Continuance. If shareholders of the Fund approve the New IM Agreement, such agreement shall become effective on the date written and shall continue in effect for two (2) years thereafter, unless sooner terminated as provided under the New IM Agreement and shall continue in effect thereafter for periods not exceeding one (1) year so long as such continuation is approved at least annually (i) by a vote of a majority of the outstanding voting securities of the Fund or by a vote of the Board, and (ii) by a vote of a majority of the Trustees of the Trust who are not parties to the New IM Agreement (other than as Trustees of the Trust) or “interested persons” of any such party, cast in person at a meeting called for the purpose of voting on the New IM Agreement.

Termination. Both the New IM Agreement and the Current Admin Agreement may at any time be terminated without the payment of any penalty by the vote of the Board on 60 days’ written notice.  The New IM Agreement may also be terminated without payment of any penalty by vote of a majority of the outstanding voting securities of the Fund (as defined by the Investment Company Act of 1940 (the “1940 Act”)) on 60 days’ written notice to FAV; shall immediately terminate with respect to the Fund in the event of its assignment; and may be terminated by FAV on 60 days’ written notice to the Fund.

What other investment companies are managed or subadvised by FAV?

The following fund is managed by FAV and has an investment objective and strategies similar to the Fund.

What fees were paid by the Fund to affiliates of FAV during the most recent fiscal year?

Information regarding the fees paid by the Fund to affiliates of FAV during the Fund’s most recently completed fiscal year is provided below under “ADDITIONAL INFORMATION ABOUT THE FUND.”

What did the Board consider when it approved the New IM Agreement?

At a meeting held on October 23, 2018 (the “October Board Meeting”), the Board of the Trust, including a majority of the trustees who are not “interested persons” as defined in the 1940 Act (the “Independent Trustees”), reviewed and approved (i) the New IM Agreement between FAV and the Trust, on behalf of the Fund, and (ii) new investment subadvisory agreements (each a “Subadvisory Agreement”) between FAV and each of FT Institutional and Global Advisors (each a “Subadviser), affiliates of FAV, on behalf of the Fund for an initial two year period effective on or about May 1, 2019, subject to prior approval of the shareholders of the Fund. The Independent Trustees received advice from and met separately with Independent Trustee counsel in considering whether to approve the New IM Agreement and each new Subadvisory Agreement (together, the “Management Agreements”).  FAV and the Subadvisers are each referred to herein as a Manager.

The Board reviewed and considered information provided by each Manager at the October Board Meeting. The Board also considered a form of the New IM Agreement and Subadvisory Agreement, which have terms that are reasonably relatedconsistent with the current investment management agreements and investment subadvisory agreements used for other funds in the Franklin Templeton Investments (“FTI”) fund complex.  The Board further considered the code of ethics applied to the employees of each Manager and compliance policies and procedures applied to the employees of each Manager. The Board noted that the Fund currently maintains a static allocation to underlying funds and so does not currently have an investment manager, nor pay investment management fees.  The Board discussed with FAV the reasons for its request that the Board approve the new Management Agreements, including the proposed Repositioning of the Fund from a fund-of-funds with a static allocation strategy to a direct investment fund with an actively managed dynamic allocation strategy. The Board noted FAV’s explanation that, as currently structured, the Fund generally does not meet the eligibility criteria for insurance companies’ living benefits products.  The Board also noted that the Fund’s assets have declined substantially, from $4.2 billion as of August 31, 2012, to $923 million as of August 31, 2018.  The Board further noted Management’s belief that the proposed Repositioning will enable the Fund to be more widely distributed across insurance company platforms, reduce the volatility of the Fund’s returns and reduce the Fund’s overall expenses.

The Board reviewed and considered all of the factors it deemed relevant in approving each new Management Agreement, including, but not limited to:  (i) the nature, extent and quality of the services to be provided by each Manager; (ii) the investment performance of the audit or reviewFund; (iii) the costs of the Funds’ financial statements and not reported under “Audit Fees” above were $4,682 for the fiscal year ended December 31, 2016, and $4,590 for the fiscal year ended December 31, 2015. The services for which these fees were paid included attestation services.

In addition, the Audit Committee pre-approves PwC’s engagement for audit-related services to be provided to the Investment ManagersFund; and any entity controlling, controlled by, or under common control with(iv) the Investment Managersextent to which economies of scale are expected to be realized.  The Board noted Management’s proposal to request shareholder approval to allow the Fund to use a manager-of-manager structure as many other funds in the FTI fund complex have in place. The Board also noted that provides ongoing servicesthe Fund’s name would be changed to the Funds, which engagements relate directly“Franklin Allocation VIP Fund” to better reflect the operationsrepositioned strategy and financial reportingstructure of the Funds. ForFund. In determining that the fiscal years ended December 31, 2016terms of each Management Agreement are fair and 2015, there were no fees paid to PwC for such services.

Tax Fees. There were no fees paid for professional services rendered by PwC toreasonable, the Funds for tax compliance, tax advice or tax planning services (together, “tax services”) forBoard noted the fiscal years ended December 31, 2016 and 2015.

In addition, the Audit Committee pre-approves PwC’s engagement for taxlevel of services to be provided under each Management Agreement and the anticipated decrease in the overall fees and expenses of 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 each Manager and its affiliates to the Investment ManagersFund and any entity controlling, controlledits shareholders. In particular, the Board took into account Management’s belief that the proposed Repositioning, including the change from a static allocation fund-of-funds to a direct investment allocation fund, will enable the Fund to be more widely distributed across insurance company platforms and reduce the Fund’s overall expenses. The Board noted each Manager’s experience as manager of other funds and accounts, including those within the FTI organization; the personnel, operations, financial condition, and investment management capabilities, methodologies and resources of each Manager and each Manager’s capabilities, as demonstrated by, or under common control with the Investment Managers that provides ongoing servicesamong other things, their policies and procedures designed to the Funds, which engagements relate directly to the operations and financial reportingprevent violations of the Trust and the Funds. In the fiscal years ended December 31, 2016 and 2015, there were no fees paid to PwC for such services.

All Other Fees. The aggregate fees paid for products and services providedFederal securities laws, which had previously been approved by PwC to the Funds, other than the services reported above, were $0 for the fiscal year ended December 31, 2016, and $8,791 for the fiscal year ended December 31, 2015. The services for which these fees were paid included review of materials provided to the Board in connection with its oversight of other funds in the investment management contract renewal process.FTI organization.

In addition,Following consideration of such information, the Audit Committee pre-approves PwC’s engagement for otherBoard was satisfied with the nature, extent and quality of services to be provided by each Manager and its affiliates to the Investment ManagersFund and its shareholders.

Fund Performance

The Board reviewed and considered the performance results of the Fund over various time periods ended August 31, 2018.  The Board considered the performance returns for the Fund in comparison to the performance returns of mutual funds deemed comparable to the Fund included in a universe (the “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 the Performance Universe. The Board also considered Fund performance reports provided and discussions that occurred with portfolio managers at Board meetings throughout the year. A summary of the Fund’s performance results is below.

The Performance Universe for the Fund included the Fund and all mixed-asset target allocation growth funds underlying variable insurance products (“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-, five- and 10-year periods was below the median of its Performance Universe.

Given the Fund’s income-oriented focus, the Board concluded that the Fund’s performance was satisfactory, but noted that it did not consider the current performance of the Fund to be a material factor in its consideration of the Management Agreements given the proposed Repositioning and restructuring of the Fund.

Comparative Fees and Expenses

The Board reviewed and considered information regarding the Fund’s proposed 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 considered the proposed total expense ratio and, separately, the proposed contractual management fee rate, without the effect of fee waivers (the “Management Rate”), if any, entity controlling, controlledof the Fund in comparison to the median expense ratio and median Management Rate, respectively, of other mutual funds deemed comparable to and with a similar expense structure as proposed for the Fund selected by or under common controlBroadridge (the “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, and the proposed total expense ratio was shown for Class 4 of the Fund and an actual total expense ratio was shown for Class B, Class 2, Class II, Service Class and Class S of the other funds in the Expense Group.  The Board received a description of the methodology used by Broadridge to select the mutual funds included in the Expense Group.

