Franklin Templeton Variable Insurance Products Trust N-CSR Certified annual shareholder report (management investment company)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT

COMPANIES

Investment Company Act file number 811-5583

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)

Murray L. Simpson, 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: 12/31/03

Item 1. Reports to Stockholders.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST ANNUAL REPORT

TABLEOF CONTENTS

A Word About Risk	i
Important Notes to Performance Information	ii
Regulatory Update	iii
Fund Summaries
Franklin Aggressive Growth Securities Fund	FA-1
*Prospectus Supplement	FA-5
Franklin Global Communications Securities Fund	FGC-1
*Prospectus Supplement	FGC-6
Franklin Growth and Income Securities Fund	FGI-1
Franklin High Income Fund	FH-1
Franklin Income Securities Fund	FI-1
Franklin Large Cap Growth Securities Fund	FL-1
Franklin Money Market Fund	FM-1
Franklin Real Estate Fund	FRE-1
*Prospectus Supplement	FRE-6
Franklin Rising Dividends Securities Fund	FRD-1
Franklin Small Cap Fund	FSC-1
Franklin Small Cap Value Securities Fund	FSV-1
Franklin Strategic Income Securities Fund	FSI-1
Franklin U.S. Government Fund	FUS-1
Franklin Zero Coupon Fund 2005	FZ5-1
Franklin Zero Coupon Fund 2010	FZ10-1
Mutual Discovery Securities Fund	MD-1
Mutual Shares Securities Fund	MS-1
Templeton Developing Markets Securities Fund	TD-1
Templeton Foreign Securities Fund	TF-1
Templeton Global Asset Allocation Fund	TGA-1
*Prospectus Supplement	TGA-6
Templeton Global Income Securities Fund	TGI-1
*Prospectus Supplement	TGI-7
Templeton Growth Securities Fund	TG-1
*Prospectus Supplement	TG-5
Index Descriptions	IND-1
Board Members and Officers	BOD-1
Proxy Voting Policies and Procedures	PV-1

*Not part of the annual report

NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE

MASTER CLASS 2 A03 02-04

A WORDABOUT RISK

All of the funds are subject to certain risks, which will cause investment returns and the value of your principal to increase or decrease. Generally, investments offering the potential for higher returns are accompanied by a higher degree of risk. Stocks and other equities, representing an ownership interest in an individual company, historically have outperformed other asset classes over the long term, but tend to fluctuate more dramatically over the shorter term. Securities of smaller companies, and companies involved in reorganization or bankruptcy, may have greater price swings and greater credit and other risks. By having significant investment in particular sectors from time to time, some funds carry greater risk of adverse developments in those sectors than a fund that always invests in a wider variety of sectors. The technology sector can be among the most volatile market sectors.

Bonds and other debt obligations are affected by the creditworthiness of their issuers, and changes in interest rates, with prices declining as interest rates increase. High yield, lower-rated (“junk”) bonds generally have greater price swings and higher default risks than investment grade bonds.

Foreign investing, especially in emerging market countries, has additional risks such as changes in currency values, market price swings, and economic, political or social instability. These and other risks pertaining to specific funds, such as specialized industry or geographical sectors or use of complex securities, are discussed in the Franklin Templeton Variable Insurance Products Trust prospectus. Your investment representative can help you determine which funds may be right for you.

i

IMPORTANT NOTESTO

PERFORMANCE INFORMATION

Total return of the funds is the percentage change in value of a hypothetical $10,000 investment over the indicated periods and includes reinvestment of dividends and capital gains. Inception dates of the funds may have preceded the effective dates of the subaccounts, contracts, or their availability in all states. 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.

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.

ii

REGULATORY UPDATE

As of February 12, 2004

To Our Valued Contract Owners:

In our efforts to fulfill our ongoing commitment to providing you with timely and accurate information, we have prepared this statement to give you an overview of current industry issues as they pertain to Franklin Resources, Inc. (Franklin Templeton Investments) and our subsidiary companies (the “Company”). Any further updates on these and other matters will be disclosed on the Company’s website at franklintempleton.com under “Statement on Current Industry Issues.”

On February 4, 2004, the Securities Division of the Office of the Secretary of the Commonwealth of Massachusetts filed an administrative complaint against Franklin Resources, Inc. and certain of its subsidiaries, alleging violations of the Massachusetts Uniform Securities Act. The complaint arises from activity that occurred in 2001 during which time an officer of a Company subsidiary was negotiating an agreement with an investor relating to investments in a mutual fund and a hedge fund.

The Company, in addition to other entities within Franklin Templeton Investments, has been named in shareholder class actions related to the matter described above. The Company believes that the claims made in the lawsuit are without merit and it intends to defend vigorously against the allegations. The Company and the Fund(s) may be named in similar civil actions related to the matter described above.

In addition, as part of ongoing investigations by the U.S. Securities and Exchange Commission (the “SEC”), the U.S. Attorney for the Northern District of California, the New York Attorney General, the California Attorney General, the U.S. Attorney for the District of Massachusetts, the Florida Department of Financial Services, and the Commissioner of Securities and the Attorney General of the State of West Virginia, relating to certain practices in the mutual fund industry, including late trading, market timing and sales compensation arrangements, the Company and its subsidiaries, as well as certain current or former executives and employees of the Company, have received requests for information and/or subpoenas to testify or produce documents. The Company and its current employees are providing documents and information in response to these requests and subpoenas. In addition, the Company has responded to requests for similar kinds of information from regulatory authorities in some of the foreign countries where the Company conducts its global asset management business.

The Staff of the SEC has informed the Company that it intends to recommend that the Commission authorize an action against the Funds’ investment adviser and/or an affiliate adviser and a senior executive officer relating to the frequent trading issues that are the subject of the SEC’s investigation. These issues were previously disclosed as being under investigation by government authorities and the subject of an internal inquiry by the Company in its Annual Report on Form 10-K and on its public website. The Company currently is in discussions with the SEC Staff in an effort to resolve the issues raised in their investigation. Such discussions are preliminary and the Company cannot predict the likelihood of whether those discussions will result in a settlement and, if so, the terms of such settlement. The impact, if any, of these matters on a fund is uncertain at this time. If it is found that the Company bears responsibility for any unlawful or improper conduct, we have committed to making a fund or its shareholders whole, as appropriate.

iii

FRANKLIN AGGRESSIVE GROWTH SECURITIES FUND

Fund Goal and Primary Investments: Franklin Aggressive Growth Securities Fund seeks capital appreciation. The Fund invests mainly in equity securities of companies demonstrating accelerating growth, increasing profitability, or above-average growth or growth potential as compared with the overall economy.

We are pleased to bring you Franklin Aggressive Growth Securities Fund’s annual report for the fiscal year ended December 31, 2003.

Performance Overview

You can find the Fund’s one-year total return in the Performance Summary following this report. The Fund outperformed its benchmarks, the Standard & Poor’s 500 Composite Index (S&P 500) and the Russell 3000^® Growth Index, which returned 28.67% and 30.97% for the year under review.¹

Economic and Market Overview

During the year ended December 31, 2003, many factors impacted global economies and financial markets. Early in the year, economic uncertainty and geopolitical events, including impending war in Iraq, pushed U.S. interest rates to their lowest level in more than four decades, and the 10-year U.S. Treasury note’s yield fell to 3.13% in mid-June. However, following the end of major conflict in Iraq, many economic indicators turned positive. The U.S. government injected fiscal stimulus into the economy, approving another round of tax cuts and rebates that included dividend and capital gains tax reductions. In June, an accommodative Federal Reserve Board, in an attempt to bolster the economy, cut the federal funds target rate to 1.00%.

During the year, the U.S. trade deficit increased significantly, contributing to the U.S. dollar’s fall to record lows against the euro and other major currencies. However, the weak dollar provided a boost to the U.S. economy and corporate profits as exports became cheaper for foreign buyers. Robust consumer spending, especially for autos and homes, and strong business spending, particularly for equipment and software, contributed to the accelerated economic activity. In addition, U.S. federal spending stayed firm and inflation remained benign. U.S. gross domestic product (GDP) grew an annualized 8.2% in third quarter 2003, its strongest pace in nearly 20 years, and overall, 2003 GDP

1. Source: Standard & Poor’s Micropal. One cannot invest directly in an index, nor is an index representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

FA-1

grew an estimated 3.1%. As economic data improved, some interest rates rose from their lows, and the 10-year Treasury note’s yield ended the period at 4.27%.

An equity market rally started in late March 2003 and continued through the end of the year. The rebound began with investors anticipating economic recovery in the second half of 2003, and it continued as data showed robust economic growth. Improved sentiment led many investors to rotate into economically sensitive and financially leveraged companies, specifically cyclical, technology, small-capitalization and emerging market stocks. The S&P 500 rose 28.67% for the 12 months ended December 31, 2003, while the technology-heavy Nasdaq Composite Index increased 50.93%.¹

Investment Strategy

We are research driven, fundamental investors, pursuing an aggressive growth strategy. As bottom-up investors focusing primarily on individual securities, we choose companies that we believe are positioned for rapid growth in revenues, earnings or assets. We rely on a team of analysts to provide in-depth industry expertise, and we use qualitative and quantitative analyses to evaluate companies for distinct and sustainable competitive advantages such as a particular marketing niche, proven technology, sound financial records, strong management and industry leadership.

Manager’s Discussion

The Fund’s overweighted position relative to the Russell 3000 Growth Index, as well as positive stock selection, in electronic technology helped performance during the year under review. Major contributors to return in this sector were Xicor and Lam Research. Additionally, specific stock selection in technology services contributed to the Fund’s performance. Strong performers in this sector were Yahoo! and Ask Jeeves. Specific stocks also boosted our retail trade allocation as our investments in Cost Plus and Tuesday Morning appreciated during the period. In health technology, some particular holdings that performed well, and an underweighted position in pharmaceuticals benefited Fund performance. Within the sector, our Boston Scientific (sold by year-end) holding increased in value.

Top 10 Holdings

Franklin Aggressive Growth

Securities Fund

12/31/03

Company Sector/Industry	% of Total Net Assets
Microsoft Corp.	2.7%
Technology Services
Forest Laboratories Inc.	2.1%
Health Technology
InterMune Inc.	2.0%
Health Technology
Tektronix Inc.	2.0%
Electronic Technology
Pfizer Inc.	1.9%
Health Technology
Carbo Ceramics Inc.	1.9%
Industrial Services
Clear Channel Communications Inc.	1.8%
Consumer Services
Verity Inc.	1.8%
Technology Services
Lam Research Corp.	1.7%
Electronic Technology
Gilead Sciences Inc.	1.7%
Health Technology

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

FA-2

Despite the Fund’s strong returns, some factors detracted from Fund performance. Our overweighted position in industrial services constrained Fund returns. Patterson UTI Energy (sold by year-end) was particularly weak in this sector. Stock selection in consumer services, such as Entravision Communications, also hampered the Fund’s performance.

Thank you for your participation in Franklin Aggressive Growth Securities Fund.

On November 18, 2003, the Board of Trustees of Franklin Templeton Variable Insurance Products Trust (the Trust) approved a proposal to merge Franklin Aggressive Growth Securities Fund (Fund) into Franklin Small Cap Fund, another series of the Trust (Reorganization). If approved by Fund shareholders, the Reorganization is expected to be completed around April 30, 2004.

This discussion reflects our analysis, opinions and portfolio holdings as of December 31, 2003, 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 advisor 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.

FA-3

PERFORMANCE SUMMARYASOF 12/31/03

Total return of Class 2 shares represents the average annual change in value, assuming reinvestment of dividends and capital gains. Average returns smooth out variations in returns, which can be significant; they are not the same as year-by-year results.

Franklin Aggressive Growth Securities Fund – Class 2*

Periods ended 12/31/03

	1-Year	Since Inception (5/1/00)
Average Annual Total Return	+45.48%	-15.13%

*Because Class 2 shares were not offered until 2/12/01, standardized Class 2 Fund performance for prior periods represents the historical results of Class 1 shares. For periods beginning on 2/12/01, Class 2’s results reflect an additional 12b-1 fee expense, which also affects future performance. Since 2/12/01 (commencement of sales), the average annual total return of Class 2 shares was -10.24%.

Ongoing market volatility can significantly affect short-term performance; recent returns may differ.

Total Return Index Comparison

for Hypothetical $10,000 Investment (5/1/00–12/31/03)

The graph compares the performance of Franklin Aggressive Growth Securities Fund – Class 2,* the S&P 500 and the Russell 3000 Growth Index. One cannot invest directly in an index, nor is an index representative of the Fund’s portfolio. Please see Important Notes to Performance Information preceding the Fund Summaries.

**Source: Standard & Poor’s Micropal. Please see Index Descriptions following the Fund Summaries.

Franklin Aggressive Growth Securities Fund – Class 2

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.

Since markets can go down as well as up, investment return and the value of your principal will fluctuate with market conditions, and you may have a gain or loss when you sell your shares.

FA-4

Past performance does not guarantee future results.

FRANKLIN AGGRESSIVE GROWTH SECURITIES FUND

(FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST)

SUPPLEMENT DATED NOVEMBER 18, 2003

TOTHE PROSPECTUS DATED MAY 1, 2003

The prospectus is amended by adding the following language:

On November 18, 2003, the Board of Trustees of Franklin Templeton Variable Insurance Products Trust (the Trust) approved a proposal whereby the assets of Franklin Aggressive Growth Securities Fund (Fund) will be acquired by, and in exchange for, shares of Franklin Small Cap Fund, another series of the Trust (Reorganization). If approved by Fund shareholders, the Reorganization is expected to be completed on or about April 30, 2004. It is anticipated that in January of 2004, Fund contract owners of record on December 29, 2003, will receive a voting instruction card requesting their instructions to the insurance company shareholders on the Reorganization. A proxy statement, which explains the details of the Reorganization, will accompany the voting instruction card. The Fund will close to new investments, including exchanges into the Fund, effective after the close of business on April 23, 2004.

Please keep this supplement for future reference.

FA-5

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN AGGRESSIVE GROWTH SECURITIES FUND

Financial Highlights

	Class 1
	Year ended December 31,
	2003			2002			2001			2000c
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	3.77		$	5.87		$	7.59		$	10.00
Income from investment operations:
Net investment income (loss)a		(.03	)		(.03	)		(.02	)		.02
Net realized and unrealized gains (losses)		1.78			(2.07	)		(1.69	)		(2.43	)
Total from investment operations		1.75			(2.10	)		(1.71	)		(2.41	)
Less distributions from net investment income		—			—			(.01	)		—
Net asset value, end of year	$	5.52		$	3.77		$	5.87		$	7.59
Total returnb		46.15%			(35.67)%			(22.67)%			(24.10)%
Ratios/supplemental data
Net assets, end of year (000’s)	$	7,188		$	4,801		$	8,294		$	13,021
Ratios to average net assets:
Expenses		1.04%			1.04%			.85%			.90%	d
Net investment income (loss)		(.64)%			(.75)%			(.38)%			.35%	d
Portfolio turnover rate		91.51%			117.74%			182.27%			86.65%

^a Based on average daily shares outstanding.                                    

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

^c For the period May 1, 2000 (effective date) to December 31, 2000.

^d Annualized.                                                                                      

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN AGGRESSIVE GROWTH SECURITIES FUND

Financial Highlights (continued)

	Class 2
	Year ended December 31,
	2003			2002			2001c
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	3.75		$	5.86		$	7.48
Income from investment operations:
Net investment income (loss)a		(.06	)		(.05	)		(.04	)
Net realized and unrealized gains (losses)		1.78			(2.06	)		(1.57	)
Total from investment operations		1.72			(2.11	)		(1.61	)
Less distributions from net investment income		—			—			(.01	)
Net asset value, end of year	$	5.47		$	3.75		$	5.86
Total returnb		45.48%			(35.73)%			(22.81)%
Ratios/supplemental data
Net assets, end of year (000’s)	$	2		$	2		$	2
Ratios to average net assets:
Expenses		1.29%			1.29%			1.10%	d
Net investment income (loss)		(.89)%			(1.00)%			(.75)%	d
Portfolio turnover rate		91.51%			117.74%			182.27%

^a Based on average daily shares outstanding.

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

^c For the period February 12, 2001 (effective date) to December 31, 2001.

^d Annualized.

See notes to financial statements.

FA-7

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN AGGRESSIVE GROWTH SECURITIES FUND

Statement of Investments, December 31, 2003

		SHARES	VALUE
	Common Stocks 92.0%
	Communications 1.4%
a	Nextel Communications Inc., A	3,500	$	98,210
	Consumer Durables 1.4%
	Polaris Industries Inc.	1,100		97,438
	Consumer Services 8.7%
a	Citadel Broadcasting Corp.	3,800		85,006
	Clear Channel Communications Inc.	2,800		131,124
a	Entercom Communications Corp.	2,000		105,920
a	Entravision Communications Corp.	8,100		89,910
a	Univision Communications Inc., A	2,300		91,287
	Viacom Inc., B	2,700		119,826
				623,073
	Distribution Services 1.1%
a	United Natural Foods Inc.	2,300		82,593
	Electronic Technology 23.7%
a	Advanced Semiconductor Engineering Inc., ADR (Taiwan)	13,600		68,680
a	Applied Materials Inc.	4,200		94,290
a	Avaya Inc.	8,400		108,696
a	Avocent Corp.	2,600		94,952
a	Dell Inc.	3,000		101,880
a	F5 Networks Inc.	3,300		82,830
a	Integrated Circuit Systems Inc.	2,800		79,772
	Intersil Corp.	4,400		109,340
a	L-3 Communications Holdings Inc.	2,100		107,856
a	Lam Research Corp.	3,800		122,740
	Microchip Technology Inc.	2,100		70,056
	National Instruments Corp.	2,300		104,581
	Rockwell Automation Inc.	3,100		110,360
a	Semtech Corp.	4,000		90,920
	Tektronix Inc.	4,500		142,200
a	Varian Semiconductor Equipment Associates Inc.	2,600		113,594
a	Xicor Inc.	9,000		102,060
				1,704,807
	Energy Minerals .7%
a	Premcor Inc.	1,900		49,400
	Finance 5.6%
	AMBAC Financial Group Inc.	1,300		90,207
	Investors Financial Services Corp.	2,800		107,548
	Montpelier Re Holdings Ltd. (Bermuda)	3,000		110,100
a	Texas Capital Bancshares Inc.	6,300		91,111
				398,966
	Health Services 5.5%
a	Accredo Health Inc.	3,600		113,796
a	Anthem Inc.	1,400		105,000
a	Caremark RX Inc.	4,200		106,386
	Select Medical Corp.	4,400		71,632
				396,814

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN AGGRESSIVE GROWTH SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

		SHARES	VALUE
	Common Stocks (cont.)
	Health Technology 10.4%
a	Adolor Corp.	4,700	$	94,094
a	Angiotech Pharmaceuticals Inc. (Canada)	1,800		82,800
a	Forest Laboratories Inc.	2,400		148,320
a	Gilead Sciences Inc.	2,100		122,094
a	InterMune Inc.	6,300		145,908
a	Myogen Inc.	1,500		21,450
	Pfizer Inc.	3,800		134,254
				748,920
	Industrial Services 3.3%
	Carbo Ceramics Inc.	2,600		133,250
a	Weatherford International Ltd. (Bermuda)	2,900		104,400
				237,650
	Process Industries 1.6%
	Cabot Corp.	3,500		111,440
	Producer Manufacturing 1.5%
	Borg Warner Inc.	1,300		110,591
	Retail Trade 7.5%
a	Cost Plus Inc.	2,800		114,800
a	Ctrip.com International Ltd., ADR (China)	50		1,700
a	Gymboree Corp.	4,100		70,643
a	Hot Topic Inc.	3,000		88,380
a	Orbitz Inc.	500		11,600
	Ross Stores Inc.	3,800		100,434
a	Tuesday Morning Corp.	2,600		78,650
a	Williams-Sonoma Inc.	2,200		76,494
				542,701
	Technology Services 18.6%
a	Accenture Ltd., A (Bermuda)	4,300		113,176
a	Affiliated Computer Services Inc., A	2,085		113,549
a	Ask Jeeves Inc.	4,800		86,976
a	Cognos Inc. (Canada)	3,300		101,046
	Computer Associates International Inc.	3,800		103,892
	Fair Isaac Inc.	1,500		73,740
a	Hewitt Associates Inc.	3,000		89,700
a	Intuit Inc.	1,900		100,529
	Microsoft Corp.	7,000		192,780
a	Network Associates Inc.	4,200		63,168
	Paychex Inc.	2,400		89,280
a	Verity Inc.	7,600		126,844
a	Yahoo! Inc.	1,900		85,823
				1,340,503

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN AGGRESSIVE GROWTH SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

		SHARES	VALUE
	Common Stocks (cont.)
	Transportation 1.0%
a	Forward Air Corp.	2,600	$	71,500
	Total Common Stocks (Cost $5,235,146)			6,614,606
	Short Term Investments (Cost $509,043) 7.1%
b	Franklin Institutional Fiduciary Trust Money Market Portfolio	509,043		509,043
	Total Investments (Cost $5,744,189) 99.1%			7,123,649
	Other Assets, less Liabilities .9%			66,253
	Net Assets 100.0%		$	7,189,902

^a Non-income producing.                                                                                                      

^b See Note 6 regarding investments in the Franklin Institutional Fiduciary Trust Money Market Portfolio.

See notes to financial statements.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN AGGRESSIVE GROWTH SECURITIES FUND

Financial Statements

Statement of Assets and Liabilities

December 31, 2003

Assets:
Investments in securities:
Cost	$	5,744,189
Value		7,123,649
Receivables:
Investment securities sold		46,544
Capital shares sold		43,211
Dividends		1,713
Total assets		7,215,117
Liabilities:
Payables:
Capital shares redeemed		4,816
Affiliates		4,010
Professional fees		16,001
Other liabilities		388
Total liabilities		25,215
Net assets, at value	$	7,189,902
Net assets consist of:
Undistributed net investment income	$	—
Net unrealized appreciation (depreciation)		1,379,460
Accumulated net realized gain (loss)		(9,303,842	)
Capital shares		15,114,284
Net assets, at value	$	7,189,902
Class 1:
Net assets, at value	$	7,187,578
Shares outstanding		1,303,206
Net asset value and offering price per share	$	5.52
Class 2:
Net assets, at value	$	2,324
Shares outstanding		425
Net asset value and offering price per share	$	5.47

See notes to financial statements.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN AGGRESSIVE GROWTH SECURITIES FUND

Financial Statements (continued)

Statement of Operations

for the year ended December 31, 2003

Investment income:
Dividends	$	22,221
Expenses:
Management fees (Note 3)		26,359
Administrative fees (Note 3)		11,191
Distribution fees - Class 2 (Note 3)		5
Transfer agent fees		140
Custodian fees		51
Reports to shareholders		1,718
Professional fees		17,454
Trustees’ fees and expenses		54
Other		1,220
Total expenses		58,192
Net investment income (loss)		(35,971	)
Realized and unrealized gains (losses):
Net realized gain (loss) from investments		66,291
Net unrealized appreciation (depreciation) on investments		2,094,888
Net realized and unrealized gain (loss)		2,161,179
Net increase (decrease) in net assets resulting from operations	$	2,125,208

See notes to financial statements.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN AGGRESSIVE GROWTH SECURITIES FUND

Financial Statements (continued)

Statements of Changes in Net Assets

for the years ended December 31, 2003 and 2002

	2003			2002
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	(35,971	)	$	(47,012	)
Net realized gain (loss) from investments		66,291			(1,414,412	)
Net unrealized appreciation (depreciation) on investments		2,094,888			(1,467,907	)
Net increase (decrease) in net assets resulting from operations		2,125,208			(2,929,331	)
Capital share transactions: (Note 2)
Class 1		261,646			(563,955	)
Class 2		(73	)		—
Total capital share transactions		261,573			(563,955	)
Net increase (decrease) in net assets		2,386,781			(3,493,286	)
Net assets:
Beginning of year		4,803,121			8,296,407
End of year	$	7,189,902		$	4,803,121
Undistributed net investment income included in net assets:
End of year	$	—		$	—

See notes to financial statements.

FA-13

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN AGGRESSIVE GROWTH SECURITIES FUND

Notes to Financial Statements

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (the Trust) is registered under the Investment Company Act of 1940 as an open-end investment company, consisting of twenty-two separate series (the Funds). Franklin Aggressive Growth Securities Fund (the Fund) included in this report is diversified. Shares of the Fund are sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. The Fund’s investment objective is capital growth.

On November 18, 2003, the Board of Trustees for the Trust approved a proposal to merge the Franklin Aggressive Growth Securities Fund into the Franklin Small Cap Fund, subject to approval by the shareholders of the Franklin Aggressive Growth Securities Fund.

The following summarizes the Fund’s significant accounting policies.

a. Security Valuation

Securities listed or traded on a recognized national exchange or NASDAQ are valued at the last reported sales price. Over-the-counter securities and listed securities for which no sale is reported are valued within the range of the latest quoted bid and asked prices. Investments in open-end mutual funds are valued at the closing net asset value. Foreign securities are valued at the close of trading of the foreign exchange or the NYSE, whichever is earlier. If events occur that materially affect the values of securities after the prices or foreign exchange rates are determined, or if market quotations are not readily available, the securities will be valued at fair value as determined following procedures approved by the Board of Trustees.

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. Purchases and sales of securities and income items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.

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.

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

c. Income Taxes

No provision has been made for income taxes because the Fund’s policy is to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable income.

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. Interest income and estimated expenses are accrued daily. Dividend income and distributions to shareholders are recorded on the ex-dividend date.

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. Other expenses are charged to each fund on a specific identification basis.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN AGGRESSIVE GROWTH SECURITIES FUND

Notes to Financial Statements (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

Realized and unrealized gains and losses and net investment income, other than class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class.

e. Accounting Estimates

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

f. Guarantees and Indemnifications

Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust 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. However, based on experience, the Trust expects the risk of loss to be remote.

2. SHARES OF BENEFICIAL INTEREST

The Fund offers two classes of shares: Class 1 and Class 2. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

At December 31, 2003, there were an unlimited number of shares authorized ($.01 par value). Transactions in the Fund’s shares were as follows:

	Year Ended December 31,
	2003					2002
Class 1 Shares:	Shares		Amount			Shares		Amount
Shares sold	678,127		$	3,174,361		312,751		$	1,490,797
Shares redeemed	(647,673	)		(2,912,715	)	(454,102	)		(2,054,752	)
Net increase (decrease)	30,454		$	261,646		(141,351	)	$	(563,955	)
Class 2 Shares:
Shares redeemed	(17	)	$	(73	)	—			—
Net increase (decrease)	(17	)	$	(73	)	—			—

3. TRANSACTIONS WITH AFFILIATES

Certain officers and trustees of the Trust are also officers and/or directors of the following entities:

Entity	Affiliation
Franklin Templeton Services LLC (FT Services)	Administrative manager
Franklin Advisers Inc. (Advisers)	Investment 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

FRANKLIN AGGRESSIVE GROWTH SECURITIES FUND

Notes to Financial Statements (continued)

3. TRANSACTIONS WITH AFFILIATES (cont.)

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
.50%	First $500 million
.40%	Over $500 million, up to and including $1 billion
.35%	Over $1 billion, up to and including $1.5 billion

Fees are further reduced on net assets over $1.5 billion.

The Fund pays an administrative fee to FT Services of .20% per year of the average daily net assets of the Fund.

The Fund reimburses Distributors up to .25% per year of the average daily net assets of Class 2 for costs incurred in marketing the Fund’s shares.

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

4. INCOME TAXES

At December 31, 2003, the Fund had tax basis capital losses of $9,273,470, which may be carried over to offset future capital gains. Such losses expire as follows:

Capital loss carryovers expiring in:
2008	$	596,259
2009		7,013,264
2010		1,634,894
2011		29,053
	$	9,273,470

At December 31, 2003, the fund had deferred capital losses occurring subsequent to October 31, 2003 of $11,565. For tax purposes, such losses will be reflected in the year ending December 31, 2004.

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

At December 31, 2003, the cost of investments, net unrealized appreciation (depreciation), undistributed ordinary income and undistributed long term capital gains for income tax purposes were as follows:

Cost of investments	$	5,762,996
Unrealized appreciation		1,404,425
Unrealized depreciation		(43,772	)
Net unrealized appreciation (depreciation)	$	1,360,653
Undistributed ordinary income	$	—
Undistributed long term capital gains		—
Distributable earnings	$	—

FA-16

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN AGGRESSIVE GROWTH SECURITIES FUND

Notes to Financial Statements (continued)

5. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short-term securities) for the year ended December 31, 2003 aggregated $4,881,889 and $4,749,791, respectively.

6. INVESTMENT IN FRANKLIN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO

The Fund may invest in the Franklin Institutional Fiduciary Trust Money Market Portfolio (the Sweep Money Fund), an open-end investment company managed by Advisers. Management fees paid by the Fund are reduced on assets invested in the Sweep Money Fund, in an amount not to exceed the management fees paid by the Sweep Money Fund. The Fund earned $4,661 of dividend income from investment in the Sweep Money Fund for the year ended December 31, 2003.

7. REGULATORY MATTERS

On February 4, 2004, the Securities Division of the Office of the Secretary of the Commonwealth of Massachusetts filed an administrative complaint against Franklin Resources, Inc. and certain of its subsidiaries (the “Company”), alleging violations of the Massachusetts Uniform Securities Act. The complaint arises from activity that occurred in 2001 during which time an officer of a Company subsidiary was negotiating an agreement with an investor relating to investments in a mutual fund and a hedge fund.

The Company, in addition to other entities within Franklin Templeton Investments, has been named in shareholder class actions related to the matter described above. The Company believes that the claims made in the lawsuit are without merit and it intends to defend vigorously against the allegations. The Company and the Fund may be named in similar civil actions related to the matter described above.

In addition, as part of ongoing investigations by the U.S. Securities and Exchange Commission (the “SEC”), the U.S. Attorney for the Northern District of California, the New York Attorney General, the California Attorney General, the U.S. Attorney for the District of Massachusetts, the Florida Department of Financial Services, and the Commissioner of Securities and the Attorney General of the State of West Virginia, relating to certain practices in the mutual fund industry, including late trading, market timing and sales compensation arrangements, the Company and its subsidiaries, as well as certain current or former executives and employees of the Company, have received requests for information and/or subpoenas to testify or produce documents. The Company and its current employees are providing documents and information in response to these requests and subpoenas. In addition, the Company has responded to requests for similar kinds of information from regulatory authorities in some of the foreign countries where the Company conducts its global asset management business.

The Staff of the SEC has informed the Company that it intends to recommend that the Commission authorize an action against the Fund’s investment adviser and a senior executive officer relating to the frequent trading issues that are the subject of the SEC’s investigation. These issues were previously disclosed as being under investigation by government authorities and the subject of an internal inquiry by the Company in its Annual Report on Form 10-K and on its public website. The Company currently is in discussions with the SEC Staff in an effort to resolve the issues raised in their investigation. Such discussions are preliminary and the Fund’s management has been advised that the Company cannot predict the likelihood of whether those discussions will result in a settlement and, if so, the terms of such settlement. The impact, if any, of these matters on the Fund is uncertain at this time. If the Company finds that it bears responsibility for any unlawful or improper conduct, it has committed to making the Fund or its shareholders whole, as appropriate.

FA-17

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN AGGRESSIVE GROWTH SECURITIES FUND

Independent Auditors’ Report

To the Board of Trustees and Shareholders of

Franklin Templeton Variable Insurance Products Trust

In our opinion, the accompanying statement of assets and liabilities, including the statement of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Franklin Aggressive Growth Securities Fund (the Fund) (one of the funds constituting the Franklin Templeton Variable Insurance Products Trust) at December 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

February 5, 2004, except for Note 7 as to which the date is February 12, 2004

FA-18

FRANKLIN GLOBAL COMMUNICATIONS SECURITIES FUND

Fund Goals and Primary Investments: Franklin Global Communications Securities Fund seeks capital appreciation and current income. The Fund invests primarily in investments of communications companies that are primarily engaged in providing the distribution, content and equipment related to the creation, transmission or processing of information in any nation, including the U.S. and emerging markets.

We are pleased to bring you Franklin Global Communications Securities Fund’s annual report for the fiscal year ended December 31, 2003.

Performance Overview

You can find the Fund’s one-year total return in the Performance Summary following this report. The Fund outperformed its benchmark, the Standard & Poor’s 500 Composite Index (S&P 500), which returned 28.67% for the year under review.¹ Given that the Fund invests in only a few sectors found within the S&P 500, the Fund’s results versus the S&P 500 are not directly comparable.

Economic and Market Overview

During the year ended December 31, 2003, many factors impacted global economies and financial markets. Early in the year, economic uncertainty and geopolitical events, including impending war in Iraq, pushed U.S. interest rates to their lowest level in more than four decades, and the 10-year U.S. Treasury note’s yield fell to 3.13% in mid-June. However, following the end of major conflict in Iraq, many economic indicators turned positive. The U.S. government injected fiscal stimulus into the economy, approving another round of tax cuts and rebates that included dividend and capital gains tax reductions. In June, an accommodative Federal Reserve Board, in an attempt to bolster the economy, cut the federal funds target rate to 1.00%.

During the year, the U.S. trade deficit increased significantly, contributing to the U.S. dollar’s fall to record lows against the euro and other major currencies. However, the weak dollar provided a boost to the U.S. economy and corporate profits as exports became cheaper for foreign buyers. Robust consumer spending, especially for autos and homes, and strong business spending, particularly for equipment and software, contributed to the accelerated economic activity. In addition, U.S. federal spending stayed firm and inflation remained benign. U.S. gross domestic product (GDP) grew an annualized 8.2% in third

1. Source: Standard & Poor’s Micropal. One cannot invest directly in an index, nor is an index representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

FGC-1

quarter 2003, its strongest pace in nearly 20 years, and overall, 2003 GDP grew an estimated 3.1%. As economic data improved, some interest rates rose from their lows, and the 10-year Treasury note’s yield ended the period at 4.27%.

An equity market rally started in late March 2003 and continued through the end of the year. The rebound began with investors anticipating economic recovery in the second half of 2003, and it continued as data showed robust economic growth. Improved sentiment led many investors to rotate into economically sensitive and financially leveraged companies, specifically cyclical, technology, small-capitalization and emerging market stocks. The S&P 500 rose 28.67% for the 12 months ended December 31, 2003, while the technology-heavy Nasdaq Composite Index increased 50.93%. Telecommunications stocks, as measured by the Nasdaq Telecommunications Index, rose 45.75% for the same period.²

Investment Strategy

We are research driven, fundamental investors pursuing a disciplined blend of growth and value strategies. Relying on a team of analysts to provide in-depth industry expertise, we look for companies that will position the Fund to benefit from potential future technological advances and increasing worldwide demand in the communications industries. As a bottom-up investor focusing primarily on individual securities, 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 the factors we also consider are a company’s historical value measures, including price/earnings ratio, profit margins and liquidation value.

Manager’s Discussion

Many telecommunications companies showed solid operational performance in 2003, largely due to efficiency gains aimed at increasing profits, which in turn benefited their underlying stock prices. The Fund’s shares of domestic and global wireless telecommunications companies benefited most from this trend, and proved to be some of our best performers during the year under review. After a prolonged industry slump, these companies demonstrated a revamped focus on profitability while taking advantage of new growth opportunities. During the year, investors became

2. Source: Standard & Poor’s Micropal. Please see Index Descriptions following the Fund Summaries.

Top 10 Holdings

Franklin Global Communications Securities Fund

12/31/03

Company Sector/Industry, Country	% of Total Net Assets
Vodafone Group PLC, ADR	3.1%
Wireless Communications, U.K.
Nextel Communications Inc., A	3.0%
Wireless Communications, U.S.
BellSouth Corp.	2.9%
Major Telecommunications, U.S.
Allstream Inc., B	2.6%
Major Telecommunications, Canada
Telefonica SA, ADR	2.4%
Major Telecommunications, Spain
Verizon Communications Inc.	2.4%
Major Telecommunications, U.S.
Qwest Communications International Inc.	2.3%
Specialty Telecommunications, U.S.
Tektronix Inc.	2.2%
Electronic Equipment & Instruments, U.S.
Commonwealth Telephone Enterprises Inc.	2.2%
Specialty Telecommunications, U.S.
Telefonos de Mexico SA de CV (Telmex), L, ADR	2.2%
Major Telecommunications, Mexico

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

FGC-2

drawn to their improving fundamentals and the relatively low stock price valuations many wireless stocks displayed.

Domestically, Western Wireless was among our best performers in the wireless telecommunications sector. Consistent with our strategy, we bought Western shares because we believed the company had one of the best and most experienced management teams in the industry. The company’s stock had an attractive valuation at our time of purchase, especially in light of our view that the company has fundamentals, including rural operations, that may attract less competition than urban markets and may reduce the impact of wireless number portability.

In the foreign markets, NII Holdings, a wireless service provider operating in Mexico, Brazil, Argentina, Chile and Peru, was another contributor to the Fund’s results. Consistent with our strategy, we purchased the stock because we felt the company had an attractive valuation and capable management team. The company has been able to grow its subscriber base and maintain profitability over the past several quarters.

Among our globally competitive wireless company holdings, Vodafone Group provided substantial support to the Fund’s overall returns. Vodafone provides a range of mobile telecommunications services, including voice and data communications. The company has a presence in the U.S., continental Europe and the U.K., and in the Far East. Following our strategy, we purchased Vodafone shares because we felt the company had an attractive stock valuation, strong competitive position, and significant exposure to a host of the world’s wireless communications growth opportunities.

Although the Fund posted excellent overall results this reporting period, there were a few disappointments in the portfolio. For example, our domestic wireline services (major telecommunications sector) holdings suffered from a combination of factors, including deteriorating fundamentals, line losses due to competing technologies (especially wireless competition), and an uncertain regulatory climate. Our strategy led us to purchase stock of AT&T, the major telecommunications provider, due to our belief that its valuation was attractive and the new management team had an opportunity to improve operations. AT&T stock faltered as the company faced tough, highly competitive market conditions that resulted in declining revenue and cash flow. Thus, AT&T negatively impacted Fund performance during the period. AT&T’s new management team is attempting to reduce costs to maximize cash flow and profitability. In

FGC-3

line with our strategy, we continued to hold AT&T in the portfolio at period-end, believing the new management team appeared on the right track to improved profitability.

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

This discussion reflects our analysis, opinions and portfolio holdings as of December 31, 2003, 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 advisor 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.

FGC-4

PERFORMANCE SUMMARYASOF 12/31/03

Total return of Class 2 shares represents the average annual change in value, assuming reinvestment of dividends and capital gains. Average returns smooth out variations in returns, which can be significant; they are not the same as year-by-year results.

Franklin Global Communications Securities Fund – Class 2*

Periods ended 12/31/03

	1-Year	5-Year	10-Year
Average Annual Total Return	+40.44%	-9.29%	+0.74%

*Because Class 2 shares were not offered until 1/6/99, standardized Class 2 Fund performance for prior periods represents the historical results of Class 1 shares. For periods beginning on 1/6/99, Class 2’s results reflect an additional 12b-1 fee expense, which also affects future performance. Since 1/6/99 (effective date), the average annual total return of Class 2 shares was -9.83%.

Ongoing market volatility can significantly affect short-term performance; recent returns may differ.

Total Return Index Comparison

for Hypothetical $10,000 Investment (1/1/94–12/31/03)

The graph compares the performance of Franklin Global Communications Securities Fund – Class 2* and the S&P 500. One cannot invest directly in an index, nor is an index representative of the Fund’s portfolio. Please see Important Notes to Performance Information preceding the Fund Summaries.

**Source: Standard & Poor’s Micropal. Please see Index Descriptions following the Fund Summaries.

Franklin Global Communications Securities Fund – Class 2

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.

Since markets can go down as well as up, investment return and the value of your principal will fluctuate with market conditions, and you may have a gain or loss when you sell your shares.

Past performance does not guarantee future results.

FGC-5

SUPPLEMENT DATED JANUARY 20, 2004

TO THE PROSPECTUS OF

FRANKLIN GLOBAL COMMUNICATIONS SECURITIES FUND

DATED MAY 1, 2003

(Franklin Templeton Variable Insurance Products Trust)

The management section on page FGC-5 of the prospectus is replaced with the following:

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

The team responsible for the Fund’s management is:

Grant Bowers VICE PRESIDENT OF ADVISERS	Mr. Bowers has been a manager of the Fund since 2002, and has been with Franklin Templeton Investments since 1993.
Christopher Grisanti, CFA PORTFOLIO MANAGER OF ADVISERS	Mr. Grisanti has been a manager of the Fund since January 2004 and has been with Franklin Templeton Investments since 1998.
Alex W. Peters, CFA VICE PRESIDENT OF ADVISERS	Mr. Peters has been a manager of the Fund since 1999, and has been with Franklin Templeton Investments since 1992.

The Fund pays Advisers a fee for managing the Fund’s assets and providing certain administrative facilities and services for the Fund. For the fiscal year ended December 31, 2002, the Fund paid 0.57% of its average daily net assets to Advisers for its services.

Please keep this supplement for future reference.

FGC-6

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN GLOBAL COMMUNICATIONS SECURITIES FUND

Financial Highlights

	Class 1
	Year Ended December 31,
	2003			2002			2001			2000			1999
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	4.53		$	6.87		$	12.88		$	24.86		$	20.45
Income from investment operations:
Net investment incomea		.06			.04			.04			.11			.37
Net realized and unrealized gains (losses)		1.78			(2.33	)		(3.55	)		(6.77	)		6.91
Total from investment operations		1.84			(2.29	)		(3.51	)		(6.66	)		7.28
Less distributions from:
Net investment income		(.05	)		(.05	)		(.01	)		(.50	)		(.84	)
Net realized gains		—			—			(2.49	)		(4.82	)		(2.03	)
Total distributions		(.05	)		(.05	)		(2.50	)		(5.32	)		(2.87	)
Net asset value, end of year	$	6.32		$	4.53		$	6.87		$	12.88		$	24.86
Total returnb		40.46%			(33.28	)%		(29.24	)%		(32.85	)%		39.42%
Ratios/supplemental data
Net assets, end of year (000’s)	$	149,480		$	130,255		$	265,055		$	523,288		$	987,011
Ratios to average net assets:
Expenses		.64%			.60%			.55%			.52%			.51%
Net investment income		1.08%			.83%			.46%			.54%			1.81%
Portfolio turnover rate		96.60%			97.75%			105.36%			117.99%			87.53%

^a Based on average daily shares outstanding.

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

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN GLOBAL COMMUNICATIONS SECURITIES FUND

Financial Highlights (continued)

	Class 2
	Year Ended December 31,
	2003			2002			2001			2000			1999c
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	4.51		$	6.84		$	12.86		$	24.78		$	21.02
Income from investment operations:
Net investment incomea		.05			.03			.02			.05			.26
Net realized and unrealized gains (losses)		1.77			(2.32	)		(3.54	)		(6.72	)		6.37
Total from investment operations		1.82			(2.29	)		(3.52	)		(6.67	)		6.63
Less distributions from:
Net investment income		(.05	)		(.04	)		(.01	)		(.43	)		(.84	)
Net realized gains		—			—			(2.49	)		(4.82	)		(2.03	)
Total distributions		(.05	)		(.04	)		(2.50	)		(5.25	)		(2.87	)
Net asset value, end of year	$	6.28		$	4.51		$	6.84		$	12.86		$	24.78
Total returnb		40.44%			(33.52)%			(29.40)%			(32.97)%			35.17%
Ratios/supplemental data
Net assets, end of year (000’s)	$	10,719		$	1,490		$	312		$	499		$	491
Ratios to average net assets:
Expenses		.89%			.85%			.80%			.77%			.77%	d
Net investment income		.83%			.58%			.21%			.29%			1.24%	d
Portfolio turnover rate		96.60%			97.75%			105.36%			117.99%			87.53%

^a Based on average daily shares outstanding.

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

^c For the period January 6, 1999 (effective date) to December 31, 1999.

^d Annualized.

FGC-8

See notes to financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN GLOBAL COMMUNICATIONS SECURITIES FUND

Statement of Investments, December 31, 2003

	COUNTRY	SHARES	VALUE
Common Stocks 90.8%
Advertising/Marketing Services .9%
Interpublic Group of Cos. Inc.	United States	95,600	$	1,491,360
Broadcasting 2.2%
Clear Channel Communications Inc.	United States	51,700		2,421,111
aRadio One Inc., D	United States	57,400		1,107,820
				3,528,931
Cable/Satellite TV 3.1%
aComcast Corp.	United States	96,200		3,009,136
aHughes Electronics Corp.	United States	115,660		1,914,166
				4,923,302
Commercial Printing/Forms 1.5%
R.R. Donnelley & Sons Co.	United States	80,700		2,433,105
Computer Communications 2.2%
a3Com Corp.	United States	218,100		1,781,877
aExtreme Networks Inc.	United States	233,300		1,682,093
				3,463,970
Computer Peripherals 3.0%
aLogitech International SA, ADR	Switzerland	42,300		1,799,019
aSeagate Technology	United States	79,500		1,502,550
aWestern Digital Corp.	United States	128,100		1,510,299
				4,811,868
Data Processing Services 1.7%
First Data Corp.	United States	66,400		2,728,376
Electronic Equipment/Instruments 2.2%
Tektronix Inc.	United States	113,100		3,573,960
Electronics/Appliance Stores 1.8%
RadioShack Corp.	United States	92,700		2,844,036
Electronics/Appliances 1.0%
Eastman Kodak Co.	United States	64,200		1,648,014
Financial Publishing/Services 1.5%
The McGraw-Hill Cos. Inc.	United States	33,400		2,335,328
Internet Retail 1.5%
aInteractive Corp.	United States	72,900		2,473,497
Internet Software/Services 2.0%
aCheck Point Software Technologies Ltd.	Israel	81,600		1,372,512
aInfoSpace Inc.	United States	70,000		1,613,500
aUnited Online Inc.	United States	9,100		152,789
				3,138,801
Major Telecommunications 28.6%
aAlaska Communications Systems Holdings Inc.	United States	164,100		777,834
Allstream Inc., Class B	Canada	73,200		4,198,020
Alltel Corp.	United States	66,400		3,092,912
AT&T Corp.	United States	148,000		3,004,400
BellSouth Corp.	United States	164,000		4,641,200
Hellenic Telecommunications Organization SA	Greece	136,400		1,803,068

FGC-9

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN GLOBAL COMMUNICATIONS SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	COUNTRY	SHARES	VALUE
Common Stocks (cont.)
Major Telecommunications (cont.)
aKoninklijke KPN NV	Netherlands	381,000	$	2,941,120
KT Corp.	South Korea	63,700		2,384,406
Portugal Telecom SGPS SA, ADR	Portugal	306,004		3,066,160
Telecom Corp. of New Zealand Ltd.	New Zealand	918,447		3,238,151
Telefonica SA, ADR	Spain	88,056		3,891,195
Telefonos de Mexico SA de CV (Telmex), L, ADR	Mexico	105,700		3,491,271
Telstra Corp. Ltd.	Australia	903,907		3,282,650
Telus Corp.	Canada	114,125		2,291,773
Verizon Communications Inc.	United States	107,400		3,767,592
				45,871,752
Media Conglomerates 1.9%
Viacom Inc., A	United States	11,200		495,824
Viacom Inc., B	United States	56,700		2,516,346
				3,012,170
Publishing: Newspapers 4.5%
Gannett Co. Inc.	United States	35,700		3,183,012
The New York Times Co., A	United States	51,000		2,437,290
Tribune Co.	United States	31,600		1,630,560
				7,250,862
Semiconductors .9%
aSemtech Corp.	United States	66,600		1,513,818
Specialty Telecommunications 8.6%
CenturyTel Inc.	United States	73,700		2,404,094
aCitizens Communications Co., B	United States	211,900		2,631,798
aCommonwealth Telephone Enterprises Inc.	United States	92,700		3,499,425
aNTL Inc.	United Kingdom	22,400		1,562,400
aQwest Communications International Inc.	United States	859,400		3,712,608
				13,810,325
Telecommunications Equipment 3.6%
aArris Group Inc.	United States	238,400		1,726,016
aComverse Technology Inc.	United States	54,700		962,173
Nokia Corp., ADR	Finland	135,000		2,295,000
aNortel Networks Corp.	Canada	182,500		771,975
				5,755,164
Wholesale Distributors 2.0%
aImagistics International Inc.	United States	83,100		3,116,250
Wireless Communications 16.1%
America Movil SA de CV, L, ADR	Mexico	91,900		2,512,546
China Mobile (Hong Kong) Ltd., ADR	China	125,600		1,950,568
aEuropolitan Holdings AB	Sweden	273,500		1,786,514
aMillicom International Cellular SA	Luxembourg	33,100		2,313,690
aNextel Communications Inc., A	United States	169,500		4,756,170
aNII Holdings Inc., B	United States	30,900		2,306,067
SK Telecom Co. Ltd., ADR	South Korea	133,800		2,495,370
Vodafone Group PLC, ADR	United Kingdom	198,700		4,975,448

FGC-10

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN GLOBAL COMMUNICATIONS SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	COUNTRY	SHARES		VALUE
Common Stocks (cont.)
Wireless Communications (cont.)
aWestern Wireless Corp., A	United States		146,700	$	2,693,412
					25,789,785
Total Common Stocks (Cost $124,949,030)					145,514,674
Preferred Stock (cost $394,938) .3%
Consumer Services
News Corp. Ltd., ADR, pfd.	Australia		12,940		391,436
Total Investments before Repurchase Agreement (Cost $125,343,968)			��		145,906,110
		PRINCIPAL AMOUNT
Repurchase Agreement (Cost $13,128,572) 8.2%
bJoint Repurchase Agreement, .873%, 01/02/04 (Maturity Value $13,129,209)	United States	$	13,128,572		13,128,572
ABN AMRO Bank, N.V., New York Branch (Maturity Value $1,223,117) Banc of America Securities LLC (Maturity Value $1,223,117) Barclays Capital Inc. (Maturity Value $873,486) Bear, Stearns & Co. Inc. (Maturity Value $698,868) BNP Paribas Securities Corp. (Maturity Value $1,223,117) Deutsche Bank Securities Inc. (Maturity Value $1,223,117) Dresdner Kleinwort Wasserstein Securities LLC (Maturity Value $1,223,117) Goldman, Sachs & Co. (Maturity Value $698,868) Greenwich Capital Markets Inc. (Maturity Value $1,223,117) Lehman Brothers Inc. (Maturity Value $1,073,051) Morgan Stanley & Co. Inc. (Maturity Value $1,223,117) UBS Securities LLC (Maturity Value $1,223,117)
Total Investments (Cost $138,472,540) 99.3%					159,034,682
Other Assets, less Liabilities .7%					1,163,589
Net Assets 100.0%				$	160,198,271

^aNon-income producing.

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

FGC-11

See notes to financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN GLOBAL COMMUNICATIONS SECURITIES FUND

Financial Statements

Statement of Assets and Liabilities

December 31, 2003

Assets:
Investments in securities:
Cost	$	138,472,540
Value		159,034,682
Receivables:
Investment securities sold		1,746,326
Capital shares sold		2,535
Dividends and Interest		392,644
Total assets		161,176,187
Liabilities:
Payables:
Investment securities purchased		821,852
Capital shares redeemed		43,953
Affiliates		80,571
Other liabilities		31,540
Total liabilities		977,916
Net assets, at value	$	160,198,271
Net assets consist of:
Undistributed net investment income	$	1,434,605
Net unrealized appreciation (depreciation)		20,567,788
Accumulated net realized gain (loss)		(265,645,892	)
Capital shares		403,841,770
Net assets, at value	$	160,198,271
Class 1:
Net assets, at value	$	149,479,620
Shares outstanding		23,637,132
Net asset value and offering price per share	$	6.32
Class 2:
Net assets, at value	$	10,718,651
Shares outstanding		1,707,663
Net asset value and offering price per share	$	6.28

See notes to financial statements.

FGC-12

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN GLOBAL COMMUNICATIONS SECURITIES FUND

Financial Statements (continued)

Statement of Operations

for the year ended December 31, 2003

Investment income:
Dividends		$2,279,924
Interest		111,486
Total investment income		2,391,410
Expenses:
Management fees (Note 3)		819,226
Distribution fees - Class 2 (Note 3)		11,278
Transfer agent fees		677
Custodian fees		21,587
Reports to shareholders		20,722
Professional fees		20,036
Trustees’ fees and expenses		1,372
Other		7,535
Total expenses		902,433
Net investment income		1,488,977
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		787,127
Foreign currency transactions		(21,091	)
Net realized gain (loss)		766,036
Net unrealized appreciation (depreciation) on:
Investments		45,608,298
Translation of assets and liabilities denominated in foreign currencies		5,646
Net unrealized appreciation (depreciation)		45,613,944
Net realized and unrealized gain (loss)		46,379,980
Net increase (decrease) in net assets resulting from operations	$	47,868,957

See notes to financial statements.

FGC-13

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN GLOBAL COMMUNICATIONS SECURITIES FUND

Financial Statements (continued)

Statements of Changes in Net Assets

for the years ended December 31, 2003 and 2002

	2003			2002
Increase (decrease) in net assets:
Operations:
Net investment income	$	1,488,977		$	1,456,605
Net realized gain (loss) from investments and foreign currency transactions		766,036			(89,410,386	)
Net unrealized appreciation (depreciation) on investments and translation of assets and liabilities denominated in foreign currencies		45,613,944			6,275,419
Net increase (decrease) in net assets resulting from operations		47,868,957			(81,678,362	)
Distributions to shareholders from:
Net investment income:
Class 1		(1,238,199	)		(1,655,159	)
Class 2		(30,287	)		(4,896	)
Total distributions to shareholders		(1,268,486)			(1,660,055	)
Capital share transactions: (Note 2)
Class 1		(25,751,370	)		(51,646,759	)
Class 2		7,603,913			1,363,628
Total capital share transactions		(18,147,457	)		(50,283,131	)
Net increase (decrease) in net assets		28,453,014			(133,621,548	)
Net assets:
Beginning of year		131,745,257			265,366,805
End of year	$	160,198,271		$	131,745,257
Undistributed net investment income included in net assets:
End of year	$	1,434,605		$	1,267,035

See notes to financial statements.

FGC-14

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN GLOBAL COMMUNICATIONS SECURITIES FUND

Notes to Financial Statements

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (the Trust) is registered under the Investment Company Act of 1940 as an open-end investment company, consisting of twenty-two separate series (the Funds). Franklin Global Communications Securities Fund (the Fund) included in this report is diversified. Shares of the Fund are sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. As of December 31, 2003, 100% of total Fund shares were sold through one insurance company. The Fund’s investment objective is growth and income.

The following summarizes the Fund’s significant accounting policies.

a. Security Valuation

Securities listed or traded on a recognized national exchange or NASDAQ are valued at the last reported sales price. Over-the-counter securities and listed securities for which no sale is reported are valued within the range of the latest quoted bid and asked prices. Foreign securities are valued at the close of trading of the foreign exchange or the NYSE, whichever is earlier. If events occur that materially affect the values of securities after the prices or foreign exchange rates are determined, or if market quotations are not readily available, the securities will be valued at fair value as determined following procedures approved by the Board of Trustees.

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. Purchases and sales of securities and income items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.

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.

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 may enter into a joint repurchase agreement whereby its uninvested cash balance is deposited into a joint cash account to be used to invest in one or more repurchase agreements. The value and face amount of the joint repurchase agreement are allocated to the Fund based on its pro-rata interest. A repurchase agreement is accounted for as a loan by the Fund to the seller, collateralized by securities which are delivered to the Fund’s custodian. The market value, including accrued interest, of the initial collateralization is required to be at least 102% of the dollar amount invested by the Funds, with the value of the underlying securities marked to market daily to maintain coverage of at least 100%. At December 31, 2003, all repurchase agreements had been entered into on that date.

d. Foreign Currency Contracts

When the Fund purchases or sells foreign securities it may enter into foreign exchange contracts to minimize foreign exchange risk from the trade date to the settlement date of the transactions. A foreign exchange contract is an agreement between two parties to exchange different currencies at an agreed upon exchange rate on a specified date. Realized and unrealized gains and losses are included in the Statement of Operations.

FGC-15

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN GLOBAL COMMUNICATIONS SECURITIES FUND

Notes to Financial Statements (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

The risks of these contracts include movement in the values of the foreign currencies relative to the U.S. dollar and the possible inability of the counterparties to fulfill their obligations under the contracts.

e. Income Taxes

No provision has been made for income taxes because the Fund’s policy is to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable income.

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 distributions to shareholders are recorded on the ex-dividend date.

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. Other expenses are charged to each Fund on a specific identification basis.

Realized and unrealized gains and losses and net investment income, other than class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class.

g. Accounting Estimates

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

h. Guarantees and Indemnifications

Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust 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. However, based on experience, the Trust expects the risk of loss to be remote.

FGC-16

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN GLOBAL COMMUNICATIONS SECURITIES FUND

Notes to Financial Statements (continued)

2. SHARES OF BENEFICIAL INTEREST

The Fund offers two classes of shares: Class 1 and 2. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

At December 31, 2003, there were an unlimited number of shares authorized ($.01 par value). Transactions in the Fund’s shares were as follows:

	Year Ended December 31,
	2003					2002
	Shares		Amount			Shares		Amount
Class 1 Shares:
Shares sold	135,529		$	698,512		307,366		$	1,672,275
Shares issued in reinvestment of distributions	230,149			1,238,199		320,767			1,655,159
Shares redeemed	(5,451,344	)		(27,688,081	)	(10,514,281	)		(54,974,193	)
Net decrease (decrease)	(5,085,666	)	$	(25,751,370	)	(9,886,148	)	$	(51,646,759	)
Class 2 Shares:
Shares sold	1,509,954		$	8,281,081		308,075		$	1,482,602
Shares issued in reinvestment of distributions	5,671			30,287		953			4,896
Shares redeemed	(138,375	)		(707,455	)	(24,284	)		(123,870	)
Net increase (decrease)	1,377,250		$	7,603,913		284,744		$	1,363,628

3. TRANSACTIONS WITH AFFILIATES

Certain officers and trustees of the Fund are also officers and/or directors of the following entities:

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

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
.625%	First $100 million
.500%	over $100 million, up to and including $250 million
.450%	over $250 million, up to and including $10 billion

Fees are further reduced on net assets over $10 billion.

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

The Fund reimburses Distributors up to .25% per year of its average daily net assets of Class 2 for costs incurred in marketing the Fund’s shares.

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

FGC-17

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN GLOBAL COMMUNICATIONS SECURITIES FUND

Notes to Financial Statements (continued)

4. INCOME TAXES

At December 31, 2003, the Fund had tax basis capital losses of $265,006,990 which may be carried over to offset future capital gains. Such losses expire as follows:

Capital loss carryovers expiring in:
2009	$	156,027,828
2010		108,979,162
	$	265,006,990

The tax character of distributions paid during the years ended December 31, 2003 and 2002, was as follows:

	2003		2002
Distributions paid from:
Ordinary Income	$	1,268,486	$	1,660,055

At December 31, 2003, the cost of investments, net unrealized appreciation (depreciation), undistributed ordinary income and undistributed long term capital gains for income tax purposes were as follows:

Cost of investments	$	139,111,442
Unrealized appreciation		25,088,251
Unrealized depreciation		(5,165,011	)
Net unrealized appreciation (depreciation)	$	19,923,240
Undistributed ordinary income	$	1,434,605
Undistributed long term capital gains		—
Distributable earnings	$	1,434,605

Net investment income differs for financial statement and tax purposes primarily due to differing treatments for foreign currency transactions.

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

5. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short-term securities) for the year ended December 31, 2003 aggregated $123,732,651 and $140,045,269, respectively.

6. REGULATORY MATTERS

On February 4, 2004, the Securities Division of the Office of the Secretary of the Commonwealth of Massachusetts filed an administrative complaint against Franklin Resources, Inc. and certain of its subsidiaries (the “Company”), alleging violations of the Massachusetts Uniform Securities Act. The complaint arises from activity that occurred in 2001 during which time an officer of a Company subsidiary was negotiating an agreement with an investor relating to investments in a mutual fund and a hedge fund.

FGC-18

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN GLOBAL COMMUNICATIONS SECURITIES FUND

Notes to Financial Statements (continued)

6. REGULATORY MATTERS (cont.)

The Company, in addition to other entities within Franklin Templeton Investments, has been named in shareholder class actions related to the matter described above. The Company believes that the claims made in the lawsuit are without merit and it intends to defend vigorously against the allegations. The Company and the Fund may be named in similar civil actions related to the matter described above.

In addition, as part of ongoing investigations by the U.S. Securities and Exchange Commission (the “SEC”), the U.S. Attorney for the Northern District of California, the New York Attorney General, the California Attorney General, the U.S. Attorney for the District of Massachusetts, the Florida Department of Financial Services, and the Commissioner of Securities and the Attorney General of the State of West Virginia, relating to certain practices in the mutual fund industry, including late trading, market timing and sales compensation arrangements, the Company and its subsidiaries, as well as certain current or former executives and employees of the Company, have received requests for information and/or subpoenas to testify or produce documents. The Company and its current employees are providing documents and information in response to these requests and subpoenas. In addition, the Company has responded to requests for similar kinds of information from regulatory authorities in some of the foreign countries where the Company conducts its global asset management business.

The Staff of the SEC has informed the Company that it intends to recommend that the Commission authorize an action against the Fund’s investment adviser and a senior executive officer relating to the frequent trading issues that are the subject of the SEC’s investigation. These issues were previously disclosed as being under investigation by government authorities and the subject of an internal inquiry by the Company in its Annual Report on Form 10-K and on its public website. The Company currently is in discussions with the SEC Staff in an effort to resolve the issues raised in their investigation. Such discussions are preliminary and the Fund’s management has been advised that the Company cannot predict the likelihood of whether those discussions will result in a settlement and, if so, the terms of such settlement. The impact, if any, of these matters on the Fund is uncertain at this time. If the Company finds that it bears responsibility for any unlawful or improper conduct, it has committed to making the Fund or its shareholders whole, as appropriate.

FGC-19

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN GLOBAL COMMUNICATIONS SECURITIES FUND

Independent Auditors’ Report

To the Board of Trustees and Shareholders of

Franklin Templeton Variable Insurance Products Trust

In our opinion, the accompanying statement of assets and liabilities, including the statement of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Franklin Global Communications Securities Fund (the Fund) (one of the funds constituting the Franklin Templeton Variable Insurance Products Trust) at December 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

February 5, 2004, except for Note 6 as to which the date is February 12, 2004

FGC-20

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN GLOBAL COMMUNICATIONS SECURITIES FUND

Tax Designation (unaudited)

Under Section 854(b)(2) of the Code, the Fund hereby designates 65.56% of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended December 31, 2003.

FGC-21

FRANKLIN GROWTHAND INCOME SECURITIES FUND

Fund Goals and Primary Investments: Franklin Growth and Income Securities Fund seeks capital appreciation, with current income as a secondary goal. The Fund invests mainly in common stocks with current dividend yields above the average of the Standard & Poor’s 500 Composite Index.¹

This annual report for Franklin Growth and Income Securities Fund covers the fiscal year ended December 31, 2003.

Performance Overview

You can find the Fund’s one-year total return in the Performance Summary following this report. The Fund underperformed its benchmarks, the Russell 3000^® Value Index, which returned 31.14%, and the Russell 1000^® Value Index, which returned 30.03% for the year under review.² The Russell 1000 Value Index replaced the Russell 3000 Value Index as the Fund’s benchmark. The manager believes the composition of the Russell 1000 Value Index better reflects the Fund’s holdings. The Fund’s returns were comparable to that of its peers, as measured by the Lipper VIP Equity Income Funds Objective Average, which returned 26.81% for the same period.³

Economic and Market Overview

During the year ended December 31, 2003, many factors impacted global economies and financial markets. Early in the year, economic uncertainty and geopolitical events, including impending war in Iraq, pushed U.S. interest rates to their lowest level in more than four decades, and the 10-year U.S. Treasury note’s yield fell to 3.13% in mid-June. However, following the end of major conflict in Iraq, many economic indicators turned positive. The U.S. government injected fiscal stimulus into the economy, approving another round of tax cuts and rebates that included dividend and capital gains tax reductions. In June, an accommodative Federal Reserve Board, in an attempt to bolster the economy, cut the federal funds target rate to 1.00%.

During the year, the U.S. trade deficit increased significantly, contributing to the U.S. dollar’s fall to record lows against the euro and other major currencies. However, the weak dollar provided a boost to the U.S. economy and corporate profits as exports became cheaper for

1. Please see Index Descriptions following the Fund Summaries.

2. Source: Standard & Poor’s Micropal. One cannot invest directly in an index, nor is an index representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

3. Source: Lipper Inc. One cannot invest directly in an index, nor is an index representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

FGI-1

foreign buyers. Robust consumer spending, especially for autos and homes, and strong business spending, particularly for equipment and software, contributed to the accelerated economic activity. In addition, U.S. federal spending stayed firm and inflation remained benign. U.S. gross domestic product (GDP) grew an annualized 8.2% in third quarter 2003, its strongest pace in nearly 20 years, and overall, 2003 GDP grew an estimated 3.1%. As economic data improved, some interest rates rose from their lows, and the 10-year Treasury note’s yield ended the period at 4.27%.

An equity market rally started in late March 2003 and continued through the end of the year. The rebound began with investors anticipating economic recovery in the second half of 2003, and it continued as data showed robust economic growth. Improved sentiment led many investors to rotate into economically sensitive and financially leveraged companies, specifically cyclical, technology, small-capitalization and emerging market stocks. The Standard & Poor’s 500 Composite Index (S&P 500) rose 28.67% for the 12 months ended December 31, 2003, while the technology-heavy Nasdaq Composite Index increased 50.93%.⁴

Investment Strategy

We are research driven, fundamental investors, pursuing a disciplined value-oriented strategy. As bottom-up investors focusing primarily on individual securities, we look at 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, with a special emphasis on current dividend yield. We believe that high relative dividend yield is frequently a good indicator of value.

Manager’s Discussion

The Fund’s strategy emphasizes dividend-paying stocks. Despite the reduced tax rate for qualified dividends, dividend-paying stocks underperformed non-dividend paying issues for the year. Income-paying stocks were disappointing relative performers during the first three quarters of the year but exhibited relative strength in the fourth quarter. According to an article in The Wall Street Journal, non-dividend paying stocks in the S&P 500 outpaced their dividend-paying counterparts by approximately 26 percentage points for the year under review.⁵

4. Source: Standard & Poor’s Micropal. Please see Index Descriptions following the Fund Summaries.

5. Source: Brown, Ken, “Dividend Stocks Could Become Favorites in ‘04,” The Wall Street Journal, wsj.com, 12/29/03.

Top 10 Holdings

Franklin Growth and Income

Securities Fund

12/31/03

Company Sector/Industry, Country	% of Total Net Assets
Citigroup Inc.	3.5%
Finance, U.S.
ChevronTexaco Corp.	3.1%
Energy Minerals, U.S.
BP PLC, ADR	3.0%
Energy Minerals, U.K.
General Electric Co.	2.5%
Producer Manufacturing, U.S.
Altria Group Inc.	2.3%
Consumer Non-Durables, U.S.
Dow Chemical Co.	2.2%
Process Industries, U.S.
Washington Mutual Inc.	2.1%
Finance, U.S.
Morgan Stanley	2.0%
Finance, U.S.
Shell Transport & Trading Co. PLC, ADR	2.0%
Energy Minerals, U.K.
Fannie Mae	2.0%
Finance, U.S.

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

FGI-2

Our largest sector position was in finance, at 28.2% of total net assets on December 31, 2003. This large allocation benefited the Fund’s absolute returns the most as the sector was up nearly 33%. Within this group, FleetBoston Financial (FBF) and JP Morgan Chase (JPM) were two of the Fund’s best performers. FBF gained 88% largely because of an acquisition bid from Bank of America, and JPM increased 60% as fundamentals improved. Although this was our largest sector, we were underweighted compared with the benchmark index’s 35% allocation. We selectively added to existing positions as well as initiated new positions. Overall, fundamentals were strong within the finance sector, and many companies significantly raised their dividends in recent months.

Some of our investments in energy minerals, non-energy minerals and commercial services were among the largest positive contributors to the Fund’s results for the year. Responding to higher-than-expected oil prices and rapid economic growth in mainland China, energy producer PetroChina gained 106% since we purchased it and was among the Fund’s most rewarding investments. Aluminum producer Alcoa gained 95% since purchase, and printing company R.R. Donnelley & Sons posted a 45% one-year total return. Within electronic technology, our investment in factory equipment company Rockwell Automation (+77%), defense contractor General Dynamics (+57%) and wireless phone company Motorola (+64%) contributed favorably to returns. During the year, we selectively realized profits among these technology and energy related holdings.

An eclectic group of stocks performed well, including filter company Pall (+64%), retailer Nordstrom (+76%) and restaurant chain McDonald’s (+57%). We sold or reduced positions in Nordstrom and McDonald’s as they met our price targets. Honeywell and United Technologies were stand-out performers within the producer manufacturing sector. Honeywell gained 43% and United Technologies rose 55% for the 12-month period.

Although the Fund performed well, we underperformed the benchmark index for several reasons. Utilities accounted for the largest percentage of the Fund’s relative underperformance for the period. Although this group was underweighted, periods of poor performance for specific

stocks in our portfolio, such as Duke Energy and First Energy, overshadowed the group’s otherwise positive returns. Our holdings in the communications sector registered the Fund’s most disappointing results. Shares of AT&T performed especially poorly after the company lowered its earnings outlook and warned that weak trends in recent

FGI-3

periods would persist. On an encouraging note, the company increased its annualized dividend 27% during the year.

Corporations appeared to respond favorably to legislation that lowered taxes on qualified dividends. The number of companies paying dividends increased for the first time in 10 years, with an average increase of 26%, according to Standard & Poor’s. Several companies within our portfolio significantly increased their dividends, most notably Citigroup (+75%), McDonald’s (+70%), and Wells Fargo (+50%).

At fiscal year-end, consistent with our strategy, our investment attention was oriented toward companies we believed were attractively valued and most likely to increase their dividends. These would include “fallen angel” growth companies in sectors such as technology and health care. We also increased our investments in selected finance companies and beaten-up cyclicals that we believe have the potential for a strong earnings recovery. Conversely, we were generally underweighted in consumer and interest rate-sensitive sectors relative to the Russell 1000 Value Index.

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

This discussion reflects our analysis, opinions and portfolio holdings as of December 31, 2003, 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 advisor 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.

FGI-4

PERFORMANCE SUMMARYASOF 12/31/03

Total return of Class 2 shares represents the average annual change in value, assuming reinvestment of dividends and capital gains. Average returns smooth out variations in returns, which can be significant; they are not the same as year-by-year results.

Franklin Growth and Income Securities Fund – Class 2*

Periods ended 12/31/03

	1-Year	5-Year	10-Year
Average Annual Total Return	+25.70%	+4.22%	+9.72%

*Because Class 2 shares were not offered until 1/6/99, standardized Class 2 Fund performance for prior periods represents the historical results of Class 1 shares. For periods beginning on 1/6/99, Class 2’s results reflect an additional 12b-1 fee expense, which also affects future performance. Since 1/6/99 (effective date), the average annual total return of Class 2 shares was +3.88%.

Ongoing market volatility can significantly affect short-term performance; recent returns may differ.

Total Return Index Comparison

for Hypothetical $10,000 Investment (1/1/94–12/31/03)

The graph compares the performance of Franklin Growth and Income Securities Fund – Class 2,* the Russell 3000 Value Index, the Russell 1000 Value Index, and the Lipper VIP Equity Income Funds Objective Average, as well as the Consumer Price Index (CPI). The Russell 1000 Value Index is replacing the Russell 3000 Value Index as the Fund’s benchmark. The manager believes the composition of the Russell 1000 Value Index better reflects the Fund’s holdings. One cannot invest directly in an index, nor is an index representative of the Fund’s portfolio. Please see Important Notes to Performance Information preceding the Fund Summaries.

**Sources: Standard & Poor’s Micropal; Lipper Inc. Please see Index Descriptions following the Fund Summaries.

Franklin Growth

and Income Securities Fund – Class 2

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.

Since markets can go down as well as up, investment return and the value of your principal will fluctuate with market conditions, and you may have a gain or loss when you sell your shares.

Past performance does not guarantee future results.

FGI-5

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN GROWTHAND INCOME SECURITIES FUND

Financial Highlights

	Class 1
	Year ended December 31,
	2003			2002			2001			2000			1999
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	11.82		$	15.27		$	17.16		$	17.78		$	20.36
Income from investment operations:
Net investment incomea		.36			.39			.37	c		.45			.57
Net realized and unrealized gains (losses)		2.66			(2.58	)		(.70	)c		2.26			(.16	)
Total from investment operations		3.02			(2.19	)		(.33	)		2.71			.41
Less distributions from:
Net investment income		(.40	)		(.42	)		(.05	)		(1.17	)		(.79	)
Net realized gains		—			(.84	)		(1.51	)		(2.16	)		(2.20	)
Total distributions		(.40	)		(1.26	)		(1.56	)		(3.33	)		(2.99	)
Net asset value, end of year	$	14.44		$	11.82		$	15.27		$	17.16		$	17.78
Total returnb		26.06%			(15.53)%			(2.02)%			17.99%			1.10%
Ratios/supplemental data
Net assets, end of year (000’s)	$	505,393		$	455,680		$	646,851		$	810,837		$	964,553
Ratios to average net assets:
Expenses		.53%			.53%			.51%			.50%			.49%
Net investment income		2.92%			2.85%			2.31%	c		2.75%			2.94%
Portfolio turnover rate		43.18%			96.61%			119.78%			66.82%			39.80%

^a Based on average daily shares outstanding.

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

^c Effective January 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide of Investment Companies and began amortizing all premium and discount on fixed-income securities, as required. The effect of this change was as follows:

Net investment income per share	$(.026)
Net realized and unrealized gains (losses) per share	.026
Ratio of net investment income to average net assets	(0.17)%

Per share data and ratios for prior periods have not been restated to reflect this change in accounting policy.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN GROWTHAND INCOME SECURITIES FUND

Financial Highlights (continued)

	Class 2
	Year Ended December 31,
	2003			2002			2001			2000			1999d
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	11.74		$	15.20		$	17.13		$	17.73		$	20.71
Income from investment operations:
Net investment incomea		.33			.34			.33	c		.40			0.47
Net realized and unrealized gains (losses)		2.63			(2.54	)		(.70	)c		2.27			(0.46	)
Total from investment operations		2.96			(2.20	)		(.37	)		2.67			0.01
Less distributions from:
Net investment income		(.39	)		(.42	)		(.05	)		(1.11	)		(0.79	)
Net realized gains		—			(.84	)		(1.51	)		(2.16	)		(2.20	)
Total distributions		(.39	)		(1.26	)		(1.56	)		(3.27	)		(2.99	)
Net asset value, end of year	$	14.31		$	11.74		$	15.20		$	17.13		$	17.73
Total returnb		25.70%			(15.72)%			(2.28)%			17.79%			(0.86)%
Ratios/supplemental data
Net assets, end of year (000’s)	$	136,824		$	38,379		$	11,789		$	2,311		$	789
Ratios to average net assets:
Expenses		.78%			.78%			.76%			.75%			.75%	e
Net investment income		2.67%			2.60%			2.13%	c		2.46%			2.55%	e
Portfolio turnover rate		43.18%			96.61%			119.78%			66.82%			39.80%

^a Based on average daily shares outstanding.

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

^c Effective January 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide of Investment Companies and began amortizing all premium and discount on fixed-income securities, as required. The effect of this change was as follows:

Net investment income per share	$(.026)
Net realized and unrealized gains (losses) per share	.026
Ratio of net investment income to average net assets	(.17)%

Per share data and ratios for prior periods have not been restated to reflect this change in accounting policy.

^d For the period January 6, 1999 (effective date) to December 31, 1999.

^e Annualized.

See notes to financial statements.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN GROWTHAND INCOME SECURITIES FUND

Statement of Investments, December 31, 2003

	SHARES	VALUE
Common Stocks 93.4%
Commercial Services 1.7%
R.R. Donnelley & Sons Co.	369,500	$	11,140,425
Communications 6.4%
Alltel Corp.	111,600		5,198,328
AT&T Corp.	265,100		5,381,530
BellSouth Corp.	354,100		10,021,030
SBC Communications Inc.	390,372		10,176,998
Verizon Communications Inc.	291,022		10,209,052
			40,986,938
Consumer Durables 1.6%
Newell Rubbermaid Inc.	144,000		3,278,880
Stanley Works	194,600		7,369,502
			10,648,382
Consumer Non-Durables 7.7%
Altria Group Inc.	266,600		14,508,372
British American Tobacco PLC (United Kingdom)	248,800		3,429,512
Colgate-Palmolive Co.	95,500		4,779,775
Kimberly-Clark Corp.	199,800		11,806,182
Loews Corp. — Carolina Group	129,900		3,278,676
Sara Lee Corp.	526,100		11,421,631
			49,224,148
Consumer Services 2.8%
Dow Jones & Co. Inc.	117,300		5,847,405
Mandalay Resort Group	101,000		4,516,720
McDonald’s Corp.	124,300		3,086,369
The Walt Disney Co.	201,300		4,696,329
			18,146,823
Electronic Technology 7.8%
Diebold Inc.	53,500		2,882,045
General Dynamics Corp.	106,000		9,581,340
Hewlett-Packard Co.	317,100		7,283,787
Motorola Inc.	563,900		7,934,073
Nokia Corp., ADR (Finland)	271,800		4,620,600
Raytheon Co.	277,300		8,330,092
Rockwell Automation Inc.	262,300		9,337,880
			49,969,817
Energy Minerals 10.4%
BP PLC, ADR (United Kingdom)	385,100		19,004,685
ChevronTexaco Corp.	227,958		19,693,292
Exxon Mobil Corp.	222,544		9,124,304
Petrochina Co. Ltd., ADR (China)	100,700		5,744,935
Shell Transport & Trading Co. PLC, ADR (United Kingdom)	290,300		13,072,209
			66,639,425
Finance 26.7%
Arthur J. Gallagher & Co.	250,300		8,132,247
Bank of America Corp.	141,300		11,364,759
Citigroup Inc.	468,900		22,760,406

FGI-8

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN GROWTHAND INCOME SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	SHARES	VALUE
Common Stocks (cont.)
Finance (cont.)
Fannie Mae	170,800	$	12,820,248
Fleet Boston Financial Corp.	263,600		11,506,140
Jefferson-Pilot Corp.	118,300		5,991,895
JP Morgan Chase & Co.	330,170		12,127,144
KeyCorp	106,400		3,119,648
Marsh & McLennan Cos. Inc.	196,700		9,419,963
Morgan Stanley	227,200		13,148,064
National Commerce Financial Corp.	331,800		9,051,504
Old Republic International Corp.	119,400		3,027,984
St. Paul Cos. Inc.	300,100		11,898,965
U.S. Bancorp	407,500		12,135,350
Washington Mutual Inc.	338,300		13,572,596
Wells Fargo & Co.	193,500		11,395,215
			171,472,128
Health Services 1.1%
CIGNA Corp.	121,900		7,009,250
Health Technology 7.9%
Abbott Laboratories	162,600		7,577,160
Bristol-Myers Squibb Co.	211,100		6,037,460
Merck & Co. Inc.	138,000		6,375,600
Pall Corp.	293,900		7,885,337
Pfizer Inc.	269,300		9,514,369
Schering-Plough Corp.	281,000		4,886,590
Wyeth	199,200		8,456,040
			50,732,556
Non-Energy Minerals 1.2%
Alcoa Inc.	200,400		7,615,200
Process Industries 3.8%
Dow Chemical Co.	335,400		13,942,578
E.I. du Pont de Nemours & Co.	234,200		10,747,438
			24,690,016
Producer Manufacturing 8.0%
Avery Dennison Corp.	83,800		4,694,476
Delphi Corp.	560,500		5,722,705
General Electric Co.	511,400		15,843,172
Honeywell International Inc.	334,200		11,172,306
Pitney Bowes Inc.	204,400		8,302,728
United Technologies Corp.	59,900		5,676,723
			51,412,110
Real Estate Investment Trusts .7%
Vornado Realty Trust	84,300		4,615,425
Retail Trade 1.2%
J.C. Penney Co. Inc.	287,400		7,552,872

FGI-9

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN GROWTHAND INCOME SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	SHARES		VALUE
Common Stocks (cont.)
Technology Services 2.0%
Automatic Data Processing Inc.		108,900	$	4,313,529
Electronic Data Systems Corp.		188,300		4,620,882
Microsoft Corp.		151,100		4,161,294
				13,095,705
Utilities 2.4%
Pinnacle West Capital Corp.		144,900		5,798,898
PPL Corp.		141,400		6,186,250
ScottishPower PLC (United Kingdom)		483,300		3,220,645
				15,205,793
Total Common Stocks (Cost $474,601,485)				600,157,013
Convertible Preferred Stocks 3.7%
Consumer Durables .5%
Ford Motor Co. Capital Trust II, 6.50%, cvt. pfd.		60,400		3,373,340
Finance 1.5%
Capital One Financial, 6.25%, cvt. pfd.		64,400		3,099,250
Prudential Financial Inc., 6.75%, cvt. pfd.		98,000		6,379,800
				9,479,050
Retail Trade .9%
Toys R Us Inc., 6.25%, cvt. pfd.		147,600		5,896,620
Utilities .8%
Sierra Pacific Resources Co., 9.00%, cvt. pfd., PIES		130,100		4,742,145
Total Convertible Preferred Stocks (Cost $22,439,640)				23,491,155
Total Investments before Repurchase Agreement (Cost $497,041,125)				623,648,168
	PRINCIPAL AMOUNT
Repurchase Agreement (Cost $17,132,886) 2.7%
aJoint Repurchase Agreement, .873%, 01/02/04 (Maturity Value $17,133,717) ABN AMRO Bank, N.V., New York Branch (Maturity Value $1,596,177) Banc of America Securities LLC (Maturity Value $1,596,177) Barclays Capital Inc. (Maturity Value $1,139,906) Bear, Stearns & Co. Inc. (Maturity Value $902,029) BNP Paribas Securities Corp. (Maturity Value $1,596,177) Deutsche Bank Securities Inc. (Maturity Value $1,596,177) Dresdner Kleinwort Wasserstein Securities LLC (Maturity Value $1,596,177) Goldman, Sachs & Co. (Maturity Value $902,028) Greenwich Capital Markets Inc. (Maturity Value $1,596,177) Lehman Brothers Inc. (Maturity Value $1,400,338) Morgan Stanley & Co. Inc. (Maturity Value $1,596,177) UBS Securities LLC (Maturity Value $1,596,177)	$	17,132,886		17,132,886
Total Investments (Cost $514,174,011) 99.8%				640,781,054
Other Assets, less Liabilities .2%				1,436,032
Net Assets 100.0%			$	642,217,086

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

See notes to financial statements.

