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:     06/30/17

Item 1. Reports to Stockholders.

Semiannual Report June 30, 2017

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 Flex Cap Growth VIP Fund	FFC-1
Franklin Founding Funds Allocation VIP Fund	FFA-1
Franklin Global Real Estate VIP Fund	FGR-1
Franklin Growth and Income VIP Fund	FGI-1
Franklin Income VIP Fund	FI-1
*Statement of Additional Information Supplement	FI-7
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
*Prospectus Supplement	FRD-6
Franklin Small Cap Value VIP Fund	FSV-1
*Prospectus Supplement	FSV-7
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
Franklin VolSmart Allocation VIP Fund	FVA-1
Templeton Developing Markets VIP Fund	TD-1
Templeton Foreign VIP Fund	TF-1
*Prospectus Supplement	TF-7
Templeton Global Bond VIP Fund	TGB-1
Templeton Growth VIP Fund	TG-1
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 – 2

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.

i         Semiannual Report

Franklin Flex Cap Growth VIP Fund

We are pleased to bring you Franklin Flex Cap Growth VIP Fund’s semiannual report for the period ended June 30, 2017.

Class 2 Performance Summary as of June 30, 2017

The Fund’s Class 2 Shares delivered a +16.05% total return* for the six-month period ended June 30, 2017.

*The Fund has an expense reduction and a fee waiver associated with any investments it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 4/30/18. Fund investment results reflect the expense reduction and fee waiver; without these reductions, the results would have been lower.

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

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 FLEX CAP GROWTH VIP FUND

Fund Goal and Main Investments

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

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 risk of adverse developments in such areas of focus than a fund that invests in a wider variety of countries, regions, industries, sectors or investments. Foreign securities involve special risks, including currency fluctuations and economic and political uncertainties. 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 Russell 1000^® Growth Index generated a +13.99% total return, the Russell 3000^® Growth Index delivered a +13.69% total return, and the Standard & Poor’s 500^® Index (S&P 500^®) produced a +9.34% total return for the same period.¹

Economic and Market Overview

U.S. economic growth decelerated in 2017’s first quarter, largely due to slower growth in consumer spending and declines in private inventory investment and government spending. However, growth accelerated in the second quarter due to increases in consumer spending, business investment and federal government spending. The manufacturing sector

generally expanded, and the services sector also continued to grow. The unemployment rate decreased from 4.7% in December 2016 to 4.4% at period-end.² Monthly retail sales were volatile, but grew for most of the period. Annual inflation, as measured by the Consumer Price Index, decreased from 2.1% to 1.6% during the period.

The U.S. Federal Reserve (Fed), at its March meeting, increased the federal funds target rate from 0.50%–0.75% to 0.75%–1.00%. The Fed again increased its target range by a

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.

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

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FRANKLIN FLEX CAP GROWTH VIP FUND

Top 10 Holdings
6/30/17
Company Sector/Industry	% of Total Net Assets
Facebook Inc. Software & Services		5.8%
Amazon.com Inc. Retailing		5.3%
Microsoft Corp. Software & Services		5.1%
Alphabet Inc. Software & Services		5.0%
Mastercard Inc. Software & Services		3.9%
ServiceNow Inc. Software & Services		3.2%
Celgene Corp. Pharmaceuticals, Biotechnology & Life Sciences		3.2%
Apple Inc. Technology Hardware & Equipment		3.1%
Constellation Brands Inc. Food, Beverage & Tobacco		2.8%
The Priceline Group Inc. Retailing		2.3%

quarter point to 1.00%–1.25% at its June meeting. The Fed made both of these increases amid signs of a growing U.S. economy, a strengthening labor market and an improvement in business spending.

U.S. equity markets rose during the period, benefiting from mostly upbeat economic data, better U.S. corporate earnings and signs of improvement in the Chinese and European economies. Investor optimism arising from pro-growth and pro-business policy plans in the U.S. and the victory of Emmanuel Macron as France’s President also helped U.S. equities. However, concerns about the terms of the U.K.’s exit from the European Union (also known as “Brexit”), uncertainty about President Trump’s ability to implement reforms, and geopolitical tensions in the Middle East and the Korean peninsula curbed market sentiment. The broad U.S. stock market, as measured by the S&P 500, generated a +9.34% total return for the period.¹

Investment Strategy

We use fundamental, bottom-up research to seek companies meeting our criteria of growth potential, quality and valuation.

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

Manager’s Discussion

During the six months ended June 30, 2017, most sectors represented in the Fund’s portfolio delivered positive returns and contributed to absolute performance. Relative to the Russell 3000^® Growth Index, stock selection and an overweighted allocation to the information technology (IT) sector benefited results, and security selection in the consumer discretionary sector also contributed.³

Within IT, cloud-based solutions provider ServiceNow contributed to the Fund’s performance. The company has been sustaining the growth of its core IT Service Management solutions segment, while also meaningfully growing its emerging IT Operations and Enterprise Service Management solutions platform. Facebook, a social media company, and Mobileye, a developer of advanced driver assistance systems, also both benefited from favorable quarterly performance, and Mobileye was acquired by Intel⁴ during the period.

In the consumer discretionary sector, electric car manufacturer Tesla, online travel company Priceline Group and online marketplace Amazon.com contributed to the Fund’s relative performance. Tesla is preparing for its Model 3 production launch later this year, and an increase in hotel bookings delivered attractive profit margins for Priceline. Amazon, with its Prime membership and third-party sales driving profit growth, continued to take market share from traditional retailers. In June, Amazon announced an agreement to acquire Whole Foods,⁴ indicating Amazon’s intention to disrupt the entire grocery ecosystem.

3. The IT sector comprises semiconductors and semiconductor equipment, software and services, and technology hardware and equipment in the SOI. The consumer discretionary sector comprises automobiles and components, consumer durables and apparel, consumer services, media and retailing in the SOI.

4. Not a Fund holding.

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FRANKLIN FLEX CAP GROWTH VIP FUND

In consumer staples, food and beverage company Constellation Brands benefited results.⁵ The company continued to take market share from premium light and craft beer makers. The Mexican import category has experienced robust growth driven by Constellation, and the company experienced a high sales growth rate.

Other notable contributors to the Fund’s relative performance included wireless telecommunication services provider Verizon Communications and industrial products manufacturer Mettler-Toledo International. The Fund’s relative results benefited from a lack of exposure to Verizon, which has continued to face intense competition that has led the industry into unlimited data packages. Precision instruments supplier Mettler-Toledo International reported solid revenue, earnings and income growth, sending its shares higher and contributing to Fund results.

Conversely, key detractors from the Fund’s relative performance included stock selection in the health care sector.⁶ Within the sector, our new positions in biopharmaceutical research company Incyte and oncology-focused biopharmaceutical firm Tesaro fell in value later in the period and hindered results. Incyte suffered in the second half of the period when it announced that approval for baricitinib, which the company licensed to Eli Lilly,⁴ would be delayed, compromising its market position as competitors will likely get to the market first. Tesaro declined toward period-end due to investors’ fears that competitor Clovis Oncology’s⁴ Rubraca 2L ovarian maintenance study would lead to data similar to Tesaro’s Zejula’s results, splitting the market equally between the two compounds. These concerns, which proved to be true in June, caused downward revisions to investors’ Zejula market share assumptions and revenue estimates.

In the energy sector, oil and natural gas provider Concho Resources detracted from relative performance. The company’s shares fell along with oil prices amid fears that rising U.S. oil supply would lead to rising global crude inventories next year.

Other detractors from the Fund’s relative results included theater operator IMAX, IT software and equipment company Apple, and global financial services firm Goldman Sachs Group. Shares of IMAX struggled during the period as the domestic summer box office has been disappointing relative to initial expectations driven, mostly by poorly reviewed films and franchise fatigue. Although Apple benefited from solid

iPhone7 sales and anticipation of strong IPhone8 sales starting this fall and aided absolute performance, our underweighting in the company compared to the benchmark index detracted from relative performance. Goldman Sachs reported weak first-quarter earnings, in contrast with stronger results from its peers.

Thank you for your participation in Franklin Flex 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, 2017, 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, state, 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 consumer staples sector comprises food and staples retailing; and food, beverage and tobacco in the SOI.

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

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FRANKLIN FLEX CAP GROWTH VIP FUND

Class 2 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: (1) transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes; and (2) 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 table below shows Fund-level ongoing expenses and can help you understand these costs 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 table below provides information about the actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of ongoing Fund expenses but does not include the effect of ongoing Contract expenses, is used to calculate the “Ending Account Value.” You can estimate the Fund-level expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number under the headings “Actual” and “Fund-Level Expenses Paid During Period” (if Fund-Level Expenses Paid During Period were $7.50, then 8.6 × $7.50 = $64.50). In this illustration, the estimated expenses paid this period at the Fund level are $64.50.

Hypothetical Example for Comparison with Other Mutual Funds

Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other mutual funds offered through the Contract. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds offered through the Contract.

Please note that expenses shown in the table are meant to highlight ongoing costs at the Fund level only and do not reflect any ongoing expenses at the Contract level, or transaction expenses at either the Fund or Contract levels. In addition, 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.

		Actual (actual return after expenses)				Hypothetical (5% annual return before expenses)
Share Class	Beginning Account Value 1/1/17		Ending Account Value 6/30/17	Fund-Level Expenses Paid During  Period 1/1/17–6/30/17	1,2		Ending Account Value 6/30/17	Fund-Level Expenses Paid During  Period 1/1/17–6/30/17	1,2	Net Annualized Expense Ratio	2
Class 2	$1,000		$1,160.50	$5.14			$1,020.03	$4.81		0.96%

1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above — in the far right column — multiplied by the simple average account value over the period indicated, and then multiplied by 181/365 to reflect the one-half year period.

2. Reflects expenses after fee waivers and expense reimbursements. Does not include any ongoing expenses of the Contract for which the Fund is an investment option or acquired fund fees and expenses.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Highlights

Franklin Flex Cap Growth VIP Fund

	Six Months Ended June 30, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 2
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$5.89			$7.09			$16.61			$18.11			$13.21			$12.09
Income from investment operationsa:
Net investment income (loss)b		(0.01	)		(0.03	)		(0.06	)		(0.08	)		(0.01	)		0.01
Net realized and unrealized gains (losses)		0.96			(0.20	)		1.00			1.09			4.95			1.11
Total from investment operations		0.95			(0.23	)		0.94			1.01			4.94			1.12
Less distributions from:
Net investment income		—			—			—			—			(—	)c		—
Net realized gains		(0.02	)		(0.97	)		(10.46	)		(2.51	)		(0.04	)		—
Total distributions		(0.02	)		(0.97	)		(10.46	)		(2.51	)		(0.04	)		—
Net asset value, end of period		$6.82			$5.89			$7.09			$16.61			$18.11			$13.21
Total returnd		16.05%			(2.89)%			4.37%			6.11%			37.48%			9.26%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		1.35%			1.36%			1.33%			1.20%			1.18%			1.18%
Expenses net of waiver and payments by affiliates		0.96%			0.96%			0.96%			0.95%			0.93%			0.93%
Net investment income (loss)		(0.14)%			(0.44)%			(0.62)%			(0.46)%			(0.09)%			0.09%
Supplemental data
Net assets, end of period (000’s)		$80,427			$73,337			$82,901			$93,354			$169,123			$159,122
Portfolio turnover rate		32.65%			17.76%			88.15%			52.83%			52.15%			43.50%

^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.

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

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL HIGHLIGHTS

Franklin Flex Cap Growth VIP Fund (continued)

	Six Months Ended June 30, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 4
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$5.70			$6.90			$16.44			$17.96			$13.12			$12.01
Income from investment operationsa:
Net investment income (loss)b		(0.01	)		(0.03	)		(0.07	)		(0.10	)		(0.03	)		(—	)c
Net realized and unrealized gains (losses)		0.93			(0.20	)		0.99			1.09			4.91			1.11
Total from investment operations		0.92			(0.23	)		0.92			0.99			4.88			1.11
Less distributions from net realized gains		(0.02	)		(0.97	)		(10.46	)		(2.51	)		(0.04	)		—
Net asset value, end of period		$6.60			$5.70			$6.90			$16.44			$17.96			$13.12
Total returnd		16.06%			(2.98)%			4.32%			5.98%			37.28%			9.24%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		1.45%			1.46%			1.43%			1.30%			1.28%			1.28%
Expenses net of waiver and payments by affiliates		1.06%			1.06%			1.06%			1.05%			1.03%			1.03%
Net investment income (loss)		(0.24)%			(0.54)%			(0.72)%			(0.56)%			(0.19)%			(0.01)%
Supplemental data
Net assets, end of period (000’s)		$28,747			$27,163			$34,479			$31,355			$251,339			$216,607
Portfolio turnover rate		32.65%			17.76%			88.15%			52.83%			52.15%			43.50%

^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.

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

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Statement of Investments, June 30, 2017 (unaudited)

Franklin Flex Cap Growth VIP Fund
		Shares		Value
	Common Stocks 97.5%
	Automobiles & Components 1.7%
a	Tesla Inc.		5,000	$	1,808,050
	Banks 1.4%
	First Republic Bank/CA		15,000		1,501,500
	Capital Goods 6.0%
	3M Co.		6,000		1,249,140
	Fortive Corp.		20,000		1,267,000
	Raytheon Co.		15,000		2,422,200
	Rockwell Automation Inc.		10,000		1,619,600
					6,557,940
	Commercial & Professional Services 1.4%
a	IHS Markit Ltd.		33,787		1,487,979
	Consumer Durables & Apparel 1.1%
	NIKE Inc., B		20,000		1,180,000
	Consumer Services 1.3%
	Starbucks Corp.		25,000		1,457,750
	Diversified Financials 3.8%
	The Goldman Sachs Group Inc.		5,000		1,109,500
	Intercontinental Exchange Inc.		27,500		1,812,800
	MarketAxess Holdings Inc.		6,000		1,206,600
					4,128,900
	Energy 1.3%
a	Concho Resources Inc.		12,000		1,458,360
	Food & Staples Retailing 1.5%
	Costco Wholesale Corp.		10,000		1,599,300
	Food, Beverage & Tobacco 2.8%
	Constellation Brands Inc., A		16,000		3,099,680
	Health Care Equipment & Services 5.2%
	Danaher Corp.		12,500		1,054,875
a	IDEXX Laboratories Inc.		10,000		1,614,200
	Medtronic PLC		14,000		1,242,500
a	Nevro Corp.		7,000		521,010
	UnitedHealth Group Inc.		7,000		1,297,940
					5,730,525
	Materials 2.8%
	Ecolab Inc.		14,500		1,924,875
	Martin Marietta Materials Inc.		5,000		1,112,900
					3,037,775
	Media 3.1%
a	Altice USA Inc.		15,300		494,190
a	Charter Communications Inc., A		6,996		2,356,603
a	IMAX Corp.		25,500		561,000
					3,411,793
	Pharmaceuticals, Biotechnology & Life Sciences 10.2%
a	Biogen Inc.		7,000		1,899,520
a	Bioverativ Inc.		3,500		210,595
a	Celgene Corp.		26,500		3,441,555
a	Illumina Inc.		3,600		624,672

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Flex Cap Growth VIP Fund (continued)

		Shares		Value
	Common Stocks (continued)
	Pharmaceuticals, Biotechnology & Life Sciences (continued)
a	Incyte Corp.		8,000	$	1,007,280
a	Mettler-Toledo International Inc.		2,500		1,471,350
a	Regeneron Pharmaceuticals Inc.		3,000		1,473,420
a	Tesaro Inc.		7,000		979,020
					11,107,412
	Real Estate 2.8%
	American Tower Corp.		10,500		1,389,360
	Equinix Inc.		4,000		1,716,640
					3,106,000
	Retailing 9.0%
a	Amazon.com Inc.		6,000		5,808,000
a	Netflix Inc.		10,000		1,494,100
a	The Priceline Group Inc.		1,350		2,525,202
					9,827,302
	Semiconductors & Semiconductor Equipment 6.8%
	Analog Devices Inc.		30,000		2,334,000
a	Cavium Inc.		10,000		621,300
a	MACOM Technology Solutions Holdings Inc.		13,000		725,010
	NVIDIA Corp.		10,000		1,445,600
	Xilinx Inc.		35,000		2,251,200
					7,377,110
	Software & Services 32.2%
a	Adobe Systems Inc.		10,000		1,414,400
a	Alphabet Inc., C		6,000		5,452,380
a,b	Cloudera Inc.		2,300		36,846
a	Electronic Arts Inc.		16,000		1,691,520
a	Facebook Inc., A		42,000		6,341,160
	Mastercard Inc., A		35,000		4,250,750
	Microsoft Corp.		80,000		5,514,400
a	MuleSoft Inc.		2,300		57,362
a	Okta Inc., A		700		15,960
a	PTC Inc.		20,000		1,102,400
a	Salesforce.com Inc.		27,500		2,381,500
a	ServiceNow Inc.		32,500		3,445,000
	Visa Inc., A		26,500		2,485,170
a,b	Yext Inc.		2,200		29,326
a	Zendesk Inc.		35,000		972,300
					35,190,474
	Technology Hardware & Equipment 3.1%
	Apple Inc.		23,500		3,384,470
	Total Common Stocks (Cost $66,337,774)				106,452,320
	Short Term Investments 2.7%
	Money Market Funds (Cost $2,928,612) 2.7%
c,d	Institutional Fiduciary Trust Money Market Portfolio, 0.58%		2,928,612		2,928,612

Semiannual Report         FFC-9

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Flex Cap Growth VIP Fund (continued)

		Shares		Value
e	Investments from Cash Collateral Received for Loaned Securities (Cost $60,600) 0.0%†
	Money Market Funds 0.0%†
c,d	Institutional Fiduciary Trust Money Market Portfolio, 0.58%		60,600	$	60,600
	Total Investments (Cost $69,326,986) 100.2%				109,441,532
	Other Assets, less Liabilities (0.2)%				(267,724	)
	Net Assets 100.0%			$	109,173,808

^†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, 2017. See Note 1(b).

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

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

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

FFC-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, 2017 (unaudited)

	Franklin Flex Cap Growth VIP Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	66,337,774
Cost - Non-controlled affiliates (Note 3e)		2,989,212
Total cost of investments	$	69,326,986
Value - Unaffiliated issuers	$	106,452,320
Value - Non-controlled affiliates (Note 3e)		2,989,212
Total value of investments (includes securities loaned in the amount of $60,302)		109,441,532
Receivables:
Capital shares sold		5,981
Dividends and interest		29,968
Other assets		68
Total assets		109,477,549
Liabilities:
Payables:
Capital shares redeemed		88,515
Management fees		56,667
Distribution fees		51,118
Reports to shareholders		21,926
Payable upon return of securities loaned		60,600
Accrued expenses and other liabilities		24,915
Total liabilities		303,741
Net assets, at value	$	109,173,808
Net assets consist of:
Paid-in capital	$	58,335,203
Undistributed net investment income (loss)		(90,731	)
Net unrealized appreciation (depreciation)		40,114,546
Accumulated net realized gain (loss)		10,814,790
Net assets, at value	$	109,173,808
Class 2:
Net assets, at value	$	80,426,540
Shares outstanding		11,789,536
Net asset value and maximum offering price per share	$	6.82
Class 4:
Net assets, at value	$	28,747,268
Shares outstanding		4,357,387
Net asset value and maximum offering price per share	$	6.60

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

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Statement of Operations

for the six months ended June 30, 2017 (unaudited)

	Franklin Flex Cap Growth VIP Fund
Investment income:
Dividends:
Unaffiliated issuers	$	422,757
Non-controlled affiliates (Note 3e)		7,875
Income from securities loaned (net of fees and rebates)		1,639
Total investment income		432,271
Expenses:
Management fees (Note 3a)		526,830
Distribution fees: (Note 3c)
Class 2		97,472
Class 4		49,038
Custodian fees (Note 4)		415
Reports to shareholders		29,609
Professional fees		18,450
Trustees’ fees and expenses		245
Other		5,129
Total expenses		727,188
Expenses waived/paid by affiliates (Note 3e and 3f)		(204,186	)
Net expenses		523,002
Net investment income (loss)		(90,731	)
Realized and unrealized gains (losses):
Net realized gain (loss) from investments		11,207,767
Net change in unrealized appreciation (depreciation) on investments		4,610,984
Net realized and unrealized gain (loss)		15,818,751
Net increase (decrease) in net assets resulting from operations	$	15,728,020

FFC-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 Flex Cap Growth VIP Fund
	Six Months Ended June 30, 2017 (unaudited)			Year Ended December 31, 2016
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	(90,731	)	$	(487,848	)
Net realized gain (loss)		11,207,767			383,295
Net change in unrealized appreciation (depreciation)		4,610,984			(3,840,892	)
Net increase (decrease) in net assets resulting from operations		15,728,020			(3,945,445	)
Distributions to shareholders from:
Net realized gains:
Class 2		(181,739	)		(9,849,775	)
Class 4		(67,426	)		(4,640,994	)
Total distributions to shareholders		(249,165	)		(14,490,769	)
Capital share transactions: (Note 2)
Class 2		(4,294,097	)		3,213,957
Class 4		(2,510,544	)		(1,658,082	)
Total capital share transactions		(6,804,641	)		1,555,875
Net increase (decrease) in net assets		8,674,214			(16,880,339	)
Net assets:
Beginning of period		100,499,594			117,379,933
End of period	$	109,173,808		$	100,499,594
Undistributed net investment income (loss) included in net assets:
End of period	$	(90,731	)	$	—

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

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Notes to Financial Statements (unaudited)

Franklin Flex 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 eighteen separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Franklin Flex Cap Growth VIP Fund (Fund) is included in this report. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. The Fund offers two classes of shares: Class 2 and Class 4. Each class of shares may differ 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. 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 Fund’s business day. Occasionally, events occur between the time at which trading in a foreign security is completed and 4 p.m. Eastern time 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 4 p.m. Eastern time. 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

FFC-14         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Flex Cap Growth VIP Fund (continued)

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

When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the Fund’s NAV is not calculated, 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. 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.

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, 2017, 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 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. Distributable earnings are determined according to income tax regulations (tax basis) and 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.

Semiannual Report         FFC-15

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Flex Cap Growth VIP Fund (continued)

1. Organization and Significant Accounting

Policies (continued)

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

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

e. Accounting Estimates

The preparation of financial statements in accordance with 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, 2017, 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, 2017						Year Ended December 31, 2016
	Shares			Amount			Shares			Amount
Class 2 Shares:
Shares sold		401,623		$	2,553,835			2,595,394		$	15,855,206
Shares issued in reinvestment of distributions		26,648			181,739			1,710,030			9,849,775
Shares redeemed		(1,087,852	)		(7,029,671	)		(3,555,838	)		(22,491,024	)
Net increase (decrease)		(659,581	)	$	(4,294,097	)		749,586		$	3,213,957
Class 4 Shares:
Shares sold		287,176		$	1,795,941			593,508		$	3,606,248
Shares issued in reinvestment of distributions		10,232			67,426			831,720			4,640,994
Shares redeemed		(705,211	)		(4,373,911	)		(1,660,346	)		(9,905,324	)
Net increase (decrease)		(407,803	)	$	(2,510,544	)		(235,118	)	$	(1,658,082	)

3. Transactions with Affiliates

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

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

FFC-16         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Flex Cap Growth 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
1.000%	Up to and including $100 million
0.900%	Over $100 million, up to and including $250 million
0.850%	Over $250 million, up to and including $10 billion
0.800%	Over $10 billion, up to and including $12.5 billion
0.775%	Over $12.5 billion, up to and including $15 billion
0.750%	In excess of $15 billion

For the period ended June 30, 2017, the annualized effective investment management fee rate was 0.993% 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. Prior to January 1, 2014, the waiver was accounted for as a reduction to management fees. During the period ended June 30, 2017, the Fund held investments in affiliated management investment companies as follows:

	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, 0.58%	6,045,419		11,867,391		(14,923,598	)		2,989,212	$	2,989,212	$	7,875	$	—		—%a

^aRounds to less than 0.1%.

Semiannual Report         FFC-17

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Flex Cap Growth VIP Fund (continued)

3. Transactions with Affiliates (continued)

f. Waiver and Expense Reimbursements

Advisers 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 Class 2 and Class 4 of the Fund do not exceed 0.71% 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, 2018. 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, 2017, there were no credits earned.

5. Income Taxes

At June 30, 2017, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	69,718,435
Unrealized appreciation	$	41,210,731
Unrealized depreciation		(1,487,634	)
Net unrealized appreciation (depreciation)	$	39,723,097

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, 2017, aggregated 33,059,305 and 37,574,475, respectively.

At June 30, 2017, in connection with securities lending transactions, the Fund loaned equity investments and received $60,600 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 9, 2018. 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 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statement of Operations. During the period ended June 30, 2017, the Fund did not use the Global Credit Facility.

FFC-18         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Flex Cap Growth 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, 2017, 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. Investment Company Reporting Modernization

In October 2016, the U.S. Securities and Exchange Commission adopted new rules and amended existing rules (together, final rules) intended to modernize the reporting and disclosure of information by registered investment companies. In part, the final rules amend Regulation S-X and require standardized, enhanced disclosures about derivatives in investment company financial statements, as well as other amendments. The compliance date for the amendments to Regulation S-X is August 1, 2017. Management has reviewed the requirements and believes the adoption of the amendments to Regulation S-X will not have a material impact on the Fund’s financial statements and related disclosures.

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.

Semiannual Report         FFC-19

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Franklin Founding Funds Allocation VIP Fund

This semiannual report for Franklin Founding Funds Allocation VIP Fund covers the period ended June 30, 2017.

Class 2 Performance Summary as of June 30, 2017

The Fund’s Class 2 Shares delivered a +6.67% total return* for the six-month period ended June 30, 2017.

*The Fund has an expense reduction contractually guaranteed through 4/30/18. Fund investment results reflect the expense reduction; without this reduction, the results would have been lower.

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

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 Goal 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 +9.34% total return and the MSCI World Index produced a +11.02% total return for the same period.¹

Economic and Market Overview

The global economy generally expanded during the period under review. In this environment, global developed and emerging market stocks rose, as measured by the MSCI All Country World Index. Global markets were aided by improved industrial commodity prices at certain points during the period, generally upbeat economic data across regions, investor optimism about pro-growth and pro-business policies in the

*The asset allocation is based on the Statement of Investments (SOI), which classifies each underlying fund into a broad asset class.

U.S, hopes of tax reforms under the Trump administration, Emmanuel Macron’s election as France’s president and encouraging corporate earnings reports.

However, investors expressed concerns about the timing and economic effects of the U.K.’s exit from the European Union (also known as “Brexit”) and the U.S. executive order banning entry from some Muslim-majority countries. Other headwinds included the health of European banks, concerns about political uncertainty in the U.S. and European Union, geopolitical tensions in certain regions, worries about global oversupply in oil production despite a pact to extend cuts, and hawkish comments from key central bankers around the world toward period-end.

U.S. economic growth decelerated in 2017’s first quarter, largely due to slower growth in consumer spending and declines in private inventory investment and government spending. However, growth accelerated in the second quarter due to increases in consumer spending, business investment and federal government spending. The unemployment rate decreased from 4.7% in December 2016 to 4.4% at period-end.² Annual inflation, as measured by the Consumer Price Index, decreased from 2.1% to 1.6% during the period. After increasing its benchmark interest rate in March, the U.S. Federal Reserve (Fed), at its June meeting, made the widely anticipated increase to its target range for the federal funds rate from 0.75%–1.00% to 1.00%–1.25%, amid signs of a growing U.S. economy, a strengthening labor market and an improvement in business spending.

In Europe, the U.K.’s economy grew at a slower rate in 2017’s first quarter over the previous quarter, largely due to slower

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.

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).

FFA-2         Semiannual Report

FRANKLIN FOUNDING FUNDS ALLOCATION VIP FUND

growth in household spending. The eurozone’s growth increased in the first quarter over the previous quarter. The bloc’s annual inflation rate fluctuated during the reporting period and ended slightly higher from where it began. During the period, the European Central Bank kept its key policy rates unchanged.

In Asia, Japan’s quarterly gross domestic product (GDP) remained unchanged in 2017’s first quarter compared to 2016’s fourth quarter. In April 2017, the Bank of Japan (BOJ) slightly increased its GDP forecasts for the 2017–2018 fiscal year. However, the BOJ lowered its inflation forecast.

In emerging markets, Brazil’s quarterly GDP grew for the first time in two years, as its first-quarter 2017 GDP grew compared to the previous quarter. The country’s central bank cut its benchmark interest rate four times between January and June 2017 to spur economic growth. Russia’s GDP grew in 2017’s first quarter compared to the prior-year period. The Bank of Russia reduced its key interest rate in March, April and June 2017 to try to revive its economy. China’s economy grew faster in the first half of 2017 compared to the first half of 2016, driven by solid growth in industrial production, services, fixed-asset investment, retail sales, and imports and exports. The People’s Bank of China left its benchmark interest rate unchanged during the period. Overall, emerging market stocks, as measured by the MSCI Emerging Markets Index, rose during the period.

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.

During the six months under review, Franklin Income VIP Fund – Class 1 and Franklin Mutual Shares VIP Fund – Class 1

underperformed the S&P 500. Templeton Growth VIP Fund – Class 1 performed in line with 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, 2017, 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         FFA-3

FRANKLIN FOUNDING FUNDS ALLOCATION VIP FUND

Class 2 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: (1) transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes; and (2) 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 table below shows Fund-level ongoing expenses and can help you understand these costs 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 table below provides information about the actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of ongoing Fund expenses but does not include the effect of ongoing Contract expenses, is used to calculate the “Ending Account Value.” You can estimate the Fund-level expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number under the headings “Actual” and “Fund-Level Expenses Paid During Period” (if Fund-Level Expenses Paid During Period were $7.50, then 8.6 × $7.50 = $64.50). In this illustration, the estimated expenses paid this period at the Fund level are $64.50.

Hypothetical Example for Comparison with Other Mutual Funds

Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other mutual funds offered through the Contract. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds offered through the Contract.

Please note that expenses shown in the table are meant to highlight ongoing costs at the Fund level only and do not reflect any ongoing expenses at the Contract level, or transaction expenses at either the Fund or Contract levels. In addition, 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.

		Actual (actual return after expenses)				Hypothetical (5% annual return before expenses)
Share Class	Beginning Account Value 1/1/17		Ending Account Value 6/30/17	Fund-Level Expenses Paid During Period 1/1/17–6/30/17	1,2		Ending Account Value 6/30/17	Fund-Level Expenses Paid During  Period 1/1/17–6/30/17	1,2	Net Annualized Expense Ratio	2
Class 2	$1,000		$1,066.70	$1.79			$1,023.06	$1.76		0.35%

1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above — in the far right column — multiplied by the simple average account value over the period indicated, and then multiplied by 181/365 to reflect the one-half year period.

2. Reflects expenses after fee waivers and expense reimbursements. Does not include any ongoing expenses of the Contract for which the Fund is an investment option or acquired fund fees and expenses.

FFA-4         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Financial Highlights

Franklin Founding Funds Allocation VIP Fund

	Six Months Ended June 30, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 1
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$7.13			$6.80			$7.47			$7.47			$8.55			$7.63
Income from investment operationsa:
Net investment incomeb,c		0.15			0.21			0.26			0.22			0.30			0.26
Net realized and unrealized gains (losses)		0.33			0.64			(0.68	)		0.02			1.42			0.90
Total from investment operations		0.48			0.85			(0.42	)		0.24			1.72			1.16
Less distributions from:
Net investment income		(0.22	)		(0.29	)		(0.24	)		(0.23	)		(1.15	)		(0.24	)
Net realized gains		(0.31	)		(0.23	)		(0.01	)		(0.01	)		(1.65	)		—
Total distributions		(0.53	)		(0.52	)		(0.25	)		(0.24	)		(2.80	)		(0.24	)
Net asset value, end of period		$7.08			$7.13			$6.80			$7.47			$7.47			$8.55
Total returnd		6.74%			13.43%			(5.93)%			3.05%			24.14%			15.56%
Ratios to average net assetse
Expenses before waiver and payments by affiliatesf		0.11%			0.11%			0.11%			0.11%			0.11%			0.11%
Expenses net of waiver and payments by affiliatesf		0.10%			0.10%			0.10%			0.10%			0.10%			0.10%
Net investment incomec		3.98%			3.09%			3.51%			2.88%			3.67%			4.06%
Supplemental data
Net assets, end of period (000’s)		$1,044			$1,025			$1,083			$1,114			$952			$767
Portfolio turnover rate		0.95%			0.10%			0.26%			4.80%			3.91%			28.46%g

^a The 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.

^b Based on average daily shares outstanding.

^c Recognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds in which the Fund invests.

^d Total 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.

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

^f Does not include expenses of the Underlying Funds in which the Fund invests. The weighted average indirect expenses of the Underlying Funds was 0.66% for the period ended June 30, 2017.

^g Excludes 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, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 2
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$7.08			$6.75			$7.42			$7.42			$8.51			$7.59
Income from investment operationsa:
Net investment incomeb,c		0.14			0.19			0.24			0.20			0.27			0.25
Net realized and unrealized gains (losses)		0.33			0.64			(0.68	)		0.02			1.42			0.89
Total from investment operations		0.47			0.83			(0.44	)		0.22			1.69			1.14
Less distributions from:
Net investment income		(0.20	)		(0.27	)		(0.22	)		(0.21	)		(1.13	)		(0.22	)
Net realized gains		(0.31	)		(0.23	)		(0.01	)		(0.01	)		(1.65	)		—
Total distributions		(0.51	)		(0.50	)		(0.23	)		(0.22	)		(2.78	)		(0.22	)
Net asset value, end of period		$7.04			$7.08			$6.75			$7.42			$7.42			$8.51
Total returnd		6.67%			13.18%			(6.21)%			2.85%			23.77%			15.33%
Ratios to average net assetse
Expenses before waiver and payments by affiliatesf		0.36%			0.36%			0.36%			0.36%			0.36%			0.36%
Expenses net of waiver and payments by affiliatesf		0.35%			0.35%			0.35%			0.35%			0.35%			0.35%
Net investment incomec		3.73%			2.84%			3.26%			2.63%			3.42%			3.81%
Supplemental data
Net assets, end of period (000’s)		$484,342			$474,669			$480,715			$557,704			$547,506			$472,686
Portfolio turnover rate		0.95%			0.10%			0.26%			4.80%			3.91%			28.46%g

^a The 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.

^b Based on average daily shares outstanding.

^c Recognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds in which the Fund invests.

^d Total 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.

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

^f Does not include expenses of the Underlying Funds in which the Fund invests. The weighted average indirect expenses of the Underlying Funds was 0.66% for the period ended June 30, 2017.

^g Excludes 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, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 4
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$7.21			$6.87			$7.54			$7.54			$8.49			$7.58
Income from investment operationsa:
Net investment incomeb,c		0.14			0.19			0.23			0.20			0.26			0.30
Net realized and unrealized gains (losses)		0.33			0.64			(0.68	)		0.02			1.43			0.83
Total from investment operations		0.47			0.83			(0.45	)		0.22			1.69			1.13
Less distributions from:
Net investment income		(0.19	)		(0.26	)		(0.21	)		(0.21	)		(0.99	)		(0.22	)
Net realized gains		(0.31	)		(0.23	)		(0.01	)		(0.01	)		(1.65	)		—
Total distributions		(0.50	)		(0.49	)		(0.22	)		(0.22	)		(2.64	)		(0.22	)
Net asset value, end of period		$7.18			$7.21			$6.87			$7.54			$7.54			$8.49
Total returnd		6.58%			12.92%			(6.24	)%		2.75%			23.68%			15.17%
Ratios to average net assetse
Expenses before waiver and payments by affiliatesf		0.46%			0.46%			0.46%			0.46%			0.46%			0.46%
Expenses net of waiver and payments by affiliatesf		0.45%			0.45%			0.45%			0.45%			0.45%			0.45%
Net investment incomec		3.63%			2.74%			3.16%			2.53%			3.32%			3.71%
Supplemental data
Net assets, end of period (000’s)		$538,949			$530,403			$550,825			$702,324			$676,781			$493,813
Portfolio turnover rate		0.95%			0.10%			0.26%			4.80%			3.91%			28.46%g

^aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’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.

^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.

^fDoes 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, 2017.

^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         FFA-7

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Statement of Investments, June 30, 2017 (unaudited)

Franklin Founding Funds Allocation VIP Fund
		Shares		Value
	Investments in Underlying Funds 100.0%
	Domestic Equity 33.3%
a	Franklin Mutual Shares VIP Fund, Class 1		15,841,639	$	341,070,503
	Domestic Hybrid 33.3%
a	Franklin Income VIP Fund, Class 1		21,486,281		340,772,414
	Foreign Equity 33.4%
a	Templeton Growth VIP Fund, Class 1		22,551,812		342,336,503
	Total Investments in Underlying Funds (Cost $731,637,333)				1,024,179,420
	Other Assets, less Liabilities 0.0%†				155,080
	Net Assets 100.0%			$	1,024,334,500

†Rounds to less than 0.1% of net assets.

^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, 2017 (unaudited)

	Franklin Founding Funds Allocation VIP Fund
Assets:
Investments in securities:
Cost - Non-controlled affiliates (Note 3d)	$	731,637,333
Value - Non-controlled affiliates (Note 3d)	$	1,024,179,420
Cash		1,313,852
Receivables:
Capital shares sold		214,497
Other assets		660
Total assets		1,025,708,429
Liabilities:
Payables:
Capital shares redeemed		707,949
Administrative fees		72,991
Distribution fees		520,941
Accrued expenses and other liabilities		72,048
Total liabilities		1,373,929
Net assets, at value	$	1,024,334,500
Net assets consist of:
Paid-in capital	$	754,682,686
Undistributed net investment income		18,751,113
Net unrealized appreciation (depreciation)		292,542,087
Accumulated net realized gain (loss)		(41,641,386	)
Net assets, at value	$	1,024,334,500
Class 1:
Net assets, at value	$	1,044,043
Shares outstanding		147,392
Net asset value and maximum offering price per share	$	7.08
Class 2:
Net assets, at value	$	484,341,517
Shares outstanding		68,806,158
Net asset value and maximum offering price per share	$	7.04
Class 4:
Net assets, at value	$	538,948,940
Shares outstanding		75,038,282
Net asset value and maximum offering price per share	$	7.18

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, 2017 (unaudited)

	Franklin Founding Funds Allocation VIP Fund
Investment income:
Dividends from non-controlled affiliates (Note 3d)	$	20,804,234
Expenses:
Administrative fees (Note 3a)		508,237
Distribution fees: (Note 3b)
Class 2		600,931
Class 4		938,723
Reports to shareholders		43,311
Professional fees		18,036
Trustees’ fees and expenses		2,301
Other		7,402
Total expenses		2,118,941
Expenses waived/paid by affiliates (Note 3e)		(69,659	)
Net expenses		2,049,282
Net investment income		18,754,952
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Sale of investments:
Non-controlled affiliates (Note 3d)		7,840,362
Net change in unrealized appreciation (depreciation) on investments		39,646,992
Net realized and unrealized gain (loss)		47,487,354
Net increase (decrease) in net assets resulting from operations	$	66,242,306

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, 2017 (unaudited)			Year Ended December 31, 2016
Increase (decrease) in net assets:
Operations:
Net investment income	$	18,754,952		$	27,575,819
Net realized gain (loss)		7,840,362			45,677,726
Net change in unrealized appreciation (depreciation)		39,646,992			46,468,720
Net increase (decrease) in net assets resulting from operations		66,242,306			119,722,265
Distributions to shareholders from:
Net investment income:
Class 1		(32,261	)		(42,944	)
Class 2		(12,990,591	)		(18,199,650	)
Class 4		(13,655,260	)		(19,362,702	)
Net realized gains:
Class 1		(45,646	)		(33,890	)
Class 2		(20,025,278	)		(15,405,932	)
Class 4		(21,899,278	)		(17,041,267	)
Total distributions to shareholders		(68,648,314	)		(70,086,385	)
Capital share transactions: (Note 2)
Class 1		25,757			(111,375	)
Class 2		11,311,225			(29,371,071	)
Class 4		9,307,031			(46,679,895	)
Total capital share transactions		20,644,013			(76,162,341	)
Net increase (decrease) in net assets		18,238,005			(26,526,461	)
Net assets:
Beginning of period		1,006,096,495			1,032,622,956
End of period	$	1,024,334,500		$	1,006,096,495
Undistributed net investment income included in net assets:
End of period	$	18,751,113		$	26,674,273

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 eighteen 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 may differ 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, 2017, 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 by Underlying Funds are recorded on the ex-dividend date. Distributions to shareholders are recorded on the ex-dividend date. Distributable earnings are determined according to income tax regulations (tax basis) and 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 proportions of the Underlying Funds at different times, the amount of expenses incurred indirectly by the Fund will vary.

FFA-12         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Founding Funds Allocation 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.

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, 2017, 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, 2017						Year Ended December 31, 2016
	Shares			Amount			Shares			Amount
Class 1 Shares:
Shares sold		11,245		$	82,719			16,848		$	112,841
Shares issued in reinvestment of distributions		11,035			77,907			12,138			76,834
Shares redeemed		(18,746	)		(134,869	)		(44,358	)		(301,050	)
Net increase (decrease)		3,534		$	25,757			(15,372	)	$	(111,375	)
Class 2 Shares:
Shares sold		2,050,451		$	15,046,605			5,277,050		$	35,702,809
Shares issued in reinvestment of distributions		4,703,115			33,015,869			5,334,220			33,605,582
Shares redeemed		(5,021,620	)		(36,751,249	)		(14,716,105	)		(98,679,462	)
Net increase (decrease)		1,731,946		$	11,311,225			(4,104,835	)	$	(29,371,071	)
Class 4 Shares:
Shares sold		1,747,334		$	13,034,025			1,664,792		$	11,425,501
Shares issued in reinvestment of distributions		4,965,718			35,554,538			5,670,400			36,403,969
Shares redeemed		(5,266,196	)		(39,281,532	)		(13,975,336	)		(94,509,365	)
Net increase (decrease)		1,446,856		$	9,307,031			(6,640,144	)	$	(46,679,895	)

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

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

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 affiliates of the Fund’s administrative manager, 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, 2017, 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		21,065,303		1,033,102		(612,124	)		21,486,281	$	340,772,414	$	14,527,615	$	687,325		5.4%
Franklin Mutual Shares VIP Fund, Class 1		16,336,774		270,908		(766,043	)		15,841,639		341,070,503		—		948,854		7.7%
Templeton Growth VIP Fund, Class 1		23,748,961		559,107		(1,756,256	)		22,551,812		342,336,503		6,276,619		6,204,183		24.1%
Total										$	1,024,179,420	$	20,804,234	$	7,840,362

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, 2018. Total expenses waived or paid are not subject to recapture subsequent to the Fund’s fiscal year end.

4. Expense Offset Arrangement

The Funds 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, 2017, there were no credits earned.

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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Founding Funds Allocation VIP Fund (continued)

5. Income Taxes

At June 30, 2017, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	781,101,859
Unrealized appreciation	$	292,542,087
Unrealized depreciation		(49,464,526	)
Net unrealized appreciation (depreciation)	$	243,077,561

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, 2017, aggregated $9,700,000 and $52,422,404, 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 9, 2018. 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 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statement of Operations. During the period ended June 30, 2017, 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.

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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Founding Funds Allocation VIP Fund (continued)

8. Fair Value Measurements (continued)

At June 30, 2017, 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. Investment Company Reporting Modernization

In October 2016, the U.S. Securities and Exchange Commission adopted new rules and amended existing rules (together, final rules) intended to modernize the reporting and disclosure of information by registered investment companies. In part, the final rules amend Regulation S-X and require standardized, enhanced disclosures about derivatives in investment company financial statements, as well as other amendments. The compliance date for the amendments to Regulation S-X is August 1, 2017. Management has reviewed the requirements and believes the adoption of the amendments to Regulation S-X will not have a material impact on the Fund’s financial statements and related disclosures.

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.

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Tax Information (unaudited)

Franklin Founding Funds Allocation VIP Fund

During the fiscal year ended December 31, 2016, 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, 2017, 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
Class1	$0.0040	$0.0461
Class2	$0.0040	$0.0461
Class4	$0.0040	$0.0461

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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Franklin Global Real Estate VIP Fund

This semiannual report for Franklin Global Real Estate VIP Fund covers the period ended June 30, 2017.

Class 2 Performance Summary as of June 30, 2017

The Fund’s Class 2 Shares delivered a +5.19% total return for the six-month period ended June 30, 2017.

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

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 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 posted a +5.37% total return for the same period.¹

Economic and Market Overview

The global economy generally expanded during the period under review. In this environment, global developed and emerging market stocks rose, as measured by the MSCI All

Country World Index. Global markets were aided by improved industrial commodity prices at certain points during the period, generally upbeat economic data across regions, investor optimism about pro-growth and pro-business policies in the U.S, hopes of tax reforms under the Trump administration, Emmanuel Macron’s election as France’s president and encouraging corporate earnings reports.

However, investors expressed concerns about the timing and economic effects of the U.K.’s exit from the European Union (also known as “Brexit”) and the U.S. executive order banning entry from some Muslim-majority countries. Other headwinds included the health of European banks, concerns about political

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.

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

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uncertainty in the U.S. and European Union, geopolitical tensions in certain regions, worries about global oversupply in oil production despite a pact to extend cuts, and hawkish comments from key central bankers around the world toward period-end.

U.S. economic growth decelerated in 2017’s first quarter, largely due to slower growth in consumer spending and declines in private inventory investment and government spending. However, growth accelerated in the second quarter due to increases in consumer spending, business investment and federal government spending. The unemployment rate decreased from 4.7% in December 2016 to 4.4% at period-end.² Annual inflation, as measured by the Consumer Price Index, decreased from 2.1% to 1.6% during the period. After increasing its benchmark interest rate in March, the U.S. Federal Reserve (Fed), at its June meeting, made the widely anticipated increase to its target range for the federal funds rate from 0.75%–1.00% to 1.00%–1.25%, amid signs of a growing U.S. economy, a strengthening labor market and an improvement in business spending.

In Europe, the U.K.’s economy grew at a slower rate in 2017’s first quarter over the previous quarter, largely due to slower growth in household spending. The eurozone’s growth increased in the first quarter over the previous quarter. The bloc’s annual inflation rate fluctuated during the reporting period and ended slightly higher from where it began. During the period, the European Central Bank kept its key policy rates unchanged.

In Asia, Japan’s quarterly gross domestic product (GDP) remained unchanged in 2017’s first quarter compared to 2016’s fourth quarter. In April 2017, the Bank of Japan (BOJ) slightly increased its GDP forecasts for the 2017–2018 fiscal year. However, the BOJ lowered its inflation forecast.

In emerging markets, Brazil’s quarterly GDP grew for the first time in two years, as its first-quarter 2017 GDP grew compared to the previous quarter. The country’s central bank cut its benchmark interest rate four times between January and June 2017 to spur economic growth. Russia’s GDP grew in 2017’s first quarter compared to the prior-year period. The Bank of Russia reduced its key interest rate in March, April and June 2017 to try to revive its economy. China’s economy grew faster in the first half of 2017 compared to the first half of 2016, driven by solid growth in industrial production, services,

Top 10 Countries
6/30/17
	% of Total Net Assets
U.S.		53.5%
Japan		10.5%
Hong Kong		8.0%
Australia		6.2%
U.K.		5.0%
Germany		3.7%
France		3.4%
Singapore		2.9%
Sweden		2.0%
Canada		1.9%

fixed-asset investment, retail sales, and imports and exports. The People’s Bank of China left its benchmark interest rate unchanged during the period. Overall, emerging market stocks, as measured by the MSCI Emerging Markets Index, rose during the period.³

Global Real Estate Market Overview

According to the FTSE EPRA/NAREIT Developed Index, in U.S. dollar terms, most countries outpaced the index. Among the leaders were Israel, Italy, Austria and Singapore. In contrast, Japan lost value and the U.S. and Australia underperformed the index. 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” 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

2. Source: Bureau of Labor Statistics.

3. Please see Index Descriptions following the Fund Summaries.

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Top 10 Holdings
6/30/17
Company Sector/Industry, Country	% of Total Net Assets
Simon Property Group Inc. Retail REITs, U.S.		4.1%
Mitsui Fudosan Co. Ltd. Diversified Real Estate Activities, Japan		2.9%
Prologis Inc. Industrial REITs, U.S.		2.8%
AvalonBay Communities Inc. Residential REITs, U.S.		2.6%
Mitsubishi Estate Co. Ltd. Diversified Real Estate Activities, Japan		2.4%
Welltower Inc. Health Care REITs, U.S.		2.4%
Unibail-Rodamco SE Retail REITs, France		2.3%
Cheung Kong Property Holdings Ltd. Real Estate Development, Hong Kong		2.2%
Equity Residential Residential REITs, U.S.		2.1%
Sun Hung Kai Properties Ltd. Diversified Real Estate Activities, Hong Kong		1.9%

Developed Index included stock selection and an over-weighting in the industrial property sector.⁴ Shares of PLA Administradora Industrial, a Mexican REIT that focuses on the industrial property segment, outperformed during the reporting period. Despite the recent political and economic uncertainty related to the future of the North American Free Trade Agreement after the recent election in the U.S., investor sentiment for the country recovered significantly as investor focus shifted back to the country’s healthy fundamentals, benefiting the Mexican real estate sector. The company’s recent quarterly core results were positive and stood out among its peers with strong year-over-year growth of both net operating income and funds from operations (FFO). At the beginning of 2017, the company closed a large industrial portfolio acquisition, which has not been fully captured in the company’s results. We believe it could add to earnings going forward. We remain bullish on the company given the company’s mostly U.S.-dollar denominated leases, diversified tenant profile, attractive stock valuation and continued external growth

opportunities as the Mexican industrial property segment remains highly fragmented.

An overweighting in the specialty sector also boosted results, with holdings such as U.S.-based data center company Coresite Realty contributing notably.⁵ Shares of Coresite rose during the six-month period, and significantly outperformed the specialty sector and the global benchmark. The company reported strong third- and fourth-quarter financial results due to leasing success in its data center properties. We believe the FFO per-share financial result was positive since the company operates with a much lower leverage ratio than most U.S. REITs. Relative performance was supported further by the portfolio’s positioning in the hotel/resort and residential sectors.⁶

We bought German residential property operator ADO Properties at the initial public offering, as it seemed attractive to us in relation to net asset value, asset quality and location in comparison to the German residential peer group. The company has continued to look positive based on our internal analysis and with its strong operational performance. The company expects solid rental growth for 2017, which seems achievable to us after having reported strong growth in the first quarter of 2017. The Berlin residential market continues to appear attractive to us with low average rent levels, in combination with strong demand from urbanization and immigration, which has created a supply and demand mismatch, in our opinion.

In contrast, stock selection in the diversified sector detracted from relative performance.⁷ Shares of Japanese REIT Mitsubishi Estate underperformed the benchmark during the six-month period. The company saw a pullback in share price since its medium-term plan was announced in May. As the company continued to prioritize capital investment during its mid-term plan, the market was disappointed by the lack of details with regard to improving shareholder returns. Overall, Mitsubishi Estate has seen smooth preleasing progress for its new office buildings despite rising office supply in 2018 and beyond. We expect steady net asset value (NAV) and earnings growth for the company, mainly driven by contributions from new projects. Nevertheless, the prospect of share buybacks by the firm will remain a near-term focus for investors as long as the company continues to trade at a deep discount to NAV.

4. Industrial property holdings are in industrial REITs in the SOI.

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

6. Hotel/resort holdings are in hotel and resort REITs and hotels, resorts and cruise lines in the SOI. Residential holdings are in real estate operating companies and residential REITs in the SOI.

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

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Stock selection in the office space sector also hampered results.⁸ Shares of Vornado Realty Trust, a dominant REIT in New York City with a portfolio of mainly Manhattan office and street retail assets (following its soon to be completed Washington, D.C. spin-off), underperformed during the reporting period. We believe the stock’s underperformance mainly reflected continued negative investor sentiment for New York REITs given the negative outlook for Manhattan office fundamentals due to upcoming supply pressures as large projects come online over the next few years as well as weak street retail fundamentals. We also believe management’s lack of capital allocation and investment decisions in recent years have been disappointing as the company has continued to maintain a large cash balance. The company has made significant progress on its simplification strategy laid out a few years back as it exited most of its non-core assets and will soon complete its spin-off of its Washington, D.C. portfolio. Nevertheless, Vornado has yet to announce further details about its highly anticipated development and re-development plans for New York City’s Penn Plaza district.

Relative returns were pressured further by positioning in the triple-net leasing and storage property sectors.⁹ Shares of CubeSmart, the third largest self-storage REIT in the U.S., underperformed during the reporting period after three years of outperformance. Similar to other storage REITs, CubeSmart’s underperformance mainly reflected deteriorating investor sentiment for the sector given the continued deceleration in the operating trends as fundamentals have peaked last year and top-line growth started to decelerate (albeit remaining higher than the REIT average) after many years of favorable demand and supply dynamics. Although the stock looked relatively attractive to us versus its peers, it started to underperform, reflecting negative investor sentiment as well as concerns about its exposure to New York City where supply has been rising. We currently have a negative bias for storage and therefore have maintained our portfolio’s overall underweighted position given our 12-month negative outlook for operating trends. We also think that acquisitions opportunities will likely be increasingly difficult going forward given the storage REITs’ recent loss of cost-of-capital advantage.

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, 2017, 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, 2017, 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. Office space holdings are in office REITs and real estate operating companies in the SOI.

9. Storage property holdings are in specialized REITs in the SOI.

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Class 2 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: (1) transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes; and (2) 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 table below shows Fund-level ongoing expenses and can help you understand these costs 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 table below provides information about the actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of ongoing Fund expenses but does not include the effect of ongoing Contract expenses, is used to calculate the “Ending Account Value.” You can estimate the Fund-level expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number under the headings “Actual” and “Fund-Level Expenses Paid During Period” (if Fund-Level Expenses Paid During Period were $7.50, then 8.6 × $7.50 = $64.50). In this illustration, the estimated expenses paid this period at the Fund level are $64.50.

Hypothetical Example for Comparison with Other Mutual Funds

Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other mutual funds offered through the Contract. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds offered through the Contract.

Please note that expenses shown in the table are meant to highlight ongoing costs at the Fund level only and do not reflect any ongoing expenses at the Contract level, or transaction expenses at either the Fund or Contract levels. In addition, 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.

		Actual (actual return after expenses)				Hypothetical (5% annual return before expenses)
Share Class	Beginning Account Value 1/1/17		Ending Account Value 6/30/17	Fund-Level Expenses Paid During  Period 1/1/17–6/30/17	1,2		Ending Account Value 6/30/17	Fund-Level Expenses Paid During  Period 1/1/17–6/30/17	1,2	Net Annualized Expense Ratio	2
Class 2	$1,000		$1,051.90	$7.07			$1,017.90	$6.95		1.39%

1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above — in the far right column — multiplied by the simple average account value over the period indicated, and then multiplied by 181/365 to reflect the one-half year period.

2. Reflects expenses after fee waivers and expense reimbursements. Does not include any ongoing expenses of the Contract for which the Fund is an investment option or acquired fund fees and expenses.

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Financial Highlights

Franklin Global Real Estate VIP Fund

	Six Months Ended June 30, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 1
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$15.83			$15.93			$16.36			$14.29			$14.66			$11.47
Income from investment operationsa:
Net investment incomeb		(—	)c		0.30	d		0.24			0.26			0.24			0.25
Net realized and unrealized gains (losses)		0.86			(0.16	)		(0.12	)		1.92			0.13			2.94
Total from investment operations		0.86			0.14			0.12			2.18			0.37			3.19
Less distributions from net investment income and net foreign currency gains		(0.56	)		(0.24	)		(0.55	)		(0.11	)		(0.74	)		—
Net asset value, end of period		$16.13			$15.83			$15.93			$16.36			$14.29			$14.66
Total returne		5.34%			0.81%			0.83%			15.27%			2.61%			27.81%
Ratios to average net assetsf
Expenses before waiver and payments by affiliates		1.14%			1.11%			1.11%			1.10%			1.10%			1.11%
Expenses net of waiver and payments by affiliates		1.14%	g		1.11%	g		1.11%			1.10%	h		1.10%			1.07%
Net investment income		0.03%			1.99%	d		1.49%			1.66%			1.62%			1.92%
Supplemental data
Net assets, end of period (000’s)		$802			$821			$32,161			$35,686			$34,276			$38,329
Portfolio turnover rate		14.32%			28.53%	i		23.35%			16.67%			21.29%			22.29%

^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 $0.06 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 1.59%.

^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%.

ⁱExcludes the value of portfolio securities delivered as a result of redemption in-kind. See Note 9.

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

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL HIGHLIGHTS

Franklin Global Real Estate VIP Fund (continued)

	Six Months Ended June 30, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 2
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$15.42			$15.52			$15.95			$13.93			$14.27			$11.20
Income from investment operationsa:
Net investment income (loss)b		(0.02	)		0.28	c		0.20			0.21			0.20			0.21
Net realized and unrealized gains (losses)		0.83			(0.19	)		(0.12	)		1.88			0.13			2.86
Total from investment operations		0.81			0.09			0.08			2.09			0.33			3.07
Less distributions from net investment income and net foreign currency gains		(0.50	)		(0.19	)		(0.51	)		(0.07	)		(0.67	)		—
Net asset value, end of period		$15.73			$15.42			$15.52			$15.95			$13.93			$14.27
Total returnd		5.19%			0.54%			0.57%			15.01%			2.32%			27.41%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		1.39%			1.36%			1.36%			1.35%			1.35%			1.36%
Expenses net of waiver and payments by affiliates		1.39%	f		1.36%	f		1.36%			1.35%	g		1.35%			1.32%
Net investment income (loss)		(0.22)%			1.74%	c		1.24%			1.41%			1.37%			1.67%
Supplemental data
Net assets, end of period (000’s)		$188,888			$193,707			$287,473			$333,554			$328,825			$344,044
Portfolio turnover rate		14.32%			28.53%	h		23.35%			16.67%			21.29%			22.29%

^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 1.34%.

^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. See Note 9.

FGR-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, 2017 (unaudited)

Franklin Global Real Estate VIP Fund
		Country		Shares		Value
	Common Stocks 99.7%
	Diversified Real Estate Activities 11.8%
	CapitaLand Ltd.		Singapore		845,895	$	2,150,372
	City Developments Ltd.		Singapore		209,847		1,635,429
	Mitsubishi Estate Co. Ltd.		Japan		242,456		4,512,438
	Mitsui Fudosan Co. Ltd.		Japan		229,878		5,477,957
	New World Development Co. Ltd.		Hong Kong		1,915,585		2,431,360
	Sun Hung Kai Properties Ltd.		Hong Kong		241,171		3,542,930
	Tokyo Tatemono Co. Ltd.		Japan		131,232		1,717,327
	The Wharf Holdings Ltd.		Hong Kong		108,818		901,735
							22,369,548
	Diversified REITs 8.3%
	Activia Properties Inc.		Japan		262		1,119,180
	GPT Group		Australia		433,608		1,596,784
	Hispania Activos Inmobiliarios SOCIMI SA		Spain		110,674		1,829,892
	Hulic REIT Inc.		Japan		593		925,203
	Kenedix Office Investment Corp.		Japan		295		1,573,543
	Land Securities Group PLC		United Kingdom		176,731		2,331,936
	Stockland		Australia		538,813		1,814,369
	United Urban Investment Corp.		Japan		797		1,137,205
	VEREIT Inc.		United States		269,070		2,190,230
	Washington REIT		United States		38,300		1,221,770
							15,740,112
	Health Care REITs 6.8%
	CareTrust REIT Inc.		United States		65,100		1,206,954
	HCP Inc.		United States		101,789		3,253,177
	Physicians Realty Trust		United States		66,381		1,336,913
	Ventas Inc.		United States		38,617		2,683,109
	Welltower Inc.		United States		59,676		4,466,749
							12,946,902
	Hotel & Resort REITs 3.2%
	Hoshino Resorts REIT Inc.		Japan		132		677,103
	Host Hotels & Resorts Inc.		United States		132,006		2,411,750
	Summit Hotel Properties Inc.		United States		91,714		1,710,466
	Sunstone Hotel Investors Inc.		United States		80,709		1,301,029
							6,100,348
	Hotels, Resorts & Cruise Lines 0.5%
	Hilton Worldwide Holdings Inc.		United States		16,114		996,651
	Industrial REITs 9.3%
	First Industrial Realty Trust Inc.		United States		63,353		1,813,163
	Frasers Logistics & Industrial Trust		Singapore		1,029,466		807,542
	Goodman Group		Australia		412,174		2,493,841
	Mapletree Logistics Trust		Singapore		973,265		844,750
	Nippon Prologis REIT Inc.		Japan		616		1,311,023
	PLA Administradora Industrial S de RL de CV		Mexico		572,307		1,053,602
	Prologis Inc.		United States		89,469		5,246,462
	Rexford Industrial Realty Inc.		United States		56,674		1,555,135
	Segro PLC		United Kingdom		405,089		2,581,257
							17,706,775

Semiannual Report         FGR-9

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 11.5%
	Alexandria Real Estate Equities Inc.		United States		25,821	$	3,110,656
	Boston Properties Inc.		United States		25,385		3,122,863
	Brandywine Realty Trust		United States		91,195		1,598,648
	Derwent London PLC		United Kingdom		40,021		1,383,513
	Dexus		Australia		303,103		2,209,082
	Highwoods Properties Inc.		United States		24,910		1,263,186
	Japan Real Estate Investment Corp.		Japan		308		1,530,622
	Kilroy Realty Corp.		United States		32,044		2,408,107
	SL Green Realty Corp.		United States		21,322		2,255,868
	Vornado Realty Trust		United States		30,127		2,828,925
							21,711,470
	Real Estate Development 2.6%
	Cheung Kong Property Holdings Ltd.		Hong Kong		524,127		4,104,943
a	Howard Hughes Corp.		United States		6,740		827,941
							4,932,884
	Real Estate Operating Companies 7.9%
	ADO Properties SA		Germany		13,736		581,077
b	ADO Properties SA, 144A		Germany		34,747		1,469,910
	BUWOG AG		Austria		64,135		1,842,810
	Deutsche Wohnen AG		Germany		87,288		3,339,111
	Fabege AB		Sweden		74,304		1,429,347
	First Capital Realty Inc.		Canada		57,764		880,621
	Hemfosa Fastigheter AB		Sweden		101,802		1,100,039
	Hufvudstaden AB, A		Sweden		79,945		1,326,167
	Hysan Development Co. Ltd.		Hong Kong		276,065		1,317,079
	Vonovia SE		Germany		42,576		1,690,707
							14,976,868
	Residential REITs 12.1%
	American Homes 4 Rent, A		United States		110,313		2,489,765
	AvalonBay Communities Inc.		United States		25,989		4,994,306
	Camden Property Trust		United States		19,800		1,693,098
	Canadian Apartment Properties REIT		Canada		66,775		1,729,458
	Equity Lifestyle Properties Inc.		United States		28,058		2,422,528
	Equity Residential		United States		60,533		3,984,887
	Essex Property Trust Inc.		United States		5,352		1,376,909
	Mid-America Apartment Communities Inc.		United States		26,600		2,803,108
	Unite Group PLC		United Kingdom		178,309		1,507,344
							23,001,403
	Retail REITs 19.3%
	Agree Realty Corp.		United States		21,721		996,342
	GGP Inc.		United States		97,474		2,296,488
	Hammerson PLC		United Kingdom		226,019		1,691,334
	Kimco Realty Corp.		United States		34,449		632,139
	Klepierre		France		52,307		2,144,045
	Link REIT		Hong Kong		378,237		2,877,561
	The Macerich Co.		United States		10,289		597,379
	National Retail Properties Inc.		United States		14,433		564,330
	Realty Income Corp.		United States		49,917		2,754,420
	Regency Centers Corp.		United States		39,939		2,501,779
	Retail Properties of America Inc., A		United States		94,400		1,152,624

FGR-10         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 (continued)
	Scentre Group		Australia		860,027	$	2,677,815
	Simon Property Group Inc.		United States		48,226		7,801,038
	Smart REIT		Canada		41,430		1,026,680
	Unibail-Rodamco SE		France		17,354		4,373,858
	Weingarten Realty Investors		United States		50,029		1,505,873
	Westfield Corp.		Australia		148,018		913,784
							36,507,489
	Specialized REITs 6.4%
	American Tower Corp.		United States		10,300		1,362,896
	Coresite Realty Corp.		United States		17,269		1,787,859
	CubeSmart		United States		47,193		1,134,520
	CyrusOne Inc.		United States		21,467		1,196,785
	Digital Realty Trust Inc.		United States		27,968		3,158,986
	Public Storage		United States		16,244		3,387,361
							12,028,407
	Total Common Stocks (Cost $129,191,453)						189,018,857
				Principal Amount
	Short Term Investments (Cost $207,476) 0.1%
	Repurchase Agreements 0.1%
C	Joint Repurchase Agreement, 1.058%, 7/03/17 (Maturity Value $207,494)		United States	$	207,476		207,476
	BNP Paribas Securities Corp. (Maturity Value $93,098) Deutsche Bank Securities Inc. (Maturity Value $21,297) HSBC Securities (USA) Inc. (Maturity Value $58,188) Merrill Lynch, Pierce, Fenner & Smith Inc. (Maturity Value $34,911)
	Collateralized by U.S. Government Agency Securities, 0.875% - 1.875%, 12/15/17 - 6/11/21; dU.S. Treasury Bill, 11/30/17 - 1/04/18; and U.S. Treasury Note, 0.75% - 4.00%, 4/30/18 - 8/15/21 (valued at $211,840)
	Total Investments (Cost $129,398,929) 99.8%						189,226,333
	Other Assets, less Liabilities 0.2%						463,341
	Net Assets 100.0%					$	189,689,674

See Abbreviations on page FGR-22.

^aNon-income producing.

^bSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. This security has been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At June 30, 2017, the value of this security was $1,469,910, representing 0.8% of net assets.

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

^dThis security was issued on a discount basis with no stated coupon rate.

Semiannual Report         FGR-11

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Statements

Statement of Assets and Liabilities

June 30, 2017 (unaudited)

	Franklin Global Real Estate VIP Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	129,191,453
Cost - Repurchase agreements		207,476
Total cost of investments	$	129,398,929
Value - Unaffiliated issuers	$	189,018,857
Value - Repurchase agreements		207,476
Total value of investments		189,226,333
Cash		55,325
Receivables:
Investment securities sold		429,335
Capital shares sold		529
Dividends		779,887
European Union tax reclaims		82,199
Other assets		126
Total assets		190,573,734
Liabilities:
Payables:
Investment securities purchased		367,200
Capital shares redeemed		203,277
Management fees		166,429
Distribution fees		79,728
Trustees’ fees and expenses		192
Accrued expenses and other liabilities		67,234
Total liabilities		884,060
Net assets, at value	$	189,689,674
Net assets consist of:
Paid-in capital	$	340,305,133
Distributions in excess of net investment income		(2,770,728	)
Net unrealized appreciation (depreciation)		59,828,763
Accumulated net realized gain (loss)		(207,673,494	)
Net assets, at value	$	189,689,674
Class 1:
Net assets, at value	$	801,627
Shares outstanding		49,710
Net asset value and maximum offering price per share	$	16.13
Class 2:
Net assets, at value	$	188,888,047
Shares outstanding		12,008,868
Net asset value and maximum offering price per share	$	15.73

FGR-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, 2017 (unaudited)

	Franklin Global Real Estate VIP Fund
Investment income:
Dividends (net of foreign taxes of $146,295)	$	1,110,636
Interest		1,271
Income from securities loaned (net of fees and rebates)		9,550
Total investment income		1,121,457
Expenses:
Management fees (Note 3a)		1,005,398
Distribution fees - Class 2 (Note 3c)		237,484
Custodian fees (Note 4)		9,829
Reports to shareholders		28,362
Professional fees		38,048
Trustees’ fees and expenses		665
Other		6,258
Total expenses		1,326,044
Expenses waived/paid by affiliates (Note 3e)		(590	)
Net expenses		1,325,454
Net investment income (loss)		(203,997	)
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		5,610,610
Realized gain distributions from REITs		2,007,071
Foreign currency transactions		14,486
Net realized gain (loss)		7,632,167
Net change in unrealized appreciation (depreciation) on:
Investments		2,304,001
Translation of other assets and liabilities denominated in foreign currencies		16,278
Net change in unrealized appreciation (depreciation)		2,320,279
Net realized and unrealized gain (loss)		9,952,446
Net increase (decrease) in net assets resulting from operations	$	9,748,449

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

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, 2017 (unaudited)			Year Ended December 31, 2016
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	(203,997	)	$	5,028,687
Net realized gain (loss)		7,632,167			52,315,717
Net change in unrealized appreciation (depreciation)		2,320,279			(53,945,685	)
Net increase (decrease) in net assets resulting from operations		9,748,449			3,398,719
Distributions to shareholders from:
Net investment income:
Class 1		(26,726	)		(442,226	)
Class 2		(5,862,949	)		(3,274,922	)
Total distributions to shareholders		(5,889,675	)		(3,717,148	)
Capital share transactions: (Note 2)
Class 1		(34,056	)		(31,539,337	)
Class 2		(8,663,027	)		(93,248,371	)
Total capital share transactions		(8,697,083	)		(124,787,708	)
Net increase (decrease) in net assets		(4,838,309	)		(125,106,137	)
Net assets:
Beginning of period		194,527,983			319,634,120
End of period	$	189,689,674		$	194,527,983
Undistributed net investment income included in net assets:
End of period	$	—		$	3,322,944
Distributions in excess of net investment income included in net assets:
End of period	$	(2,770,728	)	$	—

FGR-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 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 eighteen 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. 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, 2017, 85.9% 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 may differ 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. 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. Investments in 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 Fund’s business day. Occasionally, events occur between the time at which trading in a foreign security is completed and 4 p.m. Eastern time 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 4 p.m. Eastern time. In order to minimize the potential for these differences, the VC monitors price movements following the close of

Semiannual Report         FGR-15

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)

a. Financial Instrument Valuation (continued)

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 Fund’s NAV is not calculated, 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, 2017.

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

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Global Real Estate VIP Fund (continued)

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, 2017, 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 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. For U.S. income tax purposes, when EU reclaims are received by the Fund and the Fund previously passed foreign tax credit on to its shareholders, the Fund must either amend historic tax reporting to shareholders or enter into a closing agreement with the Internal Revenue Service (IRS) in order to pay the associated tax liability on behalf of the Fund’s shareholders.

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, 2017, 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 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. Distributable earnings are determined according to income tax regulations (tax basis) and 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.

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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)

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

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

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

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, 2017, 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, 2017						Year Ended December 31, 2016
	Shares			Amount			Shares			Amount
Class 1 Shares:
Shares sold		1,548		$	24,886			8,244		$	135,524
Shares issued in reinvestment of distributions		1,626			26,726			27,081			442,226
Shares redeemed in-kind (Note 9)		—			—			(1,772,621	)		(28,376,646	)
Shares redeemed		(5,344	)		(85,668	)		(230,198	)		(3,740,441	)
Net increase (decrease)		(2,170	)	$	(34,056	)		(1,967,494	)	$	(31,539,337	)
Class 2 Shares:
Shares sold		90,874		$	1,437,815			397,098		$	6,351,063
Shares issued in reinvestment of distributions		365,520			5,862,949			205,582			3,274,922
Shares redeemed in-kind (Note 9)		—			—			(3,806,704	)		(59,402,467	)
Shares redeemed		(1,008,056	)		(15,963,791	)		(2,762,366	)		(43,471,889	)
Net increase (decrease)		(551,662	)	$	(8,663,027	)		(5,966,390	)	$	(93,248,371	)

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

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

a. Management Fees

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

Annualized Fee Rate	Net Assets
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, 2017, 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 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.

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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Global Real Estate VIP Fund (continued)

3. Transactions with Affiliates (continued)

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. During the period ended June 30, 2017, the Fund held investments in affiliated management investment companies as follows:

	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, 0.58%		—		5,292,000		(5,292,000	)		—	$	—	$	—	$	—		—%

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, 2017, 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, 2016, capital loss carryforwards were as follows:

Capital loss carryforwards subject to expiration:
2017	$	207,448,609
2018		2,192,369
Total capital loss carryforwards	$	209,640,978

At June 30, 2017, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	139,851,365
Unrealized appreciation	$	62,206,332
Unrealized depreciation		(12,831,364	)
Net unrealized appreciation (depreciation)	$	49,374,968

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.

6. Investment Transactions

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2017, aggregated $27,427,507 and $38,822,258, respectively.

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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 9, 2018. 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 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statement of Operations. During the period ended June 30, 2017, the Fund did not use the Global Credit Facility.

9. Redemption In-Kind

During the year ended December 31, 2016, the Fund realized $27,545,389 of net gains resulting from a redemption in-kind in which a shareholder redeemed fund shares for cash and securities held by the Fund. Because such gains are not taxable to the Fund, and are not distributed to remaining shareholders, they have been reclassified from accumulated net realized gains to paid-in capital.

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 Global Real Estate VIP Fund (continued)

10. Fair Value Measurements (continued)

A summary of inputs used as of June 30, 2017, 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	$	189,018,857	$	—	$	—	$	189,018,857
Short Term Investments		—		207,476		—		207,476
Total Investments in Securities	$	189,018,857	$	207,476	$	—	$	189,226,333

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

11. Investment Company Reporting Modernization

In October 2016, the U.S. Securities and Exchange Commission adopted new rules and amended existing rules (together, final rules) intended to modernize the reporting and disclosure of information by registered investment companies. In part, the final rules amend Regulation S-X and require standardized, enhanced disclosures about derivatives in investment company financial statements, as well as other amendments. The compliance date for the amendments to Regulation S-X is August 1, 2017. Management has reviewed the requirements and believes the adoption of the amendments to Regulation S-X will not have a material impact on the Fund’s financial statements and related disclosures.

12. Subsequent Events

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

Abbreviations

Selected Portfolio
REIT	Real Estate Investment Trust

FGR-22         Semiannual Report

Franklin Growth and Income VIP Fund

This semiannual report for Franklin Growth and Income VIP Fund covers the period ended June 30, 2017.

Class 2 Performance Summary as of June 30, 2017

The Fund’s Class 2 Shares delivered a +5.44% total return* for the six-month period ended June 30, 2017.

*Return information is based on net asset values calculated for shareholder transactions. Certain adjustments were made to the net assets of the Fund at 6/30/17 for financial reporting purposes, and as a result, the total returns based on those net asset values differ from the adjusted total returns reported in the Financial Highlights. The Fund has an expense reduction contractually guaranteed through 4/30/18. Fund investment results reflect the expense reduction; without this reduction, the results would have been lower.

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

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 GROWTH AND INCOME VIP FUND

Fund Goal 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 +9.34% total return.¹ The Fund’s peers, as measured by the Lipper VIP Equity Income Funds Classification Average, had a +5.91% total return for the same period.²

Economic and Market Overview

U.S. economic growth decelerated in 2017’s first quarter, largely due to slower growth in consumer spending and declines in private inventory investment and government spending. However, growth accelerated in the second quarter due to increases in consumer spending, business investment and federal government spending. The manufacturing sector generally expanded, and the services sector also continued to grow. The unemployment rate decreased from 4.7% in December 2016 to 4.4% at period-end.³ Monthly retail sales were volatile, but grew for most of the period. Annual inflation,

as measured by the Consumer Price Index, decreased from 2.1% to 1.6% during the period.

The U.S. Federal Reserve (Fed), at its March meeting, increased the federal funds target rate from 0.50%–0.75% to 0.75%–1.00%. The Fed again increased its target range by a quarter point to 1.00%–1.25% at its June meeting. The Fed made both of these increases amid signs of a growing U.S. economy, a strengthening labor market and an improvement in business spending.

U.S. equity markets rose during the period, benefiting from mostly upbeat economic data, better U.S. corporate earnings and signs of improvement in the Chinese and European

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.

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

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FRANKLIN GROWTH AND INCOME VIP FUND

economies. Investor optimism arising from pro-growth and pro-business policy plans in the U.S. and the victory of Emmanuel Macron as France’s President also helped U.S. equities. However, concerns about the terms of the U.K.’s exit from the European Union (also known as “Brexit”), uncertainty about President Trump’s ability to implement reforms, and geopolitical tensions in the Middle East and the Korean peninsula curbed market sentiment. The broad U.S. stock market, as measured by the S&P 500, generated a +9.34% total return for the period.¹

The 10-year Treasury yield, which moves inversely to its price, shifted throughout the period. It increased early during the period amid expectations of rate hikes by the Fed and upbeat economic data. During the latter part of the period, U.S. political uncertainty, geopolitical tensions in the Middle East and the Korean peninsula, resulted in a decline in the yield. However, in June, the yield rose again due to renewed optimism for improvement in economic growth. Overall, the U.S. Treasury yield fell from 2.45% on December 30, 2016, to 2.31% at period-end.

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 six months under review, most of the Fund’s sector allocations added to absolute returns, led by information technology (IT), health care and industrials. In contrast, the Fund’s energy sector allocation was the only significant detractor during the period.

In the IT sector, most of the Fund’s holdings rose in value and added to the Fund’s absolute results, led by Apple and Microsoft. Software and equipment company Apple benefited

from solid iPhone7 sales and anticipation of strong iPhone8 sales starting this fall. Software and services firm Microsoft performed well amid sustained growth in key commercial cloud initiatives, including Office 365, Azure and Dynamics 365, expanding cloud gross margins, better personal computer metrics, and good cost controls. In this favorable environment, management took the opportunity to increase the amount of capital for dividends and share repurchases — a theme we have seen across other sectors as well.

Top 10 Holdings
6/30/17
Company Sector/Industry	% of Total Net Assets
JPMorgan Chase & Co. Financials		3.9%
Microsoft Corp. Information Technology		3.6%
Wells Fargo & Co. Financials		2.9%
Apple Inc. Information Technology		2.8%
U.S. Bancorp Financials		2.6%
PepsiCo Inc. Consumer Staples		2.4%
Chevron Corp. Energy		2.4%
General Electric Co. Industrials		2.2%
Raytheon Co. Industrials		2.2%
BlackRock Inc. Financials		2.2%

After underperforming in 2016, many health care sector stocks rallied, and all Fund investments in the sector gained value, led by medical technology company Medtronic and pharmaceutical company Allergan. Shares of Medtronic, which manufactures technologically-advanced medical devices, had been weak in late 2016 as growth disappointed. Medtronic’s results have since improved. Our convertible preferred stock position in Allergan was positively impacted by the company’s strong fourth-quarter 2016 results and outlook. Both revenue and earnings per share surpassed consensus forecasts.

In general, reports issued on first-quarter 2017 U.S. corporate earnings showed industrials stocks to be among the top recipients of upward revisions in terms of both earnings surprises and forward estimates. Unexpectedly high rates of profit expansion and relatively low levels of earnings misses for such firms played a fundamental role in supporting several

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FRANKLIN GROWTH AND INCOME VIP FUND

of the sector’s underlying equities held by the Fund. Most of the Fund’s industrials sector holdings advanced, led by Stanley Black & Decker, Raytheon and Illinois Tool Works (ITW). Despite higher restructuring expenses and additional funding on growth investments, Stanley Black & Decker, an industrial tools and household hardware manufacturer, reported better-than-expected quarterly results and claimed promising growth opportunities. Aerospace and defense contractor Raytheon’s stock performed well amid geopolitical destabilization, strong fundamental performance and an anticipated upturn in U.S. defense spending. Diversified industrial products and equipment manufacturer ITW posted better-than-expected earnings based on strong margin performance.

Other individual contributors to the Fund’s absolute performance included food and beverage company PepsiCo in consumer staples, bank JPMorgan Chase in financials, and consumer products manufacturer Newell Brands in consumer discretionary. Pepsi’s consistent earnings growth has been driven by impressive pricing-driven growth in its salty snacks business, as well as new price-pack architecture in its carbonated soft drink business. JPMorgan benefited from higher interest rates, solid cost controls and it passed its annual regulatory stress tests, adding to the firm’s overall credit quality and providing it with greater latitude to return excess capital to shareholders in the future through share buybacks and dividend increases. Shares of Newell Brands, a manufacturer of a wide range of well-known consumer and commercial products, rallied from increased first-quarter sales and earnings helped by the sales of its tools business, acquisition-related cost savings, international growth and strong e-commerce results.

As crude oil officially tipped into a bear market, given a West Texas Intermediate oil per-barrel price decline of about 20% in June 2017 from recent peak levels during March, energy equities suffered in tandem. The Fund’s energy sector holdings notably underperformed as oil prices fell, due mainly to disappointing supply/demand fundamentals despite the Organization of the Petroleum Exporting Countries’ (OPEC’s) decision to extend its global production-curtailment agreement. Increased drilling activity and rising U.S. shale oil production even in the face of lower prices caused oil supply growth to exceed expectations. This in turn prevented oil inventories from declining as much as anticipated, despite continued steady oil demand growth. Declines among the Fund’s energy sector positions were led by oil and gas exploration and production companies Chevron, Suncor Energy and Anadarko Petroleum,

and oilfield services provider Schlumberger. Investor sentiment about Anadarko was also negatively affected by an accident involving one of its assets.

Other individual detractors from the Fund’s absolute results included industrial conglomerate General Electric (GE) in industrials, Target and Mattel4 in consumer discretionary, and diversified telecommunication services provider Verizon Communications in telecommunication services. Shares of GE declined amid concerns about free cash flow, oil price volatility and guidance by the outgoing chief executive officer at the lower end of expectations. Target’s shares were negatively impacted by softer holiday traffic in stores and a decision to invest more heavily into the business, which will impact its profit margin profile. Similarly, Mattel’s holiday results were disappointing and the company’s efforts to improve the business appeared to us to be more challenging. Verizon has continued to face intense competition that has led the industry into unlimited data packages.

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, 2017, 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.

4. Not held at period-end.

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FRANKLIN GROWTH AND INCOME VIP FUND

Class 2 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: (1) transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes; and (2) 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 table below shows Fund-level ongoing expenses and can help you understand these costs 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 table below provides information about the actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of ongoing Fund expenses but does not include the effect of ongoing Contract expenses, is used to calculate the “Ending Account Value.” You can estimate the Fund-level expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number under the headings “Actual” and “Fund-Level Expenses Paid During Period” (if Fund-Level Expenses Paid During Period were $7.50, then 8.6 × $7.50 = $64.50). In this illustration, the estimated expenses paid this period at the Fund level are $64.50.

Hypothetical Example for Comparison with Other Mutual Funds

Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other mutual funds offered through the Contract. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds offered through the Contract.

Please note that expenses shown in the table are meant to highlight ongoing costs at the Fund level only and do not reflect any ongoing expenses at the Contract level, or transaction expenses at either the Fund or Contract levels. In addition, 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.

		Actual (actual return after expenses)				Hypothetical (5% annual return before expenses)
Share Class	Beginning Account Value 1/1/17		Ending Account Value 6/30/17	Fund-Level Expenses Paid During Period 1/1/17–6/30/17	1,2		Ending Account Value 6/30/17	Fund-Level Expenses Paid During Period 1/1/17–6/30/17	1,2	Net Annualized Expense Ratio	2
Class 2	$1,000		$1,054.40	$4.28			$1,020.63	$4.21		0.84%

1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above — in the far right column — multiplied by the simple average account value over the period indicated, and then multiplied by 181/365 to reflect the one-half year period.

2. Reflects expenses after fee waivers and expense reimbursements. Does not include any ongoing expenses of the Contract for which the Fund is an investment option.

Semiannual Report         FGI-5

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Highlights

Franklin Growth and Income VIP Fund

	Six Months Ended June 30, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 1
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$15.97			$15.94			$17.02			$15.97			$12.64			$11.60
Income from investment operationsa:
Net investment incomeb		0.16			0.40			0.45			0.53c			0.33			0.35
Net realized and unrealized gains (losses)		0.75			1.33			(0.54	)		0.95			3.40			1.08
Total from investment operations		0.91			1.73			(0.09	)		1.48			3.73			1.43
Less distributions from:
Net investment income		(1.03	)		(0.46	)		(0.61	)		(0.43	)		(0.40	)		(0.39	)
Net realized gains		(1.01	)		(1.24	)		(0.38	)		—			—			—
Total distributions		(2.04	)		(1.70	)		(0.99	)		(0.43	)		(0.40	)		(0.39	)
Net asset value, end of period		$14.84			$15.97			$15.94			$17.02			$15.97			$12.64
Total returnd		5.61%			11.86%			(0.62)%			9.40%			29.96%			12.53%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		0.72%			0.59%			0.58%			0.57%			0.58%			0.60%
Expenses net of waiver and payments by affiliates		0.59%			0.59%f,g			0.58%			0.57%f			0.58%f			0.60%
Net investment income		2.02%			2.38%			2.74%			3.26%c			2.29%			2.86%
Supplemental data
Net assets, end of period (000’s)		$33,505			$29,829			$144,663			$168,961			$175,860			$154,463
Portfolio turnover rate		15.56%			40.59%h			48.81%			20.54%			35.16%			30.00%

^a The 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.

^b Based on average daily shares outstanding.

^c Net investment income per share includes approximately $0.12 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 2.53%.

^d Total 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.

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

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

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

^h Excludes the value of portfolio securities delivered as a result of a redemption in-kind. See Note 8.

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

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL HIGHLIGHTS

Franklin Growth and Income VIP Fund (continued)

	Six Months Ended June 30, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 2
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$15.69			$15.68			$16.76			$15.73			$12.46			$11.44
Income from investment operationsa:
Net investment incomeb		0.14			0.30			0.40			0.48c			0.29			0.32
Net realized and unrealized gains (losses)		0.74			1.37			(0.54	)		0.94			3.35			1.05
Total from investment operations		0.88			1.67			(0.14	)		1.42			3.64			1.37
Less distributions from:
Net investment income		(0.97	)		(0.42	)		(0.56	)		(0.39	)		(0.37	)		(0.35	)
Net realized gains		(1.01	)		(1.24	)		(0.38	)		—			—			—
Total distributions		(1.98	)		(1.66	)		(0.94	)		(0.39	)		(0.37	)		(0.35	)
Net asset value, end of period		$14.59			$15.69			$15.68			$16.76			$15.73			$12.46
Total returnd		5.51%			11.62%			(0.91)%			9.14%			29.60%			12.23%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		0.97%			0.84%			0.83%			0.82%			0.83%			0.85%
Expenses net of waiver and payments by affiliates		0.84%			0.84%f,g			0.83%			0.82%f			0.83%f			0.85%
Net investment income		1.77%			2.13%			2.49%			3.01%c			2.04%			2.61%
Supplemental data
Net assets, end of period (000’s)		$73,078			$69,474			$124,691			$138,191			$150,966			$131,400
Portfolio turnover rate		15.56%			40.59%h			48.81%			20.54%			35.16%			30.00%

^a The 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.

^b Based on average daily shares outstanding.

^c Net investment income per share includes approximately $0.12 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 2.28%.

^d Total 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.

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

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

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

^h Excludes the value of portfolio securities delivered as a result of a redemption in-kind. See Note 8.

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

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Statement of Investments, June 30, 2017 (unaudited)

Franklin Growth and Income VIP Fund
		Country		Shares		Value
	Common Stocks 85.6%
	Consumer Discretionary 5.0%
	Ford Motor Co.		United States		56,807	$	635,670
	L Brands Inc.		United States		10,800		582,012
	Lowe’s Cos. Inc.		United States		21,848		1,693,876
	Newell Brands Inc.		United States		28,119		1,507,741
	Target Corp.		United States		16,880		882,655
							5,301,954
	Consumer Staples 8.3%
	Anheuser-Busch InBev SA/NV, ADR		Belgium		9,837		1,085,611
	CVS Health Corp.		United States		14,884		1,197,567
	The Kraft Heinz Co.		United States		18,481		1,582,713
	PepsiCo Inc.		United States		22,598		2,609,843
	The Procter & Gamble Co.		United States		14,500		1,263,675
	Wal-Mart Stores Inc.		United States		14,000		1,059,520
							8,798,929
	Energy 8.6%
	Anadarko Petroleum Corp.		United States		18,718		848,674
	Baker Hughes Inc.		United States		13,000		708,630
	BP PLC, ADR		United Kingdom		12,786		443,035
	Chevron Corp.		United States		24,968		2,604,911
	Exxon Mobil Corp.		United States		18,277		1,475,502
	Royal Dutch Shell PLC, A, ADR		United Kingdom		19,113		1,016,621
	Schlumberger Ltd.		United States		14,457		951,849
	Suncor Energy Inc.		Canada		38,282		1,117,834
							9,167,056
	Financials 18.9%
	Arthur J. Gallagher & Co.		United States		18,666		1,068,628
	Bank of America Corp.		United States		46,800		1,135,368
	BB&T Corp.		United States		36,176		1,642,752
	BlackRock Inc.		United States		5,461		2,306,781
	The Charles Schwab Corp.		United States		4,703		202,041
	JPMorgan Chase & Co.		United States		45,774		4,183,744
	MetLife Inc.		United States		30,000		1,648,200
	Morgan Stanley		United States		47,437		2,113,793
	U.S. Bancorp		United States		53,255		2,765,000
	Wells Fargo & Co.		United States		55,750		3,089,107
							20,155,414
	Health Care 8.5%
	Eli Lilly & Co.		United States		21,037		1,731,345
	Johnson & Johnson		United States		6,765		894,942
	Medtronic PLC		United States		25,881		2,296,939
	Merck & Co. Inc.		United States		11,000		704,990
	Pfizer Inc.		United States		57,963		1,946,977
	UnitedHealth Group Inc.		United States		8,000		1,483,360
							9,058,553
	Industrials 16.0%
	Cummins Inc.		United States		7,969		1,292,731
	Deere & Co.		United States		6,742		833,244
	General Electric Co.		United States		88,532		2,391,249
	Illinois Tool Works Inc.		United States		11,111		1,591,651
	Lockheed Martin Corp.		United States		6,169		1,712,576

FGI-8         Semiannual Report

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)
	Norfolk Southern Corp.		United States		7,300	$	888,410
	Raytheon Co.		United States		14,416		2,327,896
	Republic Services Inc.		United States		31,980		2,038,085
	Stanley Black & Decker Inc.		United States		9,932		1,397,730
	United Parcel Service Inc., B		United States		8,317		919,777
	United Technologies Corp.		United States		13,634		1,664,848
							17,058,197
	Information Technology 10.7%
	Apple Inc.		United States		13,832		1,992,084
	Broadcom Ltd.		United States		3,241		755,315
	Cisco Systems Inc.		United States		47,289		1,480,146
	Intel Corp.		United States		20,962		707,258
	Microsoft Corp.		United States		55,576		3,830,854
	Oracle Corp.		United States		15,829		793,666
	Texas Instruments Inc.		United States		24,496		1,884,477
							11,443,800
	Materials 4.2%
	BASF SE		Germany		13,937		1,290,916
	The Dow Chemical Co.		United States		26,073		1,644,424
	International Paper Co.		United States		28,220		1,597,534
							4,532,874
	Real Estate 1.3%
	Host Hotels & Resorts Inc.		United States		73,141		1,336,286
	Telecommunication Services 1.7%
	Rogers Communications Inc., B		Canada		16,744		790,484
	Verizon Communications Inc.		United States		23,610		1,054,423
							1,844,907
	Utilities 2.4%
	Dominion Energy Inc.		United States		13,604		1,042,475
	Xcel Energy Inc.		United States		32,796		1,504,680
							2,547,155
	Total Common Stocks (Cost $66,460,271)						91,245,125
a	Equity-Linked Securities 6.8%
	Consumer Discretionary 1.2%
b	Wells Fargo Bank National Assn. into Amazon.com Inc., 5.00%, 144A		United States		1,500		1,332,592
	Energy 0.4%
b	Merrill Lynch International & Co. CV into Schlumberger Ltd., 7.00%, 144A		United States		6,000		414,755
	Financials 1.2%
b	UBS AG London into The Charles Schwab Corp., 6.50%, 144A		United States		30,000		1,258,015
	Health Care 0.9%
b	Merrill Lynch International & Co. CV into Gilead Sciences Inc., 7.25%, 144A		United States		13,000		931,294

Semiannual Report         FGI-9

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Growth and Income VIP Fund (continued)

		Country		Shares		Value
a	Equity-Linked Securities (continued)
	Information Technology 3.1%
b	Barclays Bank PLC into Broadcom Ltd., 7.50%, 144A		United States		4,500	$	1,028,515
b	Goldman Sachs International into Apple Inc., 6.00%, 144A		United States		7,000		1,042,216
b	UBS AG into Intel Corp., 7.00%, 144A		United States		35,000		1,198,446
							3,269,177
	Total Equity-Linked Securities (Cost $7,245,362)						7,205,833
	Convertible Preferred Stocks 4.9%
	Energy 0.4%
	Hess Corp., 8.00%, cvt. pfd		United States		8,500		472,770
	Health Care 2.8%
	Allergan PLC, 5.50%, cvt. pfd		United States		2,051		1,780,432
	Becton Dickinson and Co., 6.125%, cvt. pfd., A		United States		21,500		1,177,770
							2,958,202
	Utilities 1.7%
	NextEra Energy Inc., 6.371%, cvt. pfd		United States		28,277		1,813,687
	Total Convertible Preferred Stocks (Cost $5,060,340)						5,244,659
	Total Investments before Short Term Investments (Cost $78,765,973)						103,695,617
				Principal Amount
	Short Term Investments (Cost $2,556,389) 2.4%
	Repurchase Agreements 2.4%
c	Joint Repurchase Agreement, 1.058%, 7/03/17 (Maturity Value $2,556,614)
	BNP Paribas Securities Corp. (Maturity Value $1,147,102)
	Deutsche Bank Securities Inc. (Maturity Value $262,411)
	HSBC Securities (USA) Inc. (Maturity Value $716,951) Merrill Lynch, Pierce, Fenner & Smith Inc. (Maturity Value $430,150)
	Collateralized by U.S. Government Agency Securities, 0.875% - 1.875%, 12/15/17 - 6/11/21; dU.S. Treasury Bill, 11/30/17 - 1/04/18; and U.S. Treasury Note, 0.75% - 4.00%, 4/30/18 - 8/15/21 (valued at $2,610,168)		United States	$	2,556,389		2,556,389
	Total Investments (Cost $81,322,362) 99.7%						106,252,006
	Other Assets, less Liabilities 0.3%						330,240
	Net Assets 100.0%					$	106,582,246

See Abbreviations on page FGI-20.

^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, 2017, the aggregate value of these securities was $7,205,833, representing 6.8% of net assets.

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

^dThe security was issued on a discount basis with no stated coupon rate.