The Expense Group for the Fund included the Fund and seven other mixed-asset target allocation growth funds underlying VIPs. The Board noted that the Management Rate and proposed total expense ratio were below the medians of its Expense Group. The Board concluded that the Management Rate to be charged to the Fund is reasonable. In doing so, the Board noted that the Fund’s proposed total expense ratio reflected a fee waiver from Management and that the Subadvisers would be paid by FAV out of the management fee FAV would receive from the Fund.

Profitability

The Board then noted that FAV and its affiliates could not report any financial results from their relationships with the Investment Managers that provides ongoing servicesFund because the Fund does not currently have an investment manager, nor pay investment management fees, and thus, the Board could not evaluate FAV’s or its affiliates’ profitability with respect to the TrustFund.  The Board noted that investment management fees are currently paid by the underlying funds in which the Fund invests.

Economies of Scale

The Board considered the extent to which FAV and its affiliates may realize economies of scale, if any, and whether the Funds, which engagements relate directly toFund’s proposed management fee structure reflects any economies of scale for the operationsbenefit of shareholders. The Board noted that FAV (and its affiliates) could not report on any potential economies of scale at this time given the Repositioning and financial reportingrestructuring of the Funds. For the fiscal years ended December 31, 2016 and 2015, there were no fees paidFund, but would be able to PwC for such services.

Aggregate Non-Audit Fees. The aggregate fees paid for non-audit services rendered by PwC to the Funds and to the Investment Managers and to any entity controlling, controlled by, or under common control with the Investment Managers

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that provide ongoing services to the Funds were $349,307 for the fiscal year ended December 31, 2016, and $595,846 for the fiscal year ended December 31, 2015. The services for which these fees were paid included review of materials provided to the Boarddo so in connection with the investment managementFund’s annual contract renewal processprocess.

Conclusion

Based on its review, consideration and derivatives assessments, reviewevaluation of system processes relatedall factors it believed relevant, including the above-described factors and conclusions, the Board unanimously approved each Management Agreement for an initial two year period effective on or about May 1, 2019, subject to fixed income securities, and compliance examination for Investment Advisors Act Rules 204-2 and 206-4(2).

The Audit Committee has considered whether the provisionprior approval of the non-audit services, including tax-related services, that were rendered to the Investment Managers and to any entity controlling, controlled by, or under common control with the Investment Managers that provides ongoing services to the Funds is compatible with maintaining PwC’s independence.

Audit Committee Pre-Approval Policies and Procedures. Asshareholders of the date of this proxy statement, the Audit Committee has not adopted written pre-approval policies and procedures within the meaning of Regulation S-X. As a result, all such services described above and provided by PwC must be pre-approved by the Audit Committee or by a designated member of the Audit Committee.Fund.

What is the Board’s Role in Risk Oversight?

The Board, as a whole, considers risk management issues as part of its general oversight responsibilities throughout the year at regular Board meetings, through regular reports that have been developed by management, in consultation with the Board and its counsel. These reports address certain investment, valuation and compliance matters. The Board also may receive special written reports or presentations on a variety of risk issues, either upon the Board’s request or upon the Investment Managers’ initiatives. In addition, the Audit Committee meets regularly with the Investment Managers’ internal audit group to review reports on its examination of functions and processes within Franklin Templeton Investments that affect the Trust and the Funds, and reviews and discusses the Trust’s and the Funds’ processes with respect to risk assessment and risk management.

With respect to investment risk, the Board receives regular written reports describing and analyzing the investment performance of the Funds. In addition, the portfolio managers of the Funds meet regularly with the Board to discuss portfolio performance, including investment risk. To the extent that a Fund changes a particular investment strategy that could have a material impact on the Fund’s risk profile, the Board generally is consulted with respect to such change. To the extent that a Fund invests in certain complex investments, including derivatives, the Board receives periodic reports containing information about exposure of the Fund to such investments. In addition, each Investment Manager’s investment risk personnel meet regularly with the Board to discuss a variety of issues, including the impact on a Fund of the investment in particular securities or instruments, such as derivatives and commodities.

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With respect to valuation, the Trust’s administrator provides regular written reports to the Board that enable the Board to monitor the number of fair valued securities in a particular Fund, the reasons for the fair valuation and the methodology used to arrive at the fair value. Such reports also include information concerning illiquid securities within a Fund’s portfolio. The Board also reviews dispositional analysis information on the sale of securities that require special valuation considerations such as illiquid or fair valued securities. In addition, the Audit Committee reviews valuation procedures and results with the Trust’s independent auditors in connection with such Committee’s review of the results of the audit of the Trust’s year-end financial statements.

With respect to compliance risks, the Board receives regular compliance reports prepared by each Investment Manager’s compliance group and meets regularly with the Trust’s Chief Compliance Officer (“CCO”) to discuss compliance issues, including compliance risks. In accordance with SEC rules, the Independent Trustees meet regularly in executive session with the CCO, and the CCO prepares and presents an annual written compliance report to the Board. The Board adopts compliance policies and procedures for the Trust and approves such procedures for the Trust’s service providers. The compliance policies and procedures are specifically designed to detect and prevent violations of the federal securities laws.

The Investment Managers periodically provide an enterprise risk management presentation to the Board to describe the way in which risk is managed on a complex-wide level. Such presentation covers such areas as investment risk, reputational risk, operational risk, personnel risk, and business continuity risk.

What is the leadership structure of the Board?

Seventy-five percent or more of Board members consist of Independent Trustees who are not deemed to be “interested persons” by reason of their relationship with the Trust’s management or otherwise as provided under the 1940 Act. While the Chairman of the Board is an interested person, the Board is also served by a lead Independent Trustee. The lead Independent Trustee, together with independent counsel, reviews proposed agendas for Board meetings and generally acts as liaison with Trust management with respect to questions and issues raised by the Independent Trustees. The lead Independent Trustee also presides at separate meetings of Independent Trustees held in advance of each scheduled Board meeting where various matters, including those being considered at such Board meeting, are discussed. It is believed such structure and activities assure that proper consideration is given at Board meetings to matters deemed important to the Trust, the Funds and their shareholders.

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What is the Required Voterequired vote on Proposal 1?

For Proposal 1, the Nominees willThe New IM Agreement must be elected to the Boardapproved by the affirmative vote of a plurality“majority of votes cast collectivelythe outstanding voting securities” of the Fund, as defined in and required by the shareholders1940 Act. The vote of alla “majority of the Fundsoutstanding voting securities” of the Trust, regardless of the results of the votes cast by the shareholders of each individual Fund. This means that the Nominees receiving the largest number of votes will be elected to fill the available positions, and a Nominee may be elected even if he or she receivesFund is defined as the affirmative vote of lessthe lesser of (A) 67% or more of the voting securities of the Fund present at the Meeting, if the holders of more than 50% of the outstanding voting securities of the Fund are present or represented by proxy; or (B) more than 50% of the outstanding voting securities of the Fund (the “1940 Act Vote”).

When will the Proposal take effect?

 If the shareholders of the Fund approve the Proposal, the Fund will effect the Repositioning on or about May 1, 2019, to coincide with the annual update of the registration statement for the Fund. If Proposal 1 is not approved by shareholders of the Fund, it is expected that the Fund will continue to operate under its Current Admin Agreement and the Repositioning of the Fund will not take effect.  The Board would then need to consider what steps to take with respect to the ongoing management of the Fund.

THE BOARD UNANIMOUSLY RECOMMENDS THAT

SHAREHOLDERS VOTE “FOR” PROPOSAL 1.

PROPOSAL 2:            TO APPROVE NEW SUBADVISORY AGREEMENTS withGlobal Advisors and FT Institutional (THIS PROPOSAL INVOLVES SEPARATE VOTES ON SUB-PROPOSALS 2(A), 2(b) AND 2(C))

            The Board, on behalf of the Fund, unanimously recommends, in conjunction with the approval of Proposal 1, that shareholders of the Fund vote to approve one (1) new Subadvisory Agreement between FAV, as investment manager for the Fund, and Global Advisors (the “Global Subadvisory Agreement”), and vote to approve two (2) new Subadvisory Agreements between FAV, as investment manager for the Fund, and FT Institutional (the “FT Subadvisory Agreements”).