FGI-10

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN GROWTHAND INCOME SECURITIES FUND

Financial Statements

Statement of Assets and Liabilities

December 31, 2003

Assets:
Investments in securities:
Cost	$	514,174,011
Value		640,781,054
Receivables:
Capital shares sold		398,729
Dividends and Interest		1,570,283
Total assets		642,750,066
Liabilities:
Payables:
Capital shares redeemed		168,752
Affiliates		306,078
Custodian fees		1,365
Reports to shareholders		27,000
Other liabilities		29,785
Total liabilities		532,980
Net assets, at value	$	642,217,086
Net assets consist of:
Undistributed net investment income	$	15,635,006
Net unrealized appreciation (depreciation)		126,607,043
Accumulated net realized gain (loss)		(32,375,338	)
Capital shares		532,350,375
Net assets, at value	$	642,217,086
Class 1:
Net assets, at value	$	505,393,446
Shares outstanding		34,999,810
Net asset value and offering price per share	$	14.44
Class 2:
Net assets, at value	$	136,823,640
Shares outstanding		9,558,134
Net asset value and offering price per share	$	14.31

See notes to financial statements.

FGI-11

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN GROWTHAND INCOME SECURITIES FUND

Financial Statements (continued)

Statement of Operations

for the year ended December 31, 2003

Investment income:
Dividends	$	18,164,780
Interest		287,526
Total investment income		18,452,306
Expenses:
Management fees (Note 3)		2,657,683
Distribution fees - Class 2 (Note 3)		187,854
Transfer Agent fees		2,259
Custodian fees		4,360
Reports to shareholders		88,695
Professional fees		28,806
Trustees’ fees and expenses		5,243
Other		30,732
Total expenses		3,005,632
Net investment income		15,446,674
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		(8,088,075	)
Foreign currency transactions		(30,812	)
Net realized gain (loss)		(8,118,887	)
Net unrealized appreciation (depreciation) on investments		121,978,025
Net realized and unrealized gain (loss)		113,859,138
Net increase (decrease) in net assets resulting from operations	$	129,305,812

See notes to financial statements.

FGI-12

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN GROWTHAND INCOME SECURITIES FUND

Financial Statements (continued)

Statements of Changes in Net Assets

for the years ended December 31, 2003 and 2002

	2003			2002
Increase (decrease) in net assets:
Operations:
Net investment income	$	15,446,674		$	16,487,104
Net realized gain (loss) from investments and foreign currency transactions		(8,118,887	)		(22,388,259	)
Net unrealized appreciation (depreciation) on investments		121,978,025			(93,969,652	)
Net increase (decrease) in net assets resulting from operations		129,305,812			(99,870,807	)
Distributions to shareholders from:
Net investment income:
Class 1		(14,899,120	)		(17,112,240	)
Class 2		(2,173,929	)		(789,171	)
Net realized gains:
Class 1		—			(34,010,678	)
Class 2		—			(1,599,783	)
Total distributions to shareholders		(17,073,049	)		(53,511,872	)
Capital share transactions: (Note 2)
Class 1		(42,683,749	)		(45,168,545	)
Class 2		78,608,309			33,971,092
Total capital share transactions		35,924,560			(11,197,453	)
Net increase (decrease) in net assets		148,157,323			(164,580,132	)
Net assets:
Beginning of year		494,059,763			658,639,895
End of year	$	642,217,086		$	494,059,763
Undistributed net investment income included in net assets:
End of year	$	15,635,006		$	16,876,313

See notes to financial statements.

FGI-13

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN GROWTHAND INCOME SECURITIES FUND

Notes to Financial Statements

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (the Trust) is registered under the Investment Company Act of 1940 as an open-end investment company, consisting of twenty-two separate series (the Funds). Franklin Growth and Income Securities Fund (the Fund) included in this report is diversified. Shares of the Fund are sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. As of December 31, 2003, over 87% of total Fund shares were sold through one insurance company. The Fund’s investment objective is current income.

The following summarizes the Fund’s significant accounting policies.

a. Security Valuation

Securities listed or traded on a recognized national exchange or NASDAQ are valued at the last reported sales price. Over-the-counter securities and listed securities for which no sale is reported are valued within the range of the latest quoted bid and asked prices. Foreign securities are valued at the close of trading of the foreign exchange or the NYSE, whichever is earlier. If events occur that materially affect the values of securities after the prices or foreign exchange rates are determined, or if market quotations are not readily available, the securities will be valued at fair value as determined following procedures approved by the Board of Trustees.

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. Purchases and sales of securities and income items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.

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.

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 may enter into a joint repurchase agreement whereby its uninvested cash balance is deposited into a joint cash account to be used to invest in one or more repurchase agreements. The value and face amount of the joint repurchase agreement are allocated to the Fund based on its pro-rata interest. A repurchase agreement is accounted for as a loan by the Fund to the seller, collateralized by securities which are delivered to the Fund’s custodian. The market value, including accrued interest, of the initial collateralization is required to be at least 102% of the dollar amount invested by the Funds, with the value of the underlying securities marked to market daily to maintain coverage of at least 100%. At December 31, 2003, all repurchase agreements had been entered into on that date.

d. Foreign Currency Contracts

When the Fund purchases or sells foreign securities it may enter into foreign exchange contracts to minimize foreign exchange risk from the trade date to the settlement date of the transactions. A foreign exchange contract is an agreement between two parties to exchange different currencies at an agreed upon exchange rate on a specified date. Realized and unrealized gains and losses are included in the Statement of Operations.

FGI-14

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN GROWTHAND INCOME SECURITIES FUND

Notes to Financial Statements (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

The risks of these contracts include movement in the values of the foreign currencies relative to the U.S. dollar and the possible inability of the counterparties to fulfill their obligations under the contracts.

e. Income Taxes

No provision has been made for income taxes because the Fund’s policy is to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable income.

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. Discounts and premiums on securities purchased are amortized over the lives of the respective securities. Dividend income and distributions to shareholders are recorded on the ex-dividend date.

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. Other expenses are charged to each Fund on a specific identification basis.

Realized and unrealized gains and losses and net investment income, other than class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class.

g. Accounting Estimates

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

h. Guarantees and Indemnifications

Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust 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. However, based on experience, the Trust expects the risk of loss to be remote.

FGI-15

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN GROWTHAND INCOME SECURITIES FUND

Notes to Financial Statements (continued)

2. SHARES OF BENEFICIAL INTEREST

The Fund offers two classes of shares: Class 1 and 2. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

At December 31, 2003, there were an unlimited number of shares authorized ($.01 par value). Transactions in the Fund’s shares were as follows:

	Year Ended December 31,
	2003					2002
Class 1 Shares:	Shares		Amount			Shares		Amount
Shares sold	2,360,924		$	28,273,066		545,381		$	8,254,474
Shares issued on mergera	—			—		1,625,533			25,081,974
Shares issued in reinvestment of distributions	1,175,936			14,899,120		3,683,207			51,122,918
Shares redeemed	(7,072,721	)		(85,855,935	)	(9,675,660	)		(129,627,911	)
Net decrease (decrease)	(3,535,861	)	$	(42,683,749	)	(3,821,539	)	$	(45,168,545	)
Class 2 Shares:
Shares sold	6,534,882		$	81,389,712		2,734,254		$	36,986,172
Shares issued on mergera	—			—		429,930			6,599,428
Shares issued in reinvestment of distributions	172,808			2,173,929		173,113			2,388,954
Shares redeemed	(417,670	)		(4,955,332	)	(844,623	)		(12,003,462	)
Net increase (decrease)	6,290,020		$	78,608,309		2,492,674		$	33,971,092

^a On May 1, 2002, the Fund acquired the net assets of Franklin Templeton Variable Insurance Products Trust — Franklin Natural Resources Fund (Natural Resources) in a taxable exchange pursuant to a plan of reorganization approved by Natural Resources’ shareholders.

3. TRANSACTIONS WITH AFFILIATES

Certain officers and trustees of the Fund are also officers and/or directors of the following entities:

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

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
.625%	First $100 million
.500%	over $100 million, up to and including $250 million
.450%	over $250 million, up to and including $10 billion

Fees are further reduced on net assets over $10 billion.

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

The Fund reimburses Distributors up to .25% per year of its average daily net assets of Class 2 for costs incurred in marketing the Fund’s shares.

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

FGI-16

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN GROWTHAND INCOME SECURITIES FUND

Notes to Financial Statements (continued)

4. INCOME TAXES

At December 31, 2003, the Fund had tax basis capital losses of $28,255,601 which may be carried over to offset future capital gains. Such losses expire as follows:

Capital loss carryovers expiring in:
2010	$	16,950,178
2011		11,305,423
	$	28,255,601

At December 31, 2003, the Fund has deferred currency losses occurring subsequent to October 31, 2003 of $32,639. For tax purposes, such losses will be reflected in the year ending December 31, 2004.

The tax character of distributions paid during the years ended December 31, 2003 and 2002, was as follows:

	2003		2002
Distributions paid from:
Ordinary income	$	17,073,049	$	17,935,266
Long term capital gains		—		35,576,606
	$	17,073,049	$	53,511,872

At December 31, 2003, the cost of investments, net unrealized appreciation (depreciation), undistributed ordinary income and undistributed long term capital gains for income tax purposes were as follows:

Cost of investments	$	518,261,111
Unrealized appreciation		125,551,172
Unrealized depreciation		(3,031,229	)
Net unrealized appreciation (depreciation)	$	122,519,943
Undistributed ordinary income	$	15,635,006
Undistributed long term capital gains		—
Distributable earnings	$	15,635,006

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

Net realized losses differ for financial statement and tax purposes primarily due to differing treatments of wash sales, foreign currency transactions and bond discounts and premiums.

5. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short-term securities) for the year ended December 31, 2003 aggregated $252,279,525 and $223,349,623, respectively.

FGI-17

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN GROWTHAND INCOME SECURITIES FUND

Notes to Financial Statements (continued)

6. REGULATORY MATTERS

On February 4, 2004, the Securities Division of the Office of the Secretary of the Commonwealth of Massachusetts filed an administrative complaint against Franklin Resources, Inc. and certain of its subsidiaries (the “Company”), alleging violations of the Massachusetts Uniform Securities Act. The complaint arises from activity that occurred in 2001 during which time an officer of a Company subsidiary was negotiating an agreement with an investor relating to investments in a mutual fund and a hedge fund.

The Company, in addition to other entities within Franklin Templeton Investments, has been named in shareholder class actions related to the matter described above. The Company believes that the claims made in the lawsuit are without merit and it intends to defend vigorously against the allegations. The Company and the Fund may be named in similar civil actions related to the matter described above.

In addition, as part of ongoing investigations by the U.S. Securities and Exchange Commission (the “SEC”), the U.S. Attorney for the Northern District of California, the New York Attorney General, the California Attorney General, the U.S. Attorney for the District of Massachusetts, the Florida Department of Financial Services, and the Commissioner of Securities and the Attorney General of the State of West Virginia relating to certain practices in the mutual fund industry, including late trading, market timing and sales compensation arrangements, the Company and its subsidiaries, as well as certain current or former executives and employees of the Company, have received requests for information and/or subpoenas to testify or produce documents. The Company and its current employees are providing documents and information in response to these requests and subpoenas. In addition, the Company has responded to requests for similar kinds of information from regulatory authorities in some of the foreign countries where the Company conducts its global asset management business.

The Staff of the SEC has informed the Company that it intends to recommend that the Commission authorize an action against the Fund’s investment adviser and a senior executive officer relating to the frequent trading issues that are the subject of the SEC’s investigation. These issues were previously disclosed as being under investigation by government authorities and the subject of an internal inquiry by the Company in its Annual Report on Form 10-K and on its public website. The Company currently is in discussions with the SEC Staff in an effort to resolve the issues raised in their investigation. Such discussions are preliminary and the Fund’s management has been advised that the Company cannot predict the likelihood of whether those discussions will result in a settlement and, if so, the terms of such settlement. The impact, if any, of these matters on the Fund is uncertain at this time. If the Company finds that it bears responsibility for any unlawful or improper conduct, it has committed to making the Fund or its shareholders whole, as appropriate.

FGI-18

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN GROWTHAND INCOME SECURITIES FUND

Independent Auditors’ Report

To the Board of Trustees and Shareholders of

Franklin Templeton Variable Insurance Products Trust

In our opinion, the accompanying statement of assets and liabilities, including the statement of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Franklin Growth and Income Securities Fund (the Fund) (one of the funds constituting the Franklin Templeton Variable Insurance Products Trust) at December 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

February 5, 2004, except for Note 6 as to which the date is February 12, 2004

FGI-19

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN GROWTHAND INCOME SECURITIES FUND

Tax Designation (unaudited)

Under Section 854(b)(2) of the Code, the Fund hereby designates 84.88% of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended December 31, 2003.

FGI-20

FRANKLIN HIGH INCOME FUND

Fund Goals and Primary Investments: Franklin High Income Fund seeks a high level of current income, with capital appreciation as a secondary goal. The Fund invests mainly in debt securities, including lower-rated “junk bonds,” offering high yield and expected total return. The Fund may also invest in foreign securities, including emerging markets.

We are pleased to bring you Franklin High Income Fund’s annual report for the fiscal year ended December 31, 2003.

Performance Overview

You can find the Fund’s one-year total return in the Performance Summary following this report. The Fund outperformed its benchmark, the Credit Suisse First Boston (CSFB) High Yield Index, which returned 27.94% for the year under review.¹

Economic and Market Overview

During the year ended December 31, 2003, many factors impacted global economies and financial markets. Early in the year, economic uncertainty and geopolitical events, including impending war in Iraq, pushed U.S. interest rates to their lowest level in more than four decades, and the 10-year U.S. Treasury note’s yield fell to 3.13% in mid-June. However, following the end of major conflict in Iraq, many economic indicators turned positive. In the U.S., third quarter 2003 gross domestic product (GDP) grew an annualized 8.2%, its strongest pace in nearly 20 years. Overall, 2003 GDP grew an estimated 3.1%. The U.S. trade deficit increased significantly, contributing to the U.S. dollar’s fall to record lows against the euro and other major currencies during the year. However, the weak dollar provided a boost to the U.S. economy and corporate profits as exports became cheaper for foreign buyers. Robust consumer spending, especially for autos and homes, and a rebound in business spending, particularly for equipment and software, contributed to the accelerated economic activity. In addition, U.S. federal spending stayed firm and inflation remained benign. As economic data improved, some interest rates rose from their lows, and the 10-year Treasury note’s yield ended the period at 4.27%.

Foreign economies also showed signs of recovery and benign inflation following a low growth and disinflationary environment that facilitated monetary easing in many major economies during the reporting period. While economic growth accelerated in the U.S., it remained strong in

1. Source: Credit Suisse First Boston. One cannot invest directly in an index, nor is an index representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

Top 10 Sectors/Industries

Franklin High Income Fund

Based on Total Net Assets

12/31/03

Consumer Services	19.0%
Communications	12.6%
Process Industries	12.1%
Producer Manufacturing	7.3%
Industrial Services	7.1%
Utilities	6.6%
Health Services	4.9%
Consumer Durables	4.0%
Electronic Technology	3.6%
Transportation	2.9%

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

FH-1

Asia, and was weak, yet positive, in Europe. Despite these signs of economic recovery, benign inflationary trends continued, supported by cyclical productivity gains and excess capacity in labor and capital.

Investment Strategy

The primary criteria we use for selecting securities are yield and expected return. We search for securities we believe offer opportunities for income today and growth tomorrow. We perform independent analysis of the corporate debt securities being considered for the Fund’s portfolio, rather than relying principally on the ratings assigned by rating agencies. In our analysis, we consider a variety of factors: 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; the company’s sensitivity to changes in interest rates and business conditions; the company’s debt maturity schedules and borrowing requirements; and the company’s changing financial condition and market recognition of the change.

Manager’s Discussion

The Fund’s outperformance relative to the CSFB High Yield Index was driven primarily by advantageous industry weightings. For example, the Fund was overweighted in the wireless communications industry versus the benchmark index.² Because this industry delivered some of the high yield market’s highest returns in 2003, our relatively overweighted allocation enhanced the Fund’s relative and absolute performance during the year. Conversely, textiles was one of 2003’s poorest performing industries represented in the index. The Fund had no exposure to this industry during the reporting period, which helped relative performance.

Security selection also benefited relative performance throughout 2003. Utilities was among the top-performing sectors during the year, and certain of the Fund’s utilities positions outperformed the sector, contributing to the Fund’s relative outperformance. Fund holdings AES Corp., Aquila and Calpine each outperformed the overall utilities sector and the CSFB High Yield Index for the year.

2. Wireless communications holdings are part of the communications sector in the Statement of Investments.

FH-2

Although overall portfolio positioning enhanced the Fund’s performance, certain industry weightings had a negative impact. Our weightings versus the index in broadcasting, telecommunications and cable hindered relative performance.⁴ The Fund was generally overweighted in broadcasting during the year, but this industry’s performance trailed that of the overall high yield market as measured by the index; therefore, the Fund’s performance was negatively impacted. On the other hand, the Fund’s relatively underweighted positions in telecommunications and cable during the year constrained the Fund’s relative return because these industries were among the top performing for 2003.

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

4. Broadcasting and cable holdings are part of the consumer services sector in the Statement of Investments. Telecommunications holdings are part of the communications sector.

This discussion reflects our analysis, opinions and portfolio holdings as of December 31, 2003, 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 advisor makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

FH-3

PERFORMANCE SUMMARYASOF 12/31/03

Total return of Class 2 shares represents the average annual change in value, assuming reinvestment of dividends and capital gains. Average returns smooth out variations in returns, which can be significant; they are not the same as year-by-year results.

Franklin High Income Fund – Class 2*

Periods ended 12/31/03

	1-Year	5-Year	10-Year
Average Annual Total Return	+31.18%	+1.26%	+4.80%

*Because Class 2 shares were not offered until 1/6/99, standardized Class 2 Fund performance for prior periods represents the historical results of Class 1 shares. For periods beginning on 1/6/99, Class 2’s results reflect an additional 12b-1 fee expense, which also affects future performance. Since 1/6/99 (effective date), the average annual total return of Class 2 shares was +1.15%.

Ongoing market volatility can significantly affect short-term performance; recent returns may differ.

Total Return Index Comparison

for Hypothetical $10,000 Investment (1/1/94–12/31/03)

The graph compares the performance of Franklin High Income Fund – Class 2* and the CSFB High Yield Index. One cannot invest directly in an index, nor is an index representative of the Fund’s portfolio. Please see Important Notes to Performance Information preceding the Fund Summaries.

**Source: Credit Suisse First Boston. Please see Index Descriptions following the Fund Summaries.

Franklin High Income Fund – Class 2

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.

Since markets can go down as well as up, investment return and the value of your principal will fluctuate with market conditions, and you may have a gain or loss when you sell your shares.

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Past performance does not guarantee future results.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN HIGH INCOME FUND

Financial Highlights

	Class 1
	Year Ended December 31,
	2003			2002			2001			2000			1999
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	5.67		$	7.44		$	8.54		$	9.86		$	13.28
Income from investment operations:
Net investment incomea		.51			.63			.87	c		1.08			1.24
Net realized and unrealized gains (losses)		1.21			(1.30	)		(.50	)c		(2.36	)		(1.19	)
Total from investment operations		1.72			(.67	)		.37			(1.28	)		.05
Less distributions from:
Net investment income		(.58	)		(1.10	)		(1.47	)		(.04	)		(3.03	)
Net realized gains		—			—			—			—			(.44	)
Total distributions		(.58	)		(1.10	)		(1.47	)		(.04	)		(3.47	)
Net asset value, end of year	$	6.81		$	5.67		$	7.44		$	8.54		$	9.86
Total returnb		31.50%			(9.55)%			4.26%			(13.00)%			(.07)%
Ratios/supplemental data
Net assets, end of year (000’s)	$	136,218		$	111,746		$	151,924		$	189,986		$	314,131
Ratios to average net assets:
Expenses		.62%			.63%			.62%			.57%			.54%
Net investment income		8.19%			9.92%			10.63%	c		11.43%			9.97%
Portfolio turnover rate		52.01%			56.01%			30.03%			20.37%			22.17%

^a Based on average daily shares outstanding.

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

^c Effective January 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide of Investment Companies and began amortizing all premium and discount on fixed-income securities, as required. The effect of this change was as follows:

Net investment income per share	$(.004)
New realized and unrealized gains (losses) per share	.004
Ratio of net investment income to average net assets	(.05)%

Per share data and ratios for prior periods have not been restated to reflect this change in accounting policy.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN HIGH INCOME FUND

Financial Highlights (continued)

	Class 2
	Year Ended December 31,
	2003			2002			2001			2000			1999d
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	5.62		$	7.41		$	8.50		$	9.83		$	13.36
Income from investment operations:
Net investment incomea		.48			.56			.84	c		1.04			1.11
Net realized and unrealized gains (losses)		1.21			(1.25	)		(.48	)c		(2.33	)		(1.18	)
Total from investment operations		1.69			(.69	)		.36			(1.29	)		(.07	)
Less distributions from:
Net investment income		(.58	)		(1.10	)		(1.45	)		(.04	)		(3.02	)
Net realized gains		—			—			—			—			(.44	)
Total distributions		(.58	)		(1.10	)		(1.45	)		(.04	)		(3.46	)
Net asset value, end of year	$	6.73		$	5.62		$	7.41		$	8.50		$	9.83
Total returnb		31.18%			(9.96)%			4.18%			(13.15)%			(0.96)%
Ratios/supplemental data
Net assets, end of year (000’s)	$	58,681		$	7,326		$	832		$	432		$	448
Ratios to average net assets:
Expenses		.87%			.88%			.87%			.82%			.80%	e
Net investment income		7.94%			9.67%			10.39%	c		11.16%			9.51%	e
Portfolio turnover rate		52.01%			56.01%			30.03%			20.37%			22.17%

^a Based on average daily shares outstanding.

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

^c Effective January 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide of Investment Companies and began amortizing all premium and discount on fixed-income securities, as required. The effect of this change was as follows:

Net investment income per share	$(.004)
New realized and unrealized gains (losses) per share	.004
Ratio of net investment income to average net assets	(.05)%

Per share data and ratios for prior periods have not been restated to reflect this change in accounting policy.

^d For the period January 6, 1999 (effective date) to December 31, 1999.

^e Annualized.

See notes to financial statements.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN HIGH INCOME FUND

Statement of Investments, December 31, 2003

	COUNTRY	PRINCIPAL AMOUNTf		VALUE
Bonds 90.2%
Commercial Services 2.0%
American Color Graphics, senior secured note, 144A, 10.00%, 6/15/10	United States	$	1,700,000	$	1,751,000
Johnsondiversey Hold Inc., senior disc. note, 144A, zero cpn. to 5/15/07, 10.67% thereafter, 5/15/13	United States		2,800,000		2,156,000
aKey3Media Group Inc., senior sub. note, 11.25%, 6/15/11	United States		2,000,000		20,000
					3,927,000
Communications 10.3%
Crown Castle International Corp., senior note, 9.375%, 8/01/11	United States		1,000,000		1,115,000
Dobson Communications, senior note, 144A, 8.875%, 10/01/13	United States		2,000,000		2,035,000
Nexstar Finance Inc., senior sub. note, 144A, 7.00%, 1/15/14	United States		2,000,000		2,020,000
Nextel Communications Inc., senior note, 7.375%, 8/01/15	United States		2,000,000		2,160,000
Nextel Partners Inc., senior note, 11.00%, 3/15/10	United States		1,000,000		1,112,500
Nextel Partners Inc., senior note, 8.125%, 7/01/11	United States		1,000,000		1,070,000
Nortel Networks Corp., 6.875%, 9/01/23	Canada		2,300,000		2,196,500
Rural Cellular Corp., senior note, 9.875%, 2/01/10	United States		2,000,000		2,140,000
Time Warner Telecom Inc., senior note, 10.125%, 2/01/11	United States		2,100,000		2,247,000
Triton PCS Inc., senior note, 8.50%, 6/01/13	United States		2,000,000		2,160,000
US West Communications Inc., 6.875%, 9/15/33	United States		2,000,000		1,910,000
					20,166,000
Consumer Durables 4.0%
D.R. Horton Inc., senior note, 8.50%, 4/15/12	United States		2,000,000		2,270,000
General Motors, 8.25%, 7/15/23	United States		2,000,000		2,276,638
Norcraft Cos. LP, senior sub. note, 144A, 9.00%, 11/01/11	United States		1,100,000		1,193,500
Sealy Mattress Co., senior sub. disc. note, B, 10.875%, 12/15/07	United States		2,000,000		2,085,000
					7,825,138
Consumer Non-Durables 2.3%
Armkel Finance Inc., senior sub. note, 9.50%, 8/15/09	United States		1,000,000		1,102,500
Philip Morris Cos. Inc., 7.75%, 1/15/27	United States		1,500,000		1,622,953
Smithfield Foods Inc., senior note, 7.75%, 5/15/13	United States		1,700,000		1,776,500
aStyling Technology Corp., senior sub. note, 10.875%, 7/01/08	United States		3,000,000		12,780
					4,514,733
Consumer Services 19.0%
a,bAdelphia Communications Corp., senior note, 10.25%, 6/15/11	United States		2,500,000		2,375,000
Advanstar Communications, senior secured note, 144A, 10.75%, 8/15/10	United States		1,500,000		1,631,250
Aztar Corp., senior sub. note, 8.875%, 5/15/07	United States		1,000,000		1,048,750
Aztar Corp., senior sub. note, 9.00%, 8/15/11	United States		500,000		551,250
aCallahan NordRhein-Westfalen, senior note, 14.00%, 7/15/10	United States		2,750,000		182,188
Chancellor Media Corp., senior note, 8.00%, 11/01/08	United States		700,000		813,750
Charter Communications Holdings II, senior note, 144A, 10.25%, 9/15/10	United States		2,500,000		2,637,500
Coast Hotel & Casino Inc., senior sub. note, 9.50%, 4/01/09	United States		1,500,000		1,593,750
Dex Media Inc., senior note, 144A, 8.00%, 11/15/13	United States		500,000		527,500
Dex Media West LLC, senior sub. note, 144A, 9.875% 8/15/13	United States		1,500,000		1,751,250
Diamond Holdings PLC, senior note, 9.125%, 2/01/08	United Kingdom		1,500,000		1,558,125
DIRECTV Holdings/Finance, senior note, 8.375%, 3/15/13	United States		2,000,000		2,330,000
EchoStar DBS Corp., senior note, 10.375%, 10/01/07	United States		1,500,000		1,651,875
EchoStar DBS Corp., senior note, 144A, 6.375%, 10/01/11	United States		2,000,000		2,060,000
Gaylord Entertainment Co, senior note, 144A, 8.00%, 11/15/03	United States		500,000		530,000
Granite Broadcasting Corp., senior sub. note, 10.375%, 5/15/05	United States		1,500,000		1,505,625

FH-7

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN HIGH INCOME FUND

Statement of Investments, December 31, 2003 (cont.)

	COUNTRY	PRINCIPAL AMOUNTf			VALUE
Bonds (cont.)
Consumer Services (cont.)
Hollywood Park, senior sub. note, B, 9.25%, 2/15/07	United States	$	1,875,000		$	1,950,000
Lin Television Corp., senior sub. note, 144A, 6.50%, 5/15/13	United States		2,015,000			2,025,075
Park Place Entertainment Corp., senior sub. note 7.875%, 3/15/10	United States		2,000,000			2,225,000
Royal Caribbean Cruises Ltd., senior note, 8.00%, 5/15/10	United States		800,000			876,000
Royal Caribbean Cruises Ltd., senior note, 6.875%, 12/01/13	United States		1,200,000			1,215,000
Six Flags Inc., senior note, 8.875%, 2/01/10	United States		1,700,000			1,753,125
Station Casinos Inc., senior sub. note, 9.875%, 7/01/10	United States		1,400,000			1,547,000
Vivendi Universal, senior note, 144A, 9.25%, 4/15/10	France		700,000			833,000
Yell Finance BV, senior disc. note, zero cpn. to 8/01/06, 13.50% thereafter, 8/01/11	United Kingdom		1,282,000			1,185,850
Young Broadcasting Inc., senior sub. note, 144A, 8.75%, 1/15/14	United States		700,000	��		712,250
						37,070,113
Electronic Technology 3.6%
Be Aerospace, senior note, 144A, 8.50%, 10/01/10	United States		1,500,000			1,616,250
Flextronics International Ltd., senior sub. note, 6.50%, 5/15/13	Singapore		2,000,000			2,080,000
ON Semiconductor Corp., 13.00%, 5/15/08	United States		2,000,000			2,330,000
Vought Aircraft Industries, senior note, 144A, Inc., 8.00%, 7/15/11	United States		1,000,000			1,026,250
						7,052,500
Energy Minerals 2.8%
Arch Western Finance, senior note, 144A, 6.75%, 7/01/13	United States		1,800,000			1,858,500
Peabody Energy Corp., senior note, B, 6.875%, 3/15/13	United States		1,300,000			1,378,000
Williams Cos., senior note, 8.625%, 6/01/10	United States		2,000,000			2,255,000
						5,491,500
Finance .5%
Western Financial Bank-FSB, sub. deb., 9.625%, 5/15/12	United States		800,000			896,000
Health Services 4.1%
Alliance Imaging Inc., senior sub. note, 10.375%, 4/15/11	United States		2,000,000			2,130,000
HealthSouth Corp., senior note, 8.50%, 2/01/08	United States		1,600,000			1,544,000
a,bMagellan Health Services Inc., senior sub. note, 9.00%, 2/15/08	United States		2,750,000			2,048,750
United Surgical Partners, senior sub. note, 10.00%, 12/15/11	United States		2,000,000			2,280,000
						8,002,750
Industrial Services 7.0%
a,dAll Star Gas Corp., senior note, 11.00%, 6/30/03	United States		2,085,834			292,017
Allied Waste North America Inc., senior secured note, 144A, 6.50%, 11/15/10	United States		2,000,000			2,060,000
Grant Prideco Escrow, senior note, 9.00%, 12/15/09	United States		2,000,000			2,210,000
Great Lakes Dredge & Dock, senior sub. note, 144A, 7.75%, 12/15/13	United States		300,000			310,125
Gulfterra Energy Partners, senior sub. note, 10.625%, 12/01/12	United States		1,000,000			1,245,000
Hanover Equipment Trust 01, senior secured note, B, 8.75%, 9/01/11	United States		2,000,000			2,130,000
SESI L.L.C., senior note, 8.875%, 5/15/11	United States		1,500,000			1,642,500
Universal Compression Inc., senior note, 7.25%, 5/15/10	United States		2,000,000			2,090,000
URS Corp., senior sub. note, 12.25%, 5/01/09	United States		1,600,000			1,718,000
						13,697,642
Non-Energy Minerals 1.2%
Century Aluminum Co., first mortgage, 11.75%, 4/15/08	United States		2,000,000			2,240,000

FH-8

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN HIGH INCOME FUND

Statement of Investments, December 31, 2003 (cont.)

	COUNTRY	PRINCIPAL AMOUNTf		VALUE
Bonds (cont.)
Process Industries 12.0%
Doane Pet Care Co., senior sub. note, 9.75%, 5/15/07	United States	$	957,000	$	861,300
Georgia-Pacific Corp., 8.125%, 5/15/11	United States		2,000,000		2,210,000
Graham Packaging Co., senior sub. note, B, 8.75%, 1/15/08	United States		2,000,000		2,055,000
HMP Equity Holdings Corp., 144A, zero cpn., 5/15/08	United States		2,200,000		1,353,000
Huntsman ICI Chemicals, senior disc. note, zero cpn., 12/31/09	United States		1,800,000		877,500
IMC Global Inc., senior note, 144A, 10.875%, 8/01/13	United States		1,500,000		1,650,000
Jefferson Smurfit Corp., senior note, 7.50%, 6/01/13	United States		2,000,000		2,100,000
Lyondell Chemical Co., senior secured note, 10.50%, 6/01/13	United States		2,000,000		2,190,000
MDP Acquisitions PLC, senior note, 9.625%, 10/01/12	Irish Republic		2,000,000		2,250,000
Nalco Company, senior sub. note, 144A, 8.875%, 11/15/13	United States		1,000,000		1,065,000
Owens-Illinois Inc., senior note, 7.80%, 5/15/18	United States		1,500,000		1,558,125
aPolysindo International Finance Co. BV, secured note, 9.375%, 7/30/07	Indonesia		4,250,000		403,750
Pliant Corp., senior sub. note, 13.00%, 6/01/10	United States		2,000,000		1,840,000
Resolution Performance Products, senior note, 9.50%, 4/15/10	United States		1,400,000		1,428,000
aTjiwi Kimia Finance Mauritius, senior note, 10.00%, 8/01/04	Indonesia		2,000,000		650,000
United Industries Corp., senior sub. note, 9.875%, 4/01/09	United States		900,000		947,250
					23,438,925
Producer Manufacturing 7.3%
Case New Holland Inc., senior note, 144A, 9.25%, 8/01/11	United States		2,000,000		2,250,000
Fimep SA, senior note, 10.50%, 2/15/13	France		2,000,000		2,333,500
aGoss Graphic Systems Inc., 12.25%, 11/19/05	United States		1,912,374		—
H&E Equipment/Finance, 11.125%, 6/15/12	United States		2,000,000		2,020,000
Hexcel Corp., senior sub. note, 9.75%, 1/15/99	United States		1,300,000		1,368,250
Joy Global Inc., senior sub. note, 8.75%, 3/15/12	United States		1,500,000		1,680,000
Motors & Gears, senior note, 10.75%, 11/15/06	United States		2,000,000		1,710,000
TRW Automotive Inc., senior note, 9.375%, 2/15/13	United States		1,400,000		1,606,500
TRW Automotive Inc., senior sub. note, 11.00%, 2/15/13	United States		300,000		354,750
Westinghouse Air Brake, senior note, 144A, 6.875%, 7/31/13	United States		800,000		833,000
					14,156,000
Real Estate Development .9%
Forest City Enterprises., senior note, 7.625%, 6/01/15	United States		1,700,000		1,812,625
Real Estate Investment Trusts 2.7%
Corrections Corp. of America, senior note, 9.875%, 5/01/09	United States		1,400,000		1,569,750
Corrections Corp. of America, senior note, 7.50%, 5/01/11	United States		300,000		316,500
Corrections Corp. of America, senior note, 144A, 7.50%, 5/01/11	United States		200,000		211,000
Host Marriott LP, senior note, 9.50%, 1/15/07	United States		1,500,000		1,676,250
Meristar Hospitality Corp., senior note, 10.50%, 6/15/09	United States		1,300,000		1,417,000
					5,190,500
Retail Trade 1.0%
Rite Aid Corp., senior note, 144A, 6.125%, 12/15/08	United States		2,000,000		1,910,000
Transportation 2.9%
American Airlines, 9.71%, 1/02/07	United States		1,512,541		1,375,467
CP Ships Ltd., senior note, 10.375%, 7/15/12	United Kingdom		1,500,000		1,747,500
aHolt Group Inc., senior note, 9.75%, 1/15/06	United States		5,250,000		157,500
Laidlaw International Inc., senior note, 144A, 10.75%, 6/15/11	United States		2,000,000		2,270,000
					5,550,467

FH-9

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN HIGH INCOME FUND

Statement of Investments, December 31, 2003 (cont.)

	COUNTRY	PRINCIPAL AMOUNTf		VALUE
Bonds (cont.)
Utilities 6.6%
AES Corp., senior secured note, 144A, 9.00%, 5/15/15	United States	$	2,000,000	$	2,270,000
Aquila Inc., 14.875%, 7/01/12	United States		2,000,000		2,685,000
Calpine Canada Energy Finance, senior note, 8.50%, 5/01/08	United States		1,000,000		802,500
Calpine Corp., senior secured note, 144A, 8.75%, 7/15/13	United States		1,500,000		1,470,000
CMS Energy Corp., senior note, 7.50%, 1/15/09	United States		2,000,000		2,070,000
Dynegy Holdings Inc., senior note, 8.75%, 2/15/12	United States		2,300,000		2,331,625
PG&E Corp., senior secured note, 144A, 6.875%, 7/15/08	United States		1,100,000		1,196,250
					12,825,375
Total Bonds (Cost $183,394,415)					175,767,268
Convertible Bond (Cost $153,566) .4%
Communications
Millicom International Cellular SA, senior note, cvt., PIK, 144A, 2.00%, 6/01/06	Luxembourg		129,000		840,435
		SHARES/ WARRANTS
Common Stocks and Warrants 1.9%
Communications 1.8%
cArch Wireless Inc., A	United States		1,321		26,156
cCall-Net Enterprises Inc., B	Canada		47,553		190,212
cDobson Communications Corp.	United States		78,146		513,419
cICG Communications Inc.	United States		10,694		70,580
cICG Communications Inc., wts., 10/10/07	United States		1,772		665
cICO Global Communications Holdings Ltd.	United States		300,767		153,391
cICO Global Communications Holdings Ltd., wts., 5/16/06	United States		75,546		377
International Wireless Communications Holdings Inc.	United States		377,088		75,418
cLoral Space & Communications Ltd., wts., 1/15/07	United States		1,500		15
cMetrocall Holdings Inc.	United States		23,100		1,686,300
cNII Holdings Inc., B	United States		9,569		714,135
c,dPoland Telecom Finance, wts., 144A, 12/01/07	Poland		8,000		—
cXO Communications Inc.	United States		4,875		28,033
cXO Communications Inc., wts., A, 1/16/10	United States		9,749		19,010
cXO Communications Inc., wts., B, 1/16/10	United States		7,312		12,430
cXO Communications Inc., wts., C, 1/16/10	United States		7,312		8,043
					3,498,184
Consumer Services
cJack in the Box Inc.	United States		210		4,486
Industrial Services .1%
cTransocean Inc., wts., 144A, 5/01/09	United States		1,500		214,500
Producer Manufacturing
cGoss Holdings Inc., B	United States		44,604		—
Utilities
c,dEmpire Gas Corp., wts., 7/15/04	United States		6,900		—
Total Common Stocks and Warrants (Cost $12,099,763)					3,717,170
Preferred Stocks .9%
Communications
Metrocall Holdings Inc., 15.00%, pfd., A	United States		2,787		32,329

FH-10

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN HIGH INCOME FUND

Statement of Investments, December 31, 2003 (cont.)

	COUNTRY	SHARES		VALUE
Preferred Stocks (cont.)
Health Services .8%
Fresenius Medical Care Capital Trust II, 7.875%	Germany		1,500,000	$	1,608,750
Process Industries .1%
aAsia Pulp & Paper Co. Ltd., 12.00%, pfd.	Indonesia		4,500,000		78,750
Total Preferred Stocks (Cost $5,958,119)					1,719,829
Convertible Preferred Stock (Cost $246,000) .1%
Communications
Dobson Communications Corp., 6.00%, cvt. pfd.	United States		1,500		270,000
Total Investments before Repurchase Agreement (Cost $201,851,863)					182,314,702
		PRINCIPAL AMOUNTf
Repurchase Agreement (Cost $9,119,002) 4.7%
eJoint Repurchase Agreement, .873%, 01/02/04 (Maturity Value $9,119,444)	United States	$	9,119,002		9,119,002
ABN AMRO Bank, N.V., New York Branch (Maturity Value $849,567) Banc of America Securities LLC (Maturity Value $849,567) Barclays Capital Inc. (Maturity Value $606,720) Bear, Stearns & Co. Inc. (Maturity Value $485,428) BNP Paribas Securities Corp. (Maturity Value $849,567) Deutsche Bank Securities Inc. (Maturity Value $849,567) Dresdner Kleinwort Wasserstein Securities LLC (Maturity Value $849,567) Goldman, Sachs & Co. (Maturity Value $485,428) Greenwich Capital Markets Inc. (Maturity Value $849,567) Lehman Brothers Inc. (Maturity Value $745,332) Morgan Stanley & Co. Inc. (Maturity Value $849,567) UBS Securities LLC (Maturity Value $849,567)
Total Investments (Cost $210,970,865) 98.2%					191,433,704
Other Assets, less Liabilities 1.8%					3,465,842
Net Assets 100.0%				$	194,899,546

^a The fund discontinues accruing income on defaulted securities. See Note 6.

^b See Note 8 regarding other considerations.

^c Non-income producing.

^d See Note 7 regarding restricted securities.

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

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

FH-11

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN HIGH INCOME FUND

Financial Statements

Statement of Assets and Liabilities

December 31, 2003

Assets:
Investments in securities:
Cost	$	210,970,865
Value		191,433,704
Cash		1,630
Receivables:
Investment securities sold		89,063
Capital shares sold		218,224
Dividends and Interest		3,454,480
Total assets		195,197,101
Liabilities:
Payables:
Capital shares redeemed		160,607
Affiliates		113,053
Other liabilities		23,895
Total liabilities		297,555
Net assets, at value	$	194,899,546
Net assets consist of:
Undistributed net investment income	$	8,905,397
Net unrealized appreciation (depreciation)		(19,537,161	)
Accumulated net realized gain (loss)		(114,469,548	)
Capital shares		320,000,858
Net assets, at value	$	194,899,546
Class 1:
Net assets, at value	$	136,218,322
Shares outstanding		19,998,888
Net asset value and offering price per share	$	6.81
Class 2:
Net assets, at value	$	58,681,224
Shares outstanding		8,713,217
Net asset value and offering price per share	$	6.73

See notes to financial statements.

FH-12

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN HIGH INCOME FUND

Financial Statements (continued)

Statement of Operations

for the year ended December 31, 2003

Investment income:
Dividends	$	296,012
Interest		12,749,130
Total investment income		13,045,142
Expenses:
Management fees (Note 3)		864,304
Distribution fees - Class 2 (Note 3)		64,841
Transfer agent fees		844
Custodian fees		1,402
Reports to shareholders		20,110
Professional fees		15,497
Trustees’ fees and expenses		1,367
Other		11,795
Total expenses		980,160
Net investment income		12,064,982
Realized and unrealized gains (losses):
Net realized gain (loss) from investments		(13,030,110	)
Net unrealized appreciation (depreciation) on investments		41,254,872
Net realized and unrealized gain (loss)		28,224,762
Net increase (decrease) in net assets resulting from operations	$	40,289,744

See notes to financial statements.

FH-13

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN HIGH INCOME FUND

Financial Statements (continued)

Statements of Changes in Net Assets

for the years ended December 31, 2003 and 2002

	2003			2002
Increase (decrease) in net assets:
Operations:
Net investment income	$	12,064,982		$	12,719,902
Net realized gain (loss) from investments and foreign currrency transactions		(13,030,110	)		(55,072,152	)
Net unrealized appreciation (depreciation) on investments		41,254,872			29,111,763
Net increase (decrease) in net assets resulting from operations		40,289,744			(13,240,487	)
Distributions to shareholders from:
Net investment income:
Class 1		(11,192,157	)		(19,700,643	)
Class 2		(2,049,901	)		(340,095	)
Total distributions to shareholders		(13,242,058	)		(20,040,738	)
Capital share transactions: (Note 2)
Class 1		2,030,563			(7,270,704	)
Class 2		46,749,559			6,868,444
Total capital share transactions		48,780,122			(402,260	)
Net increase (decrease) in net assets		75,827,808			(33,683,485	)
Net assets:
Beginning of year		119,071,738			152,755,223
End of year	$	194,899,546		$	119,071,738
Undistributed net investment income included in net assets:
End of year	$	8,905,397		$	10,080,163

See notes to financial statements.

FH-14

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN HIGH INCOME FUND

Notes to Financial Statements

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (the Trust) is registered under the Investment Company Act of 1940 as an open-end investment company, consisting of twenty-two separate series (the Funds). Franklin High Income Fund (the Fund) included in this report is diversified. Shares of the Fund are sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. As of December 31, 2003, 100% of total Fund shares were sold through one insurance company. The Fund’s investment objective is current income.

The following summarizes the Fund’s significant accounting policies.

a. Security Valuation

Securities listed or traded on a recognized national exchange or NASDAQ are valued at the last reported sales price. Over-the-counter securities and listed securities for which no sale is reported are valued within the range of the latest quoted bid and asked prices. Foreign securities are valued at the close of trading of the foreign exchange or the NYSE, whichever is earlier. If events occur that materially affect the values of securities after the prices or foreign exchange rates are determined, or if market quotations are not readily available, the securities will be valued at fair value as determined following procedures approved by the Board of Trustees.

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. Purchases and sales of securities and income items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.

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.

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 may enter into a joint repurchase agreement whereby its uninvested cash balance is deposited into a joint cash account to be used to invest in one or more repurchase agreements. The value and face amount of the joint repurchase agreement are allocated to the Fund based on its pro-rata interest. A repurchase agreement is accounted for as a loan by the Fund to the seller, collateralized by securities which are delivered to the Fund’s custodian. The market value, including accrued interest, of the initial collateralization is required to be at least 102% of the dollar amount invested by the Funds, with the value of the underlying securities marked to market daily to maintain coverage of at least 100%. At December 31, 2003, all repurchase agreements had been entered into on that date.

d. Foreign Currency Contracts

When the Fund purchases or sells foreign securities it may enter into foreign exchange contracts to minimize foreign exchange risk from the trade date to the settlement date of the transactions. A foreign exchange contract is an agreement between two parties to exchange different currencies at an agreed upon exchange rate on a specified date. Realized and unrealized gains and losses are included in the Statement of Operations.

FH-15

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN HIGH INCOME FUND

Notes to Financial Statements (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

The risks of these contracts include movement in the values of the foreign currencies relative to the U.S. dollar and the possible inability of the counterparties to fulfill their obligations under the contracts.

e. Income Taxes

No provision has been made for income taxes because the Fund’s policy is to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable income.

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. Discounts and premiums on securities purchased are amortized over the lives of the respective securities. Dividend income and distributions to shareholders are recorded on the ex-dividend date.

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. Other expenses are charged to each Fund on a specific identification basis.

Realized and unrealized gains and losses and net investment income, other than class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class.

g. Accounting Estimates

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

h. Guarantees and Indemnifications

Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust 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. However, based on experience, the Trust expects the risk of loss to be remote.

FH-16

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN HIGH INCOME FUND

Notes to Financial Statements (continued)

2. SHARES OF BENEFICIAL INTEREST

The Fund offers two classes of shares: Class 1 and 2. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

At December 31, 2003, there were an unlimited number of shares authorized ($.01 par value). Transactions in the Fund’s shares were as follows:

	Year Ended December 31,
	2003					2002
Class 1 Shares:	Shares		Amount			Shares		Amount
Shares sold	11,487,433		$	71,330,100		8,163,015		$	51,125,305
Shares issued in reinvestment of distributions	1,828,784			11,192,157		3,333,442			19,700,643
Shares redeemed	(13,033,894	)		(80,491,694	)	(12,198,620	)		(78,096,652	)
Net decrease (decrease)	282,323		$	2,030,563		(702,163	)	$	(7,270,704	)
Class 2 Shares:
Shares sold	9,104,383		$	56,921,673		2,136,319		$	13,142,002
Shares issued in reinvestment of distributions	338,268			2,049,901		57,938			340,095
Shares redeemed	(2,032,596	)		(12,222,015	)	(1,003,347	)		(6,613,653	)
Net increase (decrease)	7,410,055		$	46,749,559		1,190,910		$	6,868,444

3. TRANSACTIONS WITH AFFILIATES

Certain officers and trustees of the Fund are also officers and/or directors of the following entities:

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

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
.625%	First $100 million
.500%	over $100 million, up to and including $250 million
.450%	over $250 million, up to and including $10 billion

Fees are further reduced on net assets over $10 billion.

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

The Fund reimburses Distributors up to .25% per year of its average daily net assets of Class 2 for costs incurred in marketing the Fund’s shares.

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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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN HIGH INCOME FUND

Notes to Financial Statements (continued)

4. INCOME TAXES

At December 31, 2003, the Fund had tax basis capital losses of $114,469,549 which may be carried over to offset future capital gains. Such losses expire as follows:

Capital loss carryovers expiring in:
2007	$	2,294,320
2008		26,944,467
2009		14,152,532
2010		46,366,314
2011		24,711,916
	$	114,469,549

The tax character of distributions paid during the years ended December 31, 2003 and 2002, was as follows:

	2003		2002
Distributions paid from:
Ordinary income	$	13,242,058	$	20,040,738

At December 31, 2003, the cost of investments, net unrealized appreciation (depreciation), undistributed ordinary income and undistributed long term capital gains for income tax purposes were as follows:

Cost of investments	$	211,401,718
Unrealized appreciation	$	16,787,252
Unrealized depreciation		(36,755,266	)
Net unrealized appreciation (depreciation)	$	(19,968,014	)
Undistributed ordinary income	$	10,338,269
Undistributed long term capital gains		—
Distributable earnings	$	10,338,269

Net investment income and net realized gains and losses differ for financial statement and tax purposes primarily due to differing treatments of defaulted securities, foreign currency transactions and bond discounts and premiums.

5. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short-term securities) for the year ended December 31, 2003 aggregated $117,456,874 and $73,277,170, respectively.

6. CREDIT RISK AND DEFAULTED SECURITIES

The Fund has 89.6% of its portfolio invested in below investment grade and comparable quality unrated high yield securities, which tend to be more sensitive to economic conditions than higher rated securities. The risk of loss due to default by the issuer may be significantly greater for the holders of high yielding securities because such securities are generally unsecured and are often subordinated to other creditors of the issuer.

The Fund held defaulted and/or other securities for which the income has been deemed uncollectible. The Fund discontinues accruing income on these securities and provides an estimate for losses on interest receivable. At December 31, 2003, the value of these securities was $6,220,735 representing 3.2% of the Fund’s net assets. For information as to specific securities, see the accompanying Statement of Investments.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN HIGH INCOME FUND

Notes to Financial Statements (continued)

7. RESTRICTED SECURITIES

At December 31, 2003, investments in securities included issues that are restricted or illiquid. Restricted securities are often purchased in private placement transactions, are not registered under the Securities Act of 1933, may have contractual restrictions on resale, and are valued under methods approved by the Board of Trustees as reflecting fair value. A security may also be considered illiquid if it lacks a readily available market or if its valuation has not changed for a certain period of time. At December 31, 2003, the Fund held investments in restricted and illiquid securities that were valued under approved methods by the Trustees, as follows:

Principal Amount/ Shares		Issuer	Acquisition Date	Cost		Value
$	2,085,834	All Star Gas Corp., senior note, 11.00%, 6/30/03	2/23/01	$	1,836,487	$	292,017
	6,900	Empire Gas Corp., wts., 7/15/04	6/23/94		11,286		—
	8,000	Poland Telecom Finance, wts., 144A, 12/01/07	11/24/97		48,000		—
		Total Restricted Securities (.1% of Net Assets)				$	292,017

8. OTHER CONSIDERATIONS

Advisers, as the Fund’s Manager, may serve as a member of various bondholders’ steering committees, on credit committees, or may represent the Fund in certain corporate restructuring negotiations. Currently the Manager serves in one or more of these capacities for Adelphia Communications Corp. and Magellan Health Services Inc. As a result of this involvement, Advisers may be in possession of certain material non-public information. If the Fund’s Manager, while in possession of such information, seeks to sell any of its holdings in these securities it will comply with all applicable federal securities laws.

9. REGULATORY MATTERS

On February 4, 2004, the Securities Division of the Office of the Secretary of the Commonwealth of Massachusetts filed an administrative complaint against Franklin Resources, Inc. and certain of its subsidiaries (the “Company”), alleging violations of the Massachusetts Uniform Securities Act. The complaint arises from activity that occurred in 2001 during which time an officer of a Company subsidiary was negotiating an agreement with an investor relating to investments in a mutual fund and a hedge fund.

The Company, in addition to other entities within Franklin Templeton Investments, has been named in shareholder class actions related to the matter described above. The Company believes that the claims made in the lawsuit are without merit and it intends to defend vigorously against the allegations. The Company and the Fund may be named in similar civil actions related to the matter described above.

In addition, as part of ongoing investigations by the U.S. Securities and Exchange Commission (the “SEC”), the U.S. Attorney for the Northern District of California, the New York Attorney General, the California Attorney General, the U.S. Attorney for the District of Massachusetts, the Florida Department of Financial Services and the Commissioner of Securities and the Attorney General of the State of West Virginia, relating to certain practices in the mutual fund industry, including late trading, market timing and sales compensation arrangements, the Company and its subsidiaries, as well as certain current or former executives and employees of the Company, have received requests for information and/or subpoenas to testify or produce documents. The Company and its current employees are providing documents and information in response to these requests and subpoenas. In addition, the Company has responded to requests for similar kinds of information from regulatory authorities in some of the foreign countries where the Company conducts its global asset management business.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN HIGH INCOME FUND

Notes to Financial Statements (continued)

9. REGULATORY MATTERS (cont.)

The Staff of the SEC has informed the Company that it intends to recommend that the Commission authorize an action against the Fund’s investment adviser and a senior executive officer relating to the frequent trading issues that are the subject of the SEC’s investigation. These issues were previously disclosed as being under investigation by government authorities and the subject of an internal inquiry by the Company in its Annual Report on Form 10-K and on its public website. The Company currently is in discussions with the SEC Staff in an effort to resolve the issues raised in their investigation. Such discussions are preliminary and the Fund’s management has been advised that the Company cannot predict the likelihood of whether those discussions will result in a settlement and, if so, the terms of such settlement. The impact, if any, of these matters on the Fund is uncertain at this time. If the Company finds that it bears responsibility for any unlawful or improper conduct, it has committed to making the Fund or its shareholders whole, as appropriate.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN HIGH INCOME FUND

Independent Auditors’ Report

To the Board of Trustees and Shareholders of

Franklin Templeton Variable Insurance Products Trust

In our opinion, the accompanying statement of assets and liabilities, including the statement of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Franklin High Income Fund (the Fund) (one of the funds constituting the Franklin Templeton Variable Insurance Products Trust) at December 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

February 5, 2004, except for Note 9 as to which the date is February 12, 2004

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN HIGH INCOME FUND

Tax Designation (unaudited)

Under Section 854(b)(2) of the Code, the Fund hereby designates 0.28% of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended December 31, 2003.

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FRANKLIN INCOME SECURITIES FUND

Fund Goals and Primary Investments: Franklin Income Securities Fund seeks to maximize income while maintaining prospects for capital appreciation. The Fund invests in debt and equity securities, including lower-rated “junk bonds.”

We are pleased to bring you Franklin Income Securities Fund’s annual report for the fiscal year ended December 31, 2003.

Performance Overview

You can find the Fund’s one-year total return in the Performance Summary following this report. The Fund outperformed its benchmarks, the Standard & Poor’s 500 Composite Index (S&P 500), the Lehman Brothers (LB) U.S. Government/Credit Index, the LB U.S. Aggregate Index and the Lipper VIP Income Funds Objective Average, which returned 28.67%, 4.67%, 4.10% and 16.94%, respectively, for the year under review.¹ The Fund changed benchmark indexes from the LB U.S. Government/Credit Index to LB U.S. Aggregate Index because the LB U.S. Aggregate Index provides a broader representation of the bond market and is a more appropriate comparison for the Fund’s portfolio.

Economic and Market Overview

During the year ended December 31, 2003, many factors impacted global economies and financial markets. Early in the year, economic uncertainty and geopolitical events, including impending war in Iraq, pushed U.S. interest rates to their lowest level in more than four decades, and the 10-year U.S. Treasury note’s yield fell to 3.13% in mid-June. However, following the end of major conflict in Iraq, many economic indicators turned positive. The U.S. government injected fiscal stimulus into the economy, approving another round of tax cuts and rebates that included dividend and capital gains tax reductions. In June, an accommodative Federal Reserve Board, in an attempt to bolster the economy, cut the federal funds target rate to 1.00%.

During the year, the U.S. trade deficit increased significantly, contributing to the U.S. dollar’s fall to record lows against the euro and other major currencies. However, the weak dollar provided a boost to the U.S. economy and corporate profits as exports became cheaper for foreign buyers. Robust consumer spending, especially for autos and homes, and strong business spending, particularly for equipment and

1. Sources: Standard & Poor’s Micropal; Lipper Inc. One cannot invest directly in an index, nor is an index representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

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software, contributed to the accelerated economic activity. In addition,

U.S. federal spending stayed firm and inflation remained benign. U.S. gross domestic product (GDP) grew an annualized 8.2% in third quarter 2003, its strongest pace in nearly 20 years, and overall, 2003 GDP grew an estimated 3.1%. As economic data improved, some interest rates rose from their lows, and the 10-year Treasury note’s yield ended the period at 4.27%.

An equity market rally started in late March 2003 and continued through the end of the year. The rebound began with investors anticipating economic recovery in the second half of 2003, and it continued as data showed robust economic growth. Improved sentiment led many investors to rotate into economically sensitive and financially leveraged companies, specifically cyclical, technology, small-capitalization and emerging market stocks. The S&P 500 rose 28.67% for the 12 months ended December 31, 2003, while the technology-heavy Nasdaq Composite Index increased 50.93%.²

Investment Strategy

We search for undervalued or out-of-favor securities we believe offer opportunities for income today and growth tomorrow. We 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

Based on our overall investment strategy, several portfolio management actions favorably impacted Fund performance in 2003. We gradually reduced the Fund’s exposure to the most interest rate-sensitive securities, including our holdings of mortgage-backed securities issued by FNMA, GNMA and FHLMC. We adopted a similar strategy among the portfolio’s investment grade and non-investment grade corporate bonds.

2. Source: Standard & Poor’s Micropal. Please see Index Descriptions following the Fund Summaries.

Top Five Stock Holdings

Franklin Income Securities Fund

12/31/03

Company Sector/Industry	% of Total Net Assets
Ford Motor Capital Trust II	1.7%
Consumer Durables
ChevronTexaco Corp.	1.5%
Energy Minerals
Bristol-Myers Squibb Co.	1.3%
Health Technology
FirstEnergy Corp.	1.3%
Utilities
Pfizer Inc.	1.3%
Health Technology

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

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With a continuation of historically low interest rates during much of 2003, as represented by 10-year U.S. Treasuries, our mortgage-backed securities holdings were able to deliver total returns we regard as attractive. As a result, we took profits and redeployed the proceeds into securities we believed had greater potential to help us meet the Fund’s dual objective of income and growth. We also took advantage of profit-taking opportunities among the Fund’s corporate bonds, specifically those trading at substantial premiums to par value (also called face or nominal value) and offering only slightly higher yields than comparable maturity U.S. Treasuries. For example, we eliminated positions in AT&T Wireless 7.875% senior notes due 2011, Allied Waste 10% senior subordinate notes due 2009, and Fairchild Semiconductor 10.5% senior subordinate notes due 2009. These securities’ improving fundamentals, combined with greater risk tolerance among investors, led to a substantial decline in their overall yields.

Within the corporate sector, investment-grade and lower-rated bonds tended to perform well amid improving corporate fundamentals and relatively stable financial markets. Total returns were also aided during times of the year when interest rates were declining, because bond prices rise when rates fall. Over the course of 2003, we took profits in securities that had appreciated and we believe no longer offered the combination of attractive current yield and longer-term appreciation potential, in line with the Fund’s investment strategy. For example, the yield difference between U.S. Treasury securities and non-investment grade corporate bonds tightened over the course of the year from 9.47 percentage points to 4.86 percentage points as represented by the CSFB High Yield Bond Index.³ Despite strong corporate bond performance in 2003, at period-end we continued to look for opportunities to add to holdings that we believed still offered the optimum combination of yield and long-term capital appreciation potential. Consistent with this strategy, we added to our existing positions in Allegheny Energy, Charter Communications, Calpine and Dynegy Holdings.

At year-end, electric utilities represented the Fund’s largest sector weighting due to our assessment of the sector’s attractive combination of dividend yield and stable earnings growth profile from regulated utility operations.

3. Source: Credit Suisse First Boston (CSFB). Please see Index Descriptions following the Fund Summaries. Treasuries, if held to maturity, offer a fixed rate of return and fixed principal value; their interest payments and principal are guaranteed.

Top Five Bond Holdings

Franklin Income Securities Fund

12/31/03

Issuer Sector/Industry	% of Total Net Assets
Charter Communications Holdings LLC	2.7%
Consumer Services
Qwest Capital Funding	1.5%
Electronic Technology
Calpine Corp.	1.3%
Utilities
Nortel Networks Corp. (Canada)	1.2%
Electronic Technology
FNMA	1.2%
Government Bonds

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We added to positions in numerous holdings including Alliant Energy, Duke Energy, Exelon and FirstEnergy. We noticed many companies in the electric utilities industry pursuing a “back-to-basics” approach, emphasizing a more stable and predictable business profile pursuing excess cash flow to be deployed for balance sheet strengthening and dividend increases.

A pick-up in economic growth, both in the U.S. and abroad, as well as geopolitical turmoil in several major oil producing regions, supported higher global oil prices for most of 2003. At period-end, the Fund’s positions in international integrated oil companies included ChevronTexaco, Royal Dutch Petroleum and BP, all of which favorably contributed to Fund performance through a combination of attractive dividend yields and share price appreciation.

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

This discussion reflects our analysis, opinions and portfolio holdings as of December 31, 2003, 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 advisor 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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PERFORMANCE SUMMARYASOF 12/31/03

Total return of Class 2 shares represents the average annual change in value, assuming reinvestment of dividends and capital gains. Average returns smooth out variations in returns, which can be significant; they are not the same as year-by-year results.

Franklin Income Securities Fund – Class 2*

Periods ended 12/31/03

	1-Year	5-Year	10-Year
Average Annual Total Return	+31.72%	+9.06%	+8.89%

*Because Class 2 shares were not offered until 1/6/99, standardized Class 2 Fund performance for prior periods represents the historical results of Class 1 shares. For periods beginning on 1/6/99, Class 2’s results reflect an additional 12b-1 fee expense, which also affects future performance. Since 1/6/99 (effective date), the average annual total return of Class 2 shares was +8.90%.

Ongoing market volatility can significantly affect short-term performance; recent returns may differ.

Total Return Index Comparison

for Hypothetical $10,000 Investment (1/1/94–12/31/03)

The graph compares the performance of Franklin Income Securities Fund – Class 2,* the S&P 500, the LB Government/Credit Index, the LB U.S. Aggregate Index and the Lipper VIP Income Funds Objective Average. One cannot invest directly in an index, nor is an index representative of the Fund’s portfolio. Please see Important Notes to Performance Information preceding the Fund Summaries.

**Sources: Standard & Poor’s Micropal; Lipper Inc. Please see Index Descriptions following the Fund Summaries.

Franklin Income Securities Fund – Class 2

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.

Since markets can go down as well as up, investment return and the value of your principal will fluctuate with market conditions, and you may have a gain or loss when you sell your shares.

Past performance does not guarantee future results.

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FRANKLIN INCOME SECURITIES FUND

Financial Highlights

	Class 1
	Year Ended December 31,
	2003			2002			2001			2000			1999
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	11.48		$	12.96		$	14.70		$	14.69		$	16.92
Income from investment operations:
Net investment incomea		.81			.90			1.09	d		1.17			1.19
Net realized and unrealized gains (losses)		2.79			(.89	)		(.92	)d		1.40			(1.43	)
Total from investment operations		3.60			.01			.17			2.57			(.24	)
Less distributions from:
Net investment income		(.68	)		(1.23	)		(1.03	)		(1.85	)		(1.46	)
Net realized gains		—			(.26	)		(.88	)		(.71	)		(.53	)
Total distributions		(.68	)		(1.49	)		(1.91	)		(2.56	)		(1.99	)
Net asset value, end of year	$	14.40		$	11.48		$	12.96		$	14.70		$	14.69
Total returnb		32.10%			(.37	)%		.98%			19.77%			(1.82	)%
Ratios/supplemental data
Net assets, end of year (000’s)	$	537,950		$	427,036		$	527,047		$	647,370		$	775,116
Ratios to average net assets:
Expenses		.51%			.53%			.53%			.50%			.50%
Net investment income		6.33%			7.40%			7.90%	d		8.21%			7.41%
Portfolio turnover rate		47.03%			62.00%			32.52%			23.92%			11.89%
Portfolio turnover rate excluding mortgage dollar rollsc		45.50%			—			—			—			—

^a Based on average daily shares outstanding.

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

^c See Note 1(e) regarding mortgage dollar rolls.

^d Effective January 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide of Investment Companies and began recording all paydown gains and losses as part of investment income and amortizing all premium and discount on fixed-income securities, as required. The effect of this change was as follows:

Net investment income per share	$.008
Net realized and unrealized gains/losses per share	(.008)
Ratio of net investment income to average net assets	.06%

Per share data and ratios for prior periods have not been restated to reflect this change in the accounting policy.

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FRANKLIN INCOME SECURITIES FUND

Financial Highlights (continued)

	Class 2
	Year Ended December 31,
	2003			2002			2001			2000			1999e
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	11.38		$	12.88		$	14.66		$	14.65		$	17.07
Income from investment operations:
Net investment incomea		.76			.84			1.03	d		1.14			1.10
Net realized and unrealized gains (losses)		2.77			(.86	)		(.90	)d		1.39			(1.53	)
Total from investment operations		3.53			(.02	)		.13			2.53			(.43	)
Less distributions from:
Net investment income		(.68	)		(1.22	)		(1.03	)		(1.81	)		(1.46	)
Net realized gains		—			(.26	)		(.88	)		(.71	)		(.53	)
Total distributions		(.68	)		(1.48	)		(1.91	)		(2.52	)		(1.99	)
Net asset value, end of year	$	14.23		$	11.38		$	12.88		$	14.66		$	14.65
Total returnb		31.72%			(.61)%			.76%			19.43%			(2.93)%
Ratios/supplemental data
Net assets, end of year (000’s)	$	621,001		$	70,130		$	9,067		$	2,534		$	1,302
Ratios to average net assets:
Expenses		.76%			.78%			.78%			.75%			.75%f
Net investment income		6.08%			7.15%			7.68%d			7.99%			7.36%f
Portfolio turnover rate		47.03%			62.00%			32.52%			23.92%			11.89%
Portfolio turnover rate excluding mortgage dollar rollsc		45.50%			—			—			—			—

^a Based on average daily shares outstanding.

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

^c See Note 1(e) regarding mortgage dollar rolls.

^d Effective January 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide of Investment Companies and began recording all paydown gains and losses as part of investment income and amortizing all premium and discount on fixed-income securities, as required. The effect of this change was as follows:

Net investment income per share	$.008
Net realized and unrealized gains/losses per share	(.008)
Ratio of net investment income to average net assets	.06%

Per share data and ratios for prior periods have not been restated to reflect this change in the accounting policy.

^e For the period January 6, 1999 (effective date) to December 31, 1999.

^f Annualized.

See notes to financial statements.

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Statement of Investments, December 31, 2003

	COUNTRY	SHARES/ WARRANTS	VALUE
Common Stocks and Warrants 37.2%
Communications 1.8%
AT&T Corp.	United States	200,000	$	4,060,000
aMicrocell Telecommunications Inc., B	Canada	9,252		123,790
SBC Communications Inc.	United States	300,000		7,821,000
Verizon Communications Inc.	United States	250,000		8,770,000
aXO Communications Inc.	United States	6,967		40,058
aXO Communications Inc., wts., A, 1/16/10	United States	13,934		27,172
aXO Communications Inc., wts., B, 1/16/10	United States	10,451		17,767
aXO Communications Inc., wts., C, 1/16/10	United States	10,451		11,496
				20,871,283
Consumer Non-Durables 1.7%
Altria Group Inc.	United States	200,000		10,884,000
Coca-Cola Co.	United States	50,000		2,537,500
Loews Corp. — Carolina Group	United States	227,900		5,752,196
				19,173,696
Electronic Technology .2%
Lockheed Martin Corp.	United States	48,100		2,472,340
Energy Minerals 4.3%
BP PLC, ADR	United Kingdom	225,000		11,103,750
a,bCallon Petroleum Company $10, wts., 12/08/10	United States	90,000		345,870
Canadian Oil Sands Trust	Canada	305,000		10,783,865
ChevronTexaco Corp.	United States	200,000		17,278,000
aMission Resources Corp.	United States	1,170,000		2,644,200
Royal Dutch Petroleum Co., N.Y. shs.	Netherlands	150,000		7,858,500
				50,014,185
Finance 2.5%
Comerica Inc.	United States	120,000		6,727,200
Fleet Boston Financial Corp.	United States	300,000		13,095,000
JP Morgan Chase & Co.	United States	250,000		9,182,500
				29,004,700
Health Technology 4.7%
Bristol-Myers Squibb Co.	United States	525,000		15,015,000
Johnson & Johnson Inc.	United States	150,000		7,749,000
Merck & Co. Inc.	United States	175,000		8,085,000
Pfizer Inc.	United States	413,300		14,601,889
Schering-Plough Corp.	United States	300,000		5,217,000
Wyeth	United States	100,000		4,245,000
				54,912,889
Non-Energy Minerals 1.1%
AngloGold Ltd., ADR	South Africa	171,300		7,999,710
Barrick Gold Corp.	Canada	200,000		4,542,000
				12,541,710
Process Industries 2.0%
Dow Chemical Co.	United States	175,000		7,274,750
E.I. du Pont de Nemours & Co.	United States	150,000		6,883,500
Eastman Chemical Co.	United States	100,000		3,953,000

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN INCOME SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	COUNTRY	SHARES/ WARRANTS	VALUE
Common Stocks and Warrants (cont.)
Process Industries (cont.)
Georgia-Pacific Corp.	United States	121,662	$	3,731,374
Lyondell Chemical Co.	United States	83,500		1,415,325
				23,257,949
Real Estate Investment Trusts 1.0%
Archstone-Smith Trust	United States	27,342		765,031
Felcor Lodging Trust Inc.	United States	197,700		2,190,516
iStar Financial Inc.	United States	118,500		4,609,650
Liberty Property Trust	United States	50,000		1,945,000
ProLogis	United States	60,000		1,925,400
				11,435,597
Utilities 17.9%
Alliant Energy Corp.	United States	400,000		9,960,000
Ameren Corp.	United States	250,000		11,500,000
American Electric Power Co. Inc.	United States	300,000		9,153,000
CenterPoint Energy Inc.	United States	200,000		1,938,000
Cinergy Corp.	United States	259,500		10,071,195
CMS Energy Corp.	United States	306,000		2,607,120
Dominion Resources Inc.	United States	200,000		12,766,000
DTE Energy Co.	United States	221,500		8,727,100
Duke Energy Corp.	United States	300,000		6,135,000
Energy East Corp.	United States	250,000		5,600,000
Exelon Corp.	United States	220,000		14,599,200
FirstEnergy Corp.	United States	415,000		14,608,014
FPL Group Inc.	United States	118,200		7,732,644
Hawaiian Electric Industries Inc.	United States	60,000		2,842,200
KeySpan Corp.	United States	250,000		9,200,000
NiSource Inc.	United States	350,000		7,679,000
ONEOK Inc.	United States	619,900		13,687,392
Pepco Holdings Inc.	United States	300,000		5,862,000
Pinnacle West Capital Corp.	United States	125,500		5,022,510
PPL Corp.	United States	87,800		3,841,250
Progress Energy Inc.	United States	200,000		9,052,000
Public Service Enterprise Group Inc.	United States	140,000		6,132,000
Puget Energy Inc.	United States	250,000		5,942,500
Sempra Energy	United States	139,100		4,181,346
Southern Co.	United States	250,000		7,562,500
TECO Energy Inc.	United States	200,000		2,882,000
TXU Corp.	United States	160,000		3,795,200
Xcel Energy Inc.	United States	260,000		4,414,800
				207,493,971
Total Common Stocks and Warrants (Cost $359,071,105)				431,178,320
Preferred Stocks (Cost $7,620,963)
Process Industries
cAsia Pulp & Paper Co. Ltd., 12.00%, pfd.	Indonesia	10,073,000		176,277

FI-9

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FRANKLIN INCOME SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	COUNTRY	SHARES/ WARRANTS		VALUE
Convertible Preferred Stocks 9.4%
Communications 1.5%
Alltel Corp., 7.75%, cvt. pfd.	United States		200,000	$	9,940,000
Citigroup Global Markets Holdings Inc., into Motorola, 8.00% cvt. pfd.	United States		100,000		7,050,000
Dobson Communications Corp., 6.00%, cvt. pfd.	United States		3,100		558,000
					17,548,000
Consumer Durables 2.6%
Ford Motor Co. Capital Trust II, 6.50%, cvt. pfd.	United States		360,000		20,106,000
General Motors Corp., 6.25%, cvt. pfd.	United States		300,000		9,690,000
					29,796,000
Electronic Technology .6%
Goldman Sachs Group Inc., into Lockheed Martin Corp. 8.00%, cvt. pfd.	United States		62,000		3,154,870
Solectron Corp., 7.25%, cvt. pfd.	United States		250,000		4,170,000
					7,324,870
Energy Minerals .6%
Nuevo Financing I, 5.75%, cvt. pfd., A	United States		102,500		4,228,125
Unocal Corp., 6.25%, cvt. pfd.	United States		50,000		2,712,500
					6,940,625
Finance .4%
Travelers Property Casualty Corp., 4.50%, cvt. pfd.	United States		200,000		4,900,000
Industrial Services 1.4%
Allied Waste Industries Inc., 6.25%, cvt. pfd.	United States		130,500		9,983,250
Lehman Brothers Holdings Inc. into Weatherford International, 6.00%, cvt. pfd.	United States		180,000		6,772,500
					16,755,750
Real Estate Investment Trusts 1.4%
Glenborough Realty Trust Inc., 7.75%, cvt. pfd., A	United States		205,000		5,049,150
Host Marriott Corp., 6.75%, cvt. pfd.	United States		138,000		7,218,780
Reckson Associates Realty Corp., 7.625%, cvt. pfd., A	United States		140,000		3,605,000
					15,872,930
Technology Services .3%
Electronic Data Systems Corp., 7.625%, cvt. pfd.	United States		35,000		802,550
Goldman Sachs Group Inc. into IBM, 8.00%, cvt. pfd.	United States		25,000		2,148,950
					2,951,500
Utilities .6%
FPL Group Inc., 8.50%, cvt. pfd.	United States		62,300		3,596,579
Sempra Energy, 8.50%, cvt. pfd.	United States		120,000		3,386,040
					6,982,619
Total Convertible Preferred Stocks (Cost $95,563,176)					109,072,294
		PRINCIPAL AMOUNT
Bonds 29.7%
Commercial Services .2%
American Color Graphics, senior secured note, 144A, 10.00%, 6/15/10	United States	$	1,200,000		1,236,000
Johnsondiversey Inc., senior sub. note, 9.625%, 5/15/12	United States		600,000		672,000
					1,908,000

FI-10

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Statement of Investments, December 31, 2003 (cont.)

	COUNTRY	PRINCIPAL AMOUNT		VALUE
Bonds (cont.)
Communications 1.2%
Dobson Communications Corp., senior note, 10.875%, 7/01/10	United States	$	3,000,000	$	3,285,000
Time Warner Telecom Inc., senior note, 10.125%, 2/01/11	United States		2,900,000		3,103,000
US West Communications Inc., 6.875%, 9/15/33	United States		5,400,000		5,157,000
cWorldCom Inc., 8.00%, 5/15/06	United States		6,000,000		2,025,000
					13,570,000
Consumer Durables 1.0%
General Motors, 8.375%, 7/15/33	United States		10,000,000		11,643,030
Consumer Services 4.8%
c,dAdelphia Communications Corp., senior note, 7.875%, 5/01/09	United States		3,400,000		3,128,000
c,dAdelphia Communications Corp., senior note, 10.875%, 10/01/10	United States		1,900,000		1,786,000
cCablevision SA, 13.75%, 5/01/09	Argentina		2,000,000		1,050,000
CanWest Media Inc., senior sub. note, 10.625%, 5/15/11	Canada		2,600,000		2,977,000
Charter Communications Holdings LLC, senior note, 8.625%, 4/01/09	United States		5,000,000		4,387,500
Charter Communications Holdings LLC, senior note, 10.75%, 10/01/09	United States		10,000,000		9,225,000
CKE Restaurants Inc., senior sub. note, 9.125%, 5/01/09	United States		300,000		309,000
CSC Holdings Inc., senior note, B, 7.625%, 4/01/11	United States		5,000,000		5,287,500
CSC Holdings Inc., senior sub. deb., 9.875%, 4/01/23	United States		3,000,000		3,153,750
Dex Media West LLC, senior sub. note, 144A, 9.875% 8/15/13	United States		6,200,000		7,238,500
EchoStar DBS Corp., senior note, 10.375%, 10/01/07	United States		3,700,000		4,074,625
El Dorado Resorts LLC, senior sub. note, 10.50%, 8/15/06	United States		429,000		435,435
bLone Cypress Co., sub. note, 11.50%, 8/01/09	United States		1,860,234		1,960,221
Six Flags Inc., senior note, 9.50%, 2/01/09	United States		2,800,000		2,947,000
Universal City Development, senior note, 144A, 11.75%, 4/01/10	United States		3,000,000		3,525,000
Venetian Casino/LV Sands, 11.00%, 6/15/10	United States		2,100,000		2,446,500
Young Broadcasting Inc., senior sub. note, 10.00%, 3/01/11	United States		1,427,000		1,544,728
					55,475,759
Electronic Technology 2.6%
AMKOR Technology Inc., senior note, 7.75%, 5/15/13	United States		4,500,000		4,848,750
Lucent Technologies, 6.45%, 3/15/29	United States		10,400,000		8,229,000
Qwest Capital Funding, 7.00%, 8/03/09	United States		8,500,000		8,478,750
Qwest Capital Funding, 7.25%, 2/15/11	United States		9,000,000		8,910,000
					30,466,500
Energy Minerals 1.3%
Callon Petroleum Co., 9.75%, 12/08/10	United States		6,000,000		5,664,300
Chesapeake Energy Corp., senior note, 8.125%, 4/01/11	United States		3,800,000		4,246,500
Williams Cos., senior note, 8.625%, 6/01/10	United States		5,000,000		5,637,500
					15,548,300
Finance .7%
Ford Motor Credit Co., 7.00%, 10/01/13	United States		8,000,000		8,452,376
Health Services 1.0%
HealthSouth Corp., senior note, 7.625%, 6/01/12	United States		3,900,000		3,666,000
Tenet Healthcare Corp., senior note, 6.375%, 12/01/11	United States		8,000,000		7,720,000
					11,386,000
Industrial Services .7%
El Paso Corp., senior note, 6.75%, 5/15/09	United States		8,500,000		8,149,375

FI-11

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FRANKLIN INCOME SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	COUNTRY	PRINCIPAL AMOUNT		VALUE
Bonds (cont.)
Non-Energy Minerals .1%
Century Aluminum Co., first mortgage, 11.75%, 4/15/08	United States	$	800,000	$	896,000
Process Industries 5.1%
Consoltex Group Inc., PIK, 11.00%, 1/31/09	United States		11,799,040		1,180
Equistar Chemicals LP, senior note, 10.125%, 9/01/08	United States		6,000,000		6,600,000
Four M Corp., senior note, B, 12.00%, 6/01/06	United States		2,000,000		2,000,000
Georgia-Pacific Corp., senior note, 9.375%, 2/01/13	United States		4,700,000		5,428,500
Graphic Packaging International, 144A, senior sub. note 9.50%, 8/15/13	United States		9,000,000		9,990,000
Huntsman Advanced Materials LLC, senior secured note, 144A, 11.00%, 7/15/10	United States		2,200,000		2,442,000
Hunstman LLC, 144A, 11.625%, 10/15/10	United States		4,500,000		4,612,500
IMC Global Inc., senior note, 144A, 10.875%, 8/01/13	United States		8,500,000		9,350,000
Lyondell Chemical Co., senior secured note, 10.50%, 6/01/13	United States		11,500,000		12,592,500
Nalco Co., senior note, 144A, 7.75%, 11/15/11	United States		900,000		967,500
Nalco Co., senior sub. note, 144A, 8.875%, 11/15/13	United States		700,000		745,500
Tyco International Group, 6.375%, 10/15/11	Luxembourg		3,500,000		3,758,125
					58,487,805
Producer Manufacturing 2.1%
Case New Holland Inc., senior note, 144A, 9.25%, 8/01/11	United States		9,000,000		10,125,000
Dana Corp., 7.00%, 3/01/29	United States		3,300,000		3,295,875
H&E Equipment/Finance, 11.125%, 6/15/12	United States		2,250,000		2,272,500
Manitowoc Co. Inc., senior sub. note, 10.50%, 8/01/12	United States		2,300,000		2,630,625
Nortek Inc., senior sub. note, 9.875%, 6/15/11	United States		3,100,000		3,433,250
Trench Electric & Trench Inc., senior sub. deb., 10.25%, 12/15/07	Canada		2,350,000		2,420,500
					24,177,750
Real Estate Investment Trusts 1.6%
Felcor Lodging LP, 9.50%, 9/15/08	United States		1,800,000		1,953,000
HMH Properties Inc., senior secured note, B, 7.875%, 8/01/08	United States		3,750,000		3,914,063
HMH Properties Inc., senior note, C, 8.45%, 12/01/08	United States		1,090,000		1,141,775
Host Marriott LP, senior note, 7.125%, 11/01/13	United States		5,000,000		5,125,000
Meristar Hospitality Corp., 9.125%, 1/15/11	United States		6,200,000		6,603,000
					18,736,838
Transportation .7%
Laidlaw International Inc., senior note, 144A, 10.75%, 6/15/11	United States		7,000,000		7,945,000
Utilities 6.6%
AES Corp., senior note, 8.75%, 6/15/08	United States		1,000,000		1,077,500
Allegheny Energy Inc., 144A, 8.75%, 4/15/12	United States		10,000,000		9,475,000
Aquila Inc., 14.875%, 7/01/12	United States		6,000,000		8,055,000
Calpine Canada Energy Finance, senior note, 8.50%, 5/01/08	Canada		10,000,000		8,025,000
Calpine Corp., senior note, 8.625%, 8/15/10	United States		10,000,000		7,850,000
Calpine Corp., senior note, 8.50%, 2/15/11	United States		9,400,000		7,484,750
CMS Energy Corp., senior note, 144A, 7.75%, 8/01/10	United States		6,000,000		6,337,500
Dynegy Holdings Inc., senior note, 6.875%, 4/01/11	United States		3,500,000		3,241,875
Dynegy Holdings Inc., secured note, 144A, 10.125%, 7/15/13	United States		8,000,000		9,240,000
Edison Mission Energy, senior note, 7.73%, 6/15/09	United States		7,000,000		6,702,500

FI-12

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FRANKLIN INCOME SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	COUNTRY	PRINCIPAL AMOUNT		VALUE
Bonds (cont.)
Utilities (cont.)
FirstEnergy Corp., 6.45%, 11/15/11	United States	$	4,000,000	$	4,153,436
Nrg Energy Inc., 8.00%,12/15/13 144A	United States		4,900,000		5,175,625
					76,818,186
Total Bonds (Cost $318,988,878)					343,660,919
Convertible Bonds 7.3%
Communications .5%
Nextel Communications Inc., cvt., 5.25%, 1/15/10	United States		6,000,000		6,120,000
Consumer Services .5%
c,dAdelphia Communications Corp., junior sub. note, cvt., 6.00%, 2/15/06	United States		3,600,000		1,584,000
Mediacom Communications Corp., cvt, 5.25%, 7/01/06	United States		4,000,000		3,890,000
					5,474,000
Distribution Services 1.0%
Amerisource Health Corp., cvt., 5.00%, 12/01/07	United States		10,000,000		12,050,000
Electronic Technology 3.2%
Advanced Micro Devices Inc., cvt., FRN, 4.75%, 2/01/22	United States		4,750,000		4,868,750
L-3 Communications Holdings Inc., cvt., 4.00%, 9/15/11	United States		6,000,000		6,592,500
Lam Research Corp., cvt., 4.00%, 6/01/06	United States		4,500,000		4,635,000
Nortel Networks Corp., senior note, cvt., 4.25%, 9/01/08	Canada		15,000,000		14,268,750
PMC-Sierra Inc., cvt., 3.75%, 8/15/06	United States		2,000,000		2,002,400
SCI Systems Inc., cvt., sub. note, 3.00%, 3/15/07	United States		5,100,000		4,845,000
					37,212,400
Health Technology .4%
Enzon Pharmaceuticals Inc., cvt., 4.50%, 7/01/08	United States		5,500,000		4,853,750
Industrial Services .5%
Hanover Compressor Co., cvt., 4.75%, 3/15/08	United States		6,750,000		6,277,500
Producer Manufacturing .7%
Tyco International Group SA, cvt., 144A, 2.75%, 1/15/18	Luxembourg		6,000,000		7,687,500
Real Estate Investment Trusts .5%
Meristar Hospitality Corp., cvt., 9.50%, 4/01/10	United States		4,500,000		5,422,500
Total Convertible Bonds (Cost $76,896,461)					85,097,650
Zero Coupon/Step-Up Bonds 3.7%
Consumer Services 3.2%
Charter Communications Holdings LLC, senior disc. note, zero cpn. to 4/01/04, 9.92% thereafter, 4/01/11	United States		5,000,000		4,300,000
Charter Communications Holdings LLC, senior disc. note, zero cpn. to 1/15/06, 13.50% thereafter, 1/15/11	United States		17,500,000		13,125,000
Quebecor Media Inc., senior disc. note, zero cpn. to 7/15/06, 13.75% thereafter, 7/15/11	Canada		3,500,000		3,101,875
Telenet Group Holding NV, senior note, 144A, zero cpn. to 12/15/03, 11.50% thereafter, 6/15/14	Belgium		22,000,000		13,970,000
Yell Finance BV, senior disc. note, zero cpn. to 8/01/06, 13.50% thereafter, 8/01/11	United Kingdom		2,129,000		1,969,325
					36,466,200
Industrial Services .2%
Hanover Compressor Co., sub. note, zero cpn., 3/31/07	United States		3,100,000		2,294,000

FI-13

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FRANKLIN INCOME SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	COUNTRY	PRINCIPAL AMOUNT		VALUE
Zero Coupon/Step-Up Bonds (cont.)
Process Industries .3%
Huntsman ICI Chemicals, senior disc. note, zero cpn., 12/31/09	United States	$	8,000,000	$	3,900,000
Total Zero Coupon/Step-Up Bonds (Cost $38,910,537)					42,660,200
U.S. Government and Agency Securities 2.2%
eFHLMC, 6.00%, 1/01/31			3,548,643		3,676,465
FNMA, 6.50%, 5/01/31			57,757		60,426
FNMA, 6.50%, 1/01/32			2,512,637		2,628,718
FNMA, 6.50%, 6/01/32			4,927,624		5,155,781
FNMA, 6.50%, 7/01/32			2,180,696		2,281,665
FNMA, 6.50%, 8/01/32			3,945,801		4,128,498
GNMA, 6.00%, 1/15/29			19,072		19,846
GNMA, 6.00%, 2/15/29			95,996		99,890
GNMA, 6.00%, 3/15/29			150,062		156,149
GNMA, 6.00%, 5/15/29			13,058		13,588
GNMA, 6.00%, 12/15/31			110,864		115,333
GNMA, 6.00%, 5/15/32			37,881		39,421
GNMA, 6.00%, 9/15/32			58,281		60,651
GNMA, 6.00%, 10/15/32			2,593,673		2,699,162
GNMA, 6.00%, 11/15/32			3,964,092		4,125,316
Total U.S. Government and Agency Securities (Cost $24,725,487)					25,260,909
Total Long Term Investments (Cost $921,776,607)					1,037,106,569
fRepurchase Agreements (Cost $125,307,455) 10.8%
Joint Repurchase Agreement, .873%, 1/02/04 (Maturity Value $125,313,530)			125,307,455		125,307,455
ABN AMRO Bank, NV., New York Branch (Maturity Value $11,674,208) Banc of America Securities LLC (Maturity Value $11,674,208) Barclays Capital Inc. (Maturity Value $8,337,110) Bear, Stearns & Co. Inc. (Maturity Value $6,670,440) BNP Paribas Securities Corp. (Maturity Value $11,674,208) Deutsche Bank Securities Inc. (Maturity Value $11,674,208) Dresdner Kleinwort Wasserstein Securities LLC (Maturity Value $11,674,208) Goldman, Sachs & Co. (Maturity Value $6,670,440) Greenwich Capital Markets Inc. (Maturity Value $11,674,208) Lehman Brothers Inc. (Maturity Value $10,241,876) Morgan Stanley & Co. Inc. (Maturity Value $11,674,208) UBS Securities LLC (Maturity Value $11,674,208) Collateralized by U.S. Treasury Bills, Notes and Bonds, and U.S. Government Agency Securities
Total Investments (Cost $1,047,084,062) 100.3%					1,162,414,024
Other Assets, less Liabilities (.3%)					(3,463,119	)
Net Assets 100.0%				$	1,158,950,905

^a Non-income producing.

