for economic significance and market liquidity.

Citigroup World Government Bond Index is a market capitalization-weighted index consisting of investment-grade world government bond markets.

Consumer Price Index (CPI) is a commonly used measure of the inflation rate.

Credit Suisse (CS) High Yield Index is designed to mirror the investable universe of the U.S. dollar-denominated high yield debt market.

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.

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 6/30/16, there were 313 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 6/30/16, there were 72 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 6/30/16, there were 55 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 Yield Funds Classification Average is an equally weighted average calculation of performance figures for all funds within the Lipper High Yield Funds Classification in the Lipper VIP underlying funds universe. Lipper High Yield Funds aim at high (relative) current yield from fixed income securities, have no quality or maturity restrictions, and tend to invest in lower grade debt issues. For the six-month period

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ended 6/30/16, there were 109 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 All Country World Index (ACWI) is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed and emerging markets.

MSCI All Country World Index (ACWI) ex USA Index captures large- and mid-capitalization representation across 22 of 23 developed markets countries (excluding the U.S.) and 23 emerging markets countries. The index covers approximately 85% of the global equity opportunity set outside the U.S.

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 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 2500^TM 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^TM Value Index is market capitalization weighted and measures performance of those Russell 2500^TM 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 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^®/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.

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Shareholder Information

Board Review of Investment Management Agreement

At a meeting held April 12, 2016, the Board of Trustees (Board), including a majority of trustees that are not “interested persons” as such term is defined in section 2(a)(19) of the Investment Company Act of 1940 (hereinafter referred to as “non-interested Trustees” or “independent Trustees”), approved renewal of the investment management agreement and investment sub-advisory agreement, as applicable, 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, along with periodic reports on expenses, shareholder services, legal and compliance matters, risk control, pricing, brokerage commissions and execution, and other services provided by each Investment Manager and investment sub-adviser (Manager(s)) and their affiliates, as well as marketing support payments made to financial intermediaries. Information furnished specifically in connection with the renewal process included reports for each Fund prepared by Broadridge Financial Solutions, Inc. (Broadridge), an independent organization, as well as additional material, including a Fund profitability analysis prepared by management. The Broadridge reports, which utilize data from Lipper, Inc. (Lipper), compared each 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 (FTI) 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 Managers and their 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 FTI organization, as well as a memorandum relating to economies of scale and an analysis concerning transfer agent fees charged by

an affiliate of the Managers. The Board also received a report on all marketing support payments made by FTI to financial intermediaries during the past year, as well as a memorandum relating to third-party servicing arrangements in response to a Guidance Update from the U.S. Securities and Exchange Commission (SEC) relating to mutual fund distribution and sub-accounting fees.

In considering such materials, the independent Trustees received assistance and advice from and met separately with independent counsel. While the investment management agreements and investment sub-advisory agreements, as applicable, 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 and investment sub-advisory agreement, as applicable, 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 each investment management agreement and investment sub-advisory agreement, as applicable, was in the best interests of such 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 Managers and their affiliates to the Funds and their shareholders, except as noted later with respect to investment performance and expenses. 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 continual efforts and expenditures in establishing effective business continuity plans and developing strategies to address cybersecurity threats. Additionally, the Board noted the Managers’ continued attention to pricing and valuation issues, particularly with respect to complex securities. Among other factors taken into account by the Board was the Managers’ best execution trading policies, including a favorable report by an independent portfolio trading analytical firm that also covered FOREX transactions. Consideration was also given to the experience of each Fund’s portfolio management team, the

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SHAREHOLDER INFORMATION

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 pre-designated list of funds within such person’s fund management area so as to be aligned with the interests of shareholders. The Board also took into account the quality of transfer agent and shareholder services provided Fund shareholders by an affiliate of the Manager and steps taken by FTI to enhance analytical support to the investment management groups and provide additional oversight of liquidity risk and complex securities. 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 FTI 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 Managers’ parent company and its commitment to the mutual fund business as evidenced by its continued introduction of new funds and reassessment of the fund offerings in response to the market environment.

INVESTMENT PERFORMANCE. The Board placed significant emphasis on the investment performance of each of the Funds in view of its importance to shareholders. While consideration was given to performance reports and discussions with portfolio managers at Board meetings throughout the year, particular attention in assessing performance was given to the Broadridge reports furnished for the agreement renewals of all Funds. The Broadridge 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, 2016, 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. In certain cases, income return was indicated as well. The following summarizes the performance results for each of the Funds and the Board’s view of such performance.