FGI-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, 2017 (unaudited)

	Franklin Growth and Income VIP Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	78,765,973
Cost - Repurchase agreements		2,556,389
Total cost of investments	$	81,322,362
Value - Unaffiliated issuers	$	103,695,617
Value - Repurchase agreements		2,556,389
Total value of investments		106,252,006
Receivables:
Investment securities sold		244,487
Capital shares sold		36,387
Dividends		187,132
Other assets		66
Total assets		106,720,078
Liabilities:
Payables:
Capital shares redeemed		32,833
Management fees		43,557
Distribution fees		30,400
Reports to shareholders		10,007
Professional fees		19,093
Accrued expenses and other liabilities		1,942
Total liabilities		137,832
Net assets, at value	$	106,582,246
Net assets consist of:
Paid-in capital	$	78,748,223
Undistributed net investment income		898,482
Net unrealized appreciation (depreciation)		24,929,377
Accumulated net realized gain (loss)		2,006,164
Net assets, at value	$	106,582,246
Class 1:
Net assets, at value	$	33,504,627
Shares outstanding		2,257,392
Net asset value and maximum offering price per share	$	14.84
Class 2:
Net assets, at value	$	73,077,619
Shares outstanding		5,009,983
Net asset value and maximum offering price per share	$	14.59

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 Operations

for the six months ended June 30, 2017 (unaudited)

	Franklin Growth and Income VIP Fund
Investment income:
Dividends	$	1,331,504
Interest		12,293
Total investment income		1,343,797
Expenses:
Management fees (Note 3a)		319,579
Distribution fees - Class 2 (Note 3c)		88,396
Custodian fees (Note 4)		645
Reports to shareholders		20,889
Professional fees		22,083
Trustees’ fees and expenses		420
Other		5,747
Total expenses		457,759
Expenses waived/paid by affiliates (Note 3e)		(65,377	)
Net expenses		392,382
Net investment income		951,415
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		2,054,401
Realized gain distributions from REITs		30,229
Foreign currency transactions		1,605
Net realized gain (loss)		2,086,235
Net change in unrealized appreciation (depreciation) on:
Investments		2,522,793
Translation of other assets and liabilities denominated in foreign currencies		3,698
Net change in unrealized appreciation (depreciation)		2,526,491
Net realized and unrealized gain (loss)		4,612,726
Net increase (decrease) in net assets resulting from operations	$	5,564,141

FGI-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 Growth and Income VIP Fund
	Six Months Ended June 30, 2017 (unaudited)			Year Ended December 31, 2016
Increase (decrease) in net assets:
Operations:
Net investment income	$	951,415		$	5,508,394
Net realized gain (loss)		2,086,235			45,171,232
Net change in unrealized appreciation (depreciation)		2,526,491			(27,857,712	)
Net increase (decrease) in net assets resulting from operations		5,564,141			22,821,914
Distributions to shareholders from:
Net investment income:
Class 1		(2,052,142	)		(4,525,425	)
Class 2		(4,282,950	)		(3,230,836	)
Net realized gains:
Class 1		(2,005,313	)		(12,121,008	)
Class 2		(4,458,397	)		(9,525,503	)
Total distributions to shareholders		(12,798,802	)		(29,402,772	)
Capital share transactions: (Note 2)
Class 1		5,975,714			(110,461,648	)
Class 2		8,538,844			(53,009,745	)
Total capital share transactions		14,514,558			(163,471,393	)
Net increase (decrease) in net assets		7,279,897			(170,052,251	)
Net assets:
Beginning of period		99,302,349			269,354,600
End of period	$	106,582,246		$	99,302,349
Undistributed net investment income included in net assets:
End of period	$	898,482		$	6,282,159

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

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 eighteen 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. 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 may differ by its distribution fees, voting rights on matters affecting a single class, 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. 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 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 Fund’s business day. Occasionally, events occur between the time at which trading in a foreign security is completed and 4 p.m. Eastern time 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 4 p.m. Eastern time. 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

FGI-14         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Growth and Income VIP Fund (continued)

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

When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the Fund’s NAV is not calculated, 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, 2017.

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 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

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)

d. Equity-Linked Securities (continued)

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. For U.S. income tax purposes, when EU reclaims are received by the Fund and the Fund previously passed foreign tax credit on to its shareholders, the Fund must either amend historic tax reporting to shareholders or enter into a closing agreement with the Internal Revenue Service (IRS) in order to pay the associated tax liability on behalf of the Fund’s shareholders.

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, 2017, 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 and realized gain distributions are recorded on the ex-dividend date except for certain dividends from 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. Distributable earnings are determined according to income tax regulations (tax basis) and 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

FGI-16         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Growth and Income VIP Fund (continued)

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, 2017, 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, 2017						Year Ended December 31, 2016
	Shares			Amount			Shares			Amount
Class 1 Shares:
Shares sold		188,670		$	3,071,730			1,575,501		$	23,479,446
Shares issued in reinvestment of distributions		272,130			4,057,455			1,140,948			16,646,433
Shares redeemed in-kind (Note 8)		—			—			(8,891,023	)		(134,564,738	)
Shares redeemed		(71,318	)		(1,153,471	)		(1,034,562	)		(16,022,789	)
Net increase (decrease)		389,482		$	5,975,714			(7,209,136	)	$	(110,461,648	)
Class 2 Shares:
Shares sold		243,235		$	3,940,038			781,106		$	11,854,554
Shares issued in reinvestment of distributions		596,679			8,741,347			888,944			12,756,339
Shares redeemed in-kind (Note 8)		—			—			(4,019,533	)		(59,794,978	)
Shares redeemed		(258,564	)		(4,142,541	)		(1,173,608	)		(17,825,660	)
Net increase (decrease)		581,350		$	8,538,844			(3,523,091	)	$	(53,009,745	)

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         FGI-17

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Growth and 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, 2017, 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 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.

e. Waiver and Expense Reimbursements

Advisers 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 0.64% 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, 2018. Total expenses waived or paid are not subject to recapture subsequent to the Fund’s fiscal year end.

In addition, Advisers has voluntarily agreed 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 0.59% 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). This waiver is voluntary and may be modified or discontinued by Advisers at any time, and without further notice.

FGI-18         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Growth and Income 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, 2017, there were no credits earned.

5. Income Taxes

At June 30, 2017, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	81,405,090
Unrealized appreciation	$	26,851,061
Unrealized depreciation		(2,004,145	)
Net unrealized appreciation (depreciation)	$	24,846,916

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

6. Investment Transactions

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2017, aggregated $ 19,216,352 and $15,556,636, 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 9, 2018. 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 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statement of Operations. During the period ended June 30, 2017, the Fund did not use the Global Credit Facility.

8. Redemption In-Kind

During the year ended December 31, 2016, the Fund realized $ 38,040,305 of net gains resulting from a redemption in-kind in which a shareholder redeemed fund shares for cash and securities held by the Fund. Because such gains are not taxable to the Fund, and are not distributed to remaining shareholders, they have been reclassified from accumulated net realized gains to paid-in capital.

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

Semiannual Report         FGI-19

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Growth and Income VIP Fund (continued)

9. Fair Value Measurements (continued)

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

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

The 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, 2017, 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	$	96,489,784	$	—	$	—	$	96,489,784
Equity-Linked Securitiesb		—		7,205,833		—		7,205,833
Short Term Investments		—		2,556,389		—		2,556,389
Total Investments in Securities	$	96,489,784	$	9,762,222	$	—	$	106,252,006

^aIncludes common and convertible preferred stocks.

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

10. Investment Company Reporting Modernization

In October 2016, the U.S. Securities and Exchange Commission adopted new rules and amended existing rules (together, final rules) intended to modernize the reporting and disclosure of information by registered investment companies. In part, the final rules amend Regulation S-X and require standardized, enhanced disclosures about derivatives in investment company financial statements, as well as other amendments. The compliance date for the amendments to Regulation S-X is August 1, 2017. Management has reviewed the requirements and believes the adoption of the amendments to Regulation S-X will not have a material impact on the Fund’s financial statements and related disclosures.

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

FGI-20         Semiannual Report

Franklin Income VIP Fund

This semiannual report for Franklin Income VIP Fund covers the period ended June 30, 2017.

Class 2 Performance Summary as of June 30, 2017

The Fund’s Class 2 Shares delivered a +4.18% total return* for the six-month period ended June 30, 2017.

*Return information is based on net asset values calculated for shareholder transactions. Certain adjustments were made to the net assets of the Fund at 6/30/17 for financial reporting purposes, and as a result, the total returns based on those net asset values differ from the adjusted total returns reported in the Financial Highlights. The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 4/30/18. Fund investment results reflect the fee waiver; without this waiver, the results would have been lower.

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

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 (S&P 500^®), posted a +9.34% total return, and its fixed income benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index, produced a +2.27% total return for the same period.¹

Economic and Market Overview

U.S. economic growth decelerated in 2017’s first quarter, largely due to slower growth in consumer spending and declines in private inventory investment and government spending. However, growth accelerated in the second quarter due to increases in consumer spending, business investment and federal government spending. The manufacturing sector generally expanded, and the services sector also continued to

Portfolio Composition
6/30/17
	% of Total Net Assets
Equity*		55.1%
Energy		8.2%
Utilities		7.7%
Information Technology		7.4%
Financials		6.9%
Health Care		6.6%
Industrials		6.3%
Consumer Staples		3.6%
Materials		3.6%
Consumer Discretionary		3.3%
Telecommunication Services		1.1%
Real Estate		0.4%
Fixed Income		37.6%
Health Care		8.1%
Energy		7.0%
Consumer Discretionary		5.0%
Financials		3.7%
Information Technology		2.9%
Utilities		2.9%
Telecommunication Services		2.8%
Industrials		2.5%
Materials		2.1%
Real Estate		0.4%
Consumer Staples		0.2%
Short-Term Investments & Other Net Assets		7.3%

*Includes convertible bonds.

grow. The unemployment rate decreased from 4.7% in December 2016 to 4.4% at period-end.² Monthly retail sales were volatile, but grew for most of the period. Annual inflation, as measured by the Consumer Price Index, decreased from 2.1% to 1.6% during the period.

The U.S. Federal Reserve (Fed), at its March meeting, increased the federal funds target rate from 0.50%–0.75% to 0.75%–1.00%. The Fed again increased its target range by a quarter point to 1.00%–1.25% at its June meeting. The Fed made both of these increases amid signs of a growing U.S. economy, a strengthening labor market and an improvement in business spending.

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.

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

FI-2         Semiannual Report

FRANKLIN INCOME VIP FUND

U.S. equity markets rose during the period, benefiting from mostly upbeat economic data, better U.S. corporate earnings and signs of improvement in the Chinese and European economies. Investor optimism arising from pro-growth and pro-business policy plans in the U.S. and the victory of Emmanuel Macron as France’s President also helped U.S. equities. However, concerns about the terms of the U.K.’s exit from the European Union (also known as “Brexit”), uncertainty about President Trump’s ability to implement reforms, and geopolitical tensions in the Middle East and the Korean peninsula curbed market sentiment. The broad U.S. stock market, as measured by the S&P 500, generated a +9.34% total return for the period.¹

The 10-year Treasury yield, which moves inversely to its price, shifted throughout the period. It increased early during the period amid expectations of rate hikes by the Fed and upbeat economic data. During the latter part of the period, U.S. political uncertainty, and geopolitical tensions in the Middle East and the Korean peninsula, resulted in a decline in the yield. However, in June, the yield rose again due to renewed optimism for improvement in economic growth. Overall, the U.S. Treasury yield fell from 2.45% on December 30, 2016, to 2.31% at period-end.

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 adjusted 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 59.1% to 55.1%, and increased our fixed

Top Five Equity Holdings
6/30/17
Company Sector/Industry	% of Total Net Assets
Royal Dutch Shell PLC Energy		2.6%
Wells Fargo & Co. Banks		1.8%
Chevron Corp. Energy		1.8%
General Electric Co. Industrials		1.8%
The Dow Chemical Co. Materials		1.8%

income weighting from 35.2% to 37.5%. Our cash position rose from 5.7% to 7.4% of total net assets.

Most of the Fund’s health care equities had strong performance in the first half of 2017. Pharmaceuticals, including Sanofi, AstraZeneca and Eli Lilly³ were among the top contributors, as was Medtronic, which manufactures technologically advanced medical devices. Although pharmaceutical and biotechnology stocks turned volatile as they occasionally came under selling pressure, they have collectively rebounded in 2017’s first half for a variety of reasons. Most importantly, the specter of U.S. government-mandated price caps on specialty medicines appears to have faded into the background for the time being, thereby reducing the heightened levels of policy-oriented risks that have hovered over the industry for more than a year.

Utility stocks responded positively to a combination of falling U.S. Treasury yields and robust first-quarter performance metrics within the sector, with the majority of utilities companies reporting earnings that were above analysts’ consensus expectations. As a result, most of the Fund’s related holdings — focused on large U.S. electric utility companies such as NextEra Energy and PG&E — traded higher.

In other contributing sectors, information technology (IT) dominated equities in the first half of 2017 despite selling off in June. Several holdings contributed positively to Fund returns, notably Apple, Microsoft and Oracle. Our consumer staples holdings all added to performance, with Philip Morris International as a notable contributor. Performance among industrials sector stocks was led by Deere, which reported standout results during the period and raised their outlook for the rest of the year driven by strength in their global agriculture and U.S. construction businesses. United Technologies also

3. Not held at period-end.

Semiannual Report         FI-3

FRANKLIN INCOME VIP FUND

contributed to returns. Dow Chemical led contributors among materials sector companies as their merger with DuPont⁴ continued to move toward completion with several additional regulatory approvals, and management outlined their plan for meaningful cost and revenue synergies for the combined company.

As crude oil officially tipped into a bear market, given a West Texas Intermediate oil per-barrel price decline of about 20% in June 2017 from recent peak levels during March, energy equities suffered in tandem, while their corporate debt securities, also held by the Fund, tended to remain relatively buoyant. The Fund’s energy sector holdings notably underperformed as oil prices fell, due mainly to disappointing supply/demand fundamentals despite the Organization of the Petroleum Exporting Countries’ (OPEC’s) decision to extend its global production-curtailment agreement. Overall, increased drilling activity and rising U.S. shale oil production, even in the face of lower prices, caused oil supply growth to exceed expectations. This in turn prevented oil inventories from declining as much as anticipated, despite continued steady oil demand growth. Meanwhile, demand for natural gas was below estimates in 2017’s first half. Among the seven industries that constitute the energy sector, European integrated oil and gas companies held up much better than their U.S. counterparts and sector peers specializing in exploration, production or oilfield services. As a result, the Fund was supported by its positions in Europe-based global energy conglomerates but hindered by U.S.-based detractors such as Anadarko Petroleum, Chevron, Energy XXI Gulf Coast and Occidental Petroleum.

In other sectors, Target was the largest detractor in the consumer discretionary sector as well as for the Fund as a whole, as they transitioned to upgrading their in-store experience and online capabilities amid heightened competition from both online and brick-and-mortar peers. In the telecommunication services sector, most of the small overall decline was due to Verizon Communications. Although our industrials sector holdings contributed to overall Fund returns, General Electric was a notable detractor as it reported successive quarters of weaker-than-expected results before announcing a new chief executive officer in June. Intel and Qualcomm³ detracted from the otherwise strong returns generated by the Fund’s IT sector holdings.

Top Five Fixed Income Holdings and Senior Floating Rate Interests*
6/30/17
Company Sector/Industry	% of Total Net Assets
CHS/Community Health Systems Inc. Health Care		2.5%
Tenet Healthcare Corp. Health Care		2.0%
Weatherford International Ltd. Energy		1.8%
DISH DBS Corp. Consumer Discretionary		1.7%
Chesapeake Energy Corp. Energy		1.5%

*Does not include convertible bonds.

During the period, consumer non-cyclical holdings⁵ notably contributed to our fixed income returns, benefiting from hospital and health care facility operators CHS/Community Health Systems and Tenet Healthcare. Both holdings outperformed as investors gained comfort that any impact from a potential repeal of the Affordable Care Act would be less than initially feared, while both companies also benefited from the sale of a few of their hospital assets at attractive valuations. Similarly, our exposure to pharmaceutical companies such as Valeant Pharmaceuticals International also helped, as Valeant was also able to sell assets at attractive valuations and pay down debt, while posting improved operating results and raising guidance.

Communications⁶ was also a strong-performing sector, due to our exposure in Sprint and DISH DBS. The outperformance in Echostar DBS (an operating satellite company of DISH Network) and Sprint bonds was fueled by increased merger and acquisition speculation, due to a new Federal Communications Commission regime and a more favorable governmental regulatory landscape. Sprint’s earnings also surpassed market expectations with stable operating metrics and an improved liquidity profile during the period, while Echostar bonds were helped when the company used convertible securities to fund wireless spectrum purchases instead of raising debt.

Banking⁷ performed well, as earnings from banking institutions were relatively strong over the period. Strong earnings from

4. Not a Fund holding.

5. Consumer non-cyclical holdings are in consumer staples and health care in the fixed income section of the SOI.

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

7. Banking holdings are in financials in the fixed income section of the SOI.

FI-4         Semiannual Report

FRANKLIN INCOME VIP FUND

our holdings in JPMorgan Chase and Citigroup exceeded consensus expectations as asset quality remained strong, core net interest income improved with rising interest rates, and capital markets businesses continued to produce improving results. Capital levels remained robust and ample core deposit funding continued to contribute to a positive fundamental credit profile. Both JPMorgan and Citigroup passed their annual regulatory stress tests, adding to confidence in the overall credit quality of these institutions and providing them with greater latitude to potentially return excess capital to shareholders in the future through share buybacks and dividend increases.

None of the Fund’s fixed income sector exposures detracted from performance during the period. A few of our fixed income energy positions hurt performance, as crude oil spot and futures prices were volatile during the period. Bill Barrett was one of our largest underperformers, as the company reinitiated their drilling program in late 2016 and the increase in planned capital spending for 2017 was not received favorably by the market. Although the company remained proactive at reducing debt and refinancing near-term maturities, negative sentiment increased at the end of the period, due to the retreat in oil prices. Similarly, Sanchez Energy bonds underperformed due to lower oil prices, despite a possibly transformational acquisition of assets from Anadarko Petroleum that we believe should ultimately improve the company’s long-term credit profile. However, the energy sector was still a solid performer within our overall fixed income exposure.

Our exposure to Talen Energy Supply within electric utilities also hurt performance due to unfavorable weather conditions and a poor outcome in the 2020-2021 electricity capacity auction for the PJM geographic region in the eastern U.S., where the company has more exposure. However, the weak performance from Talen was more than offset by the strong performance in our Dynegy bonds. The market apparently gained comfort that Dynegy would be able to address their large upcoming 2019 maturity from both asset sales and internally generated cash flow, and that the company might be acquired.

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, 2017, 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         FI-5

FRANKLIN INCOME VIP FUND

Class 2 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: (1) transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes; and (2) 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 table below shows Fund-level ongoing expenses and can help you understand these costs 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 table below provides information about the actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of ongoing Fund expenses but does not include the effect of ongoing Contract expenses, is used to calculate the “Ending Account Value.” You can estimate the Fund-level expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number under the headings “Actual” and “Fund-Level Expenses Paid During Period” (if Fund-Level Expenses Paid During Period were $7.50, then 8.6 × $7.50 = $64.50). In this illustration, the estimated expenses paid this period at the Fund level are $64.50.

Hypothetical Example for Comparison with Other Mutual Funds

Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other mutual funds offered through the Contract. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds offered through the Contract.

Please note that expenses shown in the table are meant to highlight ongoing costs at the Fund level only and do not reflect any ongoing expenses at the Contract level, or transaction expenses at either the Fund or Contract levels. In addition, 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.

		Actual (actual return after expenses)				Hypothetical (5% annual return before expenses)
Share Class	Beginning Account Value 1/1/17		Ending Account Value 6/30/17	Fund-Level Expenses Paid During  Period 1/1/17–6/30/17	1,2		Ending Account Value 6/30/17	Fund-Level Expenses Paid During  Period 1/1/17–6/30/17	1,2	Net Annualized Expense Ratio	2
Class 2	$1,000		$1,041.80	$3.54			$1,021.32	$3.51		0.70%

1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above — in the far right column — multiplied by the simple average account value over the period indicated, and then multiplied by 181/365 to reflect the one-half year period.

2. Reflects expenses after fee waivers and expense reimbursements. Does not include any ongoing expenses of the Contract for which the Fund is an investment option or acquired fund fees and expenses.

FI-6         Semiannual Report

FI SA1 07/17

SUPPLEMENT DATED JULY 18, 2017

TO THE STATEMENT OF ADDITIONAL INFORMATION

DATED MAY 1, 2017

OF

FRANKLIN INCOME VIP FUND

(A series of Franklin Templeton Variable Insurance Products Trust)

The Statement of Additional Information is amended as follows:

The following bullet point is added as the last bullet point under the heading “The Funds – Goals, Additional Strategies and Risks – Franklin Income VIP Fund:”

• buy and sell exchange-traded options on indexes that measure stock volatility, such as the Chicago Board Options Exchange (CBOE) Volatility Index^® (VIX^®)

Please keep this supplement with your Statement of Additional Information for future reference.

FI-7

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Highlights

Franklin Income VIP Fund

	Six Months Ended June 30, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 1
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$15.87			$14.64			$16.48			$16.53			$15.47			$14.68
Income from investment operationsa:
Net investment incomeb		0.35			0.67			0.71			0.72			0.81			0.91
Net realized and unrealized gains (losses)		0.36			1.34			(1.78	)		0.11			1.31			0.90
Total from investment operations		0.71			2.01			(1.07	)		0.83			2.12			1.81
Less distributions from net investment income		(0.71	)		(0.78	)		(0.77	)		(0.88	)		(1.06	)		(1.02	)
Net asset value, end of period		$15.87			$15.87			$14.64			$16.48			$16.53			$15.47
Total returnc		4.42%			14.33%			(6.84)%			4.92%			14.18%			12.91%
Ratios to average net assetsd
Expenses before waiver and payments by affiliates		0.47%			0.47%			0.46%			0.47%			0.47%			0.47%
Expenses net of waiver and payments by affiliates		0.45%	e		0.44%	e		0.46%	e,f		0.47%	e		0.47%	e		0.47%
Net investment income		4.26%			4.47%			4.47%			4.26%			5.07%			6.03%
Supplemental data
Net assets, end of period (000’s)		$723,350			$696,227			$604,228			$714,664			$695,004			$584,391
Portfolio turnover rate		12.01%			39.03%			31.53%			24.77%			21.71%			26.66%	g

^aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’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

FINANCIAL HIGHLIGHTS

Franklin Income VIP Fund (continued)

	Six Months Ended June 30, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 2
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$15.38			$14.20			$16.00			$16.07			$15.07			$14.32
Income from investment operationsa:
Net investment incomeb		0.31			0.61			0.65			0.66			0.75			0.85
Net realized and unrealized gains (losses)		0.35			1.31			(1.73	)		0.11			1.27			0.88
Total from investment operations		0.66			1.92			(1.08	)		0.77			2.02			1.73
Less distributions from net investment income		(0.67	)		(0.74	)		(0.72	)		(0.84	)		(1.02	)		(0.98	)
Net asset value, end of period		$15.37			$15.38			$14.20			$16.00			$16.07			$15.07
Total returnc		4.25%			14.02%			(7.05)%			4.62%			13.94%			12.65%
Ratios to average net assetsd
Expenses before waiver and payments by affiliates		0.72%			0.72%			0.71%			0.72%			0.72%			0.72%
Expenses net of waiver and payments by affiliates		0.70%	e		0.69%	e		0.71%	e,f		0.72%	e		0.72%	e		0.72%
Net investment income		4.01%			4.22%			4.22%			4.01%			4.82%			5.78%
Supplemental data
Net assets, end of period (000’s)		$5,090,255			$5,088,556			$4,907,599			$6,022,804			$6,188,045			$6,182,997
Portfolio turnover rate		12.01%			39.03%			31.53%			24.77%			21.71%			26.66%	g

^aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’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-9

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL HIGHLIGHTS

Franklin Income VIP Fund (continued)

	Six Months Ended June 30, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 4
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$15.71			$14.49			$16.31			$16.36			$15.32			$14.54
Income from investment operationsa:
Net investment incomeb		0.31			0.61			0.65			0.66			0.75			0.85
Net realized and unrealized gains (losses)		0.36			1.33			(1.76	)		0.11			1.30			0.90
Total from investment operations		0.67			1.94			(1.11	)		0.77			2.05			1.75
Less distributions from net investment income		(0.65	)		(0.72	)		(0.71	)		(0.82	)		(1.01	)		(0.97	)
Net asset value, end of period		$15.73			$15.71			$14.49			$16.31			$16.36			$15.32
Total returnc		4.25%			13.87%			(7.15)%			4.52%			13.85%			12.56%
Ratios to average net assetsd
Expenses before waiver and payments by affiliates		0.82%			0.82%			0.81%			0.82%			0.82%			0.82%
Expenses net of waiver and payments by affiliates		0.80%	e		0.79%	e		0.81%	e,f		0.82%	e		0.82%	e		0.82%
Net investment income		3.91%			4.12%			4.12%			3.91%			4.72%			5.68%
Supplemental data
Net assets, end of period (000’s)		$317,882			$309,935			$306,023			$378,545			$397,652			$436,405
Portfolio turnover rate		12.01%			39.03%			31.53%			24.77%			21.71%			26.66%	g

^aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’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-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, 2017 (unaudited)

Franklin Income VIP Fund
		Country		Shares		Value
	Common Stocks 45.9%
	Consumer Discretionary 3.3%
	Ford Motor Co.		United States		7,138,995	$	79,885,354
	General Motors Co.		United States		1,000,000		34,930,000
	Target Corp.		United States		1,639,100		85,708,539
							200,523,893
	Consumer Staples 3.6%
	Anheuser-Busch InBev SA/NV, ADR		Belgium		505,000		55,731,800
	The Coca-Cola Co.		United States		1,325,000		59,426,250
	PepsiCo Inc.		United States		584,000		67,446,160
	Philip Morris International Inc.		United States		350,000		41,107,500
							223,711,710
	Energy 7.5%
	Anadarko Petroleum Corp.		United States		600,000		27,204,000
	Baker Hughes Inc.		United States		725,000		39,519,750
	BP PLC, ADR		United Kingdom		1,800,000		62,370,000
	Chevron Corp.		United States		1,055,000		110,068,150
a	Energy XXI Gulf Coast Inc.		United States		510,163		9,473,727
a	Halcon Resources Corp.		United States		74,398		337,767
	Occidental Petroleum Corp.		United States		436,000		26,103,320
	Royal Dutch Shell PLC, A, ADR		United Kingdom		3,021,748		160,726,776
a	Stone Energy Corp.		United States		544,906		10,015,372
a	W&T Offshore Inc.		United States		2,000,000		3,920,000
a	Weatherford International PLC		United States		2,500,000		9,675,000
							459,413,862
	Financials 5.6%
	Bank of America Corp.		United States		800,000		19,408,000
	HSBC Holdings PLC		United Kingdom		5,000,000		46,351,245
	JPMorgan Chase & Co.		United States		690,100		63,075,140
	MetLife Inc.		United States		1,245,108		68,406,233
	U.S. Bancorp		United States		1,000,000		51,920,000
	Wells Fargo & Co.		United States		1,700,000		94,197,000
							343,357,618
	Health Care 4.9%
	AstraZeneca PLC		United Kingdom		750,000		50,164,460
	Medtronic PLC		United States		335,000		29,731,250
	Merck & Co. Inc.		United States		250,000		16,022,500
a	Mylan NV		United States		628,000		24,378,960
	Pfizer Inc.		United States		2,638,975		88,643,170
	Roche Holding AG		Switzerland		136,500		34,767,458
	Sanofi, ADR		France		1,208,292		57,889,270
							301,597,068
	Industrials 5.1%
a,b	CEVA Holdings LLC		United States		13,012		3,253,065
	Deere & Co.		United States		240,000		29,661,600
	General Electric Co.		United States		3,976,200		107,397,162
	Republic Services Inc.		United States		527,300		33,604,829
	Union Pacific Corp.		United States		500,000		54,455,000
	United Technologies Corp.		United States		700,000		85,477,000
							313,848,656

Semiannual Report         FI-11

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Income VIP Fund (continued)

		Country		Shares		Value
	Common Stocks (continued)
	Information Technology 3.9%
	Apple Inc.		United States		645,317	$	92,938,554
	Intel Corp.		United States		1,207,000		40,724,180
	Microsoft Corp.		United States		1,000,000		68,930,000
	Oracle Corp.		United States		700,632		35,129,689
							237,722,423
	Materials 3.6%
	BASF SE		Germany		387,500		35,892,208
	The Dow Chemical Co.		United States		1,700,000		107,219,000
	Rio Tinto PLC, ADR		United Kingdom		1,800,000		76,158,000
							219,269,208
	Real Estate 0.4%
	Host Hotels & Resorts Inc.		United States		1,500,000		27,405,000
	Telecommunication Services 1.1%
	BCE Inc.		Canada		466,000		20,996,335
	Verizon Communications Inc.		United States		1,075,000		48,009,500
							69,005,835
	Utilities 6.9%
	Dominion Energy Inc.		United States		1,000,000		76,630,000
	Duke Energy Corp.		United States		702,500		58,721,975
	Great Plains Energy Inc.		United States		777,900		22,776,912
	NextEra Energy Inc.		United States		125,000		17,516,250
	PG&E Corp.		United States		935,300		62,075,861
	PPL Corp.		United States		450,000		17,397,000
	Public Service Enterprise Group Inc.		United States		823,500		35,418,735
	Sempra Energy		United States		368,300		41,525,825
	The Southern Co.		United States		1,062,100		50,853,348
	Xcel Energy Inc.		United States		810,964		37,207,028
							420,122,934
	Total Common Stocks (Cost $2,341,420,880)						2,815,978,207
c	Equity-Linked Securities 5.4%
	Energy 0.3%
d	Wells Fargo Bank National Assn. into Halliburton Co., 8.00%, 144A		United States		435,000		19,413,871
	Health Care 0.5%
d	JPMorgan Chase & Co. into Merck & Co. Inc., 6.25%, 144A		United States		500,000		31,526,534
	Industrials 1.1%
d	Morgan Stanley into Deere & Co., 6.00%, 144A		United States		550,000		66,142,381
	Information Technology 3.5%
d	Deutsche Bank AG/London into Apple Inc., 6.00%, 144A		United States		410,000		60,655,427
d	Goldman Sachs International into Analog Devices Inc., 6.50%, 144A		United States		570,000		45,497,718
d	Goldman Sachs International into Intel Corp., 6.00%, 144A		United States		1,700,000		58,472,495
d	Royal Bank of Canada into Texas Instruments Inc., 6.00%, 144A		United States		725,000		51,326,520
							215,952,160
	Total Equity-Linked Securities (Cost $323,858,800)						333,034,946

FI-12         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Income VIP Fund (continued)

		Country		Shares			Value
	Convertible Preferred Stocks 2.7%
	Financials 1.2%
	Bank of America Corp., 7.25%, cvt. pfd., L		United States		34,600		$	43,664,854
a	FNMA, 5.375%, cvt. pfd		United States		475			8,431,250
	Wells Fargo & Co., 7.50%, cvt. pfd., A		United States		15,000			19,666,650
								71,762,754
	Health Care 0.6%
	Allergan PLC, 5.50%, cvt. pfd		United States		9,500			8,246,760
	Becton Dickinson and Co., 6.125%, cvt. pfd., A		United States		250,000			13,695,000
	Teva Pharmaceutical Industries Ltd., 7.00%, cvt. pfd		Israel		25,000			14,862,500
								36,804,260
	Industrials 0.1%
a,b	CEVA Holdings LLC, cvt. pfd., A-1		United States		397			148,875
a,b	CEVA Holdings LLC, cvt. pfd., A-2		United States		14,711			4,119,052
								4,267,927
	Utilities 0.8%
	Dominion Energy Inc., 6.375%, cvt. pfd., A		United States		162,000			7,743,600
	Great Plains Energy Inc., 7.00%, cvt. pfd		United States		216,000			11,456,640
	NextEra Energy Inc., 6.371%, cvt. pfd		United States		500,000			32,070,000
								51,270,240
	Total Convertible Preferred Stocks (Cost $186,980,955)							164,105,181
	Preferred Stocks (Cost $4,945,000) 0.1%
	Financials 0.1%
	Morgan Stanley, 6.375%, pfd., I		United States		197,800			5,645,212
				Principal Amount*
	Convertible Bonds 1.0%
	Energy 0.4%
d	Chesapeake Energy Corp., cvt., senior note, 144A, 5.50%, 9/15/26		United States		2,500,000			2,350,000
	Weatherford International Ltd., cvt., senior note, 5.875%, 7/01/21		United States		22,000,000			22,316,250
								24,666,250
	Health Care 0.6%
d	Bayer Capital Corp BV, cvt., junior sub. note, 144A, 5.625%, 11/22/19		Germany		25,000,000	EUR		34,830,343
	Impax Laboratories Inc., cvt., senior note, 2.00%, 6/15/22		United States		2,500,000			2,139,063
								36,969,406
	Total Convertible Bonds (Cost $53,096,406)							61,635,656
	Corporate Bonds 34.8%
	Consumer Discretionary 3.9%
d	24 Hour Holdings III LLC, senior note, 144A, 8.00%, 6/01/22		United States		6,300,000			5,890,500
	CCO Holdings LLC/CCO Holdings Capital Corp.,
	senior bond, 5.125%, 2/15/23		United States		10,000,000			10,343,750
	senior bond, 5.75%, 1/15/24		United States		9,000,000			9,506,250
	DISH DBS Corp.,
	senior bond, 5.00%, 3/15/23		United States		35,000,000			35,962,500
	senior note, 5.875%, 7/15/22		United States		40,000,000			43,100,000
	senior note, 5.875%, 11/15/24		United States		9,400,000			10,064,768
	senior note, 7.75%, 7/01/26		United States		10,000,000			11,875,000
	Fiat Chrysler Automobiles NV, senior note, 5.25%, 4/15/23		United Kingdom		11,300,000			11,504,925
	iHeartCommunications Inc., senior secured note, first lien, 9.00%, 12/15/19		United States		23,000,000			18,141,250

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)
	Consumer Discretionary (continued)
d	International Game Technology PLC, senior secured note, 144A, 6.25%, 2/15/22		United States		8,500,000	$	9,286,250
	KB Home, senior bond, 7.50%, 9/15/22		United States		6,500,000		7,369,375
d	PetSmart Inc., senior note, 144A, 7.125%, 3/15/23		United States		3,000,000		2,677,500
d	Shea Homes LP/Shea Homes Funding Corp.,
	senior bond, 144A, 6.125%, 4/01/25		United States		10,000,000		10,375,000
	senior note, 144A, 5.875%, 4/01/23		United States		5,000,000		5,172,500
d	Sirius XM Radio Inc., senior bond, 144A, 6.00%, 7/15/24		United States		7,500,000		7,987,500
d	Univision Communications Inc.,
	senior secured note, first lien, 144A, 5.125%, 5/15/23		United States		10,000,000		10,121,800
	senior secured note, first lien, 144A, 5.125%, 2/15/25		United States		7,140,000		7,095,375
d	Virgin Media Secured Finance PLC, senior secured bond, first lien, 144A, 5.50%, 1/15/25		United Kingdom		7,000,000		7,297,500
d	Wynn Las Vegas LLC/Wynn Las Vegas Capital Corp., senior bond, 144A, 5.50%, 3/01/25		United States		7,500,000		7,907,813
d	Ziggo Secured Finance BV, secured bond, 144A, 5.50%, 1/15/27		Netherlands		7,500,000		7,743,750
							239,423,306
	Consumer Staples 0.2%
d	JBS USA LLC/Finance Inc., senior note, 144A, 7.25%, 6/01/21		United States		12,500,000		12,556,250
	Energy 6.8%
d	Ascent Resources Utica Holdings LLC/ARU Finance Corp., senior note, 144A, 10.00%, 4/01/22.		United States		25,000,000		25,125,000
	Bill Barrett Corp.,
	senior bond, 7.00%, 10/15/22		United States		17,937,000		15,246,450
	d senior note, 144A, 8.75%, 6/15/25		United States		23,400,000		19,714,500
	Calumet Specialty Products Partners LP/Calumet Finance Corp., senior note, 6.50%, 4/15/21		United States		12,000,000		10,500,000
	Chesapeake Energy Corp.,
	d secured note, second lien, 144A, 8.00%, 12/15/22		United States		28,872,000		30,640,410
	e senior bond, 6.125%, 2/15/21		United States		16,000,000		15,760,000
	d,e senior bond, 144A, 8.00%, 6/15/27		United States		2,000,000		1,967,500
	senior note, 5.375%, 6/15/21		United States		11,045,000		10,382,300
	senior note, 4.875%, 4/15/22		United States		5,000,000		4,675,000
	senior note, 5.75%, 3/15/23		United States		5,000,000		4,562,500
	d,e senior note, 144A, 8.00%, 1/15/25		United States		15,000,000		15,037,500
	f senior note, FRN, 4.408%, 4/15/19		United States		14,000,000		13,790,000
d	Denbury Resources Inc., senior secured note, 144A, 9.00%, 5/15/21		United States		7,200,000		6,894,000
	Ferrellgas LP/Ferrellgas Finance Corp., senior note, 6.50%, 5/01/21		United States		5,000,000		4,750,000
d	Ferrellgas Partners LP/Ferrellgas Partners Finance Corp., senior note, 144A, 8.625%, 6/15/20		United States		6,600,000		6,270,000
d	Halcon Resources Corp., senior note, 144A, 6.75%, 2/15/25		United States		2,000,000		1,810,000
	Kinder Morgan Inc.,
	senior bond, 7.75%, 1/15/32		United States		22,000,000		27,730,670
	d senior secured bond, first lien, 144A, 5.625%, 11/15/23		United States		7,000,000		7,754,215
d	McDermott International Inc., second lien, 144A, 8.00%, 5/01/21		United States		17,592,000		17,811,900
d	NGPL PipeCo LLC, secured note, 144A, 7.119%, 12/15/17		United States		850,000		870,187
g	Petroquest Energy Inc., secured note, second lien, PIK, 10.00%, 2/15/21		United States		1,710,028		1,235,495
	Rex Energy Corp., second lien, 1.00% to 10/01/17, 8.00% thereafter, 10/01/20		United States		5,000,000		2,750,000
	Sabine Pass Liquefaction LLC,
	first lien, 5.00%, 3/15/27		United States		12,200,000		12,997,441
	senior secured bond, first lien, 5.875%, 6/30/26		United States		15,000,000		16,816,380

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)
	Energy (continued)
	Sanchez Energy Corp., senior note, 7.75%, 6/15/21		United States		27,000,000	$	24,570,000
	Stone Energy Corp., senior note, 7.50%, 5/31/22		United States		6,452,837		6,130,195
d	Transocean Inc., senior note, 144A, 9.00%, 7/15/23		United States		10,000,000		10,425,000
d,g	W&T Offshore Inc.,
	secured note, second lien, 144A, PIK, 9.00%, 5/15/20		United States		10,330,593		8,460,702
	senior secured note, third lien, 144A, PIK, 10.00%, 6/15/21		United States		9,244,999		6,536,713
	Weatherford International Ltd.,
	senior note, 5.125%, 9/15/20		United States		17,500,000		16,887,500
	senior note, 7.75%, 6/15/21		United States		30,000,000		30,262,500
	senior note, 4.50%, 4/15/22		United States		11,900,000		10,561,250
	senior note, 8.25%, 6/15/23		United States		27,500,000		27,568,750
							416,494,058
	Financials 3.4%
h	Bank of America Corp.,
	junior sub. bond, AA, 6.10% to 3/17/25, FRN thereafter, Perpetual		United States		8,000,000		8,700,800
	junior sub. bond, M, 8.125% to 5/15/18, FRN thereafter, Perpetual		United States		5,000,000		5,205,500
	junior sub. bond, U, 5.20% to 6/01/23, FRN thereafter, Perpetual		United States		6,000,000		6,067,080
	junior sub. bond, X, 6.25% to 9/05/24, FRN thereafter, Perpetual		United States		6,000,000		6,502,500
h	Citigroup Inc.,
	junior sub. bond, 5.35% to 5/15/23, FRN thereafter, Perpetual		United States		10,000,000		10,237,500
	junior sub. bond, 5.90% to 2/15/23, FRN thereafter, Perpetual		United States		12,500,000		13,409,375
	junior sub. bond, 5.95% to 1/30/23, FRN thereafter, Perpetual		United States		4,500,000		4,792,500
	junior sub. bond, M, 6.30% to 5/15/24, FRN thereafter, Perpetual		United States		16,800,000		17,913,000
	junior sub. bond, O, 5.875% to 3/27/20, FRN thereafter, Perpetual		United States		25,000,000		26,286,500
	junior sub. bond, Q, 5.95% to 8/15/20, FRN thereafter, Perpetual		United States		10,000,000		10,540,950
h	JPMorgan Chase & Co.,
	junior sub. bond, I, 7.90% to 4/30/19, FRN thereafter, Perpetual		United States		50,000,000		52,037,500
	junior sub. bond, R, 6.00% to 8/01/23, FRN thereafter, Perpetual		United States		3,200,000		3,452,000
	junior sub. bond, V, 5.00% to 7/30/19, FRN thereafter, Perpetual		United States		10,000,000		10,262,500
h	Morgan Stanley, junior sub. bond, 5.55% to 7/15/20, FRN thereafter, Perpetual		United States		7,300,000		7,635,800
	Navient Corp., senior note, 6.125%, 3/25/24		United States		5,000,000		5,175,000
d	OneMain Financial Holdings Inc.,
	senior note, 144A, 6.75%, 12/15/19		United States		6,000,000		6,322,500
	senior note, 144A, 7.25%, 12/15/21		United States		5,000,000		5,291,250
h	Wells Fargo & Co., junior sub. bond, S, 5.90% to 6/15/24, FRN thereafter, Perpetual		United States		7,900,000		8,470,775
							208,303,030
	Health Care 7.8%
	CHS/Community Health Systems Inc.,
	senior note, 8.00%, 11/15/19		United States		67,195,000		67,782,956
	senior note, 7.125%, 7/15/20		United States		35,000,000		34,212,500
	senior note, 6.875%, 2/01/22		United States		38,000,000		33,345,000
	senior secured note, first lien, 6.25%, 3/31/23		United States		16,400,000		16,992,040
	DaVita Inc.,
	senior bond, 5.125%, 7/15/24		United States		5,000,000		5,084,375
	senior bond, 5.00%, 5/01/25		United States		4,000,000		4,020,000
d	Endo Dac/Endo Finance LLC/Endo Finco Inc.,
	senior bond, 144A, 6.00%, 2/01/25		United States		10,000,000		8,200,000
	senior note, 144A, 6.00%, 7/15/23		United States		15,000,000		12,682,500

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)
	Health Care (continued)
d	Endo Finance LLC, senior note, 144A, 5.75%, 1/15/22		United States		22,500,000	$	20,358,000
	HCA Inc.,
	senior bond, 5.875%, 5/01/23		United States		7,500,000		8,184,375
	senior note, 7.50%, 2/15/22		United States		25,000,000		28,843,750
	senior secured note, first lien, 5.00%, 3/15/24		United States		10,400,000		11,037,000
	Horizon Pharma Inc., senior note, 6.625%, 5/01/23		United States		9,000,000		8,505,000
	Mallinckrodt International Finance SA, senior bond, 4.75%, 4/15/23		United States		5,000,000		4,287,500
d	Mallinckrodt International Finance SA/Mallinckrodt CB LLC,
	senior note, 144A, 5.75%, 8/01/22		United States		24,200,000		22,869,000
	senior note, 144A, 5.625%, 10/15/23		United States		14,300,000		13,120,250
	senior note, 144A, 5.50%, 4/15/25		United States		10,000,000		8,825,000
	Tenet Healthcare Corp.,
	senior note, 5.00%, 3/01/19		United States		10,000,000		10,503,600
	senior note, 8.00%, 8/01/20		United States		5,000,000		5,068,750
	senior note, 8.125%, 4/01/22		United States		48,000,000		51,120,000
	senior note, 6.75%, 6/15/23		United States		53,200,000		53,333,000
d	Valeant Pharmaceuticals International, senior note, 144A, 6.375%, 10/15/20		United States		7,500,000		7,303,125
d	Valeant Pharmaceuticals International Inc.,
	first lien, 144A, 6.50%, 3/15/22		United States		3,000,000		3,153,750
	senior bond, 144A, 6.125%, 4/15/25		United States		9,400,000		7,990,000
	senior note, 144A, 5.375%, 3/15/20		United States		17,000,000		16,447,500
	senior note, 144A, 5.875%, 5/15/23		United States		12,500,000		10,781,250
	senior note, 144A, 7.00%, 3/15/24		United States		4,500,000		4,741,875
							478,792,096
	Industrials 1.8%
d	Bombardier Inc.,
	senior bond, 144A, 6.125%, 1/15/23		Canada		5,000,000		5,025,000
	senior bond, 144A, 7.50%, 3/15/25		Canada		11,000,000		11,440,000
d,g	CEVA Group PLC, senior secured note, first lien, PIK, 144A, 6.00%, 9/01/20		United Kingdom		13,009,180		12,553,859
d	Cloud Crane LLC, secured note, second lien, 144A, 10.125%, 8/01/24		United States		4,400,000		4,840,000
	Hertz Corp., senior note, 6.75%, 4/15/19		United States		3,474,000		3,474,000
	Navistar International Corp., senior bond, 8.25%, 11/01/21		United States		5,675,000		5,760,125
	TransDigm Inc.,
	senior sub. bond, 6.50%, 7/15/24		United States		10,000,000		10,350,000
	senior sub. bond, 6.375%, 6/15/26		United States		7,700,000		7,834,750
	senior sub. note, 6.00%, 7/15/22		United States		7,700,000		7,950,250
	United Rentals North America Inc.,
	senior bond, 6.125%, 6/15/23		United States		11,400,000		11,898,750
	senior bond, 5.75%, 11/15/24		United States		3,000,000		3,153,750
d	XPO Logistics Inc., senior note, 144A, 6.50%, 6/15/22		United States		22,980,000		24,243,900
							108,524,384
	Information Technology 2.9%
d	BMC Software Finance Inc., senior note, 144A, 8.125%, 7/15/21		United States		16,500,000		17,165,280
d	CommScope Inc., senior bond, 144A, 5.50%, 6/15/24		United States		10,000,000		10,446,900
d	Diamond 1 Finance Corp./Diamond 2 Finance Corp.,
	senior note, 144A, 7.125%, 6/15/24		United States		3,600,000		3,959,215
	senior secured bond, first lien, 144A, 6.02%, 6/15/26		United States		16,200,000		17,876,587
	senior secured note, first lien, 144A, 4.42%, 6/15/21		United States		12,500,000		13,188,225
	senior secured note, first lien, 144A, 5.45%, 6/15/23		United States		21,100,000		22,922,702

FI-16         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Income VIP Fund (continued)

		Country		Principal Amount*		Value
	Corporate Bonds (continued)
	Information Technology (continued)
d	First Data Corp.,
	secured note, second lien, 144A, 5.75%, 1/15/24		United States		5,000,000	$	5,212,500
	senior note, 144A, 7.00%, 12/01/23		United States		25,000,000		26,750,000
d	Microsemi Corp., senior note, 144A, 9.125%, 4/15/23		United States		2,864,000		3,286,440
	NCR Corp.,
	senior note, 5.00%, 7/15/22		United States		5,500,000		5,637,500
	senior note, 6.375%, 12/15/23		United States		7,000,000		7,525,000
	Western Digital Corp.,
	senior note, 10.50%, 4/01/24		United States		30,000,000		35,465,400
	d senior secured note, 144A, 7.375%, 4/01/23		United States		10,000,000		11,012,500
							180,448,249
	Materials 2.1%
d	Ardagh Packaging Finance PLC/Ardagh MP Holdings USA Inc.,
	senior note, 144A, 4.625%, 5/15/23		Luxembourg		15,000,000		15,412,500
	senior note, 144A, 7.25%, 5/15/24		Luxembourg		10,200,000		11,169,000
d	BWAY Holding Co.,
	secured note, 144A, 5.50%, 4/15/24		United States		10,000,000		10,237,500
	senior note, 144A, 7.25%, 4/15/25		United States		23,300,000		23,707,750
d	Cemex Finance LLC, senior secured note, first lien, 144A, 6.00%, 4/01/24		Mexico		14,700,000		15,645,063
d	FMG Resources (August 2006) Pty. Ltd.,
	senior note, 144A, 4.75%, 5/15/22		Australia		4,400,000		4,422,000
	senior note, 144A, 5.125%, 5/15/24		Australia		6,700,000		6,716,750
	senior secured note, 144A, 9.75%, 3/01/22		Australia		27,000,000		30,881,250
d	Platform Specialty Products Corp., senior note, 144A, 6.50%, 2/01/22		United States		3,500,000		3,631,250
d	Reynolds Group Issuer Inc./Reynolds Group Issuer LLC/Reynolds Group Issuer Luxembourg SA, first lien, 144A, 5.125%, 7/15/23		United States		4,300,000		4,472,000
							126,295,063
	Real Estate 0.4%
	Equinix Inc., senior bond, 5.375%, 5/15/27		United States		16,500,000		17,634,375
	Iron Mountain Inc., senior sub. bond, 5.75%, 8/15/24		United States		3,000,000		3,075,000
	iStar Inc., senior note, 5.00%, 7/01/19		United States		3,500,000		3,537,188
							24,246,563
	Telecommunication Services 2.8%
	Frontier Communications Corp.,
	senior note, 9.25%, 7/01/21		United States		7,400,000		7,277,826
	senior note, 7.125%, 1/15/23		United States		7,800,000		6,532,500
	Sprint Capital Corp., senior note, 6.90%, 5/01/19		United States		13,500,000		14,475,240
	Sprint Communications Inc.,		United States		30,000,000		38,550,000
	11.50%, 11/15/21
	senior note, 7.00%, 8/15/20		United States		7,500,000		8,268,750
	d senior note, 144A, 9.00%, 11/15/18		United States		11,900,000		12,930,064
	Sprint Corp.,
	senior bond, 7.875%, 9/15/23		United States		37,500,000		43,218,750
	senior bond, 7.125%, 6/15/24		United States		8,200,000		9,143,000
	senior note, 7.625%, 2/15/25		United States		15,000,000		17,306,250
d	Wind Acquisition Finance SA, secured note, second lien, 144A, 7.375%, 4/23/21		Italy		11,500,000		11,977,307
							169,679,687

Semiannual Report         FI-17

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Income VIP Fund (continued)

		Country		Principal Amount*		Value
	Corporate Bonds (continued)
	Utilities 2.7%
	Calpine Corp.,
	senior bond, 5.75%, 1/15/25		United States		22,000,000	$	20,707,500
	senior note, 5.375%, 1/15/23		United States		20,000,000		19,575,000
	senior note, 5.50%, 2/01/24		United States		16,375,000		15,576,719
	d senior secured bond, 144A, 5.25%, 6/01/26		United States		13,200,000		13,002,000
	Dynegy Inc.,
	senior note, 6.75%, 11/01/19		United States		43,000,000		44,558,750
	senior note, 7.375%, 11/01/22		United States		20,000,000		19,850,000
	senior note, 5.875%, 6/01/23		United States		8,000,000		7,520,000
d	InterGen NV, secured bond, 144A, 7.00%, 6/30/23		Netherlands		25,000,000		24,187,500
							164,977,469
	Total Corporate Bonds (Cost $2,022,244,835)						2,129,740,155
f,i	Senior Floating Rate Interests 2.8%
	Consumer Discretionary 1.1%
	Academy Ltd., Initial Term Loan, 5.172% - 5.226%, 7/02/22		United States		1,588,454		1,252,231
	Belk Inc., Closing Date Term Loan, 5.905, 12/12/22		United States		24,683,784		21,141,661
	iHeartCommunications Inc.,
	Tranche D Term Loan, 7.976, 1/30/19		United States		45,864,664		37,609,024
	Tranche E Term Loan, 8.726, 7/30/19		United States		13,142,768		10,777,070
							70,779,986
	Energy 0.2%
	W&T Offshore Inc., Second Lien Term Loan, 9.00%, 5/15/20		United States		11,000,000		9,515,000
	Financials 0.3%
	First Eagle Investment Management LLC, Initial Term Loans, 4.796%, 12/01/22		United States		20,000,000		20,212,500
	Health Care 0.3%
	Vizient Inc., Term Loan B, 4.726%, 2/13/23		United States		17,597,059		17,784,028
	Industrials 0.7%
	CEVA Group PLC, Pre-Funded L/C, 6.50%, 3/19/21		United Kingdom		4,865,761		4,551,515
	CEVA Intercompany BV, Dutch BV Term Loan, 6.672%, 3/19/21		United Kingdom		4,964,403		4,643,787
	CEVA Logistics Canada ULC, Canadian Term Loan, 6.672%, 3/19/21		Canada		855,932		800,653
	CEVA Logistics U.S. Holdings Inc., U.S. Term Loan, 6.672%, 3/19/21		United Kingdom		6,847,453		6,405,224
	Commercial Barge Line Co., Initial Term Loan, 9.976%, 11/12/20		United States		9,375,000		8,167,969
	Navistar Inc., Tranche B Term Loans, 5.09%, 8/07/20		United States		5,989,806		6,060,935
	Vertiv Group Corp., Term B Loans, 5.226%, 11/30/23		United States		11,031,465		11,086,490
							41,716,573
	Utilities 0.2%
	Talen Energy Supply LLC,
	Term B-1 Loans, 5.226%, 7/15/23		United States		5,985,000		5,585,998
	Tranche B-2 Term Loan, 5.226%, 4/13/24		United States		7,976,000		7,434,294
							13,020,292
	Total Senior Floating Rate Interests (Cost $184,108,769)						173,028,379

FI-18         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Income VIP Fund (continued)

		Country		Shares		Value
	Escrows and Litigation Trusts (Cost $62,602) 0.0%
a,b	Motors Liquidation Co., Escrow Account, cvt. pfd., C		United States		1,400,000	$	—
	Total Investments before Short Term Investments (Cost $5,116,718,247)						5,683,167,736
	Short Term Investments 6.7%
	Money Market Funds (Cost $407,603,583) 6.6%
j,k	Institutional Fiduciary Trust Money Market Portfolio, 0.58%		United States		407,603,583		407,603,583
l	Investments from Cash Collateral Received for Loaned Securities 0.1%
	Money Market Funds (Cost $3,903,000) 0.1%
j,k	Institutional Fiduciary Trust Money Market Portfolio, 0.58%		United States		3,903,000		3,903,000
				Principal Amount*
	Repurchase Agreement (Cost $976,430) 0.0%†
m	Joint Repurchase Agreement, 1.08%, 7/03/17 (Maturity Value $976,518)
	J.P. Morgan Securities LLC.
	Collateralized by n U.S. Treasury Bill, 4/26/18; U.S.Treasury Note 0.875% - 3.50%, 10/15/17 - 9/30/21; U.S. Treasury Notes, Index Linked, 0.125% - 2.125%, 1/15/19 - 4/15/20 (Valued at $996,004)		United States		976,430		976,430
	Total Investments from Cash Collateral Received for Loaned Securities (Cost $4,879,430)						4,879,430
	Total Investments (Cost $5,529,201,260) 99.4%						6,095,650,749
	Other Assets, less Liabilities 0.6%						35,837,124
	Net Assets 100.0%					$	6,131,487,873

Semiannual Report         FI-19

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Income VIP Fund (continued)

See Abbreviations on page FI-32.

^†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, 2017, the aggregate value of these securities was $7,520,992, representing 0.1% of net assets.

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

^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, 2017, the aggregate value of these securities was $1,150,045,696, representing 18.8% of net assets.

^eA portion or all of the security is on loan at June 30, 2017. See Note 1(e).

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

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

^hPerpetual security with no stated maturity date.

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

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

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

^lSee Note 1(e) regarding securities on loan.

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

ⁿThe security was issued on a discount basis with no stated coupon rate.

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 Assets and Liabilities

June 30, 2017 (unaudited)

	Franklin Income VIP Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	5,116,718,247
Cost - Non-controlled affiliates (Note 3e)		411,506,583
Cost - Repurchase agreements		976,430
Total cost of investments	$	5,529,201,260
Value - Unaffiliated issuers	$	5,683,167,736
Value - Non-controlled affiliates (Note 3e)		411,506,583
Value - Repurchase agreements		976,430
Total value of investments (includes securities loaned in the amount of $4,630,838)		6,095,650,749
Cash		714,193
Receivables:
Investment securities sold		2,787,304
Capital shares sold		1,991,850
Dividends and interest		42,189,604
Other assets		3,974
Total assets		6,143,337,674
Liabilities:
Payables:
Capital shares redeemed		2,062,982
Management fees		2,182,226
Distribution fees		2,332,947
Payable upon return of securities loaned		4,879,430
Accrued expenses and other liabilities		392,216
Total liabilities		11,849,801
Net assets, at value	$	6,131,487,873
Net assets consist of:
Paid-in capital	$	6,249,004,934
Undistributed net investment income		126,111,214
Net unrealized appreciation (depreciation)		566,539,892
Accumulated net realized gain (loss)		(810,168,167	)
Net assets, at value	$	6,131,487,873
Class 1:
Net assets, at value	$	723,350,098
Shares outstanding		45,571,991
Net asset value and maximum offering price per share	$	15.87
Class 2:
Net assets, at value	$	5,090,255,331
Shares outstanding		331,137,932
Net asset value and maximum offering price per share	$	15.37
Class 4:
Net assets, at value	$	317,882,444
Shares outstanding		20,212,816
Net asset value and maximum offering price per share	$	15.73

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

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Statement of Operations

for the six months ended June 30, 2017 (unaudited)

	Franklin Income VIP Fund
Investment income:
Dividends:
Unaffiliated issuers	$	58,114,109
Non-controlled affiliates (Note 3e)		628,047
Interest		84,487,059
Income from securities loaned (net of fees and rebates)		836,984
Total investment income		144,066,199
Expenses:
Management fees (Note 3a)		13,903,046
Distribution fees: (Note 3c)
Class 2		6,365,703
Class 4		549,101
Custodian fees (Note 4)		32,884
Reports to shareholders		231,441
Professional fees		88,915
Trustees’ fees and expenses		13,518
Other		75,071
Total expenses		21,259,679
Expense reductions (Note 4)		(420	)
Expenses waived/paid by affiliates (Note 3e)		(706,480	)
Net expenses		20,552,779
Net investment income		123,513,420
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		86,072,780
Realized gain distributions from REITs		307,701
Foreign currency transactions		5,742
Net realized gain (loss)		86,386,223
Net change in unrealized appreciation (depreciation) on:
Investments		49,237,355
Translation of other assets and liabilities denominated in foreign currencies		118,104
Net change in unrealized appreciation (depreciation)		49,355,459
Net realized and unrealized gain (loss)		135,741,682
Net increase (decrease) in net assets resulting from operations	$	259,255,102

FI-22         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 Income VIP Fund
	Six Months Ended June 30, 2017 (unaudited)			Year Ended December 31, 2016
Increase (decrease) in net assets:
Operations:
Net investment income	$	123,513,420		$	247,868,765
Net realized gain (loss)		86,386,223			23,444,659
Net change in unrealized appreciation (depreciation)		49,355,459			499,690,603
Net increase (decrease) in net assets resulting from operations		259,255,102			771,004,027
Distributions to shareholders from:
Net investment income:
Class 1		(30,736,550	)		(33,648,017	)
Class 2		(212,433,443	)		(243,664,392	)
Class 4		(12,598,021	)		(14,419,491	)
Total distributions to shareholders		(255,768,014	)		(291,731,900	)
Capital share transactions: (Note 2)
Class 1		27,112,508			34,616,416
Class 2		(1,335,421	)		(215,782,069	)
Class 4		7,506,111			(21,239,696	)
Total capital share transactions		33,283,198			(202,405,349	)
Net increase (decrease) in net assets		36,770,286			276,866,778
Net assets:
Beginning of period		6,094,717,587			5,817,850,809
End of period	$	6,131,487,873		$	6,094,717,587
Undistributed net investment income included in net assets:
End of period	$	126,111,214		$	258,365,808

The accompanying notes are an integral part of these financial statements.     |   Semiannual Report         FI-23

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 eighteen 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. 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 may differ 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. 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. Investments in 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

FI-24         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Income VIP Fund (continued)

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 Fund’s business day. Occasionally, events occur between the time at which trading in a foreign security is completed and 4 p.m. Eastern time 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 4 p.m. Eastern time. 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 Fund’s NAV is not calculated, 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

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)

c. Joint Repurchase Agreement (continued)

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, 2017.

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 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. 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.

f. Senior Floating Rate Interests

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

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. 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

FI-26         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Income VIP Fund (continued)

proceedings, the likelihood of receipt of these EU reclaims, and the potential timing of payment, no amounts are reflected in the financial statements. For U.S. income tax purposes, when EU reclaims are received by the Fund and the Fund previously passed foreign tax credit on to its shareholders, the Fund must either amend historic tax reporting to shareholders or enter into a closing agreement with the Internal Revenue Service (IRS) in order to pay the associated tax liability on behalf of the Fund’s shareholders.

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, 2017, 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. 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 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 from realized capital gains and other distributions, if any, are recorded on the ex-dividend date. Distributions to shareholders are recorded on the ex-dividend date. Distributable earnings are determined according to income tax regulations (tax basis) and 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.

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.

Semiannual Report         FI-27

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Income VIP Fund (continued)

2. Shares of Beneficial Interest

At June 30, 2017, 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, 2017						Year Ended December 31, 2016
	Shares			Amount			Shares			Amount
Class 1 Shares:
Shares sold		1,407,910		$	22,868,571			6,134,123		$	87,911,597
Shares issued in reinvestment of distributions		1,925,849			30,736,550			2,331,810			33,648,017
Shares redeemed		(1,622,291	)		(26,492,613	)		(5,877,695	)		(86,943,198	)
Net increase (decrease)		1,711,468		$	27,112,508			2,588,238		$	34,616,416
Class 2 Shares:
Shares sold		7,863,112		$	124,015,671			25,914,952		$	378,696,453
Shares issued in reinvestment of distributions		13,740,843			212,433,443			17,417,040			243,664,392
Shares redeemed		(21,387,138	)		(337,784,535	)		(58,055,463	)		(838,142,914	)
Net increase (decrease)		216,817		$	(1,335,421	)		(14,723,471	)	$	(215,782,069	)
Class 4 Shares:
Shares sold		1,694,853		$	27,294,426			1,804,015		$	26,579,870
Shares issued in reinvestment of distributions		796,839			12,598,021			1,008,356			14,419,491
Shares redeemed		(2,007,850	)		(32,386,336	)		(4,209,003	)		(62,239,057	)
Net increase (decrease)		483,842		$	7,506,111			(1,396,632	)	$	(21,239,696	)

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

FI-28         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Income VIP Fund (continued)

For the period ended June 30, 2017, 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 Funds invest 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. During the period ended June 30, 2017, the Fund held investments in affiliated management investment companies as follows:

	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, 0.58%		310,250,028		1,147,556,121		(1,046,299,566	)		411,506,583	$	411,506,583	$	628,047	$	—		2.2%

f. Other Affiliated Transactions

At June 30, 2017, 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, 2017, 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 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, 2016, the capital loss carryforwards were as follows:

Capital loss carryforwards subject to expiration:
2017	$	521,405,875
2018		157,561,044
Capital loss carryforwards not subject to expiration:
Short term		135,162,624
Long term		76,910,085
Total capital loss carryforwards	$	891,039,628

At June 30, 2017, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	5,533,618,674
Unrealized appreciation	$	837,095,486
Unrealized depreciation		(275,063,411	)
Net unrealized appreciation (depreciation)	$	562,032,075

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatment of 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, 2017, aggregated $691,251,845 and $891,140,442, respectively.

At June 30, 2017, in connection with securities lending transactions, the Fund loaned corporate bonds and received $4,879,430 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

At June 30, 2017, the Fund had 33.10% of its portfolio invested in high yield, senior secured floating rate notes, or other securities rated below investment grade and unrated securities, if any. 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. 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 9, 2018. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Income VIP Fund (continued)

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statement of Operations. During the period ended June 30, 2017, 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, 2017, 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
Banks	$	338,282,889	$	8,431,250	$	—		$	346,714,139
Transportation		54,455,000		7,520,992		—			61,975,992
All Other Equity Investmentsb		2,577,038,469		—		—			2,577,038,469
Equity-Linked Securities		—		333,034,946		—			333,034,946
Convertible Bonds		—		61,635,656		—			61,635,656
Corporate Bonds		—		2,129,740,155		—			2,129,740,155
Senior Floating Rate Interests		—		173,028,379		—			173,028,379
Escrows and Litigation Trusts		—		—		—	c		—
Short Term Investments		411,506,583		976,430		—			412,483,013
Total Investments in Securities	$	3,381,282,941	$	2,714,367,808	$	—		$	6,095,650,749

^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, 2017.

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.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Income VIP Fund (continued)

10. New Accounting Pronouncements

In March 2017, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2017-08, Receivables — Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The amendments in the ASU shorten the amortization period for certain callable debt securities, held at a premium, to be amortized to the earliest call date. The ASU does not require an accounting change for securities held at a discount; which continues to be amortized to maturity. The ASU is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. Management is currently evaluating the impact, if any, of applying this provision.

11. Investment Company Reporting Modernization

In October 2016, the U.S. Securities and Exchange Commission adopted new rules and amended existing rules (together, final rules) intended to modernize the reporting and disclosure of information by registered investment companies. In part, the final rules amend Regulation S-X and require standardized, enhanced disclosures about derivatives in investment company financial statements, as well as other amendments. The compliance date for the amendments to Regulation S-X is August 1, 2017. Management has reviewed the requirements and believes the adoption of the amendments to Regulation S-X will not have a material impact on the Fund’s financial statements and related disclosures.

12. Subsequent Events

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

Abbreviations

Currency		Selected Portfolio
EUR	Euro	ADR	American Depositary Receipt
		FNMA	Federal National Mortgage Association
		FRN	Floating Rate Note
		PIK	Payment-In-Kind
		L/C	Letter of Credit

FI-32         Semiannual Report

Franklin Large Cap Growth VIP Fund

We are pleased to bring you Franklin Large Cap Growth VIP Fund’s semiannual report for the period ended June 30, 2017.

Class 2 Performance Summary as of June 30, 2017

The Fund’s Class 2 Shares delivered a +15.66% total return for the six-month period ended June 30, 2017.

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

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 +9.34% total return.²

Economic and Market Overview

U.S. economic growth decelerated in 2017’s first quarter, largely due to slower growth in consumer spending and declines in private inventory investment and government spending. However, growth accelerated in the second quarter due to increases in consumer spending, business investment and federal government spending. The manufacturing sector generally expanded, and the services sector also continued to grow. The unemployment rate decreased from 4.7% in December 2016 to 4.4% at period-end.³ Monthly retail sales

were volatile, but grew for most of the period. Annual inflation, as measured by the Consumer Price Index, decreased from 2.1% to 1.6% during the period.

The U.S. Federal Reserve (Fed), at its March meeting, increased the federal funds target rate from 0.50%–0.75% to 0.75%–1.00%. The Fed again increased its target range by a quarter point to 1.00%–1.25% at its June meeting. The Fed made both of these increases amid signs of a growing U.S. economy, a strengthening labor market and an improvement in business spending.

U.S. equity markets rose during the period, benefiting from mostly upbeat economic data, better U.S. corporate earnings and signs of improvement in the Chinese and European economies. Investor optimism arising from pro-growth and

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.

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

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FRANKLIN LARGE CAP GROWTH VIP FUND

pro-business policy plans in the U.S. and the victory of Emmanuel Macron as France’s President also helped U.S. equities. However, concerns about the terms of the U.K.’s exit from the European Union (also known as “Brexit”), uncertainty about President Trump’s ability to implement reforms, and geopolitical tensions in the Middle East and the Korean peninsula curbed market sentiment. The broad U.S. stock market, as measured by the S&P 500, generated a +9.34% total return for the period.²

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 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.

During the period under review, most sectors represented in the Fund’s portfolio contributed to absolute performance. Relative to the S&P 500, the information technology (IT) sector contributed significantly to performance, due to stock selection and an overweighted position. Security selection in the consumer discretionary and real estate sectors also benefited results.

In IT, computer software developer Facebook, Adobe Systems and ServiceNow⁴ contributed notably to relative performance. Facebook continued to generate strong user growth and engagement in its Facebook and Instagram platforms. Innovative advertising formats and targeting capabilities helped the company gain a larger share of clients’ advertising budgets. The company has been investing heavily into its business,

Top 10 Holdings
6/30/17
Company Sector/Industry	% of Total Net Assets
Amazon.com Inc. Consumer Discretionary		5.8%
Facebook Inc. Information Technology		5.0%
Apple Inc. Information Technology		4.9%
Alphabet Inc. Information Technology		3.8%
Mastercard Inc. Information Technology		3.7%
Visa Inc. Information Technology		3.6%
Microsoft Corp. Information Technology		3.5%
Celgene Corp. Health Care		3.1%
SBA Communications Corp. Real Estate		2.4%
Broadcom Ltd. Information Technology		2.1%

while sustaining high operating margins. Increased advertising on Instagram and the proliferation of video (and video ads) across both platforms drove revenue growth. Adobe Systems benefited from the successful transition of its creative cloud productivity tools from a license to a subscription model, with creative cloud revenues surpassing pre-transition levels, as well as from its marketing cloud’s robust growth. The company generated strong earnings and free cash flow growth, driven by rapid margin expansion. Cloud-based solutions provider ServiceNow contributed to the Fund’s performance. The company has been sustaining the growth of its core IT service management solutions segment, while also meaningfully growing its emerging IT operations and enterprise service management solutions platform.

Within the consumer discretionary sector, online marketplace Amazon.com helped performance. With e-commerce gaining momentum, the company continued to increase its e-commerce market share by expanding categories and regions, shortening delivery times and driving consumer loyalty through Amazon Prime. Amazon continues to invest heavily on its business, while creating significant longer term company and shareholder value. Cloud-computing leader Amazon Web Services

4. Not part of the index.

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FRANKLIN LARGE CAP GROWTH VIP FUND

generated strong growth and profitability, and now accounts for half of Amazon’s current operating income.

In the real estate sector, real estate investment trust (REIT) SBA Communications contributed to relative performance.⁴ Shares of SBA, which operates wireless telecommunications infrastructure, rebounded after underperforming with the REIT industry after the U.S. presidential election in November 2016. Fundamentally, industry growth seems to be accelerating as carriers look to deploy many spectrum bands that were recently acquired or won.

In contrast, relative to the S&P 500, a major detractor from the Fund’s relative performance was stock selection in the health care sector. Within the sector, pharmaceutical company Bristol-Myers Squibb hindered results. Company setbacks and competitors’ gains led many investors to believe that Bristol-Myers Squibb has lost its advantage in the lung cancer category. A competitor’s lung cancer drug approval for certain first-line lung cancer indications beat the company in this category and is likely to negatively impact future revenues, leading the company to change its head of research and development.

In the industrials sector, low-cost airline Allegiant Travel detracted from performance.⁴ Allegiant has been going through fleet transitions from MD-80s to Airbus planes. This has been depressing revenue and driving up costs. We believe this is a temporary period that sets them up to return to growth in 2018. The stock has struggled during the transition, but the company’s prospects look good starting next year, in our analysis.

Other individual detractors from the Fund’s relative performance included oil and gas exploration and production company Anadarko Petroleum and oilfield services firm Halliburton in the energy sector. Both companies’ shares declined along with crude oil prices. Investor sentiment about Anadarko was also negatively affected by an accident involving one of its assets. In financials, commercial bank Signature Bank hindered results. The company’s shares fell amid a flattening yield curve during the period (short-term interest rates rose, while long-term interest rates declined) that hurt future net interest income, ongoing decreases in taxi medallion (operating permit) collateral values and softer loan growth.

Thank you for your participation in Franklin Large 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, 2017, 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.

FLG-4         Semiannual Report

FRANKLIN LARGE CAP GROWTH VIP FUND

Class 2 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: (1) transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes; and (2) 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 table below shows Fund-level ongoing expenses and can help you understand these costs 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 table below provides information about the actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of ongoing Fund expenses but does not include the effect of ongoing Contract expenses, is used to calculate the “Ending Account Value.” You can estimate the Fund-level expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number under the headings “Actual” and “Fund-Level Expenses Paid During Period” (if Fund-Level Expenses Paid During Period were $7.50, then 8.6 × $7.50 = $64.50). In this illustration, the estimated expenses paid this period at the Fund level are $64.50.

Hypothetical Example for Comparison with Other Mutual Funds

Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other mutual funds offered through the Contract. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds offered through the Contract.

Please note that expenses shown in the table are meant to highlight ongoing costs at the Fund level only and do not reflect any ongoing expenses at the Contract level, or transaction expenses at either the Fund or Contract levels. In addition, 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.

		Actual (actual return after expenses)				Hypothetical (5% annual return before expenses)
Share Class	Beginning Account Value 1/1/17		Ending Account Value 6/30/17	Fund-Level Expenses Paid During Period 1/1/17–6/30/17	1,2		Ending Account Value 6/30/17	Fund-Level Expenses Paid During Period 1/1/17–6/30/17	1,2	Annualized Expense Ratio	2
Class 2	$1,000		$1,156.60	$5.83			$1,019.39	$5.46		1.09%

1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above — in the far right column — multiplied by the simple average account value over the period indicated, and then multiplied by 181/365 to reflect the one-half year period.

2. Does not include any ongoing expenses of the Contract for which the Fund is an investment option.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Highlights

Franklin Large Cap Growth VIP Fund

	Six Months Ended June 30, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 1
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$17.85			$18.42			$23.26			$20.91			$16.43			$14.75
Income from investment operationsa:
Net investment income (loss)b		(0.01	)		(0.04	)		(0.06	)		0.11			0.24			0.21
Net realized and unrealized gains (losses)		2.83			(0.26	)		1.56			2.54			4.48			1.65
Total from investment operations		2.82			(0.30	)		1.50			2.65			4.72			1.86
Less distributions from:
Net investment income		(0.20	)		—			(0.13	)		(0.30	)		(0.24	)		(0.18	)
Net realized gains		(1.60	)		(0.27	)		(6.21	)		—			—			—
Total distributions		(1.80	)		(0.27	)		(6.34	)		(0.30	)		(0.24	)		(0.18	)
Net asset value, end of period		$18.87			$17.85			$18.42			$23.26			$20.91			$16.43
Total returnc		15.74%			(1.49)%			5.89%			12.74%			28.92%			12.65%
Ratios to average net assetsd
Expenses		0.84%	e		0.80%	e		0.78%			0.79%			0.79%			0.80%
Net investment income (loss)		(0.09)%			(0.19)%			(0.27)%			0.50%			1.27%			1.31%
Supplemental data
Net assets, end of period (000’s)		$994			$883			$47,864			$54,971			$54,291			$46,756
Portfolio turnover rate		14.83%			36.26%	f		23.23%			93.53%			28.27%			33.88%

^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%.

^fExcludes the value of portfolio securities delivered as a result of a redemption in-kind. See Note 9.

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

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL HIGHLIGHTS

Franklin Large Cap Growth VIP Fund (continued)

	Six Months Ended June 30, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 2
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$17.48			$18.09			$22.94			$20.62			$16.20			$14.54
Income from investment operationsa:
Net investment income (loss)b		(0.03	)		(0.08	)		(0.11	)		0.06			0.19			0.17
Net realized and unrealized gains (losses)		2.77			(0.26	)		1.54			2.50			4.42			1.62
Total from investment operations		2.74			(0.34	)		1.43			2.56			4.61			1.79
Less distributions from:
Net investment income		(0.13	)		—			(0.07	)		(0.24	)		(0.19	)		(0.13	)
Net realized gains		(1.60	)		(0.27	)		(6.21	)		—			—			—
Total distributions		(1.73	)		(0.27	)		(6.28	)		(0.24	)		(0.19	)		(0.13	)
Net asset value, end of period		$18.49			$17.48			$18.09			$22.94			$20.62			$16.20
Total returnc		15.66%			(1.79)%			5.62%			12.46%			28.63%			12.37%
Ratios to average net assetsd
Expenses		1.09%	e		1.05%	e		1.03%			1.04%			1.04%			1.05%
Net investment income (loss)		(0.34)%			(0.44)%			(0.52)%			0.25%			1.02%			1.06%
Supplemental data
Net assets, end of period (000’s)		$119,991			$113,028			$223,807			$256,098			$285,477			$278,989
Portfolio turnover rate		14.83%			36.26%	f		23.23%			93.53%			28.27%			33.88%

^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%.

^fExcludes the value of portfolio securities delivered as a result of a redemption in-kind. See Note 9.

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, 2017 (unaudited)

Franklin Large Cap Growth VIP Fund
		Shares		Value
	Common Stocks 98.2%
	Consumer Discretionary 15.0%
a	Altice USA Inc.		24,664	$	796,647
a	Amazon.com Inc.		7,219		6,987,992
a	Charter Communications Inc., A		5,539		1,865,812
	Comcast Corp., A		30,894		1,202,395
	Delphi Automotive PLC		8,307		728,109
	Las Vegas Sands Corp.		21,675		1,384,816
	Newell Brands Inc.		11,123		596,415
	NIKE Inc., B		11,847		698,973
a	The Priceline Group Inc.		887		1,659,151
	Starbucks Corp.		15,833		923,222
	The Walt Disney Co.		12,124		1,288,175
					18,131,707
	Consumer Staples 3.9%
	Constellation Brands Inc., A		8,263		1,600,791
a	Hostess Brands Inc., A		37,141		597,970
a	Monster Beverage Corp.		27,314		1,356,960
	Pinnacle Foods Inc.		19,940		1,184,436
					4,740,157
	Energy 2.3%
	Anadarko Petroleum Corp.		21,205		961,435
a	Diamondback Energy Inc.		6,618		587,744
	Halliburton Co.		20,166		861,290
a	Resolute Energy Corp.		13,366		397,906
					2,808,375
	Financials 7.2%
a	Athene Holding Ltd., A		25,034		1,241,937
	The Charles Schwab Corp.		46,144		1,982,346
	Intercontinental Exchange Inc.		9,994		658,804
	MarketAxess Holdings Inc.		8,346		1,678,381
	S&P Global Inc.		6,821		995,798
a	Signature Bank		8,282		1,188,715
a	SVB Financial Group		5,659		994,796
					8,740,777
	Health Care 12.1%
a,b	Acerta Pharma BV (Netherlands)		9,780,975		326,401
	Allergan PLC		4,993		1,213,748
a	Biogen Inc.		2,189		594,007
	Bristol-Myers Squibb Co.		25,121		1,399,742
a	Celgene Corp.		29,245		3,798,048
a	Edwards Lifesciences Corp.		13,215		1,562,542
a	Heron Therapeutics Inc.		29,654		410,708
a	Incyte Corp.		10,944		1,377,959
	Medtronic PLC		8,622		765,203
a	Nevro Corp.		8,509		633,325
a	Tesaro Inc.		6,634		927,831
	UnitedHealth Group Inc.		9,086		1,684,726
					14,694,240

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 6.4%
	Allegiant Travel Co.		3,090	$	419,004
a	Azul SA, ADR (Brazil)		13,900		293,012
	Honeywell International Inc.		9,684		1,290,780
a	IHS Markit Ltd.		37,138		1,635,557
	Raytheon Co.		11,235		1,814,228
	Rockwell Automation Inc.		4,011		649,622
	Roper Technologies Inc.		3,484		806,650
a	Univar Inc.		27,928		815,498
					7,724,351
	Information Technology 42.2%
a	Adobe Systems Inc.		17,175		2,429,232
a	Alphabet Inc., A		3,876		3,603,440
a	Alphabet Inc., C		1,084		985,063
	Analog Devices Inc.		10,418		810,520
	Apple Inc.		41,101		5,919,366
a	Autodesk Inc.		17,374		1,751,647
	Broadcom Ltd.		10,881		2,535,817
a	CoStar Group Inc.		4,719		1,243,928
a	Electronic Arts Inc.		10,976		1,160,383
a	Facebook Inc., A		39,719		5,996,774
a	Fiserv Inc.		7,846		959,880
a	InterXion Holding NV (Netherlands)		13,793		631,443
	KLA-Tencor Corp.		6,030		551,805
	Mastercard Inc., A		37,116		4,507,738
	Microsoft Corp.		61,793		4,259,391
	Monolithic Power Systems		6,352		612,333
	NVIDIA Corp.		11,371		1,643,792
a	Palo Alto Networks Inc.		5,828		779,845
a	Q2 Holdings Inc.		7,805		288,395
a	Salesforce.com Inc.		18,237		1,579,324
a	ServiceNow Inc.		19,578		2,075,268
a	Tyler Technologies Inc.		4,194		736,760
	Visa Inc., A		46,274		4,339,576
	Xilinx Inc.		14,649		942,224
a	Zendesk Inc.		24,274		674,332
					51,018,276
	Materials 2.8%
a	Axalta Coating Systems Ltd.		24,793		794,368
	Ecolab Inc.		6,090		808,447
a	Ingevity Corp.		9,875		566,825
	Martin Marietta Materials Inc.		5,415		1,205,271
					3,374,911
	Real Estate 5.4%
	American Tower Corp.		13,587		1,797,832
	Equinix Inc.		4,255		1,826,076
a	SBA Communications Corp., A		21,154		2,853,674
					6,477,582
	Telecommunication Services 0.9%
a	T-Mobile U.S. Inc.		18,967		1,149,780
	Total Common Stocks (Cost $73,509,464)				118,860,156

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 $1,763,258) 1.5%
c	Repurchase Agreements 1.5%
	Joint Repurchase Agreement, 1.058%, 7/03/17 (Maturity Value $1,763,414)
	BNP Paribas Securities Corp. (Maturity Value $791,209) Deutsche Bank Securities Inc. (Maturity Value $180,997) HSBC Securities (USA) Inc. (Maturity Value $494,514) Merrill Lynch, Pierce, Fenner & Smith Inc. (Maturity Value $296,694)
	Collateralized by U.S. Government Agency Securities, 0.875% - 1.875%, 12/15/17 - 6/11/21; dU.S. Treasury Bill, 11/30/17 - 1/04/18; and U.S. Treasury Note, 0.75% - 4.00%, 4/30/18 - 8/15/21 (valued at $1,800,352)	$	1,763,258	$	1,763,258
	Total Investments (Cost $75,272,722) 99.7%				120,623,414
	Other Assets, less Liabilities 0.3%				361,550
	Net Assets 100.0%			$	120,984,964

See Abbreviations on page FLG-21.

^aNon-income producing.

^bSee Note 7 regarding restricted securities.

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

^dThe security was issued on a discount basis with no stated coupon rate.

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, 2017 (unaudited)

	Franklin Large Cap Growth VIP Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	73,509,464
Cost - Repurchase agreements		1,763,258
Total cost of investments	$	75,272,722
Value - Unaffiliated issuers	$	118,860,156
Value - Repurchase agreements		1,763,258
Total value of investments		120,623,414
Receivables:
Investment securities sold		855,227
Capital shares sold		62
Dividends		34,373
Other assets		30,418
Total assets		121,543,494
Liabilities:
Payables:
Capital shares redeemed		392,372
Management fees		75,974
Distribution fees		51,041
Trustees’ fees and expenses		218
Reports to shareholders		28,398
Accrued expenses and other liabilities		10,527
Total liabilities		558,530
Net assets, at value	$	120,984,964
Net assets consist of:
Paid-in capital	$	70,323,665
Distributions in excess of net investment income		(204,663	)
Net unrealized appreciation (depreciation)		45,350,692
Accumulated net realized gain (loss)		5,515,270
Net assets, at value	$	120,984,964
Class 1:
Net assets, at value	$	994,232
Shares outstanding		52,691
Net asset value and maximum offering price per share	$	18.87
Class 2:
Net assets, at value	$	119,990,732
Shares outstanding		6,490,892
Net asset value and maximum offering price per share	$	18.49

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, 2017 (unaudited)

	Franklin Large Cap Growth VIP Fund
Investment income:
Dividends	$	446,889
Interest		5,479
Total investment income		452,368
Expenses:
Management fees (Note 3a)		452,620
Distribution fees - Class 2 (Note 3c)		149,217
Custodian fees (Note 4)		625
Reports to shareholders		29,724
Professional fees		18,686
Trustees’ fees and expenses		508
Other		5,267
Total expenses		656,647
Expense reductions (Note 4)		(22	)
Net expenses		656,625
Net investment income (loss)		(204,257	)
Realized and unrealized gains (losses):
Net realized gain (loss) from investments		5,716,100
Net change in unrealized appreciation (depreciation) on:
Investments		11,916,481
Translation of other assets and liabilities denominated in foreign currencies		28,483
Net change in unrealized appreciation (depreciation)		11,944,964
Net realized and unrealized gain (loss)		17,661,064
Net increase (decrease) in net assets resulting from operations	$	17,456,807

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, 2017 (unaudited)			Year Ended December 31, 2016
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	(204,257	)	$	(854,138	)
Net realized gain (loss)		5,716,100			45,675,157
Net change in unrealized appreciation (depreciation)		11,944,964			(50,315,678	)
Net increase (decrease) in net assets resulting from operations		17,456,807			(5,494,659	)
Distributions to shareholders from:
Net investment income:
Class 1		(9,601	)		—
Class 2		(751,572	)		—
Net realized gains:
Class 1		(77,085	)		(673,017	)
Class 2		(9,605,025	)		(3,070,097	)
Total distributions to shareholders		(10,443,283	)		(3,743,114	)
Capital share transactions: (Note 2)
Class 1		59,427			(45,655,781	)
Class 2		956			(102,866,036	)
Total capital share transactions		60,383			(148,521,817	)
Net increase (decrease) in net assets		7,073,907			(157,759,590	)
Net assets:
Beginning of period		113,911,057			271,670,647
End of period	$	120,984,964		$	113,911,057
Undistributed net investment income included in net assets:
End of period	$	—		$	760,767
Distributions in excess of net investment income included in net assets:
End of period	$	(204,663	)	$	—

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 eighteen 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. 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, 2017, 68.4% 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 may differ 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. 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 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 Fund’s business day. Occasionally, events occur between the time at which trading in a foreign security is completed and 4 p.m. Eastern time 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 4 p.m. Eastern time. 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 Fund’s NAV is not calculated, 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, 2017.

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.

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)

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, 2017, 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 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. Distributable earnings are determined according to income tax regulations (tax basis) and 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, 2017, 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, 2017						Year Ended December 31, 2016
	Shares			Amount			Shares			Amount
Class 1 Shares:
Shares sold		—		$	—			5,179		$	86,575
Shares issued in reinvestment of distributions		4,591			86,686			39,404			673,017
Shares redeemed in-kind (Note 9)		—			—			(2,315,969	)		(41,560,066	)
Shares redeemed		(1,331	)		(27,259	)		(277,582	)		(4,855,307	)
Net increase (decrease)		3,260		$	59,427			(2,548,968	)	$	(45,655,781	)
Class 2 Shares:
Shares sold		214,684		$	4,053,983			490,428		$	8,312,649
Shares issued in reinvestment of distributions		559,816			10,356,597			183,399			3,070,097
Shares redeemed in-kind (Note 9)		—			—			(3,930,777	)		(69,101,102	)
Shares redeemed		(749,385	)		(14,409,624	)		(2,651,505	)		(45,147,680	)
Net increase (decrease)		25,115		$	956			(5,908,455	)	$	(102,866,036	)

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, 2017, 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, 2017, the custodian fees were reduced as noted in the Statement of Operations.

5. Income Taxes

At June 30, 2017, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	75,473,230
Unrealized appreciation	$	46,714,925
Unrealized depreciation		(1,564,741	)
Net unrealized appreciation (depreciation)	$	45,150,184

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, 2017, aggregated $17,591,772 and $28,188,122, 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.

FLG-18         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Large Cap Growth VIP Fund (continued)

At June 30, 2017, investments in restricted securities, excluding certain securities exempt from registration under the 1933 Act deemed to be liquid, were as follows:

Shares	Issuer	Acquisition Date		Cost		Value
9,780,975	Acerta Pharma BV (Value is 0.3% of Net Assets)		5/06/15	$	562,683	$	326,401

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 9, 2018. 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 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statement of Operations. During the period ended June 30, 2017, the Fund did not use the Global Credit Facility.

9. Redemption In-Kind

During the year ended December 31, 2016, the Fund realized $34,226,067 of net gains resulting from a redemption in-kind in which a shareholder redeemed fund shares for cash and securities held by the Fund. Because such gains are not taxable to the Fund and are not distributed to remaining shareholders, they have been reclassified from accumulated net realized gains to paid-in capital.

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 Large Cap Growth VIP Fund (continued)

10. Fair Value Measurements (continued)

A summary of inputs used as of June 30, 2017, 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	$	14,367,839	$	—	$	326,401	$	14,694,240
All Other Equity Investmentsb		104,165,916		—		—		104,165,916
Short Term Investments		—		1,763,258		—		1,763,258
Total Investments in Securities	$	118,533,755	$	1,763,258	$	326,401	$	120,623,414
Receivables:
Investment Securities Sold	$	—	$	—	$	855,227	$	855,227

^aIncludes common stocks.

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

A reconciliation of assets in which Level 3 inputs are used in determining fair value is presented when there are significant Level 3

financial instruments at the end of the period. At June 30, 2017, 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	$	364,322	$	—	$	—	$	—	$	—	$	(37,921	)	$	326,401	$	(37,921	)
Receivables:
Investment Securities Sold	$	826,648	$	—	$	—	$	—	$	—	$	28,579		$	855,227	$	28,579

^aIncludes common stocks.

Level 3 investments include financial instruments with values derived using prior transaction prices or third party pricing information without adjustment for which such inputs are unobservable. They may also include fair value of immaterial financial instruments and/or other assets developed using various valuation techniques and unobservable inputs.

11. Investment Company Reporting Modernization

In October 2016, the U.S. Securities and Exchange Commission adopted new rules and amended existing rules (together, final rules) intended to modernize the reporting and disclosure of information by registered investment companies. In part, the final rules amend Regulation S-X and require standardized, enhanced disclosures about derivatives in investment company financial statements, as well as other amendments. The compliance date for the amendments to Regulation S-X is August 1, 2017. Management has reviewed the requirements and believes the adoption of the amendments to Regulation S-X will not have a material impact on the Fund’s financial statements and related disclosures.

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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Large Cap Growth VIP Fund (continued)

12. Subsequent Events

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

Abbreviations

Selected Portfolio
ADR	American Depositary Receipt

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Franklin Mutual Global Discovery VIP Fund

This semiannual report for Franklin Mutual Global Discovery VIP Fund covers the period ended June 30, 2017.

Class 2 Performance Summary as of June 30, 2017

The Fund’s Class 2 Shares delivered a +5.73% total return* for the six-month period ended June 30, 2017.

*Return information is based on net asset values calculated for shareholder transactions. Certain adjustments were made to the net assets of the Fund at 12/31/16 for financial reporting purposes, and as a result, the total returns based on those net asset values differ from the adjusted total returns reported in the Financial Highlights.

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

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 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. Derivatives involve costs and can create economic leverage in the Fund’s portfolio which may result in significant volatility and cause the Fund to participate in losses (as well as gains) in an amount that exceeds the Fund’s initial investment. 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, generated a +11.02% total return and the Standard & Poor’s 500 Index^® posted a +9.34% total return for the same period.¹

Economic and Market Overview

The global economy generally expanded during the period under review. In this environment, global developed and emerging market stocks rose, as measured by the MSCI All Country World Index. Global markets were aided by improved industrial commodity prices at certain points during the period, generally upbeat economic data across regions, investor optimism about pro-growth and pro-business policies in the U.S, hopes of tax reforms under the Trump administration,

*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.

Emmanuel Macron’s election as France’s president and encouraging corporate earnings reports.

However, investors expressed concerns about the timing and economic effects of the U.K.’s exit from the European Union (also known as “Brexit”). Other headwinds included the health of European banks, concerns about political uncertainty in the U.S. and European Union, geopolitical tensions in certain regions, worries about global oversupply in oil production despite a pact to extend cuts, and hawkish comments from key central bankers around the world toward period-end.

U.S. economic growth decelerated in 2017’s first quarter, largely due to slower growth in consumer spending and declines in private inventory investment and government spending. However, growth accelerated in the second quarter due to increases in consumer spending, business investment and federal government spending. The unemployment 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

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

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decreased from 4.7% in December 2016 to 4.4% at period-end.² Annual inflation, as measured by the Consumer Price Index, decreased from 2.1% to 1.6% during the period. After increasing its benchmark interest rate in March, the U.S. Federal Reserve (Fed), at its June meeting, made the widely anticipated increase to its target range for the federal funds rate from 0.75%–1.00% to 1.00%–1.25%, amid signs of a growing U.S. economy, a strengthening labor market and an improvement in business spending.

In Europe, the U.K.’s economy grew at a slower rate in 2017’s first quarter over the previous quarter, largely due to slower growth in household spending. The eurozone’s growth increased in the first quarter over the previous quarter. The bloc’s annual inflation rate fluctuated during the reporting period and ended slightly higher from where it began. During the period, the European Central Bank kept its key policy rates unchanged.

In Asia, Japan’s quarterly gross domestic product (GDP) remained unchanged in 2017’s first quarter compared to 2016’s fourth quarter. In April 2017, the Bank of Japan (BOJ) slightly increased its GDP forecasts for the 2017–2018 fiscal year. However, the BOJ lowered its inflation forecast.

In emerging markets, Brazil’s quarterly GDP grew for the first time in two years, as its first-quarter 2017 GDP grew compared to the previous quarter. The country’s central bank cut its benchmark interest rate four times between January and June 2017 to spur economic growth. Russia’s GDP grew in 2017’s first quarter compared to the prior-year period. The Bank of Russia reduced its key interest rate in March, April and June 2017 to try to revive its economy. China’s economy grew faster in the first half of 2017 compared to the first half of 2016, driven by solid growth in industrial production, services, fixed-asset investment, retail sales, and imports and exports. The People’s Bank of China left its benchmark interest rate unchanged during the period. Overall, emerging market stocks, as measured by the MSCI Emerging Markets Index, rose during the period.

Investment Strategy

At Franklin Mutual Advisors, 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 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.

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

Many equity markets posted meaningful gains in 2017’s first half, across most regions and with minimal volatility. Global markets were aided by generally upbeat economic data, improved corporate earnings in the U.S., Europe and Japan, as well as improved industrial commodity prices at certain points during the period. However, those largely positive headline

2. Source: Bureau of Labor Statistics.

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conditions overshadowed a fair amount of turbulence and uncertainty.

In the U.S., markets began 2017 rallying as investors hoped that a Republican sweep of U.S. elections in November 2016 would lead to a general loosening in regulations and tax reform, including lower corporate tax rates. However, political gridlock took hold. The political drama in Washington, D.C., tempered the rally in U.S. markets overall. Many stocks that led the way in the post-election rally subsequently gave back some or all of their outperformance, particularly value stocks dominated by companies in cyclical sectors most likely to benefit from acceleration in economic growth. In an environment of modest economic growth and low interest rates, investors continued to favor growth stocks. During the period, the Russell 1000^® Growth Index generated a total return of +13.99%, while the Russell 1000^® Value Index posted a total return of +4.66%.1 Within the Russell 1000^® Growth Index, stocks with the largest weights were technology firms that dominated the headlines: Apple,³ Alphabet (a.k.a. Google),³ Microsoft, Amazon.com³ and Facebook.³

European equity markets started 2017 slowly, but political events combined with upbeat economic news sparked strong performance during the period, with the notable exception of the U.K. Elections in Europe produced generally positive outcomes, with voters in the Netherlands and France rejecting extremist candidates. Political stability in the European Union (EU) helped to support equity markets on the belief that it would help facilitate the ongoing economic recovery. In the U.K., however, a snap election resulting in no party having a majority in Parliament appeared to make a “hard Brexit,” in which the U.K. leaves the EU in March 2019 without a negotiated deal, even more likely than before.