Background

            As noted above, Management proposed, and the Board approved, the Repositioning.  If approved by shareholders, FAV would serve as investment manager of the Fund and manage investment strategy sleeves of the Fund alongside various FT Subadvisers in a “manager of managers” structure.  Certain sleeves within the repositioned Fund would be managed by FAV, while others would be managed by FT Subadvisers pursuant to subadvisory agreements between FAV and the respective FT Subadviser. The Fund would pay FAV an overall investment management fee of 0.55% of the Fund’s average daily net assets for its management of the Fund.  For a strategy sleeve managed by FAV, the Fund would not pay any additional investment management fees or separate subadvisory fees to FAV. For a strategy sleeve managed by an FT Subadviser, the FT Subadviser would be compensated from the investment management fee paid by the Fund to FAV. Management is proposing that three new subadvisory agreements be approved in connection with the Repositioning of the Fund. The names of the strategy sleeves, the proposed FT Subadviser and the proposed subadvisory fee rates are set forth in the table below.

Why are Global Advisors and FT Institutional recommended to serve as the Fund’s subadvisers?

            Global Advisors and FT Institutional are recommended to serve as the Fund’s subadvisers in order to allow them to manage investment strategy sleeves of the Fund alongside FAV in a “manager of managers” structure.  Additional information regarding the specific sleeves and their management is provided below:

Sub-Proposal 2(a): Templeton Foreign Strategy (Global Advisors):  The strategy seeks long-term capital growth by investing predominantly in foreign securities which are predominantly equity securities of companies located outside of the U.S., including developing markets.  The strategy is managed by Tucker Scott, Norman Boersma, Heather Arnold, Christopher James Peel and Herbert J. Arnett Jr. 

Sub-Proposal 2(b): Franklin International Growth Strategy (FT Institutional):  The strategy seeks capital appreciation by investing predominantly in the equity securities of mid-and large capitalization companies outside the U.S. with long-term growth potential.  The strategy is managed by Don Huber and John Remmert.

Sub-Proposal 2(c): Investment Grade Corporate Strategy (FT Institutional):    The strategy seeks as high a level of current income as is consistent with prudent investing, while seeking preservation of capital, by investing predominantly in investment grade corporate debt securities and investments. The strategy may invest a significant part of its net assets in foreign securities, including those in developing markets, and a portion of its net assets in non-U.S. dollar denominated securities.  The strategy is managed by Marc Kremer and Shawn Lyons. 

            Management believes it is in the best interests of the Fund’s shareholders for Global Advisors and FT Institutional to manage the sleeves of the Fund discussed above.  In order for Global Advisors and FT Institutional to serve as subadvisors for the Fund, shareholders of the Fund are being asked to approve the Global Subadvisory Agreement and FT Subadvisory Agreements. A form of subadvisory agreement is included as Exhibit C to this proxy statement.  The only differences between the Global and FT Subadvisory Agreements are the subadvisory fee rates for the different strategy sleeves as noted in the table above. 

            The addition of Global Advisors and FT Institutional as subadvisers to the Fund will have no impact on the amount of investment management fees that are paid by the Fund or Fund shareholders (other than the increase discussed in Proposal 1) because Global Advisors’ and FT Institutional’s fees will be deducted from the fees that FAV receives from the Fund.  If Proposal 1 is not approved by shareholders of the Fund, it is expected that the Fund will continue to operate under its Current Admin Agreement and the Repositioning of the Fund, including the Global Subadvisory Agreement and FT Subadvisory Agreements, will not take effect.  The Board would then need to consider what steps to take with respect to the ongoing management of the Fund.

Additional Information about FAV

            Information regarding FAV, the investment manager proposed for the Fund, is described above in Proposal 1. 

Additional Information about Global Advisors

            Global Advisors, with its principal offices at Cannon Place, Lyford Cay, Nassau, Bahamas, is organized as a Bahamian corporation, and is registered as an investment adviser with the SEC. On October 23, 2018, the Board voted to approve the Global Subadvisory Agreement and to submit the Global Subadvisory Agreement to the Fund’s shareholders for approval.

            Global Advisors is a wholly-owned subsidiary of Templeton Global Holdings Limited, and an indirect wholly-owned subsidiary of Franklin Resources. The following table sets forth the name and principal occupation of the principal executive officer and each director of Global Advisors. Unless otherwise noted, the business address of the principal executive officer and each director in the table below is Lyford Cay, Nassau, Bahamas.

Additional Information about FT Institutional

            FT Institutional, with its principal offices at 280 Park Avenue, New York, New York 10017, is organized as a Delaware limited liability company, and is registered as an investment adviser with the SEC. On October 23, 2018, the Board voted to approve each FT Subadvisory Agreement and to submit each FT Subadvisory Agreement to the Fund’s shareholders for approval.

            FT Institutional is a wholly-owned subsidiary of Franklin Resources. The following table sets forth the name and principal occupation of the principal executive officer and each director of FT Institutional. Unless otherwise noted, the business address of the principal executive officer and each director in the table below is 280 Park Avenue, New York, New York 10017.

What are the material terms of the Global and FT Subadvisory Agreements?

Below is a summary of the material terms of each Subadvisory Agreement. The following discussion is qualified in its entirety by reference to the form of Subadvisory Agreement attached as Exhibit C to this proxy statement. The only differences between the Global and FT Subadvisory Agreements are the subadvisory fee rates for the different strategy sleeves as noted in the table below. 

Services. Subject to the overall policies, direction and review of the Board and subject to the instructions and supervision of FAV, Global Advisors and FT Institutional, pursuant to their respective Subadvisory Agreements, will provide certain investment advisory services with respect to securities and investments and cash equivalents in the Fund.

Subadvisory Fees. Global Advisors’ and FT Institutional’s provision of subadvisory services to the Fund will have no impact on the amount of investment management fees that are paid by the Fund or the fees paid by Fund shareholders (other than the increase discussed in Proposal 1) because the fees that are received by Global Advisors and FT Institutional with respect to each applicable Subadvisory Agreement will be paid directly by FAV. If Proposal 1 is not approved by shareholders of the Fund, it is expected that the Fund will continue to operate under its Current Admin Agreement and the Repositioning of the Fund, including the Global Subadvisory Agreement and FT Subadvisory Agreements, will not take effect.  The Board would then need to consider what steps to take with respect to the ongoing management of the Fund.

            Under each Subadvisory Agreement, FAV would pay Global Advisors or FT Institutional a subadvisory fee based on a percentage of the average daily net assets allocated to the subadviser for the specific strategy sleeve. The names of the strategy sleeves, subadvisers and proposed subadvisory fee rates are set forth in the table below.

Payment of Expenses. During the term of each Subadvisory Agreement, Global Advisors and FT Institutional will each pay all expenses incurred by it in connection with the services to be provided by it under the applicable Subadvisory Agreement, other than the cost of securities (including brokerage commissions, if any) purchased by the Fund.

Brokerage. Global Advisors and FT Institutional will each seek to obtain the most favorable price and execution available when placing trades for the Fund’s portfolio transactions. The Global and FT Subadvisory Agreements each recognize that Global Advisors and FT Institutional may place orders on behalf of the Fund with a broker who charges a commission for that transaction which is in excess of the amount of commissions that another broker would have charged for effecting that transaction, in recognition of the brokerage and research services that such broker provides, in accordance with the Fund’s policies and procedures, the terms of the Fund’s proposed New IM Agreement, the Fund’s prospectus and Statement of Additional Information, and applicable law.

            Limitation of Liability. Each Subadvisory Agreement provides that in the absence of willful misfeasance, bad faith, gross negligence, or reckless disregard of its obligations or duties under such agreement on the part of Global Advisors or FT Institutional, neither Global Advisors or FT Institutional nor any of its directors, officers, employees or affiliates will be subject to liability to FAV, the Fund, or to any shareholder of the Fund for any error of judgment or mistake of law or any other act or omission in the course of, or connected with, rendering services thereunder or for any losses that may be sustained in the purchase, holding or sale of any security by the Fund.

Continuance. If shareholders of the Fund approve a Subadvisory Agreement, the Subadvisory Agreement will continue in effect for two years from the date of its execution, unless earlier terminated. The applicable Subadvisory Agreement is thereafter renewable annually for successive periods of twelve (12) months by a vote of a majority of the outstanding sharesTrust’s Independent Trustees, cast in person at a meeting called for the purpose of voting on such approval, and either (a) a 1940 Act Majority Vote of the Trust voting.Fund’s shareholders, or (b) a majority of the Board as a whole.