Franklin Founding Funds Allocation VIP 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 operation less than 10 years. The Broadridge report showed its

income return to be in the highest quintile of such Lipper universe for the one-year period, and on an annualized basis to also be in the highest quintile of such universe for each of the previous three- and five-year periods. The Broadridge report showed the Fund’s total return for the one-year period to be in the lowest performing quintile of such performance universe, and on an annualized basis to also be in the lowest performing quintile of such universe for the previous three- and five-year periods. In assessing the relevance of such comparative performance, the Board noted the Fund is not actively managed and that its performance reflects those of the three underlying funds in which it invests in equal portions, which are not perfectly aligned to the investment style of comparative funds. The Board found the Fund’s performance as shown in the Broadridge report to be acceptable in light of the unique investment strategy of the Fund.

Franklin Global Real Estate VIP Fund – The performance universe for this Fund consisted of the Fund and all global real estate funds underlying variable insurance products as selected by Lipper. The Broadridge report showed the Fund’s total return to be in the highest performing quintile of such universe for the one-year period, and on an annualized basis to also be in the highest performing quintile of such universe for the previous three- and five-year periods, but in the lowest performing quintile of such universe for the previous 10-year period. Noting the marked improvement in performance in recent years, the Board was satisfied with the Fund’s comparative performance as shown in the Broadridge report.

Franklin Growth and Income VIP 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 Broadridge report showed the Fund’s income return during the one-year period to be in the highest quintile of its Lipper 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 Broadridge report showed the Fund’s total return for the one-year period to be in the highest performing quintile of its performance universe, and on an annualized basis to be in the second-highest performing quintile of such universe for each of the previous three-, five-, and 10-year periods. The Board found the Fund’s comparative performance as shown in the Broadridge report to be satisfactory.

Franklin High Income VIP Fund – The performance universe for this Fund consisted of the Fund and all high yield funds underlying variable insurance products as selected by Lipper.

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The Broadridge report showed the Fund’s income 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 and second-highest quintile of such universe for the previous three- and five-year periods, respectively, and to be in the middle quintile of such universe for the previous 10-year period. The Broadridge report showed the Fund’s total return to be in the lowest performing quintile of its performance universe for the one-year period, and on an annualized basis to be in the lowest performing quintile of such universe for the previous three-year period, and in the second-lowest performing quintile of such universe for the previous five- and 10-year periods. The Board found the Fund’s comparative performance as shown in the Broadridge report to be acceptable given the Fund’s income objective.

Franklin Income VIP 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 Broadridge report showed the Fund’s income return to be in the highest quintile of such performance 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 Broadridge report showed the Fund’s total return to be in the lowest performing quintile of its performance universe for the one-year period, and on an annualized basis to be in the lowest performing quintile of such universe for the previous three- and five-year periods, and the middle performing quintile of such universe for the previous 10-year period. The Board found the Fund’s comparative performance as shown in the Broadridge report to be acceptable, noting the Fund’s income objective.

Franklin Large Cap Growth VIP Fund – The performance universe for this Fund consisted of the Fund and all multi-cap growth funds underlying variable insurance products as selected by Lipper. The Broadridge report showed the Fund’s total return to be in the second-highest performing quintile of such universe for the one-year period, and on an annualized basis to be in the middle performing quintile of such universe for the previous three-, five- and 10-year periods. The Board found the Fund’s comparative performance as shown in the Broadridge report to be acceptable.

Franklin Mutual Global Discovery VIP Fund – The performance universe for this Fund consisted of the Fund and all global multi-cap value funds underlying variable insurance products as selected by Lipper. The Broadridge report showed the Fund’s

total return to be in the highest performing quintile of such universe for the one-year period, and on an annualized basis to also be in the highest performing quintile of such universe for the previous three-, five- and 10-year periods. The Board found the Fund’s overall comparative performance as set forth in the Broadridge report to be satisfactory.

Franklin Mutual Shares VIP 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 Broadridge report showed the Fund’s total return for the one-year period to be in the second-lowest performing quintile of the performance universe, and on an annualized basis to be in the lowest performing quintile of such universe for the previous three- and five-year periods, and to be in the second-lowest performing quintile for the previous 10-year period. The Board found the Fund’s overall performance as set forth in the Broadridge report to be unacceptable, but acknowledged management’s explanation that the Fund is managed conservatively and the Fund’s cash holdings detract from relative performance in sharply rising markets. The Board indicated it would continue to monitor the Fund.