As value investors, we managed to benefit from steady economic growth despite underlying market turbulence. We seek to invest prudently in securities that we believe represent good value, and then we adjust our views as the world around us changes.

The energy sector has been a significant area of investment for the Fund.⁴ Following an extended period of high prices, crude oil and natural gas prices have been significantly lower during the past few years. The benchmark oil price dropped from more than $100 a barrel to below $30, and has more recently stayed between $40 and $60. The impact on the sector, and the

Top 10 Sectors/Industries

6/30/17

	% of Total Net Assets
Banks		15.5%
Insurance		8.8%
Pharmaceuticals		8.5%
Oil, Gas & Consumable Fuels		7.6%
Software		6.0%
Media		5.8%
Tobacco		4.7%
Health Care Equipment & Supplies		3.8%
Industrial Conglomerates		3.2%
Food & Staples Retailing		2.8%

securities of companies in the sector, has been unsurprisingly quite dramatic. Although many uncertainties exist, we continue to expect demand for oil and gas to rise for a number of years, which we believe will require continued investment by the industry, not only to meet that growth but also to replace declining production in mature fields around the world. Accordingly, we expect some combination of higher prices or lower costs over time to provide the sufficient returns needed to justify the required investment.

After an initial period of distress, most companies within the energy sector appear to have made considerable progress in resizing their cost structures and strengthening their balance sheets. In aggregate, capital spending has been cut massively, and cash flow breakeven levels suggest an ability to fund a base level of investment activity given crude oil and gas prices as of period-end. From an investment standpoint, in many cases we are finding securities with reasonable prospects at current commodity prices, and substantively greater upside potential should our longer term price-versus-cost outlook come to pass. We expect continued commodity price volatility, but would look to use that to our advantage when seeking to buy or sell energy sector securities.

Our energy sector investment process has focused on finding situations where commodity price upside is not necessary to generate attractive security returns. One such area is within the infrastructure space. Companies such as Kinder Morgan and Williams provide critical pipelines, processing facilities, ports, and other assets used to bring vital commodities to market. Investors shunned these companies due to a combination of counterparty risk related to exploration and production

3. Not a Fund holding.

4. The energy sector comprises energy equipment and services and oil, gas and consumable fuels in the SOI.

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companies, their own balance sheet concerns and dividend levels. As our analysis about the criticality of their assets and the flexibility of their funding options has, in our view, been proven, the securities of infrastructure companies have recovered significantly from their lows. Moreover, if expectations of an oil and gas supply glut from greater North American production hold true, more infrastructure investment should be needed to move this product to export markets.

Royal Dutch Shell, a leading integrated oil and gas company, is another investment held by the Fund for which fears about the impact of low commodity prices were overblown, in our view. The company used the initial phase of the price downturn to acquire BG Group, a major exploration and production company with significant positions and strength in liquefied natural gas and a great oil asset in the pre-salt Santos Basin in Brazil. The assets were highly complementary to Shell’s existing positions, allowing the post-merger company to prune other areas of its portfolio and still show considerable growth. Management, under the leadership of relatively new chief executive officer Ben van Beurden, has been focused on reducing costs so that the company can still grow, while funding all required capital expenditures and its dividend, at an oil price below $50 per barrel. As Shell shows continued progress in its efforts and demonstrates the resilience of its portfolio and balance sheet, we expect the shares to continue to benefit.

Merger and acquisition activity has remained healthy, with the number of deals remaining high, although the average size of deals fell. Very large deals may have been affected by ongoing political and regulatory uncertainty. Although many mega-deals were rumored, the largest deal actually announced during the period was Becton, Dickinson and Company’s³ takeover of C.R. Bard.³ Meanwhile, many large deals initiated in 2016 await regulatory approval, including Bayer’s³ acquisition of Monsanto, AT&T’s³ acquisition of Time Warner, and 21st Century Fox’s³ offer for Sky. Several key regulatory agencies remain short of members, including the Federal Communication Commission and the Federal Trade Commission, and these openings may be affecting regulatory approvals.

Credit spreads narrowed in 2016 and continued that trend in the first half of 2017 for higher quality credit, with the exception of a brief period of volatility in March and April. High yield credit has remained at levels seen at the start of 2017. The spread compression provided the Fund with the opportunity to exit

Top 10 Holdings
6/30/17
Company Sector/Industry, Country	% of Total Net Assets
Medtronic PLC Health Care Equipment & Supplies, U.S.		2.5%
Merck & Co. Inc. Pharmaceuticals, U.S.		2.5%
Microsoft Corp. Software, U.S.		2.5%
Citigroup Inc. Banks, U.S.		2.2%
Time Warner Inc. Media, U.S.		2.1%
Novartis AG Pharmaceuticals, Switzerland		2.1%
Wells Fargo & Co. Banks, U.S.		2.1%
Accor SA Hotels, Restaurants & Leisure, France		2.0%
Eli Lilly & Co. Pharmaceuticals, U.S.		2.0%
Royal Dutch Shell PLC Oil, Gas & Consumable Fuels, U.K.		2.0%

many of the opportunities that presented themselves in early 2016, including several “hung deals,” as prices improved, spreads shrank, and the risk-adjusted returns were no longer mispriced. As the year progressed and investors became more willing buyers of credit, mispriced risk became more difficult to find, in our opinion. However, we found what we viewed as value in some unloved industries like specialty pharmaceuticals, hospitals, media/broadcasting and telecommunications⁵ that faced increasing political or secular challenges. In sorting through these less-favored industries, we sought out securities that we believed could benefit most from liquidity-enhancing events like asset sales, the ability within existing agreements to issue secured debt, and free cash flow that could create a long enough runway to weather the storm and/or provide enough current recovery to create the enterprise at a significant discount to our assessment of its intrinsic value. In times when the credit markets fluctuate and value is difficult to easily identify, we believe our industry specific expertise, deep fundamental analysis with a focus on cash flow, and intensive credit and covenant review combine seamlessly and provide us with unique ways of looking at the same ideas others may disregard.

5. The telecommunication services sector comprises diversified telecommunication services and wireless telecommunication services in the SOI.

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Turning to Fund performance, top contributors included U.S.-based medical device maker Medtronic, Israel-based information technology security company Check Point Software Technologies and Switzerland-based health care company Novartis.

Investors responded positively to quarterly results issued by Medtronic in February and May. On both occasions, earnings exceeded consensus expectations, driven by solid revenues and successful cost control efforts, which led to better operating profitability. The positive results led to improved investor confidence in Medtronic’s ability to deliver on future growth goals, especially given concerns following tough quarterly results issued in November 2016. Medtronic’s agreement in April to sell its medical supplies business to Cardinal Health³ provided additional support to Medtronic’s stock price. Medtronic obtained the medical supplies business as part of its 2014 acquisition of Covidien. The medical supplies business, in our view, was not core to Medtronic’s operations and had less attractive profitability and future growth prospects. In addition, Medtronic intends to use the after-tax proceeds for additional share buy-backs and to pay down debt.

Check Point’s stock rallied on positive quarterly results in January after the company showed results that exceeded expectations across most metrics. Billings growth reached a five-year high, demand for software licenses and advanced technology subscriptions grew at a strong pace, and discounting had a smaller negative impact. Earnings and revenue guidance for 2017 were also better than expected. In April, further improvement in billings growth that significantly exceeded investor expectations and improved demand from international markets showed the ongoing fundamental strength of the company.

Novartis is a Switzerland-based health care company with meaningful market positions in biopharmaceuticals, especially oncology, generic pharmaceuticals through its Sandoz division, and eye care through its Alcon division. Investors reacted positively to decent quarterly results in January and April when Novartis beat consensus expectations. Investors also reacted positively to news reports in April that the process of reviewing strategic options for its Alcon division may be moving along. Novartis has made substantial investments to turn around Alcon, but the process has taken longer than expected. We believe a sale or spin-off of Alcon may make sense at the right price. In June, Novartis made good progress on its pipeline with two positive late-stage trials, one for a drug to treating neovascular age-related macular degeneration and second for a cardiovascular treatment for heart attack patients.

During the period under review, Fund investments that detracted from performance included U.S.-based drugstore chain Rite Aid, U.S.-based Marathon Oil, and Canada-based Crescent Point Energy.

Shares of Rite Aid declined as a deal to be acquired by Walgreens Boots Alliance fell apart. The transaction was mired in antitrust review by the Federal Trade Commission (FTC) during much of the period as the FTC questioned whether Walgreens’ proposed divestitures were sufficient to maintain competition. In late June, Walgreens announced the immediate termination of the merger agreement. Instead, Rite Aid agreed to sell numerous stores and related distribution assets to Walgreens. The new agreement is also subject to antitrust review, but we believe FTC approval is likely.

Oil and gas exploration and production company Marathon Oil generally followed the path of declining oil prices. During the first half of 2017, oil prices retreated as U.S. crude oil production increased and data showed that worldwide supply had not yet begun to decline. The supply and price trends for crude oil prices overshadowed some moves by Marathon that we believe were positive. As part of its portfolio transformation effort, in March Marathon announced agreements to exit a Canadian oil sands asset, and two transactions to acquire acreage in the northern Delaware basin of New Mexico. Although we regard the price received for the oil sands asset to be merely adequate, we look favorably upon the continuing expansion of the company’s resource portfolio and increasing focus on predictable, higher return onshore assets.

Additionally, the three transactions led to a further improvement in Marathon’s balance sheet. These favorable changes were nonetheless overshadowed by an oil market which remains both volatile and challenging.

Crescent Point Energy is an exploration and production company with significant exposure to oil production. The stock price generally followed the path of deteriorating crude oil prices during the period. A stronger Canadian dollar, which comprises a significant portion of the company’s cost base, further hurt the stock’s performance. We believe the stock is attractive as it trades at a significant discount to its peers, despite having decent assets, a good track record on operational execution and a healthy balance sheet. As Crescent Point Energy focuses on organic growth, we believe the stock’s discounted valuation should improve.

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

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depreciation of the U.S. dollar versus the hedged currencies, while 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, 2017, 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 2 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: (1) transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes; and (2) 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 table below shows Fund-level ongoing expenses and can help you understand these costs 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 table below provides information about the actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of ongoing Fund expenses but does not include the effect of ongoing Contract expenses, is used to calculate the “Ending Account Value.” You can estimate the Fund-level expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number under the headings “Actual” and “Fund-Level Expenses Paid During Period” (if Fund-Level Expenses Paid During Period were $7.50, then 8.6 × $7.50 = $64.50). In this illustration, the estimated expenses paid this period at the Fund level are $64.50.

Hypothetical Example for Comparison with Other Mutual Funds

Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other mutual funds offered through the Contract. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds offered through the Contract.

Please note that expenses shown in the table are meant to highlight ongoing costs at the Fund level only and do not reflect any ongoing expenses at the Contract level, or transaction expenses at either the Fund or Contract levels. In addition, 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.

		Actual (actual return after expenses)				Hypothetical (5% annual return before expenses)
Share Class	Beginning Account Value 1/1/17		Ending Account Value 6/30/17	Fund-Level Expenses Paid During  Period 1/1/17–6/30/17	1,2		Ending Account Value 6/30/17	Fund-Level Expenses Paid During  Period 1/1/17–6/30/17	1,2	Net Annualized Expense Ratio	2
Class 2	$1,000		$1,058.40	$6.33			$1,018.65	$6.21		1.24	%

1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above — in the far right column — multiplied by the simple average account value over the period indicated, and then multiplied by 181/365 to reflect the one-half year period.

2. Reflects expenses after fee waivers and expense reimbursements. Does not include any ongoing expenses of the Contract for which the Fund is an investment option or acquired fund fees and expenses.

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Financial Highlights

Franklin Mutual Global Discovery VIP Fund

	Six Months Ended June 30, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 1
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$20.22			$19.85			$22.61			$23.31			$20.55			$19.66
Income from investment operationsa:
Net investment incomeb		0.25			0.41			0.37			0.68	c		0.46			0.43
Net realized and unrealized gains (losses)		0.96			1.92			(1.17	)		0.76			5.03			2.21
Total from investment operations		1.21			2.33			(0.80	)		1.44			5.49			2.64
Less distributions from:
Net investment income		—			(0.39	)		(0.69	)		(0.57	)		(0.58	)		(0.64	)
Net realized gains		—			(1.57	)		(1.27	)		(1.57	)		(2.15	)		(1.11	)
Total distributions		—			(1.96	)		(1.96	)		(2.14	)		(2.73	)		(1.75	)
Net asset value, end of period		$21.43			$20.22			$19.85			$22.61			$23.31			$20.55
Total returnd		5.98%			12.32%			(3.39)%			5.98%			27.95%			13.63%
Ratios to average net assetse
Expensesf		0.99%	g,h		1.01%	g,h		1.02%	g,h		1.00%	g		0.97%	g		0.99%
Expenses incurred in connection with securities sold short		—%			0.01%			0.02%			0.03%			—%	i		—%	i
Net investment income		2.37%			2.10%			1.71%			2.85%	c		2.13%			2.12%
Supplemental data
Net assets, end of period (000’s)		$3,271			$3,084			$2,632			$2,313			$2,465			$1,136
Portfolio turnover rate		9.98%			17.54%			21.88%			22.18%			15.58%			25.63%

^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 shares 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 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(d).

^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%.

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, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 2
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$19.69			$19.37			$22.11			$22.84			$20.17			$19.30
Income from investment operationsa:
Net investment incomeb		0.22			0.35			0.32			0.60c			0.42			0.38
Net realized and unrealized gains (losses)		0.93			1.87			(1.16	)		0.75			4.92			2.15
Total from investment operations		1.15			2.22			(0.84	)		1.35			5.34			2.53
Less distributions from:
Net investment income		—			(0.33	)		(0.63	)		(0.51	)		(0.52	)		(0.55	)
Net realized gains		—			(1.57	)		(1.27	)		(1.57	)		(2.15	)		(1.11	)
Total distributions		—			(1.90	)		(1.90	)		(2.08	)		(2.67	)		(1.66	)
Net asset value, end of period		$20.84			$19.69			$19.37			$22.11			$22.84			$20.17
Total returnd		5.84%			12.06%			(3.65)%			5.71%			27.61%			13.36%
Ratios to average net assetse
Expensesf		1.24%	g,h		1.26%	g,h		1.27%	g,h		1.25%	g		1.22%	g		1.24%
Expenses incurred in connection with securities sold short		—%			0.01%			0.02%			0.03%			—%	i		—%	i
Net investment income		2.12%			1.85%			1.46%			2.60%c			1.88%			1.87%
Supplemental data
Net assets, end of period (000’s)		$640,102			$630,397			$629,366			$685,711			$684,780			$660,465
Portfolio turnover rate		9.98%			17.54%			21.88%			22.18%			15.58%			25.63%

^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 shares 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 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(d).

^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%.

MGD-10         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, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 4
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$20.02			$19.66			$22.39			$23.10			$20.38			$19.50
Income from investment operationsa:
Net investment incomeb		0.21			0.34			0.30			0.61	c		0.40			0.36
Net realized and unrealized gains (losses)		0.95			1.89			(1.17	)		0.73			4.97			2.19
Total from investment operations		1.16			2.23			(0.87	)		1.34			5.37			2.55
Less distributions from:
Net investment income		—			(0.30	)		(0.59	)		(0.48	)		(0.50	)		(0.56	)
Net realized gains		—			(1.57	)		(1.27	)		(1.57	)		(2.15	)		(1.11	)
Total distributions		—			(1.87	)		(1.86	)		(2.05	)		(2.65	)		(1.67	)
Net asset value, end of period		$21.18			$20.02			$19.66			$22.39			$23.10			$20.38
Total returnd		5.79%			11.91%			(3.74)%			5.60%			27.52%			13.27%
Ratios to average net assetse
Expensesf		1.34%	g,h		1.36%	g,h		1.37%	g,h		1.35%	g		1.32%	g		1.34%
Expenses incurred in connection with securities sold short		—%			0.01%			0.02%			0.03%			—%	i		—%	i
Net investment income		2.02%			1.75%			1.36%			2.50%	c		1.78%			1.77%
Supplemental data
Net assets, end of period (000’s)		$43,845			$45,262			$49,054			$59,961			$70,354			$62,346
Portfolio turnover rate		9.98%			17.54%			21.88%			22.18%			15.58%			25.63%

^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 shares 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 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(d).

^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%.

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

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Statement of Investments, June 30, 2017 (unaudited)

Franklin Mutual Global Discovery VIP Fund

		Country		Shares/ Units		Value
	Common Stocks and Other Equity Interests 90.6%
	Aerospace & Defense 0.5%
a	KLX Inc.		United States		32,920	$	1,646,000
	Rockwell Collins Inc.		United States		20,416		2,145,313
							3,791,313
	Auto Components 0.4%
a,b	International Automotive Components Group Brazil LLC		Brazil		424,073		10,372
a,b,c	International Automotive Components Group North America LLC		United States		4,052,916		2,494,635
							2,505,007
	Automobiles 1.3%
	General Motors Co.		United States		192,700		6,731,011
	Hyundai Motor Co.		South Korea		17,572		2,447,952
							9,178,963
	Banks 15.5%
	Barclays PLC		United Kingdom		2,052,511		5,420,518
	BNP Paribas SA		France		117,870		8,490,210
	Capital Bank Financial Corp., A		United States		78,494		2,990,621
d	Capital Bank Financial Corp., B, 144A, non-voting		United States		269,922		10,284,028
	CIT Group Inc.		United States		136,169		6,631,430
	Citigroup Inc.		United States		229,050		15,318,864
	Citizens Financial Group Inc.		United States		310,923		11,093,733
	HSBC Holdings PLC		United Kingdom		438,755		4,067,368
	JPMorgan Chase & Co.		United States		96,110		8,784,454
	PNC Financial Services Group Inc.		United States		62,732		7,833,345
	Societe Generale SA		France		118,614		6,382,785
a	Standard Chartered PLC		United Kingdom		374,211		3,788,295
a	Unicaja Banco SA		Spain		1,141,179		1,525,109
	Wells Fargo & Co.		United States		256,320		14,202,691
							106,813,451
	Beverages 0.9%
	PepsiCo Inc.		United States		55,497		6,409,348
	Capital Markets 0.4%
a	Guotai Junan Securities Co. Ltd.		China		1,275,797		2,666,710
	Chemicals 1.1%
	Monsanto Co.		United States		64,910		7,682,748
	Communications Equipment 2.6%
	Cisco Systems Inc.		United States		359,180		11,242,334
	Nokia OYJ, A.		Finland		611,269		3,738,979
	Nokia OYJ, ADR		Finland		519,486		3,200,034
							18,181,347
	Construction Materials 0.7%
	LafargeHolcim Ltd., B.		Switzerland		78,676		4,505,150
	Consumer Finance 1.2%
	Ally Financial Inc.		United States		151,600		3,168,440
	Capital One Financial Corp.		United States		60,788		5,022,305
							8,190,745
	Diversified Financial Services 1.3%
a,b	Hightower Holding LLC, B, Series II		United States		1,775,736		5,533,549
	Voya Financial Inc.		United States		101,650		3,749,869
							9,283,418

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)
	Diversified Telecommunication Services 2.0%
	China Telecom Corp. Ltd., H		China		13,642,104	$	6,482,303
	Koninklijke KPN NV		Netherlands		979,670		3,134,398
a	Telecom Italia SpA		Italy		4,563,482		4,211,811
							13,828,512
	Energy Equipment & Services 1.4%
	Baker Hughes Inc.		United States		178,964		9,755,328
	Food & Staples Retailing 2.8%
	CVS Health Corp.		United States		84,991		6,838,376
	Metro AG		Germany		96,726		3,265,392
a	Rite Aid Corp.		United States		391,098		1,153,739
	Walgreens Boots Alliance Inc.		United States		102,904		8,058,412
							19,315,919
	Health Care Equipment & Supplies 3.8%
	Medtronic PLC		United States		196,610		17,449,137
	Stryker Corp.		United States		62,868		8,724,821
							26,173,958
	Hotels, Restaurants & Leisure 2.4%
	Accor SA		France		292,594		13,717,875
	Sands China Ltd.		Hong Kong		648,800		2,970,715
							16,688,590
	Independent Power & Renewable Electricity Producers 0.5%
	Vistra Energy Corp.		United States		199,533		3,350,159
	Industrial Conglomerates 3.2%
	General Electric Co.		United States		377,400		10,193,574
	Koninklijke Philips NV		Netherlands		328,294		11,660,433
							21,854,007
	Insurance 8.8%
a	Alleghany Corp.		United States		2,730		1,623,804
	American International Group Inc.		United States		204,833		12,806,159
	China Pacific Insurance Group Co. Ltd., H		China		845,908		3,456,113
	Chubb Ltd.		United States		59,966		8,717,857
	The Hartford Financial Services Group Inc.		United States		68,896		3,621,863
	MetLife Inc.		United States		100,526		5,522,898
	NN Group NV		Netherlands		323,882		11,512,975
	T&D Holdings Inc.		Japan		199,721		3,035,276
	XL Group Ltd.		Bermuda		235,290		10,305,702
							60,602,647
	IT Services 1.5%
	Cognizant Technology Solutions Corp., A		United States		130,860		8,689,104
	DXC Technology Co.		United States		25,657		1,968,405
							10,657,509
	Machinery 0.7%
	Caterpillar Inc.		United States		42,175		4,532,125
	Media 5.8%
a	Charter Communications Inc., A		United States		30,386		10,235,524
a	DISH Network Corp., A.		United States		124,103		7,788,704
	Sky PLC		United Kingdom		538,425		6,971,176
	Time Warner Inc.		United States		146,582		14,718,299
							39,713,703

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)
	Metals & Mining 1.5%
a	Freeport-McMoRan Inc.		United States		186,260	$	2,236,983
	thyssenkrupp AG		Germany		242,203		6,881,827
b,c	Warrior Met Coal Inc.		United States		54,024		883,779
							10,002,589
	Multi-Utilities 0.4%
	innogy SE		Germany		63,784		2,511,026
	Oil, Gas & Consumable Fuels 7.6%
	Apache Corp.		United States		70,359		3,372,307
	BP PLC		United Kingdom		1,028,014		5,929,268
	China Shenhua Energy Co. Ltd., H		China		776,950		1,729,486
a	CONSOL Energy Inc.		United States		219,381		3,277,552
	Crescent Point Energy Corp.		Canada		506,700		3,877,996
	JXTG Holdings Inc.		Japan		392,812		1,713,587
	Kinder Morgan Inc.		United States		391,270		7,496,733
	Marathon Oil Corp.		United States		438,465		5,195,810
	Royal Dutch Shell PLC, A (EUR Traded)		United Kingdom		327,191		8,683,707
	Royal Dutch Shell PLC, A (GBP Traded)		United Kingdom		179,410		4,755,602
	The Williams Cos. Inc.		United States		196,601		5,953,078
							51,985,126
	Pharmaceuticals 8.5%
	Eli Lilly & Co.		United States		165,580		13,627,234
	GlaxoSmithKline PLC.		United Kingdom		262,323		5,588,321
	Merck & Co. Inc.		United States		267,118		17,119,593
	Novartis AG, ADR		Switzerland		176,221		14,709,167
	Teva Pharmaceutical Industries Ltd., ADR		Israel		226,691		7,530,675
							58,574,990
	Software 6.0%
a	Check Point Software Technologies Ltd.		Israel		101,567		11,078,928
a	Dell Technologies Inc., V		United States		33,415		2,041,991
	Microsoft Corp.		United States		245,936		16,952,369
	Symantec Corp.		United States		403,861		11,409,073
							41,482,361
	Specialty Retail 0.7%
	Kingfisher PLC		United Kingdom		1,151,830		4,511,451
	Technology Hardware, Storage & Peripherals 0.9%
	Hewlett Packard Enterprise Co.		United States		298,680		4,955,101
	Lenovo Group Ltd.		China		1,500,454		947,423
							5,902,524
	Tobacco 4.7%
	Altria Group Inc.		United States		118,684		8,838,397
	British American Tobacco PLC		United Kingdom		188,332		12,839,623
	Reynolds American Inc.		United States		159,669		10,384,872
							32,062,892
	Wireless Telecommunication Services 1.5%
	Vodafone Group PLC		United Kingdom		3,618,505		10,263,176
	Total Common Stocks and Other Equity Interests (Cost $480,680,810)						622,976,792
	Preferred Stocks (Cost $7,441,859) 0.9%
	Automobiles 0.9%
e	Volkswagen AG, 1.545%, pfd		Germany		40,296		6,137,848

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 3.2%
f,g	Avaya Inc., DIP Facility, 8.617% - 8.716%, 1/23/18.		United States	$	902,000	$	931,597
f,g	Belk Inc., Closing Date Term Loan, 5.905%, 12/12/22		United States		944,186		808,695
	CHS/Community Health Systems Inc., senior note, 6.875%, 2/01/22		United States		1,220,000		1,070,550
f,g	Cumulus Media Holdings Inc., Term Loans, 4.48%, 12/23/20		United States		2,596,190		2,099,669
	Frontier Communications Corp.,
	senior note, 10.50%, 9/15/22		United States		442,000		422,663
	senior note, 11.00%, 9/15/25		United States		4,065,000		3,765,206
	iHeartCommunications Inc., senior secured note, first lien, 9.00%, 12/15/19		United States		5,184,000		4,088,880
f,g	Tranche D Term Loan, 7.976%, 1/30/19		United States		6,889,154		5,649,106
f,g	Tranche E Term Loan, 8.726%, 7/30/19		United States		2,213,881		1,815,382
d	Valeant Pharmaceuticals International,
	senior bond, 144A, 6.75%, 8/15/21		United States		363,000		346,665
	senior bond, 144A, 7.25%, 7/15/22		United States		241,000		227,444
d	Valeant Pharmaceuticals International Inc., senior note, 144A, 7.50%, 7/15/21		United States		203,000		197,418
d	Veritas U.S. Inc./Veritas Bermuda Ltd., senior note, 144A, 7.50%, 2/01/23		United States		336,000		362,040
	Total Corporate Bonds, Notes and Senior Floating Rate Interests (Cost $23,745,606)						21,785,315
	Corporate Notes and Senior Floating Rate Interests in Reorganization 0.4%
h	Avaya Inc.,
	d senior note, 144A, 10.50%, 3/01/21		United States		1,270,000		130,175
	f,g Term B-7 Loan, 4.13%, 5/29/20.		United States		1,240,000		1,000,267
b,h	Broadband Ventures III LLC, secured promissory note, 5.00%, 2/01/12		United States		595		—
f,g,h	Caesars Entertainment Operating Co. Inc., Term B-7 Loans, 1.50%, 3/01/17		United States		1,110,195		1,383,581
	Total Corporate Notes and Senior Floating Rate Interests in Reorganization (Cost $3,171,682)						2,514,023
				Shares
	Companies in Liquidation 0.1%
a	Adelphia Recovery Trust		United States		5,379,562		3,497
a,i	Adelphia Recovery Trust, Arahova Contingent Value Vehicle, Contingent Distribution		United States		386,774		39
a,i,j	Century Communications Corp., Contingent Distribution.		United States		1,074,000		—
a,b	FIM Coinvestor Holdings I, LLC		United States		2,077,368		—
a,k	Lehman Brothers Holdings Inc., Bankruptcy Claim.		United States		17,348,669		385,140
a,j	NewPage Corp., Litigation Trust.		United States		4,854,000		—
a,i,j	Tribune Media, Litigation Trust, Contingent Distribution		United States		56,997		—
a,j	Vistra Energy Corp., Litigation Trust		United States		11,807,264		136,964
a	Vistra Energy Corp., Litigation Trust, TRA		United States		199,534		214,499
	Total Companies in Liquidation (Cost $2,674,362)						740,139
				Principal Amount
	Municipal Bonds in Reorganization (Cost $2,115,501) 0.2%
h	Puerto Rico Commonwealth GO, Refunding, Series A, 8.00%, 7/01/35		United States	$	2,261,000		1,379,210
	Total Investments before Short Term Investments (Cost $519,829,820)						655,533,327

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
	Short Term Investments 3.9%
	U.S. Government and Agency Securities 3.9%
l	FHLB, 7/03/17		United States	$	10,500,000	$	10,500,000
l	U.S. Treasury Bill,
	m 8/17/17 - 8/24/17		United States		7,000,000		6,991,816
	7/20/17 - 11/24/17		United States		9,000,000		8,971,884
	Total U.S. Government and Agency Securities (Cost $26,464,869)						26,463,700
	Senior Floating Rate Interests in Reorganization (Cost $346,820) 0.0%†
f,g,h	Avaya Inc., Term B-3 Loan, 7.63%, 10/26/17		United States		428,000		342,043
	Total Investments (Cost $546,641,509) 99.3%						682,339,070
	Other Assets, less Liabilities 0.7%						4,878,469
	Net Assets 100.0%					$	687,217,539

†Rounds to less than 0.1% of net assets.

^aNon-income producing.

^bSee Note 8 regarding restricted securities.

^cAt June 30, 2017, pursuant to the Fund’s policies and the requirements of applicable securities law, the Fund is restricted from trading these securities at period end.

^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, 2017, the aggregate value of these securities was $11,547,770, representing 1.7% of net assets.

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

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

^gSee Note 1(f) regarding senior floating rate interests.

^hSee Note 7 regarding credit risk and defaulted securities.

ⁱContingent 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.

^jSecurity has been deemed illiquid because it may not be able to be sold within seven days. At June 30, 2017, the aggregate value of these securities was $136,964, representing less than 0.1% of net assets.

^kBankruptcy 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.

^lThe security was issued on a discount basis with no stated coupon rate.

^mA portion or all of the security has been segregated as collateral for open forward contracts. At June 30, 2017, the aggregate value of these securities and/or cash pledged amounted to $2,167,220, representing 0.3% of net assets.

MGD-16         Semiannual Report    

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Mutual Global Discovery VIP Fund (continued)

At June 30, 2017, the Fund had the following futures contracts outstanding. See Note 1(c).

Futures Contracts
Description	Type		Number of Contracts		Notional Value		Expiration Date		Unrealized Appreciation		Unrealized Depreciation
Currency Contracts
EUR/USD		Short		210	$	30,100,875		9/18/17	$	—	$	(528,589	)
GBP/USD		Short		272		22,176,500		9/18/17		—		(455,297	)
Total Futures Contracts									$	—	$	(983,886	)
Net unrealized appreciation (depreciation)											$	(983,886	)

At June 30, 2017, the Fund had the following forward exchange contracts outstanding. See Note 1(c).

Forward Exchange Contracts
Currency	Counterpartya	Type	Quantity		Contract Amount		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
OTC Forward Exchange Contracts
South Korean Won	HSBK	Buy		260,761,200	$	229,310		7/14/17	$	—	$	(1,563	)
South Korean Won	HSBK	Sell		1,035,970,475		917,153		7/14/17		12,347		—
South Korean Won	UBSW	Buy		476,475,500		417,908		7/14/17		—		(1,759	)
South Korean Won	UBSW	Sell		2,528,563,225		2,228,965		7/14/17		20,540		—
British Pound	SSBT	Buy		280,000		363,504		8/14/17		1,741		—
British Pound	SSBT	Sell		32,778,165		41,564,353		8/14/17		—		(1,193,020	)
Euro	HSBK	Sell		27,040,031		30,255,686		8/18/17		—		(712,169	)
Euro	SSBT	Sell		27,040,046		30,247,671		8/18/17		—		(720,200	)
Japanese Yen	UBSW	Sell		329,365,603		2,968,790		8/28/17		33,214		—
Total Forward Exchange Contracts									$	67,842	$	(2,628,711	)
Net unrealized appreciation (depreciation)											$	(2,560,869	)

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

See Abbreviations on page MGD-32.

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

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Statements

Statement of Assets and Liabilities

June 30, 2017 (unaudited)

	Franklin Mutual Global Discovery VIP Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	546,641,509
Value - Unaffiliated issuers	$	682,339,070
Cash		69,944
Foreign currency, at value (cost $2,410,931)		2,411,245
Receivables:
Investment securities sold		3,236,626
Capital shares sold		72,010
Dividends and interest		2,656,633
European Union tax reclaims		293,821
Due from brokers		1,056,090
Unrealized appreciation on OTC forward exchange contracts		67,842
Other assets		97,205
Total assets		692,300,486
Liabilities:
Payables:
Investment securities purchased		1,432,310
Capital shares redeemed		106,659
Management fees		530,886
Distribution fees		295,111
Variation margin		4,587
Unrealized depreciation on OTC forward exchange contracts		2,628,711
Accrued expenses and other liabilities		84,683
Total liabilities		5,082,947
Net assets, at value	$	687,217,539
Net assets consist of:
Paid-in capital	$	493,808,371
Undistributed net investment income		18,603,002
Net unrealized appreciation (depreciation)		132,174,674
Accumulated net realized gain (loss)		42,631,492
Net assets, at value	$	687,217,539
Class 1:
Net assets, at value	$	3,271,106
Shares outstanding		152,663
Net asset value and maximum offering price per share	$	21.43
Class 2:
Net assets, at value	$	640,101,598
Shares outstanding		30,716,058
Net asset value and maximum offering price per share	$	20.84
Class 4:
Net assets, at value	$	43,844,835
Shares outstanding		2,070,083
Net asset value and maximum offering price per share	$	21.18

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 Operations

for the six months ended June 30, 2017 (unaudited)

	Franklin Mutual Global Discovery VIP Fund
Investment income:
Dividends (net of foreign taxes of $618,962)	$	9,534,607
Interest		1,483,780
Income from securities loaned (net of fees and rebates)		496,876
Total investment income.		11,515,263
Expenses:
Management fees (Note 3a)		3,218,192
Distribution fees: (Note 3c)
Class 2		796,526
Class 4		78,158
Custodian fees (Note 4)		12,069
Reports to shareholders		68,940
Professional fees		68,612
Trustees’ fees and expenses		1,532
Other.		17,393
Total expenses		4,261,422
Expense reductions (Note 4)		(410	)
Expenses waived/paid by affiliates (Note 3e)		(5,592	)
Net expenses		4,255,420
Net investment income		7,259,843
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		12,716,426
Foreign currency transactions		(3,825,440	)
Futures contracts		(1,574,124	)
Securities sold short		(62,176	)
Net realized gain (loss)		7,254,686
Net change in unrealized appreciation (depreciation) on:
Investments		28,538,897
Translation of other assets and liabilities denominated in foreign currencies		(2,507,987	)
Futures contracts		(1,559,330	)
Net change in unrealized appreciation (depreciation)		24,471,580
Net realized and unrealized gain (loss)		31,726,266
Net increase (decrease) in net assets resulting from operations	$	38,986,109

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

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, 2017 (unaudited)			Year Ended December 31, 2016
Increase (decrease) in net assets:
Operations:
Net investment income	$	7,259,843		$	12,072,848
Net realized gain (loss)		7,254,686			38,874,630
Net change in unrealized appreciation (depreciation)		24,471,580			23,661,183
Net increase (decrease) in net assets resulting from operations		38,986,109			74,608,661
Distributions to shareholders from:
Net investment income:
Class 1		—			(54,304	)
Class 2		—			(10,085,440	)
Class 4		—			(662,593	)
Net realized gains:
Class 1		—			(220,428	)
Class 2		—			(47,823,620	)
Class 4		—			(3,482,606	)
Total distributions to shareholders		—			(62,328,991	)
Capital share transactions: (Note 2)
Class 1		2,912			377,199
Class 2		(26,557,034	)		(10,255,413	)
Class 4		(3,957,289	)		(4,711,238	)
Total capital share transactions		(30,511,411	)		(14,589,452	)
Net increase (decrease) in net assets		8,474,698			(2,309,782	)
Net assets:
Beginning of period		678,742,841			681,052,623
End of period	$	687,217,539		$	678,742,841
Undistributed net investment income included in net assets:
End of period	$	18,603,002		$	11,343,159

MGD-20         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 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 eighteen 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. 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, 2017, 49.2% 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 may differ 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 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.

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 derivative financial instruments 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

Semiannual Report         MGD-21

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)

a. Financial Instrument Valuation (continued)

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 Fund’s business day. Occasionally, events occur between the time at which trading in a foreign security is completed and 4 p.m. Eastern time 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 4 p.m. Eastern time. 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 Fund’s NAV is not calculated, 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. Derivative Financial Instruments

The Fund invested in derivative financial instruments 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

MGD-22         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Mutual Global Discovery VIP Fund (continued)

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 counter-parties. 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, 2017, the Fund had OTC derivatives in a net liability position of $2,612,864 and the aggregate value of collateral pledged for such contracts was $2,167,220.

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 the next business day, or 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 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 at 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.

d. Securities Sold Short

The Fund is engaged in selling securities short, which obligates the Fund to replace a borrowed security with the same security at current 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. At June 30, 2017, the Fund had no securities sold short.

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)

e. 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, 2017, the Fund had no securities on loan.

f. Senior Floating Rate Interests

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

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. 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. For U.S. income tax purposes, EU reclaims received by the Fund and the Fund previously passed foreign tax credit on to its shareholders, the Fund must either amend historic tax reporting to shareholders or enter into a closing agreement with the Internal Revenue Service (IRS) in order to pay the associated tax liability on behalf of the Fund’s shareholders.

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, 2017, 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.

MGD-24         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Mutual Global Discovery VIP Fund (continued)

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. Dividend income is recorded on the ex-dividend date except for certain dividends from 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. Distributable earnings are determined according to income tax regulations (tax basis) and 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.

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.

2. Shares of Beneficial Interest

At June 30, 2017, 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, 2017						Year Ended December 31, 2016
	Shares			Amount			Shares			Amount
Class 1 Shares:
Shares sold		10,515		$	220,655			23,387		$	453,227
Shares issued in reinvestment of distributions		—			—			14,414			274,732
Shares redeemed		(10,367	)		(217,743	)		(17,886	)		(350,760	)
Net increase (decrease)		148		$	2,912			19,915		$	377,199
Class 2 Shares:
Shares sold		1,014,724		$	20,703,140			1,329,879		$	25,305,228
Shares issued in reinvestment of distributions		—			—			3,118,420			57,909,060
Shares redeemed		(2,311,605	)		(47,260,174	)		(4,923,922	)		(93,469,701	)
Net increase (decrease)		(1,296,881	)	$	(26,557,034	)		(475,623	)	$	(10,255,413	)

Semiannual Report         MGD-25

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Mutual Global Discovery VIP Fund (continued)

2. Shares of Beneficial Interest (continued)

	Six Months Ended June 30, 2017						Year Ended December 31, 2016
	Shares			Amount			Shares			Amount
Class 4 Shares:
Shares sold		52,602		$	1,098,508			108,847		$	2,055,482
Shares issued in reinvestment of distributions		—			—			219,439			4,145,199
Shares redeemed		(242,907	)		(5,055,797	)		(563,526	)		(10,911,919	)
Net increase (decrease)		(190,305	)	$	(3,957,289	)		(235,240	)	$	(4,711,238	)

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
0.950%	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, 2017, the annualized effective investment management fee rate was 0.939% 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 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.

MGD-26         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Mutual Global Discovery VIP Fund (continued)

d. Transfer Agent Fees

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

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. During the period ended June 30, 2017, the Fund held investments in affiliated management investment companies as follows:

	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, 0.58%		—		53,818,000		(53,818,000	)		—	$	—	$	—	$	—		—

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, 2017, the custodian fees were reduced as noted in the Statement of Operations.

5. Income Taxes

At June 30, 2017, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	546,784,806
Unrealized appreciation	$	179,132,282
Unrealized depreciation		(43,578,018	)
Net unrealized appreciation (depreciation)	$	135,554,264

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, 2017, aggregated $65,403,589 and $74,914,385, 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 could 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

Semiannual Report         MGD-27

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Mutual Global Discovery VIP Fund (continued)

7. Credit Risk and Defaulted Securities (continued)

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, 2017, the aggregate long value of distressed company securities for which interest recognition has been discontinued was $4,235,276, representing 0.6% 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.

At June 30, 2017, investments in restricted securities, excluding certain securities exempt from registration under the 1933 Act deemed to be liquid, were 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		—		—
1,775,736	Hightower Holding LLC, B, Series II		6/10/10 - 5/10/12		5,430,000		5,533,549
424,073	International Automotive Components Group Brazil LLC		4/13/06 - 12/26/08		281,629		10,372
4,052,916	International Automotive Components Group North America LLC		1/12/06 - 3/18/13		3,247,714		2,494,635
54,024	Warrior Met Coal Inc.		3/31/16 - 6/23/16		309,924		883,779
	Total Restricted Securities (Value is 1.3% of Net Assets)			$	9,269,862	$	8,922,335

9. Other Derivative Information

At June 30, 2017, 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	$	983,886	a
	Unrealized appreciation on OTC forward exchange contracts	$	67,842	Unrealized depreciation on OTC forward exchange contracts		2,628,711
Totals		$	67,842		$	3,612,597

^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.

MGD-28         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, 2017, 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 Location	Net Realized Gain (Loss) for the Period			Statement of Operations Location	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	$	(3,853,581	)a	Translation of other assets and liabilities denominated in foreign currencies	$	(2,564,897	)a
	Futures contracts		(1,574,124	)	Futures contracts		(1,559,330	)
Totals		$	(5,427,705	)		$	(4,124,227	)

^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.

For the period ended June 30, 2017, the average month end notional amount of futures contracts represented $ 50,148,120. The

average month end contract value of forward exchange contracts was $100,725,638.

See Note 1(c) regarding derivative financial instruments.

10. Credit Facility

The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matures on February 9, 2018. 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 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statement of Operations. During the period ended June 30, 2017, 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.

Semiannual Report         MGD-29

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Mutual Global Discovery VIP Fund (continued)

11. Fair Value Measurements (continued)

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

A summary of inputs used as of June 30, 2017, 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	$	—	$	—	$	2,505,007		$	2,505,007
Diversified Financial Services		3,749,869		—		5,533,549			9,283,418
Metals & Mining		9,118,810		—		883,779			10,002,589
All Other Equity Investmentsb		607,323,626		—		—			607,323,626
Corporate Bonds, Notes and Senior Floating Rate Interests		—		21,785,315		—			21,785,315
Corporate Notes and Senior Floating Rate Interests in Reorganization		—		2,514,023		—	c		2,514,023
Companies in Liquidation		—		603,175		136,964	c		740,139
Municipal Bonds in Reorganization		—		1,379,210		—			1,379,210
Short Term Investments		15,963,700		10,842,043		—			26,805,743
Total Investments in Securities	$	636,156,005	$	37,123,766	$	9,059,299		$	682,339,070
Other Financial Instruments:
Forward Exchange Contracts	$	—	$	67,842	$	—		$	67,842
Liabilities:
Other Financial Instruments:
Futures Contracts	$	983,886	$	—	$	—		$	983,886
Forward Exchange Contracts		—		2,628,711		—			2,628,711
Total Other Financial Instruments	$	983,886	$	2,628,711	$	—		$	3,612,597

^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, 2017.

	Balance at Beginning of Period		Purchases		Sales			Transfer Into Level 3a		Transfer 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	$	3,025,399	$	—	$	—		$	—	$	—		$	—	$	—		$	(520,392	)	$	2,505,007	$	(520,392	)
Diversified Financial Services.		5,466,782		—		—			—		—			—		—			66,767			5,533,549		66,767
Metals & Mining		—		—		(564,683	)		1,465,905		—			—		(1,889,894	)		1,872,451			883,779		(40,031	)
Oil, Gas & Consumable
Fuels		1,997,775		—		—			—		(1,844,100	)		—		—			(153,675	)		—		—

MGD-30         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Mutual Global Discovery VIP Fund (continued)

	Balance at Beginning of Period			Purchases		Sales			Transfer Into Level 3a		Transfer 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
Companies in Liquidation	$	136,964	d	$	—	$	—		$	—	$	—		$	—	$	—		$	—	$	136,964	d	$	—
Total	$	10,626,920		$	—	$	(564,683	)	$	1,465,905	$	(1,844,100	)	$	—	$	(1,889,894	)	$	1,265,151	$	9,059,299		$	(493,656	)

^aThe investments were transferred into Level 3 as a 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. May include amounts related to a corporate action.

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

^dIncludes securities determined to have no value.

Significant unobservable valuation inputs for material Level 3 financial instruments and impact to fair value as a result of changes in unobservable valuation inputs as of June 30, 2017, are as follows:

Description	Fair Value at End of Period			Valuation Technique	Unobservable Input	Amount		Impact to Fair Value if Input Increasesa
Assets:
Investments in Securities:
Equity Investments:b
Auto Components	$	2,494,634		Market Comparables	EV / EBITDA multiple		3.7x		Increase
				Discounted Cash Flow	3 Yr Forward EBITDA Growth Rate Discount Rate		1.01x 10%		Increase Decrease	c  c
Diversified Financial Services		5,533,549		Market comparables	EV / Last 12 Months Revenue multiple EV / Last 12 Months EBITDA multiple EV / Forward 12 Months EBITDA multiple Discount rate		2.1x 11.3x 9.1x 7.9%		Increase Increase Increase Decrease	c  c  c
Metals & Mining		883,779		Market comparables	Discount for lack of marketability		4.5%		Decrease
All Other Investmentsd		147,337	e
Total	$	9,059,299

^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 the 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.

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

^eIncludes securities determined to have no value at June 30, 2017.

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)

Abbreviations List

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

12. New Accounting Pronouncements

In March 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-08, Receivables — Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The amendments in the ASU shorten the amortization period for certain callable debt securities, held at a premium, to be amortized to the earliest call date. The ASU does not require an accounting change for securities held at a discount; which continues to be amortized to maturity. The ASU is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. Management is currently evaluating the impact, if any, of applying this provision.

13. Investment Company Reporting Modernization

In October 2016, the U.S. Securities and Exchange Commission adopted new rules and amended existing rules (together, final rules) intended to modernize the reporting and disclosure of information by registered investment companies. In part, the final rules amend Regulation S-X and require standardized, enhanced disclosures about derivatives in investment company financial statements, as well as other amendments. The compliance date for the amendments to Regulation S-X is August 1, 2017. Management has reviewed the requirements and believes the adoption of the amendments to Regulation S-X will not have a material impact on the Fund’s financial statements and related disclosures.

14. Subsequent Events

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

Abbreviations

Counterparty		Currency		Selected Portfolio
HSBK	HSBC Bank PLC	EUR	Euro	ADR	American Depositary Receipt
SSBT	State Street Bank and Trust Co., N.A.	GBP	British Pound	DIP	Debtor-In-Possession
UBSW	UBS AG	USD	United States Dollar	FHLB	Federal Home Loan Bank
				GO	General Obligation
				TRA	Tax Receivable Agreement Right

MGD-32         Semiannual Report

Franklin Mutual Shares VIP Fund

This semiannual report for Franklin Mutual Shares VIP Fund covers the period ended June 30, 2017.

Class 2 Performance Summary as of June 30, 2017

The Fund’s Class 2 Shares delivered a +5.43% total return for the six-month period ended June 30, 2017.

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

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

FRANKLIN MUTUAL SHARES VIP FUND

Fund Goal 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. Derivatives involve costs and can create economic leverage in the Fund’s portfolio which may result in significant volatility and cause the Fund to participate in losses (as well as gains) in an amount that exceeds the Fund’s initial investment. 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 +9.34% total return for the period under review.¹

Economic and Market Overview

The global economy generally expanded during the period under review. In this environment, global developed and emerging market stocks rose significantly, as measured by the MSCI All Country World Index. Global markets were aided by improved industrial commodity prices at certain points during the period, generally upbeat economic data across regions, investor optimism about pro-growth and pro-business policies in the U.S, hopes of tax reforms under the Trump administration, Emmanuel Macron’s election as France’s president and encouraging corporate earnings reports.

*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.

However, investors expressed concerns about the timing and economic effects of the U.K.’s exit from the European Union (also known as “Brexit”). Other headwinds included the health of European banks, concerns about political uncertainty in the U.S. and European Union, geopolitical tensions in certain regions, worries about global oversupply in oil production despite a pact to extend cuts, and hawkish comments from key central bankers around the world toward period-end.

U.S. economic growth decelerated in 2017’s first quarter, largely due to slower growth in consumer spending and declines in private inventory investment and government spending. However, growth accelerated in the second quarter due to increases in consumer spending, business investment and federal government spending. The unemployment rate decreased from 4.7% in December 2016 to 4.4% at

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.

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).

MS-2         Semiannual Report

FRANKLIN MUTUAL SHARES VIP FUND

period-end.² Annual inflation, as measured by the Consumer Price Index, decreased from 2.1% to 1.6% during the period. After increasing its benchmark interest rate in March, the U.S. Federal Reserve (Fed), at its June meeting, made the widely anticipated increase to its target range for the federal funds rate from
0.75%–1.00% to 1.00%–1.25%, amid signs of a growing U.S. economy, a strengthening labor market and an improvement in business spending.

In Europe, the U.K.’s economy grew at a slower rate in 2017’s first quarter over the previous quarter, largely due to slower growth in household spending. The eurozone’s growth increased in the first quarter over the previous quarter. The bloc’s annual inflation rate fluctuated during the reporting period and ended slightly higher from where it began. During the period, the European Central Bank kept its key policy rates unchanged.

In Asia, Japan’s quarterly gross domestic product (GDP) remained unchanged in 2017’s first quarter compared to 2016’s fourth quarter. In April 2017, the Bank of Japan (BOJ) slightly increased its GDP forecasts for the 2017–2018 fiscal year. However, the BOJ lowered its inflation forecast.

In emerging markets, Brazil’s quarterly GDP grew for the first time in two years, as its first-quarter 2017 GDP grew compared to the previous quarter. The country’s central bank cut its benchmark interest rate four times between January and June 2017 to spur economic growth. Russia’s GDP grew in 2017’s first quarter compared to the prior-year period. The Bank of Russia reduced its key interest rate in March, April and June 2017 to try to revive its economy. China’s economy grew faster in the first half of 2017 compared to the first half of 2016, driven by solid growth in industrial production, services, fixed-asset investment, retail sales, and imports and exports. The People’s Bank of China left its benchmark interest rate unchanged during the period. Overall, emerging market stocks, as measured by the MSCI Emerging Markets Index, rose during the period.

Investment Strategy

At Franklin Mutual Advisors, 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 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.

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

Many equity markets posted meaningful gains in 2017’s first half, across most regions and with minimal volatility. Global markets were aided by generally upbeat economic data, improved corporate earnings in the U.S., Europe and Japan, as well as improved industrial commodity prices at certain points during the period. However, those largely positive headline conditions overshadowed a fair amount of turbulence and uncertainty.

2. Source: Bureau of Labor Statistics.

Semiannual Report         MS-3

FRANKLIN MUTUAL SHARES VIP FUND

In the U.S., markets began 2017 rallying as investors hoped that a Republican sweep of U.S. elections in November 2016 would lead to a general loosening in regulations and tax reform, including lower corporate tax rates. However, political gridlock took hold. The political drama in Washington, D.C., tempered the rally in U.S. markets overall. Many stocks that led the way in the post-election rally subsequently gave back some or all of their outperformance, particularly value stocks dominated by companies in cyclical sectors most likely to benefit from acceleration in economic growth. In an environment of modest economic growth and low interest rates, investors continued to favor growth stocks. During the period, the Russell 1000^® Growth Index generated a total return of +13.99%, while the Russell 1000^® Value Index posted a total return of +4.66%.¹ Within the Russell 1000^® Growth Index, stocks with the largest weights were technology firms that dominated the headlines: Apple,³ Alphabet (a.k.a. Google),³ Microsoft, Amazon.com³ and Facebook.³

European equity markets started 2017 slowly, but political events combined with upbeat economic news sparked strong performance during the period, with the notable exception of the U.K. Elections in Europe produced generally positive outcomes, with voters in the Netherlands and France rejecting extremist candidates. Political stability in the European Union (EU) helped to support equity markets on the belief that it would help facilitate the ongoing economic recovery. In the U.K., however, a snap election resulting in no party having a majority in Parliament appeared to make a “hard Brexit,” in which the U.K. leaves the EU in March 2019 without a negotiated deal, even more likely than before.

As value investors, we managed to benefit from steady economic growth despite underlying market turbulence. We seek to invest prudently in securities that we believe represent good value, and then we adjust our views as the world around us changes.

The energy sector has been a significant area of investment for the Fund.⁴ Following an extended period of high prices, crude oil and natural gas prices have been significantly lower during the past few years. The benchmark oil price dropped from more than $100 a barrel to below $30, and has more recently stayed between $40 and $60. The impact on the sector, and the securities of companies in the sector, has been unsurprisingly quite dramatic. Although many uncertainties exist, we continue to expect demand for oil and gas to rise for a number of years,

Top 10 Sectors/Industries
6/30/17
	% of Total Net Assets
Banks		9.5%
Insurance		9.2%
Pharmaceuticals		8.3%
Oil, Gas & Consumable Fuels		7.4%
Media		6.1%
Software		5.7%
Health Care Equipment & Supplies		5.2%
Tobacco		4.7%
Food & Staples Retailing		4.0%
Communications Equipment		2.6%

which we believe will require continued investment by the sector, not only to meet that growth but also to replace declining production in mature fields around the world. Accordingly, we expect some combination of higher prices or lower costs over time to provide the sufficient returns needed to justify the required investment.

After an initial period of distress, most companies within the energy sector appear to have made considerable progress in resizing their cost structures and strengthening their balance sheets. In aggregate, capital spending has been cut massively, and cash flow breakeven levels suggest an ability to fund a base level of investment activity given crude oil and gas prices as of period-end. From an investment standpoint, in many cases we are finding securities with reasonable prospects at current commodity prices, and substantively greater upside potential should our longer term price-versus-cost outlook come to pass. We expect continued commodity price volatility, but would look to use that to our advantage when seeking to buy or sell energy sector securities.

Our energy sector investment process has focused on finding situations where commodity price upside is not necessary to generate attractive security returns. One such area is within the infrastructure space. Companies such as Kinder Morgan and Williams provide critical pipelines, processing facilities, ports, and other assets used to bring vital commodities to market. Investors shunned these companies due to a combination of counterparty risk related to exploration and production companies, their own balance sheet concerns and dividend levels. As our analysis about the criticality of their assets and the flexibility of their funding options has, in our view, been

3. Not a Fund holding.

4. The energy sector comprises energy equipment and services and oil, gas and consumable fuels in the SOI.

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Top 10 Holdings
6/30/17
Company Sector/Industry, Country	% of Total Net Assets
Medtronic PLC Health Care Equipment & Supplies, U.S.		3.6%
Merck & Co. Inc. Pharmaceuticals, U.S.		2.8%
Eli Lilly & Co. Pharmaceuticals, U.S.		2.4%
Microsoft Corp. Software, U.S.		2.2%
Time Warner Inc. Media, U.S.		2.1%
Symantec Corp. Software, U.S.		2.0%
Novartis AG Pharmaceuticals, Switzerland		2.0%
American International Group Inc. Insurance, U.S.		2.0%
British American Tobacco PLC Tobacco, U.K.		1.9%
Charter Communications Inc. Media, U.S.		1.8%

proven, the securities of infrastructure companies have recovered significantly from their lows. Moreover, if expectations of an oil and gas supply glut from greater North American production hold true, more infrastructure investment should be needed to move this product to export markets.

Royal Dutch Shell, a leading integrated oil and gas company, is another investment held by the Fund for which fears about the impact of low commodity prices were overblown, in our view. The company used the initial phase of the crude oil price downturn to acquire BG Group, a major exploration and production company with significant positions and strength in liquefied natural gas and a great oil asset in the pre-salt Santos Basin in Brazil. The assets were highly complementary to Shell’s existing positions, allowing the post-merger company to prune other areas of its portfolio and still show considerable growth. Management, under the leadership of relatively new chief executive officer Ben van Beurden, has been focused on reducing costs so that the company can still grow, while funding all required capital expenditures and its dividend, at an oil price below $50 per barrel. As Shell shows continued progress in its efforts and demonstrates the resilience of its portfolio and balance sheet, we expect the shares to continue to benefit.

Merger and acquisition activity has remained healthy, with the number of deals remaining high, although the average size of deals fell. Very large deals may have been affected by ongoing political and regulatory uncertainty. Although many mega-deals were rumored, the largest deal actually announced during the period was Becton, Dickinson and Company’s³ takeover of C.R. Bard.³ Meanwhile, many large deals initiated in 2016 await regulatory approval, including Bayer’s³ acquisition of Monsanto, AT&T’s³ acquisition of Time Warner, and 21st Century Fox’s³ offer for Sky. Several key regulatory agencies remain short of members, including the Federal Communication Commission and the Federal Trade Commission, and these openings may be affecting regulatory approvals.

Credit spreads narrowed in 2016 and continued that trend in the first half of 2017 for higher quality credit, with the exception of a brief period of volatility in March and April. High yield credit has remained at levels seen at the start of 2017. The spread compression provided the Fund with the opportunity to exit many of the opportunities that presented themselves in early 2016, including several “hung deals,” as prices improved, spreads shrank, and the risk-adjusted returns were no longer mispriced. As the year progressed and investors became more willing buyers of credit, mispriced risk became more difficult to find, in our opinion. However, we found what we viewed as value in some unloved industries like specialty pharmaceuticals, hospitals, media/broadcasting and telecommunications⁵ that faced increasing political or secular challenges. In sorting through these less-favored industries, we sought out securities that we believed could benefit most from liquidity-enhancing events like asset sales, the ability within existing agreements to issue secured debt, and free cash flow that could create a long enough runway to weather the storm and/or provide enough current recovery to create the enterprise at a significant discount to our assessment of its intrinsic value. In times when the credit markets fluctuate and value is difficult to easily identify, we believe our industry specific expertise, deep fundamental analysis with a focus on cash flow, and intensive credit and covenant review combine seamlessly and provide us with unique ways of looking at the same ideas others may disregard.

Turning to Fund performance, top positive contributors included U.S.-based medical device maker Medtronic, South Korea-based Samsung Electronics, and Switzerland-based health care company Novartis.

5. The telecommunication services sector comprises diversified telecommunication services and wireless telecommunication services in the SOI.

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FRANKLIN MUTUAL SHARES VIP FUND

Investors responded positively to quarterly results issued by Medtronic in February and May. On both occasions, earnings exceeded consensus expectations, driven by solid revenues and successful cost control efforts, which led to better operating profitability. The positive results led to improved investor confidence in Medtronic’s ability to deliver on future growth goals, especially given concerns following tough quarterly results issued in November 2016. Medtronic’s agreement in April to sell its medical supplies business to Cardinal Health³ provided additional support to Medtronic’s stock price. Medtronic obtained the medical supplies business as part of its 2014 acquisition of Covidien. The medical supplies business, in our view, was not core to Medtronic’s operations and had less attractive profitability and future growth prospects. In addition, Medtronic intends to use the after-tax proceeds for additional share buybacks and to pay down debt.

Samsung Electronics is a low cost provider of commodity memory products (e.g., dynamic random-access memory and flash memory), which have seen very strong pricing recently. Samsung also produces smartphones, consumer electronics and other goods. In February, shares retreated as Samsung chief Jay Y. Lee was arrested for bribery as part of a wider government influence-peddling scandal that led to the impeachment of then president Park Geun-hye. However, the stock price rallied as investors turned their focus to Samsung’s better-than-expected earnings results announced in April. Samsung reported strong sales in its core businesses, including memory chips and OLED (organic light-emitting diode) displays. Despite adverse publicity surrounding its Note 7 smartphone in the fall of 2016, sales of its newest generation of smartphones have been running ahead of market expectations. Management also surprised investors in April by announcing a plan to cancel existing treasury shares held by the company.

Novartis has meaningful market positions in biopharmaceu-ticals, especially oncology, generic pharmaceuticals through its Sandoz division, and eye care through its Alcon division. Investors reacted positively to decent quarterly results in January and April when Novartis beat consensus expectations. Investors also reacted positively to news reports in April that the process of reviewing strategic options for its Alcon division may be moving along. Novartis has made substantial investments to turn around Alcon, but the process has taken longer than expected. We believe a sale or spin-off of Alcon may make sense at the right price. In June, Novartis made good progress on its pipeline with two positive late-stage trials, one for a drug to treating neovascular age-related macular degeneration and second for a cardiovascular treatment for heart attack patients.

During the period under review, Fund investments that detracted from performance included Cincinnati-based grocery retailer Kroger, U.S.-based oil and gas exploration and production company Marathon Oil and U.S.-based drugstore chain Rite Aid.

Kroger operates over 2,400 grocery and multi-department stores in 31 states. Kroger’s stock price declined as investors remained focused on the industry-wide impact of food price deflation, which is pressuring the revenue growth of grocery retailers. Quarterly results released in early March reflected the pressure of food price deflation on Kroger’s revenues. The stock price further declined in mid-June due to Kroger’s negative full-year earnings guidance update and the announced acquisition of Whole Foods³ by Amazon.com.³ Kroger reduced its full-year 2017 earning range due to a combination of higher costs and lower margins. The company selectively increased starting wages to lower employee turnover and improve productivity. In addition, Kroger decided to match major promotions by some competitors. Kroger’s management believes promotion activity will likely persist through 2017 as other grocery chains fight to maintain market share. In our view, the Whole Foods acquisition by Amazon was another sign of encroaching competition from non-traditional grocery retailers and hard discounters. Overall, we believe Kroger is still among the strongest grocery retailers, including a sharp management team, and that it has the capability to successfully adjust to the shifting competitive landscape.

Shares of Marathon Oil generally followed the path of declining oil prices. During the first half of 2017, oil prices retreated as U.S. crude oil production increased and data showed that worldwide supply had not yet begun to decline. The supply and price trends for crude oil prices overshadowed some moves by Marathon that we believe were positive. As part of its portfolio transformation effort, in March Marathon announced agreements to exit a Canadian oil sands asset, and two transactions to acquire acreage in the northern Delaware basin of New Mexico. Although we regard the price received for the oil sands asset to be merely adequate, we look favorably upon the continuing expansion of the company’s resource portfolio and increasing focus on predictable, higher return onshore assets. Additionally, the three transactions led to a further improvement in Marathon’s balance sheet. These favorable changes were nonetheless overshadowed by an oil market which remains both volatile and challenging.

Shares of Rite Aid declined as a deal to be acquired by Walgreens Boots Alliance fell apart. The transaction was mired in antitrust review by the Federal Trade Commission (FTC) during much of the period as the FTC questioned whether

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FRANKLIN MUTUAL SHARES VIP FUND

Walgreens’ proposed divestitures were sufficient to maintain competition. In late June, Walgreens announced the immediate termination of the merger agreement. Instead, Rite Aid agreed to sell numerous stores and related distribution assets to Walgreens. The new agreement is also subject to antitrust review, but we believe FTC approval is likely.

During the period, the Fund held currency forwards and futures seeking to hedge most of the currency risk of the portfolio’s non-U.S. dollar investments. The currency forwards had a negative impact on the Fund’s performance because of the depreciation of the U.S. dollar versus the hedged currencies, while 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 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, 2017, 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 MUTUAL SHARES VIP FUND

Class 2 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: (1) transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes; and (2) 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 table below shows Fund-level ongoing expenses and can help you understand these costs 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 table below provides information about the actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of ongoing Fund expenses but does not include the effect of ongoing Contract expenses, is used to calculate the “Ending Account Value.” You can estimate the Fund-level expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number under the headings “Actual” and “Fund-Level Expenses Paid During Period” (if Fund-Level Expenses Paid During Period were $7.50, then 8.6 × $7.50 = $64.50). In this illustration, the estimated expenses paid this period at the Fund level are $64.50.

Hypothetical Example for Comparison with Other Mutual Funds

Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other mutual funds offered through the Contract. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds offered through the Contract.

Please note that expenses shown in the table are meant to highlight ongoing costs at the Fund level only and do not reflect any ongoing expenses at the Contract level, or transaction expenses at either the Fund or Contract levels. In addition, 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.

		Actual (actual return after expenses)				Hypothetical (5% annual return before expenses)
Share Class	Beginning Account Value 1/1/17		Ending Account Value 6/30/17	Fund-Level Expenses Paid During Period 1/1/17–6/30/17	1,2		Ending Account Value 6/30/17	Fund-Level Expenses Paid During Period 1/1/17–6/30/17	1,2	Net Annualized Expense Ratio	2
Class 2	$1,000		$1,054.30	$4.89			$1,020.03	$4.81		0.96%

1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above — in the far right column — multiplied by the simple average account value over the period indicated, and then multiplied by 181/365 to reflect the one-half year period.

2. Reflects expenses after fee waivers and expense reimbursements. Does not include any ongoing expenses of the Contract for which the Fund is an investment option or acquired fund fees and expenses.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Highlights

Franklin Mutual Shares VIP Fund

	Six Months Ended June 30, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 1
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$20.40			$19.48			$22.91			$21.92			$17.45			$15.57
Income from investment operationsa:
Net investment incomeb		0.21			0.50			0.44			0.62	c		0.42			0.35
Net realized and unrealized gains (losses)		0.92			2.56			(1.54	)		1.01			4.52			1.92
Total from investment operations		1.13			3.06			(1.10	)		1.63			4.94			2.27
Less distributions from:
Net investment income		—			(0.46	)		(0.77	)		(0.52	)		(0.47	)		(0.39	)
Net realized gains		—			(1.68	)		(1.56	)		(0.12	)		—			—
Total distributions		—			(2.14	)		(2.33	)		(0.64	)		(0.47	)		(0.39	)
Net asset value, end of period		$21.53			$20.40			$19.48			$22.91			$21.92			$17.45
Total returnd		5.54%			16.35%			(4.69)%			7.38%			28.53%			14.61%
Ratios to average net assetse
Expensesf		0.71%	g,h		0.72%	g,h		0.73%	g,h		0.73%	g		0.71%	g		0.71%
Expenses incurred in connection with securities sold short		—%			0.01%			0.02%			0.03%			—%	i		—%	i
Net investment income		1.96%			2.57%			2.00%			2.83%	c		2.08%			2.06%
Supplemental data
Net assets, end of period (000’s)		$644,175			$610,395			$643,438			$656,463			$552,163			$449,343
Portfolio turnover rate		8.66%			24.45%			19.88%			21.33%			24.05%			34.07%	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 $0.23 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%.

^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.

^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(f).

^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         MS-9

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL HIGHLIGHTS

Franklin Mutual Shares VIP Fund (continued)

	Six Months Ended June 30, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 2
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$20.08			$19.20			$22.60			$21.63			$17.23			$15.38
Income from investment operationsa:
Net investment incomeb		0.18			0.45			0.38			0.58	c		0.36			0.30
Net realized and unrealized gains (losses)		0.91			2.52			(1.51	)		0.97			4.46			1.90
Total from investment operations		1.09			2.97			(1.13	)		1.55			4.82			2.20
Less distributions from:
Net investment income		—			(0.41	)		(0.71	)		(0.46	)		(0.42	)		(0.35	)
Net realized gains		—			(1.68	)		(1.56	)		(0.12	)		—			—
Total distributions		—			(2.09	)		(2.27	)		(0.58	)		(0.42	)		(0.35	)
Net asset value, end of period		$21.17			$20.08			$19.20			$22.60			$21.63			$17.23
Total returnd		5.43%			16.06%			(4.94)%			7.12%			28.26%			14.24%
Ratios to average net assetse
Expensesf		0.96%	g,h		0.97%	g,h		0.98%	g,h		0.98%	g		0.96%	g		0.96%
Expenses incurred in connection with securities sold short		—%			0.01%			0.02%			0.03%			—%	i		—%	i
Net investment income		1.71%			2.32%			1.75%			2.58%	c		1.83%			1.81%
Supplemental data
Net assets, end of period (000’s)		$3,574,863			$3,621,358			$3,353,505			$4,218,342			$4,558,547			$4,069,803
Portfolio turnover rate		8.66%			24.45%			19.88%			21.33%			24.05%			34.07%	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 $0.23 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%.

^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.

^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(f).

^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.

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

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL HIGHLIGHTS

Franklin Mutual Shares VIP Fund (continued)

	Six Months Ended June 30, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 4
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$20.23			$19.32			$22.72			$21.74			$17.31			$15.45
Income from investment operationsa:
Net investment incomeb		0.17			0.44			0.36			0.57	c		0.34			0.28
Net realized and unrealized gains (losses)		0.92			2.53			(1.52	)		0.96			4.49			1.91
Total from investment operations		1.09			2.97			(1.16	)		1.53			4.83			2.19
Less distributions from:
Net investment income		—			(0.38	)		(0.68	)		(0.43	)		(0.40	)		(0.33	)
Net realized gains		—			(1.68	)		(1.56	)		(0.12	)		—			—
Total distributions		—			(2.06	)		(2.24	)		(0.55	)		(0.40	)		(0.33	)
Net asset value, end of period		$21.32			$20.23			$19.32			$22.72			$21.74			$17.31
Total returnd		5.39%			15.94%			(5.05)%			7.04%			28.05%			14.20%
Ratios to average net assetse
Expensesf		1.06%	g,h		1.07%	g,h		1.08%	g,h		1.08%	g		1.06%	g		1.06%
Expenses incurred in connection with securities sold short		—%			0.01%			0.02%			0.03%			—%	i		—%	i
Net investment income		1.61%			2.22%			1.65%			2.48%c			1.73%			1.71%
Supplemental data
Net assets, end of period (000’s)		$120,304			$122,476			$130,978			$158,020			$188,153			$165,015
Portfolio turnover rate		8.66%			24.45%			19.88%			21.33%			24.05%			34.07%	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 $0.23 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%.

^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.

^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(f).

^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         MS-11

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Statement of Investments, June 30, 2017 (unaudited)

Franklin Mutual Shares VIP Fund
		Country		Shares/Units		Value
	Common Stocks and Other Equity Interests 87.0%
	Aerospace & Defense 0.6%
a	KLX Inc.		United States		224,586	$	11,229,300
	Rockwell Collins Inc.		United States		125,222		13,158,328
							24,387,628
	Auto Components 0.7%
	The Goodyear Tire & Rubber Co.		United States		632,638		22,117,024
a,b	International Automotive Components Group Brazil LLC		Brazil		1,730,515		42,327
a,b,c	International Automotive Components Group North America LLC		United States		15,382,424		9,468,128
							31,627,479
	Automobiles 1.2%
	General Motors Co.		United States		1,510,630		52,766,306
	Banks 9.5%
	Barclays PLC		United Kingdom		10,534,300		27,820,247
	CIT Group Inc.		United States		757,326		36,881,776
	Citigroup Inc.		United States		926,419		61,958,903
	Citizens Financial Group Inc.		United States		1,851,966		66,078,147
a	FCB Financial Holdings Inc., A		United States		493,723		23,575,273
	Guaranty Bancorp		United States		209,583		5,700,658
	JPMorgan Chase & Co.		United States		757,320		69,219,048
	PNC Financial Services Group Inc.		United States		571,295		71,337,607
	State Bank Financial Corp.		United States		352,200		9,551,664
	Wells Fargo & Co.		United States		698,860		38,723,832
							410,847,155
	Beverages 0.8%
	PepsiCo Inc.		United States		319,942		36,950,102
	Chemicals 1.1%
a,d,e	Dow Corning Corp., Contingent Distribution		United States		100,000		—
	Monsanto Co.		United States		405,580		48,004,449
							48,004,449
	Communications Equipment 2.6%
	Cisco Systems Inc.		United States		2,183,380		68,339,794
	Nokia OYJ, A		Finland		3,670,248		22,449,985
	Nokia OYJ, ADR		Finland		3,299,845		20,327,045
							111,116,824
	Construction Materials 0.7%
	LafargeHolcim Ltd., B		Switzerland		547,060		31,325,783
	Consumer Finance 1.3%
	Ally Financial Inc.		United States		943,970		19,728,973
	Capital One Financial Corp.		United States		436,885		36,095,439
							55,824,412
	Containers & Packaging 2.2%
	International Paper Co.		United States		1,044,075		59,105,086
	WestRock Co.		United States		681,512		38,614,470
							97,719,556
	Diversified Financial Services 0.8%
	Voya Financial Inc.		United States		959,810		35,407,391
	Diversified Telecommunication Services 0.6%
	Koninklijke KPN NV		Netherlands		8,378,890		26,807,774

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)
	Electrical Equipment 1.1%
a	Sensata Technologies Holding NV		United States		1,104,530	$	47,185,522
	Energy Equipment & Services 1.3%
	Baker Hughes Inc.		United States		1,003,685		54,710,870
a,b	Gulfmark Offshore Inc.		United States		48,169		10,067
							54,720,937
	Equity Real Estate Investment Trusts (REITs) 1.2%
	Alexander’s Inc.		United States		40,126		16,911,504
	Vornado Realty Trust		United States		358,219		33,636,764
							50,548,268
	Food & Staples Retailing 4.0%
	CVS Health Corp.		United States		821,861		66,126,936
	The Kroger Co.		United States		2,243,460		52,317,487
a	Rite Aid Corp.		United States		2,439,970		7,197,912
	Walgreens Boots Alliance Inc.		United States		628,158		49,191,053
							174,833,388
	Health Care Equipment & Supplies 5.2%
	Medtronic PLC		United States		1,734,212		153,911,315
	Stryker Corp.		United States		512,391		71,109,623
							225,020,938
	Household Products 0.2%
	Energizer Holdings Inc.		United States		196,162		9,419,699
	Independent Power & Renewable Electricity Producers 0.8%
	Vistra Energy Corp.		United States		2,184,095		36,670,955
	Industrial Conglomerates 1.5%
	General Electric Co.		United States		2,362,600		63,813,826
	Insurance 9.2%
a	Alleghany Corp.		United States		102,188		60,781,422
	American International Group Inc.		United States		1,369,996		85,652,150
	Chubb Ltd.		United States		319,645		46,469,990
	The Hartford Financial Services Group Inc.		United States		441,878		23,229,527
	MetLife Inc.		United States		977,203		53,687,533
	White Mountains Insurance Group Ltd.		United States		65,521		56,913,506
	XL Group Ltd.		Bermuda		1,639,580		71,813,604
							398,547,732
	IT Services 1.6%
	Cognizant Technology Solutions Corp., A		United States		822,270		54,598,728
	DXC Technology Co.		United States		177,792		13,640,202
							68,238,930
	Machinery 2.1%
	Caterpillar Inc.		United States		445,006		47,820,345
	CNH Industrial NV		United Kingdom		888,427		10,061,799
	CNH Industrial NV, special voting		United Kingdom		1,844,814		20,893,272
	Federal Signal Corp.		United States		657,993		11,422,758
							90,198,174

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)
	Media 6.1%
a	Charter Communications Inc., A		United States		237,513	$	80,006,254
a	DISH Network Corp., A		United States		778,183		48,838,765
	Sky PLC		United Kingdom		3,381,508		43,781,560
	Time Warner Inc.		United States		918,888		92,265,544
							264,892,123
	Metals & Mining 0.9%
	thyssenkrupp AG		Germany		1,147,037		32,591,299
b,c	Warrior Met Coal Inc.		United States		361,612		5,915,616
							38,506,915
	Oil, Gas & Consumable Fuels 7.4%
	Anadarko Petroleum Corp.		United States		512,870		23,253,526
	Apache Corp.		United States		653,346		31,314,874
	BP PLC		United Kingdom		4,322,322		24,929,821
a	CONSOL Energy Inc.		United States		1,236,955		18,480,108
	Kinder Morgan Inc.		United States		3,158,940		60,525,290
	Marathon Oil Corp.		United States		2,991,878		35,453,754
	Royal Dutch Shell PLC, A (EUR Traded)		United Kingdom		1,916,196		50,856,184
	Royal Dutch Shell PLC, A (GBP Traded)		United Kingdom		927,720		24,590,976
	The Williams Cos. Inc.		United States		1,751,598		53,038,387
							322,442,920
	Pharmaceuticals 8.3%
	Eli Lilly & Co.		United States		1,274,136		104,861,393
	Merck & Co. Inc.		United States		1,898,948		121,703,577
	Novartis AG, ADR		Switzerland		1,026,481		85,680,369
	Teva Pharmaceutical Industries Ltd., ADR		Israel		1,427,173		47,410,687
							359,656,026
	Professional Services 0.8%
	RELX PLC		United Kingdom		1,702,110		36,803,586
	Software 5.7%
	CA Inc.		United States		1,442,532		49,724,078
a	Dell Technologies Inc., V		United States		198,331		12,120,007
	Microsoft Corp.		United States		1,379,947		95,119,747
	Symantec Corp.		United States		3,140,461		88,718,023
							245,681,855
	Technology Hardware, Storage & Peripherals 2.3%
	Hewlett Packard Enterprise Co.		United States		2,069,667		34,335,775
	Samsung Electronics Co. Ltd.		South Korea		30,959		64,274,273
							98,610,048
	Tobacco 4.7%
	Altria Group Inc.		United States		638,788		47,570,542
	British American Tobacco PLC		United Kingdom		1,188,947		81,057,022
	Imperial Brands PLC		United Kingdom		487,268		21,887,318
	Reynolds American Inc.		United States		849,494		55,251,090
							205,765,972

MS-14         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)
	Wireless Telecommunication Services 0.5%
	Vodafone Group PLC		United Kingdom		8,229,954	$	23,342,642
	Total Common Stocks and Other Equity Interests (Cost $2,751,631,200)						3,777,685,315
				Principal Amount
	Corporate Bonds, Notes and Senior Floating Rate Interests 3.3%
f,g	Avaya Inc., DIP Facility, 8.617% - 8.716%, 1/23/18		United States	$	5,756,000		5,944,872
f,g	Belk Inc., Closing Date Term Loan, 5.905%, 12/12/22		United States		5,741,131		4,917,278
	CHS/Community Health Systems Inc., senior note, 6.875%, 2/01/22		United States		7,784,000		6,830,460
f,g	Cumulus Media Holdings Inc., Term Loans, 4.48%, 12/23/20		United States		16,442,442		13,297,825
	Frontier Communications Corp.,
	senior note, 10.50%, 9/15/22		United States		2,804,000		2,681,325
	senior note, 11.00%, 9/15/25		United States		25,535,000		23,651,794
	iHeartCommunications Inc.,
	senior secured note, first lien, 9.00%, 12/15/19		United States		26,449,000		20,861,649
	f,g Tranche D Term Loan, 7.976%, 1/30/19		United States		34,746,619		28,492,227
	f,g Tranche E Term Loan, 8.726%, 7/30/19		United States		11,168,253		9,157,968
f,g	Toys R Us-Delaware Inc.,
	FILO Loans, 8.422%, 10/24/19		United States		2,560,000		2,563,200
	Term B-4 Loan, 9.952%, 4/24/20		United States		21,133,461		17,620,023
h	Valeant Pharmaceuticals International,
	senior bond, 144A, 6.75%, 8/15/21		United States		2,207,000		2,107,685
	senior bond, 144A, 7.25%, 7/15/22		United States		1,460,000		1,377,875
h	Valeant Pharmaceuticals International Inc., senior note, 144A, 7.50%, 7/15/21		United States		1,314,000		1,277,865
h	Veritas U.S. Inc./Veritas Bermuda Ltd., senior note, 144A, 7.50%, 2/01/23		United States		2,386,000		2,570,915
	Total Corporate Bonds, Notes and Senior Floating Rate Interests (Cost $155,448,003)						143,352,961
	Corporate Notes and Senior Floating Rate Interests in Reorganization 1.6%
i	Avaya Inc.,
	h senior note, 144A, 10.50%, 3/01/21		United States		22,449,000		2,301,023
	h senior secured note, 144A, 7.00%, 4/01/19		United States		8,441,000		6,816,107
	f,g Term B-3 Loan, 7.63%, 10/26/17		United States		15,539,927		12,418,997
	f,g,j Term B-6 Loan, 4.13%, 3/30/18		United States		3,248,721		2,593,561
	f,g Term B-7 Loan, 4.13%, 5/29/20		United States		15,158,619		12,227,958
b,i	Broadband Ventures III LLC, secured promissory note, 5.00%, 2/01/12		United States		1,754		—
f,g,i	Caesars Entertainment Operating Co. Inc.,
	Term B-5-B Loans, 1.50%, 3/01/17		United States		3,069,560		3,572,201
	Term B-6-B Loans, 1.50%, 3/01/17		United States		14,634,842		17,433,755
	Term B-7 Loans, 1.50%, 3/01/17		United States		9,298,589		11,588,366
	Total Corporate Notes and Senior Floating Rate Interests in Reorganization (Cost $82,557,205)						68,951,968

Semiannual Report         MS-15

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Mutual Shares VIP Fund (continued)

		Country		Shares		Value
	Companies in Liquidation 0.2%
a	Adelphia Recovery Trust		United States		29,283,354	$	19,034
a,d	Adelphia Recovery Trust, Arahova Contingent Value Vehicle, Contingent
	Distribution		United States		1,955,453		196
a,b,c,k	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,l	Lehman Brothers Holdings Inc., Bankruptcy Claim		United States		144,058,799		3,198,105
a,d,e	Tribune Media, Litigation Trust, Contingent Distribution		United States		394,551		—
a,d,e	Tropicana, Litigation Trust, Contingent Distribution		United States		18,305,000		—
a,e	Vistra Energy Corp., Litigation Trust		United States		129,926,405		1,507,146
a	Vistra Energy Corp., Litigation Trust, TRA		United States		2,184,095		2,347,902
	Total Companies in Liquidation (Cost $23,439,539)						7,072,383
				Principal Amount
	Municipal Bonds in Reorganization (Cost $17,936,642) 0.3%
i	Puerto Rico Commonwealth GO, Refunding, Series A, 8.00%, 7/01/35		United States	$	20,409,000		12,449,490
	Total Investments before Short Term Investments (Cost $3,031,012,589)						4,009,512,117
	Short Term Investments 7.0%
	U.S. Government and Agency Securities 7.0%
m	FHLB,
	7/03/17		United States		79,400,000		79,400,000
	7/05/17		United States		25,000,000		24,998,625
m	U.S. Treasury Bill,
	n 9/07/17		United States		20,000,000		19,965,340
	7/20/17 - 12/21/17		United States		182,000,000		181,519,880
	Total U.S. Government and Agency Securities (Cost $305,891,749)						305,883,845
	Total Investments (Cost $3,336,904,338) 99.4%						4,315,395,962
	Other Assets, less Liabilities 0.6%						23,945,524
	Net Assets 100.0%					$	4,339,341,486

MS-16         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Mutual Shares VIP Fund (continued)

^aNon-income producing.

^bSee Note 8 regarding restricted securities.

^cAt June 30, 2017, 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, 2017, the aggregate value of these securities was $1,507,146, representing less than 0.1% of net assets.

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

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

^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, 2017, the aggregate value of these securities was $16,451,470, representing 0.4% of net assets.

ⁱSee Note 7 regarding credit risk and defaulted securities.

^jA portion or all of the security purchased on a delayed delivery basis. See Note 1(c).

^kSee Note 10 regarding holdings of 5% voting securities.

^lBankruptcy 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.

^mThe security was issued on a discount basis with no stated coupon rate.

ⁿA portion or all of the security has been segregated as collateral for open forward contracts. At June 30, 2017, the aggregate value of this security and/or cash pledged amounted to $4,636,950, representing 0.1% of net assets.

Semiannual Report         MS-17

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Mutual Shares VIP Fund (continued)

At June 30, 2017, 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		478	$	68,515,325		9/18/17	$	—	$	(1,204,813	)
GBP/USD		Short		1,341		109,333,406		9/18/17		—		(2,226,903	)
Total Futures Contracts									$	—	$	(3,431,716	)
Net unrealized appreciation (depreciation)											$	(3,431,716	)

At June 30, 2017, the Fund had the following forward exchange contracts outstanding. See Note 1(d).

Forward Exchange Contracts
Currency	Counterparty	a	Type	Quantity		Contract Amount	Settlement Date		Unrealized Appreciation		Unrealized Depreciation
OTC Forward Exchange Contracts
South Korean Won	HSBK		Buy	15,250,943,768	$	13,569,615	7/14/17	$	—	$	(249,579	)
South Korean Won	HSBK		Sell	60,952,959,545		53,915,112	7/14/17		679,349		—
South Korean Won	UBSW		Buy	4,358,008,432		3,860,543	7/14/17		—		(54,297	)
South Korean Won	UBSW		Sell	30,193,573,135		26,576,768	7/14/17		205,975		—
British Pound	BOFA		Buy	3,152,268		4,051,573	8/14/17		60,393		—
British Pound	HSBK		Buy	1,233,497		1,572,528	8/14/17		36,503		—
British Pound	SSBT		Buy	1,373,006		1,756,049	8/14/17		34,964		—
British Pound	SSBT		Sell	100,115,134		126,950,995	8/14/17		—		(3,643,870	)
British Pound	UBSW		Buy	1,878,264		2,421,931	8/14/17		28,165		—
Euro	BOFA		Buy	352,190		402,582	8/18/17		767		—
Euro	BOFA		Sell	214,707		241,405	8/18/17		—		(4,490	)
Euro	BONY		Buy	360,418		412,172	8/18/17		600		—
Euro	HSBK		Buy	352,191		402,343	8/18/17		1,007		—
Euro	HSBK		Sell	49,200,330		55,051,332	8/18/17		—		(1,295,817	)
Euro	SSBT		Buy	352,190		402,761	8/18/17		588		—
Euro	SSBT		Sell	49,200,356		55,036,748	8/18/17		—		(1,310,431	)
Euro	UBSW		Buy	568,560		649,804	8/18/17		1,345		—
Total Forward Exchange Contracts								$	1,049,656	$	(6,558,484	)
Net unrealized appreciation (depreciation)										$	(5,508,828	)

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

See Abbreviations on page MS-33.

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

June 30, 2017 (unaudited)

	Franklin Mutual Shares VIP Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	3,336,904,338
Value - Unaffiliated issuers	$	4,315,395,962
Cash		463,226
Restricted Cash (Note 1e)		10,000
Foreign currency, at value (cost $1,784,392)		1,789,328
Receivables:
Investment securities sold		22,174,094
Capital shares sold		180,283
Dividends and interest		6,858,260
European Union tax reclaims		1,170,006
Due from brokers		4,002,180
Unrealized appreciation on OTC forward exchange contracts		1,049,656
Other assets		2,844
Total assets		4,353,095,839
Liabilities:
Payables:
Investment securities purchased		1,200,821
Capital shares redeemed		1,475,011
Management fees		2,464,268
Distribution fees		1,571,337
Variation margin		109,700
Due to brokers		10,000
Unrealized depreciation on OTC forward exchange contracts		6,558,484
Accrued expenses and other liabilities		364,732
Total liabilities		13,754,353
Net assets, at value	$	4,339,341,486
Net assets consist of:
Paid-in capital	$	2,959,304,020
Undistributed net investment income		126,117,767
Net unrealized appreciation (depreciation)		969,557,699
Accumulated net realized gain (loss)		284,362,000
Net assets, at value	$	4,339,341,486
Class 1:
Net assets, at value	$	644,174,599
Shares outstanding		29,921,358
Net asset value and maximum offering price per share	$	21.53
Class 2:
Net assets, at value	$	3,574,863,273
Shares outstanding		168,887,196
Net asset value and maximum offering price per share	$	21.17
Class 4:
Net assets, at value	$	120,303,614
Shares outstanding		5,643,694
Net asset value and maximum offering price per share	$	21.32

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, 2017 (unaudited)

	Franklin Mutual Shares VIP Fund
Investment income:
Dividends	$	47,545,108
Interest		10,303,786
Income from securities loaned (net of fees and rebates)		230,510
Total investment income		58,079,404
Expenses:
Management fees (Note 3a)		14,953,814
Distribution fees: (Note 3c)
Class 2		4,493,370
Class 4		209,827
Custodian fees (Note 4)		53,022
Reports to shareholders		234,143
Professional fees		170,286
Trustees’ fees and expenses		10,340
Other		66,092
Total expenses		20,190,894
Expense reductions (Note 4)		(2,566	)
Expenses waived/paid by affiliates (Note 3e)		(5,064	)
Net expenses		20,183,264
Net investment income		37,896,140
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		147,157,592
Foreign currency transactions		(6,944,681	)
Futures contracts		(3,891,018	)
Securities sold short		(391,267	)
Net realized gain (loss)		135,930,626
Net change in unrealized appreciation (depreciation) on:
Investments		73,010,433
Translation of other assets and liabilities denominated in foreign currencies		(8,774,420	)
Futures contracts		(6,056,813	)
Net change in unrealized appreciation (depreciation)		58,179,200
Net realized and unrealized gain (loss)		194,109,826
Net increase (decrease) in net assets resulting from operations	$	232,005,966

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, 2017 (unaudited)			Year Ended December 31, 2016
Increase (decrease) in net assets:
Operations:
Net investment income	$	37,896,140		$	96,857,347
Net realized gain (loss)		135,930,626			177,041,416
Net change in unrealized appreciation (depreciation)		58,179,200			340,244,965
Net increase (decrease) in net assets resulting from operations		232,005,966			614,143,728
Distributions to shareholders from:
Net investment income:
Class 1		—			(12,783,421	)
Class 2		—			(69,990,186	)
Class 4		—			(2,230,613	)
Net realized gains:
Class 1		—			(46,218,042	)
Class 2		—			(288,327,268	)
Class 4		—			(9,935,345	)
Total distributions to shareholders		—			(429,484,875	)
Capital share transactions: (Note 2)
Class 1		(151,228	)		(54,403,896	)
Class 2		(238,211,624	)		110,574,611
Class 4		(8,529,725	)		(14,522,761	)
Total capital share transactions		(246,892,577	)		41,647,954
Net increase (decrease) in net assets.		(14,886,611	)		226,306,807
Net assets:
Beginning of period		4,354,228,097			4,127,921,290
End of period	$	4,339,341,486		$	4,354,228,097
Undistributed net investment income included in net assets:
End of period	$	126,117,767		$	88,221,627

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 eighteen 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. 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 may differ 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 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. 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.

Certain derivative financial instruments 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

MS-22         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Mutual Shares VIP Fund (continued)

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 Fund’s business day. Occasionally, events occur between the time at which trading in a foreign security is completed and 4 p.m. Eastern time 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 4 p.m. Eastern time. 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 Fund’s NAV is not calculated, 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 Delayed Delivery Basis

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

d. Derivative Financial Instruments

The Fund invested in derivative financial instruments 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

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)

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 counter-parties. 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, 2017, the Fund had OTC derivatives in a net liability position of $5,747,286 and the aggregate value of collateral pledged for such contracts was $4,636,950.

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 the next business day, or within a few business days. Collateral pledged and/or received by the Fund, 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 at 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, 2017, 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 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.

MS-24         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Mutual Shares VIP Fund (continued)

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. At June 30, 2017, the Fund had no securities sold short.

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, 2017, 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. For U.S. income tax purposes, when EU reclaims are received by the Fund and the Fund previously passed foreign tax credit on to its shareholders, the Fund must either amend historic tax reporting to shareholders or enter into a closing agreement with the Internal Revenue Service (IRS) in order to pay the associated tax liability on behalf of the Fund’s shareholders.

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)

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, 2017, 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 is recorded on the ex-dividend date except for certain dividends from 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. Distributable earnings are determined according to income tax regulations (tax basis) and 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, 2017, 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, 2017						Year Ended December 31, 2016
	Shares			Amount			Shares			Amount
Class 1 Shares:
Shares sold		1,296,286		$	27,319,254			2,468,008		$	48,112,430
Shares issued in reinvestment of distributions		—			—			3,058,655			59,001,463
Shares redeemed		(1,297,867	)		(27,470,482	)		(8,638,060	)		(161,517,789	)
Net increase (decrease)		(1,581	)	$	(151,228	)		(3,111,397	)	$	(54,403,896	)
Class 2 Shares:
Shares sold		1,601,314		$	33,376,951			19,363,703		$	382,884,835
Shares issued in reinvestment of distributions		—			—			18,848,893			358,317,454
Shares redeemed		(13,052,336	)		(271,588,575	)		(32,549,983	)		(630,627,678	)
Net increase (decrease)		(11,451,022	)	$	(238,211,624	)		5,662,613		$	110,574,611
Class 4 Shares:
Shares sold		295,511		$	6,220,300			203,267		$	3,894,989
Shares issued in reinvestment of distributions		—			—			634,967			12,165,958
Shares redeemed		(705,187	)		(14,750,025	)		(1,564,342	)		(30,583,708	)
Net increase (decrease)		(409,676	)	$	(8,529,725	)		(726,108	)	$	(14,522,761	)

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 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

Semiannual Report         MS-27

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, 2017, the annualized effective investment management fee rate was 0.688% 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 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. During the period ended June 30, 2017, the Fund held investments in affiliated management investment companies as follows:

	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, 0.58%		—		86,287,000		(86,287,000	)		—	$	—	$	—	$	—		—%

f. Other Affiliated Transactions

At June 30, 2017, Franklin Templeton Variable Insurance Products Trust – Franklin Founding Funds Allocation VIP Fund owned 7.7% 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 Funds’ custodian expenses. During the period ended June 30, 2017, the custodian fees were reduced as noted in the Statements of Operations.

MS-28         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Mutual Shares VIP Fund (continued)

5. Income Taxes

At June 30, 2017, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	3,360,338,989
Unrealized appreciation	$	1,233,181,771
Unrealized depreciation		(278,124,798	)
Net unrealized appreciation (depreciation)	$	955,056,973

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) for the period ended June 30, 2017, aggregated $350,876,789 and $513,592,020, 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 could 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, 2017, the aggregate long value of distressed company securities for which interest recognition has been discontinued was $81,401,458, representing 1.9% 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.

At June 30, 2017, investments in restricted securities, excluding certain securities exempt from registration under the 1933 Act deemed to be liquid, were as follows:

Principal Amount/ Shares	Issuer	Acquisition Date		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		—		—
48,169	Gulfmark Offshore Inc.		1/06/17		86,699		10,067
1,730,515	International Automotive Components Group Brazil LLC		4/13/06 - 12/26/08		1,149,241		42,327

Semiannual Report         MS-29

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Mutual Shares VIP Fund (continued)

8. Restricted Securities (continued)

Principal Amount/ Shares	Issuer	Acquisition Date		Cost		Value
15,382,424	International Automotive Components Group North America LLC		1/12/06 - 3/18/13	$	12,591,586	$	9,468,128
361,612	Warrior Met Coal Inc		3/31/16		2,074,365		5,915,616
	Total Restricted Securities (Value is 0.4% of Net Assets)			$	15,903,645	$	15,436,138

9. Other Derivative Information

At June 30, 2017, 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	$	3,431,716	a
	Unrealized appreciation on OTC forward exchange contracts	$	1,049,656	Unrealized depreciation on OTC forward exchange contracts		6,558,484
Totals		$	1,049,656		$	9,990,200

^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, 2017, 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 Location	Net Realized Gain (Loss) for the Period			Statement of Operations Location	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	$	(7,525,031	)a	Translation of other assets and liabilities denominated in foreign currencies	$	(8,921,806	)a
	Futures contracts		(3,891,018	)	Futures contracts		(6,056,813	)
Totals		$	(11,416,049	)		$	(14,978,619	)

^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.