THE BOARD UNANIMOUSLY RECOMMENDS
A VOTE “FOR” THE ELECTION OF EACH
OF THE NOMINEES TO THE BOARD.Termination. Each Subadvisory Agreement may be terminated (i) at any time, without payment of any penalty, by the Board upon written notice to FAV and Global Advisors or FT Institutional, as applicable, or by a 1940 Act Majority Vote of the Fund’s shareholders, or (ii) by FAV, Global Advisors or FT Institutional, as applicable, upon not less than sixty (60) days’ written notice to the other party.

What other investment companies are managed or subadvised by Global Advisors and FT Institutional?

            Following is a list of funds that are managed or subadvised by Global Advisors and FT Institutionalthat have investment objectives and strategies similar to the strategy sleeve proposed for the Fund.

(For purposes of Proposal 2, the term “Fund” shall refer to each Fund except Franklin

What fees were paid by the Fund to affiliates of FAV, Global Advisors and FT Institutional during the most recent fiscal year?

PursuantInformation regarding the fees paid by the Fund to an investment managementaffiliates of FAV, Global Advisors and FT Institutional during the Fund’s most recently completed fiscal year is provided below, under “ADDITIONAL INFORMATION ABOUT THE FUND.”

What did the Board consider when it approved the Subadvisory Agreements?

As described above, at the October Board Meeting, the Board, including a majority of the Independent Trustees, reviewed and approved (i) the New IM agreement between FAV and the Trust, on behalf of eachthe Fund, and (ii) each Subadvisory Agreement between FAV and each of FT Institutional and Global Advisors, on behalf of the Fund for an initial two year period effective on or about May 1, 2019, subject to prior approval of the shareholders of the Fund. Please see Proposal 1 for a discussion regarding the Board’s consideration of the Subadvisory Agreements.

What is the required vote on Proposal 2?

            Proposal 2 consists of three Sub-Proposals.  Sub-Proposals 2(a), 2(b) and 2(c) will each be voted on separately by the shareholders of the Fund. Each Sub-Proposal and corresponding Subadvisory Agreement must be approved by the affirmative 1940 Act Majority Vote of shareholders of the Fund. If approved for the Fund, each Subadvisory Agreement is anticipated to become effective on or about May 1, 2019, to coincide with the annual update of the registration statement for the Fund. If Proposal 1 is not approved by shareholders of the Fund, it is expected that the Fund will continue to operate under its Investment Manager,Current Admin Agreement and the Investment ManagerRepositioning of the Fund will not take effect.  The Board would then need to consider what steps to take with respect to the ongoing management of the Fund.

            If any of Sub-Proposals 2(a), 2(b) or 2(c) are not approved by shareholders of the Fund, the Board will consider what further actions to take, which may include, if Proposal 3 is approved by shareholders, hiring Global Advisors or FT Institutional as a subadviser and providing notice of such hiring to the Fund’s shareholders pursuant to the Order.  If Proposal 1 is approved, it is expected that the Fund will still be repositioned and the Fund will be managed by FAV under the New IM Agreement.

THE BOARD UNANIMOUSLY RECOMMENDS THAT

SHAREHOLDERS VOTE “FOR” EACH OF

SUB-PROPOSAL 2(a), SUB-PROPOSAL 2(b)

and SUB-PROPOSAL 2(c)

PROPOSAL 3:            TO APPROVE THE USE OF A “MANAGER OF MANAGERS” STRUCTURE WHEREBY the FUND’S INVESTMENT MANAGER WOULD BE ABLE TO HIRE AND REPLACE AFFILIATED AND UNAFFILIATED  SUBADVISERS WITHOUT SHAREHOLDER APPROVAL

Background

Pursuant to the New IM Agreement submitted for shareholder approval in Proposal 1, FAV would be responsible for, among other items, managing the assets of the Fund and making decisions with respect to the investment of the Fund’s assets and purchases and sales of investment securities on behalf of the Fund, subject to the supervision of the Trust’s Board.

Each Fund’s Investment ManagerFAV is directly or indirectly wholly or majority ownedwholly-owned by Franklin Resources. Many of Franklin Resources’ subsidiaries that provide investment management services (together, the “Investment Manager Affiliates,” and each an “Investment Manager Affiliate”) are organized under the laws of different jurisdictions throughout the world for sales, client servicing and tax purposes. Franklin Resources operates the Investment Manager Affiliates on a unified basis. For example, the Investment Manager Affiliates generally share order management systems, investment operations support and many compliance policies and procedures. While each Investment Manager Affiliate has its own personnel and resources, including portfolio managers and analysts, and offers specialized management services to clients, the Investment Manager Affiliates generally share support personnel, such as with respect to tax, legal and accounting matters. Depending on the strategy, for a particular Fund, the Fund’s Investment Managerinvestment manager may wish to use the portfolio management and trading expertise of personnel employed by an Investment Manager Affiliate in other global locations, thereby providing to Fund shareholders the full benefit of the global

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resources of Franklin Resources. Alternatively, athe Fund’s Investment Managerinvestment manager may wish to provide the Fund with the skill and expertise of a subadviser that is not affiliated in any way with Franklin Resources or the Investment Manager.Fund’s investment manager.

ProvisionsThe provisions of the 1940 Act that apply to the FundsFund require that investment management agreements between funds and their investment managers (including subadvisers) be approved by shareholders. The SEC, however, has issued an exemptive order (the “Order”) to FAI, a wholly owned subsidiary of Franklin Resources,FAV that permits FAI,FAV, and any Investment Manager Affiliates (such as certain of the Funds’ Investment Managers) and any existing or future registered open-end investment company or series advised by FAIFAV or the Investment Manager Affiliates to hire certain new subadvisers without obtaining shareholder approval, (the “Manager of Managers Structure”). Under the Order, the hiring of new subadvisers remains subject to the approval of the Board,investment company’s board of trustees, including a majority of the Independent Trustees, as well asand certain other conditions. The Order would allow athe Fund’s Investment Managerinvestment manager to hire, without shareholder approval, new subadvisers that are affiliated with the Investment Managerinvestment manager (e.g., the Investment Managerinvestment manager and the subadviser are both wholly ownedwholly-owned by the same corporate parent)Franklin Resources), and new subadvisers that are not affiliated with the Investment Managerinvestment manager in any way. Underway (the “Manager of Managers Structure”). Before the Order, a Fund must disclose to its shareholders the aggregate fees paid by the Investment Manager to affiliated subadvisers and to unaffiliated subadvisers and the fee paid to each affiliated subadviser. Before a Fund may rely on the Order, the Fund’s use of the Manager of Managers Structure must be approved by a “majority of the outstanding voting securities” of the Fund, as defined in the 1940 Act and discussed below.Vote.

Why am I being asked to vote on this Proposal?

The Board determined to seek shareholder approval of the Manager of Managers Structure in reliance onfor the OrderFund in connection with the Meeting, which otherwise was called to elect Trustees and to vote on other matters described in this proxy statement,the New IM Agreement, in order to avoid additional meeting and proxy solicitation costs in the future, in the event that athe Fund’s Investment Manager,investment manager, with the approval of the Board, including a majority of the Independent Trustees, determines that the use of the Manager of Managers Structure is in the best interests of the Fund. In addition, as discussed in Proposals 1 and 2, Management proposed Repositioning the Fund to allow FAV to manage investment strategy sleeves of the Fund alongside various FT Subadvisers in a “manager of managers” structure.  The process of seeking shareholder approval of the Manager of Managers Structure in the future to add an FT Subadviser to manage a sleeve of the Fund could cause delays in executing changes that the Board and Investment Managerinvestment manager have determined are in the best interests of athe Fund. Seeking shareholder approval, as being done in Proposal 2, typically involves additional expenses, such as hiring a proxy solicitor.

Under the Manager of Managers Structure, upon receiving approval of the Board, including a majority of the Fund’s Independent Trustees, subadvisers selected by the Fund’s investment manager could immediately manage the Fund’s assets. The Fund would, however, inform shareholders of the hiring of any new subadviser within 90 days after hiring the subadviser. Any new fund launched by Franklin Templeton InvestmentsFTI typically will allow for the Manager of Managers Structure. However, because each Fund was launched before the Order was received, shareholder approval is now required for a Fund to use the Manager of Managers Structure in reliance on the Order.