Franklin Rising Dividends VIP 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 Broadridge report showed the Fund’s comparative total return to be in the highest performing quintile of the performance universe for the one-year period, and on an annualized basis to be in the middle performing quintile of such universe for the previous three-year period, the second-highest performing quintile of such universe for the previous five-year period, and the highest performing quintile of such universe for the previous 10-year period. The Board found the Fund’s comparative performance as set forth in the Broadridge report to be satisfactory.

Franklin Small Cap Value VIP 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 Broadridge report showed the Fund’s total return for the one-year period to be in the highest performing quintile of such performance universe, and on an annualized basis to be in the second-lowest performing quintile of such universe for the previous three-year period, and in the second-highest performing quintile of such universe for each of the previous five- and 10-year periods. The Board found the Fund’s comparative performance as set forth in the Broadridge report to be satisfactory, noting the Fund’s improved performance over the past year.

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Franklin Small-Mid Cap Growth VIP 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 Broadridge report showed the Fund’s total return for the one-year period to be in the second-lowest performing quintile of such universe, and on an annualized basis to be in the middle performing quintile of such universe for the previous three-year period, and the second-lowest performing quintile of such universe for each of the previous five- and 10-year periods. The Board discussed with management its ongoing attention to the Fund. The Board found the Fund’s performance to be acceptable and noted that the three-year annualized total return performance was eight basis points above the median.

Franklin Strategic Income VIP 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 Broadridge report showed the Fund’s income return to be in the highest quintile of such Lipper universe for the one-year period, 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. The Broadridge report showed the Fund’s total return to be in the lowest performing quintile of such universe during the one-year period, and on an annualized basis to be in the second-lowest performing quintile of such universe for the previous three- and five-year periods, and the second-highest performing quintile of such universe for the previous 10-year period. The Board found the Fund’s performance as shown in the Broadridge report to be acceptable, noting its income orientation.

Franklin U.S. Government Securities VIP 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 Broadridge report showed the Fund’s income return for the one-year period to be in the highest quintile of such universe, and on an annualized basis to also be in the highest quintile of such universe for each of the previous three-, five- and 10-year periods. The Broadridge report showed the Fund’s total return to be in the highest performing quintile of such universe for the one-year period, and on an annualized basis to be in the middle performing quintile of such universe for the previous three- and 10-year periods, and in the second-lowest performing quintile of such universe for the previous five-year period. The Board found the Fund’s comparative performance as shown in the Broadridge report to be satisfactory, noting the Fund’s income objective and the nature of the Fund’s investments, which were primarily in U.S. mortgage backed securities.

Templeton Developing Markets VIP 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 Broadridge report showed the Fund’s comparative total return for the one-year period to be in the lowest performing quintile of such performance universe, and on an annualized basis to also be in the lowest performing quintile of such universe for the previous three-year period and in the second-lowest performing quintile of such universe for each of the previous five- and 10-year periods. The Board found the performance of the Fund as set forth in the Broadridge report to be unacceptable and discussed with management measures it was implementing to address the performance, including a more rigorous selling discipline. The Board concluded that continued monitoring is warranted in light of the Fund’s underperformance, but did not believe a portfolio management change was needed at this time given management’s attention to the Fund.

Templeton Foreign VIP Fund – The performance universe for this Fund consisted of the Fund and all international large-cap value funds underlying variable insurance products as selected by Lipper. The Broadridge report showed the Fund’s comparative total return for the one-year period to be in the lowest performing quintile of such performance universe and on an annualized basis to be in the lowest performing quintile of such universe for the previous three-year period, in the second-lowest performing quintile of such universe for the previous five-year period, and in the second-highest performing quintile of such universe for the previous 10-year period. The Board found the Fund’s comparative investment performance as set forth in the Broadridge report to be acceptable, noting that performance was in the highest or second-highest quintile in seven of the previous eight years.

Templeton Global Bond VIP 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 Broadridge report showed the Fund’s income return for the one-year period to be in the highest quintile of such Lipper universe, and on an annualized basis to also be in the highest quintile of such universe for the previous three-, five- and 10-year periods. The Broadridge report showed the Fund’s total return for the one-year period to be in the second-lowest performing quintile of its performance universe, and on an annualized basis to be in the highest performing quintile of such universe for each of the previous three-, five- and 10-year annualized periods. The Board was satisfied with the Fund’s comparative performance as set forth in the Broadridge report.