For the period ended June 30, 2017, the average month end notional amount of futures contracts represented $ 171,522,326. The average month end contract value of forward exchange contracts was $285,137,395.

See Notes 1(d) regarding derivative financial instruments.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Mutual Shares VIP Fund (continued)

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. During the period ended June 30, 2017, investments in “affiliated companies” were as follows:

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)
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 9, 2018. 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 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statement of Operations. During the period ended June 30, 2017, 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, 2017, 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	$	22,117,024	$	—	$	9,510,455		$	31,627,479
Energy Equipment & Services		54,710,870		—		10,067			54,720,937
Machinery		69,304,902		20,893,272		—			90,198,174
Metals & Mining		32,591,299		—		5,915,616			38,506,915
All Other Equity Investmentsb		3,562,631,810		—		—	c		3,562,631,810
Corporate Bonds, Notes and Senior Floating Rate Interests		—		143,352,961		—			143,352,961
Corporate Notes and Senior Floating Rate Interests in Reorganization		—		68,951,968		—	c		68,951,968
Companies in Liquidation		—		5,565,237		1,507,146	c		7,072,383
Municipal Bonds in Reorganization		—		12,449,490		—			12,449,490
Short Term Investments		201,485,220		104,398,625		—			305,883,845
Total Investments in Securities	$	3,942,841,125	$	355,611,553	$	16,943,284		$	4,315,395,962
Other Financial Instruments:
Forward Exchange Contracts	$	—	$	1,049,656	$	—		$	1,049,656
Liabilities:
Other Financial Instruments:
Futures Contracts	$	3,431,716	$	—	$	—		$	3,431,716
Forward Exchange Contracts		—		6,558,484		—			6,558,484
Total Other Financial Instruments	$	3,431,716	$	6,558,484	$	—		$	9,990,200

^aIncludes common stocks and other equity investments.

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

^cIncludes securities determined to have no value at June 30, 2017.

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. New Accounting Pronouncements

In March 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-08, Receivables — Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The amendments in the ASU shorten the amortization period for certain callable debt securities, held at a premium, to be amortized to the earliest call date. The ASU does not require an accounting change for securities held at a discount; which continues to be amortized to maturity. The ASU is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. Management is currently evaluating the impact, if any, of applying this provision.

14. Investment Company Reporting Modernization

In October 2016, the U.S. Securities and Exchange Commission adopted new rules and amended existing rules (together, final rules) intended to modernize the reporting and disclosure of information by registered investment companies. In part, the final rules amend Regulation S-X and require standardized, enhanced disclosures about derivatives in investment company financial statements, as

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Mutual Shares VIP Fund (continued)

well as other amendments. The compliance date for the amendments to Regulation S-X is August 1, 2017. Management has reviewed the requirements and believes the adoption of the amendments to Regulation S-X will not have a material impact on the Fund’s financial statements and related disclosures.

15. Subsequent Events

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

Abbreviations

Counterparty		Currency		Selected Portfolio
BOFA	Bank of America Corp.	EUR	Euro	ADR	American Depositary Receipt
BONY	The Bank of New York Mellon Corp.	GBP	British Pound	DIP	Debtor-In-Possession
HSBK	HSBC Bank PLC	USD	United States Dollar	FHLB	Federal Home Loan Bank
SSBT	State Street Bank			GO	General Obligation
UBSW	UBS AG			TRA	Tax Receivable Agreement

Semiannual Report         MS-33

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Franklin Rising Dividends VIP Fund

This semiannual report for Franklin Rising Dividends VIP Fund covers the period ended June 30, 2017.

Class 2 Performance Summary as of June 30, 2017

The Fund’s Class 2 Shares delivered a +8.19% total return* for the six-month period ended June 30, 2017.

*The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 4/30/18. Fund investment results reflect the fee waiver; without this waiver, the results would have been lower.

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

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 companies that have paid 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 +9.34% 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

U.S. economic growth decelerated in 2017’s first quarter, largely due to slower growth in consumer spending and declines in private inventory investment and government spending. However, growth accelerated in the second quarter due to increases in consumer spending, business investment and federal government spending. The manufacturing sector generally expanded, and the services sector also continued to grow. The unemployment rate decreased from 4.7% in December 2016 to 4.4% at period-end.² Monthly retail sales were volatile, but grew for most of the period. Annual inflation, as measured by the Consumer Price Index, decreased from 2.1% to 1.6% during the period.

The U.S. Federal Reserve (Fed), at its March meeting, increased the federal funds target rate from 0.50%–0.75% to 0.75%–1.00%. The Fed again increased its target range by a quarter point to 1.00%–1.25% at its June meeting. The Fed made both of these increases amid signs of a growing U.S. economy, a strengthening labor market and an improvement in business spending.

U.S. equity markets rose during the period, benefiting from mostly upbeat economic data, better U.S. corporate earnings and signs of improvement in the Chinese and European economies. Investor optimism arising from pro-growth and pro-business policy plans in the U.S. and the victory of Emmanuel Macron as France’s President also helped U.S. equities. However, concerns about the terms of the U.K.’s exit from the European Union (also known as “Brexit”), uncertainty about President Trump’s ability to implement reforms, and geopolitical tensions in the Middle East and the Korean peninsula curbed market sentiment. The broad U.S. stock market, as measured by the S&P 500, generated a +9.34% total return for the period.¹

Investment Strategy

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

Manager’s Discussion

During the six-month period ended June 30, 2017, some holdings that contributed to absolute performance included Roper Technologies, Albemarle and Medtronic.

Roper Technologies, a diversified industrial company, enjoyed strong stock price performance after reporting robust financial results during the period. Headwinds facing the energy and industrial technology segments have moderated 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.

2. Source: Bureau of Labor Statistics.

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).

FRD-2         Semiannual Report

FRANKLIN RISING DIVIDENDS VIP FUND

segments generated better-than-expected results, while the remaining segments have continued to perform well. The company expects to build on its strong performance in the RF (radio frequency) Technology and Software segment, which was driven by large project wins. The company has grown its dividend for 24 consecutive years.

Shares of Albemarle, a specialty chemicals producer, performed well over the period, as the company continued to report strong revenue and earnings growth driven by robust demand in the company’s lithium business. Albemarle also benefited from stronger-than-expected performance in its bromine business, while the company’s Refining Solutions business experienced more mixed performance during the period. Management continues to focus on expanding the company’s market leading position in lithium. The company has increased its dividend for 23 consecutive years.

Shares of Medtronic, a developer of therapeutic and diagnostic medical products, rose after reporting good earnings during the period. We believe top-line growth could remain solid, based on a regular stream of innovation. Overall financial performance could be further bolstered by margin expansion driven by factory consolidation and the creation of shared service centers. Medtronic has benefited from improved access to its overseas cash via the company’s recent relocation of its legal domicile to a lower-tax nation, particularly from the perspective of meeting its dividend obligations. The company has grown its dividend for 40 consecutive years.

Conversely, some holdings that detracted from absolute performance included Schlumberger, Matthews International and Occidental Petroleum.

Despite reporting earnings in line with expectations, shares of Schlumberger, a global oilfield services company, declined over the period as the oil markets remained in a position of significant oversupply, reducing prospects for a near-term rebound in oil prices. Oil services providers such as Schlumberger tend to benefit later in an oil price rebound as their diverse activities tend to lead to a slower return to growth. Despite the current headwinds, we believe that Schlumberger could be uniquely well-positioned to benefit from the recovery in oil prices if it takes shape, given the company’s scale and scope of activities.

Despite announcing financial results largely in line with expectations, shares in Matthews International, a small industrial conglomerate with activities ranging from branding products and services, marketing display equipment and a range of death-care products, were weak during the period,

largely driven by slower-than-expected activity in the SGK Brand Solutions business. We believe that the company remains on track to meet its full-year financial earnings guidance and continues to enjoy a number of potential

Semiannual Report         FRD-3

FRANKLIN RISING DIVIDENDS VIP FUND

performance catalysts, including acquisition integration synergies, the benefits of a recent investment in an enterprise resource planning system and product innovation. Matthews has raised its dividend for 22 consecutive years.

Shares in Occidental Petroleum, an oil and gas producer, were weak during the period as the energy sector continued to struggle in a lower oil price environment. Despite stronger-than-expected earnings over the period, Occidental’s share performance could not escape an industry-wide downdraft. We believe the market does not fully appreciate the strength of Occidental’s position in the Permian Basin, which could resume production growth despite low oil prices. Although Occidental has been slow to increase its production in the basin, management expects strong growth in the region going forward that could drive long-term overall production growth. Occidental has increased its dividend for 14 consecutive years.

During the period, the Fund initiated a new position in Comcast, a telecommunications conglomerate (9 consecutive years of dividend increases). We added to existing positions including Analog Devices, an integrated circuits manufacturer (14 consecutive years of dividend increases), Accenture, a management consultant and professional services company (12 consecutive years of dividend increases) and Texas Instruments, a semiconductor designer and manufacturer (13 consecutive years of dividend increases).

We exited positions in Qualcomm, along with Adient and Yum China Holdings, both of which we received as the result of spinoffs. We also reduced several holdings including Dover, Erie Indemnity and Hillenbrand. Additionally, Linear Technology was acquired by Analog Devices, during the period.

Our 10 largest positions on June 30, 2017, represented 34.1% 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 28 years in a row and by 260% over the past 10 years. Their most recent year-over-year dividend increases averaged 8.9% with a dividend yield of 1.7% on June 30, 2017, and a dividend payout ratio of 36.8%, based on estimates of calendar year 2017 operating earnings. Their average price/earnings ratio was 23.2 times calendar year 2017 estimates versus 18.6 for that of the unmanaged S&P 500.

Top 10 Holdings
6/30/17
Company Sector/Industry	% of Total Net Assets
Roper Technologies Inc. Industrial Conglomerates		4.3%
Microsoft Corp. Software & Services		4.3%
Albemarle Corp. Materials		4.2%
Stryker Corp. Health Care Equipment & Services		3.3%
Becton, Dickinson and Co. Health Care Equipment & Services		3.2%
United Technologies Corp. Aerospace & Defense		3.1%
Medtronic PLC Health Care Equipment & Services		3.0%
Praxair Inc. Materials		3.0%
West Pharmaceutical Services Inc. Health Care Equipment & Services		2.9%
Air Products and Chemicals Inc. Materials		2.8%

Thank you for your participation in Franklin Rising Dividends VIP Fund. We look forward to continuing to serve your investment needs.

The foregoing information reflects our analysis, opinions and portfolio holdings as of June 30, 2017, 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 RISING DIVIDENDS VIP FUND

Class 2 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: (1) transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes; and (2) 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 table below shows Fund-level ongoing expenses and can help you understand these costs 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 table below provides information about the actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of ongoing Fund expenses but does not include the effect of ongoing Contract expenses, is used to calculate the “Ending Account Value.” You can estimate the Fund-level expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number under the headings “Actual” and “Fund-Level Expenses Paid During Period” (if Fund-Level Expenses Paid During Period were $7.50, then 8.6 × $7.50 = $64.50). In this illustration, the estimated expenses paid this period at the Fund level are $64.50.

Hypothetical Example for Comparison with Other Mutual Funds

Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other mutual funds offered through the Contract. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds offered through the Contract.

Please note that expenses shown in the table are meant to highlight ongoing costs at the Fund level only and do not reflect any ongoing expenses at the Contract level, or transaction expenses at either the Fund or Contract levels. In addition, 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.

		Actual (actual return after expenses)				Hypothetical (5% annual return before expenses)
Share Class	Beginning Account Value 1/1/17		Ending Account Value 6/30/17	Fund-Level Expenses Paid During Period 1/1/17–6/30/17	1,2		Ending Account Value 6/30/17	Fund-Level Expenses Paid During Period 1/1/17–6/30/17	1,2	Net Annualized Expense Ratio	2
Class 2	$1,000		$1,081.90	$4.49			$1,020.48	$4.36		0.87%

1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above — in the far right column — multiplied by the simple average account value over the period indicated, and then multiplied by 181/365 to reflect the one-half year period.

2. Reflects expenses after fee waivers and expense reimbursements. Does not include any ongoing expenses of the Contract for which the Fund is an investment option or acquired fund fees and expenses.

Semiannual Report         FRD-5

FRD1 P1 P2 P4 06/17

SUPPLEMENT DATED JUNE 8, 2017

TO THE PROSPECTUSES

DATED MAY 1, 2017

OF

FRANKLIN RISING DIVIDENDS VIP FUND

(a series of Franklin Templeton Variable Insurance Products Trust)

Effective June 30, 2017, the Prospectus is amended as follows:

I.  The section in the Fund Summary under the heading “Portfolio Managers” on page FRD-S4 is revised as follows:

Portfolio Managers

Donald G. Taylor, CPA President and Chief Investment Officer of Advisory Services and portfolio manager of the Fund since 1996.

Nicholas P. B. Getaz, CFA Research Analyst of Advisory Services and portfolio manager of the Fund since 2014.

II.  In the Fund Details, under the heading “Management”, the portfolio manager information on page FRD-D6 is revised as follows:

Franklin Advisory Services, LLC (Advisory Services), 101 John F. Kennedy Parkway, Short Hills, NJ 07078, is the Fund’s investment manager.

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

Donald G. Taylor, CPA President and Chief Investment Officer of Advisory Services

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

Nicholas P. B. Getaz, CFA Research Analyst of Advisory Services

Mr. Getaz has been portfolio manager of the Fund since 2014, providing support to the lead portfolio manager(s) as needed. He joined Franklin Templeton Investments in 2011.

Please keep this supplement with your prospectus for future reference.

FRD-6        

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Highlights

Franklin Rising Dividends VIP Fund

	Six Months Ended June 30, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 1
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$25.51			$25.26			$29.63			$28.14			$22.03			$20.01
Income from investment operationsa:
Net investment incomeb		0.20			0.42			0.45			0.45			0.40			0.41
Net realized and unrealized gains (losses)		1.93			3.45			(1.33	)		2.03			6.16			2.00
Total from investment operations		2.13			3.87			(0.88	)		2.48			6.56			2.41
Less distributions from:
Net investment income		(0.48	)		(0.44	)		(0.48	)		(0.44	)		(0.45	)		(0.39	)
Net realized gains		(0.98	)		(3.18	)		(3.01	)		(0.55	)		—			—
Total distributions		(1.46	)		(3.62	)		(3.49	)		(0.99	)		(0.45	)		(0.39	)
Net asset value, end of period		$26.18			$25.51			$25.26			$29.63			$28.14			$22.03
Total returnc		8.31%			16.33%			(3.42)%			9.01%			30.05%			12.18%
Ratios to average net assetsd
Expenses before waiver and payments by affiliates		0.62%			0.63%			0.63%			0.62%			0.61%			0.63%
Expenses net of waiver and payments by affiliates		0.62%	e		0.62%	f		0.63%	e		0.62%	e		0.61%			0.63%
Net investment income		1.52%			1.67%			1.65%			1.58%			1.59%			1.96%
Supplemental data
Net assets, end of period (000’s)		$201,553			$181,072			$143,376			$160,480			$168,380			$141,455
Portfolio turnover rate		2.82%			6.66%			4.74%			8.61%			0.07%			11.19%

^aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’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         FRD-7

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL HIGHLIGHTS

Franklin Rising Dividends VIP Fund (continued)

	Six Months Ended June 30, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 2
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$24.89			$24.72			$29.06			$27.62			$21.64			$19.65
Income from investment operationsa:
Net investment incomeb		0.16			0.35			0.37			0.37			0.33			0.35
Net realized and unrealized gains (losses)		1.88			3.37			(1.29	)		1.99			6.04			1.98
Total from investment operations		2.04			3.72			(0.92	)		2.36			6.37			2.33
Less distributions from:
Net investment income		(0.41	)		(0.37	)		(0.41	)		(0.37	)		(0.39	)		(0.34	)
Net realized gains		(0.98	)		(3.18	)		(3.01	)		(0.55	)		—			—
Total distributions		(1.39	)		(3.55	)		(3.42	)		(0.92	)		(0.39	)		(0.34	)
Net asset value, end of period		$25.54			$24.89			$24.72			$29.06			$27.62			$21.64
Total returnc		8.19%			16.04%			(3.65)%			8.72%			29.69%			11.96%
Ratios to average net assetsd
Expenses before waiver and payments by affiliates		0.87%			0.88%			0.88%			0.87%			0.86%			0.88%
Expenses net of waiver and payments by affiliates		0.87%	e		0.87%	f		0.88%	e		0.87%	e		0.86%			0.88%
Net investment income		1.27%			1.42%			1.40%			1.33%			1.34%			1.71%
Supplemental data
Net assets, end of period (000’s)		$1,560,939			$1,530,374			$1,310,783			$1,667,816			$1,752,012			$1,550,084
Portfolio turnover rate		2.82%			6.66%			4.74%			8.61%			0.07%			11.19%

^aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’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%.

FRD-8         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, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 4
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$24.98			$24.81			$29.19			$27.76			$21.78			$19.83
Income from investment operationsa:
Net investment incomeb		0.15			0.32			0.35			0.35			0.32			0.35
Net realized and unrealized gains (losses)		1.89			3.39			(1.31	)		2.00			6.07			1.96
Total from investment operations		2.04			3.71			(0.96	)		2.35			6.39			2.31
Less distributions from:
Net investment income		(0.41	)		(0.36	)		(0.41	)		(0.37	)		(0.41	)		(0.36	)
Net realized gains		(0.98	)		(3.18	)		(3.01	)		(0.55	)		—			—
Total distributions		(1.39	)		(3.54	)		(3.42	)		(0.92	)		(0.41	)		(0.36	)
Net asset value, end of period		$25.63			$24.98			$24.81			$29.19			$27.76			$21.78
Total returnc		8.13%			15.93%			(3.75)%			8.62%			29.57%			11.78%
Ratios to average net assetsd
Expenses before waiver and payments by affiliates		0.97%			0.98%			0.98%			0.97%			0.96%			0.98%
Expenses net of waiver and payments by affiliates		0.97%	e		0.97%	f		0.98%	e		0.97%	e		0.96%			0.98%
Net investment income		1.17%			1.32%			1.30%			1.23%			1.24%			1.61%
Supplemental data
Net assets, end of period (000’s)		$31,735			$28,579			$20,453			$15,503			$12,028			$6,432
Portfolio turnover rate		2.82%			6.66%			4.74%			8.61%			0.07%			11.19%

^aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’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         FRD-9

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Statement of Investments, June 30, 2017 (unaudited)

Franklin Rising Dividends VIP Fund
		Shares		Value
	Common Stocks 98.9%
	Aerospace & Defense 4.8%
	General Dynamics Corp.		157,911	$	31,282,169
	United Technologies Corp.		453,011		55,317,173
					86,599,342
	Building Products 2.1%
	Johnson Controls International PLC		848,653		36,797,594
	Commercial & Professional Services 4.4%
	ABM Industries Inc.		779,288		32,356,038
	Brady Corp., A		174,279		5,908,058
	Cintas Corp.		194,675		24,536,837
	Matthews International Corp., A		251,442		15,400,822
					78,201,755
	Consumer Durables & Apparel 2.4%
	Leggett & Platt Inc.		332,800		17,481,984
	NIKE Inc., B		445,100		26,260,900
					43,742,884
	Consumer Services 2.0%
	McDonald’s Corp.		201,545		30,868,632
	Yum! Brands Inc.		72,900		5,377,104
					36,245,736
	Diversified Financials 0.6%
	State Street Corp.		110,500		9,915,165
	Energy 5.9%
	Chevron Corp.		252,900		26,385,057
	EOG Resources Inc.		33,600		3,041,472
	Exxon Mobil Corp.		358,500		28,941,705
	Occidental Petroleum Corp.		370,790		22,199,197
	Schlumberger Ltd.		398,000		26,204,320
					106,771,751
	Food & Staples Retailing 3.6%
	CVS Health Corp.		210,200		16,912,692
	Wal-Mart Stores Inc.		294,100		22,257,488
	Walgreens Boots Alliance Inc.		315,300		24,691,143
					63,861,323
	Food, Beverage & Tobacco 5.6%
	Archer-Daniels-Midland Co.		548,000		22,676,240
	Bunge Ltd.		307,700		22,954,420
	McCormick & Co. Inc.		208,900		20,369,839
	PepsiCo Inc.		301,000		34,762,490
					100,762,989
	Health Care Equipment & Services 14.0%
	Abbott Laboratories		641,800		31,197,898
	Becton, Dickinson and Co.		291,200		56,816,032
	DENTSPLY SIRONA Inc.		4,000		259,360
	Medtronic PLC		602,000		53,427,500
	Stryker Corp.		420,200		58,315,356
	West Pharmaceutical Services Inc.		547,218		51,723,046
					251,739,192

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)
Household & Personal Products 2.6%
Colgate-Palmolive Co.		202,300	$	14,996,499
The Procter & Gamble Co.		355,200		30,955,680
				45,952,179
Industrial Conglomerates 6.7%
Carlisle Cos. Inc.		101,061		9,641,219
Honeywell International Inc.		257,900		34,375,491
Roper Technologies Inc.		333,043		77,109,446
				121,126,156
Insurance 4.8%
Aflac Inc.		276,200		21,455,216
Arthur J. Gallagher & Co.		611,900		35,031,275
Erie Indemnity Co., A		179,185		22,410,668
Old Republic International Corp.		300,808		5,874,780
RLI Corp.		33,800		1,846,156
				86,618,095
Machinery 5.5%
Donaldson Co. Inc.		350,068		15,942,097
Dover Corp.		487,776		39,129,391
Hillenbrand Inc.		113,200		4,086,520
Pentair PLC (United Kingdom)		586,000		38,992,440
				98,150,448
Materials 12.4%
Air Products and Chemicals Inc.		353,900		50,628,934
Albemarle Corp.		706,700		74,585,118
Bemis Co. Inc.		58,899		2,724,079
Ecolab Inc.		115,600		15,345,900
Nucor Corp.		447,055		25,871,073
Praxair Inc.		400,560		53,094,228
				222,249,332
Media 1.5%
Comcast Corp., A		276,300		10,753,596
John Wiley & Sons Inc., A		310,700		16,389,425
				27,143,021
Pharmaceuticals, Biotechnology & Life Sciences 5.8%
AbbVie Inc.		206,400		14,966,064
Johnson & Johnson		372,800		49,317,712
Perrigo Co. PLC		208,500		15,745,920
Pfizer Inc.		669,700		22,495,223
Roche Holding AG, ADR (Switzerland)		25,000		795,000
				103,319,919
Retailing 2.6%
The Gap Inc.		556,300		12,233,037
Ross Stores Inc.		185,000		10,680,050
Target Corp.		164,600		8,606,934
Tiffany & Co.		161,500		15,160,005
				46,680,026

Semiannual Report         FRD-11

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Rising Dividends VIP Fund (continued)

		Shares		Value
	Common Stocks (continued)
	Semiconductors & Semiconductor Equipment 3.9%
	Analog Devices Inc.		410,437	$	31,931,999
	Texas Instruments Inc.		429,300		33,026,049
	Versum Materials Inc.		182,000		5,915,000
					70,873,048
	Software & Services 7.0%
	Accenture PLC, A		332,000		41,061,760
	Microsoft Corp.		1,107,900		76,367,547
	Visa Inc., A		89,500		8,393,310
					125,822,617
	Trading Companies & Distributors 0.3%
	W.W. Grainger Inc.		28,100		5,072,893
	Transportation 0.4%
	United Parcel Service Inc., B		64,800		7,166,232
	Total Common Stocks (Cost $985,663,699)				1,774,811,697
	Short Term Investments (Cost $19,398,755) 1.1%
	Money Market Funds 1.1%
a,b	Institutional Fiduciary Trust Money Market Portfolio, 0.58%		19,398,755		19,398,755
	Total Investments (Cost $1,005,062,454) 100.0%				1,794,210,452
	Other Assets, less Liabilities 0.0%†				16,827
	Net Assets 100.0%			$	1,794,227,279

See Abbreviations on page FRD-21.

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

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

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

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 Assets and Liabilities

June 30, 2017 (unaudited)

	Franklin Rising Dividends VIP Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	985,663,699
Cost - Non-controlled affiliates (Note 3e)		19,398,755
Total cost of investments.	$	1,005,062,454
Value - Unaffiliated issuers	$	1,774,811,697
Value - Non-controlled affiliates (Note 3e)		19,398,755
Total value of investments		1,794,210,452
Receivables:
Investment securities sold		12,648
Capital shares sold		175,214
Dividends		2,239,339
Other assets		1,134
Total assets		1,796,638,787
Liabilities:
Payables:
Capital shares redeemed		708,030
Management fees		892,018
Distribution fees		674,865
Accrued expenses and other liabilities		136,595
Total liabilities		2,411,508
Net assets, at value	$	1,794,227,279
Net assets consist of:
Paid-in capital	$	943,005,193
Undistributed net investment income		7,413,743
Net unrealized appreciation (depreciation)		789,147,998
Accumulated net realized gain (loss)		54,660,345
Net assets, at value	$	1,794,227,279
Class 1:
Net assets, at value	$	201,553,486
Shares outstanding		7,699,457
Net asset value and maximum offering price per share	$	26.18
Class 2:
Net assets, at value	$	1,560,938,529
Shares outstanding		61,124,550
Net asset value and maximum offering price per share	$	25.54
Class 4:
Net assets, at value	$	31,735,264
Shares outstanding		1,238,298
Net asset value and maximum offering price per share	$	25.63

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

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Statement of Operations

for the six months ended June 30, 2017 (unaudited)

	Franklin Rising Dividends VIP Fund
Investment income:
Dividends:
Unaffiliated issuers	$	18,811,309
Non-controlled affiliates (Note 3e)		31,560
Total investment income		18,842,869
Expenses:
Management fees (Note 3a)		5,344,227
Distribution fees: (Note 3c)
Class 2		1,932,257
Class 4		52,554
Custodian fees (Note 4)		7,692
Reports to shareholders		81,667
Professional fees		30,824
Trustees’ fees and expenses		3,771
Other		16,966
Total expenses		7,469,958
Expenses waived/paid by affiliates (Note 3e)		(35,044	)
Net expenses		7,434,914
Net investment income		11,407,955
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		54,716,933
Foreign currency transactions		196
Net realized gain (loss)		54,717,129
Net change in unrealized appreciation (depreciation) on investments		73,327,848
Net realized and unrealized gain (loss)		128,044,977
Net increase (decrease) in net assets resulting from operations	$	139,452,932

FRD-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 Rising Dividends VIP Fund
	Six Months Ended June 30, 2017 (unaudited)			Year Ended December 31, 2016
Increase (decrease) in net assets:
Operations:
Net investment income	$	11,407,955		$	23,756,244
Net realized gain (loss)		54,717,129			65,501,800
Net change in unrealized appreciation (depreciation)		73,327,848			155,534,476
Net increase (decrease) in net assets resulting from operations		139,452,932			244,792,520
Distributions to shareholders from:
Net investment income:
Class 1		(3,388,715	)		(2,718,521	)
Class 2		(24,052,908	)		(20,665,957	)
Class 4		(476,793	)		(304,600	)
Net realized gains:
Class 1		(7,011,086	)		(19,761,965	)
Class 2		(57,291,559	)		(177,746,237	)
Class 4		(1,158,380	)		(2,696,441	)
Total distributions to shareholders		(93,379,441	)		(223,893,721	)
Capital share transactions: (Note 2)
Class 1		15,829,733			33,560,724
Class 2		(10,163,140	)		203,254,702
Class 4		2,461,470			7,699,850
Total capital share transactions		8,128,063			244,515,276
Net increase (decrease) in net assets		54,201,554			265,414,075
Net assets:
Beginning of period		1,740,025,725			1,474,611,650
End of period	$	1,794,227,279		$	1,740,025,725
Undistributed net investment income included in net assets:
End of period	$	7,413,743		$	23,924,204

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

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 eighteen 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. 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 may differ 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. 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 Fund’s business day. Occasionally, events occur between the time at which trading in a foreign security is completed and 4 p.m. Eastern time 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 4 p.m. Eastern time. 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

FRD-16         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Rising Dividends VIP Fund (continued)

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

When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the Fund’s NAV is not calculated, 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, 2017, 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 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. Distributable earnings are determined according to income tax regulations (tax basis) and may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital

Semiannual Report         FRD-17

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Rising Dividends VIP Fund (continued)

1. Organization and Significant Accounting Policies (continued)

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

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, 2017, 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, 2017						Year Ended December 31, 2016
	Shares			Amount			Shares			Amount
Class 1 Shares:
Shares sold		654,229		$	17,307,518			1,408,862		$	34,658,685
Shares issued in reinvestment of distributions		394,680			10,399,801			944,162			22,480,486
Shares redeemed		(447,140	)		(11,877,586	)		(931,787	)		(23,578,447	)
Net increase (decrease)		601,769		$	15,829,733			1,421,237		$	33,560,724
Class 2 Shares:
Shares sold		1,093,070		$	28,288,014			9,423,278		$	238,665,574
Shares issued in reinvestment of distributions		3,163,923			81,344,467			8,526,523			198,412,194
Shares redeemed		(4,610,070	)		(119,795,621	)		(9,496,533	)		(233,823,066	)
Net increase (decrease)		(353,077	)	$	(10,163,140	)		8,453,268		$	203,254,702
Class 4 Shares:
Shares sold		137,271		$	3,575,705			404,421		$	9,995,211
Shares issued in reinvestment of distributions		63,379			1,635,173			128,469			3,001,041
Shares redeemed		(106,334	)		(2,749,408	)		(213,254	)		(5,296,402	)
Net increase (decrease)		94,316		$	2,461,470			319,636		$	7,699,850

FRD-18         Semiannual Report

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

Effective May 1, 2017, 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%	Over $1 billion, up to and including $5 billion
0.490%	In excess of $5 billion

Prior to May 1, 2017, the Fund paid fees 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, 2017, the annualized effective investment management fee rate was 0.605% 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.

Semiannual Report         FRD-19

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Rising Dividends VIP Fund (continued)

3. Transactions with Affiliates (continued)

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. During the period ended June 30, 2017, the Fund held investments in affiliated management investment companies as follows:

	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, 0.58%		14,889,095		80,478,157		(75,968,497	)		19,398,755	$	19,398,755	$	31,560	$	—		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, 2017, there were no credits earned.

5. Income Taxes

At June 30, 2017, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	1,009,435,273
Unrealized appreciation	$	832,348,609
Unrealized depreciation		(47,573,430	)
Net unrealized appreciation (depreciation)	$	784,775,179

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, 2017, aggregated $49,458,592 and $124,132,969, 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 9, 2018. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Rising Dividends VIP Fund (continued)

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statement of Operations. During the period ended June 30, 2017, 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, 2017, 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. Investment Company Reporting Modernization

In October 2016, the U.S. Securities and Exchange Commission adopted new rules and amended existing rules (together, final rules) intended to modernize the reporting and disclosure of information by registered investment companies. In part, the final rules amend Regulation S-X and require standardized, enhanced disclosures about derivatives in investment company financial statements, as well as other amendments. The compliance date for the amendments to Regulation S-X is August 1, 2017. Management has reviewed the requirements and believes the adoption of the amendments to Regulation S-X will not have a material impact on the Fund’s financial statements and related disclosures.

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

Semiannual Report         FRD-21

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Franklin Small Cap Value VIP Fund

This semiannual report for Franklin Small Cap Value VIP Fund covers the period ended June 30, 2017.

Class 2 Performance Summary as of June 30, 2017

The Fund’s Class 2 Shares delivered a +0.20% total return* for the six-month period ended June 30, 2017.

*The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 4/30/18. Fund investment results reflect the fee waiver; without this waiver, the results would have been lower.

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

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 not exceeding either the highest market capitalization in the Russell 2000^TM Index or the 12-month average of the highest market capitalization in the Russell 2000^® Index, whichever is greater, 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. In comparison, the Fund’s new benchmark, the Russell 2000^TM Value Index posted a +0.54% total return for the same period, while its old benchmark, the Russell 2500^TM Value Index, had a +1.95% total return.¹ We believe the composition of the new index aligns more closely with the Fund’s portfolio. 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

U.S. economic growth decelerated in 2017’s first quarter, largely due to slower growth in consumer spending and declines in private inventory investment and government spending. However, growth accelerated in the second quarter due to increases in consumer spending, business investment and federal government spending. The manufacturing sector generally expanded, and the services sector also continued to grow. The unemployment rate decreased from 4.7% in December 2016 to 4.4% at period-end.² Monthly retail sales were volatile, but grew for most of the period. Annual inflation, as measured by the Consumer Price Index, decreased from 2.1% to 1.6% during the period.

The U.S. Federal Reserve (Fed), at its March meeting, increased the federal funds target rate from 0.50%–0.75% to 0.75%–1.00%. The Fed again increased its target range by a quarter point to 1.00%–1.25% at its June meeting. The Fed made both of these increases amid signs of a growing U.S. economy, a strengthening labor market and an improvement in business spending.

U.S. equity markets rose during the period, benefiting from mostly upbeat economic data, better U.S. corporate earnings and signs of improvement in the Chinese and European economies. Investor optimism arising from pro-growth and pro-business policy plans in the U.S. and the victory of Emmanuel Macron as France’s President also helped U.S. equities. However, concerns about the terms of the U.K.’s exit from the European Union (also known as “Brexit”), uncertainty about President Trump’s ability to implement reforms, and geopolitical tensions in the Middle East and the Korean peninsula curbed market sentiment. The broad U.S. stock market, as measured by the Standard & Poor’s^® 500 Index, generated a +9.34% total return for the period.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

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.

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

FSV-2         Semiannual Report

FRANKLIN SMALL CAP VALUE VIP FUND

that are low relative to current or historical or future earnings, book 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 period ended June 30, 2017, some contributors to absolute Fund performance included Hill-Rom Holdings, BRP and Maple Leaf Foods.

Hill-Rom Holdings is a manufacturer of medical equipment including hospital beds, surgical tables and diagnostic tools. The company’s shares rose due to stability in hospital capital spending, which led to modest growth in its U.S. patient support business. Hill-Rom’s international business recovered with strong organic growth during its quarter ended March 2017 and management expected the momentum to continue through the remainder of the year. The company completed the acquisition of Mortara Instruments,⁴ a provider of diagnostic cardiology and patient monitoring technology, services and devices. Mortara will complement Hill-Rom’s Welch Allyn⁴ business, and analysts believe it could be additive to earnings. Additionally, Hill-Rom launched a new bed system for higher acuity patients in intensive and acute care settings and also introduced a new air-fluidized therapy bed for wound care during the period. The company continues to focus on reducing the debt incurred from the Welch and Mortara acquisitions, improving overall margins through operational efficiencies, bringing out new products in 2017 and increasing the penetration of its existing suite of products.

BRP is a leading manufacturer of powersport vehicles and equipment, primarily for the off-road, snowmobile and personal watercraft markets. BRP reported a strong quarter, beating earnings per share estimates and raising its full-year outlook. New product introductions of side-by-side off-road vehicles and a significantly weakened competitor drove sales and market share gains. Additionally, management announced a large share repurchase program, which could shrink its share count. Finally, a quarterly dividend was initiated for the first time in the company’s history, which signaled management’s

4. Not a Fund holding.

Semiannual Report         FSV-3

FRANKLIN SMALL CAP VALUE VIP FUND

confidence in its business model to deliver strong operating performance and free cash flow generation.

Maple Leaf Foods, a Canadian-based producer of fresh and packaged meats, experienced stronger-than-expected adjusted earnings due to the elimination of duplicate costs stemming from its recently completed multi-year manufacturing and network optimization plan. Favorable pork processing costs also boosted margins. We believe the company is now completely focused on driving growth through new product innovation and acquisitions such as the purchase of Lightlife Foods,⁴ a plant-based protein foods company. In addition, Maple Leaf possesses a cash rich balance sheet, which it used to opportunistically repurchase shares, while growing its dividend.

Detractors from absolute Fund performance included Oil States International, Unit Corp. and First Horizon National.

Oil States International is a provider of onshore and offshore well-completion services and deep-water connection products and services. A decline in the company’s stock price was due to a weaker-than-expected order outlook for its offshore products business as low oil prices continued to dampen activity.

Unit Corp., a domestic land-based drilling and exploration and production company, saw its share price decline substantially in 2017 after having more than doubled in 2016, closely mirroring the direction of oil prices during these periods. The upward movement in crude oil prices in 2016 was primarily due to investors’ initial hope that an agreement by the Organization of the Petroleum Exporting Countries to limit output would reduce inventories. The drop in 2017 was caused by the ultimate failure of domestic inventories to decline in a meaningful way as production by U.S. shale drillers increased at a faster rate than expected.

First Horizon National is a regional bank concentrated in Tennessee. In May, First Horizon announced the acquisition of Capital Bank Financial,⁴ which we believe appears strategically sound and should increase earnings per share. However, the transaction is relatively large relative to First Horizon’s balance sheet and introduces an elevated level of integration risk, which pressured the stock’s valuation. Additionally, First Horizon’s fixed income capital markets⁴ segment has been negatively impacted by a low level of market volatility, which resulted in lower-than-expected fixed income trading activity and revenues during the period.

During the reporting period, we added some new positions with the largest purchases including Glacier Bancorp, a multi-bank holding company headquartered in Montana; Titan

Top 10 Holdings
6/30/17
Company Sector/Industry	% of Total Net Assets
AAR Corp. Aerospace & Defense		2.9%
Maple Leaf Foods Inc. Food, Beverage & Tobacco		2.7%
LTC Properties Inc. Real Estate		2.6%
Sensient Technologies Corp. Materials		2.5%
Simpson Manufacturing Co. Inc. Building Products		2.2%
Columbia Banking System Inc. Banks		2.1%
IDACORP Inc. Utilities		2.1%
Chemical Financial Corp. Banks		2.1%
Hill-Rom Holdings Inc. Health Care Equipment & Services		2.1%
First Horizon National Corp. Banks		2.0%

International, a manufacturer of mounted tire and wheel systems for off highway equipment; Highwoods Properties, a real estate investment trust company; The Manitowoc Co., a manufacturer of cranes and lift solutions; and Access National, a bank holding company. The Fund also added to several holdings including Zebra Technologies, a manufacturer of marking, tracking and computer printing technologies; Simpson Manufacturing, an engineering firm and building materials producer; and the aforementioned First Horizon National. Conversely, we exited some positions including Omega Protein, Cato, Brunswick, Genesco and West Marine. We also reduced our positions in Carlisle Cos., the aforementioned Unit Corp. and MKS Instruments, among others. Additionally, during the period, three cash takeovers were completed: Endurance Specialty Holdings, EverBank Financial and Mentor Graphics.

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

FSV-4         Semiannual Report

FRANKLIN SMALL CAP VALUE VIP FUND

The foregoing information reflects our analysis, opinions and portfolio holdings as of June 30, 2017, 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         FSV-5

FRANKLIN SMALL CAP VALUE VIP FUND

Class 2 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: (1) transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes; and (2) 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 table below shows Fund-level ongoing expenses and can help you understand these costs 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 table below provides information about the actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of ongoing Fund expenses but does not include the effect of ongoing Contract expenses, is used to calculate the “Ending Account Value.” You can estimate the Fund-level expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number under the headings “Actual” and “Fund-Level Expenses Paid During Period” (if Fund-Level Expenses Paid During Period were $7.50, then 8.6 × $7.50 = $64.50). In this illustration, the estimated expenses paid this period at the Fund level are $64.50.

Hypothetical Example for Comparison with Other Mutual Funds

Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other mutual funds offered through the Contract. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds offered through the Contract.

Please note that expenses shown in the table are meant to highlight ongoing costs at the Fund level only and do not reflect any ongoing expenses at the Contract level, or transaction expenses at either the Fund or Contract levels. In addition, 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.

		Actual (actual return after expenses)				Hypothetical (5% annual return before expenses)
Share Class	Beginning Account Value 1/1/17		Ending Account Value 6/30/17	Fund-Level Expenses Paid During Period 1/1/17–6/30/17	1,2		Ending Account Value 6/30/17	Fund-Level Expenses Paid During Period 1/1/17–6/30/17	1,2	Net Annualized Expense Ratio	2
Class 2	$1,000		$1,002.00	$4.42			$1,020.38	$4.46		0.89%

1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above — in the far right column — multiplied by the simple average account value

over the period indicated, and then multiplied by 181/365 to reflect the one-half year period.

2. Reflects expenses after fee waivers and expense reimbursements. Does not include any ongoing expenses of the Contract for which the Fund is an investment option or

acquired fund fees and expenses.

FSV-6         Semiannual Report

FSV1 P1 P2 P4 06/17

SUPPLEMENT DATED JUNE 8, 2017

TO THE PROSPECTUSES DATED MAY 1, 2017

OF

FRANKLIN SMALL CAP VALUE VIP FUND

(a series of Franklin Templeton Variable Insurance Products Trust)

Effective June 30, 2017, the Prospectus is amended as follows:

I.  The section in the Fund Summary under the heading “Portfolio Managers” on page FSV-S5 is revised as follows:

Portfolio Managers

Steven B. Raineri Vice President of Advisory Services and portfolio manager of the Fund since 2012.

Christopher Meeker, CFA Portfolio Manager of Advisory Services and portfolio manager of the Fund since 2015.

II.  In the Fund Details, under the heading “Management”, the portfolio manager information on page FSV-D5 is revised as follows:

Franklin Advisory Services, LLC (Advisory Services), 101 John F. Kennedy Parkway, Short Hills, NJ 07078, is the Fund’s investment manager.

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

Steven B. Raineri Vice President of Advisory Services

Mr. Raineri has been a lead portfolio manager of the Fund since 2012. Mr. Raineri has primary responsibility for the investments of the Fund. He has final authority over all aspects of the Fund’s investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio risk assessment, and the management of daily cash balances in accordance with anticipated investment management requirements. The degree to which he may perform these functions, and the nature of these functions, may change from time to time. He joined Franklin Templeton Investments in 2005.

Christopher Meeker, CFA Portfolio Manager of Advisory Services

Mr. Meeker has been a portfolio manager of the Fund since 2015, providing support to the lead portfolio manager(s) as needed. He joined Franklin Templeton Investments in 2012. Prior to joining Franklin Templeton Investments, he worked as a senior buy-side analyst at Federated Global Investment Management with a focus on the international markets and coverage of the industrial, consumer and technology sectors.

Please keep this supplement with your prospectus for future reference.

FSV-7

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Highlights

Franklin Small Cap Value VIP Fund

	Six Months Ended June 30, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 1
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$19.93			$18.12			$22.81			$24.54			$18.58			$15.82
Income from investment operationsa:
Net investment incomeb		0.12			0.15			0.21			0.19			0.19			0.29	c
Net realized and unrealized gains (losses)		(0.04	)		4.79			(1.53	)		0.06			6.45			2.64
Total from investment operations		0.08			4.94			(1.32	)		0.25			6.64			2.93
Less distributions from:
Net investment income		(0.15	)		(0.21	)		(0.20	)		(0.20	)		(0.32	)		(0.17	)
Net realized gains		(1.38	)		(2.92	)		(3.17	)		(1.78	)		(0.36	)		—
Total distributions		(1.53	)		(3.13	)		(3.37	)		(1.98	)		(0.68	)		(0.17	)
Net asset value, end of period		$18.48			$19.93			$18.12			$22.81			$24.54			$18.58
Total returnd		0.33%			30.54%			(7.18)%			0.88%			36.50%			18.75%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		0.65%			0.66%			0.65%			0.63%			0.63%			0.67%
Expenses net of waiver and payments by affiliates		0.64%			0.64%	f		0.64%	f		0.63%	f,g		0.63%			0.67%
Net investment income		1.19%			0.84%			1.04%			0.82%			0.90%			1.70%	c
Supplemental data
Net assets, end of period (000’s)		$48,226			$47,831			$45,897			$57,843			$62,408			$40,133
Portfolio turnover rate		11.44%			34.60%			27.05%			19.45%			10.44%			5.84%

^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, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 2
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$19.36			$17.68			$22.32			$24.07			$18.23			$15.53
Income from investment operationsa:
Net investment incomeb		0.09			0.10			0.16			0.13			0.14			0.24	c
Net realized and unrealized gains (losses)		(0.03	)		4.66			(1.49	)		0.05			6.34			2.59
Total from investment operations		0.06			4.76			(1.33	)		0.18			6.48			2.83
Less distributions from:
Net investment income		(0.10	)		(0.16	)		(0.14	)		(0.15	)		(0.28	)		(0.13	)
Net realized gains		(1.38	)		(2.92	)		(3.17	)		(1.78	)		(0.36	)		—
Total distributions		(1.48	)		(3.08	)		(3.31	)		(1.93	)		(0.64	)		(0.13	)
Net asset value, end of period		$17.94			$19.36			$17.68			$22.32			$24.07			$18.23
Total returnd		0.20%			30.19%			(7.39)%			0.57%			36.24%			18.39%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		0.90%			0.91%			0.90%			0.88%			0.88%			0.92%
Expenses net of waiver and payments by affiliates		0.89%			0.89%	f		0.89%	f		0.88%	f,g		0.88%			0.92%
Net investment income		0.94%			0.59%			0.79%			0.57%			0.65%			1.45%	c
Supplemental data
Net assets, end of period (000’s)		$1,268,816			$1,366,807			$1,172,173			$1,445,325			$1,606,802			$1,286,573
Portfolio turnover rate		11.44%			34.60%			27.05%			19.45%			10.44%			5.84%

^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, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 4
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$19.74			$17.96			$22.63			$24.37			$18.44			$15.71
Income from investment operationsa:
Net investment incomeb		0.08			0.09			0.14			0.11			0.12			0.22	c
Net realized and unrealized gains (losses)		(0.03	)		4.75			(1.52	)		0.05			6.42			2.63
Total from investment operations		0.05			4.84			(1.38	)		0.16			6.54			2.85
Less distributions from:
Net investment income		(0.09	)		(0.14	)		(0.12	)		(0.12	)		(0.25	)		(0.12	)
Net realized gains		(1.38	)		(2.92	)		(3.17	)		(1.78	)		(0.36	)		—
Total distributions		(1.47	)		(3.06	)		(3.29	)		(1.90	)		(0.61	)		(0.12	)
Net asset value, end of period		$18.32			$19.74			$17.96			$22.63			$24.37			$18.44
Total returnd		0.17%			30.12%			(7.52)%			0.48%			36.12%			18.27%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		1.00%			1.01%			1.00%			0.98%			0.98%			1.02%
Expenses net of waiver and payments by affiliates		0.99%			0.99%	f		0.99%	f		0.98%	f,g		0.98%			1.02%
Net investment income		0.84%			0.49%			0.69%			0.47%			0.55%			1.35%	c
Supplemental data
Net assets, end of period (000’s)		$30,988			$32,751			$26,128			$30,452			$35,936			$32,424
Portfolio turnover rate		11.44%			34.60%			27.05%			19.45%			10.44%			5.84%

^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, 2017 (unaudited)

Franklin Small Cap Value VIP Fund
		Shares		Value
	Common Stocks 96.5%
	Aerospace & Defense 4.8%
	AAR Corp.		1,110,000	$	38,583,600
	Cubic Corp.		246,400		11,408,320
a	Esterline Technologies Corp.		154,200		14,618,160
					64,610,080
	Automobiles & Components 2.2%
	Gentex Corp.		36,000		682,920
	LCI Industries		131,800		13,496,320
	Thor Industries Inc.		123,300		12,887,316
	Winnebago Industries Inc.		87,900		3,076,500
					30,143,056
	Banks 14.7%
	Access National Corp.		228,121		6,049,769
	Bryn Mawr Bank Corp.		175,250		7,448,125
	Chemical Financial Corp.		591,154		28,617,765
	Columbia Banking System Inc.		722,100		28,775,685
	First Horizon National Corp.		1,579,037		27,506,824
	First of Long Island Corp.		439,022		12,556,029
	German American Bancorp Inc.		152,723		5,206,327
	Glacier Bancorp Inc.		383,100		14,025,291
	Lakeland Financial Corp.		551,400		25,298,232
	Peoples Bancorp Inc.		248,712		7,991,117
	Pinnacle Financial Partners Inc.		349,802		21,967,566
	TrustCo Bank Corp. NY		684,300		5,303,325
	Washington Trust Bancorp Inc.		134,900		6,954,095
					197,700,150
	Building Products 5.4%
a	Armstrong Flooring Inc.		262,320		4,713,890
a	Gibraltar Industries Inc.		361,200		12,876,780
	Griffon Corp.		290,700		6,380,865
	Insteel Industries Inc.		195,000		6,429,150
	Simpson Manufacturing Co. Inc.		665,000		29,067,150
	Universal Forest Products Inc.		151,700		13,244,927
					72,712,762
	Commercial & Professional Services 2.1%
a	Huron Consulting Group Inc.		92,400		3,991,680
	McGrath RentCorp		452,218		15,660,310
	MSA Safety Inc.		103,713		8,418,384
					28,070,374
	Construction & Engineering 2.2%
	Argan Inc.		19,516		1,170,960
	EMCOR Group Inc.		256,400		16,763,432
	Granite Construction Inc.		240,346		11,594,291
					29,528,683
	Consumer Durables & Apparel 3.4%
	BRP Inc. (Canada)		800,300		23,456,696
	Hooker Furniture Corp.		158,800		6,534,620
	La-Z-Boy Inc.		196,400		6,383,000
a	M/I Homes Inc.		347,700		9,926,835
					46,301,151

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)
	Consumer Services 0.4%
	Brinker International Inc.		124,100	$	4,728,210
	Electrical Equipment 1.2%
	Encore Wire Corp.		17,600		751,520
	EnerSys		140,710		10,194,440
	Regal Beloit Corp.		68,600		5,594,330
					16,540,290
	Energy 4.4%
a	Energen Corp.		340,507		16,810,831
a	Helix Energy Solutions Group Inc.		30,800		173,712
a	Hunting PLC (United Kingdom)		2,349,039		14,925,416
a	Natural Gas Services Group Inc.		145,100		3,605,735
a	Oil States International Inc.		492,500		13,371,375
a	Rowan Cos. PLC		192,016		1,966,244
a	Unit Corp.		434,715		8,142,212
					58,995,525
	Food, Beverage & Tobacco 4.8%
	AGT Food and Ingredients Inc. (Canada)		170,500		3,062,331
	Dairy Crest Group PLC (United Kingdom)		1,370,000		10,689,116
	GrainCorp Ltd. (Australia)		408,300		2,972,643
a	Landec Corp.		848,600		12,601,710
	Maple Leaf Foods Inc. (Canada)		1,422,800		35,939,106
					65,264,906
	Health Care Equipment & Services 4.0%
	Hill-Rom Holdings Inc.		352,600		28,070,486
	STERIS PLC		313,100		25,517,650
					53,588,136
	Industrial Conglomerates 0.9%
	Carlisle Cos. Inc.		123,600		11,791,440
	Insurance 6.6%
	Arthur J. Gallagher & Co.		147,400		8,438,650
	Aspen Insurance Holdings Ltd.		389,600		19,421,560
	The Hanover Insurance Group Inc.		199,100		17,646,233
	Horace Mann Educators Corp.		293,100		11,079,180
	Old Republic International Corp.		763,300		14,907,249
	Validus Holdings Ltd.		346,300		17,997,211
					89,490,083
	Machinery 7.3%
	Astec Industries Inc.		198,100		10,996,531
	Federal Signal Corp.		417,100		7,240,856
	Franklin Electric Co. Inc.		64,514		2,670,880
	Hillenbrand Inc.		79,200		2,859,120
	Kennametal Inc.		356,800		13,351,456
	Lindsay Corp.		55,300		4,935,525
a	The Manitowoc Co. Inc.		976,700		5,869,967
	Mueller Industries Inc.		449,900		13,699,455
	Mueller Water Products Inc., A		2,089,700		24,407,696
	Titan International Inc.		872,000		10,472,720
	Watts Water Technologies Inc., A		40,700		2,572,240
					99,076,446

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 5.9%
	A Schulman Inc.		13,866	$	443,712
	AptarGroup Inc.		65,000		5,645,900
a	Detour Gold Corp. (Canada)		776,900		9,098,748
	H.B. Fuller Co.		52,200		2,667,942
a	Ingevity Corp.		168,200		9,654,680
	Minerals Technologies Inc.		45,600		3,337,920
	OceanaGold Corp. (Australia)		2,985,200		9,005,232
	Reliance Steel & Aluminum Co.		47,400		3,451,194
	Sensient Technologies Corp.		424,300		34,168,879
	Stepan Co.		18,300		1,594,662
					79,068,869
	Pharmaceuticals, Biotechnology & Life Sciences 1.9%
	Gerresheimer AG (Germany)		326,200		26,242,355
	Real Estate 6.3%
	Brandywine Realty Trust		1,359,300		23,828,529
	Highwoods Properties Inc.		128,900		6,536,519
	LTC Properties Inc.		689,800		35,448,822
	Sunstone Hotel Investors Inc.		1,223,800		19,727,656
					85,541,526
	Retailing 0.8%
	Caleres Inc.		308,200		8,561,796
	The Finish Line Inc., A		184,300		2,611,531
					11,173,327
	Semiconductors & Semiconductor Equipment 5.4%
	Cohu Inc.		642,800		10,117,672
a	Kulicke and Soffa Industries Inc. (Singapore)		633,100		12,041,562
	MKS Instruments Inc.		321,200		21,616,760
a	Photronics Inc.		1,000,800		9,407,520
	Versum Materials Inc.		621,238		20,190,235
					73,373,749
	Technology Hardware & Equipment 3.6%
a	NetScout Systems Inc.		574,100		19,749,040
a	Plexus Corp.		65,400		3,438,078
a	Rogers Corp.		61,500		6,680,130
a	Zebra Technologies Corp., A		185,500		18,646,460
					48,513,708
	Telecommunication Services 0.9%
a	ORBCOMM Inc.		1,042,000		11,774,600
	Transportation 2.9%
a	SAIA Inc.		384,000		19,699,200
a	Spirit Airlines Inc.		370,900		19,156,985
					38,856,185
	Utilities 4.4%
	Connecticut Water Service Inc.		47,200		2,620,072
	IDACORP Inc.		336,289		28,702,266
	Spire Inc.		392,500		27,376,875
					58,699,213
	Total Common Stocks (Cost $931,586,142)				1,301,784,824

Semiannual Report         FSV-13

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Small Cap Value VIP Fund (continued)

		Principal Amount		Value
	Corporate Bonds 0.9%
	Energy 0.7%
	Unit Corp., senior sub. note, 6.625%, 5/15/21	$	9,632,000	$	9,270,800
	Machinery 0.2%
	Mueller Industries Inc., 6.00%, 3/01/27		2,378,000		2,449,340
	Total Corporate Bonds (Cost $11,573,506)				11,720,140
	Total Investments before Short Term Investments (Cost $943,159,648)				1,313,504,964
		Shares
	Short Term Investments (Cost $42,774,480) 3.2%
	Money Market Funds 3.2%
b,c	Institutional Fiduciary Trust Money Market Portfolio, 0.58%		42,774,480		42,774,480
	Total Investments (Cost $985,934,128) 100.6%				1,356,279,444
	Other Assets, less Liabilities (0.6)%				(8,248,381	)
	Net Assets 100.0%			$	1,348,031,063

^aNon-income producing.

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

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

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, 2017 (unaudited)

	Franklin Small Cap Value VIP Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	943,159,648
Cost - Non-controlled affiliates (Note 3e)		42,774,480
Total cost of investments	$	985,934,128
Value - Unaffiliated issuers	$	1,313,504,964
Value - Non-controlled affiliates (Note 3e)		42,774,480
Total value of investments		1,356,279,444
Cash		102,344
Receivables:
Investment securities sold		3,645,987
Capital shares sold		109,954
Dividends and interest		1,026,413
Other assets		937
Total assets		1,361,165,079
Liabilities:
Payables:
Investment securities purchased		10,587,830
Capital shares redeemed		1,119,991
Management fees		689,898
Distribution fees		555,825
Accrued expenses and other liabilities		180,472
Total liabilities		13,134,016
Net assets, at value	$	1,348,031,063
Net assets consist of:
Paid-in capital	$	904,716,052
Undistributed net investment income		7,322,593
Net unrealized appreciation (depreciation)		370,349,134
Accumulated net realized gain (loss)		65,643,284
Net assets, at value	$	1,348,031,063
Class 1:
Net assets, at value	$	48,226,475
Shares outstanding		2,609,617
Net asset value and maximum offering price per share	$	18.48
Class 2:
Net assets, at value	$	1,268,816,492
Shares outstanding		70,745,150
Net asset value and maximum offering price per share	$	17.94
Class 4:
Net assets, at value	$	30,988,096
Shares outstanding		1,691,513
Net asset value and maximum offering price per share	$	18.32

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, 2017 (unaudited)

	Franklin Small Cap Value VIP Fund
Investment income:
Dividends:
Unaffiliated issuers	$	12,216,761
Non-controlled affiliates (Note 3e)		56,409
Interest		407,962
Total investment income		12,681,132
Expenses:
Management fees (Note 3a)		4,323,837
Distribution fees: (Note 3c)
Class 2		1,632,087
Class 4		54,971
Custodian fees (Note 4)		11,091
Reports to shareholders		145,480
Professional fees		31,122
Trustees’ fees and expenses		3,021
Other		16,029
Total expenses		6,217,638
Expenses waived/paid by affiliates		(65,396	)
Net expenses		6,152,242
Net investment income		6,528,890
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		66,429,171
Realized gain distributions from REITs		737,835
Foreign currency transactions		11,336
Net realized gain (loss)		67,178,342
Net change in unrealized appreciation (depreciation) on:
Investments		(70,866,113	)
Translation of other assets and liabilities denominated in foreign currencies		9,136
Net change in unrealized appreciation (depreciation)		(70,856,977	)
Net realized and unrealized gain (loss)		(3,678,635	)
Net increase (decrease) in net assets resulting from operations	$	2,850,255

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, 2017 (unaudited)			Year Ended December 31, 2016
Increase (decrease) in net assets:
Operations:
Net investment income	$	6,528,890		$	7,749,254
Net realized gain (loss)		67,178,342			96,362,922
Net change in unrealized appreciation (depreciation)		(70,856,977	)		243,787,716
Net increase (decrease) in net assets resulting from operations		2,850,255			347,899,892
Distributions to shareholders from:
Net investment income:
Class 1		(357,335	)		(515,097	)
Class 2		(6,657,162	)		(10,103,275	)
Class 4		(135,525	)		(189,568	)
Net realized gains:
Class 1		(3,344,065	)		(7,134,342	)
Class 2		(91,049,189	)		(185,669,944	)
Class 4		(2,178,641	)		(4,020,473	)
Total distributions to shareholders		(103,721,917	)		(207,632,699	)
Capital share transactions: (Note 2)
Class 1		3,927,170			(2,877,866	)
Class 2		(2,885,923	)		62,430,130
Class 4		473,137			3,371,117
Total capital share transactions		1,514,384			62,923,381
Net increase (decrease) in net assets		(99,357,278	)		203,190,574
Net assets:
Beginning of period		1,447,388,341			1,244,197,767
End of period	$	1,348,031,063		$	1,447,388,341
Undistributed net investment income included in net assets:
End of period	$	7,322,593		$	7,943,725

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 eighteen 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. 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 may differ 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. 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.

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.

FSV-18         Semiannual Report

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 Fund’s business day. Occasionally, events occur between the time at which trading in a foreign security is completed and 4 p.m. Eastern time 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 4 p.m. Eastern time. 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 Fund’s NAV is not calculated, 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 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, 2017, the Fund had no securities on loan.

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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)

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.

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, 2017, 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. Amortization of premium and accretion of discount on debt securities are included in interest income. Dividend income and realized gain distributions are recorded on the ex-dividend date except for certain dividends from 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. Distributable earnings are determined according to income tax regulations (tax basis) and 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.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Small Cap Value VIP Fund (continued)

2. Shares of Beneficial Interest

At June 30, 2017, 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, 2017						Year Ended December 31, 2016
	Shares			Amount			Shares			Amount
Class 1 Shares:
Shares sold		211,530		$	4,187,580			219,629		$	4,034,514
Shares issued in reinvestment of distributions		198,148			3,701,400			456,683			7,649,439
Shares redeemed		(200,291	)		(3,961,810	)		(809,509	)		(14,561,819	)
Net increase (decrease)		209,387		$	3,927,170			(133,197	)	$	(2,877,866	)
Class 2 Shares:
Shares sold		2,499,606		$	48,225,645			7,124,811		$	128,912,250
Shares issued in reinvestment of distributions		5,389,209			97,706,351			12,018,000			195,773,219
Shares redeemed		(7,735,893	)		(148,817,919	)		(14,862,137	)		(262,255,339	)
Net increase (decrease)		152,922		$	(2,885,923	)		4,280,674		$	62,430,130
Class 4 Shares:
Shares sold		143,557		$	2,797,259			330,960		$	6,027,880
Shares issued in reinvestment of distributions		124,955			2,314,166			253,312			4,210,041
Shares redeemed		(236,045	)		(4,638,288	)		(379,696	)		(6,866,804	)
Net increase (decrease)		32,467		$	473,137			204,576		$	3,371,117

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 $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, 2017, the annualized effective investment management fee rate was 0.624% of the Fund’s average daily net assets.

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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)

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 Statements 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. During the period ended June 30, 2017, the Fund held investments in affiliated management investment companies as follows:

	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, 0.58%	46,387,989		136,046,736		(139,660,245	)		42,774,480	$	42,774,480	$	56,409	$	—		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, 2017, there were no credits earned.

5. Income Taxes

At June 30, 2017, the cost of investments, net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	986,727,494
Unrealized appreciation	$	387,354,772
Unrealized depreciation		(17,802,822	)
Net unrealized appreciation (depreciation)	$	369,551,950

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Small Cap Value VIP Fund (continued)

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

6. Investment Transactions

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2017, aggregated $155,821,934 and $245,184,980, 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 9, 2018. 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 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statement of Operations. During the period ended June 30, 2017, 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.

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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)

A summary of inputs used as of June 30, 2017, 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	$	1,301,784,824	$	—	$	—	$	1,301,784,824
Corporate Bonds		—		11,720,140		—		11,720,140
Short Term Investments		42,774,480		—		—		42,774,480
Total Investments in Securities	$	1,344,559,304	$	11,720,140	$	—	$	1,356,279,444

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

9. Investment Company Reporting Modernization

In October 2016, the U.S. Securities and Exchange Commission adopted new rules and amended existing rules (together, final rules) intended to modernize the reporting and disclosure of information by registered investment companies. In part, the final rules amend Regulation S-X and require standardized, enhanced disclosures about derivatives in investment company financial statements, as well as other amendments. The compliance date for the amendments to Regulation S-X is August 1, 2017. Management has reviewed the requirements and believes the adoption of the amendments to Regulation S-X will not have a material impact on the Fund’s financial statements and related disclosures.

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.

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Franklin Small-Mid Cap Growth VIP Fund

This semiannual report for Franklin Small-Mid Cap Growth VIP Fund covers the period ended June 30, 2017.

Class 2 Performance Summary as of June 30, 2017

The Fund’s Class 2 Shares delivered a +10.91% total return* for the six-month period ended June 30, 2017.

*The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 4/30/18. Fund investment results reflect the fee waiver; without this waiver, the results would have been lower.

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

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 or relatively new or unseasoned companies can be particularly sensitive to changing economic conditions, and their prospects for growth are less certain than those of larger, more established companies. 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 risk 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 +11.40% total return, and its broad benchmark, the Standard & Poor’s^® 500 Index (S&P 500^®), produced a +9.34% total return for the same period.²

*Includes common and preferred stocks.

Economic and Market Overview

U.S. economic growth decelerated in 2017’s first quarter, largely due to slower growth in consumer spending and declines in private inventory investment and government spending. However, growth accelerated in the second quarter due to increases in consumer spending, business investment and federal government spending. The manufacturing sector generally expanded, and the services sector also continued to grow. The unemployment rate decreased from 4.7% in December 2016 to 4.4% at period-end.³ Monthly retail sales were volatile, but grew for most of the period. Annual inflation, as measured by the Consumer Price Index, decreased from 2.1% to 1.6% during the period.

The U.S. Federal Reserve (Fed), at its March meeting, increased the federal funds target rate from 0.50% - 0.75% to

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.

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

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FRANKLIN SMALL-MID CAP GROWTH VIP FUND

0.75% - 1.00%. The Fed again increased its target range by a quarter point to 1.00% - 1.25% at its June meeting. The Fed made both of these increases amid signs of a growing U.S. economy, a strengthening labor market and an improvement in business spending.

U.S. equity markets rose during the period, benefiting from mostly upbeat economic data, better U.S. corporate earnings and signs of improvement in the Chinese and European economies. Investor optimism arising from pro-growth and pro-business policy plans in the U.S. and the victory of Emmanuel Macron as France’s President also helped U.S. equities. However, concerns about the terms of the U.K.’s exit from the European Union (also known as “Brexit”), uncertainty about President Trump’s ability to implement reforms, and geopolitical tensions in the Middle East and the Korean peninsula curbed market sentiment. The broad U.S. stock market, as measured by the S&P 500, generated a +9.34% total return for the period.²

Investment Strategy

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

Manager’s Discussion

During the period under review, most sectors represented in the Fund’s portfolio had positive returns and contributed to absolute performance. Relative to the Fund’s narrow benchmark, the Russell MidCap Growth^® Index, key contributors included stock selection in the information technology (IT), consumer staples and real estate sectors.

Top 10 Holdings
6/30/17
Company Sector/Industry	% of Total Net Assets
Roper Technologies Inc. Industrials		2.3%
Equinix Inc. Real Estate		1.9%
Edwards Lifesciences Corp. Health Care		1.6%
Axalta Coating Systems Ltd. Materials		1.5%
Newell Brands Inc. Consumer Discretionary		1.5%
Vantiv Inc. Information Technology		1.5%
ServiceNow Inc. Information Technology		1.5%
2U Inc. Information Technology		1.4%
Martin Marietta Materials Inc. Materials		1.4%
Pinnacle Foods Inc. Consumer Staples		1.3%

In IT, positions in 2U,⁴ a provider of cloud-based software-as-a-service solutions for non-profit colleges and universities, and CoStar Group, a commercial real estate information company, contributed to the Fund’s relative performance. Since the start of the year, 2U has announced several new domestic graduate degree programs and disclosed its program launch schedule through 2020, which we believe can lead to significant revenue growth in coming years. CoStar Group’s stock rose amid favorable growth and profit margin expansion.

In the consumer staples and real estate sectors, contributors included food and beverage company TreeHouse Foods⁵ and real estate investment trust (REIT) SBA Communications, respectively. TreeHouse performed well as demand trends for private-label products picked up during the first half of the year. Shares of SBA, which operates wireless telecommunications infrastructure, rebounded after underperforming with the REIT sector after the U.S. presidential election in November 2016. Fundamentally, industry growth seems to be accelerating as carriers look to deploy many spectrum bands that were recently acquired or won.

4. Not part of the index.

5. No longer held by period-end.

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FRANKLIN SMALL-MID CAP GROWTH VIP FUND

Other notable contributors to the Fund’s relative performance included industrial goods manufacturer Roper Technologies and homebuilder NVR. Shares of Roper Technologies rose after the company reported better-than-estimated fourth-quarter 2016 and first-quarter 2017 revenue and earnings per share. In our view, Roper could potentially benefit as investors see a general improvement in economic activity. NVR’s shares performed well as the company reported stronger-than-expected earnings results and management stated robust order rates, indicating continued growth. Further supporting investor sentiment were fairly low interest rates and strong housing demand.

In contrast, key detractors from the Fund’s relative performance included stock selection in the health care sector and an overweighted position in the energy sector. Security selection in the industrials and consumer discretionary sectors also hampered relative results.

Notable detractors in health care included an underweighted position in genome sequencing company Illumina. Its shares performed well during the period and contributed to absolute performance, but our underweighted position dampened relative results.

In industrials, industrial products distributor HD Supply Holdings⁵ and commercial data and analytics provider Dun & Bradstreet detracted from results. HD Supply’s recent results missed investor expectations for the third time in a year. Shares of Dun & Bradstreet fell, as the company received notification that Salesforce.com will no longer provide sales support for new Data.com subscriptions beginning in mid-2017, which in our view will likely lead to a modest revenue headwind.

Detractors in the consumer discretionary sector included theater operator IMAX⁴ and sporting goods retailer Dick’s Sporting Goods. Shares of IMAX struggled during the period as the domestic summer box office has been disappointing relative to initial expectations, driven mostly by poorly reviewed films and franchise fatigue. Softer in-store traffic trends at Dick’s Sporting Goods has led to more sales promotions, which pressured profit margin.

Elsewhere, oilfield services provider Superior Energy Services detracted from the Fund’s relative performance.⁴ Its share price declined as crude oil prices fell during the period, leading to investor concerns that there will be less demand for Superior’s oil exploration and production services.

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, 2017, 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 SMALL-MID CAP GROWTH VIP FUND

Class 2 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: (1) transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes; and (2) 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 table below shows Fund-level ongoing expenses and can help you understand these costs 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 table below provides information about the actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of ongoing Fund expenses but does not include the effect of ongoing Contract expenses, is used to calculate the “Ending Account Value.” You can estimate the Fund-level expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number under the headings “Actual” and “Fund-Level Expenses Paid During Period” (if Fund-Level Expenses Paid During Period were $7.50, then 8.6 × $7.50 = $64.50). In this illustration, the estimated expenses paid this period at the Fund level are $64.50.

Hypothetical Example for Comparison with Other Mutual Funds

Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other mutual funds offered through the Contract. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds offered through the Contract.

Please note that expenses shown in the table are meant to highlight ongoing costs at the Fund level only and do not reflect any ongoing expenses at the Contract level, or transaction expenses at either the Fund or Contract levels. In addition, 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.

		Actual (actual return after expenses)				Hypothetical (5% annual return before expenses)
Share Class	Beginning Account Value 1/1/17		Ending Account Value 6/30/17	Fund-Level Expenses Paid During Period 1/1/17–6/30/17	1,2		Ending Account Value 6/30/17	Fund-Level Expenses Paid During Period 1/1/17–6/30/17	1,2	Net Annualized Expense Ratio	2
Class 2	$1,000		$1,109.10	$5.70			$1,019.39	$5.46		1.09%

1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above — in the far right column — multiplied by the simple average account value over the period indicated, and then multiplied by 181/365 to reflect the one-half year period.

2. Reflects expenses after fee waivers and expense reimbursements. Does not include any ongoing expenses of the Contract for which the Fund is an investment option or acquired fund fees and expenses.

Semiannual Report         FSC-5

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Highlights

Franklin Small-Mid Cap Growth VIP Fund

	Six Months Ended June 30, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 1
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$17.77			$19.09			$24.95			$28.38			$21.87			$21.19
Income from investment operationsa:
Net investment income (loss)b		(0.02)			(0.03)			—	c,d		(0.07)			(0.09)			(0.01)	e
Net realized and unrealized gains (losses)		1.99			0.77			(0.03)			2.04			8.19			2.27
Total from investment operations		1.97			0.74			(0.03)			1.97			8.10			2.26
Less distributions from net realized gains		(1.76)			(2.06)			(5.83)			(5.40)			(1.59)			(1.58)
Net asset value, end of period		$17.98			$17.77			$19.09			$24.95			$28.38			$21.87
Total returnf		11.06%			4.40%			(2.44)%			7.78%			38.50%			11.12%
Ratios to average net assetsg
Expenses before waiver and payments by affiliates		0.85%			0.84%			0.81%			0.80%			0.80%			0.80%
Expenses net of waiver and payments by affiliates		0.84%	h		0.82%	h		0.81%	i		0.80%	i		0.80%	h		0.80%
Net investment income (loss)		(0.22)%			(0.16)%			0.01%	d		(0.29)%			(0.35)%			(0.03)%	e
Supplemental data
Net assets, end of period (000’s)		$34,414			$31,756			$87,866			$99,803			$98,020			$75,977
Portfolio turnover rate		20.97%			32.23%	j		37.85%			48.73%			42.77%			41.44%

^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%.

^jExcludes the value of portfolio securities delivered as a result of a redemption in-kind. See Note 9.

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, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 2
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$16.27			$17.69			$23.56			$27.16			$21.04			$20.49
Income from investment operationsa:
Net investment income (loss)b		(0.04	)		(0.07	)		(0.05	)c		(0.13	)		(0.14	)		(0.06	)d
Net realized and unrealized gains (losses)		1.82			0.71			0.01			1.93			7.85			2.19
Total from investment operations		1.78			0.64			(0.04	)		1.80			7.71			2.13
Less distributions from net realized gains		(1.76	)		(2.06	)		(5.83	)		(5.40	)		(1.59	)		(1.58	)
Net asset value, end of period		$16.29			$16.27			$17.69			$23.56			$27.16			$21.04
Total returne		10.91%			4.17%			(2.66)%			7.47%			38.15%			10.85%
Ratios to average net assetsf
Expenses before waiver and payments by affiliates		1.10%			1.09%			1.06%			1.05%			1.05%			1.05%
Expenses net of waiver and payments by affiliates		1.09%	g		1.07%	g		1.06%	h		1.05%	h		1.05%	g		1.05%
Net investment income (loss)		(0.47)%			(0.41)%			(0.24)%	c		(0.54)%			(0.60)%			(0.28)%	d
Supplemental data
Net assets, end of period (000’s)		$406,630			$392,777			$478,649			$582,772			$660,806			$670,193
Portfolio turnover rate		20.97%			32.23%i			37.85%			48.73%			42.77%			41.44%

^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%.

ⁱExcludes the value of portfolio securities delivered as a result of a redemption in-kind. See Note 9.

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, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 4
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$16.81			$18.23			$24.14			$27.72			$21.47			$20.90
Income from investment operationsa:
Net investment income (loss)b		(0.05)			(0.09)			(0.07)	c		(0.16)			(0.17)			(0.09)	d
Net realized and unrealized gains (losses)		1.88			0.73			(0.01)			1.98			8.01			2.24
Total from investment operations		1.83			0.64			(0.08)			1.82			7.84			2.15
Less distributions from net realized gains		(1.76)			(2.06)			(5.83)			(5.40)			(1.59)			(1.58)
Net asset value, end of period		$16.88			$16.81			$18.23			$24.14			$27.72			$21.47
Total returne		10.86%			4.04%			(2.77)%			7.39%			37.99%			10.79%
Ratios to average net assetsf
Expenses before waiver and payments by affiliates		1.20%			1.19%			1.16%			1.15%			1.15%			1.15%
Expenses net of waiver and payments by affiliates		1.19%	g		1.17%	g		1.16%	h		1.15%	h		1.15%	g		1.15%
Net investment income (loss)		(0.57)%			(0.51)%			(0.34)%	c		(0.64)%			(0.70)%			(0.38)%	d
Supplemental data
Net assets, end of period (000’s)		$15,219			$13,825			$15,105			$16,384			$19,132			$12,000
Portfolio turnover rate		20.97%			32.23%	i		37.85%			48.73%			42.77%			41.44%

^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%.

ⁱExcludes the value of portfolio securities delivered as a result of a redemption in-kind. See Note 9.

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, 2017 (unaudited)

Franklin Small-Mid Cap Growth VIP Fund
		Shares		Value
	Common Stocks 93.5%
	Consumer Discretionary 16.2%
a	Burlington Stores Inc.		23,500	$	2,161,765
	Delphi Automotive PLC		67,377		5,905,594
	Dick’s Sporting Goods Inc.		51,542		2,052,918
a	Dollar Tree Inc.		66,811		4,671,425
	Dominos Pizza Inc.		15,000		3,172,950
	Expedia Inc.		38,000		5,660,100
a	Global Eagle Entertainment Inc.		87,868		312,810
a	Grand Canyon Education Inc.		63,357		4,967,822
	Hanesbrands Inc.		48,207		1,116,474
a	IMAX Corp.		126,588		2,784,936
	L Brands Inc.		43,288		2,332,790
a	Laureate Education Inc., A		81,000		1,419,930
a	Liberty Broadband Corp., C		55,150		4,784,263
	Marriott International Inc., A		50,267		5,042,283
	Newell Brands Inc.		125,944		6,753,117
a	Norwegian Cruise Line Holdings Ltd.		73,178		3,972,834
a	NVR Inc.		2,382		5,742,073
a	O’Reilly Automotive Inc.		14,707		3,217,009
	Ross Stores Inc.		59,485		3,434,069
	Thor Industries Inc.		14,700		1,536,444
	Tractor Supply Co.		49,137		2,663,717
					73,705,323
	Consumer Staples 5.2%
	Church & Dwight Co. Inc.		92,300		4,788,523
a	Hostess Brands Inc., A		147,200		2,369,920
	Molson Coors Brewing Co., B		33,000		2,849,220
a	Monster Beverage Corp.		69,416		3,448,587
	Pinnacle Foods Inc.		101,494		6,028,744
a	Post Holdings Inc.		56,639		4,398,018
					23,883,012
	Energy 2.6%
	Cabot Oil & Gas Corp., A		153,649		3,853,517
a	Jagged Peak Energy Inc.		221,000		2,950,350
	Noble Energy Inc.		83,207		2,354,758
b	RPC Inc.		46,700		943,807
a	Superior Energy Services Inc.		185,061		1,930,186
					12,032,618
	Financials 6.6%
	Affiliated Managers Group Inc.		28,586		4,741,274
	Arthur J. Gallagher & Co.		85,108		4,872,433
	CBOE Holdings Inc.		5,200		475,280
	Lazard Ltd., A		36,037		1,669,594
	MarketAxess Holdings Inc.		18,696		3,759,765
	Moody’s Corp.		23,809		2,897,079
a	Signature Bank		29,079		4,173,709
a	SVB Financial Group		21,578		3,793,197
	Willis Towers Watson PLC		24,000		3,491,040
					29,873,371

Semiannual Report         FSC-9

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 13.5%
a	Acadia Pharmaceuticals Inc.		41,773	$	1,165,049
a	BioMarin Pharmaceutical Inc.		20,408		1,853,455
a	Cerner Corp.		47,995		3,190,228
	The Cooper Cos. Inc.		15,972		3,824,016
a	DaVita Inc.		63,392		4,105,266
a	DexCom Inc.		37,688		2,756,877
a	Edwards Lifesciences Corp.		61,121		7,226,947
a,b	Heron Therapeutics Inc.		68,230		944,985
a	Hologic Inc.		103,567		4,699,870
a	Illumina Inc.		24,600		4,268,592
a	Incyte Corp.		30,169		3,798,579
a	Insulet Corp.		37,288		1,913,247
a	iRhythm Technologies Inc.		24,900		1,058,001
a	Jazz Pharmaceuticals PLC		11,600		1,803,800
a	Mednax Inc.		20,703		1,249,840
a	Mettler-Toledo International Inc.		10,055		5,917,770
a	Neurocrine Biosciences Inc.		27,444		1,262,424
a	Nevro Corp.		28,181		2,097,512
a	Penumbra Inc.		21,648		1,899,612
a	Revance Therapeutics Inc.		44,372		1,171,421
a	Tesaro Inc.		12,924		1,807,551
a	Waters Corp.		20,500		3,768,720
					61,783,762
	Industrials 15.7%
	Acuity Brands Inc.		17,707		3,599,479
	Alaska Air Group Inc.		15,600		1,400,256
	Allegiant Travel Co.		7,726		1,047,646
	BWX Technologies Inc.		33,800		1,647,750
	Dun & Bradstreet Corp.		32,442		3,508,602
	Equifax Inc.		18,900		2,597,238
	Fortive Corp.		46,800		2,964,780
a	Gardner Denver Holdings Inc.		76,900		1,661,809
a	Genesee & Wyoming Inc.		39,816		2,723,016
	Hexcel Corp.		97,234		5,132,983
	IDEX Corp.		20,200		2,282,802
a	IHS Markit Ltd.		115,315		5,078,473
	J.B. Hunt Transport Services Inc.		36,846		3,366,987
	Robert Half International Inc.		38,888		1,863,902
	Rockwell Automation Inc.		36,400		5,895,344
	Roper Technologies Inc.		46,343		10,729,795
	Stanley Black & Decker Inc.		26,996		3,799,147
	Textron Inc.		56,700		2,670,570
a	Univar Inc.		83,000		2,423,600
a	Verisk Analytics Inc.		52,361		4,417,697
a	WABCO Holdings Inc.		22,400		2,856,224
					71,668,100
	Information Technology 24.9%
a	2U Inc.		133,879		6,281,603
a	Alarm.com Holdings Inc.		52,696		1,982,950
	Alliance Data Systems Corp.		10,266		2,635,180
	Amphenol Corp., A		46,200		3,410,484

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)
	Analog Devices Inc.		52,391	$	4,076,020
a	ANSYS Inc.		19,669		2,393,324
a	Atlassian Corp. PLC (Australia)		75,082		2,641,385
a	Autodesk Inc.		55,000		5,545,100
a	Bottomline Technologies (de) Inc.		61,419		1,577,854
a	Cavium Inc.		32,000		1,988,160
	Cognex Corp.		64,148		5,446,165
a	CoStar Group Inc.		19,635		5,175,786
	CSRA Inc.		147,455		4,681,696
	Fidelity National Information Services Inc.		64,282		5,489,683
a	FleetCor Technologies Inc.		23,995		3,460,319
a	GoDaddy Inc., A		127,917		5,426,239
a	Inphi Corp.		61,000		2,092,300
a	Integrated Device Technology Inc.		78,440		2,022,968
a	IPG Photonics Corp.		2,000		290,200
	KLA-Tencor Corp.		38,287		3,503,643
	Lam Research Corp.		30,116		4,259,306
	Microchip Technology Inc.		59,327		4,578,858
	Monolithic Power Systems		21,000		2,024,400
a	Palo Alto Networks Inc.		34,998		4,683,082
a	Proofpoint Inc.		27,124		2,355,177
a	Q2 Holdings Inc.		19,696		727,767
a	ServiceNow Inc.		62,537		6,628,922
a	Square Inc., A		72,500		1,700,850
a	Vantiv Inc., A		104,934		6,646,520
a,b	ViaSat Inc.		51,366		3,400,429
a	Workday Inc., A		41,143		3,990,871
a	Zendesk Inc.		90,500		2,514,090
					113,631,331
	Materials 4.4%
a	Axalta Coating Systems Ltd.		219,007		7,016,984
a	Ingevity Corp.		59,121		3,393,546
	International Flavors & Fragrances Inc.		25,500		3,442,500
	Martin Marietta Materials Inc.		28,191		6,274,753
					20,127,783
	Real Estate 4.4%
	American Campus Communities Inc.		43,000		2,033,900
a	CBRE Group Inc.		93,321		3,396,885
	Equinix Inc.		20,553		8,820,526
a	SBA Communications Corp., A		42,757		5,767,919
					20,019,230
	Total Common Stocks (Cost $308,839,532)				426,724,530
	Preferred Stocks 0.4%
	Consumer Discretionary 0.4%
a,c	DraftKings Inc., pfd., D		115,528		383,147
a,c	DraftKings Inc., pfd., D-1		284,105		1,295,720
	Total Preferred Stocks (Cost $2,800,003)				1,678,867
	Total Investments before Short Term Investments (Cost $311,639,535)				428,403,397

Semiannual Report         FSC-11

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Small-Mid Cap Growth VIP Fund (continued)

		Shares		Value
	Short Term Investments 7.1%
	Money Market Funds (Cost $30,349,988) 6.6%
d,e	Institutional Fiduciary Trust Money Market Portfolio, 0.58%		30,349,988	$	30,349,988
f	Investments from Cash Collateral Received for Loaned Securities (Cost $2,297,750) 0.5%
	Money Market Funds 0.5%
d,e	Institutional Fiduciary Trust Money Market Portfolio, 0.58%		2,297,750		2,297,750
	Total Investments (Cost $344,287,273) 101.0%				461,051,135
	Other Assets, less Liabilities (1.0)%				(4,787,450	)
	Net Assets 100.0%			$	456,263,685

^aNon-income producing.

^bA portion or all of the security is on loan at June 30, 2017. See Note 1(c).

^cSee Note 7 regarding restricted securities.

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

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

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

FSC-12         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Statements

Statement of Assets and Liabilities

June 30, 2017 (unaudited)

	Franklin Small-Mid Cap Growth VIP Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	311,639,535
Cost - Non-controlled affiliates (Note 3e)		32,647,738
Total cost of investments	$	344,287,273
Value - Unaffiliated issuers	$	428,403,397
Value - Non-controlled affiliates (Note 3e)		32,647,738
Total value of investments (includes securities loaned in the amount of $2,752,190)		461,051,135
Receivables:
Investment securities sold		5,051,555
Capital shares sold		213,261
Dividends and interest		84,525
Due from custodian		530,400
Other assets		294
Total assets		466,931,170
Liabilities:
Payables:
Investment securities purchased		6,837,956
Capital shares redeemed.		400,633
Management fees		297,801
Distribution fees		180,287
Trustees’ fees and expenses		157
Payable upon return of securities loaned		2,828,150
Accrued expenses and other liabilities		122,501
Total liabilities		10,667,485
Net assets, at value	$	456,263,685
Net assets consist of:
Paid-in capital	$	317,456,236
Undistributed net investment income (loss)		(1,015,846	)
Net unrealized appreciation (depreciation)		116,763,862
Accumulated net realized gain (loss)		23,059,433
Net assets, at value	$	456,263,685
Class 1:
Net assets, at value	$	34,414,305
Shares outstanding		1,913,864
Net asset value and maximum offering price per share	$	17.98
Class 2:
Net assets, at value	$	406,630,468
Shares outstanding		24,967,195
Net asset value and maximum offering price per share	$	16.29
Class 4:
Net assets, at value	$	15,218,912
Shares outstanding		901,638
Net asset value and maximum offering price per share	$	16.88

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, 2017 (unaudited)

	Franklin Small-Mid Cap Growth VIP Fund
Investment income:
Dividends:
Unaffiliated issuers	$	1,378,895
Non-controlled affiliates (Note 3e)		19,930
Income from securities loaned (net of fees and rebates)		9,164
Total investment income		1,407,989
Expenses:
Management fees (Note 3a)		1,807,718
Distribution fees: (Note 3c)
Class 2		503,367
Class 4		25,717
Custodian fees (Note 4)		1,871
Reports to shareholders		79,407
Professional fees		21,942
Trustees’ fees and expenses		1,230
Other		7,376
Total expenses		2,448,628
Expense reductions (Note 4)		(60	)
Expenses waived/paid by affiliates (Note 3e)		(24,733	)
Net expenses		2,423,835
Net investment income (loss)		(1,015,846	)
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		23,548,425
Foreign currency transactions		290
Net realized gain (loss)		23,548,715
Net change in unrealized appreciation (depreciation) on investments		24,332,081
Net realized and unrealized gain (loss)		47,880,796
Net increase (decrease) in net assets resulting from operations	$	46,864,950

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, 2017 (unaudited)			Year Ended December 31, 2016
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	(1,015,846	)	$	(1,996,016	)
Net realized gain (loss)		23,548,715			66,637,011
Net change in unrealized appreciation (depreciation)		24,332,081			(44,367,102	)
Net increase (decrease) in net assets resulting from operations		46,864,950			20,273,893
Distributions to shareholders from:
Net realized gains:
Class 1		(3,085,657	)		(8,833,462	)
Class 2		(39,960,537	)		(52,547,749	)
Class 4		(1,450,459	)		(1,581,894	)
Total distributions to shareholders		(44,496,653	)		(62,963,105	)
Capital share transactions: (Note 2)
Class 1		2,275,016			(50,265,073	)
Class 2		11,913,760			(50,062,313	)
Class 4		1,348,827			(245,962	)
Total capital share transactions		15,537,603			(100,573,348	)
Net increase (decrease) in net assets		17,905,900			(143,262,560	)
Net assets:
Beginning of period		438,357,785			581,620,345
End of period	$	456,263,685		$	438,357,785
Undistributed net investment income (loss) included in net assets:
End of period	$	(1,015,846	)	$	—

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 eighteen 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. 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, 2017, 45.8% 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 may differ 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. 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 Fund’s business day. Occasionally, events occur between the time at which trading in a foreign security is completed and 4 p.m. Eastern time 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 4 p.m. Eastern time. 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

FSC-16         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Small-Mid 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 Fund’s NAV is not calculated, 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 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

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)

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, 2017, 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. Estimated expenses are accrued daily. Dividend income is recorded on the ex-dividend date except for certain dividends from 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. Distributable earnings are determined according to income tax regulations (tax basis) and 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, 2017, 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, 2017						Year Ended December 31, 2016
	Shares			Amount			Shares			Amount
Class 1 Shares:
Shares sold		55,138		$	1,054,408			134,053		$	2,403,127
Shares issued in reinvestment of distributions		170,856			3,085,657			521,763			8,833,462
Shares redeemed in-kind		—			—			(2,772,844	)		(48,919,064	)
Shares redeemed		(98,737	)		(1,865,049	)		(698,942	)		(12,582,598	)
Net increase (decrease)		127,257		$	2,275,016			(2,815,970	)	$	(50,265,073	)
Class 2 Shares:
Shares sold		383,661		$	6,580,343			1,837,505		$	30,239,284
Shares issued in reinvestment of distributions		2,442,575			39,960,537			3,385,809			52,547,749
Shares redeemed in-kind		—			—			(3,221,857	)		(52,049,416	)
Shares redeemed		(2,003,656	)		(34,627,120	)		(4,916,789	)		(80,799,930	)
Net increase (decrease)		822,580		$	11,913,760			(2,915,332	)	$	(50,062,313	)
Class 4 Shares:
Shares sold		84,591		$	1,514,880			147,333		$	2,490,349
Shares issued in reinvestment of distributions		85,574			1,450,459			98,560			1,581,894
Shares redeemed		(90,889	)		(1,616,512	)		(252,259	)		(4,318,205	)
Net increase (decrease)		79,276		$	1,348,827			(6,366	)	$	(245,962	)

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         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

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

For the period ended June 30, 2017, the annualized effective investment management fee rate was 0.800% 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.

FSC-20         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Small-Mid Cap Growth VIP Fund (continued)

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. During the period ended June 30, 2017, the Fund held investments in affiliated management investment companies as follows:

	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, 0.58%		19,269,553		83,204,860		(69,826,675	)		32,647,738	$	32,647,738	$	19,930	$	—		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, 2017, the custodian fees were reduced as noted in the Statement of Operations.

5. Income Taxes

At June 30, 2017, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	344,762,541
Unrealized appreciation	$	126,464,980
Unrealized depreciation		(10,176,386	)
Net unrealized appreciation (depreciation)	$	116,288,594

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, 2017, aggregated $92,162,896 and $136,647,017, respectively.

At June 30, 2017, in connection with securities lending transactions, the Fund loaned equity investments and received $2,828,150 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         FSC-21

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Small-Mid Cap Growth VIP Fund (continued)

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, 2017, investments in restricted securities, excluding certain securities exempt from registration under the 1933 Act deemed to be liquid, were as follows:

Shares	Issuer	Acquisition Date		Cost		Value
115,528	DraftKings Inc., pfd., D		8/07/15	$	622,222	$	383,147
284,105	DraftKings Inc., pfd., D-1		8/07/15		2,177,781		1,295,720
	Total Restricted Securities (Value is 0.4% of Net Assets)			$	2,800,003	$	1,678,867

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 9, 2018. 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 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statement of Operations. During the period ended June 30, 2017, the Fund did not use the Global Credit Facility.

9. Redemption In-Kind

During the year ended December 31, 2016, the Fund realized $22,002,600 of net gains resulting from a redemption in-kind in which a shareholder redeemed fund shares for cash and securities held by the Fund. Because such gains are not taxable to the Fund and are not distributed to remaining shareholders, they have been reclassified from accumulated net realized gains to paid-in capital.

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)

FSC-22         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Small-Mid Cap Growth VIP Fund (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, 2017, 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	$	73,705,323	$	—	$	1,678,867	$	75,384,190
All Other Equity Investmentsb		353,019,207		—		—		353,019,207
Short Term Investments		32,647,738		—		—		32,647,738
Total Investments in Securities	$	459,372,268	$	—	$	1,678,867	$	461,051,135

^aIncludes common and preferred stocks.

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

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

11. Investment Company Reporting Modernization

In October 2016, the U.S. Securities and Exchange Commission adopted new rules and amended existing rules (together, final rules) intended to modernize the reporting and disclosure of information by registered investment companies. In part, the final rules amend Regulation S-X and require standardized, enhanced disclosures about derivatives in investment company financial statements, as well as other amendments. The compliance date for the amendments to Regulation S-X is August 1, 2017. Management has reviewed the requirements and believes the adoption of the amendments to Regulation S-X will not have a material impact on the Fund’s financial statements and related disclosures.

12. Subsequent Events

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

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Franklin Strategic Income VIP Fund

This semiannual report for Franklin Strategic Income VIP Fund covers the period ended June 30, 2017.

Class 2 Performance Summary as of June 30, 2017

The Fund’s Class 2 Shares delivered a +3.01% total return* for the six-month period ended June 30, 2017.

*The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through its current fiscal year-end. Fund investment results reflect the fee waiver; without this waiver, the results would have been lower.

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

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 Goal 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 Bloomberg Barclays U.S. Aggregate Index, delivered a +2.27% 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 +3.60% return.²

Economic and Market Overview

U.S. economic growth decelerated in 2017’s first quarter, largely due to slower growth in consumer spending and declines in private inventory investment and government spending. However, growth accelerated in the second quarter due to increases in consumer spending, business investment and federal government spending. The manufacturing sector generally expanded, and the services sector also continued to grow. The unemployment rate decreased from 4.7% in December 2016 to 4.4% at period-end.³ Monthly retail sales were volatile, but grew for most of the period. Annual inflation, as measured by the Consumer Price Index, decreased from 2.1% to 1.6% during the period.

The U.S. Federal Reserve (Fed), at its March meeting, increased the federal funds target rate from 0.50%–0.75% to 0.75%–1.00%. The Fed again increased its target range by a quarter point to 1.00%–1.25% at its June meeting. The Fed made both of these increases amid signs of a growing U.S. economy, a strengthening labor market and an improvement in business spending.

The 10-year Treasury yield, which moves inversely to its price, shifted throughout the period. It increased early during the period amid expectations of rate hikes by the Fed and upbeat economic data. During the latter part of the period, U.S. political uncertainty and geopolitical tensions in the Middle East and the Korean peninsula resulted in a decline in the yield. However, in June, the yield rose again due to renewed optimism for improvement in economic growth. Overall, the U.S. Treasury yield fell from 2.45% on December 30, 2016, to 2.31% at period-end.

Investment Strategy

We allocate our investments among the various types of debt available based on our assessment of changing economic, global market, industry and issuer conditions. We use a top-down analysis of macroeconomic trends, combined with a bottom-up fundamental analysis of market sectors, industries and issuers, seeking to take advantage of varying sector reactions to economic events. For example, we may evaluate business cycles, yield curves, country risk, and the relative interest rates among currencies, and values between and within

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.

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

FSI-2         Semiannual Report

FRANKLIN STRATEGIC INCOME VIP FUND

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?