^b See Note 7 regarding restricted securities.

^c The fund discontinues accruing income on defaulted securities. See Note 6.

^d See Note 8 regarding other considerations.

^e See Note 1(d) regarding securities purchased on a when-issued, delayed delivery, or to-be-announced basis.

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

See notes to financial statements.

FI-14

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Financial Statements

Statement of Assets and Liabilities
December 31, 2003
Assets:
Investments in securities:
Cost	$	1,047,084,062
Value		1,162,414,024
Receivables:
Investment securities sold		3,055,777
Capital shares sold		1,771,267
Dividends and Interest		10,920,340
Total assets		1,178,161,408
Liabilities:
Payables:
Investment securities purchased		18,195,435
Capital shares redeemed		284,965
Affiliates		666,379
Other liabilities		63,724
Total liabilities		19,210,503
Net assets, at value	$	1,158,950,905
Net assets consist of:
Undistributed net investment income	$	41,582,064
Net unrealized appreciation (depreciation)		115,329,962
Accumulated net realized gain (loss)		(37,457,636	)
Capital shares		1,039,496,515
Net assets, at value	$	1,158,950,905
Class 1:
Net assets, at value	$	537,950,404
Shares outstanding		37,366,485
Net asset value and offering price per share	$	14.40
Class 2:
Net assets, at value	$	621,000,501
Shares outstanding		43,627,646
Net asset value and offering price per share	$	14.23

See notes to financial statements.

FI-15

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

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Financial Statements (continued)

Statement of Operations

for the year ended December 31, 2003

Investment income:
Dividends	$	19,395,415
Interest		33,279,688
Total investment income		52,675,103
Expenses:
Management fees (Note 3)		3,709,956
Distribution fees — Class 2 (Note 3)		700,724
Transfer agent fees		4,988
Custodian fees		15,088
Reports to shareholders		107,256
Professional fees		30,721
Trustees’ fees and expenses		6,937
Other		41,965
Total expenses		4,617,635
Net investment income		48,057,468
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		(19,644,648	)
Foreign currency transactions		17,494
Net realized gain (loss)		(19,627,154	)
Net unrealized appreciation (depreciation) on:
Investments		195,331,457
Translation of assets and liabilities denominated in foreign currencies		(19,561)
Net unrealized appreciation (depreciation)		195,311,896
Net realized and unrealized gain (loss)		175,684,742
Net increase (decrease) in net assets resulting from operations	$	223,742,210

See notes to financial statements.

FI-16

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Financial Statements (continued)

Statements of Changes in Net Assets

for the years ended December 31, 2003 and 2002

	2003			2002
Increase (decrease) in net assets:
Operations:
Net investment income	$	48,057,468		$	36,971,600
Net realized gain (loss) from investments and foreign currency transactions		(19,627,154	)		(16,162,743	)
Net unrealized appreciation (depreciation) on investments and translation of assets and liabilities denominated in foreign currencies		195,311,896			(22,040,928	)
Net increase (decrease) in net assets resulting from operations		223,742,210			(1,232,071	)
Distributions to shareholders from:
Net investment income:
Class 1		(25,944,365	)		(46,080,044	)
Class 2		(12,475,273	)		(1,712,911	)
Net realized gains:
Class 1		—			(9,646,747	)
Class 2		—			(361,202	)
Total distributions to shareholders		(38,419,638)			(57,800,904	)
Capital share transactions: (Note 2)
Class 1		(330,826	)		(41,449,431	)
Class 2		476,792,986			61,535,455
Total capital share transactions		476,462,160			20,086,024
Net increase (decrease) in net assets		661,784,732			(38,946,951	)
Net assets:
Beginning of year		497,166,173			536,113,124
End of year	$	1,158,950,905		$	497,166,173
Undistributed net investment income included in net assets:
End of year	$	41,582,064		$	31,394,413

See notes to financial statements.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN INCOME SECURITIES FUND

Notes to Financial Statements

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (the Trust) is registered under the Investment Company Act of 1940 as an open-end investment company, consisting of twenty-two separate series (the Funds). The Franklin Income Securities Fund (the Fund) included in this report is diversified. Shares of the Fund are sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. As of December 31, 2003, over 84% of the total Fund shares were sold through one insurance company. The Fund’s investment objective is growth and income.

The following summarizes the Fund’s significant accounting policies.

a. Security Valuation

Securities listed or traded on a recognized national exchange or NASDAQ are valued at the last reported sales price. Over-the-counter securities and listed securities for which no sale is reported are valued within the range of the latest quoted bid and asked prices. Foreign securities are valued at the close of trading of the foreign exchange or the NYSE, whichever is earlier. If events occur that materially affect the values of securities after the prices or foreign exchange rates are determined, or if market quotations are not readily available, the securities will be valued at fair value as determined following procedures approved by the Board of Trustees.

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. Purchases and sales of securities and income items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.

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.

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 Agreements

The Fund may enter into a joint repurchase agreement whereby its uninvested cash balance is deposited into a joint cash account to be used to invest in one or more repurchase agreements. The value and face amount of the joint repurchase agreement are allocated to the Fund based on its pro-rata interest. A repurchase agreement is accounted for as a loan by the Fund to the seller, collateralized by securities which are delivered to the Fund’s custodian. The market value, including accrued interest, of the initial collateralization is required to be at least 102% of the dollar amount invested by the Fund, with the value of the underlying securities marked to market daily to maintain coverage of at least 100%. At December 31, 2003, all repurchase agreements had been entered into on that date.

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

The Fund may purchase securities on a when-issued, delayed delivery, or to-be-announced (TBA) basis, with payment and delivery scheduled for a future date. These transactions are subject to market fluctuations and are subject to the risk that the value at delivery may be more or less than the trade date purchase price. 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.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN INCOME SECURITIES FUND

Notes to Financial Statements (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

e. Mortgage Dollar Rolls

The Fund enters into mortgage dollar rolls, typically on a TBA basis. Dollar rolls are agreements between the Fund and a financial institution to simultaneously sell and repurchase a mortgage-backed security at a future date. Gains or losses are realized at the time of the sale and the difference between the repurchase price and sale price is recorded as an unrealized gain to the Fund. The risks of mortgage dollar roll transactions include the potential inability of the counterparty to fulfill their obligations.

f. Income Taxes

No provision has been made for income taxes because the Fund’s policy is to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable income.

g. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Discounts and premiums on securities purchased are amortized over the lives of the respective securities. Dividend income and distributions to shareholders are recorded on the ex-dividend date.

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. Other expenses are charged to each fund on a specific identification basis.

Distributions received by the Fund from 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.

Realized and unrealized gains and losses and net investment income, other than class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class.

h. Accounting Estimates

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

i. Guarantees and Indemnifications

Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust 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. However, based on experience, the Trust expects the risk of loss to be remote.

2. SHARES OF BENEFICIAL INTEREST

The Fund offers two classes of shares: Class 1 and Class 2. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN INCOME SECURITIES FUND

Notes to Financial Statements (continued)

2. SHARES OF BENEFICIAL INTEREST (cont.)

At December 31, 2003, there were an unlimited number of shares authorized ($.01 par value). Transactions in the Fund’s shares were as follows:

	Year Ended December 31,
	2003					2002
Class 1 Shares:	Shares		Amount			Shares		Amount
Shares sold	4,419,445		$	52,203,669		508,864		$	6,691,697
Shares issued in reinvestment of distributions	2,030,076			25,944,365		4,663,330			55,726,791
Shares redeemed	(6,284,305	)		(78,478,860	)	(8,642,050	)		(103,867,919	)
Net increase (decrease)	165,216		$	(330,826	)	(3,469,856	)	$	(41,449,431	)
Class 2 Shares:
Shares sold	37,243,295		$	474,085,976		5,631,345		$	63,504,458
Shares issued in reinvestment of distributions	985,408			12,475,273		174,883			2,074,113
Shares redeemed	(763,349	)		(9,768,263	)	(347,804	)		(4,043,116	)
Net increase (decrease)	37,465,354		$	476,792,986		5,458,424		$	61,535,455

3. TRANSACTIONS WITH AFFILIATES

Certain officers and trustees of the Trust are also officers and/or directors of the following entities:

Entity	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

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
.625%	First $100 million
.500%	Over $100 million, up to and including $250 million
.450%	Over $250 million, up to and including $10 billion

Fees are further reduced on net assets over $10 billion.

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

The Fund reimburses Distributors up to .25% per year of its average daily net assets of Class 2, for costs incurred in marketing the Fund’s shares.

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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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN INCOME SECURITIES FUND

Notes to Financial Statements (continued)

4. INCOME TAXES

At December 31, 2003, the Fund had tax basis capital losses of $27,472,299, which may be carried over to offset future capital gains. Such losses expire as follows:

Capital loss carryovers expiring in:
2010	$	9,035,077
2011		18,437,222
	$	27,472,299

At December 31, 2003, the Fund had deferred capital and deferred currency losses occurring subsequent to October 31, 2003 of $9,028,860 and $531, respectively. For tax purposes, such losses will be reflected in the year ending December 31, 2004.

The tax character of distributions paid during the years ended December 31, 2003 and 2002 was as follows:

	2003		2002
Distributions paid from:
Ordinary Income	$	38,419,638	$	52,277,504
Long Term Capital gain		—		5,523,400
	$	38,419,638	$	57,800,904

Net investment income differs for financial statement and tax purposes primarily due to differing treatments of defaulted securities, foreign currency transactions, mortgage dollar rolls, paydown losses, and bond discounts and premiums.

Net realized gains (losses) differ for financial statement and tax purposes primarily due to differing treatments of wash sales, foreign currency transactions, mortgage dollar rolls, paydown losses, bond discounts and premiums, and payment-in-kind bonds.

At December 31, 2003, the cost of investments, net unrealized appreciation (depreciation), undistributed ordinary income and undistributed long term capital gains for income tax purposes were as follows:

Cost of Investments	$	1,050,195,422
Unrealized appreciation	$	157,627,301
Unrealized depreciation		(45,408,699	)
Net unrealized appreciation (depreciation)	$	112,218,602
Undistributed ordinary income	$	43,969,084
Undistributed long term capital gains		—
Distributable earnings	$	43,969,084

5. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities) for the year ended December 31, 2003, aggregated $724,435,009 and $337,487,401 respectively.

6. CREDIT RISK AND DEFAULTED SECURITIES

The Fund has 37.4% of their portfolio invested in below investment grade and comparable quality unrated high yield securities, which tend to be more sensitive to economic conditions than higher rated securities. The risk of loss due to default by the issuer may be significantly greater for the holders of high yielding securities because such securities are generally unsecured and are often subordinated to other creditors of the issuer.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN INCOME SECURITIES FUND

Notes to Financial Statements (continued)

6. CREDIT RISK AND DEFAULTED SECURITIES (cont.)

The Fund held defaulted and/or other securities for which the income has been deemed uncollectible. The Fund discontinues accruing income on these securities and provide an estimate for losses on interest receivable. At December 31, 2003, the value of these securities was $9,749,277 representing .84% of the Fund’s net assets. For information as to specific securities, see the accompanying Statement of Investments.

7. RESTRICTED SECURITIES

At December 31,2003, investments in securities included issues that are restricted or illiquid. Restricted securities are often purchased in private placement transactions, are not registered under the Securities Act of 1933, may have contractual restrictions on resale, and are valued under methods approved by the Board of Trustees as reflecting fair value. A security may also be considered illiquid if it lacks a readily available market or if its valuation has not changed for a certain period of time. At December 31, 2003, the Fund held investments in restricted and illiquid securities that were valued under approved methods by the Trustees, as follows:

Principal Amount/ Shares	Issuer	Acquisition Date	Cost		Value
90,000	Callon Petroleum Company $10, wts., 12/08/10	12/08/2003	$	335,700	$	345,870
1,860,234	Lone Cypress, sub. note, 11.5%, 8/01/09	12/02/1999		1,860,234		1,960,221
	Total Restricted Securities (.20% of Net Assets)				$	2,306,091

8. OTHER CONSIDERATIONS

Advisers, as the Fund’s Manager, may serve as a member of various bondholders’ steering committees, on credit committees, or may represent the Funds in certain corporate restructuring negotiations. Currently the manager serves on the bondholder committee of Adelphia Communications. As a result of this involvement, Advisers may be in possession of certain material non-public information. If the Fund’s manager, while in possession on such information, seeks to sell any of its holdings in these securities it will comply with all applicable federal securities laws.

9. REGULATORY MATTERS

On February 4, 2004, the Securities Division of the Office of the Secretary of the Commonwealth of Massachusetts filed an administrative complaint against Franklin Resources, Inc. and certain of its subsidiaries (the “Company”), alleging violations of the Massachusetts Uniform Securities Act. The complaint arises from activity that occurred in 2001 during which time an officer of a Company subsidiary was negotiating an agreement with an investor relating to investments in a mutual fund and a hedge fund.

The Company, in addition to other entities within Franklin Templeton Investments, has been named in shareholder class actions related to the matter described above. The Company believes that the claims made in the lawsuit are without merit and it intends to defend vigorously against the allegations. The Company and the Fund may be named in similar civil actions related to the matter described above.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN INCOME SECURITIES FUND

Notes to Financial Statements (continued)

9. REGULATORY MATTERS (cont.)

In addition, as part of ongoing investigations by the U.S. Securities and Exchange Commission (the “SEC”), the U.S. Attorney for the Northern District of California, the New York Attorney General, the California Attorney General, the U.S. Attorney for the District of Massachusetts, the Florida Department of Financial Services, and the Commissioner of Securities and the Attorney General of the State of West Virginia, relating to certain practices in the mutual fund industry, including late trading, market timing and sales compensation arrangements, the Company and its subsidiaries, as well as certain current or former executives and employees of the Company, have received requests for information and/or subpoenas to testify or produce documents. The Company and its current employees are providing documents and information in response to these requests and subpoenas. In addition, the Company has responded to requests for similar kinds of information from regulatory authorities in some of the foreign countries where the Company conducts its global asset management business.

The Staff of the SEC has informed the Company that it intends to recommend that the Commission authorize an action against the Fund’s investment adviser and a senior executive officer relating to the frequent trading issues that are the subject of the SEC’s investigation. These issues were previously disclosed as being under investigation by government authorities and the subject of an internal inquiry by the Company in its Annual Report on Form 10-K and on its public website. The Company currently is in discussions with the SEC Staff in an effort to resolve the issues raised in their investigation. Such discussions are preliminary and the Fund’s management has been advised that the Company cannot predict the likelihood of whether those discussions will result in a settlement and, if so, the terms of such settlement. The impact, if any, of these matters on the Fund is uncertain at this time. If the Company finds that it bears responsibility for any unlawful or improper conduct, it has committed to making the Fund or its shareholders whole, as appropriate.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN INCOME SECURITIES FUND

Independent Auditors’ Report

To the Board of Trustees and Shareholders

of Franklin Templeton Variable Insurance Products Trust

In our opinion, the accompanying statement of assets and liabilities, including the statement of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Franklin Income Securities Fund (the Fund) (one of the funds constituting the Franklin Templeton Variable Insurance Products Trust) at December 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

February 5, 2004, except for Note 9 as to which the date is February 12, 2004

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN INCOME SECURITIES FUND

Tax Designation

Under Section 852(b)(2) of the Internal Revenue Code, the Fund hereby designates 29.36% of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended December 31, 2003.

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FRANKLIN LARGE CAP GROWTH SECURITIES FUND

Fund Goal and Primary Investments: Franklin Large Cap Growth Securities Fund seeks capital appreciation. The Fund invests primarily in investments of U.S. large-cap companies with market capitalization values within those of the top 50% of companies in the Russell 1000^® Index at the time of purchase.¹ The Fund may hold significant positions in the technology sector (including health technology, electronic technology and technology services), and in communications and financial services companies.

We are pleased to bring you Franklin Large Cap Growth Securities Fund’s annual report for the fiscal year ended December 31, 2003.

Performance Overview

You can find the Fund’s one-year total return in the Performance Summary following this report. The Fund’s underperformed its benchmarks, the Standard & Poor’s 500 Composite Index (S&P 500) and Russell 1000 Growth Index, which returned 28.67% and 29.75% for the year under review.²

Economic and Market Overview

During the year ended December 31, 2003, many factors impacted global economies and financial markets. Early in the year, economic uncertainty and geopolitical events, including impending war in Iraq, pushed U.S. interest rates to their lowest level in more than four decades, and the 10-year U.S. Treasury note’s yield fell to 3.13% in mid-June. However, following the end of major conflict in Iraq, many economic indicators turned positive. The U.S. government injected fiscal stimulus into the economy, approving another round of tax cuts and rebates that included dividend and capital gains tax reductions. In June, an accommodative Federal Reserve Board, in an attempt to bolster the economy, cut the federal funds target rate to 1.00%.

During the year, the U.S. trade deficit increased significantly, contributing to the U.S. dollar’s fall to record lows against the euro and other major currencies. However, the weak dollar provided a boost to the U.S. economy and corporate profits as exports became cheaper for foreign buyers. Robust consumer spending, especially for autos and homes, and strong business spending, particularly for equipment and software, contributed to the accelerated economic activity. In addition, U.S. federal spending stayed firm and inflation remained benign. U.S.

1. Please see Index Descriptions following the Fund Summaries.

2. Source: Standard & Poor’s Micropal. One cannot invest directly in an index, nor is an index representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

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gross domestic product (GDP) grew an annualized 8.2% in third quarter 2003, its strongest pace in nearly 20 years, and overall, 2003 GDP grew an estimated 3.1%. As economic data improved, some interest rates rose from their lows, and the 10-year Treasury note’s yield ended the period at 4.27%.

An equity market rally started in late March 2003 and continued through the end of the year. The rebound began with investors anticipating economic recovery in the second half of 2003, and it continued as data showed robust economic growth. Improved sentiment led many investors to rotate into economically sensitive and financially leveraged companies, specifically cyclical, technology, small-capitalization and emerging market stocks. The S&P 500 rose 28.67% for the 12 months ended December 31, 2003, while the technology-heavy Nasdaq Composite Index increased 50.93%.³

Investment Strategy

We are research driven, fundamental investors pursuing a growth strategy. As bottom-up investors focusing primarily on individual securities, we choose companies that we believe are positioned for growth in revenues, earnings or assets. In choosing investments, we focus on large-cap companies that have exhibited above average growth, strong financial records, or compelling valuations. In addition, we also consider management expertise, industry leadership, growth in market share and sustainable competitive advantage.

Manager’s Discussion

Looking back on the key factors impacting the Fund’s returns during 2003, we would like to remind our shareholders that our investment strategy is primarily bottom-up and individual stock selection-driven. However, we do recognize that our investors have interest in a top-down, industry- and sector-based discussion of key performance drivers.

On a sector-weighted basis compared with the S&P 500, the Fund’s top positive contributors to performance in 2003 were our overweighted position in the retail trade sector and our underweighted position in consumer non-durables. In retail trade, the Fund’s overweighted positions in Tuesday Morning, Cost Plus, Best Buy, Rent-A-Center and Nordstrom benefited performance, as did our significant underweighting in Wal-Mart, which performed poorly in 2003. We sold Cost Plus, Best Buy and Nordstrom by year-end.

3. Source: Standard & Poor’s Micropal. Please see Index Descriptions following the Fund Summaries.

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Other significant positive contributors to the Fund’s performance relative to the S&P 500 on an individual holdings basis included overweighted positions in finance-related companies CIT Group, Countrywide Financial and MBIA; electronic technology companies Amdocs (sold by year-end), Xilinx, Motorola, Applied Materials, Agilent Technologies and Linear Technology; and consumer services companies Cendant and McDonald’s.

Despite the Fund’s double-digit returns, there were some detractors to performance. Among these, most significant on a sector weightings basis were our overweighted positions in communications and technology services, including software. Overweighted positions in technology services companies Automatic Data Processing and Concord EFS also negatively impacted the Fund’s results, as did an overweighted position in software company Microsoft. Among our communications holdings, overweighted positions in telecommunications-related companies AT&T, SBC Communications and Sprint hindered performance. Total returns were also negatively affected by overweighted positions in aircraft manufacturer Boeing, energy company Anadarko Petroleum, pharmaceutical company Pfizer and finance company Fifth Third Bancorp. The Fund also witnessed poor relative performance among its underweighted positions in electronic technology companies Intel and Cisco Systems.

Some notable changes in the Fund’s positioning over the second half of the year included a significant increase in the energy minerals sector — in absolute terms as well as in comparison with the S&P 500. This was driven in part by our purchases of Exxon Mobil and Devon Energy. By year-end, the Fund’s energy minerals sector weighting stood at 5.2% of total net assets, slightly higher than the weighting in the S&P 500. We also gradually increased the Fund’s electronic technology sector weighting. This move was driven, in part, by our incremental purchases of Cisco Systems, Lexmark, Motorola, Lockheed Martin and Seagate Technology shares. At period-end, the Fund’s weighting in electronic technology stood at 10.8% of total net assets, just fractionally lower than the S&P 500’s weighting. Toward the very end of 2003, we sought to take advantage of a general decline in share prices and valuations in the retail trade sector to build an overweighted position there — 9.0% of total net assets versus 7.2% for the S&P 500 at year-end. Before this adjustment, the Fund’s mid-year 2003 retail trade sector weighting was approximately equal to that of the S&P 500. Specifically, the increase was driven in

Top 10 Holdings

Franklin Large Cap Growth Securities Fund

12/31/03

Company Sector/Industry	% of Total Net Assets
Pfizer Inc.	3.4%
Health Technology
Microsoft Corp.	3.2%
Technology Services
Exxon Mobil Corp.	2.6%
Energy Minerals
General Electric Co.	2.2%
Producer Manufacturing
Wal-Mart Stores Inc.	2.0%
Retail Trade
Citigroup Inc.	1.9%
Finance
Altria Group Inc.	1.9%
Consumer Non-Durables
Johnson & Johnson	1.8%
Health Technology
American International Group Inc.	1.6%
Finance
Marsh & McLennan Cos. Inc.	1.6%
Finance

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

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part by purchases of retailers such as Wal-Mart, Kohl’s, Ross Stores, Dollar Tree Stores and Family Dollar Stores.

Meanwhile, we gradually reduced the Fund’s exposure to the consumer services sector with partial sales of various stocks including Disney, Clear Channel Communications and McDonald’s. We also reduced the Fund’s stake in utilities as we sold off all shares of American Electric Power and TXU.

At year-end, one of the Fund’s largest sector weightings was health technology, constituting 16.1% of total net assets versus 12.6% in the S&P 500. Our selections among health technology stocks were composed primarily of overweighted positions in various large-capitalization and specialty pharmaceutical companies such as Pfizer, Merck, Wyeth, Johnson & Johnson, Forest Labs and King Pharmaceuticals. While we recognized significant challenges facing the pharmaceuticals industry, we believed the mitigating factors were abundantly reflected in their attractive stock price valuations, and thus sought to create some very attractive long-term investment opportunities, consistent with our investment strategy.

Thank you for your continued interest in Franklin Large Cap Growth Securities Fund. We look forward to serving your future investment needs.

This discussion reflects our analysis, opinions and portfolio holdings as of December 31, 2003, 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 advisor 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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PERFORMANCE SUMMARYASOF 12/31/03

Total return of Class 2 shares represents the average annual change in value, assuming reinvestment of dividends and capital gains. Average returns smooth out variations in returns, which can be significant; they are not the same as year-by-year results.

Franklin Large Cap Growth Securities Fund – Class 2*

Periods ended 12/31/03

	1-Year	5-Year	Since Inception (5/1/96)
Average Annual Total Return	+26.95%	+3.63%	+8.97%

*Because Class 2 shares were not offered until 1/6/99, standardized Class 2 Fund performance for prior periods represents the historical results of Class 1 shares. For periods beginning on 1/6/99, Class 2’s results reflect an additional 12b-1 fee expense, which also affects future performance. Since 1/6/99 (effective date), the average annual total return of Class 2 shares was +3.14%.

Ongoing market volatility can significantly affect short-term performance; recent returns may differ.

Total Return Index Comparison

for Hypothetical $10,000 Investment (5/1/96–12/31/03)

The graph compares the performance of Franklin Large Cap Growth Securities Fund – Class 2,* the S&P 500 and the Russell 1000 Growth Index. One cannot invest directly in an index, nor is an index representative of the Fund’s portfolio. Please see Important Notes to Performance Information preceding the Fund Summaries.

**Source: Standard & Poor’s Micropal. Please see Index Descriptions following the Fund Summaries.

.

Franklin Large Cap Growth Securities Fund – Class 2

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.

Since markets can go down as well as up, investment return and the value of your principal will fluctuate with market conditions, and you may have a gain or loss when you sell your shares.

Past performance does not guarantee future results.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN LARGE CAP GROWTH SECURITIES FUND

Financial Highlights

	Class 1
	Year Ended December 31,
	2003			2002			2001			2000			1999
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	11.10		$	14.52		$	21.03		$	21.07		$	16.08
Income from investment operations:
Net investment incomea		.10			.09			.10			.09			.11
Net realized and unrealized gains (losses)		2.90			(3.41	)		(2.13	)		1.14			4.96
Total from investment operations		3.00			(3.32	)		(2.03	)		1.23			5.07
Less distributions from:
Net investment income		(.09	)		(.10	)		(.11	)		(.11	)		(.08	)
Net realized gains		—			—			(4.37	)		(1.16	)		—
Total distributions		(.09	)		(.10	)		(4.48	)		(1.27	)		(.08	)
Net asset value, end of year	$	14.01		$	11.10		$	14.52		$	21.03		$	21.07
Total returnb		27.14%			(22.94%)			(11.26)%			5.75%			31.65%
Ratios/supplemental data
Net assets, end of year (000’s)	$	191,028		$	175,917		$	300,135		$	431,384		$	407,515
Ratios to average net assets:
Expenses		.79%			.80%			.78%			.78%			.77%
Net investment income		.86%			.73%			.56%			.43%			.63%
Portfolio turnover rate		35.28%			59.65%			75.67%			70.16%			41.78%

^a Based on average daily shares outstanding.

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

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FRANKLIN LARGE CAP GROWTH SECURITIES FUND

Financial Highlights (continued)

	Class 2
	Year Ended December 31,
	2003			2002			2001			2000			1999c
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	11.00		$	14.43		$	20.93		$	21.01		$	16.47
Income from investment operations:
Net investment incomea		.08			.07			.05			.03			.04
Net realized and unrealized gains (losses)		2.87			(3.40	)		(2.12	)		1.13			4.58
Total from investment operations		2.95			(3.33	)		(2.07	)		1.16			4.62
Less distributions from:
Net investment income		(.08	)		(.10	)		(.06	)		(.08	)		(.08	)
Net realized gains		—			—			(4.37	)		(1.16	)		—
Total distributions		(.08	)		(.10	)		(4.43	)		(1.24	)		(.08	)
Net asset value, end of year	$	13.87		$	11.00		$	14.43		$	20.93		$	21.01
Total returnb		26.95%			(23.19)%			(11.43)%			5.46%			28.11%
Ratios/supplemental data
Net assets, end of year (000’s)	$	128,029		$	30,289		$	5,290		$	1,081		$	542
Ratios to average net assets:
Expenses		1.04%			1.05%			1.03%			1.03%			1.02%	d
Net investment income		.61%			.48%			.30%			.17%			0.22%	d
Portfolio turnover rate		35.28%			59.65%			75.67%			70.16%			41.78%

^a Based on average daily shares outstanding.

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

^c For the period January 6, 1999 (effective date) to December 31, 1999.

^d Annualized.

See notes to financial statements.

FL-7

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN LARGE CAP GROWTH SECURITIES FUND

Statement of Investments, December 31, 2003

	SHARES	VALUE
Common Stocks 95.2%
Communications 4.7%
AT&T Corp.	140,000	$	2,842,000
BellSouth Corp.	80,900		2,289,470
SBC Communications Inc.	136,100		3,548,127
Sprint Corp. (FON Group)	165,000		2,709,300
Verizon Communications Inc.	106,000		3,718,480
			15,107,377
Consumer Durables .4%
aElectronic Arts Inc.	24,600		1,175,388
aLeapfrog Enterprises Inc.	100		2,653
			1,178,041
Consumer Non-Durables 7.8%
Adolph Coors Co., B	31,300		1,755,930
Altria Group Inc.	111,700		6,078,714
Coca-Cola Co.	51,000		2,588,250
Colgate-Palmolive Co.	71,200		3,563,560
Kimberly-Clark Corp.	41,000		2,422,690
Loews Corp. – Carolina Group	60,000		1,514,400
PepsiCo Inc.	32,000		1,491,840
Procter & Gamble Co.	27,000		2,696,760
Sara Lee Corp.	124,000		2,692,040
			24,804,184
Consumer Services 3.6%
aCendant Corp.	100,000		2,227,000
Clear Channel Communications Inc.	25,700		1,203,531
aComcast Corp.	43,996		1,446,149
Darden Restaurants Inc.	60,000		1,262,400
McDonald’s Corp.	74,000		1,837,420
The New York Times Co., A	31,000		1,481,490
aUnivision Communications Inc., A	29,683		1,178,118
The Walt Disney Co.	42,000		979,860
			11,615,968
Distribution Services 1.8%
AmerisourceBergen Corp.	65,500		3,677,825
McKesson Corp.	60,000		1,929,600
			5,607,425
Electronic Technology 10.8%
aAgilent Technologies Inc.	52,000		1,520,480
aApplied Materials Inc.	165,000		3,704,250
aCisco Systems Inc.	180,000		4,372,200
Intel Corp.	120,000		3,864,000
aLexmark International Inc.	20,200		1,588,528
Linear Technology Corp.	65,000		2,734,550
Lockheed Martin Corp.	78,600		4,040,040
Motorola Inc.	153,400		2,158,338
Nokia Corp., ADR (Finland)	100,800		1,713,600
Qualcomm Inc.	34,000		1,833,620

FL-8

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN LARGE CAP GROWTH SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	SHARES	VALUE
Common Stocks (cont.)
Electronic Technology (cont.)
aSeagate Technology	186,200	$	3,519,180
aXilinx Inc.	84,000		3,254,160
			34,302,946
Energy Minerals 5.2%
Anadarko Petroleum Corp.	55,000		2,805,550
Devon Energy Corp.	56,000		3,206,560
Exxon Mobil Corp.	203,400		8,339,400
Royal Dutch Petroleum Co., N.Y. shs. (Netherlands)	40,000		2,095,600
			16,447,110
Finance 17.5%
American International Group Inc.	79,200		5,249,376
Bank of America Corp.	38,000		3,056,340
Bank of New York Co. Inc.	90,000		2,980,800
Bank One Corp.	42,000		1,914,780
aBerkshire Hathaway Inc., B	300		844,500
CIT Group Inc.	95,300		3,426,035
Citigroup Inc.	127,000		6,164,580
Countrywide Financial Corp.	45,333		3,438,508
Fannie Mae	38,000		2,852,280
Fifth Third Bancorp	69,100		4,083,810
Freddie Mac	69,700		4,064,904
Goldman Sachs Group Inc.	30,000		2,961,900
Marsh & McLennan Cos. Inc.	108,300		5,186,487
MBIA Inc.	24,000		1,421,520
The PMI Group Inc.	20,000		744,600
Washington Mutual Inc.	76,000		3,049,120
Wells Fargo & Co.	75,000		4,416,750
			55,856,290
Health Services 1.4%
CIGNA Corp.	1,200		69,000
HCA Inc.	69,900		3,002,904
Universal Health Services Inc., B	27,000		1,450,440
			4,522,344
Health Technology 16.1%
Abbott Laboratories	73,000		3,401,800
aAmgen Inc.	71,000		4,387,800
aBiogen Idec Inc.	50,000		1,839,000
Bristol-Myers Squibb Co.	94,000		2,688,400
aForest Laboratories Inc.	68,000		4,202,400
aGilead Sciences Inc.	17,000		988,380
Johnson & Johnson Inc.	113,200		5,847,912
aKing Pharmaceuticals Inc.	225,000		3,433,500
Medtronic Inc.	75,000		3,645,750
Merck & Co. Inc.	110,000		5,082,000
Pfizer Inc.	310,000		10,952,300
aShire Pharmaceuticals Group PLC, ADR (United Kingdom)	59,600		1,731,380
Wyeth	77,000		3,268,650
			51,469,272

FL-9

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN LARGE CAP GROWTH SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	SHARES	VALUE
Common Stocks (cont.)
Industrial Services .9%
Schlumberger Ltd.	50,000	$	2,736,000
Process Industries .4%
Georgia-Pacific Corp.	39,600		1,214,532
Producer Manufacturing 3.9%
General Electric Co.	225,000		6,970,500
aMettler-Toledo International Inc. (Switzerland)	38,200		1,612,422
United Technologies Corp.	42,200		3,999,294
			12,582,216
Retail Trade 9.0%
aAutoZone Inc.	27,800		2,368,838
CVS Corp.	25,400		917,448
Dillards Inc., A	50,000		823,000
aDollar Tree Stores Inc.	135,700		4,079,142
Family Dollar Stores Inc.	84,500		3,031,860
aKohl’s Corp.	65,500		2,943,570
aRent-A-Center Inc.	51,000		1,523,880
Ross Stores Inc.	68,200		1,802,526
Target Corp.	39,300		1,509,120
aTuesday Morning Corp.	91,700		2,773,925
Wal-Mart Stores Inc.	122,600		6,503,930
Walgreen Co.	16,000		582,080
			28,859,319
Technology Services 9.5%
aAccenture Ltd., A (Bermuda)	20,000		526,400
aAffiliated Computer Services Inc., A	66,700		3,632,482
Automatic Data Processing Inc.	100,000		3,961,000
Computer Associates International Inc.	76,400		2,088,776
aComputer Sciences Corp.	35,000		1,548,050
aConcord EFS Inc.	53,000		786,520
First Data Corp.	53,600		2,202,424
International Business Machines Corp.	46,000		4,263,280
Microsoft Corp.	374,000		10,299,960
Paychex Inc.	25,800		959,760
			30,268,652
Transportation 1.1%
Expeditors International of Washington Inc.	90,000		3,389,400
Utilities 1.1%
DTE Energy Co.	50,000		1,970,000
Exelon Corp.	25,500		1,692,180
			3,662,180
Total Common Stocks (Cost $256,358,343)			303,623,256

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN LARGE CAP GROWTH SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	PRINCIPAL AMOUNT		VALUE
bRepurchase Agreement (Cost $23,925,553) 7.5%
Joint Repurchase Agreement, .873%, 01/02/04 (Maturity Value $23,926,713)	$	23,925,553	$	23,925,553
ABN AMRO Bank, N.V., New York Branch (Maturity Value $2,229,013)
Banc of America Securities LLC (Maturity Value $2,229,013) Barclays Capital Inc. (Maturity Value $1,591,844) Bear, Sterns & Co. Inc. (Maturity Value $1,273,619) BNP Paribas Securities Corp. (Maturity Value $2,229,013) Deutsche Bank Securities Inc. (Maturity Value $2,229,013) Dresdner Kleinwort Wasserstein Securities LLC (Maturity Value $2,229,013) Goldman, Sachs & Co. (Maturity Value $1,273,619) Greenwich Capital Markets Inc. (Maturity Value $2,229,013) Lehman Brothers Inc. (Maturity Value $1,955,527) Morgan Stanley & Co. Inc. (Maturity Value $2,229,013) UBS Securities LLC (Maturity Value $2,229,013)
Collateralized by U.S. Treasury Bills, Notes, and Bonds, and U.S Government Agency Securities
Total Investments (Cost $280,283,896) 102.7%				327,548,809
Other Assets, less Liabilities (2.7)%				(8,491,646	)
Net Assets 100.0%			$	319,057,163

^a Non-income producing.

^b See Note 1(b) regarding joint repurchase agreement.

See notes to financial statements.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN LARGE CAP GROWTH SECURITIES FUND

Financial Statements

Statement of Assets and Liabilities

December 31, 2003

Assets:
Investments in securities:
Cost	$	280,283,896
Value		327,548,809
Receivables:
Capital shares sold		463,515
Dividends		428,788
Total assets		328,441,112
Liabilities:
Payables:
Investment securities purchased		9,067,775
Capital shares redeemed		47,500
Affiliates		239,672
Other liabilities		29,002
Total liabilities		9,383,949
Net assets, at value	$	319,057,163
Net assets consist of:
Undistributed net investment income	$	1,927,301
Net unrealized appreciation (depreciation)		47,264,913
Accumulated net realized gain (loss)		(51,262,288)
Capital shares		321,127,237
Net assets, at value	$	319,057,163
Class 1:
Net assets, at value	$	191,027,888
Shares outstanding		13,631,696
Net asset value and offering price per share	$	14.01
Class 2:
Net assets, at value	$	128,029,275
Shares outstanding		9,231,409
Net asset value and offering price per share	$	13.87

See notes to financial statements.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN LARGE CAP GROWTH SECURITIES FUND

Financial Statements (continued)

Statement of Operations

for the year ended December 31, 2003

Investment income:
Dividends	$	3,809,496
Interest		196,816
Total investment income		4,006,312
Expenses:
Management fees (Note 3)		1,822,675
Distribution fees - Class 2 (Note 3)		166,192
Transfer agent fees		1,182
Custodian fees		2,430
Reports to shareholders		53,807
Professional fees		16,484
Trustees’ fees and expenses		2,324
Other		13,510
Total expenses		2,078,604
Net investment income		1,927,708
Realized and unrealized gains (losses):
Net realized gain (loss) from investments		1,479,180
Net unrealized appreciation (depreciation) on investments		56,887,471
Net realized and unrealized gain (loss)		58,366,651
Net increase (decrease) in net assets resulting from operations	$	60,294,359

See notes to financial statements.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN LARGE CAP GROWTH SECURITIES FUND

Financial Statements (continued)

Statements of Changes in Net Assets

For the year ended December 31, 2003 and 2002

	2003			2002
Increase (decrease) in net assets:
Operations:
Net investment income	$	1,927,708		$	1,758,425
Net realized gain (loss) from investments		1,479,180			(30,320,684	)
Net unrealized appreciation (depreciation) on investments		56,887,471			(38,629,313	)
Net increase (decrease) in net assets resulting from operations		60,294,359			(67,191,572	)
Distributions to shareholders from:
Net investment income:
Class 1		(1,331,195	)		(1,919,600	)
Class 2		(427,106	)		(96,711	)
Total distributions to shareholders		(1,758,301	)		(2,016,311	)
Capital share transactions: (Note 2)
Class 1		(26,198,818	)		(58,273,965	)
Class 2		80,514,244			28,262,526
Total capital share transactions		54,315,426			(30,011,439	)
Net increase (decrease) in net assets		112,851,484			(99,219,322	)
Net assets:
Beginning of year		206,205,679			305,425,001
End of year	$	319,057,163		$	206,205,679
Undistributed net investment income included in net assets:
End of year	$	1,927,301		$	1,757,894

See notes to financial statements.

FL-14

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN LARGE CAP GROWTH SECURITIES FUND

Notes to Financial Statements

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (the Trust) is registered under the Investment Company Act of 1940 as an open-end investment company, consisting of twenty-two separate series (the Funds). Franklin Large Cap Growth Securities Fund (the Fund) included in this report is diversified. Shares of the Fund are sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. As of December 31, 2003, over 79% of the total Fund shares were sold through one insurance company. The Fund’s investment objective is capital growth.

The following summarizes the Fund’s significant accounting policies.

a. Security Valuation

Securities listed or traded on a recognized national exchange or NASDAQ are valued at the last reported sales price. Over-the-counter securities and listed securities for which no sale is reported are valued within the range of the latest quoted bid and asked prices. If events occur that materially affect the values of securities after the prices are determined, or if market quotations are not readily available, the securities will be valued at fair value as determined following procedures approved by the Board of Trustees.

b. Joint Repurchase Agreements

The Fund may enter into a joint repurchase agreement whereby its uninvested cash balance is deposited into a joint cash account to be used to invest in one or more repurchase agreements. The value and face amount of the joint repurchase agreement are allocated to the Fund based on its pro-rata interest. A repurchase agreement is accounted for as a loan by the Fund to the seller, collateralized by securities which are delivered to the Fund’s custodian. The market value, including accrued interest, of the initial collateralization is required to be at least 102% of the dollar amount invested by the Fund, with the value of the underlying securities marked to market daily to maintain coverage of at least 100%. At December 31, 2003, all repurchase agreements had been entered into on that date.

c. Income Taxes

No provision has been made for income taxes because the fund’s policy is to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable income.

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. Interest income and estimated expenses are accrued daily. Dividend income and distributions to shareholders are recorded on the ex-dividend date.

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. Other expenses are charged to each Fund on a specific identification basis.

Realized and unrealized gains and losses and net investment income, other than class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class.

e. Accounting Estimates

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

FL-15

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN LARGE CAP GROWTH SECURITIES FUND

Notes to Financial Statements (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

f. Guarantees and Indemnifications

Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust 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. However, based on experience, the Trust expects the risk of loss to be remote.

2. SHARES OF BENEFICIAL INTEREST

The Fund offers two classes of shares: Class 1 and Class 2. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class, and its exchange privilege.

At December 31, 2003, there were an unlimited number of shares authorized ($.01 par value). Transactions in the Fund’ shares were as follows:

	Year Ended December 31,
	2003					2002
Class 1 Shares:	Shares		Amount			Shares		Amount
Shares sold	688,775		$	8,672,422		1,297,340		$	17,726,425
Shares issued in reinvestment of distributions	105,567			1,331,195		149,735			1,919,600
Shares redeemed	(3,017,447	)		(36,202,435	)	(6,261,147	)		(77,919,990	)
Net increase (decrease)	(2,223,105	)	$	(26,198,818	)	(4,814,072	)	$	(58,273,965	)
Class 2 Shares:
Shares sold	6,995,198		$	86,731,493		3,035,459		$	36,852,947
Shares issued in reinvestment of distributions	34,168			427,106		7,597			96,711
Shares redeemed	(550,967	)		(6,644,355	)	(656,684	)		(8,687,132	)
Net increase (decrease)	6,478,399		$	80,514,244		2,386,372		$	28,262,526

3. TRANSACTIONS WITH AFFILIATES

Certain officers and trustees of the Fund are also officers and/or directors of the following entities:

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

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
.75%	First $500 million
.625%	Over $500 million, up to and including $1 billion
.50%	Over $1 billion

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

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN LARGE CAP GROWTH SECURITIES FUND

Notes to Financial Statements (continued)

3. TRANSACTIONS WITH AFFILIATES (cont.)

The Fund reimburses Distributors up to .25% per year of its average daily net assets of Class 2, for costs incurred in marketing the Fund’s shares.

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

4. INCOME TAXES

At December 31, 2003, the Fund had tax basis capital losses of $49,804,588, which may be carried over to offset future capital gains. Such losses expire as follows:

Capital loss carryovers expiring in:
2009	$	8,952,191
2010		39,271,476
2011		1,580,921
	$	49,804,588

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

The tax character of distributions paid during the year ended December 31, 2003 and 2002, was as follows:

	2003		2002
Distributions paid from:
Ordinary income	$	1,758,301	$	2,016,311
Long term capital gain		—		—
	$	1,758,301	$	2,016,311

At December 31, 2003, the cost of investments, net unrealized appreciation, undistributed ordinary income and undistributed long term capital gains for income tax purposes were as follows:

Cost of investments	$	281,741,592
Unrealized appreciation		52,981,911
Unrealized depreciation		(7,174,694	)
Net unrealized appreciation (depreciation)	$	45,807,217
Undistributed ordinary income	$	1,927,301
Undistributed long term capital gains		—
Distributable earnings	$	1,927,301

5. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short-term securities) for the year ended December 31, 2003 aggregated $131,548,591 and $80,566,651 respectively.

6. REGULATORY MATTERS

On February 4, 2004, the Securities Division of the Office of the Secretary of the Commonwealth of Massachusetts filed an administrative complaint against Franklin Resources, Inc. and certain of its subsidiaries (the “Company”), alleging violations of the Massachusetts Uniform Securities Act. The complaint arises from activity that occurred in 2001 during which time an officer of a Company subsidiary was negotiating an agreement with an investor relating to investments in a mutual fund and a hedge fund.

FL-17

Franklin Templeton Variable Insurance Products Trust

Franklin Large Cap Growth Securities Fund

Notes to Financial Statements (continued)

6. REGULATORY MATTERS (cont.)

The Company, in addition to other entities within Franklin Templeton Investments, has been named in shareholder class actions related to the matter described above. The Company believes that the claims made in the lawsuit are without merit and it intends to defend vigorously against the allegations. The Company and the Fund may be named in similar civil actions related to the matter described above.

In addition, as part of ongoing investigations by the U.S. Securities and Exchange Commission (the “SEC”), the U.S. Attorney for the Northern District of California, the New York Attorney General, the California Attorney General, the U.S. Attorney for the District of Massachusetts, the Florida Department of Financial Services, and the Commissioner of Securities and the Attorney General of the State of West Virginia, relating to certain practices in the mutual fund industry, including late trading, market timing and sales compensation arrangements, the Company and its subsidiaries, as well as certain current or former executives and employees of the Company, have received requests for information and/or subpoenas to testify or produce documents. The Company and its current employees are providing documents and information in response to these requests and subpoenas. In addition, the Company has responded to requests for similar kinds of information from regulatory authorities in some of the foreign countries where the Company conducts its global asset management business.

The Staff of the SEC has informed the Company that it intends to recommend that the Commission authorize an action against the Fund’s investment adviser and a senior executive officer relating to the frequent trading issues that are the subject of the SEC’s investigation. These issues were previously disclosed as being under investigation by government authorities and the subject of an internal inquiry by the Company in its Annual Report on Form 10-K and on its public website. The Company currently is in discussions with the SEC Staff in an effort to resolve the issues raised in their investigation. Such discussions are preliminary and the Fund’s management has been advised that the Company cannot predict the likelihood of whether those discussions will result in a settlement and, if so, the terms of such settlement. The impact, if any, of these matters on the Fund is uncertain at this time. If the Company finds that it bears responsibility for any unlawful or improper conduct, it has committed to making the Fund or its shareholders whole, as appropriate.

FL-18

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN LARGE CAP GROWTH SECURITIES FUND

Independent Auditors’ Report

To the Board of Trustees and Shareholders

of Franklin Templeton Variable Insurance Products Trust

In our opinion, the accompanying statement of assets and liabilities, including the statement of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Franklin Large Cap Growth Securities Fund (the Fund) (one of the funds constituting the Franklin Templeton Variable Insurance Products Trust) at December 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with generally accepted accounting principles. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

February 5, 2004, except for Note 6 as to which the date is February 12, 2004

FL-19

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN LARGE CAP GROWTH SECURITIES FUND

Tax Designation

Under Section 854(b)(2) of the Code, the Fund hereby designates 100% of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended December 31, 2003.

FL-20

FRANKLIN MONEY MARKET FUND

Fund Goals and Primary Investments: Franklin Money Market Fund seeks high current income, consistent with liquidity and capital preservation. The Fund also seeks to maintain a stable share price of $1.00.¹ The Fund invests in high quality U.S. dollar-denominated money market debt instruments.

We are pleased to bring you Franklin Money Market Fund’s annual report for the fiscal year ended December 31, 2003.

Economic and Market Overview

During the year ended December 31, 2003, many factors strongly impacted the U.S. economy and markets. In general, uncertainty about the economy’s strength and geopolitical events pushed interest rates down during the first part of the year. The Iraq conflict weighed heavily on many investors’ minds, which helped interest rates decline. By mid-June, the 10-year U.S. Treasury yield fell to 3.13%, the lowest level in more than four decades. For consumers, historically low mortgage rates enabled many homeowners to refinance their mortgages, and refinancing applications reached their highest levels on record. Additionally, the refinancing activity, rising home values and stabilizing equity markets improved consumers’ net worths and allowed them to continue spending, which helped to keep the economy moving forward.

Increases in business spending also helped economic growth. After having been largely absent since the end of 2000, business spending improved in the latter half of 2003. Nonresidential fixed investment increased 12.8% annualized in the third quarter of 2003, the highest increase since the second quarter of 2000. Lower interest rates during the past year allowed many businesses the opportunity to refinance their old debt at more attractive levels. This helped enhance business operating performance. Additionally, businesses continued to achieve productivity gains by reducing their labor forces and taking advantage of recent technology investments. Higher productivity levels helped dampen inflation. Core inflation (excluding food and energy), as measured by the Consumer Price Index, rose a modest 1.1% for the year. Expectations for lower inflation contributed to the historically lower overall interest rate environment during the period.

1. An investment in the Fund is not insured or guaranteed by the U.S. government or any other entity or institution. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund.

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While much of the economic data pointed toward an improving economy, one area that showed mixed results was employment. The unemployment rate began the year at 5.7%, spiked to 6.4% in June, and ended the year at 5.7%. With inflation expectations muted, the Federal Reserve Board continued its accommodative stance and reduced the federal funds target rate to 1.00% in June from 1.25%, and maintained this level through year-end.

Investment Strategy

In selecting investments, we use a conservative investment approach, focusing on the highest quality and the most liquid of eligible money market securities. We assess the relative value of each security meeting our credit criteria to find the best combination of assets we believe will maximize the Fund’s yield relative to our expectations of the investment environment. We monitor short-term interest rates, economic conditions, and Federal Reserve Board monetary policy to determine the portfolio maturity we believe will provide high overall return.

Manager’s Discussion

Consistent with our strategy, we continued to invest mainly in high-quality money market securities. For example, on December 31, 2003, more than 89.1% of the portfolio was invested in securities with an AA or higher long-term credit rating by independent credit rating agencies Standard & Poor’s and Moody’s Investors Service, with the balance rated A.²

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

2. These do not indicate ratings of the Fund.

This discussion reflects our analysis, opinions and portfolio holdings as of December 31, 2003, 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 advisor makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

Top 10 Holdings

Franklin Money Market Fund

12/31/03

Security Name	% of Total Net Assets
ABN Amro Inc.—Repurchase Agreement	18.7%
UBS Warburg LLC—Repurchase Agreement	18.7%
Federal Home Loan Bank	8.6%
Province of British Columbia	5.0%
UBS AG	4.9%
Citigroup Global Markets Holding	4.9%
Coca-Cola Co.	4.9%
General Electric Capital Corp.	4.1%
HBOS Treasury Services	4.0%
Shell Finance PLC (U.K.)	3.9%

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

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Financial Highlights

	Class 1
	Year Ended December 31,
	2003			2002			2001			2000			1999
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Income from investment operations - net investment income		.01			.01			.04			.06			.05
Less distributions from net investment income		(.01	)		(.01	)		(.04	)		(.06	)		(.05	)
Net asset value, end of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total returna		.52%			1.33%			3.91%			5.95%			4.76%
Ratios/supplemental data
Net assets, end of year (000’s)	$	81,734		$	119,819		$	200,911		$	274,580		$	364,028
Ratios to average net assets:
Expenses		.66%			.63%			.56%			.55%			.53%
Net investment income		.56%			1.37%			3.89%			5.75%			4.64%

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

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Financial Highlights (continued)

	Class 2
	Year Ended December 31,
	2003			2002			2001			2000			1999c
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Income from investment operations - net investment income		—	b		.01			.04			.06			.04
Less distributions from net investment income		—	b		(.01	)		(.04	)		(.06	)		(.04	)
Net asset value, end of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total returna		.27%			1.08%			3.65%			5.69%			4.39%
Ratios/supplemental data
Net assets, end of year (000’s)	$	590		$	479		$	952		$	21,609		$	8,602
Ratios to average net assets:
Expenses		.91%			.88%			.81%			.79%			.79%	d
Net investment income		.31%			1.12%			3.52%			5.59%			4.51%	d

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

^b Includes net investment income and distributions from net investment income in the amount of $.003.

^c For the period January 6, 1999 (effective date) to December 31, 1999.

^d Annualized.

See notes to financial statements.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

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Statement of Investments, December 31, 2003

	PRINCIPAL AMOUNT		VALUE
Certificates of Deposit 6.1%
UBS AG, Stamford Connecticut Branch, 1.305%, 4/16/04	$	4,000,000		$  4,000,000
Wells Fargo Bank N.A., San Francisco Branch, 1.07%, 1/07/04		1,000,000		1,000,000
Total Certificates of Deposit (Cost $5,000,000)				5,000,000
Commercial Paper 47.3%
aBP Capital Markets PLC, 1.07%-1.10%, 2/09/04-3/02/04		1,400,000		1,398,095
aCitigroup Global Markets Holding Inc., 1.03%-1.07%, 1/02/04-1/14/04		4,000,000		3,999,363
aCoca-Cola Co., 1.03%, 1/05/04-1/12/04		4,000,000		3,999,142
aDupont De Nemours & Co, 1.05%-1.07%, 1/21/04-2/10/04		3,090,000		3,086,734
aGeneral Electric Capital Corp., 1.08%-1.12%, 1/15/04-4/08/04		3,392,000		3,386,972
aGoldman Sachs Group Inc., 1.07%, 1/16/04		2,000,000		1,999,108
aHBOS Treasury Services, 1.10%-1.13%, 1/05/04-3/19/04		3,265,000		3,259,642
aLloyds TSB Bank PLC, 1.10%-1.11%, 1/22/04-3/09/04		1,700,000		1,697,504
aMerrill Lynch & Co Inc., 1.04%, 1/29/04		1,000,000		999,191
aMorgan Stanley & Co, 1.08%, 1/09/04		2,000,000		1,999,520
aProvince of British Columbia, 1.11%, 4/19/04		4,100,000		4,086,221
aRabobank USA Finance Corp, 1.04%, 1/30/04		934,000		933,218
aRoyal Bank of Scotland PLC, 1.10%-1.12%, 1/20/04-1/27/04		2,350,000		2,348,207
aShell Finance (UK) PLC, 1.06%-1.10%, 1/15/04-3/17/04		3,200,000		3,196,288
aWestpac Capital Corp., 1.07%-1.11%, 1/28/04-2/12/04		2,600,000		2,597,391
Total Commercial Paper (Cost $38,986,596)				38,986,596
U.S. Government Agency Securities 9.3%
Federal Farm Credit Bank, 1.31%, 9/01/04		633,000		627,380
Federal Home Loan Bank, 1.07%-1.40%, 1/23/04-11/26/04		6,000,000		5,983,897
Federal Home Loan Bank, Strip, 4/05/04-5/04/04		1,070,000		1,065,465
Total U.S. Government Agency Securities (Cost $7,676,742)				7,676,742
Total Investments before Repurchase Agreements (Cost $51,663,338)				51,663,338
Repurchase Agreements 37.4%
bABN AMRO Bank NV., .90%, 1/02/04 (Maturity Value $15,390,770) Collateralized by U.S. Government Agency Securities		15,390,000		15,390,000
bUBS Securities LLC., .85%, 1/02/04 (Maturity Value $15,385,727) Collateralized by U.S. Government Agency Securities		15,385,000		15,385,000
Total Repurchase Agreements (Cost $30,775,000)				30,775,000
Total Investments (Cost $82,438,338) 100.1%				82,438,338
Other Assets, less Liabilities (.1)%				(114,498	)
Net Assets 100.0%			$	82,323,840

^a Securities are traded on a discount basis; the rates shown are the discount rates at the time of purchase by the fund.

^b See Note 1(b) regarding repurchase agreements.

See notes to financial statements.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN MONEY MARKET FUND

Financial Statements

Statement of Assets and Liabilities

December 31, 2003

Assets:
Investments in securities, at value and cost	$	51,663,338
Repurchase agreements, at value and cost		30,775,000
Cash		1,077
Receivable from interest		39,072
Total assets		82,478,487
Liabilities:
Payables:
Capital shares redeemed		64,706
Affiliates		47,259
Distributions to shareholders		22,141
Other liabilities		20,541
Total liabilities		154,647
Net assets, at value	$	82,323,840
Class 1:
Net assets, at value	$	81,734,220
Shares outstanding		81,734,220
Net asset value per share	$	1.00
Class 2:
Net assets, at value		$589,620
Shares outstanding		589,620
Net asset value per share	$	1.00

See notes to financial statements.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN MONEY MARKET FUND

Financial Statements (continued)

Statement of Operations

for the year ended December 31, 2003

Investment income:
Interest		$1,217,495
Expenses:
Management fees (Note 3)		619,226
Distribution fees - Class 2 (Note 3)		1,267
Transfer agent fees		353
Custodian fees		977
Reports to shareholders		21,091
Professional fees		11,942
Trustees’ fees and expenses		1,917
Other		6,598
Total expenses		663,371
Net investment income		554,124
Net realized gain (loss) from investments		577
Net increase (decrease) in net assets resulting from operations	$	554,701

See notes to financial statements.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN MONEY MARKET FUND

Financial Statements (continued)

Statements of Changes in Net Assets

For the year ended December 31, 2003 and 2002

	2003			2002
Increase (decrease) in net assets:
Operations:
Net investment income	$	554,124		$	2,127,903
Net realized gain (loss) from investments		577			(444	)
Net increase (decrease) in net assets resulting from operations		554,701			2,127,459
Distributions to shareholders from net investment income:a
Class 1		(553,446	)		(2,119,738	)
Class 2		(1,255	)		(7,721	)
Total distributions to shareholders		(554,701	)		(2,127,459	)
Capital share transactions: (Note 2)
Class 1		(38,084,738	)		(81,091,795	)
Class 2		110,815			(473,226	)
Total capital share transactions		(37,973,923	)		(81,565,021	)
Net increase (decrease) in net assets		(37,973,923	)		(81,565,021	)
Net assets: (there is no undistributed net investment income at beginning or end of year).
Beginning of year		120,297,763			201,862,784
End of year	$	82,323,840		$	120,297,763

^a Distributions were increased by net realized gains of $577 and decreased by net realized losses of $444 from security transactions for the years ended December 31, 2003 and 2002, respectively.

See notes to financial statements.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN MONEY MARKET FUND

Notes to Financial Statements

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (the Trust) is registered under the Investment Company Act of 1940 as an open-end investment company, consisting of twenty-two separate series (the Funds). Franklin Money Market Fund (the Fund) included in this report is diversified. Shares of the Fund are sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. As of December 31, 2003, 93.6% of the Fund’s shares were sold through one insurance company. The Fund’s investment objective is to obtain a high level of current income while seeking capital preservation and liquidity.

The following summarizes the Fund’s significant accounting policies.

a. Security Valuation

Securities are valued at amortized cost which approximates value.

b. Repurchase Agreements

The Fund may enter into repurchase agreements, which are accounted for as a loan by the Fund to the seller, collateralized by securities which are delivered to the Fund’s custodian. The market value, including accrued interest, of the initial collateralization is required to be at least 102% of the dollar amount invested by the Funds, with the value of the underlying securities marked to market daily to maintain coverage of at least 100%. At December 31, 2003, all repurchase agreements held by the Fund had been entered into on that date.

c. Income Taxes

No provision has been made for income taxes because the Fund’s policy is to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable income.

d. Security Transactions, Investment Income, Expenses and Distribution

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. Dividends from net investment income and capital gains or losses are normally declared daily. Such distributions are reinvested in additional shares of the Fund.

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. Other expenses are charged to each fund on a specific identification basis.

Net investment income, other than class specific expenses, is allocated daily to each class of shares based upon the relative value of the settled shares of each class. Realized and unrealized gains and losses are allocated daily based upon the relative proportion of net assets of each class.

e. Accounting Estimates

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

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN MONEY MARKET FUND

Notes to Financial Statements (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

f. Guarantees and Indemnifications

Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust 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. However, based on experience, the Trust expects the risk of loss to be remote.

2. SHARES OF BENEFICIAL INTEREST

The Fund offers two classes of shares: Class 1 and Class 2. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class, and its exchange privilege.

At December 31, 2003, there were an unlimited number of shares authorized ($.01 par value). Transactions in the Fund’s shares were as follows:

	Year Ended December 31,
Class 1 Shares:	2003			2002
Shares sold	$	—		$	25,235,589
Shares issued in reinvestment of distributions		531,271			2,119,892
Shares redeemed		(38,616,009	)		(108,447,276	)
Net increase (decrease)	$	(38,084,738	)	$	(81,091,795	)
Class 2 Shares:
Shares sold	$	242,800		$	341,277
Shares issued in reinvestment of distributions		1,323			7,721
Shares redeemed		(133,308	)		(822,224	)
Net increase (decrease)	$	110,815		$	(473,226	)

3. TRANSACTIONS WITH AFFILIATES

Certain officers and trustees of the Trust are also officers and/or directors of the following entities:

Entity	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

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
.625%	First $100 million
.500%	Over $100 million, up to and including $250 million
.450%	Over $250 million, up to and including $10 billion

Fees are further reduced on net assets over $10 billion.

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Notes to Financial Statements (continued)

3. TRANSACTIONS WITH AFFILIATES (cont.)

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

The Fund reimburses Distributors up to .25% per year of its average daily net assets of Class 2, for costs incurred in marketing the Fund’s shares.

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

4. INCOME TAXES

At December 31, 2003, the Fund had tax basis capital losses of $724 which may be carried over to offset future capital gains. Such losses expire as follows:

Capital loss carryovers expiring in:
2008	$	280
2010		444
	$	724

At December 31, 2003, the cost of investments and undistributed ordinary income for income tax purposes were as follows:

Cost of investments	$	82,438,338
Undistributed ordinary income	$	29,996

5. REGULATORY MATTERS

On February 4, 2004, the Securities Division of the Office of the Secretary of the Commonwealth of Massachusetts filed an administrative complaint against Franklin Resources, Inc. and certain of its subsidiaries (the “Company”), alleging violations of the Massachusetts Uniform Securities Act. The complaint arises from activity that occurred in 2001 during which time an officer of a Company subsidiary was negotiating an agreement with an investor relating to investments in a mutual fund and a hedge fund.

The Company, in addition to other entities within Franklin Templeton Investments, has been named in shareholder class actions related to the matter described above. The Company believes that the claims made in the lawsuit are without merit and it intends to defend vigorously against the allegations. The Company and the Fund may be named in similar civil actions related to the matter described above.

In addition, as part of ongoing investigations by the U.S. Securities and Exchange Commission (the “SEC”), the U.S. Attorney for the Northern District of California, the New York Attorney General, the California Attorney General, the U.S. Attorney for the District of Massachusetts, the Florida Department of Financial Services, and the Commissioner of Securities and the Attorney General of the State of West Virginia, relating to certain practices in the mutual fund industry, including late trading, market timing and sales compensation arrangements, the Company and its subsidiaries, as well as certain current or former executives and employees of the Company, have received requests for information and/or subpoenas to testify or produce documents. The Company and its current employees are providing documents and information in response to these requests and subpoenas. In addition, the Company has responded to requests for similar kinds of information from regulatory authorities in some of the foreign countries where the Company conducts its global asset management business.

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Notes to Financial Statements (continued)

5. REGULATORY MATTERS (cont.)

The Staff of the SEC has informed the Company that it intends to recommend that the Commission authorize an action against the Fund’s investment adviser and a senior executive officer relating to the frequent trading issues that are the subject of the SEC’s investigation. These issues were previously disclosed as being under investigation by government authorities and the subject of an internal inquiry by the Company in its Annual Report on Form 10-K and on its public website. The Company currently is in discussions with the SEC Staff in an effort to resolve the issues raised in their investigation. Such discussions are preliminary and the Fund’s management has been advised that the Company cannot predict the likelihood of whether those discussions will result in a settlement and, if so, the terms of such settlement. The impact, if any, of these matters on the Fund is uncertain at this time. If the Company finds that it bears responsibility for any unlawful or improper conduct, it has committed to making the Fund or its shareholders whole, as appropriate.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN MONEY MARKET FUND

Independent Auditors’ Report

To the Board of Trustees and Shareholders of

Franklin Templeton Variable Insurance Products Trust

In our opinion, the accompanying statement of assets and liabilities, including the statement of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Franklin Money Market Fund (the Fund) (one of the funds constituting the Franklin Templeton Variable Insurance Products Trust) at December 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

February 5, 2004, except for Note 5 as to which the date is February 12, 2004

FM-13

FRANKLIN REAL ESTATE FUND

Fund Goals and Primary Investments: Franklin Real Estate Fund seeks capital appreciation, with current income as a secondary goal. The Fund invests primarily in investments of companies operating in the real estate sector, primarily real estate investment trusts (REITs) and generally in small to medium capitalization companies.¹

This annual report for Franklin Real Estate Fund covers the fiscal year ended December 31, 2003.

Performance Overview

You can find the Fund’s one-year total return in the Performance Summary following this report. The Fund outperformed the benchmark Standard & Poor’s 500 Composite Index (S&P 500), which returned 28.67% for the year under review, while the Fund’s return was comparable to that of the Wilshire Real Estate Securities Index’s 37.07% return for the same period.²

Economic and Market Overview

During the year ended December 31, 2003, many factors impacted global economies and financial markets. Early in the year, economic uncertainty and geopolitical events, including impending war in Iraq, pushed U.S. interest rates to their lowest level in more than four decades, and the 10-year U.S. Treasury note’s yield fell to 3.13% in mid-June. However, following the end of major conflict in Iraq, many economic indicators turned positive. The U.S. government injected fiscal stimulus into the economy, approving another round of tax cuts and rebates that included dividend and capital gains tax reductions. In June, an accommodative Federal Reserve Board, in an attempt to bolster the economy, cut the federal funds target rate to 1.00%.

During the year, the U.S. trade deficit increased significantly, contributing to the U.S. dollar’s fall to record lows against the euro and other major currencies. However, the weak dollar provided a boost to the U.S. economy and corporate profits as exports became cheaper for foreign buyers. Robust consumer spending, especially for autos and homes, and strong business spending, particularly for equipment and software, contributed to the accelerated economic activity. In addition,

1. Equity REITs are real estate companies that own and manage income-producing properties such as apartments or hotels. The income, primarily rent from these properties, is generally passed on to investors in the form of dividends. These companies provide experienced property management teams and generally concentrate on a specific geographic region and property type.

2. Source: Standard & Poor’s Micropal. One cannot invest directly in an index, nor is an index representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

FRE-1

U.S. federal spending stayed firm and inflation remained benign. U.S. gross domestic product (GDP) grew an annualized 8.2% in third quarter 2003, its strongest pace in nearly 20 years, and overall, 2003 GDP grew an estimated 3.1%. As economic data improved, some interest rates rose from their lows, and the 10-year Treasury note’s yield ended the period at 4.27%.

An equity market rally started in late March 2003 and continued through the end of the year. The rebound began with investors anticipating economic recovery in the second half of 2003, and it continued as data showed robust economic growth. Improved sentiment led many investors to rotate into economically sensitive and financially leveraged companies, specifically cyclical, technology, small-capitalization and emerging market stocks. The S&P 500 rose 28.67% for the 12 months ended December 31, 2003, while the technology-heavy Nasdaq Composite Index increased 50.93%.³

Real estate stocks, as measured by the Wilshire Real Estate Securities Index, outpaced the broader markets. Despite sluggish underlying conditions in the commercial real estate market, related stocks continued a strong upward trend begun more than three years ago. Investor interest in the sector was bolstered by the relatively high dividend yields offered by equity REITs compared with many other investments.

Investment Strategy

We are research driven, fundamental investors pursuing a disciplined strategy. As bottom-up investors focusing primarily on individual securities, we pay close attention to the market price of a company’s security relative to our evaluation of its potential long-term earnings, asset value

3. Source: Standard & Poor’s Micropal. Please see Index Descriptions following the Fund Summaries.

FRE-2

and cash flow. Using both qualitative and quantitative analysis, we evaluate security characteristics, the strength and quality of management, and underlying properties. In addition, we may consider other factors, such as the supply and demand outlook for various property types and regional markets.

Manager’s Discussion

The Fund had a strong year largely by adhering to its strategy of using its disciplined, value-oriented approach to investing in real estate securities. Consistent with our strategy, we continued to look for well-managed companies with valuable real estate assets that were trading at attractive valuations. In addition, we analyzed supply and demand trends and outlooks for various property types and regional real estate markets, while closely evaluating company managements and the underlying properties of their real estate securities.

Cendant, a consumer services stock, was a significant positive contributor for the Fund during the reporting period; its share price rose more than 112% in 2003. The company’s operating fundamentals remained solid during the year and it continued a stock repurchase program, returning capital to shareholders.

Within the retail sector, regional mall stocks aided Fund performance during the year, as cash flow among most of these companies continued to be positive. Our shares of General Growth Properties contributed to the Fund’s total return as its fundamentals improved within a fairly robust retail environment, aiding share price appreciation. Simon Property Group was another positive contributor to performance, as consumer spending benefited the higher-quality retail mall properties it owns and operates.

Despite the Fund’s solid one-year performance, some of our positions fell in value and detracted from overall Fund performance. Our hotel stocks, including the Fund’s shares of MeriStar Hospitality, saw weak performance as hotels spent much of 2003 trying to emerge from a slump. MeriStar continued to suffer from a reduction in business travelers. MeriStar also completed a secondary offering to improve its balance sheet and has been actively selling assets in an effort to set the stage for future growth.

Although not a large position in the Fund at period-end, Apartment Investment & Management, an apartment REIT, turned in a relatively weak performance during the reporting period. Apartment sector

Top 10 Holdings

Franklin Real Estate Fund

12/31/03

Company Security Type	% of Total Net Assets
Vornado Realty Trust	4.8%
Equity REIT – Diversified Property
Equity Residential	4.6%
Equity REIT – Apartments
Simon Property Group Inc.	4.1%
Equity REIT – Retail
Equity Office Properties Trust	3.9%
Equity REIT – Office
The Macerich Co.	3.5%
Equity REIT– Retail
Boston Properties Inc.	3.0%
Equity REIT – Office
iStar Financial Inc.	2.9%
Equity REIT – Other
ProLogis	2.9%
Equity REIT – Industrial
Cendant Corp.	2.6%
Hotels & Travel
Avalonbay Communities Inc.	2.6%
Equity REIT – Apartments

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

FRE-3

fundamentals remained soft as low interest rates encouraged potential renters to buy homes.

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

This discussion reflects our analysis, opinions and portfolio holdings as of December 31, 2003, 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 advisor 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.

FRE-4

PERFORMANCE SUMMARYASOF 12/31/03

Total return of Class 2 shares represents the average annual change in value, assuming reinvestment of dividends and capital gains. Average returns smooth out variations in returns, which can be significant; they are not the same as year-by-year results.

Franklin Real Estate Fund – Class 2*

Periods ended 12/31/03

	1-Year	5-Year	10-Year
Average Annual Total Return	+35.75%	+12.99%	+11.50%

*Because Class 2 shares were not offered until 1/6/99, standardized Class 2 Fund performance for prior periods represents the historical results of Class 1 shares. For periods beginning on 1/6/99, Class 2’s results reflect an additional 12b-1 fee expense, which also affects future performance. Since 1/6/99 (effective date), the average annual total return of Class 2 shares was +12.72%.

Ongoing market volatility can significantly affect short-term performance; recent returns may differ.

Total Return Index Comparison

for Hypothetical $10,000 Investment (1/1/94–12/31/03)

The graph compares the performance of Franklin Real Estate Fund – Class 2,* the S&P 500 and the Wilshire Real Estate Securities Index. One cannot invest directly in an index, nor is an index representative of the Fund’s portfolio. Please see Important Notes to Performance Information preceding the Fund Summaries.

**Source: Standard & Poor’s Micropal. Please see Index Descriptions following the Fund Summaries.

Franklin Real Estate

Fund – Class 2

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.

Since markets can go down as well as up, investment return and the value of your principal will fluctuate with market conditions, and you may have a gain or loss when you sell your shares.

Past performance does not guarantee future results.

FRE-5

FRANKLIN REAL ESTATE FUND

(FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST)

SUPPLEMENT DATED DECEMBER 26, 2003

TOTHE PROSPECTUS DATED MAY 1, 2003

The “Management” section of the prospectus (page FRE-4) is replaced with the following:

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

MANAGEMENT TEAM    The team responsible for the Fund’s management is:

Alex W. Peters, CFA VICE PRESIDENT, ADVISERS	Mr. Peters has been a manager of the Fund since December 2003, and has been with Franklin Templeton Investments since 1992.
Samuel R. Kerner PORTFOLIO MANAGER, ADVISERS	Mr. Kerner has been a manager of the Fund since 2000, and has been with Franklin Templeton Investments since 1996.

The Fund pays Advisers a fee for managing the Fund’s assets and providing certain administrative facilities and services for the Fund. For the fiscal year ended December 31, 2002, the Fund paid 0.53% of its average daily net assets to Advisers for its services.

Please keep this supplement for future reference.

FRE-6

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN REAL ESTATE FUND

Financial Highlights

	Class 1
	Year Ended December 31,
	2003			2002			2001			2000			1999
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	18.05		$	18.14		$	17.47		$	14.92		$	19.93
Income from investment operations:
Net investment incomea		.74			.75			.74			.84			.88
Net realized and unrealized gains (losses)		5.67			(.30	)		.65			3.55			(1.77	)
Total from investment operations		6.41			0.45			1.39			4.39			(.89	)
Less distributions from:
Net investment income		(.55	)		(.54	)		(.72	)		(1.15	)		(1.73	)
Net realized gains		—			—			—			(.69	)		(2.39	)
Total distributions		(.55	)		(.54	)		(.72	)		(1.84	)		(4.12	)
Net asset value, end of year	$	23.91		$	18.05		$	18.14		$	17.47		$	14.92
Total returnb		36.08%			2.25%			8.19%			31.95%			(6.14)%
Ratios/supplemental data
Net assets, end of year (000’s)	$	134,468		$	112,991		$	134,058		$	153,203		$	158,553
Ratios to average net assets:
Expenses		.53%			.57%			.59%			.60%			.58%
Net investment income		3.62%			4.23%			4.25%			5.29%			4.83%
Portfolio turnover rate		15.44%			18.13%			34.21%			16.41%			10.27%

^a Based on average daily shares outstanding.

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

FRE-7

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN REAL ESTATE FUND

Financial Highlights (continued)

	Class 2
	Year Ended December 31,
	2003			2002			2001			2000			1999c
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	17.88		$	17.99		$	17.38		$	14.88		$	20.21
Income from investment operations:
Net investment incomea		.74			.76			.80			.93			1.29
Net realized and unrealized gains (losses)		5.55			(.35	)		.52			3.41			(2.50	)
Total from investment operations		6.29			0.41			1.32			4.34			(1.21	)
Less distributions from:
Net investment income		(.52	)		(.52	)		(.71	)		(1.15	)		(1.73	)
Net realized gains		—			—			—			(.69	)		(2.39	)
Total distributions		(.52	)		(.52	)		(.71	)		(1.84	)		(4.12	)
Net asset value, end of year	$	23.65		$	17.88		$	17.99		$	17.38		$	14.88
Total returnb		35.75%			2.07%			7.88%			31.59%			(7.66)%
Ratios/supplemental data
Net assets, end of year (000’s)	$	522,415		$	249,116		$	95,891		$	23,743		$	2,449
Ratios to average net assets:
Expenses		.78%			.82%			.84%			.85%			.83%	d
Net investment income		3.37%			3.98%			4.60%			5.75%			8.84%	d
Portfolio turnover rate		15.44%			18.13%			34.21%			16.41%			10.27%

^a Based on average daily shares outstanding.

^b Total return does not include any fees, charges or expenses imposed by the variable annuity and life insurance contracts for which the Franklin Templeton

 Variable Insurance Products Trust serves as an underlying investment vehicle. Total return is not annualized for periods less than one year.

^c For the period January 6, 1999 (effective date) to December 31, 1999.

^d Annualized.

See notes to financial statements.

FRE-8

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN REAL ESTATE FUND

Statement of Investments, December 31, 2003

	SHARES	VALUE
Common Stocks 89.4%
Equity REIT - Apartments 9.2%
Amli Residential Properties Trust	162,500	$	4,355,000
Apartment Investment & Management Co., A	83,000		2,863,500
Archstone-Smith Trust	215,360		6,025,773
Avalonbay Communities Inc.	352,000		16,825,600
Equity Residential	1,034,600		30,531,046
			60,600,919
Equity REIT - Diversified Property 12.9%
aAshford Hospitality Trust	436,000		4,094,040
Bedford Property Investors Inc.	231,280		6,621,546
Crescent Real Estate Equities Co.	171,800		2,942,934
Duke Realty Corp.	34,348		1,064,788
Glenborough Realty Trust Inc.	458,700		9,151,065
Lexington Corporate Properties Trust	207,100		4,181,349
Liberty Property Trust	425,000		16,532,500
Pennsylvania Real Estate Investment Trust	70,457		2,557,589
U.S. Restaurant Properties Inc.	375,200		6,393,408
Vornado Realty Trust	574,900		31,475,775
			85,014,994
Equity REIT - Health Care 1.9%
Ventas Inc.	455,000		10,010,000
Windrose Medical Properties	180,200		2,236,282
			12,246,282
Equity REIT - Hotels 2.4%
aHost Marriott Corp.	851,900		10,495,408
aMeriStar Hospitality Corp.	791,200		5,150,712
			15,646,120
Equity REIT - Industrial 5.3%
AMB Property Corp.	70,400		2,314,752
ProLogis	593,800		19,055,042
PS Business Parks Inc.	330,000		13,615,800
			34,985,594
Equity REIT - Manufactured Homes 1.3%
Manufactured Home Communities Inc.	146,600		5,519,490
Sun Communities Inc.	81,100		3,138,570
			8,658,060
Equity REIT - Office 19.9%
American Financial Realty Trust	147,700		2,518,285
Arden Realty Inc.	313,900		9,523,726
Boston Properties Inc.	410,250		19,769,947
Brandywine Realty Trust	422,000		11,296,940
CarrAmerica Realty Corp.	533,600		15,890,608
Corporate Office Properties Trust	160,000		3,360,000
Cousins Properties Inc.	167,600		5,128,560
Equity Office Properties Trust	896,352		25,680,485
Kilroy Realty Corp.	255,200		8,357,800
Parkway Properties Inc.	122,000		5,075,200
Reckson Associates Realty Corp.	228,700		5,557,410

FRE-9

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN REAL ESTATE FUND

Statement of Investments, December 31, 2003 (cont.)