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Templeton Growth VIP Fund – The performance universe for this Fund consisted of the Fund and all global large-cap value funds underlying variable insurance products as selected by Lipper. The Broadridge report showed the Fund’s total return for the one-year period to be in the second-lowest performing quintile of such performance universe, and on an annualized basis to also be in the second-lowest performing quintile of such universe for each of the previous three- and five-year periods. (Although the Fund has been in operation for 10 years, Lipper comparative data is not available for this longer period.) The Board found the Fund’s comparative performance as set forth in the Broadridge report to be acceptable, noting that the Fund’s performance had been in the highest or second-highest quintile in three of the previous five one-year periods. They also observed that the Fund’s annualized performance was within 1% of the median for the five- year period and at the median for the 10-year period.

COMPARATIVE EXPENSES. Consideration was given to information contained in the Broadridge reports furnished for each Fund, which compared its management fee and total expense ratio with those of a group of other funds selected by Lipper as its appropriate Lipper expense group. Lipper expense data is based upon information taken from each fund’s most recent annual report, which reflects historical asset levels that may be quite different from those currently existing, particularly in a period of market volatility. While recognizing such inherent limitation and the fact that expense ratios generally increase as assets decline and decrease as assets grow, the Board believed the independent analysis conducted by Lipper to be an appropriate measure of comparative expenses. In reviewing comparative costs, Lipper provides information on the Funds’ 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 quintiles of their respective Lipper expense groups:

Franklin Small Cap Value VIP Fund, Franklin Growth and Income VIP Fund, Franklin High Income VIP Fund, Franklin Income VIP Fund and Templeton Global Bond VIP Fund. The Board was satisfied with the comparative contractual investment management fees and expenses of these Funds as shown in their Broadridge reports.

The contractual investment management fee rates and actual total expense ratios of each of Franklin Global Real Estate VIP Fund, Franklin Large Cap Growth VIP Fund, Franklin Mutual Global Discovery VIP Fund and Templeton Developing Markets VIP Fund were above the medians of their Lipper expense groups. In the case of contractual management fees, Franklin Mutual Global Discovery VIP Fund exceeds the median by 23.6 basis points, while the other Funds exceed the median by less than 16 basis points. The Board found the comparative contractual investment management fees and expenses of these Funds as shown in their Broadridge reports to be acceptable.

The contractual investment management fee rates of the following Funds were above the median of their Lipper expense groups, while the actual total expense ratios were at the median: Franklin Small-Mid Cap Growth VIP Fund and Templeton Growth VIP Fund. The Board found the comparative expenses of these Funds as shown in the Broadridge reports to be acceptable.

The contractual investment management fee rates of the following Funds were at or above the median of their Lipper expense groups, while the actual total expense ratios were at or below the median: Franklin Founding Funds Allocation VIP Fund and Franklin Mutual Shares VIP Fund. The Board found the comparative expenses of these Funds as shown in their Broadridge reports to be acceptable, noting that a fee waiver was in place for Franklin Founding Funds Allocation VIP Fund.

The contractual investment management fee rate and actual total expense ratio for Franklin Rising Dividends VIP Fund were both below the median of its Lipper expense group. The Board found the comparative expenses of Franklin Rising Dividends VIP Fund as shown in the Broadridge reports to be acceptable.

The contractual investment management fee rates and actual total expense ratios for the following Funds were in the first or second quintiles of their expense groups, meaning they were among the least expensive of their peers: Franklin Strategic Income VIP Fund, Franklin U.S. Government Securities VIP Fund and Templeton Foreign VIP Fund. The Board was satisfied with the comparative expenses of these Funds as shown in their Broadridge reports.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