A yield curve is a line that plots the yield to maturity of bonds having equal credit quality against their maturity dates.

Manager’s Discussion

The Fund allocated assets across the broad fixed income markets. During the period, we maintained large allocations to credit-sensitive sector securities, primarily noninvestment-grade corporate credit, with a smaller exposure to investment-grade corporate bonds. The Fund also held positions in select non-U.S. dollar global government bonds. Additionally, the Fund sought to maintain a relatively low sensitivity to U.S. interest rates.

The Fund’s non-U.S. dollar yield curve positioning posted strong positive returns and delivered positive absolute performance. The Fund’s exposure to corporate credit provided a significant boost to absolute performance, led by senior-secured floating-rate bank loans, while investment-grade corporate bond, high-yield corporate bonds and collateralized loan obligations also benefited returns. In addition, performance was supported by our exposures to non-agency residential mortgage-backed securities, currency positions and commercial mortgage-backed securities.

In contrast, our non-US dollar denominated emerging-market debt, and Treasury-Inflation Protected-Securities also weighed on returns.

The Fund utilized derivatives, including credit default swaps, currency forwards and government bond futures, primarily as a tool for efficient portfolio management and to manage overall portfolio risk. These derivative transactions may provide the same, or similar, net long or short exposure to select currencies, interest rates, countries, duration or credit risks compared to holding securities.

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.

Portfolio Composition* Based on Total Net Assets
	6/30/17		12/31/16
High-Yield Corporate Bonds		27.5%		25.6%
Investment-Grade Corporate Bonds		17.2%		16.9%
Floating-Rate Loans		16.1%		16.4%
Agency Mortgage-Backed Securities		9.5%		9.9%
U.S. Treasury Securities		7.5%		5.4%
International Government & Agency Bonds		7.2%		7.9%
Collateralized Loan Obligations		3.8%		3.9%
Residential Mortgage-Backed Securities		3.4%		1.6%
Other		3.3%		4.1%
Commercial Mortgage-Backed Securities		2.9%		2.1%
Asset-Backed Securities		2.1%		2.1%
Municipal Bonds		1.8%		1.9%
Short-Term Investments & Other Net Assets		-2.3%		2.3%

*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 derivatives, unsettled trades or other factors. The composition may not match the Statements of Investments (SOI).

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 financial assets and/or to hedge against credit risk.

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.

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, 2017, 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         FSI-3

FRANKLIN STRATEGIC INCOME VIP FUND

Class 2 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: (1) transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes; and (2) 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 table below shows Fund-level ongoing expenses and can help you understand these costs 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 table below provides information about the actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of ongoing Fund expenses but does not include the effect of ongoing Contract expenses, is used to calculate the “Ending Account Value.” You can estimate the Fund-level expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number under the headings “Actual” and “Fund-Level Expenses Paid During Period” (if Fund-Level Expenses Paid During Period were $7.50, then 8.6 × $7.50 = $64.50). In this illustration, the estimated expenses paid this period at the Fund level are $64.50.

Hypothetical Example for Comparison with Other Mutual Funds

Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other mutual funds offered through the Contract. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds offered through the Contract.

Please note that expenses shown in the table are meant to highlight ongoing costs at the Fund level only and do not reflect any ongoing expenses at the Contract level, or transaction expenses at either the Fund or Contract levels. In addition, 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.

		Actual (actual return after expenses)				Hypothetical (5% annual return before expenses)
Share Class	Beginning Account Value 1/1/17		Ending Account Value 6/30/17	Fund-Level Expenses Paid During Period 1/1/17–6/30/17	1,2		Ending Account Value 6/30/17	Fund-Level Expenses Paid During Period 1/1/17–6/30/17	1,2	Net Annualized Expense Ratio	2
Class 2	$1,000		$1,030.10	$4.33			$1,020.53	$4.31		0.86%

1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above — in the far right column — multiplied by the simple average account value over the period indicated, and then multiplied by 181/365 to reflect the one-half year period.

2. Reflects expenses after fee waivers and expense reimbursements. Does not include any ongoing expenses of the Contract for which the Fund is an investment option or acquired fund fees and expenses.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Consolidated Financial Highlights

Franklin Strategic Income VIP Fund

	Six Months Ended June 30, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 1
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$11.01			$10.55			$11.90			$12.64			$13.17			$12.55
Income from investment operationsa:
Net investment incomeb		0.23			0.48			0.53			0.54			0.59			0.65
Net realized and unrealized gains (losses)		0.12			0.37			(0.91	)		(0.25	)		(0.15	)		0.92
Total from investment operations		0.35			0.85			(0.38	)		0.29			0.44			1.57
Less distributions from:
Net investment income and net foreign currency gains		(0.35	)		(0.39	)		(0.77	)		(0.78	)		(0.80	)		(0.93	)
Net realized gains		—			—			(0.20	)		(0.25	)		(0.17	)		(0.02	)
Total distributions		(0.35	)		(0.39	)		(0.97	)		(1.03	)		(0.97	)		(0.95	)
Net asset value, end of period		$11.01			$11.01			$10.55			$11.90			$12.64			$13.17
Total returnc		3.14%			8.25%			(3.62)%			2.12%			3.52%			13.12%
Ratios to average net assetsd
Expenses before waiver and payments by affiliates		0.67%			0.67%			0.63%			0.63%			0.60%			0.58%
Expenses net of waiver and payments by affiliates		0.61%	e		0.60%	e		0.62%	e		0.62%	e		0.60%	e		0.58%
Net investment income		4.07%			4.42%			4.71%			4.34%			4.58%			5.04%
Supplemental data
Net assets, end of period (000’s)		$379,253			$396,170			$441,658			$574,850			$705,493			$1,019,537
Portfolio turnover rate		54.68%			128.51%			85.85%			55.64%			48.06%			49.98%
Portfolio turnover rate excluding mortgage dollar rollsf		25.39%			77.93%			51.47%			48.86%			47.01%			48.75%

^a The 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.

^b Based on average daily shares outstanding.

^c Total 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.

^d Ratios are annualized for periods less than one year, except for non-recurring expenses, if any.

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

^f See Note 1(h) regarding mortgage dollar rolls.

The accompanying notes are an integral part of these consolidated financial  statements.    |   Semiannual Report             FSI-5

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

CONSOLIDATED FINANCIAL HIGHLIGHTS

Franklin Strategic Income VIP Fund (continued)

	Six Months Ended June 30, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 2
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$10.64			$10.21			$11.55			$12.30			$12.84			$12.27
Income from investment operationsa:
Net investment incomeb		0.21			0.43			0.49			0.49			0.54			0.60
Net realized and unrealized gains (losses)		0.11			0.36			(0.89	)		(0.24	)		(0.13	)		0.89
Total from investment operations		0.32			0.79			(0.40	)		0.25			0.41			1.49
Less distributions from:
Net investment income and net foreign currency gains.		(0.32	)		(0.36	)		(0.74	)		(0.75	)		(0.78	)		(0.90	)
Net realized gains		—			—			(0.20	)		(0.25	)		(0.17	)		(0.02	)
Total distributions		(0.32	)		(0.36	)		(0.94	)		(1.00	)		(0.95	)		(0.92	)
Net asset value, end of period		$10.64			$10.64			$10.21			$11.55			$12.30			$12.84
Total returnc		3.01%			7.94%			(3.87)%			1.86%			3.32%			12.75%
Ratios to average net assetsd
Expenses before waiver and payments by affiliates		0.92%			0.92%			0.88%			0.88%			0.85%			0.83%
Expenses net of waiver and payments by affiliates		0.86%	e		0.85%	e		0.87%	e		0.87%	e		0.85%	e		0.83%
Net investment income		3.82%			4.17%			4.46%			4.09%			4.33%			4.79%
Supplemental data
Net assets, end of period (000’s)		$211,739			$203,418			$202,192			$206,571			$175,307			$158,451
Portfolio turnover rate		54.68%			128.51%			85.85%			55.64%			48.06%			49.98%
Portfolio turnover rate excluding mortgage dollar rollsf		25.39%			77.93%			51.47%			48.86%			47.01%			48.75%

^a The 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.

^b Based on average daily shares outstanding.

^c Total 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.

^d Ratios are annualized for periods less than one year, except for non-recurring expenses, if any.

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

^f See 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, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 4
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$10.90			$10.44			$11.78			$12.51			$13.04			$12.44
Income from investment operationsa:
Net investment incomeb		0.20			0.43			0.49			0.49			0.54			0.60
Net realized and unrealized gains (losses)		0.13			0.38			(0.91	)		(0.25	)		(0.14	)		0.91
Total from investment operations		0.33			0.81			(0.42	)		0.24			0.40			1.51
Less distributions from:
Net investment income and net foreign currency gains.		(0.30	)		(0.35	)		(0.72	)		(0.72	)		(0.76	)		(0.89	)
Net realized gains		—			—			(0.20	)		(0.25	)		(0.17	)		(0.02	)
Total distributions		(0.30	)		(0.35	)		(0.92	)		(0.97	)		(0.93	)		(0.91	)
Net asset value, end of period		$10.93			$10.90			$10.44			$11.78			$12.51			$13.04
Total returnc		2.95%			7.86%			(3.98)%			1.75%			3.17%			12.67%
Ratios to average net assetsd
Expenses before waiver and payments by affiliates		1.02%			1.02%			0.98%			0.98%			0.95%			0.93%
Expenses net of waiver and payments by affiliates		0.96%	e		0.95%	e		0.97%	e		0.97%	e		0.95%	e		0.93%
Net investment income		3.72%			4.07%			4.36%			3.99%			4.23%			4.69%
Supplemental data
Net assets, end of period (000’s)		$76,283			$80,175			$92,965			$113,986			$134,970			$196,479
Portfolio turnover rate		54.68%			128.51%			85.85%			55.64%			48.06%			49.98%
Portfolio turnover rate excluding mortgage dollar rollsf		25.39%			77.93%			51.47%			48.86%			47.01%			48.75%

^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, except for non-recurring expenses, if any.

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

^fSee 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 Statement of Investments, June 30, 2017 (unaudited)

Franklin Strategic Income VIP Fund
		Country		Shares/Units/ Warrants		Value
	Common Stocks and Other Equity Interests 1.9%
	Consumer Services 1.3%
a,b,c	Turtle Bay Resort		United States		1,901,449	$	8,841,736
	Energy 0.4%
a	CHC Group LLC		Cayman Islands		17,097		196,615
a	Energy XXI Gulf Coast Inc.		United States		26,029		483,359
a	Energy XXI Gulf Coast Inc., wts., 12/30/21		United States		4,009		4,009
a	Halcon Resources Corp.		United States		97,655		443,354
a	Halcon Resources Corp., wts., 9/09/20		United States		8,155		7,013
a	Linn Energy Inc.		United States		23,266		710,544
a	Midstates Petroleum Co. Inc.		United States		682		8,641
a,d	Midstates Petroleum Co. Inc., wts., 4/21/20		United States		4,836		3,553
a	Penn Virginia Corp.		United States		18,797		690,790
a	W&T Offshore Inc.		United States		85,100		166,796
							2,714,674
	Materials 0.1%
a	Verso Corp., A		United States		6,954		32,614
a	Verso Corp., wts., 7/25/23		United States		732		110
e	Warrior Met Coal Inc		United States		20,905		341,985
							374,709
	Retailing 0.0%†
a,e	Holdco 2, A		South Africa		14,792,309		11,296
a,e	Holdco 2, B		South Africa		1,472,041		1,124
							12,420
	Transportation 0.0%†
a,d	CEVA Holdings LLC		United States		224		56,070
	Utilities 0.1%
	Vistra Energy Corp.		United States		25,689		431,318
	Total Common Stocks and Other Equity Interests (Cost $17,003,706)						12,430,927
	Management Investment Companies 6.3%
	Diversified Financials 6.3%
f	Franklin Lower Tier Floating Rate Fund		United States		2,081,861		21,942,813
f	Franklin Middle Tier Floating Rate Fund		United States		2,024,951		20,330,512
	Total Management Investment Companies (Cost $40,585,221)						42,273,325
	Convertible Preferred Stocks 0.0%†
	Transportation 0.0%†
a,d	CEVA Holdings LLC, cvt. pfd., A-1		United States		6		2,250
a,d	CEVA Holdings LLC, cvt. pfd., A-2		United States		486		135,943
	Total Convertible Preferred Stocks (Cost $731,856)						138,193

FSI-8         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Strategic Income VIP Fund (continued)

		Country		Principal Amount*			Value
	Convertible Bonds (Cost $1,626,587) 0.2%
	Energy 0.2%
	CHC Group LLC/CHC Finance Ltd., cvt., zero cpn., 10/01/20		Cayman Islands		879,236		$	1,376,004
	Corporate Bonds 45.0%
	Automobiles & Components 0.9%
	Fiat Chrysler Automobiles NV, senior note, 5.25%, 4/15/23		United Kingdom		2,700,000			2,748,965
	Ford Motor Credit Co. LLC, senior note, 3.096%, 5/04/23		United States		1,400,000			1,385,090
	The Goodyear Tire & Rubber Co.,
	senior bond, 5.00%, 5/31/26		United States		1,300,000			1,348,750
	senior note, 5.125%, 11/15/23		United States		700,000			735,000
								6,217,805
	Banks 4.7%
	Bank of America Corp.,
	senior note, 7.75%, 4/30/18		United States		500,000	GBP		687,636
	senior note, 5.65%, 5/01/18		United States		750,000			773,715
	senior note, 3.50%, 4/19/26		United States		4,800,000			4,825,886
	CIT Group Inc., senior note, 5.00%, 8/15/22.		United States		2,500,000			2,700,000
	Citigroup Inc.,
	senior note, 3.875%, 10/25/23		United States		3,000,000			3,134,697
	senior note, 3.30%, 4/27/25		United States		300,000			300,630
	senior note, 3.40%, 5/01/26		United States		3,100,000			3,072,723
	sub. bond, 5.50%, 9/13/25		United States		500,000			556,988
	sub. note, 4.05%, 7/30/22		United States		300,000			313,939
	JPMorgan Chase & Co.,
	g junior sub. bond, R, 6.00% to 8/01/23, FRN thereafter, Perpetual		United States		1,500,000			1,618,125
	g junior sub. bond, X, 6.10% to 10/01/24, FRN thereafter, Perpetual		United States		500,000			543,125
	senior bond, 3.30%, 4/01/26		United States		400,000			397,689
	senior bond, 3.20%, 6/15/26		United States		1,500,000			1,484,264
	senior note, 4.25%, 10/15/20		United States		1,000,000			1,062,283
	sub. note, 3.375%, 5/01/23		United States		1,000,000			1,015,959
	sub. note, 3.875%, 9/10/24		United States		1,000,000			1,032,796
	Royal Bank of Scotland Group PLC, sub. note, 5.125%, 5/28/24		United Kingdom		500,000			525,585
	Wells Fargo & Co.,
	g junior sub. bond, S, 5.90% to 6/15/24, FRN thereafter, Perpetual		United States		1,500,000			1,608,375
	senior note, 2.60%, 7/22/20		United States		700,000			710,123
	senior note, 3.00%, 4/22/26		United States		5,000,000			4,889,380
								31,253,918
	Capital Goods 1.4%
	Aircastle Ltd., senior note, 4.125%, 5/01/24		United States		1,600,000			1,630,000
h	Vertiv Group Corp., senior note, 144A, 9.25%, 10/15/24		United States		1,600,000			1,736,000
	Navistar International Corp., senior bond, 8.25%, 11/01/21		United States		1,400,000			1,421,000
h	Tennant Co., senior note, 144A, 5.625%, 5/01/25		United States		1,000,000			1,055,000
h	Terex Corp., senior note, 144A, 5.625%, 2/01/25		United States		1,400,000			1,442,000
	TransDigm Inc.,
	senior sub. bond, 6.50%, 7/15/24		United States		500,000			517,500
	senior sub. bond, 6.50%, 5/15/25		United States		200,000			204,000
	senior sub. bond, 6.375%, 6/15/26		United States		900,000			915,750
	senior sub. note, 6.00%, 7/15/22		United States		400,000			413,000
								9,334,250
	Commercial & Professional Services 0.3%
	United Rentals North America Inc., senior bond, 5.875%, 9/15/26		United States		1,600,000			1,710,000

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)
	Consumer Durables & Apparel 0.8%
h	Hanesbrands Inc., senior bond, 144A, 4.875%, 5/15/26		United States		2,000,000		$	2,040,000
	KB Home,
	senior note, 4.75%, 5/15/19		United States		1,000,000			1,035,000
	senior note, 7.00%, 12/15/21		United States		1,200,000			1,356,000
	Toll Brothers Finance Corp., senior bond, 5.625%, 1/15/24		United States		1,100,000			1,189,375
								5,620,375
	Consumer Services 2.0%
h	1011778 BC ULC/New Red Finance Inc.,
	secured note, second lien, 144A, 6.00%, 4/01/22		Canada		2,000,000			2,077,500
	senior secured note, first lien, 144A, 4.25%, 5/15/24		Canada		900,000			896,571
h	International Game Technology PLC, senior secured bond, 144A, 6.50%, 2/15/25		United States		3,300,000			3,634,125
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			940,500
	senior note, 144A, 5.25%, 6/01/26		United States		800,000			844,000
	Marriott International Inc., senior bond, 3.75%, 10/01/25		United States		3,000,000			3,091,392
	MGM Resorts International, senior note, 6.75%, 10/01/20		United States		200,000			222,080
h	Wynn Las Vegas LLC/Wynn Las Vegas Capital Corp., senior bond, 144A, 5.50%, 3/01/25		United States		700,000			738,062
h	Wynn Macau Ltd., senior note, 144A, 5.25%, 10/15/21		Macau		1,000,000			1,030,000
								13,474,230
	Diversified Financials 3.0%
	Capital One Financial Corp., senior note, 3.20%, 2/05/25		United States		2,000,000			1,961,164
	The Goldman Sachs Group Inc.,
	senior note, 3.50%, 1/23/25		United States		3,000,000			3,035,763
	senior note, 3.75%, 2/25/26		United States		1,500,000			1,530,261
h	Lincoln Finance Ltd., senior secured note, 144A, 6.875%, 4/15/21		Netherlands		600,000	EUR		736,340
	Morgan Stanley,
	senior note, 3.875%, 1/27/26		United States		4,200,000			4,328,940
	sub. bond, 3.95%, 4/23/27		United States		1,000,000			1,008,426
	Navient Corp.,
	senior note, 6.625%, 7/26/21		United States		800,000			863,000
	senior note, 7.25%, 9/25/23		United States		2,500,000			2,693,750
	senior note, 6.125%, 3/25/24		United States		500,000			517,500
h	Park Aerospace Holdings Ltd.,
	senior note, 144A, 5.25%, 8/15/22		Ireland		700,000			733,943
	senior note, 144A, 5.50%, 2/15/24		Ireland		1,300,000			1,358,630
h	Transurban Finance Co. Pty. Ltd., 144A, 3.375%, 3/22/27		Australia		1,100,000			1,072,180
								19,839,897
	Energy 3.9%
	Apache Corp., senior bond, 2.625%, 1/15/23		United States		1,900,000			1,856,515
i	BreitBurn Energy Partners LP/BreitBurn Finance Corp., senior bond, 7.875%, 4/15/22		United States		1,200,000			324,000
h	California Resources Corp., secured note, second lien, 144A, 8.00%, 12/15/22		United States		716,000			455,555
	Cheniere Corpus Christi Holdings LLC,
	senior note, first lien, 7.00%, 6/30/24		United States		800,000			896,000
	senior secured note, first lien, 5.875%, 3/31/25		United States		700,000			749,000
	CONSOL Energy Inc., senior note, 5.875%, 4/15/22		United States		2,500,000			2,468,750
	Energy Transfer Equity LP, senior note, first lien, 7.50%, 10/15/20		United States		1,900,000			2,132,750

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)
	Energy (continued)
	Energy Transfer Partners LP, senior note, 5.20%, 2/01/22		United States		1,000,000	$	1,076,121
h,j	EnQuest PLC, 144A, PIK, 8.00%, 10/15/23		United Kingdom		1,178,610		879,407
h,k	Gaz Capital SA, (OJSC Gazprom), loan participation, senior note, 144A, 3.85%, 2/06/20		Russia		1,500,000		1,520,325
	Kinder Morgan Inc.,
	senior bond, 4.30%, 6/01/25		United States		2,000,000		2,082,922
	senior note, 6.50%, 9/15/20		United States		1,500,000		1,666,959
	Martin Midstream Partners LP/Martin Midstream Finance Corp., senior note, 7.25%, 2/15/21		United States		2,000,000		2,030,000
	Regency Energy Partners LP/Regency Energy Finance Corp.,
	senior note, 5.875%, 3/01/22		United States		200,000		220,510
	senior note, 5.00%, 10/01/22		United States		500,000		536,787
	Sabine Pass Liquefaction LLC,
	first lien, 5.625%, 2/01/21		United States		2,000,000		2,178,836
	first lien, 5.625%, 4/15/23		United States		900,000		1,001,520
	Sanchez Energy Corp., senior note, 6.125%, 1/15/23		United States		300,000		241,500
h,j	W&T Offshore Inc.,
	secured note, second lien, 144A, PIK, 9.00%, 5/15/20		United States		459,137		376,031
	senior secured note, third lien, 144A, PIK, 10.00%, 6/15/21		United States		410,888		290,520
	Weatherford International Ltd.,
	senior note, 7.75%, 6/15/21		United States		800,000		807,000
	senior note, 8.25%, 6/15/23		United States		1,000,000		1,002,500
h	Woodside Finance Ltd., senior note, 144A, 3.70%, 9/15/26		Australia		1,300,000		1,282,693
							26,076,201
	Food & Staples Retailing 0.7%
	Kroger Co., senior bond, 2.65%, 10/15/26		United States		1,400,000		1,293,893
	Walgreens Boots Alliance Inc., senior note, 3.80%, 11/18/24		United States		3,200,000		3,328,979
							4,622,872
	Food, Beverage & Tobacco 1.6%
	Anheuser-Busch InBev Finance Inc., senior note, 3.30%, 2/01/23		Belgium		1,300,000		1,340,136
h	Imperial Brands Finance PLC, senior note, 144A, 3.50%, 2/11/23		United Kingdom		2,100,000		2,152,928
h	JBS USA LLC/Finance Inc.,
	senior note, 144A, 8.25%, 2/01/20		United States		1,500,000		1,507,500
	senior note, 144A, 5.75%, 6/15/25		United States		500,000		472,500
	Kraft Heinz Foods Co., senior bond, 3.00%, 6/01/26		United States		2,400,000		2,300,700
h	Lamb Weston Holdings Inc.,
	senior note, 144A, 4.625%, 11/01/24		United States		600,000		621,000
	senior note, 144A, 4.875%, 11/01/26		United States		1,400,000		1,457,750
h	Post Holdings Inc.,
	senior note, 144A, 6.00%, 12/15/22		United States		500,000		531,875
	senior note, 144A, 5.50%, 3/01/25		United States		500,000		516,875
							10,901,264
	Health Care Equipment & Services 1.6%
	CHS/Community Health Systems Inc.,
	senior note, 6.875%, 2/01/22		United States		400,000		351,000
	senior secured note, first lien, 6.25%, 3/31/23		United States		500,000		518,050
	DaVita Inc.,
	senior bond, 5.125%, 7/15/24		United States		500,000		508,438
	senior bond, 5.00%, 5/01/25		United States		900,000		904,500
	senior note, 5.75%, 8/15/22		United States		1,500,000		1,543,125

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)
	Health Care Equipment & Services (continued)
	HCA Inc.,
	senior bond, 5.875%, 5/01/23		United States		1,500,000		$	1,636,875
	senior secured bond, first lien, 5.875%, 3/15/22		United States		450,000			500,063
	senior secured bond, first lien, 5.25%, 4/15/25		United States		600,000			646,500
	senior secured bond, first lien, 5.50%, 6/15/47		United States		1,200,000			1,245,000
h	MPH Acquisition Holdings LLC, senior note, 144A, 7.125%, 6/01/24		United States		900,000			961,875
	Stryker Corp., senior bond, 3.50%, 3/15/26		United States		500,000			513,075
	Tenet Healthcare Corp.,
	senior note, 5.50%, 3/01/19		United States		300,000			312,000
	senior note, 8.125%, 4/01/22		United States		1,000,000			1,065,000
								10,705,501
	Household & Personal Products 0.3%
	The Procter & Gamble Co., senior note, 2.45%, 11/03/26		United States		1,800,000			1,761,383
	Insurance 1.1%
	MetLife Inc.,
	senior note, 3.60%, 4/10/24		United States		2,400,000			2,524,342
	senior note, 3.00%, 3/01/25		United States		300,000			301,226
h	Nippon Life Insurance Co., sub. bond, 144A, 5.10% to 10/16/24, FRN thereafter, 10/16/44		Japan		3,500,000			3,741,570
	Prudential Financial Inc., 3.50%, 5/15/24		United States		800,000			834,198
								7,401,336
	Materials 5.7%
	ArcelorMittal,
	senior note, 6.00%, 3/01/21		France		1,800,000			1,948,005
	senior note, 6.125%, 6/01/25		France		300,000			337,500
h	Ardagh Packaging Finance PLC/Ardagh MP Holdings USA Inc.,
	senior note, 144A, 6.00%, 6/30/21		Luxembourg		1,300,000			1,343,062
	senior note, 144A, 6.00%, 2/15/25		Luxembourg		400,000			421,000
h	BWAY Holding Co., senior note, 144A, 7.25%, 4/15/25		United States		2,200,000			2,238,500
h	Cemex Finance LLC, senior secured note, first lien, 144A, 6.00%, 4/01/24		Mexico		1,000,000			1,064,290
h	Cemex SAB de CV, senior secured bond, first lien, 144A, 5.70%, 1/11/25 .		Mexico		1,500,000			1,599,390
h	Ceramtec Group GmbH, senior note, 144A, 8.25%, 8/15/21		Germany		1,200,000	EUR		1,442,936
	The Chemours Co., senior note, 6.625%, 5/15/23		United States		2,000,000			2,125,000
h	First Quantum Minerals Ltd.,
	senior note, 144A, 7.00%, 2/15/21		Zambia		625,000			643,750
	senior note, 144A, 7.25%, 4/01/23		Zambia		800,000			788,000
h	FMG Resources (August 2006) Pty. Ltd., senior note, 144A, 5.125%, 5/15/24		Australia		800,000			802,000
	Freeport-McMoRan Inc., senior note, 4.55%, 11/14/24		United States		2,500,000			2,368,750
h	Glencore Finance Canada Ltd., senior bond, 144A, 4.95%, 11/15/21		Switzerland		1,000,000			1,070,550
h	Glencore Funding LLC,
	senior note, 144A, 4.125%, 5/30/23		Switzerland		600,000			616,457
	senior note, 144A, 4.625%, 4/29/24		Switzerland		250,000			261,713
h	INVISTA Finance LLC, senior secured note, 144A, 4.25%, 10/15/19		United States		3,000,000			3,105,600
	LYB International Finance BV, senior note, 4.00%, 7/15/23		United States		2,100,000			2,230,326
h	New Gold Inc., senior note, 144A, 6.375%, 5/15/25		Canada		700,000			722,750
h	Novelis Corp., senior bond, 144A, 5.875%, 9/30/26		United States		2,000,000			2,065,000

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)
	Materials (continued)
h	Owens-Brockway Glass Container Inc.,
	senior note, 144A, 5.00%, 1/15/22		United States		1,400,000		$	1,485,750
	senior note, 144A, 5.875%, 8/15/23		United States		700,000			773,062
	Reynolds Group Issuer Inc./Reynolds Group Issuer LLC/Reynolds Group Issuer Luxembourg SA,
	first lien, 5.75%, 10/15/20		United States		700,000			717,213
	h first lien, 144A, 5.125%, 7/15/23		United States		700,000			728,000
	h senior note, 144A, 7.00%, 7/15/24		United States		500,000			537,295
h	Sealed Air Corp.,
	senior bond, 144A, 5.125%, 12/01/24		United States		1,000,000			1,077,500
	senior bond, 144A, 5.50%, 9/15/25		United States		400,000			438,000
	senior note, 144A, 4.875%, 12/01/22		United States		1,000,000			1,068,750
	Steel Dynamics Inc.,
	senior bond, 5.50%, 10/01/24		United States		1,000,000			1,065,000
	senior note, 5.125%, 10/01/21		United States		1,000,000			1,029,480
h	SunCoke Energy Partners LP/SunCoke Energy Partners Finance Corp., senior note, 144A, 7.50%, 6/15/25		United States		900,000			893,250
h	Valvoline Inc., senior note, 144A, 5.50%, 7/15/24		United States		700,000			742,000
								37,749,879
	Media 5.0%
	21st Century Fox America Inc., senior note, 3.00%, 9/15/22		United States		500,000			507,830
h	Altice U.S. Finance I Corp., senior secured bond, 144A, 5.50%, 5/15/26		United States		1,700,000			1,789,250
	AMC Networks Inc., senior note, 5.00%, 4/01/24		United States		2,000,000			2,052,500
	CCO Holdings LLC/CCO Holdings Capital Corp.,
	senior bond, 5.25%, 9/30/22		United States		2,000,000			2,063,800
	h senior bond, 144A, 5.375%, 5/01/25		United States		900,000			960,750
	Clear Channel Worldwide Holdings Inc.,
	senior note, 6.50%, 11/15/22		United States		1,000,000			1,032,700
	senior sub. note, 7.625%, 3/15/20		United States		200,000			198,000
	senior sub. note, 7.625%, 3/15/20		United States		500,000			499,375
	CSC Holdings LLC, senior note, 6.75%, 11/15/21		United States		2,000,000			2,220,000
	DISH DBS Corp.,
	senior note, 6.75%, 6/01/21		United States		500,000			556,250
	senior note, 5.875%, 7/15/22		United States		500,000			538,750
	senior note, 5.875%, 11/15/24		United States		500,000			535,360
	iHeartCommunications Inc.,
	senior secured bond, first lien, 9.00%, 3/01/21		United States		1,000,000			753,750
	senior secured note, first lien, 9.00%, 9/15/22		United States		700,000			520,625
h	Nexstar Broadcasting Inc., senior note, 144A, 5.625%, 8/01/24		United States		1,600,000			1,624,000
h	Sirius XM Radio Inc.,
	senior bond, 144A, 6.00%, 7/15/24		United States		1,700,000			1,810,500
	senior bond, 144A, 5.375%, 4/15/25		United States		800,000			829,000
	Tegna Inc.,
	senior bond, 6.375%, 10/15/23		United States		1,000,000			1,058,750
	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			1,026,250
	Time Warner Cable LLC, senior note, 4.00%, 9/01/21		United States		1,300,000			1,360,001
	Time Warner Inc., senior bond, 2.95%, 7/15/26		United States		2,500,000			2,363,367
h	Unitymedia Hessen GmbH & Co. KG/Unitymedia NRW GmbH, senior secured note, first lien, 144A, 5.625%, 4/15/23		Germany		560,000	EUR		678,056
h	Unitymedia KabelBW GmbH, senior bond, 144A, 6.125%, 1/15/25		Germany		1,700,000			1,831,750

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)
	Media (continued)
h	Univision Communications Inc., senior secured note, first lien, 144A, 5.125%, 2/15/25		United States		2,500,000		$	2,484,375
h	Virgin Media Finance PLC, senior bond, 144A, 6.375%, 10/15/24		United Kingdom		900,000	GBP		1,265,885
h	Virgin Media Secured Finance PLC, senior secured bond, first lien, 144A, 5.50%, 1/15/25		United Kingdom		1,900,000			1,980,750
h	Ziggo Secured Finance BV, senior secured bond, 144A, 4.25%, 1/15/27		Netherlands		700,000	EUR		848,377
								33,700,126
	Pharmaceuticals, Biotechnology & Life Sciences 1.7%
	Actavis Funding SCS, senior bond, 3.80%, 3/15/25		United States		2,200,000			2,279,446
	Baxalta Inc., senior note, 4.00%, 6/23/25		United States		2,500,000			2,612,088
	Biogen Inc., senior note, 3.625%, 9/15/22		United States		1,500,000			1,570,458
h,j	Eagle Holdings Co. II LLC, senior note, 144A, PIK, 7.625%, 5/15/22		United States		200,000			206,250
h	Endo Dac/Endo Finance LLC/Endo Finco Inc.,
	senior bond, 144A, 6.00%, 2/01/25		United States		1,200,000			984,000
	senior note, 144A, 6.00%, 7/15/23		United States		400,000			338,200
h	Jaguar Holding Co. II/Pharmaceutical Product Development LLC, senior note, 144A, 6.375%, 8/01/23		United States		1,200,000			1,267,500
h	Valeant Pharmaceuticals International, senior note, 144A, 6.375%, 10/15/20		United States		1,100,000			1,071,125
h	Valeant Pharmaceuticals International Inc.,
	senior bond, 144A, 6.125%, 4/15/25		United States		300,000			255,000
	senior note, 144A, 5.50%, 3/01/23		United States		400,000			341,496
	senior note, 144A, 7.00%, 3/15/24		United States		200,000			210,750
								11,136,313
	Real Estate 0.9%
	American Tower Corp., senior bond, 3.375%, 10/15/26		United States		2,400,000			2,353,018
	Equinix Inc., senior bond, 5.375%, 4/01/23		United States		2,500,000			2,609,375
	MPT Operating Partnership LP/MPT Finance Corp., senior bond, 5.25%, 8/01/26		United States		800,000			833,320
								5,795,713
	Retailing 0.6%
	Home Depot Inc., senior note, 2.125%, 9/15/26		United States		1,500,000			1,404,174
h,j	K2016470219 South Africa Ltd., senior secured note, 144A, PIK, 3.00%, 12/31/22		South Africa		1,104,601			49,707
h,j	K2016740260 South Africa Ltd., senior secured note, 144A, PIK, 25.00%, 12/31/22		South Africa		173,896			161,723
	Netflix Inc., senior bond, 5.875%, 2/15/25		United States		2,300,000			2,553,000
								4,168,604
	Semiconductors & Semiconductor Equipment 0.2%
	Qorvo Inc., senior bond, 7.00%, 12/01/25		United States		1,400,000			1,596,000
	Software & Services 1.1%
h	BMC Software Finance Inc., senior note, 144A, 8.125%, 7/15/21		United States		1,900,000			1,976,608
h	First Data Corp.,
	secured note, second lien, 144A, 5.75%, 1/15/24		United States		2,100,000			2,189,250
	senior note, 144A, 7.00%, 12/01/23		United States		700,000			749,000
	Fiserv Inc., senior bond, 3.85%, 6/01/25		United States		600,000			624,368
	Infor (U.S.) Inc., senior note, 6.50%, 5/15/22		United States		1,000,000			1,040,000
h	Symantec Corp., senior note, 144A, 5.00%, 4/15/25		United States		500,000			524,530
								7,103,756

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)
	Technology Hardware & Equipment 0.6%
h	CommScope Technologies LLC,
	senior bond, 144A, 6.00%, 6/15/25		United States		1,400,000		$	1,501,500
	senior bond, 144A, 5.00%, 3/15/27		United States		1,700,000			1,700,000
h	Diamond 1 Finance Corp./Diamond 2 Finance Corp.,
	senior note, 144A, 5.875%, 6/15/21		United States		300,000			315,000
	senior note, 144A, 7.125%, 6/15/24		United States		200,000			219,956
								3,736,456
	Telecommunication Services 3.3%
	AT&T Inc., senior bond, 3.40%, 5/15/25		United States		1,900,000			1,871,234
	CenturyLink Inc.,
	senior bond, 6.75%, 12/01/23		United States		500,000			540,315
	senior bond, 5.625%, 4/01/25		United States		300,000			300,624
h	Digicel Group Ltd., senior note, 144A, 8.25%, 9/30/20		Bermuda		1,200,000			1,125,978
h	Digicel Ltd., senior note, 144A, 6.00%, 4/15/21		Bermuda		1,000,000			961,290
	Hughes Satellite Systems Corp., senior bond, 6.625%, 8/01/26		United States		1,600,000			1,724,000
	Intelsat Jackson Holdings SA,
	senior note, 7.25%, 10/15/20		Luxembourg		1,000,000			950,000
	senior note, 7.50%, 4/01/21		Luxembourg		500,000			463,750
h	Millicom International Cellular SA, senior note, 144A, 6.625%, 10/15/21		Colombia		2,200,000			2,292,356
	Sprint Communications Inc.,
	senior note, 6.00%, 11/15/22		United States		500,000			531,250
	h senior note, 144A, 9.00%, 11/15/18		United States		148,000			160,811
	h senior note, 144A, 7.00%, 3/01/20		United States		800,000			880,000
	Sprint Corp., senior bond, 7.875%, 9/15/23		United States		500,000			576,250
h	Sprint Spectrum Co. LLC/Sprint Spectrum Co. II LLC, first lien, 144A, 3.36%, 3/20/23		United States		1,800,000			1,815,873
	T-Mobile USA Inc.,
	senior bond, 6.50%, 1/15/24		United States		500,000			538,750
	senior bond, 6.375%, 3/01/25		United States		1,300,000			1,408,875
	senior note, 6.125%, 1/15/22		United States		200,000			210,687
	senior note, 6.00%, 4/15/24		United States		200,000			214,500
	Verizon Communications Inc., senior note, 5.15%, 9/15/23		United States		2,000,000			2,224,246
h	Wind Acquisition Finance SA,
	senior secured note, 144A, 4.00%, 7/15/20		Italy		1,200,000	EUR		1,387,292
	senior secured note, 144A, 7.00%, 4/23/21		Italy		1,500,000	EUR		1,786,862
								21,964,943
	Transportation 0.7%
	FedEx Corp., senior bond, 3.25%, 4/01/26		United States		2,500,000			2,526,375
h	Florida East Coast Holdings Corp.,
	secured note, first lien, 144A, 6.75%, 5/01/19		United States		900,000			923,423
	senior note, 144A, 9.75%, 5/01/20		United States		400,000			429,750
	United Airlines Pass Through Trust, second lien, 2016-1, A, 3.45%, 1/07/30		United States		1,000,000			1,011,250
								4,890,798
	Utilities 2.9%
	Calpine Corp.,
	senior bond, 5.75%, 1/15/25		United States		1,200,000			1,129,500
	senior note, 5.375%, 1/15/23		United States		1,300,000			1,272,375
	Dominion Energy Inc., senior bond, 2.85%, 8/15/26		United States		1,100,000			1,050,742
h	Dynegy Inc., senior note, 144A, 8.00%, 1/15/25		United States		2,000,000			1,950,000

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)
	Utilities (continued)
g,h	EDF SA, sub. note, 144A, 5.25% to 1/29/23, FRN thereafter, Perpetual		France		3,000,000	$	3,080,505
	Exelon Corp., senior bond, 3.95%, 6/15/25		United States		1,800,000		1,865,961
h	InterGen NV, secured bond, 144A, 7.00%, 6/30/23		Netherlands		2,500,000		2,418,750
	Sempra Energy,
	senior bond, 3.55%, 6/15/24		United States		700,000		718,042
	senior note, 3.75%, 11/15/25		United States		1,100,000		1,135,333
	The Southern Co., senior bond, 3.25%, 7/01/26		United States		3,600,000		3,528,900
h	Talen Energy Supply LLC, senior note, 144A, 9.50%, 7/15/22		United States		1,400,000		1,211,000
							19,361,108
	Total Corporate Bonds (Cost $296,729,917)						300,122,728
l,m	Senior Floating Rate Interests 10.0%
	Automobiles & Components 0.4%
	The Goodyear Tire & Rubber Co., Second Lien Term Loan, 3.12%, 4/30/19		United States		158,771		160,193
	TI Group Automotive Systems LLC, Initial US Term Loan, 3.976%, 6/30/22		United States		2,245,142		2,247,948
							2,408,141
	Capital Goods 0.2%
	Allison Transmission Inc., Term Loans, 3.22%, 9/23/22		United States		853,436		859,545
	Doncasters U.S. Finance LLC, Second Lien Term Loan, 9.546%, 10/09/20		United States		76,701		73,441
	Harsco Corp., Initial Term Loan, 6.25%, 11/02/23		United States		232,588		236,949
	Leidos (Abacus Innovations Corp.), B Term Loan, 3.50%, 8/16/23		United States		160,958		162,347
							1,332,282
	Commercial & Professional Services 0.1%
	KAR Auction Services Inc., Term Loan B, 3.813%, 3/09/23		United States		693,048		698,246
	Ventia Pty. Ltd., Term B Loans (USD), 4.796%, 5/21/22		Australia		83,512		84,451
							782,697
	Consumer Services 0.7%
	Aristocrat Technologies Inc., Tranche B-2 Loans, 3.406%, 10/20/21		United States		166,886		167,804
	Avis Budget Car Rental LLC, Tranche B Term Loan, 3.30%, 3/15/22		United States		733,118		731,468
n	Caesars Entertainment Operating Co. LLC, Term B Loans, 5.63%, 8/31/24		United States		141,555		141,289
	Eldorado Resorts Inc., Initial Term Loan, 3.375%, 4/17/24		United States		521,702		518,686
	Fitness International LLC, Term A Loan, 4.476%, 4/01/20		United States		2,789,554		2,792,171
	Greektown Holdings LLC, Initial Term Loan, 4.226%, 4/25/24		United States		282,692		283,090
n	NVA Holdings Inc., Second Lien Term Loan, 10.13%, 8/14/22		United States		53,412		54,013
							4,688,521
	Diversified Financials 0.1%
	Russell Investments US Institutional Holdco Inc., Initial Term Loan, 6.976%, 6/01/23		United States		330,823		334,752
	Energy 1.6%
	Bowie Resource Holdings LLC,
	First Lien Initial Term Loan, 6.976%, 8/14/20		United States		2,592,029		2,509,947
	Second Lien Initial Term Loan, 11.976%, 2/16/21		United States		1,248,332		1,165,630

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
l,m	Senior Floating Rate Interests (continued)
	Energy (continued)
n	Fieldwood Energy LLC, Loans, 4.171%, 10/01/18		United States		4,096,974	$	3,950,167
n	Foresight Energy LLC, Term Loans, 8.88%, 3/28/22		United States		1,243,347		1,192,318
n	International Seaways Inc., Initial Term Loans, 8.63%, 6/22/22		United States		850,000		841,500
	OSG Bulk Ships Inc., Initial Term Loan, 5.43%, 8/05/19		United States		990,092		940,587
	UTEX Industries Inc., First Lien Initial Term Loan, 5.226%, 5/21/21		United States		189,437		170,335
							10,770,484
	Food & Staples Retailing 0.3%
	Aramark Corp., U.S. Term A Loan, 2.976%, 3/28/22		United States		602,475		604,546
	Smart and Final LLC, First Lien Term Loan, 4.726% - 4.796%, 11/15/22		United States		1,157,580		1,120,923
							1,725,469
	Food, Beverage & Tobacco 0.3%
	JBS USA LUX SA, New Initial Term Loans, 5.75%, 10/30/22		Brazil		1,739,470		1,697,886
	Health Care Equipment & Services 0.1%
	U.S. Renal Care Inc., Intial Term Loan, 5.546%, 12/31/22		United States		890,198		866,831
	Household & Personal Products 0.1%
	Spectrum Brands Inc., USD Term Loans, 3.172% - 3.179%, 6/23/22		United States		952,841		957,367
	Materials 0.8%
	Chemours Co., Tranche B-1 US Term Loans, 3.57%, 5/12/22		United States		2,704,206		2,717,727
	Cyanco Intermediate Corp., Initial Term Loan, 5.726%, 5/01/20		United States		758,509		762,934
	Huntsman International LLC, 2015 Extended Term B Dollar Loan, 4.226%, 4/19/19		United States		100,667		101,150
	OCI Beaumont LLC, Term B-3 Loan, 7.929%, 8/20/19		United States		929,240		940,855
	Oxbow Carbon LLC,
	Tranche A-1 Term Loan, 3.976%, 10/21/19		United States		465,454		466,036
	Tranche B Term Loan, 4.726%, 1/19/20		United States		565,610		570,559
							5,559,261
	Media 0.7%
	Altice U.S. Finance I Corp., March 2017 Refinancing TL Commitments, 3.466%, 7/28/25		United States		200,109		200,258
	AMC Entertainment Holdings Inc.,
	2016 Incremental Term Loans, 3.466%, 12/15/23		United States		77,724		77,967
	Initial Term Loans, 3.459%, 12/15/22		United States		121,283		121,775
	Charter Communications Operating LLC (CCO Safari), Term Loan A-1, 2.98%, 5/18/21		United States		956,250		958,214
	CSC Holdings LLC (Cablevision), March 2017 Incremental Term Loans, 3.459%, 7/17/25		United States		1,234,200		1,232,272
	Gray Television Inc., Term B-2 Loan, 3.551%, 2/07/24		United States		904,545		911,556
	Lions Gate Entertainment Corp., Term A Loan, 3.226%, 12/08/21		United States		528,252		530,068
	Live Nation Entertainment Inc., Term B-2 Loans, 3.313%, 10/31/23		United States		77,529		77,698
	UPC Financing Partnership (UPC Broadband Holdings BV), Facility AP, 3.909%, 4/15/25		United States		303,920		304,642
							4,414,450
	Pharmaceuticals, Biotechnology & Life Sciences 0.9%
	Endo Luxembourg Finance Co. I S.A.R.L. and Endo LLC, Initial Term Loans, 5.50%, 4/27/24		United States		2,260,321		2,282,041
	Grifols Worldwide Operations USA Inc., Tranche B Term Loan, 3.436%, 1/31/25		United States		2,353,127		2,359,603
	RPI Finance Trust, Term A-3 Loan, 3.046%, 10/14/21		United States		363,782		364,236

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)
	Pharmaceuticals, Biotechnology & Life Sciences (continued)
	Valeant Pharmaceuticals International Inc., Series F Tranche B Term Loan, 5.83%, 4/01/22		United States		1,277,144	$	1,295,858
							6,301,738
	Retailing 0.8%
	Ascena Retail Group Inc., Tranche B Term Loan, 5.625%, 8/21/22		United States		3,436,848		2,927,050
	Dollar Tree Inc., Term A-1 Loans, 2.938%, 7/06/20		United States		536,903		535,722
n	PetSmart Inc., Tranche B-2 Loans, 4.22%, 3/11/22		United States		1,940,396		1,806,842
							5,269,614
	Semiconductors & Semiconductor Equipment 0.3%
	MKS Instruments Inc., Tranche B-2 Term Loans, 3.976%, 5/01/23		United States		431,948		434,648
	ON Semiconductor Corp., 2017 Replacement Term Loans, 3.476%, 3/31/23		United States		1,813,150		1,818,251
							2,252,899
	Software & Services 0.5%
	Global Payments Inc., Term A-2 Loan, 2.939%, 5/02/22		United States		627,658		627,658
	MoneyGram International Inc., Term Loan, 4.546%, 3/27/20		United States		2,241,590		2,243,457
	Rackspace Hosting Inc., 2017 Term Loans, 4.172%, 11/03/23		United States		388,621		390,038
							3,261,153
	Technology Hardware & Equipment 0.4%
	Ciena Corp., Refinancing Term Loan, 3.712%, 1/28/22		United States		182,233		183,144
	CommScope Inc., Tranche 5 Term Loans, 3.296%, 12/29/22		United States		148,379		149,214
	Dell International LLC, Term A-3 Loan, 3.23%, 12/31/18		United States		971,147		973,676
	Western Digital Corp., US Term B-2 Loan, 3.976%, 4/29/23		United States		943,956		951,109
	Zebra Technologies Corp., Second Amendment Refinancing Term Loan, 3.723%, 10/27/21		United States		281,739		283,325
							2,540,468
	Telecommunication Services 0.1%
	Consolidated Communications Inc., Initial Term Loan, 4.23%, 10/05/23		United States		238,460		240,070
	Global Tel*Link Corp., Term Loan, 5.046%, 5/23/20		United States		277,134		277,394
							517,464
	Transportation 0.5%
	Air Canada, Term Loan, 3.46%, 10/06/23		Canada		49,550		49,819
	The Hertz Corp., Tranche B-1 Term Loan, 3.976%, 6/30/23		United States		1,724,242		1,721,952
	Navios Maritime Midstream Partners LP and Navios Maritime Midstream
	Partners Finance (US) Inc., Term Loan, 5.78%, 6/18/20		Marshall Islands		1,279,033		1,278,500
	United Airlines Inc., Class B Term Loans, 3.422%, 4/01/24		United States		294,303		295,738
	XPO Logistics Inc., Loans, 3.405%, 11/01/21		United States		93,651		94,002
							3,440,011
	Utilities 1.1%
	Calpine Construction Finance Co. LP, Term B-1 Loan, 3.48%, 5/03/20		United States		994,819		994,663
	EFS Cogen Holdings I LLC (Linden), Term B Advance, 4.80%, 6/28/23		United States		3,012,253		3,036,728
	Lightstone Holdco LLC,
	Initial Term B Loan, 5.726%, 1/30/24		United States		2,343,297		2,293,828
	Initial Term C Loan, 5.726%, 1/30/24		United States		144,928		141,868
	NRG Energy Inc., Term Loans, 3.546%, 6/30/23		United States		861,300		860,685
							7,327,772
	Total Senior Floating Rate Interests (Cost $66,822,584)						66,449,260

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
	Foreign Government and Agency Securities 7.6%
	Government of Hungary, senior note, 6.25%, 1/29/20		Hungary		1,500,000		$	1,642,140
	Government of Indonesia, 6.125%, 5/15/28		Indonesia		34,000,000,000	IDR		2,356,594
	FR34, 12.80%, 6/15/21		Indonesia		17,235,000,000	IDR		1,566,796
	senior bond, FR53, 8.25%, 7/15/21		Indonesia		46,000,000,000	IDR		3,648,274
	senior bond, FR70, 8.375%, 3/15/24		Indonesia		26,500,000,000	IDR		2,155,086
	Government of Malaysia, senior note, 4.012%, 9/15/17		Malaysia		10,400,000	MYR		2,427,555
	Government of Mexico, 7.75%, 12/14/17.		Mexico		345,000	o MXN		1,909,087
	senior note, 8.50%, 12/13/18		Mexico		2,305,000	o MXN		12,994,365
h	Government of Serbia,
	senior note, 144A, 4.875%, 2/25/20		Serbia		4,000,000			4,176,600
	senior note, 144A, 7.25%, 9/28/21		Serbia		200,000			231,301
h	Government of Ukraine,
	144A, 7.75%, 9/01/22		Ukraine		200,000			201,515
	144A, 7.75%, 9/01/23		Ukraine		369,000			366,232
	144A, 7.75%, 9/01/24		Ukraine		369,000			362,696
	144A, 7.75%, 9/01/25		Ukraine		369,000			361,164
	144A, 7.75%, 9/01/26		Ukraine		369,000			359,784
	144A, 7.75%, 9/01/27		Ukraine		369,000			358,447
	a,p 144A, VRI, GDP Linked Security, 5/31/40		Ukraine		1,952,000			764,559
	Nota Do Tesouro Nacional,
	10.00%, 1/01/21		Brazil		13,600	q BRL		4,111,654
	10.00%, 1/01/23		Brazil		9,000	q BRL		2,683,054
	r Index Linked, 6.00%, 8/15/18		Brazil		5,525	q BRL		5,059,403
	r Index Linked, 6.00%, 5/15/23		Brazil		3,350	q BRL		3,083,594
	Total Foreign Government and Agency Securities (Cost $50,541,947)							50,819,900
	U.S. Government and Agency Securities 7.4%
	U.S. Treasury Bond,
	7.875%, 2/15/21		United States		900,000			1,094,695
	6.50%, 11/15/26		United States		2,400,000			3,259,219
	3.00%, 11/15/45		United States		5,000,000			5,159,570
	s Index Linked, 0.625%, 1/15/24		United States		8,341,038			8,462,734
	s Index Linked, 2.375%, 1/15/25		United States		3,113,050			3,547,611
	U.S. Treasury Note,
	3.75%, 11/15/18		United States		7,000,000			7,228,186
	2.75%, 2/15/24		United States		1,000,000			1,040,273
	2.25%, 11/15/25		United States		8,500,000			8,502,490
	s Index Linked, 0.125%, 7/15/24		United States		8,773,109			8,620,615
	s Index Linked, 0.625%, 7/15/21		United States		1,735,705			1,779,599
	s Index Linked, 2.125%, 1/15/19		United States		797,160			823,361
	Total U.S. Government and Agency Securities (Cost $49,497,312)							49,518,353

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
	Asset-Backed Securities and Commercial Mortgage- Backed Securities 12.3%
	Banks 1.4%
	Banc of America Commercial Mortgage Trust, 2006-4, AJ, 5.695%, 7/10/46		United States		229,463	$	229,099
l	Bear Stearns ARM Trust, 2004-4, A6, FRN, 3.363%, 6/25/34		United States		1,250,210		1,270,959
	Bear Stearns Commercial Mortgage Securities Trust, 2006-PW13, AJ, 5.611%, 9/11/41		United States		23,889		24,035
l	Citibank Credit Card Issuance Trust,
	2013-A2, A2, FRN, 1.496%, 5/26/20		United States		650,000		651,244
	2013-A4, A4, FRN, 1.636%, 7/24/20		United States		710,000		712,683
	Citigroup Commercial Mortgage Trust,
	2006-C5, AJ, 5.482%, 10/15/49		United States		1,263,072		1,198,529
	l 2007-C6, AM, FRN, 5.691%, 12/10/49		United States		1,700,000		1,703,261
l	Commercial Mortgage Trust, 2006-GG7, AJ, FRN, 5.759%, 7/10/38		United States		1,215,000		1,149,346
	CSAIL Commercial Mortgage Trust, 2015-C1, A4, 3.505%, 4/15/50		United States		915,000		947,159
l	CWABS Asset-Backed Certificates Trust, 2005-11, AF4, FRN, 4.673%, 3/25/34		United States		1,275,000		1,284,787
l	Merrill Lynch Mortgage Investors Trust, 2005-A6, 2A3, FRN, 1.596%, 8/25/35		United States		183,439		179,089
l	Morgan Stanley Capital I Trust, 2006-HQ8, AJ, FRN, 5.461%, 3/12/44		United States		32,115		32,096
							9,382,287
	Diversified Financials 10.9%
h,l	Ares Enhanced Loan Investment Strategy IR Ltd., 2013-IRAR, A2A, 144A, FRN, 3.053%, 7/23/25		Cayman Islands		740,000		743,974
h,l	Atrium VIII,
	8A, BR, 144A, FRN, 3.053%, 10/23/24		Cayman Islands		350,000		352,891
	8A, CR, 144A, FRN, 3.653%, 10/23/24		Cayman Islands		470,000		473,530
h,l	Atrium XI, 11A, CR, 144A, FRN, 3.303%, 10/23/25		Cayman Islands		1,820,000		1,820,000
	Banc of America Commercial Mortgage Trust,
	2015-UBS7, A3, 3.441%, 9/15/48		United States		1,050,000		1,083,088
	2015-UBS7, A4, 3.705%, 9/15/48		United States		1,170,000		1,227,331
	l 2015-UBS7, B, FRN, 4.366%, 9/15/48		United States		760,000		800,452
l	Bank of America Credit Card Trust, 2005-A1, A, FRN, 1.489%, 6/15/20		United States		800,000		801,320
h,l	BCAP LLC Trust, 2009-RR1, 2A2, 144A, FRN, 3.208%, 5/26/35		United States		440,000		416,593
h	BlueMountain CLO Ltd.,
	l 2012-2A, BR, 144A, FRN, 3.072%, 11/20/28		Cayman Islands		510,000		512,545
	2012-2A, CR, 144A, 3.772%, 11/20/28		Cayman Islands		270,000		272,395
h,l	Burnham Park CLO Ltd.,
	2016-1A, A, 144A, FRN, 2.586%, 10/20/29		Cayman Islands		350,000		351,533
	2016-1A, B, 144A, FRN, 2.956%, 10/20/29		Cayman Islands		460,000		458,634
	2016-1A, C, 144A, FRN, 3.556%, 10/20/29		Cayman Islands		460,000		460,547
l	Capital One Multi-Asset Execution Trust,
	2014-A3, A3, FRN, 1.539%, 1/18/22		United States		370,000		371,700
	2016-A1, A1, FRN, 1.609%, 2/15/22		United States		2,950,000		2,968,309
	2016-A2, A2, FRN, 1.789%, 2/15/24		United States		3,990,000		4,046,881
h,l	Carlyle Global Market Strategies CLO Ltd.,
	2012-4A, BR, 144A, FRN, 3.056%, 1/20/29		United States		500,000		502,740
	2012-4A, C1R, 144A, FRN, 3.756%, 1/20/29		United States		480,000		482,150
h,l	Carlyle U.S. CLO Ltd., 2017-2A, A1B, 144A, FRN, 2.551%, 7/20/31		Cayman Islands		1,150,000		1,150,218
h,l	Catamaran CLO Ltd.,
	2013-1A, C, 144A, FRN, 3.77%, 1/27/25		United States		1,130,000		1,127,186
	2014-2A, BR, 144A, FRN, 4.108%, 10/18/26		Cayman Islands		1,550,000		1,557,827

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
	Asset-Backed Securities and Commercial Mortgage- Backed Securities (continued)
	Diversified Financials (continued)
h,l	Cent CDO Ltd., 2007-15A, A2B, 144A, FRN, 1.568%, 3/11/21		United States		1,251,000	$	1,224,954
h,l	Cent CLO LP,
	2013-17A, B, 144A, FRN, 4.17%, 1/30/25		United States		784,314		785,867
	2014-22A, A2AR, 144A, FRN, 3.129%, 11/07/26		Cayman Islands		392,000		394,289
	2014-22A, BR, 144A, FRN, 4.129%, 11/07/26		Cayman Islands		340,000		343,475
h,l	CGRBS Commercial Mortgage Trust, 2013-VN05, C, 144A, FRN, 3.584%, 3/13/35		United States		870,000		885,813
l	Chase Issuance Trust,
	2012-A10, A10, FRN, 1.419%, 12/16/19		United States		470,000		470,527
	2013-A6, A6, FRN, 1.579%, 7/15/20		United States		1,090,000		1,093,653
h,l	Cole Park CLO Ltd., 15-1A, B, 144A, FRN, 3.406%, 10/20/28		Cayman Islands		270,000		274,352
l	COMM Mortgage Trust, 2014-CR19, B, FRN, 4.703%, 8/10/47		United States		870,000		933,082
h	Core Industrial Trust, 2015-CALW, A, 144A, 3.04%, 2/10/34		United States		1,410,000		1,448,191
h,l	Cumberland Park CLO Ltd.,
	2015-2A, B, 144A, FRN, 3.256%, 7/20/26		United States		1,080,000		1,088,543
	2015-2A, C, 144A, FRN, 4.006%, 7/20/26		United States		190,000		190,920
l	Discover Card Execution Note Trust, 2016-A2, A2, FRN, 1.699%, 9/15/21 .		United States		2,950,000		2,970,584
h,l	Dryden 33 Senior Loan Fund,
	2014-33A, BR, 144A, FRN, 3.008%, 10/15/28		Cayman Islands		535,000		535,642
	2014-33A, CR, 144A, FRN, 3.658%, 10/15/28		United States		270,000		270,008
h,l	Dryden 34 Senior Loan Fund, 14-34A, AR, 144A, FRN, 2.318%, 10/15/26.		Cayman Islands		200,000		200,062
h,l	Dryden XXV Senior Loan Fund, 2012-25A, CR, 144A, FRN, 3.658%, 1/15/25		Cayman Islands		378,000		379,848
h,l	Dryden XXVIII Senior Loan Fund, 2013-28A, A3L, 144A, FRN, 3.882%, 8/15/25		Cayman Islands		1,000,000		999,980
h,l	Eleven Madison Trust Mortgage Trust, 2015-11MD, A, 144A, FRN, 3.555%, 9/10/35		United States		1,350,000		1,404,455
l	FHLMC Structured Agency Credit Risk Debt Notes,
	2014-DN1, M2, FRN, 3.416%, 2/25/24		United States		1,483,910		1,525,862
	2014-DN4, M3, FRN, 5.766%, 10/25/24		United States		762,807		841,381
	2014-HQ2, M2, FRN, 3.416%, 9/25/24		United States		1,000,000		1,027,623
	2015-HQ1, M2, FRN, 3.416%, 3/25/25		United States		596,572		603,609
	2015-HQ1, M3, FRN, 5.016%, 3/25/25		United States		370,000		402,689
h,l	Flagship CLO VIII Ltd., 2014-8A, AR, 144A, FRN, 2.408%, 1/16/26		Cayman Islands		540,000		541,696
h,l	Flatiron CLO Ltd., 2014-1A, A1R, 144A, FRN, 2.338%, 7/17/26		Cayman Islands		1,640,000		1,641,919
l	FNMA Connecticut Avenue Securities,
	2014-C03, 1M2, FRN, 4.216%, 7/25/24		United States		670,000		714,910
	2015-C01, 1M2, FRN, 5.516%, 2/25/25		United States		1,145,963		1,247,716
	2015-C01, 2M2, FRN, 5.766%, 2/25/25		United States		1,930,871		2,087,228
	2015-C02, 1M2, FRN, 5.216%, 5/25/25		United States		1,193,218		1,289,899
	2015-C02, 2M2, FRN, 5.216%, 5/25/25		United States		1,324,138		1,418,950
	2015-C03, 2M2, FRN, 6.216%, 7/25/25		United States		2,450,000		2,719,551
	2017-C01, 1M2, FRN, 4.766%, 7/25/29		United States		1,890,000		1,998,306
h,l	Galaxy CLO Ltd.,
	2014-17A, AR, 144A, FRN, 2.558%, 7/15/26		Cayman Islands		720,000		719,338
	2014-17A, BR, 144A, FRN, 2.958%, 7/15/26		Cayman Islands		470,000		472,806
	2014-17A, C1R, 144A, FRN, 3.558%, 7/15/26		Cayman Islands		250,000		248,785
h	G-Force LLC, 2005-RRA, C, 144A, 5.20%, 8/22/36		United States		1,964,439		1,933,228
	GS Mortgage Securities Trust,
	l 2016-GS3, B, FRN, 3.395%, 10/10/49		United States		900,000		887,505
	2017-GS6, B, 3.869%, 5/10/50		United States		870,000		891,997

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)
	Diversified Financials (continued)
l	Impac Secured Assets Trust, 2007-2, FRN, 1.466%, 4/25/37		United States		162,039	$	160,268
h,l	Invitation Homes Trust, 2015-SFR1, A, 144A, FRN, 2.659%, 3/17/32		United States		1,425,212		1,439,262
h,l	J.P. Morgan Chase Commercial Mortgage Securities, 2016-Nine, B, 144A, FRN, 2.854%, 10/06/38		United States		1,200,000		1,160,816
	JP Morgan Chase Commercial Mortgage Securities Trust, 2006-CB17, AM, 5.464%, 12/12/43		United States		41,268		41,248
	JPMCC Commercial Mortgage Securities Trust, 2017-JP6, B, 3.946%, 7/15/50		United States		1,040,000		1,069,745
h,l	LCM XVI LP, 2016A, BR, 144A, FRN, 2.658%, 7/15/26		Cayman Islands		570,000		569,766
h,l	LCM XVII LP,
	2017A, BR, 144A, FRN, 3.008%, 10/15/26		United States		350,000		351,305
	2017A, CR, 144A, FRN, 3.658%, 10/15/26		United States		320,000		320,733
h,l,t	Madison Park Funding XXIII Ltd.,
	2017-23A, B, 144A, FRN, 3.009%, 7/27/30		Cayman Islands		400,000		400,000
	2017-23A, C, 144A, FRN, 3.659%, 7/27/30		Cayman Islands		500,000		500,000
l	MortgageIT Trust, 2004-1, A2, FRN, 2.116%, 11/25/34		United States		232,960		224,223
h,l	Octagon Investment Partners XX Ltd., 2014-1A, AR, 144A, FRN, 2.311%, 8/12/26		Cayman Islands		900,000		901,701
h,l	Octagon Investment Partners XXIII Ltd., 2015-1A, B, 144A, FRN, 3.158%, 7/15/27		Cayman Islands		400,000		399,772
l	Opteum Mortgage Acceptance Corp. Trust, 2005-4, 1APT, FRN, 1.526%, 11/25/35		United States		359,344		346,029
l	Structured Asset Securities Corp., 2005-2XS, 2A2, FRN, 2.551%, 2/25/35		United States		240,905		232,933
l	Thornburg Mortgage Securities Trust, 2005-1, A3, FRN, 3.098%, 4/25/45 .		United States		212,046		213,124
h,l	Voya CLO Ltd.,
	2013-1A, B, 144A, FRN, 4.058%, 4/15/24		United States		270,000		270,472
	2013-2A, B, 144A, FRN, 3.836%, 4/25/25		United States		1,080,000		1,084,028
	2015-2A, B, 144A, FRN, 3.133%, 7/23/27		United States		820,000		821,378
	Wells Fargo Mortgage Backed Securities Trust,
	l 2004-W, A9, FRN, 3.03%, 11/25/34		United States		621,319		633,486
	2007-3, 3A1, 5.50%, 4/25/22		United States		132,113		135,336
							72,366,712
	Total Asset-Backed Securities and Commercial Mortgage-Backed Securities (Cost $80,430,160)						81,748,999
	Mortgage-Backed Securities 9.5%
	Federal Home Loan Mortgage Corp. (FHLMC) Adjustable Rate 0.0%†
	FHLMC, 2.957%, 1/01/33		United States		26,711		27,604
	Federal Home Loan Mortgage Corp. (FHLMC) Fixed Rate 4.4%
	FHLMC Gold 15 Year, 5.50%, 9/01/17 - 7/01/19		United States		22,234		22,729
	FHLMC Gold 30 Year, 3.00%, 1/01/47		United States		586,854		586,057
u	FHLMC Gold 30 Year, 3.00%, 7/01/47		United States		7,250,000		7,233,574
	FHLMC Gold 30 Year, 3.50%, 6/01/47		United States		4,576,083		4,704,934
u	FHLMC Gold 30 Year, 3.50%, 7/01/47		United States		4,200,000		4,313,859
u	FHLMC Gold 30 Year, 4.00%, 7/01/46		United States		1,400,000		1,472,242
	FHLMC Gold 30 Year, 4.00%, 3/01/47		United States		9,099,426		9,579,951
	FHLMC Gold 30 Year, 4.00%, 6/01/47		United States		797,548		839,665
	FHLMC Gold 30 Year, 5.00%, 4/01/34 - 8/01/35		United States		282,162		308,660
	FHLMC Gold 30 Year, 5.50%, 3/01/33 - 1/01/35		United States		197,732		219,974

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 (continued)
	FHLMC Gold 30 Year, 6.00%, 4/01/33 - 2/01/36		United States		183,811	$	207,567
	FHLMC Gold 30 Year, 6.50%, 11/01/27 - 6/01/36		United States		37,352		41,441
	FHLMC Gold 30 Year, 7.00%, 9/01/21 - 4/01/30		United States		15,654		16,818
	FHLMC Gold 30 Year, 7.50%, 8/01/30 - 7/01/31		United States		1,052		1,126
							29,548,597
	Federal National Mortgage Association (FNMA) Adjustable Rate 0.0%†
	FNMA, 2.787% - 2.955%, 4/01/20 - 12/01/34		United States		106,017		111,062
	Federal National Mortgage Association (FNMA) Fixed Rate 3.3%
	FNMA 15 Year, 2.50%, 7/01/22 - 6/01/27		United States		371,258		375,704
	FNMA 15 Year, 4.50%, 6/01/19 - 3/01/20		United States		39,396		40,358
	FNMA 15 Year, 5.00%, 10/01/17 - 6/01/18		United States		14,831		15,193
	FNMA 15 Year, 5.50%, 7/01/17 - 11/01/18		United States		38,635		39,074
u	FNMA 30 Year, 3.00%, 7/01/46		United States		8,050,000		8,038,051
	FNMA 30 Year, 3.00%, 3/01/47		United States		592,774		592,451
u	FNMA 30 Year, 3.50%, 7/01/46		United States		4,200,000		4,312,745
	FNMA 30 Year, 3.50%, 5/01/47		United States		5,921,343		6,085,423
u	FNMA 30 Year, 4.00%, 7/01/46		United States		1,700,000		1,786,859
	FNMA 30 Year, 4.00%, 5/01/47		United States		198,899		209,240
	FNMA 30 Year, 5.00%, 4/01/30		United States		68,721		75,088
	FNMA 30 Year, 6.50%, 6/01/28 - 10/01/37		United States		186,579		211,586
							21,781,772
	Government National Mortgage Association (GNMA) Fixed Rate 1.8%
	GNMA I SF 30 Year, 5.00%, 11/15/33 - 7/15/34		United States		265,023		291,724
	GNMA I SF 30 Year, 6.50%, 2/15/32		United States		1,021		1,117
	GNMA I SF 30 Year, 7.00%, 10/15/28 - 6/15/32		United States		16,759		17,058
	GNMA I SF 30 Year, 7.50%, 9/15/30		United States		1,292		1,492
	GNMA II SF 30 Year, 3.00%, 5/20/47		United States		398,754		403,289
u	GNMA II SF 30 Year, 3.00%, 7/01/47		United States		5,400,000		5,454,422
u	GNMA II SF 30 Year, 3.50%, 7/01/46		United States		1,700,000		1,760,563
	GNMA II SF 30 Year, 3.50%, 2/20/47		United States		3,420,481		3,546,870
	GNMA II SF 30 Year, 3.50%, 5/20/47		United States		399,138		413,886
	GNMA II SF 30 Year, 5.00%, 9/20/33 - 11/20/33		United States		75,402		83,883
	GNMA II SF 30 Year, 6.00%, 11/20/34		United States		93,853		106,583
	GNMA II SF 30 Year, 6.50%, 4/20/31 - 2/20/34		United States		47,127		54,575
	GNMA II SF 30 Year, 7.50%, 1/20/28 - 4/20/32		United States		11,343		13,006
							12,148,468
	Total Mortgage-Backed Securities (Cost $63,659,832)						63,617,503
	Municipal Bonds 1.8%
	California State GO, Various Purpose, Refunding, 5.00%, 9/01/29		United States		1,650,000		1,996,071
	California Statewide CDA, PCR, Southern California Edison Co., Mandatory Put 12/01/23, Refunding, Series D, 2.625%, 11/01/33		United States		390,000		400,787
	Clark County School District GO, Refunding, Series D, 5.00%, 6/15/23		United States		1,500,000		1,775,820
	Denver City and County Airport System Revenue, Refunding, Series A, 5.00%, 11/15/25		United States		210,000		256,456
	Minnesota State GO, Refunding, Series D, 5.00%, 8/01/25		United States		830,000		1,030,055
	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		557,900

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)
	New York State Dormitory Authority State Personal Income Tax Revenue, General Purpose, Refunding, Series A, 5.00%, 2/15/25		United States		930,000	$	1,119,116
	Port Authority of New York and New Jersey Revenue, Consolidated, One Hundred Ninety-First Series, 4.823%, 6/01/45		United States		1,490,000		1,590,351
i	Puerto Rico Electric Power Authority Power Revenue,
	Series A, 6.75%, 7/01/36		United States		3,465,000		2,122,312
	Series XX, 5.25%, 7/01/40		United States		165,000		101,063
	University of Texas Revenue, Series J, 5.00%, 8/15/25		United States		960,000		1,184,266
	Total Municipal Bonds (Cost $12,894,009)						12,134,197
				Shares
	Escrows and Litigation Trusts 0.0%†
a,d	Midstates Petroleum Co. Inc./Midstates Petroleum Co. LLC, Escrow Account		United States		1,500,000		—
a,d	NewPage Corp., Litigation Trust		United States		2,500,000		—
a	Penn Virginia Corp., Escrow Account		United States		1,500,000		22,500
a,d	Vistra Energy Corp., Escrow Account		United States		3,000,000		34,800
	Total Escrows and Litigation Trusts (Cost $91,006)						57,300
	Total Investments before Short Term Investments (Cost $680,614,137)						680,686,689
				Principal Amount*
	Short Term Investments 2.6%
	U.S. Government and Agency Securities (Cost $369,620) 0.1%
v,w	U.S. Treasury Bill, 8/17/17		United States		370,000		369,588
	Total Investments before Money Market Funds (Cost $680,983,757)						681,056,277
				Shares
	Money Market Funds (Cost $16,814,541) 2.5%
f,x	Institutional Fiduciary Trust Money Market Portfolio, 0.58%		United States		16,814,541		16,814,541
	Total Investments (Cost $697,798,298) 104.6%						697,870,818
	Other Assets, less Liabilities (4.6)%						(30,596,472	)
	Net Assets 100.0%					$	667,274,346

FSI-24         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Strategic Income VIP Fund (continued)

^†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 lll, a wholly-owned subsidiary of the Fund. See Note 1(f).

^cAt June 30, 2017, pursuant to the Fund’s policies and the requirements of applicable securities law, the Fund is restricted from trading these securities at period end.

^dSecurity has been deemed illiquid because it may not be able to be sold within seven days. At June 30, 2017, the aggregate value of these securities was $232,616, representing less than 0.1% of net assets.

^eSee Note 8 regarding restricted securities.

^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, 2017, the aggregate value of these securities was $155,998,628, representing 23.4% of net assets.

ⁱSee Note 7 regarding defaulted securities.

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

^kSee Note 1(e) regarding loan participation notes.

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

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

ⁿA portion or all of the security purchased on a delayed delivery 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 is stated in 1,000 Brazilian Real Units.

^rRedemption price at maturity is adjusted for inflation. See Note 1(j).

^sPrincipal amount of security is adjusted for inflation. See Note 1(j).

^tSecurity purchased on a when-issued basis. See Note 1(c).

^uSecurity purchased on a to-be-announced (TBA) basis. See Note 1(c).

^vThe security was issued on a discount basis with no stated coupon rate.

^wA portion or all of the security has been segregated as collateral for open future contracts. At June 30, 2017, the value of this security and/or cash pledged amounted to $268,772, representing less than 0.1% of net assets.

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

Semiannual Report         FSI-25

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Strategic Income VIP Fund (continued)

At June 30, 2017, 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
Interest Rate Contracts
Euro-Bund		Long		13	$	2,403,648		9/07/17	$	—	$	(41,013	)
Long Gilt		Long		46		7,523,816		9/27/17		—		(134,885	)
U.S. Treasury 10 Yr. Note Ultra		Long		14		1,887,375		9/20/17		—		(584	)
U.S. Treasury Long Bond		Long		22		3,381,125		9/20/17		26,753		—
Total Futures Contracts									$	26,753	$	(176,482	)
Net unrealized appreciation (depreciation)											$	(149,729	)

At June 30, 2017, the Fund had the following forward exchange contracts outstanding. See Note 1(d).

Forward Exchange Contracts
Currency	Counterpartya		Type		Quantity		Contract Amount*		Settlement Date			Appreciation Unrealized		Depreciation Unrealized
OTC Forward Exchange Contracts
Argentine Peso		JPHQ		Buy		27,000,000		1,641,337			8/23/17	$	—	$	(63,313	)
Argentine Peso		JPHQ		Buy		5,500,000		324,675			9/25/17		—		(8,838	)
Colombian Peso		JPHQ		Buy		3,000,000,000		970,874			9/25/17		2,828		—
Australian Dollar		DBAB		Sell		8,308,345		6,113,530			10/26/17		—		(264,297	)
Australian Dollar		JPHQ		Sell		7,050,000		5,192,572			10/26/17		—		(219,298	)
British Pound		DBAB		Buy		1,100,000		1,407,890			10/26/17		30,191		—
British Pound		DBAB		Sell		2,700,000		3,511,755			10/26/17		—		(18,080	)
British Pound		JPHQ		Sell		337,472		438,928			10/26/17		—		(2,265	)
British Pound		JPHQ		Sell		1,300,000		14,926,644		SEK	10/26/17		85,276		—
Canadian Dollar		JPHQ		Sell		4,600,000		3,378,627			10/26/17		—		(176,440	)
Euro		BZWS		Sell		2,561,255		2,805,022			10/26/17		—		(139,522	)
Euro		CITI		Sell		2,131,200		2,334,559			10/26/17		—		(115,573	)
Euro		DBAB		Sell		992,876		1,088,887			10/26/17		—		(52,572	)
Euro		GSCO		Sell		369,000		404,313			10/26/17		—		(19,907	)
Euro		HSBK		Sell		142,717		156,317			10/26/17		—		(7,758	)
Euro		JPHQ		Sell		17,878,207		19,592,191			10/26/17		—		(961,472	)
Indian Rupee		CITI		Buy		4,537,000		68,915			10/26/17		363		—
Indian Rupee		DBAB		Buy		345,556,000		5,258,604			10/26/17		17,839		—
Indian Rupee		HSBK		Buy		144,338,000		2,192,587			10/26/17		11,372		—
Japanese Yen		BZWS		Sell		60,047,000		530,490			10/26/17		—		(6,277	)
Japanese Yen		CITI		Sell		42,830,000		378,420			10/26/17		—		(4,442	)
Japanese Yen		DBAB		Sell		540,993,500		4,778,039			10/26/17		—		(57,968	)
Japanese Yen		HSBK		Sell		147,626,000		1,304,117			10/26/17		—		(15,530	)
Japanese Yen		JPHQ		Sell		1,136,286,000		10,038,527			10/26/17		—		(118,872	)
Mexican Peso		JPHQ		Buy		54,000,000		2,943,341			10/26/17		—		(22,956	)
British Pound		JPHQ		Sell		1,250,000		1,649,375			8/15/18		631		—
Total Forward Exchange Contracts												$	148,500	$	(2,275,380	)
Net unrealized appreciation (depreciation)														$	(2,126,880	)

*In U.S. dollars unless otherwise indicated.

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

FSI-26         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Strategic Income VIP Fund (continued)

At June 30, 2017, the Fund had the following credit default swap contracts outstanding. See Note 1(d).

Credit Default Swap Contracts

Description	Periodic Payment Rate			Counter- party/ 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.28		5.00	%		ICE	$	3,400,000		6/20/22	$	257,657		$	—	$	(17,323	)	$	240,334			Non-Investment
																						Grade
OTC Swap Contracts
Contracts to Buy Protection
Single Name
Best Buy Co. Inc.		5.00	%		CITI		2,000,000		6/20/22		(350,107	)		—		(5,572	)		(355,679	)
Kohl’s Corp.		1.00	%		CITI		1,300,000		6/20/22		71,495			11,477		—			82,972
Macy’s Retail Holdings Inc.		1.00	%		CITI		1,100,000		6/20/22		80,347			4,454		—			84,801
Contracts to Sell Protectionc
Single Name
Government of Argentina		5.00	%		CITI		2,000,000		6/20/22		155,684			564		—			156,248			B
Government of Argentina		5.00	%		JPHQ		1,700,000		6/20/22		145,564			—		(12,753	)		132,811			B
Government of Brazil		1.00	%		FBCO		2,000,000		6/20/22		(128,174	)		1,416		—			(126,758	)		BB
Government of Colombia		1.00	%		JPHQ		3,700,000		6/20/22		(53,075	)		—		(8,918	)		(61,993	)		BBB
Government of Mexico		1.00	%		FBCO		1,700,000		6/20/22		(6,431	)		—		(3,350	)		(9,781	)		BBB+
Traded Index
Citibank Bespoke 58 IG/42 HY Equity Tranche 0-3% Index		0.00	%		CITI		530,000		6/20/19		(123,688	)		29,475		—			(94,213	)		Non-Investment Grade
MCDX.NA.28		1.00	%		CITI		3,025,000		6/20/22		46,172			2,766		—			48,938			Investment
																						Grade
Total OTC Swap Contracts										$	(162,213	)	$	50,152	$	(30,593	)	$	(142,654	)
Total Credit Default Swap Contracts										$	95,444		$	50,152	$	(47,916	)	$	97,680
Net unrealized appreciation (depreciation)													$	2,236

^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 Standard and Poor’s (S&P) Rating for single name swaps and internal ratings for index swaps. Internal ratings based on mapping into equivalent ratings from external vendors.

^cThe fund enters contracts to sell protection to create a long credit position. Performance triggers include default, bankruptcy or restructuring for single name swaps and 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-49.

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

June 30, 2017 (unaudited)

	Franklin Strategic Income VIP Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	640,398,536
Cost - Non-controlled affiliates (Note 3e)		57,399,762
Total cost of investments	$	697,798,298
Value - Unaffiliated issuers	$	638,782,952
Value - Non-controlled affiliates (Note 3e)		59,087,866
Total value of investments		697,870,818
Cash		558,978
Foreign currency, at value (cost $16,360)		16,336
Receivables:
Investment securities sold		3,297,024
Capital shares sold		531,331
Dividends and interest		6,312,410
Due from brokers		1,762,389
OTC swap contracts (upfront payments $509,705)		499,262
Unrealized appreciation on OTC forward exchange contracts		148,500
Unrealized appreciation on OTC swap contracts		50,152
Total assets		711,047,200
Liabilities:
Payables:
Investment securities purchased		38,755,451
Capital shares redeemed		1,334,845
Management fees		306,096
Distribution fees		134,069
Variation margin		22,575
OTC swap contracts (upfront receipts $689,557)		661,475
Unrealized depreciation on OTC forward exchange contracts		2,275,380
Unrealized depreciation on OTC swap contracts		30,593
Deferred tax		70,043
Accrued expenses and other liabilities		182,327
Total liabilities		43,772,854
Net assets, at value	$	667,274,346
Net assets consist of:
Paid-in capital	$	693,003,582
Undistributed net investment income		7,093,159
Net unrealized appreciation (depreciation)		(2,294,824	)
Accumulated net realized gain (loss)		(30,527,571	)
Net assets, at value	$	667,274,346

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 Assets and Liabilities (continued)

June 30, 2017 (unaudited)

	Franklin Strategic Income VIP Fund
Class 1:
Net assets, at value	$	379,252,685
Shares outstanding		34,447,004
Net asset value and maximum offering price per share	$	11.01
Class 2:
Net assets, at value	$	211,739,091
Shares outstanding		19,891,201
Net asset value and maximum offering price per share	$	10.64
Class 4:
Net assets, at value	$	76,282,570
Shares outstanding		6,981,075
Net asset value and maximum offering price per share	$	10.93

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 Statement of Operations

for the six months ended June 30, 2017 (unaudited)

	Franklin Strategic Income VIP Fund
Investment income:
Dividends:
Unaffiliated issuers	$	347,217
Non-controlled affiliates (Note 3e)		1,779,855
Interest		13,646,437
Total investment income		15,773,509
Expenses:
Management fees (Note 3a)		2,009,150
Distribution fees: (Note 3c)
Class 2		258,085
Class 4		136,362
Custodian fees (Note 4)		13,956
Reports to shareholders		83,958
Professional fees		47,585
Trustees’ fees and expenses		1,644
Other		144,273
Total expenses		2,695,013
Expense reductions (Note 4)		(889	)
Expenses waived/paid by affiliates (Note 3e)		(183,291	)
Net expenses		2,510,833
Net investment income		13,262,676
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments:
Unaffiliated issuers		(9,304,401	)
Non-controlled affiliates (Note 3e)		332,845
Foreign currency transactions		2,499,158
Futures contracts		594,361
Swap contracts		45,207
Net realized gain (loss)		(5,832,830	)
Net change in unrealized appreciation (depreciation) on:
Investments		19,353,716
Translation of other assets and liabilities denominated in foreign currencies		(5,655,197	)
Futures contracts		(235,198	)
Swap contracts		39,348
Change in deferred taxes on unrealized appreciation		(41,940	)
Net change in unrealized appreciation (depreciation)		13,460,729
Net realized and unrealized gain (loss)		7,627,899
Net increase (decrease) in net assets resulting from operations.	$	20,890,575

FSI-30         Semiannual Report    |    The accompanying notes are an integral part of these consolidated financial statements.

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, 2017 (unaudited)			Year Ended December 31, 2016
Increase (decrease) in net assets:
Operations:
Net investment income	$	13,262,676		$	30,329,844
Net realized gain (loss)		(5,832,830	)		(23,035,691	)
Net change in unrealized appreciation (depreciation)		13,460,729			47,403,999
Net increase (decrease) in net assets resulting from operations		20,890,575			54,698,152
Distributions to shareholders from:
Net investment income:
Class 1		(11,689,930	)		(15,028,686	)
Class 2		(6,228,631	)		(6,934,919	)
Class 4		(2,076,378	)		(2,790,452	)
Total distributions to shareholders		(19,994,939	)		(24,754,057	)
Capital share transactions: (Note 2)
Class 1		(17,505,504	)		(63,348,838	)
Class 2		8,281,516			(7,135,423	)
Class 4		(4,160,566	)		(16,512,240	)
Total capital share transactions		(13,384,554	)		(86,996,501	)
Net increase (decrease) in net assets		(12,488,918	)		(57,052,406	)
Net assets:
Beginning of period		679,763,264			736,815,670
End of period	$	667,274,346		$	679,763,264
Undistributed net investment income included in net assets:
End of period	$	7,093,159		$	13,825,422

The accompanying notes are an integral part of these consolidated financial statements.    |   Semiannual Report         FSI-31

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 eighteen 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. 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, 2017, 69.0% 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 may differ 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 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.

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 derivative financial instruments are centrally cleared or traded 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

FSI-32         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Strategic Income VIP Fund (continued)

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 Fund’s business day. Occasionally, events occur between the time at which trading in a foreign security is completed and 4 p.m. Eastern time 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 4 p.m. Eastern time. 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 Fund’s NAV is not calculated, 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 TBA basis, with payment and delivery scheduled for a future date. These transactions are subject to market fluctuations and are subject to the risk that the value at delivery may be more or less than the trade date purchase price. Although the Fund will generally purchase these securities with the intention of holding the securities, it may sell the securities before the settlement date.

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

The Fund invested in derivative financial instruments 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 counter-parties. 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 the next business day, or 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 exchange traded futures contracts primarily to manage and/or gain exposure to interest rate risk. A futures contract is an agreement between the Fund and a counterparty to buy or sell an asset at 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.

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

FSI-34         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Strategic Income VIP Fund (continued)

notional amount of the credit default swap contract from the seller in exchange for the referenced debt obligation, a net settlement amount equal to the notional amount of the credit default swap less the recovery value of the referenced debt obligation, or other agreed upon amount. 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. 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.

f. 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, 2017, 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, 2017, the net assets of FT subsidiary were $8,904,907, representing 1.3% of the Fund’s consolidated net assets. The Fund’s investment in FT subsidiary is limited to 25% of consolidated assets.

g. Mortgage Dollar Rolls

The Fund enters into mortgage dollar rolls, typically on a TBA basis. Mortgage dollar rolls are agreements between the Fund and a financial institution 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.

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

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)

h. Senior Floating Rate Interests (continued)

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.

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, 2017, 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. 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. Distributable earnings are determined according to income tax regulations (tax basis) and 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.

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.

FSI-36         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Strategic Income VIP Fund (continued)

l. Guarantees and Indemnifications

Under the Trust’s organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust, on behalf of the Fund, enters into contracts with service providers

that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.

2. Shares of Beneficial Interest

At June 30, 2017, 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, 2017						Year Ended December 31, 2016
	Shares			Amount			Shares			Amount
Class 1 Shares:
Shares sold		341,390		$	3,804,879			468,712		$	5,060,377
Shares issued in reinvestment of distributions		1,057,912			11,689,929			1,427,226			15,028,686
Shares redeemed		(2,951,081	)		(33,000,312	)		(7,769,695	)		(83,437,901	)
Net increase (decrease)		(1,551,779	)	$	(17,505,504	)		(5,873,757	)	$	(63,348,838	)
Class 2 Shares:
Shares sold		1,947,827		$	21,055,464			2,848,537		$	29,648,040
Shares issued in reinvestment of distributions		583,205			6,228,631			679,894			6,934,919
Shares redeemed		(1,759,175	)		(19,002,579	)		(4,217,745	)		(43,718,382	)
Net increase (decrease)		771,857		$	8,281,516			(689,314	)	$	(7,135,423	)
Class 4 Shares:
Shares sold		155,424		$	1,717,526			197,446		$	2,112,111
Shares issued in reinvestment of distributions		189,278			2,076,378			267,029			2,790,452
Shares redeemed		(718,470	)		(7,954,470	)		(2,012,761	)		(21,414,803	)
Net increase (decrease)		(373,768	)	$	(4,160,566	)		(1,548,286	)	$	(16,512,240	)

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 officer 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         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)

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, 2017, the annualized effective investment management fee rate was 0.599% 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. During the period ended June 30, 2017, the Fund held investments in affiliated management investment companies as follows:

FSI-38         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Strategic Income 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
Franklin Lower Tier Floating Rate Fund		2,590,404		—		(508,543	)		2,081,861	$	21,942,813	$	1,015,897	$	310,211		6.4%
Franklin Middle Tier Floating Rate Fund		2,175,846		—		(150,895	)		2,024,951		20,330,512		716,353		22,634		6.7%
Institutional Fiduciary Trust Money Market Portfolio, 0.58%		27,288,407		79,977,678		(90,451,544	)		16,814,541		16,814,541		47,605		—		0.1%
Total										$	59,087,866	$	1,779,855	$	332,845

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, 2017, 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, 2016, the capital loss carryforwards were as follows:

Capital loss carryforwards:
Short term	1,731,758
Long term	22,864,360
Total capital loss carryforwards	24,596,118

At June 30, 2017, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	700,063,407
Unrealized appreciation	$	25,281,304
Unrealized depreciation		(27,473,893	)
Net unrealized appreciation (depreciation)	$	(2,192,589	)

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 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, 2017, aggregated $371,492,085 and $369,803,636, respectively.

7. Credit Risk and Defaulted Securities

At June 30, 2017, the Fund had 42.0% of its portfolio invested in high yield, senior secured floating rate notes, or other securities rated below investment grade and unrated securities, if any. 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.

Semiannual Report         FSI-39

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Strategic Income VIP Fund (continued)

7. Credit Risk and Defaulted Securities (continued)

The Fund held defaulted securities and/or other securities for which the income has been deemed uncollectible. At June 30, 2017, the aggregate value of these securities was $2,547,375, representing 0.4% 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, 2017, investments in restricted securities, excluding certain securities exempt from registration under the 1933 Act deemed to be liquid, were as follows:

Shares	Issuer	Acquisition Date		Cost		Value
14,792,309	Holdco 2, A		2/08/13 - 2/01/17	$	114,768	$	11,296
1,472,041	Holdco 2, B		2/01/17		1,093		1,124
20,905	Warrior Met Coal Inc		5/29/14 - 11/13/14		2,911,693		341,985
	Total Restricted Securities (Value is 0.1% of Net Assets)			$	3,027,554	$	354,405

9. Other Derivative Information

At June 30, 2017, 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
Interest rate contracts	Variation margin	$	26,753	a	Variation margin	$	176,482	a
Foreign exchange contracts	Unrealized appreciation on OTC forward exchange contracts		148,500		Unrealized depreciation on OTC forward exchange contracts		2,275,380
Credit contracts					Variation margin		17,323	a
	OTC swap contracts (Upfront payments)		499,262		OTC swap contracts (Upfront receipts)		661,475
	Unrealized appreciation on OTC swap contracts		50,152		Unrealized depreciation on OTC swap contract		30,593
Value recovery instruments	Investments in securities, at value		764,559
Totals		$	1,489,226			$	3,161,253

^aThis amount reflects the cumulative appreciation (depreciation) of futures contracts and 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.

FSI-40         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Strategic Income VIP Fund (continued)

For the period ended June 30, 2017, 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:
Interest rate contracts	Futures contracts	$	594,361	Futures contracts	$	(235,198	)
Foreign exchange contracts	Foreign currency transactions		2,610,364a	Translation of other assets		(5,673,784	)a
				and liabilities denominated in
				foreign currencies
Credit contracts	Swap contracts		45,207	Swap contracts		39,348
Value recovery instruments				Investments		169,199
Totals		$	3,249,932		$	(5,700,435	)

^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.

For the period ended June 30, 2017, the average month end notional amount of futures contracts and swap contracts and the average month end contract value for forward exchange contracts, and average month end fair value of VRI, were as follows:

Futures Contracts	$	18,216,884
Swap contracts	$	9,641,579
Forward exchange contracts	$	81,242,068
VRI	$	667,581

	Gross Amounts of Assets and Liabilities Presented in the Consolidated Statement of Assets and Liabilities
		Assetsa		Liabilitiesa
Derivatives
Forward exchange contracts	$	148,500	$	2,275,380
Swap contracts		549,414		692,068
Total	$	697,914	$	2,967,448

^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.

Semiannual Report         FSI-41

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Strategic Income VIP Fund (continued)

9. Other Derivative Information (continued)

At June 30, 2017, 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 Amounts of Assets Presented in the Consolidated Statement of Assets and Liabilities		Financial Instruments Available for Offset			Financial Instruments Collateral Received		Cash Collateral Receivedb		Net Amount (Not less than zero)
Counterparty
BZWS	$	—	$	—		$	—	$	—	$	—
CITI		402,797		(402,797	)		—		—		—
DBAB		48,030		(48,030	)		—		—		—
FBCO		1,416		(1,416	)		—		—		—
GSCO		—		—			—		—		—
HSBK		11,372		(11,372	)		—		—		—
JPHQ		234,299		(234,299	)		—		—		—
Total	$	697,914	$	(697,914	)	$	—	$	—	$	—

At June 30, 2017, 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 Amounts of Liabilities Presented in the Consolidated Statement of Assets and Liabilities		Financial Instruments Available for Offset			Financial Instruments Collateral Pledged		Cash Collateral Pledgedb			Net Amount (Not less than zero)
Counterparty
BZWS	$	145,799	$	—		$	—	$	—		$	145,799
CITI		599,382		(402,797	)		—		—			196,585
DBAB		392,917		(48,030	)		—		(240,000	)		104,887
FBCO		137,955		(1,416	)		—		(130,000	)		6,539
GSCO		19,907		—			—		—			19,907
HSBK		23,288		(11,372	)		—		—			11,916
JPHQ		1,648,200		(234,299	)		—		(1,210,000	)		203,901
Total	$	2,967,448	$	(697,914	)	$	—	$	(1,580,000	)	$	689,534

^bIn 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.

See Note 1(d) regarding derivative financial instruments.

See Abbreviations on page FSI - 46.