The Investment Managersinvestment manager for the FundsFund currently dodoes not intend to use the Manager of Managers Structure for such Funds because near-term changes to the portfolio management structureadd subadvisers for the FundsFund unlessany of Sub-Proposals 2(a), 2(b) and 2(c) are not anticipated, other than as described in

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Proposals 3 and 4 below.approved by shareholders of the Fund.  However, as noted above, Franklin Resources is a global investment management organization with offices and Investment Manager Affiliates located around the world. From time to time, a portfolio manager may relocate from one Investment Manager Affiliate to another in order to gain further experience, or aif the Fund’s Investment Manager may believeinvestment manager believes it would be beneficial to the Fund to have access to the investment management expertise of another Investment Manager Affiliate.Affiliate to manage a sleeve of the Fund after the Repositioning.  If athe Fund were permitted to rely on the Order, such investment management changes could be effected with Board approval, but without the time and expense associated with obtaining shareholder approval.For example, as discussed in Proposal 4 below,2, shareholders of the Templeton Developing Markets VIP Fund are being asked to approve athree new subadvisory agreementagreements for the Fund, in order to allow Carlos Hardenberg, Director of Frontier Markets Strategy of Templeton Emerging Markets Group and a portfolio manager of FTIML, an Investment Manager Affiliate, to join the Templeton Developing Markets VIP Fund’s existing portfolio management team.Fund.   If the Templeton Developing Markets VIP Fund had been authorized to use the Manager of Managers Structure, shareholder approval of the subadvisory agreement for the Fundagreements with Global Advisors and FT Institutional would not be necessary.

How will the Manager of Managers Structure Operate?

operate?

Under the Manager of Managers Structure, the Investment Managerinvestment manager of eachthe Fund will be permitted to appoint and replace subadvisers for the Fund and to enter into and approve amendments to subadvisory agreements without first obtaining shareholder approval. However, the Board of the Fund, including a majority of the Independent Trustees, must approve any new subadviser and any new or amended subadvisory agreement. In addition, if the Manager of Managers Structure is approved for a Fund, that Fund’s investment management agreement will be amended to allow for subadvisory agreements that are not approved by shareholders.

Under the Manager of Managers Structure, athe Fund’s Investment Managerinvestment manager would have the overall responsibility, subject to oversight by the Board, to oversee the subadvisers and recommend their hiring, termination and replacement. Specifically, the Order requires athe Fund’s Investment Manager to,investment manager, subject to the review and approval of the Board, including a majority of the Independent Trustees:Trustees, to: (a) set the Fund’s overall investment strategy; (b) evaluate, select and recommend subadvisers to manage all or a portion of the Fund’s assets; and (c) implement procedures reasonably designed to ensure that each subadviser complies with the Fund’s investment goal,goals, policies and restrictions. In addition, subject to the review by the Board, the Fund’s Investment Managerinvestment manager is required to: (a) when appropriate, allocate and reallocate the Fund’s assets among multiple subadvisers; and (b) monitor and evaluate the performance of the subadvisers. The replacement of athe Fund’s Investment Managerinvestment manager or the imposition of material changes to the Fund’s investment management agreement would, however, require prior shareholder approval.

If athe Fund’s Investment Manager,investment manager, with the approval of the Board, including a majority of the Fund’s Independent Trustees, determines that the use of the Manager of Managers Structure is in the best interestsinterest of the Fund, the Manager of Managers

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Structure would without obtaining shareholder approval: (1) enable a new subadviser to commence providing services to the Fund more quickly and with less potential expense to the Fund; (2) permit the Fund’s Investment Managerinvestment manager to allocate and reallocate the Fund’s assets among itself and one or more subadvisers; and (3) permit the Board to approve material changes to a subadvisory agreement.

How does this Proposal affect my fees as a shareholder of athe Fund?

Approval of this Proposal will not affect your fees as a shareholder of athe Fund. The Manager of Managers Structure will not at any time entail an increase in the investment management fees paid by athe Fund. Further shareholder approval would be necessary to increase the investment management fees that are payable by athe Fund, which is not contemplated.

How does this Proposal affect my right to vote on subadvisory agreements?

If Proposal 23 is approved for athe Fund, and the Board and the Fund’s Investment Managerinvestment manager believe that the use of one or more subadvisers would be in the best interests of the Fund, the Fund’s shareholders generally would not be asked to approve hiring a subadviser for the Fund, assuming that the conditions of the Order are met. Rather, athe Fund’s Investment Manager,investment manager, with the approval of the Board, including a majority of the Independent Trustees, would be able to appoint subadvisers and make appropriate changes to the subadvisory agreements without seeking shareholder approval. The Fund would, however, inform shareholders of the hiring of any new subadviser within 90 days after the hiring of the subadviser.

Why did the Board approve the Manager of Managers Structure?

The Board, including a majority of the Independent Trustees, approved the Manager of Managers Structure and is recommending that shareholders approve the Manager of Managers Structure in reliance on the Order at the Meeting in order to avoid additional meeting and proxy solicitation costs in the future, in the event that athe Fund’s Investment Manager,investment manager, with the approval of the Board, including a majority of the Independent Trustees, determines that it is in the best interests of the Fund to useappoint additional subadvisers, particularly in light of the ManagerRepositioning of Managers Structure.the Fund.

What is the required vote on Proposal 2?

3?

Proposal 2 will be voted on by shareholders of each Fund, other than the Franklin Founding Funds Allocation VIP Fund and the Franklin VolSmart Allocation VIP Fund. For Proposal 2,3, before athe Fund may rely on the Order, the operation of the Fund using the Manager of Managers Structure must be approved by the affirmative vote of a “majority1940 Act Vote of the outstanding voting securities” of the Fund, which is defined in

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the 1940 Act as the lesser of: (A) 67% or more of the voting securities of the Fund present at the Meeting, if the holders of more than 50% of the outstanding voting securities of such Fund are present or represented by proxy; or (B) more than 50% of the outstanding voting securities of such Fund (a “1940 Act Majority Vote”). If Proposal 2 is approved by shareholders of the Templeton Developing Markets VIP Fund, the Board would be able to approve a subadviser for the Fund under the Manager of Managers Structure, regardless of whether the Fund’s shareholders approve the subadvisory agreement described in Proposal 4 below.

shareholders.

If Proposal 23 is not approved by athe Fund’s shareholders, then the Fund’s Investment Managerinvestment manager generally would only be able to enter into new or amended subadvisory agreements with shareholder approval, potentially causing delay and expense in making a change deemed beneficial to the Fund and its shareholders by the Board and the Fund’s Investment Manager.Board.

THE BOARD UNANIMOUSLY RECOMMENDS
A THAT SHAREHOLDERS VOTE “FOR” PROPOSAL 2.3.

¿         ADDITIONAL INFORMATION ABOUT THE FUND

The Board, on behalf of the Franklin Rising Dividends VIP Fund (the “Rising Dividends Fund”), unanimously recommends that shareholders of the Rising Dividends Fund vote to approve a new investment management agreement with FAI.

Why is FAI recommended to serve as the Rising Dividends Fund’s investment manager?

Franklin Advisory Services, LLC (“FASL”) is the Fund’s current investment manager and has served as the investment manager for the Rising Dividends Fund since July 1996, prior to which time the Rising Dividends Fund’s investment manager was FAI. Donald G. Taylor, CPA, President and Chief Investment Officer of FASL, has been a portfolio manager of the Rising Dividends Fund since 1996, and the lead portfolio manager of the Rising Dividends Fund since 1999. Nicholas P.B. Getaz, CFA, Portfolio Manager and Research Analyst of FASL, has been a portfolio manager of the Rising Dividends Fund since 2014.

Franklin Templeton Investments has determined that a restructuring of FASL’s personnel within the Franklin Templeton Investments organization would allow more resources to be made available for the management of those funds managed or subadvised by FASL. As part of this restructuring, Messrs. Taylor and Getaz, along with research and trading personnel (the “Rising Dividends Team”), are relocating from FASL to FAI, both of which are wholly owned subsidiaries of Franklin Resources. Management believes that relocating the Rising Dividends Team to FAI will promote better integration of the Rising Dividends Team within the Franklin Equity Group, a

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unit of Franklin Templeton Investments offering expertise in managing growth and hybrid/balanced equity strategies, by fostering the sharing of resources and investment ideas.