SHAREHOLDER INFORMATION

MANAGEMENT PROFITABILITY. The Board also considered the level of profits realized by the Managers and their 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, 2015, being the most recent fiscal year-end for Franklin Resources, Inc., the Managers’ parent. In reviewing the analysis, the Board recognized that allocation methodologies are inherently subjective and various allocation methodologies may be reasonable while producing different results. In this respect, the Board noted that while management continually makes refinements to its methodologies in response to organizational and product related changes, the overall approach as defined by the primary drivers and activity measurements has remained consistent with that used in the Funds’ profitability report presentations from prior years. Additionally, the Funds’ independent registered public accounting firm had been engaged by the Manager to periodically review the reasonableness of the allocation methodologies to be used solely 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 Managers and their affiliates may not be fully reflected in the expenses allocated to each Fund in determining its profitability, as well as the fact that the level of profits, to a certain extent, reflected operational cost savings and efficiencies initiated by management. The Board also took into account management’s expenditures in improving services provided the Funds, as well as the need to implement systems to meet additional regulatory and compliance requirements resulting from statutes such as the Sarbanes-Oxley and Dodd-Frank Acts and recent SEC and other regulatory requirements. In addition, the Board considered a third-party study comparing the profitability of the Managers’ parent on an overall basis to other publicly held managers broken down to show profitability from management operations exclusive of distribution expenses, as well as profitability including distribution expenses. The Board also considered the extent to which the Managers and their affiliates might derive ancillary benefits from Fund operations, including potential benefits resulting from personnel and systems enhancements necessitated by fund growth, increased leverage with the service providers and counterparties, 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 Managers and their 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 a 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 Founding Funds Allocation VIP 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, other than Franklin Rising Dividends VIP Fund, their management fees contain breakpoints that extend beyond their existing asset sizes. To the extent economies of scale may be realized by the Managers and their affiliates, the Board believed the schedule of investment management fees provides a sharing of benefits for each Fund and its shareholders. The investment management structure of the Franklin Rising Dividends VIP Fund provides for a fee of 0.750% on the first $500 million of net assets; 0.625% on the next $500 million of net assets; and 0.500% on assets in excess of $1 billion. This Fund had assets of approximately $1.5 billion at December 31, 2015, and in reviewing its fee structure, management stated its belief that this fee structure reaches a relatively low rate quickly, reflecting anticipated economies of scale. In support of such position, management pointed out the favorable management fee and total expense comparisons of this Fund within its Lipper expense group as previously discussed under “Comparative Expenses.” In light of such position and taking into account the fact that the reduced rate on assets in excess of the last breakpoint lowers the Fund’s overall investment management fee rate, the Board believed that the schedule of investment management fees provides a sharing of benefits for the Fund and its shareholders, but intends to monitor future growth and the appropriateness of adding additional breakpoints.

Proxy Voting Policies and Procedures

The Trust’s investment manager has established Proxy Voting Policies and Procedures (Policies) that the Trust uses to

SI-6 Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

SHAREHOLDER INFORMATION

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.

Semiannual Report SI-7

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 help ensure we provide you with quality service, all calls to and from our service areas are monitored and/or recorded.

©2016 Franklin Templeton Investments. All rights reserved. VIP1 S 08/16

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 Company 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 changes in the Registrant’s internal controls or in other factors that could materially affect the internal controls over financial reporting 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, 2016

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, 2016

By	/s/  GASTON GARDEY
	Gaston Gardey
	Chief Financial Officer and Chief Accounting Officer

Date August 25, 2016

EX-99.CODE

Exhibit 12(a)(1)

CODE OF ETHICS FOR PRINCIPAL EXECUTIVES & SENIOR FINANCIAL OFFICERS

PROCEDURES Revised December 18, 2009

FRANKLIN TEMPLETON FUNDS

CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND

SENIOR FINANCIAL OFFICERS

I. Covered Officers and Purpose of the Code

This code of ethics (the “Code”) applies to the Principal Executive Officers, Principal Financial Officer and Principal Accounting Officer (the “Covered Officers,” each of whom is set forth in Exhibit A) of each investment company advised by a Franklin Resources subsidiary and that is registered with the United States Securities & Exchange Commission (“SEC”) (collectively, “FT Funds”) for the purpose of promoting:

• Honest and ethical conduct, including the ethical resolution of actual or apparent conflicts of interest between personal and professional relationships;

• Full, fair, accurate, timely and understandable disclosure in reports and documents that a registrant files with, or submits to, the SEC and in other public communications made by or on behalf of the FT Funds;

• Compliance with applicable laws and governmental rules and regulations;

• The prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and

• Accountability for adherence to the Code.

Each Covered Officer will be expected to adhere to a high standard of business ethics and must be sensitive to situations that may give rise to actual as well as apparent conflicts of interest.

II. Other Policies and Procedures

This Code shall be the sole code of ethics adopted by the Funds for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder.

Franklin Resources, Inc. has separately adopted the CODE OF ETHICS AND BUSINESS CONDUCT (“Business Conduct”), which is applicable to all officers, directors and employees of Franklin Resources, Inc., including Covered Officers. It summarizes the values, principles and business practices that guide the employee’s business conduct and also provides a set of basic principles to guide officers, directors and employees regarding the minimum ethical requirements expected of them. It supplements the values, principles and business conduct identified in the Code and other existing employee policies.

Additionally, the Franklin Templeton Funds have separately adopted the CODE OF ETHICS AND POLICY STATEMENT ON INSIDER TRADING governing personal securities trading and other related matters. The Code for Insider Trading provides for separate requirements that apply to the Covered Officers and others, and therefore is not part of this Code.