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 9, 2018. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Strategic Income VIP Fund (continued)

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Consolidated Statement of Operations. During the period ended June 30, 2017, 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         FSI-43

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Strategic Income VIP Fund (continued)

11. Fair Value Measurements (continued)

A summary of inputs used as of June 30, 2017, 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	$	—	$	—		$	8,841,736		$	8,841,736
Energy		2,514,506		196,615			3,553			2,714,674
Materials		32,614		110			341,985			374,709
Retailing		—		—			12,420			12,420
Transportation		—		194,263			—			194,263
All Other Equity Investmentsb		42,704,643		—			—			42,704,643
Convertible Bonds		—		1,376,004			—			1,376,004
Corporate Bonds		—		300,073,021			49,707			300,122,728
Senior Floating Rate Interests		—		66,449,260	c		—			66,449,260
Foreign Government and Agency Securities		—		50,819,900			—			50,819,900
U.S. Government and Agency Securities		—		49,518,353			—			49,518,353
Asset-Backed Securities and Commercial
Mortgage-Backed Securities		—		81,748,999			—			81,748,999
Mortgage-Backed Securities		—		63,617,503			—			63,617,503
Municipal Bonds		—		12,134,197			—			12,134,197
Escrows and Litigation Trusts		—		22,500			34,800	c		57,300
Short Term Investments		17,184,129		—			—			17,184,129
Total Investments in Securities	$	62,435,892	$	626,150,725		$	9,284,201		$	697,870,818
Other Financial Instruments:
Futures Contracts	$	26,753	$	—		$	—		$	26,753
Forward Exchange Contracts		—		148,500			—			148,500
Swap Contracts		—		50,152			—			50,152
Total Other Financial Instruments	$	26,753	$	198,652		$	—		$	225,405
Liabilities:
Other Financial Instruments:
Futures Contracts	$	176,482	$	—		$	—		$	176,482
Forward Exchange Contracts		—		2,275,380			—			2,275,380
Swap Contracts		—		47,916			—			47,916
Total Other Financial Instruments	$	176,482	$	2,323,296		$	—		$	2,499,778

^aIncludes common and convertible preferred stocks and management investment companies as well as other equity interests.

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

^cIncludes securities determined to have no value at June 30, 2017.

FSI-44         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Strategic Income 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, 2017, the reconciliation of assets is as follows:

	Balance at Beginning of Period			Purchases		Sales		Transfer Into Level 3a		Transfer 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
Consumer Services	$	8,913,040		$	—	$	—	$	—	$	—		$	—	$	—	$	(71,304	)	$	8,841,736		$	(71,304	)
Energy		1,305,543	d		—		—		—		(1,051,255	)		—		—		(250,735	)		3,553			3,553
Materials		—			—		—		357,475		—			—		—		(15,490	)		341,985			(15,490	)
Retailing		—			—		—		12,097		—			—		—		323			12,420			323
Corporate Bonds		—			—		—		49,707		—			—		—		—			49,707			—
Escrows and Litigation Trusts		72,300	d		—		—		—		(37,500	)		—		—		—			34,800	d		—
Total	$	10,290,883		$	—	$	—	$	419,279	$	(1,088,755	)	$	—	$	—	$	(337,206	)	$	9,284,201		$	(82,918	)

^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 removal of a significant unobservable valuation input. May include amounts related to a corporate action.

^cIncludes common as well as other equity investments.

^dIncludes securities determined to have no value.

Level 3 investments include financial instruments with values derived using prior transaction prices or third party pricing information without adjustment for which such inputs are unobservable. They may also include fair value of immaterial financial instruments and/or other assets developed using various valuation techniques and unobservable inputs.

12. New Accounting Pronouncements

In March 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-08, Receivables — Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The amendments in the ASU shorten the amortization period for certain callable debt securities, held at a premium, to be amortized to the earliest call date. The ASU does not require an accounting change for securities held at a discount; which continues to be amortized to maturity. The ASU is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. Management is currently evaluating the impact, if any, of applying this provision.

13. Investment Company Reporting Modernization

In October 2016, the U.S. Securities and Exchange Commission adopted new rules and amended existing rules (together, final rules) intended to modernize the reporting and disclosure of information by registered investment companies. In part, the final rules amend Regulation S-X and require standardized, enhanced disclosures about derivatives in investment company financial statements, as well as other amendments. The compliance date for the amendments to Regulation S-X is August 1, 2017. Management has reviewed the requirements and believes the adoption of the amendments to Regulation S-X will not have a material impact on the Fund’s financial statements and related disclosures.

Semiannual Report         FSI-45

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Strategic Income VIP Fund (continued)

14. Subsequent Events

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

Abbreviations

Counterparty/Exchange		Currency		Selected Portfolio
BZWS	Barclays Bank PLC	BRL	Brazilian Real	ARM	Adjustable Rate Mortgage
CITI	Citigroup, Inc.	EUR	Euro	CDA	Community Development Authority/Agency
DBAB	Deutsche Bank AG	GBP	British Pound	CDO	Collateralized Debt Obligation
FBCO	Credit Suisse International	IDR	Indonesian Rupiah	CLO	Collateralized Loan Obligation
GSCO	The Goldman Sachs Group, Inc.	MXN	Mexican Peso	FRN	Floating Rate Note
HSBK	HSBC Bank PLC	MYR	Malaysian Ringgit	GDP	Gross Domestic Product
ICE	Intercontinental Exchange	SEK	Swedish krona	GO	General Obligation
JPHQ	JP Morgan Chase & Co.			HDC	Housing Development Corp.
				PCR	Pollution Control Revenue
				PIK	Payment-In-Kind
				SF	Single Family
				VRI	Value Recovery Instruments

Index Abbreviation
CDX.NA.HY.28	CDX North America High Yield Index
MCDX.NA.28	MCDX North America Index

FSI-46         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, 2017.

Class 2 Performance Summary as of June 30, 2017

The Fund’s Class 2 Shares delivered a +0.75% total return for the six-month period ended June 30, 2017.

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

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 Bloomberg Barclays U.S. Government Index: Intermediate Component, produced a +1.20% total return.¹ The Fund’s secondary benchmark, the Lipper VIP General U.S. Government Funds Classification Average, posted a +1.84% 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

U.S. economic growth decelerated in 2017’s first quarter, largely due to slower growth in consumer spending and declines in private inventory investment and government spending. However, growth accelerated in the second quarter due to increases in consumer spending, business investment and federal government spending. The manufacturing sector generally expanded, and the services sector also continued to grow. The unemployment rate decreased from 4.7% in December 2016 to 4.4% at period-end.³ Monthly retail sales were volatile, but grew for most of the period. Annual inflation,

as measured by the Consumer Price Index, decreased from 2.1% to 1.6% during the period.

The U.S. Federal Reserve (Fed), at its March meeting, increased the federal funds target rate from 0.50%–0.75% to 0.75%–1.00%. The Fed again increased its target range by a quarter point to
1.00%–1.25% at its June meeting. The Fed made both of these increases amid signs of a growing U.S. economy, a strengthening labor market and an improvement in business spending.

The 10-year Treasury yield, which moves inversely to its price, shifted throughout the period. It increased early during the period amid expectations of rate hikes by the Fed and upbeat economic data. During the latter part of the period, U.S. political uncertainty and geopolitical tensions in the Middle East and the Korean peninsula resulted in a decline in the yield. However, in June, the yield rose again due to renewed optimism for improvement in economic growth. Overall, the U.S. Treasury yield fell from 2.45% on December 30, 2016, to 2.31% at period-end.

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.

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).

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). In contrast, asset-backed securities, U.S. agency securities and commercial MBS outpaced Treasuries. U.S. economic indicators were generally encouraging during the reporting period. Steady growth in the services sector created new jobs and boosted employment levels. Retail sales grew for most of the period. Low energy prices pulled inflation lower. In this environment, home sales grew early in the period, but slowed by period-end because of low supply levels and rising prices.

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 had positive excess returns, while Ginnie Mae (GNMA) MBS and Fannie Mae MBS had negative excess returns. All had 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 3.0% coupons, while reducing the exposure to 3.5% and 4.0% coupons. At period-end, our heaviest exposures were in 3.5% and 4.0% coupons. Based on excess returns over Treasuries, coupon performance was mixed. GN I 5.0% securities were among the best performers while GN I & II 5.5% securities lagged.

The Fund’s U.S. yield curve positioning was a contributor during the period as yield curve movements had a positive impact relative to the benchmark. Our exposure to Fannie Mae DUS also helped results. In contrast, our exposure to fixed-rate

agency MBS and Treasury Inflation Protected Securities were detractors.

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, 2017, 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 2 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: (1) transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes; and (2) 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 table below shows Fund-level ongoing expenses and can help you understand these costs 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 table below provides information about the actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of ongoing Fund expenses but does not include the effect of ongoing Contract expenses, is used to calculate the “Ending Account Value.” You can estimate the Fund-level expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number under the headings “Actual” and “Fund-Level Expenses Paid During Period” (if Fund-Level Expenses Paid During Period were $7.50, then 8.6 × $7.50 = $64.50). In this illustration, the estimated expenses paid this period at the Fund level are $64.50.

Hypothetical Example for Comparison with Other Mutual Funds

Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other mutual funds offered through the Contract. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds offered through the Contract.

Please note that expenses shown in the table are meant to highlight ongoing costs at the Fund level only and do not reflect any ongoing expenses at the Contract level, or transaction expenses at either the Fund or Contract levels. In addition, 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.

		Actual (actual return after expenses)				Hypothetical (5% annual return before expenses)
Share Class	Beginning Account Value 1/1/17		Ending Account Value 6/30/17	Fund-Level Expenses Paid During Period 1/1/17–6/30/17	1,2		Ending Account Value 6/30/17	Fund-Level Expenses Paid During Period 1/1/17–6/30/17	1,2	Annualized Expense Ratio	2
Class 2	$1,000		$1,007.50	$3.73			$1,021.08	$3.76		0.75%

1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above — in the far right column — multiplied by the simple average account value over the period indicated, and then multiplied by 181/365 to reflect the one-half year period.

2. Does not include any ongoing expenses of the Contract for which the Fund is an investment option.

FUS-4         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Highlights

Franklin U.S. Government Securities VIP Fund

	Six Months Ended June 30, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 1
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$12.51			$12.74			$13.00			$12.91			$13.57			$13.67
Income from investment operationsa:
Net investment incomeb		0.12			0.22			0.21			0.24			0.24			0.32
Net realized and unrealized gains (losses)		(—	)c		(0.10	)		(0.12	)		0.22			(0.51	)		(0.03	)
Total from investment operations		0.12			0.12			0.09			0.46			(0.27	)		0.29
Less distributions from net investment income		(0.36	)		(0.35	)		(0.35	)		(0.37	)		(0.39	)		(0.39	)
Net asset value, end of period		$12.27			$12.51			$12.74			$13.00			$12.91			$13.57
Total returnd		0.92%			0.90%			0.71%			3.64%			(1.99)%			2.12%
Ratios to average net assetse
Expenses		0.50%	f		0.50%	f		0.50%	f		0.49%	f		0.49%	f		0.50%
Net investment income		1.97%			1.75%			1.64%			1.84%			1.84%			2.36%
Supplemental data
Net assets, end of period (000’s)		$71,153			$73,695			$79,620			$90,656			$99,947			$126,536
Portfolio turnover rate		35.07%			86.28%			61.91%			42.88%			69.47%			45.89%
Portfolio turnover rate excluding mortgage dollar rollsg		35.07%			86.28%			61.91%			42.88%			67.80%			45.89%

^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.

^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%.

^gSee Note 1(c) 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, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 2
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$12.24			$12.47			$12.73			$12.65			$13.31			$13.42
Income from investment operationsa:
Net investment incomeb		0.11			0.19			0.18			0.20			0.21			0.28
Net realized and unrealized gains (losses)		(0.02	)		(0.10	)		(0.12	)		0.22			(0.50	)		(0.03	)
Total from investment operations		0.09			0.09			0.06			0.42			(0.29	)		0.25
Less distributions from net investment income		(0.32	)		(0.32	)		(0.32	)		(0.34	)		(0.37	)		(0.36	)
Net asset value, end of period		$12.01			$12.24			$12.47			$12.73			$12.65			$13.31
Total returnc		0.75%			0.66%			0.47%			3.38%			(2.24)%			1.89%
Ratios to average net assetsd
Expenses		0.75%	e		0.75%	e		0.75%	e		0.74%	e		0.74%	e		0.75%
Net investment income		1.72%			1.50%			1.39%			1.59%			1.59%			2.11%
Supplemental data
Net assets, end of period (000’s)		$1,252,604			$1,268,963			$1,311,974			$1,369,037			$1,267,994			$1,206,089
Portfolio turnover rate		35.07%			86.28%			61.91%			42.88%			69.47%			45.89%
Portfolio turnover rate excluding mortgage dollar rollsf		35.07%			86.28%			61.91%			42.88%			67.80%			45.89%

^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(c) 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, 2017 (unaudited)

Franklin U.S. Government Securities VIP Fund
		Principal Amount*		Value
	Mortgage-Backed Securities 77.5%
a	Federal Home Loan Mortgage Corp. (FHLMC) Adjustable Rate 1.5%
	FHLMC, 3.369%, 4/01/40	$	8,280,668	$	8,722,204
	FHLMC, 3.377%, 6/01/37		6,131,651		6,452,228
	FHLMC, 2.953% - 3.66%, 3/01/36 - 5/01/38		4,605,550		4,886,834
					20,061,266
	Federal Home Loan Mortgage Corp. (FHLMC) Fixed Rate 9.6%
	FHLMC Gold 15 Year, 4.50%, 3/01/25 - 4/01/25		1,367,270		1,437,264
	FHLMC Gold 30 Year, 3.00%, 5/01/43		519,813		521,960
	FHLMC Gold 30 Year, 3.00%, 6/01/46		40,917,927		40,862,343
	FHLMC Gold 30 Year, 3.00%, 10/01/46		28,841,129		28,801,951
	FHLMC Gold 30 Year, 3.50%, 3/01/32 - 5/01/43		4,460,227		4,655,998
	FHLMC Gold 30 Year, 3.50%, 6/01/47		8,316,279		8,550,445
	FHLMC Gold 30 Year, 4.00%, 9/01/40 - 3/01/47		12,401,419		13,083,899
	FHLMC Gold 30 Year, 4.00%, 6/01/47		14,954,022		15,743,717
	FHLMC Gold 30 Year, 4.50%, 5/01/40 - 7/01/41		2,975,804		3,195,247
	FHLMC Gold 30 Year, 5.00%, 9/01/33 - 4/01/40		5,363,617		5,877,857
	FHLMC Gold 30 Year, 5.50%, 7/01/33 - 5/01/38		1,488,050		1,664,142
	FHLMC Gold 30 Year, 6.00%, 1/01/24 - 8/01/35		978,866		1,105,989
	FHLMC Gold 30 Year, 6.50%, 12/01/23 - 5/01/35		489,986		542,789
	FHLMC Gold 30 Year, 7.00%, 4/01/24 - 6/01/32		213,455		233,796
	FHLMC Gold 30 Year, 7.50%, 12/01/22 - 5/01/24		1,799		1,825
	FHLMC Gold 30 Year, 8.00%, 9/01/21 - 5/01/22		3,472		3,790
	FHLMC Gold 30 Year, 8.50%, 10/01/21 - 7/01/31		346,929		415,236
	FHLMC PC 30 Year, 8.50%, 9/01/20		159		160
					126,698,408
a	Federal National Mortgage Association (FNMA) Adjustable Rate 5.2%
	FNMA, 2.774%, 7/01/38		6,220,094		6,551,282
	FNMA, 1.833% - 3.079%, 11/01/17 - 10/01/44		11,625,897		12,124,570
	FNMA, 3.097%, 10/01/35		6,811,286		7,192,767
	FNMA, 3.188%, 8/01/36		7,407,352		7,804,541
	FNMA, 3.08% - 3.431%, 1/01/19 - 9/01/40		10,907,650		11,439,184
	FNMA, 3.474%, 9/01/37		20,261,701		21,513,565
	FNMA, 3.433% - 7.22%, 8/01/18 - 3/01/47		2,778,016		2,914,487
					69,540,396
	Federal National Mortgage Association (FNMA) Fixed Rate 7.3%
	FNMA 15 Year, 2.64%, 7/01/25		2,500,000		2,508,060
	FNMA 15 Year, 2.77%, 4/01/25		3,500,000		3,523,759
	FNMA 15 Year, 2.99%, 11/01/24		3,000,000		3,081,345
	FNMA 15 Year, 3.14%, 10/01/25		4,000,000		4,088,332
	FNMA 15 Year, 3.28%, 7/01/27		4,000,000		4,111,644
	FNMA 15 Year, 3.51%, 8/01/23		3,000,000		3,188,739
	FNMA 15 Year, 5.50%, 11/01/17 - 1/01/25		1,382,497		1,472,651
	FNMA 15 Year, 6.00%, 8/01/17 - 9/01/17		4,236		4,238
	FNMA 30 Year, 3.00%, 12/01/42		222,987		223,697
	FNMA 30 Year, 3.50%, 7/01/45		39,638,424		40,736,800
	FNMA 30 Year, 4.00%, 1/01/41 - 8/01/41		9,206,687		9,722,226
	FNMA 30 Year, 4.50%, 8/01/40 - 6/01/41		9,121,184		9,862,653
	FNMA 30 Year, 5.00%, 3/01/34 - 7/01/41		5,473,203		5,987,073
	FNMA 30 Year, 5.50%, 12/01/32 - 8/01/35		2,184,465		2,438,746
	FNMA 30 Year, 6.00%, 1/01/24 - 8/01/38		2,698,474		3,066,289
	FNMA 30 Year, 6.50%, 1/01/24 - 9/01/36		525,346		584,694

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, 7.50%, 4/01/23 - 8/01/25	$	18,247	$	18,858
FNMA 30 Year, 8.00%, 3/01/22 - 2/01/25		92,018		94,520
FNMA 30 Year, 8.50%, 3/01/20 - 6/01/21		461		482
FNMA 30 Year, 9.00%, 10/01/26		86,241		91,789
FNMA GL 30 Year, 8.00%, 8/01/19		1,626		1,630
FNMA PL 30 Year, 5.50%, 4/01/34		1,263,708		1,362,592
				96,170,817
Government National Mortgage Association (GNMA) Fixed Rate 53.9%
GNMA I SF 30 Year, 3.00%, 7/15/42		589,157		597,498
GNMA I SF 30 Year, 4.00%, 10/15/40 - 8/15/45		12,381,340		13,120,209
GNMA I SF 30 Year, 4.00%, 9/15/45 - 8/15/46		985,066		1,043,430
GNMA I SF 30 Year, 4.50%, 1/15/39 - 5/15/40		12,163,146		13,166,323
GNMA I SF 30 Year, 4.50%, 5/15/40 - 6/15/41		6,756,623		7,317,740
GNMA I SF 30 Year, 5.00%, 6/15/30 - 10/15/39		11,409,337		12,561,712
GNMA I SF 30 Year, 5.00%, 10/15/39 - 3/15/40		10,689,336		11,856,538
GNMA I SF 30 Year, 5.00%, 3/15/40 - 9/15/40		5,738,996		6,345,510
GNMA I SF 30 Year, 5.50%, 12/15/28 - 10/15/39		6,684,740		7,509,554
GNMA I SF 30 Year, 6.00%, 11/15/23 - 11/15/38		3,607,346		4,118,921
GNMA I SF 30 Year, 6.50%, 6/15/23 - 9/15/38		1,813,066		2,013,647
GNMA I SF 30 Year, 7.00%, 9/15/22 - 1/15/32		482,015		506,994
GNMA I SF 30 Year, 7.50%, 2/15/22 - 8/15/33		515,556		590,380
GNMA I SF 30 Year, 8.00%, 12/15/21 - 5/15/24		126,287		130,166
GNMA I SF 30 Year, 8.50%, 6/15/22 - 12/15/24		47,656		48,721
GNMA I SF 30 Year, 9.00%, 9/15/19 - 3/15/20		1,219		1,224
GNMA I SF 30 Year, 9.50%, 3/15/18 - 12/15/20		24,910		25,363
GNMA I SF 30 Year, 10.00%, 9/15/18 - 8/15/21		11,558		11,705
GNMA II SF 30 Year, 3.00%, 12/20/42 - 2/20/45		3,075,322		3,110,929
GNMA II SF 30 Year, 3.00%, 9/20/45		12,056,799		12,193,899
GNMA II SF 30 Year, 3.00%, 8/20/46		12,440,927		12,582,394
GNMA II SF 30 Year, 3.00%, 10/20/46		12,192,161		12,330,800
GNMA II SF 30 Year, 3.50%, 12/20/40 - 8/20/43		3,144,834		3,271,445
GNMA II SF 30 Year, 3.50%, 8/20/42		8,725,725		9,076,955
GNMA II SF 30 Year, 3.50%, 9/20/42		25,243,005		26,259,100
GNMA II SF 30 Year, 3.50%, 10/20/42		7,676,891		7,985,909
GNMA II SF 30 Year, 3.50%, 11/20/42		14,995,265		15,598,870
GNMA II SF 30 Year, 3.50%, 12/20/42		11,328,523		11,784,536
GNMA II SF 30 Year, 3.50%, 1/20/43		18,948,335		19,711,074
GNMA II SF 30 Year, 3.50%, 3/20/43		6,877,334		7,154,179
GNMA II SF 30 Year, 3.50%, 4/20/43		8,644,416		8,992,398
GNMA II SF 30 Year, 3.50%, 5/20/43		15,791,757		16,427,462
GNMA II SF 30 Year, 3.50%, 6/20/43		7,235,921		7,527,210
GNMA II SF 30 Year, 3.50%, 2/20/47		109,149,816		113,182,986
GNMA II SF 30 Year, 3.50%, 5/20/47		147,611,175		153,065,522
GNMA II SF 30 Year, 4.00%, 11/20/39 - 3/20/41		12,258,122		13,005,529
GNMA II SF 30 Year, 4.00%, 7/20/41 - 2/20/44		6,863,562		7,273,848
GNMA II SF 30 Year, 4.00%, 11/20/41		8,622,592		9,131,736
GNMA II SF 30 Year, 4.00%, 3/20/47		74,437,686		78,435,966
GNMA II SF 30 Year, 4.00%, 5/20/47		14,969,866		15,805,130
GNMA II SF 30 Year, 4.50%, 10/20/39 - 5/20/41		9,270,091		9,975,239
GNMA II SF 30 Year, 4.50%, 6/20/41 - 10/20/41		10,190,313		10,951,903
GNMA II SF 30 Year, 4.50%, 9/20/41		6,893,181		7,408,876

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, 4.50%, 3/20/42 - 10/20/44	$	11,381,685	$	12,155,611
	GNMA II SF 30 Year, 5.00%, 9/20/33 - 10/20/42		11,541,051		12,704,781
	GNMA II SF 30 Year, 5.00%, 6/20/44		3,810,156		4,130,617
	GNMA II SF 30 Year, 5.50%, 5/20/34 - 6/20/38		5,653,333		6,300,028
	GNMA II SF 30 Year, 6.00%, 11/20/23 - 7/20/39		3,577,183		4,080,330
	GNMA II SF 30 Year, 6.50%, 12/20/27 - 4/20/34		553,365		635,200
	GNMA II SF 30 Year, 7.00%, 5/20/32		9,248		10,966
	GNMA II SF 30 Year, 7.50%, 12/20/17 - 5/20/33		100,828		112,684
	GNMA II SF 30 Year, 8.00%, 8/20/26		6,429		7,631
	GNMA II SF 30 Year, 9.50%, 4/20/25		2,197		2,207
					713,349,585
	Total Mortgage-Backed Securities (Cost $1,027,870,624)				1,025,820,472
	Foreign Government and Agency Securities (Cost $1,760,153) 0.1%
b	International Bank for Reconstruction and Development, Principal Strip, 7/15/17 (Supranational)		1,761,000		1,760,527
	U.S. Government and Agency Securities 17.8%
	Federal Agricultural Mortgage Corp.,
	4.30%, 5/13/19		1,010,000		1,061,952
	1.41%, 3/06/20		10,000,000		9,927,050
	2.66%, 4/12/22		7,000,000		7,145,936
	FHLB, 2.625%, 9/12/25		20,000,000		20,115,100
	FICO,
	1P, Strip, 5/11/18		10,000,000		9,877,350
	12, Strip, 6/06/18		4,627,000		4,565,253
	13P, Strip, 12/27/18		2,500,000		2,444,470
	15P, Strip, 3/07/19		1,798,000		1,751,448
	A-P, Strip, 2/08/18		1,000,000		992,226
	B-P, Strip, 4/06/18		1,405,000		1,390,833
	D-P, Strip, 9/26/19		7,605,000		7,323,463
	E-P, Strip, 11/02/18		8,896,000		8,720,802
	Israel Government Agency for International Development Bond,
	5.50%, 9/18/23		12,000,000		14,294,904
	7-Z, U.S. Government Guaranteed, Strip, 8/15/22		5,619,000		5,046,402
	New Valley Generation IV, secured bond, 4.687%, 1/15/22		1,873,266		1,988,334
	Overseas Private Investment Corp.,
	A, zero cpn., 2/19/18		682,174		725,330
	A, zero cpn., 11/15/20		2,575,000		3,100,936
	Private Export Funding Corp.,
	secured bond, 2.80%, 5/15/22		9,000,000		9,294,093
	secured note, 4.30%, 12/15/21		1,865,000		2,044,877
	secured note, LL, 2.25%, 3/15/20		1,700,000		1,723,467
	senior secured note, MM, 2.30%, 9/15/20		3,500,000		3,541,594
	SBA,
	a FRN, 3.875%, 3/25/18		53,536		53,492
	PC, 1997-20G, 1, 6.85%, 7/01/17		11,384		11,387
	PC, 1998-20I, 1, 6.00%, 9/01/18		103,722		104,740
	Tunisia Government Agency for International Development Bonds, 1.686%, 7/16/19		7,000,000		7,050,253

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)
	TVA,
	1.875%, 8/15/22	$	6,000,000	$	5,970,684
	5.88%, 4/01/36		5,000,000		6,873,390
	Strip, 11/01/18		2,644,000		2,589,502
	Strip, 6/15/19		5,973,000		5,774,296
	Strip, 6/15/20		6,138,000		5,798,182
	U.S. Treasury Bond,
	2.50%, 2/15/46		4,000,000		3,730,468
	c Index Linked, 2.375%, 1/15/25		12,192,781		13,894,808
	c Index Linked, 2.00%, 1/15/26		13,550,654		15,192,479
	c Index Linked, 1.75%, 1/15/28		9,336,670		10,413,888
	c Index Linked, 3.625%, 4/15/28		7,558,424		9,881,581
c	U.S. Treasury Note,
	Index Linked, 0.125%, 4/15/19		10,434,459		10,442,901
	Index Linked, 0.125%, 7/15/24		15,960,469		15,683,044
	Ukraine Government Agency for International Development Bonds, 1.844%, 5/16/19		5,000,000		5,057,210
	Total U.S. Government and Agency Securities (Cost $234,589,675)				235,598,125
	Total Investments before Short Term Investments (Cost $1,264,220,452)				1,263,179,124
	Short Term Investments (Cost $57,294,355) 4.4%
	Repurchase Agreements 4.4%
d	Joint Repurchase Agreement, 1.058%, 7/03/17 (Maturity Value $57,299,407)
	BNP Paribas Securities Corp. (Maturity Value $25,709,098)
	Deutsche Bank Securities Inc. (Maturity Value $5,881,211)
	HSBC Securities (USA) Inc. (Maturity Value $16,068,473) Merrill Lynch, Pierce, Fenner & Smith Inc. (Maturity Value $9,640,625)
	Collateralized by U.S. Government Agency Securities, 0.875% - 1.875%, 12/15/17 - 6/11/21; e U.S. Treasury Bill, 11/30/17 - 1/04/18; and U.S. Treasury Note, 0.75% - 4.00%, 4/30/18 - 8/15/21 (valued at $58,499,661)		57,294,355		57,294,355
	Total Investments (Cost $1,321,514,807) 99.8%				1,320,473,479
	Other Assets, less Liabilities 0.2%				3,283,203
	Net Assets 100.0%			$	1,323,756,682

See Abbreviations on page FUS-19.

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

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

^bA supranational organization is an entity formed by two or more central governments through international treaties.

^cPrincipal amount of security is adjusted for inflation. See Note 1(e).

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

^eThe security was issued on a discount basis with no stated coupon rate.

FUS-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, 2017 (unaudited)

	Franklin U.S. Government Securities VIP Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	1,264,220,452
Cost - Repurchase agreements		57,294,355
Total cost of investments	$	1,321,514,807
Value - Unaffiliated issuers	$	1,263,179,124
Value - Repurchase agreements		57,294,355
Total value of investments		1,320,473,479
Receivables:
Investment securities sold		909,531
Capital shares sold		50,887
Interest		4,168,688
Other assets		864
Total assets		1,325,603,449
Liabilities:
Payables:
Capital shares redeemed		631,008
Management fees		515,565
Distribution fees		529,779
Reports to shareholders		102,588
Accrued expenses and other liabilities		67,827
Total liabilities		1,846,767
Net assets, at value	$	1,323,756,682
Net assets consist of:
Paid-in capital	$	1,390,475,980
Undistributed net investment income		6,543,431
Net unrealized appreciation (depreciation)		(1,041,328	)
Accumulated net realized gain (loss)		(72,221,401	)
Net assets, at value	$	1,323,756,682
Class 1:
Net assets, at value	$	71,152,625
Shares outstanding		5,798,170
Net asset value and maximum offering price per share	$	12.27
Class 2:
Net assets, at value	$	1,252,604,057
Shares outstanding		104,281,600
Net asset value and maximum offering price per share	$	12.01

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 Operations

for the six months ended June 30, 2017 (unaudited)

	Franklin U.S. Government Securities VIP Fund
Investment income:
Interest	$	21,017,211
Paydown gain (loss)		(4,620,524	)
Total investment income		16,396,687
Expenses:
Management fees (Note 3a)		3,115,231
Distribution fees - Class 2 (Note 3c)		1,570,644
Custodian fees (Note 4)		6,113
Reports to shareholders		72,476
Professional fees		32,077
Trustees’ fees and expenses		2,999
Other		83,326
Total expenses		4,882,866
Expense reductions (Note 4)		(477	)
Net expenses		4,882,389
Net investment income		11,514,298
Realized and unrealized gains (losses):
Net realized gain (loss) from investments		(8,543,682	)
Net change in unrealized appreciation (depreciation) on investments		7,571,380
Net realized and unrealized gain (loss)		(972,302	)
Net increase (decrease) in net assets resulting from operations	$	10,541,996

FUS-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 U.S. Government Securities VIP Fund
	Six Months Ended June 30, 2017 (unaudited)			Year Ended December 31, 2016
Increase (decrease) in net assets:
Operations:
Net investment income	$	11,514,298		$	21,356,404
Net realized gain (loss)		(8,543,682	)		3,288,253
Net change in unrealized appreciation (depreciation)		7,571,380			(15,237,134	)
Net increase (decrease) in net assets resulting from operations		10,541,996			9,407,523
Distributions to shareholders from:
Net investment income:
Class 1		(2,011,168	)		(2,105,837	)
Class 2		(33,122,555	)		(33,509,223	)
Total distributions to shareholders		(35,133,723	)		(35,615,060	)
Capital share transactions: (Note 2)
Class 1		(1,183,467	)		(4,571,855	)
Class 2		6,874,062			(18,157,380	)
Total capital share transactions		5,690,595			(22,729,235	)
Net increase (decrease) in net assets		(18,901,132	)		(48,936,772	)
Net assets:
Beginning of period		1,342,657,814			1,391,594,586
End of period	$	1,323,756,682		$	1,342,657,814
Undistributed net investment income included in net assets:
End of period	$	6,543,431		$	30,162,856

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

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 eighteen 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. 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, 2017, 41.9% 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 may differ 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 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 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

FUS-14         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin U.S. Government Securities VIP Fund (continued)

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, 2017.

c. 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.

d. Income Taxes

It is the Fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and 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, 2017, 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. 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. Distributable earnings are determined according to income tax regulations (tax basis) and 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

Semiannual Report         FUS-15

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)

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

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.

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.

2. Shares of Beneficial Interest

At June 30, 2017, 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, 2017						Year Ended December 31, 2016
	Shares			Amount			Shares			Amount
Class 1 Shares:
Shares sold		131,627		$	1,652,445			351,919		$	4,501,949
Shares issued in reinvestment of distributions		163,377			2,011,168			166,207			2,105,837
Shares redeemed		(386,199	)		(4,847,080	)		(876,092	)		(11,179,641	)
Net increase (decrease)		(91,195	)	$	(1,183,467	)		(357,966	)	$	(4,571,855	)
Class 2 Shares:
Shares sold		5,078,302		$	62,315,681			17,880,837		$	224,111,450
Shares issued in reinvestment of distributions		2,748,760			33,122,555			2,700,179			33,509,223
Shares redeemed		(7,231,163	)		(88,564,174	)		(22,088,516	)		(275,778,053	)
Net increase (decrease)		595,899		$	6,874,062			(1,507,500	)	$	(18,157,380	)

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

FUS-16         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin U.S. Government Securities 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, 2017, the annualized effective investment management fee rate was 0.469% 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, 2017, 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.

Semiannual Report         FUS-17

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin U.S. Government Securities VIP Fund (continued)

5. Income Taxes (continued)

At December 31, 2016, capital loss carryforwards were as follows:

Capital loss carryforwards subject to expiration:
2017	$	401,851
2018		426,637
Capital loss carryforwards not subject to expiration:
Short term		22,594,468
Long term		40,093,383
Total capital loss carryforwards	$	63,516,339

At June 30, 2017, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	1,324,128,864
Unrealized appreciation	$	11,093,611
Unrealized depreciation		(14,748,996	)
Net unrealized appreciation (depreciation)	$	(3,655,385	)

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, 2017, aggregated $452,261,385 and $493,656,375, 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 9, 2018. 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 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statement of Operations. During the period ended June 30, 2017, 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

FUS-18         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin U.S. Government Securities VIP Fund (continued)

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

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

The 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, 2017, all of the Fund’s investments in financial instruments carried at fair value were valued using Level 2 inputs.

9. New Accounting Pronouncements

In March 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-08, Receivables — Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The amendments in the ASU shorten the amortization period for certain callable debt securities, held at a premium, to be amortized to the earliest call date. The ASU does not require an accounting change for securities held at a discount; which continues to be amortized to maturity. The ASU is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. Management is currently evaluating the impact, if any, of applying this provision.

10. Investment Company Reporting Modernization

In October 2016, the U.S. Securities and Exchange Commission adopted new rules and amended existing rules (together, final rules) intended to modernize the reporting and disclosure of information by registered investment companies. In part, the final rules amend Regulation S-X and require standardized, enhanced disclosures about derivatives in investment company financial statements, as well as other amendments. The compliance date for the amendments to Regulation S-X is August 1, 2017. Management has reviewed the requirements and believes the adoption of the amendments to Regulation S-X will not have a material impact on the Fund’s financial statements and related disclosures.

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
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

Semiannual Report         FUS-19

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Franklin VolSmart Allocation VIP Fund

This semiannual report for Franklin VolSmart Allocation VIP Fund covers the period ended June 30, 2017.

Class 2 Performance Summary as of June 30, 2017

The Fund’s Class 2 Shares delivered a +6.83% total return* for the six-month period ended June 30, 2017.

*The Fund has an expense reduction and a fee waiver associated with any investments it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 4/30/18. Fund investment results reflect the expense reduction and fee waiver; without these reductions, the results would have been lower.

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

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 VOLSMART ALLOCATION VIP FUND

Fund Goal and Main Investments

The Fund seeks total return (including income and capital gains) while seeking to manage volatility.

Fund Risks

All investments involve risks, including possible loss of principal. There can be no guarantee that the Fund will stay within its target volatility. Also, the managed volatility and tail risk protection strategies could negatively impact the Fund’s return and expose the Fund to additional costs. Generally, investors should be comfortable with fluctuation in the value of their investments, especially over the short term. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Bond prices generally move in the opposite direction of interest rates. Derivatives involve costs and can create economic leverage in the portfolio, which may result in significant volatility and cause the Fund to participate in losses 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. Because the Fund allocates assets to a variety of investment strategies, ETFs and other mutual funds, which involve certain risks, it may be subject to those same risks. 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 Standard & Poor’s^® 500 Index (S&P 500^®) and the Bloomberg Barclays U.S. Aggregate Bond Index, returned +9.34% and +2.27%, respectively, for the period under review.¹ The Fund’s blended benchmark, a combination of leading stock and bond indexes that better reflects the asset allocation of the Fund’s portfolio, returned +6.30% for the same period.²

Economic and Market Overview

U.S. economic growth decelerated in 2017’s first quarter, largely due to slower growth in consumer spending and declines in private inventory investment and government spending. However, growth accelerated in the second quarter due to increases in consumer spending, business investment and federal government spending. The manufacturing sector generally expanded, and the services sector also continued to grow. The unemployment rate decreased from 4.7% in December 2016 to 4.4% at period-end.³ Monthly retail sales were volatile, but grew for most of the period. Annual inflation, as measured by the Consumer Price Index, decreased from 2.1% to 1.6% during the period.

The U.S. Federal Reserve (Fed), at its March meeting, increased the federal funds target rate from 0.50%–0.75% to 0.75%–1.00%. The Fed again increased its target range by a quarter point to
1.00%–1.25% at its June meeting. The Fed made both of these increases amid signs of a growing U.S. economy, a strengthening labor market and an improvement in business spending.

U.S. equity markets rose during the period, benefiting from mostly upbeat economic data, better U.S. corporate earnings and signs of improvement in the Chinese and European economies. Investor optimism arising from pro-growth and pro-business policy plans in the U.S. and the victory of Emmanuel Macron as France’s President also helped U.S. equities. However, concerns about the terms of the U.K.’s exit from the European Union (also known as “Brexit”), uncertainty about President Trump’s ability to implement reforms, and geopolitical tensions in the Middle East and the Korean peninsula curbed market sentiment. The broad U.S. stock market, as measured by the S&P 500, generated a +9.34% total return for the period.¹

The 10-year Treasury yield, which moves inversely to its price, shifted throughout the period. It increased early during the period amid expectations of rate hikes by the Fed and upbeat economic data. During the latter part of the period, U.S. political uncertainty, and geopolitical tensions in the Middle East and the Korean peninsula, resulted in a decline in the yield. However, in June, the yield rose again due to renewed

1. Source: Morningstar.

2. The Fund’s blended benchmark was calculated internally and rebalanced monthly and was composed of 60% S&P 500, 30% Bloomberg Barclays U.S. Aggregate Bond Index and 10% Bloomberg Barclays 1-3 Month U.S. Treasury Bill Index.

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.

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

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FRANKLIN VOLSMART ALLOCATION VIP FUND

optimism for improvement in economic growth. Overall, the U.S. Treasury yield fell from 2.45% on December 30, 2016, to 2.31% at period-end.

Investment Strategy

Under normal market conditions, the Fund seeks to achieve its investment goal by allocating its assets across certain asset classes, sectors and strategies in an attempt to produce a diversified portfolio that will generate returns while minimizing the expected volatility of the Fund’s returns so that volatility does not exceed a target of 10% per year. (Volatility within the 10% target is referred to as “Target Volatility.”) The Fund’s assets are primarily invested in its “core portfolio,” which is principally composed of various U.S. equity and fixed income investments and strategies, including other mutual funds.

In addition, the Fund employs a volatility management strategy, which is designed to manage the expected volatility of the Fund’s returns so that volatility remains within the Fund’s Target Volatility. Thus, the Fund may utilize certain derivative instruments (such as futures contracts on indexes) in an effort to adjust the Fund’s expected volatility to within the Target Volatility. There is no guarantee that the Fund will stay within its Target Volatility. The Fund also employs a “tail risk protection strategy,” designed to protect the Fund from risks related to extreme short-term market downturns (tail risk). Thus, the Fund may utilize certain derivatives (such as total return swap agreements) in an effort to hedge the tail risk of the Fund. There is no guarantee that the Fund’s volatility management or tail risk protection strategies will be successful.

What is a futures contract?

A futures contract 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.

What is a total return swap agreement?

A swap agreement, such as an equity total return swap, is a contract between the Fund and a counterparty to exchange on a future date the returns, or differentials in rates of return, that would have been earned or realized if a notional amount were invested in specific instruments.

Manager’s Discussion

At the end of the six-month period, at the asset allocation level, the Fund held approximately 68% in equities, 28% in fixed income and 4% in cash. In comparison, the Fund’s blended

Portfolio Composition*
6/30/17
	% of Total Net Assets
Stocks		49.4%
Capital Goods		10.7%
Health Care Equipment & Services		6.6%
Materials		6.0%
Software & Services		4.0%
Energy		3.1%
Food, Beverage & Tobacco		3.0%
Semiconductors & Semiconductor Equipment		2.5%
Pharmaceuticals, Biotechnology & Life Sciences		2.4%
Retailing		1.8%
Food & Staples Retailing		1.7%
Household & Personal Products		1.7%
Consumer Services		1.1%
Consumer Durables & Apparel		1.1%
Media		1.0%
Commercial & Professional Services		1.0%
Insurance		0.9%
Transportation		0.6%
Diversified Financials		0.2%
Underlying Funds – Equity		18.2%
Franklin DynaTech Fund – Class R6		8.7%
Franklin Income Fund – Class R6		5.5%
iShares Core MSCI EAFE ETF		4.0%
Underlying Funds – Fixed Income		27.9%
Franklin Low Duration Total Return Fund – Class R6		13.1%
Franklin Strategic Income Fund – Class R6		10.7%
Franklin Income Fund – Class R6		4.1%
Hedge Strategy		2.0%
Short-Term Investments & Other Net Assets		2.5%

*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 breakdown may not match the SOI.

benchmark was composed of approximately 60% equities, 30% fixed income and 10% cash.²

Equities

Growth stocks, namely technology and health care companies, led U.S. equities higher in the first half of 2017. The NASDAQ Composite Index posted its strongest first half of the year results since 2009, while value equities widely trailed their growth peers in the review period.

Looking at the portfolio as a whole, the overweighting in comparison to the Fund’s blended benchmark and fund

Semiannual Report         FVA-3

FRANKLIN VOLSMART ALLOCATION VIP FUND

selection within equities benefited relative performance. We maintained a favorable view of global equities as corporate earnings results and upside earnings surprises raised forward-looking consensus expectations. Overall, low volatility remained intact and supportive of investor confidence and higher equity multiples, while robust quantitative easing programs from a number of central banks remained in effect.

Franklin DynaTech Fund was a notable contributor to relative returns as its focus on technology and health care led to significant outperformance versus its benchmark index. However, the value bias of the Franklin Rising Dividends Strategy and the equity component of Franklin Income Fund both weighed on relative results, despite solid absolute returns. Positioning within the energy sector hindered relative performance for the equity allocation.

Portfolio Strategy Holdings*
6/30/17
	% of Total Net Assets
Franklin Rising Dividends Strategy		49.4%
Franklin Low Duration Total Return Fund		13.1%
Franklin Strategic Income Fund		10.7%
Franklin Income Fund		9.6%
Franklin DynaTech Fund		8.7%
iShares Core MSCI EAFE ETF		4.0%
Hedge Strategy		2.0%
Short-Term Investments & Other Net Assets		2.5%

*The breakdown may not match the SOI.

Fixed Income

U.S. Treasuries rallied in 2017’s second quarter and the yield on the 10-year Treasury note finished lower at period-end than at the start of 2017. The fixed income component of Franklin VolSmart Allocation VIP Fund remained underweighted compared to its neutral fixed income target range, reflecting our concerns over a combination of low-term premiums for global sovereign debt and the persistent momentum for global equity markets. The Fund’s duration remained lower relative to its benchmark index.

On a portfolio level, a moderate fixed income underweighting strengthened relative returns. A decrease in long-term interest rates and tightening credit spreads supported corporate bonds in the first half of 2017, helping Franklin Income Fund and Franklin Strategic Income Fund on both a relative and an absolute performance basis. Significant exposure to high-yield bonds for the fixed income strategies also benefited relative returns, despite some pullback in the sector in the second quarter amid falling oil prices. Conversely, Franklin Low

Duration Total Return Fund detracted from relative performance as it lagged amid the rally in long U.S. Treasuries.

Hedging

Hedging strategies were relatively inactive during the review period as equity market volatility drifted lower. Volatility in 2017’s first half was at or near multi-year lows in U.S., European and Asian equity markets, despite geopolitical concerns surrounding elections in Europe and tensions involving North Korea. Periods of drawdowns were minimal and short lived for global equity markets.

This minimal hedge activity reflected our view that the pace of global growth remained on track for marked improvement for the calendar year, with investor sentiment expected to be strong, and that global financial conditions remained accommodative.

Thank you for your participation in Franklin VolSmart 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, 2017, 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 VOLSMART ALLOCATION VIP FUND

Class 2 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: (1) transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes; and (2) 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 table below shows Fund-level ongoing expenses and can help you understand these costs 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 table below provides information about the actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of ongoing Fund expenses but does not include the effect of ongoing Contract expenses, is used to calculate the “Ending Account Value.” You can estimate the Fund-level expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number under the headings “Actual” and “Fund-Level Expenses Paid During Period” (if Fund-Level Expenses Paid During Period were $7.50, then 8.6 × $7.50 = $64.50). In this illustration, the estimated expenses paid this period at the Fund level are $64.50.

Hypothetical Example for Comparison with Other Mutual Funds

Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other mutual funds offered through the Contract. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds offered through the Contract.

Please note that expenses shown in the table are meant to highlight ongoing costs at the Fund level only and do not reflect any ongoing expenses at the Contract level, or transaction expenses at either the Fund or Contract levels. In addition, 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.

		Actual (actual return after expenses)				Hypothetical (5% annual return before expenses)
Share Class	Beginning Account Value 1/1/17		Ending Account Value 6/30/17	Fund-Level Expenses Paid During  Period 1/1/17–6/30/17	1,2		Ending Account Value 6/30/17	Fund-Level Expenses Paid During  Period 1/1/17–6/30/17	1,2	Net Annualized Expense Ratio	2
Class 2	$1,000		$1,068.30	$3.74			$1,021.17	$3.66		0.73%

1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above — in the far right column — multiplied by the simple average account value over the period indicated, and then multiplied by 181/365 to reflect the one-half year period.

2. Reflects expenses after fee waivers and expense reimbursements. Does not include any ongoing expenses of the Contract for which the Fund is an investment option or acquired fund fees and expenses.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Highlights

Franklin VolSmart Allocation VIP Fund

	Six Months Ended June 30, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013a
Class 2
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$10.10			$9.68			$10.20			$10.07			$10.00
Income from investment operationsb:
Net investment incomec,d		0.07			0.16			0.10			0.11			0.09
Net realized and unrealized gains (losses)		0.62			0.28			(0.42	)		0.25			0.17
Total from investment operations		0.69			0.44			(0.32	)		0.36			0.26
Less distributions from:
Net investment income and net foreign currency gains		—			(—	)e		(0.05	)		(0.23	)		(0.19	)
Net realized gains		—			(0.02	)		(0.15	)		(—	)e		—
Total distributions		—			(0.02	)		(0.20	)		(0.23	)		(0.19	)
Net asset value, end of period		$10.79			$10.10			$9.68			$10.20			$10.07
Total returnf		6.83%			4.39%			(3.12)%			3.60%			2.56%
Ratios to average net assetsg
Expenses before waiver and payments by affiliatesh		1.15%			1.25%			1.77%			1.97%			2.97%
Expenses net of waiver and payments by affiliatesh		0.73%	i		0.73%	i		0.93%			1.08%	i		1.08%	i
Net investment incomed		1.34%			1.50%			1.30%			1.07%			1.21%
Supplemental data
Net assets, end of period (000’s)		$33			$31			$8,703			$10,201			$10,065
Portfolio turnover rate		5.49%			1.00%			95.15%			22.04%			8.12%

^aFor the period April 1, 2013 (commencement of operations) to December 31, 2013.

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

^cBased on average daily shares outstanding.

^dRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the Fund invests.

^eAmount rounds to less than $0.01 per share.

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

^gRatios are annualized for periods less than one year.

^hDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying Funds and exchange traded funds was 0.21% for the period ended June 30, 2017.

ⁱBenefit of expense reduction rounds to less than 0.01%.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL HIGHLIGHTS

Franklin VolSmart Allocation VIP Fund (continued)

	Six Months Ended June 30, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013a
Class 5
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$10.07			$9.67			$10.20			$10.07			$10.00
Income from investment operationsb:
Net investment incomec,d		0.08			0.16			0.16			0.13			0.10
Net realized and unrealized gains (losses)		0.62			0.29			(0.47	)		0.25			0.17
Total from investment operations		0.70			0.45			(0.31	)		0.38			0.27
Less distributions from:
Net investment income and net foreign currency gains		—			(0.03	)		(0.07	)		(0.25	)		(0.20	)
Net realized gains		—			(0.02	)		(0.15	)		(—	)e		—
Total distributions		—			(0.05	)		(0.22	)		(0.25	)		(0.20	)
Net asset value, end of period		$10.77			$10.07			$9.67			$10.20			$10.07
Total returnf		6.95%			4.59%			(3.10)%			3.75%			2.68%
Ratios to average net assetsg
Expenses before waiver and payments by affiliatesh		1.05%			1.15%			1.66%			1.82%			2.82%
Expenses net of waiver and payments by affiliatesh		0.63%	i		0.63%	i		0.82%			0.93%	i		0.93%	i
Net investment incomed		1.44%			1.60%			1.41%			1.22%			1.36%
Supplemental data
Net assets, end of period (000’s)		$169,203			$124,581			$54,816			$10,201			$10,065
Portfolio turnover rate		5.49%			1.00%			95.15%			22.04%			8.12%

^aFor the period April 1, 2013 (commencement of operations) to December 31, 2013.

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

^cBased on average daily shares outstanding.

^dRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the Fund invests.

^eAmount rounds to less than $0.01 per share.

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

^gRatios are annualized for periods less than one year.

^hDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying Funds and exchange traded funds was 0.21% for the period ended June 30, 2017.

ⁱBenefit of expense reduction rounds to less than 0.01%.

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

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Statement of Investments, June 30, 2017 (unaudited)

Franklin VolSmart Allocation VIP Fund
		Shares		Value
	Common Stocks 49.4%
	Capital Goods 10.7%
	Carlisle Cos. Inc.		7,460	$	711,684
	Donaldson Co. Inc.		13,630		620,710
	Dover Corp.		21,800		1,748,796
	General Dynamics Corp.		10,200		2,020,620
	Honeywell International Inc.		19,900		2,652,471
	Johnson Controls International PLC		40,092		1,738,389
	Pentair PLC (United Kingdom)		26,300		1,750,002
	Roper Technologies Inc.		16,800		3,889,704
	United Technologies Corp.		21,400		2,613,154
	W.W. Grainger Inc.		2,550		460,352
					18,205,882
	Commercial & Professional Services 1.0%
	Cintas Corp.		7,100		894,884
	Matthews International Corp., A		11,870		727,037
					1,621,921
	Consumer Durables & Apparel 1.1%
	Leggett & Platt Inc.		9,590		503,763
	NIKE Inc., B		23,800		1,404,200
					1,907,963
	Consumer Services 1.1%
	McDonald’s Corp.		9,180		1,406,009
	Yum! Brands Inc.		7,400		545,824
					1,951,833
	Diversified Financials 0.2%
	State Street Corp.		3,750		336,488
	Energy 3.1%
	Chevron Corp.		10,390		1,083,989
	EOG Resources Inc.		5,730		518,679
	Exxon Mobil Corp.		14,800		1,194,804
	Occidental Petroleum Corp.		16,300		975,881
	Schlumberger Ltd.		21,300		1,402,392
					5,175,745
	Food & Staples Retailing 1.7%
	CVS Health Corp.		9,250		744,255
	Walgreens Boots Alliance Inc.		13,900		1,088,509
	Wal-Mart Stores Inc.		13,490		1,020,923
					2,853,687
	Food, Beverage & Tobacco 3.0%
	Archer-Daniels-Midland Co.		24,200		1,001,396
	Bunge Ltd.		19,100		1,424,860
	McCormick & Co. Inc.		10,450		1,018,979
	PepsiCo Inc.		13,800		1,593,762
					5,038,997
	Health Care Equipment & Services 6.6%
	Abbott Laboratories		23,560		1,145,252
	Becton, Dickinson and Co.		13,400		2,614,474
	DENTSPLY SIRONA Inc.		11,300		732,692
	Medtronic PLC		28,700		2,547,125

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin VolSmart Allocation VIP Fund (continued)

	Shares		Value
Common Stocks (continued)
Health Care Equipment & Services (continued)
Stryker Corp.		19,500	$	2,706,210
West Pharmaceutical Services Inc.		14,600		1,379,992
				11,125,745
Household & Personal Products 1.7%
Colgate-Palmolive Co.		18,300		1,356,579
The Procter & Gamble Co.		16,680		1,453,662
				2,810,241
Insurance 0.9%
Aflac Inc.		8,020		622,994
Chubb Ltd.		3,981		578,758
Erie Indemnity Co., A		2,720		340,190
				1,541,942
Materials 6.0%
Air Products and Chemicals Inc.		16,600		2,374,796
Albemarle Corp.		32,600		3,440,604
Bemis Co. Inc.		2,600		120,250
Ecolab Inc.		7,560		1,003,590
Nucor Corp.		12,200		706,014
Praxair Inc.		18,700		2,478,685
				10,123,939
Media 1.0%
Comcast Corp., A		21,900		852,348
John Wiley & Sons Inc., A		14,600		770,150
				1,622,498
Pharmaceuticals, Biotechnology & Life Sciences 2.4%
AbbVie Inc.		8,940		648,239
Johnson & Johnson		16,900		2,235,701
Perrigo Co. PLC		6,040		456,141
Pfizer Inc.		13,410		450,442
Roche Holding AG, ADR (Switzerland)		8,900		283,020
				4,073,543
Retailing 1.8%
The Gap Inc.		15,720		345,683
Ross Stores Inc.		21,700		1,252,741
Target Corp.		13,240		692,319
Tiffany & Co.		8,800		826,056
				3,116,799
Semiconductors & Semiconductor Equipment 2.5%
Analog Devices Inc.		25,514		1,984,989
Texas Instruments Inc.		26,800		2,061,724
Versum Materials Inc.		5,495		178,588
				4,225,301
Software & Services 4.0%
Accenture PLC, A		19,400		2,399,392
Microsoft Corp.		50,100		3,453,393
Visa Inc., A		10,800		1,012,824
				6,865,609

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin VolSmart Allocation VIP Fund (continued)

		Shares		Value
	Common Stocks (continued)
	Transportation 0.6%
	United Parcel Service Inc., B		10,000	$	1,105,900
	Total Common Stocks (Cost $74,427,354)				83,704,033
	Investments in Underlying Funds and Exchange Traded Funds 46.1%
	Domestic Equity 8.7%
a,b	Franklin DynaTech Fund, Class R6		243,422		14,753,796
	Domestic Fixed Income 23.8%
b	Franklin Low Duration Total Return Fund, Class R6		2,242,401		22,199,769
b	Franklin Strategic Income Fund, Class R6		1,831,877		18,043,994
					40,243,763
	Domestic Hybrid 9.6%
b	Franklin Income Fund, Class R6		6,989,570		16,215,801
	Foreign Equity 4.0%
	iShares Core MSCI EAFE ETF		111,600		6,795,324
	Total Investments in Underlying Funds and Exchange Traded Funds (Cost $74,024,972)				78,008,684
	Total Investments before Short Term Investments (Cost $148,452,326)				161,712,717
	Short Term Investments (Cost $13,993,974) 8.3%
	Money Market Funds 8.3%
b,c	Institutional Fiduciary Trust Money Market Portfolio, 0.58%		13,993,974		13,993,974
	Total Investments (Cost $162,446,300) 103.8%				175,706,691
	Other Assets, less Liabilities (3.8)%				(6,470,599	)
	Net Assets 100.0%			$	169,236,092

^aNon-income producing.

^bSee Note 3(e) regarding investments in Underlying Funds.

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

At June 30, 2017, the Fund had the following total return swap contracts outstanding. See Note 1(c).

Total Return Swap Contracts

Underlying Instruments	Financing Rate			Counterparty		Notional Value		Expiration Date		Unrealized Appreciation		Unrealized Depreciation
OTC Swap Contracts Long
Dynamic VIX Backwardation (BEFSDVB1)		0.25	%		BZWS	$	34,100,000		5/25/18	$	—	$	(3,374	)

See Note 7 regarding other derivative information.

See Abbreviations on page FVA-22.

FVA-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, 2017 (unaudited)

	Franklin VolSmart Allocation VIP Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	81,235,791
Cost - Non-controlled affiliates (Note 3e)		81,210,509
Total cost of investments	$	162,446,300
Value - Unaffiliated issuers	$	90,499,357
Value - Non-controlled affiliates (Note 3e)		85,207,334
Total value of investments		175,706,691
Receivables:
Capital shares sold		419,396
Dividends		102,112
Other assets		86
Total assets		176,228,285
Liabilities:
Payables:
Investment securities purchased		6,808,437
Capital shares redeemed		20,731
Management fees		56,706
Distribution fees		41,391
Unrealized depreciation on OTC swap contracts		3,374
Accrued expenses and other liabilities		61,554
Total liabilities		6,992,193
Net assets, at value	$	169,236,092
Net assets consist of:
Paid-in capital	$	157,877,684
Undistributed net investment income (loss)		(300,534	)
Net unrealized appreciation (depreciation)		13,257,017
Accumulated net realized gain (loss)		(1,598,075	)
Net assets, at value	$	169,236,092
Class 2:
Net assets, at value	$	33,042
Shares outstanding		3,061
Net asset value and maximum offering price per share	$	10.79
Class 5:
Net assets, at value	$	169,203,050
Shares outstanding		15,713,994
Net asset value and maximum offering price per share	$	10.77

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

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Statement of Operations

for the six months ended June 30, 2017 (unaudited)

	Franklin VolSmart Allocation VIP Fund
Investment income:
Dividends:
Unaffiliated issuers	$	779,136
Non-controlled affiliates (Note 3e)		761,564
Total investment income		1,540,700
Expenses:
Management fees (Note 3a)		596,489
Distribution fees: (Note 3c)
Class 2		40
Class 5		112,011
Custodian fees (Note 4)		504
Reports to shareholders		13,646
Registration and filing fees		135
Professional fees		49,812
Trustees’ fees and expenses		86
Other		8,365
Total expenses		781,088
Expense reductions (Note 4)		(36	)
Expenses waived/paid by affiliates (Note 3e and 3f)		(314,037	)
Net expenses		467,015
Net investment income		1,073,685
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments:
Unaffiliated issuers		323,182
Non-controlled affiliates (Note 3e)		532,731
Swap contracts		(333,356	)
Net realized gain (loss)		522,557
Net change in unrealized appreciation (depreciation) on:
Investments		7,938,381
Swap contracts		1,664
Net change in unrealized appreciation (depreciation)		7,940,045
Net realized and unrealized gain (loss)		8,462,602
Net increase (decrease) in net assets resulting from operations	$	9,536,287

FVA-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 VolSmart Allocation VIP Fund
	Six Months Ended June 30, 2017 (unaudited)			Year Ended December 31, 2016
Increase (decrease) in net assets:
Operations:
Net investment income	$	1,073,685		$	1,419,032
Net realized gain (loss)		522,557			(4,311,221	)
Net change in unrealized appreciation (depreciation)		7,940,045			6,451,189
Net increase (decrease) in net assets resulting from operations		9,536,287			3,559,000
Distributions to shareholders from:
Net investment income:
Class 2		—			(294	)
Class 5		—			(354,685	)
Net realized gains:
Class 2		—			(7,355	)
Class 5		—			(116,711	)
Total distributions to shareholders		—			(479,045	)
Capital share transactions: (Note 2)
Class 2		—			(8,888,134	)
Class 5		35,087,861			66,900,840
Total capital share transactions		35,087,861			58,012,706
Net increase (decrease) in net assets		44,624,148			61,092,661
Net assets:
Beginning of period		124,611,944			63,519,283
End of period	$	169,236,092		$	124,611,944
Undistributed net investment income (loss) included in net assets:
End of period	$	(300,534	)	$	—
Distributions in excess of net investment income included in net assets:
End of period	$	—		$	(1,374,219	)

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

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Notes to Financial Statements (unaudited)

Franklin VolSmart 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 eighteen separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Franklin VolSmart Allocation VIP Fund (Fund) is included in this report. The Fund invests in affiliated funds managed by Franklin Templeton (Underlying Funds). Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. At June 30, 2017, 98.2% 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 2 and Class 5. Each class of shares may differ 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 Fund’s 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. 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.

Investments in the Underlying Funds are valued at their closing NAV each trading day.

Equity securities and exchange traded funds (ETFs) 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. 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.

Certain derivative financial instruments 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

FVA-14         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin VolSmart Allocation VIP Fund (continued)

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 Fund’s business day. Occasionally, events occur between the time at which trading in a foreign security is completed and 4 p.m. Eastern time 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 4 p.m. Eastern time. 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 Fund’s NAV is not calculated, 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. Derivative Financial Instruments

The Fund invested in derivative financial instruments 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 counter-parties. 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

Semiannual Report         FVA-15

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin VolSmart Allocation VIP Fund (continued)

1. Organization and Significant Accounting

Policies (continued)

c. Derivative Financial Instruments (continued)

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, 2017, the Fund had OTC derivatives in a net liability position for such contracts of $3,374.

Collateral requirements differ by type of derivative. Collateral terms are contract specific for OTC derivatives. 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 the next business day, or within a few business days. Collateral pledged and/or received by the Fund, 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 total return swap contracts primarily to manage and/or gain exposure to equity price risk of an underlying instrument such as a stock, bond, index or basket of securities or indices. A total return swap is an agreement between the Fund and a counterparty to exchange a return linked to an underlying instrument for a floating or fixed rate payment, both based upon a notional amount. Over the term of the contract, contractually required payments to be paid or received are accrued daily and recorded as unrealized appreciation or depreciation until the payments are made, at which time they are recognized as realized gain or loss.

See Note 7 regarding other derivative information.

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.

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, 2017, 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.

FVA-16         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin VolSmart Allocation VIP Fund (continued)

e. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Estimated expenses are accrued daily. Dividend income and realized gain distributions are recorded on the ex-dividend date except for certain dividends from 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. Distributable earnings are determined according to income tax regulations (tax basis) and 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 and ETFs. Since the Underlying Funds and ETFs have varied expense levels and the Fund may own different proportions of the Underlying Funds and ETFs 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.

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.

2. Shares of Beneficial Interest

At June 30, 2017, 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, 2017						Year Ended December 31, 2016
	Shares			Amount			Shares			Amount
Class 2 Shares:
Shares redeemed		—		$	—			(895,626	)	$	(8,888,134	)
Class 5 Shares:
Shares sold		4,731,150		$	49,702,839			8,177,643		$	81,628,729
Shares issued in reinvestment of distributions		—			—			46,757			471,396
Shares redeemed		(1,383,036	)		(14,614,978	)		(1,525,885	)		(15,199,285	)
Net increase (decrease)		3,348,114		$	35,087,861			6,698,515		$	66,900,840

Semiannual Report         FVA-17

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin VolSmart Allocation 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, directors and/or trustees of certain of the Underlying Funds and of the following subsidiaries:

Subsidiary	Affiliation
Franklin Advisers, Inc. (Advisers)	Investment manager
Franklin Advisory Services, LLC (Advisory Services)	Investment manager
K2/D&S Management Co., LLC (K2 Advisors)	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 of 0.80% per year of the average daily net assets of the Fund.

Under a subadvisory agreement, Advisory Services and K2 Advisors, affiliates of Advisers, provide subadvisory services to the Fund. The subadvisory fee is paid by Advisers based on the Fund’s average daily net assets, and is not an additional expense of the Fund.

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 5 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% and 0.15% per year of its average daily net assets of Class 2 and Class 5, respectively. 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 Underlying Funds

The Fund invests in Underlying Funds which are managed by Advisers or affiliates of Advisers. The Fund does not invest in Underlying Funds for the purpose of exercising a controlling influence over the management or policies. Management fees paid by the Fund are waived on assets invested in the Underlying Funds, as noted in the Statement of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by the Underlying Funds.

FVA-18         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin VolSmart Allocation VIP Fund (continued)

Investments in Underlying Funds for the period ended June 30, 2017, 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 DynaTech Fund, Class R6		251,990		75,446		(84,014	)		243,422	$	14,753,796	$	—	$	532,731		0.4%
Franklin Income Fund, Class R6		5,053,596		1,935,974		—			6,989,570		16,215,801		370,716		—		—%	a
Franklin Low Duration Total Return Fund, Class R6		1,612,689		629,712		—			2,242,401		22,199,769		193,937		—		0.8%
Franklin Strategic Income Fund, Class R6		1,380,378		451,499		—			1,831,877		18,043,994		182,060		—		0.3%
Institutional Fiduciary Trust Money Market Portfolio, 0.58%		9,750,824		39,732,839		(35,489,689	)		13,993,974		13,993,974		14,851		—		0.1%
Total										$	85,207,334	$	761,564	$	532,731

^aRounds to less than 0.1%

f. Waiver and Expense Reimbursements

Advisers 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 0.65%, 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, 2018. 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, 2017, 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, if any.

At December 31, 2016, the capital loss carryforwards were as follows:

Capital loss carryforwards:
Short term	$	809,159
Long term		1,009,574
Total capital loss carryforwards	$	1,818,733

For tax purposes, the Fund may elect to defer any portion of a late-year ordinary loss to the first day of the following fiscal year. At December 31, 2016, the Fund deferred late-year ordinary losses of $1,237,675.

Semiannual Report         FVA-19

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin VolSmart Allocation VIP Fund (continued)

5. Income Taxes (continued)

At June 30, 2017, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	162,884,741
Unrealized appreciation	$	14,914,036
Unrealized depreciation		(2,092,086	)
Net unrealized appreciation (depreciation)	$	12,821,950

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

6. Investment Transactions

Purchases and sales of investments (excluding short term securities) for the period ended June 30, 2017, aggregated $46,327,087 and $7,848,445, respectively.

7. Other Derivative Information

At June 30, 2017, 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
Equity contracts	Unrealized appreciation on OTC swap contracts	$	—	Unrealized depreciation on OTC swap contracts	$	3,374

For the period ended June 30, 2017, 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:
Equity contracts	Swap contracts	$	(333,356	)	Swap contracts	$	1,664

For the period ended June 30, 2017, the average month end notional amount of swap contracts represented $28,385,714.

See Note 1(c) regarding derivative financial instruments.

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 9, 2018. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin VolSmart Allocation VIP Fund (continued)

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statement of Operations. During the period ended June 30, 2017, 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, 2017, 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 Investmentsa	$	83,704,033	$	—	$	—	$	83,704,033
Investments in Underlying Funds and Exchange Traded Fundsa		78,008,684		—		—		78,008,684
Short Term Investments		13,993,974		—		—		13,993,974
Total Investments in Securities	$	175,706,691	$	—	$	—	$	175,706,691
Liabilities:
Other Financial Instruments:
Swap Contracts	$	—	$	3,374	$	—	$	3,374

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

10. Investment Company Reporting Modernization

In October 2016, the U.S. Securities and Exchange Commission adopted new rules and amended existing rules (together, final rules) intended to modernize the reporting and disclosure of information by registered investment companies. In part, the final rules amend Regulation S-X and require standardized, enhanced disclosures about derivatives in investment company financial statements, as well as other amendments. The compliance date for the amendments to Regulation S-X is August 1, 2017. Management has reviewed the requirements and believes the adoption of the amendments to Regulation S-X will not have a material impact on the Fund’s financial statements and related disclosures.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin VolSmart Allocation VIP Fund (continued)

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

Counterparty		Selected Portfolio
BZWS	Barclays Bank PLC	ADR	American Depositary Receipt
		VIX	Market Volatility Index

FVA-22         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, 2017.

Class 2 Performance Summary as of June 30, 2017

The Fund’s Class 2 Shares delivered a +21.19% total return* for the six-month period ended June 30, 2017.

*The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 4/30/18. Fund investment results reflect the fee waiver; without this waiver, the results would have been lower.

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

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         TD-1

TEMPLETON DEVELOPING MARKETS VIP FUND

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 +18.60% total return, and the Standard & Poor’s^®/International Finance Corporation Investable Composite Index produced a +18.74% total return for the same period.¹ Please note, index performance numbers are for reference and we do not attempt to track an index but rather undertake investments on the basis of fundamental research.

Economic and Market Overview

Emerging market economies in general continued to grow faster than developed market economies during the six months under review. China’s economy grew faster in the first half of 2017 compared to the first half of 2016, driven by solid growth in industrial production, services, fixed-asset investment, retail

sales, and imports and exports. India’s economy grew at a slower pace in the March 2017 quarter compared to the prior-year period, as consumer spending growth slowed and investment declined following the government’s demonetization program that recalled large-denominated currency notes from circulation. Russia’s economy grew in the first quarter of 2017 compared to the prior-year period, driven by growth in mining, manufacturing, trade and transportation. Brazil’s economy contracted at a slower rate in 2017’s first quarter compared to the prior-year period, but it grew compared to the previous quarter, as export growth offset a small decline in consumer spending and contraction in investment and public spending. Following a quarterly decline in 2016’s fourth quarter, South Africa’s economy fell into recession in 2017’s first quarter as gross domestic product contracted due largely to trade and manufacturing declines. Among other emerging markets, South Korea’s, Taiwan’s and Hungary’s economies continued to grow.

Several central banks, including those of Mexico and Turkey, raised their benchmark interest rates to control inflation and support their currencies, while some, including those of Chile, lowered their benchmark interest rates to promote economic growth. The Bank of Russia reduced its key interest rate several times, but noted at its June meeting that it would implement moderately tight monetary conditions to maintain inflation. Brazil’s central bank cut its benchmark interest rate several times during the period to spur economic growth. China’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.

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

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TEMPLETON DEVELOPING MARKETS VIP FUND

India’s and South Africa’s central banks left their benchmark interest rates unchanged during the period.

Emerging market stocks rose significantly during the six months under review, as corporate earnings growth and encouraging economic data from China and other emerging market countries helped offset investor concerns about lower commodity prices and various geopolitical tensions. Further supporting stocks were emerging market currencies’ overall strength against the U.S. dollar and subsiding concerns about the potential for a protectionist U.S. trade policy. In this environment, emerging market stocks, as measured by the MSCI EM Index, generated a +18.60% total return for the six months ended June 30, 2017.¹

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 investments in Samsung Electronics, Tencent Holdings and Brilliance China Automotive Holdings.

Samsung Electronics is a major South Korea-based manufacturer of consumer electronics. It is one of the world’s largest manufacturers of mobile phones, smartphones, tablets and televisions. The company is also a leading supplier of memory chips for high-end phones and is a key provider of organic light-emitting diodes (OLED) displays. Key drivers of the stock price included strong first-quarter 2017 corporate results, robust second-quarter earnings guidance, proposed share buybacks and announcement of a cancelation of all existing Treasury shares. Strong demand for Samsung’s new high-end smartphone, the Galaxy S8, which was released in March 2017, also supported sentiment.

Tencent is one of the world’s largest and most widely used Internet service portals. The company provides value-added Internet, mobile and telecommunication services and online advertising under the strategic goal of providing users with

Top 10 Countries
6/30/2017
	% of Total Net Assets
China		21.3%
South Korea		16.7%
Taiwan		12.0%
India		7.9%
South Africa		6.9%
Russia		6.4%
Brazil		4.5%
Thailand		3.9%
Indonesia		3.5%
U.K.		3.3%

“one-stop online lifestyle services.” Over the last decade, Tencent has maintained steady growth under its user-oriented operating strategies. Internet stocks in China rebounded in the first half of 2017 following pressure in the fourth quarter of 2016. Tencent’s shares further benefited from a better-than-expected double-digit increase in first-quarter revenues, driven by the online gaming, online advertising and social networking segments.

Brilliance China Automotive manufactures and sells automobiles to the Chinese domestic market, predominantly through its joint venture with German luxury car manufacturer BMW. The company announced an in-line set of figures for 2016, and better-than-expected first-quarter 2017 earnings growth driven by strong sales growth. Expectations for a continuation of strong sales momentum in the second half of 2017, supported by resilient luxury car demand and the continued rise of China’s upper middle class also drove share price performance over the period. An encouraging outlook based upon new vehicle launches, increased financing revenues, a supportive macroeconomic environment and attractive valuations further supported investor sentiment in the stock.

In contrast, key detractors included positions in IMAX, LUKOIL and Glenmark Pharmaceuticals.

IMAX is one of the world’s leading entertainment technology companies, specializing in immersive motion picture technologies. The company combines proprietary software, theater architecture and equipment to create high-quality motion picture experiences. Its systems are used globally, including a notable market position in China. Gross profit margin for first-quarter 2017 was down from first-quarter 2016, when box-office figures were helped by a stronger movie slate.

Semiannual Report         TD-3

TEMPLETON DEVELOPING MARKETS VIP FUND

In June, the company announced a cost-cutting program and proposed further share buybacks.

LUKOIL is a Russia-based energy company primarily involved in the exploration, production, marketing and refining of oil and oil-related products. The company is one of the world’s largest oil companies in terms of reserves. Although the company delivered first-quarter 2017 results that beat expectations, its shares underperformed due to weak investor sentiment in the Russian market in general and a decline in crude oil prices. After surging 55.93% in U.S. dollar terms in 2016, the Russian market gave back some of those gains in the first half of 2017, with the MSCI Russia Index declining 13.96%. Key reasons for the correction were a decline in oil prices and geopolitical worries, including additional U.S. sanctions.

Glenmark Pharmaceuticals is an Indian manufacturer of generic drugs and pharmaceutical ingredients. Glenmark produces formulation products in areas such as oncology, respiratory and cardiac. It also researches and develops its own chemical and biological entities. In addition to India, the U.S. is its main market. Its share price declined significantly in May as the company announced weaker-than-expected first-quarter 2017 operating performance with disappointing revenue growth. Sales in India were impacted by the government’s demonetization program to recall large-denominated currency notes, while price declines and lower sales for a cholesterol-lowering drug pressured sales in the U.S.

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, 2017, the U.S. dollar declined in value relative to most currencies. As a result, the Fund’s performance was positively affected by the portfolio’s investment predominantly in securities with non-U.S. currency exposure. However, one cannot expect the same result in future periods.

Top 10 Holdings
6/30/17
Company Sector/Industry, Country	% of Total Net Assets
Samsung Electronics Co. Ltd. Technology Hardware, Storage & Peripherals, South Korea		7.4%
Taiwan Semiconductor Manufacturing Co. Ltd. Semiconductors & Semiconductor Equipment, Taiwan		6.2%
Naspers Ltd. Media, South Africa		5.5%
Brilliance China Automotive Holdings Ltd. Automobiles, China		4.7%
Alibaba Group Holding Ltd. Internet Software & Services, China		3.4%
Unilever PLC Personal Products, U.K.		3.2%
Tencent Holdings Ltd. Internet Software & Services, China		3.1%
Hon Hai Precision Industry Co. Ltd. Electronic Equipment, Instruments & Components, Taiwan		3.0%
ICICI Bank Ltd. Banks, India		2.4%
Astra International Tbk PT Automobiles, Indonesia		2.0%

During the past six months, we increased the Fund’s holdings in Russia, South Korea, Mexico and the Czech Republic as we continued to invest in opportunities we considered to be attractive. In sector terms, we added to the Fund’s holdings in financials, health care and materials.² Key purchases included a new position in Sberbank of Russia, the country’s leading bank. We also increased investments in South Korea-listed POSCO, one of the world’s largest steel producers, and Alibaba Group Holding, China’s largest e-commerce company.

Conversely, we conducted some sales to focus on stocks we considered to be more attractively valued within our investment universe. We reduced the Fund’s investments in Brazil, South Africa and the U.K. and made some sales in China. In sector terms, we reduced holdings in industrials and consumer staples and conducted some sales in information technology (IT).³ Key sales included reducing holdings in the aforementioned Tencent and in Brazilian financial conglomerate Itau Unibanco Holding.

2. The financials sector comprises banks, diversified financial services and insurance in the SOI. The health care sector comprises biotechnology and pharmaceuticals in the SOI. The materials sector comprises chemicals, construction materials, and metals and mining in the SOI.

3. The industrials sector comprises construction and engineering, distributors, trading companies and distributors, and transportation infrastructure in the SOI. The consumer staples sector comprises beverages, food and staples retailing, food products and personal products in the SOI. The IT sector comprises electronic equipment, instruments and components; Internet software and services; IT services; semiconductors and semiconductor equipment; and technology hardware, storage and peripherals in the SOI.

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TEMPLETON DEVELOPING MARKETS VIP FUND

We also closed the Fund’s position in Remgro, a South African holding company with interests in food, finance and health care.

Thank you for your participation in Templeton Developing Markets 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, 2017, 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         TD-5

TEMPLETON DEVELOPING MARKETS VIP FUND

Class 2 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: (1) transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes; and (2) 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 table below shows Fund-level ongoing expenses and can help you understand these costs 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 table below provides information about the actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of ongoing Fund expenses but does not include the effect of ongoing Contract expenses, is used to calculate the “Ending Account Value.” You can estimate the Fund-level expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number under the headings “Actual” and “Fund-Level Expenses Paid During Period” (if Fund-Level Expenses Paid During Period were $7.50, then 8.6 × $7.50 = $64.50). In this illustration, the estimated expenses paid this period at the Fund level are $64.50.

Hypothetical Example for Comparison with Other Mutual Funds

Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other mutual funds offered through the Contract. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds offered through the Contract.

Please note that expenses shown in the table are meant to highlight ongoing costs at the Fund level only and do not reflect any ongoing expenses at the Contract level, or transaction expenses at either the Fund or Contract levels. In addition, 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.

		Actual (actual return after expenses)				Hypothetical (5% annual return before expenses)
Share Class	Beginning Account Value 1/1/17		Ending Account Value 6/30/17	Fund-Level Expenses Paid During Period 1/1/17–6/30/17	1,2		Ending Account Value 6/30/17	Fund-Level Expenses Paid During Period 1/1/17–6/30/17	1,2	Net Annualized Expense Ratio	2
Class 2	$1,000		$1,211.90	$8.77			$1,016.86	$8.00		1.60%

1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above — in the far right column — multiplied by the simple average account value over the period indicated, and then multiplied by 181/365 to reflect the one-half year period.

2. Reflects expenses after fee waivers and expense reimbursements. Does not include any ongoing expenses of the Contract for which the Fund is an investment option or acquired fund fees and expenses.

TD-6         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Highlights

Templeton Developing Markets VIP Fund

	Six Months Ended June 30, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 1
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$7.42			$6.37			$9.27			$10.26			$10.58			$9.50
Income from investment operationsa:
Net investment incomeb		0.04			0.05			0.06			0.15	c		0.13			0.19
Net realized and unrealized gains (losses)		1.54			1.08			(1.63	)		(0.97	)		(0.22	)		1.06
Total from investment operations		1.58			1.13			(1.57	)		(0.82	)		(0.09	)		1.25
Less distributions from:
Net investment income		(0.11	)		(0.08	)		(0.20	)		(0.17	)		(0.23	)		(0.17	)
Net realized gains		—			—			(1.13	)		—			—			—
Total distributions		(0.11	)		(0.08	)		(1.33	)		(0.17	)		(0.23	)		(0.17	)
Redemption fees		—			—			—			—	d		—	d		—	d
Net asset value, end of period		$8.89			$7.42			$6.37			$9.27			$10.26			$10.58
Total returne		21.28%			17.79%			(19.42)%			(8.09)%			(0.73)%			13.40%
Ratios to average net assetsf
Expenses before waiver and payments by affiliates		1.36%			1.38%			1.33%			1.36%			1.35%			1.35%
Expenses net of waiver and payments by affiliates		1.35%	g		1.36%			1.32%			1.36%	h		1.35%			1.35%
Net investment income		1.03%			0.79%			0.74%			1.51%	c		1.25%			1.93%
Supplemental data
Net assets, end of period (000’s)		$96,653			$82,596			$77,000			$114,487			$145,707			$203,568
Portfolio turnover rate		8.54%			26.78%			71.69%			82.87%			44.59%			24.45%

^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 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         TD-7

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL HIGHLIGHTS

Templeton Developing Markets VIP Fund (continued)

	Six Months Ended June 30, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 2
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$7.36			$6.32			$9.20			$10.19			$10.50			$9.42
Income from investment operationsa:
Net investment incomeb		0.03			0.04			0.04			0.12	c		0.10			0.17
Net realized and unrealized gains (losses)		1.53			1.06			(1.61	)		(0.96	)		(0.21	)		1.05
Total from investment operations		1.56			1.10			(1.57	)		(0.84	)		(0.11	)		1.22
Less distributions from:
Net investment income		(0.09	)		(0.06	)		(0.18	)		(0.15	)		(0.20	)		(0.14	)
Net realized gains		—			—			(1.13	)		—			—			—
Total distributions		(0.09	)		(0.06	)		(1.31	)		(0.15	)		(0.20	)		(0.14	)
Redemption fees		—			—			—			—	d		—	d		—	d
Net asset value, end of period		$8.83			$7.36			$6.32			$9.20			$10.19			$10.50
Total returne		21.19%			17.44%			(19.60)%			(8.39)%			(0.92)%			13.16%
Ratios to average net assetsf
Expenses before waiver and payments by affiliates		1.61%			1.63%			1.58%			1.61%			1.60%			1.60%
Expenses net of waiver and payments by affiliates		1.60%	g		1.61%			1.57%			1.61%	h		1.60%			1.60%
Net investment income		0.78%			0.54%			0.49%			1.26%	c		1.00%			1.68%
Supplemental data
Net assets, end of period (000’s)		$241,493			$205,151			$192,120			$250,813			$274,683			$291,638
Portfolio turnover rate		8.54%			26.78%			71.69%			82.87%			44.59%			24.45%

^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 expense reduction rounds to less than 0.01%.

^hBenefit 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, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 4
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$7.39			$6.34			$9.22			$10.20			$10.50			$9.42
Income from investment operationsa:
Net investment incomeb		0.03			0.03			0.03			0.12	c		0.10			0.16
Net realized and unrealized gains (losses)		1.54			1.06			(1.62	)		(0.97	)		(0.21	)		1.04
Total from investment operations		1.57			1.09			(1.59	)		(0.85	)		(0.11	)		1.20
Less distributions from:
Net investment income		(0.08	)		(0.04	)		(0.16	)		(0.13	)		(0.19	)		(0.12	)
Net realized gains		—			—			(1.13	)		—			—			—
Total distributions		(0.08	)		(0.04	)		(1.29	)		(0.13	)		(0.19	)		(0.12	)
Redemption fees		—			—			—			—	d		—	d		—	d
Net asset value, end of period		$8.88			$7.39			$6.34			$9.22			$10.20			$10.50
Total returne		21.20%			17.32%			(19.70)%			(8.48)%			(1.07)%			13.06%
Ratios to average net assetsf
Expenses before waiver and payments by affiliates		1.71%			1.73%			1.68%			1.71%			1.70%			1.70%
Expenses net of waiver and payments by affiliates		1.70%	g		1.71%			1.67%			1.71%	h		1.70%			1.70%
Net investment income		0.68%			0.44%			0.39%			1.16%	c		0.90%			1.58%
Supplemental data
Net assets, end of period (000’s)		$6,602			$6,377			$7,109			$11,106			$15,225			$23,341
Portfolio turnover rate		8.54%			26.78%			71.69%			82.87%			44.59%			24.45%

^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 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         TD-9

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Statement of Investments, June 30, 2017 (unaudited)

Templeton Developing Markets VIP Fund
		Industry		Shares		Value
	Common Stocks 94.3%
	Belgium 1.0%
	Anheuser-Busch InBev SA/NV		Beverages		31,970	$	3,531,630
	Brazil 1.1%
a	B2W Cia Digital		Internet & Direct Marketing Retail		183,800		648,853
	B3 SA - Brasil Bolsa Balcao		Capital Markets		55,400		330,135
	M Dias Branco SA		Food Products		136,200		2,025,997
	Mahle-Metal Leve SA		Auto Components		136,600		801,650
							3,806,635
	Cambodia 0.7%
	NagaCorp Ltd.		Hotels, Restaurants & Leisure		4,824,000		2,533,176
	China 21.3%
a	Alibaba Group Holding Ltd., ADR		Internet Software & Services		82,310		11,597,479
	BAIC Motor Corp. Ltd., H		Automobiles		1,686,100		1,634,757
a	Baidu Inc., ADR		Internet Software & Services		19,190		3,432,323
	Bloomage Biotechnology Corp. Ltd.		Chemicals		772,000		1,483,142
	Brilliance China Automotive Holdings Ltd.		Automobiles		8,909,300		16,226,217
	China Life Insurance Co. Ltd., H		Insurance		539,000		1,646,460
	China Mobile Ltd.		Wireless Telecommunication Services		490,500		5,204,819
	China Petroleum & Chemical Corp., H		Oil, Gas & Consumable Fuels		5,918,000		4,616,006
	CNOOC Ltd.		Oil, Gas & Consumable Fuels		1,465,500		1,604,819
	COSCO Shipping Ports Ltd.		Transportation Infrastructure		1,069,334		1,254,535
	Dah Chong Hong Holdings Ltd.		Distributors		1,746,100		800,620
	Inner Mongolia Yitai Coal Co. Ltd., B		Oil, Gas & Consumable Fuels		556,500		573,195
	NetEase Inc., ADR		Internet Software & Services		13,224		3,975,531
	Ping An Insurance Group Co. of China Ltd., A		Insurance		611,929		4,476,055
	Poly Culture Group Corp. Ltd., H		Media		229,200		542,489
	Tencent Holdings Ltd.		Internet Software & Services		299,900		10,724,227
	Uni-President China Holdings Ltd.		Food Products		3,563,300		2,879,757
	Weifu High-Technology Co. Ltd., B		Auto Components		334,339		790,483
							73,462,914
	Czech Republic 0.4%
	Moneta Money Bank AS		Banks		390,403		1,308,060
	Hong Kong 2.5%
	Dairy Farm International Holdings Ltd.		Food & Staples Retailing		149,333		1,176,744
	MGM China Holdings Ltd.		Hotels, Restaurants & Leisure		1,731,200		3,849,205
	Sands China Ltd.		Hotels, Restaurants & Leisure		807,600		3,697,826
							8,723,775
	Hungary 1.4%
	Richter Gedeon Nyrt		Pharmaceuticals		177,170		4,631,514
	India 7.9%
	Bajaj Holdings & Investment Ltd.		Diversified Financial Services		35,390		1,157,130
	Biocon Ltd.		Biotechnology		889,725		4,558,085
	Coal India Ltd.		Oil, Gas & Consumable Fuels		338,475		1,279,364
	Glenmark Pharmaceuticals Ltd.		Pharmaceuticals		292,323		2,862,612
	ICICI Bank Ltd.		Banks		1,806,409		8,110,950
	Infosys Ltd.		IT Services		183,099		2,650,855
	Reliance Industries Ltd.		Oil, Gas & Consumable Fuels		118,700		2,534,912
	Tata Chemicals Ltd.		Chemicals		238,500		2,240,136
	Tata Motors Ltd., A		Automobiles		401,271		1,635,015
							27,029,059

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 3.5%
	Astra International Tbk PT		Automobiles		10,115,100	$	6,773,759
	Bank Danamon Indonesia Tbk PT		Banks		5,707,000		2,194,588
	Perusahaan Gas Negara (Persero) Tbk PT		Gas Utilities		6,697,400		1,130,681
	Semen Indonesia (Persero) Tbk PT		Construction Materials		2,764,700		2,074,432
							12,173,460
	Kenya 0.4%
	Equity Group Holdings Ltd.		Banks		3,712,900		1,351,610
	Mexico 1.9%
	Grupo Financiero Santander Mexico SAB de CV, B, ADR		Banks		545,057		5,254,349
	Nemak SAB de CV		Auto Components		1,426,300		1,368,299
							6,622,648
	Nigeria 0.0%†
	Nigerian Breweries PLC		Beverages		170,327		73,447
	Pakistan 1.2%
	Habib Bank Ltd.		Banks		1,550,000		3,988,966
	Peru 0.8%
	Compania de Minas Buenaventura SA, ADR		Metals & Mining		243,390		2,798,985
	Philippines 0.2%
	BDO Unibank Inc.		Banks		327,469		805,350
	Russia 6.4%
	Gazprom PAO, ADR		Oil, Gas & Consumable Fuels		666,900		2,639,590
	LUKOIL PJSC, ADR		Oil, Gas & Consumable Fuels		56,700		2,761,290
	LUKOIL PJSC, ADR (London Stock Exchange)		Oil, Gas & Consumable Fuels		38,600		1,879,820
a,b	Mail.Ru Group Ltd., GDR, Reg S		Internet Software & Services		179,485		4,729,430
	MMC Norilsk Nickel PJSC, ADR		Metals & Mining		137,400		1,896,120
	Sberbank of Russia PJSC, ADR		Banks		402,166		4,162,418
a	Yandex NV, A		Internet Software & Services		150,078		3,938,047
							22,006,715
	Singapore 0.1%
	DBS Group Holdings Ltd.		Banks		25,706		387,233
	South Africa 6.9%
	Massmart Holdings Ltd.		Food & Staples Retailing		293,714		2,366,220
	MTN Group Ltd.		Wireless Telecommunication Services		276,096		2,405,601
	Naspers Ltd., N		Media		97,448		18,938,197
							23,710,018
	South Korea 16.7%
	Daelim Industrial Co. Ltd.		Construction & Engineering		53,442		4,154,261
	Fila Korea Ltd.		Textiles, Apparel & Luxury Goods		33,470		2,499,441
	Hankook Tire Co. Ltd.		Auto Components		21,600		1,199,864
	Hanon Systems		Auto Components		292,362		2,630,142
	Hite Jinro Co. Ltd.		Beverages		64,320		1,308,950
	Hyundai Development Co-Engineering & Construction		Construction & Engineering		126,830		5,200,902
	iMarketkorea Inc.		Trading Companies & Distributors		70,490		837,312
	Interpark Holdings Corp.		Internet & Direct Marketing Retail		142,053		750,632
	KT Skylife Co. Ltd.		Media		176,060		2,514,198
	POSCO		Metals & Mining		13,592		3,407,111
	Samsung Electronics Co. Ltd.		Technology Hardware, Storage & Peripherals		12,367		25,675,246
	SK Hynix Inc.		Semiconductors & Semiconductor Equipment		113,860		6,702,737

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)
	South Korea (continued)
	Youngone Corp.		Textiles, Apparel & Luxury Goods		22,200	$	661,193
							57,541,989
	Taiwan 12.0%
	Catcher Technology Co. Ltd.		Technology Hardware, Storage & Peripherals		357,000		4,269,576
	Hon Hai Precision Industry Co. Ltd.		Electronic Equipment, Instruments & Components		2,700,500		10,395,423
	Largan Precision Co. Ltd.		Electronic Equipment, Instruments & Components		14,000		2,233,994
	Pegatron Corp.		Technology Hardware, Storage & Peripherals		973,800		3,053,338
	Taiwan Semiconductor Manufacturing Co. Ltd.		Semiconductors & Semiconductor Equipment		3,100,000		21,265,710
							41,218,041
	Thailand 3.9%
	Kasikornbank PCL, fgn		Banks		619,500		3,643,581
	Kiatnakin Bank PCL, fgn		Banks		1,009,800		2,128,558
	Land and Houses PCL, fgn		Real Estate Management & Development		4,853,900		1,459,604
	PTT Exploration and Production PCL, fgn		Oil, Gas & Consumable Fuels		584,500		1,486,236
	Siam Commercial Bank PCL, fgn		Banks		306,400		1,404,635
	Thai Beverage PCL, fgn		Beverages		5,290,600		3,458,411
							13,581,025
	United Kingdom 3.3%
	Unilever PLC		Personal Products		206,804		11,192,430
	United States 0.7%
a	IMAX Corp.		Media		114,064		2,509,408
	Total Common Stocks (Cost $249,026,842)						324,988,088
c	Participatory Notes 1.2%
	Saudi Arabia 1.2%
	Deutsche Bank AG/London, Samba Financial Group, 8/03/20		Banks		143,055		989,901
	HSBC Bank PLC, Saudi Basic Industries Corp., 1/22/18		Chemicals		118,213		3,215,265
	Total Participatory Notes (Cost $3,355,684)						4,205,166
	Preferred Stocks 3.4%
	Brazil 3.4%
d	Banco Bradesco SA, 4.12%, ADR, pfd.		Banks		627,815		5,336,428
d	Itau Unibanco Holding SA, 5.137%, ADR, pfd.		Banks		589,962		6,519,080
	Total Preferred Stocks (Cost $6,333,400)						11,855,508
	Total Investments before Short Term Investments (Cost $258,715,926)						341,048,762

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 $3,394,033) 1.0%
	Money Market Funds 1.0%
	United States 1.0%
e,f	Institutional Fiduciary Trust Money Market Portfolio, 0.58%		3,394,033	$	3,394,033
	Total Investments (Cost $262,109,959) 99.9%				344,442,795
	Other Assets, less Liabilities 0.1%				304,507
	Net Assets 100.0%			$	344,747,302

See Abbreviations on page TD-23.

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

^aNon-income producing.

^bSecurity was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. This security has been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At June 30, 2017, the value of this security was $4,729,430, representing 1.4% of net assets.

^cSee Note 1(c) regarding Participatory Notes.

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

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

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

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, 2017 (unaudited)

	Templeton Developing Markets VIP Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	258,715,926
Cost - Non-controlled affiliates (Note 3e)		3,394,033
Total cost of investments	$	262,109,959
Value - Unaffiliated issuers	$	341,048,762
Value - Non-controlled affiliates (Note 3e)		3,394,033
Total value of investments		344,442,795
Receivables:
Investment securities sold		117,889
Capital shares sold		231,148
Dividends		1,267,290
Foreign tax		23,735
Other assets		202
Total assets		346,083,059
Liabilities:
Payables:
Investment securities purchased		83,938
Capital shares redeemed		416,379
Management fees		352,000
Distribution fees		105,050
Reports to shareholders		73,589
Deferred tax		236,544
Accrued expenses and other liabilities		68,257
Total liabilities		1,335,757
Net assets, at value	$	344,747,302
Net assets consist of:
Paid-in capital	$	294,801,597
Distributions in excess of net investment income		(3,913,862	)
Net unrealized appreciation (depreciation)		82,066,897
Accumulated net realized gain (loss)		(28,207,330	)
Net assets, at value	$	344,747,302
Class 1:
Net assets, at value	$	96,653,027
Shares outstanding		10,866,797
Net asset value and maximum offering price per share	$	8.89
Class 2:
Net assets, at value	$	241,492,621
Shares outstanding		27,348,017
Net asset value and maximum offering price per share	$	8.83
Class 4:
Net assets, at value	$	6,601,654
Shares outstanding		743,522
Net asset value and maximum offering price per share	$	8.88

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 Operations

for the six months ended June 30, 2017 (unaudited)

	Templeton Developing Markets VIP Fund
Investment income:
Dividends: (net of foreign taxes of $671,504)
Unaffiliated issuers	$	3,883,788
Non-controlled affiliates (Note 3e)		7,086
Total investment income		3,890,874
Expenses:
Management fees (Note 3a)		2,033,073
Distribution fees: (Note 3c)
Class 2		286,240
Class 4		11,451
Custodian fees (Note 4)		52,054
Reports to shareholders		84,976
Registration and filing fees		1,189
Professional fees		33,436
Trustees’ fees and expenses		662
Other		12,256
Total expenses		2,515,337
Expense reductions (Note 4)		(92	)
Expenses waived/paid by affiliates (Note 3e)		(8,295	)
Net expenses		2,506,950
Net investment income		1,383,924
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		11,089,640
Foreign currency transactions		104,255
Net realized gain (loss)		11,193,895
Net change in unrealized appreciation (depreciation) on:
Investments		49,611,553
Translation of other assets and liabilities denominated in foreign currencies		4,184
Change in deferred taxes on unrealized appreciation		32,849
Net change in unrealized appreciation (depreciation)		49,648,586
Net realized and unrealized gain (loss)		60,842,481
Net increase (decrease) in net assets resulting from operations	$	62,226,405

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

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Statements of Changes in Net Assets

	Templeton Developing Markets VIP Fund
	Six Months Ended June 30, 2017 (unaudited)			Year Ended December 31, 2016
Increase (decrease) in net assets:
Operations:
Net investment income	$	1,383,924		$	1,776,761
Net realized gain (loss)		11,193,895			10,092,119
Net change in unrealized appreciation (depreciation)		49,648,586			34,428,227
Net increase (decrease) in net assets resulting from operations		62,226,405			46,297,107
Distributions to shareholders from:
Net investment income:
Class 1		(1,158,124	)		(875,959	)
Class 2		(2,409,152	)		(1,674,699	)
Class 4		(56,318	)		(44,436	)
Total distributions to shareholders		(3,623,594	)		(2,595,094	)
Capital share transactions: (Note 2)
Class 1		(2,213,100	)		(6,421,627	)
Class 2		(4,783,739	)		(17,591,736	)
Class 4		(982,491	)		(1,794,556	)
Total capital share transactions		(7,979,330	)		(25,807,919	)
Net increase (decrease) in net assets		50,623,481			17,894,094
Net assets:
Beginning of period		294,123,821			276,229,727
End of period	$	344,747,302		$	294,123,821
Distributions in excess of net investment income included in net assets:
End of period	$	(3,913,862	)	$	(1,674,192	)

TD-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 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 eighteen 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. 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 may differ 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. 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 Fund’s business day. Occasionally, events occur between the time at which trading in a foreign security is completed and 4 p.m. Eastern time 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 4 p.m. Eastern time. 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

Semiannual Report         TD-17

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Developing Markets VIP Fund (continued)

1. Organization and Significant Accounting Policies (continued)

a. Financial Instrument Valuation (continued)

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

When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the Fund’s NAV is not calculated, 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. 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, 2017, 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.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Developing Markets VIP Fund (continued)

e. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Estimated expenses are accrued daily. Dividend income is recorded on the ex-dividend date except for certain dividends from 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. Distributable earnings are determined according to income tax regulations (tax basis) and 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.