	SHARES	VALUE
Common Stocks (cont.)
Equity REIT - Office (cont.)
SL Green Realty Corp.	249,000	$	10,221,450
Trizec Properties Inc.	529,200		8,149,680
			130,530,091
Equity REIT - Other 3.5%
Entertainment Properties Trust	110,000		3,818,100
iStar Financial Inc.	495,600		19,278,840
			23,096,940
Equity REIT - Retail 17.5%
Chelsea Property Group Inc.	75,700		4,149,117
General Growth Properties Inc.	471,600		13,086,900
Glimcher Realty Trust	202,000		4,520,760
Kimco Realty Corp.	101,600		4,546,600
The Macerich Co.	522,000		23,229,000
Ramco-Gershenson Properties Trust	257,100		7,275,930
Regency Centers Corp.	284,300		11,329,355
The Rouse Co.	335,400		15,763,800
Simon Property Group Inc.	584,800		27,099,632
Taubman Centers Inc.	199,200		4,103,520
			115,104,614
Equity REIT - Storage 1.9%
Public Storage Inc.	281,200		12,201,268
Apartments 1.8%
Boardwalk Equities Inc. (Canada)	858,200		11,868,906
Diversified Property 3.5%
Brookfield Properties Corp. (Canada)	185,560		5,325,572
Catellus Development Corp.	516,833		12,466,012
Forest City Enterprises Inc., A	110,000		5,226,100
			23,017,684
Home Builders 1.0%
aMeritage Corp.	98,600		6,538,166
Hotels & Travel 7.3%
aCendant Corp.	772,500		17,203,575
Fairmont Hotels & Resorts Inc. (Canada)	492,800		13,374,592
Hilton Hotels Corp.	293,600		5,029,368
aLa Quinta Corp.	597,500		3,829,975
Starwood Hotels & Resorts Worldwide Inc.	230,700		8,298,279
			47,735,789
Total Common Stocks (Cost $434,771,446)			587,245,427
Convertible Preferred Stock (Cost $1,503,132) .5%
Hotels & Travel
Host Marriott Corp., 6.75%, cvt. pfd.	56,900		2,976,439
Total Long Term Investments (Cost $436,274,578)			590,221,866

FRE-10

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN REAL ESTATE FUND

Statement of Investments, December 31, 2003 (cont.)

	PRINCIPAL AMOUNT		VALUE
Repurchase Agreement (Cost $63,374,549) 9.6%
bJoint Repurchase Agreement .873%, 1/02/04, (Maturity Value $63,377,621) ABN AMRO Bank, N. V., New York Branch (Maturity Value $5,904,259) Banc of America Securities LLC (Maturity Value $5,904,259) Barclays Capital Inc. (Maturity Value $4,216,514) Bear, Stearns & Co. Inc. (Maturity Value $3,373,591) BNP Paribas Securities Corp. (Maturity Value $5,904,259) Deutsche Bank Securities Inc. (Maturity Value $5,904,259) Dresdner Kleinwort Wasserstein Securities LLC (Maturity Value $5,904,259) Goldman, Sachs & Co. (Maturity Value $3,373,591) Greenwich Capital Markets Inc. (Maturity Value $5,904,259) Lehman Brothers Inc. (Maturity Value $5,179,853) Morgan Stanley & Co. Inc. (Maturity Value $5,904,259) UBS Securities LLC (Maturity Value $5,904,259) Collateralized by U.S. Treasury Bills, Notes, and Bonds and U.S. Government Agency Securities	$	63,374,549	$	63,374,549
Total Investments (Cost $499,649,127) 99.5%				653,596,415
Other Assets, less Liabilities .5%				3,286,307
Net Assets 100.0%			$	656,882,722

^a Non-income producing.

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

See notes to financial statements.

FRE-11

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN REAL ESTATE FUND

Financial Statements

Statement of Assets and Liabilities

December 31, 2003

Assets:
Investments in securities:
Cost	$	499,649,127
Value		653,596,415
Cash		23,659
Receivables:
Capital shares sold		500,578
Dividends		3,347,852
Total assets		657,468,504
Liabilities:
Payables:
Capital shares redeemed		81,451
Affiliates		468,526
Other liabilities		35,805
Total liabilities		585,782
Net assets, at value	$	656,882,722
Net assets consist of:
Undistributed net investment income	$	19,252,857
Net unrealized appreciation (depreciation)		153,947,288
Accumulated net realized gain (loss)		(2,860,927	)
Capital shares		486,543,504
Net assets, at value	$	656,882,722
Class 1:
Net assets, at value	$	134,467,799
Shares outstanding		5,622,892
Net asset value and offering price per share	$	23.91
Class 2:
Net assets, at value	$	522,414,923
Shares outstanding		22,094,008
Net asset value and offering price per share	$	23.65

See notes to financial statements.

FRE-12

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN REAL ESTATE FUND

Financial Statements (continued)

Statement of Operations

for the year ended December 31, 2003

Investment income:
Dividends	$	20,165,368
Interest		509,965
Total investment income		20,675,333
Expenses:
Management fees (Note 3)		2,391,891
Distribution fees - Class 2 (Note 3)		891,984
Transfer agent fees		3,441
Custodian fees		4,707
Reports to shareholders		64,975
Professional fees		12,592
Trustees’ fees and expenses		4,418
Other		25,460
Total expenses		3,399,468
Net investment income		17,275,865
Realized and unrealized gains (losses):
Net realized gain (loss) from investments		821,285
Net unrealized appreciation (depreciation) on investments		132,680,180
Net realized and unrealized gain (loss)		133,501,465
Net increase (decrease) in net assets resulting from operations	$	150,777,330

See notes to financial statements.

FRE-13

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN REAL ESTATE FUND

Financial Statements (continued)

Statements of Changes in Net Assets

for the year ended December 31, 2003 and 2002

	2003			2002
Increase (decrease) in net assets:
Operations:
Net investment income	$	17,275,865		$	12,273,479
Net realized gain (loss) from investments		821,285			9,960,012
Net unrealized appreciation (depreciation) on investments		132,680,180			(21,421,211	)
Net increase (decrease) in net assets resulting from operations		150,777,330			812,280
Distributions to shareholders from:
Net investment income:
Class 1		(3,177,591	)		(3,665,154	)
Class 2		(8,704,406	)		(4,495,007	)
Total distributions to shareholders		(11,881,997	)		(8,160,161	)
Capital share transactions: (Note 2)
Class 1		(12,667,903	)		(20,526,649	)
Class 2		168,547,853			160,033,068
Total capital share transactions		155,879,950			139,506,419
Net increase (decrease) in net assets		294,775,283			132,158,538
Net assets:
Beginning of year		362,107,439			229,948,901
End of year		$656,882,722		$	362,107,439
Undistributed net investment income included in net assets:
End of year	$	19,252,857		$	13,858,989

See notes to financial statements.

FRE-14

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN REAL ESTATE FUND

Notes to Financial Statements

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (the Trust) is registered under the Investment Company Act of 1940 as an open-end investment company, consisting of twenty-two separate series (the Funds). Franklin Real Estate Fund (the Fund) included in this report is diversified. Shares of the Fund are sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. As of December 31, 2003 over 54.3% of the Fund’s shares were sold through one insurance company. The Fund’s investment objective is growth and income.

The following summarizes the Fund’s significant accounting policies.

a. Security Valuation

Securities listed or traded on a recognized national exchange or NASDAQ are valued at the last reported sales price. Over-the-counter securities and listed securities for which no sale is reported are valued within the range of the latest quoted bid and asked prices. Foreign securities are valued at the close of trading of the foreign exchange or the NYSE, whichever is earlier. If events occur that materially affect the values of securities after the prices or foreign exchange rates are determined, or if market quotations are not readily available, the securities will be valued at fair value as determined following procedures approved by the Board of Trustees.

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. Purchases and sales of securities and income items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.

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.

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 may enter into a joint repurchase agreement whereby its uninvested cash balance is deposited into a joint cash account to be used to invest in one or more repurchase agreements. The value and face amount of the joint repurchase agreement are allocated to the Fund based on its pro-rata interest. A repurchase agreement is accounted for as a loan by the Fund to the seller, collateralized by securities which are delivered to the Fund’s custodian. The market value, including accrued interest, of the initial collateralization is required to be at least 102% of the dollar amount invested by the Fund, with the value of the underlying securities marked to market daily to maintain coverage of at least 100%. At December 31, 2003, all repurchase agreements had been entered into on that date.

e. Income Taxes

No provision has been made for income taxes because the Fund’s policy is to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable income.

FRE-15

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN REAL ESTATE FUND

Notes to Financial Statements (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

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 distributions to shareholders are recorded on the ex-dividend date.

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. Other expenses are charged to each fund on a specific identification basis.

Distributions received by the Fund from 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.

Realized and unrealized gains and losses and net investment income, other than class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class.

g. Accounting Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expense 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 against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust 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. However, based on experience, the Trust expects the risk of loss to be remote.

FRE-16

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN REAL ESTATE FUND

Notes to Financial Statements (continued)

2. SHARES OF BENEFICIAL INTEREST

The Fund offers two classes of shares: Class 1 and Class 2. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class, and its exchange privilege.

At December 31, 2003, there were an unlimited number of shares authorized ($.01 par value). Transactions in the Fund’s shares were as follows:

	Year Ended December 31,
	2003					2002
Class 1 Shares:	Shares		Amount			Shares		Amount
Shares sold	108,708		$	2,250,887		378,683		$	7,219,909
Shares issued in reinvestment of distributions	159,198			3,177,591		187,668			3,665,154
Shares redeemed	(904,315	)		(18,096,381	)	(1,698,569	)		(31,411,712	)
Net increase (decrease)	(636,409	)	$	(12,667,903	)	(1,132,218	)	$	(20,526,649	)
Class 2 Shares:
Shares sold	8,352,474		$	172,419,233		9,199,579		$	170,461,629
Shares issued in reinvestment of distributions	440,506			8,704,406		232,180			4,495,007
Shares redeemed	(635,445	)		(12,575,786	)	(824,400	)		(14,923,568	)
Net increase (decrease)	8,157,535		$	168,547,853		8,607,359		$	160,033,068

3. TRANSACTIONS WITH AFFILIATES

Certain officers and trustees of the Trust are also officers and/or directors of the following entities:

Entity	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

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
.625%	First $100 million
.500%	Over $100 million, up to and including $250 million
.450%	Over $250 million, up to and including $10 billion

Fees are further reduced on net assets over $10 billion.

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

The Fund reimburses Distributors up to .25% per year of its average daily net assets of Class 2, for costs incurred in marketing the Fund’s shares.

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

FRE-17

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN REAL ESTATE FUND

Notes to Financial Statements (continued)

4. INCOME TAXES

At December 31, 2003, the Fund had tax basis capital losses of $2,642,456 which may be carried over to offset future capital gains. Such losses expire as follows:

Capital loss carryover expiring in:
2008	$	1,350,977
2011		1,291,479
	$	2,642,456

The tax character of distributions paid during the years ended December 31, 2003 and 2002, was as follows:

	2003		2002
Distributions paid from:
Ordinary Income	$	11,881,997	$	8,160,161
Long-term capital gains		—		—
	$	11,881,997	$	8,160,161

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

At December 31, 2003, the cost of investments, net unrealized appreciation (depreciation), undistributed ordinary income, and undistributed long term capital gains for income tax purposes were as follows:

Cost of investments	$	499,867,599
Unrealized appreciation		155,836,507
Unrealized depreciation		(2,107,691	)
Net unrealized appreciation (depreciation)	$	153,728,816
Undistributed ordinary income	$	19,252,857
Undistributed long term capital gains		—
Distributable earnings	$	19,252,857

5. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short-term securities) for the year ended December 31, 2003 aggregated $196,843,170 and $66,433,259, respectively.

6. REGULATORY MATTERS

On February 4, 2004, the Securities Division of the Office of the Secretary of the Commonwealth of Massachusetts filed an administrative complaint against Franklin Resources, Inc. and certain of its subsidiaries (the “Company”), alleging violations of the Massachusetts Uniform Securities Act. The complaint arises from activity that occurred in 2001 during which time an officer of a Company subsidiary was negotiating an agreement with an investor relating to investments in a mutual fund and a hedge fund.

The Company, in addition to other entities within Franklin Templeton Investments, has been named in shareholder class actions related to the matter described above. The Company believes that the claims made in the lawsuit are without merit and it intends to defend vigorously against the allegations. The Company and the Fund may be named in similar civil actions related to the matter described above.

FRE-18

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN REAL ESTATE FUND

Notes to Financial Statements (continued)

6. REGULATORY MATTERS (cont.)

In addition, as part of ongoing investigations by the U.S. Securities and Exchange Commission (the “SEC”), the U.S. Attorney for the Northern District of California, the New York Attorney General, the California Attorney General, the U.S. Attorney for the District of Massachusetts, the Florida Department of Financial Services, and the Commissioner of Securities and the Attorney General of the State of West Virginia, relating to certain practices in the mutual fund industry, including late trading, market timing and sales compensation arrangements, the Company and its subsidiaries, as well as certain current or former executives and employees of the Company, have received requests for information and/or subpoenas to testify or produce documents. The Company and its current employees are providing documents and information in response to these requests and subpoenas. In addition, the Company has responded to requests for similar kinds of information from regulatory authorities in some of the foreign countries where the Company conducts its global asset management business.

The Staff of the SEC has informed the Company that it intends to recommend that the Commission authorize an action against of the Fund’s investment adviser and a senior executive officer relating to the frequent trading issues that are the subject of the SEC’s investigation. These issues were previously disclosed as being under investigation by government authorities and the subject of an internal inquiry by the Company in its Annual Report on Form 10-K and on its public website. The Company currently is in discussions with the SEC Staff in an effort to resolve the issues raised in their investigation. Such discussions are preliminary and the Fund’s management has been advised that the Company cannot predict the likelihood of whether those discussions will result in a settlement and, if so, the terms of such settlement. The impact, if any, of these matters on the Fund is uncertain at this time. If the Company finds that it bears responsibility for any unlawful or improper conduct, it has committed to making the Fund or its shareholders whole, as appropriate.

FRE-19

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN REAL ESTATE FUND

Independent Auditors’ Report

To the Board of Directors and Shareholders of

Franklin Templeton Variable Insurance Products Trust

In our opinion, the accompanying statement of assets and liabilities, including the statement of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Franklin Real Estate Fund (the Fund) (one of the funds constituting the Franklin Templeton Variable Insurance Products Trust) at December 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

February 5, 2004, except for Note 6 as to which the date is February 12, 2004

FRE-20

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN REAL ESTATE FUND

Tax Designation (unaudited)

Under Section 854(b)(2) of the Code, the Fund hereby designates 17% of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended December 31, 2003.

FRE-21

FRANKLIN RISING DIVIDENDS SECURITIES FUND

Fund Goal and Primary Investments: Franklin Rising Dividends Securities Fund seeks long-term capital appreciation. Preservation of capital, while not a goal, is also an important consideration. The Fund primarily invests in equity securities of companies that have paid consistently rising dividends over the past 10 years.

This annual report for Franklin Rising Dividends Securities Fund covers the fiscal year ended December 31, 2003.

Performance Overview

You can find the Fund’s one-year total return in the Performance Summary following this report. The Fund underperformed its benchmark, the Russell Midcap^® Value Index, which returned 38.07% for the year under review.¹ Please note that the Fund employs a bottom-up stock selection process, and the managers invest in securities without regard to benchmark comparisons.

Economic and Market Overview

During the year ended December 31, 2003, many factors impacted global economies and financial markets. Early in the year, economic uncertainty and geopolitical events, including impending war in Iraq, pushed U.S. interest rates to their lowest level in more than four decades, and the 10-year U.S. Treasury note’s yield fell to 3.13% in mid-June. However, following the end of major conflict in Iraq, many economic indicators turned positive. The U.S. government injected fiscal stimulus into the economy, approving another round of tax cuts and rebates that included dividend and capital gains tax reductions. In June, an accommodative Federal Reserve Board, in an attempt to bolster the economy, cut the federal funds target rate to 1.00%.

During the year, the U.S. trade deficit increased significantly, contributing to the U.S. dollar’s fall to record lows against the euro and other major currencies. However, the weak dollar provided a boost to the U.S. economy and corporate profits as exports became cheaper for foreign buyers. Robust consumer spending, especially for autos and homes, and strong business spending, particularly for equipment and software, contributed to the accelerated economic activity. In addition, U.S. federal spending stayed firm and inflation remained benign. U.S. gross domestic product (GDP) grew an annualized 8.2% in third quarter 2003, its strongest pace in nearly 20 years, and overall, 2003 GDP

1. Source: Standard & Poor’s Micropal. One cannot invest directly in an index, nor is an index representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

FRD-1

grew an estimated 3.1%. As economic data improved, some interest rates rose from their lows, and the 10-year Treasury note’s yield ended the period at 4.27%.

An equity market rally started in late March 2003 and continued through the end of the year. The rebound began with investors anticipating economic recovery in the second half of 2003, and it continued as data showed robust economic growth. Improved sentiment led many investors to rotate into economically sensitive and financially leveraged companies, specifically cyclical, technology, small-capitalization and emerging market stocks. The Standard & Poor’s 500 Composite Index (S&P 500) rose 28.67% for the 12 months ended December 31, 2003, while the technology-heavy Nasdaq Composite Index increased 50.93%.²

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 meet our screening criteria: 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 rate but rather on companies that consistently increase their dividends.

Manager’s Discussion

Significant positive contributors to the Fund’s one-year performance came from a variety of industries. Although many of the stock market’s top performers were economically sensitive companies, our best investment during the year was Old Republic International, a multi-line insurance company (finance sector). Old Republic rewarded investors with a $1 per share special dividend in December 2003, followed by a 3-for-2 stock split at year-end. Furthermore, Old Republic has posted 22 years of dividend increases. West Pharmaceutical Services was our most important contributor from the health technology sector. West is a small-capitalization company that develops and manufactures packaging materials and drug delivery devices for pharmaceutical and biologic companies. West has increased its dividend annually for the

2. Source: Standard & Poor’s Micropal. Please see Index Descriptions following the Fund Summaries.

FRD-2

Top 10 Holdings

Franklin Rising Dividends Securities Fund 12/31/03

Company Sector/Industry	% of Total Net Assets
Family Dollar Stores Inc.	4.2%
Retail Trade
American International Group Inc.	4.2%
Finance
Fannie Mae	4.1%
Finance
Hillenbrand Industries Inc.	4.1%
Health Technology
General Electric Co.	3.9%
Producer Manufacturing
Old Republic International Corp.	3.9%
Finance
Pfizer Inc.	3.9%
Health Technology
Washington Mutual Inc.	3.8%
Finance
Procter & Gamble Co.	3.6%
Consumer Non-Durables
Alberto-Culver Co., B	3.2%
Consumer Non-Durables

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

last 10 years. The largest contributor from the producer manufacturing sector during the year was Graco. Graco manufactures fluid dispensing equipment and systems, such as paint sprayers used by building contractors. Graco declared a $2.25 special dividend in December 2003 and increased its regular quarterly dividend by 70%.

Despite the Fund’s double-digit total returns, two stocks in the portfolio declined during the year. The worst performance came from the Fund’s small position in Fresh Brands, a supermarket chain and grocery wholesaler based in Wisconsin; weak operating results led to several changes in its executive management team. The other declining stock in the portfolio was Leggett & Platt. Leggett is an engineered component manufacturer with heavy exposure to the residential furnishings market, and has 32 years of dividend increases. Bemis, which makes flexible packaging and pressure sensitive materials, only delivered a marginally positive return for the year; however, Bemis has increased its dividend for 20 consecutive years.

Consistent with our strategy, we added four new positions in 2003 that have long track records of increased dividends. During the year we purchased Erie Indemnity, the management company for the Erie Insurance Exchange, a personal and small commercial property and casualty insurer; Pfizer, the largest pharmaceutical company by market capitalization; Praxair, a supplier of industrial gases; and Procter & Gamble, the large consumer products conglomerate. The only company we eliminated from the portfolio during the Fund’s fiscal year was Pall, which cut its dividend in 2002.

FRD-3

Our 10 largest positions on December 31, 2003, represented 38.9% of the Fund’s total net assets. It is interesting to note how these 10 companies would, in aggregate, respond to the Fund’s screening criteria based on a simple average of statistical measures. On average, these 10 companies have raised their dividends 26 years in a row and by 264% in the past 10 years. Their most recent year-over-year dividend increases averaged 20% with a yield of 1.8% on December 31, 2003, and a dividend payout ratio of 28% based on estimates of calendar year 2003 operating earnings. The average price/earnings ratio was 17.3 times 2003 estimates versus 20.7 for that of the unmanaged S&P 500 on the same date.²

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

2. Source: Standard & Poor’s Micropal. Please see Index Descriptions following the Fund Summaries.

This discussion reflects our analysis, opinions and portfolio holdings as of December 31, 2003, 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 advisor makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

FRD-4

PERFORMANCE SUMMARYASOF 12/31/03

Total return of Class 2 shares represents the average annual change in value, assuming reinvestment of dividends and capital gains. Average returns smooth out variations in returns, which can be significant; they are not the same as year-by-year results.

Franklin Rising Dividends Securities Fund – Class 2*

Periods ended 12/31/03

	1-Year	5-Year	10-Year
Average Annual Total Return	+24.59%	+8.63%	+12.77%

*Because Class 2 shares were not offered until 1/6/99, standardized Class 2 Fund performance for prior periods represents the historical results of Class 1 shares. For periods beginning on 1/6/99, Class 2’s results reflect an additional 12b-1 fee expense, which also affects future performance. Since 1/6/99 (effective date), the average annual total return of Class 2 shares was +8.46%.

Ongoing market volatility can significantly affect short-term performance; recent returns may differ.

Total Return Index Comparison

for Hypothetical $10,000 Investment (1/1/94–12/31/03)

The graph compares the performance of Franklin Rising Dividends Securities Fund – Class 2* and the Russell Midcap Value Index. One cannot invest directly in an index, nor is an index representative of the Fund’s portfolio. Please see Important Notes to Performance Information preceding the Fund Summaries.

**Source: Standard & Poor’s Micropal. Please see Index Descriptions following the Fund Summaries.

Franklin Rising Dividends Securities Fund – Class 2

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.

Since markets can go down as well as up, investment return and the value of your principal will fluctuate with market conditions, and you may have a gain or loss when you sell your shares.

Past performance does not guarantee future results.

FRD-5

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN RISING DIVIDENDS SECURITIES FUND

Financial Highlights

	Class 1
	Year Ended December 31,
	2003			2002			2001			2000			1999
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	13.57		$	14.19		$	13.23		$	13.61		$	18.11
Income from investment operations:
Net investment incomea		.19			.16			.18			.20			.22
Net realized and unrealized gains (losses)		3.10			(.30	)		1.60			2.18			(1.57	)
Total from investment operations		3.29			(.14	)		1.78			2.38			(1.35	)
Less distributions from:
Net investment income		(.14	)		(.19	)		(.01	)		(.50	)		(.29	)
Net realized gains		(.44	)		(.29	)		(.81	)		(2.26	)		(2.86	)
Total distributions		(.58	)		(.48	)		(.82	)		(2.76	)		(3.15	)
Net asset value, end of year	$	16.28		$	13.57		$	14.19		$	13.23		$	13.61
Total returnb		24.88%			(1.32)%			13.90%			21.05%			(9.70)%
Ratios/supplemental data
Net assets, end of year (000’s)	$	326,663		$	292,881		$	347,336		$	363,485		$	450,549
Ratios to average net assets:
Expenses		.76%			.78%			.76%			.78%			.75%
Net investment income		1.39%			1.11%			1.36%			1.66%			1.35%
Portfolio turnover rate		9.54%			14.06%			11.78%			12.26%			5.32%

^a Based on average daily shares outstanding.

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

FRD-6

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN RISING DIVIDENDS SECURITIES FUND

Financial Highlights (continued)

	Class 2
	Year Ended December 31,
	2003			2002			2001			2000			1999c
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	13.44		$	14.09		$	13.18		$	13.56		$	18.28
Income from investment operations:
Net investment incomea		.17			.13			.15			.17			.17
Net realized and unrealized gains (losses)		3.05			(.31	)		1.58			2.17			(1.74	)
Total from investment operations		3.22			(.18	)		1.73			2.34			(1.57	)
Less distributions from:
Net investment income		(.13	)		(.18	)		(.01	)		(.46	)		(.29	)
Net realized gains		(.44	)		(.29	)		(.81	)		(2.26	)		(2.86	)
Total distributions		(.57	)		(.47	)		(.82	)		(2.72	)		(3.15	)
Net asset value, end of year	$	16.09		$	13.44		$	14.09		$	13.18		$	13.56
Total returnb		24.59%			(1.58)%			13.57%			20.71%			(10.84)%
Ratios/supplemental data
Net assets, end of year (000’s)	$	343,675		$	63,879		$	11,831		$	1,041		$	549
Ratios to average net assets:
Expenses		1.01%			1.03%			1.01%			1.03%			1.01%	d
Net investment income		1.14%			.86%			1.13%			1.44%			1.15%	d
Portfolio turnover rate		9.54%			14.06%			11.78%			12.26%			5.32%

^a Based on average daily shares outstanding.

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

^c For the period January 6, 1999 (effective date) to December 31, 1999.

^d Annualized.

FRD-7

See notes to financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN RISING DIVIDENDS SECURITIES FUND

Statement of Investments, December 31, 2003

	SHARES	VALUE
Common Stocks 93.3%
Commercial Services .7%
ABM Industries Inc.	264,000	$	4,596,240
Consumer Durables 3.4%
Leggett & Platt Inc.	618,000		13,367,340
Russ Berrie & Co. Inc.	278,400		9,437,760
			22,805,100
Consumer Non-Durables 9.3%
Alberto-Culver Co., B	340,300		21,466,124
Altria Group Inc.	48,000		2,612,160
Lancaster Colony Corp.	109,600		4,949,536
Procter & Gamble Co.	239,700		23,941,236
Superior Uniform Group Inc.	248,600		4,089,470
Universal Corp.	115,800		5,114,886
			62,173,412
Electronic Technology 1.8%
Cohu Inc.	106,800		2,045,220
Diebold Inc.	189,000		10,181,430
			12,226,650
Energy Minerals .6%
Royal Dutch Petroleum Co., N.Y. shs. (Netherlands)	70,300		3,683,017
Finance 31.5%
AFLAC Inc.	439,600		15,904,728
American International Group Inc.	423,855		28,093,109
Arthur J. Gallagher & Co.	453,000		14,717,970
Erie Indemnity Co., A	276,800		11,730,784
Fannie Mae	366,500		27,509,490
Mercantile Bankshares Corp.	220,525		10,051,530
Mercury General Corp.	129,200		6,014,260
National Commerce Financial Corp.	680,200		18,555,856
Old Republic International Corp.	1,034,250		26,228,580
Peoples Bancorp Inc.	89,345		2,636,571
RLI Corp.	252,512		9,459,100
State Street Corp.	75,400		3,926,832
TrustCo Bank Corp. NY	328,588		4,320,932
U.S. Bancorp	87,749		2,613,165
Washington Mutual Inc.	630,200		25,283,624
Wilmington Trust Corp.	119,000		4,284,000
			211,330,531
Health Technology 12.7%
Becton, Dickinson & Co.	300,200		12,350,228
Hillenbrand Industries Inc.	439,400		27,269,164
Pfizer Inc.	739,000		26,108,870
West Pharmaceutical Services Inc.	562,800		19,078,920
			84,807,182
Non-Energy Minerals 1.7%
Nucor Corp.	206,800		11,580,800

FRD-8

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN RISING DIVIDENDS SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	SHARES	VALUE
Common Stocks (cont.)
Process Industries 5.3%
Bemis Co. Inc.	98,600	$	4,930,000
Donaldson Co. Inc.	104,900		6,205,884
Myers Industries Inc.	641,147		7,770,702
Praxair Inc.	439,000		16,769,800
			35,676,386
Producer Manufacturing 18.0%
Baldor Electric Co.	59,233		1,353,474
Brady Corp., A	114,400		4,661,800
Carlisle Cos. Inc.	239,300		14,563,798
CIRCOR International Inc.	132,350		3,189,635
Dover Corp.	170,600		6,781,350
General Electric Co.	851,000		26,363,980
Graco Inc.	234,075		9,386,407
Kaydon Corp.	109,600		2,832,064
Roper Industries Inc.	372,600		18,354,276
Superior Industries International Inc.	444,400		19,340,288
Teleflex Inc.	287,900		13,914,207
			120,741,279
Retail Trade 5.2%
Family Dollar Stores Inc.	784,100		28,133,508
Fresh Brands Inc.	227,700		2,504,700
Limited Brands Inc.	231,046		4,165,759
			34,803,967
Technology Services 3.1%
Reynolds & Reynolds Co., A	721,600		20,962,480
Total Common Stocks (Cost $444,992,561)			625,387,044
Short Term Investment (Cost $43,278,528) 6.5%
aFranklin Institutional Fiduciary Trust Money Market Portfolio	43,278,528		43,278,528
Total Investments (Cost $488,271,089) 99.8%			668,665,572
Other Assets, less Liabilities .2%			1,671,826
Net Assets 100.0%		$	670,337,398

^a See Note 6 regarding investments in the Franklin Institutional Fiduciary Trust Money Market Portfolio.

See notes to financial statements.

FRD-9

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN RISING DIVIDENDS SECURITIES FUND

Financial Statements

Statement of Assets and Liabilities

December 31, 2003

Assets:
Investments in securities:
Cost	$	488,271,089
Value		668,665,572
Cash		57,784
Receivables:
Investment securities sold		170,759
Capital shares sold		1,287,783
Dividends		943,970
Total assets		671,125,868
Liabilities:
Payables:
Capital shares redeemed		236,186
Affiliates		503,134
Other liabilities		49,150
Total liabilities		788,470
Net assets, at value	$	670,337,398
Net assets consist of:
Undistributed net investment income	$	5,814,236
Net unrealized appreciation (depreciation)		180,394,483
Accumulated net realized gain (loss)		11,542,248
Capital shares		472,586,431
Net assets, at value	$	670,337,398
Class 1:
Net assets, at value	$	326,662,527
Shares outstanding		20,067,891
Net asset value and offering price per share		$16.28
Class 2:
Net assets, at value	$	343,674,871
Shares outstanding		21,361,737
Net asset value and offering price per share		$16.09

See notes to financial statements.

FRD-10

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN RISING DIVIDENDS SECURITIES FUND

Financial Statements (continued)

Statement of Operations

for the year ended December 31, 2003

Investment income: (net of foreign taxes of $19,090)
Dividends	$	9,585,128
Expenses:
Management fees (Note 3)		3,256,622
Distribution fees – Class 2 (Note 3)		384,302
Transfer agent fees		2,914
Custodian fees		4,227
Reports to shareholders		64,459
Professional fees		28,161
Trustees’ fees and expenses		4,152
Other		24,691
Total expenses		3,769,528
Net investment income		5,815,600
Realized and unrealized gains (losses):
Net realized gain (loss) from investments		12,013,697
Net unrealized appreciation (depreciation) on investments		89,189,068
Net realized and unrealized gain (loss)		101,202,765
Net increase (decrease) in net assets resulting from operations	$	107,018,365

See notes to financial statements.

FRD-11

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN RISING DIVIDENDS SECURITIES FUND

Financial Statements (continued)

Statements of Changes in Net Assets

For the years ended December 31, 2003 and 2002

	2003			2002
Increase (decrease) in net assets:
Operations:
Net investment income	$	5,815,600		$	4,005,301
Net realized gain (loss) from investments		12,013,697			12,430,771
Net unrealized appreciation (depreciation) on investments		89,189,068			(21,892,359	)
Net increase (decrease) in net assets resulting from operations		107,018,365			(5,456,287	)
Distributions to shareholders from:
Net investment income:
Class 1		(2,869,400	)		(4,426,633	)
Class 2		(1,134,822	)		(372,154	)
Net realized gains:
Class 1		(8,730,599	)		(6,786,420	)
Class 2		(3,701,357	)		(588,470	)
Total distributions to shareholders		(16,436,178	)		(12,173,677	)
Capital share transactions: (Note 2)
Class 1		(20,625,618	)		(39,872,739	)
Class 2		243,621,232			55,095,055
Total capital share transactions		222,995,614			15,222,316
Net increase (decrease) in net assets		313,577,801			(2,407,648	)
Net assets:
Beginning of year		356,759,597			359,167,245
End of year	$	670,337,398		$	356,759,597
Undistributed net investment income included in net assets:
End of year	$	5,814,236		$	4,002,858

See notes to financial statements.

FRD-12

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN RISING DIVIDENDS SECURITIES FUND

Notes to Financial Statements

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (the Trust) is registered under the Investment Company Act of 1940 as an open-end investment company, consisting of twenty-two separate series (the Funds). The Franklin Rising Dividends Securities Fund (the Fund) included in this report is diversified. Shares of the Fund are sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. As of December 31, 2003, over 76% of the total Fund shares were sold through one insurance company. The Fund’s investment objective is growth and income.

The following summarizes the Fund’s significant accounting policies.

a. Security Valuation

Securities listed or traded on a recognized national exchange or NASDAQ are valued at the last reported sales price. Over-the-counter securities and listed securities for which no sale is reported are valued within the range of the latest quoted bid and asked prices. Investments in open-ended mutual funds are valued at the closing net asset value. If events occur that materially affect the values of securities after the prices are determined, or if market quotations are not readily available, the securities will be valued at fair value as determined following procedures approved by the Board of Trustees.

b. Income Taxes

No provision has been made for income taxes because the Fund’s policy is to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable income.

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. Interest income and estimated expenses are accrued daily. Dividend income and distributions to shareholders are recorded on the ex-dividend date.

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. Other expenses are charged to each fund on a specific identification basis.

Realized and unrealized gains and losses and net investment income, other than class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class.

d. Accounting Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expense 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 against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust 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. However, based on experience, the Trust expects the risk of loss to be remote.

FRD-13

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN RISING DIVIDENDS SECURITIES FUND

Notes to Financial Statements (continued)

2. SHARES OF BENEFICIAL INTEREST

The Fund offers two classes of shares: Class 1 and Class 2. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class, and its exchange privilege.

At December 31, 2003, there were an unlimited number of shares authorized ($.01 par value). Transactions in the Fund’s shares were as follows:

	Year Ended December 31,
	2003					2002
Class 1 Shares:	Shares		Amount			Shares		Amount
Shares sold	574,822		$	8,584,713		1,165,077		$	17,506,981
Shares issued in reinvestment of distributions	820,948			11,599,999		741,604			11,213,053
Shares redeemed	(2,908,584	)		(40,810,330	)	(4,810,513	)		(68,592,773	)
Net increase (decrease)	(1,512,814	)	$	(20,625,618	)	(2,903,832	)	$	(39,872,739	)
Class 2 Shares:
Shares sold	16,604,956		$	243,911,817		4,272,940		$	59,907,271
Shares issued in reinvestment of distributions	345,935			4,836,178		64,042			960,624
Shares redeemed	(340,952	)		(5,126,763	)	(425,107	)		(5,772,840	)
Net increase (decrease)	16,609,939		$	243,621,232		3,911,875		$	55,095,055

3. TRANSACTIONS WITH AFFILIATES

Certain officers and trustees of the Fund are also officers and/or directors of the following entities:

Entity	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

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
.75%	First $500 million
.625%	Over $500 million, up to and including $1 billion
.50%	Over $1 billion

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

The Fund reimburses Distributors up to .25% per year of its average daily net assets of Class 2, for costs incurred in marketing the Fund’s shares.

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

FRD-14

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN RISING DIVIDENDS SECURITIES FUND

Notes to Financial Statements (continued)

4. INCOME TAXES

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

The tax character of distributions paid during the years ended December 31, 2003 and 2002, was as follows:

	2003		2002
Distributions paid from:
Ordinary income	$	4,040,358	$	4,798,787
Long term capital gain	$	12,395,820		7,374,890
	$	16,436,178	$	12,173,677

At December 31, 2003, the cost of investments, net unrealized appreciation (depreciation), undistributed ordinary income and undistributed long term capital gains for income tax purposes were as follows:

Cost of investments	$	488,739,133
Unrealized appreciation	$	181,457,233
Unrealized depreciation		(1,530,794	)
Net unrealized appreciation (depreciation)	$	179,926,439
Undistributed ordinary income	$	5,814,237
Undistributed long term capital gains		12,010,292
Distributable earnings	$	17,824,529

5. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities) for the year ended December 31, 2003 aggregated $218,563,530 and $41,299,846, respectively.

6. INVESTMENTS IN FRANKLIN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO

The Fund may invest in the Franklin Institutional Fiduciary Trust Money Market Portfolio (the Sweep Money Fund), an open-end investment company managed by Franklin Advisers Inc. (an affiliate of the advisor). Management fees paid by the Fund are reduced on assets invested in the Sweep Money Fund, in an amount not to exceed the management fees paid by the Sweep Money Fund. The Fund earned $157,853 of dividend income from investment in the Sweep Money Fund for the year ended December 31, 2003.

7. REGULATORY MATTERS

On February 4, 2004, the Securities Division of the Office of the Secretary of the Commonwealth of Massachusetts filed an administrative complaint against Franklin Resources, Inc. and certain of its subsidiaries (the “Company”), alleging violations of the Massachusetts Uniform Securities Act. The complaint arises from activity that occurred in 2001 during which time an officer of a Company subsidiary was negotiating an agreement with an investor relating to investments in a mutual fund and a hedge fund.

The Company, in addition to other entities within Franklin Templeton Investments, has been named in shareholder class actions related to the matter described above. The Company believes that the claims made in the lawsuit are without merit and it intends to defend vigorously against the allegations. The Company and the Fund may be named in similar civil actions related to the matter described above.

FRD-15

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN RISING DIVIDENDS SECURITIES FUND

Notes to Financial Statements (continued)

7. REGULATORY MATTERS (cont.)

In addition, as part of ongoing investigations by the U.S. Securities and Exchange Commission (the “SEC”), the U.S. Attorney for the Northern District of California, the New York Attorney General, the California Attorney General, the U.S. Attorney for the District of Massachusetts, the Florida Department of Financial Services, and the Commissioner of Securities and the Attorney General of the State of West Virginia, relating to certain practices in the mutual fund industry, including late trading, market timing and sales compensation arrangements, the Company and its subsidiaries, as well as certain current or former executives and employees of the Company, have received requests for information and/or subpoenas to testify or produce documents. The Company and its current employees are providing documents and information in response to these requests and subpoenas. In addition, the Company has responded to requests for similar kinds of information from regulatory authorities in some of the foreign countries where the Company conducts its global asset management business.

The Staff of the SEC has informed the Company that it intends to recommend that the Commission authorize an action against an affiliate of the Fund’s adviser and a senior executive officer relating to the frequent trading issues that are the subject of the SEC’s investigation. These issues were previously disclosed as being under investigation by government authorities and the subject of an internal inquiry by the Company in its Annual Report on Form 10-K and on its public website. The Company currently is in discussions with the SEC Staff in an effort to resolve the issues raised in their investigation. Such discussions are preliminary and the Fund’s management has been advised that the Company cannot predict the likelihood of whether those discussions will result in a settlement and, if so, the terms of such settlement. The impact, if any, of these matters on the Fund is uncertain at this time. If the Company finds that it bears responsibility for any unlawful or improper conduct, it has committed to making the Fund or its shareholders whole, as appropriate.

FRD-16

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN RISING DIVIDENDS SECURITIES FUND

Independent Auditors’ Report

To the Board of Trustees and Shareholders of

Franklin Templeton Variable Insurance Products Trust

In our opinion, the accompanying statement of assets and liabilities, including the statement of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Franklin Rising Dividends Securities Fund (the Fund) (one of the funds constituting the Franklin Templeton Variable Insurance Products Trust) at December 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

February 5, 2004, except for Note 7 as to which the date is February 12, 2004

FRD-17

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN RISING DIVIDENDS SECURITIES FUND

Tax Designation (unaudited)

Under Section 852(b)(3)(C) of the Internal Revenue Code, the Fund hereby designates $12,013,697 as a capital gain dividend for the fiscal year ended December 31, 2003.

Under Section 854(b)(2) of the Code, the Fund herby designates 100% of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended December 31, 2003.

FRD-18

FRANKLIN SMALL CAP FUND

Fund Goal and Primary Investments: Franklin Small Cap Fund seeks long-term capital growth. The Fund invests primarily in investments of U.S. small-capitalization companies with market capitalization values not exceeding: (i) $1.5 billion; or (ii) the highest market capitalization value in the Russell 2000^® Index; whichever is greater, at the time of purchase.¹

We are pleased to bring you Franklin Small Cap Fund’s annual report for the fiscal year ended December 31, 2003.

Performance Overview

You can find the Fund’s one-year total return in the Performance Summary following this report. Compared with its benchmarks over the same period, the Fund outperformed the Standard & Poor’s 500 Composite Index’s (S&P 500’s) 28.67% return but underperformed the Russell 2500^™ Growth Index’s 46.31% return.²

Economic and Market Overview

During the year ended December 31, 2003, many factors impacted global economies and financial markets. Early in the year, economic uncertainty and geopolitical events, including impending war in Iraq, pushed U.S. interest rates to their lowest level in more than four decades, and the 10-year U.S. Treasury note’s yield fell to 3.13% in mid-June. However, following the end of major conflict in Iraq, many economic indicators turned positive. The U.S. government injected fiscal stimulus into the economy, approving another round of tax cuts and rebates that included dividend and capital gains tax reductions. In June, an accommodative Federal Reserve Board, in an attempt to bolster the economy, cut the federal funds target rate to 1.00%.

During the year, the U.S. trade deficit increased significantly, contributing to the U.S. dollar’s fall to record lows against the euro and other major currencies. However, the weak dollar provided a boost to the U.S. economy and corporate profits as exports became cheaper for foreign buyers. Robust consumer spending, especially for autos and homes, and strong business spending, particularly for equipment and software, contributed to the accelerated economic activity. In addition, U.S. federal spending stayed firm and inflation remained benign. U.S. gross domestic product (GDP) grew an annualized 8.2% in third quarter 2003, its strongest pace in nearly 20 years, and overall, 2003 GDP

1. Please see Index Descriptions following the Fund Summaries.

2. Source: Standard & Poor’s Micropal. One cannot invest directly in an index, nor is an index representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

FSC-1

grew an estimated 3.1%. As economic data improved, some interest rates rose from their lows, and the 10-year Treasury note’s yield ended the period at 4.27%.

An equity market rally started in late March 2003 and continued through the end of the year. The rebound began with investors anticipating economic recovery in the second half of 2003, and it continued as data showed robust economic growth. Improved sentiment led many investors to rotate into economically sensitive and financially leveraged companies, specifically cyclical, technology, small-capitalization and emerging market stocks. The S&P 500 rose 28.67% for the 12 months ended December 31, 2003, while the technology-heavy Nasdaq Composite Index increased 50.93%.²

Investment Strategy

We are research driven, fundamental investors, pursuing a growth strategy. As bottom-up investors focusing primarily on individual securities, we choose companies that we believe are positioned for rapid growth in revenues, earnings or assets. We rely on a team of analysts to provide in-depth industry expertise, and we use qualitative and quantitative analyses to evaluate companies for distinct and sustainable competitive advantages. Advantages, such as a particular marketing or product niche, proven technology and industry leadership, are all factors we believe point to strong long-term growth potential.

Manager’s Discussion

The Fund’s overweighted position relative to the Russell 2500 Growth Index in electronic technology, specifically in semiconductors and electronic production equipment, helped performance during the year under review. A major contributor to return in this sector was Lam Research. Our specific stock selection in retail trade also contributed to returns as our investments in Fred’s and Tuesday Morning appreciated during the period. In health services, our underweighted position benefited Fund performance as this industry underperformed the index.

Although the Fund delivered strong returns, some factors constrained our results. Our overweighted position relative to the index in industrial services, which performed poorly relative to other sectors, detracted from Fund performance. In particular, Trico Marine Services

Top 10 Holdings

Franklin Small Cap Fund

12/31/03

Company Sector/Industry	% of Total Net Assets
Lam Research Corp.	2.0%
Electronic Technology
Varian Semiconductor Equipment Associates Inc.	2.0%
Electronic Technology
Tektronix Inc.	1.6%
Electronic Technology
Mettler-Toledo International Inc. (Switzerland)	1.6%
Producer Manufacturing
Varian Inc.	1.5%
Electronic Technology
Micrel Inc.	1.3%
Electronic Technology
Integrated Device Technology Inc.	1.3%
Electronic Technology
Tom Brown Inc.	1.3%
Energy Minerals
Semtech Corp.	1.3%
Electronic Technology
Avocent Corp.	1.3%
Electronic Technology

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

FSC-2

(sold by year-end) declined in value during the reporting period. Our overweighted allocation as well as poor stock selection, such as Milacron (sold by year-end), in producer manufacturing hampered the Fund. Stock selection in technology services, such as Borland Software and Affiliated Computer Services, negatively impacted the Fund.

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

This discussion reflects our analysis, opinions and portfolio holdings as of December 31, 2003, 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 advisor makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

FSC-3

PERFORMANCE SUMMARYASOF 12/31/03

Total return of Class 2 shares represents the average annual change in value, assuming reinvestment of dividends and capital gains. Average returns smooth out variations in returns, which can be significant; they are not the same as year-by-year results.

Franklin Small Cap Fund – Class 2*

Periods ended 12/31/03

	1-Year	5-Year	Since Inception (11/1/95)
Average Annual Total Return	+37.24%	+6.78%	+9.71%

*Because Class 2 shares were not offered until 1/6/99, standardized Class 2 Fund performance for prior periods represents the historical results of Class 1 shares. For periods beginning on 1/6/99, Class 2’s results reflect an additional 12b-1 fee expense, which also affects future performance. Since 1/6/99 (effective date), the average annual total return of Class 2 shares was +6.00%.

Ongoing market volatility can significantly affect short-term performance; recent returns may differ.

Total Return Index Comparison for Hypothetical $10,000 Investment (11/1/95–12/31/03)

The graph compares the performance of Franklin Small Cap Fund – Class 2,* the S&P 500 and the Russell 2500 Growth Index. One cannot invest directly in an index, nor is an index representative of the Fund’s portfolio. Please see Important Notes to Performance Information preceding the Fund Summaries.

**Source: Standard & Poor’s Micropal. Please see Index Descriptions following the Fund Summaries.

Franklin Small Cap Fund – Class 2

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.

Since markets can go down as well as up, investment return and the value of your principal will fluctuate with market conditions, and you may have a gain or loss when you sell your shares.

FSC-4

Past performance does not guarantee future results.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN SMALL CAP FUND

Financial Highlights

	Class 1
	Year Ended December 31,
	2003			2002			2001			2000			1999
Per share operating performance
(For a share outstanding throughout the year)
Net asset value, beginning of year	$	12.79		$	17.97		$	21.25		$	26.87		$	13.72
Income from investment operations:
Net investment income (loss)a		(.03	)		(.02	)		.09			.11			(.01	)
Net realized and unrealized gains (losses)		4.84			(5.09	)		(3.28	)		(3.81	)		13.25
Total from investment operations		4.81			(5.11	)		(3.19	)		(3.70	)		13.24
Less distributions from:
Net investment income		—			(.07	)		(.09	)		—			(.08	)
Net realized gains		—			—			—			(1.92	)		(.01	)
Total distributions		—			(.07	)		(.09	)		(1.92	)		(.09	)
Net asset value, end of year	$	17.60		$	12.79		$	17.97		$	21.25		$	26.87
Total returnb		37.61%			(28.52)%			(15.02)%			(14.60)%			96.94%
Ratios/supplemental data
Net assets, end of year (000’s)	$	197,551		$	164,350		$	266,694		$	387,474		$	488,062
Ratios to average net assets:
Expenses		.76%			.79%			.76%			.75%			.77%
Net investment income (loss)		(.24)%			(.16)%			.50%			.42%			(.05)%
Portfolio turnover rate		45.00%			29.59%			37.94%			19.49%			39.49%

^a Based on average daily shares outstanding.

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

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN SMALL CAP FUND

Financial Highlights (continued)

	Class 2
	Year Ended December 31,
	2003			2002			2001			2000			1999c
Per share operating performance
(For a share outstanding throughout the year)
Net asset value, beginning of year	$	12.70		$	17.85		$	21.14		$	26.80		$	14.25
Income from investment operations:
Net investment income (loss)a		(.07	)		(.06	)		.03			.12			(.04	)
Net realized and unrealized gains (losses)		4.80			(5.05	)		(3.25	)		(3.86	)		12.68
Total from investment operations		4.73			(5.11	)		(3.22	)		(3.74	)		12.64
Less distributions from:
Net investment income		—			(.04	)		(.07	)		—			(.08	)
Net realized gains		—			—			—			(1.92	)		(.01	)
Total distributions		—			(.04	)		(.07	)		(1.92	)		(.09	)
Net asset value, end of year	$	17.43		$	12.70		$	17.85		$	21.14		$	26.80
Total returnb		37.24%			(28.68)%			(15.25)%			(14.76)%			89.05%
Ratios/supplemental data
Net assets, end of year (000’s)	$	909,946		$	415,952		$	401,663		$	301,420		$	6,156
Ratios to average net assets:
Expenses		1.01%			1.04%			1.01%			1.00%			1.02%	d
Net investment income (loss)		(.49)%			(.41)%			.19%			.49%			(.18)%	d
Portfolio turnover rate		45.00%			29.59%			37.94%			19.49%			39.49%

^a Based on average daily shares outstanding.

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

^c For the period January 6, 1999 (effective date) to December 31, 1999.

^d Annualized.

See notes to financial statements.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN SMALL CAP FUND

Statement of Investments, December 31, 2003

	SHARES	VALUE
Common Stocks 87.7%
Commercial Services 3.3%
aAquantive Inc.	425,800	$	4,364,450
Brinks Co.	209,400		4,734,534
CDI Corp.	90,700		2,970,425
aConcur Technologies Inc.	30,500		295,240
aCorporate Executive Board Co.	150,200		7,009,834
aDoubleClick Inc.	277,000		2,830,940
aLearning Tree International Inc.	52,000		904,280
aLECG Corp.	75,400		1,725,906
aMaximus Inc.	250,000		9,782,500
aResources Connection Inc.	74,600		2,037,326
			36,655,435
Communications 1.1%
aCommonwealth Telephone Enterprises Inc.	115,400		4,356,350
aNII Holdings Inc., B	105,600		7,880,928
			12,237,278
Consumer Durables 1.1%
Briggs & Stratton Corp.	37,800		2,547,720
aLeapfrog Enterprises Inc.	94,900		2,517,697
Polaris Industries Inc.	64,300		5,695,694
Winnebago Industries Inc.	19,000		1,306,250
			12,067,361
Consumer Non-Durables .5%
aNBTY Inc.	80,000		2,148,800
bNu Skin Enterprises Inc., A, P.I.P.E.S.	170,000		2,730,982
			4,879,782
Consumer Services 3.5%
aArgosy Gaming Co.	305,100		7,929,549
aEntercom Communications Corp.	62,000		3,283,520
aEntravision Communications Corp.	735,000		8,158,500
Four Seasons Hotels Inc. (Canada)	88,200		4,511,430
aJack in the Box Inc.	72,200		1,542,192
aMediacom Communications Corp., A	362,600		3,143,742
aRadio One Inc.	39,500		772,225
aRadio One Inc., D	236,400		4,562,520
Station Casinos Inc.	137,100		4,199,373
			38,103,051
Distribution Services .2%
aPerformance Food Group Co.	70,300		2,542,751
Electronic Technology 23.5%
a,b3Ware Inc.	411		—
aActel Corp.	257,800		6,212,980
aAdvanced Energy Industries Inc.	375,000		9,768,750
aAdvanced Fibre Communications Inc.	265,000		5,339,750
aAvocent Corp.	387,300		14,144,196
BEI Technologies Inc.	10,300		206,000
aCoherent Inc.	300,000		7,140,000

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN SMALL CAP FUND

Statement of Investments, December 31, 2003 (cont.)

	SHARES	VALUE
Common Stocks (cont.)
Electronic Technology (cont.)
aDrexler Technology Corp.	218,100	$	2,981,427
aElectro Scientific Industries Inc.	587,233		13,976,146
aExtreme Networks Inc.	1,159,100		8,357,111
aF5 Networks Inc.	342,500		8,596,750
aFLIR Systems Inc.	232,900		8,500,850
aIntegrated Circuit Systems Inc.	459,500		13,091,155
aIntegrated Device Technology Inc.	841,500		14,448,555
Intersil Corp.	87,200		2,166,920
aLam Research Corp.	700,000		22,610,000
aLattice Semiconductor Corp.	287,300		2,781,064
aLogitech International SA, ADR (Switzerland)	144,700		6,154,091
aMicrel Inc.	934,100		14,553,278
MTS Systems Corp.	140,500		2,701,815
National Instruments Corp.	250,000		11,367,500
aPericom Semiconductor Corp.	228,500		2,435,810
aSemtech Corp.	630,000		14,319,900
Tektronix Inc.	556,200		17,575,920
aTrimble Navigation Ltd.	216,500		8,062,460
aVarian Inc.	391,400		16,333,122
aVarian Semiconductor Equipment Associates Inc.	499,700		21,831,893
aVitesse Semiconductor Corp.	855,600		5,022,372
			260,679,815
Energy Minerals 3.4%
Chesapeake Energy Corp.	331,900		4,507,202
aNewfield Exploration Co.	126,100		5,616,494
aPremcor Inc.	174,700		4,542,200
aSpinnaker Exploration Co.	258,300		8,335,341
aTom Brown Inc.	446,200		14,389,950
			37,391,187
Finance 5.2%
American Capital Strategies Ltd.	214,500		6,377,085
Cullen/Frost Bankers Inc.	111,800		4,535,726
East West Bancorp Inc.	21,800		1,170,224
aeSPEED Inc., A	116,600		2,729,606
aFinancial Federal Corp.	175,000		5,346,250
aFranklin Bank Corp./Houston Texas	20,200		383,800
Greater Bay Bancorp Inc.	183,600		5,228,928
aNCO Group Inc.	225,200		5,127,804
Radian Group Inc.	77,676		3,786,705
aSilicon Valley Bancshares	145,100		5,233,757
Texas Regional Bancshares Inc., A	20,100		743,700
UCBH Holdings Inc.	137,600		5,362,272
Waddell & Reed Financial Inc., A	200,000		4,692,000
Westcorp	75,000		2,741,250
aWFS Financial Inc.	85,100		3,613,346
			57,072,453

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FRANKLIN SMALL CAP FUND

Statement of Investments, December 31, 2003 (cont.)

	SHARES	VALUE
Common Stocks (cont.)
Health Services 3.0%
aCoventry Health Care Inc.	123,800	$	7,983,862
aMolina Healthcare Inc.	202,300		5,104,029
aPharmaceutical Product Development Inc.	166,800		4,498,596
Select Medical Corp.	447,000		7,277,160
aSierra Health Services Inc.	319,400		8,767,530
			33,631,177
Health Technology 9.1%
aAdolor Corp.	258,200		5,169,164
aAlkermes Inc.	100,000		1,350,000
Alpharma Inc., A	140,400		2,822,040
aAmerican Medical Systems Holdings Ltd.	113,800		2,480,840
aAngiotech Pharmaceuticals Inc. (Canada)	112,300		5,165,800
aConceptus Inc.	266,300		2,828,106
aCTI Molecular Imaging Inc.	161,600		2,732,656
aFirst Horizon Pharmaceutical Corp.	500,500		5,605,600
Galen Holdings PLC, ADR (United Kingdom)	100,000		5,199,900
aIntegra LifeSciences Holdings Corp.	85,900		2,459,317
aInterMune Inc.	512,500		11,869,500
aKosan Biosciences Inc.	506,000		4,989,160
aNPS Pharmaceuticals Inc.	261,700		8,044,658
aOSI Pharmaceuticals Inc.	348,200		11,215,522
aSTERIS Corp.	339,800		7,679,480
aThoratec Corp.	296,100		3,852,261
aUnited Therapeutics Corp.	362,000		8,307,900
aVarian Medical Systems Inc.	112,000		7,739,200
aVentana Medical Systems Inc.	42,700		1,682,380
			101,193,484
Industrial Services 4.0%
aAllied Waste Industries Inc.	250,000		3,470,000
aAtwood Oceanics Inc.	59,200		1,890,848
aGrey Wolf Inc.	568,800		2,127,312
aOil States International Inc.	503,100		7,013,214
aPride International Inc.	270,000		5,032,800
aRowan Cos. Inc.	225,000		5,213,250
aShaw Group Inc.	133,100		1,812,822
aSuperior Energy Services Inc.	632,200		5,942,680
aVarco International Inc.	345,100		7,119,413
aWaste Connections Inc.	131,600		4,970,532
			44,592,871
Non-Energy Minerals .6%
Olin Corp.	143,100		2,870,586
Reliance Steel & Aluminum Co.	126,800		4,211,028
			7,081,614
Process Industries 4.1%
Bunge Ltd.	237,300		7,811,916
Cabot Corp.	361,500		11,510,160
a FMC Corp.	187,100		6,385,723
Minerals Technologies Inc.	75,000		4,443,750

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN SMALL CAP FUND

Statement of Investments, December 31, 2003 (cont.)

	SHARES	VALUE
Common Stocks (cont.)
Process Industries (cont.)
Nova Chemicals Corp. (Canada)	368,900	$	9,941,855
Valspar Corp.	100,300		4,956,826
			45,050,230
Producer Manufacturing 7.0%
a CUNO Inc.	12,800		576,384
aFlowserve Corp.	325,000		6,786,000
Gentex Corp.	246,900		10,903,104
Gibraltar Steel Corp.	158,100		3,976,215
Kennametal Inc.	162,300		6,451,425
a Mettler-Toledo International Inc. (Switzerland)	407,900		17,217,459
Oshkosh Truck Corp.	171,900		8,772,057
Superior Industries International Inc.	266,000		11,576,320
Toro Co.	98,600		4,575,040
a Wilson Greatbatch Technologies Inc.	150,000		6,340,500
			77,174,504
Real Estate Development .5%
a Jones Lang Lasalle Inc.	247,000		5,120,310
Real Estate Investment Trusts 1.0%
Glenborough Realty Trust Inc.	49,000		977,550
MeriStar Hospitality Corp.	1,064,584		6,930,442
SL Green Realty Corp.	80,000		3,284,000
			11,191,992
Retail Trade 3.9%
a Casual Male Retail Group Inc.	324,900		2,254,806
a Charming Shoppes Inc.	356,800		1,926,720
a Cost Plus Inc.	136,500		5,596,500
Fred’s Inc.	242,600		7,515,748
a Gymboree Corp.	264,000		4,548,720
a Hot Topic Inc.	175,350		5,165,811
a J. Jill Group Inc.	250,000		3,177,500
Regis Corp.	94,000		3,714,880
a Tuesday Morning Corp.	320,700		9,701,175
			43,601,860
Technology Services 9.7%
a Affiliated Computer Services Inc., A	198,200		10,793,972
a Ask Jeeves Inc.	234,000		4,240,080
a Aspen Technology Inc.	925,000		9,490,500
a BearingPoint Inc.	389,400		3,929,046
a Borland Software Corp.	545,000		5,302,850
a Entrust Inc.	750,000		3,060,000
Fair Isaac Inc.	75,255		3,699,536
aFileNET Corp.	366,700		9,930,236
Global Payments Inc.	128,500		6,054,920
aHyperion Solutions Corp.	327,900		9,882,906
aInformatica Corp.	500,000		5,150,000
aInfoSpace Inc.	109,000		2,512,450
aMicromuse Inc.	370,000		2,553,000
aNetIQ Corp.	424,400		5,623,300

FSC-10

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

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Statement of Investments, December 31, 2003 (cont.)

	SHARES	VALUE
Common Stocks (cont.)
Technology Services (cont.)
aQuest Software Inc.	319,000	$	4,529,800
aRetek Inc.	175,000		1,624,000
aRSA Security Inc.	362,800		5,151,760
aSapient Corp.	254,400		1,424,640
aVerity Inc.	630,800		10,528,052
awebMethods Inc.	209,390		1,915,918
			107,396,966
Transportation 3.0%
aABX Air Inc.	50		215
C.H. Robinson Worldwide Inc.	216,800		8,218,888
Expeditors International of Washington Inc.	123,800		4,662,308
aForward Air Corp.	191,500		5,266,250
aLandstar System Inc.	123,900		4,713,156
aOvernite Corp.	116,500		2,650,375
SkyWest Inc.	421,100		7,630,332
			33,141,524
Total Common Stocks (Cost $770,462,341)			970,805,645
Preferred Stock (Cost $65,499)
a,b3Ware Inc., pfd., A-1	6,968		65,499
Total Long Term Investments (Cost $770,527,840)			970,871,144
Short Term Investments (Cost $134,463,707) 12.1%
cFranklin Institutional Fiduciary Trust Money Market Portfolio	134,463,707		134,463,707
Total Investments (Cost $904,991,547) 99.8%			1,105,334,851
Other Assets, less Liabilities .2%			2,162,375
Net Assets 100.0%		$	1,107,497,226

^a Non-income producing.

^b See Note 7 regarding restricted securities.

^c See Note 6 regarding investments in the Franklin Institutional Fiduciary Trust Money Market Portfolio.

See notes to financial statements.

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Financial Statements

Statement of Assets and Liabilities

December 31, 2003

Assets:
Investments in securities:
Cost	$	904,991,547
Value		1,105,334,851
Receivables:
Investment securities sold		3,361,335
Capital shares sold		717,375
Dividends		210,619
Total assets		1,109,624,180
Liabilities:
Payables:
Investment securities purchased		379,051
Capital shares redeemed		705,080
Affiliates		993,065
Other liabilities		49,758
Total liabilities		2,126,954
Net assets, at value	$	1,107,497,226
Net assets consist of:
Undistributed net investment income	$	—
Net unrealized appreciation (depreciation)		200,343,304
Accumulated net realized gain (loss)		(145,664,955	)
Capital shares		1,052,818,877
Net assets, at value	$	1,107,497,226
Class 1:
Net assets, at value	$	197,551,265
Shares outstanding		11,226,781
Net asset value and offering price per share	$	17.60
Class 2:
Net assets, at value	$	909,945,961
Shares outstanding		52,212,329
Net asset value and offering price per share	$	17.43

See notes to financial statements.

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Financial Statements (continued)

Statement of Operations

for the year ended December 31, 2003

Investment income:
(net of foreign taxes of $18,551)
Dividends	$	4,018,303
Expenses:
Management fees (Note 3)		3,667,101
Administrative fees (Note 3)		1,940,190
Distribution fees - Class 2 (Note 3)		1,514,388
Transfer agent fees		5,009
Other		306,347
Total expenses		7,433,035
Net investment loss		(3,414,732	)
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		(18,540,916	)
Foreign currency transactions		(1,123	)
Net realized gain (loss)		(18,542,039	)
Net unrealized appreciation (depreciation) on investments		280,516,980
Net realized and unrealized gain (loss)		261,974,941
Net increase (decrease) in net assets resulting from operations	$	258,560,209

See notes to financial statements.

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Financial Statements (continued)

Statements of Changes in Net Assets

For the years ended December 31, 2003 and 2002

	2003			2002
Increase (decrease) in net assets:
Operations:
Net investment loss	$	(3,414,732	)	$	(1,931,994	)
Net realized gain (loss) from investments and foreign currency transactions		(18,542,039	)		(80,346,044	)
Net unrealized appreciation (depreciation) on investments		280,516,980			(129,271,878	)
Net increase (decrease) in net assets resulting from operations		258,560,209			(211,549,916	)
Distributions to shareholders from:
Net investment income:
Class 1		—			(968,151	)
Class 2		—			(994,005	)
Total distributions to shareholders		—			(1,962,156	)
Capital share transactions: (Note 2)
Class 1		(22,075,723	)		(25,542,310	)
Class 2		290,711,064			150,999,228
Total capital share transactions		268,635,341			125,456,918
Net increase (decrease) in net assets		527,195,550			(88,055,154	)
Net assets:
Beginning of year		580,301,676			668,356,830
End of year	$	1,107,497,226		$	580,301,676
Undistributed net investment income included in net assets:
End of year	$	—		$	—

See notes to financial statements.

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Notes to Financial Statements

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (the Trust) is registered under the Investment Company Act of 1940 as an open-end investment company, consisting of twenty-two separate series (the Funds). Franklin Small Cap Fund (the Fund) included in this report is diversified. Shares of the Fund are sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. The Fund’s investment objective is capital growth.

On November 18, 2003, the Board of Trustees for the Franklin Templeton Variable Insurance Products Trust approved a proposal to merge Franklin Aggressive Growth Securities Fund into the Franklin Small Cap Fund, subject to approval by the shareholders of the Franklin Aggressive Growth Securities Fund.

The following summarizes the Fund’s significant accounting policies.

a. Security Valuation

Securities listed or traded on a recognized national exchange or NASDAQ are valued at the last reported sales price. Over-the-counter securities and listed securities for which no sale is reported are valued within the range of the latest quoted bid and asked prices. Foreign securities are valued at the close of trading of the foreign exchange or the NYSE, whichever is earlier. If events occur that materially affect the values of securities after the prices of foreign exchange rates are determined, or if market quotations are not readily available, the securities will be valued at fair value as determined following procedures approved by the Board of Trustees.

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. Purchases and sales of securities and income items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.

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.

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. Foreign Currency Contracts

When the Fund purchases or sells foreign securities it may enter into foreign exchange contracts to minimize foreign exchange risk from the trade date to the settlement date of the transactions. A foreign exchange contract is an agreement between two parties to exchange different currencies at an agreed upon exchange rate on a specified date. Realized and unrealized gains and losses are included in the Statement of Operations.

The risks of these contracts include movement in the values of the foreign currencies relative to the U.S. dollar and the possible inability of the counterparties to fulfill their obligations under the contracts.

d. Income Taxes

No provision has been made for income taxes because the Fund’s policy is to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable income.

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FRANKLIN SMALL CAP FUND

Notes to Financial Statements (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

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 distributions to shareholders are recorded on the ex-dividend date.

Distributions received by the Fund from 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.

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. Other expenses are charged to each Fund on a specific identification basis.

Realized and unrealized gains and losses and net investment income, other than class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class.

f. Accounting Estimates

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

g. Guarantees and Indemnifications

Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust 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. However, based on experience, the Trust expects the risk of loss to be remote.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN SMALL CAP FUND

Notes to Financial Statements (continued)

2. SHARES OF BENEFICIAL INTEREST

The Fund offers two classes of shares: Class 1 and 2. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

At December 31, 2003, there were an unlimited number of shares authorized ($.01 par value). Transactions in the Fund’s shares were as follows:

	Year Ended December 31,
	2003					2002
Class 1 Shares:	Shares		Amount			Shares		Amount
Shares sold	763,219		$	11,952,567		1,153,418		$	18,182,473
Shares issued on merger (Note 8)a	131,849			1,739,071		1,202,758			20,098,091
Shares issued in reinvestment of distributions	—			—		63,569			968,152
Shares redeemed	(2,513,508	)		(35,767,361	)	(4,419,152	)		(64,791,026	)
Net increase (decrease)	(1,618,440	)	$	(22,075,723	)	(1,999,407	)	$	(25,542,310	)
Class 2 Shares:
Shares sold	24,892,963		$	372,062,375		23,004,447		$	326,745,200
Shares issued on merger (Note 8)a	986,724			12,916,332		36,720			609,184
Shares issued in reinvestment of distributions	—			—		65,654			994,005
Shares redeemed	(6,409,960	)		(94,267,643	)	(12,868,867	)		(177,349,161	)
Net increase (decrease)	19,469,727		$	290,711,064		10,237,954		$	150,999,228

^a On May 1, 2002, the Fund acquired the net assets of Franklin Global Health Care Securities Fund in a taxable exchange pursuant to a plan of reorganization approved by the Franklin Global Health Care Securities Fund Shareholders.

3. TRANSACTIONS WITH AFFILIATES

Certain officers and trustees of the Fund are also officers and/or directors of the following entities:

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

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
.55%	First $500 million
.45%	Over $500 million, up to and including $1 billion
.40%	Over $1 billion, up to and including $1.5 billion

Fees are further reduced on net assets over $1.5 billion.

The Fund pays an administration fee to FT Services of .25% per year of the average daily net assets of the Fund.

The Fund reimburses Distributors up to .25% per year of its average daily net assets of Class 2 for costs incurred in marketing the Fund’s shares.

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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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN SMALL CAP FUND

Notes to Financial Statements (continued)

4. INCOME TAXES

At December 31, 2003, the Fund had tax basis capital losses of $145,649,486 which may be carried over to offset future capital gains. Such losses expire as follows:

Capital loss carryovers expiring in:
2008	$	11,665,898
2009		23,790,865
2010		89,635,453
2011		20,557,270
	$	145,649,486

The tax character of distributions paid during the years ended December 31, 2003 and 2002, was as follows:

	2003		2002
Distributions paid from:
Ordinary income	$	—	$	1,962,156
Long term capital gain		—		—
	$	—	$	1,962,156

At December 31, 2003, the cost of investments, net unrealized appreciation (depreciation), undistributed ordinary income and undistributed long term capital gains for income tax purposes were as follows:

Cost of investments	$	905,007,016
Unrealized appreciation	$	223,653,083
Unrealized depreciation		(23,325,248	)
Net unrealized appreciation (depreciation)	$	200,327,835
Undistributed ordinary income	$	—
Undistributed long term capital gains		—
Distributable earnings	$	—

Net investment income differs for financial statement and tax purposes primarily due to differing treatments for foreign currency transactions.

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

5. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities) for the year ended December 31, 2003 aggregated $497,133,238 and $307,908,969, respectively.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN SMALL CAP FUND

Notes to Financial Statements (continued)

6. INVESTMENT IN FRANKLIN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO

The Fund may invest in the Franklin Institutional Fiduciary Trust Money Market Portfolio (the Sweep Money Fund), an open-end investment company managed by Advisers. Management fees paid by the Fund are reduced on assets invested in the Sweep Money Fund, in an amount not to exceed the management fees paid by the Sweep Money Fund. The Fund earned $804,731 of dividend income from investment in the Sweep Money Fund for the year ended December 31, 2003.

7. RESTRICTED SECURITIES

At December 31, 2003, investments in securities included issues that are restricted or illiquid. Restricted securities are often purchased in private placement transactions, are not registered under the Securities Act of 1933, may have contractual restrictions on resale, and are valued under methods approved by the Board of Trustees as reflecting fair value. A security may also be considered illiquid if it lacks a readily available market or if its valuation has not changed for a certain period of time. At December 31, 2003, the Fund held investments in restricted and illiquid securities that were valued under approved methods by the Trustees, as follows:

Shares	Issuer	Acquisition Date	Cost		Value
411	3Ware Inc.	7/28/00	$	229,176	$	—
6,968	3Ware Inc., pfd., A-1	12/17/02		65,499		65,499
170,000	Nu Skin Enterprises Inc., A, P.I.P.E.S	10/23/03		2,201,500		2,730,982
	Total Restricted Securities (0.25% of net assets)				$	2,796,481

8. MERGER OF FRANKLIN TECHNOLOGY SECURITIES FUND

On May 1, 2003, the Franklin Templeton Variable Insurance Products Trust (FTVIPT) — Franklin Small Cap Fund (Small Cap) acquired the net assets of the FTVIPT — Franklin Technology Securities Fund (Technology) pursuant to a plan of reorganization. The merger was accomplished by a taxable exchange, and accounted for as a purchase.

The selected financial information and shares outstanding immediately before and after the acquisition were as follows:

	Class 1					Class 2
Fund Name	Net Assets		NAV		Shares	Net Assets		NAV		Shares
Technology	$	1,739,071	$	3.30	527,220	$	12,916,332	$	3.28	3,942,678
Small Cap	$	158,617,460	$	13.19	12,023,169	$	483,814,924	$	13.09	36,965,893
Small Cap — post merger	$	160,356,531	$	13.19	12,155,018	$	496,731,256	$	13.09	37,952,617

9. REGULATORY MATTERS

On February 4, 2004, the Securities Division of the Office of the Secretary of the Commonwealth of Massachusetts filed an administrative complaint against Franklin Resources, Inc. and certain of its subsidiaries (the “Company”), alleging violations of the Massachusetts Uniform Securities Act. The complaint arises from activity that occurred in 2001 during which time an officer of a Company subsidiary was negotiating an agreement with an investor relating to investments in a mutual fund and a hedge fund.

The Company, in addition to other entities within Franklin Templeton Investments, has been named in shareholder class actions related to the matter described above. The Company believes that the claims made in the lawsuit are without merit and it intends to defend vigorously against the allegations. The Company and the Fund may be named in similar civil actions related to the matter described above.

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Notes to Financial Statements (continued)

9. REGULATORY MATTERS (cont.)

In addition, as part of ongoing investigations by the U.S. Securities and Exchange Commission (the “SEC”), the U.S. Attorney for the Northern District of California, the New York Attorney General, the California Attorney General, the U.S. Attorney for the District of Massachusetts, the Florida Department of Financial Services, and the Commissioner of Securities and the Attorney General of the State of West Virginia, relating to certain practices in the mutual fund industry, including late trading, market timing and sales compensation arrangements, the Company and its subsidiaries, as well as certain current or former executives and employees of the Company, have received requests for information and/or subpoenas to testify or produce documents. The Company and its current employees are providing documents and information in response to these requests and subpoenas. In addition, the Company has responded to requests for similar kinds of information from regulatory authorities in some of the foreign countries where the Company conducts its global asset management business.

The Staff of the SEC has informed the Company that it intends to recommend that the Commission authorize an action against the Fund’s investment adviser and a senior executive officer relating to the frequent trading issues that are the subject of the SEC’s investigation. These issues were previously disclosed as being under investigation by government authorities and the subject of an internal inquiry by the Company in its Annual Report on Form 10-K and on its public website. The Company currently is in discussions with the SEC Staff in an effort to resolve the issues raised in their investigation. Such discussions are preliminary and the Fund’s management has been advised that the Company cannot predict the likelihood of whether those discussions will result in a settlement and, if so, the terms of such settlement. The impact, if any, of these matters on the Fund is uncertain at this time. If the Company finds that it bears responsibility for any unlawful or improper conduct, it has committed to making the Fund or its shareholders whole, as appropriate.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN SMALL CAP FUND

Independent Auditors’ Report

To the Board of Trustees and Shareholders of Franklin Templeton Variable Insurance Products Trust

In our opinion, the accompanying statement of assets and liabilities, including the statement of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Franklin Small Cap Fund (the Fund) (one of the funds constituting the Franklin Templeton Variable Insurance Products Trust) at December 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

February 5, 2004, except for Note 9 as to which the date is February 12, 2004

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FRANKLIN SMALL CAP VALUE SECURITIES FUND

Fund Goal and Primary Investments: Franklin Small Cap Value Securities Fund seeks long-term total return. The Fund invests primarily in equity securities of U.S. small capitalization companies that the Fund’s manager believes are undervalued.

This annual report for Franklin Small Cap Value Securities Fund covers the fiscal year ended December 31, 2003.

Performance Overview

You can find the Fund’s one-year total return in the Performance Summary following this report. The Fund underperformed the Russell 2000^® Value Index, which returned 46.03% for the year under review.¹ Please note that the Fund employs a bottom-up stock selection process, and the managers invest in securities without regard to benchmark comparisons.

Economic and Market Overview

During the year ended December 31, 2003, many factors impacted global economies and financial markets. Early in the year, economic uncertainty and geopolitical events, including impending war in Iraq, pushed U.S. interest rates to their lowest level in more than four decades, and the 10-year U.S. Treasury note’s yield fell to 3.13% in mid-June. However, following the end of major conflict in Iraq, many economic indicators turned positive. The U.S. government injected fiscal stimulus into the economy, approving another round of tax cuts and rebates that included dividend and capital gains tax reductions. In June, an accommodative Federal Reserve Board, in an attempt to bolster the economy, cut the federal funds target rate to 1.00%.

During the year, the U.S. trade deficit increased significantly, contributing to the U.S. dollar’s fall to record lows against the euro and other major currencies. However, the weak dollar provided a boost to the U.S. economy and corporate profits as exports became cheaper for foreign buyers. Robust consumer spending, especially for autos and homes, and strong business spending, particularly for equipment and software, contributed to the accelerated economic activity. In addition, U.S. federal spending stayed firm and inflation remained benign. U.S. gross domestic product (GDP) grew an annualized 8.2% in third quarter 2003, its strongest pace in nearly 20 years, and overall, 2003 GDP grew an estimated 3.1%. As economic data improved, some interest

1. Source: Standard & Poor’s Micropal. One cannot invest directly in an index, nor is an index representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

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rates rose from their lows, and the 10-year Treasury note’s yield ended the period at 4.27%.

An equity market rally started in late March 2003 and continued through the end of the year. The rebound began with investors anticipating economic recovery in the second half of 2003, and it continued as data showed robust economic growth. Improved sentiment led many investors to rotate into economically sensitive and financially leveraged companies, specifically cyclical, technology, small-capitalization and emerging market stocks. The Standard & Poor’s 500 Composite Index (S&P 500) rose 28.67% for the 12 months ended December 31, 2003, while the technology-heavy Nasdaq Composite Index increased 50.93%.¹

Investment Strategy

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

Manager’s Discussion

During the year under review, stocks that aided Fund performance came from a variety of sectors. OMI Corp. gained 117% during the Fund’s fiscal year, largely due to three-year-high oil tanker rates resulting from a shortage of vessels for shipping oil, contributing to the Fund’s transportation holdings’ overall positive results. Another solid performer was United States Steel, which produces, sells and transports steel mill products. The company’s stock appreciated 170% during the year and contributed to the Fund’s non-energy minerals sector’s overall positive performance. Energy minerals, one of the Fund’s top-performing sectors, was led by Nuevo Energy’s nearly 118% return for the period. Nuevo explores, acquires and develops crude oil and natural gas properties.

Despite the Fund’s double-digit total return, several Fund holdings declined in value during the year under review. Midwest Express (now

Top 10 Holdings

Franklin Small Cap Value

Securities Fund

12/31/03

Company Sector/Industry	% of Total Net Assets
OMI Corp.	1.9%
Transportation
Peabody Energy Corp.	1.9%
Energy Minerals
Reliance Steel & Aluminum Co.	1.8%
Non-Energy Minerals
York International Corp.	1.8%
Producer Manufacturing
Teekay Shipping Corp. (Bahamas)	1.8%
Transportation
Roper Industries Inc.	1.7%
Producer Manufacturing
Arthur J. Gallagher & Co.	1.7%
Finance
Dillards Inc., A	1.6%
Retail Trade
Consol Energy Inc.	1.6%
Energy Minerals
Arch Coal Inc.	1.6%
Energy Minerals

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

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Midwest Air Group) and Atlantic Coast Airlines Holdings each were impacted by reduced travel, due largely to war in Iraq, continued terrorist threats, and higher fuel prices. Atlantic Coast announced in October 2003 that Mesa Airlines had bid for the company, and we sold our position as open-market prices exceeded the proposed takeover price. We also sold our holdings in Midwest Express in July 2003 because of deteriorating fundamentals. In the industrial services sector, several companies recorded unfavorable results during the period, which hindered Fund performance.

The Fund experienced net inflows during its fiscal year, and we used the proceeds to invest in 17 new positions that fit our investment criteria. Allstream, a recent addition to the Fund, is a Canadian provider of communication services. At period-end, Allstream traded at 14.1 times 2004 estimated earnings and 2.1 times book value, had negligible long-term debt and a substantial tax-loss carryforward. We also initiated a position in Montpelier Re Holdings, a Bermuda-based reinsurer for the global insurance market. Consistent with our strategy, we thought Montpelier was attractively valued at period-end at 1.5 times book value and 8.9 times 2004 earnings estimates. Late in the reporting period, we added La Quinta, an owner and operator of franchise hotels, which traded at less than book value at period-end.

During the Fund’s fiscal year, 14 positions were eliminated from the portfolio, including three takeovers. We sold two takeovers after the acquiring companies announced bids because of higher market prices than the proposed takeover prices. We continued to hold a third takeover target, Airborne (now ABX Air), because the deal included Air Freight stock in addition to cash. The remaining Fund liquidations included stocks that had reached our price targets or where the companies’ fundamentals had deteriorated.

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

This discussion reflects our analysis, opinions and portfolio holdings as of December 31, 2003, 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 advisor 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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PERFORMANCE SUMMARYASOF 12/31/03

Total return of Class 2 shares represents the average annual change in value, assuming reinvestment of dividends and capital gains. Average returns smooth out variations in returns, which can be significant; they are not the same as year-by-year results.

Franklin Small Cap Value Securities Fund – Class 2*

Periods ended 12/31/03

	1-Year	5-Year	Since Inception (5/1/98)
Average Annual Total Return	+32.12%	+11.58%	+5.39%

*Because Class 2 shares were not offered until 1/6/99, standardized Class 2 Fund performance for prior periods represents the historical results of Class 1 shares. For periods beginning on 1/6/99, Class 2’s results reflect an additional 12b-1 fee expense, which also affects future performance. Since 1/6/99 (effective date), the average annual total return of Class 2 shares was +11.11%.

Ongoing market volatility can significantly affect short-term performance; recent returns may differ.

Total Return Index Comparison

for Hypothetical $10,000 Investment (5/1/98–12/31/03)

The graph compares the performance of Franklin Small Cap Value Securities Fund – Class 2* and the Russell 2000 Value Index. One cannot invest directly in an index, nor is an index representative of the Fund’s portfolio. Please see Important Notes to Performance Information preceding the Fund Summaries.

**Source: Standard & Poor’s Micropal. Please see Index Descriptions following the Fund Summaries.

Franklin Small Cap Value Securities Fund – Class 2

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.

Since markets can go down as well as up, investment return and the value of your principal will fluctuate with market conditions, and you may have a gain or loss when you sell your shares.

Past performance does not guarantee future results.

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Financial Highlights

	Class 1
	Year Ended December 31,
	2003			2002			2001			2000			1999
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	9.70		$	10.97		$	9.86		$	7.90		$	7.79
Income from investment operations:
Net investment incomea		.06			.07			.11			.10			.05
Net realized and unrealized gains (losses)		3.08			(1.01	)		1.29			1.89			.08
Total from investment operations		3.14			(.94	)		1.40			1.99			.13
Less distributions from:
Net investment income		(.03	)		(.05	)		(.05	)		(.03	)		(.02	)
Net realized gains		—			(.28	)		(.24	)		—			—
Total distributions		(.03	)		(.33	)		(.29	)		(.03	)		(.02	)
Net asset value, end of year	$	12.81		$	9.70		$	10.97		$	9.86		$	7.90
Total returnb		32.47%			(9.05)%			14.21%			25.23%			1.65%
Ratios/supplemental data
Net assets, end of year (000’s)	$	37,108		$	28,720		$	32,604		$	19,455		$	11,320
Ratios to average net assets:
Expenses		.74%			.76%			.77%			.84%			.81%
Net investment income		.63%			.63%			1.07%			1.13%			.65%
Portfolio turnover rate		12.52%			5.11%			40.54%			42.47%			61.23%

^a Based on average daily shares outstanding.

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

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Financial Highlights (continued)

	Class 2
	Year Ended December 31,
	2003			2002			2001			2000			1999c
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	9.61		$	10.89		$	9.81		$	7.88		$	7.97
Income from investment operations:
Net investment incomea		.04			.04			.08			.08			.05
Net realized and unrealized gains (losses)		3.04			(1.00	)		1.28			1.88			(.12	)
Total from investment operations		3.08			(.96	)		1.36			1.96			(.07	)
Less distributions from:
Net investment income		(.02	)		(.04	)		(.04	)		(.03	)		(.02	)
Net realized gains		—			(.28	)		(.24	)		—			—
Total distributions		(.02	)		(.32	)		(.28	)		(.03	)		(.02	)
Net asset value, end of year	$	12.67		$	9.61		$	10.89		$	9.81		$	7.88
Total returnb		32.12%			(9.26)%			13.79%			25.02%			(.90)%
Ratios/supplemental data
Net assets, end of year (000’s)	$	333,625		$	125,302		$	34,282		$	7,209		$	1,263
Ratios to average net assets:
Expenses		.99%			1.01%			1.02%			1.09%			1.06%	d
Net investment income		.38%			.38%			.81%			.90%			.62%	d
Portfolio turnover rate		12.52%			5.11%			40.54%			42.47%			61.23%

^a Based on average daily shares outstanding.