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Insofar as other policies or procedures of Franklin Resources, Inc., the Funds, the Funds’ adviser, principal underwriter, or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superceded by this Code to the extent that they overlap or conflict with the provisions of this Code. Please review these other documents or consult with the Legal Department if have questions regarding the applicability of these policies to you.

III. Covered Officers Should Handle Ethically Actual and Apparent Conflicts of Interest

OVERVIEW. A “conflict of interest” occurs when a Covered Officer’s private interest interferes with the interests of, or his or her service to, the FT Funds. For example, a conflict of interest would arise if a Covered Officer, or a member of his family, receives improper personal benefits as a result of apposition with the FT Funds.

Certain conflicts of interest arise out of the relationships between Covered Officers and the FT Funds and already are subject to conflict of interest provisions in the Investment Company Act of 1940 (“Investment Company Act”) and the Investment Advisers Act of 1940 (“Investment Advisers Act”). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the FT Funds because of their status as “affiliated persons” of the FT Funds. The FT Funds’ and the investment advisers’ compliance programs and procedures are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code.

Although typically not presenting an opportunity for improper personal benefit, conflicts arise from, or as a result of, the contractual relationship between the FT Funds, the investment advisers and the fund administrator of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for the FT Funds, for the adviser, the administrator, or for all three), be involved in establishing policies and implementing decisions that will have different effects on the adviser, administrator and the FT Funds. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the FT Funds, the adviser, and the administrator and is consistent with the performance by the Covered Officers of their duties as officers of the FT Funds. Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically. In addition, it is recognized by the FT Funds’ Boards of Directors (“Boards”) that the Covered Officers may also be officers or employees of one or more other investment companies covered by this or other codes.

Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the FT Funds.

Each Covered Officer must:

• Not use his or her personal influence or personal relationships improperly to influence investment decisions or financial reporting by the FT Funds whereby the Covered Officer would benefit personally to the detriment of the FT Funds;

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• Not cause the FT Funds to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit the FT Funds;

• Not retaliate against any other Covered Officer or any employee of the FT Funds or their affiliated persons for reports of potential violations that are made in good faith;

• Report at least annually the following affiliations or other relationships:/1

• all directorships for public companies and all companies that are required to file reports with the SEC;

• any direct or indirect business relationship with any independent directors of the FT Funds;

• any direct or indirect business relationship with any independent public accounting firm (which are not related to the routine issues related to the firm’s service as the Covered Persons accountant); and

• any direct or indirect interest in any transaction with any FT Fund that will benefit the officer (not including benefits derived from the advisory, sub-advisory, distribution or service agreements with affiliates of Franklin Resources).

These reports will be reviewed by the Legal Department for compliance with the Code.

There are some conflict of interest situations that should always be approved in writing by Franklin Resources General Counsel or Deputy General Counsel, if material. Examples of these include/2:

• Service as a director on the board of any public or private Company;

• The receipt of any gifts in excess of $100 from any person, from any corporation or association

• The receipt of any entertainment from any Company with which the FT Funds has current or prospective business dealings unless such entertainment is business related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety. Notwithstanding the foregoing, the Covered Officers must obtain prior approval from the Franklin Resources General Counsel for any entertainment with a value in excess of $1000.

• Any ownership interest in, or any consulting or employment relationship with, any of the FT Fund’s service providers, other than an investment adviser, principal underwriter, administrator or any affiliated person thereof;

• A direct or indirect financial interest in commissions, transaction charges or spreads paid by the FT Funds for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer’s employment, such as compensation or equity ownership.

Franklin Resources General Counsel or Deputy General Counsel will provide a report to the FT Funds Audit Committee of any approvals granted at the next regularly scheduled meeting.

IV. Disclosure and Compliance

• Each Covered Officer should familiarize himself with the disclosure requirements generally applicable to the FT Funds;

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• Each Covered Officer should not knowingly misrepresent, or cause others to misrepresent, facts about the FT Funds to others, whether within or outside the FT Funds, including to the FT Funds’ directors and auditors, and to governmental regulators and self-regulatory organizations;

• Each Covered Officer should, to the extent appropriate within his or her area of responsibility, consult with other officers and employees of the FT Funds, the FT Fund’s adviser and the administrator with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the FT Funds file with, or submit to, the SEC and in other public communications made by the FT Funds; and

• It is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations.

V. Reporting and Accountability

Each Covered Officer must:

• Upon becoming a covered officer affirm in writing to the Board that he or she has received, read, and understands the Code (see Exhibit B);

• Annually thereafter affirm to the Board that he has complied with the requirements of the Code; and

• Notify Franklin Resources’ General Counsel or Deputy General Counsel promptly if he or she knows of any violation of this Code. Failure to do so is itself is a violation of this Code.