2. Shares of Beneficial Interest

At June 30, 2017, 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, 2017						Year Ended December 31, 2016
	Shares			Amount			Shares			Amount
Class 1 Shares:
Shares sold		689,630		$	5,752,411			1,670,412		$	11,807,302
Shares issued in reinvestment of distributions		132,055			1,158,124			130,351			875,960
Shares redeemed		(1,090,182	)		(9,123,635	)		(2,747,707	)		(19,104,889	)
Net increase (decrease)		(268,497	)	$	(2,213,100	)		(946,944	)	$	(6,421,627	)
Class 2 Shares:
Shares sold		3,923,463		$	32,364,912			6,851,485		$	48,325,937
Shares issued in reinvestment of distributions		276,596			2,409,152			251,080			1,674,699
Shares redeemed		(4,732,334	)		(39,557,803	)		(9,617,120	)		(67,592,372	)
Net increase (decrease)		(532,275	)	$	(4,783,739	)		(2,514,555	)	$	(17,591,736	)

Semiannual Report         TD-19

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Developing Markets VIP Fund (continued)

2. Shares of Beneficial Interest (continued)

	Six Months Ended June 30, 2017						Year Ended December 31, 2016
	Shares			Amount			Shares			Amount
Class 4 Shares:
Shares sold		24,562		$	206,936			84,033		$	595,503
Shares issued in reinvestment of distributions		6,436			56,318			6,622			44,436
Shares redeemed		(150,274	)		(1,245,745	)		(348,788	)		(2,434,495	)
Net increase (decrease)		(119,276	)	$	(982,491	)		(258,133	)	$	(1,794,556	)

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

For the period ended June 30, 2017, the annualized effective investment management fee rate was 1.243% 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 the Fund’s average daily net assets, and is not an additional expense of the Fund.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Developing Markets VIP Fund (continued)

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. During the period ended June 30, 2017, the Fund held investments in affiliated management investment companies as follows:

	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, 0.58%		4,395,622		33,884,277		(34,885,866	)		3,394,033	$	3,394,033	$	7,086	$	—		0.0%	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, 2017, 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, if any. At December 31, 2016, the capital loss carryforwards were as follows:

Capital loss carryforwards not subject to expiration:
Short term	$	19,728,638
Long term		13,677,912
Total capital loss carryforwards	$	33,406,550

Semiannual Report         TD-21

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Developing Markets VIP Fund (continued)

5. Income Taxes (continued)

At June 30, 2017, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	272,491,891
Unrealized appreciation	$	94,555,997
Unrealized depreciation		(22,605,093	)
Net unrealized appreciation (depreciation)	$	71,950,904

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, 2017, aggregated $27,509,930 and $36,956,196, 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.

The United States and other nations have imposed and could impose additional sanctions on certain issuers in Russia due to regional conflicts. These sanctions could result in the devaluation of Russia’s currency, a downgrade in Russian issuers’ credit ratings, or a decline in the value and liquidity of Russian stocks or other securities. Such sanctions could also adversely affect Russia’s economy, possibly forcing the economy into a recession. The Fund may be prohibited from investing in securities issued by companies subject to such sanctions. In addition, if the Fund holds the securities of an issuer that is subject to such sanctions, an immediate freeze of that issuer’s securities could result, impairing the ability of the Fund to buy, sell, receive or deliver those securities. There is also the risk that countermeasures could be taken by Russia’s government, which could involve the seizure of the Fund’s assets. These risks could affect the value of the Fund’s portfolio. While the Fund holds securities of certain companies impacted by the sanctions, the restrictions do not impact the existing investments in those issuers. At June 30, 2017, the Fund had 6.4% of its net assets invested in Russia.

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 9, 2018. 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 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statement of Operations. During the period ended June 30, 2017, the Fund did not use the Global Credit Facility.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Developing Markets 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, 2017, 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	$	336,843,596	$	—	$	—	$	336,843,596
Participatory Notes		—		4,205,166		—		4,205,166
Short Term Investments		3,394,033		—		—		3,394,033
Total Investments in Securities	$	340,237,629	$	4,205,166	$	—	$	344,442,795

^aIncludes common and preferred stocks.

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

10. Investment Company Reporting Modernization

In October 2016, the U.S. Securities and Exchange Commission adopted new rules and amended existing rules (together, final rules) intended to modernize the reporting and disclosure of information by registered investment companies. In part, the final rules amend Regulation S-X and require standardized, enhanced disclosures about derivatives in investment company financial statements, as well as other amendments. The compliance date for the amendments to Regulation S-X is August 1, 2017. Management has reviewed the requirements and believes the adoption of the amendments to Regulation S-X will not have a material impact on the Fund’s financial statements and related disclosures.

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
GDR	Global Depositary Receipt

Semiannual Report         TD-23

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Tax Information (unaudited)

Templeton Developing Markets VIP Fund

At December 31, 2016, 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, 2017, 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	$0.0202	$0.1271
Class 2	$0.0202	$0.1083
Class 4	$0.0202	$0.0952

Foreign Tax Paid Per Share (Column 1) is the amount per share available to you, as a tax credit (assuming you held your shares in the Fund for a minimum of 16 days during the 31-day period beginning 15 days before the ex-dividend date of the Fund’s distribution to which the foreign taxes relate), or, as a tax deduction.

Foreign Source Income Per Share (Column 2) is the amount per share of income dividends attributable to foreign securities held by the Fund, plus any foreign taxes withheld on these dividends.

TD-24         Semiannual Report

Templeton Foreign VIP Fund

This semiannual report for Templeton Foreign VIP Fund covers the period ended June 30, 2017.

Class 2 Performance Summary as of June 30, 2017

The Fund’s Class 2 Shares delivered a +9.98% total return* for the six-month period ended June 30, 2017.

*The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 4/30/18. Fund investment results reflect the fee waiver; without this waiver, the results would have been lower.

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

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 benchmark, the MSCI All Country (ACWI) ex USA Index, generated a +14.45% total return for the same period.¹ Please note, index performance information is provided for reference and we do not attempt to track the index but rather undertake investments on the basis of fundamental research.

Economic and Market Overview

The global economy generally expanded during the period under review. In this environment, global developed and emerging market stocks rose, as measured by the MSCI ACWI.² Global markets were aided by improved industrial commodity prices at certain points during the period, generally upbeat economic data across regions, investor optimism about pro-growth and pro-business policies in the U.S, hopes of tax reforms under the Trump administration, Emmanuel Macron’s

election as France’s president and encouraging corporate earnings reports.

However, investors expressed concerns about the timing and economic effects of the U.K.’s exit from the European Union (also known as “Brexit”) and the U.S. executive order banning entry from some Muslim-majority countries. Other headwinds included the health of European banks, concerns about political uncertainty in the U.S. and European Union, geopolitical tensions in certain regions, worries about global oversupply in oil production despite a pact to extend cuts, and hawkish comments from key central bankers around the world toward period-end.

U.S. economic growth decelerated in 2017’s first quarter, largely due to slower growth in consumer spending and declines in private inventory investment and government spending. However, growth accelerated in the second quarter due to increases in consumer spending, business investment and federal government spending. The unemployment rate decreased from 4.7% in December 2016 to 4.4% at period-end.³ Annual inflation, as measured by the Consumer Price Index, decreased from 2.1% to 1.6% during the period. After increasing its benchmark interest rate in March, the U.S. Federal Reserve (Fed), at its June meeting, made the widely anticipated increase to its target range for the federal funds rate from 0.75%–1.00% to 1.00%–1.25%, amid signs of a growing U.S. economy, a strengthening labor market and an improvement in business spending.

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.

3. Source: Bureau of Labor Statistics.

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

TF-2         Semiannual Report

TEMPLETON FOREIGN VIP FUND

In Europe, the U.K.’s economy grew at a slower rate in 2017’s first quarter over the previous quarter, largely due to slower growth in household spending. The eurozone’s growth increased in the first quarter over the previous quarter. The bloc’s annual inflation rate fluctuated during the reporting period and ended slightly higher from where it began. During the period, the European Central Bank kept its key policy rates unchanged.

In Asia, Japan’s quarterly gross domestic product (GDP) remained unchanged in 2017’s first quarter compared to 2016’s fourth quarter. In April 2017, the Bank of Japan (BOJ) slightly increased its GDP forecasts for the 2017–2018 fiscal year. However, the BOJ lowered its inflation forecast.

In emerging markets, Brazil’s quarterly GDP grew for the first time in two years, as its first-quarter 2017 GDP grew compared to the previous quarter. The country’s central bank cut its benchmark interest rate four times between January and June 2017 to spur economic growth. Russia’s GDP grew in 2017’s first quarter compared to the prior-year period. The Bank of Russia reduced its key interest rate in March, April and June 2017 to try to revive its economy. China’s economy grew faster in the first half of 2017 compared to the first half of 2016, driven by solid growth in industrial production, services, fixed-asset investment, retail sales, and imports and exports. The People’s Bank of China left its benchmark interest rate unchanged during the period. Overall, emerging market stocks, as measured by the MSCI Emerging Markets Index, rose during the 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

During the six months under review, most sectors represented in the Fund’s portfolio generated positive returns and contributed to absolute performance. Relative to the Fund’s benchmark, the MSCI ACWI ex USA Index, key contributors

Top 10 Holdings
6/30/17
Company Sector/Industry, Country	% of Total Net Assets
Samsung Electronics Co. Ltd. Technology Hardware, Storage & Peripherals, South Korea		3.7%
SoftBank Group Corp. Wireless Telecommunication Services, Japan		2.7%
BP PLC Oil, Gas & Consumable Fuels, U.K.		2.5%
Wheaton Precious Metals Corp. Metals & Mining, Canada		2.5%
Standard Chartered PLC Banks, U.K.		2.3%
Teva Pharmaceutical Industries Ltd. Pharmaceuticals, Israel		2.3%
Royal Dutch Shell PLC Oil, Gas & Consumable Fuels, U.K.		2.2%
Roche Holding AG Pharmaceuticals, Switzerland		2.2%
Baidu Inc. Internet Software & Services, China		2.1%
SBM Offshore NV Energy Equipment & Services, Netherlands		2.1%

included stock selection in the financials sector, especially in banks.⁴ Notably, our positions in South Korean banking firms Hana Financial Group and KB Financial Group helped performance. Shares of both banks benefited from solid earnings reports and the general belief among market participants that interest rates and net interest margins in South Korea are improving. Further supporting share prices were signs that South Korea’s new government would pursue fiscal stimulus measures, reform the rigid corporate chaebol (large, mostly family-owned, business conglomerates) structure and normalize economic ties with China.

Stock selection in the telecommunication services sector also supported relative performance, notably SoftBank Group (Japan).⁵ Its shares rose to the highest levels in nearly two decades after the firm’s majority-owned U.S. telecommunications subsidiary, Sprint,⁶ reported better-than-expected sales and subscriber growth. The higher share price also reflected rising optimism that SoftBank might be able to execute a long-desired merger between Sprint and another major U.S. mobile operator, T-Mobile U.S.,⁶ under a new Republican administration. SoftBank Chairman Masayoshi Son recently

4. The financials sector comprises banks, capital markets and insurance in the SOI.

5. The telecommunication services sector comprises diversified telecommunication services and wireless telecommunication services in the SOI.

6. Not a Fund holding.

Semiannual Report         TF-3

TEMPLETON FOREIGN VIP FUND

met with President Donald Trump and pledged to invest US$50 billion and create 50,000 jobs in the U.S., an indication that SoftBank is working to curry favor with the new administration to facilitate a deal that, if executed, we believe could represent a potential share price catalyst. Elsewhere at SoftBank, the core Japanese telecommunications business is providing strong, stable free cash flow; Chinese technology subsidiary Alibaba Group Holding⁶ continues to realize outsized growth; and the newly acquired U.K. semiconductor manufacturer ARM Holdings,⁶ while expensive and value-destructive in the near term, in our view, offers another exciting long-term growth driver.

Key individual contributors included investments in semiconductor and consumer electronics company Samsung Electronics (South Korea); technology hardware, storage and peripherals company Catcher Technology (Taiwan); home electric appliance company Haier Electronics Group (China); biotechnology company MorphoSys⁷ (Germany); and banking firm Standard Chartered (U.K.). Samsung’s stock benefited from record first-quarter earnings and the company’s cancelation of billions of U.S. dollars’ worth of its Treasury shares, which sparked a raft of earnings upgrades from Wall Street analysts. Although sentiment on the stock is beginning to improve as results highlight operational progress, our analysis indicates to us that the market continues to undervalue the sustainability of Samsung’s dominant, low-cost position in core markets due to excessive focus on problem areas of lesser business impact. With its shares trading at what we considered low valuation multiples and the company holding a large net cash position, Samsung’s improving business mix shift and increasing focus on shareholder returns remain significantly undervalued, in our analysis.

In contrast, stock selection and an overweighting in the energy sector weighed on relative results.⁸ Within energy, our positions in energy equipment and services companies Petrofac⁹ (U.K.) and Precision Drilling⁷ (Canada); and oil and gas companies Cenovus Energy (Canada), BP (U.K.) and Royal Dutch Shell (U.K.) hurt relative returns.

Stock selection in the materials sector also hampered relative results, notably our positions in gold producer Eldorado Gold (Canada) and precious metals company Wheaton Precious Metals (Canada).¹⁰

Key individual detractors included drugmaker Teva Pharmaceutical Industries (Israel), insurance firm Aegon (Netherlands) and automobile producer Nissan Motor (Japan). Teva’s share price fell after the company reported declining profits and investors worried about an ongoing leadership transition and the loss of U.S. patent protection on a key multiple sclerosis drug. Many market participants remained concerned about Teva’s ability to bring new products to fruition and grow its global generic franchise.

From a geographic perspective, stock selection in Asia contributed to relative performance, particularly investments in South Korea, Taiwan and Japan, although positions in China and Hong Kong hindered results. In contrast, stock selection in Europe detracted from relative performance, especially positions in the U.K., Italy and the Netherlands, although investments in Germany aided results. Stock selection and an overweighting in North America hindered results, particularly holdings in Canada. Our exposure to Israel also weighed on performance.

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, 2017, the U.S. dollar declined in value relative to many currencies in which the Fund’s investments were traded. As a result, the Fund’s performance was negatively affected by the portfolio’s investment predominantly in securities with non-U.S. currency exposure.

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

7. Not part of the index.

8. The energy sector comprises energy equipment and services and oil, gas and consumable fuels in the SOI.

9. No longer held by period-end.

10. The materials sector comprises chemicals and metals and mining in the SOI.

TF-4         Semiannual Report

TEMPLETON FOREIGN VIP FUND

The foregoing information reflects our analysis, opinions and portfolio holdings as of June 30, 2017, 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         TF-5

TEMPLETON FOREIGN VIP FUND

Class 2 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: (1) transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes; and (2) 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 table below shows Fund-level ongoing expenses and can help you understand these costs 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 table below provides information about the actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of ongoing Fund expenses but does not include the effect of ongoing Contract expenses, is used to calculate the “Ending Account Value.” You can estimate the Fund-level expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number under the headings “Actual” and “Fund-Level Expenses Paid During Period” (if Fund-Level Expenses Paid During Period were $7.50, then 8.6 × $7.50 = $64.50). In this illustration, the estimated expenses paid this period at the Fund level are $64.50.

Hypothetical Example for Comparison with Other Mutual Funds

Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other mutual funds offered through the Contract. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds offered through the Contract.

Please note that expenses shown in the table are meant to highlight ongoing costs at the Fund level only and do not reflect any ongoing expenses at the Contract level, or transaction expenses at either the Fund or Contract levels. In addition, 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.

		Actual (actual return after expenses)				Hypothetical (5% annual return before expenses)
Share Class	Beginning Account Value 1/1/17		Ending Account Value 6/30/17	Fund-Level Expenses Paid During Period 1/1/17–6/30/17	1,2		Ending Account Value 6/30/17	Fund-Level Expenses Paid During Period 1/1/17–6/30/17	1,2	Net Annualized Expense Ratio	2
Class 2	$1,000		$1,099.80	$5.41			$1,019.64	$5.21		1.04%

1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above — in the far right column — multiplied by the simple average account value over the period indicated, and then multiplied by 181/365 to reflect the one-half year period.

2. Reflects expenses after fee waivers and expense reimbursements. Does not include any ongoing expenses of the Contract for which the Fund is an investment option or acquired fund fees and expenses.

TF-6         Semiannual Report

TF P1 P2 P4 07/17

SUPPLEMENT DATED JULY 11, 2017

TO THE PROSPECTUSES DATED MAY 1, 2017

TEMPLETON FOREIGN VIP FUND

(A series of Franklin Templeton Variable Insurance Products Trust)

The prospectus is amended as follows:

I.  Cindy L. Sweeting, CFA, President of Investment Counsel and portfolio manager of the Fund, will be retiring effective December 31, 2017. Effective January 1, 2018, it is anticipated that she will no longer be a portfolio manager of the Fund, and Peter A. Nori will continue to be lead portfolio manager of the Fund.

II.  Effective January 1, 2018, the portfolio management team under the “FUND SUMMARIES – Templeton Foreign VIP Fund – Portfolio Managers” section on page TF-S5 is replaced with the following:

Portfolio Managers

Peter A. Nori, CFA Executive Vice President/Portfolio Manager – Research Analyst of Investment Counsel and portfolio manager of the Fund since 1999.

Matthew R. Nagle, CFA Portfolio Manager of Investment Counsel and portfolio manager of the Fund since January 2018.

Heather Waddell, CFA Portfolio Manager of Investment Counsel and portfolio manager of the Fund since January 2018.

III.  Effective January 1, 2018, the portfolio management team under the “FUND DETAILS – Templeton Foreign VIP Fund – Management” section on page TF-D8 is replaced with the following:

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

Peter A. Nori, CFA Executive Vice President/Portfolio Manager – Research Analyst of Investment Counsel

Mr. Nori has been the lead portfolio manager of the Fund since 1999. He has primary responsibility for the investment of the Fund. He has final authority over all aspects of the Fund’s investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio risk assessment, and the management of daily cash balances in accordance with anticipated investment management requirements. The degree to which he may perform these functions, and the nature of these functions, may change from time to time. He joined Franklin Templeton Investments in 1987.

Matthew R. Nagle, CFA Portfolio Manager of Investment Counsel

Mr. Nagle has been a portfolio manager of the Fund since January 2018, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. He joined Franklin Templeton Investments in 2003.

Heather Waddell, CFA Portfolio Manager of Investment Counsel

Ms. Waddell has been a portfolio manager of the Fund since January 2018, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. She joined Franklin Templeton Investments in 1996.

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

Please keep this supplement with your prospectus for future reference.

TF-7

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Highlights

Templeton Foreign VIP Fund

	Six Months Ended June 30, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 1
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$13.89			$13.46			$15.34			$17.56			$14.63			$12.78
Income from investment operationsa:
Net investment incomeb		0.22			0.33			0.31			0.53	c		0.34			0.38
Net realized and unrealized gains (losses)		1.17			0.62			(1.16	)		(2.39	)		3.00			1.91
Total from investment operations		1.39			0.95			(0.85	)		(1.86	)		3.34			2.29
Less distributions from:
Net investment income		(0.42	)		(0.29	)		(0.53	)		(0.36	)		(0.41	)		(0.44	)
Net realized gains		—			(0.23	)		(0.50	)		—			—			—
Total distributions		(0.42	)		(0.52	)		(1.03	)		(0.36	)		(0.41	)		(0.44	)
Redemption fees		—			—			—			—	d		—	d		—	d
Net asset value, end of period		$14.86			$13.89			$13.46			$15.34			$17.56			$14.63
Total returne		10.06%			7.49%			(6.31)%			(10.89)%			23.27%			18.60%
Ratios to average net assetsf
Expenses before waiver and payments by affiliates		0.81%			0.80%			0.78%			0.77%			0.78%			0.79%
Expenses net of waiver and payments by affiliates		0.79%	g		0.78%			0.78%	h		0.77%	h		0.78%			0.79%
Net investment income		2.90%			2.38%			2.05%			3.11%	c		2.16%			2.84%
Supplemental data
Net assets, end of period (000’s)		$141,982			$133,218			$214,172			$248,355			$298,468			$265,924
Portfolio turnover rate		17.05%			20.93%			15.15%			25.71%			23.61%			12.53%

^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 expense reduction rounds to less than 0.01%.

^hBenefit of waiver and payments by affiliates 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, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 2
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$13.61			$13.20			$15.05			$17.24			$14.37			$12.56
Income from investment operationsa:
Net investment incomeb		0.20			0.28			0.27			0.48	c		0.30			0.34
Net realized and unrealized gains (losses)		1.15			0.62			(1.13	)		(2.35	)		2.94			1.87
Total from investment operations		1.35			0.90			(0.86	)		(1.87	)		3.24			2.21
Less distributions from:
Net investment income		(0.38	)		(0.26	)		(0.49	)		(0.32	)		(0.37	)		(0.40	)
Net realized gains		—			(0.23	)		(0.50	)		—			—			—
Total distributions		(0.38	)		(0.49	)		(0.99	)		(0.32	)		(0.37	)		(0.40	)
Redemption fees		—			—			—			—	d		—	d		—	d
Net asset value, end of period		$14.58			$13.61			$13.20			$15.05			$17.24			$14.37
Total returne		9.98%			7.18%			(6.49)%			(11.13)%			22.97%			18.23%
Ratios to average net assetsf
Expenses before waiver and payments by affiliates		1.06%			1.05%			1.03%			1.02%			1.03%			1.04%
Expenses net of waiver and payments by affiliates		1.04%	g		1.03%			1.03%	h		1.02%	h		1.03%			1.04%
Net investment income		2.65%			2.13%			1.80%			2.86%	c		1.91%			2.59%
Supplemental data
Net assets, end of period (000’s)		$1,386,563			$1,436,518			$1,456,854			$1,645,571			$1,873,586			$1,744,231
Portfolio turnover rate		17.05%			20.93%			15.15%			25.71%			23.61%			12.53%

^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 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         TF-9

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL HIGHLIGHTS

Templeton Foreign VIP Fund (continued)

	Six Months Ended June 30, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 4
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$13.71			$13.29			$15.16			$17.37			$14.48			$12.66
Income from investment operationsa:
Net investment incomeb		0.14			0.26			0.25			0.46	c		0.28			0.33
Net realized and unrealized gains (losses)		1.22			0.63			(1.14	)		(2.36	)		2.97			1.89
Total from investment operations		1.36			0.89			(0.89	)		(1.90	)		3.25			2.22
Less distributions from:
Net investment income		(0.26	)		(0.24	)		(0.48	)		(0.31	)		(0.36	)		(0.40	)
Net realized gains		—			(0.23	)		(0.50	)		—			—			—
Total distributions		(0.26	)		(0.47	)		(0.98	)		(0.31	)		(0.36	)		(0.40	)
Redemption fees		—			—			—			—	d		—	d		—	d
Net asset value, end of period		$14.81			$13.71			$13.29			$15.16			$17.37			$14.48
Total returne		9.94%			7.09%			(6.65)%			(11.22)%			22.86%			18.14%
Ratios to average net assetsf
Expenses before waiver and payments by affiliates		1.16%			1.15%			1.13%			1.12%			1.13%			1.14%
Expenses net of waiver and payments by affiliates		1.14%	g		1.13%			1.13%	h		1.12%	h		1.13%			1.14%
Net investment income		2.55%			2.03%			1.70%			2.76%	c		1.81%			2.49%
Supplemental data
Net assets, end of period (000’s)		$152,544			$484,763			$472,189			$503,143			$513,098			$416,277
Portfolio turnover rate		17.05%			20.93%			15.15%			25.71%			23.61%			12.53%

^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 expense reduction rounds to less than 0.01%.

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

TF-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, 2017 (unaudited)

Templeton Foreign VIP Fund
		Country		Shares		Value
	Common Stocks 96.6%
	Aerospace & Defense 2.7%
	BAE Systems PLC		United Kingdom		2,720,370	$	22,447,554
	Cobham PLC		United Kingdom		5,307,199		8,959,109
a	Rolls-Royce Holdings PLC		United Kingdom		1,153,600		13,388,360
							44,795,023
	Auto Components 2.5%
	Cie Generale des Etablissements Michelin, B		France		67,168		8,930,516
	Hyundai Mobis Co. Ltd.		South Korea		93,646		20,447,975
	Sumitomo Rubber Industries Ltd.		Japan		712,200		12,004,545
							41,383,036
	Automobiles 3.2%
	Hero Motocorp Ltd.		India		154,059		8,824,300
	Hyundai Motor Co.		South Korea		89,304		12,440,925
	Nissan Motor Co. Ltd.		Japan		3,254,400		32,345,817
							53,611,042
	Banks 13.4%
	Bangkok Bank PCL, fgn.		Thailand		3,144,600		18,263,154
	Barclays PLC		United Kingdom		5,761,190		15,214,844
	BNP Paribas SA		France		427,800		30,814,556
	Hana Financial Group Inc.		South Korea		714,850		28,252,349
	HSBC Holdings PLC		United Kingdom		3,364,400		31,305,262
	ING Groep NV		Netherlands		1,074,304		18,529,568
	Kasikornbank PCL, fgn.		Thailand		249,500		1,467,431
	KB Financial Group Inc., ADR		South Korea		557,806		28,163,625
a	Standard Chartered PLC		United Kingdom		3,816,307		38,634,076
	United Overseas Bank Ltd.		Singapore		916,700		15,393,743
							226,038,608
	Beverages 1.9%
	Kirin Holdings Co. Ltd.		Japan		709,500		14,437,885
	Suntory Beverage & Food Ltd.		Japan		363,800		16,882,571
							31,320,456
	Capital Markets 1.9%
	Credit Suisse Group AG		Switzerland		501,113		7,244,252
	GAM Holding AG		Switzerland		505,360		6,773,273
	UBS Group AG		Switzerland		1,060,280		17,959,788
							31,977,313
	Chemicals 1.3%
	Johnson Matthey PLC		United Kingdom		325,061		12,156,050
	Yara International ASA		Norway		266,170		10,000,469
							22,156,519
	Construction & Engineering 0.9%
	Sinopec Engineering Group Co. Ltd.		China		17,492,000		15,771,980
	Diversified Telecommunication Services 3.3%
	China Telecom Corp. Ltd., H		China		46,766,357		22,221,918
	Singapore Telecommunications Ltd.		Singapore		3,003,400		8,485,783
	Telefonica Deutschland Holding AG		Germany		2,094,590		10,462,601
	Telenor ASA		Norway		879,834		14,599,424
							55,769,726

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)
	Electrical Equipment 0.8%
	ABB Ltd.		Switzerland		520,159	$	12,847,317
	Energy Equipment & Services 3.8%
	Ensign Energy Services Inc.		Canada		1,552,600		8,301,137
a	Precision Drilling Corp.		Canada		3,319,200		11,344,409
	SBM Offshore NV		Netherlands		2,224,690		35,652,364
	Tenaris SA		Italy		525,742		8,197,218
							63,495,128
	Health Care Equipment & Supplies 0.7%
	Getinge AB, B		Sweden		569,660		11,154,418
	Health Care Providers & Services 2.0%
	Shanghai Pharmaceuticals Holding Co. Ltd., H		China		5,083,800		15,138,593
	Sinopharm Group Co. Ltd.		China		3,996,400		18,068,319
							33,206,912
	Household Durables 0.7%
	Haier Electronics Group Co. Ltd.		China		4,501,000		11,702,513
	Industrial Conglomerates 2.2%
	CK Hutchison Holdings Ltd.		Hong Kong		2,021,500		25,373,123
	Siemens AG		Germany		85,456		11,747,618
							37,120,741
	Insurance 6.1%
	Aegon NV		Netherlands		5,251,690		26,820,379
	Aviva PLC		United Kingdom		2,528,220		17,321,881
	AXA SA		France		722,428		19,763,381
	China Life Insurance Co. Ltd., H		China		4,639,000		14,170,555
	Chubb Ltd.		United States		113,369		16,481,585
	Dongbu Insurance Co. Ltd.		South Korea		147,418		8,755,491
							103,313,272
	Internet Software & Services 2.1%
a	Baidu Inc., ADR		China		201,130		35,974,112
	Life Sciences Tools & Services 2.1%
a	MorphoSys AG		Germany		202,180		14,341,380
	QIAGEN NV		Netherlands		616,864		20,521,851
							34,863,231
	Media 0.8%
	SES SA, IDR		Luxembourg		546,940		12,822,834
	Metals & Mining 6.6%
	Alamos Gold Inc., A		Canada		2,101,752		15,090,580
	Barrick Gold Corp.		Canada		1,314,020		20,906,058
	Eldorado Gold Corp.		Canada		3,898,300		10,346,142
	Sumitomo Metal Mining Co. Ltd.		Japan		1,039,000		13,859,799
	Tahoe Resources Inc.		Canada		956,400		8,249,471
	Wheaton Precious Metals Corp.		Canada		2,109,400		41,922,728
							110,374,778
	Multi-Utilities 0.9%
	innogy SE		Germany		406,610		16,007,278

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)
	Oil, Gas & Consumable Fuels 10.6%
	BP PLC		United Kingdom		7,393,705	$	42,644,611
	Cenovus Energy Inc.		Canada		1,082,702		7,985,674
	Eni SpA		Italy		1,507,144		22,655,403
a	Husky Energy Inc.		Canada		733,000		8,324,469
	INPEX Corp.		Japan		1,331,900		12,799,786
	Kunlun Energy Co. Ltd.		China		7,166,000		6,075,876
	PTT Exploration and Production PCL, fgn.		Thailand		3,183,300		8,094,329
	Royal Dutch Shell PLC, A		United Kingdom		16,803		445,395
	Royal Dutch Shell PLC, B		United Kingdom		1,390,353		37,351,966
	Suncor Energy Inc.		Canada		529,200		15,469,960
	Total SA		France		332,436		16,436,397
							178,283,866
	Pharmaceuticals 11.5%
	Astellas Pharma Inc.		Japan		1,689,500		20,644,688
	Bayer AG		Germany		198,000		25,601,934
	GlaxoSmithKline PLC		United Kingdom		398,895		8,497,743
	Merck KGaA		Germany		151,830		18,339,992
	Novartis AG		Switzerland		128,920		10,730,447
	Roche Holding AG		Switzerland		143,560		36,565,687
	Sanofi		France		352,215		33,698,120
	Teva Pharmaceutical Industries Ltd., ADR		Israel		1,161,238		38,576,326
							192,654,937
	Professional Services 0.6%
	Capita PLC		United Kingdom		1,051,471		9,470,740
	Semiconductors & Semiconductor Equipment 1.8%
	Infineon Technologies AG		Germany		590,665		12,471,591
	Taiwan Semiconductor Manufacturing Co. Ltd.		Taiwan		2,587,000		17,746,578
							30,218,169
	Specialty Retail 0.7%
	Kingfisher PLC		United Kingdom		3,066,896		12,012,320
	Technology Hardware, Storage & Peripherals 5.8%
	Catcher Technology Co. Ltd.		Taiwan		1,963,000		23,476,689
	Quanta Computer Inc.		Taiwan		5,640,000		13,360,532
	Samsung Electronics Co. Ltd.		South Korea		29,598		61,448,688
							98,285,909
	Trading Companies & Distributors 1.4%
	Posco Daewoo Corp.		South Korea		671,448		13,077,909
	SIG PLC		United Kingdom		5,760,800		11,150,544
							24,228,453
	Wireless Telecommunication Services 4.3%
	China Mobile Ltd.		China		1,394,500		14,797,391
	SoftBank Group Corp.		Japan		565,100		45,701,335
	Vodafone Group PLC, ADR		United Kingdom		434,503		12,483,271
							72,981,997
	Total Common Stocks (Cost $1,343,744,798)						1,623,842,628

Semiannual Report         TF-13

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Templeton Foreign VIP Fund (continued)

		Country		Shares		Value
	Short Term Investments (Cost $50,345,936) 3.0%
	Money Market Funds 3.0%
b,c	Institutional Fiduciary Trust Money Market Portfolio, 0.58%		United States		50,345,936	$	50,345,936
	Total Investments (Cost $1,394,090,734) 99.6%						1,674,188,564
	Other Assets, less Liabilities 0.4%						6,901,354
	Net Assets 100.0%					$	1,681,089,918

See Abbreviations on page TF-25.

^aNon-income producing.

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

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

TF-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, 2017 (unaudited)

	Templeton Foreign VIP Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	1,343,744,798
Cost - Non-controlled affiliates (Note 3e)		50,345,936
Total cost of investments	$	1,394,090,734
Value - Unaffiliated issuers	$	1,623,842,628
Value - Non-controlled affiliates (Note 3e)		50,345,936
Total value of investments		1,674,188,564
Receivables:
Investment securities sold		57,828
Capital shares sold		230,938
Dividends		7,115,853
European Union tax reclaims		2,837,275
Other assets		1,363
Total assets		1,684,431,821
Liabilities:
Payables:
Investment securities purchased		410,188
Capital shares redeemed		791,924
Management fees		1,062,381
Distribution fees		681,000
Reports to shareholders		201,608
Accrued expenses and other liabilities		194,802
Total liabilities		3,341,903
Net assets, at value	$	1,681,089,918
Net assets consist of:
Paid-in capital	$	1,465,342,022
Undistributed net investment income		26,908,679
Net unrealized appreciation (depreciation)		280,288,014
Accumulated net realized gain (loss)		(91,448,797	)
Net assets, at value	$	1,681,089,918
Class 1:
Net assets, at value	$	141,982,175
Shares outstanding		9,553,313
Net asset value and maximum offering price per share	$	14.86
Class 2:
Net assets, at value	$	1,386,563,414
Shares outstanding		95,124,478
Net asset value and maximum offering price per share	$	14.58
Class 4:
Net assets, at value	$	152,544,329
Shares outstanding		10,300,834
Net asset value and maximum offering price per share	$	14.81

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

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Statement of Operations

for the six months ended June 30, 2017 (unaudited)

	Templeton Foreign VIP Fund
Investment income:
Dividends: (net of foreign taxes of $3,605,273)
Unaffiliated issuers	$	33,638,393
Non-controlled affiliates (Note 3e)		94,031
Income from securities loaned (net of fees and rebates)		227,392
Total investment income		33,959,816
Expenses:
Management fees (Note 3a)		7,050,361
Distribution fees: (Note 3c)
Class 2		1,759,800
Class 4		500,632
Custodian fees (Note 4)		121,301
Reports to shareholders		179,117
Professional fees		64,203
Trustees’ fees and expenses		4,855
Other		37,548
Total expenses		9,717,817
Expense reductions (Note 4)		(268	)
Expenses waived/paid by affiliates (Note 3e)		(162,263	)
Net expenses		9,555,286
Net investment income		24,404,530
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		(18,956,367	)
Foreign currency transactions		1,402,239
Net realized gain (loss)		(17,554,128	)
Net change in unrealized appreciation (depreciation) on:
Investments		176,064,873
Translation of other assets and liabilities denominated in foreign currencies		417,992
Net change in unrealized appreciation (depreciation)		176,482,865
Net realized and unrealized gain (loss)		158,928,737
Net increase (decrease) in net assets resulting from operations	$	183,333,267

TF-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 Foreign VIP Fund
	Six Months Ended June 30, 2017 (unaudited)			Year Ended December 31, 2016
Increase (decrease) in net assets:
Operations:
Net investment income	$	24,404,530		$	44,630,962
Net realized gain (loss)		(17,554,128	)		(69,896,957	)
Net change in unrealized appreciation (depreciation)		176,482,865			170,488,749
Net increase (decrease) in net assets resulting from operations		183,333,267			145,222,754
Distributions to shareholders from:
Net investment income:
Class 1		(3,928,195	)		(4,469,747	)
Class 2		(35,708,156	)		(28,417,976	)
Class 4		(2,623,801	)		(8,605,853	)
Net realized gains:
Class 1		—			(3,504,221	)
Class 2		—			(25,453,391	)
Class 4		—			(8,118,929	)
Total distributions to shareholders		(42,260,152	)		(78,570,117	)
Capital share transactions: (Note 2)
Class 1		(597,022	)		(85,110,427	)
Class 2		(150,407,798	)		(66,083,288	)
Class 4		(363,477,608	)		(4,174,320	)
Total capital share transactions		(514,482,428	)		(155,368,035	)
Net increase (decrease) in net assets		(373,409,313	)		(88,715,398	)
Net assets:
Beginning of period		2,054,499,231			2,143,214,629
End of period	$	1,681,089,918		$	2,054,499,231
Undistributed net investment income included in net assets:
End of period	$	26,908,679		$	44,764,301

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

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 eighteen 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. 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 may differ 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. 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 Fund’s business day. Occasionally, events occur between the time at which trading in a foreign security is completed and 4 p.m. Eastern time 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 4 p.m. Eastern time. 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

TF-18         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Foreign VIP Fund (continued)

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

When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the Fund’s NAV is not calculated, 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. At June 30, 2017, the Fund had no securities on loan.

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. As a result of several court cases, in

Semiannual Report         TF-19

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Foreign VIP Fund (continued)

1. Organization and Significant Accounting Policies (continued)

d. 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. For U.S. income tax purposes, when EU reclaims are received by the Fund and the Fund previously passed foreign tax credit on to its shareholders, the Fund must either amend historic tax reporting to shareholders or enter into a closing agreement with the Internal Revenue Service (IRS) in order to pay the associated tax liability on behalf of the Fund’s shareholders.

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, 2017, 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. Estimated expenses are accrued daily. Dividend income is recorded on the ex-dividend date except for certain dividends from 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. Distributable earnings are determined according to income tax regulations

(tax basis) and 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

TF-20         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Foreign VIP Fund (continued)

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, 2017, 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, 2017						Year Ended December 31, 2016
	Shares			Amount			Shares			Amount
Class 1 Shares:
Shares sold		286,184		$	4,197,990			398,476		$	5,247,673
Shares issued in reinvestment of distributions		267,406			3,928,195			633,861			7,973,968
Shares redeemed		(593,951	)		(8,723,207	)		(7,350,785	)		(98,332,068	)
Net increase (decrease)		(40,361	)	$	(597,022	)		(6,318,448	)	$	(85,110,427	)
Class 2 Shares:
Shares sold		2,311,425		$	33,338,337			12,602,852		$	163,261,270
Shares issued in reinvestment of distributions		2,478,012			35,708,156			4,365,589			53,871,367
Shares redeemed		(15,226,977	)		(219,454,291	)		(21,800,082	)		(283,215,925	)
Net increase (decrease)		(10,437,540	)	$	(150,407,798	)		(4,831,641	)	$	(66,083,288	)
Class 4 Shares:
Shares sold		962,151		$	13,955,052			4,242,533		$	54,403,633
Shares issued in reinvestment of distributions		179,221			2,623,801			1,344,436			16,724,782
Shares redeemed		(26,199,367	)		(380,056,461	)		(5,754,548	)		(75,302,735	)
Net increase (decrease)		(25,057,995	)	$	(363,477,608	)		(167,579	)	$	(4,174,320	)

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

Semiannual Report         TF-21

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Foreign VIP Fund (continued)

3. Transactions with Affiliates (continued)

a. Management Fees

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

Annualized Fee Rate	Net Assets
0.900%	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

For the period ended June 30, 2017, the annualized effective investment management fee rate was 0.768% 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.

TF-22         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Foreign VIP Fund (continued)

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. During the period ended June 30, 2017, the Fund held investments in affiliated management investment companies as follows:

	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, 0.58%		111,135,782		727,102,142		(787,891,988	)		50,345,936	$	50,345,936	$	94,031	$	—		0.3%

f. Interfund Transactions

The Fund engaged in purchases and sales of investments with funds or other accounts that have common investment managers (or affiliated investment managers), directors, trustees or officers. During the period ended June 30, 2017, the purchase and sale transactions aggregated $0 and $375,044,374, respectively.

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, 2017, 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, if any. At December 31, 2016, the capital loss carryforwards were as follows:

Capital loss carryforwards:
Short term	$	1,095,327
Long term		68,138,792
Total capital loss carryforwards	$	69,234,119

At June 30, 2017, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments.	$	1,398,821,252
Unrealized appreciation	$	364,105,277
Unrealized depreciation		(88,737,965	)
Net unrealized appreciation (depreciation)	$	275,367,312

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

Semiannual Report         TF-23

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, 2017, aggregated $302,484,971 and $787,641,694, 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 9, 2018. 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 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statement of Operations. During the period ended June 30, 2017, 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.

At June 30, 2017, 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.

TF-24         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Foreign VIP Fund (continued)

10. Investment Company Reporting Modernization

In October 2016, the U.S. Securities and Exchange Commission adopted new rules and amended existing rules (together, final rules) intended to modernize the reporting and disclosure of information by registered investment companies. In part, the final rules amend Regulation S-X and require standardized, enhanced disclosures about derivatives in investment company financial statements, as well as other amendments. The compliance date for the amendments to Regulation S-X is August 1, 2017. Management has reviewed the requirements and believes the adoption of the amendments to Regulation S-X will not have a material impact on the Fund’s financial statements and related disclosures.

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
IDR	International Depositary Receipt

Semiannual Report         TF-25

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Tax Information (unaudited)

Templeton Foreign VIP Fund

At December 31, 2016, 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, 2017, 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	$0.0414	$0.4624
Class 2	$0.0414	$0.4245
Class 4	$0.0414	$0.3024

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-26         Semiannual Report

Templeton Global Bond VIP Fund

This semiannual report for Templeton Global Bond VIP Fund covers the period ended June 30, 2017.

Class 2 Performance Summary as of June 30, 2017

The Fund’s Class 2 Shares delivered a +2.91% total return* for the six-month period ended June 30, 2017.

*The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 4/30/18. Fund investment results reflect the fee waiver; without this waiver, the results would have been lower.

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

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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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 governmental 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 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.

*Figures represent the net Fund exposure and include 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 or other factors.

**The Fund’s supranational investment was denominated in the Mexican peso.

Performance Overview

You can find the Fund’s six-month total return in the Performance Summary. For comparison, the J.P. Morgan (JPM) Global Government Bond Index (GGBI) produced a +4.07% total return and the Citigroup World Government Bond Index posted a +4.49% total return for the same period.¹

Economic and Market Overview

In the months before the reporting period began, global bond markets shifted significantly, setting new valuation levels that meaningfully impacted markets during the six-month reporting period. In November 2016, a sharp correction to U.S. Treasury valuations manifested quickly after the results of the U.S. election, driving yields higher based on growing investor expectations for a December rate hike and a recognition that inflation pressures were rising. A number of emerging markets saw currency depreciations from broad-based strengthening of the U.S. dollar and fears over potential protectionist trade shocks.

However, during the first three months of the reporting period, several local-currency emerging markets significantly rebounded from trade concerns, particularly in select areas of Latin America and Asia. Local-currency bond markets in

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.

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

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TEMPLETON GLOBAL BOND VIP FUND

Brazil, Colombia, Indonesia and India notably strengthened during the six-month period. Additionally, the Mexican peso recovered significantly after reaching its lowest valuation on record in the days leading up to President Trump’s inauguration on January 20. After breaching 22 pesos per U.S. dollar in January, the peso strengthened more than 21% through the remainder of the period, ending around 18 pesos per dollar.

In developed markets, U.S. Treasury yields initially rose significantly in the weeks leading up to the U.S. Federal Reserve (Fed’s) March 15 meeting, with the 10-year U.S. Treasury note reaching its highest yield of the reporting period on the day before the meeting, at 2.63%. The Fed hiked the federal funds target rate 25 basis points (bps) to a range of 0.75% to 1.00%, as largely expected by markets. However, yields declined during the second half of the month based on U.S. policy uncertainties and less hawkish-sounding language than anticipated in the Fed’s forward guidance. Consumer Price Index figures also began to moderate from a peak of 2.7% year-over-year in February to 2.4% in March, eventually dropping to 1.9% in May.

On March 29, U.K. Prime Minister Theresa May formally triggered Article 50 to begin the U.K.’s exit from the European Union (also known as “Brexit”) in a written letter to Donald Tusk, president of the European Council, largely spurring a protracted decline in the yield on 10-year British government bonds. In April, the European Central Bank (ECB) reduced its pace of monthly quantitative easing purchases to €60 billion from its previous €80 billion a month pace, but kept policy rates unchanged. In early May, Emmanuel Macron won the French presidential election over Marine Le Pen, resulting in strengthening European market sentiment, appreciation of the euro and a rise in European bond yields. The reporting period ended with Europe in a cyclical upswing and the euro 8.6% stronger against the U.S. dollar than when the period began.

The Fed raised its policy rate 25 basis points (to a range of 1.00% to 1.25%) at its June 14 meeting and appeared more committed to tightening policy than it has been in recent years, specifically stating its intentions to begin unwinding its balance sheet later this year, while remaining on course for three rate hikes in 2017 and highlighting the need to strengthen financial market stability. However, it was not until the last week of June that markets began to react to the renewed determination from the Fed, only after similar comments on potential policy direction were made by the heads of the ECB, Bank of England and Bank of Canada. U.S. Treasury yields rose sharply during late June, with the yield on the 10-year U.S. Treasury note increasing 17 bps over the final four days of the month. The 10-year U.S. Treasury note finished the reporting period at

2.31%. As the period came to an end, rates in developed markets were largely trending higher, while select local-currency emerging markets in Latin America and Asia remained resilient.

Currency Composition*
6/30/17
	% of Total Net Assets
Americas		158.0%
U.S. Dollar		113.7%
Mexican Peso		22.8%
Brazilian Real		12.6%
Argentinian Peso		4.5%
Colombian Peso		4.0%
Chilean Peso		0.3%
Peruvian Neuvo Sol		0.1%
Middle East & Africa		3.2%
Ghanaian Cedi		1.6%
South African Rand		1.6%
Australia & New Zealand		-9.4%
New Zealand Dollar		0.0%	**
Australian Dollar		-9.4%
Asia Pacific		-14.1%
Indonesian Rupiah		11.2%
Indian Rupee		10.0%
Philippine Peso		2.3%
Malaysian Ringgit		0.1%
South Korean Won		-7.3%
Japanese Yen		-30.4%
Europe		-37.7%
Euro		-37.7%

*Figures represent the net Fund exposure and include 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 or other factors.

**Rounds to less than 0.1%.

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 regularly utilize currency and cross currency forward contracts and may also use currency and

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TEMPLETON GLOBAL BOND VIP FUND

currency index futures contracts and other derivative instruments.

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.

What is a futures contract?

A futures contract 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.

Manager’s Discussion

On the whole, we continued to position the Fund 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 added to some of our strongest investment convictions as prices became cheaper during periods of heightened volatility. We also maintained exposures to a number of emerging market currencies that we believe remained fundamentally undervalued. Overall, we were positioned for depreciation of the euro and Japanese yen, rising U.S. Treasury yields and currency appreciation in select emerging markets. During the period, we used forward currency exchange contracts to actively manage currencies. We also used interest-rate swaps to tactically manage duration exposures.

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.

During the period, the Fund’s positive absolute performance was primarily attributable to interest-rate strategies, followed by currency positions. Sovereign credit exposures had a largely neutral effect on absolute results. The Fund maintained a defensive approach regarding interest rates in developed and

What is an interest-rate swap?

An interest-rate swap is an agreement between two parties to exchange interest rate payment 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).

emerging markets. Select duration exposures in Latin America (Brazil) and Asia ex-Japan (Indonesia) contributed to absolute performance, while negative duration exposure to U.S. Treasuries detracted. Among currencies, positions in Latin America (Mexican peso) and Asia ex-Japan (Indian rupee) contributed to absolute results. However, the Fund’s net-negative positions in the euro, the Japanese yen and the Australian dollar detracted from absolute performance.

On a relative basis, the Fund’s underperformance was primarily due to currency positions. Interest-rate strategies contributed to relative results, while sovereign credit exposures had a largely neutral effect. Among currencies, the Fund’s underweighted positions in the euro, the Japanese yen and the Australian dollar detracted from relative performance. However, overweighted currency positions in Latin America (Mexican peso) and Asia ex-Japan (Indian rupee) contributed to relative results. The Fund maintained a defensive approach regarding interest rates in developed and emerging markets. Select overweighted duration exposures in Latin America (Brazil) and Asia ex-Japan (Indonesia) contributed to relative performance. However, underweighted duration exposure in the U.S. detracted from relative results.

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, 2017, 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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TEMPLETON GLOBAL BOND VIP FUND

Class 2 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: (1) transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes; and (2) 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 table below shows Fund-level ongoing expenses and can help you understand these costs 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 table below provides information about the actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of ongoing Fund expenses but does not include the effect of ongoing Contract expenses, is used to calculate the “Ending Account Value.” You can estimate the Fund-level expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number under the headings “Actual” and “Fund-Level Expenses Paid During Period” (if Fund-Level Expenses Paid During Period were $7.50, then 8.6 × $7.50 = $64.50). In this illustration, the estimated expenses paid this period at the Fund level are $64.50.

Hypothetical Example for Comparison with Other Mutual Funds

Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other mutual funds offered through the Contract. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds offered through the Contract.

Please note that expenses shown in the table are meant to highlight ongoing costs at the Fund level only and do not reflect any ongoing expenses at the Contract level, or transaction expenses at either the Fund or Contract levels. In addition, 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.

		Actual (actual return after expenses)				Hypothetical (5% annual return before expenses)
Share Class	Beginning Account Value 1/1/17		Ending Account Value 6/30/17	Fund-Level Expenses Paid During Period 1/1/17–6/30/17	1,2		Ending Account Value 6/30/17	Fund-Level Expenses Paid During  Period 1/1/17–6/30/17	1,2	Net Annualized Expense Ratio	2
Class 2	$1,000		$1,029.10	$3.52			$1,021.32	$3.51		0.70%

1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above — in the far right column — multiplied by the simple average account value over the period indicated, and then multiplied by 181/365 to reflect the one-half year period.

2. Reflects expenses after fee waivers and expense reimbursements. Does not include any ongoing expenses of the Contract for which the Fund is an investment option or acquired fund fees and expenses.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Highlights

Templeton Global Bond VIP Fund

	Six Months Ended June 30, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 1
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$16.85			$16.34			$18.56			$19.15			$20.01			$18.61
Income from investment operationsa:
Net investment incomeb		0.41			0.62			0.52			0.58			0.64			0.72
Net realized and unrealized gains (losses)		0.10			(0.10	)		(1.22	)		(0.16	)		(0.30	)		1.99
Total from investment operations		0.51			0.52			(0.70	)		0.42			0.34			2.71
Less distributions from:
Net investment income and net foreign currency gains		—			—			(1.43	)		(1.01	)		(0.96	)		(1.28	)
Net realized gains		(0.05	)		(0.01	)		(0.09	)		—			(0.24	)		(0.03	)
Total distributions		(0.05	)		(0.01	)		(1.52	)		(1.01	)		(1.20	)		(1.31	)
Redemption fees		—			—			—			—	c		—	c		—	c
Net asset value, end of period		$17.31			$16.85			$16.34			$18.56			$19.15			$20.01
Total returnd		3.05%			3.21%			(4.10)%			2.12%			1.89%			15.31%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		0.52%			0.53%			0.52%			0.51%			0.51%			0.55%
Expenses net of waiver and payments by affiliatesf		0.45%			0.48%			0.52%	g		0.51%			0.51%			0.55%
Net investment income		4.81%			3.88%			2.99%			3.08%			3.26%			3.71%
Supplemental data
Net assets, end of period (000’s)		$261,770			$241,792			$292,802			$323,491			$280,963			$307,142
Portfolio turnover rate		15.84%			59.00%			51.58%			39.14%			34.39%			43.26%

^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, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 2
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$16.25			$15.80			$17.99			$18.60			$19.47			$18.15
Income from investment operationsa:
Net investment incomeb		0.38			0.56			0.46			0.52			0.57			0.65
Net realized and unrealized gains (losses)		0.09			(0.10	)		(1.17	)		(0.17	)		(0.27	)		1.94
Total from investment operations		0.47			0.46			(0.71	)		0.35			0.30			2.59
Less distributions from:
Net investment income and net foreign currency gains		—			—			(1.39	)		(0.96	)		(0.93	)		(1.24	)
Net realized gains		(0.05	)		(0.01	)		(0.09	)		—			(0.24	)		(0.03	)
Total distributions		(0.05	)		(0.01	)		(1.48	)		(0.96	)		(1.17	)		(1.27	)
Redemption fees		—			—			—			—	c		—	c		—	c
Net asset value, end of period		$16.67			$16.25			$15.80			$17.99			$18.60			$19.47
Total returnd		2.91%			2.94%			(4.30)%			1.83%			1.63%			15.07%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		0.77%			0.78%			0.77%			0.76%			0.76%			0.80%
Expenses net of waiver and payments by affiliatesf		0.70%			0.73%			0.77%	g		0.76%			0.76%			0.80%
Net investment income		4.56%			3.63%			2.74%			2.83%			3.01%			3.46%
Supplemental data
Net assets, end of period (000’s)		$2,793,645			$2,812,535			$2,971,667			$3,177,638			$2,826,039			$2,418,229
Portfolio turnover rate		15.84%			59.00%			51.58%			39.14%			34.39%			43.26%

^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, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 4
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$16.62			$16.18			$18.38			$18.97			$19.82			$18.44
Income from investment operationsa:
Net investment incomeb		0.38			0.56			0.46			0.51			0.56			0.64
Net realized and unrealized gains (losses)		0.10			(0.11	)		(1.21	)		(0.18	)		(0.28	)		1.98
Total from investment operations		0.48			0.45			(0.75	)		0.33			0.28			2.62
Less distributions from:
Net investment income and net foreign currency gains		—			—			(1.36	)		(0.92	)		(0.89	)		(1.21	)
Net realized gains		(0.05	)		(0.01	)		(0.09	)		—			(0.24	)		(0.03	)
Total distributions		(0.05	)		(0.01	)		(1.45	)		(0.92	)		(1.13	)		(1.24	)
Redemption fees		—			—			—			—	c		—	c		—	c
Net asset value, end of period		$17.05			$16.62			$16.18			$18.38			$18.97			$19.82
Total returnd		2.85%			2.87%			(4.39)%			1.69%			1.54%			14.97%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		0.87%			0.88%			0.87%			0.86%			0.86%			0.90%
Expenses net of waiver and payments by affiliatesf		0.80%			0.83%			0.87%	g		0.86%			0.86%			0.90%
Net investment income		4.46%			3.53%			2.64%			2.73%			2.91%			3.36%
Supplemental data
Net assets, end of period (000’s)		$97,697			$96,798			$103,045			$111,199			$118,145			$163,241
Portfolio turnover rate		15.84%			59.00%			51.58%			39.14%			34.39%			43.26%

^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, 2017 (unaudited)

Templeton Global Bond VIP Fund
		Principal Amount*				Value
	Foreign Government and Agency Securities 66.9%
	Argentina 4.5%
	Argentine Bonos del Tesoro,
	21.20%, 9/19/18		44,122,000		ARS	$	2,678,159
	18.20%, 10/03/21		798,350,000		ARS		51,113,174
	16.00%, 10/17/23		240,805,000		ARS		15,561,104
	senior note, 15.50%, 10/17/26		1,067,286,000		ARS		71,684,267
a	Government of Argentina, FRN, 21.472%, 4/03/22		24,036,000		ARS		1,403,091
							142,439,795
	Brazil 12.6%
	Letra Tesouro Nacional,
	Strip, 1/01/19		38,960	b	BRL		10,349,634
	Strip, 7/01/19		102,840	b	BRL		26,047,747
	Strip, 7/01/20		259,441	b	BRL		59,132,615
	Nota Do Tesouro Nacional,
	10.00%, 1/01/21		38,520	b	BRL		11,645,655
	10.00%, 1/01/23		522,145	b	BRL		155,660,347
	10.00%, 1/01/25		69,029	b	BRL		20,364,969
	10.00%, 1/01/27		260,633	b	BRL		76,422,690
	c Index Linked, 6.00%, 5/15/19		2,087	b	BRL		1,928,115
	c Index Linked, 6.00%, 8/15/22		18,002	b	BRL		16,568,182
	c Index Linked, 6.00%, 5/15/23		4,510	b	BRL		4,151,346
	c Index Linked, 6.00%, 8/15/24		3,110	b	BRL		2,882,896
	c Index Linked, 6.00%, 5/15/45		5,285	b	BRL		4,990,409
	senior note, 10.00%, 1/01/19		21,390	b	BRL		6,553,067
							396,697,672
	Colombia 3.9%
	Government of Colombia,
	senior bond, 7.75%, 4/14/21		2,386,000,000		COP		835,119
	senior bond, 4.375%, 3/21/23		362,000,000		COP		110,061
	senior bond, 9.85%, 6/28/27		576,000,000		COP		243,528
	Titulos de Tesoreria,
	B, 5.00%, 11/21/18		2,882,000,000		COP		948,525
	B, 7.75%, 9/18/30		140,945,200,000		COP		50,416,479
	B, 7.00%, 6/30/32		5,967,000,000		COP		1,974,962
	senior bond, B, 11.25%, 10/24/18		5,135,000,000		COP		1,822,493
	senior bond, B, 11.00%, 7/24/20		9,167,000,000		COP		3,461,277
	senior bond, B, 7.00%, 5/04/22		10,237,000,000		COP		3,529,044
	senior bond, B, 10.00%, 7/24/24		40,977,000,000		COP		16,376,278
	senior bond, B, 7.50%, 8/26/26		77,594,200,000		COP		27,176,911
	senior bond, B, 6.00%, 4/28/28		42,303,600,000		COP		13,247,144
	senior note, B, 7.00%, 9/11/19		4,056,000,000		COP		1,377,435
							121,519,256
	Ghana 1.6%
	Government of Ghana,
	24.75%, 3/01/21		80,000		GHS		21,254
	24.50%, 6/21/21		80,000		GHS		21,244
	24.75%, 7/19/21		80,000		GHS		21,406
	18.75%, 1/24/22		26,840,000		GHS		6,255,654
	19.75%, 3/25/24		26,840,000		GHS		6,529,851
	19.00%, 11/02/26		80,510,000		GHS		19,062,147
	senior bond, 19.75%, 3/15/32		80,510,000		GHS		19,502,234

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)
Ghana (continued)
Government of Ghana, (continued)
senior note, 21.50%, 3/09/20		520,000		GHS	$	125,838
						51,539,628
India 7.6%
Government of India,
senior bond, 7.80%, 5/03/20		270,800,000		INR		4,326,933
senior bond, 8.20%, 2/15/22		353,000,000		INR		5,781,399
senior bond, 8.35%, 5/14/22		212,700,000		INR		3,516,989
senior bond, 8.08%, 8/02/22		622,000,000		INR		10,182,319
senior bond, 8.13%, 9/21/22		28,000,000		INR		459,410
senior bond, 9.15%, 11/14/24		2,409,000,000		INR		42,021,057
senior note, 7.28%, 6/03/19		28,000,000		INR		440,127
senior note, 8.27%, 6/09/20		1,222,000,000		INR		19,788,685
senior note, 8.12%, 12/10/20		844,000,000		INR		13,688,552
senior note, 7.80%, 4/11/21		1,980,300,000		INR		31,859,478
senior note, 8.79%, 11/08/21		653,000,000		INR		10,894,247
senior note, 8.15%, 6/11/22		1,621,000,000		INR		26,585,704
senior note, 7.16%, 5/20/23		133,700,000		INR		2,107,948
senior note, 8.83%, 11/25/23		2,983,900,000		INR		50,909,157
senior note, 7.68%, 12/15/23		1,062,000,000		INR		17,221,837
						239,783,842
Indonesia 6.1%
Government of Indonesia,
6.125%, 5/15/28		37,000,000		IDR		2,564
8.375%, 3/15/34		81,180,000,000		IDR		6,566,277
FR34, 12.80%, 6/15/21		392,506,000,000		IDR		35,681,857
FR35, 12.90%, 6/15/22		71,229,000,000		IDR		6,733,755
FR43, 10.25%, 7/15/22		147,832,000,000		IDR		12,734,958
FR52, 10.50%, 8/15/30		6,960,000,000		IDR		658,217
senior bond, 9.00%, 3/15/29		51,222,000,000		IDR		4,395,810
senior bond, 8.75%, 5/15/31		85,845,000,000		IDR		7,278,548
senior bond, FR39, 11.75%, 8/15/23		5,491,000,000		IDR		507,039
senior bond, FR40, 11.00%, 9/15/25		46,856,000,000		IDR		4,348,546
senior bond, FR44, 10.00%, 9/15/24		4,454,000,000		IDR		388,306
senior bond, FR46, 9.50%, 7/15/23		226,780,000,000		IDR		19,227,769
senior bond, FR47, 10.00%, 2/15/28		12,000,000		IDR		1,094
senior bond, FR56, 8.375%, 9/15/26		525,219,000,000		IDR		43,595,856
senior bond, FR59, 7.00%, 5/15/27		47,752,000,000		IDR		3,636,711
senior bond, FR61, 7.00%, 5/15/22		244,849,000,000		IDR		18,642,705
senior bond, FR63, 5.625%, 5/15/23		258,951,000,000		IDR		18,178,619
senior bond, FR70, 8.375%, 3/15/24		136,475,000,000		IDR		11,098,693
						193,677,324
Mexico 20.7%
Government of Mexico,
7.75%, 12/14/17		30,626,300	d	MXN		169,473,233
M, 4.75%, 6/14/18		6,775,400	d	MXN		36,608,366
senior note, 8.50%, 12/13/18		60,159,700	d	MXN		339,148,412
senior note, M, 5.00%, 12/11/19		18,742,300	d	MXN		99,600,226

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)
	Mexico (continued)
e	Mexican Udibonos,
	Index Linked, 3.50%, 12/14/17		648,817	f MXN	$	3,595,915
	Index Linked, 4.00%, 6/13/19		445,332	f MXN		2,495,704
	Index Linked, 2.50%, 12/10/20		350,721	f MXN		1,897,215
						652,819,071
	Peru 0.1%
	Government of Peru, senior bond, 7.84%, 8/12/20		11,090,000	PEN		3,795,779
	Philippines 1.7%
	Government of the Philippines,
	senior note, 5.875%, 1/31/18		81,610,000	PHP		1,642,971
	senior note, 3.375%, 8/20/20		1,102,110,000	PHP		21,556,702
	senior note, 5-72, 2.125%, 5/23/18		686,978,000	PHP		13,545,375
	senior note, 7-51, 5.00%, 8/18/18		64,060,000	PHP		1,289,333
	senior note, 7-56, 3.875%, 11/22/19		813,510,000	PHP		16,165,539
						54,199,920
	South Africa 1.6%
	Government of South Africa,
	8.00%, 1/31/30		141,289,000	ZAR		9,761,937
	7.00%, 2/28/31		100,900,000	ZAR		6,305,489
	8.25%, 3/31/32		181,200,000	ZAR		12,484,272
	8.875%, 2/28/35		79,858,000	ZAR		5,669,143
	8.50%, 1/31/37		42,938,000	ZAR		2,912,617
	R186, 10.50%, 12/21/26		100,497,000	ZAR		8,514,522
	senior bond, 6.25%, 3/31/36		89,397,000	ZAR		4,816,665
						50,464,645
	South Korea 4.7%
	Korea Treasury Bond,
	senior note, 1.375%, 9/10/21		45,614,300,000	KRW		39,066,436
	senior note, 1.875%, 3/10/22		124,352,000,000	KRW		108,560,502
						147,626,938
g	Supranational 0.4%
	Inter-American Development Bank, senior bond, 7.50%, 12/05/24		200,000,000	MXN		11,405,885
	Ukraine 1.4%
h	Government of Ukraine,
	144A, 7.75%, 9/01/24		3,147,000			3,093,234
	144A, 7.75%, 9/01/25		8,515,000			8,334,184
	144A, 7.75%, 9/01/26		9,566,000			9,327,089
	144A, 7.75%, 9/01/27		11,581,000			11,249,783
	i,j 144A, VRI, GDP Linked Security, 5/31/40		29,978,000			11,741,783
						43,746,073
	Total Foreign Government and Agency Securities (Cost $2,060,751,339)					2,109,715,828
	Short Term Investments 23.0%
	Foreign Government and Agency Securities 2.4%
	Argentina 0.0%†
	Argentine Bonos del Tesoro, 22.75%, 3/05/18		2,617,000	ARS		158,373

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)
	Colombia 0.1%
	Colombian Tes Corto Plazo, Strip, 9/12/17 - 3/13/18		9,908,000,000		COP	$	3,187,800
	Mexico 1.7%
k	Mexico Treasury Bill, 7/06/17 - 4/26/18		98,582,640	l	MXN		53,335,518
	Philippines 0.6%
k	Philippine Treasury Bill, 7/19/17 - 9/27/17		948,920,000		PHP		18,793,434
	Total Foreign Government and Agency Securities (Cost $75,005,886)						75,475,125
	Total Investments before Money Market Funds (Cost $2,135,757,225)						2,185,190,953
		Shares
	Money Market Funds (Cost $649,035,632) 20.6%
	United States 20.6%
m,n	Institutional Fiduciary Trust Money Market Portfolio, 0.58%		649,035,632				649,035,632
	Total Investments (Cost $2,784,792,857) 89.9%						2,834,226,585
	Other Assets, less Liabilities 10.1%						318,884,966
	Net Assets 100.0%					$	3,153,111,551

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

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

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

^bPrincipal amount is stated in 1,000 Brazilian Real Units.

^cRedemption price at maturity is adjusted for inflation. See Note 1(e).

^dPrincipal amount is stated in 100 Mexican Peso Units.

^ePrincipal amount of security is adjusted for inflation. See Note 1(e).

^fPrincipal amount is stated in 100 Unidad de Inversion Units.

^gA supranational organization is an entity formed by two or more central governments through international treaties.

^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.

ⁱNon-income producing.

^jThe principal represents the notional amount. See Note 1(c) regarding value recovery instruments.

^kThe security was issued on a discount basis with no stated coupon rate.

^lPrincipal amount is stated in 10 Mexican Peso Units.

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

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

TGB-12         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Templeton Global Bond VIP Fund (continued)

At June 30, 2017, the Fund had the following forward exchange contracts outstanding. See Note 1(c).

Forward Exchange Contracts
Currency	Counterparty	a	Type	Quantity	Contract Amount	*	Settlement Date		Unrealized Appreciation		Unrealized Depreciation
OTC Forward Exchange Contracts
Chilean Peso	DBAB		Buy	4,683,134,000	7,017,087		7/03/17	$	25,717	$	—
Chilean Peso	DBAB		Sell	4,683,134,000	7,061,314		7/03/17		18,509		—
Euro	GSCO		Buy	463,000	528,052		7/03/17		899		—
Euro	GSCO		Sell	463,000	499,021		7/03/17		—		(29,929	)
Euro	DBAB		Buy	2,579,651	2,945,703		7/05/17		1,729		—
Euro	DBAB		Sell	2,579,651	2,766,289		7/05/17		—		(181,144	)
Euro	HSBK		Buy	18,537,726	21,157,107		7/05/17		23,550		—
Euro	HSBK		Sell	18,537,726	19,907,108		7/05/17		—		(1,273,549	)
Chilean Peso	JPHQ		Buy	1,792,000,000	2,715,563		7/07/17		—		(20,949	)
Chilean Peso	JPHQ		Sell	1,792,000,000	2,754,000		7/07/17		59,386		—
Euro	DBAB		Sell	1,536,000	1,730,273		7/07/17		—		(24,912	)
Euro	BOFA		Sell	11,879,864	12,714,781		7/10/17		—		(862,608	)
Euro	HSBK		Sell	15,262,292	16,336,757		7/10/17		—		(1,106,378	)
Euro	JPHQ		Sell	32,859,900	35,175,866		7/10/17		—		(2,379,416	)
Euro	SCNY		Sell	2,400,751	2,570,496		7/10/17		—		(173,300	)
Chilean Peso	GSCO		Buy	4,809,568,000	7,281,708		7/11/17		—		(50,445	)
Euro	BOFA		Sell	2,643,000	2,828,750		7/11/17		—		(192,080	)
Japanese Yen	BZWS		Sell	1,689,110,000	14,647,600		7/11/17		—		(376,314	)
Japanese Yen	DBAB		Sell	770,370,000	6,664,100		7/11/17		—		(188,013	)
Japanese Yen	GSCO		Sell	329,010,000	2,849,632		7/11/17		—		(76,771	)
Japanese Yen	JPHQ		Sell	2,831,950,000	24,478,779		7/11/17		—		(710,209	)
Euro	GSCO		Sell	8,105,300	8,626,957		7/12/17		—		(637,556	)
Euro	SCNY		Sell	15,572,000	16,576,394		7/12/17		—		(1,222,701	)
Euro	JPHQ		Sell	36,882,000	39,326,539		7/13/17		—		(2,832,661	)
Japanese Yen	BZWS		Sell	1,089,820,000	9,494,322		7/13/17		—		(200,055	)
Japanese Yen	BZWS		Sell	1,426,300,000	12,999,927		7/13/17		312,429		—
Japanese Yen	CITI		Sell	138,680,000	1,203,851		7/13/17		—		(29,762	)
Japanese Yen	HSBK		Sell	536,380,000	4,658,341		7/13/17		—		(112,970	)
Japanese Yen	JPHQ		Sell	708,450,000	6,923,866		7/14/17		621,636		—
Euro	JPHQ		Sell	15,313,111	16,660,068		7/17/17		—		(848,025	)
Euro	SCNY		Sell	4,975,000	5,417,427		7/17/17		—		(270,690	)
Indian Rupee	JPHQ		Buy	82,107,000	1,257,574		7/17/17		10,426		—
Malaysian Ringgit	JPHQ		Buy	1,700,000	421,094		7/17/17		—		(25,917	)
Chilean Peso	DBAB		Buy	1,828,805,000	2,766,013		7/18/17		—		(16,935	)
Chilean Peso	DBAB		Sell	470,022,000	710,110		7/18/17		3,568		—
Euro	GSCO		Sell	2,279,000	2,427,067		7/18/17		—		(178,752	)
Euro	JPHQ		Sell	36,334,000	38,692,077		7/18/17		—		(2,852,372	)
Euro	UBSW		Sell	599,610	638,902		7/18/17		—		(46,694	)
Chilean Peso	DBAB		Buy	1,757,372,000	2,664,098		7/20/17		—		(22,552	)
Chilean Peso	DBAB		Sell	1,525,306,000	2,309,845		7/20/17		17,123		—
Indian Rupee	DBAB		Buy	491,655,000	7,538,906		7/20/17		51,096		—
Japanese Yen	SCNY		Sell	707,660,000	6,289,752		7/20/17		—		(7,190	)
Malaysian Ringgit	DBAB		Buy	11,455,000	2,543,408	EUR	7/20/17		—		(246,683	)
Euro	DBAB		Sell	14,940,282	16,124,598		7/24/17		—		(963,939	)
Euro	JPHQ		Sell	300,000	324,248		7/24/17		—		(18,889	)
Indian Rupee	JPHQ		Buy	358,075,000	5,488,581		7/24/17		36,586		—
Japanese Yen	DBAB		Sell	858,140,000	7,511,006		7/24/17		—		(126,352	)
South Korean Won	HSBK		Sell	59,965,000,000	52,573,207		7/24/17		201,387		—

Semiannual Report         TGB-13

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Templeton Global Bond VIP Fund (continued)    

Forward Exchange Contracts (continued)
Currency	Counterparty	a	Type	Quantity	Contract Amount	*	Settlement Date		Unrealized Appreciation		Unrealized Depreciation
OTC Forward Exchange Contracts (continued)
Japanese Yen	CITI		Sell	913,412,000	8,748,319		7/25/17	$	618,671	$	—
Japanese Yen	JPHQ		Sell	1,407,000,000	12,522,306		7/25/17		—		(427	)
Euro	GSCO		Sell	4,711,000	5,155,907		7/27/17		—		(233,393	)
Indian Rupee	DBAB		Buy	838,950,988	12,933,282		7/27/17		7,202		—
Japanese Yen	GSCO		Sell	944,420,000	8,401,977		7/27/17		—		(4,426	)
Japanese Yen	JPHQ		Sell	490,100,000	4,363,232		7/27/17		789		—
Indian Rupee	HSBK		Buy	679,529,000	10,403,874		7/28/17		76,324		—
Euro	BOFA		Sell	65,140,400	71,214,091		7/31/17		—		(3,321,640	)
Euro	CITI		Sell	132,315,770	144,734,267		7/31/17		—		(6,665,672	)
Euro	DBAB		Sell	27,189,556	29,742,927		7/31/17		—		(1,368,233	)
Indonesian Rupiah	HSBK		Buy	424,000,000,000	30,372,493		7/31/17		1,328,363		—
Japanese Yen	BZWS		Sell	1,079,470,000	10,393,060		7/31/17		782,844		—
Japanese Yen	DBAB		Sell	897,860,782	8,648,745		7/31/17		655,344		—
Japanese Yen	HSBK		Sell	1,162,462,488	10,192,569		7/31/17		—		(156,506	)
Euro	GSCO		Sell	41,639,000	45,511,427		8/02/17		—		(2,138,000	)
Euro	HSBK		Sell	25,974,891	28,384,582		8/02/17		—		(1,339,683	)
Euro	JPHQ		Sell	11,263,000	12,293,722		8/02/17		—		(595,048	)
South Korean Won	HSBK		Sell	15,755,000,000	13,988,280		8/02/17		227,493		—
Euro	BOFA		Sell	32,701,000	35,849,125		8/03/17		—		(1,574,002	)
Euro	DBAB		Sell	12,156,556	13,361,271		8/08/17		—		(554,199	)
Euro	GSCO		Sell	2,045,000	2,248,477		8/08/17		—		(92,410	)
Indian Rupee	DBAB		Buy	497,366,494	7,678,371		8/08/17		—		(17,268	)
Japanese Yen	SCNY		Sell	1,720,000,000	15,414,742		8/08/17		97,107		—
Euro	DBAB		Sell	13,483,000	14,842,356		8/09/17		—		(592,249	)
Japanese Yen	JPHQ		Sell	1,723,960,000	15,452,309		8/09/17		98,787		—
Euro	GSCO		Sell	5,023,100	5,527,922		8/10/17		—		(222,537	)
Euro	HSBK		Sell	1,800,000	1,977,188		8/10/17		—		(83,456	)
Japanese Yen	CITI		Sell	683,420,000	6,072,955		8/14/17		—		(14,790	)
Euro	BOFA		Sell	21,007,276	22,915,997		8/15/17		—		(1,139,186	)
Euro	CITI		Sell	37,063,039	40,440,223		8/15/17		—		(2,000,225	)
Euro	DBAB		Sell	50,881,000	55,523,179		8/15/17		—		(2,740,053	)
Euro	DBAB		Sell	5,008,730	5,496,340		8/16/17		—		(239,384	)
Euro	GSCO		Sell	3,797,000	4,164,018		8/16/17		—		(184,099	)
Euro	JPHQ		Sell	8,370,000	9,177,646		8/16/17		—		(407,220	)
Euro	SCNY		Sell	657,000	720,749		8/16/17		—		(31,612	)
Indian Rupee	DBAB		Buy	239,338,000	3,671,673		8/16/17		11,602		—
Indian Rupee	HSBK		Buy	402,232,000	6,176,781		8/16/17		13,340		—
Japanese Yen	GSCO		Sell	1,205,250,280	10,719,148		8/16/17		—		(17,809	)
Japanese Yen	JPHQ		Sell	2,553,380,000	22,702,462		8/16/17		—		(44,290	)
Euro	BOFA		Sell	561,829	619,063		8/17/17		—		(24,345	)
Euro	GSCO		Sell	3,095,000	3,409,916		8/17/17		—		(134,485	)
South Korean Won	HSBK		Sell	75,818,000,000	67,191,593		8/17/17		947,228		—
Indian Rupee	JPHQ		Buy	378,455,000	5,854,811		8/18/17		—		(31,919	)
Japanese Yen	DBAB		Sell	838,612,000	8,491,414		8/18/17		1,020,044		—
Euro	JPHQ		Sell	11,580,291	12,928,295		8/21/17		—		(336,130	)
Euro	DBAB		Sell	9,037,398	10,096,192		8/22/17		—		(256,040	)
Euro	HSBK		Sell	19,488,000	21,771,701		8/22/17		—		(551,572	)
Euro	UBSW		Sell	3,245,000	3,625,801		8/22/17		—		(91,308	)
Japanese Yen	HSBK		Sell	1,621,372,000	16,443,935		8/22/17		1,996,453		—

TGB-14         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Templeton Global Bond VIP Fund (continued)    

Forward Exchange Contracts (continued)
Currency	Counterparty	a	Type	Quantity	Contract Amount	*	Settlement Date		Unrealized Appreciation		Unrealized Depreciation
OTC Forward Exchange Contracts (continued)
Japanese Yen	JPHQ		Sell	1,135,828,000	11,520,313		8/22/17	$	1,399,345	$	—
Euro	DBAB		Sell	3,887,000	4,372,020		8/23/17		—		(80,715	)
Euro	JPHQ		Sell	28,236,000	31,754,488		8/23/17		—		(591,130	)
Euro	UBSW		Sell	678,250	761,919		8/23/17		—		(15,047	)
Euro	BZWS		Sell	7,066,000	7,982,778		8/24/17		—		(112,049	)
Japanese Yen	BZWS		Sell	376,247,000	3,809,267		8/24/17		456,389		—
Japanese Yen	DBAB		Sell	371,821,000	3,769,933		8/24/17		456,497		—
Euro	GSCO		Sell	4,454,000	5,006,964		8/28/17		—		(96,568	)
Euro	JPHQ		Sell	4,730,771	5,319,397		8/28/17		—		(101,268	)
Indian Rupee	JPHQ		Buy	139,661,000	2,133,532		8/28/17		12,864		—
Japanese Yen	BZWS		Sell	343,460,000	3,071,412		8/28/17		10,215		—
Japanese Yen	JPHQ		Sell	1,135,833,000	11,497,158		8/28/17		1,373,684		—
Euro	BOFA		Sell	2,680,925	3,014,164		8/30/17		—		(58,048	)
Euro	BZWS		Sell	744,197	836,998		8/30/17		—		(15,816	)
Euro	DBAB		Sell	837,570	942,132		8/30/17		—		(17,683	)
Euro	SCNY		Sell	13,581,483	15,259,203		8/30/17		—		(304,527	)
Japanese Yen	DBAB		Sell	685,950,000	6,961,027		8/30/17		846,733		—
Japanese Yen	JPHQ		Sell	751,903,000	7,614,979		8/30/17		912,806		—
Euro	BOFA		Sell	2,694,506	3,029,433		8/31/17		—		(58,514	)
Euro	DBAB		Sell	1,530,900	1,722,002		8/31/17		—		(32,434	)
Euro	SCNY		Sell	11,263,000	12,654,375		8/31/17		—		(253,204	)
Japanese Yen	BZWS		Sell	1,576,550,000	14,158,764		8/31/17		105,323		—
Japanese Yen	DBAB		Sell	229,660,000	2,065,474		9/01/17		18,174		—
Japanese Yen	HSBK		Sell	1,247,125,000	12,384,558		9/01/17		1,267,088		—
South Korean Won	HSBK		Sell	42,561,000,000	38,058,660		9/05/17		857,699		—
Euro	UBSW		Sell	8,311,299	9,361,224		9/06/17		—		(166,841	)
Euro	UBSW		Sell	6,231,299	7,039,685		9/07/17		—		(104,268	)
South Korean Won	GSCO		Sell	44,346,000,000	39,173,181		9/07/17		410,890		—
Euro	BOFA		Sell	11,879,864	13,440,284		9/08/17		—		(180,298	)
Euro	BZWS		Sell	7,003,000	7,891,597		9/08/17		—		(137,530	)
Japanese Yen	BZWS		Sell	1,712,605,900	15,146,221		9/11/17		—		(128,193	)
Japanese Yen	DBAB		Sell	595,700,000	5,238,572		9/13/17		—		(74,883	)
Euro	MSCO		Sell	13,171,500	14,848,891		9/14/17		—		(257,636	)
Indian Rupee	DBAB		Buy	258,123,000	3,974,792		9/14/17		—		(15,061	)
Euro	BOFA		Sell	17,769,000	20,032,771		9/15/17		—		(347,811	)
Euro	HSBK		Sell	8,692,000	9,785,845		9/15/17		—		(183,653	)
Euro	JPHQ		Sell	5,636,000	6,353,012		9/15/17		—		(111,334	)
Euro	JPHQ		Sell	17,833,294	20,162,322		9/18/17		—		(295,423	)
Euro	MSCO		Sell	17,573,000	19,894,393		9/18/17		—		(264,751	)
Euro	JPHQ		Sell	11,580,290	12,979,884		9/19/17		—		(305,369	)
Euro	UBSW		Sell	11,641,500	13,058,503		9/19/17		—		(296,972	)
Japanese Yen	CITI		Sell	286,112,008	2,830,200		9/19/17		277,427		—
South Korean Won	CITI		Sell	11,790,000,000	10,294,937		9/20/17		—		(12,508	)
South Korean Won	HSBK		Sell	7,007,000,000	6,113,244		9/20/17		—		(12,649	)
Japanese Yen	BZWS		Sell	981,707,504	8,774,372		9/21/17		14,446		—
Japanese Yen	BZWS		Sell	983,714,840	8,925,700		9/25/17		146,154		—
Japanese Yen	MSCO		Sell	575,230,000	5,156,424		9/25/17		22,559		—
South Korean Won	HSBK		Sell	70,417,000,000	62,917,262		9/27/17		1,348,692		—
Euro	BZWS		Sell	44,246,134	50,550,544		9/29/17		—		(238,323	)

Semiannual Report         TGB-15

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Templeton Global Bond VIP Fund (continued)

Forward Exchange Contracts (continued)
Currency	Counterparty	a	Type	Quantity	Contract Amount	*	Settlement Date		Unrealized Appreciation		Unrealized Depreciation
OTC Forward Exchange Contracts (continued)
Japanese Yen	JPHQ		Sell	172,207,000	1,562,918		9/29/17	$	25,686	$	—
Euro	GSCO		Sell	463,000	530,621		10/03/17		—		(965	)
Euro	DBAB		Sell	2,579,651	2,959,634		10/05/17		—		(2,492	)
Euro	HSBK		Sell	18,537,726	21,260,177		10/05/17		—		(26,061	)
Australian Dollar	GSCO		Sell	127,700,540	96,694,849		10/06/17		—		(1,357,952	)
Japanese Yen	JPHQ		Sell	2,831,950,000	26,823,030		10/10/17		1,528,820		—
Japanese Yen	HSBK		Sell	2,816,800,000	25,607,273		10/11/17		447,077		—
Japanese Yen	SCNY		Sell	415,980,000	3,769,403		10/12/17		53,598		—
South Korean Won	CITI		Sell	8,844,000,000	7,907,018		10/16/17		171,516		—
South Korean Won	HSBK		Sell	5,991,000,000	5,246,519		10/18/17		6,221		—
Japanese Yen	JPHQ		Sell	1,886,055,000	17,471,723		10/20/17		617,278		—
Japanese Yen	BZWS		Sell	735,200,000	6,799,286		10/24/17		227,923		—
Indian Rupee	DBAB		Buy	79,271,000	1,200,894		10/25/17		9,665		—
Indian Rupee	JPHQ		Buy	60,607,000	926,146		11/02/17		—		(1,437	)
Indian Rupee	HSBK		Buy	240,033,500	3,665,753		11/08/17		—		(5,906	)
Japanese Yen	CITI		Sell	341,992,119	3,332,412		11/09/17		273,087		—
Japanese Yen	CITI		Sell	683,420,000	6,102,782		11/14/17		—		(12,404	)
Japanese Yen	CITI		Sell	796,524,000	7,765,057		11/14/17		637,826		—
Japanese Yen	JPHQ		Sell	335,950,000	3,280,714		11/14/17		274,661		—
Australian Dollar	JPHQ		Sell	100,287,000	73,924,556		11/15/17		—		(3,040,537	)
Japanese Yen	GSCO		Sell	490,555,000	4,335,555		11/15/17		—		(54,118	)
South Korean Won	CITI		Sell	11,823,000,000	10,443,424		11/15/17		96,272		—
Japanese Yen	CITI		Sell	366,680,000	3,461,825		11/16/17		180,463		—
Japanese Yen	JPHQ		Sell	355,193,000	3,171,904		11/16/17		—		(6,663	)
Japanese Yen	SCNY		Sell	340,600,700	3,028,423		11/16/17		—		(19,559	)
South Korean Won	CITI		Sell	13,902,000,000	12,289,604		11/16/17		122,735		—
Japanese Yen	CITI		Sell	1,599,308,500	14,209,129		11/20/17		—		(105,799	)
Japanese Yen	DBAB		Sell	796,770,000	7,427,429		11/21/17		295,412		—
Japanese Yen	HSBK		Sell	207,909,000	1,886,652		11/27/17		25,046		—
Japanese Yen	SCNY		Sell	937,086,000	8,601,459		11/27/17		210,843		—
South Korean Won	HSBK		Sell	35,277,000,000	31,549,434		11/27/17		668,806		—
Japanese Yen	CITI		Sell	1,370,500,000	12,634,422		12/08/17		356,042		—
Japanese Yen	HSBK		Sell	2,052,400,000	18,916,129		12/11/17		525,711		—
Japanese Yen	CITI		Sell	2,595,800,000	23,180,822		12/12/17		—		(79,909	)
Japanese Yen	CITI		Sell	310,702,000	2,836,101		12/13/17		51,784		—
Japanese Yen	HSBK		Sell	1,798,900,000	16,460,856		12/13/17		340,239		—
Japanese Yen	JPHQ		Sell	1,666,680,000	14,772,782		12/13/17		—		(162,962	)
Japanese Yen	JPHQ		Sell	702,800,000	6,446,731		12/18/17		147,043		—
Japanese Yen	MSCO		Sell	300,000,000	2,764,467		12/18/17		75,358		—
Indian Rupee	CITI		Buy	69,318,000	1,055,711		12/19/17		—		(3,627	)
South Korean Won	DBAB		Sell	13,919,000,000	12,493,493		12/20/17		303,685		—
Japanese Yen	JPHQ		Sell	652,895,000	5,869,722		1/22/18		6,720		—
Japanese Yen	DBAB		Sell	8,368,505,770	74,632,175		1/30/18		—		(548,330	)
Japanese Yen	JPHQ		Sell	1,719,500,000	15,617,408		2/08/18		162,628		—
Japanese Yen	BZWS		Sell	1,720,220,000	15,584,526		2/09/18		122,471		—
Japanese Yen	CITI		Sell	366,860,000	3,327,951		2/09/18		30,460		—
Japanese Yen	CITI		Sell	751,731,000	6,848,081		2/13/18		89,803		—
Japanese Yen	CITI		Sell	689,390,000	6,190,226		2/14/18		—		(7,912	)
Japanese Yen	HSBK		Sell	1,035,240,000	9,301,348		2/16/18		—		(7,212	)

TGB-16         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Templeton Global Bond VIP Fund (continued)

Forward Exchange Contracts (continued)
Currency	Counterparty	a	Type	Quantity	Contract Amount	*	Settlement Date		Unrealized Appreciation		Unrealized Depreciation
OTC Forward Exchange Contracts (continued)
Japanese Yen	JPHQ		Sell	353,873,000	3,171,900		2/16/18	$	—	$	(10,017	)
Australian Dollar	CITI		Sell	13,307,000	9,828,949		2/22/18		—		(371,183	)
Japanese Yen	HSBK		Sell	1,131,678,000	10,236,798		2/27/18		55,268		—
Japanese Yen	JPHQ		Sell	372,662,000	3,380,798		2/28/18		27,842		—
Japanese Yen	JPHQ		Sell	848,300,000	7,604,764		3/05/18		—		(29,645	)
Japanese Yen	HSBK		Sell	400,800,000	3,571,238		3/06/18		—		(36,012	)
Australian Dollar	CITI		Sell	58,003,000	43,076,218		3/13/18		—		(1,374,415	)
Australian Dollar	JPHQ		Sell	86,973,000	64,360,020		3/13/18		—		(2,291,789	)
Japanese Yen	DBAB		Sell	725,287,000	6,565,228		3/22/18		32,108		—
Japanese Yen	CITI		Sell	1,866,452,000	16,883,711		3/23/18		70,517		—
Japanese Yen	JPHQ		Sell	285,510,329	2,618,244		3/26/18		45,935		—
Japanese Yen	CITI		Sell	261,800,000	2,410,348		4/13/18		49,288		—
Japanese Yen	DBAB		Sell	1,406,600,000	12,955,816		4/13/18		270,300		—
Japanese Yen	BOFA		Sell	700,840,000	6,454,774		4/18/18		132,430		—
Japanese Yen	JPHQ		Sell	917,650,000	8,567,961		4/23/18		287,432		—
Indonesian Rupiah	JPHQ		Buy	1,721,000,000,000	123,991,354		5/03/18		487,022		—
Japanese Yen	HSBK		Sell	413,563,000	3,697,479		5/15/18		—		(38,967	)
Japanese Yen	SCNY		Sell	366,681,000	3,274,551		5/15/18		—		(38,327	)
Japanese Yen	BOFA		Sell	1,105,661,700	9,924,259		5/18/18		—		(66,821	)
Japanese Yen	CITI		Sell	1,599,298,500	14,346,508		5/18/18		—		(105,218	)
South Korean Won	DBAB		Sell	13,920,000,000	12,530,381		5/18/18		304,864		—
Japanese Yen	BOFA		Sell	1,102,846,375	10,045,282		5/21/18		77,962		—
Japanese Yen	HSBK		Sell	1,106,730,400	10,102,514		5/21/18		100,091		—
Japanese Yen	BOFA		Sell	1,105,842,500	10,134,187		5/22/18		139,228		—
Japanese Yen	JPHQ		Sell	715,709,000	6,559,067		5/22/18		90,260		—
Japanese Yen	BOFA		Sell	1,085,075,000	9,936,584		5/25/18		127,676		—
Japanese Yen	HSBK		Sell	1,455,540,000	13,558,826		6/18/18		383,209		—
Japanese Yen	DBAB		Sell	1,453,310,000	13,399,996		6/19/18		243,826		—
Japanese Yen	CITI		Sell	1,086,780,000	9,949,464		6/20/18		110,774		—
Japanese Yen	DBAB		Sell	1,455,820,000	13,275,761		6/22/18		94,644		—
Total Forward Exchange Contracts								$	30,418,172	$	(60,187,073	)
Net unrealized appreciation (depreciation)										$	(29,768,901	)

*In U.S. dollars unless otherwise indicated.

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

At June 30, 2017, the Fund had the following interest rate swap contracts outstanding. See Note 1(c).

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	$	309,262	$	—
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 3.558%		LCH		3,240,000		3/04/21		—		(234,643	)

Semiannual Report         TGB-17

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Templeton Global Bond VIP Fund (continued)

Interest Rate Swap Contracts (continued)
Description	Counterparty/ Exchange		Notional Amount		Expiration Date		Unrealized Appreciation		Unrealized Depreciation
Centrally Cleared Swap Contracts (continued)
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 2.775%		CME	$	13,090,000		10/04/23	$	—	$	(607,053	)
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 2.795%		CME		13,090,000		10/04/23		—		(623,186	)
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 2.765%		CME		13,090,000		10/07/23		—		(597,606	)
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 2.731%		LCH		34,000,000		7/07/24		—		(1,734,742	)
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 1.914%		LCH		114,670,000		1/22/25		1,176,630		—
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 1.970%		LCH		143,340,000		1/23/25		877,886		—
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 1.973%		LCH		84,590,000		1/27/25		514,012		—
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 1.937%		LCH		21,150,000		1/29/25		186,432		—
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 1.942%		LCH		17,910,000		1/30/25		154,196		—
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 1.817%		LCH		28,210,000		2/03/25		508,953		—
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 4.349%		LCH		7,460,000		2/25/41		—		(2,636,609	)
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 4.320%		LCH		5,600,000		2/28/41		—		(1,956,958	)
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 4.299%		LCH		1,870,000		3/01/41		—		(643,132	)
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 3.668%		CME		6,370,000		10/04/43		—		(1,496,086	)
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 3.687%		CME		6,370,000		10/04/43		—		(1,520,067	)
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 3.675%		CME		6,370,000		10/07/43		—		(1,504,005	)
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 2.378%		LCH		122,400,000		11/18/46		3,904,246		—
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 2.537%		LCH		72,700,000		4/13/47		—		(298,454	)
Total Centrally Cleared Swap Contracts								7,631,617		(13,852,541	)
OTC Swap Contracts
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 3.523%		DBAB		14,630,000		3/28/21		—		(1,031,212	)
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 4.347%		CITI		7,460,000		2/25/41		—		(2,632,870	)
Total OTC Swap Contracts								—		(3,664,082	)
Total Interest Rate Swap Contracts							$	7,631,617	$	(17,516,623	)
Net unrealized appreciation (depreciation)									$	(9,885,006	)

See Abbreviations on page TGB-33.