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

^c For the period January 6, 1999 (effective date) to December 31, 1999.

^d Annualized.

See notes to financial statements.

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Statement of Investments, December 31, 2003

	SHARES	VALUE
Common Stocks 89.3%
Commercial Services .6%
ABM Industries Inc.	120,000	$	2,089,200
Communications 1.5%
aAllstream Inc., Class B (Canada)	95,000		5,448,250
Consumer Durables 6.9%
Action Performance Cos. Inc.	45,000		882,000
Briggs & Stratton Corp.	75,000		5,055,000
D.R. Horton Inc.	14,250		616,455
Hooker Furniture Corp.	45,000		1,836,000
La-Z-Boy Inc.	205,000		4,300,900
M/I Schottenstein Homes Inc.	41,600		1,624,480
aMonaco Coach Corp.	227,500		5,414,500
Russ Berrie & Co. Inc.	174,000		5,898,600
			25,627,935
Consumer Non-Durables 4.9%
Brown Shoe Co. Inc.	140,000		5,310,200
Lancaster Colony Corp.	60,000		2,709,600
Oshkosh B’Gosh Inc., A	152,900		3,281,234
Russell Corp.	17,000		298,520
Standard Commercial Corp.	48,500		973,395
aTimberland Co., A	100,000		5,207,000
Wolverine World Wide Inc.	13,000		264,940
			18,044,889
Consumer Services 3.0%
aAztar Corp.	185,000		4,162,500
Intrawest Corp. (Canada)	225,000		4,160,250
aLa Quinta Corp.	404,900		2,595,409
			10,918,159
Electronic Technology 2.9%
aAvocent Corp.	135,000		4,930,200
Cohu Inc.	105,000		2,010,750
Diebold Inc.	70,000		3,770,900
aSPACEHAB Inc.	13,500		20,655
			10,732,505
Energy Minerals 6.2%
Arch Coal Inc.	195,000		6,078,150
Consol Energy Inc.	235,000		6,086,500
Holly Corp.	60,000		1,650,000
aNuevo Energy Co.	41,100		993,387
Peabody Energy Corp.	165,000		6,882,150
aPioneer Natural Resources Co.	45,000		1,436,850
			23,127,037
Finance 12.2%
American National Insurance Co.	62,100		5,239,377
Arthur J. Gallagher & Co.	190,000		6,173,100
Chemical Financial Corp.	2,300		83,697
Corus Bankshares Inc.	13,000		410,280

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Statement of Investments, December 31, 2003 (cont.)

	SHARES	VALUE
Common Stocks (cont.)
Finance (cont.)
aDollar Thrifty Automotive Group Inc.	120,000	$	3,112,800
First Indiana Corp.	42,500		796,875
Hancock Holding Co.	35,000		1,909,950
Harleysville Group Inc.	95,000		1,889,550
IPC Holdings Ltd. (Bermuda)	107,500		4,186,050
Montpelier Re Holdings Ltd. (Bermuda)	145,000		5,321,500
Peoples Bancorp Inc.	70,350		2,076,029
The PMI Group Inc.	65,000		2,419,950
Presidential Life Corp.	189,200		2,489,872
Protective Life Corp.	68,200		2,307,888
RLI Corp.	110,000		4,120,600
StanCorp Financial Group Inc.	45,000		2,829,600
			45,367,118
Health Technology 2.2%
aSTERIS Corp.	234,800		5,306,480
West Pharmaceutical Services Inc.	85,000		2,881,500
			8,187,980
Industrial Services 7.6%
aAtwood Oceanics Inc.	85,000		2,714,900
ENSCO International Inc.	27,500		747,175
aGlobal Industries Ltd.	912,500		4,699,375
GlobalSantaFe Corp.	17,500		434,525
aLone Star Technologies Inc.	260,000		4,154,800
aOffshore Logistics Inc.	129,300		3,170,436
aOil States International Inc.	245,000		3,415,300
aRowan Cos. Inc.	135,000		3,127,950
aShaw Group Inc.	78,700		1,071,894
Tidewater Inc.	147,500		4,407,300
aTransocean Inc.	13,000		312,130
			28,255,785
Non-Energy Minerals 3.4%
Reliance Steel & Aluminum Co.	200,000		6,642,000
United States Steel Corp.	165,000		5,778,300
			12,420,300
Process Industries 6.3%
AptarGroup Inc.	117,500		4,582,500
Bunge Ltd.	160,000		5,267,200
Cabot Corp.	175,000		5,572,000
Myers Industries Inc.	210,000		2,545,200
RPM International Inc.	325,000		5,349,500
			23,316,400
Producer Manufacturing 16.2%
American Woodmark Corp.	10,600		583,530
aCable Design Technologies Corp.	205,900		1,851,041
Carlisle Cos. Inc.	30,000		1,825,800

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Statement of Investments, December 31, 2003 (cont.)

	SHARES	VALUE
Common Stocks (cont.)
Producer Manufacturing (cont.)
CIRCOR International Inc.	107,100	$	2,581,110
CNH Global NV (Netherlands)	160,000		2,656,000
aGenlyte Group Inc.	50,000		2,919,000
Graco Inc.	96,000		3,849,600
JLG Industries Inc.	195,000		2,969,850
aMettler-Toledo International Inc. (Switzerland)	140,000		5,909,400
aMueller Industries Inc.	150,000		5,154,000
aPowell Industries Inc.	87,700		1,679,455
Roper Industries Inc.	126,600		6,236,316
Stewart & Stevenson Services Inc.	78,000		1,095,900
Superior Industries International Inc.	90,000		3,916,800
Teleflex Inc.	68,000		3,286,440
Thomas Industries Inc.	70,000		2,426,200
Timken Co.	44,800		898,688
aTower Automotive Inc.	89,500		611,285
Watts Water Technologies Inc., A	140,000		3,108,000
York International Corp.	180,000		6,624,000
			60,182,415
Retail Trade 7.0%
aAmerican Eagle Outfitters Inc.	127,500		2,091,000
Dillards Inc., A	370,000		6,090,200
Fresh Brands Inc.	18,000		198,000
aLinens ‘n Things Inc.	147,500		4,436,800
aThe Men’s Wearhouse Inc.	165,000		4,126,650
Pier 1 Imports Inc.	85,000		1,858,100
aWest Marine Inc.	198,900		5,531,409
aZale Corp.	29,000		1,542,800
			25,874,959
Technology Services 1.9%
aNetIQ Corp.	115,000		1,523,750
Reynolds & Reynolds Co., A	195,000		5,664,750
			7,188,500
Transportation 6.2%
aABX Air Inc.	70,000		301,000
aKansas City Southern	65,100		932,232
aOMI Corp.	780,000		6,965,400
Overseas Shipholding Group Inc.	110,000		3,745,500
SkyWest Inc.	250,000		4,530,000
Teekay Shipping Corp. (Bahamas)	115,000		6,558,450
			23,032,582
Utilities .3%
aSierra Pacific Resources Co.	168,000		1,233,120
Total Common Stocks (Cost $261,751,484)			331,047,134
Short Term Investments (Cost $38,324,388) 10.3%
bFranklin Institutional Fiduciary Trust Money Market Portfolio	38,324,388		38,324,388
Total Investments (Cost $300,075,872) 99.6%			369,371,522
Other Assets, less Liabilities .4%			1,360,975
Net Assets 100.0%		$	370,732,497

^a Non-income producing.

^b See Note 6 regarding investments in the Franklin Institutional Fiduciary Trust Money Market Portfolio.

See notes to financial statements.

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Financial Statements

Statement of Assets and Liabilities

December 31, 2003

Assets:
Investments in securities:
Cost	$	300,075,872
Value		369,371,522
Receivables:
Investment securities sold		897,842
Capital shares sold		611,402
Dividends		469,642
Total assets		371,350,408
Liabilities:
Payables:
Funds advanced by custodian		11,071
Capital shares redeemed		249,641
Affiliates		325,864
Other liabilities		31,335
Total liabilities		617,911
Net assets, at value	$	370,732,497
Net assets consist of:
Undistributed net investment income	$	947,707
Net unrealized appreciation (depreciation)		69,295,650
Accumulated net realized gain (loss)		(4,295,419	)
Capital shares		304,784,559
Net assets, at value	$	370,732,497
Class 1:
Net assets, at value	$	37,107,652
Shares outstanding		2,895,945
Net asset value and offering price per share	$	12.81
Class 2:
Net assets, at value	$	333,624,845
Shares outstanding		26,322,982
Net asset value and offering price per share	$	12.67

See notes to financial statements.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN SMALL CAP VALUE SECURITIES FUND

Financial Statements (continued)

Statement of Operations

for the year ended December 31, 2003

Investment income:
Dividends	$	3,192,849
Expenses:
Management fees (Note 3)		1,292,872
Administrative fees (Note 3)		341,811
Distribution fees - Class 2 (Note 3)		508,231
Transfer agent fees		1,809
Custodian fees		2,130
Reports to shareholders		61,400
Professional fees		18,566
Trustees’ fees and expenses		2,082
Other		13,389
Total expenses		2,242,290
Net investment income		950,559
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		(2,905,215	)
Foreign currency transactions		(610	)
Net realized gain (loss)		(2,905,825	)
Net unrealized appreciation (depreciation) on investments		79,386,021
Net realized and unrealized gain (loss)		76,480,196
Net increase (decrease) in net assets resulting from operations	$	77,430,755

See notes to financial statements.

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Financial Statements (continued)

Statements of Changes in Net Assets

for the years ended December 31, 2003 and 2002

	2003			2002
Increase (decrease) in net assets:
Operations:
Net investment income	$	950,559		$	510,537
Net realized gain (loss) from investments and foreign currency transactions		(2,905,825	)		(1,240,229	)
Net unrealized appreciation (depreciation) on investments		79,386,021			(15,328,688	)
Net increase (decrease) in net assets resulting from operations		77,430,755			(16,058,380	)
Distributions to shareholders from:
Net investment income:
Class 1		(92,314	)		(158,450	)
Class 2		(419,082	)		(299,301	)
Net realized gains:
Class 1		—			(959,618	)
Class 2		—			(2,093,611	)
Total distributions to shareholders		(511,396)			(3,510,980	)
Capital share transactions: (Note 2)
Class 1		(270,231	)		1,083,853
Class 2		140,061,392			105,621,633
Total capital share transactions		139,791,161			106,705,486
Net increase (decrease) in net assets		216,710,520			87,136,126
Net assets:
Beginning of year		154,021,977			66,885,851
End of year	$	370,732,497		$	154,021,977
Undistributed net investment income included in net assets:
End of year	$	947,707		$	509,154

See notes to financial statements.

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Notes to Financial Statements

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (the Trust) is registered under the Investment Company Act of 1940 as an open-end investment company, consisting of twenty-two separate series (the Funds). Franklin Small Cap Value Securities Fund (the Fund) included in this report is non-diversified. Shares of the Fund are sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. The Fund’s investment objective is total return.

The following summarizes the Fund’s significant accounting policies.

a. Security Valuation

Securities listed or traded on a recognized national exchange or NASDAQ are valued at the last reported sales price. Over-the-counter securities and listed securities for which no sale is reported are valued within the range of the latest quoted bid and asked prices. Investments in open-end mutual funds are valued at the closing net asset value. Foreign securities are valued at the close of trading of the foreign exchange or the NYSE, whichever is earlier. If events occur that materially affect the values of securities after the prices or foreign exchange rates are determined, or if market quotations are not readily available, the securities will be valued at fair value as determined following procedures approved by the Board of Trustees.

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. Purchases and sales of securities and income items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.

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.

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

c. Income Taxes

No provision has been made for income taxes because the Fund’s policy is to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable income.

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. Certain income from foreign securities is recorded as soon as information is available to the funds. Estimated expenses are accrued daily. Dividend income and distributions to shareholders are recorded on the ex-dividend date.

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. Other expenses are charged to each fund on a specific identification basis.

Realized and unrealized gains and losses and net investment income, other than class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class.

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Notes to Financial Statements (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

e. Accounting Estimates

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

f. Guarantees and Indemnifications

Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust 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. However, based on experience, the Trust expects the risk of loss to be remote.

2. SHARES OF BENEFICIAL INTEREST

The Fund offers two classes of shares: Class 1 and Class 2. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

At December 31, 2003, there were an unlimited number of shares authorized ($.01 par value). Transactions in the Fund’s shares were as follows:

	Year Ended December 31,
	2003					2002
Class 1 Shares:	Shares		Amount			Shares		Amount
Shares sold	535,888		$	5,992,067		1,067,913		$	12,265,267
Shares issued in reinvestment of distributions	8,652			92,314		97,904			1,118,068
Shares redeemed	(608,775	)		(6,354,612	)	(1,177,077	)		(12,299,482	)
Net increase (decrease)	(64,235	)	$	(270,231	)	(11,260	)	$	1,083,853
Class 2 Shares:
Shares sold	16,349,327		$	172,717,267		10,964,657		$	116,028,421
Shares issued in reinvestment of distributions	39,648			419,082		211,202			2,392,912
Shares redeemed	(3,103,212	)		(33,074,957	)	(1,285,701	)		(12,799,700	)
Net increase (decrease)	13,285,763		$	140,061,392		9,890,158		$	105,621,633

3. TRANSACTIONS WITH AFFILIATES

Certain officers and trustees of the Fund are also officers and/or directors of the following entities:

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

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Notes to Financial Statements (continued)

3. TRANSACTIONS WITH AFFILIATES (cont.)

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
.60%	First $200 million
.50%	Over $200 million, up to and including $1.3 billion
.40%	Over $1.3 billion

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

Annualized Fee Rate	Net Assets
.15%	First $200 million
.135%	Over $200 million, up to and including $700 million
.10%	Over $700 million, up to and including $1.2 billion

Fees are further reduced on net assets over $1.2 billion.

The Fund reimburses Distributors up to .25% per year of its average daily net assets of Class 2, for costs incurred in marketing the Fund’s shares.

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

4. INCOME TAXES

At December 31, 2003, the Fund had tax basis capital losses of $4,206,062, which may be carried over to offset future capital gains. Such losses expire as follows:

Capital loss carryovers expiring in:
2010	$	968,401
2011		3,237,661
	$	4,206,062

Net investment income (loss) differs for financial statement and tax purposes primarily due to differing treatment of foreign currency transactions.

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

The tax character of distributions paid during the years ended December 31, 2003 and 2002, was as follows:

	Year Ended December 31,
	2003		2002
Distributions paid from:
Ordinary Income	$	511,396	$	1,793,020
Long term capital gain		—		1,717,960
	$	511,396	$	3,510,980

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Notes to Financial Statements (continued)

4. INCOME TAXES (cont.)

At December 31, 2003, the cost of investments, net unrealized appreciation (depreciation), undistributed ordinary income and undistributed long term capital gains for income tax purposes were as follows:

Cost of investments	$	300,165,229
Unrealized appreciation		73,212,303
Unrealized depreciation		(4,006,010	)
Net unrealized appreciation (depreciation)	$	69,206,293
Undistributed ordinary income	$	947,707
Undistributed long term capital gains		—
Distributable earnings	$	947,707

5. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short-term securities) for the year ended December 31, 2003 aggregated $136,838,800 and $27,329,178, respectfully.

6. INVESTMENT IN FRANKLIN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO

The Fund may invest in the Franklin Institutional Fiduciary Trust Money Market Portfolio (the Sweep Money Fund), an open-end investment company managed by Franklin Advisers, Inc. (an affiliate of the investment manager). Management fees paid by the Fund are reduced on assets invested in the Sweep Money Fund, in an amount not to exceed the management fees paid by the Sweep Money Fund. The Fund earned $134,946 of dividend income from investment in the Sweep Money Fund for the year ended December 31, 2003.

7. REGULATORY MATTERS

On February 4, 2004, the Securities Division of the Office of the Secretary of the Commonwealth of Massachusetts filed an administrative complaint against Franklin Resources, Inc. and certain of its subsidiaries (the “Company”), alleging violations of the Massachusetts Uniform Securities Act. The complaint arises from activity that occurred in 2001 during which time an officer of a Company subsidiary was negotiating an agreement with an investor relating to investments in a mutual fund and a hedge fund.

The Company, in addition to other entities within Franklin Templeton Investments, has been named in shareholder class actions related to the matter described above. The Company believes that the claims made in the lawsuit are without merit and it intends to defend vigorously against the allegations. The Company and the Fund may be named in similar civil actions related to the matter described above.

In addition, as part of ongoing investigations by the U.S. Securities and Exchange Commission (the “SEC”), the U.S. Attorney for the Northern District of California, the New York Attorney General, the California Attorney General, the U.S. Attorney for the District of Massachusetts, the Florida Department of Financial Services, and the Commissioner of Securities and the Attorney General of the State of West Virginia, relating to certain practices in the mutual fund industry, including late trading, market timing and sales compensation arrangements, the Company and its subsidiaries, as well as certain current or former executives and employees of the Company, have received requests for information and/or subpoenas to testify or produce documents. The Company and its current employees are providing documents and information in response to these requests and subpoenas. In addition, the Company has responded to requests for similar kinds of information from regulatory authorities in some of the foreign countries where the Company conducts its global asset management business.

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Notes to Financial Statements (continued)

7. REGULATORY MATTERS (cont.)

The Staff of the SEC has informed the Company that it intends to recommend that the Commission authorize an action against an affiliate of the Fund’s adviser and a senior executive officer relating to the frequent trading issues that are the subject of the SEC’s investigation. These issues were previously disclosed as being under investigation by government authorities and the subject of an internal inquiry by the Company in its Annual Report on Form 10-K and on its public website. The Company currently is in discussions with the SEC Staff in an effort to resolve the issues raised in their investigation. Such discussions are preliminary and the Fund’s management has been advised that the Company cannot predict the likelihood of whether those discussions will result in a settlement and, if so, the terms of such settlement. The impact, if any, of these matters on the Fund is uncertain at this time. If the Company finds that it bears responsibility for any unlawful or improper conduct, it has committed to making the Fund or its shareholders whole, as appropriate.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

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Independent Auditors’ Report

To the Board of Trustees and Shareholders

of Franklin Templeton Variable Insurance Products Trust

In our opinion, the accompanying statement of assets and liabilities, including the statement of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Franklin Small Cap Value Securities Fund (the Fund) (one of the funds constituting the Franklin Templeton Variable Insurance Products Trust) at December 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

February 5, 2004, except for Note 7, as to which the date is February 12, 2004

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Tax Designation (unaudited)

Under Section 854(b)(2) of the Internal Revenue Code, the Fund hereby designates 100.00% of the ordinary income dividends paid as income qualifying for the dividends received deduction for the fiscal year ended December 31, 2003.

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FRANKLIN STRATEGIC INCOME SECURITIES FUND

Fund Goals and Primary Investments: Franklin Strategic Income Securities Fund seeks a high level of current income, with capital appreciation over the long term as a secondary goal. The Fund invests mainly in U.S. and foreign debt securities, including those in emerging markets.

We are pleased to bring you Franklin Strategic Income Securities Fund’s annual report for the fiscal year ended December 31, 2003.

Performance Overview

You can find the Fund’s one-year total return in the Performance Summary following this report. The Fund outperformed its benchmarks, the Lehman Brothers U.S. Aggregate Index and the Lipper Multi-Sector Income Funds Objective Average, which returned 4.10% and 16.11% for the year under review.¹

Economic and Market Overview

During the year ended December 31, 2003, many factors impacted global economies and financial markets. Early in the year, economic uncertainty and geopolitical events, including impending war in Iraq, pushed U.S. interest rates to their lowest level in more four decades, and the 10-year U.S. Treasury note’s yield fell to 3.13% in mid-June. However, following the end of major conflict in Iraq, many economic indicators turned positive. In the U.S., third quarter 2003 gross domestic product (GDP) grew an annualized 8.2%, its strongest pace in nearly 20 years. Overall, 2003 GDP grew an estimated 3.1%. The U.S. trade deficit increased significantly, contributing to the U.S. dollar’s fall to record lows against the euro and other major currencies during the year. However, the weak dollar provided a boost to the U.S. economy and corporate profits as exports became cheaper for foreign buyers. Robust consumer spending, especially for autos and homes, and a rebound in business spending, particularly for equipment and software, contributed to the accelerated economic activity. In addition, U.S. federal spending stayed firm and inflation remained benign. As economic data improved, some interest rates rose from their lows, and the 10-year Treasury note’s yield ended the period at 4.27%.

Foreign economies also showed signs of recovery and benign inflation following a low growth and disinflationary environment that facilitated monetary easing in many major economies during the reporting period.

1. Sources: Standard & Poor’s Micropal; Lipper Inc. One cannot invest directly in an index, nor is an index representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

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

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While economic growth accelerated in the U.S., it remained strong in Asia, and was weak, yet positive, in Europe. Despite these signs of economic recovery, benign inflationary trends continued, supported by cyclical productivity gains and excess capacity in labor and capital.

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 to take advantage of varying sector reactions to economic events. For example, we evaluate business cycles, yield curves, country risk, and the relative interest rates among currencies, and values between and within markets. In selecting debt securities, we conduct our own analysis of the security’s intrinsic value rather than simply relying on the coupon rate or rating.

Manager’s Discussion

Consistent with our investment strategy, we invested across the fixed income market in sectors including high yield and investment grade corporate bonds, international developed and emerging market bonds, U.S. government and agency securities, mortgage- and other asset-backed securities, convertible securities and preferred stocks. The Fund’s performance benefited during the period from its allocation to high yield corporate bonds and preferred stocks, which at period-end represented the largest asset class weighting at 39.4% of total net assets. Over the past year the high yield corporate bond market was driven largely by a combination of improving fundamentals, such as declining corporate default rates and improving credit profiles, along with robust retail and institutional demand for the asset class. During the 12 months under review, yield spreads over Treasury securities in the high yield market compressed from 9.5% at the beginning of the period to 4.9% at the end, benefiting this sector’s performance relative to other fixed income sectors.

Our second-largest exposure at period-end was in international foreign currency government bonds. This asset class benefited from the U.S. dollar’s significant weakness versus other major currencies, albeit while experiencing significant volatility during the reporting period. Moreover, interest rate differentials between certain international government bonds and U.S. Treasury securities narrowed, providing further performance gains relative to U.S. government bonds.

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U.S. dollar-denominated emerging market bonds also delivered strong returns during the period, as this sector’s yield spread over Treasury securities narrowed, at least partially due to stable-to-improving economic and political conditions in many developing countries. For example, in October 2003 Moody’s Investors Service, an independent credit rating agency, upgraded Russia’s sovereign debt to investment grade status. At period-end, Russian government bonds represented one of our largest holdings within the emerging market bond asset class.

Within the more interest rate-sensitive sectors, such as the U.S. government securities market, a moderate rise in domestic interest rates dampened returns. However, the Fund held a relatively low weighting in U.S. government and agency bonds, representing 4.4% of total net assets on December 31, 2003. The Fund had a somewhat heavier exposure to mortgage-backed securities, which generally outperformed the Treasury market as prepayment risk for these securities fell with the rise in interest rates, although nominal returns for mortgage-backed securities were still moderated by the interest rate rise. Finally, similar to the high yield market, investment grade corporate bond issues generally benefited from improved corporate credit fundamentals, reflected in a drop in investment grade corporate yield spreads over comparable Treasury securities by nearly half over the course of the year, from 1.8% at the beginning of the period to less than 1.0% by year-end. Consequently, investment grade corporate bonds outperformed U.S. government bonds during the period. At period-end, investment grade corporate bonds represented 6.9% of the Fund’s total net assets.

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

This discussion reflects our analysis, opinions and portfolio holdings as of December 31, 2003, 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 advisor 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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PERFORMANCE SUMMARYASOF 12/31/03

Total return of Class 2 shares represents the average annual change in value, assuming reinvestment of dividends and capital gains. Average returns smooth out variations in returns, which can be significant; they are not the same as year-by-year results.

Franklin Strategic Income Securities Fund – Class 2*

Periods ended 12/31/03

	1-Year	Since Inception (7/1/99)
Average Annual Total Return	+20.10%	+7.91%

*Because Class 2 shares were not offered until 5/15/01, standardized Class 2 Fund performance for prior periods represents the historical results of Class 1 shares. For periods beginning on 5/15/01, Class 2’s results reflect an additional 12b-1 fee expense, which also affects future performance. Since 5/15/01 (commencement of sales), the average annual total return of Class 2 shares was +9.72%.

Ongoing market volatility can significantly affect short-term performance; recent returns may differ.

Total Return Index Comparison for Hypothetical $10,000 Investment (7/1/99–12/31/03)

The graph compares the performance of Franklin Strategic Income Securities Fund – Class 2,* the Lehman Brothers U.S. Aggregate Index and the Lipper Multi-Sector Income Funds Objective Average. One cannot invest directly in an index, nor is an index representative of the Fund’s portfolio. Please see Important Notes to Performance Information preceding the Fund Summaries.

**Sources: Standard & Poor’s Micropal; Lipper Inc. Please see Index Descriptions following the Fund Summaries.

Franklin Strategic Income Securities Fund – Class 2

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.

Since markets can go down as well as up, investment return and the value of your principal will fluctuate with market conditions, and you may have a gain or loss when you sell your shares.

Past performance does not guarantee future results.

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FRANKLIN STRATEGIC INCOME SECURITIES FUND

Financial Highlights

	Class 1
	Year Ended December 31,
	2003			2002			2001			2000			1999f
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	10.37		$	9.87		$	9.89		$	9.96		$	10.00
Income from investment operations:
Net investment incomea		.65			.73			.76	e		.82			.38
Net realized and unrealized gains (losses)		1.44			(.23	)		(.32	)e		(.33	)		(.12	)
Total from investment operations		2.09			.50			.44			.49			.26
Less distributions from net investment income		(.30	)		—	d		(.46	)		(.56	)		(.30	)
Net asset value, end of year	$	12.16		$	10.37		$	9.87		$	9.89		$	9.96
Total returnb		20.36%			5.12%			4.51%			4.95%			2.61%
Ratios/supplemental data
Net assets, end of year (000’s)	$	359,947		$	102,751		$	43,778		$	11,437		$	4,741
Ratios to average net assets:
Expenses		.65%			.66%			.71%			.75%			.75%	g
Expenses, excluding waiver and payments by affiliate		.65%			.66%			.71%			.99%			1.46%	g
Net investment income		5.69%			7.37%			7.48%	e		8.13%			7.52%	g
Portfolio turnover rate		49.87%			45.78%			35.21%			29.19%			9.96%
Portfolio turnover rate excluding mortgage dollar rollsc		32.74%			40.50%			30.32%			29.19%			9.96%

^a Based on average daily shares outstanding.

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

^c See Note 1(d) regarding mortgage dollar rolls.

^d Includes distributions of net investment income in the amount of $.005.

^e Effective January 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide of Investment Companies and began recording all paydown gains and losses as part of the investment income and amortizing all premium and discount on fixed-income securities, as required. The effect of this change was as follows:

Net investment income per share	$(.018	)
Net realized and unrealized losses per share	.018
Ratio of net investment income to average net assets	(.18	)%

Per share data and ratios for prior periods have not been restated to reflect this change in accounting policy.

^f For the period July 1, 1999 (effective date) to December 31, 1999.

^g Annualized.

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Financial Highlights (continued)

	Class 2
	Year Ended December 31,
	2003			2002			2001e
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	10.29		$	9.82		$	10.14
Income from investment operations:
Net investment incomea		.62			.70			.45	f
Net realized and unrealized gains (losses)		1.43			(.23	)		(.31	)f
Total from investment operations		2.05			.47			.14
Less distributions from net investment income		(.29	)		—	d		(.46	)
Net asset value, end of year	$	12.05		$	10.29		$	9.82
Total returnb		20.10%			4.81%			1.38%
Ratios/supplemental data
Net assets, end of year (000’s)	$	1,841		$	210		$	48
Ratios to average net assets:
Expenses		.90%			.91%			.96%	g
Net investment income		5.44%			7.12%			7.05%	g,f
Portfolio turnover rate		49.87%			45.78%			35.21%
Portfolio turnover rate excluding mortgage dollar rollsc		32.74%			40.50%			30.32%

^a Based on average daily shares outstanding.

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

^c See Note 1(d) regarding mortgage dollar rolls.

^d Includes distributions of net investment income in the amount of $.003.

^e For the period May 15, 2001 (effective date) to December 31, 2001.

^f Effective January 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide of Investment Companies and began recording all paydown gains and losses as part of the investment income and amortizing all premium and discount on fixed-income securities, as required. The effect of this change was as follows:

Net investment income per share	$(.018	)
Net realized and unrealized losses per share	.018
Ratio of net investment income to average net assets	(.18	)%

Per share data and ratios for prior periods have not been restated to reflect this change in accounting policy.

^g Annualized.

See notes to financial statements.

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FRANKLIN STRATEGIC INCOME SECURITIES FUND

Statement of Investments, December 31, 2003

	COUNTRY	SHARES/ WARRANTS		VALUE
Common Stocks and Warrants
aXO Communications Inc.	United States		289	$	1,664
aXO Communications Inc., wts., A, 1/16/10	United States		578		1,127
aXO Communications Inc., wts., B, 1/16/10	United States		434		738
aXO Communications Inc., wts., C, 1/16/10	United States		434		477
Total Common Stocks and Warrants (Cost $183,497)					4,006
Preferred Stock (Cost $2,435,097) .7%
Fresenius Medical Care Capital Trust II, 7.875%, 2/01/08	Germany		2,400,000		2,574,000
Convertible Preferred Stocks 1.7%
Consumer Durables .5%
Ford Motor Co. Capital Trust II, 6.50%, cvt. pfd.	United States		34,000		1,898,900
Electronic Technology .4%
Northrop Grumman, 7.00%, cvt. pfd., B	United States		11,000		1,369,500
Industrial Services .2%
Allied Waste Industries Inc., 6.25%, cvt. pfd.	United States		12,000		918,000
Technology Services .2%
Electronic Data Systems Corp., 7.625%, cvt. pfd.	United States		31,000		710,830
Utilities .4%
FPL Group Inc., 8.50%, cvt. pfd.	United States		24,000		1,385,520
Total Convertible Preferred Stocks (Cost $5,816,907)					6,282,750
		PRINCIPAL AMOUNTd
Bonds 45.6%
Commercial Services 1.2%
Johnsondiversey Inc., senior sub. note B, 9.625%, 5/15/12	United States	$	1,400,000		1,568,000
Johnsondiversey Hold Inc., senior disc. note, 144A, zero cpn. to 5/15/07, 10.67% thereafter, 5/15/13	United States		1,100,000		847,000
Lamar Media Corp., senior sub. note, 7.25%, 1/01/13	United States		1,700,000		1,836,000
					4,251,000
Communications 5.7%
AT&T Wireless Services Inc., senior note, 8.125%, 5/01/12	United States		1,700,000		2,002,854
Dobson Communications Corp., senior note, 10.875%, 7/01/10	United States		700,000		766,500
Dobson Communications Corp., senior note, 144A, 8.875%, 10/01/13	United States		1,000,000		1,017,500
Intelsat Ltd., 144A, 6.50%, 11/01/13	Bahamas		2,400,000		2,508,691
Millicom International Cellular, senior note, 144A, 10.00%, 12/01/13	Luxembourg		1,700,000		1,779,866
Nextel Communications Inc., senior note, 9.375%, 11/15/09	United States		500,000		547,500
Nextel Communications Inc., senior note, 7.375%, 8/01/15	United States		2,500,000		2,700,000
Nextel Partners Inc., senior note, 12.50%, 11/15/09	United States		280,000		326,200
Rural Cellular Corp., senior note, 9.875%, 2/01/10	United States		1,700,000		1,819,000
Time Warner Telecom Inc., senior note, 10.125%, 2/01/11	United States		800,000		856,000
Triton PCS Inc., senior note, 8.50%, 6/01/13	United States		1,700,000		1,836,000
US West Communications Inc., 6.875%, 9/15/33	United States		2,400,000		2,292,000
bWorldCom Inc. WorldCom Group, senior note, 6.95%, 8/15/06	United States		2,700,000		2,193,750
					20,645,861

FSI-7

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FRANKLIN STRATEGIC INCOME SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	COUNTRY	PRINCIPAL AMOUNTd		VALUE
Bonds (cont.)
Consumer Durables 1.7%
D.R. Horton Inc., senior note, 8.50%, 4/15/12	United States	$	2,200,000	$	2,497,000
General Motors, 8.25%, 7/15/23	United States		1,300,000		1,479,815
General Motors, 8.375%, 7/15/33	United States		1,000,000		1,164,303
Simmons, senior sub. note, 144A, 7.875%, 1/15/14	United States		1,100,000		1,111,000
					6,252,118
Consumer Non-Durables 1.6%
Philip Morris Cos. Inc., 7.75%, 1/15/27	United States		1,600,000		1,731,150
Revlon Consumer Products Corp., senior note, 9.00%, 11/01/06	United States		1,200,000		792,000
Smithfield Foods Inc., senior note, 7.75%, 5/15/13	United States		1,700,000		1,776,500
Tyson Foods Inc., senior note, 8.25%, 10/01/11	United States		1,200,000		1,393,516
					5,693,166
Consumer Services 9.9%
Advanstar Communications, senior secured note, 144A, 10.75%, 8/15/10	United States		190,000		2,066,250
AOL Time Warner Inc., 6.75%, 4/15/11	United States		2,000,000		2,237,828
Aztar Corp., senior sub. note, 9.00%, 8/15/11	United States		1,100,000		1,212,750
CanWest Media Inc., senior sub. note, 10.625%, 5/15/11	Canada		700,000		801,500
CanWest Media Inc., senior note, 7.625%, 4/15/13	Canada		1,000,000		1,100,000
Cendant Corp., senior note, 7.375%, 4/15/13	United States		1,500,000		1,722,930
bCentury Communications Corp., senior disc. note, B, zero cpn., 1/15/08	United States		700,000		430,500
Charter Communications Holdings II, senior note, 144A, 10.25%, 9/15/10	United States		2,000,000		2,110,000
Charter Communications Holdings LLC, senior disc. note, zero cpn. to 4/01/04, 9.92% thereafter, 4/01/11	United States		600,000		516,000
CSC Holdings Inc., senior deb., 7.625%, 7/15/18	United States		1,900,000		2,004,500
Dex Media East LLC, senior note, B, 12.125%, 11/15/12	United States		1,000,000		1,235,000
Dex Media West LLC, senior sub. note, 144A, 9.875% 8/15/13	United States		900,000		1,050,750
DIRECTV Holdings/Finance, senior note, 8.375%, 3/15/13	United States		1,800,000		2,097,000
EchoStar DBS Corp., senior note, 10.375%, 10/01/07	United States		1,200,000		1,321,500
EchoStar DBS Corp., senior note, 144A, 6.375%, 10/01/11	United States		1,400,000		1,442,000
Gaylord Entertainment Co, senior note, 144A, 8.00%, 11/15/03	United States		600,000		636,000
Hollywood Park, senior sub. note, B, 9.25%, 2/15/07	United States		1,900,000		1,976,000
Lin Television Corp., senior note, 8.00%, 1/15/08	United States		1,100,000		1,186,625
Lin Television Corp., senior sub. note, 144A, 6.50%, 5/15/13	United States		1,000,000		1,005,000
Meristar Hospitality Corp., senior note, 10.50%, 6/15/09	United States		1,100,000		1,199,000
Park Place Entertainment Corp., senior sub. note, 9.375%, 02/15/07	United States		2,400,000		2,730,000
Quebecor Media Inc., senior disc. note, zero cpn. to 7/15/06, 13.75% thereafter, 7/15/11	Canada		1,700,000		1,506,625
Royal Caribbean Cruises Ltd., senior deb., 7.25%, 3/15/18	United States		2,300,000		2,254,000
Six Flags Inc., senior note, 8.875%, 2/01/10	United States		1,400,000		1,443,750
Station Casinos Inc., senior sub. note, 9.875%, 7/01/10	United States		400,000		442,000
					35,727,508
Electronic Technology 1.0%
Flextronics International Ltd., senior sub. note, 6.50%, 5/15/13	Singapore		2,400,000		2,496,000
Semiconductor Note Part, jr sub. note, 144A, zero cpn., 8/04/11	United States		1,100,000		1,226,500
					3,722,500

FSI-8

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FRANKLIN STRATEGIC INCOME SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	COUNTRY	PRINCIPAL AMOUNTd		VALUE
Bonds (cont.)
Energy Minerals 1.1%
Peabody Energy Corp., senior note, B, 6.875%, 3/15/13	United States	$	2,100,000	$	2,226,000
Westport Resources Corp., senior sub. note, 8.25%, 11/01/11	United States		1,300,000		1,436,500
Westport Resources Corp., senior sub. note, 144A, 8.25%, 11/01/11	United States		400,000		442,000
					4,104,500
Finance 3.1%
Boston Properties Inc., senior note, 5.00%, 6/01/15	United States		2,000,000		1,914,240
Citigroup Inc., sub. note, 5.625%, 8/27/12	United States		1,000,000		1,057,452
Forest City Enterprises., senior note, 7.625%, 6/01/15	United States		1,500,000		1,599,375
General Electric Capital Corp., 6.75%, 3/15/32	United States		1,500,000		1,666,201
Host Marriott LP, senior note, 9.25%, 10/01/07	United States		2,000,000		2,245,000
JP Morgan Chase & Co., sub. note, 5.75%, 1/02/13	United States		1,800,000		1,901,416
Willis Corroon Corp., senior sub. note, 9.00%, 2/01/09	United Kingdom		900,000		949,500
					11,333,184
Health Services 1.4%
Healthsouth Corp., senior note, 8.50%, 2/01/08	United States		1,600,000		1,544,000
bMagellan Health Services Inc., senior sub. note, 9.00%, 2/15/08	United States		600,000		447,000
Tenet Healthcare Corp., senior note, 6.375%, 12/01/11	United States		2,400,000		2,316,000
United Surgical Partners, senior sub. note, 10.00%, 12/15/11	United States		800,000		912,000
					5,219,000
Health Technology .3%
Wyeth, 6.45%, 2/01/24	United States		1,000,000		1,027,703
Industrial Services 2.1%
Allied Waste North America Inc., senior secured note, 144A, 6.50%, 11/15/10	United States		2,000,000		2,060,000
Grant Prideco Escrow, senior note, 9.00%, 12/15/09	United States		1,100,000		1,215,500
Great Lakes Dredge & Dock, senior sub. note, 144A, 7.75%, 12/15/13	United States		300,000		310,125
Hanover Equipment Trust 01, senior secured note, B, 8.75%, 9/01/11	United States		2,200,000		2,343,000
URS Corp., senior note, 11.50%, 9/15/09	United States		1,400,000		1,590,750
					7,519,375
Non-Energy Minerals .8%
Century Aluminum Co., first mortgage, 11.75%, 4/15/08	United States		1,800,000		2,016,000
Oregon Steel Mills Inc., first mortgage, 10.00%, 7/15/09	United States		1,100,000		970,750
					2,986,750
Process Industries 5.2%
Buckeye Technologies Inc., senior note, 144A, 8.50%, 10/01/13	United States		1,400,000		1,505,000
Consolidated Container Co. LLC, senior disc. note, 10.125%, 7/15/09	United States		900,000		549,000
Georgia-Pacific Corp., senior note, 9.375%, 2/01/13	United States		2,100,000		2,425,500
Graham Packaging Co., senior sub. note, B, 8.75%, 1/15/08	United States		900,000		924,750
Graham Packaging Co., senior sub. note, 144A, 8.75%, 1/15/08	United States		800,000		822,000
Graham Packaging Co., senior disc. note, B, 10.75%, 1/15/09	United States		400,000		415,000
Huntsman ICI Chemicals, senior disc. note, zero cpn., 12/31/09	United States		3,500,000		1,706,250
IMC Global Inc., senior note, 144A, 10.875%, 8/01/13	United States		2,100,000		2,310,000
Lyondell Chemical Co., senior secured note, B, 9.875%, 5/01/07	United States		1,000,000		1,060,000
Lyondell Chemical Co., senior secured note, 10.50%, 6/01/13	United States		1,400,000		1,533,000
Nalco Co., senior sub. note, 144A, 8.875%, 11/15/13	United States		1,700,000		1,810,500
Owens-Illinois Inc., senior note, 7.80%, 5/15/18	United States		2,300,000		2,389,125
Stone Container Corp., senior note, 8.375%, 7/01/12	United States		1,200,000		1,308,000
					18,758,125

FSI-9

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN STRATEGIC INCOME SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	COUNTRY	PRINCIPAL AMOUNTd		VALUE
Bonds (cont.)
Producer Manufacturing 3.8%
Case New Holland Inc., senior note, 144A, 9.25%, 8/01/11	United States	$	2,000,000	$	2,250,000
Case New Holland Inc., senior note, 144A, 9.25%, 8/01/11	United States		500,000		562,500
Cummins Inc., senior note, 144A, 9.50%, 12/01/10	United States		1,700,000		1,967,750
Hutchison Whampoa International Ltd., senior note, 144A, 6.25%, 1/24/14	Hong Kong		2,500,000		2,544,105
Fimep SA, senior note, 10.50%, 2/15/13	France		1,700,000		1,983,475
Motors & Gears, senior note, 10.75%, 11/15/06	United States		1,300,000		1,111,500
Norcraft Cos./Finance, senior sub. note, 144A, 9.00%, 11/01/11	United States		800,000		868,000
TRW Automotive Inc., senior note, 9.375%, 2/15/13	United States		1,300,000		1,491,750
TRW Automotive Inc., senior sub. note, 11.00%, 2/15/13	United States		700,000		827,750
					13,606,830
Retail Trade 1.2%
Delhaize America Inc., 9.00%, 4/15/31	United States		1,600,000		1,952,000
Kroger Co., senior note, 6.80%, 4/01/11	United States		700,000		784,557
Rite Aid Corp., 7.70%, 2/15/27	United States		1,800,000		1,656,000
					4,392,557
Transportation 1.2%
CP Ships Ltd., senior note, 10.375%, 7/15/12	United Kingdom		1,300,000		1,514,500
Laidlaw International Inc., senior note, 144A, 10.75%, 6/15/11	United States		1,400,000		1,589,000
United Air Lines, 7.73%, 7/01/10	United States		1,700,000		1,407,610
					4,511,110
Utilities 4.3%
AES Corp., senior secured note, 144A, 9.00%, 5/15/15	United States		1,900,000		2,156,500
Calpine Corp., senior secured note, 144A, 8.75%, 7/15/13	United States		2,200,000		2,156,000
CMS Energy Corp., senior note, 7.50%, 1/15/09	United States		2,000,000		2,070,000
Dynegy Holdings Inc., senior note, 8.75%, 2/15/12	United States		2,200,000		2,230,250
Edison Mission, 9.875%, 4/15/11	United States		1,100,000		1,149,500
Firstenergy Corp., senior note, 7.375%, 11/15/31	United States		1,700,000		1,745,298
Utilicorp United Inc., senior note, 9.95%, 2/01/11	United States		1,900,000		2,037,750
Williams Cos., senior note, 8.625%, 6/01/10	United States		1,600,000		1,804,000
					15,349,298
Total Bonds (Cost $153,532,664)					165,100,585
Convertible Bonds 1.6%
Consumer Services .4%
bAdelphia Communications Corp., junior sub. note, cvt., 6.00%, 2/15/06	United States		450,000		198,000
Liberty Media Corp. into Motorola, senior deb., cvt., 3.50%, 1/15/31	United States		1,700,000		1,432,250
					1,630,250
Electronic Technology 1.2%
Fairchild Semiconductor Corp., cvt., 5.00%, 11/01/08	United States		1,100,000		1,215,500
Nortel Networks Corp., senior note, cvt., 4.25%, 9/01/08	Canada		2,200,000		2,092,750
SCI Systems Inc., cvt., sub. note, 3.00%, 3/15/07	United States		1,000,000		950,000
					4,258,250
Total Convertible Bonds (Cost $5,413,150)					5,888,500

FSI-10

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN STRATEGIC INCOME SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	COUNTRY	PRINCIPAL AMOUNTd		VALUE
Other Mortgages/Asset Backed Securities 1.3%
Centex Home Equity Loan Trust, 1999-1, A4, 6.39%, 10/25/27	United States	$	318,238	$	329,820
Chase Funding Mortgage, Loan Asset Backed Certificates, CFAB, 2003-6, 4.499%, 8/25/2030	United States		2,200,000		2,202,967
Green Tree Financial Corp., 1993-4, B1, 7.20%, 1/15/19	United States		16,819		17,025
Keystone Owner Trust, 1997-P3, M2, 144A, 7.98%, 12/25/24	United States		165,195		168,675
Morgan Stanley, 2003-HB1, D, 144A, 5.50%, 4/15/11	United States		792,000		759,330
Residential Asset Securities Corp., 2002-KS8, A4, 4.58%, 11/25/30	United States		1,000,000		1,023,018
Total Other Mortgages/Asset Backed Securities (Cost $4,453,423)					4,500,835
U.S. Government and Agency Securities 15.1%
Other U.S. Government and Agencies Securities 2.6%
FHLMC, 2.375%, 4/15/06	United States		1,700,000		1,707,652
FHLMC, 2.875%, 12/15/06	United States		1,430,000		1,441,266
FHLMC, 7.00%, 3/15/10	United States		300,000		350,523
FHLMC, 5.50%, 9/15/11	United States		300,000		323,049
FHLMC, 4.50%, 1/15/13	United States		1,580,000		1,574,911
FNMA, 6.00%, 12/15/05	United States		500,000		538,689
FNMA, 5.25%, 6/15/06	United States		900,000		963,310
FNMA, 5.00%, 1/15/07	United States		900,000		961,389
FNMA, 5.25%, 1/15/09	United States		250,000		269,359
FNMA, 6.625%, 11/15/10	United States		350,000		402,706
FNMA, 6.00%, 05/15/11	United States		500,000		555,003
FNMA, 6.625%, 11/15/30	United States		300,000		342,206
					9,430,063
U.S. Government Agencies/Mortgages 10.7%
FHLMC, 6.50%, 5/01/16	United States		67,998		72,044
FHLMC, 6.00%, 5/01/17	United States		119,795		125,746
FHLMC, 5.50%, 7/01/17	United States		238,871		247,837
FHLMC, 5.50%, 9/01/17	United States		256,006		265,615
FHLMC, 5.00%, 12/01/17	United States		368,238		375,493
FHLMC, 4.50%, 10/01/18	United States		497,549		498,224
cFHLMC, 4.50%, 1/01/19	United States		1,500,000		1,500,000
FHLMC, 7.00%, 9/01/21	United States		418,768		443,822
FHLMC, 6.50%, 12/01/23	United States		82,218		86,610
FHLMC, 6.50%, 11/01/27	United States		426,250		448,481
FHLMC, 7.50%, 3/01/30	United States		18,302		19,659
FHLMC, 7.00%, 4/01/30	United States		113,102		119,794
FHLMC, 7.50%, 8/01/30	United States		5,648		6,068
FHLMC, 7.50%, 7/01/31	United States		42,745		45,917
FHLMC, 6.50%, 10/01/31	United States		202,518		212,188
FHLMC, 7.00%, 1/01/32	United States		171,700		181,720
FHLMC, 6.50%, 6/01/32	United States		194,669		203,980
FHLMC, 7.00%, 6/01/32	United States		145,111		153,579
FHLMC, 6.50%, 7/01/32	United States		372,079		389,874
FHLMC, 6.00%, 1/01/33	United States		4,788,934		4,952,348
FHLMC, 5.50%, 3/01/33	United States		453,372		459,235
FHLMC, 5.00%, 5/01/33	United States		474,907		469,163
FHLMC, 5.00%, 6/01/33	United States		398,460		393,640
FHLMC, 5.50%, 6/01/33	United States		1,433,421		1,451,918
FHLMC, 5.00%, 7/01/33	United States		158,824		156,903
FHLMC, 5.50%, 7/01/33	United States		1,643,582		1,664,792
FHLMC, 5.00%, 9/01/33	United States		841,275		831,100

FSI-11

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN STRATEGIC INCOME SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	COUNTRY	PRINCIPAL AMOUNTd		VALUE
U.S. Government and Agency Securities (cont.)
U.S. Government Agencies/Mortgages (cont.)
FHLMC, 5.00%, 10/01/33	United States	$	2,405,839	$	2,376,739
FHLMC, 5.50%, 10/01/33	United States		719,060		728,339
FHLMC, 5.50%, 11/01/33	United States		499,691		506,139
cFHLMC, 5.00%, 1/01/34	United States		1,300,000		1,283,344
FNMA, 7.00%, 5/01/12	United States		16,566		17,706
FNMA, 6.00%, 4/01/16	United States		25,079		26,341
FNMA, 6.00%, 7/01/16	United States		110,848		116,428
FNMA, 5.50%, 10/01/16	United States		29,511		30,628
FNMA, 5.00%, 10/01/17	United States		244,288		249,524
FNMA, 5.50%, 12/01/17	United States		244,781		254,005
FNMA, 5.00%, 6/01/18	United States		1,867,288		1,907,485
FNMA, 6.50%, 6/01/28	United States		713,325		747,123
FNMA, 7.00%, 2/01/29	United States		38,692		41,048
FNMA, 6.50%, 5/01/31	United States		181,185		189,551
FNMA, 6.50%, 8/01/31	United States		59,935		62,704
FNMA, 7.50%, 9/01/31	United States		130,936		139,957
FNMA, 6.50%, 12/01/31	United States		207,457		217,041
FNMA, 7.00%, 1/01/32	United States		39,710		42,057
FNMA, 6.50%, 4/01/32	United States		139,731		146,201
FNMA, 6.50%, 6/01/32	United States		50,855		53,210
FNMA, 6.50%, 8/01/32	United States		616,266		644,793
FNMA, 6.50%, 9/01/32	United States		146,193		152,947
FNMA, 6.00%, 4/01/33	United States		948,474		981,125
FNMA, 5.00%, 6/01/33	United States		942,475		933,431
FNMA, 5.50%, 8/01/33	United States		647,212		656,171
FNMA, 5.50%, 11/01/33	United States		1,980,035		2,007,443
GNMA, 7.50%, 1/20/28	United States		100,776		107,452
GNMA, 7.00%, 10/15/28	United States		529,089		564,962
GNMA, 7.00%, 2/15/29	United States		52,045		55,522
GNMA, 7.50%, 9/15/30	United States		21,241		22,805
GNMA, 6.50%, 4/15/31	United States		34,222		36,041
GNMA, 6.50%, 11/15/31	United States		89,273		94,196
GNMA, 6.50%, 1/20/32	United States		522,884		550,391
GNMA, 6.50%, 2/15/32	United States		29,186		30,780
GNMA, 6.50%, 2/20/32	United States		223,694		235,461
GNMA, 7.50%, 4/20/32	United States		455,357		485,095
GNMA, 6.50%, 5/20/32	United States		71,151		74,894
GNMA, 7.00%, 6/15/32	United States		123,053		131,175
GNMA, 5.50%, 1/15/33	United States		255,338		259,935
GNMA, 6.00%, 1/15/33	United States		787,500		819,394
GNMA, 6.50%, 1/20/33	United States		327,494		344,728
GNMA, 7.00%, 2/20/33	United States		2,439,618		2,592,997
GNMA, 5.50%, 6/15/33	United States		1,015,115		1,033,388
GNMA, 5.00%, 9/15/33	United States		299,006		296,051
GNMA, 5.00%, 11/20/33	United States		717,845		710,703
GNMA, SF, 8.00%, 6/15/26	United States		19,432		21,215
					38,754,415

FSI-12

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN STRATEGIC INCOME SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	COUNTRY	PRINCIPAL AMOUNTd			VALUE
U.S. Government and Agency Securities (cont.)
U.S. Government Securities 1.8%
U.S. Treasury Bond, 5.375%, 2/15/31	United States	$	500,000		$	521,582
U.S. Treasury Bond, 6.125%, 11/15/27	United States		150,000			169,160
U.S. Treasury Note, 1.625%,10/31/05	United States		700,000			699,126
U.S. Treasury Note, 2.00%, 5/15/06	United States		1,000,000			1,000,508
U.S. Treasury Note, 3.00%, 11/15/07	United States		1,500,000			1,513,361
U.S. Treasury Note, 4.00%, 11/15/12	United States		150,000			148,606
U.S. Treasury Note, 4.375%, 8/15/12	United States		1,570,000			1,601,646
U.S. Treasury Note, 5.625%, 5/15/08	United States		600,000			664,828
						6,318,817
Total U.S. Government and Agency Securities (Cost $54,079,332)						54,503,295
Foreign Government and Agency Securities 30.4%
New South Wales Treasury Corp., 6.50%, 5/01/06	Australia		983,000	AUD		755,231
New South Wales Treasury Corp., 8.00%, 3/01/08	Australia		1,321,000	AUD		1,079,587
New South Wales Treasury Corp., 6.00%, 5/01/12	Australia		1,570,000	AUD		1,196,288
Queensland Treasury Corp., 6.00%, 7/14/09	Australia		3,820,000	AUD		2,927,823
Queensland Treasury Corp., 6.00%, 8/14/13	Australia		1,220,000	AUD		934,558
Republic of Austria, 4.00%, 7/15/09	Austria		700,000	EUR		896,176
Republic of Austria, 5.00%, 7/15/12	Austria		40,000	EUR		53,301
Republic of Austria, 4.65%, 1/15/18	Austria		1,500,000	EUR		1,900,921
Kingdom of Belgium, 4.75%, 9/28/06	Belgium		100,000	EUR		131,981
Kingdom of Belgium, 7.50%, 7/29/08	Belgium		146,000	EUR		214,746
Kingdom of Belgium, 5.00%, 9/28/12	Belgium		790,000	EUR		1,051,573
Republic of Bulgaria, 144A, 8.25%, 1/15/15	Bulgaria		1,078,000			1,276,999
Republic of Bulgaria, Reg S, 8.25%, 1/15/15	Bulgaria		270,000			320,706
Government of Canada, 5.25%, 6/01/12	Canada		160,000	CAD		129,860
Republic of Colombia, 10.00%, 1/23/12	Colombia		320,000			351,301
Republic of Columbia, 10.75%, 1/15/13	Colombia		640,000			718,752
Republic of Colombia, 11.75%, 2/25/20	Colombia		1,110,000			1,322,958
Kingdom of Denmark, 5.00%, 8/15/05	Denmark		1,729,000	DKK		303,644
Kingdom of Denmark, 6.00%, 11/15/09	Denmark		2,390,000	DKK		448,898
Kingdom of Denmark, 5.00%, 11/15/13	Denmark		5,890,000	DKK		1,039,928
Government of Finland, 5.00%, 7/04/07	Finland		330,000	EUR		440,535
Government of Finland, 5.75%, 2/23/11	Finland		50,000	EUR		69,867
Government of Finland, 5.375%, 7/04/13	Finland		1,625,000	EUR		2,222,897
Government of France, 3.00%, 7/12/08	France		500,000	EUR		618,189
Government of France, 4.00%, 4/25/09	France		1,130,000	EUR		1,451,625
Government of France, 4.00%, 10/25/09	France		1,443,000	EUR		1,844,337
Government of France, 4.00%, 4/25/13	France		2,365,000	EUR		2,926,971
Bundesrepublik Deutschland Board, 3.75%, 1/04/09	Germany		1,070,000	EUR		1,362,738
Federal Republic of Germany, 6.00%, 7/04/07	Germany		580,000	EUR		798,524
Federal Republic of Germany, 4.50%, 7/04/09	Germany		192,000	EUR		252,157
Federal Republic of Germany, 5.00%, 7/04/11	Germany		551,000	EUR		736,514
Hellenic Republic, 6.50%, 10/22/19	Greece		1,000,000	EUR		1,488,711
Indonesia Recapital, 14.00%, 6/15/09	Indonesia		7,750,000,000	IDR		954,200
Indonesia Recapital, 13.15%, 3/15/10	Indonesia		13,925,000,000	IDR		1,661,576
Buoni Poliennali Del Tesoro, 7.75%, 11/01/06	Italy		300,000	EUR		424,495
Buoni Poliennali Del Tesoro, 6.75%, 2/01/07	Italy		130,000	EUR		181,357
Buoni Poliennali Del Tesoro, 4.50%, 5/01/09	Italy		80,000	EUR		104,854
Buoni Poliennali Del Tesoro, 5.50%, 11/01/10	Italy		43,000	EUR		59,116
United Mexican States, 8.625%, 3/12/08	Mexico		100,000			118,150
United Mexican States, 10.375%, 2/17/09	Mexico		134,000			170,012
United Mexican States, 9.875%, 2/01/10	Mexico		1,612,000			2,030,620
United Mexican States, 11.375%, 9/15/16	Mexico		1,612,000			2,293,876

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Statement of Investments, December 31, 2003 (cont.)

	COUNTRY	PRINCIPAL AMOUNTd			VALUE
Foreign Government and Agency Securities (cont.)
United Mexican States, 8.125%, 12/30/19	Mexico	$	2,030,000		$	2,272,341
United Mexican States, 8.00% 09/24/22	Mexico		280,000			305,060
United Mexican States, 11.50%, 5/15/26	Mexico		1,600,000			2,324,000
Government of Netherlands, 5.75%, 2/15/07	Netherlands		170,000	EUR		231,241
Government of Netherlands, 3.75%, 7/15/09	Netherlands		80,000	EUR		101,251
Government of Netherlands, 5.00%, 7/15/12	Netherlands		250,000	EUR		333,470
Government of Netherlands, 4.25% 7/15/13	Netherlands		90,000	EUR		113,158
Government of New Zealand, 8.00%, 11/15/06	New Zealand		300,000	NZD		208,764
Government of New Zealand, 7.00%, 7/15/09	New Zealand		4,590,000	NZD		3,176,605
Government of New Zealand, 6.00%, 11/15/11	New Zealand		1,600,000	NZD		1,058,231
Government of New Zealand, 6.50%, 4/15/13	New Zealand		4,010,000	NZD		2,740,241
Kingdom of Norway, 6.75%, 1/15/07	Norway		8,725,000	NOK		1,440,306
Kingdom of Norway, 5.50%, 5/15/09	Norway		6,800,000	NOK		1,093,021
Republic of Panama, 8.875%, 9/30/27	Panama		95,000			100,225
Republic of Panama, 9.375%, 4/01/29	Panama		75,000			84,516
Republic of Peru, 9.125%, 1/15/08	Peru		10,000			11,800
Republic of Peru, 9.875%, 2/06/15	Peru		380,000			442,820
Republic of Peru, FRN, 5.00%, 3/07/17	Peru		190,820			178,115
Republic of Philippines, 9.875%, 3/16/10	Philippines		630,000			698,544
Republic of Philippines, 9.00%, 2/15/13	Philippines		1,370,000			1,430,759
Republic of Philippines, 10.625%, 3/16/25	Philippines		2,542,000			2,804,144
Federation of Russia, 144A, 12.75%, 6/24/28	Russia		140,000			222,950
Federation of Russia, 5.00%, 3/31/30	Russia		5,030,000			4,866,525
Federation of Russia, Reg S, 11.00%, 7/24/18	Russia		840,000			1,138,683
Federation of Russia, Reg S, 5.00%, 3/31/30	Russia		7,105,000			6,826,129
Korea Treasury Bond, 4.75%, 3/12/08	South Korea		8,200,000,000	KRW		6,926,646
Republic of South Africa, 7.375%, 4/25/12	South Africa		30,000			33,759
Republic of South Africa, 8.50%, 6/23/17	South Africa		200,000			240,750
Bonos Y Oblig Del Estado, 3.25%, 1/31/05	Spain		573,000	EUR		730,777
Bonos Y Oblig Del Estado, 6.00%, 1/31/08	Spain		80,000	EUR		111,116
Bonos Y Oblig Del Estado, 5.15%, 7/30/09	Spain		210,000	EUR		284,374
Government of Spain, 10.15%, 1/31/06	Spain		58,000	EUR		84,037
Government of Spain, 4.80%, 10/31/06	Spain		100,000	EUR		132,480
Government of Spain, 5.00%, 7/30/12	Spain		350,000	EUR		466,461
Kingdom of Sweden, 6.00%, 2/09/05	Sweden		12,890,000	SEK		1,849,848
Kingdom of Sweden, 3.50%, 4/20/06	Sweden		6,400,000	SEK		891,709
Kingdom of Sweden, 6.50%, 5/05/08	Sweden		2,400,000	SEK		366,411
Kingdom of Sweden, 5.00%, 1/28/09	Sweden		13,685,000	SEK		1,976,035
Kingdom of Sweden, 5.50%, 10/08/12	Sweden		21,390,000	SEK		3,151,536
Kingdom of Sweden, 6.75%, 5/05/14	Sweden		9,710,000	SEK		1,562,995
Kingdom of Thailand, 6.00%, 3/05/05	Thailand		63,500,000	THB		1,687,850
Kingdom of Thailand, 8.50%, 10/14/05	Thailand		188,500,000	THB		5,328,524
Kingdom of Thailand, 4.125%, 2/12/08	Thailand		17,000,000	THB		455,564
Kingdom of Thailand, 8.50%, 12/08/08	Thailand		14,000,000	THB		446,209
Republic of Ukraine, 144A, 7.65%, 6/11/13	Ukraine		3,800,000			3,957,928
cRepublic of Ukraine, Reg S, 11.00%, 3/15/07	Ukraine		98,001			109,487
Ukraine Republic Of, Reg S, 7.65%, 6/11/13	Ukraine		2,000,000			2,083,120
United Kingdom, 7.50%, 12/07/06	United Kingdom		332,000	GBP		643,394
Republic of Venezuela, 144A, 10.75%, 9/19/13	Venezuela		200,000			213,000
Republic of Venezuela, 9.25%, 9/15/27	Venezuela		2,137,000			1,948,014
cRepublic of Vietnam, 4.00%, 3/12/16	Vietnam		700,000			647,500
Total Foreign Government and Agency Securities (Cost $98,561,433)						109,798,975

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Statement of Investments, December 31, 2003 (cont.)

	COUNTRY	PRINCIPAL AMOUNTd		VALUE
Municipal Bond (Cost $1,816,961) .5%
California St G.O., 5.5, 11/01/33	United States	$	1,800,000	$	1,843,758
Total Long Term Investments (Cost $326,292,464)					350,496,704
Short Term Investments (Cost $10,584,979) 2.9%
eFranklin Institutional Fiduciary Trust Money Market Portfolio	United States		10,584,979		10,584,979
Total Investments (Cost $336,877,443) 99.8%					361,081,683
Other Assets, less Liabilities .2%					706,386
Net Assets 100.0%				$	361,788,069

Currency Abbreviations:

AUD - Australian Dollar

CAD - Canadian Dollar

DKK - Danish Krone

EUR - Euro

GBP - British Pound

IDR - Indonesian Rupiah

KRW - South Korean Won

NOK - Norwegian Krone

NZD - New Zealand Dollar

SEK - Swedish Krona

THB - Thai Baht

^a Non-income producing.                                                                                              

^b The fund discontinues accruing income on defaulted securities. See Note 7.

^c See Note 1c regarding securities purchased on a when-issued, delayed delivery, or to-be-announced basis.

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

^e See Note 6 regarding investments in the Franklin Institutional Fiduciary Trust Money Market Portfolio.

See notes to financial statements.

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Financial Statements

Statement of Assets and Liabilities

December 31, 2003

Assets:
Investments in securities:
Cost	$	336,877,443
Value		361,081,683
Receivables:
Capital shares sold		320,598
Dividends and Interest		6,219,946
Total assets		367,622,227
Liabilities:
Payables:
Investment securities purchased		5,615,491
Capital shares redeemed		335
Affiliates		180,622
Other liabilities		37,710
Total liabilities		5,834,158
Net assets, at value	$	361,788,069
Net assets consist of:
Undistributed net investment income	$	12,709,647
Net unrealized appreciation (depreciation)		24,297,301
Accumulated net realized gain (loss)		586,184
Capital shares		324,194,937
Net assets, at value	$	361,788,069
Class 1:
Net assets, at value	$	359,947,225
Shares outstanding		29,599,047
Net asset value and offering price per share	$	12.16
Class 2:
Net assets, at value	$	1,840,844
Shares outstanding		152,749
Net asset value and offering price per share	$	12.05

See notes to financial statements.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

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Financial Statements (continued)

Statement of Operations

for the year ended December 31, 2003

Investment income:
Dividends	$	536,552
Interest		13,401,094
Total investment income		13,937,646
Expenses:
Management fees (Note 3)		878,257
Administrative fees (Note 3)		438,471
Distribution fees - Class 2 (Note 3)		1,617
Transfer agent fees		1,590
Custodian fees		32,166
Reports to shareholders		29,273
Professional fees		21,046
Trustees’ fees and expenses		2,512
Other		22,509
Total expenses		1,427,441
Net investment income		12,510,205
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		3,664,506
Foreign currency transactions		174,104
Net realized gain (loss)		3,838,610
Net unrealized appreciation (depreciation) on:
Investments		23,091,276
Translation of assets and liabilities denominated in foreign currencies		76,209
Net unrealized appreciation (depreciation)		23,167,485
Net realized and unrealized gain (loss)		27,006,095
Net increase (decrease) in net assets resulting from operations	$	39,516,300

See notes to financial statements.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

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Financial Statements (continued)

Statements of Changes in Net Assets

for the year ended December 31, 2003 and 2002

	2003		2002
Increase (decrease) in net assets:
Operations:
Net investment income	$  12,510,205		$	4,811,707
Net realized gain (loss) from investments and foreign currency transactions	3,838,610			(2,129,248	)
Net unrealized appreciation (depreciation) on investments and translation of assets and liabilities denominated in foreign currencies	23,167,485			2,001,936
Net increase (decrease) in net assets resulting from operations	39,516,300			4,684,395
Distributions to shareholders from:
Net investment income:
Class 1	(5,519,539	)		(29,968	)
Class 2	(8,268	)		(32	)
Total distributions to shareholders	(5,527,807)			(30,000	)
Capital share transactions: (Note 2)
Class 1	223,318,963			54,327,713
Class 2	1,519,523			153,014
Total capital share transactions	224,838,486			54,480,727
Net increase (decrease) in net assets	258,826,979			59,135,122
Net assets:
Beginning of year	102,961,090			43,825,968
End of year	$361,788,069		$	102,961,090
Undistributed net investment income included in net assets:
End of year	$  12,709,647		$	4,835,092

See notes to financial statements.

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FRANKLIN STRATEGIC INCOME SECURITIES FUND

Notes to Financial Statements

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (the Trust) is registered under the Investment Company Act of 1940 as an open-end investment company, consisting of twenty-two separate series (the Funds). Franklin Strategic Income Securities Fund (the Fund) included in this report is non-diversified. Shares of the Fund are sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. As of December 31, 2003, over 99% of the Fund’s shares were sold through one insurance company. The Fund’s investment objective is to obtain a high level of current income while seeking capital appreciation.

The following summarizes the Fund’s significant accounting policies.

a. Security Valuation

Securities listed or traded on a recognized national exchange or NASDAQ are valued at the last reported sales price. Over-the-counter securities and listed securities for which no sale is reported are valued within the range of the latest quoted bid and asked prices. Investments in open-end mutual funds are valued at the closing net asset value. Foreign securities are valued at the close of trading of the foreign exchange or the NYSE, whichever is earlier. If events occur that materially affect the values of securities after the prices or foreign exchange rates are determined, or if market quotations are not readily available, the securities will be valued at fair value as determined following procedures approved by the Board of Trustees.

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. Purchases and sales of securities and income items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.

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.

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, Delayed Delivery, or TBA Basis

The Fund may purchase securities on a when-issued, delayed delivery, or to-be-announced (TBA) basis, with payment and delivery scheduled for a future date. These transactions are subject to market fluctuations and are subject to the risk that the value at delivery may be more or less than the trade date purchase price. 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. Mortgage Dollar Rolls

The Fund enters into mortgage dollar rolls, typically on a TBA basis. Dollar rolls are agreements between the Fund and a financial institution to simultaneously sell and repurchase a mortgage-backed security at a future date. Gains or losses are realized at the time of the sale and the difference between the repurchase price and sale price is recorded as an unrealized gain to the Fund. The risks of mortgage dollar roll transactions include the potential inability of the counterparty to fulfill their obligations.

e. Income Taxes

No provision has been made for income taxes because the Fund’s policy is to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable income.

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FRANKLIN STRATEGIC INCOME SECURITIES FUND

Notes to Financial Statements (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

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. Discounts and premiums on securities purchased are amortized over the lives of the respective securities. Dividend income and distributions to shareholders are recorded on the ex-dividend date.

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. Other expenses are charged to each fund on a specific identification basis.

Realized and unrealized gains and losses and net investment income, other than class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class.

g. Accounting Estimates

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

h. Guarantees and Indemnifications

Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust 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. However, based on experience, the Trust expects the risk of loss to be remote.

2. SHARES OF BENEFICIAL INTEREST

The Fund offers two classes of shares: Class 1 and Class 2. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class, and its exchange privilege.

At December 31, 2003, there were an unlimited number of shares authorized ($.01 par value). Transactions in the Fund’s shares were as follows:

	Year Ended December 31,
	2003					2002
	Shares		Amount			Shares		Amount
Class 1 Shares:
Shares sold	19,399,863		$	219,913,794		5,630,598		$	56,469,809
Shares issued in reinvestment of distributions	479,960			5,519,538		3,021			29,968
Shares redeemed	(188,670	)		(2,114,369	)	(220,896	)		(2,172,064	)
Net increase (decrease)	19,691,153		$	223,318,963		5,472,723		$	54,327,713
Class 2 Shares:
Shares sold	181,906		$	2,090,164		18,004		$	177,242
Shares issued in reinvestment of distributions	724			8,268		3			32
Shares redeemed	(50,283	)		(578,909	)	(2,460	)		(24,260	)
Net increase (decrease)	132,347		$	1,519,523		15,547		$	153,014

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

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Notes to Financial Statements (continued)

3. TRANSACTIONS WITH AFFILIATES

Certain officers and trustees of the Trust are also officers and/or directors of the following entities:

Entity	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

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
.425%	First $500 million
.325%	Over $500 million, up to and including $1 billion
.280%	Over $1 billion, up to and including $1.5 billion

Fees are further reduced on assets over $1.5 billion.

The Fund pays an administrative fee to FT Services of .20% per year of the Fund’s average daily net assets.

The Fund reimburses Distributors up to .25% per year of the average daily net assets of Class 2 for costs incurred in marketing the Fund’s shares.

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

4. INCOME TAXES

The tax character of distributions paid during the years ended December 31, 2003 and 2002, was as follows:

	2003		2002
Distribution paid from ordinary income	$	5,527,807	$	30,000

Net investment income (loss) differs for financial statement and tax purposes primarily due to differing treatments of defaulted securities, foreign currency transactions, mortgage dollar rolls, paydown losses, and bond discounts and premiums.

Net realized gains (losses) differ for financial statement and tax purposes primarily due to differing treatments of wash sales, foreign currency transactions, mortgage dollar rolls, paydown losses, and bond discounts and premiums.

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Notes to Financial Statements (continued)

4. INCOME TAXES (cont.)

At December 31, 2003, the cost of investments, net unrealized appreciation (depreciation), undistributed ordinary income, and undistributed long term capital gains for income tax purposes was as follows:

Cost of Investments	$	337,539,573
Unrealized appreciation	$	24,944,158
Unrealized depreciation		(1,402,048	)
Net unrealized appreciation (depreciation)	$	23,542,110
Undistributed ordinary income	$	13,740,612
Undistributed long-term capital gains		258,001
Distributable earnings	$	13,998,613

5. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short-term securities) for the year ended December 31, 2003 aggregated $335,384,810 and $103,414,082 respectively.

6. INVESTMENT IN FRANKLIN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO

The Fund may invest in the Franklin Institutional Fiduciary Trust Money Market Portfolio (the Sweep Money Fund), an open-end investment company managed by Advisers. Management fees paid by the Fund are reduced on assets invested in the Sweep Money Fund, in an amount not to exceed the management fees paid by the Sweep Money Fund. The Fund earned $132,246 of dividend income from investment in the Sweep Money Fund for the year ended December 31, 2003.

7. CREDIT RISK AND DEFAULTED SECURITIES

The Fund has 51.7% of its portfolio invested in below investment grade and comparable quality unrated high yield securities, which tend to be more sensitive to economic conditions than higher rated securities. The risk of loss due to default by the issuer may be significantly greater for the holders of high yielding securities because such securities are generally unsecured and are often subordinated to other creditors of the issuer.

The Fund held defaulted and/or other securities for which the income has been deemed uncollectible. The Fund discontinues accruing income on these securities and provides an estimate for losses on interest receivable. At December 31, 2003, the value of these securities was $3,269,250 representing .9% of the Fund’s net assets. For information as to specific securities see the accompanying Statement of Investments.

8. OTHER CONSIDERATIONS

Advisers, as the Fund’s Manager, may serve as a member of various bondholders’ steering committees, on credit committees, or may represent the Fund in certain corporate restructuring negotiations. Currently the Manager serves in one or more of these capacities for Adelphia Communications, Century Communications, Magellan Health Services, and United Air Lines. As a result of this involvement, Advisers may be in possession of certain material non-public information. If the Fund’s Manager, while in possession on such information, seeks to sell any of its holdings in these securities it will comply with all applicable federal securities laws.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN STRATEGIC INCOME SECURITIES FUND

Notes to Financial Statements (continued)

9. REGULATORY MATTERS

On February 4, 2004, the Securities Division of the Office of the Secretary of the Commonwealth of Massachusetts filed an administrative complaint against Franklin Resources, Inc. and certain of its subsidiaries (the “Company”), alleging violations of the Massachusetts Uniform Securities Act. The complaint arises from activity that occurred in 2001 during which time an officer of a Company subsidiary was negotiating an agreement with an investor relating to investments in a mutual fund and a hedge fund.

The Company, in addition to other entities within Franklin Templeton Investments, has been named in shareholder class actions related to the matter described above. The Company believes that the claims made in the lawsuit are without merit and it intends to defend vigorously against the allegations. The Company and the Fund may be named in similar civil actions related to the matter described above.

In addition, as part of ongoing investigations by the U.S. Securities and Exchange Commission (the “SEC”), the U.S. Attorney for the Northern District of California, the New York Attorney General, the California Attorney General, the U.S. Attorney for the District of Massachusetts, the Florida Department of Financial Services, and the Commissioner of Securities and the Attorney General of the State of West Virginia, relating to certain practices in the mutual fund industry, including late trading, market timing and sales compensation arrangements, the Company and its subsidiaries, as well as certain current or former executives and employees of the Company, have received requests for information and/or subpoenas to testify or produce documents. The Company and its current employees are providing documents and information in response to these requests and subpoenas. In addition, the Company has responded to requests for similar kinds of information from regulatory authorities in some of the foreign countries where the Company conducts its global asset management business.

The Staff of the SEC has informed the Company that it intends to recommend that the Commission authorize an action against the Fund’s investment adviser and a senior executive officer relating to the frequent trading issues that are the subject of the SEC’s investigation. These issues were previously disclosed as being under investigation by government authorities and the subject of an internal inquiry by the Company in its Annual Report on Form 10-K and on its public website. The Company currently is in discussions with the SEC Staff in an effort to resolve the issues raised in their investigation. Such discussions are preliminary and the Fund’s management has been advised that the Company cannot predict the likelihood of whether those discussions will result in a settlement and, if so, the terms of such settlement. The impact, if any, of these matters on the Fund is uncertain at this time. If the Company finds that it bears responsibility for any unlawful or improper conduct, it has committed to making the Fund or its shareholders whole, as appropriate.

FSI-23

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN STRATEGIC INCOME SECURITIES FUND

Independent Auditors’ Report

To the Board of Trustees and Shareholders

of Franklin Templeton Variable Insurance Products Trust

In our opinion, the accompanying statement of assets and liabilities, including the statement of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Franklin Strategic Income Securities Fund (the Fund) (one of the funds constituting the Franklin Templeton Variable Insurance Products Trust) at December 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

February 5, 2004, except for Note 9 as to which the date is February 12, 2004

FSI-24

FRANKLIN U.S. GOVERNMENT FUND

Fund Goal and Primary Investments: Franklin U.S. Government Fund seeks income. The Fund invests primarily in U.S. government securities, primarily fixed and variable rate mortgage-backed securities.

This annual report for Franklin U.S. Government Fund covers the fiscal year ended December 31, 2003.

Performance Overview

You can find the Fund’s one-year total return in the Performance Summary following this report. The Fund’s performance was comparable to that of its benchmarks, the Lehman Brothers Intermediate U.S. Government Bond Index and the Lipper VIP General U.S. Government Funds Objective Average, which returned 2.29% and 2.32% for the year under review.¹

Economic and Market Overview

During the year ended December 31, 2003, many factors strongly impacted the U.S. economy and markets. In general, uncertainty about the economy’s strength and geopolitical events pushed interest rates down during the first part of the year. The Iraq conflict weighed heavily on many investors’ minds, which helped interest rates decline. By mid-June, the 10-year U.S. Treasury yield fell to 3.13%, the lowest level in more than four decades. For consumers, historically low mortgage rates enabled many homeowners to refinance their mortgages, and refinancing applications reached their highest levels on record. Prepayments on mortgage-backed securities increased as well. Additionally, the refinancing activity, rising home values and stabilizing equity markets improved consumers’ net worths and allowed them to continue spending, which helped to keep the economy moving forward.

Increases in business spending also helped economic growth. After having been largely absent since the end of 2000, business spending improved in the latter half of 2003. Nonresidential fixed investment increased 12.8% annualized in the third quarter of 2003, the highest increase since the second quarter of 2000. Lower interest rates during the past year allowed many businesses the opportunity to refinance their old debt at more attractive levels. This helped enhance business operating performance. Many corporate fixed income products also benefited from this improvement. Additionally, businesses continued to achieve productivity gains by reducing their labor forces and taking advantage of recent technology investments. Higher productivity levels

1. Sources: Standard & Poor’s Micropal; Lipper Inc. One cannot invest directly in an index, nor is an index representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

FUS-1

helped dampen inflation. Core inflation (excluding food and energy), as measured by the Consumer Price Index, rose a modest 1.1% for the year. Expectations for lower inflation contributed to the historically lower overall interest rate environment during the period.

As some of the immediate perceived risks related to the Iraq war subsided in late spring, and economic activity and domestic equity markets rebounded, interest rates rose as investors tolerated more risk in their portfolios. Rising interest rates led to higher mortgage rates, and although prepayments slowed, prices for bond and other interest rate-sensitive investments declined.

Investment Strategy

We generally buy, and hold, high-quality income securities. Using this straightforward 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 non-proprietary research, we seek to identify attractive investment opportunities.

Manager’s Discussion

During the year under review, our commitment to our investment strategy provided positive returns through a portfolio of mortgage-backed securities, U.S. Treasuries and agency debentures. At period-end, the Fund’s largest allocation was to agency mortgage-backed securities, which have historically offered a yield premium over comparable duration Treasuries.

Based on our research, we believe that agency mortgage-backed securities historically have offered attractive risk-adjusted returns over the past 5-, 10- and 15-year time periods versus other areas of the fixed income and equity markets. Such time periods include multiple economic, credit, prepayment and interest rate cycles. Our strategy within mortgages was to use our proprietary research to uncover areas of the markets where we thought prepayment risk was mispriced. During periods of stable or rising interest rates, these sectors can outperform similar maturity, government-guaranteed sectors. For example, during the last six months of the reporting period the Lehman Brothers Mortgage-Backed Securities Index returned 1.45%, while the Lehman Brothers U.S. Treasury Index returned -1.45%.²

2. Source: Standard & Poor’s Micropal. Please see Index Descriptions following the Fund Summaries.

Investment Holdings

Franklin U.S. Government Fund

12/31/03

	% of Total Net Assets
Mortgage-Backed Securities	76.2%
Agency Securities	24.1%
Short-Term Investments & Other Net Assets less Liabilities	-0.3%

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

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Thank you for your participation in Franklin U.S. Government Fund. We look forward to serving your future investment needs.

This discussion reflects our analysis, opinions and portfolio holdings as of December 31, 2003, 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 advisor 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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PERFORMANCE SUMMARYASOF 12/31/03

Total return of Class 2 shares represents the average annual change in value, assuming reinvestment of dividends and capital gains. Average returns smooth out variations in returns, which can be significant; they are not the same as year-by-year results.

Franklin U.S. Government Fund – Class 2*

Periods ended 12/31/03

	1-Year	5-Year	10-Year
Average Annual Total Return	+2.21%	+5.82%	+6.30%

*Because Class 2 shares were not offered until 1/6/99, standardized Class 2 Fund performance for prior periods represents the historical results of Class 1 shares. For periods beginning on 1/6/99, Class 2’s results reflect an additional 12b-1 fee expense, which also affects future performance. Since 1/6/99 (effective date), the average annual total return of Class 2 shares was +5.84%.

Ongoing market volatility can significantly affect short-term performance; recent returns may differ.

Total Return Index Comparison

for Hypothetical $10,000 Investment (1/1/94–12/31/03)

The graph compares the performance of Franklin U.S. Government Fund – Class 2,* the Lehman Brothers Intermediate U.S. Government Bond Index and the Lipper VIP General U.S. Government Funds Objective Average, as well as the Consumer Price Index (CPI). One cannot invest directly in an index, nor is an index representative of the Fund’s portfolio. Please see Important Notes to Performance Information preceding the Fund Summaries.

**Sources: Standard & Poor’s Micropal; Lipper Inc. Please see Index Descriptions following the Fund Summaries.

Franklin U.S. Government Fund – Class 2

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.

Since markets can go down as well as up, investment return and the value of your principal will fluctuate with market conditions, and you may have a gain or loss when you sell your shares

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Past performance does not guarantee future results.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN U.S. GOVERNMENT FUND

Financial Highlights

	Class 1
	Year Ended December 31,
	2003			2002			2001			2000			1999
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	13.61		$	13.16		$	13.16		$	11.78		$	13.89
Income from investment operations:
Net investment incomea		.51			.71			.80	d		.79			.83
Net realized and unrealized gains (losses)		(.18	)		.57			.17	d		.60			(.96	)
Total from investment operations		.33			1.28			.97			1.39			(.13	)
Less distributions from net investment income		(.72	)		(.83	)		(.97	)		(.01	)		(1.98	)
Net asset value, end of period	$	13.22		$	13.61		$	13.16		$	13.16		$	11.78
Total returnb		2.43%			10.08%			7.62%			11.82%			(.94)%
Ratios/supplemental data
Net assets, end of period (000’s)	$	311,864		$	382,663		$	392,453		$	424,513		$	515,033
Ratios to average net assets:
Expenses		.53%			.54%			.53%			.52%			.51%
Net investment income		3.79%			5.34%			6.06%	d		6.48%			6.25%
Portfolio turnover rate		72.09%			86.86%			35.94%			6.28%			7.90%
Portfolio turnover rate excluding mortgage dollar rollsc		23.26%			38.47%			29.09%			—			—

^aBased on average daily shares outstanding.

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

^cSee Note 1(e) regarding mortgage dollar rolls.