Franklin Resources’ General Counsel and Deputy General Counsel are responsible for applying this Code to specific situations in which questions are presented under it and have the authority to interpret this Code in any particular situation./3 However, the Independent Directors of the respective FT Funds will consider any approvals or waivers/4 sought by any Chief Executive Officers of the Funds.

The FT Funds will follow these procedures in investigating and enforcing this Code:

• Franklin Resources General Counsel or Deputy General Counsel will take all appropriate action to investigate any potential violations reported to the Legal Department;

• If, after such investigation, the General Counsel or Deputy General Counsel believes that no violation has occurred, The General Counsel is not required to take any further action;

• Any matter that the General Counsel or Deputy General Counsel believes is a violation will be reported to the Independent Directors of the appropriate FT Fund;

• If the Independent Directors concur that a violation has occurred, it will inform and make a recommendation to the Board of the appropriate FT Fund or Funds, which will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the investment adviser or its board; or a recommendation to dismiss the Covered Officer;

• The Independent Directors will be responsible for granting waivers, as appropriate; and

• Any changes to or waivers of this Code will, to the extent required, are disclosed as provided by SEC rules./5

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VI. Other Policies and Procedures

This Code shall be the sole code of ethics adopted by the FT Funds for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the FT Funds, the FT Funds’ advisers, principal underwriter, or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The FT Code of Ethics and Policy Statement On Insider Trading, adopted by the FT Funds, FT investment advisers and FT Fund’s principal underwriter pursuant to Rule 17j-1 under the Investment Company Act, the Code of Ethics and Business Conduct and more detailed policies and procedures set forth in FT’s Employee Handbook are separate requirements applying to the Covered Officers and others, and are not part of this Code.

VII. Amendments

Any amendments to this Code, other than amendments to Exhibit A, must be approved or ratified by a majority vote of the FT Funds’ Board including a majority of independent directors.

VIII. Confidentiality

All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the FT Funds’ Board and their counsel.

IX. Internal Use

The Code is intended solely for the internal use by the FT Funds and does not constitute an admission, by or on behalf of any FT Funds, as to any fact, circumstance, or legal conclusion.

X. Disclosure on Form N-CSR

Item 2 of Form N-CSR requires a registered management investment company to disclose annually whether, as of the end of the period covered by the report, it has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these officers are employed by the registrant or a third party. If the registrant has not adopted such a code of ethics, it must explain why it has not done so.

The registrant must also: (1) file with the SEC a copy of the code as an exhibit to its annual report; (2) post the text of the code on its Internet website and disclose, in its most recent report on Form N-CSR, its Internet address and the fact that it has posted the code on its Internet website; or (3) undertake in its most recent report on Form N-CSR to provide to any person without charge, upon request, a copy of the code and explain the manner in which such request may be made. Disclosure is also required of amendments to, or waivers (including implicit waivers) from, a provision of the code in the registrant’s annual report on Form N-CSR or on its website. If the registrant intends to satisfy the requirement to disclose amendments and waivers by posting such information on its website, it will be required to disclose its Internet address and this intention.

The Legal Department shall be responsible for ensuring that:

• a copy of the Code is filed with the SEC as an exhibit to each Fund’s annual report; and

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• any amendments to, or waivers (including implicit waivers) from, a provision of the Code is disclosed in the registrant’s annual report on Form N-CSR.

In the event that the foregoing disclosure is omitted or is determined to be incorrect, the Legal Department shall promptly file such information with the SEC as an amendment to Form N-CSR.

In such an event, the Fund Chief Compliance Officer shall review the Code and propose such changes to the Code as are necessary or appropriate to prevent reoccurrences.

EXHIBIT A

Persons Covered by the Franklin Templeton Funds

Code of Ethics

December 2013

FRANKLIN GROUP OF FUNDS

Edward B. Jamieson	President and Chief Executive Officer – Investment Management
Rupert H. Johnson, Jr.	President and Chief Executive Officer – Investment Management
William J. Lippman	President and Chief Executive Officer – Investment Management
Christopher Molumphy	President and Chief Executive Officer – Investment Management
Laura Fergerson	Chief Executive Officer Finance and Administration
Gaston R. Gardey	Chief Financial Officer and Chief Accounting Officer

FRANKLIN MUTUAL SERIES FUNDS

Peter Langerman	Chief Executive Officer – Investment Management
Laura Fergerson	Chief Executive Officer – Finance and Administration
Robert G. Kubilis	Chief Financial Officer and Chief Accounting Officer