TGB-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, 2017 (unaudited)

	Templeton Global Bond VIP Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	2,135,757,225
Cost - Non-controlled affiliates (Note 3e)		649,035,632
Total cost of investments	$	2,784,792,857
Value - Unaffiliated issuers	$	2,185,190,953
Value - Non-controlled affiliates (Note 3e)		649,035,632
Total value of investments		2,834,226,585
Cash		3,545,995
Foreign currency, at value (cost $2,140,997)		2,141,115
Receivables:
Investment securities sold		222,714,664
Capital shares sold		1,055,648
Interest		39,064,148
Due from brokers		89,850,046
Variation margin		2,776,215
Unrealized appreciation on OTC forward exchange contracts		30,418,172
Other assets		2,618
Total assets		3,225,795,206
Liabilities:
Payables:
Capital shares redeemed		1,587,343
Management fees		1,018,621
Distribution fees		1,231,158
Unrealized depreciation on OTC forward exchange contracts		60,187,073
Unrealized depreciation on OTC swap contracts		3,664,082
Deferred tax		3,624,531
Accrued expenses and other liabilities		1,370,847
Total liabilities		72,683,655
Net assets, at value	$	3,153,111,551
Net assets consist of:
Paid-in capital	$	3,260,804,810
Accumulated net investment loss		(98,467,306	)
Net unrealized appreciation (depreciation)		3,934,955
Accumulated net realized gain (loss)		(13,160,908	)
Net assets, at value	$	3,153,111,551

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

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Statement of Assets and Liabilities (continued)

June 30, 2017 (unaudited)    

	Templeton Global Bond VIP Fund
Class 1:
Net assets, at value	$	261,769,950
Shares outstanding		15,121,957
Net asset value and maximum offering price per share	$	17.31
Class 2:
Net assets, at value	$	2,793,645,038
Shares outstanding		167,594,737
Net asset value and maximum offering price per share	$	16.67
Class 4:
Net assets, at value	$	97,696,563
Shares outstanding		5,730,732
Net asset value and maximum offering price per share	$	17.05

TGB-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, 2017 (unaudited)

	Templeton Global Bond VIP Fund
Investment income:
Dividends from non-controlled affiliates (Note 3e)	$	934,011
Interest		81,802,497
Total investment income		82,736,508
Expenses:
Management fees (Note 3a)		7,194,718
Distribution fees: (Note 3c)
Class 2		3,491,466
Class 4		169,806
Custodian fees (Note 4)		671,882
Reports to shareholders		203,187
Professional fees		61,095
Trustees’ fees and expenses		7,489
Other		130,825
Total expenses		11,930,468
Expense reductions (Note 4)		(54,000	)
Expenses waived/paid by affiliates (Note 3e)		(1,051,101	)
Net expenses		10,825,367
Net investment income		71,911,141
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		(33,258,771	)
Foreign currency transactions		24,437,019
Swap contracts		(4,330,467	)
Net realized gain (loss)		(13,152,219	)
Net change in unrealized appreciation (depreciation) on:
Investments		195,163,320
Translation of other assets and liabilities denominated in foreign currencies		(156,948,648	)
Swap contracts		(4,874,179	)
Change in deferred taxes on unrealized appreciation		(967,005	)
Net change in unrealized appreciation (depreciation)		32,373,488
Net realized and unrealized gain (loss)		19,221,269
Net increase (decrease) in net assets resulting from operations	$	91,132,410

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

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FINANCIAL STATEMENTS

Statements of Changes in Net Assets

	Templeton Global Bond VIP Fund
	Six Months Ended June 30, 2017 (unaudited)			Year Ended December 31, 2016
Increase (decrease) in net assets:
Operations:
Net investment income	$	71,911,141		$	116,633,475
Net realized gain (loss)		(13,152,219	)		(287,949,944	)
Net change in unrealized appreciation (depreciation)		32,373,488			258,515,773
Net increase (decrease) in net assets resulting from operations		91,132,410			87,199,304
Distributions to shareholders from:
Net realized gains:
Class 1		(806,829	)		(230,624	)
Class 2		(8,999,053	)		(2,445,769	)
Class 4		(307,109	)		(81,295	)
Total distributions to shareholders		(10,112,991	)		(2,757,688	)
Capital share transactions: (Note 2)
Class 1		13,688,252			(58,117,212	)
Class 2		(91,174,504	)		(233,957,681	)
Class 4		(1,546,222	)		(8,756,905	)
Total capital share transactions		(79,032,474	)		(300,831,798	)
Net increase (decrease) in net assets		1,986,945			(216,390,182	)
Net assets:
Beginning of period		3,151,124,606			3,367,514,788
End of period	$	3,153,111,551		$	3,151,124,606
Accumulated net investment loss included in net assets:
End of period	$	(98,467,306	)	$	(170,378,447	)

TGB-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)

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 eighteen 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. 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 may differ 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.

Derivative financial instruments listed on an exchange are valued at the official closing price of the day. Certain derivative financial instruments are centrally cleared or 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-23

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. Derivative Financial Instruments

The Fund invested in derivative financial instruments 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 counter-parties. 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.

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 the next business day, or within a few business days. Collateral pledged and/or received by the Fund for OTC derivatives, if any, is held in segregated accounts with

TGB-24         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Global Bond VIP Fund (continued)

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.

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.

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, 2017, 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. Amortization of premium and accretion of discount on debt securities are included in interest income. Dividend income is recorded on the ex-dividend date. Distributions to shareholders are recorded on the ex-dividend date. Distributable earnings are determined according to income tax regulations (tax basis) and 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

Semiannual Report         TGB-25

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Global Bond VIP Fund (continued)

1. Organization and Significant Accounting Policies (continued)

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

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.

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.

2. Shares of Beneficial Interest

At June 30, 2017, 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, 2017						Year Ended December 31, 2016
	Shares			Amount			Shares			Amount
Class 1 Shares:
Shares sold		1,921,419		$	33,302,536			2,249,431		$	36,190,152
Shares issued in reinvestment of distributions		46,290			806,829			14,671			230,624
Shares redeemed		(1,194,464	)		(20,421,113	)		(5,831,060	)		(94,537,988	)
Net increase (decrease)		773,245		$	13,688,252			(3,566,958	)	$	(58,117,212	)
Class 2 Shares:
Shares sold		4,852,402		$	81,006,223			12,422,365		$	192,901,752
Shares issued in reinvestment of distributions		535,977			8,999,053			161,118			2,445,769
Shares redeemed		(10,887,065	)		(181,179,780	)		(27,589,750	)		(429,305,202	)
Net increase (decrease)		(5,498,686	)	$	(91,174,504	)		(15,006,267	)	$	(233,957,681	)
Class 4 Shares:
Shares sold		487,619		$	8,316,260			793,050		$	12,575,365
Shares issued in reinvestment of distributions		17,886			307,109			5,231			81,295
Shares redeemed		(597,221	)		(10,169,591	)		(1,344,557	)		(21,413,565	)
Net increase (decrease)		(91,716	)	$	(1,546,222	)		(546,276	)	$	(8,756,905	)

TGB-26         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Global Bond 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 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, 2017, the annualized effective investment management fee rate was 0.458% 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.

Semiannual Report         TGB-27

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Global Bond VIP Fund (continued)

3. Transactions with Affiliates (continued)

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. During the period ended June 30, 2017, the Fund held investments in affiliated management investment companies as follows:

	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, 0.58%		436,780,215		591,026,045		(378,770,628	)		649,035,632	$	649,035,632	$	934,011	$	—		3.4%

f. Interfund Transactions

The Fund engaged in purchases and sales of investments with funds or other accounts that have common investment managers (or affiliated investment managers), directors, trustees or officers. During the period ended June 30, 2017, the purchase and sale transactions aggregated $— and $8,246,196, respectively.

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, 2017, the custodian fees were reduced as noted in the Statement of Operations.

5. Income Taxes

At June 30, 2017, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	2,815,575,413
Unrealized appreciation	$	111,398,751
Unrealized depreciation		(92,747,579	)
Net unrealized appreciation (depreciation)	$	18,651,172

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, 2017, aggregated $357,685,034 and $622,866,820, respectively.

TGB-28         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Global Bond VIP Fund (continued)

7. Credit Risk

At June 30, 2017, the Fund had 22.4% of its portfolio invested in high yield or other securities rated below investment grade and unrated securities, if any. 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, 2017, 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	$	7,631,617	a	Variation margin	$	13,852,541	a
					Unrealized depreciation on OTC swap contracts		3,664,082
Foreign exchange contracts	Unrealized appreciation on OTC forward exchange contracts		30,418,172		Unrealized depreciation on OTC forward exchange contracts		60,187,073
Value recovery instruments	Investments in securities, at value		11,741,783
Totals		$	49,791,572			$	77,703,696

^aThis amount reflects the cumulative appreciation (depreciation) of centrally cleared swap 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, 2017, 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 Location	Net Realized Gain (Loss) for the Period			Statement of Operations Location	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	$	(4,330,467	)	Swap contracts	$	(4,874,179	)
Foreign exchange contracts	Foreign currency transactions		20,704,148	a	Translation of other assets and liabilities denominated in foreign currencies		(154,923,103	)a
Value recovery instruments					Investments		2,598,493
Totals		$	16,373,681			$	(157,198,789	)

^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-29

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Global Bond VIP Fund (continued)

9. Other Derivative Information (continued)

For the period ended June 30, 2017, the average month end notional amount of swap contracts represented $879,557,143. The average month end contract value and fair value of forward exchange contracts and VRI was $3,404,454,907 and $10,252,433, respectively.

At June 30, 2017, the Fund’s OTC derivative assets and liabilities are as follows:

	Gross Amounts of Assets and Liabilities Presented in the Statement of Assets and Liabilities
		Assets	a		Liabilities	a
Derivatives
Forward exchange contracts	$	30,418,172		$	60,187,073
Swap contracts		—			3,664,082
Total	$	30,418,172		$	63,851,155

^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, 2017, 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 Amounts of Assets Presented in the Statement of Assets and Liabilities		Financial Instruments Available for Offset			Financial Instruments Collateral Received	b		Cash Collateral Received		Net Amount (Not less than zero)
Counterparty
BOFA	$	477,296	$	(477,296	)	$	—		$	—	$	—
BZWS		2,178,194		(1,208,280	)		—			—		969,914
CITI		3,136,665		(3,136,665	)		—			—		—
DBAB		4,687,842		(4,687,842	)		—			—		—
GSCO		411,789		(411,789	)		—			—		—
HSBK		10,839,285		(4,934,574	)		(4,201,960	)		—		1,702,751
JPHQ		8,227,636		(8,227,636	)		—			—		—
MSCO		97,917		(97,917	)		—			—		—
SCNY		361,548		(361,548	)		—			—		—
UBSW		—		—			—			—		—
Total	$	30,418,172	$	(23,543,547	)	$	(4,201,960	)	$	—	$	2,672,665

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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Global Bond VIP Fund (continued)

At June 30, 2017, 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 Amounts of Liabilities Presented in the Statement of Assets and Liabilities		Financial Instruments Available for Offset			Financial Instruments Collateral Pledged		Cash Collateral Pledged	c		Net Amount (Not less than zero)
Counterparty
BOFA	$	7,825,353	$	(477,296	)	$	—	$	(7,348,057	)	$	—
BZWS		1,208,280		(1,208,280	)		—		—			—
CITI		13,416,294		(3,136,665	)		—		(9,980,000	)		299,629
DBAB		9,340,766		(4,687,842	)		—		(4,630,000	)		22,924
GSCO		5,510,215		(411,789	)		—		(5,050,000	)		48,426
HSBK		4,934,574		(4,934,574	)		—		—			—
JPHQ		18,051,046		(8,227,636	)		—		(7,880,000	)		1,943,410
MSCO		522,387		(97,917	)		—		(310,000	)		114,470
SCNY		2,321,110		(361,548	)		—		(1,959,562	)		—
UBSW		721,130		—			—		(721,130	)		—
Total	$	63,851,155	$	(23,543,547	)	$	—	$	(37,878,749	)	$	2,428,859

^bAt June 30, 2017, the Fund received United Kingdom Treasury Bonds and Notes as collateral for derivatives.

^cIn 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.

See Note 1(e) regarding derivative financial instruments.

See Abbreviations on page TGB-33.

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 9, 2018. 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 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statement of Operations. During the period ended June 30, 2017, 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.)

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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Global Bond VIP Fund (continued)

11. 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, 2017, 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	$	—	$	2,109,715,828	$	—	$	2,109,715,828
Short Term Investments		649,035,632		75,475,125		—		724,510,757
Total Investments in Securities	$	649,035,632	$	2,185,190,953	$	—	$	2,834,226,585
Other Financial Instruments:
Forward Exchange Contracts	$	—	$	30,418,172	$	—	$	30,418,172
Swap Contracts		—		7,631,617		—		7,631,617
Total Other Financial Instruments	$	—	$	38,049,789	$	—	$	38,049,789
Liabilities:
Other Financial Instruments:
Forward Exchange Contracts	$	—	$	60,187,073	$	—	$	60,187,073
Swap Contracts		—		17,516,623		—		17,516,623
Total Other Financial Instruments	$	—	$	77,703,696	$	—	$	77,703,696

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

12. New Accounting Pronouncements

In March 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-08, Receivables — Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The amendments in the ASU shorten the amortization period for certain callable debt securities, held at a premium, to be amortized to the earliest call date. The ASU does not require an accounting change for securities held at a discount; which continues to be amortized to maturity. The ASU is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. Management is currently evaluating the impact, if any, of applying this provision.

13. Investment Company Reporting Modernization

In October 2016, the U.S. Securities and Exchange Commission adopted new rules and amended existing rules (together, final rules) intended to modernize the reporting and disclosure of information by registered investment companies. In part, the final rules amend Regulation S-X and require standardized, enhanced disclosures about derivatives in investment company financial statements, as well as other amendments. The compliance date for the amendments to Regulation S-X is August 1, 2017. Management has reviewed the requirements and believes the adoption of the amendments to Regulation S-X will not have a material impact on the Fund’s financial statements and related disclosures.

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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Global Bond VIP Fund (continued)

14. Subsequent Events

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

Abbreviations

Counterparty/Exchange		Currency		Selected Portfolio
BOFA	Bank of America, N.A.	ARS	Argentine Peso	BBA	British Bankers Association
BZWS	Barclays Bank PLC	BRL	Brazilian Real	FRN	Floating Rate Note
CITI	Citibank, N.A.	COP	Colombian Peso	GDP	Gross Domestic Product
CME	Chicago Mercantile Exchange	EUR	Euro	LIBOR	London InterBank Offered Rate
DBAB	Deutsche Bank, AG	GHS	Ghanaian Cedi	VRI	Value Recovery Instruments
GSCO	Goldman Sachs Bank USA	IDR	Indonesian Rupiah
HSBK	HSBC Bank PLC	INR	Indian Rupee
JPHQ	JP Morgan Chase Bank, N.A.	KRW	South Korean Won
LCH	LCH Clearnet LLC	MXN	Mexican Peso
MSCO	Morgan Stanley & Co. LLC	PEN	Peruvian Nuevo Sol
SCNY	Standard Chartered Bank	PHP	Philippine Peso
UBSW	UBS AG	USD	United States Dollar
		ZAR	South African Rand

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Templeton Growth VIP Fund

This semiannual report for Templeton Growth VIP Fund covers the period ended June 30, 2017.

Class 2 Performance Summary as of June 30, 2017

The Fund’s Class 2 Shares delivered a +10.93% total return for the six-month period ended June 30, 2017.

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

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 growth. Under normal market conditions, the Fund invests predominantly in equity securities of companies located anywhere in the world, including developing 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. Derivatives, including currency management strategies, involve costs and can create economic leverage in the portfolio, which 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 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 MSCI All country World Index (ACWI), returned +11.82% for the period under review.¹

Economic and Market Overview

The global economy generally expanded during the period under review. In this environment, global developed and emerging market stocks rose, as measured by the MSCI ACWI. Global markets were aided by improved industrial commodity prices at certain points during the period, generally upbeat

economic data across regions, investor optimism about pro-growth and pro-business policies in the U.S, hopes of tax reforms under the Trump administration, Emmanuel Macron’s election as France’s president and encouraging corporate earnings reports.

However, investors expressed concerns about the timing and economic effects of the U.K.’s exit from the European Union (also known as “Brexit”) and the U.S. executive order banning entry from some Muslim-majority countries. Other headwinds included the health of European banks, concerns about political uncertainty in the U.S. and European Union, geopolitical tensions in certain regions, worries about global oversupply in oil production despite a pact to extend cuts, and hawkish comments from key central bankers around the world toward period-end.

U.S. economic growth decelerated in 2017’s first quarter, largely due to slower growth in consumer spending and declines in private inventory investment and government spending. However, growth accelerated in the second quarter due to increases in consumer spending, business investment and federal government spending. The unemployment rate decreased from 4.7% in December 2016 to 4.4% at period-end.² Annual inflation, as measured by the Consumer Price Index, decreased from 2.1% to 1.6% during the period. After increasing its benchmark interest rate in March, the U.S. Federal Reserve (Fed), at its June meeting, made the widely anticipated increase to its target range for the federal funds rate from
0.75%–1.00% to 1.00%–1.25%, amid signs of a growing

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.

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

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U.S. economy, a strengthening labor market and an improvement in business spending.

In Europe, the U.K.’s economy grew at a slower rate in 2017’s first quarter over the previous quarter, largely due to slower growth in household spending. The eurozone’s growth increased in the first quarter over the previous quarter. The bloc’s annual inflation rate fluctuated during the reporting period and ended slightly higher from where it began. During the period, the European Central Bank kept its key policy rates unchanged.

In Asia, Japan’s quarterly gross domestic product (GDP) remained unchanged in 2017’s first quarter compared to 2016’s fourth quarter. In April 2017, the Bank of Japan (BOJ) slightly increased its GDP forecasts for the 2017–2018 fiscal year. However, the BOJ lowered its inflation forecast.

In emerging markets, Brazil’s quarterly GDP grew for the first time in two years, as its first-quarter 2017 GDP grew compared to the previous quarter. The country’s central bank cut its benchmark interest rate four times between January and June 2017 to spur economic growth. Russia’s GDP grew in 2017’s first quarter compared to the prior-year period. The Bank of Russia reduced its key interest rate in March, April and June 2017 to try to revive its economy. China’s economy grew faster in the first half of 2017 compared to the first half of 2016, driven by solid growth in industrial production, services, fixed-asset investment, retail sales, and imports and exports. The People’s Bank of China left its benchmark interest rate unchanged during the period. Overall, emerging market stocks, as measured by the MSCI Emerging Markets Index, rose during the period.³

Investment Strategy

Our investment philosophy is bottom up, value oriented and long term. In choosing investments, we will focus on the market price of a company’s securities relative to our evaluation of the company’s potential long-term earnings, asset value and cash flow. Among factors we may consider are a company’s historical value measures, including price/earnings ratio, profit margins and liquidation value. We do in-depth research to construct a bargain list from which we buy.

Manager’s Discussion

The Fund delivered double-digit absolute gains but slightly trailed its official benchmark, the MSCI ACWI, during the

reporting period. Although stocks sustained upward momentum through the bulk of the period, market leadership transitioned from cyclical, value-oriented stocks back to defensive, growth-oriented issues as the period progressed. The market’s increasingly defensive posture was consistent with mixed global economic and political newsflow. Growth slowed in the world’s two largest economies (the U.S. and China), major central banks incrementally tightened policy and political tensions in key markets such as the U.S., Japan and the U.K remained elevated. Yet, investors focused more on positive factors: continued corporate earnings strength, still abundant liquidity and a favorable election outcome in France, which creates a window of opportunity for structural change and further European reform and integration. We, too, have been encouraged by positive political and economic developments in Europe (discussed in greater detail herein), which rewarded our long-standing overweighted allocation to the region.

An overweighted energy position detracted from the Fund’s relative performance as oil fell briefly into bear market territory amid the worst start to a year since 1997.⁴ The sector accounted for four of the Fund’s biggest detractors during the period, including U.S.-based exploration and production firms Apache and ConocoPhillips, U.S.-based oil services firm Halliburton and U.K.-based oil major Royal Dutch Shell. Apache was one of the Fund’s biggest laggards, declining after the firm reported an unexpected loss and disappointing 2017 production guidance. We continue to like Apache’s longer term prospects, given the strong cash-flow generating capabilities of its low-cost international assets (in Egypt and the North Sea) and an attractive growth pipeline in U.S. shale, including a potential major new discovery in the Permian Basin. We initially invested in Apache on the premise that its attractive growth pipeline was deeply undervalued by a short-term-oriented market; the market now ascribes a higher value to these assets, and although the stock is no longer an outright bargain in our view, it remains a core holding with potential for future appreciation as value materializes.

More generally, we believe the current pessimism in oil markets is misplaced, and we view near-term concerns about rising North American supply as overblown in the context of our long-term investment outlook. The rise in U.S. inventories is partially a seasonal event, and we expect some drawdown of stockpiles in the second half of 2017, countering the perception of a supply glut. In any event, more comprehensive data on global inventories paint the picture of a tighter market than the

3. Please see Index Descriptions following the Fund Summaries.

4. The energy sector comprises energy equipment and services and oil, gas and consumable fuels in the SOI.

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TEMPLETON GROWTH VIP FUND

one suggested by U.S. data. We could also begin to see falling output from North American shale fields if sustained low prices discourage investment in future production. Financial speculation has further pressured oil, with net positioning in futures markets revealing one of the highest levels of short trades on record, a potential contrarian indicator. We also observe that geopolitical relations among the world’s largest oil producers are mostly stable, with compliance to the Organization of the Petroleum Exporting Countries (OPEC) production cuts above 100% and Russia apparently making good on its pledge to constrain output in line with OPEC. Finally, the world’s largest oil producer, Saudi Arabia, is preparing to conduct an initial public offering (IPO) of one of the world’s most valuable companies, Saudi Arabian Oil Co. (commonly known as Saudi Aramco). Riyadh seems to hope to maximize proceeds from this historic IPO, and therefore has every incentive to wish for a more buoyant price environment.

An underweighted position and stock selection in consumer staples also detracted during a period when the defensive sector came back into favor.⁵ We continue to believe that the historic valuation premium commanded by consumer staples stocks is likely to limit long-term investment returns in a commoditized sector subject to extreme pricing pressure and deteriorating earnings trends. For exposure to quality stocks with defensive characteristics, we continue to prefer health care to consumer staples given, among other things, the near-record valuation gap between the two sectors.

However, the Fund’s health care holdings also came under pressure during the review period, largely due to stock-specific weakness.⁶ Shares of Israel-based drugmaker Teva Pharmaceutical Industries led the sector lower after the company reported declining profits and investors worried about an ongoing leadership transition and the loss of U.S. patent protection on a key multiple sclerosis drug. Many market participants remained concerned about Teva’s ability to bring new products to fruition and grow its global generic franchise. However, we are more interested in Teva’s cash-generating abilities than its growth profile. With a relatively high free cash flow yield in 2017, in our assessment, Teva’s core businesses generate enough cash to healthily reward shareholders, while steadily bringing down elevated debt stemming from the recent acquisition of U.S. biotechnology firm Allergan’s generics business. We believe the market is excessively punishing Teva

Top 10 Holdings
6/30/17
Company Sector/Industry, Country	% of Total Net Assets
Oracle Corp. Software, U.S.		3.1%
Samsung Electronics Co. Ltd. Technology Hardware, Storage & Peripherals, South Korea		2.9%
Citigroup Inc. Banks, U.S.		2.5%
Royal Dutch Shell PLC Oil, Gas & Consumable Fuels, U.K.		2.5%
Teva Pharmaceutical Industries Ltd. Pharmaceuticals, Israel		2.1%
KB Financial Group Inc. Banks, South Korea		2.0%
Amgen Inc. Biotechnology, U.S.		1.9%
Allergan PLC Pharmaceuticals, U.S.		1.8%
Standard Chartered PLC Banks, U.K.		1.8%
Alphabet Inc. Internet Software & Services, U.S.		1.7%

amid concerns about the company’s growth profile and competitive threats associated with a key patent’s expiration, and we feel the stock represents compelling value trading at an all-time low multiple relative to 2017 earnings. More broadly, our analysis indicates that the defensive growth prospects of the entire health care sector remain materially undervalued amid excessive political concerns, and we continue to find sufficient bottom-up bargains to justify an overweighted allocation. Within the sector, we continue to favor innovative companies we feel have portfolios of high-margin, long-duration products and think are facing little competition or have demonstrable advantages over existing therapies.

Stock selection in the materials⁷ sector detracted, pressured by Russian nickel miner MMC Norilsk Nickel and Canadian gold miner Barrick Gold.⁸ Norilsk declined as nickel prices lagged due to loosening concentrate export restrictions in Indonesia and the removal of a hardline mining minister in the Philippines, events likely to increase global nickel supply. Although we continue to like Norilsk for its quality asset

5. The consumer staples sector comprises food and staples retailing and personal products in the SOI.

6. The health care sector comprises biotechnology, health care equipment and supplies, health care providers and services, life sciences tools and services, and pharmaceuticals in the SOI.

7. The materials sector comprises chemicals, construction materials, and metals and mining in the SOI.

8. Not part of the index.

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portfolio, attractive cost position and prolific cash flow generation, we believe the stock is not as cheap as it seems on headline earnings ratios given the firm’s practice of under-depreciating capital expenditure, and we worry about the sustainability of the double-digit dividend yield at spot metals prices. Although we continue to hold Norilsk in anticipation of a better exit opportunity, we have been more active buyers of Barrick thus far in 2017. Barrick’s stock came under pressure from both weaker gold prices and company-specific issues that included a cyanide spill at an Argentinian mine and a dispute with the government of Tanzania about the declared value of gold bullion exported by Acacia Mining,⁹ Barrick’s subsidiary. We expect such issues to ultimately prove transitory, and remain encouraged by the solid progress Barrick continues to make executing its overarching corporate strategy. Costs are trending down, the balance sheet is improving and management is pursuing a number of value-adding strategic partnerships with Goldcorp, Antofagasta, Zijin Mining Group and Shandong Gold Mining.⁹ We have used the recent weakness in gold prices and lull in market volatility to moderately increase exposure to select precious metals holdings, including Barrick.

Turning to contributors, we were encouraged by the outperformance of the Fund’s overweighted financials holdings.¹⁰ Sector outperformance during the period was led by European and Asian lenders, which offered more exposure to tailwinds associated with the French election outcome than the headwinds stemming from doubts about the viability of the global reflation trade. French bank Credit Agricole finished as the Fund’s top contributor among European banks, rallying on both the French election outcome and earnings results that exceeded expectations amid stronger performance from the firm’s capital markets division. Efforts to simplify Credit Agricole’s complex corporate structure and refocus on core French and Italian markets are progressing well, and we see additional scope for outperformance. We are encouraged by the continued progress in the European banking sector more generally, where earnings revisions have returned to a positive trajectory, regulatory capital has been largely rebuilt and the bulk of post-crisis re-regulation efforts are now complete. As economic data have picked up and certain risky political events have been favorably resolved, demand for credit has increased. Indeed, private loan growth is steadily rising in Europe, with favorable implications for bank earnings. Yet, little of this good news has made it into the price of European bank shares, which continue to look undervalued to us based on price-to-earnings

ratio, price-to-book value and dividend yields, relative to both their own history and to their U.S. peers. South Korean lender KB Financial Group was the top contributor among the Fund’s Asian financials holdings, rallying amid signs that a new government in South Korea could deliver fiscal stimulus, reform the rigid corporate chaebol structure (large, mostly family-owned conglomerates) and normalize economic ties with China. Prospects for improving corporate governance and political stability have combined with rising interest rates and genuine economic growth to benefit the banking sector in emerging Asia more generally. South Korea in particular is an excellent example of a banking market subject to all of these cyclical and structural tailwinds, but still trading at what we considered low valuation multiples.

We also continue to find value outside of the financials sector in South Korea, and note that South Korean semiconductor and consumer electronics manufacturer Samsung Electronics finished among the Fund’s top contributors during the period. Its stock benefited from the aforementioned macroeconomic tailwinds in addition to record first-quarter earnings and the company’s cancelation of billions of U.S. dollars’ worth of its Treasury shares, which sparked a raft of earnings upgrades from Wall Street analysts. Although sentiment on the stock is beginning to improve as results highlight operational progress, our analysis indicates to us that the market continues to undervalue the sustainability of Samsung’s dominant, low-cost position in core markets due to excessive focus on problem areas of lesser business impact. With its shares trading at what we considered low valuation multiples and the company holding a large net cash position, Samsung’s improving business mix shift and increasing focus on shareholder returns remain significantly undervalued, in our analysis.

Stock selection among overweighted telecommunication services holdings notably contributed, led by Japanese mobile operator and technology conglomerate SoftBank Group.¹¹ Its shares rose to the highest levels in nearly two decades after the firm’s majority-owned U.S. telecommunications subsidiary, Sprint,⁹ reported better-than-expected sales and subscriber growth. The higher share price also reflected rising optimism that SoftBank might be able to execute a long-desired merger between Sprint and another major U.S. mobile operator, T-Mobile U.S.,⁹ under a new Republican administration. SoftBank Chairman Masayoshi Son recently met with President Donald Trump and pledged to invest US$50 billion and create

9. Not a Fund holding.

10. The financials sector comprises banks, capital markets, consumer finance and insurance in the SOI.

11. The telecommunication services sector comprises diversified telecommunication services and wireless telecommunication services in the SOI.

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TEMPLETON GROWTH VIP FUND

50,000 jobs in the U.S., an indication that SoftBank is working to curry favor with the new administration to facilitate a deal that, if executed, we believe could represent a potential share price catalyst. Elsewhere at SoftBank, the core Japanese telecommunications business is providing strong, stable free cash flow; Chinese technology subsidiary Alibaba Group Holding⁹ continues to realize outsized growth; and the newly acquired U.K. semiconductor manufacturer ARM Holdings,⁹ while expensive and value-destructive in the near term, in our view, offers another exciting long-term growth driver. SoftBank’s stock remains excessively cheap on a sum-of-the-parts basis, in our analysis.

From a regional standpoint, stock selection drove outperformance among overweight Asian holdings. Stock-specific weakness offset the benefit of an underweighted allocation in the U.S. and an overweighted allocation in Europe. We were encouraged by positive developments in Europe and continue to find what we consider attractive bottom-up bargains in the region. Although economic indicators in the U.S. are softening and the political environment remains hostile, Europe is experiencing an encouraging combination of genuine economic momentum and a political climate now conducive to structural reform. To the first point, unemployment in Europe recently hit an eight-year low, gross domestic product growth in 2016 outpaced the U.S. for the first time since the global financial crisis, and corporate profits are solidly accelerating. Encouragingly, European equity markets attracted record weekly investment inflows during 2017’s second quarter. On the political front, Emmanuel Macron’s victory in the French presidential election (and subsequent success in parliamentary votes) creates a historic opportunity for genuine reform and closer European integration.

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, 2017, the U.S. dollar declined in value relative to most currencies. As a result, the Fund’s performance was positively affected by the portfolio’s substantial investment in securities with non-U.S. currency exposure. However, one cannot expect the same result in future periods.

More broadly, we continue to stress the value of fundamental investing, active stock picking and disciplined risk management in the current environment. Overall, we assess that equities offer selectively attractive opportunities and could continue to generate investor interest in a lower-yield, lower-return environment in which asset owners are under pressure to meet challenging return targets. However, in our opinion, this is not the point in the cycle to buy equities indiscriminately. We believe monetary policy has never been so loose and experimental, artificially depressing the price of money and skewing the risk-free rate (and therefore the assets that are priced off of it). Global debt levels have never been so high, generating a flood of liquidity that has saturated many financial assets. Political tensions remain elevated, and policymakers may struggle to turn pro-growth campaign promises into actual legislation. Meanwhile, we believe stocks have become commoditized into “factor buckets,” and are thought of today not as ownership stakes in long-term, cash-generating businesses, but instead as high-or-low-beta, high-or-low-quality, defensive-or-aggressive, risk-on-or-off, etc. These are all unusual conditions that create additional challenges for fundamentally oriented security analysts. Yet, it is our belief that all of these trends are temporary, as price eventually converges with value over time and a healthy market needs investors with the ability to facilitate price discovery. After a long, fallow period for active value investors, we were encouraged by 2016’s value rally and, despite the more recent pull-back, we anticipate a supportive environment for value investing over our 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, 2017, 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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TEMPLETON GROWTH VIP FUND

Class 2 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: (1) transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes; and (2) 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 table below shows Fund-level ongoing expenses and can help you understand these costs 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 table below provides information about the actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of ongoing Fund expenses but does not include the effect of ongoing Contract expenses, is used to calculate the “Ending Account Value.” You can estimate the Fund-level expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number under the headings “Actual” and “Fund-Level Expenses Paid During Period” (if Fund-Level Expenses Paid During Period were $7.50, then 8.6 × $7.50 = $64.50). In this illustration, the estimated expenses paid this period at the Fund level are $64.50.

Hypothetical Example for Comparison with Other Mutual Funds

Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other mutual funds offered through the Contract. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds offered through the Contract.

Please note that expenses shown in the table are meant to highlight ongoing costs at the Fund level only and do not reflect any ongoing expenses at the Contract level, or transaction expenses at either the Fund or Contract levels. In addition, 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.

		Actual (actual return after expenses)				Hypothetical (5% annual return before expenses)
Share Class	Beginning Account Value 1/1/17		Ending Account Value 6/30/17	Fund-Level Expenses Paid During Period 1/1/17–6/30/17	1,2		Ending Account Value 6/30/17	Fund-Level Expenses Paid During Period 1/1/17–6/30/17	1,2	Net Annualized Expense Ratio	2
Class 2	$1,000		$1,109.30	$5.54			$1,019.54	$5.31		1.06%

1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above — in the far right column — multiplied by the simple average account value over the period indicated, and then multiplied by 181/365 to reflect the one-half year period.

2. Reflects expenses after fee waivers and expense reimbursements. Does not include any ongoing expenses of the Contract for which the Fund is an investment option or acquired fund fees and expenses.

Semiannual Report         TG-7

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Financial Highlights

Templeton Growth VIP Fund

	Six Months Ended June 30, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 1
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$13.93			$13.54			$14.85			$15.47			$12.16			$10.27
Income from investment operationsa:
Net investment incomeb		0.19			0.26			0.28			0.38	c		0.22			0.27
Net realized and unrealized gains (losses)		1.34			0.96			(1.17	)		(0.75	)		3.49			1.88
Total from investment operations		1.53			1.22			(0.89	)		(0.37	)		3.71			2.15
Less distributions from:
Net investment income		(0.28	)		(0.31	)		(0.42	)		(0.25	)		(0.40	)		(0.26	)
Net realized gains		—			(0.52	)		—			—			—			—
Total distributions		(0.28	)		(0.83	)		(0.42	)		(0.25	)		(0.40	)		(0.26	)
Net asset value, end of period		$15.18			$13.93			$13.54			$14.85			$15.47			$12.16
Total returnd		11.02%			9.90%			(6.24)%			(2.53)%			31.05%			21.40%
Ratios to average net assetse
Expenses		0.81%	f,g		0.82%	f		0.80%	f		0.78%			0.78%	g		0.78%	g
Net investment income		2.53%			2.01%			1.96%			2.46%	c		1.62%			2.31%
Supplemental data
Net assets, end of period (000’s)		$472,768			$453,997			$468,548			$572,860			$588,409			$476,954
Portfolio turnover rate		16.05%			22.88%			20.92%			17.46%			11.60%			18.73%	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 a redemption in-kind.

TG-8         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, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 2
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$13.70			$13.32			$14.61			$15.23			$11.97			$10.11
Income from investment operationsa:
Net investment incomeb		0.16			0.23			0.25			0.34	c		0.19			0.21
Net realized and unrealized gains (losses)		1.33			0.94			(1.16	)		(0.75	)		3.44			1.88
Total from investment operations		1.49			1.17			(0.91	)		(0.41	)		3.63			2.09
Less distributions from:
Net investment income		(0.24	)		(0.27	)		(0.38	)		(0.21	)		(0.37	)		(0.23	)
Net realized gains		—			(0.52	)		—			—			—			—
Total distributions		(0.24	)		(0.79	)		(0.38	)		(0.21	)		(0.37	)		(0.23	)
Net asset value, end of period		$14.95			$13.70			$13.32			$14.61			$15.23			$11.97
Total returnd		10.93%			9.62%			(6.49)%			(2.81)%			30.82%			21.07%
Ratios to average net assetse
Expenses		1.06%	f,g		1.07%	f		1.05%	f		1.03%			1.03%	g		1.03%	g
Net investment income		2.28%			1.76%			1.71%			2.21%	c		1.37%			2.06%
Supplemental data
Net assets, end of period (000’s)		$892,615			$876,128			$921,895			$1,171,896			$1,450,304			$1,352,554
Portfolio turnover rate		16.05%			22.88%			20.92%			17.46%			11.60%			18.73%	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 a 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, 2017 (unaudited)			Year Ended December 31,
				2016			2015			2014			2013			2012
Class 4
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$13.83			$13.44			$14.73			$15.35			$12.07			$10.19
Income from investment operationsa:
Net investment incomeb		0.16			0.22			0.23			0.33	c		0.17			0.20
Net realized and unrealized gains (losses)		1.34			0.94			(1.16	)		(0.76	)		3.47			1.90
Total from investment operations		1.50			1.16			(0.93	)		(0.43	)		3.64			2.10
Less distributions from:
Net investment income		(0.22	)		(0.25	)		(0.36	)		(0.19	)		(0.36	)		(0.22	)
Net realized gains		—			(0.52	)		—			—			—			—
Total distributions		(0.22	)		(0.77	)		(0.36	)		(0.19	)		(0.36	)		(0.22	)
Net asset value, end of period		$15.11			$13.83			$13.44			$14.73			$15.35			$12.07
Total returnd		10.89%			9.47%			(6.54)%			(2.88)%			30.64%			21.02%
Ratios to average net assetse
Expenses		1.16%	f,g		1.17%	f		1.15%	f		1.13%			1.13%	g		1.13%	g
Net investment income		2.18%			1.66%			1.61%			2.11%	c		1.27%			1.96%
Supplemental data
Net assets, end of period (000’s)		$41,221			$43,286			$47,777			$59,989			$72,683			$67,158
Portfolio turnover rate		16.05%			22.88%			20.92%			17.46%			11.60%			18.73%	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 a redemption in-kind.

TG-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, 2017 (unaudited)

Templeton Growth VIP Fund
		Country		Shares		Value
	Common Stocks 97.4%
	Aerospace & Defense 1.3%
	BAE Systems PLC		United Kingdom		2,298,132	$	18,963,392
	Air Freight & Logistics 0.8%
	United Parcel Service Inc., B		United States		99,220		10,972,740
	Airlines 0.7%
	Deutsche Lufthansa AG		Germany		447,422		10,183,025
	Automobiles 3.7%
	Hero Motocorp Ltd.		India		281,730		16,137,130
	Hyundai Motor Co.		South Korea		140,600		19,586,962
	Nissan Motor Co. Ltd.		Japan		1,696,510		16,861,787
							52,585,879
	Banks 15.8%
	Bangkok Bank PCL, fgn		Thailand		1,230,200		7,144,735
	Bangkok Bank PCL, NVDR		Thailand		913,600		4,982,783
	Barclays PLC		United Kingdom		4,370,990		11,543,436
	BNP Paribas SA		France		243,927		17,570,131
	Citigroup Inc.		United States		532,290		35,599,555
	Credit Agricole SA		France		970,876		15,620,027
	DBS Group Holdings Ltd.		Singapore		932,690		14,049,964
	HSBC Holdings PLC		United Kingdom		2,362,494		21,982,670
	ING Groep NV		Netherlands		737,796		12,725,487
	JPMorgan Chase & Co.		United States		169,570		15,498,698
	KB Financial Group Inc.		South Korea		552,314		27,834,468
a	Standard Chartered PLC		United Kingdom		2,433,563		24,635,978
	SunTrust Banks Inc.		United States		218,530		12,395,022
							221,582,954
	Biotechnology 3.9%
	Amgen Inc.		United States		155,440		26,771,431
a	Celgene Corp.		United States		60,320		7,833,759
	Gilead Sciences Inc.		United States		283,260		20,049,143
							54,654,333
	Capital Markets 1.6%
	Man Group PLC		United Kingdom		2,385,372		4,809,739
	UBS Group AG		Switzerland		887,140		15,027,018
	Value Partners Group Ltd.		Hong Kong		2,850,000		2,595,306
							22,432,063
	Chemicals 1.3%
	Akzo Nobel NV		Netherlands		208,005		18,078,505
	Communications Equipment 2.6%
	Cisco Systems Inc.		United States		633,880		19,840,444
	Ericsson, B		Sweden		1,947,362		13,932,027
a	NetScout Systems Inc.		United States		86,600		2,979,040
							36,751,511
	Construction Materials 0.2%
	CRH PLC		Ireland		61,741		2,184,470
	Consumer Finance 1.3%
	Ally Financial Inc.		United States		160,390		3,352,151
	Capital One Financial Corp.		United States		187,470		15,488,771
							18,840,922

Semiannual Report         TG-11

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

STATEMENT OF INVESTMENTS (UNAUDITED)

Templeton Growth VIP Fund (continued)

		Country		Shares		Value
	Common Stocks (continued)
	Diversified Telecommunication Services 3.2%
b	China Telecom Corp. Ltd., ADR		China		179,195	$	8,588,816
	China Telecom Corp. Ltd., H		China		2,006,000		953,189
	Singapore Telecommunications Ltd.		Singapore		7,861,800		22,212,669
	Telefonica SA		Spain		1,290,675		13,324,484
							45,079,158
	Energy Equipment & Services 0.7%
	Halliburton Co.		United States		217,950		9,308,645
	Helmerich & Payne Inc.		United States		19,100		1,037,894
							10,346,539
	Food & Staples Retailing 2.0%
	Metro AG		Germany		269,320		9,092,027
a	Tesco PLC		United Kingdom		2,246,078		4,938,462
	Walgreens Boots Alliance Inc.		United States		173,340		13,574,256
							27,604,745
	Health Care Equipment & Supplies 1.8%
	Getinge AB, B		Sweden		925,050		18,113,251
	Medtronic PLC		United States		74,440		6,606,550
							24,719,801
	Health Care Providers & Services 2.2%
	AmerisourceBergen Corp.		United States		160,900		15,209,877
	Cardinal Health Inc.		United States		196,970		15,347,902
							30,557,779
	Household Durables 1.3%
	Panasonic Corp.		Japan		1,349,530		18,284,071
	Industrial Conglomerates 1.1%
	Siemens AG		Germany		107,392		14,763,155
	Insurance 5.1%
	Aegon NV		Netherlands		2,505,936		12,797,814
	American International Group Inc.		United States		312,040		19,508,741
	AXA SA		France		790,268		21,619,273
	China Life Insurance Co. Ltd., H		China		6,041,230		18,453,887
							72,379,715
	Internet Software & Services 2.9%
a	Alphabet Inc., A		United States		25,760		23,948,557
a	Baidu Inc., ADR		China		97,340		17,410,232
							41,358,789
	IT Services 0.5%
	DXC Technology Co.		United States		92,729		7,114,169
	Life Sciences Tools & Services 0.5%
	QIAGEN NV		Netherlands		205,690		6,842,901
	Machinery 1.1%
a	Navistar International Corp.		United States		598,440		15,697,081
	Media 4.7%
	Comcast Corp., A		United States		594,404		23,134,204
	SES SA, IDR		Luxembourg		295,280		6,922,745
	Sky PLC		United Kingdom		1,499,257		19,411,402

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)
	Media (continued)
	Twenty-First Century Fox Inc., A		United States		591,972	$	16,776,486
							66,244,837
	Metals & Mining 2.9%
	Barrick Gold Corp.		Canada		865,310		13,767,082
	MMC Norilsk Nickel PJSC, ADR		Russia		695,600		9,599,280
	Sumitomo Metal Mining Co. Ltd.		Japan		276,500		3,688,387
	Wheaton Precious Metals Corp.		Canada		680,489		13,524,204
							40,578,953
	Multiline Retail 0.3%
	Ryohin Keikaku Co. Ltd.		Japan		19,340		4,826,188
	Multi-Utilities 1.3%
	innogy SE		Germany		410,700		16,168,292
	Veolia Environnement SA		France		91,200		1,927,204
							18,095,496
	Oil, Gas & Consumable Fuels 10.1%
	Apache Corp.		United States		221,140		10,599,240
	BP PLC		United Kingdom		3,841,161		22,154,633
	Cenovus Energy Inc.		Canada		108,800		802,475
	ConocoPhillips		United States		361,710		15,900,772
	Eni SpA		Italy		1,331,279		20,011,799
	Galp Energia SGPS SA, B		Portugal		1,013,670		15,347,495
a	Husky Energy Inc.		Canada		616,720		7,003,910
	Kunlun Energy Co. Ltd.		China		17,103,030		14,501,240
	Royal Dutch Shell PLC, A		United Kingdom		15,359		407,119
	Royal Dutch Shell PLC, B		United Kingdom		1,303,219		35,011,103
							141,739,786
	Personal Products 0.3%
	Coty Inc., A		United States		236,700		4,440,492
	Pharmaceuticals 9.1%
	Allergan PLC		United States		106,454		25,877,903
	Eli Lilly & Co.		United States		192,470		15,840,281
	Merck KGaA		Germany		127,234		15,368,968
	Perrigo Co. PLC		United States		192,570		14,542,886
	Roche Holding AG		Switzerland		45,563		11,605,199
	Sanofi		France		146,857		14,050,523
	Teva Pharmaceutical Industries Ltd., ADR		Israel		904,490		30,047,158
							127,332,918
	Semiconductors & Semiconductor Equipment 0.2%
a	First Solar Inc.		United States		74,720		2,979,834
	Software 4.6%
	Microsoft Corp.		United States		311,849		21,495,752
	Oracle Corp.		United States		857,350		42,987,529
							64,483,281
	Specialty Retail 0.7%
	Kingfisher PLC		United Kingdom		2,677,124		10,485,674

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)
	Technology Hardware, Storage & Peripherals 4.7%
	Apple Inc.		United States		164,980	$	23,760,420
	Hewlett Packard Enterprise Co.		United States		100,890		1,673,765
	Samsung Electronics Co. Ltd.		South Korea		19,450		40,380,329
							65,814,514
	Wireless Telecommunication Services 2.9%
	China Mobile Ltd.		China		636,000		6,748,756
	SoftBank Group Corp.		Japan		247,120		19,985,337
	Turkcell Iletisim Hizmetleri AS, ADR		Turkey		830,743		6,812,093
	Vodafone Group PLC		United Kingdom		2,681,677		7,606,048
							41,152,234
	Total Common Stocks (Cost $1,100,242,083)						1,370,151,904
				Principal Amount
	Corporate Bonds (Cost $8,457,000) 0.7%
	Oil, Gas & Consumable Fuels 0.7%
c	Chesapeake Energy Corp., secured note, second lien, 144A, 8.00%, 12/15/22		United States	$	9,117,000		9,675,416
	Total Investments before Short Term Investments (Cost $1,108,699,083)						1,379,827,320
	Short Term Investments 1.9%
	Time Deposits 1.9%
	Bank of Montreal, 1.00%, 7/03/17		United States		10,000,000		10,000,000
	Royal Bank of Canada, 1.02%, 7/03/17		United States		16,800,000		16,800,000
	Total Time Deposits (Cost $26,800,000)						26,800,000
d	Investments from Cash Collateral Received for Loaned Securities (Cost $333,200) 0.0%†
				Shares
	Money Market Funds 0.0%†
e,f	Institutional Fiduciary Trust Money Market Portfolio, 0.58%		United States		333,200		333,200
	Total Investments (Cost $1,135,832,283) 100.0%						1,406,960,520
	Other Assets, less Liabilities (0.0)%†						(356,005	)
	Net Assets 100.0%					$	1,406,604,515

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, 2017. See Note 1(c).

^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. This security has been deemed liquid under guidelines approved by the Trust’s Board of Trustees.

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

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

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

TG-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, 2017 (unaudited)

	Templeton Growth VIP Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	1,135,499,083
Cost - Non-controlled affiliates (Note 3e)		333,200
Total cost of investments	$	1,135,832,283
Value - Unaffiliated issuers	$	1,406,627,320
Value - Non-controlled affiliates (Note 3e)		333,200
Total value of investments (includes securities loaned in the amount of $325,924)		1,406,960,520
Cash		195,573
Foreign currency, at value (cost $13,131)		13,131
Receivables:
Investment securities sold		3,335,095
Capital shares sold		199,456
Dividends and interest		4,172,303
European Union tax reclaims		825,248
Other assets		903
Total assets		1,415,702,229
Liabilities:
Payables:
Investment securities purchased		6,579,390
Capital shares redeemed		581,909
Management fees		899,854
Distribution fees		398,997
Payable upon return of securities loaned		333,200
Deferred tax		48,836
Accrued expenses and other liabilities		255,528
Total liabilities		9,097,714
Net assets, at value	$	1,406,604,515
Net assets consist of:
Paid-in capital	$	1,082,199,845
Undistributed net investment income		18,159,949
Net unrealized appreciation (depreciation)		271,124,226
Accumulated net realized gain (loss)		35,120,495
Net assets, at value	$	1,406,604,515
Class 1:
Net assets, at value	$	472,768,230
Shares outstanding		31,135,566
Net asset value and maximum offering price per share	$	15.18
Class 2:
Net assets, at value	$	892,615,437
Shares outstanding		59,702,574
Net asset value and maximum offering price per share	$	14.95
Class 4:
Net assets, at value	$	41,220,848
Shares outstanding		2,728,532
Net asset value and maximum offering price per share	$	15.11

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 Operations

for the six months ended June 30, 2017 (unaudited)

	Templeton Growth VIP Fund
Investment income:
Dividends (net of foreign taxes of $2,065,266)	$	22,360,577
Interest		755,954
Income from securities loaned (net of fees and rebates)		127,579
Total investment income		23,244,110
Expenses:
Management fees (Note 3a)		5,419,292
Distribution fees: (Note 3c)
Class 2		1,103,308
Class 4		74,094
Custodian fees (Note 4)		51,900
Reports to shareholders		105,771
Professional fees		64,604
Trustees’ fees and expenses		3,150
Other		20,901
Total expenses		6,843,020
Expense reductions (Note 4)		(7,797	)
Expenses waived/paid by affiliates (Note 3e)		(18,200	)
Net expenses		6,817,023
Net investment income		16,427,087
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		53,354,700
Foreign currency transactions		93,162
Net realized gain (loss)		53,447,862
Net change in unrealized appreciation (depreciation) on:
Investments		75,672,097
Translation of other assets and liabilities denominated in foreign currencies		213,059
Change in deferred taxes on unrealized appreciation		(48,836	)
Net change in unrealized appreciation (depreciation)		75,836,320
Net realized and unrealized gain (loss)		129,284,182
Net increase (decrease) in net assets resulting from operations	$	145,711,269

TG-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 Growth VIP Fund
	Six Months Ended June 30, 2017 (unaudited)			Year Ended December 31, 2016
Increase (decrease) in net assets:
Operations:
Net investment income	$	16,427,087		$	24,853,200
Net realized gain (loss)		53,447,862			(7,519,261	)
Net change in unrealized appreciation (depreciation)		75,836,320			106,000,252
Net increase (decrease) in net assets resulting from operations		145,711,269			123,334,191
Distributions to shareholders from:
Net investment income:
Class 1		(8,645,537	)		(10,324,588	)
Class 2		(14,420,565	)		(17,569,556	)
Class 4		(607,359	)		(854,329	)
Net realized gains:
Class 1		—			(17,221,955	)
Class 2		—			(33,791,595	)
Class 4		—			(1,749,580	)
Total distributions to shareholders		(23,673,461	)		(81,511,603	)
Capital share transactions: (Note 2)
Class 1		(21,721,782	)		(29,290,497	)
Class 2		(61,234,691	)		(71,266,569	)
Class 4		(5,888,489	)		(6,073,422	)
Total capital share transactions		(88,844,962	)		(106,630,488	)
Net increase (decrease) in net assets		33,192,846			(64,807,900	)
Net assets:
Beginning of period		1,373,411,669			1,438,219,569
End of period	$	1,406,604,515		$	1,373,411,669
Undistributed net investment income included in net assets:
End of period	$	18,159,949		$	25,406,323

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

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 eighteen 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. 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. 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. Investments in 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.

TG-18         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Growth 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 Fund’s business day. Occasionally, events occur between the time at which trading in a foreign security is completed and 4 p.m. Eastern time 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 4 p.m. Eastern time. 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 Fund’s NAV is not calculated, 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.

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)

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. 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. For U.S. income tax purposes, when EU reclaims are received by the Fund and the Fund previously passed foreign tax credit on to its shareholders, the Fund must either amend historic tax reporting to shareholders or enter into a closing agreement with the Internal Revenue Service (IRS) in order to pay the associated tax liability on behalf of the Fund’s shareholders.

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, 2017, 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. 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 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. Distributable earnings are determined according to income tax regulations (tax basis) and 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.

TG-20         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Growth VIP Fund (continued)

g. Guarantees and Indemnifications

Under the Trust’s organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust, on behalf of the Fund, enters into contracts with service providers

that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.

2. Shares of Beneficial Interest

At June 30, 2017, 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, 2017						Year Ended December 31, 2016
	Shares			Amount			Shares			Amount
Class 1 Shares:
Shares sold		196,844		$	2,864,766			110,663		$	1,440,832
Shares issued in reinvestment of distributions		578,684			8,645,537			2,252,375			27,546,543
Shares redeemed		(2,233,010	)		(33,232,085	)		(4,377,350	)		(58,277,872	)
Net increase (decrease)		(1,457,482	)	$	(21,721,782	)		(2,014,312	)	$	(29,290,497	)
Class 2 Shares:
Shares sold		597,550		$	8,642,207			3,935,051		$	50,119,612
Shares issued in reinvestment of distributions		980,324			14,420,565			4,262,336			51,361,152
Shares redeemed		(5,811,515	)		(84,297,463	)		(13,462,698	)		(172,747,333	)
Net increase (decrease)		(4,233,641	)	$	(61,234,691	)		(5,265,311	)	$	(71,266,569	)
Class 4 Shares:
Shares sold		12,724		$	190,131			280,303		$	3,402,727
Shares issued in reinvestment of distributions		40,845			607,359			213,961			2,603,908
Shares redeemed		(454,526	)		(6,685,979	)		(920,832	)		(12,080,057	)
Net increase (decrease)		(400,957	)	$	(5,888,489	)		(426,568	)	$	(6,073,422	)

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

Semiannual Report         TG-21

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Growth VIP Fund (continued)

3. Transactions with Affiliates (continued)

a. Management Fees

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

Annualized Fee Rate	Net Assets
1.000%	Up to and including $100 million
0.900%	Over $100 million, up to and including $250 million
0.800%	Over $250 million, up to and including $500 million
0.750%	Over $500 million, up to and including $1 billion
0.700%	Over $1 billion, up to and including $5 billion
0.675%	Over $5 billion, up to and including $10 billion
0.655%	Over $10 billion, up to and including $15 billion
0.635%	Over $15 billion, up to and including $20 billion
0.615%	In excess of $20 billion

For the period ended June 30, 2017, the annualized effective investment management fee rate was 0.778% 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. During the period ended June 30, 2017, the Fund held investments in affiliated management investment companies as follows:

TG-22         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Growth 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, 0.58%		—		156,998,655		(156,665,455	)		333,200	$	333,200	$	—	$	—		0.0%a

^aRounds to less than 0.1%.

f. Other Affiliated Transactions

At June 30, 2017, Franklin Templeton Variable Insurance Products Trust – Franklin Founding Funds Allocation VIP Fund owned 24.1% 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, 2017, 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. At December 31, 2016, the Fund had long-term capital loss carryforwards of $11,285,978.

At June 30, 2017, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	1,142,897,905
Unrealized appreciation	$	333,248,122
Unrealized depreciation		(69,185,507	)
Net unrealized appreciation (depreciation)	$	264,062,615

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, 2017, aggregated $218,806,394 and $274,507,720, respectively.

At June 30, 2017, in connection with securities lending transactions, the Fund loaned equity investments and received $333,200 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         TG-23

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Growth 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.

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 9, 2018. 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 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statement of Operations. During the period ended June 30, 2017, 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, 2017, 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	$	1,370,151,904	$	—	$	—	$	1,370,151,904
Corporate Bonds		—		9,675,416		—		9,675,416
Short Term Investments		333,200		26,800,000		—		27,133,200
Total Investments in Securities	$	1,370,485,104	$	36,475,416	$	—	$	1,406,960,520

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

TG-24         Semiannual Report

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Templeton Growth VIP Fund (continued)

10. Investment Company Reporting Modernization

In October 2016, the U.S. Securities and Exchange Commission adopted new rules and amended existing rules (together, final rules) intended to modernize the reporting and disclosure of information by registered investment companies. In part, the final rules amend Regulation S-X and require standardized, enhanced disclosures about derivatives in investment company financial statements, as well as other amendments. The compliance date for the amendments to Regulation S-X is August 1, 2017. Management has reviewed the requirements and believes the adoption of the amendments to Regulation S-X will not have a material impact on the Fund’s financial statements and related disclosures.

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
IDR	International Depositary Receipt
NVDR	Non-Voting Depositary Receipt

Semiannual Report         TG-25

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Tax Information (unaudited)

Templeton Growth VIP Fund

At December 31, 2016, 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, 2017, 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	$0.0221	$0.2302
Class 2	$0.0221	$0.2029
Class 4	$0.0221	$0.1868

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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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

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.

Bloomberg 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.

Bloomberg Barclays U.S. Government Index: Intermediate Component is the intermediate component of the Barclays U.S. Government Index, which includes public obligations of the U.S. Treasury with at least one year to final maturity and publicly issued debt of U.S. government agencies, quasi-federal corporations, and corporate or foreign debt guaranteed by the U.S. government.

Citigroup World Government Bond Index is a market capitalization-weighted index consisting of investment-grade world government bond markets.

Consumer Price Index (CPI) is a commonly used measure of the inflation rate.

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 allocation 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 6/30/17, there were 344 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 6/30/17, there were 75 funds in this category. Lipper calculations do not include contract fees, expenses or sales charges, and may have been different if such charges had been considered.

Lipper VIP 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 6/30/17, 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.

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.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

INDEX DESCRIPTIONS

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 World Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed markets.

Russell 1000^® Growth Index is market capitalization weighted and measures performance of those Russell 1000^® Index companies with higher price-to-book ratios and higher forecasted growth values.

Russell 1000^® Index is market capitalization weighted and measures performance of the largest companies in the Russell 3000^® Index, which represents the majority of the U.S. market’s total capitalization.

Russell 1000^TM Value Index is market capitalization weighted and measures performance of those Russell 1000^TM Index companies with lower price-to-book ratios and lower forecasted growth values.

Russell 2000^® Index is market capitalization weighted and measures performance of the 2,000 smallest companies in the Russell 3000^® Index, which represent a small amount of the total market capitalization of the Russell 3000^® Index.

Russell 2000^TM Value Index is market capitalization weighted and measures performance of those Russell 2000^TM Index companies with lower price-to-book ratios and lower forecasted growth values.

Russell 2500^® Index is market capitalization weighted and measures performance of the smallest companies in the Russell 3000^® Index, which represent a modest amount of the Russell 3000^® Index’s total market capitalization.

Russell 2500^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 represents 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 Approval of Investment Management Agreements

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Franklin Flex Cap Growth VIP Fund

Franklin Global Real Estate VIP Fund

Franklin Growth and Income VIP Fund

Franklin Income VIP Fund

Franklin Large Cap Growth VIP Fund

Franklin Mutual Global Discovery VIP Fund

Franklin Mutual Shares VIP Fund

Franklin Rising Dividends VIP Fund

Franklin Small Cap Value VIP Fund

Franklin Small-Mid Cap Growth VIP Fund

Franklin Strategic Income VIP Fund

Franklin U.S. Government Securities VIP Fund Franklin VolSmart Allocation VIP Fund

Templeton Developing Markets VIP Fund

Templeton Foreign VIP Fund

Templeton Global Bond VIP Fund

Templeton Growth VIP Fund

(each a Fund)

At an in-person meeting held on April 18, 2017 (Meeting), the Board of Trustees (Board) of Franklin Templeton Variable Insurance Products Trust (Trust), including a majority of the trustees who are not “interested persons” as defined in the Investment Company Act of 1940 (Independent Trustees), reviewed and approved the continuance of the (i) investment management agreement between Franklin Advisers, Inc. (FAI) and each of Franklin Flex Cap Growth VIP Fund, Franklin Growth and Income VIP Fund, Franklin Income VIP Fund, Franklin Large Cap Growth VIP Fund, Franklin Small Mid-Cap Growth VIP Fund, Franklin Strategic Income VIP Fund, Franklin U.S. Government Securities VIP Fund, Franklin VolSmart Allocation VIP Fund, and Templeton Global Bond VIP Fund; (ii) the investment sub-advisory agreements between FAI and each of Franklin Advisory Services, LLC and K2/D&S Management Co., L.L.C. (each a Sub-Adviser), affiliates of FAI, on behalf of the Franklin VolSmart Allocation VIP Fund; (iii) the investment management agreement between Franklin Templeton Institutional, LLC (FTIL) and Franklin Global Real Estate VIP Fund; (iv) the investment management agreement between Franklin Mutual Advisers, LLC (FMA) and each of Franklin Mutual Global Discovery VIP Fund and Franklin Mutual Shares VIP Fund; (v) the investment management agreement between Franklin Advisory Services,

LLC (FAS) and each of Franklin Rising Dividends VIP Fund and Franklin Small Cap Value VIP Fund; (vi) the investment management agreement between Templeton Asset Management Ltd. (TAML) and Templeton Developing Markets VIP Fund; (vii) the investment management agreement between Templeton Investment Counsel, LLC (TICL) and Templeton Foreign VIP Fund; and (viii) the investment management agreement between Templeton Global Advisors Limited (TGAL) and Templeton Growth VIP Fund (each a Management Agreement) for an additional one-year period. The Independent Trustees received advice from and met separately with Independent Trustee counsel in considering whether to approve the continuation of each Management Agreement. Although the Management Agreements for the Funds were considered at the same Board meeting, the Board considered the information provided to it about the Funds together and with respect to each Fund separately as the Board deemed appropriate. FAI, FTIL, FMA, FAS, TAML, TICL, TGAL and the Sub-Advisers are each referred to herein as a Manager.

In considering the continuation of each Management Agreement, the Board reviewed and considered information provided by each Manager at the Meeting and throughout the year at meetings of the Board and its committees. The Board also reviewed and considered information provided in response to a detailed set of requests for information submitted to each Manager by Independent Trustee counsel on behalf of the Independent Trustees in connection with the annual contract renewal process. In addition, prior to the Meeting, the Independent Trustees held a telephonic contract renewal meeting at which the Independent Trustees conferred amongst themselves and Independent Trustee counsel about contract renewal matters. The Board reviewed and considered all of the factors it deemed relevant in approving the continuance of each Management Agreement, including, but not limited to: (i) the nature, extent, and quality of the services provided by each Manager; (ii) the investment performance of each Fund; (iii) the costs of the services provided and profits realized by each Manager and its affiliates from the relationship with each Fund; (iv) the extent to which economies of scale are realized as each Fund grows; and (v) whether fee levels reflect these economies of scale for the benefit of Fund investors.

In approving the continuance of each Management Agreement, the Board, including a majority of the Independent Trustees, determined that the existing management fees are fair and reasonable and that the continuance of such Management Agreement is in the interests of the applicable Fund and its

Semiannual Report         SI-1

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SHAREHOLDER INFORMATION

shareholders. While attention was given to all information furnished, the following discusses some primary factors relevant to the Board’s determination.

Nature, Extent and Quality of Services

The Board reviewed and considered information regarding the nature, extent and quality of investment management services provided by each Manager and its affiliates to the Funds and their shareholders. This information included, among other things, the qualifications, background and experience of the senior management and investment personnel of each Manager; the structure of investment personnel compensation; oversight of third-party service providers; investment performance reports and related financial information for each Fund; reports on expenses, shareholder services, marketing support payments made to financial intermediaries and third party servicing arrangements; legal and compliance matters; risk controls; pricing and other services provided by each Manager and its affiliates; and management fees charged by each Manager and its affiliates to U.S. funds and other accounts, including management’s explanation of differences among accounts where relevant. The Board noted management’s continual efforts and expenditures in establishing effective business continuity plans and developing strategies to address areas of heightened concern in the mutual fund industry, such as cybersecurity, derivatives and liquidity risk management.

The Board also reviewed and considered the benefits provided to Fund shareholders of investing in a fund that is part of the Franklin Templeton family of funds. The Board noted the financial position of Franklin Resources, Inc. (FRI), the Managers’ parent, and its commitment to the mutual fund business as evidenced by its continued introduction of new funds, reassessment of the fund offerings in response to the market environment and project initiatives and capital investments relating to the services provided to the Funds by the Franklin Templeton Investments (FTI) organization.

Following consideration of such information, the Board was satisfied with the nature, extent and quality of services provided by each Manager and its affiliates to the Funds and their shareholders.

Fund Performance

The Board reviewed and considered the performance results of each Fund over various time periods ended January 31, 2017. The Board considered the performance returns for each Fund in comparison to the performance returns of mutual funds deemed comparable to the Fund included in a universe (Performance Universe) selected by Broadridge Financial Solutions, Inc.

(Broadridge), an independent provider of investment company data. The Board received a description of the methodology used by Broadridge to select the mutual funds included in a Performance Universe. The Board also reviewed and considered Fund performance reports provided and discussions that occurred with portfolio managers at Board meetings throughout the year. A summary of each Fund’s performance results is below.

Franklin Flex Cap Growth VIP Fund – The Performance Universe for this Fund included the Fund and all multi-cap growth funds underlying variable insurance products (VIPs). The Board noted that the Fund’s annualized total return for the one-, three-, five- and 10-year periods was below the median of its Performance Universe. The Board concluded that the Fund’s performance was acceptable. In doing so, the Board noted the actions management has taken in an effort to address the Fund’s performance, including changes to the Fund’s portfolio management team and enhancements to the team’s security selection process. The Board also noted that the Fund’s annualized total return for each period, while below the median, was positive.

Franklin Global Real Estate VIP Fund – The Performance Universe for this Fund included the Fund and all global real estate funds underlying VIPs. The Board noted that the Fund’s annualized total return for the one-, three- and five-year periods was above the median of its Performance Universe, but for the

10-year period was below the median of its Performance Universe. The Board concluded that the Fund’s performance was satisfactory.

Franklin Growth and Income VIP Fund – The Performance Universe for this Fund included the Fund and all equity income funds underlying VIPs. The Board noted that the Fund’s annualized income return for the one-, three-, five- and 10-year periods was above the median of its Performance Universe. The Board also noted that the Fund’s annualized total return for the one-, three- and five-year periods was below the median of its Performance Universe, but for the 10-year period was equal to the median of its Performance Universe. Given the Fund’s income-oriented investment objective, the Board concluded that the Fund’s performance was satisfactory. In doing so, the Board noted that the Fund’s annualized total return for each of the one-, three- and five-year periods, while below the median, exceeded 8.2%.

Franklin Income VIP Fund and Franklin Strategic Income VIP Fund – The Performance Universe for the Franklin Income VIP Fund included the Fund and all mixed-asset target allocation

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SHAREHOLDER INFORMATION

moderate funds underlying VIPs. The Performance Universe for the Franklin Strategic Income VIP Fund included the Fund and all general bond funds underlying VIPs. The Board noted that the Funds’ annualized income returns for the one-, three-, five- and 10-year periods were above the medians of their respective Performance Universes. The Board also noted that the Funds’ annualized total returns for the one-, five- and 10-year periods were above the medians of their respective Performance Universes, but for the three-year period were below the medians of their respective Performance Universes. Given the Funds’ income-oriented investment objective, the Board concluded that the Funds’ performance was satisfactory.

Franklin Large Cap Growth VIP Fund – The Performance Universe for this Fund included the Fund and all multi-cap growth funds underlying VIPs. The Board noted that the Fund’s annualized total return for the one-, five- and 10-year periods was below the median of its Performance Universe, but for the three-year period was above the median of its Performance Universe. The Board concluded that the Fund’s performance was acceptable. In doing so, the Board noted the actions management has taken in an effort to address the Fund’s performance, including the addition of a portfolio manager and the repositioning of certain of the Fund’s portfolio holdings. The Board also noted that the Fund’s annualized total return for the one-, five- and 10-year periods, while below the median, exceeded 13.4%, 11.2%, and 5.8%, respectively.

Franklin Mutual Global Discovery VIP Fund – The Performance Universe for this Fund included the Fund and all global multi-cap value funds underlying VIPs. The Board noted that the Fund’s annualized total return for the one-year period was below the median of its Performance Universe, but for the three-, five- and 10-year periods was above the median and in the first quintile of its Performance Universe. The Board concluded that the Fund’s performance was satisfactory. In doing so, the Board noted that the Fund’s annualized total return for the one-year period, while below the median, exceeded 21.1%.

Franklin Mutual Shares VIP Fund and Templeton Developing Markets VIP Fund – The Performance Universe for the Franklin Mutual Shares VIP Fund included the Fund and all large-cap value funds underlying VIPs. The Performance Universe for the Templeton Developing Markets VIP Fund included the Fund and all emerging markets funds underlying VIPs. The Board noted that the Funds’ annualized total returns for the one-year period were above the medians of their respective Performance Universes, but for the three-, five- and 10-year

periods were below the medians of their respective Performance Universes. The Board concluded that the Funds’ performance was acceptable. In doing so, the Board noted that the annualized total returns for the one-year period exceeded 23.8% for the Franklin Mutual Shares VIP Fund and 30.6% for the Templeton Developing Markets VIP Fund. The Board also acknowledged management’s explanation that the Franklin Mutual Shares VIP Fund is managed conservatively and has historically held higher cash weightings than its peers, detracting from relative performance in sharply rising markets. The Board further noted recent and expected portfolio management team changes for the Templeton Developing Markets VIP Fund. In light of such changes, the Board determined that additional time will be needed to evaluate the effectiveness of management’s actions.

Franklin Rising Dividends VIP Fund – The Performance Universe for this Fund included the Fund and all multi-cap core funds underlying VIPs. The Board noted that the Fund’s annualized total return for the one-, three- and 10-year periods was above the median of its Performance Universe, but for the five-year period was below the median of its Performance Universe. The Board concluded that the Fund’s performance was satisfactory. In doing so, the Board noted that the Fund’s annualized total return for the five-year period, while below the median, exceeded 11.9%.

Franklin Small Cap Value VIP Fund – The Performance Universe for this Fund included the Fund and all small-cap value funds underlying VIPs. The Board noted that the Fund’s annualized total return for the one-, five- and 10-year periods was above the median of its Performance Universe, but for the three-year period was below the median of its Performance Universe. The Board concluded that the Fund’s performance was satisfactory. In doing so, the Board noted that effective September 30, 2016, the Fund changed its definition of small-capitalization companies and changed its primary benchmark from the Russell 2500 Value Index to the Russell 2000 Value Index. The Board also noted that the definition of “small-capitalization companies” was changed from those with market capitalizations of under $3.5 billion, at the time of purchase, to those with market capitalizations 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. The Board further noted that, in light of the change to the definition of small-capitalization companies, the Russell 2000 Value Index will provide a more appropriate

Semiannual Report         SI-3

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SHAREHOLDER INFORMATION

comparison for performance purposes and is more commonly used in the Fund’s small cap value peer group.

Franklin Small-Mid Cap Growth VIP Fund – The Performance Universe for this Fund included the Fund and all mid-cap growth funds underlying VIPs. The Board noted that the Fund’s annualized total return for the one-year period was equal to the median of its Performance Universe, but for the three-, five- and 10-year periods was below the median of its Performance Universe. The Board concluded that the Fund’s performance was acceptable. In doing so, the Board noted management’s explanation that the Fund’s positioning in the health care sector was a primary detractor from benchmark relative performance over the one-, three-, and five-year periods, particularly as a result of recent pricing pressure and public scrutiny on drug price increases for several holdings within the pharmaceutical industry. Management further explained that avoiding certain benchmark holdings due to high valuations also contributed to underperformance, as those companies ultimately performed better than expected. The Board then noted that the investment team continues to believe its approach to active management will contribute to stronger performance over the long-term. The Board also noted that the Fund’s annualized total return for the one-year period exceeded 19.4%.

Franklin U.S. Government Securities VIP Fund – The Performance Universe for this Fund included the Fund and all general U.S. government funds underlying VIPs. The Board noted that the Fund’s annualized income return for the one-, three-, five- and 10-year periods was above the median of its Performance Universe. The Board also noted that the Fund’s annualized total return for the one- and 10-year periods was above the median of its Performance Universe, but for the three- and five-year periods was below the median of its Performance Universe. The Board concluded that the Fund’s performance was satisfactory given the Fund’s income-oriented investment objective and the nature of the Fund’s investments, which are primarily in U.S. mortgage-backed securities.

Franklin VolSmart Allocation VIP Fund – The Performance Universe for this Fund included the Fund and all flexible portfolio funds underlying VIPs. The Fund has been in operation for less than five years. The Board noted that the Fund’s annualized total return for the one- and three-year periods was below the median of its Performance Universe. The Board concluded that the Fund’s performance was acceptable given its short period of operation. In doing so, the Board noted that the Fund’s current portfolio management team

began managing the Fund in May 2015. The Board further noted that Fund’s annualized total return for the one-year period, while below the median, exceeded 8.1%.

Templeton Foreign VIP Fund – The Performance Universe for this Fund included the Fund and all international multi-cap value funds underlying VIPs. The Board noted that the Fund’s annualized total return for one- and 10-year periods was above the median of its Performance Universe, but for the three- and five-year periods was below the median of its Performance Universe. The Board concluded that the Fund’s performance was satisfactory. In doing so, the Board noted that the Fund’s annualized total return for the one-year period was 20.39%.

Templeton Global Bond VIP Fund – The Performance Universe for this Fund included the Fund and all global income funds underlying VIPs. The Board noted that the Fund’s annualized income return for the one-year period was below the median of its Performance Universe, but for the three-, five- and 10-year periods was above the median and in the first quintile of its Performance Universe. The Board also noted that the Fund’s annualized total return for the one-, three-, five- and 10-year periods was above the median of its Performance Universe. Given the Fund’s income-oriented investment objective, the Board concluded that the Fund’s performance was satisfactory.

Templeton Growth VIP Fund – The Performance Universe for this Fund included the Fund and all global multi-cap value funds underlying VIPs. The Board noted that the Fund’s annualized total return for the one- and five-year periods was above the median and in the second quintile of its Performance Universe, for the three-year period was equal to the median of its Performance Universe, and for the 10-year period was below the median of its Performance Universe. The Board concluded that the Fund’s performance was satisfactory. In doing so, the Board noted that the Fund’s annualized total return for the one-year period exceeded 22.5%. The Board noted that in the second half of 2016, the MSCI All Country World Index replaced the MSCI World Index as the Fund’s primary benchmark.

Comparative Fees and Expenses

The Board reviewed and considered information regarding each Fund’s actual total expense ratio and its various components, including, as applicable, management fees; transfer agent expenses; underlying fund expenses; Rule 12b-1 and non-Rule 12b-1 service fees; and other non-management fees. The Board also noted that at its February meeting each year, it receives an annual report on all marketing support payments made by FTI to financial intermediaries. The Board considered

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SHAREHOLDER INFORMATION

the actual total expense ratio and, separately, the contractual management fee rate, without the effect of fee waivers, if any (Management Rate) of each Fund, in comparison to the median ratio and median Management Rate, respectively, of other mutual funds deemed comparable to and with a similar expense structure as the Fund selected by Broadridge (Expense Group). Broadridge fee and 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 and Management Rates generally increase as assets decline and decrease as assets grow, the Board believed the independent analysis conducted by Broadridge to be an appropriate measure of comparative fees and expenses. The Broadridge Management Rate includes administrative charges. The Board received a description of the methodology used by Broadridge to select the mutual funds included in an Expense Group.

Franklin Flex Cap Growth VIP Fund – The Expense Group for the Fund included the Fund and nine other multi-cap growth funds underlying VIPs. The Board noted that the Management Rate for the Fund was above the median of its Expense Group, but its actual total expense ratio was below the median of its Expense Group. The Board concluded that the Management Rate charged to the Fund is fair and reasonable. In doing so, the Board noted that the Fund’s actual total expense ratio reflected a fee waiver from management.

Franklin Growth and Income VIP Fund, Franklin Income VIP Fund, Franklin Rising Dividends VIP Fund, Franklin Small Cap Value VIP Fund, Franklin Strategic Income VIP Fund, Franklin U.S. Government Securities VIP Fund, Templeton Foreign VIP Fund and Templeton Global Bond VIP Fund – The Expense Group for the Franklin Growth and Income VIP Fund included the Fund and six other equity income funds underlying VIPs. The Expense Group for the Franklin Income VIP Fund included the Fund and five other mixed-asset target allocation moderate funds underlying VIPs. The Expense Group for the Franklin Rising Dividends VIP Fund included the Fund and eight other multi-cap core funds underlying VIPs. The Expense Group for the Franklin Small Cap Value VIP Fund included the Fund and seven other small-cap value funds underlying VIPs. The Expense Group for the Franklin Strategic Income VIP Fund included the Fund and eight other general bond funds underlying VIPs. The Expense Group for the Franklin U.S. Government Securities VIP Fund included the Fund and six other general U.S. government funds underlying

VIPs. The Expense Group for the Templeton Foreign VIP Fund included the Fund, five other international multi-cap value funds underlying VIPs and four international multi-cap core funds underlying VIPs. The Expense Group for the Templeton Global Bond VIP Fund included the Fund and six other global income funds underlying VIPs. The Board noted that the Management Rates and actual total expense ratios for these Funds were below the medians of their respective Expense Groups. The Board concluded that the Management Rates charged to these Funds are fair and reasonable. In doing so, the Board noted that, effective May 1, 2017, management agreed to add an additional breakpoint level of 0.4900% on assets that exceed $5 billion to the Franklin Rising Dividends VIP Fund’s Management Rate. The Board also noted that the Franklin Growth and Income VIP Fund’s actual total expense ratio reflected a fee waiver from management.

Franklin Small-Mid Cap Growth VIP Fund – The Expense Group for the Fund included the Fund and ten other mid-cap growth funds underlying VIPs. The Board noted that the Management Rate and actual total expense ratio for the Fund were each equal to the medians of its Expense Group. The Board concluded that the Management Rate charged to the Fund is fair and reasonable.

Franklin VolSmart Allocation VIP Fund – The Expense Group for the Fund included the Fund and four other flexible portfolio funds underlying VIPs. The Board noted the small size of the Expense Group. The Board also noted that the Management Rate for the Fund was below the median of its Expense Group and its actual total expense ratio (including underlying fund expenses) was equal to the median of its Expense Group. The Board concluded that the Management Rate charged to the Fund is fair and reasonable. In doing so, the Board noted that the Fund’s actual total expense ratio reflected a fee waiver from management and that the Sub-Advisers were paid by FAI out of the management fee FAI received from the Fund.

Franklin Global Real Estate VIP Fund, Franklin Large Cap Growth VIP Fund, Franklin Mutual Global Discovery VIP Fund, Franklin Mutual Shares VIP Fund, Templeton Developing Markets VIP Fund and Templeton Growth VIP Fund – The Expense Group for the Franklin Global Real Estate VIP Fund included the Fund and five other global real estate funds underlying VIPs. The Expense Group for the Franklin Large Cap Growth VIP Fund included the Fund and 10 other multi-cap growth funds underlying VIPs. The Expense Group for the Franklin Mutual Global Discovery VIP Fund included the Fund, two other global multi-cap value funds underlying

Semiannual Report         SI-5

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SHAREHOLDER INFORMATION

VIPs and four global multi-cap core funds underlying VIPs. The Expense Group for the Franklin Mutual Shares VIP Fund included the Fund and eight other large-cap value funds underlying VIPs. The Expense Group for the Templeton Developing Markets VIP Fund included the Fund and nine other emerging markets funds underlying VIPs. The Expense Group for the Templeton Growth VIP Fund included the Fund, two other global multi-cap value funds underlying VIPs, four global multi-cap core funds underlying VIPs and two global multi-cap growth funds underlying VIPs. The Board noted that the Management Rates and actual total expense ratios for these Funds were above the medians of their respective Expense Groups. The Board concluded that the Management Rates charged to the Funds are fair and reasonable. In doing so, the Board noted that the Management Rate for the Franklin Large Cap Growth VIP Fund was only one basis point above the median of its Expense Group. With respect to the Franklin Mutual Shares VIP Fund and the Franklin Mutual Global Discovery VIP Fund, the Board took into account management’s explanation that the portfolio management team makes investments in distressed securities and merger arbitrage that are specialist in nature and therefore merit a higher Management Rate. In the case of each of the Franklin Mutual Shares VIP Fund and the Templeton Growth VIP Fund, the respective Fund’s actual total expense ratio was only one basis point above the median ratio of the Fund’s Expense Group. Finally, with respect to the Franklin Global Real Estate VIP Fund, the Board accepted management’s explanation that the portfolio managers’ rigorous fundamental analysis with the inclusion of more active risk controls merits a higher Management Rate.

Profitability

The Board reviewed and considered information regarding the profits realized by each Manager and its affiliates in connection with the operation of each Fund. In this respect, the Board considered the Fund profitability analysis provided by each Manager that addresses the overall profitability of FTI’s U.S. fund business, as well as its profits in providing investment management and other services to each of the individual funds during the 12-month period ended September 30, 2016, being the most recent fiscal year-end for FRI. The Board noted that although management continually makes refinements to its methodologies used in calculating profitability in response to organizational and product related changes, the overall methodology has remained consistent with that used in the Funds’ profitability report presentations from prior years. Additionally, the Funds’ independent registered public accounting firm has been engaged by each Manager to

periodically review the reasonableness of the allocation methodologies to be used solely by the Funds’ Board with respect to the profitability analysis.

The Board noted management’s belief that costs incurred in establishing the infrastructure necessary for the type of mutual fund operations conducted by each Manager and its affiliates may not be fully reflected in the expenses allocated to each Fund in determining its profitability, as well as the fact that the level of profits, to a certain extent, reflected operational cost savings and efficiencies initiated by management. The Board also noted management’s expenditures in improving shareholder services provided to the Funds, as well as the need to implement systems and meet additional regulatory and compliance requirements resulting from recent SEC and other regulatory requirements.

The Board also considered the extent to which each Manager and its affiliates might derive ancillary benefits from fund operations, including revenues generated from transfer agent services, potential benefits resulting from personnel and systems enhancements necessitated by fund growth, as well as increased leverage with service providers and counterparties. Based upon its consideration of all these factors, the Board concluded that the level of profits realized by each Manager and its affiliates from providing services to each Fund was not excessive in view of the nature, quality and extent of services provided to each Fund.

Economies of Scale

The Board reviewed and considered the extent to which each Manager may realize economies of scale, if any, as each Fund grows larger and whether the Fund’s management fee structure reflects any economies of scale for the benefit of shareholders. With respect to possible economies of scale, the Board noted the existence of management fee breakpoints for each Fund (except for the Franklin VolSmart Allocation VIP Fund), which operate generally to share any economies of scale with a Fund’s shareholders by reducing the Fund’s effective management fees as the Fund grows in size. The Board considered each Manager’s view that any analyses of potential economies of scale in managing a particular fund are inherently limited in light of the joint and common costs and investments each Manager incurs across the Franklin Templeton family of funds as a whole. The Board concluded that to the extent economies of scale may be realized by each Manager and its affiliates, each Fund’s management fee structure (except that of the Franklin VolSmart Allocation VIP Fund) provided a sharing of benefits with the Fund and its shareholders as the Fund grows.

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SHAREHOLDER INFORMATION

The Board recognized that there would not likely be any economies of scale for each of the Franklin Flex Cap Growth VIP Fund and Franklin VolSmart Allocation VIP Fund until the Fund’s assets grow.

Conclusion

Based on its review, consideration and evaluation of all factors it believed relevant, including the above-described factors and conclusions, the Board unanimously approved the continuation of each Management Agreement for an additional one-year period.

Board Approval of Investment Management Agreements

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Franklin Rising Dividends VIP Fund

(Fund)

At a meeting held on May 23, 2017 (Meeting), the Board of Trustees (Board) of Franklin Templeton Variable Insurance Products Trust (Trust), including a majority of the trustees who are not “interested persons” as defined in the Investment Company Act of 1940 (Independent Trustees), reviewed and approved, and recommended to shareholders the approval of, a new investment management agreement between Franklin Advisers, Inc. (Manager) and the Fund (Management Agreement) for an initial two year period effective on or about December 1, 2017. The Independent Trustees received advice from and met separately with Independent Trustee counsel in considering whether to approve the Management Agreement.

The Board reviewed and considered information provided by the Manager at the Meeting. The Board also considered a form of Management Agreement, which is consistent with the agreements used across the Franklin Templeton Investments (FTI) organization, as well as the Code of Ethics and Insider Trading Compliance Policies and Procedures applied to the employees of the Manager. The Board discussed with FTI the reasons for its request that the Board approve the Management Agreement, including the benefits of the current portfolio management team, who would become employees of the Manager, having access to additional resources. The Board reviewed and considered all of the factors it deemed relevant in approving the Management Agreement, including, but not limited to: (i) the nature, extent, and quality of the services to be provided by the Manager; and (ii) the costs of the services, which are to remain unchanged. The Board also considered that

the change in the investment manager for the Fund facilitates a restructuring of the Fund’s current investment manager, Franklin Advisory Services, LLC (FASL), and the relocation of substantially all of the Fund’s current portfolio management team from FASL to the Manager. In determining that the Management Agreement is fair and reasonable, the Board also noted that the Management Agreement is substantially the same as the Fund’s current investment management agreement with FASL and does not reflect a substantially new or different level of services to or fees payable by the Fund.

Nature, Extent and Quality of Services

The Board considered information regarding the nature, extent and quality of investment management services to be provided by the Manager and its affiliates to the Fund and its shareholders. In particular, the Board took into account that the Fund will have the same investment goals, principal investment policies, and service provider arrangements (except with respect to the Manager) and other key factors. The Board discussed the fact that the same portfolio management team would serve the Fund but that there would be benefits to having them join the investment professionals at the Manager with a similar investment style. This realignment would promote greater collaboration through the sharing of resources and investment ideas. It also noted the Manager’s experience as manager of other funds and accounts, including those within the Franklin Templeton Investments (FTI) organization; the personnel, operations, financial condition, and investment management capabilities, methodologies and resources of the Manager and the Manager’s capabilities, as demonstrated by, among other things, its policies and procedures designed to prevent violations of the Federal securities laws, which had previously been approved by the Board in connection with its oversight of other funds in the FTI organization.

Following consideration of such information, the Board was satisfied with the nature, extent and quality of services to be provided by the Manager and its affiliates to the Fund and its shareholders.

Fund Performance

The Board noted that in connection with the restructuring of FASL that substantially all of the Fund’s current portfolio management team would be relocated from FASL to the Manager. The Board considered the track record of such portfolio management team in managing the Fund, which was reviewed most recently by the Board in April 2017 as part of the annual contract renewal process. With that, and the additional resources available to the portfolio management

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

SHAREHOLDER INFORMATION

team by joining the Manager, the Board was confident in the abilities of such portfolio management team to continue the investment approach of the Fund and to provide quality services to the Fund and its shareholders.

Comparative Fees and Expenses

The Board reviewed and considered information regarding the investment management fee to be charged by the Manager. The Board noted that the management fee to be paid by the Fund under the Management Agreement is identical to the management fee the Fund currently pays FASL, which fee was found to be acceptable in connection with the April 2017 annual contract renewal process. The Board concluded that the proposed investment management fee is fair and reasonable.

Management Profitability and Economies of Scale

The Board determined that its conclusions regarding profitability and economies of scale reached in connection with the April 2017 annual contract renewal of the existing investment management agreement with FASL that would continue in effect until the date the new Management Agreement becomes effective had not changed as a result of the proposed retention of the Manager in connection with the restructuring of FASL.

Conclusion

Based on its review, consideration and evaluation of all factors it believed relevant, including the above-described factors and conclusions, the Board unanimously approved the new Management Agreement for an initial two year period effective on or about December 1, 2017.

Board Approval of Investment Management Agreements

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Templeton Developing Markets VIP Fund

(Fund)

At an in-person meeting held on May 23, 2017 (Meeting), the Board of Trustees (Board) of the Franklin Templeton Variable Insurance Products Trust, including a majority of the trustees who are not “interested persons” as defined in the Investment Company Act of 1940 (Independent Trustees), reviewed and approved, and recommended shareholder approval of, a new investment sub-advisory agreement between Templeton Asset Management Ltd. (Manager), the Fund’s investment manager, and Franklin Templeton Investment Management Limited (Sub-Adviser), an affiliate of the Manager, on behalf of the

Fund (Sub-Advisory Agreement) for an initial two year period. The Independent Trustees received advice from and met separately with Independent Trustee counsel in considering whether to approve the Sub-Advisory Agreement.

The Board reviewed and considered information provided by the Manager at the Meeting with respect to the Sub-Advisory Agreement. The Board reviewed and considered the factors it deemed relevant in approving the Sub-Advisory Agreement, including, but not limited to: (i) the nature, extent, and quality of the services to be provided by the Sub-Adviser; and (ii) the costs of the services to be provided by the Sub-Adviser. The Board considered that management proposed that the Board approve the Sub-Advisory Agreement in order to facilitate certain portfolio management team enhancements.

In approving the Sub-Advisory Agreement, the Board, including a majority of the Independent Trustees, determined that the proposed investment sub-advisory fees are fair and reasonable and that the approval of such Sub-Advisory Agreement is in the interests of the Fund and its shareholders. While attention was given to all information furnished, the following discusses some primary factors relevant to the Board’s determination.

Nature, Extent and Quality of Services

The Board reviewed and considered information regarding the nature, extent and quality of investment management services to be provided by the Sub-Adviser and currently being provided by the Manager and its affiliates to the Fund and its shareholders. In particular, with respect to the Sub-Adviser, the Board took into account that the Sub-Advisory Agreement would not affect how the Fund is managed or the Fund’s investment goal, principal investment strategies or principal risks associated with an investment in the Fund. The Board reviewed and considered information regarding the nature, quality and extent of investment sub-advisory services to be provided by the Sub-Adviser to the Fund and its shareholders under the Sub-Advisory Agreement; the Sub-Adviser’s experience as manager of other funds and accounts, including those within the Franklin Templeton Investments (FTI) organization; the personnel, operations, financial condition, and investment management capabilities, methodologies and resources of the Sub-Adviser and the Sub-Adviser’s capabilities, as demonstrated by, among other things, its policies and procedures designed to prevent violations of the Federal securities laws, which had previously been approved by the Board in connection with its oversight of other funds in the FTI organization.

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SHAREHOLDER INFORMATION

The Board also reviewed and considered the benefits provided to Fund shareholders of investing in a fund that is part of the Franklin Templeton family of funds. The Board noted the financial position of Franklin Resources, Inc. (FRI), the Manager’s and the Sub-Adviser’s parent, and its commitment to the mutual fund business as evidenced by its continued introduction of new funds, reassessment of the fund offerings in response to the market environment and project initiatives and capital investments relating to the services provided to the Fund by the (FTI) organization.

Following consideration of such information, the Board was satisfied with the nature, extent and quality of services to be provided by the Sub-Adviser to the Fund and its shareholders.

Fund Performance

The Board noted its review and consideration of the performance results of the Fund in connection with the April 2017 annual contract renewal. The Board recalled its conclusion at that time that the Fund’s performance was acceptable. The Board further recalled recent and expected portfolio management team changes for the Fund and again determined that, in light of these changes, additional time will be needed to evaluate the effectiveness of management’s actions.

Comparative Fees and Expenses

The Board reviewed and considered information regarding the investment sub-advisory fee to be charged by the Sub-Adviser. The Board noted that the addition of the Sub-Adviser will have no impact on the amount of management fees that are currently paid by the Fund as the Sub-Adviser will be paid by the Manager out of the management fee that the Manager receives from the Fund. The Board further noted that the allocation of the fee between the Manager and the Sub-Adviser reflected the services to be provided by each. The Board concluded that the proposed investment sub-advisory fee is fair and reasonable.

Management Profitability and Economies of Scale

The Board determined that its conclusions regarding profitability and economies of scale reached in connection with the April 2017 annual contract renewal of the existing investment management agreement with the Manager had not changed as a result of the proposal to approve the Sub-Advisory Agreement.

Conclusion

Based on its review, consideration and evaluation of all factors it believed relevant, including the above-described factors and

conclusions, the Board unanimously approved the Sub-Advisory Agreement for an initial two year period.

Proxy Voting Policies and Procedures

The Trust’s investment manager has established Proxy Voting Policies and Procedures (Policies) that the Trust uses to determine how to vote proxies relating to portfolio securities. Shareholders may view the Trust’s complete Policies online at franklintempleton.com. Alternatively, shareholders may request copies of the Policies free of charge by calling the Proxy Group collect at (954) 527-7678 or by sending a written request to: Franklin Templeton Companies, LLC, 300 S.E. 2nd Street, Fort Lauderdale, FL 33301, Attention: Proxy Group. Copies of the Trust’s proxy voting records are also made available online at franklintempleton.com and posted on the U.S. Securities and Exchange Commission’s website at sec.gov and reflect the most recent 12-month period ended June 30.

Quarterly Statement of Investments

The Trust files a complete statement of investments with the U.S. Securities and Exchange Commission for the first and third quarters for each fiscal year on Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission’s website at sec.gov. The filed form may also be viewed and copied at the Commission’s Public Reference Room in Washington, DC. Information regarding the operations of the Public Reference Room may be obtained by calling (800) SEC-0330.

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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.

© 2017 Franklin Templeton Investments. All rights reserved. VIP2 S 08/17

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 Matthew T. Hinkle, 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 Matthew T. Hinkle , 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/ Matthew T. Hinkle
	Matthew T. Hinkle
	Chief Executive Officer –
	Finance and Administration
Date August 25, 2017

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/ Matthew T. Hinkle
	Matthew T. Hinkle
	Chief Executive Officer –
	Finance and Administration
Date August 25, 2017
By	/s/ Gaston Gardey
	Gaston Gardey
	Chief Financial Officer and
	Chief Accounting Officer
Date August 25, 2017

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 orfinancial 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

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• Any changes to or waivers of this Code will, to the extent required, are disclosed as provided by SEC rules./5

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:

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• a copy of the Code is filed with the SEC as an exhibit to each Fund’s annual report; and

• 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 STRTEGIES 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, Matthew T. Hinkle, 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.

8/25/2017

/S/ MATTHEW T. HINKLE

Matthew T. Hinkle

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.

8/25/2017

/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, Matthew T. Hinkle, 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 6/30/2017 (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: 8/25/2017

/S/ MATTHEW T. HINKLE

Matthew T. Hinkle

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 6/30/2017 (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: 8/25/2017

/S/ GASTON GARDEY

Gaston Gardey

Chief Financial Officer and Chief Accounting Officer