^dEffective January 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide of Investment Companies and began recording all paydown gains and losses as part of investment income and amortizing all premium and discount on fixed-income securities, as required. The effect of this change was as follows:

Net investment income per share	$.016
Net realized and unrealized gains per share	(.016)
Ratio of net investment income to average net assets	.12%

Per share data and ratios for prior periods have not been restated to reflect this change in accounting policy.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN U.S. GOVERNMENT FUND

Financial Highlights (continued)

	Class 2
	Year Ended December 31,
	2003			2002			2001			2000			1999e
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	13.49		$	13.08		$	13.11		$	11.78		$	13.89
Income from investment operations:
Net investment incomea		.46			.66			.75	d		.77			.77
Net realized and unrealized gains (losses)		(.16	)		.57			.18	d		.57			(.92	)
Total from investment operations		(.30	)		1.23			.93			1.34			(.15	)
Less distributions from net investment income		(.71	)		(.82	)		(.96	)		(.01	)		(1.96	)
Net asset value, end of period	$	13.08		$	13.49		$	13.08		$	13.11		$	11.78
Total returnb		2.21%			9.77%			7.37%			11.39%			(1.10)%
Ratios/supplemental data
Net assets, end of period (000’s)	$	240,065		$	136,875		$	23,356		$	3,961		$	1,877
Ratios to average net assets:
Expenses		.78%			.79%			.78%			.77%			.77%	f
Net investment income		3.54%			5.09%			5.69%	d		6.22%			5.95%	f
Portfolio turnover rate		72.09%			86.86%			35.94%			6.28%			7.90%
Portfolio turnover rate excluding mortgage dollar rollsc		23.26%			38.47%			29.09%			—			—

^a Based on average daily shares outstanding.

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

^c See Note 1(e) regarding mortgage dollar rolls.

^d Effective January 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide of Investment Companies and began recording all paydown gains and losses as part of investment income and amortizing all premium and discount on fixed-income securities, as required. The effect of this change was as follows:

Net investment income per share	$.016
Net realized and unrealized gains per share	(.016)
Ratio of net investment income to average net assets	.12%

Per share data and ratios for prior periods have not been restated to reflect this change in accounting policy.

^e For the period January 6, 1999 (effective date) to December 31, 1999.

^f Annualized.

See notes to financial statements.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN U.S. GOVERNMENT FUND

Statement of Investments, December 31, 2003

	PRINCIPAL AMOUNT		VALUE
Mortgage-Backed Securities 76.2%
Federal Home Loan Mortgage Corp. (FHLMC) Adjustable Rate .3%
FHLMC, Cap 12.522%, Margin 2.105% + CMT, Resets Annually, 3.882%, 6/01/22	$	729,838	$	755,240
FHLMC, Cap 13.458%, Margin 2.195% + CMT, Resets Annually, 3.662%, 2/01/19		823,344		852,350
				1,607,590
Federal Home Loan Mortgage Corp. (FHLMC) Fixed Rate 11.9%
FHLMC, 5.00%, 6/01/33 - 12/01/33		10,957,425		10,824,889
aFHLMC, 5.00%, 1/01/34		5,000,000		4,935,940
FHLMC, 5.50%, 7/01/33 - 10/01/33		3,999,999		4,051,617
aFHLMC, 6.00%, 1/01/31		7,540,000		7,811,590
FHLMC, 6.00%, 1/01/24 - 9/01/33		8,306,095		8,592,609
FHLMC, 6.50%, 6/01/08 - 7/01/32		8,668,339		9,108,170
FHLMC, 7.00%, 4/01/24 - 10/01/32		7,688,466		8,145,057
FHLMC, 7.50%, 11/01/22 - 5/01/24		487,210		526,784
FHLMC, 8.00%, 1/01/17 - 5/01/22		198,932		217,206
FHLMC, 8.50%, 4/01/18 - 7/01/31		10,697,573		11,589,689
				65,803,551
Federal National Mortgage Association (FNMA) Adjustable Rate 1.4%
FNMA, Cap 12.490%, Margin 2.00% + CMT, Resets Annually, 3.246%, 2/01/19		985,532		1,010,880
FNMA, Cap 12.819%, Margin 2.127% + CMT, Resets Annually, 3.433%, 9/01/18		1,248,074		1,289,185
FNMA, Cap 13.313%, Margin 2.126% + CMT, Resets Annually, 4.298%, 7/01/19		943,060		950,210
FNMA, Cap 13.644%, Margin 2.011% + CMT, Resets Annually, 3.371%, 1/01/18		3,827,264		3,938,059
FNMA, Cap 15.156%, Margin 2.284% + 3CMT, Resets Tri-Annually, 6.433%, 3/01/20		354,087		366,479
				7,554,813
Federal National Mortgage Association (FNMA) Fixed Rate 8.3%
FNMA, 5.50%, 6/01/16 - 11/01/33		21,707,567		22,134,293
FNMA, 6.00%, 8/01/17 - 11/01/31		8,208,015		8,598,454
aFNMA, 6.00%, 1/01/29		5,170,000		5,344,488
FNMA, 6.50%, 1/01/24 - 8/01/32		3,909,179		4,100,297
FNMA, 7.00%, 5/01/24 - 9/01/31		1,372,288		1,454,156
FNMA, 7.50%, 4/01/23 - 8/01/25		594,691		638,137
FNMA, 8.00%, 7/01/16 - 2/01/25		1,100,261		1,202,817
FNMA, 8.50%, 10/01/19 - 8/01/21		41,593		45,612
aFNMA, 9.00%, 10/01/26		2,047,147		2,283,427
				45,801,681
Government National Mortgage Association (GMNA) Fixed Rate 54.3%
aGNMA I, 5.00%, 1/01/34		5,000,000		4,954,690
aGNMA I, 5.50%, 1/15/33		4,000,000		4,067,500
aGNMA I, 6.00%, 1/01/31		4,000,000		4,157,500
GNMA I, SF, 5.00%, 8/15/33 - 11/20/33		41,808,836		41,411,864
GNMA I, SF, 5.50%, 11/15/28 - 7/20/33		62,193,215		63,309,265
GNMA I, SF, 6.00%, 11/15/23 - 11/15/33		30,524,501		31,790,506
GNMA I, SF, 6.50%, 5/15/23 - 2/15/33		61,037,216		64,417,071
GNMA I, SF, 7.00%, 3/15/22 - 11/20/32		48,456,502		51,619,367
GNMA I, SF, 7.25%, 5/15/22 - 11/15/25		1,578,870		1,668,177
GNMA I, SF, 7.50%, 2/15/17 - 5/20/33		7,947,537		8,552,662
GNMA I, SF, 8.00%, 4/15/05 - 6/15/24		2,689,282		2,954,171
GNMA I, SF, 8.25%, 4/15/25		218,304		238,922
GNMA I, SF, 8.50%, 8/15/21 - 12/15/24		819,997		904,565

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN U.S. GOVERNMENT FUND

Statement of Investments, December 31, 2003 (cont.)

	PRINCIPAL AMOUNT		VALUE
Mortgage-Backed Securities (cont.)
Government National Mortgage Association (GMNA) Fixed Rate (cont.)
GNMA I, SF, 9.00%, 4/15/16 - 2/15/21	$	490,776	$	549,413
GNMA I, SF, 9.50%, 7/15/16 - 12/15/21		832,353		932,517
GNMA I, SF, 10.00%, 8/15/17 - 8/15/21		877,235		988,357
GNMA II, 6.50%, 12/20/27 - 3/20/28		3,807,750		4,014,145
GNMA II, 7.50%, 11/20/16 - 11/20/26		2,712,036		2,903,668
GNMA II, 8.00%, 7/20/16 - 8/20/26		255,798		278,842
GNMA II, 9.50%, 4/20/25		54,366		60,676
aGNMA II, 6.00%, 1/01/30		9,829,589		10,198,199
				299,972,077
Total Mortgage-Backed Securities (Cost $412,390,569)				420,739,712
Other Agency Securities 24.1%
Federal Farm Credit Bank, 4.45%, 8/27/10		15,000,000		15,289,575
Federal Farm Credit Bank, 4.50%, 7/09/07		10,000,000		10,509,070
Federal Home Loan Bank, 2.25%, 5/15/06		25,000,000		25,019,975
Federal Home Loan Bank, 2.625%, 5/15/07		15,000,000		14,878,905
Federal Home Loan Bank, 4.875%, 05/15/07		5,000,000		5,318,370
FICO, Strip, Series 12, zero cpn., 12/06/14		13,569,000		7,802,596
FICO, Strip, Series 16, zero cpn., 10/05/10		4,745,000		3,580,847
Housing and Urban Development, 96-A, 7.625%, 8/01/14		5,000,000		5,407,810
Housing and Urban Development, 96-A, 7.66%, 8/01/15		5,000,000		5,406,360
Small Business Administration, 3.60%, 6/25/19		1,099,195		1,145,580
Small Business Administration, 3.875%, 3/25/18		1,488,187		1,564,056
Small Business Administration, 6.00%, 9/01/18		6,545,636		7,023,025
Small Business Administration, 6.45%, 12/01/15		2,268,104		2,450,669
Small Business Administration, 6.70%, 12/01/16		2,466,613		2,693,231
Small Business Administration, 6.85%, 7/01/17		2,806,698		3,085,119
Student Loan Marketing Association, zero cpn., 5/15/14		15,000,000		6,901,095
Tennessee Valley Authority, 5.88%, 4/01/36		10,000,000		10,993,360
Tennessee Valley Authority, Strip, zero cpn., 4/15/42		6,000,000		4,112,731
Total Other Agency Securities (Cost $125,808,418)				133,182,374
Total Long Term Investments (Cost $538,198,987)				553,922,086

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN U.S. GOVERNMENT FUND

Statement of Investments, December 31, 2003 (cont.)

	PRINCIPAL AMOUNT		VALUE
Repurchase Agreements (Cost $39,025,037) 7.1%
bJoint Repurchase Agreement, .873%, 1/02/04, (Maturity Value $39,026,930)	$	39,025,037	$	39,025,037
ABN AMRO Bank, N.V., New York Branch (Maturity Value $3,635,749)
Banc of America Securities LLC (Maturity Value $3,635,749)
Barclays Capital Inc. (Maturity Value $2,596,460)
Bear, Stearns & Co. Inc. (Maturity Value $2,077,403)
BNP Paribas Securities Corp. (Maturity Value $3,635,749)
Deutsche Bank Securities Inc. (Maturity Value $3,635,749)
Dresdner Kleinwort Wasserstein Securities LLC (Maturity Value $3,635,749)
Goldman, Sachs & Co. (Maturity Value $2,077,403)
Greenwich Capital Markets Inc. (Maturity Value $3,635,749)
Lehman Brothers Inc. (Maturity Value $3,189,672)
Morgan Stanley & Co. Inc. (Maturity Value $3,635,749)
UBS Securities LLC (Maturity Value $3,635,749)
Collateralized by U.S. Treasury Bills, Notes, and Bonds, and U.S. Government Agency Securities
Total Investments Before Allowance for Paydowns 107.4%				592,947,123
cAllowance for Paydowns				(430,237	)
Total Investments (Cost $577,224,024) 107.4%				592,516,886
Other Assets, less Liabilities (7.4%)				(40,588,523	)
Net Assets 100.0%			$	551,928,363

^a See Note 1(c) regarding securities purchases on a to-be-announced basis.

^b See Note 1(b) regarding joint repurchase agreement.

^c See Note 1(d) regarding allowance for paydowns.

See notes to financial statements.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN U.S. GOVERNMENT FUND

Financial Statements

Statement of Assets and Liabilities

December 31, 2003

Assets:
Investments in securities:
Cost	$	577,224,024
Value	$	592,516,886
Receivables:
Investment securities sold		170,702
Capital shares sold		665,164
Interest		3,093,932
Total assets		596,446,684
Liabilities:
Payables:
Investment securities purchased		43,581,938
Capital shares redeemed		556,857
Affiliates		329,683
Other liabilities		49,843
Total liabilities		44,518,321
Net assets, at value	$	551,928,363
Net assets consist of:
Undistributed net investment income	$	25,304,961
Net unrealized appreciation (depreciation)		15,292,862
Accumulated net realized gain (loss)		(11,284,736	)
Capital shares		522,615,276
Net assets, at value	$	551,928,363
Class 1:
Net assets, at value	$	311,863,814
Shares outstanding		23,587,836
Net asset value per share	$	13.22
Class 2:
Net assets, at value	$	240,064,549
Shares outstanding		18,353,162
Net asset value and maximum offering price per share	$	13.08

See notes to financial statements.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN U.S. GOVERNMENT FUND

Financial Statements (continued)

Statement of Operations

for the year ended December 31, 2003

Investment income:
Interest		$23,790,309
Expenses:
Management fees (Note 3)		2,732,761
Distribution fees - Class 2 (Note 3)		499,178
Transfer agent fees		3,492
Custodian fees		5,881
Reports to shareholders		96,293
Professional fees		23,675
Trustees’ fees and expenses		5,447
Other		36,684
Total expenses		3,403,411
Net investment income		20,386,898
Realized and unrealized gains (losses):
Net realized gain (loss) from investments		3,046,596
Net unrealized appreciation (depreciation) on investments		(10,903,820	)
Net realized and unrealized gain (loss)		(7,857,224	)
Net increase (decrease) in net assets resulting from operations	$	12,529,674

See notes to financial statements.

FUS-11

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN U.S. GOVERNMENT FUND

Financial Statements (continued)

Statements of Changes in Net Assets

for the years ended December 31, 2003 and 2002

	2003			2002
Increase (decrease) in net assets:
Operations:
Net investment income	$	20,386,898		$	24,218,463
Net realized gain (loss) from investments		3,046,596			3,804,636
Net unrealized appreciation (depreciation) on investments		(10,903,820	)		15,233,412
Net increase (decrease) in net assets resulting from operations		12,529,674			43,256,511
Distributions to shareholders from:
Net investment income:
Class 1		(18,596,320	)		(22,736,492	)
Class 2		(10,519,204	)		(3,744,993	)
Total distributions to shareholders		(29,115,524	)		(26,481,485	)
Capital share transactions: (Note 2)
Class 1		(60,577,726	)		(23,721,662	)
Class 2		109,553,750			110,675,553
Total capital share transactions		48,976,024			86,953,891
Net increase (decrease) in net assets		32,390,174			103,728,917
Net assets:
Beginning of year		519,538,189			415,809,272
End of year	$	551,928,363		$	519,538,189
Undistributed net investment income included in net assets:
End of year	$	25,304,961		$	25,975,527

See notes to financial statements.

FUS-12

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN U.S. GOVERNMENT FUND

Notes to Financial Statements

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (the Trust) is registered under the Investment Company Act of 1940 as an open-end investment company, consisting of twenty-two separate series (the Funds). The Franklin U.S. Government Fund (the Fund) included in this report is diversified. Shares of the Fund are sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. As of December 31, 2003, over 90% of the total Fund shares were sold through one insurance company. The Fund’s investment objective is current income.

The following summarizes the Fund’s significant accounting policies.

a. Security Valuation

Securities listed or traded on a recognized national exchange or NASDAQ are valued at the latest reported sales price. Over-the-counter securities and listed securities for which no sale is reported are valued within the range of the latest quoted bid and asked prices. If events occur that materially affect the values of securities after the prices are determined, or if market quotations are not readily available, the securities will be valued at fair value as determined following procedures approved by the Board of Trustees.

b. Joint Repurchase Agreement

The Fund may enter into a joint repurchase agreement whereby its uninvested cash balance is deposited into a joint cash account to be used to invest in one or more repurchase agreements. The value and face amount of the joint repurchase agreement are allocated to the Fund based on its pro-rata interest. A repurchase agreement is accounted for as a loan by the Fund to the seller, collateralized by securities which are delivered to the Fund’s custodian. The market value, including accrued interest, of the initial collateralization is required to be at least 102% of the dollar amount invested by the Funds, with the value of the underlying securities marked to market daily to maintain coverage of at least 100%. At December 31, 2003, all repurchase agreements had been entered into on that date.

c. Securities Purchased on a TBA Basis

The Fund may purchase securities on a to-be-announced (TBA) basis, with payment and delivery scheduled for a future date. These transactions are subject to market fluctuations and are subject to the risk that the value at delivery may be more or less than the trade date purchase price. 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. Allowance for Paydowns

The Fund provides estimates, based on historical experience, for anticipated paydown. The allowance is recorded as a reduction or increase to net assets as noted on the Statement of Investments and is included in the unrealized appreciation/depreciation shown on the accompanying financial statements.

e. Mortgage Dollar Rolls

The Fund enters into mortgage dollar rolls, typically on a TBA basis. Dollar rolls are agreements between the Fund and a financial institution to simultaneously sell and repurchase a mortgage-backed security at a future date. Gains or losses are realized at the time of the sale and the difference between the repurchase price and sale price is recorded as an unrealized gain to the Fund. The risks of mortgage dollar roll transactions include the potential inability of the counterparty to fulfill their obligations.

FUS-13

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN U.S. GOVERNMENT FUND

Notes to Financial Statements (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

f. Income Taxes

No provision has been made for income taxes because the Fund’s policy is to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable income.

g. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Discounts and premiums on securities purchased are amortized over the lives of the respective securities. Distributions to shareholders are recorded on the ex-dividend date.

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. Other expenses are charged to each fund on a specific identification basis.

Realized and unrealized gains and losses and net investment income, other than class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class.

h. Accounting Estimates

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

i. Guarantees and Indemnifications

Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust 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. However, based on experience, the Trust expects the risk of loss to be remote.

2. SHARES OF BENEFICIAL INTEREST

The Fund offers two classes of shares: Class 1 and Class 2. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class, and its exchange privilege.

FUS-14

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN U.S. GOVERNMENT FUND

Notes to Financial Statements (continued)

2. SHARES OF BENEFICIAL INTEREST (cont.)

At December 31, 2003, there were an unlimited number of shares authorized ($.01 par value). Transactions in the Fund’s shares were as follows:

	Year Ended December 31,
	2003					2002
Class 1 Shares:	Shares		Amount			Shares		Amount
Shares sold	429,090		$	5,692,469		2,108,070		$	27,924,326
Shares issued in reinvestment of distributions	1,410,949			18,596,320		1,762,519			22,736,492
Shares redeemed	(6,372,407	)		(84,866,515	)	(5,568,427	)		(74,382,480	)
Net increase (decrease)	(4,532,368	)	$	(60,577,726	)	(1,697,838	)	$	(23,721,662	)
Class 2 Shares:
Shares sold	10,564,288		$	140,491,586		9,927,016		$	131,615,360
Shares issued in reinvestment of distributions	806,069			10,519,204		292,349			3,744,993
Shares redeemed	(3,162,095	)		(41,457,040	)	(1,859,896	)		(24,684,800	)
Net increase (decrease)	8,208,262		$	109,553,750		8,359,469		$	110,675,553

3. TRANSACTIONS WITH AFFILIATES

Certain officers and trustees of the Fund are also officers and/or directors of the following entities:

Entity	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

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
.625%	First $100 million
.50%	over $100 million, up to and including $250 million
.45%	over $250 million, up to and including $10 billion

Fees are further reduced on net assets over $10 billion.

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

The Fund reimburses Distributors up to .25% per year of its average daily net assets of Class 2, for costs incurred in marketing the Fund’s shares.

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

FUS-15

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN U.S. GOVERNMENT FUND

Notes to Financial Statements (continued)

4. INCOME TAXES

At December 31, 2003, the Fund had tax basis capital losses of $10,480,690, which may be carried over to offset future capital gains. Such losses expire as follows:

Capital loss carryover expiring in:
2005	$	169,754
2008		5,752,213
2011		4,558,723
	$	10,480,690

On December 31, 2003, the Fund had expired capital loss carryovers of $826,481, which were reclassified to paid-in capital.

At December 31, 2003, the Fund had deferred capital losses occurring subsequent to October 31, 2003 of $756,064. For tax purposes, such losses will be reflected in the year ending December 31, 2004.

Net investment income differs for financial statement and tax purposes primarily due to differing treatments of mortgage dollar rolls, paydown losses, bond discounts and premiums.

Net realized gains differ for financial statement and tax purposes primarily due to differing treatments of mortgage dollar rolls, paydown losses, bond discounts and premiums.

The tax character of distributions paid during the years ended December 31, 2003 and 2002, was as follows:

	2003		2002
Distributions paid from:
Ordinary income	$	29,115,524	$	26,481,485
Long term capital gain		—		—
	$	29,115,524	$	26,481,485

At December 31, 2003, the cost of investments, net unrealized appreciation (depreciation), and undistributed ordinary income and undistributed long term capital gains for income tax purposes was as follows:

Cost of investments	$	577,836,150
Unrealized appreciation		16,233,390
Unrealized depreciation		(1,552,654	)
Net unrealized appreciation (depreciation)	$	14,680,736
Undistributed ordinary income	$	26,869,109
Undistributed long term capital gains		—
Distributable earnings	$	26,869,109

5. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities) for the year ended December 31, 2003 aggregated $708,557,705 and $395,801,222, respectively.

FUS-16

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN U.S. GOVERNMENT FUND

Notes to Financial Statements (continued)

6. REGULATORY MATTERS

On February 4, 2004, the Securities Division of the Office of the Secretary of the Commonwealth of Massachusetts filed an administrative complaint against Franklin Resources, Inc. and certain of its subsidiaries (the “Company”), alleging violations of the Massachusetts Uniform Securities Act. The complaint arises from activity that occurred in 2001 during which time an officer of a Company subsidiary was negotiating an agreement with an investor relating to investments in a mutual fund and a hedge fund.

The Company, in addition to other entities within Franklin Templeton Investments, has been named in shareholder class actions related to the matter described above. The Company believes that the claims made in the lawsuit are without merit and it intends to defend vigorously against the allegations. The Company and the Fund may be named in similar civil actions related to the matter described above.

In addition, as part of ongoing investigations by the U.S. Securities and Exchange Commission (the “SEC”), the U.S. Attorney for the Northern District of California, the New York Attorney General, the California Attorney General, the U.S. Attorney for the District of Massachusetts, the Florida Department of Financial Services, and the Commissioner of Securities and the Attorney General of the State of West Virginia, relating to certain practices in the mutual fund industry, including late trading, market timing and sales compensation arrangements, the Company and its subsidiaries, as well as certain current or former executives and employees of the Company, have received requests for information and/or subpoenas to testify or produce documents. The Company and its current employees are providing documents and information in response to these requests and subpoenas. In addition, the Company has responded to requests for similar kinds of information from regulatory authorities in some of the foreign countries where the Company conducts its global asset management business.

The Staff of the SEC has informed the Company that it intends to recommend that the Commission authorize an action against the Fund’s investment adviser and a senior executive officer relating to the frequent trading issues that are the subject of the SEC’s investigation. These issues were previously disclosed as being under investigation by government authorities and the subject of an internal inquiry by the Company in its Annual Report on Form 10-K and on its public website. The Company currently is in discussions with the SEC Staff in an effort to resolve the issues raised in their investigation. Such discussions are preliminary and the Fund’s management has been advised that the Company cannot predict the likelihood of whether those discussions will result in a settlement and, if so, the terms of such settlement. The impact, if any, of these matters on the Fund is uncertain at this time. If the Company finds that it bears responsibility for any unlawful or improper conduct, it has committed to making the Fund or its shareholders whole, as appropriate.

FUS-17

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN U.S. GOVERNMENT FUND

Independent Auditors’ Report

To the Board of Trustees and Shareholders

of Franklin Templeton Variable Insurance Products Trust

In our opinion, the accompanying statement of assets and liabilities, including the statement of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Franklin U.S. Government Fund (the Fund) (one of the funds constituting the Franklin Templeton Variable Insurance Products Trust) at December 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

February 5, 2004, except for Note 6 as to which the date is February 12, 2004

FUS-18

FRANKLIN ZERO COUPON FUND 2010

Fund Goal and Primary Investments: Franklin Zero Coupon Fund 2010 seeks as high an investment return as is consistent with capital preservation. The Fund invests primarily in zero coupon debt securities, primarily U.S. Treasury-issued stripped securities and stripped securities issued by the U.S. government and its agencies and authorities. The Fund may not be appropriate for those who intend to redeem units before the maturity date.

This annual report for Franklin Zero Coupon Fund 2010 covers the fiscal year ended December 31, 2003.

Performance Overview

You can find the Fund’s one-year total return in the Performance Summary following this report. The Fund outperformed its benchmarks, the Merrill Lynch 10-Year Zero Coupon Bond Index and the Merrill Lynch 5-Year Zero Coupon Bond Index, which returned 2.61% and 2.57% for the year under review.¹

Economic and Market Overview

During the year ended December 31, 2003, many factors strongly impacted the U.S. economy and markets. In general, uncertainty about the economy’s strength and geopolitical events pushed interest rates down during the first part of the year. The Iraq conflict weighed heavily on many investors’ minds, which helped interest rates decline. By mid-June, the 10-year U.S. Treasury yield fell to 3.13%, the lowest level in more than four decades. For consumers, historically low mortgage rates enabled many homeowners to refinance their mortgages, and refinancing applications reached their highest levels on record. Prepayments on mortgage-backed securities increased as well. Additionally, the refinancing activity, rising home values and stabilizing equity markets improved consumers’ net worths and allowed them to continue spending, which helped to keep the economy moving forward.

Increases in business spending also helped economic growth. After having been largely absent since the end of 2000, business spending improved in the latter half of 2003. Nonresidential fixed investment increased 12.8% annualized in the third quarter of 2003, the highest increase since the second quarter of 2000. Lower interest rates during the past year allowed many businesses the opportunity to refinance their old debt at more attractive levels. This helped enhance business operating performance. Many corporate fixed income products also

1. Source: Standard & Poor’s Micropal. One cannot invest directly in an index, nor is an index representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

FZ10-1

benefited from this improvement. Additionally, businesses continued to achieve productivity gains by reducing their labor forces and taking advantage of recent technology investments. Higher productivity levels helped dampen inflation. Core inflation (excluding food and energy), as measured by the Consumer Price Index, rose a modest 1.1% for the year. Expectations for lower inflation contributed to the historically lower overall interest rate environment during the period.

As some of the immediate perceived risks related to the Iraq war subsided in late spring, and economic activity and domestic equity markets rebounded, interest rates rose as investors tolerated more risk in their portfolios. Rising interest rates led to higher mortgage rates, and although prepayments slowed, prices for bond and other interest rate-sensitive investments declined.

Investment Strategy

In selecting investments for the Fund, we seek to keep the average duration of the Fund to within 12 months of its maturity Target Date. Duration is a measure of the length of an investment, taking into account the timing and amount of any interest payments and the principal repayment.

Manager’s Discussion

Declining interest rates early in the period benefited Fund performance. However, during periods of rising interest rates, such as those experienced over the latter half of 2003, investors tend to see fixed income portfolios with shorter durations outperform those with longer durations. This occurred and dampened Fund performance during the latter half of the year.

Thank you for your participation in Franklin Zero Coupon Fund 2010. We look forward to serving your future investment needs.

This discussion reflects our analysis, opinions and portfolio holdings as of December 31, 2003, 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 advisor 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.

FZ10-2

PERFORMANCE SUMMARYASOF 12/31/03

Total return of Class 2 shares represents the average annual change in value, assuming reinvestment of dividends and capital gains. Average returns smooth out variation in returns, which can be significant; they are not the same as year-by-year results.

Franklin Zero Coupon Fund 2010 – Class 2*

Periods ended 12/31/03

	1-Year	5-Year	10-Year
Average Annual Total Return	+3.40%	+6.45%	+8.47%

*Because Class 2 shares were not offered until 5/12/03, standardized Class 2 performance for prior periods represents the historical results of Class 1 shares. For periods beginning on 5/12/03, Class 2’s results reflects an additional 12b-1 fee expense, which also affects subsequent performance. Since 5/12/03 (commencement of sales), the aggregate total return of Class 2 shares was -1.93%

Ongoing market volatility can significantly affect short-term performance; recent returns may differ.

Total Return Index Comparison

for Hypothetical $10,000 Investment (1/1/94–12/31/03)

The graph compares the performance of Franklin Zero Coupon Fund 2010 – Class 2,* the Merrill Lynch 10-Year Zero Coupon Bond Index and the Merrill Lynch 5-Year Zero Coupon Bond Index, as well as the Consumer Price Index (CPI). The Merrill Lynch 5-Year Zero Coupon Bond Index is included to reflect the portfolio’s changing duration as it moves toward its 2010 target date. One cannot invest directly in an index, nor is an index representative of the Fund’s portfolio. Please see Important Notes to Performance Information preceding the Fund Summaries.

**Source: Standard & Poor’s Micropal. Please see Index Descriptions following the Fund Summaries.

Franklin Zero Coupon Fund 2010 – Class 2

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.

Since markets can go down as well as up, investment return and the value of your principal will fluctuate with market conditions, and you may have a gain or loss when you sell your shares.

FZ10-3

Past performance does not guarantee future results.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN ZERO COUPON FUND – 2010

Financial Highlights

	Class 1
	Year Ended December 31,
	2003			2002			2001			2000			1999
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	16.61		$	15.33		$	16.50		$	14.15		$	19.05
Income from investment operations:
Net investment incomea		.82			.87			.92			0.94		��	.99
Net realized and unrealized gains (losses)		(.20	)		2.03			(.06	)		1.67			(3.24	)
Total from investment operations		.62			2.90			.86			2.61			(2.25	)
Less distributions from:
Net investment income		(.68	)		(.95	)		(1.21	)		(.02	)		(2.14	)
Net realized gains		—			(.67	)		(.82	)		(.24	)		(.51	)
Total distributions		(.68	)		(1.62	)		(2.03	)		(.26	)		(2.65	)
Net asset value, end of year	$	16.55		$	16.61		$	15.33		$	16.50		$	14.15
Total returnb		3.59%			20.10%			5.62%			18.72%			(12.24)%
Ratios/supplemental data
Net assets, end of year (000’s)	$	72,833		$	68,489		$	51,002		$	56,720		$	66,049
Ratios to average net assets:
Expenses		.65%			.68%			.68%			.65%			.65%
Net investment income		4.77%			5.48%			5.73%			6.28%			5.83%
Portfolio turnover rate		38.37%			19.03%			23.68%			34.39%			19.30%

^a Based on average daily shares outstanding.

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

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN ZERO COUPON FUND – 2010

Financial Highlights (continued)

	Class 2
	Period Ended
	12/31/2003c
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$	17.39
Income from investment operations:
Net investment incomea		.49
Net realized and unrealized gains (losses)		(.68	)
Total from investment operations		(.19	)
Less distributions from net investment income		(.68	)
Net asset value, end of period	$	16.52
Total returnb		3.40%
Ratios/supplemental data
Net assets, end of period (000’s)	$	11,649
Ratios to average net assets:
Expenses		.90%
Net investment income		4.52%
Portfolio turnover rate		38.37%

^a Based on average daily shares outstanding.

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

^c For the period May 12, 2003 (effective date) to December 31, 2003.

See notes to financial statements.

FZ10-5

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN ZERO COUPON FUND – 2010

Statement of Investments, December 31, 2003

	PRINCIPAL AMOUNT		VALUE
U.S. Government and Agency Securities 89.5%
FHLMC, Strip, 7/15/10	$	11,150,000	$	8,522,001
FHLMC, Strip, 1/15/11		10,629,000		7,887,760
FICO, Strip, 19, 6/06/10		9,800,000		7,516,737
FICO, Strip, A, 8/08/10		7,000,000		5,319,062
FNMA, Strip, 8/12/09		1,975,000		1,595,508
FNMA, Strip, 8/01/10		8,250,000		6,118,390
FNMA, Strip, 8/12/10		1,230,000		933,250
REFCO, Strip, 10/15/10		10,000,000		7,627,140
SLMA, zero cpn., 5/15/14		8,650,000		3,979,631
Tennessee Valley Authority, Strip, 1/01/10		412,000		318,109
Tennessee Valley Authority, Strip, 4/15/10		12,000,000		9,181,068
Tennessee Valley Authority, Strip, 10/15/10		1,320,000		983,632
Tennessee Valley Authority, Strip, 1/15/11		10,669,000		7,802,133
Tennessee Valley Authority, Strip, 10/15/11		7,295,000		5,084,484
U.S. Treasury, Strip, 2/15/11		3,671,000		2,761,004
Total U.S. Government and Agency Securities (Cost $65,688,173)				75,629,909
Other Securities – AAA Rated 9.2%
International Bank for Reconstruction and Development, 2/15/11		1,392,000		990,180
International Bank for Reconstruction and Development, 2/15/12		2,800,000		1,864,430
International Bank for Reconstruction and Development, 2/15/13		3,287,000		2,050,585
International Bank for Reconstruction and Development, 8/15/13		4,100,000		2,471,529
International Bank for Reconstruction and Development, Series 2, 2/15/11		500,000		355,668
Total Other Securities – AAA Rated (Cost $6,529,530)				7,732,392
Total Long Term Investments (Cost $72,217,703)				83,362,301
aRepurchase Agreements (Cost $585,733) .7%
Joint Repurchase Agreement, .873%, 1/02/04 (Maturity Value $585,761)		585,733		585,733
ABN AMRO Bank, N.V., New York Branch (Maturity Value $54,570)
Banc of America Securities LLC (Maturity Value $54,570)
Barclays Capital Inc. (Maturity Value $38,971)
Bear, Stearns & Co. Inc. (Maturity Value $31,180)
BNP Paribas Securities Corp. (Maturity Value $54,570)
Deutsche Bank Securities Inc. (Maturity Value $54,570)
Dresdner Kleinwort Wasserstein Securities LLC (Maturity Value $54,570)
Goldman, Sachs & Co. (Maturity Value $31,180)
Greenwich Capital Markets Inc. (Maturity Value $47,870)
Lehman Brothers Inc. (Maturity Value $54,570)
Morgan Stanley & Co. Inc. (Maturity Value $54,570)
UBS Securities LLC (Maturity Value $54,570)
Collateralized by U.S. Treasury Bills, Notes, Bonds, and U.S. Government Agency Securities
Total Investments (Cost $72,803,436) 99.4%				83,948,034
Other Assets, less Liabilities .6%				534,155
Net Assets 100.0%			$	84,482,189

^a See Note 1(b) regarding joint repurchase agreement.

See notes to financial statements.

FZ10-6

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN ZERO COUPON FUND – 2010

Financial Statements

Statement of Assets and Liabilities

December 31, 2003

Assets:
Investments in securities:
Cost	$	72,803,436
Value		83,948,034
Receivables for capital shares sold		629,812
Total assets		84,577,846
Liabilities:
Payables:
Capital shares redeemed		23,619
Affiliates		49,093
Reports to shareholders		4,646
Professional fees		15,751
Other liabilities		2,548
Total liabilities		95,657
Net assets, at value	$	84,482,189
Net assets consist of:
Undistributed net investment income	$	3,892,403
Net unrealized appreciation (depreciation)		11,144,598
Accumulated net realized gain (loss)		(594,118	)
Capital shares		70,039,306
Net assets, at value	$	84,482,189
Class 1:
Net assets, at value	$	72,833,266
Shares outstanding		4,401,745
Net asset value and offering price per share	$	16.55
Class 2:
Net assets, at value	$	11,648,923
Shares outstanding		705,228
Net asset value and offering price per share	$	16.52

FZ10-7

See notes to financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN ZERO COUPON FUND – 2010

Financial Statements (continued)

Statement of Operations

for the year ended December 31, 2003

Investment income:
Interest		$4,435,911
Expenses:
Management fees (Note 3)		494,783
Distribution fees – Class 2 (Note 3)		11,039
Transfer agent fees		506
Custodian fees		805
Reports to shareholders		12,940
Professional fees		18,439
Trustees’ fees and expenses		760
Other		6,632
Total expenses		545,904
Net investment income		3,890,007
Realized and unrealized gains (losses):
Net realized gain (loss) from investments		(141,473)
Net unrealized appreciation (depreciation) on investments		(1,454,844)
Net realized and unrealized gain (loss)		(1,596,317	)
Net increase (decrease) in net assets resulting from operations	$	2,293,690

See notes to financial statements.

FZ10-8

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN ZERO COUPON FUND – 2010

Financial Statements (continued)

Statements of Changes in Net Assets

For the year ended December 31, 2003 and 2002

	2003			2002
Increase (decrease) in net assets:
Operations:
Net investment income	$	3,890,007		$	3,095,573
Net realized gain (loss) from investments		(141,473	)		(432,337	)
Net unrealized appreciation (depreciation) on investments		(1,454,844	)		7,466,700
Net increase (decrease) in net assets resulting from operations		2,293,690			10,129,936
Distributions to shareholders from:
Net investment income:
Class 1		(3,089,057	)		(3,019,579	)
Class 2		(3,871	)		—
Net realized gains-Class 1		—			(2,117,685	)
Total distributions to shareholders		(3,092,928	)		(5,137,264	)
Capital share transactions: (Note 2)
Class 1		5,013,338			12,494,918	)
Class 2		11,778,876			—
Total capital share transactions		16,792,214			12,494,918
Net increase (decrease) in net assets		15,992,976			17,487,590
Net assets:
Beginning of year		68,489,213			51,001,623
End of year	$	84,482,189		$	68,489,213
Undistributed net investment income included in net assets:
End of year	$	3,892,403		$	3,095,324

See notes to financial statements.

FZ10-9

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN ZERO COUPON FUND – 2010

Notes to Financial Statements

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (the Trust) is registered under the Investment Company Act of 1940 as an open-end investment company, consisting of twenty-two separate series (the Funds). The Franklin Zero Coupon Fund-2010 (the Fund) included in this report is diversified. Shares of the Fund are sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. As of December 31, 2003, over 86% of the total Fund’s shares were sold through one insurance company. The Fund’s investment objective is current income.

The following summarizes the Fund’s significant accounting policies.

a. Security Valuation

Securities listed or traded on a recognized national exchange or NASDAQ are valued at the last reported sales price. Over-the-counter securities and listed securities for which no sale is reported are valued within the range of the latest quoted bid and asked prices. If events occur that materially affect the values of securities after the prices are determined, or if market quotations are not readily available, the securities will be valued at fair value as determined following procedures approved by the Board of Trustees.

b. Joint Repurchase Agreements

The Fund may enter into a joint repurchase agreement whereby its uninvested cash balance is deposited into a joint cash account to be used to invest in one or more repurchase agreements. The value and face amount of the joint repurchase agreement are allocated to the Fund based on its pro-rata interest. A repurchase agreement is accounted for as a loan by the Fund to the seller, collateralized by securities which are delivered to the Fund’s custodian. The market value, including accrued interest, of the initial collateralization is required to be at least 102% of the dollar amount invested by the Fund, with the value of the underlying securities marked to market daily to maintain coverage of at least 100%. At December 31, 2003, all repurchase agreements had been entered into on that date.

c. Income Taxes

No provision has been made for income taxes because the Fund’s policy is to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable income.

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. Interest income and estimated expenses are accrued daily. Discounts on securities purchased are amortized over the lives of the respective securities. Distributions to shareholders are recorded on the ex-dividend date.

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. Other expenses are charged to each fund on a specific identification basis.

Realized and unrealized gains and losses and net investment income, other than class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class.

e. Accounting Estimates

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

FZ10-10

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN ZERO COUPON FUND – 2010

Notes to Financial Statements (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

f. Guarantees and Indemnifications

Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust 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. However, based on experience, the Trust expects the risk of loss to be remote.

2. SHARES OF BENEFICIAL INTEREST

Effective May 12, 2003, the Fund offers two classes of shares: Class 1 and Class 2. Outstanding shares before that date were designated as Class 1 shares. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

At December 31, 2003, there were an unlimited number of shares authorized ($.01 par value). Transactions in the Fund’s shares were as follows:

	Year Ended December 31,
	2003					2002
Class 1 Shares:	Shares		Amount			Shares		Amount
Shares sold	1,372,218		$	23,091,741		2,523,146		$	40,144,293
Shares issued in reinvestment of distributions	180,120			3,089,057		347,582			5,137,264
Shares redeemed	(1,273,553	)		(21,167,460	)	(2,073,783	)		(32,786,639	)
Net increase (decrease)	278,785		$	5,013,338		796,945		$	12,494,918
Class 2 Shares:
Shares sold	1,043,127		$	17,281,578
Shares issued in reinvestment of distributions	226			3,871
Shares redeemed	(338,125	)		(5,506,573	)
Net increase (decrease)	705,228		$	11,778,876

3. TRANSACTIONS WITH AFFILIATES

Certain officers and trustees of the Trust are also officers and/or directors of the following entities:

Entity	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

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
.625%	First $100 million
.500%	Over $100 million, up to and including $250 million
.450%	Over $250 million, up to and including $10 billion

Fees are further reduced on net assets over $10 billion.

FZ10-11

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN ZERO COUPON FUND – 2010

Notes to Financial Statements (continued)

3. TRANSACTIONS WITH AFFILIATES (cont.)

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

The Fund reimburses Distributors up to .25% per year of its average daily net assets of Class 2, for costs incurred in marketing the Fund’s shares.

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

4. INCOME TAXES

At December 31, 2003, the Fund had tax basis capital losses of $573,310 which may be carried over to offset future capital gains. Such losses expire as follows:

Capital loss carryovers expiring in:
2010	$	274,229
2011		299,081
	$	573,310

At December 31, 2003, the Fund deferred capital losses occurring subsequent to October 31, 2003 of $501. For tax purposes, such losses will be reflected in the year ending December 31, 2004.

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

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

The tax character of distributions paid during the years ended December 31, 2003 and 2002 was as follows:

	2003		2002
Distributions paid from:
Ordinary Income	$	3,092,928	$	3,247,895
Long term capital gain		—		1,889,369
	$	3,092,928	$	5,137,264

At December 31, 2003, the cost of investments, net unrealized appreciation (depreciation), undistributed ordinary income and undistributed long term capital gains for income tax purposes were as follows:

Cost of Investments	$	72,821,002
Unrealized appreciation	$	11,147,342
Unrealized depreciation		(20,310	)
Net unrealized appreciation (depreciation)	$	11,127,032
Undistributed ordinary income	$	3,889,659
Undistributed long-term capital gains		—
Distributable earnings	$	3,889,659

5. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities) for the year ended December 31, 2003, aggregated $43,557,857 and $30,210,251, respectively.

FZ10-12

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN ZERO COUPON FUND – 2010

Notes to Financial Statements (continued)

6. REGULATORY MATTERS

On February 4, 2004, the Securities Division of the Office of the Secretary of the Commonwealth of Massachusetts filed an administrative complaint against Franklin Resources, Inc. and certain of its subsidiaries (the “Company”), alleging violations of the Massachusetts Uniform Securities Act. The complaint arises from activity that occurred in 2001 during which time an officer of a Company subsidiary was negotiating an agreement with an investor relating to investments in a mutual fund and a hedge fund.

The Company, in addition to other entities within Franklin Templeton Investments, has been named in shareholder class actions related to the matter described above. The Company believes that the claims made in the lawsuit are without merit and it intends to defend vigorously against the allegations. The Company and the Fund may be named in similar civil actions related to the matter described above.

In addition, as part of ongoing investigations by the U.S. Securities and Exchange Commission (the “SEC”), the U.S. Attorney for the Northern District of California, the New York Attorney General, the California Attorney General, the U.S. Attorney for the District of Massachusetts, the Florida Department of Financial Services, and the Commissioner of Securities and the Attorney General of the State of West Virginia, relating to certain practices in the mutual fund industry, including late trading, market timing and sales compensation arrangements, the Company and its subsidiaries, as well as certain current or former executives and employees of the Company, have received requests for information and/or subpoenas to testify or produce documents. The Company and its current employees are providing documents and information in response to these requests and subpoenas. In addition, the Company has responded to requests for similar kinds of information from regulatory authorities in some of the foreign countries where the Company conducts its global asset management business.

The Staff of the SEC has informed the Company that it intends to recommend that the Commission authorize an action against the Fund’s investment adviser and a senior executive officer relating to the frequent trading issues that are the subject of the SEC’s investigation. These issues were previously disclosed as being under investigation by government authorities and the subject of an internal inquiry by the Company in its Annual Report on Form 10-K and on its public website. The Company currently is in discussions with the SEC Staff in an effort to resolve the issues raised in their investigation. Such discussions are preliminary and the Fund’s management has been advised that the Company cannot predict the likelihood of whether those discussions will result in a settlement and, if so, the terms of such settlement. The impact, if any, of these matters on the Fund is uncertain at this time. If the Company finds that it bears responsibility for any unlawful or improper conduct, it has committed to making the Fund or its shareholders whole, as appropriate.

FZ10-13

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN ZERO COUPON FUND – 2010

Independent Auditors’ Report

To the Board of Trustees and Shareholders of

Franklin Templeton Variable Insurance Products Trust

In our opinion, the accompanying statement of assets and liabilities, including the statement of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Franklin Zero Coupon Fund—2010 (the Fund) (one of the Funds constituting the Franklin Templeton Variable Insurance Products Trust) at December 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

February 5, 2004, except for Note 6 as to which the date is February 12, 2004

FZ10-14

MUTUAL DISCOVERY SECURITIES FUND

Fund Goal and Primary Investments: Mutual Discovery Securities Fund seeks capital appreciation. The Fund invests mainly in U.S. and foreign equity securities (including securities convertible, or that the manager expects to become convertible, into common or preferred stock) of companies that the Fund’s manager believes are available at market prices less than their value based on certain recognized or objective criteria. The Fund may also invest a significant portion in small capitalization companies.

This annual report for Mutual Discovery Securities Fund covers the fiscal year ended December 31, 2003.

Performance Overview

You can find the Fund’s one-year total return in the Performance Summary following this report. Compared with its benchmarks over the same period, the Fund slightly outperformed the Standard & Poor’s 500 Composite Index’s (S&P 500’s) 28.67% return but underperformed the Morgan Stanley Capital International (MSCI) World Index’s 33.76% return.¹

Economic and Market Overview

Early in 2003, economic uncertainty and geopolitical events pushed U.S. interest rates to their lowest level in more than four decades. The U.S. government injected fiscal stimulus into the economy, approving another round of tax cuts and rebates that included dividend and capital gains tax reductions. In June, an accommodative Federal Reserve Board, in an attempt to bolster the economy, cut the federal funds target rate to 1.00%.

During the year, the U.S. trade deficit increased significantly, contributing to the U.S. dollar’s fall to record lows against the euro and other major currencies. However, the weak dollar provided a boost to the U.S. economy and corporate profits as exports became cheaper for foreign buyers. Robust consumer spending, especially for autos and homes, and strong business spending, particularly for equipment and software, contributed to the accelerated economic activity. In addition, U.S. federal spending stayed firm and inflation remained benign. U.S. gross domestic product (GDP) grew an annualized 8.2% in third quarter 2003, its strongest pace in nearly 20 years, and overall, 2003 GDP grew an estimated 3.1%. As economic data improved, some interest rates rose from their lows, and the 10-year Treasury note’s yield ended the period at 4.27%.

1. Source: Standard & Poor’s Micropal. One cannot invest directly in an index, nor is an index representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

MD-1

Foreign economies also showed signs of recovery and benign inflation following a low growth and disinflationary environment that facilitated monetary easing in many major economies during the reporting period. While economic growth accelerated in the U.S., it remained strong in Asia, and was weak, yet positive, in Europe. Despite these signs of economic recovery, benign inflationary trends continued, supported by cyclical productivity gains and excess capacity in labor and capital.

A global equity market rally started in late March 2003 and continued through the end of the year. The rebound began with investors anticipating economic recovery in the second half of 2003, and it continued as data showed robust economic growth. Improved sentiment led many investors to rotate into economically sensitive and financially leveraged companies, specifically cyclical, technology, small-capitalization and emerging market stocks. Consequently, domestic and foreign equity markets generally performed well.

Investment Strategy

At Mutual Series, we follow a distinctive, three-pronged investment approach, which combines the purchase of undervalued equities with investments in distressed debt and risk arbitrage. We build the bulk of the portfolio by investing in undervalued common stock — stocks where we believe we are buying assets at a substantial discount to intrinsic or business value. We focus on situations where we believe there is limited downside risk, and the potential for substantial long-term appreciation; we believe successful investing is as much about avoiding and containing losses as it is about generating gains. We augment the Fund’s equity portfolio with investments in distressed securities and bankruptcy situations. As with equities, we undertake our own rigorous fundamental analysis of each situation and focus our efforts on situations where we believe there is limited risk and substantial upside potential. Lastly, the Fund will invest in arbitrage situations, another highly specialized field. In arbitrage investing, we generally seek to invest in companies in the process of being acquired, or undergoing mergers. By buying those shares at a discount to the announced deal value, the Fund seeks to earn a return as that discount narrows and the transaction is completed.

We will migrate the Fund’s capital toward the areas where we find the most compelling opportunities at any given moment. Typically, the bulk of the Fund’s assets will be invested in equities, while distressed investing and arbitrage will each represent a much smaller portion of the Fund. We may also hold a significant portion of the Fund’s assets in cash or high-quality, short-term debt instruments when other invest - -

Top 10 Sectors/Industries

Mutual Discovery Securities Fund

Based on Equity Securities

12/31/03

	% of Total Net Assets
Tobacco	8.9%
Insurance	8.1%
Media	7.4%
Beverages	7.0%
Metals & Mining	6.3%
Food Products	5.7%
Diversified Financial Services	4.9%
Commercial Banks	4.4%
Chemicals	3.4%
Diversified Telecommunication Services	3.1%

MD-2

ment opportunities are not sufficiently compelling. As a global fund, Mutual Discovery Securities Fund will seek out opportunities around the world, with an emphasis on developed markets — markets where we believe the political risks are low and potential returns are attractive. We will generally seek to hedge the Fund’s currency exposure when we believe it is advantageous to do so, in order to focus our efforts on analyzing business fundamentals and assessing the value of the company’s assets and liabilities.

Manager’s Discussion

Several of the most significant contributors to the Fund’s performance during the year under review were from our distressed portfolio, such as NTL, International Steel Group (ISG), Telewest Communications and Adelphia Communications. In January 2003, NTL emerged from bankruptcy. In the process, our bonds were converted into the new company’s equity, and share prices subsequently rose. ISG was formed to purchase selected steel assets from bankrupt U.S. steel companies. ISG went public in December 2003, resulting in investment appreciation. Telewest and Adelphia bond prices rose as the companies progressed through their respective bankruptcy processes.

Within equities, White Mountains Insurance Group was one of the Fund’s largest contributors during the period. Our investment in White Mountains reflects our focus on companies with strong or improving fundamentals, attractive valuations and management teams who think like owners. During 2003, the company benefited from strong price increases for primary and reinsurance risks, disciplined underwriting and solid returns from its investment portfolio. While many companies within the P&C insurance industry struggled with eroding capital from past underwriting mistakes and significant losses in their investment portfolios, we believe White Mountains utilized its much-improved balance sheet and industry knowledge to acquire insurance companies we believe are undervalued or capital-constrained and to increase exposure to what we feel are its most attractive lines of businesses. Primarily as a result of these actions, the company continued to improve profitability and enjoyed a 13% increase in its book value during 2003.

Also contributing positively to the Fund was SES Global, which offers global satellite services primarily to broadcasters, cable television networks and broadband telecommunications companies. We purchased most of the Fund’s position in a single block trade from another company, which was divesting non-core holdings to shore up its balance

Top 10 Equity Holdings

Mutual Discovery Securities Fund

12/31/03

Company Sector/Industry, Country	% of Total Net Assets
Berkshire Hathaway Inc., A & B	3.2%
Insurance, U.S.
British American Tobacco PLC	3.1%
Tobacco, U.K.
Altadis SA	2.0%
Tobacco, Spain
Newmont Mining Corp.	2.0%
Metals & Mining, U.S.
Vinci SA	2.0%
Construction & Engineering, France
Groupe Danone	2.0%
Food Products, France
Imperial Tobacco Group PLC	1.9%
Tobacco, U.K.
NTL Inc.	1.6%
Diversified Telecommunication Services, U.K.
Diageo PLC	1.6%
Beverages, U.K.
Liberty Media Corp., A	1.6%
Media, U.S.

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

MD-3

sheet. This is an excellent example of a situation where keeping a cash reserve enabled the Fund to take advantage of an opportunity that arose quickly. As SES generated improved free cash flow, reduced balance sheet debt and signed contracts for additional satellite capacity, and as the technical pressure due to the forced sale abated, the company’s shares rose, resulting in a Fund gain.

Detracting from Fund performance during the reporting period were Allied Domecq (sold by year-end), one of the world’s largest spirits and wine companies; Abitibi-Consolidated, a Canadian paper and forest products company; and Beiersdorf, a German personal care products company. Allied Domecq’s stock declined after the company lowered its earnings outlook in February due to a weak U.S. dollar, higher pension expenses and weakness in its Spanish operations. Abitibi’s shares underperformed in 2003 after a weak U.S. dollar, soft sales and higher energy prices forced the company to reduce its earnings outlook and cut its dividend. Beiersdorf, which owns leading skin care brand Nivea, had been the subject of takeover speculation earlier in the year. Beiersdorf’s shares declined after the company’s major shareholders announced it would remain independent and not be sold.

Because the Fund generally hedges its foreign currency exposure, periods of a rising U.S. dollar should benefit relative performance, but a falling dollar should dampen relative performance, as was the case in 2003. Because we believed there were structural imbalances that placed the dollar at risk, we reduced the Fund’s hedges in 2003, which helped the Fund’s relative performance. We remained underhedged at year-end (we consider approximately 85% to be fully hedged).

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

This discussion reflects our analysis, opinions and portfolio holdings as of December 31, 2003, 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 advisor 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.

MD-4

PERFORMANCE SUMMARYASOF 12/31/03

Total return of Class 2 shares represents the average annual change in value, assuming reinvestment of dividends and capital gains. Average returns smooth out variations in returns, which can be significant; they are not the same as year-by-year results.

Mutual Discovery Securities Fund – Class 2*

Periods ended 12/31/03

	1-Year	5-Year	Since Inception (11/8/96)
Average Annual Total Return	+28.99%	+9.78%	+8.94%

*Because Class 2 shares were not offered until 1/6/99, standardized Class 2 Fund performance for prior periods represents the historical results of Class 1 shares. For periods beginning on 1/6/99, Class 2’s results reflect an additional 12b-1 fee expense, which also affects future performance. Since 1/6/99 (effective date), the average annual total return of Class 2 shares was +9.12%.

Ongoing market volatility can significantly affect short-term performance; recent returns may differ.

Total Return Index Comparison

for Hypothetical $10,000 Investment (11/8/96–12/31/03)

The graph compares the performance of Mutual Discovery Securities Fund – Class 2,* the S&P 500 and the MSCI World Index. One cannot invest directly in an index, nor is an index representative of the Fund’s portfolio. Please see Important Notes to Performance Information preceding the Fund Summaries.

**Source: Standard & Poor’s Micropal. Please see Index Descriptions following the Fund Summaries.

Mutual Discovery Securities Fund – Class 2

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.

Since markets can go down as well as up, investment return and the value of your principal will fluctuate with market conditions, and you may have a gain or loss when you sell your shares.

MD-5

Past performance does not guarantee future results.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL DISCOVERY SECURITIES FUND

Financial Highlights

	Class 1
	Year Ended December 31,
	2003			2002			2001			2000			1999
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	11.06		$	12.56		$	14.55		$	13.57		$	11.29
Income from investment operations:
Net investment incomea		.19			.19			.24			.26			.17
Net realized and unrealized gains (losses)		3.01			(1.28	)		(.08	)		1.14			2.48
Total from investment operations		3.20			(1.09	)		.16			1.40			2.65
Less distributions from:
Net investment income		(.22	)		(.19	)		(.30	)		(.42	)		(.37	)
Net realized gains		—			(.22	)		(1.85	)		—			—
Total distributions		(.22	)		(.41	)		(2.15	)		(.42	)		(.37	)
Net asset value, end of year	$	14.04		$	11.06		$	12.56		$	14.55		$	13.57
Total returnb		29.19%			(9.06)%			.39%			10.45%			23.76%
Ratios/supplemental data
Net assets, end of year (000’s)	$	134,332		$	122,011		$	164,527		$	191,051		$	202,777
Ratios to average net assets:*
Expensesc		1.04%			1.03%			1.02%			1.02%			1.01%
Net investment income		1.48%			1.55%			1.76%			1.80%			1.42%
Portfolio turnover rate		41.52%			47.46%			64.58%			74.77%			104.69%
*Ratios to average net assets, excluding dividend expense on securities sold short: Expenses		1.01%			1.02%			1.00%			.98%			.99%

^aBased on average daily shares outstanding.

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

^cIncludes dividend expense on securities sold short which varies from period to period. See below for expense ratios that reflect consistent operating expenses.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL DISCOVERY SECURITIES FUND

Financial Highlights (continued)

	Class 2
	Year Ended December 31,
	2003			2002			2001			2000			1999d
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	10.97		$	12.50		$	14.50		$	13.54		$	11.65
Income from investment operations:
Net investment incomea		.13			.16			.13			.22			.11
Net realized and unrealized gains (losses)		3.02			(1.29	)		.01			1.14			2.15
Total from investment operations		3.15			(1.13	)		.14			1.36			2.26
Less distributions from:
Net investment income		(.22	)		(.18	)		(.29	)		(.40	)		(.37	)
Net realized gains		—			(.22	)		(1.85	)		—			—
Total distributions		(.22	)		(.40	)		(2.14	)		(.40	)		(.37	)
Net asset value, end of year	$	13.90		$	10.97		$	12.50		$	14.50		$	13.54
Total returnb		28.99%			(9.40)%			.24%			10.21%			19.68%
Ratios/supplemental data
Net assets, end of year (000’s)	$	160,371		$	37,241		$	5,681		$	1,035		$	413
Ratios to average net assets:*
Expensesc		1.29%			1.28%			1.27%			1.27%			1.27%	e
Net investment income		1.23%			1.30%			1.03%			1.59%			.94%	e
Portfolio turnover rate		41.52%			47.46%			64.58%			74.77%			104.69%
*Ratios to average net assets, excluding dividend expense on securities sold short:
Expenses		1.26%			1.27%			1.25%			1.23%			1.27%e

^a Based on average daily shares outstanding.

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

^c Includes dividend expense on securities sold short which varies from period to period. See below for expense ratios that reflect consistent operating expenses.

^d For the period January 6, 1999 (effective date) to December 31, 1999.

^e Annualized.

See notes to financial statements.

MD-7

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL DISCOVERY SECURITIES FUND

Statement of Investments, December 31, 2003

	COUNTRY	SHARES/ WARRANTS/ CONTRACTS	VALUE
Common Stocks and Other Equity Interests 79.6%
Aerospace & Defense .5%
Northrop Grumman Corp.	United States	16,200	$	1,548,720
Airlines
aAtlantic Coast Airlines Holdings Inc.	United States	1,800		17,820
Auto Components .4%
NGK Spark Plug Co. Ltd.	Japan	7,000		56,760
Trelleborg AB, B	Sweden	72,941		1,186,066
				1,242,826
Beverages 7.0%
Brown-Forman Corp., A	United States	3,700		358,715
Brown-Forman Corp., B	United States	10,780		1,007,391
aCarlsberg AS, A	Denmark	3,500		144,076
Carlsberg AS, B	Denmark	77,700		3,580,190
Coca-Cola Enterprises Inc.	United States	15,500		338,985
Diageo PLC	United Kingdom	355,440		4,676,758
Fomento Economico Mexicano SA de CV Femsa, ADR	Mexico	60,300		2,223,864
Heineken Holding NV, A	Netherlands	67,110		2,296,537
Kirin Brewery Co. Ltd.	Japan	24,900		212,360
Molson Inc., A	Canada	59,200		1,653,798
Orkla ASA	Norway	173,270		3,880,656
Pepsi Bottling Group Inc.	United States	9,500		229,710
				20,603,040
Biotechnology
aSICOR Inc.	United States	1,600		43,520
Capital Markets .5%
C.I. Fund Management Inc.	Canada	124,800		1,355,923
Chemicals 3.4%
Akzo Nobel NV	Netherlands	48,130		1,857,692
Givaudan AG	Switzerland	6,750		3,503,942
MG Technologies AG	Germany	103,800		1,453,305
Solvay SA	Belgium	29,070		2,520,891
Syngenta AG	Switzerland	10,460		704,522
				10,040,352
Commercial Banks 4.5%
Allied Irish Banks PLC	Irish Republic	276,700		4,425,525
aBanca Nazionale del Lavoro SpA	Italy	224,600		536,853
Bank of Ireland	Irish Republic	171,170		2,329,622
Danske Bank	Denmark	101,550		2,382,571
DNB NOR ASA	Norway	371,340		2,481,070
Fleet Boston Financial Corp.	United States	5,500		240,075
KeyCorp	United States	24,800		727,136
a,bNippon Investment LLC	Japan	477,000		181,260
				13,304,112

MD-8

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL DISCOVERY SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	COUNTRY	SHARES/ WARRANTS/ CONTRACTS	VALUE
Common Stocks and Other Equity Interests (cont.)
Commercial Services & Supplies .7%
aAlderwoods Group Inc.	United States	26,228	$	247,068
aCendant Corp.	United States	45,300		1,008,831
Republic Services Inc.	United States	37,100		950,873
				2,206,772
Computers & Peripherals
aDecisionOne Corp.	United States	5,288		10,576
Construction & Engineering 2.0%
Vinci SA	France	70,180		5,811,449
Construction Materials .8%
Ciments Francais SA	France	22,650		1,585,614
RMC Group PLC	United Kingdom	56,800		709,225
				2,294,839
Diversified Financial Services 4.9%
Brascan Corp., A	Canada	92,700		2,850,045
E-L Financial Corp. Ltd.	Canada	7,400		1,732,250
a,bElephant Capital Holdings Ltd.	Japan	746		745,500
Euronext	Netherlands	82,200		2,080,921
aIrish Life & Permanent PLC	Irish Republic	147,300		2,368,914
a,bLeucadia National Corp.	United States	34,780		1,523,190
Pargesa Holdings SA	Switzerland	1,147		3,060,522
				14,361,342
Diversified Telecommunication Services 3.1%
a,b,cAboveNet Inc.	United States	3,103		92,948
BCE Inc.	Canada	46,400		1,037,694
Chunghwa Telecom Co. Ltd., ADR	Taiwan	55,045		798,152
Global Crossing Holdings Ltd., Contingent Equity Distribution	United States	2,239,973		1,959
aGlobal Crossing Ltd.	United States	3,405		112,370
aKoninklijke KPN NV	Netherlands	174,400		1,346,276
a,bNTL Inc.	United Kingdom	30,150		1,997,814
aNTL Inc.	United Kingdom	39,981		2,788,675
aSpectrasite Inc.	United States	25,062		870,905
aXO Communications Inc.	United States	49,930		212,203
				9,258,996
Electric Utilities 1.0%
E.ON AG	Germany	25,950		1,699,778
a,bPG & E Corp., wts., 9/02/06	United States	667		16,664
aReliant Resources Inc.	United States	164,000		1,207,040
				2,923,482
Food & Staples Retailing .4%
aKroger Co.	United States	42,600		788,526
aSafeway Inc.	United States	16,200		354,942
				1,143,468

MD-9

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL DISCOVERY SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	COUNTRY	SHARES/ WARRANTS/ CONTRACTS	VALUE
Common Stocks and Other Equity Interests (cont.)
Food Products 5.7%
Cadbury Schweppes PLC	United Kingdom	402,627	$	2,956,942
Farmer Brothers Co.	United States	4,200		1,307,250
Groupe Danone	France	35,475		5,790,193
aKoninklijke Numico NV	Netherlands	46,100		1,274,030
Lotte Confectionary Co. Ltd.	South Korea	2,812		1,058,483
Nestle SA	Switzerland	17,360		4,337,368
Weetabix Ltd., A	United Kingdom	1,200		113,854
				16,838,120
Gas Utilities .2%
Tokyo Gas Co. Ltd.	Japan	173,800		619,498
Health Care Equipment & Supplies .1%
Amersham PLC	United Kingdom	21,800		298,740
Health Care Providers & Services 1.1%
aAdvancePCS	United States	2,200		115,852
HCA Inc.	United States	15,100		648,696
a,cKindred Healthcare Inc.	United States	28,754		1,419,901
a,cKindred Healthcare Inc., Jul. 47.50 Calls, 7/11/11	United States	46		20,608
a,cKindred Healthcare Inc., Jan. 52.00 Calls, 1/01/12	United States	7		—
a,cKindred Healthcare Inc., wts., Series A, 4/20/06	United States	5,258		122,280
a,cKindred Healthcare Inc., wts., Series B, 4/20/06	United States	13,145		275,355
aLaboratory Corp. of America Holdings	United States	5,100		188,445
aMid Atlantic Medical Services Inc.	United States	1,600		103,680
aRotech Healthcare Inc.	United States	8,060		185,380
aWellpoint Health Networks Inc.	United States	1,200		116,388
				3,196,585
Hotels Restaurants & Leisure .2%
Cara Operations Ltd.	Canada	500		2,782
Cara Operations Ltd., A	Canada	27,000		147,928
aFHC Delaware Inc.	United States	49,920		392,870
				543,580
Household Products .4%
KAO Corp.	Japan	65,300		1,328,301
Insurance 8.2%
aAlleghany Corp.	United States	3,614		804,115
aBerkshire Hathaway Inc., A	United States	45		3,791,250
aBerkshire Hathaway Inc., B	United States	2,000		5,630,000
Guinness Peat Group PLC	New Zealand	271,000		332,721
Hartford Financial Services Group Inc.	United States	32,000		1,888,960
IPC Holdings Ltd.	Bermuda	15,500		603,570
John Hancock Financial Services Inc.	United States	9,000		337,500
aMontpelier Re Holdings Ltd.	Bermuda	4,857		178,252
Old Republic International Corp.	United States	54,300		1,377,048
a,bOlympus Re Holdings Ltd.	Bermuda	2,140		338,484
Prudential Financial Inc.	United States	33,200		1,386,764
Travelers Property Casualty Corp., A	United States	164,050		2,752,759
United Fire & Casualty Co.	United States	14,700		593,292
White Mountains Insurance Group Inc.	United States	6,200		2,851,690
bWhite Mountains Insurance Group Inc.	United States	2,796		1,221,719
				24,088,124

MD-10

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL DISCOVERY SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	COUNTRY	SHARES/ WARRANTS/ CONTRACTS		VALUE
Common Stocks and Other Equity Interests (cont.)
IT Services .1%
Comdisco Contingent Equity Distribution	United States	2,066,357		$	7,646
aComdisco Holding Co., Inc.	United States	1			40
aConcord EFS Inc.	United States	10,300			152,852
					160,538
Leisure Equipment & Products .7%			��
Agfa Gevaert NV	Belgium	25,090			715,230
Nintendo Co. Ltd.	Japan	13,300			1,241,019
					1,956,249
Machinery .9%
Alfa Laval AB	Sweden	80,700			1,228,114
aSchindler Holding AG	Switzerland	4,100			1,001,172
aSchindler Holding AG, Reg D	Switzerland	1,800			499,212
					2,728,498
Media 7.1%
Astral Media Inc., A	Canada	70,900			1,538,979
Dow Jones & Co. Inc.	United States	2,000			99,700
E.W. Scripps Co., A	United States	8,200			771,948
aEchoStar Communications Corp., A	United States	25,500			867,000
Gannett Co. Inc.	United States	3,700			329,892
aJC Decaux SA	France	40,325			659,198
Lagardere SCA	France	40,510			2,338,727
aLiberty Media Corp., A	United States	391,846			4,659,049
McGraw-Hill Cos. Inc.	United States	3,200			223,744
aNTL Europe Inc.	United Kingdom	10,535			105
NV Holdingsmig de Telegraaf	Netherlands	45,878			1,047,416
Omnicom Group Inc.	United States	4,500			392,985
SES Global, FDR	Luxembourg	381,600			3,850,656
Torstar Corp., B	Canada	46,500			1,043,889
aTVMAX Holdings Inc.	United States	3,535			8,837
Washington Post Co., B	United States	3,821			3,023,939
					20,856,064
Metals & Mining 6.3%
Anglo American PLC	United Kingdom	101,000			2,182,327
aApollo Gold Corp.	Canada	93,900			215,085
aAshanti Goldfields Co. Ltd., GDR, Reg S	Ghana	15,100			196,904
Barrick Gold Corp.	Canada	75,900			1,723,689
Falconbridge Ltd.	Canada	2,400			58,243
aGlamis Gold Ltd.	Canada	39,200			675,857
Gold Fields Ltd.	South Africa	31,900			456,397
Impala Platinum Holdings Ltd.	South Africa	24,500			2,128,839
a,bInternational Steel Group	United States	128,899			4,267,524
Newmont Mining Corp.	United States	119,700			5,818,617
Noranda Inc.	Canada	18,200			289,425
Pechiney SA, A	France	500			30,588
Placer Dome Inc.	Canada	25,100			450,042
aRandgold & Exploration Co. Ltd., ADR	South Africa	2,000			32,798
aWheaton River Minerals Ltd.	Canada	51,498			154,225
aWheaton River Minerals Ltd., wts., 5/30/07	Canada	20,700			37,002
					18,717,562

MD-11

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL DISCOVERY SECURITIEs FUND

Statement of Investments, December 31, 2003 (cont.)

	COUNTRY	SHARES/ WARRANTS/ CONTRACTS	VALUE
Common Stocks and Other Equity Interests (cont.)
Multi-Utilities & Unregulated Power .7%
Suez SA	France	100,365	$	2,016,668
Oil & Gas 2.5%
BP PLC	United Kingdom	158,600		1,286,153
BP PLC, ADR	United Kingdom	9,000		444,150
Eni SpA	Italy	67,710		1,277,676
Lukoil Holdings, ADR	Russia	4,000		372,320
Norsk Hydro ASA	Norway	6,500		401,072
Occidental Petroleum Corp.	United States	5,700		240,768
aSouthwest Royalties Inc., A	United States	3,410		102,295
Suncor Energy Inc.	Canada	2,200		55,330
Total SA, B	France	12,324		2,291,319
Total SA, B, ADR	France	9,670		894,571
Yukos Corp., ADR	Russia	3,200		136,800
				7,502,454
Paper & Forest Products 1.0%
Abitibi-Consolidated Inc.	Canada	97,900		785,624
Potlatch Corp.	United States	63,100		2,193,987
				2,979,611
Personal Products .4%
Beiersdorf AG	Germany	9,200		1,127,371
Pharmaceuticals 1.3%
Merck & Co. Inc.	United States	29,000		1,339,800
Takeda Chemical Industries Ltd.	Japan	48,785		1,934,648
Wyeth	United States	11,000		466,950
				3,741,398
Real Estate 1.6%
American Financial Realty Trust	United States	5,400		92,070
aCanary Wharf Group PLC	United Kingdom	185,900		891,046
iStar Financial Inc.	United States	42,200		1,641,580
a,bSecurity Capital European Realty	Luxembourg	4,563		33,994
a.bTorre Mayor Investments, LP	Mexico	10		800,000
Ventas Inc.	United States	55,600		1,223,200
				4,681,890
Road & Rail 1.1%
Canadian National Railway Co.	Canada	20,400		1,294,486
Florida East Coast Industries Inc., A	United States	33,300		1,102,230
Norfolk Southern Corp.	United States	40,500		957,825
				3,354,541
Specialty Retail
New Look Group	United Kingdom	19,300		107,451
Thrifts & Mortgage Finance 1.2%
Freddie Mac	United States	37,000		2,157,840
Greenpoint Financial Corp.	United States	2,946		104,053
Hudson City Bancorp Inc.	United States	26,600		1,015,588
				3,277,481

MD-12

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL DISCOVERY SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	COUNTRY	SHARES/ WARRANTS/ CONTRACTS			VALUE
Common Stocks and Other Equity Interests (cont.)
Tobacco 8.9%
Altadis SA	Spain		205,115		$	5,821,251
Altria Group Inc.	United States		16,700			908,814
British American Tobacco PLC	United Kingdom		663,675			9,148,239
Gallaher Group PLC	United Kingdom		72,170			775,174
Gallaher Group PLC, ADR	United Kingdom		1,000			42,540
Imperial Tobacco Group PLC	United Kingdom		285,417			5,620,356
ITC Ltd.	India		65,968			1,423,535
KT&G Corp.	South Korea		25,000			434,326
KT&G Corp., GDR, 144A	South Korea		222,090			1,949,950
						26,124,185
Trading Companies & Distributors .3%
Compania de Distribucion Intefral Logista SA	Spain		30,900			954,517
Transportation Infrastructure .4%
aLaidlaw International Inc.	United States		48,203			666,647
Peninsular & Oriental Steam Navigation Co.	United Kingdom		93,800			386,209
						1,052,856
Total Common Stocks and Other Equity Interests (Cost $178,954,864)						234,419,519
Preferred Stocks .5%
Electric Utilities
aMontana Power Co., 8.45%, pfd.	United States		2,880			34,560
Food Products .1%
Unilever NV, pfd.	Netherlands		43,200			310,050
Insurance .1%
United Fire & Casualty Co., 6.375%, cvt. pfd.	United States		5,300			153,700
Media .3%
News Corp. Ltd., ADR, pfd.	Australia		34,100			1,031,525
NTL Europe Inc., 10.00%, A, pfd.	United Kingdom		4,660			38,329
						1,069,854
Total Preferred Stocks (Cost $1,409,776)						1,568,164
		PRINCIPAL AMOUNTf
Corporate Bonds & Notes 2.8%
Calpine Constructor Finance,
8.50%, 8/26/11	United States	$	274,000			284,960
First Priority Term Loan, 8/26/09	United States		225,000			236,250
Calpine Corp., 144A, 9.875%, 12/01/11	United States		634,000			654,605
Charter Communications Operating LLC, Bank Claim	United States		357,000			344,505
DecisionOne Corp., Term Loan	United States		160,202			112,142
Eurotunnel PLC,
12/31/18, Tier 2	United Kingdom		160,314	GBP		209,500
12/31/25, Tier 3	United Kingdom		254,024	GBP		250,109
Stabilization Advance S8, Tier 2	United Kingdom		117,813	GBP		40,072
Eurotunnel SA,
5.28%, 12/31/18, Tier 2 (Pibor)	France		17,565	EUR		16,174
12/31/18, Tier 2 (Libor)	France		39,763	EUR		36,613
12/31/25, Tier 3 (Libor)	France		82,595	EUR		57,300

MD-13

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL DISCOVERY SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	COUNTRY	PRINCIPAL AMOUNTf		VALUE
Corporate Bonds & Notes (cont.)
Eurotunnel SA, (cont.)
Stabilization Advance S6, Tier 1 (Pibor)	France	10,849	EUR	$	2,600
Stabilization Advance S6, Tier 2 (Libor)	France	21,402	EUR		5,129
Stabilization Advance S7, Tier 1 (Pibor)	France	36,561	EUR		8,762
Healthsouth Corp.,
8.50%, 2/01/08	United States	285,000			275,025
7.00%, 6/15/08	United States	148,000			138,750
8.375%, 10/01/11	United States	97,000			92,150
7.625%, 6/01/12	United States	730,000			686,200
cvt., 3.25%, 4/01/03	United States	531,000			515,070
Marconi Corp., 10.00%, 10/31/08	United Kingdom	71,367			79,217
Marconi PLC, 8.00%, 4/30/08	United Kingdom	365,215			357,911
Mirant Mid-Atlantic LLC,
8.625%, 6/30/12	United States	162,669			163,584
9.125%, 6/30/17	United States	80,508			80,558
10.06%, 12/30/28	United States	152,964			154,589
bMP Finance Ltd., 5.00%, 8/28/07	Japan	2,227,000			2,271,540
Providian Financial Corp, cvt., zero cpn., 2/15/21	United States	644,000			307,510
Seton House Finance Ltd., 2/07/12	United Kingdom	2,553,000	EUR		740,653
Teco Panda,
Bank Claim #2	United States	432,100			308,951
Debt Service Reserve L/C Loan	United States	24,800			17,732
Project L/C Loan Facility	United States	62,000			44,330
TVMAX Holdings Inc., PIK, 14.00%, 2/01/06	United States	16,306			16,306
Total Corporate Bonds & Notes (Cost $7,549,565)					8,508,797
Bonds & Notes in Reorganization 6.7%
dAdelphia Communications Corp.,
9.25%, 10/01/02	United States	2,638,000			2,453,340
8.125%, 7/15/03	United States	219,000			203,670
7.50%, 1/15/04	United States	80,000			74,000
9.50%, 2/15/04	United States	13,844			12,944
10.50%, 7/15/04	United States	124,000			117,180
10.25%, 11/01/06	United States	159,000			148,665
8.375%, 2/01/08	United States	245,000			229,687
7.75%, 1/15/09	United States	210,000			196,350
7.875%, 5/01/09	United States	117,000			107,640
9.375%, 11/15/09	United States	110,000			104,500
10.25%, 6/15/11	United States	250,000			237,500
dAES Drax Holdings Ltd.,
10.41%, 12/31/20	Cayman Islands	2,317,000			2,038,960
9.07%, 12/31/25	Cayman Islands	220,000	GBP		340,667
dAiken Cnty SC Indl Rev Ref Beloit, 6.00%, 12/01/11	United States	20,000			100
dAir Canada Inc.,
6.75%, 2/02/04	Canada	55,000	CAD		15,535
9.00%, 6/01/06	Canada	100,000	CAD		28,632
10.00%, 6/01/06	Canada	254,000	EUR		136,163
7.25%, 10/01/07	Canada	187,000	CAD		51,010
10.25%, 3/15/11	Canada	1,830,000			745,725
Bank Claim	Canada	625,300	CAD		174,198
Bank Claim	Canada	11,338,000	JPY		40,202
Term Loan	Canada	425,300			157,361
zero cpn., 7/31/05	Canada	454,546			175,000

MD-14

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL DISCOVERY SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	COUNTRY	PRINCIPAL AMOUNTf			VALUE
Bonds & Notes in Reorganization (cont.)
dCentury Communications Corp.,
9.50%, 3/01/05	United States	$	15,000		$	14,550
8.875%, 1/15/07	United States		11,000			10,725
8.375%, 12/15/07	United States		20,000			19,550
zero cpn., 3/15/03	United States		223,000			198,470
dDow Corning Corp., 9.375%, 2/01/08	United States		300,000			654,000
dHarnischfeger Industries Inc.,
8.90%, 3/01/22	United States		162,000			907
8.70%, 6/15/22	United States		159,000			906
7.25%, 12/15/25	United States		232,000			1,322
6.875%, 2/15/27	United States		216,000			1,210
Stipulated Bank Claim	United States		250,450			1,377
dMetromedia Fiber Network Inc.,
14.00%, 3/15/07	United States		880,000			466,400
10.00%, 11/15/08	United States		577,000			39,669
senior note 10.00%, 12/15/09	United States		575,000			40,969
senior note 10.00%, 12/15/09	United States		280,000	EUR		26,488
dMirant Corp.,
Tranche C Revolver	United States		313,706			194,498
4 Year Revolver, 7/17/05	United States		258,149			201,356
364 Day Revolver	United States		448,600			264,674
dNorthwestern Corp.,
8.75%, 3/15/12	United States		359,000			325,792
6.95%, 11/15/28	United States		191,000			171,184
dNRG Energy Inc.,
7.625%, 2/01/06	United States		250,000			141,250
6.75%, 7/15/06	United States		431,000			243,515
7.50%, 6/15/07	United States		245,000			139,650
7.50%, 6/01/09	United States		230,000			131,100
8.25%, 9/15/10	United States		287,000			167,895
7.75%, 4/01/11	United States		31,000			17,825
8.00%, 11/01/13	United States		1,550,000			891,250
8.70%, 3/15/20	United States		20,000			11,600
8.625%, 4/01/31	United States		226,000			132,210
Revolver	United States		1,000,101			620,062
dOwens Corning, Revolver	United States		1,969,266			1,476,949
dParmalat Netherlands BV, 0.875%, 06/30/21	Italy		350,000	EUR		110,788
dPG & E Corp.,
9.625%, 11/01/05	United States		853,000			870,060
Commercial Paper, 1/18/01	United States		35,000			35,175
Commercial Paper, 1/30/01	United States		18,000			18,090
Commercial Paper, 2/16/01	United States		54,000			54,270
FRN, 144A, 8.333%, 10/31/01	United States		271,000			276,420
MTN, 5.94%, 10/07/03	United States		44,000			44,220
dPort Seattle Wash Rev Ref-Beloit Proj., 6.00%, 12/01/17	United States		10,000			50
dSafety Kleen Corp., 9.25%, 5/15/09	United States		31,000			1,550
dSafety Kleen Services, 9.25%, 6/01/08	United States		3,000			15
dTelewest Communications PLC,
11.00%, 10/01/07	United Kingdom		321,000			210,255
11.25%, 11/01/08	United Kingdom		46,000			29,785

MD-15

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL DISCOVERY SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	COUNTRY	PRINCIPAL AMOUNTf			VALUE
Bonds & Notes in Reorganization (cont.)
dTelewest Communications PLC, (cont.)
9.875%, 2/01/10	United Kingdom		107,000	GBP	$	113,013
Bank Claim	United Kingdom		1,174,313	GBP		998,547
cvt., 5.25%, 2/19/07	United Kingdom		307,000	GBP		291,277
senior disc. note, zero cpn., 4/15/09	United Kingdom		120,000			63,000
senior disc. note, zero cpn., 2/01/10	United Kingdom		95,000			47,025
zero cpn., 4/15/04	United Kingdom		371,000	GBP		332,074
dTelewest Finance Ltd., cvt., 6.00%, 7/07/05	United Kingdom		274,000			290,440
dWorldCom Inc.,
7.875%, 5/15/03	United States		335,000			113,063
6.25%, 8/15/03	United States		35,000			11,813
6.50%, 5/15/04	United States		46,000			15,525
6.40%, 8/15/05	United States		410,000			138,375
7.375%, 1/15/06	United States		100,000			33,750
8.00%, 5/15/06	United States		146,000			49,275
7.75%, 4/01/07	United States		245,000			82,688
8.25%, 5/15/10	United States		335,000			113,063
7.375%, 1/15/11	United States		766,000			258,525
7.50%, 5/15/11	United States		737,000			248,738
7.75%, 4/01/27	United States		65,000			21,938
6.95%, 8/15/28	United States		25,000			8,438
8.25%, 5/15/31	United States		1,172,000			395,550
Total Bonds & Notes in Reorganization (Cost $16,160,518)						19,673,177
		SHARES/ PRINCIPAL AMOUNTf
Companies in Liquidation
aBrunos Inc., Liquidating Unit	United States		2,247			4,944
aGuangdong International Trust & Investment Corp.,
144A, 8.75%, 10/24/16	China		120,000			7,500
Revolver—Admitted Claim	Hong Kong		130,067			8,129
Structured Note—Admitted Claim	Hong Kong		205,745			12,859
Syndicated Loan—Admitted Claim	Hong Kong		355,733			22,233
Total Companies in Liquidation (Cost $50,949)						55,665
		PRINCIPAL AMOUNTf
U.S. Government and Agency Securities 12.2%
eFederal National Mortgage Association, 1.010% to 1.286%, with maturities to 6/25/04	United States	$	7,000,000			6,985,506
Federal Home Loan Bank, 0.75% to 1.42%, with maturities to 12/16/04	United States		26,901,000			26,787,998
U.S. Treasury Bill, 0.97%, 4/01/04	United States		2,000,000			1,995,515
Total U.S. Government and Agency Securities (Cost $35,752,174)						35,769,019
Short Term Investments (Cost $2,997,366) 1.0%
Hbos Treasury Services, 1.093%, 1/29/04	United Kingdom		3,000,000			2,997,318
Total Investments (Cost $242,875,211) 102.8%						302,991,659
Options Written						(387	)
Securities Sold Short (.6%)						(1,813,911	)
Net Equity in Forward Contracts (1.9%)						(5,730,713	)
Other Assets, less Liabilities (.3%)						(743,247	)
Net Assets 100.0%					$	294,703,401

MD-16

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL DISCOVERY SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

Option Written ISSUER	COUNTRY	CONTRACTS/ SHARES	VALUE
Diversified Telecommunications Services
XO Communications Inc., Jun. 4.25 Calls, 6/21/04	United States	49,930	$	—
Food & Staples Retailing
Safeway PLC, Jan. 2.70 Puts, 1/16/04	United Kingdom	120		387
Total Options Written (Premiums received $13,653)			$	387
Securities Sold Short ISSUER
Capital Markets
gLehman Brothers Holdings Inc.	United States	700	$	54,054
Commercial Banks .1%
gBank of America Corp.	United States	3,100		249,333
Food Products .1%
gKraft Foods Inc., A	United States	11,200		360,864
Health Care Providers & Services .1%
gAnthem Inc.	United States	1,200		90,000
gCaremark RX Inc.	United States	3,900		98,787
gUnited Health Group Inc.	United States	1,400		81,452
				270,239
Insurance .1%
gManulife Financial Corp.	Canada	10,600		342,380
Internet Software & Services
gYahoo! Inc.	United States	1,185		53,527
IT Services .1%
gFirst Data Corp.	United States	2,560		105,190
Media
gNews Corp. Ltd., ADR	Australia	2,900		104,690
Metals & Mining .1%
gAlcan Inc.	Canada	283		13,287
gAngloGold Ltd., ADR	South Africa	4,400		205,480
gRandgold Resources Ltd., ADR	United Kingdom	1,505		41,086
				259,853
Pharmaceuticals
gTeva Pharmaceutical Industries Ltd., ADR	Israel	243		13,781
Total Securities Sold Short (Proceeds $1,764,589)			$	1,813,911

Synthetic Equity Swaps (ses) ISSUER	COUNTRY	SHARES		VALUE AT 12/31/03			UNREALIZED GAIN/(LOSS)
Health Care Equipment & Supplies
hSmith & Nephew PLC, ses., 3.752 GBP	United Kingdom	(46	)	$	(386	)	$	(78	)
hSmith & Nephew PLC, ses., 3.776 GBP	United Kingdom	(900	)		(7,560	)		(1,488	)
					(7,946	)		(1,566	)

MD-17

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL DISCOVERY SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

Synthetic Equity Swaps (cont.) ISSUER	COUNTRY	SHARES		VALUE AT 12/31/03			UNREALIZED GAIN (LOSS)
Insurance
hAxa SA, ses., 15.850 EUR	France	1,019		$	21,812		$	1,399
hAxa SA, ses., 15.870 EUR	France	200			4,281			270
hAxa SA, ses., 16.030 EUR	France	1,804			38,615			2,067
hAxa SA, ses., 16.700 EUR	France	(1,019	)		(21,812	)		(389	)
hAxa SA, ses., 16.770 EUR	France	(200	)		(4,281	)		(59	)
hAxa SA, ses., 17.000 EUR	France	(1,804	)		(38,615	)		61
					—			3,349
Real Estate
hChelsfield PLC, ses., 3.095 GBP	United Kingdom	300			1,650			(15	)
hChelsfield PLC, ses., 3.107 GBP	United Kingdom	1,000			5,500			(71	)
hChelsfield PLC, ses., 3.112 GBP	United Kingdom	696			3,828			(60	)
hChelsfield PLC, ses., 3.154 GBP	United Kingdom	9,600			52,802			(1,476	)
hChelsfield PLC, ses., 3.160 GBP	United Kingdom	3,300			18,151			(543	)
hChelsfield PLC, ses., 3.165 GBP	United Kingdom	1,400			7,700			(243	)
hChelsfield PLC, ses., 3.166 GBP	United Kingdom	4,800			26,401			(841	)
					116,032			(3,249	)
Textiles, Apparel & Luxury Goods
hChristian Dior SA, ses., 46.766 EUR	France	239			14,479			355
hChristian Dior SA, ses., 47.220 EUR	France	196			11,874			177
hChristian Dior SA, ses., 47.384 EUR	France	485			29,383			355
hChristian Dior SA, ses., 47.614 EUR	France	485			29,383			200
hChristian Dior SA, ses., 47.790 EUR	France	236			14,298			42
hChristian Dior SA, ses., 48.208 EUR	France	475			28,777			(161	)
hChristian Dior SA, ses., 48.550 EUR	France	297			17,993			(230	)
hChristian Dior SA, ses., 48.586 EUR	France	489			29,625			(398	)
hChristian Dior SA, ses., 48.790 EUR	France	198			11,995			(213	)
hChristian Dior SA, ses., 49.000 EUR	France	25			1,515			(33	)
hChristian Dior SA, ses., 49.027 EUR	France	72			4,362			(99	)
hLVMH Moet Hennessy Louis Vuitton, ses., 56.520 EUR	France	(196	)		(14,265	)		(319	)
hLVMH Moet Hennessy Louis Vuitton, ses., 57.050 EUR	France	(236	)		(17,176	)		(227	)
hLVMH Moet Hennessy Louis Vuitton, ses., 58.672 EUR	France	(485	)		(35,298	)		667
hLVMH Moet Hennessy Louis Vuitton, ses., 58.860 EUR	France	(239	)		(17,394	)		317
hLVMH Moet Hennessy Louis Vuitton, ses., 58.900 EUR	France	(485	)		(35,298	)		545
hLVMH Moet Hennessy Louis Vuitton, ses., 59.841 EUR	France	(475	)		(34,571	)		1,216
hLVMH Moet Hennessy Louis Vuitton, ses., 60.149 EUR	France	(297	)		(21,616	)		875
hLVMH Moet Hennessy Louis Vuitton, ses., 60.300 EUR	France	(198	)		(14,410	)		624
hLVMH Moet Hennessy Louis Vuitton, ses., 60.421 EUR	France	(489	)		(35,589	)		1,610
hLVMH Moet Hennessy Louis Vuitton, ses., 60.950 EUR	France	(25	)		(1,820	)		99
hLVMH Moet Hennessy Louis Vuitton, ses., 60.950 EUR	France	(72	)		(5,240	)		285
					(38,993	)		5,687
Total Synthetic Equity Swaps				$	69,093		$	4,221

Currency Abbreviations:

CAD - Canadian Dollar

EUR - Euro

GBP - British Pound

JPY - Japanese Yen

^a Non-income producing.