In order for Messrs. Taylor and Getaz to continue managing the Rising Dividends Fund following their transfer to FAI, FAI would need to become the new investment manager for the Fund pursuant to a new investment management agreement (the “New IM Agreement”). Pursuant to Section 15 of the 1940 Act, a new investment management agreement requires the approval of the Rising Dividends Fund’s shareholders. Therefore, shareholders of the Rising Dividends Fund are being asked to approve the New IM Agreement. The form of New IM Agreement is included as Exhibit B to this proxy statement.

Fund management believes that it is in the best interests of the Rising Dividends Fund’s shareholders for Mr. Taylor to continue to serve as the lead portfolio manager of the Fund, and for Mr. Getaz to continue to provide portfolio management support to Mr. Taylor, after their transfer from FASL to FAI. As noted above, having Messrs. Taylor and Getaz become employees of FAI will further their integration into the Franklin Equity Group.

There is no proposed change in the level of investment management fees to be paid by the Rising Dividends Fund or its shareholders, and the transfer of Messrs. Taylor and Getaz to FAI will not impact the portfolio management services that currently are provided to the Fund. Management does not believe that the approval of the New IM Agreement will affect how the Rising Dividends Fund is managed or the Fund’s investment goal, principal investment strategies or the principal risks associated with an investment in the Fund. If the New IM Agreement is approved by the Rising Dividends Fund’s shareholders, it is expected that Messrs. Taylor and Getaz will become employees of FAI, and FAI would begin managing the Rising Dividends Fund on or about December 1, 2017.

Additional information about FASL

FASL, located at 101 John F. Kennedy Parkway, Short Hills, New Jersey 07078 is organized as a limited liability company in the State of Delaware, and is registered as an investment adviser with the SEC.

FASL serves as the Rising Dividends Fund’s investment manager pursuant to an investment management agreement dated May 1, 2007 (the “Current IM Agreement”). The Board most recently voted to renew the Current IM Agreement on April 18, 2017. The Current IM Agreement was last submitted to the Rising Dividends Fund’s sole initial shareholder on April 27, 2007, in connection with the redomestication of the Trust from a Massachusetts business trust to a Delaware statutory trust, which was approved by the Trust’s shareholders at a meeting held on March 21, 2007, and reconvened on April 3, 2007.

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For the fiscal year ended December 31, 2016, the amount of investment management fees paid by the Rising Dividends Fund to FASL was $9,998,652, after taking account of FASL’s agreement to reduce its fees to reflect reduced services resulting from the Fund’s investment in a Franklin Templeton money fund. Before any such waiver, the Rising Dividends Fund’s investment management fees totaled $10,110,214.

FASL is a wholly owned subsidiary of Franklin/Templeton Distributors, Inc., and an indirect wholly owned subsidiary of Franklin Resources, which is a publicly held corporation. The principal executive officer of FASL is Donald G. Taylor, President and Chief Investment Officer, with a business address of 101 John F. Kennedy Parkway, Short Hills, New Jersey 07078.

Additional information about FAI

FAI, with its principal offices at One Franklin Parkway, San Mateo, CA 94403-1906, is organized as a California corporation, and is registered as an investment adviser with the SEC. As of June 30, 2017, FAI, together with its affiliates, managed approximately $742 billion in assets, and has been in the investment management business since 1947. FAI is a wholly owned subsidiary of Franklin Resources. The following table sets forth the name and principal occupation of the principal executive officer and each director of FAI. The business address of the principal executive officer and each director in the table below is One Franklin Parkway, San Mateo, CA 94403-1906. Mr. Rupert H. Johnson, Jr. is the Chairman of the Board and a Trustee of the Trust, and Edward B. Jamieson is the President and Chief Executive Officer – Investment Management of the Trust.

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Are there any material differences between the New IM Agreement and the Current IM Agreement?

The terms of the New IM Agreement and the terms of the Current IM Agreement are substantively the same. However, certain outdated provisions in the Current IM Agreement have been removed, and the New IM Agreement includes several provisions now routinely included in investment management agreements used across the Franklin Templeton Investments fund complex. More specifically, the New IM Agreement was modified to:

None of these modifications is intended to reflect new or different levels of services to or investment management fees payable by the Rising Dividends Fund. Rather, such modifications memorialize existing services and obligations.

What are the material terms of the New IM Agreement?

Below is a summary of the material terms of the New IM Agreement. The following discussion is qualified in its entirety by reference to the form of the New IM Agreement attached as Exhibit B to this proxy statement.

Services. FAI will manage the Rising Dividends Fund’s assets subject to and in accordance with the Rising Dividends Fund’s investment goals and policies, the terms of the New IM Agreement, and any directions which the Board may issue from timeAdministrator.

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to time. FAI will make all determinations with respect to the investment of the Rising Dividends Fund’s assets and the purchase and sale of the Rising Dividends Fund’s investment securities, and will take such steps as may be necessary to implement the same.

FAI also will be responsible for providing or procuring, at its own expense (unless otherwise agreed to by the parties), the following services to the Rising Dividends Fund to the extent that any such services are not otherwise provided by any other service provider to the Rising Dividends Fund: (a) providing office space, equipment and supplies appropriate for the effective administration of the Rising Dividends Fund as contemplated in the New IM Agreement; (b) providing trading desk facilities; (c) authorizing expenditures on behalf of the Rising Dividends Fund; (d) supervising preparation of periodic reports to Fund shareholders, notices of distributions and attending to routine shareholder communications; (e) coordinating and supervising the daily pricing and valuation of the Rising Dividends Fund’s investment portfolio; (f) providing fund accounting services, including preparing and supervising publication of daily net asset value quotations and other financial data; (g) monitoring and coordinating relationships with unaffiliated service providers; (h) supervising the Rising Dividends Fund’s compliance with recordkeeping requirements under the federal securities, state and foreign laws and regulations and maintaining books and records for the Rising Dividends Fund; (i) preparing and filing of domestic and foreign tax reports and monitoring the Rising Dividends Fund’s compliance with all applicable tax laws and regulations; (j) establishing, maintaining and monitoring the Rising Dividends Fund’s compliance program with respect to the federal securities, state and foreign laws and regulations applicable to the operation of investment companies; the Rising Dividends Fund’s investment goals, policies and restrictions; and the Code of Ethics and other policies applicable to the Rising Dividends Fund; (k) preparing regulatory reports; (l) preparing and arranging for the filing of registration statements and other documents with the SEC and other federal, state and foreign or other regulatory authorities; (m) maintaining a review and certification program and internal controls and procedures in accordance with the Sarbanes Oxley Act of 2002, as applicable; and (n) providing executive, clerical and other personnel needed to carry out the above responsibilities. As FASL does under the Current IM Agreement, FAI will engage Franklin Templeton Services, LLC (“FT Services”) to provide such services to the Rising Dividends Fund.

Management Fees. Pursuant to the New IMAdministration Agreement, the annual rate of the fee payable to FAI by the Rising Dividends Fund is identical to the annual rate of the fee paid by the Rising Dividends Fund under the Current IM Agreement to FASL, and shall be based upon the following annual rate, as a percentage of the Rising Dividends Fund’s average daily net assets:

0.750% of the value of net assets up to and including $500 million;
0.625% of the value of net assets over $500 million up to and including $1 billion;
0.500% of the value of net assets over $1 billion up to and including $5 billion; and
0.490% of the value of net assets in excess of $5 billion.

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Fund Expenses. The New IM Agreement includes a general list of expenses that are payable by the Rising Dividends Fund. The obligations of the Rising Dividends Fund and the investment manager with respect to Fund expenses would remain unchanged.

Brokerage. Under the New IM Agreement, FAI will seek to obtain the best net price and execution when placing trades for the Rising Dividends Fund. The role and obligations of the Rising Dividends Fund’s investment manager with respect to seeking best execution would remain unchanged. The New IM Agreement recognizes that FAI may place orders on behalf of the Rising Dividends Fund with a broker who charges a commission for that transaction which is in excess of the amount of commissions that another broker would have charged for effecting that transaction, provided that the excess commission is reasonable in relation to the value of “brokerage and research services” provided by that broker, as such services are defined in Section 28(e) of the Securities Exchange Act of 1934, as amended.