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

William Yun	Chief Executive Officer – Investment Management
Laura Fergerson	Chief Executive Officer – Finance and Administration
Robert G. Kubilis	Chief Financial Officer and Chief Accounting Officer

TEMPLETON GROUP OF FUNDS

Mark Mobius	President and Chief Executive Officer – Investment Management
Christopher J. Molumphy	President and Chief Executive Officer – Investment Management
Norman Boersma	President and Chief Executive Officer – Investment Management
Donald F. Reed	President and Chief Executive Officer – Investment Management
Laura Fergerson	Chief Executive Officer – Finance and Administration
Mark H. Otani	Chief Financial Officer and Chief Accounting Officer

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EXHIBIT B

ACKNOWLEDGMENT FORM

DECEMBER

FRANKLIN TEMPLETON FUNDS CODE OF ETHICS

FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS

INSTRUCTIONS:

1. Complete all sections of this form.

2. Print the completed form, sign, and date.

3. Submit completed form to FT’s General Counsel c/o Code of Ethics Administration within 10 days of becoming a Covered Officer and by February 15th of each subsequent year.

INTER-OFFICE MAIL:	Code of Ethics Administration, Global Compliance SM-920/2
Fax:	(650) 312-5646
E-MAIL:	Preclear-Code of Ethics (internal address);
	lpreclear@frk.com (external address)

COVERED OFFICER’S NAME:

TITLE:

DEPARTMENT:

LOCATION:

CERTIFICATION FOR YEAR ENDING:

TO:  Franklin Resources General Counsel, Legal Department

I acknowledge receiving, reading and understanding the Franklin Templeton Fund’s Code of Ethics for Principal Executive Officers and Senior Financial Officers (the “Code”). I will comply fully with all provisions of the Code to the extent they apply to me during the period of my employment. I further understand and acknowledge that any violation of the Code may subject me to disciplinary action, including termination of employment.

Signature Date signed

1. Reporting of these affiliations or other relationships shall be made by completing the annual Directors and Officers Questionnaire and returning the questionnaire to Franklin Resources Inc, General Counsel or Deputy General Counsel.

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2. Any activity or relationship that would present a conflict for a Covered Officer may also present a conflict for the Covered Officer if a member of the Covered Officer’s immediate family engages in such an activity or has such a relationship. The Cover Person should also obtain written approval by FT’s General Counsel in such situations.

3. Franklin Resources General Counsel and Deputy General Counsel are authorized to consult, as appropriate, with members of the Audit Committee, counsel to the FT Funds and counsel to the Independent Directors, and are encouraged to do so.

4. Item 2 of Form N-CSR defines “waiver” as “the approval by the registrant of a material departure from a provision of the code of ethics” and “implicit waiver,” which must also be disclosed, as “the registrant’s failure to take action within a reasonable period of time regarding a material departure from a provision of the code of ethics that has been made known to an executive officer” of the registrant. See Part X.

5. See Part X.

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EX-99.CERT

Exhibit 12(a)(2)

I, Laura F. Fergerson, certify that:

1. I have reviewed this report on Form N-CSR of Franklin Templeton Variable Insurance Products Trust;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

8/25/2016

S\LAURA F. FERGERSON

Laura F. Fergerson

Chief Executive Officer – Finance and Administration

Exhibit 12(a)(2)

I, Gaston Gardey, certify that:

1. I have reviewed this report on Form N-CSR of Franklin Templeton Variable Insurance Products Trust;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

8/25/2016

S\GASTON GARDEY

Gaston Gardey

Chief Financial Officer and Chief Accounting Officer

EX-99.906CERT

Exhibit 12(b)

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

I, Laura F. Fergerson, Chief Executive Officer of the Franklin Templeton Variable Insurance Products Trust (the “Registrant”), certify, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1. The periodic report on Form N-CSR of the Registrant for the period ended 6/30/2016 (the “Form N-CSR”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Dated: 8/25/2016

S\LAURA F. FERGERSON

Laura F. Fergerson

Chief Executive Officer – Finance and Administration

Exhibit 12(b)

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

I, Gaston Gardey, Chief Financial Officer of the Franklin Templeton Variable Insurance Products Trust (the “Registrant”), certify, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1. The periodic report on Form N-CSR of the Registrant for the period ended 6/30/2016 (the “Form N-CSR”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Dated: 8/25/2016

S\GASTON GARDEY

Gaston Gardey

Chief Financial Officer and Chief Accounting Officer