^b See Note 8 regarding restricted securities.

^c See Note 9 regarding other considerations.

^d See Note 7 regarding defaulted securities.

^e See Note 1(g) regarding securities segregated with broker for securities sold short.

^f Principal amount is stated in U.S. dollar unless otherwise indicated.

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

^h See Note 1(e) regarding synthetic equity swaps.

MD-18

See notes to financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL DISCOVERY SECURITIES FUND

Financial Statements

Statement of Assets and Liabilities

December 31, 2003

Assets:
Investments in securities:
Cost	$	242,875,211
Value – (includes securities segregated with broker for securities sold short in the amount of $2,987,254)		302,991,659
Cash		105,699
Receivables:
Investment securities sold		743,705
Capital shares sold		738,227
Dividends and interest		405,966
Unrealized gain on forward exchange contracts (Note 6)		69,867
Deposits with broker for securities sold short		2,883,808
Due from broker – variation margin (Note 1e)		5,355
Total assets		307,944,286
Liabilities:
Payables:
Investment securities purchased		4,012,978
Capital shares redeemed		11,037
Affiliates		283,491
Deferred tax liability (Note 1l)		62,924
Options written, at value (premiums received $13,653)		387
Securities sold short, at value (proceeds $1,764,589)		1,813,911
Unrealized loss on forward exchange contracts (Note 6)		5,800,580
Funds advanced by custodian – Foreign		1,190,393
Other liabilities		65,184
Total liabilities		13,240,885
Net assets, at value	$	294,703,401
Net assets consist of:
Undistributed net investment income (loss)	$	2,414,242
Net unrealized appreciation (depreciation)		54,335,339
Accumulated net realized gain (loss)		(8,148,413	)
Capital shares		246,102,233
Net assets, at value	$	294,703,401
Class 1:
Net asset value and maximum offering price per share ($134,332,027÷9,569,298 shares outstanding)	$	14.04
Class 2:
Net asset value and maximum offering price per share ($160,371,374÷11,537,085 shares outstanding)	$	13.90

See notes to financial statements.

MD-19

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL DISCOVERY SECURITIES FUND

Financial Statements (continued)

Statement of Operations

For the year ended December 31, 2003

Investment income:
(net of foreign taxes of $250,193)
Dividends	$	3,099,101
Interest		1,949,459
Total investment income		5,048,560
Expenses:
Management fees (Note 3)		1,618,534
Administrative fees (Note 3)		300,854
Distribution fees – Class 2 (Note 3)		203,832
Custodian fees		36,100
Reports to shareholders		33,500
Professional fees		27,344
Trustees’ fees and expenses		1,900
Dividends on securities sold short		57,816
Other		11,100
Total expenses		2,290,980
Net investment income		2,757,580
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		8,496,813
Written options (Note 1f)		24,534
Foreign currency transactions		(7,140,173	)
Securities sold short (Note 1g)		(123,080	)
Net realized gain (loss)		1,258,094
Net unrealized appreciation (depreciation) on:
Investments		56,374,857
Deferred taxes (Note 1l)		(51,356	)
Translation of assets and liabilities denominated in foreign currencies		(3,660,829	)
Net unrealized appreciation (depreciation)		52,662,672
Net realized and unrealized gain (loss)		53,920,766
Net increase (decrease) in net assets resulting from operations	$	56,678,346

See notes to financial statements.

MD-20

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL DISCOVERY SECURITIES FUND

Financial Statements (continued)

Statements of Changes in Net Assets

For the years ended December 31, 2003 and 2002

	2003			2002
Increase (decrease) in net assets:
Operations:
Net investment income	$	2,757,580		$	2,519,236
Net realized gain (loss) from investments, written options, securities sold short and foreign currency transactions		1,258,094			(7,689,144	)
Net unrealized appreciation (depreciation) on investments, deferred taxes and translation of assets and liabilities denominated in foreign currencies		52,662,672			(10,098,519	)
Net increase (decrease) in net assets resulting from operations		56,678,346			(15,268,427	)
Distributions to shareholders from:
Net investment income:
Class 1		(2,214,822	)		(2,341,069	)
Class 2		(1,329,275	)		(221,015	)
Net realized gains:
Class 1		—			(2,749,123	)
Class 2		—			(269,767	)
Total distributions to shareholders		(3,544,097	)		(5,580,974	)
Capital share transactions: (Note 2)
Class 1		(16,943,099	)		(24,189,253	)
Class 2		99,261,086			34,081,590
Total capital share transactions		82,317,987			9,892,337
Net increase (decrease) in net assets		135,452,236			(10,957,064	)
Net assets:
Beginning of year		159,251,165			170,208,229
End of year	$	294,703,401		$	159,251,165
Undistributed net investment income included in net assets:
End of year	$	2,414,242		$	2,896,047

See notes to financial statements.

MD-21

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL DISCOVERY SECURITIES FUND

Notes to Financial Statements

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (the Trust) is registered under the Investment Company Act of 1940 as an open-end investment company, consisting of twenty-two separate series (the Funds). The Mutual Discovery Securities Fund (the Fund) included in this report is diversified. Shares of the Fund are sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. As of December 31, 2003, over 88.6% of the total Fund shares were sold through one insurance company. The Fund’s investment objective is capital growth.

The following summarizes the Fund’s significant accounting policies.

a. Security Valuation

Securities listed or traded on a recognized national exchange or NASDAQ are valued at the last reported sales price. Over-the-counter securities and listed securities for which no sale is reported are valued within the range of the latest quoted bid and asked prices. Investments in open-end mutual funds are valued at the closing net asset value. Foreign securities are valued at the close of trading of the foreign exchange or the NYSE, whichever is earlier. If events occur that materially affect the values of the securities after the prices or foreign exchange rates are determined, or if market quotations are not readily available, the securities will be valued at fair value as determined following procedures approved by the Board of Trustees.

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. Purchases and sales of securities and income items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.

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.

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. Foreign Currency Contracts

The Fund may enter into forward exchange contracts to hedge against fluctuations in foreign exchange rates. A forward exchange contract is an agreement between two parties to exchange different currencies at an agreed upon forward exchange rate at a future date. These contracts are valued daily and the Fund’s equity therein is included in the Statement of Assets and Liabilities. Realized and unrealized gains and losses are included in the Statement of Operations.

When the Fund purchases or sells foreign securities, it may enter into foreign exchange contracts to minimize foreign exchange risk from the trade date to the settlement date of the transactions. Realized and unrealized gains and losses are included in the Statement of Operations.

The risks of these contracts include movement in the values of the foreign currencies relative to the U.S. dollar and the possible inability of the counter parties to fulfill their obligations under the contracts.

MD-22

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL DISCOVERY SECURITIES FUND

Notes to Financial Statements (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

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

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

e. Synthetic Equity Swaps

The Fund may engage in synthetic equity swaps. Synthetic equity swaps are contracts entered into between a broker and the Fund under which the parties agree to make payments to each other so as to replicate the economic consequences that would apply had a purchase or sale of the underlying security taken place. Upon entering into synthetic equity swaps, the Fund is required to pledge to the broker an amount of cash and/or other assets equal to a certain percentage of the contract amount (“initial margin”). Subsequent payments known as “variation margin”, are made or received by the Fund periodically, depending on fluctuations in the value of the underlying security. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The risks of entering into equity swaps include unfavorable price movements in the underlying securities or the inability of the counterparties to fulfill their obligations under the contract.

f. Option Contracts

The Fund may purchase or write options. Options are contracts entitling the holder to purchase or sell a specified number of shares or units of a particular security at a specified price. Options purchased are recorded as investments; options written (sold) are recorded as liabilities. When the exercise of an option results in a cash settlement, the difference between the premium (original option value) and the settlement proceeds is realized as a gain or loss. When securities are acquired or delivered upon exercise of an option, the acquisition cost or sale proceeds are adjusted by the amount of the premium. When an option is closed, the difference between the premium and the cost to close the position is realized as a gain or loss. When an option expires, the premium is realized as a gain for options written or as a loss for options purchased. The risks include the possibility there may be an illiquid options market or the inability of the counterparties to fulfill their obligations under the contract. Writing options involves, to varying degrees, elements of market risk in excess of the amount recognized in the Statement of Assets and Liabilities.

g. Securities Sold Short

The Fund is engaged in selling securities short, which obligates the Fund to replace a security borrowed with the same security at the current market value. The Fund would incur 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 would realize a gain if the price of the security declines between those dates. A gain, limited to the price at which the Fund sold the security short, or a loss, unlimited in size, will be recognized upon the termination of a short sale.

The Fund is required to establish a margin account with the broker lending the security sold short. While the short sale is outstanding, the broker retains the proceeds of the short sale and the Fund must maintain a deposit for the broker consisting of cash and securities having a value equal to a specified percentage of the value of the securities sold short.

h. Securities Lending

The Fund loans securities to certain brokers for which it received collateral against loaned securities in an amount equal to at least 102% of the market value of the loaned securities.

MD-23

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL DISCOVERY SECURITIES FUND

Notes to Financial Statements (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

i. Income Taxes

No provision has been made for income taxes because the Fund’s policy is to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable income.

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. Certain income from foreign securities is recorded as soon as information is available to the Fund.

Interest income and estimated expenses are accrued daily. Discounts and premiums on securities purchased are amortized over the lives of the respective securities. Dividend income, dividends declared on securities sold short and distributions to shareholders are recorded on the ex-dividend date.

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. Other expenses are charged to each fund on a specific identification basis.

Distributions received by the Fund from 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.

Realized and unrealized gains and losses and net investment income, other than class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class.

k. Accounting Estimates

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

l. Deferred Taxes

The Fund is subject to a tax imposed on net realized gains of securities of certain foreign countries. The Fund records an estimated deferred tax liability for net unrealized gains on these securities as reflected in the accompanying financial statements.

m. Guarantees and Indemnifications

Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust 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. However, based on experience, the Trust expects the risk of loss to be remote.

2. SHARES OF BENEFICIAL INTEREST

The Fund offers two classes of shares: Class 1 and Class 2. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class, and its exchange privilege.

MD-24

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL DISCOVERY SECURITIES FUND

Notes to Financial Statements (continued)

2. SHARES OF BENEFICIAL INTEREST (cont.)

At December 31, 2003, there were an unlimited number of shares authorized ($.01 par value). Transactions in the Fund’s shares were as follows:

	Year ended December 31,
	2003					2002
Class 1 Shares:	Shares		Amount			Shares		Amount
Shares sold	99,648		$	1,178,413		500,372		$	6,299,567
Shares issued on reinvestment of distributions	183,955			2,214,822		403,663			5,090,192
Shares redeemed	(1,747,279	)		(20,336,334	)	(2,970,808	)		(35,579,012	)
Net increase (decrease)	(1,463,676	)	$	(16,943,099	)	(2,066,773	)	$	(24,189,253	)
Class 2 Shares:
Shares sold	8,207,573		$	99,960,705		8,904,270		$	107,444,507
Shares issued on reinvestment of distributions	111,330			1,329,275		39,168			490,782
Shares redeemed	(175,895	)		(2,028,894	)	(6,003,911	)		(73,853,699	)
Net increase (decrease)	8,143,008		$	99,261,086		2,939,527		$	34,081,590

3. TRANSACTIONS WITH AFFILIATES

Certain officers and trustees of the Trust are also officers and/or directors of the following entities:

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

The Fund pays an investment management fee to Franklin Mutual of .80% per year of the average daily net assets of the Fund.

The Fund pays administrative fees to FT Services based on the average daily net assets of the Fund as follows:

Annualized Fee Rate	Daily Net Assets
.15%	First $200 million
.135%	Over $200 million, up to and including $700 million
.10%	Over $700 million, up to and including $1.2 billion

Fees are further reduced on net assets over $1.2 billion.

The Fund reimburses Distributors up to .25% per year of its average daily net assets of Class 2, for costs incurred in marketing the Fund’s shares.

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 (continued)

4. INCOME TAXES

At December 31, 2003, the cost of investments, net unrealized appreciation (depreciation) and undistributed ordinary income for income tax purposes was as follows:

Cost of investments	$	244,712,965
Unrealized appreciation		61,542,358
Unrealized depreciation		(3,263,664	)
Net unrealized appreciation (depreciation)	$	58,278,694
Distributable earnings—Undistributed ordinary income	$	4,135,235

The tax character of distributions paid during the years ended December 31, 2003 and 2002, was as follows:

	2003		2002
Distributions paid from:
Ordinary income	$	3,544,097	$	4,560,237
Long-term capital gains		—		1,020,737
	$	3,544,097	$	5,580,974

Net investment income (loss) differs for financial statement and tax purposes primarily due to differing treatments of defaulted securities, foreign currency transactions, passive foreign investment company shares, and bond discounts and premiums.

Net realized losses differ for financial statement and tax purposes primarily due to differing treatment of wash sales, foreign currency transactions and bond discounts and premiums.

At December 31, 2003, the Fund has deferred capital losses occurring subsequent to October 31, 2003 of $2,282,737. For tax purposes, such losses will be reflected in the year ending December 31, 2004.

At December 31, 2003, the Fund had tax basis capital losses which may be carried over to offset future capital gains. Such losses expire as follows:

Capital loss carryovers expiring in:
2010	$	6,699,672
2011		4,363,507
	$	11,063,179

5. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities and securities sold short) for the year ended December 31, 2003 aggregated $142,612,971 and $70,944,403, respectively.

Transactions in options written during the year ended December 31, 2003 were as follows:

	Number of Contracts		Premium
Options outstanding at December 31, 2002	10,000		$	5,572
Options written	50,886			78,948
Options expired	(6,325	)		(20,074	)
Options terminated in closing transactions	(22	)		(5,003	)
Options exercised	(4,489	)		(45,790	)
Options outstanding at December 31, 2003	50,050		$	13,653

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL DISCOVERY SECURITIES FUND

Notes to Financial Statements (continued)

6. FORWARD CURRENCY CONTRACTS

At December 31, 2003, the Fund has outstanding forward exchange contracts as set out below. The contracts are reported in the financial statements at the Fund’s net equity, as measured by the difference between the forward exchange rates at the reporting date and the forward exchange rates at the day of entry into the contracts.

Contracts to buy:		In Exchange for				Settlement Date	Unrealized Gain (Loss)
50,000	British Pounds	U.S.	$	88,108		1/28/04	U.S.	$	1,205
200,000	European Unit			228,060		1/28/04			24,009
200,000	British Pounds			354,924		2/05/04			2,134
800,000	European Unit			1,005,076		2/05/04			3,005
11,304,159	Swedish Krona			1,540,239		3/23/04			24,631
		U.S.	$	3,216,407			U.S.	$	54,984
Contracts to sell:
957,480,000	Korean Won	U.S.	$	800,000		3/18/04	U.S.	$	2,193
2,479,287	South African Rand			375,583		4/26/04			12,690
		U.S.	$	1,175,583					14,883
Unrealized gain on forward exchange contracts							U.S.	$	69,867
Contracts to sell:
2,450,000	British Pounds	U.S.	$	4,259,335		1/12/04	U.S.	$	(122,441	)
5,999,326	British Pounds			10,212,517		1/20/04			(510,458	)
12,812,796	Canadian Dollars			9,292,295		1/21/04			(613,099	)
1,009,956	British Pounds			1,716,758		1/28/04			(87,273	)
2,667,997	British Pounds			4,625,932		2/11/04			(134,676	)
2,598,505	Swiss Franc			1,906,083		2/17/04			(197,544	)
11,740,443	European Unit			12,974,811		2/23/04			(1,811,792	)
10,194,000	Taiwan Dollars			300,000		2/25/04			(265	)
2,000,000	British Pounds			3,370,600		2/27/04			(193,734	)
33,019,105	Danish Krone			5,438,697		3/17/04			(142,311	)
85,883,801	Japanese Yen			750,000		3/18/04			(53,366	)
2,287,578,250	Korean Won			1,900,000		3/18/04			(6,154	)
26,025,395	Swedish Krona			3,221,164		3/23/04			(381,612	)
1,048,485	European Unit			1,222,177		3/25/04			(97,233	)
284,292,580	Japanese Yen			2,563,264		3/25/04			(96,618	)
29,097,438	Norwegian Krona			4,088,861		4/15/04			(270,180	)
10,137,827	European Unit			11,763,018		4/22/04			(985,196	)
5,829,132	South African Rand			822,471		4/26/04			(30,740	)
255,113,353	Japanese Yen			2,328,265		6/24/04			(65,888	)
		U.S.	$	82,756,248					(5,800,580	)
Unrealized loss on forward exchange contracts									(5,800,580	)
					��
Net unrealized loss on forward exchange contracts							U.S.	$	(5,730,713	)

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL DISCOVERY SECURITIES FUND

Notes to Financial Statements (continued)

7. CREDIT RISK AND DEFAULTED SECURITIES

The Fund held defaulted and/or other securities for which the income has been deemed uncollectible. The Fund discontinues accruing income on these securities and provides and estimate for losses on interest receivable. At December 31, 2003 the value of these securities was $19,673,177 representing 6.7% of the Fund’s net assets. For information as to specific securities, see the accompanying Statement of Investments.

8. RESTRICTED SECURITIES

At December 31, 2003, investments in securities included issues that are restricted or illiquid. Restricted securities are often purchased in private placement transactions, are not registered under the Securities Act of 1933, may have contractual restrictions on resale, and are valued under methods approved by the Board of Trustees as reflecting fair value. A security may also be considered illiquid if it lacks a readily available market or if its valuation has not changed for a certain period of time. At December 31, 2003, the Fund held investments in restricted and illiquid securities that were valued under approved methods by the Trustees, as follows:

Shares	Issuer	Acquisition Date	Cost		Value
3,103	AboveNet Inc.	10/2/01	$	92,948	$	92,948
746	Elephant Capital Holdings Ltd.	10/21/03		745,500		745,500
128,899	International Steel Group	4/10/02		587,500		4,267,524
34,780	Leucadia National Corp.	12/20/02		1,225,995		1,523,190
2,227,000	MP Finance Ltd., 5.00%, 8/28/07	8/29/03		2,184,362		2,271,540
477,000	Nippon Investments LLC	2/14/01		—		181,260
30,150	NTL Inc.	1/08/03		1,581,443		1,997,814
2,140	Olympus Re Holdings Ltd.	12/19/01		214,000		338,484
667	PG & E Corp., wts. 9/02/06	10/29/02		—		16,664
4,563	Security Capital European Realty	4/08/98		103,688		33,994
10	Torre Mayor Investments, LP	10/28/02		1,000,000		800,000
2,796	White Mountains Insurance Group Inc.	10/22/02		824,820		1,221,719
	Total Restricted Securities (4.6% of Net Assets)				$	13,490,637

9. OTHER CONSIDERATIONS

A member of the Fund’s Portfolio Management team may serve as a member on the board of directors of certain companies in which the Fund invests and may represent the Fund in certain corporate negotiations. Currently, a member of the Portfolio Management team serves in one or more of these capacities for Kindred Healthcare and AboveNet Inc. As a result of this involvement, the Portfolio Manager could receive certain material non-public information which, pursuant to the Fund’s policies and the requirements of the federal securities laws, could prevent the Fund from trading in the securities of such companies for limited or extended periods of time.

10. REGULATORY MATTERS

On February 4, 2004, the Securities Division of the Office of the Secretary of the Commonwealth of Massachusetts filed an administrative complaint against Franklin Resources, Inc. and certain of its subsidiaries (the “Company”), alleging violations of the Massachusetts Uniform Securities Act. The complaint arises from activity that occurred in 2001 during which time an officer of a Company subsidiary was negotiating an agreement with an investor relating to investments in a mutual fund and a hedge fund.

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Notes to Financial Statements (continued)

10. REGULATORY MATTERS (cont.)

The Company, in addition to other entities within Franklin Templeton Investments, has been named in shareholder class actions related to the matter described above. The Company believes that the claims made in the lawsuit are without merit and it intends to defend vigorously against the allegations. The Company and the Fund may be named in similar civil actions related to the matter described above.

In addition, as part of ongoing investigations by the U.S. Securities and Exchange Commission (the “SEC”), the U.S. Attorney for the Northern District of California, the New York Attorney General, the California Attorney General, the U.S. Attorney for the District of Massachusetts, the Florida Department of Financial Services, and the Commissioner of Securities and the Attorney General of the State of West Virginia, relating to certain practices in the mutual fund industry, including late trading, market timing and sales compensation arrangements, the Company and its subsidiaries, as well as certain current or former executives and employees of the Company, have received requests for information and/or subpoenas to testify or produce documents. The Company and its current employees are providing documents and information in response to these requests and subpoenas. In addition, the Company has responded to requests for similar kinds of information from regulatory authorities in some of the foreign countries where the Company conducts its global asset management business.

The Staff of the SEC has informed the Company that it intends to recommend that the Commission authorize an action against an affiliate of the Fund’s adviser and a senior executive officer relating to the frequent trading issues that are the subject of the SEC’s investigation. These issues were previously disclosed as being under investigation by government authorities and the subject of an internal inquiry by the Company in its Annual Report on Form 10-K and on its public website. The Company currently is in discussions with the SEC Staff in an effort to resolve the issues raised in their investigation. Such discussions are preliminary and the Fund’s management has been advised that the Company cannot predict the likelihood of whether those discussions will result in a settlement and, if so, the terms of such settlement. The impact, if any, of these matters on the Fund is uncertain at this time. If the Company finds that it bears responsibility for any unlawful or improper conduct, it has committed to making the Fund or its shareholders whole, as appropriate.

MD-29

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL DISCOVERY SECURITIES FUND

Independent Auditors’ Report

To the Board of Trustees and Shareholders of Franklin Templeton Variable Insurance Products Trust – Mutual Discovery Securities Fund

In our opinion, the accompanying statement of assets and liabilities, including the statement of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Mutual Discovery Securities Fund (the “Fund,” one of the funds constituting the Franklin Templeton Variable Insurance Products Trust) at December 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

February 5, 2004, except for Note 10 as to which the date is February 12, 2004

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL DISCOVERY SECURITIES FUND

Tax Designation (unaudited)

Under Section 854(b)(2) of the Code, the Fund hereby designates 17.72% of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended December 31, 2003.

The foreign tax information will be disclosed in the June 30, 2004 semi-annual report of the funds.

MD-31

MUTUAL SHARES SECURITIES FUND

Fund Goals and Primary Investments: Mutual Shares Securities Fund seeks capital appreciation, with income as a secondary goal. The Fund invests mainly in equity securities (including securities convertible, or that the manager expects to become convertible, into common or preferred stock) of companies that the Fund’s manager believes are available at market prices less than their value based on certain recognized or objective criteria. The Fund may also invest a significant portion in small capitalization companies and a portion in foreign securities.

This annual report for Mutual Shares Securities Fund covers the fiscal year ended December 31, 2003.

Performance Overview

You can find the Fund’s one-year total return in the Performance Summary following this report. The Fund underperformed its benchmark, the Standard & Poor’s 500 Composite Index (S&P 500), which returned 28.67% for the year under review.¹ Because our investment style seeks to assume less risk than the markets, the Fund may outperform when indexes are weak and underperform when markets rally.

Economic and Market Overview

Early in 2003, economic uncertainty and geopolitical events pushed U.S. interest rates to their lowest level in more than four decades. The U.S. government injected fiscal stimulus into the economy, approving another round of tax cuts and rebates that included dividend and capital gains tax reductions. In June, an accommodative Federal Reserve Board, in an attempt to bolster the economy, cut the federal funds target rate to 1.00%.

During the year, the U.S. trade deficit increased significantly, contributing to the U.S. dollar’s fall to record lows against the euro and other major currencies. However, the weak dollar provided a boost to the U.S. economy and corporate profits as exports became cheaper for foreign buyers. Robust consumer spending, especially for autos and homes, and strong business spending, particularly for equipment and software, contributed to the accelerated economic activity. In addition, U.S. federal spending stayed firm and inflation remained benign. U.S. gross domestic product (GDP) grew an annualized 8.2% in third

1. Source: Standard & Poor’s Micropal. One cannot invest directly in an index, nor is an index representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

MS-1

quarter 2003, its strongest pace in nearly 20 years, and overall, 2003 GDP grew an estimated 3.1%. As economic data improved, some interest rates rose from their lows, and the 10-year Treasury note’s yield ended the period at 4.27%.

Foreign economies also showed signs of recovery and benign inflation following a low growth and disinflationary environment that facilitated monetary easing in many major economies during the reporting period. While economic growth accelerated in the U.S., it remained strong in Asia, and was weak, yet positive, in Europe. Despite these signs of economic recovery, benign inflationary trends continued, supported by cyclical productivity gains and excess capacity in labor and capital.

A global equity market rally started in late March 2003 and continued through the end of the year. The rebound began with investors anticipating economic recovery in the second half of 2003, and it continued as data showed robust economic growth. Improved sentiment led many investors to rotate into economically sensitive and financially leveraged companies, specifically cyclical, technology, small-capitalization and emerging market stocks. Consequently, domestic and foreign equity markets generally performed well.

Investment Strategy

At Mutual Series, we are committed to our distinctive three-pronged approach to investing. The first prong of our investment strategy, and the component that typically comprises the largest portion of our portfolio, is investing in undervalued stocks. When selecting undervalued equities, we seek to invest in fundamentally strong companies, with healthy balance sheets, high-quality assets, substantial free cash flow and shareholder-oriented management teams whose stocks are trading at material discounts to our assessment of the companies’ intrinsic or business value. While most of our undervalued equity investments are made in publicly traded companies, we occasionally may invest in privately held companies as well.

Our second investment prong is bankruptcy or distressed investing, a highly specialized field, which is complex and can take many forms. The most common distressed investment the Fund undertakes is the purchase of the debt of financially troubled or bankrupt companies at a substantial discount to face value. After the financially distressed company is reorganized, often in bankruptcy court, the old bonds are typically replaced with new securities issued by the financially stronger company.

Top 10 Sectors/Industries

Mutual Shares Securities Fund

Based on Equity Securities

12/31/03

	% of Total Net Assets
Insurance	16.7%
Media	8.0%
Tobacco	7.0%
Metals & Mining	5.7%
Beverages	3.3%
Food Products	3.1%
Thrifts & Mortgage Finance	2.7%
Diversified Telecommunication Services	2.4%
Pharmaceuticals	2.3%
Commercial Banks	2.1%

MS-2

The third prong of our investment strategy is participating in arbitrage situations, another highly specialized field. When companies announce 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 the purchase of the target company stock when it is trading below the value we believe it is likely to receive in a deal. In keeping with our commitment to a conservative investment approach, we primarily focus our arbitrage efforts on announced deals, generally eschewing rumored deals or other situations we consider to be risky.

Manager’s Discussion

While all three prongs of our investment strategy contributed to Fund performance during the year under review, the strongest contributors were the distressed and equity portfolios. Three of our best performers in 2003 included International Steel Group (ISG); White Mountains Insurance Group, a property and casualty (P&C) insurer; and NTL Communications, a distressed investment.

ISG, the nation’s second-largest steel producer, restructured and assimilated steel facilities and we feel that the company emerged as a competitive, low-cost operator. Our ISG investment’s value was highlighted in the public markets during the first half of December when the company raised capital through an initial public offer (IPO). The IPO was very well received and ISG’s stock price appreciated almost 40% in December, contributing to a solid 2003 performance.

Our investment in White Mountains reflects our focus on companies with strong or improving fundamentals, attractive valuations and management teams who think like owners. During 2003, the company benefited from strong price increases for primary and reinsurance risks, disciplined underwriting and solid returns from its investment portfolio. While many companies within the P&C insurance industry struggled with eroding capital from past underwriting mistakes and significant losses in their investment portfolios, we believe White Mountains utilized its much-improved balance sheet and industry knowledge to acquire insurance companies we believe are undervalued or capital-constrained and to increase exposure to what we feel are its most attractive lines of businesses. Primarily as a result of these actions, the company continued to improve profitability and enjoyed a 13% increase in its book value during 2003.

Top 10 Holdings

Mutual Shares Securities Fund

12/31/03

Company Sector/Industry, Country	% of Total Net Assets
Berkshire Hathaway Inc., A & B	4.9%
Insurance, U.S.
White Mountains Insurance Group Inc., common & restricted	3.3%
Insurance, U.S.
Liberty Media Corp., A	2.5%
Media, U.S.
Newmont Mining Corp.	2.5%
Metals & Mining, U.S.
British American Tobacco PLC, ord. & ADR	2.0%
Tobacco, U.K.
Washington Post Co., B	1.8%
Media, U.S.
Altadis SA	1.7%
Tobacco, Spain
Hartford Financial Services Group Inc.	1.7%
Insurance, U.S.
Willis Group Holdings Ltd.	1.6%
Insurance, U.S.
R.J. Reynolds Tobacco Holdings Inc.	1.6%
Tobacco, U.S.

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

MS-3

A reorganized NTL, the U.K.’s largest cable company, emerged from bankruptcy in January 2003. As global cable valuations recovered, the new NTL shares performed well during the year and appreciated more than 15 times from their lows.

Although the Fund’s successes during the reporting period were many, not all of our investments performed as well as we hoped. Three of the Fund’s underperformers included Allied Domecq (sold by year-end), one of the world’s largest spirits and wine companies; Abitibi-Consolidated (sold by year-end), a Canadian paper and forest products company; and Beiersdorf, a German personal care products company. Allied Domecq’s stock declined after the company lowered its earnings outlook in February due to a weak U.S. dollar, higher pension expenses and weakness in its Spanish operations. Abitibi’s shares underperformed in 2003 after a weak U.S. dollar, soft sales and higher energy prices forced the company to reduce its earnings outlook and cut its dividend. Beiersdorf, which had been the subject of takeover speculation earlier in the year, declined after the company’s major shareholders announced the company would remain independent and not be sold.

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

This discussion reflects our analysis, opinions and portfolio holdings as of December 31, 2003, 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 advisor makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

MS-4

PERFORMANCE SUMMARYASOF 12/31/03

Total return of Class 2 shares represents the average annual change in value, assuming reinvestment of dividends and capital gains. Average returns smooth out variations in returns, which can be significant; they are not the same as year-by-year results.

Mutual Shares Securities Fund – Class 2*

Periods ended 12/31/03

	1-Year	5-Year	Since Inception (11/8/96)
Average Annual Total Return	+25.15%	+8.73%	+9.02%

*Because Class 2 shares were not offered until 1/6/99, standardized Class 2 Fund performance for prior periods represents the historical results of Class 1 shares. For periods beginning on 1/6/99, Class 2’s results reflect an additional 12b-1 fee expense, which also affects future performance. Since 1/6/99 (effective date), the average annual total return of Class 2 shares was +8.04%.

Ongoing market volatility can significantly affect short-term performance; recent returns may differ.

Total Return Index Comparison

for Hypothetical $10,000 Investment (11/8/96–12/31/03)

The graph compares the performance of Mutual Shares Securities Fund – Class 2* and the S&P 500. One cannot invest directly in an index, nor is an index representative of the Fund’s portfolio. Please see Important Notes to Performance Information preceding the Fund Summaries.

**Source: Standard & Poor’s Micropal. Please see Index Descriptions following the Fund Summaries.

Mutual Shares

Securities Fund – Class 2

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.

Since markets can go down as well as up, investment return and the value of your principal will fluctuate with market conditions, and you may have a gain or loss when you sell your shares.

MS-5

Past performance does not guarantee future results.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Financial Highlights

	Class 1
	Year Ended December 31,
	2003			2002			2001			2000			1999
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	12.09		$	14.08		$	14.24		$	13.23		$	11.96
Income from investment operations:
Net investment incomea		.18			.20			.21			.30			.20
Net realized and unrealized gains (losses)		2.88			(1.78	)		.86			1.42			1.41
Total from investment operations		3.06			(1.58	)		1.07			1.72			1.61
Less distributions from:
Net investment income		(.15	)		(.12	)		(.29	)		(.38	)		(.34	)
Net realized gains		—			(.29	)		(.94	)		(.33	)		—
Total distributions		(.15	)		(.41	)		(1.23	)		(.71	)		(.34	)
Net asset value, end of year	$	15.00		$	12.09		$	14.08		$	14.24		$	13.23
Total returnb		25.48%			(11.56)%			7.31%			13.62%			13.40%
Ratios/ supplemental data
Net assets, end of year (000’s)	$	312,386		$	288,928		$	399,336		$	407,063		$	448,278
Ratios to average net assets:*
Expensesc		.80%			.80%			.79%			.80%			.79%
Net investment income		1.33%			1.57%			1.42%			2.23%			1.59%
Portfolio turnover rate		55.71%			49.80%			54.73%			66.67%			80.02%
*Ratios to average net assets, excluding dividend expense on securities sold short:
Expenses		.76%			.79%			.78%			.77%			.77%

^aBased on average daily shares outstanding.

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

^cIncludes dividend expense on securities sold short which varies from period to period. See below for expense ratios that reflect consistent operating expenses.

MS-6

.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Financial Highlights (continued)

	Class 2
	Year Ended December 31 ,
	2003			2002			2001			2000			1999d
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	12.02		$	14.03		$	14.22		$	13.25		$	12.36
Income from investment operations:
Net investment incomea		.14			.16			.15			.26			.16
Net realized and unrealized gains (losses)		2.88			(1.77	)		.88			1.41			1.07
Total from investment operations		3.02			(1.61	)		1.03			1.67			1.23
Less distributions from:
Net investment income		(.14	)		(.11	)		(.28	)		(.37	)		(.34	)
Net realized gains		—			(.29	)		(.94	)		(.33	)		—
Total distributions		(.14	)		(.40	)		(1.22	)		(.70	)		(.34	)
Net asset value, end of year	$	14.90		$	12.02		$	14.03		$	14.22		$	13.25
Total returnb		25.15%			(11.81)%			7.04%			13.25%			9.91%
Ratios/ supplemental data
Net assets, end of year (000’s)	$	1,469,745		$	589,738		$	262,621		$	37,087		$	5,716
Ratios to average net assets:*
Expensesc		1.05%			1.05%			1.04%			1.05%			1.04%	e
Net investment income		1.08%			1.32%			1.04%			1.96%			1.26%	e
Portfolio turnover rate		55.71%			49.80%			54.73%			66.67%			80.02%
*Ratios to average net assets, excluding dividend expense on securities sold short:
Expenses		1.01%			1.04%			1.03%			1.02%			1.04%

^a Based on average daily shares outstanding.

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

^c Includes dividend expense on securities sold short which varies from period to period. See below for expense ratios that reflect consistent operating expenses.

^d For the period January 6, 1999 (effective date) to December 31, 1999.

^e Annualized.

MS-7

See notes to financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Statement of Investments, December 31, 2003

		COUNTRY	SHARES/ WARRANTS/ CONTRACTS	VALUE
	Common Stocks and Other Equity Interests 66.4%
	Aerospace & Defense .6%
	Northrop Grumman Corp.	United States	120,000	$	11,472,000
	Airlines
a	Atlantic Coast Airlines Holdings Inc.	United States	10,700		105,930
	Beverages 3.3%
	Brown-Forman Corp., A	United States	3,800		368,410
	Brown-Forman Corp., B	United States	42,965		4,015,079
	Coca-Cola Enterprises Inc.	United States	95,800		2,095,146
	Diageo PLC	United Kingdom	2,117,374		27,859,686
	Heineken Holding NV, A	Netherlands	127,905		4,376,971
	Orkla ASA	Norway	802,860		17,981,322
	Pepsi Bottling Group Inc.	United States	57,600		1,392,768
					58,089,382
	Biotechnology
a	SICOR Inc.	United States	11,000		299,200
	Capital Markets .2%
	Bear Stearns Cos. Inc.	United States	37,420		2,991,729
	Chemicals .9%
	International Flavors & Fragrances Inc.	United States	469,300		16,387,956
	Commercial Banks 2.2%
	Allied Irish Banks PLC	Irish Republic	802,400		12,833,542
	Bank of Ireland	Irish Republic	761,384		10,362,428
	Danske Bank	Denmark	294,580		6,911,451
	Fleet Boston Financial Corp.	United States	47,500		2,073,375
	KeyCorp	United States	219,100		6,424,012
a,b	Nippon Investment LLC	Japan	1,148,000		436,240
	U.S. Bancorp	United States	35,752		1,065,558
					40,106,606
	Commercial Services & Supplies .9%
a	Alderwoods Group Inc.	United States	66,448		625,940
a	Cendant Corp.	United States	296,577		6,604,770
	Republic Services Inc.	United States	329,700		8,450,211
					15,680,921
	Computers & Peripherals
a	DecisionOne Corp.	United States	26,349		52,698
	Construction Materials .3%
	Martin Marietta Materials Inc.	United States	129,600		6,087,312
	Diversified Financial Services 1.5%
	Brascan Corp., A	Canada	447,300		13,752,160
a,b	Elephant Capital Holdings Ltd.	Japan	4,595		4,594,900
a,b	Leucadia National Corp.	United States	184,830		8,094,630
					26,441,690

MS-8

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	COUNTRY	SHARES/ WARRANTS/ CONTRACTS	VALUE
Common Stocks and Other Equity Interests (cont.)
Diversified Telecommunication Services 2.4%
a,b,cAboveNet Inc.	United States	10,442	$	312,783
BCE Inc.	Canada	295,000		6,597,408
Global Crossing Holdings Ltd., Contingent Equity Distribution	United States	9,018,431		7,891
aGlobal Crossing Ltd.	United States	13,853		457,142
aKoninklijke KPN NV	Netherlands	437,100		3,374,183
aNTL Inc.	United Kingdom	224,423		15,653,504
a,bNTL Inc.	United Kingdom	169,343		11,221,090
aSpectrasite Inc.	United States	120,846		4,199,398
aXO Communications Inc.	United States	230,239		978,516
				42,801,915
Electric Utilities 1.3%
aAllegheny Energy Inc.	United States	965,600		12,321,056
E.ON AG	Germany	92,000		6,026,185
a,bPG & E Corp, wts., 9/02/06	United States	1,520		37,976
aReliant Resources Inc.	United States	695,000		5,115,200
				23,500,417
Food & Staples Retailing .4%
aKroger Co.	United States	290,000		5,367,900
aSafeway Inc.	United States	68,900		1,509,599
				6,877,499
Food Products 3.3%
Cadbury Schweppes PLC	United Kingdom	1,900,794		13,959,663
Groupe Danone	France	131,069		21,392,947
Nestle SA	Switzerland	92,190		23,033,524
				58,386,134
Health Care Equipment & Supplies .6%
Amersham PLC	United Kingdom	134,400		1,841,772
Hillenbrand Industries Inc.	United States	147,400		9,147,644
				10,989,416
Health Care Providers & Services .8%
aAdvancePCS	United States	13,500		710,910
HCA Inc.	United States	120,500		5,176,680
aHealth Net Inc., A	United States	14,765		482,815
a,cKindred Healthcare Inc.	United States	70,034		3,458,349
a,cKindred Healthcare Inc., Jul. 47.50 Calls, 7/11/11	United States	114		51,072
a,cKindred Healthcare Inc., Jan. 52.00 Calls, 1/01/12	United States	17		—
a,cKindred Healthcare Inc., wts., Series A, 4/20/06	United States	12,897		299,933
a,cKindred Healthcare Inc., wts., Series B, 4/20/06	United States	32,243		675,410
aLaboratory Corp. of America Holdings	United States	33,800		1,248,910
aMid Atlantic Medical Services Inc.	United States	11,400		738,720
aRotech Healthcare Inc.	United States	41,340		950,820
aWellpoint Health Networks Inc.	United States	7,400		717,726
				14,511,345

MS-9

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	COUNTRY	SHARES/ WARRANTS/ CONTRACTS	VALUE
Common Stocks and Other Equity Interests (cont.)
Hotels Restaurants & Leisure .2%
Cara Operations Ltd., A	Canada	27,600	$	151,215
aFHC Delaware, Inc.	United States	139,062		1,094,418
aPark Place Entertainment Corp.	United States	160,600		1,739,298
				2,984,931
Insurance 16.8%
aAlleghany Corp.	United States	21,566		4,798,435
aBerkshire Hathaway Inc., A	United States	151		12,721,750
aBerkshire Hathaway Inc., B	United States	26,667		75,067,605
Hartford Financial Services Group Inc.	United States	510,300		30,123,009
John Hancock Financial Services Inc.	United States	56,900		2,133,750
MetLife Inc.	United States	255,700		8,609,419
aMontpelier Re Holdings Ltd.	Bermuda	36,947		1,355,955
Nationwide Financial Services Inc., A	United States	786,500		26,001,690
Old Republic International Corp.	United States	651,000		16,509,360
a,bOlympus Re Holdings Ltd.	Bermuda	16,280		2,575,008
Prudential Financial Inc.	United States	255,900		10,688,943
Travelers Property Casualty Corp., A	United States	1,293,085		21,697,966
White Mountains Insurance Group Inc.	United States	99,151		45,604,503
bWhite Mountains Insurance Group Inc.	United States	30,898		13,500,958
Willis Group Holdings Ltd.	United States	841,600		28,673,312
				300,061,663
IT Services .1%
Comdisco Contingent Equity Distribution	United States	8,175,255		30,248
aComdisco Holding Co., Inc.	United States	12		480
aConcord EFS Inc.	United States	67,600		1,003,184
				1,033,912
Media 7.9%
Dow Jones & Co. Inc.	United States	211,000		10,518,350
E.W. Scripps Co., A	United States	108,216		10,187,454
aEchoStar Communications Corp., A	United States	574,200		19,522,800
aFox Entertainment Group Inc., A	United States	46,200		1,346,730
Gannett Co. Inc.	United States	23,800		2,122,008
Lagardere SCA	France	74,580		4,305,659
aLiberty Media Corp., A	United States	3,811,090		45,313,860
McGraw-Hill Cos. Inc.	United States	31,700		2,216,464
Meredith Corp.	United States	99,659		4,864,356
aNTL Europe Inc.	United Kingdom	42,220		422
Omnicom Group Inc.	United States	60,600		5,292,198
aSinclair Broadcast Group Inc., A	United States	211,600		3,157,072
aTVMAX Holdings Inc.	United States	7,459		18,648
Washington Post Co., B	United States	41,469		32,818,567
				141,684,588
Metals & Mining 5.7%
Anglo American PLC	United Kingdom	711,090		15,364,666
Anglo American PLC, ADR	United Kingdom	200		4,424
aAshanti Goldfields Co. Ltd., GDR, Reg S	Ghana	48,000		625,920

MS-10

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	COUNTRY	SHARES/ WARRANTS/ CONTRACTS	VALUE
Common Stocks and Other Equity Interests (cont.)
Metals & Mining (cont.)
Barrick Gold Corp.	Canada	437,600	$	9,937,896
Falconbridge Ltd.	Canada	14,500		351,882
aGlamis Gold Ltd.	Canada	124,800		2,151,708
Gold Fields Ltd.	South Africa	177,200		2,535,221
a,bInternational Steel Group	United States	639,453		21,170,690
Newmont Mining Corp.	United States	927,700		45,095,497
Noranda Inc.	Canada	111,600		1,774,719
Placer Dome Inc.	Canada	127,600		2,287,864
aRandgold & Exploration Co. Ltd., ADR	South Africa	8,700		142,671
aWheaton River Minerals Ltd., wts., 5/30/07	Canada	221,465		395,886
				101,839,044
Oil & Gas 1.3%
BP PLC	United Kingdom	803,000		6,511,860
BP PLC, ADR	United Kingdom	5,100		251,685
Occidental Petroleum Corp.	United States	35,400		1,495,296
aSouthwest Royalties Inc., A	United States	6,820		204,590
Suncor Energy Inc.	Canada	13,300		334,494
Total SA, B	France	76,970		14,310,517
				23,108,442
Personal Products .3%
Beiersdorf AG	Germany	38,889		4,765,472
Pharmaceuticals 2.3%
Merck & Co. Inc.	United States	229,300		10,593,660
Takeda Chemical Industries Ltd.	Japan	129,415		5,132,162
Valeant Phamaceuticals International	United States	656,200		16,503,430
Wyeth	United States	222,000		9,423,900
				41,653,152
Real Estate 1.3%
aAlexander’s Inc.	United States	7,800		972,348
American Financial Realty Trust	United States	45,800		780,890
aCanary Wharf Group PLC	United Kingdom	1,535,898		7,361,786
aFieldstone Investment Corp.	United States	449,300		7,525,775
a,bSecurity Capital European Realty	Luxembourg	8,958		66,737
St. Joe Co.	United States	112,200		4,183,938
Ventas Inc.	United States	97,800		2,151,600
				23,043,074
Road & Rail 2.0%
Burlington Northern Santa Fe Corp.	United States	232,000		7,505,200
Florida East Coast Industries Inc., A	United States	451,813		14,955,010
Norfolk Southern Corp.	United States	524,600		12,406,790
				34,867,000
Specialty Retail
New Look Group	United Kingdom	70,000		389,717

MS-11

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	COUNTRY		SHARES/ WARRANTS/ CONTRACTS			VALUE
Common Stocks and Other Equity Interests (cont.)
Thrifts & Mortgage Finance 2.7%
Freddie Mac	United States			315,000		$	18,370,800
Greenpoint Financial Corp.	United States			47,441			1,675,616
Hudson City Bancorp Inc.	United States			225,600			8,613,408
Sovereign Bancorp Inc.	United States			816,600			19,394,250
							48,054,074
Tobacco 7.0%
Altadis SA	Spain			1,066,115			30,256,796
Altria Group Inc.	United States			204,870			11,149,025
British American Tobacco PLC	United Kingdom			2,514,956			34,666,693
British American Tobacco PLC, ADR	United Kingdom			4,300			118,981
Imperial Tobacco Group PLC	United Kingdom			1,013,947			19,966,375
R.J. Reynolds Tobacco Holdings Inc.	United States			491,200			28,563,280
							124,721,150
Transportation Infrastructure .1%
aLaidlaw International Inc.	United States			144,616			2,000,039
Total Common Stocks and Other Equity Interests (Cost $929,960,727)							1,184,988,408
Preferred Stocks .3%
Electric Utilities
aMontana Power Co., 8.45% pfd.	United States			17,650			211,800
Food Products .1%
Unilever NV, pfd.	Netherlands			261,750			1,878,605
Media .2%
News Corp. Ltd., ADR, pfd.	Australia			78,700			2,380,675
NTL Europe Inc., 10.00%, A, pfd.	United Kingdom			18,774			154,416
							2,535,091
Total Preferred Stocks (Cost $4,122,095)							4,625,496
		��	PRINCIPAL AMOUNTf
Corporate Bonds & Notes 2.4%
Calpine Constructor Finance, 8.50%, 8/26/11	United States		$	1,693,000			1,760,720
First Priority Term Loan, 8/26/09	United States			1,392,000			1,461,600
Calpine Corp., 144A, 9.875%, 12/01/11	United States			3,896,000			4,022,620
Charter Communications Operating LLC, Bank Claim	United States			2,062,200			1,990,023
DecisionOne Corp., Term Loan	United States			798,394			558,876
Eurotunnel PLC,
12/31/18, Tier 2	United Kingdom			385,556	GBP		503,851
12/31/25, Tier 3	United Kingdom			531,240	GBP		523,052
Participating Loan Note, 4/30/40	United Kingdom			58,000	GBP		22,323
Stabilization Advance S8, Tier 2	United Kingdom			147,693	GBP		50,235

MS-12

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	COUNTRY	PRINCIPAL AMOUNTf		VALUE
Corporate Bonds & Notes (cont.)
Eurotunnel SA
5.28%, 12/31/18, Tier 2 (Pibor)	France	45,056	EUR	$	41,487
5.28%, 12/31/25, Tier 3 (Pibor)	France	84,795	EUR		58,826
12/31/18, Tier 2 (Libor)	France	60,952	EUR		56,124
12/31/25, Tier 3 (Libor)	France	619,054	EUR		429,465
Stabilization Advance S6, Tier 1 (Pibor)	France	22,154	EUR		5,309
Stabilization Advance S6, Tier 2 (Pibor)	France	43,502	EUR		10,425
Stabilization Advance S7, Tier 1 (Pibor)	France	55,949	EUR		13,408
Healthsouth Corp.,
8.50%, 2/01/08	United States	1,651,000			1,593,215
7.00%, 6/15/08	United States	890,000			834,375
8.375%, 10/01/11	United States	520,000			494,000
7.625%, 6/01/12	United States	4,259,000			4,003,460
cvt., 3.25%, 4/01/03	United States	3,219,000			3,122,430
Marconi Corp., 10.00%, 10/31/08	United Kingdom	407,903			452,772
Marconi PLC, 8.00%, 4/30/08	United Kingdom	2,146,476			2,103,546
Mirant Mid-Atlantic LLC,
8.625%, 6/30/12	United States	973,345			978,820
9.125%, 6/30/17	United States	483,045			483,347
10.06%, 12/30/28	United States	638,163			644,943
bMP Finance Ltd., 5.00%, 8/28/07	Japan	13,716,000			13,990,320
Providian Financial Corp, cvt., zero cpn., 2/15/21	United States	2,562,000			1,223,355
Teco Panda,
Bank Claim #2	United States	2,655,600			1,898,754
Debt Service Reserve L/C Loan	United States	152,300			108,895
Project L/C Loan Facility	United States	380,800			272,272
TVMAX Holdings Inc., PIK, 14.00%, 2/01/06	United States	34,406			34,406
Total Corporate Bonds & Notes (Cost $38,879,168)					43,747,254
Bonds & Notes in Reorganization 7.3%
dAdelphia Communications Corp.,
9.25%, 10/01/02	United States	3,746,000			3,483,780
8.125%, 7/15/03	United States	1,895,000			1,762,350
7.50%, 1/15/04	United States	350,000			323,750
9.50%, 2/15/04	United States	1,000,000			935,000
10.50%, 7/15/04	United States	5,577,000			5,270,265
10.25%, 11/01/06	United States	799,000			747,065
8.375%, 2/01/08	United States	1,123,000			1,052,812
7.75%, 1/15/09	United States	991,000			926,585
7.875%, 5/01/09	United States	3,228,000			2,969,760
9.375%, 11/15/09	United States	12,310,000			11,694,500
10.875%, 10/01/10	United States	2,000,000			1,880,000
10.25%, 6/15/11	United States	1,220,000			1,159,000
dAES Drax Holdings Ltd.,
10.41%, 12/31/20	Cayman Islands	18,057,000			15,890,160
9.07%, 12/31/25	Cayman Islands	1,725,000	GBP		2,671,139
dAiken Cnty SC Indl Rev Ref Beloit, 6.00%, 12/01/11	United States	45,000			225
dAir Canada Inc.,
6.75%, 2/02/04	Canada	343,000	CAD		96,881
9.00%, 6/01/06	Canada	614,000	CAD		175,802
10.00%, 6/01/06	Canada	1,583,000	EUR		848,606
7.25%, 10/01/07	Canada	168,000	CAD		45,827
10.25%, 3/15/11	Canada	11,639,000			4,742,892
Bank Claim	Canada	2,887,200	CAD		804,327
Bank Claim	Canada	69,759,000	JPY		247,349
Term Loan	Canada	2,073,000			767,010
zero cpn., 7/31/05	Canada	818,200			315,007

MS-13

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

		COUNTRY	PRINCIPAL AMOUNTf			VALUE
	Bonds & Notes in Reorganization (cont.)
d	Century Communications Corp.,
	9.50%, 3/01/05	United States	$	75,000		$	72,750
	8.875%, 1/15/07	United States		55,000			53,625
	8.375%, 12/15/07	United States		90,000			87,975
	zero cpn., 3/15/03	United States		1,010,000			898,900
d	Dow Corning Corp.,
	9.375%, 2/01/08	United States		550,000			1,199,000
	Bank Debt #1	United States		100,000			180,000
d	Harnischfeger Industries Inc.,
	8.90%, 3/01/22	United States		410,000			2,296
	8.70%, 6/15/22	United States		360,000			2,052
	7.25%, 12/15/25	United States		519,000			2,958
	6.875%, 2/15/27	United States		463,000			2,593
	Stipulated Bank Claim	United States		603,475			3,319
d	Metromedia Fiber Network Inc.,
	14.00%, 3/15/07	United States		2,897,000			1,535,410
	10.00%, 11/15/08	United States		2,297,000			157,919
	senior note, 10.00%, 12/15/09	United States		2,418,000			172,283
	senior note, 10.00%, 12/15/09	United States		1,085,000	EUR		102,643
d	Mirant Corp.,
	Tranche C Revolver	United States		1,904,055			1,180,514
	4 Year Revolver, 7/17/05	United States		1,564,014			1,219,931
	364 Day Revolver	United States		2,716,500			1,602,735
d	Northwestern Corp.,
	8.75%, 3/15/12	United States		2,193,000			1,990,148
	6.95%, 11/15/28	United States		1,155,000			1,035,169
d	NRG Energy Inc.,
	7.625%, 2/01/06	United States		1,425,000			805,125
	6.75%, 7/15/06	United States		2,600,000			1,469,000
	7.50%, 6/15/07	United States		1,405,000			800,850
	7.50%, 6/01/09	United States		1,405,000			800,850
	8.25%, 9/15/10	United States		8,370,000			4,896,450
	7.75%, 4/01/11	United States		200,000			115,000
	8.00%, 11/01/13	United States		2,015,000			1,158,625
	8.70%, 3/15/20	United States		855,000			495,900
	8.625%, 4/01/31	United States		1,315,000			769,275
	Bank Claim	United States		15,000,000			7,500,000
	Revolver	United States		6,418,893			3,979,714
d	Owens Corning, Revolver	United States		8,719,580			6,539,685
d	Parmalat Netherlands BV, 0.875%, 06/30/21	Italy		1,250,000	EUR		395,670
d	PG & E Corp.,
	9.625%, 11/01/05	United States		2,269,000			2,314,380
	Commercial Paper, 1/18/01	United States		92,000			92,460
	Commercial Paper, 1/30/01	United States		45,000			45,225
	Commercial Paper, 2/16/01	United States		136,000			136,680
	FRN, 144A, 8.333% 10/31/01	United States		610,000			622,200
	MTN, 5.94%, 10/07/03	United States		115,000			115,575
d	Port Seattle Wash Rev Ref-Beloit Proj., 6.00%, 12/01/17	United States		20,000			100

MS-14

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	COUNTRY	PRINCIPAL AMOUNTf			VALUE
Bonds & Notes in Reorganization (cont.)
dSafety Kleen Corp., 9.25%, 5/15/09	United States	$	63,000		$	3,150
dSafety Kleen Services, 9.25%, 6/01/08	United States		5,000			25
dTelewest Communications PLC,
11.00%, 10/01/07	United Kingdom		1,783,000			1,167,865
11.25%, 11/01/08	United Kingdom		230,000			148,925
9.875%, 2/01/10	United Kingdom		610,000	GBP		644,278
Bank Claim	United Kingdom		6,542,600	GBP		5,563,336
cvt., 5.25%, 2/19/07	United Kingdom		1,810,000	GBP		1,717,298
senior disc. note, zero cpn., 4/15/09	United Kingdom		675,000			354,375
senior disc. note, zero cpn., 2/01/10	United Kingdom		485,000			240,075
zero cpn., 4/15/04	United Kingdom		1,916,000	GBP		1,714,971
dTelewest Finance Ltd., cvt., 6.00%, 7/07/05	United Kingdom		1,475,000			1,563,500
dWorldCom Inc.,
7.875%, 5/15/03	United States		1,910,000			644,625
6.50%, 5/15/04	United States		11,000,000			3,712,500
6.40%, 8/15/05	United States		2,827,000			954,113
7.375%, 1/15/06	United States		620,000			209,250
8.00%, 5/15/06	United States		620,000			209,250
7.75%, 4/01/07	United States		1,430,000			482,625
8.25%, 5/15/10	United States		1,745,000			588,938
7.375%, 1/15/11	United States		3,819,000			1,288,913
7.50%, 5/15/11	United States		4,470,000			1,508,625
7.75%, 4/01/27	United States		340,000			114,750
6.95%, 8/15/28	United States		150,000			50,625
8.25%, 5/15/31	United States		10,264,000			3,464,100
Total Bonds & Notes in Reorganization (Cost $106,265,449)						129,711,188
		SHARES/ PRINCIPAL AMOUNTf
Companies in Liquidation .1%
aBrunos Inc., Liquidating Unit	United States		5,044			11,097
aGuangdong International Trust & Investment Corp., 144A, 8.75%, 10/24/16	China		630,000			39,375
aPeregrine Investments Holdings Ltd., 6.70%, 1/15/98	Hong Kong		5,000,000	JPY		3,032
aPIV Investment Finance (Cayman) Ltd.	Hong Kong		12,200,000			1,464,000
Total Companies in Liquidation (Cost $36,337)						1,517,504
		PRINCIPAL AMOUNT
U.S. Government and Agency Securities 24.9%
Federal National Mortgage Association, 1.010% to 1.286%, with maturities to 7/23/04	United States	$	108,813,000			108,522,229
eFederal Home Loan Bank, 1.022% to 2.260%, with maturities to 1/26/07	United States		273,371,000			272,313,322
eFederal Home Loan Mortgage Corp, 1.356% to 2.500%, with maturities to 5/19/06	United States		45,000,000			44,935,941
eU.S. Treasury Bills, 0.985% to 1.035%, with maturities to 5/06/04	United States		18,000,000			17,970,793
Total U.S. Government and Agency Securities (Cost $443,585,627)						443,742,285
Total Investments (Cost $1,522,849,403) 101.4%						1,808,332,135
Options Written						(2,288	)
Securities Sold Short (.7)%						(13,332,394	)
Net Equity in Forward Contracts (.9)%						(15,634,205	)
Other Assets, less Liabilities .2%						2,767,518
Net Assets 100.0%					$	1,782,130,766

MS-15

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

Option Written ISSUER	COUNTRY	CONTRACTS	VALUE
Diversified Telecommunication Services
XO Communications Inc., Jun. 4.25 Calls, 6/21/04	United States	230,239	$	—
Food & Staples Retailing
Safeway PLC, Jan. 2.70 Puts, 1/16/04	United Kingdom	710		2,288
Total Options Written (Premiums Received $64,483)			$	2,288
Securities Sold Short ISSUER	COUNTRY	SHARES	VALUE
Capital Markets
gLehman Brothers Holdings Inc.	United States	3,179	$	245,483
Commercial Banks .1%
gBank of America Corp.	United States	26,200		2,107,266
Food Products .2%
gKraft Foods Inc., A	United States	130,700		4,211,154
Health Care Providers & Services .1%
gAnthem Inc.	United States	7,400		555,000
gCaremark RX Inc.	United States	29,200		739,636
gUnited Health Group Inc.	United States	9,300		541,074
				1,835,710
Insurance .1%
gManulife Financial Corp.	Canada	67,400		2,177,020
Internet Software & Services
gYahoo! Inc.	United States	6,902		311,763
IT Services .1%
gFirst Data Corp.	United States	18,600		764,274
Media
gNews Corp. Ltd., ADR	Australia	17,600		635,360
Metals & Mining .1%
gAlcan Inc.	Canada	1,637		76,857
gAngloGold Ltd., ADR	South Africa	14,000		653,800
gRandgold Resources Ltd., ADR	United Kingdom	7,000		191,100
				921,757
Pharmaceuticals
gTeva Pharmaceutical Industries Ltd., ADR	Israel	2,162		122,607
Total Securities Sold Short (Proceeds $13,432,906)			$	13,332,394

Synthetic Equity Swaps (ses) ISSUER	COUNTRY	SHARES		VALUE AT 12/31/03			UNREALIZED GAIN/(LOSS)
Health Care Equipment & Supplies
hSmith & Nephew PLC, ses., 3.752 GBP	United Kingdom	(267	)	$	(2,243	)	$	(453	)
hSmith & Nephew PLC, ses., 3.776 GBP	United Kingdom	(5,400	)		(45,362	)		(8,926	)
					(47,605	)		(9,379	)
Insurance
hAxa SA, ses., 15.850 EUR	France	6,236			133,482			8,564
hAxa SA, ses., 15.870 EUR	France	1,500			32,108			2,022
hAxa SA, ses., 16.030 EUR	France	11,033			236,163			12,641
hAxa SA, ses., 16.700 EUR	France	(6,236	)		(133,482	)		(2,382	)
hAxa SA, ses., 16.770 EUR	France	(1,500	)		(32,108	)		(441	)
hAxa SA, ses., 17.000 EUR	France	(11,033	)		(236,163	)		371
					0			20,775

MS-16

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

Synthetic Equity Swaps (ses) (cont.) ISSUER	COUNTRY	SHARES		VALUE AT 12/31/03			UNREALIZED GAIN (LOSS)
Real Estate
hChelsfield PLC, ses., 3.095 GBP	United Kingdom	1,900		$	10,450		$	(92	)
hChelsfield PLC, ses., 3.107 GBP	United Kingdom	5,900			32,452			(417	)
hChelsfield PLC, ses., 3.112 GBP	United Kingdom	4,271			23,492			(365	)
hChelsfield PLC, ses., 3.154 GBP	United Kingdom	59,100			325,065			(9,087	)
hChelsfield PLC, ses., 3.160 GBP	United Kingdom	20,100			110,555			(3,309	)
hChelsfield PLC, ses., 3.165 GBP	United Kingdom	8,900			48,952			(1,544	)
hChelsfield PLC, ses., 3.166 GBP	United Kingdom	29,500			162,258			(5,170	)
					713,224			(19,984	)
Textiles, Apparel & Luxury Goods
hChristian Dior SA, ses., 46.766 EUR	France	1,468			88,935			2,180
hChristian Dior SA, ses., 47.220 EUR	France	1,199			72,639			1,085
hChristian Dior SA, ses., 47.384 EUR	France	2,979			180,476			2,180
hChristian Dior SA, ses., 47.614 EUR	France	2,979			180,476			1,230
hChristian Dior SA, ses., 47.790 EUR	France	1,445			87,542			260
hChristian Dior SA, ses., 48.208 EUR	France	2,916			176,659			(985	)
hChristian Dior SA, ses., 48.550 EUR	France	1,824			110,503			(1,415	)
hChristian Dior SA, ses., 48.586 EUR	France	3,003			181,930			(2,442	)
hChristian Dior SA, ses., 48.790 EUR	France	1,215			73,608			(1,304	)
hChristian Dior SA, ses., 49.000 EUR	France	80			4,847			(107	)
hChristian Dior SA, ses., 49.027 EUR	France	444			26,899			(609	)
hLVMH Moet Hennessy Louis Vuitton, ses., 56.520 EUR	France	(1,199	)		(87,263	)		(1,952	)
hLVMH Moet Hennessy Louis Vuitton, ses., 57.050 EUR	France	(1,445	)		(105,167	)		(1,388	)
hLVMH Moet Hennessy Louis Vuitton, ses., 58.672 EUR	France	(2,979	)		(216,812	)		3,344
hLVMH Moet Hennessy Louis Vuitton, ses., 58.860 EUR	France	(1,468	)		(106,841	)		1,949
hLVMH Moet Hennessy Louis Vuitton, ses., 58.900 EUR	France	(2,979	)		(216,812	)		4,097
hLVMH Moet Hennessy Louis Vuitton, ses., 59.841 EUR	France	(2,916	)		(212,227	)		7,466
hLVMH Moet Hennessy Louis Vuitton, ses., 60.149 EUR	France	(1,824	)		(132,751	)		5,375
hLVMH Moet Hennessy Louis Vuitton, ses., 60.300 EUR	France	(1,215	)		(88,428	)		3,827
hLVMH Moet Hennessy Louis Vuitton, ses., 60.421 EUR	France	(3,003	)		(218,558	)		9,889
hLVMH Moet Hennessy Louis Vuitton, ses., 60.950 EUR	France	(444	)		(32,314	)		1,758
hLVMH Moet Hennessy Louis Vuitton, ses., 60.950 EUR	France	(80	)		(5,822	)		317
					(238,481	)		34,755
Total Synthetic Equity Swaps				$	427,498		$	26,167

Currency Abbreviations:

CAD  -  Canadian Dollar

EUR  -  Euro

GBP  -  British Pound

JPY   -  Japanese Yen

^a Non-income producing.

^b See Note 9 regarding restricted securities.

^c See Note 10 regarding other considerations.

^d See Note 8 regarding defaulted securities.

^e See Note 1(g) regarding securities segregated with broker for securities sold short.

^f Principal amount is stated in U.S. dollar unless otherwise indicated.

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

^h See Note 1(e) regarding synthetic equity swaps.

MS-17

See notes to financial statements.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Financial Statements

Statement of Assets and Liabilities

December 31, 2003

Assets:
Investments in securities:
Cost	$	1,522,849,403
Value - (includes securities segregated with broker for securities sold short in the amount of $18,429,216)		1,808,332,135
Cash		434,304
Foreign currency, at value (cost $610,219)		972,908
Receivables:
Investment securities sold		2,557,543
Capital shares sold		1,642,134
Dividends and interest		2,318,539
Unrealized gain on forward exchange contracts (Note 7)		1,047,484
Deposits with broker for securities sold short		15,303,411
Due from broker - Variation margin (Note 1e)		33,110
Total assets		1,832,641,568
Liabilities:
Payables:
Investment securities purchased		18,483,390
Capital shares redeemed		136,366
Affiliates		1,592,325
Options written, at value (premiums received $64,483)		2,288
Securities sold short, at value (proceeds $13,432,906 )		13,332,394
Unrealized loss on forward exchange contracts (Note 7)		16,681,689
Other liabilities		282,350
Total liabilities		50,510,802
Net assets, at value	$	1,782,130,766
Net assets consist of:
Undistributed net investment income (loss)	$	14,428,647
Net unrealized appreciation (depreciation)		270,423,453
Accumulated net realized gain (loss)		(33,451,176	)
Capital shares		1,530,729,842
Net assets, at value	$	1,782,130,766
Class 1:
Net asset value and maximum offering price per share ($312,386,153 ÷ 20,820,981 shares outstanding)	$	15.00
Class 2:
Net asset value and maximum offering price per share ($1,469,744,613 ÷ 98,647,778 shares outstanding)	$	14.90

See notes to financial statements.

MS-18

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Financial Statements (continued)

Statement of Operations

for the year ended December 31, 2003

Investment income:
(net of foreign taxes of $650,979)
Dividends	$	12,661,881
Interest		13,259,968
Total investment income		25,921,849
Expenses:
Management fees (Note 3)		7,279,926
Administrative fees (Note 3)		1,461,840
Distribution fees - Class 2 (Note 3)		2,329,085
Custodian fees		127,200
Reports to shareholders		320,300
Professional fees		41,661
Trustees’ fees and expenses		11,000
Dividends on securities sold short		479,014
Other		30,800
Total expenses		12,080,826
Net investment income		13,841,023
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		34,162,369
Written Options (Note 1f)		179,735
Foreign currency transactions		(23,865,744	)
Securities sold short (Note 1g)		(1,938,996	)
Net realized gain (loss)		8,537,364
Net unrealized appreciation (depreciation) on:
Investments		288,073,262
Translation of assets and liabilities denominated in foreign currencies		(9,394,540	)
Net unrealized appreciation (depreciation)		278,678,722
Net realized and unrealized gain (loss)		287,216,086
Net increase (decrease) in net assets resulting from operations	$	301,057,109

See notes to financial statements.

MS-19

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Financial Statements (continued)

Statements of Changes in Net Assets

for the years ended December 31, 2003 and 2002

	2003			2002
Increase (decrease) in net assets:
Operations:
Net investment income	$	13,841,023		$	11,074,067
Net realized gain (loss) from investments, written options, securities sold short and foreign currency transactions		8,537,364			(37,295,738	)
Net unrealized appreciation (depreciation) on investments and translation of assets and liabilities denominated in foreign currencies		278,678,722			(74,747,568	)
Net increase (decrease) in net assets resulting from operations		301,057,109			(100,969,239	)
Distributions to shareholders from:
Net investment income:
Class 1		(3,290,885	)		(3,339,385	)
Class 2		(9,026,103	)		(3,698,558	)
Net realized gains:
Class 1		—			(7,639,415	)
Class 2		—			(9,170,486	)
Total distributions to shareholders		(12,316,988	)		(23,847,844	)
Capital share transactions: (Note 2)
Class 1		(38,975,858	)		(56,246,676	)
Class 2		653,701,033			397,772,006
Total capital share transactions		614,725,175			341,525,330
Net increase (decrease) in net assets		903,465,296			216,708,247
Net assets:
Beginning of year		878,665,470			661,957,223
End of year	$	1,782,130,766		$	878,665,470
Undistributed net investment income included in net assets:
End of year	$	14,428,647		$	10,495,227

See notes to financial statements.

MS-20

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Notes to Financial Statements

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (the Trust) is registered under the Investment Company Act of 1940 as an open-end investment company, consisting of twenty-two separate series (the Funds). The Mutual Shares Securities Fund (the Fund) included in this report is diversified. Shares of the Fund are sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. As of December 31, 2003, over 51% of the total Fund shares were sold through one insurance company. The Fund’s investment objective is capital growth.

The following summarizes the Fund’s significant accounting policies.

a. Security Valuation

Securities listed or traded on a recognized national exchange or NASDAQ are valued at the last reported sales price. Over-the-counter securities and listed securities for which no sale is reported are valued within the range of the latest quoted bid and asked prices. Investments in open-end mutual funds are valued at the closing net asset value. Foreign securities are valued at the close of trading of the foreign exchange or the NYSE, whichever is earlier. If events occur that materially affect the values of securities after the prices or foreign exchange rates are determined, or if market quotations are not readily available, the securities will be valued at fair value as determined following procedures approved by the Board of Trustees.

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. Purchases and sales of securities and income items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.

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.

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. Foreign Currency Contracts

The Fund may enter into forward exchange contracts to hedge against fluctuations in foreign exchange rates. A forward exchange contract is an agreement between two parties to exchange different currencies at an agreed upon forward exchange rate at a future date. These contracts are valued daily and the Fund’s equity therein is included in the Statement of Assets and Liabilities. Realized and unrealized gains and losses are included in the Statement of Operations.

When the Fund purchases or sells foreign securities it may enter into foreign exchange contracts to minimize foreign exchange risk from the trade date to the settlement date of the transactions. Realized and unrealized gains and losses are included in the Statement of Operations.

The risks of these contracts include movement in the values of the foreign currencies relative to the U.S. dollar and the possible inability of the counter parties to fulfill their obligations under the contracts.

d. Securities Purchase on a When-Issued, Delayed Delivery, or TBA Basis

The Fund may purchase securities on a when-issued, delayed delivery, or to-be-announced (TBA) basis, with payment and delivery scheduled for a future date. These transactions are subject to market fluctuations and are subject to the risk that the

MS-21

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Notes to Financial Statements (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

d. Securities Purchase on a When-Issed, Delayed Delivery, or TBA Basis (cont.)

value at delivery may be more or less than the trade date purchase price. Although the Fund will generally purchase these securities with the intention of holding the securities, it may sell the securities before the settlement date. Sufficient assets have been segregated for these securities.

e. Synthetic Equity Swaps

The Fund may engage in synthetic equity swaps. Synthetic equity swaps are contracts entered into between a broker and the Fund under which the parties agree to make payments to each other so as to replicate the economic consequences that would apply had a purchase or sale of the underlying security taken place. Upon entering into synthetic equity swaps, the Fund is required to pledge to the broker an amount of cash and/or other assets equal to a certain percentage of the contract amount (“initial margin”). Subsequent payments known as “variation margin”, are made or received by the Fund periodically, depending on fluctuations in the value of the underlying security. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The risks of entering into equity swaps include unfavorable price movements in the underlying securities or the inability of the counterparties to fulfill their obligations under the contract.

f. Option Contracts

The Fund may purchase or write options. Options are contracts entitling the holder to purchase or sell a specified number of shares or units of a particular security at a specified price. Options purchased are recorded as investments; options written (sold) are recorded as liabilities. When the exercise of an option results in a cash settlement, the difference between the premium (original option value) and the settlement proceeds is realized as a gain or loss. When securities are acquired or delivered upon exercise of an option, the acquisition cost or sale proceeds are adjusted by the amount of the premium. When an option is closed, the difference between the premium and the cost to close the position is realized as a gain or loss. When an option expires, the premium is realized as a gain for options written or as a loss for options purchased. The risks include the possibility there may be an illiquid options market, or the inability of the counterparties to fulfill their obligations under the contract. Writing options involves, to varying degrees, elements of market risk in excess of the amount recognized in the Statement of Assets and Liabilities.

g. Securities Sold Short

The Fund is engaged in selling securities short, which obligates the Fund to replace a security borrowed with the same security at the current market value. The Fund would incur 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 would realize a gain if the price of the security declines between those dates. A gain, limited to the price at which the Fund sold the security short, or a loss, unlimited in size, will be recognized upon the termination of a short sale.

The Fund is required to establish a margin account with the broker lending the security sold short. While the short sale is outstanding, the broker retains the proceeds of the short sale and the Fund must maintain a deposit for the broker consisting of cash and securities having a value equal to a specified percentage of the value of the securities sold short.

h. Securities Lending

The Fund loans securities to certain brokers for which it received collateral against loaned securities in an amount equal to at least 102% of the market value of the loaned securities.

MS-22

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Notes to Financial Statements (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

i. Income Taxes

No provision has been made for income taxes because the Fund’s policy is to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable income.

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. Certain income from foreign securities is recorded as soon as information is available to the Fund. Interest income and estimated expenses are accrued daily. Discounts and premiums on securities purchased are amortized over the lives of the respective securities. Dividend income, dividends declared on securities sold short and distributions to shareholders are recorded on the ex-dividend date.

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. Other expenses are charged to each fund on a specific identification basis.

Distributions received by the Fund from 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.

Realized and unrealized gains and losses and net investment income, other than class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class.

k. Accounting Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expense 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 against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust 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. However, based on experience, the Trust expects the risk of loss to be remote.

2. SHARES OF BENEFICIAL INTEREST

The Fund offers two classes of shares: Class 1 and Class 2. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class, and its exchange privilege.

MS-23

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Notes to Financial Statements (continued)

2. SHARES OF BENEFICIAL INTEREST (cont.)

At December 31, 2003, there were an unlimited number of shares authorized ($.01 par value). Transactions in the Fund’s shares were as follows:

	Year ended December 31,
	2003					2002
Class 1 Shares:	Shares		Amount			Shares		Amount
Shares sold	255,723		$	3,324,112		1,104,143		$	15,457,891
Shares issued on reinvestment of distributions	247,994			3,290,886		805,488			10,978,800
Shares redeemed	(3,582,053	)		(45,590,856	)	(6,372,892	)		(82,683,367	)
Net increase (decrease)	(3,078,336	)	$	(38,975,858	)	(4,463,261	)	$	(56,246,676	)
Class 2 Shares:
Shares sold	54,231,399		$	712,756,799		36,489,325		$	472,129,169
Shares issued on reinvestment of distributions	684,314			9,026,103		948,345			12,869,044
Shares redeemed	(5,323,957	)		(68,081,869	)	(7,102,935	)		(87,226,207	)
Net increase (decrease)	49,591,756		$	653,701,033		30,334,735		$	397,772,006

3. TRANSACTIONS WITH AFFILIATES

Certain officers and trustees of the Trust are also officers and/or directors of the following entities:

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

The Fund pays an investment management fee to Franklin Mutual of .60% per year of the average daily net assets of the Fund.

The Fund pays administrative fees to FT Services based on the average daily net assets of the Fund as follows:

Annualized Fee Rate	Daily Net Assets
.15%	First $200 million
.135%	Over $200 million, up to and including $700 million
.10%	Over $700 million, up to and including $1.2 billion
.075%	Over $1.2 billion

The Fund reimburses Distributors up to ..25% per year of its average daily net assets of Class 2, for costs incurred in marketing the Fund’s shares.

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

MS-24

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Notes to Financial Statements (continued)

4. INCOME TAXES

At December 31, 2003, the cost of investments, net unrealized appreciation (depreciation) and undistributed ordinary income for income tax purpose was:

Cost of investments	$	1,527,196,535
Unrealized appreciation		289,967,700
Unrealized depreciation		(8,832,100	)
Net unrealized appreciation (depreciation)	$	281,135,600
Distributable earnings—Undistributed ordinary income	$	16,897,762

The tax character of distributions paid during the years ended December 31, 2003 and 2002, was as follows:

	2003		2002
Distributions paid from:
Ordinary income	$	12,316,988	$	8,944,526
Long-term capital gain		—		14,903,318
	$	12,316,988	$	23,847,844

Net Investment Income (loss) differs for financial statement and tax purposes primarily due to differing treatments of defaulted securities, foreign currency transactions and bond discounts and premiums.

Net realized losses differ for financial statement and tax purposes primarily due to differing treatment of wash sales, foreign currency transactions and bond discounts and premiums.

At December 31, 2003, the Fund has deferred capital losses occurring subsequent to October 31, 2003 of $4,566,879. For tax purposes, such losses will be reflected in the year ending December 31, 2004.

At December 31, 2003, the Fund had tax basis capital losses which may be carried over to offset future capital gains. Such losses expire as follows:

Capital loss expiring on:
2010	$	33,868,516
2011		7,220,378
	$	41,088,894

5. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities and securities sold short) for the year ended December 31, 2003 aggregated $964,542,806 and $475,105,919, respectively.