Proxy Voting. The New IM Agreement provides that all decisions on proxy voting with respect to the Rising Dividends Fund’s portfolio securities will be made by FAI, unless the Board determines otherwise. However, the role and obligations of the Rising Dividends Fund’s investment manager with respect to proxy voting would remain unchanged. Both FASL and FAI have adopted proxy voting guidelines that are substantially identical, which have been approved by the Board.

Delegation. The New IM Agreement includes a new provision that reflects the ability of the Rising Dividends Fund to operate in a Manager of Managers Structure whereby the Fund’s investment manager would be able to hire and replace subadvisers without shareholder approval, including FAI’s obligation to supervise any subadviser. As discussed above, the use of the Manager of Managers Structure was previously approved by the Board, and is being submitted for the approval of the Rising Dividends Fund’s shareholders at the Meeting.

Limitation of Liability. The New IM Agreement provides that in the absence of FAI’s willful misfeasance, bad faith, gross negligence, or reckless disregard of obligations or duties under the New IM Agreement, FAI will not be subject to liability to the Rising Dividends Fund for any act or omission in providing investment management services. The same limitation of liability of the investment manager is provided in the Current IM Agreement.

Indemnification. As noted above, the New IM Agreement includes a revised indemnification provision that describes FAI’s obligation to indemnify the Trust, the Rising Dividends Fund, and their officers and Trustees for losses or expenses resulting from the willful misfeasance, bad faith, gross negligence, or reckless disregard by FAI of its obligations or duties under the New IM Agreement.

Continuance. If shareholders of the Rising Dividends Fund approve the New IM Agreement, the New IM Agreement will continue in effect until two years from the date of its execution, unless earlier terminated. The New IM Agreement is thereafter renewable annually for successive periods of twelve (12) months by a vote of a

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majority of the Independent Trustees, cast in person at a meeting called for the purpose of voting on such approval, and either the vote of (a) a “majority of outstanding voting securities” of the Rising Dividends Fund (as defined by the 1940 Act, and described above under “What is the required vote on Proposal 2?”), or (b) a majority of the Board as a whole.

Termination. The New IM Agreement may be terminated by either party at any time, without payment of any penalty, on sixty (60) days’ written notice to the other party, provided that termination by the Rising Dividends Fund is approved by a majority of the Board or by a “majority of the outstanding voting securities” of the Rising Dividends Fund (as defined by the 1940 Act, and described below under “What is the required vote on Proposal 3?”).

What fees were paid by the Rising Dividends Fund to affiliates of FASL and FAI during the most recent fiscal year?

Information regarding the fees paid by the Rising Dividends Fund to affiliates of FASL and FAI during the Fund’s most recently completed fiscal year is provided below, under “ADDITIONAL INFORMATION ABOUT THE TRUST.”

What did the Board consider when it approved the New IM Agreement?

At a meeting held on May 23, 2017 (the “May Board Meeting”), the Board, including a majority of the Independent Trustees, reviewed and approved, and recommended to shareholders the approval of, the New IM Agreement between FAI and the Trust, on behalf of the Rising Dividends Fund, 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 New IM Agreement.

The Board reviewed and considered information provided by FAI at the May Board Meeting. The Board also considered a form of the New IM Agreement, which is consistent with the agreements used across the Franklin Templeton Investments organization, as well as the Code of Ethics and Insider Trading Compliance Policies and Procedures that applied to the employees of FAI. The Board discussed with Franklin Templeton Investments the reasons for its request that the Board approve the New IM Agreement, including the benefits of the current portfolio management team, who would become employees of FAI, having access to additional resources. The Board reviewed and considered all of the factors it deemed relevant in approving the New IM Agreement, including, but not limited to: (i) the nature, extent, and quality of the services to be provided by FAI; 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 Rising Dividends Fund facilitates a restructuring of the Fund’s current investment manager, FASL, and the relocation of substantially all of the Rising Dividends Fund’s current portfolio management team from FASL to FAI. In determining that the New IM Agreement is fair and reasonable, the Board also

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noted that the New IM Agreement is substantially the same as the Fund’s Current IM Agreement with FASL and does not reflect a substantially new or different level of services to or fees payable by the Rising Dividends 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 FAI and its affiliates to the Rising Dividends Fund and its shareholders. In particular, the Board took into account that the Rising Dividends Fund will have the same investment goals, principal investment policies, and service provider arrangements (except with respect to FAI) and other key factors. The Board discussed the fact that the same portfolio management team would serve the Rising Dividends Fund but that there would be benefits to having them join the investment professionals at FAI with a similar investment style. This realignment would promote greater collaboration through the sharing of resources and investment ideas. It also noted FAI’s experience as manager of other funds and accounts, including those within the Franklin Templeton Investments organization; the personnel, operations, financial condition, and investment management capabilities, methodologies and resources of FAI and FAI’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 Franklin Templeton Investments organization.

Following consideration of such information, the Board was satisfied with the nature, extent and quality of services to be provided by FAI and its affiliates to the Rising Dividends Fund and its shareholders.

Fund Performance. The Board noted that, in connection with the restructuring of FASL, substantially all of the Rising Dividends Fund’s current portfolio management team would be relocated from FASL to FAI. The Board considered the track record of such portfolio management team in managing the Rising Dividends Fund, which was reviewed most recently by the Board in April 2017 as part of the annual contract renewal process (the “2017 Contract Renewal Process”). With that, and the additional resources available to the portfolio management team by joining FAI, the Board was confident in the abilities of such portfolio management team to continue the investment approach of the Rising Dividends 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 FAI. The Board noted that the management fee to be paid by the Rising Dividends Fund under the New IM 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 Contract Renewal Process. The Board concluded that the proposed investment management fee is fair and reasonable.

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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 Contract Renewal Process of the Current IM Agreement with FASL that would continue in effect until the date the New IM Agreement becomes effective had not changed as a result of the proposed retention of FAI 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 IM Agreement for an initial two year period effective on or about December 1, 2017.

What is the required vote on Proposal 3?

Proposal 3 must be approved by the affirmative 1940 Act Majority Vote of shareholders of the Rising Dividends Fund.

If Proposal 3 is not approved by shareholders of the Rising Dividends Fund, it is expected that the Fund will continue to operate under the Current IM Agreement and the Board will consider what steps to take with respect to the ongoing management of the Fund.

THE BOARD UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS OF THE RISING DIVIDENDS FUND
VOTE “FOR” PROPOSAL 3.

The Board, on behalf of the Templeton Developing Markets VIP Fund (the “Developing Markets Fund”), unanimously recommends that shareholders of the Developing Markets Fund vote to approve a new Subadvisory Agreement between Templeton Asset Management Ltd. (“TAML”), as investment manager for the Developing Markets Fund, and FTIML (the “FTIML Subadvisory Agreement”).

Background

Templeton Emerging Markets Group is a unit of Franklin Templeton Investments with over 50 portfolio managers, analysts and other investment professionals across various Investment Manager Affiliates dedicated to emerging and frontier markets. Franklin Templeton Investments recently began initiating a series of new portfolio manager assignments within Templeton Emerging Markets Group that are designed to align portfolio management teams across its fund offerings, to recognize the investment leadership roles that key individuals have been playing in their specific strategies, and to further formalize their contribution and responsibility in the management of specific portfolios.

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As part of this initiative, on April 3, 2017, Chetan Sehgal, CFA, Director of Global Emerging Markets and Small Cap Strategies of Templeton Emerging Markets Group and a portfolio manager of TAML, began serving as the lead portfolio manager for the Developing Markets Fund. In addition, Franklin Templeton Investments recommended adding Carlos Hardenberg, Director of Frontier Markets Strategy of Templeton Emerging Markets Group and a portfolio manager of FTIML, to the Developing Markets Fund’s portfolio management team.

Why is FTIML recommended to serve as the Developing Markets Fund’s subadviser?

FTIML is recommended to serve as the Developing Markets Fund’s subadviser in order to allow Mr. Hardenberg to serve as a portfolio manager for the Developing Markets Fund.

Mr. Hardenberg has served in an investment leadership role with regard to the Frontier Markets Strategy since its inception in 2008, and was named Director of the Frontier Markets Strategy on January 1, 2016. As Director of the Frontier Markets Strategy, Mr. Hardenberg is responsible for the design, implementation and ongoing refinement of the Frontier Markets Strategy across Franklin Templeton Investments’ individual portfolios. Mr. Hardenberg also collaborates on Franklin Templeton Investments’ Global Emerging Markets Strategies and serves as the portfolio manager for the Templeton Emerging Markets Investment Trust PLC.

Fund management believes it is in the best interests of the Developing Markets Fund’s shareholders for Mr. Hardenberg, a portfolio manager with FTIML, to serve as a portfolio manager for the Developing Markets Fund. Mr. Hardenberg has been working closely with Mr. Sehgal on the Global Emerging Markets Strategies, while retaining oversight of the Frontier Markets Strategy. Mr. Sehgal will continue in his role as lead portfolio manager of the Developing Markets Fund, with Mr. Hardenberg collaborating with Mr. Sehgal in this capacity.

In order for Mr. Hardenberg to serve as a portfolio manager for the Developing Markets Fund, shareholders of the Fund are being asked to approve the FTIML Subadvisory Agreement. The form of FTIML Subadvisory Agreement is included as Exhibit C to this proxy statement.

The addition of FTIML as a subadviser to the Developing Markets Fund will have no impact on the amount of investment management fees that are paid by the Fund or Fund shareholders because FTIML’s fees will be deducted from the fees that TAML receives from the Developing Markets Fund. Further shareholder approval would be necessary to increase the management fees that are payable by the Developing Markets Fund, which is not contemplated. The approval of the FTIML Subadvisory Agreement for the Developing Markets Fund will not affect how the Fund is managed or the Fund’s investment goal, principal investment strategies or the principal risks associated with an investment in the Fund.

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Additional Information about TAML

TAML, with its principal offices at 7 Temasek Boulevard, Suntec Tower One, #38-03, Singapore 038987, is the investment manager for the Fund. TAML is organized as a public company limited by shares incorporated in Singapore, and is registered as an investment adviser with the SEC.

TAML serves as the Developing Markets Fund’s investment manager pursuant to an amended and restated investment management agreement dated May 1, 2014. The Board most recently voted to renew the investment management agreement for the Developing Markets Fund on April 18, 2017. The investment management agreement for the Developing Markets Fund was last submitted to the Developing Markets Fund’s sole initial shareholder on April 27, 2007 in connection with the redomestication of the Trust from a Massachusetts business trust to a Delaware statutory trust, which was approved by the Trust’s shareholders at a meeting held on March 21, 2007, and reconvened on April 3, 2007.

For the fiscal year ended December 31, 2016, the amount of investment management fees paid to TAML by the Developing Markets Fund was $3,593,021, after taking account of TAML’s agreement to waive its fees and reduce its fees to reflect reduced services resulting from the Fund’s investment in a Franklin Templeton money fund. Before any such waiver, the Developing Markets Fund’s investment management fees totaled $3,651,393.

TAML is a wholly owned subsidiary of Franklin Templeton Capital Holdings Private Limited, and an indirect wholly owned subsidiary of Franklin Resources. The following table sets forth the name and principal occupation of the principal executive officers and each director of TAML. Unless otherwise noted, the business address of the principal executive officers and each director in the table below is 7 Temasek Boulevard, Suntec Tower One, #38-03, Singapore 038987.

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Additional Information about FTIML

FTIML, with its principal offices at Cannon Place, 78 Cannon Street, London, England EC4N 6HL, is organized as a Private Limited Company in England, and is registered as an investment adviser with the SEC.

On May 23, 2017, the Board voted to approve the FTIML Subadvisory Agreement and to submit the FTIML Subadvisory Agreement to the Developing Markets Fund’s shareholders for approval.

FTIML is a wholly owned subsidiary of Franklin Templeton Global Investors Limited, and an indirect wholly owned subsidiary of Franklin Resources. The following table sets forth the name and principal occupation of the principal executive officer and each director of FTIML. Unless otherwise noted, the business address of the principal executive officer and each director in the table below is Cannon Place, 78 Cannon Street, London, England EC4N 6HL.

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What are the material terms of the FTIML Subadvisory Agreement?

Below is a summary of the material terms of the FTIML Subadvisory Agreement. The following discussion is qualified in its entirety by reference to the form of FTIML Subadvisory Agreement attached as Exhibit C to this proxy statement.

Services. Subject to the overall policies, direction and review of the Board and subject to the instructions and supervision of TAML, FTIML will provide certain investment advisory services with respect to securities and investments and cash equivalents in the Developing Markets Fund.

Subadvisory Fees. The addition of FTIML as a subadviser to the Developing Markets Fund and FTIML’s provision of subadvisory services to the Fund will have no impact on the amount of investment management fees that are paid by the Fund or the fees paid by Fund shareholders because the fees that are received by FTIML will be paid directly by TAML. Further, shareholder approval would be necessary to increase the management fees that are payable by the Developing Markets Fund, which is not contemplated. The approval of the FTIML Subadvisory Agreement will not affect how the Developing Markets Fund is managed or the Fund’s investment goal, principal investment strategies or the principal risks associated with an investment in the Fund.

Under the FTIML Subadvisory Agreement, TAML would pay FTIML a subadvisory fee of 50% of the “net investment advisory fee” paid by the Developing Markets Fund to TAML. The net investment advisory fee is defined in the FTIML Subadvisory Agreement to equal (i) 96% of an amount equal to the total investment management fee payable to TAML, minus any fees and/or expenses of the Developing Markets Fund waived and/or reimbursed by TAML, minus (ii) any fees payable by TAML to FT Services for fund administrative services.

Payment of Expenses. During the term of the FTIML Subadvisory Agreement, FTIML will pay all expenses incurred by it in connection with the services to be provided by it under the FTIML Subadvisory Agreement, other than the cost of securities (including brokerage commissions, if any) purchased by the Developing Markets Fund.

Brokerage. FTIML will seek to obtain the most favorable price and execution available when placing trades for the Developing Markets Fund’s portfolio transactions. The FTIML Subadvisory Agreement recognizes that FTIML may place orders on behalf of the Developing Markets Fund with a broker who charges a commission for that transaction which is in excess of the amount of commissions that another broker would have charged for effecting that transaction, in recognition of the brokerage and research services that such broker provides, in accordance with the Developing Markets Fund’s policies and procedures, the terms of the Developing Markets Fund’s investment management agreement, the Developing Markets Fund’s prospectus and Statement of Additional Information, and applicable law.

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Limitation of Liability. The FTIML Subadvisory Agreement provides that in the absence of willful misfeasance, bad faith, gross negligence, or reckless disregard of its obligations or duties under such agreement on the part of FTIML, neither FTIML nor any of its directors, officers, employees or affiliates will be subject to liability to TAML, the Developing Markets Fund, or to any shareholder of the Developing Markets Fund for any error of judgment or mistake of law or any other act or omission in the course of, or connected with, rendering services thereunder or for any losses that may be sustained in the purchase, holding or sale of any security by the Fund.

Continuance. If shareholders of the Developing Markets Fund approve the FTIML Subadvisory Agreement, the FTIML Subadvisory Agreement will continue in effect for two years from the date of its execution, unless earlier terminated. The FTIML Subadvisory Agreement is thereafter renewable annually for successive periods of twelve (12) months by a vote of a majority of the Trust’s Independent Trustees, cast in person at a meeting called for the purpose of voting on such approval, and either (a) a 1940 Act Majority Vote of the Developing Markets Fund’s shareholders, or (b) a majority of the Board as a whole.

Termination. The FTIML Subadvisory Agreement may be terminated (i) at any time, without payment of any penalty, by the Board upon written notice to TAML and FTIML, or by a 1940 Act Majority Vote of the Developing Markets Fund’s shareholders, or (ii) by TAML or FTIML upon not less than sixty (60) days’ written notice to the other party.

What other investment companies are managed or subadvised by FTIML?

Following is a list of funds that are managed or subadvised by FTIML that have investment objectives and strategies similar to the Developing Markets Fund.