Transactions in options written during the year ended December 31, 2003 were as follows:

	Number of Contracts		Premium
Options outstanding at December 31, 2002	51,300		$	31,802
Options written	242,956			481,956
Options expired	(41,431	)		(150,077	)
Options terminated in closing transactions	(21,717	)		(265,932	)
Options closed	(159	)		(33,266	)
Options outstanding at December 31, 2003	230,949		$	64,483

MS-25

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Notes to Financial Statements (continued)

6. INVESTMENTS IN FRANKLIN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO

The Fund may invest in the Franklin Institutional Fiduciary Trust Money Market Portfolio (the Sweep Money Fund), an open-end investment company managed by Franklin Advisers Inc. (an affiliate of the Fund’s Investment Manager). Management fees paid by the Fund are reduced on assets invested in the Sweep Money Fund, in an amount not to exceed the management fees paid by the Sweep Money Fund. The Fund earned $63,763 of dividend income from investments in the Sweep Money Fund.

7. FORWARD CURRENCY CONTRACTS

At December 31, 2003, the Fund has outstanding forward exchange contracts as set out below. The contracts are reported in the financial statements at the Fund’s net equity, as measured by the difference between the forward exchange rates at the reporting date and the forward exchange rates at the day of entry into the contracts.

Contracts to buy:		In Exchange for			Settlement Date	Unrealized Gain (Loss)
16,751,685	Canadian Dollars		U.S.$	12,387,452	1/21/04		U.S.$	563,043
600,000	British Pounds			1,057,290	1/28/04			14,459
2,850,000	European Unit			3,465,338	1/28/04			126,641
500,000	British Pounds			887,310	2/05/04			5,335
3,200,000	European Unit			4,020,304	2/05/04			12,020
550,376,652	Japanese Yen			4,986,137	3/25/04			163,265
4,704,362	European Unit			5,768,112	3/25/04			151,844
			U.S.$	32,571,943			U.S.$	1,036,607
Contracts to sell:
2,320,874	South African Rand		U.S.$	350,583	4/26/04		U.S.	$10,877
Unrealized gain on forward exchange contracts							U.S.$	1,047,484
Contracts to sell:
4,805,167	British Pounds			8,524,367	1/06/04			(73,608)
1,500,000	European Unit			1,869,000	1/06/04			(22,704	)
13,887,676	British Pounds			24,152,332	1/12/04			(685,500	)
14,350,000	British Pounds			24,267,427	1/20/04			(1,381,237	)
38,743,250	Canadian Dollars			27,595,514	1/21/04			(2,356,354	)
15,000,000	British Pounds			25,302,000	1/28/04			(1,491,721	)
5,146,117	European Unit			6,041,541	1/28/04			(444,332	)
15,000,000	British Pounds			26,004,000	2/11/04			(761,066	)
17,957,185	European Unit			19,843,161	2/23/04			(2,770,169	)
4,500,000	British Pounds			7,583,850	2/27/04			(435,901	)
7,313,816	European Unit			8,206,358	3/11/04			(1,000,843	)
37,397,174	Danish Krone			6,159,610	3/17/04			(161,395	)
526,955,204	Japanese Yen			4,600,000	3/18/04			(329,191	)
4,120,529	European Unit			4,697,403	3/25/04			(487,859	)
692,035,430	Japanese Yen			6,212,167	3/25/04			(262,614	)
107,638,519	Norwegian Krona			15,126,547	4/15/04			(998,612	)
16,485,969	European Unit			19,130,210	4/22/04			(1,600,727	)
5,660,863	South African Rand			807,194	4/26/04			(21,386	)
14,850,000	European Unit			17,477,103	4/28/04			(1,193,772	)
491,053,849	Japanese Yen			4,432,938	6/24/04			(175,437	)
			U.S.$	258,032,722				(16,654,428	)
Net unrealized loss on offsetting forward exchange contracts								(27,261	)
Unrealized loss on forward exchange contracts								(16,681,689	)
Net unrealized loss on forward exchange contracts							U.S.$	(15,634,205	)

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Notes to Financial Statements (continued)

8. CREDIT RISK DEFAULTED SECURITIES

The Fund held defaulted and/or other securities for which the income has been deemed uncollectible. The Fund discontinues accruing income on these securities and provides an estimate for losses on interest receivable. At December 31, 2003, the value of these securities was $129,711,188 representing 7.3% of the Fund’s net assets. For information as to specific securities, see the accompanying Statement of Investments.

9. RESTRICTED SECURITIES

At December 31, 2003, investments in securities included issues that are restricted or illiquid. Restricted securities are often purchased in private placement transactions, are not registered under the Securities Act of 1933, may have contractual restrictions on resale, and are valued under methods approved by the Board of Trustees as reflecting fair value. A security may also be considered illiquid if it lacks a readily available market or if its valuation has not changed for a certain period of time. At December 31, 2003, the Fund held investments in restricted and illiquid securities that were valued under approved methods by the Trustees, as follows:

Shares	Issuer	Acquisition Date	Cost		Value
10,442	AboveNet Inc.	11/25/03	$	312,783	$	312,783
4,595	Elephant Capital Holdings Ltd.	10/22/03		4,594,900		4,594,900
639,453	International Steel Group	4/10/02		3,118,750		21,170,690
184,830	Leucadia National Corp.	12/20/02		6,515,258		8,094,630
13,716,000	MP Finance Ltd., 5.00%, 8/28/07	10/22/03		13,453,263		13,990,320
1,148,000	Nippon Investments LLC	2/14/01		—		436,240
169,343	NTL Inc.	9/21/01		8,887,840		11,221,091
16,280	Olympus Re Holdings Ltd.	12/19/01		1,628,000		2,575,008
1,520	PG & E Corp., wts. 9/02/06	10/29/02		—		37,976
8,958	Security Capital European Realty	4/08/98		203,480		66,737
30,898	White Mountains Insurance Group Inc.	6/01/01		9,114,910		13,500,958
	Total Restricted Securities (4.3% of Net Assets)				$	76,001,333

10. OTHER CONSIDERATIONS

A member of the Fund’s Portfolio Management team may serve as a member on the board of directors of certain companies in which the Fund invests and may represent the Fund in certain corporate negotiations. Currently, a member of the Portfolio Management team serves in one or more of these capacities for Kindred Healthcare and AboveNet Inc. As a result of this involvement, the Portfolio Manager could receive certain material non-public information which, pursuant to the Fund’s policies and the requirements of the federal securities laws, could prevent the Fund from trading in the securities of such companies for limited or extended periods of time.

11. REGULATORY MATTERS

On February 4, 2004, the Securities Division of the Office of the Secretary of the Commonwealth of Massachusetts filed an administrative complaint against Franklin Resources, Inc. and certain of its subsidiaries (the “Company”), alleging violations of the Massachusetts Uniform Securities Act. The complaint arises from activity that occurred in 2001 during which time an officer of a Company subsidiary was negotiating an agreement with an investor relating to investments in a mutual fund and a hedge fund.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Notes to Financial Statements (continued)

11. REGULATORY MATTERS (cont.)

The Company, in addition to other entities within Franklin Templeton Investments, has been named in shareholder class actions related to the matter described above. The Company believes that the claims made in the lawsuit are without merit and it intends to defend vigorously against the allegations. The Company and the Fund may be named in similar civil actions related to the matter described above.

In addition, as part of ongoing investigations by the U.S. Securities and Exchange Commission (the “SEC”), the U.S. Attorney for the Northern District of California, the New York Attorney General, the California Attorney General, the U.S. Attorney for the District of Massachusetts, the Florida Department of Financial Services, and the Commissioner of Securities and the Attorney General of the State of West Virginia, relating to certain practices in the mutual fund industry, including late trading, market timing and sales compensation arrangements, the Company and its subsidiaries, as well as certain current or former executives and employees of the Company, have received requests for information and/or subpoenas to testify or produce documents. The Company and its current employees are providing documents and information in response to these requests and subpoenas. In addition, the Company has responded to requests for similar kinds of information from regulatory authorities in some of the foreign countries where the Company conducts its global asset management business.

The Staff of the SEC has informed the Company that it intends to recommend that the Commission authorize an action against an affiliate of the Fund’s adviser and a senior executive officer relating to the frequent trading issues that are the subject of the SEC’s investigation. These issues were previously disclosed as being under investigation by government authorities and the subject of an internal inquiry by the Company in its Annual Report on Form 10-K and on its public website. The Company currently is in discussions with the SEC Staff in an effort to resolve the issues raised in their investigation. Such discussions are preliminary and the Fund’s management has been advised that the Company cannot predict the likelihood of whether those discussions will result in a settlement and, if so, the terms of such settlement. The impact, if any, of these matters on the Fund is uncertain at this time. If the Company finds that it bears responsibility for any unlawful or improper conduct, it has committed to making the Fund or its shareholders whole, as appropriate.

MS-28

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Independent Auditor’s Report

To the Board of Trustees and Shareholders

of Franklin Templeton Variable Insurance Products Trust – Mutual Shares Securities Fund

In our opinion, the accompanying statement of assets and liabilities, including the statement of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Mutual Shares Securities Fund (the “Fund,” one of the funds constituting the Franklin Templeton Variable Insurance Products Trust) at December 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

February 5, 2004, except for Note 11 as to which the date is February 12, 2004

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Tax Designation (unaudited)

Under Section 854(b)(2) of the Code, the Fund hereby designates 51.83% of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended December 31, 2003.

MS-30

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Fund Goal and Primary Investments: Templeton Developing Markets Securities Fund seeks long-term capital appreciation. The Fund invests primarily in emerging markets investments.

This annual report for Templeton Developing Markets Securities Fund covers the period ended December 31, 2003.

Performance Overview

You can find the Fund’s one-year total return in the Performance Summary following this report. The Fund underperformed its benchmarks, the Morgan Stanley Capital International (MSCI) Emerging Markets Free (EMF) Index and the Standard & Poor’s/International Finance Corporation Investable (S&P/IFCI) Composite Index, which returned 56.28% and 57.16% for the year under review.¹ Please note that the index performance numbers are purely for reference and that Templeton does not index its funds, but rather undertakes investments on the basis of careful, fundamental research.

Economic and Market Overview

For the year ended December 31, 2003, generally improving economic growth worldwide had favorable effects on many emerging market economies, which exhibited faster growth than many developed countries. Many emerging country financial markets seemed to reflect the strengthening global economic conditions. Early in 2003, concerns about military conflicts in Afghanistan and Iraq, as well as high oil prices, rattled investor confidence, and most equity markets experienced losses in the first quarter. However, a quicker-than-expected end to major combat in Iraq relieved some market concerns, and many emerging markets rebounded in the second quarter. The severe acute respiratory syndrome (SARS) outbreak in early spring greatly impacted Asian market performance as regional tourism suffered, particularly the airline and hospitality sectors. However, the containment of SARS in following months allowed concerns to subside, and investors returned from the sidelines. Largely as a result, emerging markets generally outperformed the U.S., European and Japanese markets for the 12 months under review. For example, the MSCI EMF Index returned 56.28% for the year ended December 31, 2003. The Standard & Poor’s 500 Composite Index (S&P 500), a broad measure of U.S. equity performance, returned 28.67%, while the MSCI Europe Australasia Far

1. Source: Standard & Poor’s Micropal. One cannot invest directly in an index, nor is an index representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

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East (EAFE) Index and MSCI Japan Index returned 39.17% and 36.15% for the same one-year period.²

During the Fund’s fiscal year, Latin American markets were some of the world’s strongest performing as political and financial issues that engulfed the region in 2002 subsided. Brazil and Argentina experienced renewed investor interest as their governments strove to implement key structural reforms and sealed agreements with the International Monetary Fund. Asian markets rebounded sharply in 2003’s second half largely due to strong macroeconomic data. In Africa, South Africa ended years of ongoing debate, and the government agreed to provide free AIDS-related treatments, creating the world’s largest such program. Eastern European equity markets’ upward trend continued as prospective European Union (EU) candidates successfully passed referendums for accession into the EU in 2004. In Russia, an investigation and subsequent arrest of Michail Khodorkovsky, the CEO and major shareholder of oil company Yukos, as well as the breakup of the Sibneft-Yukos merger, contributed to some severe market fluctuations during 2003’s fourth quarter. For the year, however, Russia’s market outperformed its regional peers. To the south, Turkey’s market appeared to take recent terrorist attacks in stride and continued its upward trend as investor confidence seemed to remain largely unshaken.

Investment Strategy

Our investment philosophy is bottom-up, value-oriented and long-term. In choosing investments, we may make onsite visits to companies to assess critical factors such as management strength and local conditions. In addition, we focus on the market price of a company’s securities relative to our evaluation of the company’s potential long-term (typically 5 years) earnings, asset value, cash flow and balance sheet. Among factors we consider are a company’s historical value measures, including price/earnings ratio, book value, profit margins and liquidation value. We perform in-depth research to construct an action list from which we make our investment decisions.

Manager’s Discussion

During the year under review, the Fund’s performance benefited from underweighted positions, relative to the MSCI EMF Index, in South Korea and Malaysia because those countries underperformed the index. Also helping Fund performance were relatively overweighted positions in China, Turkey and Austria, which outperformed the index.

2. Source: Standard & Poor’s Micropal. Please see Index Descriptions following the Fund Summaries.

TD-2

By industry, the Fund’s holdings in banks (including commercial banks), information technology (IT) services and industrial conglomerates provided the greatest contribution to Fund performance relative to the MSCI EMF Index during the period. Individual contributors included Turkey’s Akbank and Brazil’s Banco Bradesco. Within IT services, Satyam Computers, an Indian IT services company with strong working relationships with multinationals, led performance. Industrial conglomerates that helped the Fund’s relative performance included India’s Grasim Industries and Singapore’s Keppel.

Areas that hindered Fund performance during the period included a relatively overweighted position in the Philippines and underweighted positions in Brazil and Russia. The Fund’s Philippine position is concentrated in San Miguel Corp., one of the largest beverage companies in the Asia-Pacific region. The company and its subsidiaries have broad exposure in the Asia-Pacific region and operate more than 100 facilities in the Philippines, China and other Southeast Asian countries. We believe Asia’s economic recovery could bode well for the company; therefore, consistent with our investment strategy, we continued to hold the stock. Poor liquidity made additional investments in Russia difficult, while Brazil’s strong market performance led to increasingly expensive valuations.

During the Fund’s fiscal year, we made investments in several Asian countries, including Taiwan, Singapore and China (Red Chip shares, Hong Kong-listed companies with significant exposure to China, and H shares, Hong Kong-listed Chinese companies). Consistent with our investment strategy, we purchased shares of China Mobile, a dominant wireless telecommunications operator in China; China Telecom and Taiwan Cellular, key integrated telecommunications services providers in China and Taiwan, respectively; and Singapore Telecommunications, one of Asia’s leading communications companies. Conversely, we undertook selective sales in strong performers in Indonesia and Thailand as some stock valuations became expensive.

Top 10 Countries

Templeton Developing Markets Securities Fund

12/31/03

South Korea	11.7%
South Africa	11.1%
China	9.8%
Taiwan	9.6%
Brazil	7.7%
Singapore	6.4%
Hong Kong	5.7%
Mexico	5.1%
India	3.9%
Turkey	3.4%

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Consistent with our strategy, in Latin America we added to our shares of Telefonos de Mexico, the country’s largest integrated telecommunications services provider, which increased our overall Mexican holdings. We decreased our Argentina position during the period and repositioned our Brazil holdings by adding to our shares of Embraer-Empresa Brasileira de Aeronautica, one of the world’s largest aircraft manufacturers, and reducing our position and taking profits in Cia Vale Do Rio Doce.

We purchased shares in several European companies during the fiscal year, including Poland’s Telekomunikacja Polska SA, Greece’s Hellenic Telecommunications Organization SA (OTE) and the Czech Republic’s Cesky Telecom. Largely as a result of these purchases and some of our Asian investments, the Fund’s exposure to telecommunications increased during the period. We sold some of our Turkey holdings before the terrorist attacks there, locking in gains.

Thank you for your participation in Templeton Developing Markets Securities Fund. We look forward to serving your future investment needs.

This discussion reflects our analysis, opinions and portfolio holdings as of December 31, 2003, 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 advisor makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

Top 10 Equity Holdings

Templeton Developing Markets

Securities Fund

12/31/03

Company Sector/Industry, Country	% of Total Net Assets
Anglo American PLC Metals & Mining, South Africa	3.6%
SABMiller PLC Beverages, South Africa	2.5%
Citic Pacific Ltd. Industrial Conglomerates, Hong Kong	2.1%
Hyundai Motor Co. Ltd. Automobiles, South Korea	2.0%
China Mobile (Hong Kong) Ltd., fgn. Wireless Telecommunication Services, China	2.0%
Lukoil Holdings, ADR Oil & Gas, Russia	1.8%
Petroleo Brasileiro SA, ADR, pfd. Oil & Gas, Brazil	1.7%
Telefonos de Mexico SA de CV (Telmex), L, ADR Diversified Telecommunication Services, Mexico	1.6%
Banco Bradesco SA, ADR, pfd. Banks, Brazil	1.6%
Kimberly Clark de Mexico SA de CV, A Household Products, Mexico	1.6%

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

TD-4

PERFORMANCE SUMMARYASOF 12/31/03

Total return of Class 2 shares represents the average annual change in value, assuming reinvestment of dividends and capital gains. Average returns smooth out variations in returns, which can be significant; they are not the same as year-by-year results.

Templeton Developing Markets Securities Fund – Class 2* Periods ended 12/31/03

	1-Year	5-Year	Since Inception (3/4/96)
Average Annual Total Return	+52.99%	+7.90%	-3.29%

*Performance prior to the 5/1/00 merger reflects the historical performance of Templeton Developing Markets Fund. Additionally, because Class 2 shares were not offered until 5/1/97, standardized Class 2 Fund performance for prior periods represents the historical results of Class 1 shares. For periods beginning on 5/1/97, Class 2’s results reflect an additional 12b-1 fee expense, which also affects future performance. Since 5/1/97 (effective date), the average annual total return of Class 2 shares was -3.73%.

Ongoing market volatility can significantly affect short-term performance; recent returns may differ.

Total Return Index Comparison

for Hypothetical $10,000 Investment (3/4/96–12/31/03)

The graph compares the performance of Templeton Developing Markets Securities Fund – Class 2,* the MSCI Emerging Markets Free Index and the S&P/IFCI Composite Index. One cannot invest directly in an index, nor is an index representative of the Fund’s portfolio. Please see Important Notes to Performance Information preceding the Fund Summaries.

**Source: Standard & Poor’s Micropal. Please see Index Descriptions following the Fund Summaries.

Templeton Developing Markets Securities Fund – Class 2

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.

Since markets can go down as well as up, investment return and the value of your principal will fluctuate with market conditions, and you may have a gain or loss when you sell your shares.

TD-5

Past performance does not guarantee future results.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Financial Highlights^a

	Class 1
	Year Ended December 31,
	2003			2002			2001			2000			1999
Per share operating performance
(For a share outstanding throughout the year)
Net asset value, beginning of year	$	4.71		$	4.78		$	5.25		$	7.77		$	5.13
Income from investment operations:
Net investment incomeb		.13			.07			.08			.07			.05
Net realized and unrealized gains (losses)		2.38			(.06	)		(.50	)		(2.52	)		2.67
Total from investment operations		2.51			.01			(.42	)		(2.45	)		2.72
Less distributions from net investment income		(.08	)		(.08	)		(.05	)		(.07	)		(.08	)
Net asset value, end of year	$	7.14		$	4.71		$	4.78		$	5.25		$	7.77
Total returnc		53.74%			.04%			(8.08)%			(31.76)%			53.84%
Ratios/supplemental data
Net assets, end of year (000’s)	$	359,299		$	225,454		$	240,289		$	301,645		$	297,605
Ratios to average net assets:
Expenses		1.55%			1.58%			1.57%			1.56%			1.50%
Net investment income		2.35%			1.45%			1.64%			1.13%			.82%
Portfolio turnover rate		46.20%			57.91%			78.29%			89.48%			60.27%

^a Financial highlights presented reflect historical financial information from Templeton Variable Products Series Fund (TVP)-Templeton Developing Markets Fund as a result of a merger on May 1, 2000.

^b Based on average daily shares outstanding.

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

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Financial Highlights^a(continued)

	Class 2
	Year Ended December 31,
	2003			2002			2001			2000			1999
Per share operating performance
(For a share outstanding throughout the year)
Net asset value, beginning of year	$	4.69		$	4.76		$	5.22		$	7.74		$	5.12
Income from investment operations:
Net investment incomeb		.11			.06			.07			.06			.03
Net realized and unrealized gains (losses)		2.35			(.06	)		(.49	)		(2.53	)		2.66
Total from investment operations		2.46			—			(.42	)		(2.47	)		2.69
Less distributions from net investment income		(.06	)		(.07	)		(.04	)		(.05	)		(.07	)
Net asset value, end of year	$	7.09		$	4.69		$	4.76		$	5.22		$	7.74
Total returnc		52.99%			(.15)%			(8.08)%			(32.04)%			53.27%
Ratios/supplemental data
Net assets, end of year (000’s)	$	170,953		$	80,952		$	64,081		$	56,617		$	49,654
Ratios to average net assets:
Expenses		1.80%			1.83%			1.82%			1.81%			1.75%
Net investment income		2.10%			1.20%			1.37%			.88%			.52%
Portfolio turnover rate		46.20%			57.91%			78.29%			89.48%			60.27%

^a Financial highlights presented reflect historical financial information from Templeton Variable Products Series Fund (TVP)-Templeton Developing Markets Fund as a result of a merger on May 1, 2000.

^b Based on average daily shares outstanding.

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

See notes to financial statements.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Statement of Investments, December 31, 2003

	INDUSTRY	SHARES/ RIGHTS/ WARRANTS	VALUE
Long Term Investments 94.3%
Argentina 1.0%
Tenaris SA, ADR	Energy Equipment & Services	152,914	$	5,095,095
Austria 2.8%
aBank Austria Creditanstalt, Reg S	Banks	95,500		4,878,595
OMV AG	Oil & Gas	47,065		7,009,883
Wienerberger AG	Building Products	106,392		2,842,309
				14,730,787
Brazil 7.7%
Banco Bradesco SA, ADR, pfd.	Banks	325,181		8,588,030
Centrais Eletricas Brasileiras SA	Electric Utilities	92,373,000		1,552,891
Centrais Eletricas Brasileiras SA	Electric Utilities	159,745,000		2,685,488
Cia Vale do Rio Doce, ADR, pfd., A	Metals & Mining	82,885		4,269,406
aCompanhia Paranaense de Energia-Copel, ADR, pfd.	Electric Utilities	61,700		294,309
Duratex SA, pfd.	Building Products	24,097,583		693,359
Embraer-Empresa Brasileira de Aeronautica SA, ADR	Aerospace & Defense	205,254		7,190,048
Petroleo Brasileiro SA, ADR, pfd.	Oil & Gas	338,985		9,037,340
Souza Cruz SA	Tobacco	297,200		3,118,282
Unibanco Uniao de Bancos Brasileiros SA, GDR	Banks	135,495		3,380,600
				40,809,753
China 9.8%
Beijing Enterprises Holdings Ltd.	Industrial Conglomerates	1,370,000		1,605,827
China Mobile (Hong Kong) Ltd., fgn.	Wireless Telecommunication Services	3,378,000		10,377,312
China Petroleum & Chemical Corp., H	Oil & Gas	17,520,000		7,841,980
China Resources Enterprise Ltd.	Distributors	4,248,000		4,815,086
China Telecom Corp. Ltd., H	Diversified Telecommunication Services	15,932,000		6,566,850
China Travel International Investment Hong Kong Ltd.	Hotels Restaurants & Leisure	12,082,000		2,287,668
Cofco International Ltd.	Food Products	1,700,000		1,094,853
Huadian Power International Corp Ltd.	Electric Utilities	5,670,000		2,373,577
PetroChina Co. Ltd., H	Oil & Gas	12,300,000		7,050,209
Shanghai Industrial Holdings Ltd.	Industrial Conglomerates	1,829,000		4,181,662
TCL International Holdings Inc.	Household Durables	7,194,000		3,173,715
Travelsky Technology Ltd., H	IT Consulting & Services	802,000		862,577
				52,231,316
Croatia .7%
Pliva D D, GDR, Reg S	Pharmaceuticals	218,000		3,553,400
Czech Republic .6%
Cesky Telecom AS	Diversified Telecommunication Services	117,990		1,341,795
CEZ AS	Electric Utilities	350,850		1,999,052
				3,340,847
Denmark .8%
Carlsberg AS, B	Beverages	98,060		4,518,320
Egypt .2%
Commercial International Bank Ltd.	Banks	311,380		1,111,170
Greece 1.3%
Coca-Cola Hellenic Bottling Co., SA	Beverages	132,757		2,766,329
Hellenic Telecommunications Organization SA (OTE)	Diversified Telecommunication Services	315,390		4,169,131
				6,935,460

TD-8

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	INDUSTRY	SHARES/ RIGHTS/ WARRANTS	VALUE
Long Term Investments (cont.)
Hong Kong 5.7%
Cheung Kong Holdings Ltd.	Real Estate	528,000	$	4,199,598
Cheung Kong Infrastructure Holdings Ltd.	Construction Materials	580,000		1,299,912
Citic Pacific Ltd.	Industrial Conglomerates	4,360,000		11,119,584
Dairy Farm International Holdings Ltd.	Food & Drug Retailing	1,655,833		2,773,520
Guoco Group Ltd.	Diversified Financials	130,000		954,454
Hang Lung Group Ltd.	Real Estate	1,279,000		1,598,009
Henderson Investment Ltd.	Real Estate	1,344,000		1,549,384
Hong Kong Land Holdings Ltd.	Real Estate	675,000		1,147,500
aHopewell Highway Infrastructure Ltd., wts., 08/05/06	Transportation Infrastructure	30,000		5,835
Hopewell Holdings Ltd.	Transportation Infrastructure	282,000		434,064
HSBC Holdings PLC	Banks	38,800		612,216
MTR Corp. Ltd.	Road & Rail	1,558,707		2,057,904
Tack Fat Group International Ltd.	Specialty Retail	5,042,000		513,058
Tingyi (Cayman Islands) Holding Corp.	Food Products	8,138,000		1,907,770
VTech Holdings Ltd.	Communications Equipment	32,000		45,546
				30,218,354
Hungary 2.7%
Egis RT	Pharmaceuticals	50,884		2,070,522
Gedeon Richter Ltd.	Pharmaceuticals	40,592		4,805,479
Matav RT	Diversified Telecommunication Services	493,000		1,877,718
MOL Magyar Olaj-Es Gazipari RT	Oil & Gas	188,140		5,728,102
				14,481,821
India 3.9%
Container Corp. of India Ltd.	Road & Rail	34,944		509,666
HCL Technologies Ltd.	IT Consulting & Services	131,500		883,104
Hero Honda Motors Ltd.	Automobiles	261,869		2,576,217
Hindustan Petroleum Corp. Ltd.	Oil & Gas	362,004		3,471,271
aIndraprastha Gas Ltd.	Gas Utilities	125,000		406,438
ITC Ltd.	Tobacco	48,300		1,042,274
Mahanagar Telephone Nigam Ltd.	Diversified Telecommunication Services	1,468,285		4,431,405
aMaruti Udyog Ltd.	Automobiles	249,000		2,053,670
Nestle India Ltd.	Food Products	12,000		181,348
Satyam Computers Services Ltd.	IT Consulting & Services	459,421		3,699,031
Union Bank of India Ltd.	Banks	881,400		990,066
Videsh Sanchar Nigam Ltd.	Diversified Telecommunication Services	203,030		656,371
				20,900,861
Indonesia 2.2%
PT Gudang Garam TBK	Tobacco	1,672,000		2,699,816
PT Indosat (Persero) TBK	Diversified Telecommunication Services	3,410,500		6,073,909
aPT Perusahaan Gas Negara, 144A	Oil & Gas	1,731,000		318,557
PT Telekomunikasi Indonesia TBK, B	Diversified Telecommunication Services	3,194,645		2,560,268
				11,652,550
Israel
Elbit Systems Ltd.	Aerospace & Defense	12,476		224,540

TD-9

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	INDUSTRY	SHARES/ RIGHTS/ WARRANTS	VALUE
Long Term Investments (cont.)
Malaysia .4%
Tanjong PLC	Hotels Restaurants & Leisure	14,000	$	39,789
YTL Power International Bhd.	Electric Utilities	2,259,100		1,997,520
				2,037,309
Mexico 5.1%
Alfa SA	Industrial Conglomerates	7,000		20,993
Embotelladoras Arca SA	Food & Drug Retailing	132,000		252,553
Embotelladoras Arca SA, 144A	Food & Drug Retailing	294,833		564,098
Fomento Economico Mexicano SA de CV Femsa, ADR	Beverages	86,020		3,172,417
Grupo Bimbo SA de CV, A	Food Products	496,100		931,519
Grupo Carso SA de CV	Industrial Conglomerates	703,500		2,472,869
Grupo Continental SA	Beverages	494,359		835,865
Grupo Televisa SA, ADR	Media	36,000		1,434,960
Kimberly Clark de Mexico SA de CV, A	Household Products	3,273,400		8,389,412
Telefonos de Mexico SA de CV (Telmex), L, ADR	Diversified Telecommunication Services	263,882		8,716,022
				26,790,708
Peru
Credicorp Ltd.	Banks	5,100		68,085
Philippines .8%
San Miguel Corp., B	Beverages	3,892,630		4,487,182
Poland 2.4%
aBRE Bank SA	Banks	34,625		855,704
Polski Koncern Naftowy Orlen SA	Oil & Gas	887,238		5,926,140
Telekomunikacja Polska SA	Diversified Telecommunication Services	1,498,800		6,066,638
				12,848,482
Russia 1.9%
Aeroflot	Airlines	25,100		17,319
bLukoil Holdings, ADR	Oil & Gas	102,807		9,569,276
Yuzhnaya Telecommunication Co.	Diversified Telecommunication Services	2,913,300		282,590
				9,869,185
Singapore 6.4%
Comfortdelgro Corp. Ltd.	Road & Rail	4,474,000		2,147,036
DBS Group Holdings Ltd.	Banks	430,000		3,721,957
Fraser & Neave Ltd.	Beverages	1,005,681		7,461,332
Keppel Corp. Ltd.	Industrial Conglomerates	2,032,600		7,300,748
Singapore Airlines Ltd.	Airlines	702,000		4,629,571
Singapore Press Holdings Ltd.	Media	54,000		600,954
Singapore Technologies Engineering Ltd.	Aerospace & Defense	2,069,000		2,485,285
Singapore Telecommunications Ltd.	Diversified Telecommunication Services	4,819,000		5,561,585
				33,908,468
South Africa 11.1%
Anglo American PLC	Metals & Mining	893,410		19,139,720
Barloworld Ltd.	Industrial Conglomerates	202,350		2,126,570
BHP Billiton PLC	Metals & Mining	286,200		2,486,831
Imperial Holdings Ltd.	Air Freight & Couriers	289,177		2,902,601
Nampak Ltd.	Containers & Packaging	291,200		567,131

TD-10

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	INDUSTRY	SHARES/ RIGHTS/ WARRANTS	VALUE
Long Term Investments (cont.)
South Africa (cont.)
Nedcor Ltd.	Banks	92,000	$	854,945
Old Mutual PLC	Insurance	2,773,960		4,568,560
Remgro Ltd.	Industrial Conglomerates	680,270		7,195,065
SABMiller PLC	Beverages	1,304,424		13,290,476
Sasol Ltd.	Oil & Gas	410,087		5,836,444
				58,968,343
South Korea 11.7%
CJ Corp.	Food Products	67,200		3,502,409
Dong-A Pharmaceutical Co. Ltd.	Pharmaceuticals	55,633		866,129
Hite Brewery Co. Ltd.	Beverages	49,490		3,630,236
Hyundai Development Co.	Construction & Engineering	463,020		4,799,242
Hyundai Motor Co. Ltd.	Automobiles	247,460		10,488,233
Kangwon Land Inc.	Hotels Restaurants & Leisure	574,055		6,841,444
Korea Electric Power Corp.	Electric Utilities	306,189		5,499,324
Korea Gas Corp.	Gas Utilities	92,390		1,919,138
KT Corp.	Diversified Telecommunication Services	71,340		2,670,385
KT&G Corp.	Tobacco	68,990		1,198,567
LG Card Co. Ltd.	Consumer Finance	299,013		764,158
LG Chem Ltd.	Chemicals	440		20,311
LG Home Shopping Inc.	Internet & Catalog Retail	12,830		648,230
LG Household & Health Care Ltd.	Household Products	88,940		2,321,472
LG International Corp.	Trading Companies & Distributors	75,000		503,567
Poongsan Corp.	Metals & Mining	28,970		306,355
POSCO	Metals & Mining	16,330		2,233,982
Samsung Corp.	Trading Companies & Distributors	268,540		2,231,260
Samsung Fine Chemicals	Chemicals	221,490		3,039,330
Samsung Heavy Industries Co. Ltd.	Machinery	779,620		4,311,956
SK Corp.	Oil & Gas	183,880		4,228,546
				62,024,274
Taiwan 9.6%
Acer Inc.	Computers & Peripherals	1,675,000		2,491,532
Amtran Technology Co. Ltd.	Computers & Peripherals	575,000		484,389
Cheng Shin Rubber Industry Co. Ltd.	Auto Components	327,000		417,057
Chinatrust Financial Holding Co. Ltd.	Banks	2,438,980		2,449,756
Chunghwa Telcom Co. Ltd.	Diversified Telecommunication Services	1,570,000		2,279,853
D-Link Corp.	Communications Equipment	3,870,000		5,163,800
Delta Electronics Inc.	Electronic Equipment & Instruments	3,453,255		4,424,642
Elan Microelectronics Corp.	Software	2,555,000		2,295,361
Elite Semiconductor Memory Technology Inc.	Electrical Equipment	759,400		1,465,116
Fubon Financial Holding Co. Ltd.	Diversified Financials	1,092,000		1,045,361
Lite-on Technology Corp.	Computers & Peripherals	4,404,000		4,669,926
Mega Financial Holdings Co. Ltd.	Banks	4,070,503		2,445,899
Micro-Star International Co. Ltd.	Computers & Peripherals	104,000		153,166
Phoenixtec Power Co. Ltd.	Electrical Equipment	1,487,270		1,743,545
President Chain Store Corp.	Food & Drug Retailing	1,276,000		1,954,403
Sunplus Technology Co. Ltd.	Semiconductors & Semiconductor Equipment	3,426,000		6,407,982
Taiwan Cellular Corp.	Wireless Telecommunication Services	5,285,302		4,592,530
Taiwan Glass Industrial Corp.	Building Products	235,000		177,894

TD-11

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	INDUSTRY	SHARES/ RIGHTS/ WARRANTS		VALUE
Long Term Investments (cont.)
Taiwan (cont.)
aTatung Co. Ltd.	Industrial Conglomerates		4,438,000	$	1,124,206
Tsann Kuen Enterprise Co. Ltd.	Household Durables		1,008,000		1,466,722
UNI-President Enterprises Corp.	Food Products		3,218,600		1,322,518
Yuanta Core Pacific Securities Co.	Diversified Financials		3,488,212		2,085,735
					50,661,393
Thailand 2.1%
Delta Electronics (Thailand) Public Co. Ltd.	Electronic Equipment & Instruments		1,295,000		879,185
Hana Microelectronics Co. Ltd., fgn.	Electronic Equipment & Instruments		283,000		892,801
Krung Thai Bank Public Co. Ltd., fgn.	Banks		1,200,000		372,515
National Finance Public Co. Ltd., fgn.	Consumer Finance		1,023,700		431,467
PTT Exploration & Production Public Co. Ltd., fgn.	Oil & Gas		1,004,200		6,792,242
Shin Corporation Public Co. Ltd., fgn.	Wireless Telecommunication Services		260,000		255,915
Siam City Cement Public Co. Ltd., fgn.	Construction Materials		58,000		333,750
Siam Makro Public Co. Ltd., fgn.	Food & Drug Retailing		96,000		111,452
aTelecomasia Corp. Public Co. Ltd., purch. rts.	Diversified Telecommunication Services		344,616		—
Thai Airways International Public Co. Ltd., fgn.	Airlines		401,600		463,706
aThai Military Bank Public Co. Ltd., fgn.	Banks		1,680,000		290,441
Thai Union Frozen Products Ltd., fgn.	Food Products		110,000		88,838
					10,912,312
Turkey 3.4%
Akbank	Banks		497,801,261		2,604,158
Arcelik AS, Br.	Household Durables		1,103,826,400		6,128,003
Migros Turk T.A.S.	Food & Drug Retailing		178,149,000		2,548,608
Tupras-Turkiye Petrol Rafineleri AS	Oil & Gas		781,213,000		6,505,473
					17,786,242
Total Long Term Investments (Cost $375,486,632)					500,166,257
		PRINCIPAL AMOUNT
Short Term Investment (Cost $29,789,752) 5.6%
U.S. Treasury Bill, .845% to .92%, 1/2/04 - 3/25/04		$	29,835,000		29,793,685
Total Investments (Cost $405,276,384) 99.9%					529,959,942
Other Assets, less Liabilities .1%					292,476
Net Assets 100.0%				$	530,252,418

^a Non-income producing.

^b See Note 6 regarding other considerations.

TD-12

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Financial Statements

Statement of Assets and Liabilities

December 31, 2003

Assets:
Investments in securities:
Cost	$	405,276,384
Value		529,959,942
Foreign currency, at value (cost $1,032,821)		1,035,766
Receivables:
Investment securities sold		1,610,393
Capital shares sold		905,555
Dividends and interest		1,117,412
Total assets		534,629,068
Liabilities:
Payables:
Investment securities purchased		1,194,914
Capital shares redeemed		400,623
Affiliates		654,802
Deferred tax liability (Note 1f)		1,922,971
Funds advanced by custodian		4,457
Other liabilities		198,883
Total liabilities		4,376,650
Net assets, at value	$	530,252,418
Net assets consist of:
Undistributed net investment income	$	5,951,933
Net unrealized appreciation (depreciation)		122,749,174
Accumulated net realized gain (loss)		(199,577,235)
Capital shares		601,128,546
Net assets, at value	$	530,252,418
Class 1:
Net assets, at value	$	359,299,298
Shares outstanding		50,348,005
Net asset value and offering price per share	$	7.14
Class 2:
Net assets, at value	$	170,953,120
Shares outstanding		24,101,077
Net asset value and offering price per share	$	7.09

See notes to financial statements.

TD-13

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Financial Statements (continued)

Statement of Operations

for the year ended December 31, 2003

Investment income: (net of foreign taxes and fees of $1,154,374)
Dividends	$	14,244,030
Interest		93,559
Total investment income		14,337,589
Expenses:
Management fees (Note 3)		4,585,327
Administrative fees (Note 3)		525,214
Distribution fees – Class 2 (Note 3)		257,460
Transfer agent fees		2,054
Custodian fees		373,147
Reports to shareholders		148,264
Professional fees		35,822
Trustees’ fees and expenses		3,447
Other		23,250
Total expenses		5,953,985
Net investment income		8,383,604
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments (net of foreign taxes of $468,507) (Note 1f)		19,346,500
Foreign currency transactions		(510,671	)
Net realized gain (loss)		18,835,829
Net unrealized appreciation (depreciation) on:
Investments		143,243,426
Translation of assets and liabilities denominated in foreign currencies		(14,496	)
Deferred taxes (Note 1f)		(1,914,669	)
Net unrealized appreciation (depreciation)		141,314,261
Net realized and unrealized gain (loss)		160,150,090
Net increase (decrease) in net assets resulting from operations	$	168,533,694

See notes to financial statements.

TD-14

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Financial Statements (continued)

Statements of Changes in Net Assets

For the years ended December 31, 2003 and 2002

	2003			2002
Increase (decrease) in net assets:
Operations:
Net investment income	$	8,383,604		$	4,455,928
Net realized gain (loss) from investments and foreign currency transactions		18,835,829			(9,268,738	)
Net unrealized appreciation (depreciation) on investments and translation of assets and liabilities denominated in foreign currencies		141,314,261			6,877,309
Net increase (decrease) in net assets resulting from operations		168,533,694			2,064,499
Distributions to shareholders from:
Net investment income:
Class 1		(3,521,009	)		(3,878,945	)
Class 2		(1,068,523	)		(1,149,535	)
Total distributions to shareholders		(4,589,532	)		(5,028,480	)
Capital share transactions: (Note 2)
Class 1		18,051,739			(12,115,583	)
Class 2		41,851,167			17,115,195
Total capital share transactions		59,902,906			4,999,612
Net increase (decrease) in net assets		223,847,068			2,035,631
Net assets:
Beginning of year		306,405,350			304,369,719
End of year	$	530,252,418		$	306,405,350
Undistributed net investment income included in net assets:
End of year	$	5,951,933		$	3,131,753

See notes to financial statements.

TD-15

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Notes to Financial Statements

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (the Trust) is registered under the Investment Company Act of 1940 as an open-end investment company, consisting of twenty-two separate series (the Funds). The Templeton Developing Markets Securities Fund (the Fund) included in this report is diversified. Shares of the Fund are sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. The Fund’s investment objective is capital growth.

The following summarizes the Fund’s significant accounting policies.

a. Security Valuation

Securities listed or traded on a recognized national exchange or NASDAQ are valued at the last reported sales price. Over-the-counter securities and listed securities for which no sale is reported are valued within the range of the latest quoted bid and asked prices. Foreign securities are valued at the close of trading of the foreign exchange or the NYSE, whichever is earlier. If events occur that materially affect the values of securities after the prices or foreign exchange rates are determined, or if market quotations are not readily available, the securities will be valued at fair value as determined following procedures approved by the Board of Trustees.

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. Purchases and sales of securities and income items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.

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.

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. Foreign Currency Contracts

When the Fund purchases or sells foreign securities it may enter into foreign exchange contracts to minimize foreign exchange risk from the trade date to the settlement date of the transactions. A foreign exchange contract is an agreement between two parties to exchange different currencies at an agreed upon exchange rate on a specified date. Realized and unrealized gains and losses are included in the Statement of Operations.

The risks of these contracts include movement in the values of the foreign currencies relative to the U.S. dollar and the possible inability of the counterparties to fulfill their obligations under the contracts.

d. Income Taxes

No provision has been made for income taxes because the Fund’s policy is to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable income.

TD-16

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Notes to Financial Statements (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

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. Certain income from foreign securities is recorded as soon as information is available to the Fund. Interest income and estimated expenses are accrued daily. Dividend income and distributions to shareholders are recorded on the ex-dividend date.

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. Other expenses are charged to each fund on a specific identification basis.

Realized and unrealized gains and losses and net investment income, other than class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class.

f. Deferred Taxes

The Fund is subject to a tax imposed on net realized gains of securities of certain foreign countries. The Fund records an estimated deferred tax liability for net unrealized gains on these securities as reflected in the accompanying financial statements.

g. Accounting Estimates

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

h. Guarantees and Indemnifications

Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust 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. However, based on experience, the Trust expects the risk of loss to be remote.

TD-17

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Notes to Financial Statements (continued)

2. SHARES OF BENEFICIAL INTEREST

The Fund offers two classes of shares: Class 1 and Class 2. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class, and its exchange privilege.

At December 31, 2003, there were an unlimited number of shares authorized ($.01 par value). Transactions in the Fund’s shares were as follows:

	Year Ended December 31,
	2003					2002
Class 1 Shares:	Shares		Amount			Shares		Amount
Shares sold	10,436,573		$	60,506,599		20,100,040		$	96,134,388
Shares issued in reinvestment of distributions	652,039			3,521,009		751,734			3,878,945
Shares redeemed	(8,573,395	)		(45,975,869	)	(23,322,593	)		(112,128,916	)
Net increase (decrease)	2,515,217		$	18,051,739		(2,470,819	)	$	(12,115,583	)
Class 2 Shares:
Shares sold	30,181,277		$	163,641,071		65,809,894		$	323,925,644
Shares issued in reinvestment of distributions	198,398			1,068,523		223,645			1,149,535
Shares redeemed	(23,541,038	)		(122,858,427	)	(62,244,002	)		(307,959,984	)
Net increase (decrease)	6,838,637		$	41,851,167		3,789,537		$	17,115,195

3. TRANSACTIONS WITH AFFILIATES

Certain officers and trustees of the Fund are also officers and/or directors of the following entities:

Entity	Affiliation
Franklin Templeton Services LLC (FT Services)	Administrative manager
Templeton Asset Management Ltd. (TAML)	Investment manager
Franklin/Templeton Distributors Inc. (Distributors)	Principal underwriter
Franklin/Templeton Investor Services LLC (Investor Services)	Transfer agent

The Fund pays an investment management fee to TAML of 1.25% per year of the average daily net assets of the fund.

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

Annualized Fee Rate	Net Assets
.15%	First $200 million
.135%	Over $200 million, up to and including $700 million
.10%	Over $700 million, up to and including $1.2 billion

Fees are further reduced on net assets over $1.2 billion.

The Fund reimburses Distributors up to .25% per year of its average daily net assets of Class 2, for costs incurred in marketing the Fund’s shares.

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

TD-18

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Notes to Financial Statements (continued)

4. INCOME TAXES

At December 31, 2003, the Fund had tax basis capital losses of $197,860,620, which may be carried over to offset future capital gains. Such losses expire as follows:

Capital loss carryovers expiring in:
2006	$	19,633,396
2007		91,657,992
2009		62,323,035
2010		24,246,197
	$	197,860,620

At December 31, 2003, the Fund had deferred currency losses occurring subsequent to October 31, 2003 of $115,389. For tax purposes, such losses will be reflected in the year ending December 31, 2004.

Net investment income differs for financial statement and tax purposes primarily due to differing treatments of foreign currency transactions and passive foreign investment company shares.

Net realized gains and losses differ for financial statement and tax purposes primarily due to differing treatments of wash sales, foreign currency transactions, and passive foreign investment company shares.

The tax character of distributions paid during the years ended December 31, 2003 and 2002, was as follows:

	2003		2002
Distributions paid from:
Ordinary income	$	4,589,532	$	5,028,480
Long term capital gain		—		—
	$	4,589,532	$	5,028,480

At December 31, 2003, the cost of investments, net unrealized appreciation (depreciation), undistributed ordinary income and undistributed long term capital gains for income tax purposes were as follows:

Cost of investments	$	411,565,787
Unrealized appreciation	$	128,486,746
Unrealized depreciation		(10,092,591	)
Net unrealized appreciation (depreciation)	$	118,394,155
Undistributed ordinary income	$	10,640,108
Undistributed long term capital gains		—
Distributable earnings	$	10,640,108

5. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities) for the year ended December 31, 2003 aggregated $202,924,854 and $165,313,499, respectively.

6. OTHER CONSIDERATIONS

TAML, as the Fund’s Manager, may serve as a member on the board of directors of certain companies in which the Fund invests and/or may represent the Fund in certain corporate negotiations. Currently, the Manager serves in one or more of these capacities for Lukoil Holdings. As a result of this involvement, the Manager may be in possession of certain material non-public information which, pursuant to the Fund’s policies and the requirements of the federal securities laws, could prevent the Fund from trading in the securities of such companies for limited or extended periods of time.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Notes to Financial Statements (continued)

7. REGULATORY MATTERS

On February 4, 2004, the Securities Division of the Office of the Secretary of the Commonwealth of Massachusetts filed an administrative complaint against Franklin Resources, Inc. and certain of its subsidiaries (the “Company”), alleging violations of the Massachusetts Uniform Securities Act. The complaint arises from activity that occurred in 2001 during which time an officer of a Company subsidiary was negotiating an agreement with an investor relating to investments in a mutual fund and a hedge fund.

The Company, in addition to other entities within Franklin Templeton Investments, has been named in shareholder class actions related to the matter described above. The Company believes that the claims made in the lawsuit are without merit and it intends to defend vigorously against the allegations. The Company and the Fund may be named in similar civil actions related to the matter described above.

In addition, as part of ongoing investigations by the U.S. Securities and Exchange Commission (the “SEC”), the U.S. Attorney for the Northern District of California, the New York Attorney General, the California Attorney General, the U.S. Attorney for the District of Massachusetts, the Florida Department of Financial Services and the Commissioner of Securities and the Attorney General of the State of West Virginia, relating to certain practices in the mutual fund industry, including late trading, market timing and sales compensation arrangements, the Company and its subsidiaries, as well as certain current or former executives and employees of the Company, have received requests for information and/or subpoenas to testify or produce documents. The Company and its current employees are providing documents and information in response to these requests and subpoenas. In addition, the Company has responded to requests for similar kinds of information from regulatory authorities in some of the foreign countries where the Company conducts its global asset management business.

The Staff of the SEC has informed the Company that it intends to recommend that the Commission authorize an action against an affiliate of the Fund’s adviser and a senior executive officer relating to the frequent trading issues that are the subject of the SEC’s investigation. These issues were previously disclosed as being under investigation by government authorities and the subject of an internal inquiry by the Company in its Annual Report on Form 10-K and on its public website. The Company currently is in discussions with the SEC Staff in an effort to resolve the issues raised in their investigation. Such discussions are preliminary and the Fund’s management has been advised that the Company cannot predict the likelihood of whether those discussions will result in a settlement and, if so, the terms of such settlement. The impact, if any, of these matters on the Fund is uncertain at this time. If the Company finds that it bears responsibility for any unlawful or improper conduct, it has committed to making the Fund or its shareholders whole, as appropriate.

TD-20

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Independent Auditors’ Report

To the Board of Trustees and Shareholders of

Franklin Templeton Variable Insurance Products Trust

In our opinion, the accompanying statement of assets and liabilities, including the statement of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Templeton Developing Markets Securities Fund (the Fund) (one of the funds constituting the Franklin Templeton Variable Insurance Products Trust) at December 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

February 5, 2004, except for Note 7 as to which the date is February 12, 2004

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Tax Designation (unaudited)

At December 31, 2003, more than 50% of the Fund’s total assets were invested in securities of foreign issuers. In most instances, foreign taxes were withheld from dividends paid to the Fund on these investments. The Fund elects to treat foreign taxes paid under Section 853 of the Internal Revenue Code. This election will allow shareholders of record in June, 2004, 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 foreign tax information will be disclosed in the June 30, 2004 semi-annual report of the Fund.

TD-22

TEMPLETON FOREIGN SECURITIES FUND

Fund Goal and Primary Investments: Templeton Foreign Securities Fund seeks long-term capital growth. The Fund invests primarily in investments of issuers located outside the U.S., including those in emerging markets.

This annual report for Templeton Foreign Securities Fund covers the fiscal year ended December 31, 2003.

Performance Overview

You can find the Fund’s one-year total return in the Performance Summary following this report. The Fund underperformed its benchmark, the Morgan Stanley Capital International Europe Australasia Far East (MSCI EAFE) Index, which returned 39.17% for the year under review.¹

Economic and Market Overview

In spring 2003, the end of major conflict in Iraq coincided with the start of a global equity market rally that produced the strongest annual total returns since 1986. The rally’s main catalyst was an improving global economy, underpinned by expansionary fiscal and monetary policies, corporate restructuring and consolidation, and more than two years of declining equity valuations that created potential opportunities in Asia, Europe and the Americas.

In many countries, including the U.S., China and Japan, gross domestic product (GDP) growth accelerated in 2003, particularly in the second half of the year. In the U.S., GDP grew at annualized rates of 3.1% and 8.2% in the second and third quarters. Over the same periods, consumer spending rose at annualized rates of 3.3% and 6.9% spurred largely by tax cuts, car-buying incentives and mortgage refinancing, as interest rates remained at the lowest level in more than four decades. Industrial production increased in the U.S., China, Japan and South Korea in the second half of the year, as did consumer sentiment in the U.S., U.K., Germany and Sweden, and business sentiment in the U.S., Australia, Germany and Japan. In short, a synchronized global economic recovery gained momentum in the second half of 2003.

Further evidence of this recovery was the continued rise in the prices of base metals and other commodities. This was due, in part, to greater demand in China. On December 31, 2003, contracts for aluminum and other metals such silver, gold, copper and zinc were anywhere from

1. Source: Standard & Poor’s Micropal. One cannot invest directly in an index, nor is an index representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

TF-1

19% to 50% higher than 12 months before.² While gold crossed the $400-an-ounce threshold for the first time in more than seven years, such agricultural commodities as cotton and soybeans gained approximately 40%.² Despite rising commodities prices, global inflation remained subdued throughout the year.

In 2003, the value of the U.S. dollar fell against most major currencies, including a 17% decline versus the euro.³ While the decline magnified top-line and earnings-per-share growth in the U.S., it had the opposite effect in Europe. The dollar decline also benefited U.S. investors in international equities because it increased the returns of investments denominated in currencies that appreciated against the dollar, such as the euro. Although the dollar’s decline significantly affected equity market returns, it was not the only reason for the past year’s gains. Equity markets in many countries, including emerging market countries, produced stronger gains than the U.S. equity market, even in their local currencies. These countries benefited from the improving economic and financial market conditions in 2003.

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 12 months under review, the Fund’s overweighted position in the industrials sector relative to the MSCI EAFE Index benefited performance as that sector outperformed the overall index, and the Fund’s industrials sector holdings posted better overall returns than the index’s overall industrials sector return. The Fund’s overweighted utilities sector exposure also helped performance because our utilities stocks outperformed the index’s overall utilities return. In addition, the Fund’s overweighted position in materials aided performance, as the materials sector outperformed the overall MSCI EAFE Index for the year under review.

2. Source: Reuters, Commodity Research Bureau Index; London Metal Exchange.

3. Source: European Central Bank.

TF-2

Despite the Fund’s double-digit return, some sector positioning dampened performance. Detractors from Fund performance during the year included our underweighted position in the financials sector, and our financials sector holdings’ underperformance relative to the index. The underperformance of the Fund’s energy and consumer staples holdings also hindered relative performance during the reporting period. In addition, the Fund held more than 10% of its total net assets in short-term investments and other net assets (cash) during the period, which constrained performance.

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

This discussion reflects our analysis, opinions and portfolio holdings as of December 31, 2003, 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 advisor makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

Top 10 Holdings

Templeton Foreign Securities Fund 12/31/03

Company Sector/Industry, Country	% of Total Net Assets
Samsung Electronics Co. Ltd.	1.8%
Semiconductors & Semiconductor Equipment, South Korea
Denso Corp.	1.8%
Auto Components, Japan
Nippon Telegraph & Telephone Corp.	1.8%
Diversified Telecommunication Services, Japan
Sony Corp.	1.7%
Household Durables, Japan
Aventis SA	1.6%
Pharmaceuticals, France
Koninklijke Philips Electronics NV	1.5%
Household Durables, Netherlands
Cheung Kong Holdings Ltd.	1.5%
Real Estate, Hong Kong
Volkswagen AG, ord. & pfd.	1.4%
Automobiles, Germany
Eni SpA	1.4%
Oil & Gas, Italy
Nordea AB, FDR	1.4%
Banks, Sweden

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

TF-3

PERFORMANCE SUMMARYASOF 12/31/03

Total return of Class 2 shares represents the average annual change in value, assuming reinvestment of dividends and capital gains. Average returns smooth out variations in returns, which can be significant; they are not the same as year-by-year results.

Templeton Foreign Securities Fund – Class 2*

Periods ended 12/31/03

	1-Year	5-Year	10-Year
Average Annual Total Return	+32.21%	+1.70%	+6.60%

*Performance prior to the 5/1/00 merger reflects the historical performance of Templeton International Fund. Additionally, because Class 2 shares were not offered until 5/1/97, standardized Class 2 Fund performance for prior periods represents the historical results of Class 1 shares. For periods beginning on 5/1/97, Class 2’s results reflect an additional 12b-1 fee expense, which also affects future performance. Since 5/1/97 (effective date), the average annual total return of Class 2 shares was +4.00%.

Ongoing market volatility can significantly affect short-term performance; recent returns may differ.

Total Return Index Comparison

for Hypothetical $10,000 Investment (1/1/94–12/31/03)

The graph compares the performance of Templeton Foreign Securities Fund – Class 2* and the MSCI EAFE Index. One cannot invest directly in an index, nor is an index representative of the Fund’s portfolio. Please see Important Notes to Performance Information preceding the Fund Summaries.

**Source: Standard & Poor’s Micropal. Please see Index Descriptions following the Fund Summaries.

Templeton Foreign Securities Fund – Class 2

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.

Since markets can go down as well as up, investment return and the value of your principal will fluctuate with market conditions, and you may have a gain or loss when you sell your shares.

TF-4

Past performance does not guarantee future results.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON FOREIGN SECURITIES FUND

Financial Highlights^a

	Class 1
	Year Ended December 31,
	2003			2002			2001			2000			1999
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	9.51		$	11.85		$	18.78		$	22.25		$	20.69
Income from investment operations:
Net investment incomeb		.19			.22			.23			.40			.33
Net realized and unrealized gains (losses)		2.87			(2.37	)		(5.23	)		(.95	)		3.78
Total from investment operations		3.06			(2.15	)		(5.00	)		(.55	)		4.11
Less distributions from:
Net investment income		(.20	)		(.19	)		(.26	)		(.43	)		(.57	)
Net realized gains		—			—			(1.67	)		(2.49	)		(1.98	)
Total distributions		(.20	)		(.19	)		(1.93	)		(2.92	)		(2.55	)
Net asset value, end of year	$	12.37		$	9.51		$	11.85		$	18.78		$	22.25
Total returnc		32.55%			(18.40)%			(15.75)%			(2.19)%			23.61%
Ratios/supplemental data
Net assets, end of year (000’s)	$	472,665		$	397,420		$	565,220		$	776,495		$	1,056,798
Ratios to average net assets:
Expenses		.87%			.88%			.90%			.87%			.85%
Net investment income		1.81%			1.97%			1.59%			2.08%			1.69%
Portfolio turnover rate		18.01%			28.12%			20.00%			32.81%			30.04%

^a Financial highlights presented reflect historical financial information from Templeton Variable Products Series Fund (TVP) - Templeton International Securities Fund as a result of a merger May 1, 2000.

^b Based on average daily shares outstanding.

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

TF-5

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON FOREIGN SECURITIES FUND

Financial Highlights^a(continued)

	Class 2
	Year Ended December 31,
	2003			2002			2001			2000			1999
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	9.42		$	11.74		$	18.67		$	22.13		$	20.61
Income from investment operations:
Net investment incomeb		.15			.17			.18			.31			.25
Net realized and unrealized gains (losses)		2.85			(2.32	)		(5.21	)		(.90	)		3.78
Total from investment operations		3.00			(2.15	)		(5.03	)		(.59	)		4.03
Less distributions from:
Net investment income		(.18	)		(.17	)		(.23	)		(.38	)		(.53	)
Net realized gains		—			—			(1.67	)		(2.49	)		(1.98	)
Total distributions		(.18	)		(.17	)		(1.90	)		(2.87	)		(2.51	)
Net asset value, end of year	$	12.24		$	9.42		$	11.74		$	18.67		$	22.13
Total returnc		32.21%			(18.56)%			(15.99)%			(2.38)%			23.23%
Ratios/supplemental data
Net assets, end of year (000’s)	$	653,594		$	299,760		$	225,505		$	187,115		$	101,365
Ratios to average net assets:
Expenses		1.12%			1.13%			1.15%			1.12%			1.10%
Net investment income		1.56%			1.72%			1.32%			1.66%			1.26%
Portfolio turnover rate		18.01%			28.12%			20.00%			32.81%			30.04%

^a Financial highlights presented reflect historical financial information from Templeton Variable Products Series Fund (TVP) - Templeton International Fund a result of a merger May 1, 2000.

^b Based on average daily shares outstanding.

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

See notes to financial statements.

TF-6

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON FOREIGN SECURITIES FUND

Statement of Investments, December 31, 2003

	COUNTRY	SHARES	VALUE
Common Stocks 82.4%
Aerospace & Defense .9%
BAE Systems PLC	United Kingdom	3,544,411	$	10,675,555
Air Freight & Couriers 1.2%
Deutsche Post AG	Germany	677,613		13,948,845
Airlines .7%
Qantas Airways Ltd.	Australia	3,060,000		7,585,272
Auto Components 4.2%
Autoliv Inc., SDR	Sweden	393,611		14,934,166
Denso Corp.	Japan	1,044,800		20,570,383
Michelin SA, B	France	266,820		12,243,834
				47,748,383
Automobiles .9%
Volkswagen AG	Germany	181,815		10,170,907
Banks 6.2%
Abbey National PLC	United Kingdom	628,800		5,977,208
DBS Group Holdings Ltd.	Singapore	662,000		5,730,083
DBS Group Holdings Ltd., 144A	Singapore	650,000		5,626,215
HSBC Holdings PLC	Hong Kong	147,855		2,332,969
Kookmin Bank, ADR	South Korea	314,560		11,902,950
Lloyds TSB Group PLC	United Kingdom	1,387,500		11,127,620
Nordea AB, FDR	Sweden	2,135,083		15,943,102
UBS AG	Switzerland	161,000		11,026,238
				69,666,385
Biotechnology .4%
aCellTech Group PLC	United Kingdom	630,000		4,263,082
Chemicals 2.9%
Akzo Nobel NV	Netherlands	329,003		12,698,652
BASF AG	Germany	184,669		10,423,736
Bayer AG, Br.	Germany	333,400		9,840,515
				32,962,903
Commercial Services & Supplies 1.6%
Adecco SA	Switzerland	86,100		5,534,627
Securitas AB, B	Sweden	809,980		10,919,358
Societe BIC SA	France	23,250		1,074,521
				17,528,506
Computers & Peripherals .8%
NEC Corp.	Japan	1,058,000		7,789,139
Seiko Epson Corp., 144A	Japan	14,800		690,491
				8,479,630
Construction Materials .7%
Cemex SA, ADR	Mexico	315,900		8,276,580
Diversified Financials 3.8%
Housing Development Finance Corp. Ltd.	India	41,040		579,597
ING Groep NV	Netherlands	450,610		10,509,308
Nomura Holdings Inc.	Japan	525,730		8,952,666

TF-7

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON FOREIGN SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	COUNTRY	SHARES	VALUE
Common Stocks (cont.)
Diversified Financials (cont.)
Rodamco Europe NV	Netherlands	164,000	$	9,550,807
Swire Pacific Ltd., B	Hong Kong	12,648,627		13,359,620
				42,951,998
Diversified Telecommunication Services 6.8%
BCE Inc.	Canada	410,160		9,172,857
Chunghwa Telecom Co. Ltd., ADR	Taiwan	472,300		6,848,350
KT Corp., ADR	South Korea	420,880		8,026,182
Nippon Telegraph & Telephone Corp.	Japan	4,236		20,434,935
Telecom Corp. of New Zealand Ltd.	New Zealand	2,964,626		10,452,325
Telefonica SA, ADR	Spain	247,113		10,919,923
Telefonos de Mexico SA de CV (Telmex), L, ADR	Mexico	333,129		11,003,251
				76,857,823
Electric Utilities 3.7%
E. On AG	Germany	142,653		9,344,059
Endesa SA	Spain	547,398		10,529,540
Hong Kong Electric Holdings Ltd.	Hong Kong	1,800,000		7,117,832
Iberdrola SA, Br.	Spain	528,222		10,440,513
Korea Electric Power Corp.	South Korea	250,000		4,490,139
				41,922,083
Electrical Equipment .8%
Kidde PLC	United Kingdom	2,724,071		5,193,490
Vestas Wind Systems AS	Denmark	261,605		4,254,353
				9,447,843
Electronic Equipment & Instruments 1.2%
Hitachi Ltd.	Japan	2,213,867		13,344,761
Energy Equipment & Services .6%
IHC Caland NV	Netherlands	115,874		6,284,791
Food & Drug Retailing .9%
J Sainsbury PLC	United Kingdom	1,830,860		10,250,469
Food Products 2.6%
Cadbury Schweppes PLC	United Kingdom	1,300,000		9,547,359
Nestle SA	Switzerland	51,790		12,939,648
Unilever PLC	United Kingdom	728,934		6,795,302
				29,282,309
Health Care Equipment & Supplies 1.1%
Amersham PLC	United Kingdom	918,222		12,697,875
Health Care Providers & Services .7%
Mayne Group Ltd.	Australia	3,390,208		8,327,176
Household Durables 3.2%
Koninklijke Philips Electronics NV	Netherlands	576,739		16,840,953
Sony Corp.	Japan	560,854		19,415,586
				36,256,539

TF-8

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON FOREIGN SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	COUNTRY	SHARES	VALUE
Common Stocks (cont.)
Industrial Conglomerates 2.2%
Hutchison Whampoa Ltd.	Hong Kong	1,962,000	$	14,468,095
Smiths Group PLC	United Kingdom	837,500		9,910,089
				24,378,184
Insurance 7.2%
Ace Ltd.	Bermuda	337,803		13,991,800
AXA SA	France	479,792		10,270,018
AXA SA, 144A	France	40,480		866,480
aPICC Property & Casualty Co. Ltd., 144A	China	330,000		147,709
Sampo OYJ, A	Finland	1,292,550		13,368,958
Sompo Japan Insurance Inc.	Japan	1,694,000		13,925,670
Swiss Reinsurance Co.	Switzerland	235,318		15,887,652
XL Capital Ltd., A	Bermuda	162,428		12,596,291
				81,054,578
IT Consulting & Services .5%
Satyam Computers Services Ltd.	India	728,666		5,866,859
Machinery 1.0%
Volvo AB, B	Sweden	369,264		11,290,437
Media 2.2%
Reed Elsevier NV	Netherlands	877,400		10,901,097
Reuters Group PLC	United Kingdom	1,842,300		7,750,318
Wolters Kluwer NV	Netherlands	380,280		5,947,871
				24,599,286
Metals & Mining 3.0%
Alcan Inc.	Canada	55,334		2,652,235
Barrick Gold Corp.	Canada	330,494		7,496,056
BHP Billiton Ltd.	Australia	1,338,050		12,289,377
POSCO, ADR	South Korea	331,100		11,247,467
				33,685,135
Multi-Utilities 1.1%
National Grid Transco PLC	United Kingdom	736,100		5,274,235
Suez SA	France	354,000		7,113,042
				12,387,277
Oil & Gas 5.9%
BP PLC	United Kingdom	1,647,720		13,362,044
Eni SpA	Italy	845,840		15,960,856
Repsol YPF SA	Spain	723,515		14,108,907
Shell Transport & Trading Co. PLC	United Kingdom	1,679,653		12,493,436
Total SA, B	France	54,077		10,054,175
				65,979,418
Paper & Forest Products 2.1%
Stora Enso OYJ, R	Finland	671,830		9,010,270
UPM-Kymmene Corp.	Finland	764,284		14,576,153
				23,586,423

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON FOREIGN SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	COUNTRY	SHARES		VALUE
Common Stocks (cont.)
Pharmaceuticals 4.4%
Aventis SA	France	266,548		$	17,617,451
GlaxoSmithKline PLC	United Kingdom	514,900			11,798,428
Ono Pharmaceutical Co. Ltd.	Japan	299,000			11,243,539
aShire Pharmaceuticals Group PLC	United Kingdom	928,000			9,012,370
					49,671,788
Real Estate 1.5%
Cheung Kong Holdings Ltd.	Hong Kong	2,086,137			16,592,684
Road & Rail .5%
East Japan Railway Co.	Japan	1,100			5,183,354
Semiconductors & Semiconductor Equipment 2.4%
ASM Pacific Technology Ltd.	Hong Kong	252,500			1,105,802
Samsung Electronics Co. Ltd.	South Korea	54,850			20,761,519
aTaiwan Semiconductor Manufacturing Co.	Taiwan	2,494,800			4,666,268
					26,533,589
Software 1.7%
aCheck Point Software Technologies Ltd.	Israel	268,550			4,517,011
Nintendo Co. Ltd.	Japan	163,000			15,209,480
					19,726,491
Wireless Telecommunication Services .8%
China Mobile (Hong Kong) Ltd., fgn.	China	2,932,000			9,007,187
Total Common Stocks (Cost $763,745,208)					928,472,405
Preferred Stocks 1.1%
Cia Vale do Rio Doce, A, ADR, pfd.	Brazil	132,792			6,840,116
Volkswagen AG, pfd.	Germany	160,254			5,841,752
Total Preferred Stocks (Cost $8,049,893)					12,681,868
		PRINCIPAL AMOUNTSc
Convertible Bonds .1%
Axa SA, cvt., zero cpn., 12/21/04	France	29,987	EUR		604,808
Axa SA, cvt., 144A, zero cpn., 12/21/04	France	2,530	EUR		51,028
Total Convertible Bonds (Cost $485,675)					655,836
Total Long Term Investments (Cost $772,280,776)					941,810,109
		SHARES
Short Term Investments (Cost $176,523,500) 15.7%
bFranklin Institutional Fiduciary Trust Money Market Portfolio	United States	176,523,500			176,523,500
Total Investments (Cost $948,804,276) 99.3%					1,118,333,609
Other Assets, less Liabilities .7%					7,925,852
Net Assets 100.0%				$	1,126,259,461

Currency Abbreviations:

EUR - Euro

^a Non-income producing.

^b See Note 6 regarding investments in the Franklin Institutional Fiduciary Trust Money Market Portfolio.

^c The principal amount is stated in US dollars unless otherwise indicated.

See notes to financial statements.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

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Financial Statements

Statement of Assets and Liabilities

December 31, 2003

Assets:
Investments in securities:
Cost	$	948,804,276
Value		1,118,333,609
Cash		77,965
Foreign currency, at value (cost $7,986,229)		8,104,073
Receivables:
Capital shares sold		1,243,792
Dividends and interest		1,653,004
Total assets		1,129,412,443
Liabilities:
Payables:
Investment securities purchased		455,400
Capital shares redeemed		871,002
Affiliates		936,118
Deferred tax liability (Note 1f)		624,409
Other liabilities		266,053
Total liabilities		3,152,982
Net assets, at value	$	1,126,259,461
Net assets consist of:
Undistributed net investment income	$	13,972,294
Net unrealized appreciation (depreciation)		169,136,446
Accumulated net realized gain (loss)		(146,674,699	)
Capital shares		1,089,825,420
Net assets, at value	$	1,126,259,461
Class 1:
Net assets, at value	$	472,665,174
Shares outstanding		38,198,511
Net asset value and offering price per share	$	12.37
Class 2:
Net assets, at value	$	653,594,287
Shares outstanding		53,391,172
Net asset value and offering price per share	$	12.24

See notes to financial statements.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON FOREIGN SECURITIES FUND

Financial Statements (continued)

Statement of Operations

for the year ended December 31, 2003

Investment income:
(net of foreign taxes and fees of $2,708,201)
Dividends	$	22,240,216
Interest		11,106
Total investment income		22,251,322
Expenses:
Management fees (Note 3)		5,421,046
Administrative fees (Note 3)		1,100,974
Distribution fees - Class 2 (Note 3)		1,051,609
Transfer agent fees		6,838
Other		725,130
Total expenses		8,305,597
Net investment income		13,945,725
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		(31,135,006	)
Foreign currency transactions		43,941
Net realized gain (loss)		(31,091,065	)
Net unrealized appreciation (depreciation) on:
Investments		272,546,674
Translation of assets and liabilities denominated in foreign currencies		205,168
Deferred taxes (Note 1f)		(624,409	)
Net unrealized appreciation (depreciation)		272,127,433
Net realized and unrealized gain (loss)		241,036,368
Net increase (decrease) in net assets resulting from operations	$	254,982,093

See notes to financial statements.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON FOREIGN SECURITIES FUND

Financial Statements (continued)

Statements of Changes in Net Assets

for the years ended December 31, 2003 and 2002

	2003			2002
Increase (decrease) in net assets:
Operations:
Net investment income	$	13,945,725		$	14,225,614
Net realized gain (loss) from investments and foreign currency transactions		(31,091,065	)		(89,762,160	)
Net unrealized appreciation (depreciation) on investments and translation of assets and liabilities denominated in foreign currencies, and deferred taxes		272,127,433			(61,179,717	)
Net increase (decrease) in net assets resulting from operations		254,982,093			(136,716,263	)
Distributions to shareholders from:
Net investment income:
Class 1		(7,698,069	)		(8,763,684	)
Class 2		(6,848,227	)		(4,308,628	)
Total distributions to shareholders		(14,546,296	)		(13,072,312	)
Capital share transactions: (Note 2)
Class 1		(35,694,170	)		(64,156,384	)
Class 2		224,338,382			120,399,514
Total capital share transactions		188,644,212			56,243,130
Net increase (decrease) in net assets		429,080,009			(93,545,445	)
Net assets:
Beginning of year		697,179,452			790,724,897
End of year	$	1,126,259,461		$	697,179,452
Undistributed net investment income included in net assets:
End of year	$	13,972,294		$	14,477,229

See notes to financial statements.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON FOREIGN SECURITIES FUND

Notes to Financial Statements

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (the Trust) is registered under the Investment Company Act of 1940 as an open-end investment company consisting of twenty-two separate series (the Funds). Templeton Foreign Securities Fund (the Fund) included in this report is diversified. Shares of the Fund are sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. The Fund’s investment objective is capital growth.

The following summarizes the Fund’s significant accounting policies.

a. Security Valuation

Securities listed or traded on a recognized national exchange or NASDAQ are valued at the last reported sales price. Over-the-counter securities and listed securities for which no sale is reported are valued within the range of the latest quoted bid and asked prices. Foreign securities are valued at the close of trading of the foreign exchange or the NYSE, whichever is earlier. If events occur that materially affect the values of securities after the prices or foreign exchange rates are determined, or if market quotations are not readily available, the securities will be valued at fair value as determined following procedures approved by the Board of Trustees.

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. Purchases and sales of securities and income items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.

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.

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. Foreign Currency Contracts

When the Fund purchases or sells foreign securities it may enter into foreign exchange contracts to minimize foreign exchange risk from the trade date to the settlement date of the transactions. A foreign exchange contract is an agreement between two parties to exchange different currencies at an agreed upon exchange rate on a specified date. Realized and unrealized gains and losses are included in the Statement of Operations.

The risks of these contracts include movement in the values of the foreign currencies relative to the U.S. dollar and the possible inability of the counterparties to fulfill their obligations under the contracts.

d. Income Taxes

No provision has been made for income taxes because the Fund’s policy is to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable income.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON FOREIGN SECURITIES FUND

Notes to Financial Statements (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

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. Certain income from foreign securities is recorded as soon as information is available to the Fund. Interest income and estimated expenses are accrued daily. Dividend income and distributions to shareholders are recorded on the ex-dividend date.

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. Other expenses are charged to each fund on a specific identification basis.

Realized and unrealized gains and losses and net investment income, other than class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class.

f. Deferred Taxes

The Fund is subject to a tax imposed on net realized gains of securities of certain foreign countries. The Fund records an estimated deferred tax liability for net unrealized gains on these securities as reflected in the accompanying financial statements.

g. Accounting Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expense 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 against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust 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. However, based on experience, the Trust expects the risk of loss to be remote.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON FOREIGN SECURITIES FUND

Notes to Financial Statements (continued)

2. SHARES OF BENEFICIAL INTEREST

The Fund offers two classes of shares: Class 1 and Class 2. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

At December 31, 2003, there were an unlimited number of shares authorized ($.01 par value). Transactions in the Fund’s shares were as follows:

	Year Ended December 31,
	2003					2002
Class 1 Shares:	Shares		Amount			Shares		Amount
Shares sold	4,070,068		$	41,441,600		16,717,042		$	179,100,108
Shares issued on mergera	—			—		1,133,785			13,775,492
Shares issued in reinvestment of distributions	745,937			7,698,069		754,190			8,763,684
Shares redeemed	(8,386,415	)		(84,833,839	)	(24,542,240	)		(265,795,668	)
Net increase (decrease)	(3,570,410	)	$	(35,694,170	)	(5,937,223	)	$	(64,156,384	)
Class 2 Shares:
Shares sold	77,265,095		$	769,052,246		160,323,831		$	1,703,285,592
Shares issued on mergera	—			—		1,702,025			20,475,362
Shares issued in reinvestment of distributions	669,785			6,848,227		374,013			4,308,628
Shares redeemed	(56,376,439	)		(551,562,091	)	(149,780,718	)		(1,607,670,068	)
Net increase (decrease)	21,558,441		$	224,338,382		12,619,151		$	120,399,514

^a On May 1, 2002, the Fund acquired the net assets of Templeton International Smaller Companies Fund in a taxable exchange pursuant to a plan of reorganization approved by the Templeton International Smaller Companies Fund shareholders.

3. TRANSACTIONS WITH AFFILIATES

Certain officers and trustees of the Fund are also officers and/or directors of the following entities:

Entity	Affiliation
Franklin Templeton Services LLC (FT Services)	Administrative manager
Templeton Investment Counsel LLC (TIC)	Investment manager
Franklin/Templeton Distributors Inc. (Distributors)	Principal underwriter
Franklin/Templeton Investor Services LLC (Investor Services)	Transfer agent

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
.75%	First $200 million
.675%	Over $200 million, up to and including $1.3 billion
.60%	Over $1.3 billion

The Fund pays a business management fees to FT Services based on the average daily net assets of the Fund as follows:

Annualized Fee Rate	Net Assets
.15%	First $200 million
.135%	Over $200 million, up to and including $700 million
.10%	Over $700 million, up to and including $1.2 billion

Fees are further reduced on net assets over $1.2 billion.

The Fund reimburses Distributors up to .25% per year of its average daily net assets of Class 2, for costs incurred in marketing the Fund’s shares.

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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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON FOREIGN SECURITIES FUND

Notes to Financial Statements (continued)

4. INCOME TAXES

At December 31, 2003, the Fund had tax basis capital losses of $146,623,002 which may be carried over to offset future capital gains. Such losses expire as follows:

Capital loss carryovers expiring in:
2009	$	25,468,205
2010		54,671,097
2011		66,483,700
	$	146,623,002

At December 31, 2003, the Fund has deferred currency losses occurring subsequent to October 31, 2003 of $51,695. For tax purposes, such losses will be reflected in the year ending December 31, 2004.

The tax character of distributions paid during the years ended December 31, 2003 and 2002, was as follows:

	2003		2002
Distributions paid from:
Ordinary income	$	14,546,296	$	13,072,312
Long term capital gains		—		—
	$	14,546,296	$	13,072,312

At December 31, 2003, the cost of investments, net unrealized appreciation (depreciation), undistributed ordinary income and undistributed long term capital gains for income tax purposes were as follows:

Cost of investments	$	949,111,026
Unrealized appreciation	$	220,505,970
Unrealized depreciation		(51,283,387	)
Net unrealized appreciation (depreciation)	$	169,222,583
Undistributed ordinary income	$	14,279,043
Undistributed long term capital gains		—
Distributable earnings	$	14,279,043

Net investment income and net realized gains (losses) differ for financial statement and tax purposes primarily due to differing treatments of foreign currency transactions and passive foreign investment company shares.

5. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities) for the period ended December 31, 2003 aggregated $223,736,214 and $129,917,072, respectively.

6. INVESTMENT IN FRANKLIN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO

The Fund may invest in the Franklin Institutional Fiduciary Trust Money Market Portfolio (the Sweep Money Fund), an open-end investment company managed by Advisers. Management fees paid by the Fund are reduced on assets invested in the Sweep Money Fund, in an amount not to exceed the management fees paid by the Sweep Money Fund. The Fund earned $797,901 of dividend income from investment in the Sweep Money Fund for the period ended December 31, 2003.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON FOREIGN SECURITIES FUND

Notes to Financial Statements (continued)

7. REGULATORY MATTERS

On February 4, 2004, the Securities Division of the Office of the Secretary of the Commonwealth of Massachusetts filed an administrative complaint against Franklin Resources, Inc. and certain of its subsidiaries (the “Company”), alleging violations of the Massachusetts Uniform Securities Act. The complaint arises from activity that occurred in 2001 during which time an officer of a Company subsidiary was negotiating an agreement with an investor relating to investments in a mutual fund and a hedge fund.

The Company, in addition to other entities within Franklin Templeton Investments, has been named in shareholder class actions related to the matter described above. The Company believes that the claims made in the lawsuit are without merit and it intends to defend vigorously against the allegations. The Company and the Fund may be named in similar civil actions related to the matter described above.

In addition, as part of ongoing investigations by the U.S. Securities and Exchange Commission (the “SEC”), the U.S. Attorney for the Northern District of California, the New York Attorney General, the California Attorney General, the U.S. Attorney for the District of Massachusetts, the Florida Department of Financial Services, and the Commissioner of Securities and the Attorney General of the State of West Virginia, relating to certain practices in the mutual fund industry, including late trading, market timing and sales compensation arrangements, the Company and its subsidiaries, as well as certain current or former executives and employees of the Company, have received requests for information and/or subpoenas to testify or produce documents. The Company and its current employees are providing documents and information in response to these requests and subpoenas. In addition, the Company has responded to requests for similar kinds of information from regulatory authorities in some of the foreign countries where the Company conducts its global asset management business.

The Staff of the SEC has informed the Company that it intends to recommend that the Commission authorize an action against an affiliate of the Fund’s adviser and a senior executive officer relating to the frequent trading issues that are the subject of the SEC’s investigation. These issues were previously disclosed as being under investigation by government authorities and the subject of an internal inquiry by the Company in its Annual Report on Form 10-K and on its public website. The Company currently is in discussions with the SEC Staff in an effort to resolve the issues raised in their investigation. Such discussions are preliminary and the Fund’s management has been advised that the Company cannot predict the likelihood of whether those discussions will result in a settlement and, if so, the terms of such settlement. The impact, if any, of these matters on the Fund is uncertain at this time. If the Company finds that it bears responsibility for any unlawful or improper conduct, it has committed to making the Fund or its shareholders whole, as appropriate.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON FOREIGN SECURITIES FUND

Independent Auditors’ Report

To the Board of Trustees and Shareholders of

Franklin Templeton Variable Insurance Products Trust

In our opinion, the accompanying statement of assets and liabilities, including the statement of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Templeton Foreign Securities Fund (the Fund) (one of the funds constituting the Franklin Templeton Variable Insurance Products Trust) at December 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

February 5, 2004, except for Note 7 as to which the date is February 12, 2004

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON FOREIGN SECURITIES FUND

Tax Designation (unaudited)

At December 31, 2003, more than 50% of the Fund’s total assets were invested in securities of foreign issuers. In most instances, foreign taxes were withheld from dividends paid to the Fund on these investments. The Fund elects to treat foreign taxes paid under Section 853 of the Internal Revenue Code. This election will allow shareholders of record in June 2004, 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 foreign tax information will be disclosed in the June 30, 2004, semi-annual report of the Fund.

TF-20

TEMPLETON GLOBAL ASSET ALLOCATION FUND

Fund Goal and Primary Investments: Templeton Global Asset Allocation Fund seeks high total return. The Fund will invest in equity securities of companies of any country, debt securities of companies and governments of any country, and in money market instruments. The Fund may invest in lower-rated “junk bonds.”

We are pleased to bring you Templeton Global Asset Allocation Fund’s annual report covering the fiscal year ended December 31, 2003.

Performance Overview

You can find the Fund’s one-year total return in the Performance Summary following this report. The Fund underperformed its broad equity benchmark, the Morgan Stanley Capital International (MSCI) All Country World Free Index, which returned 34.63% for the year under review, and it outperformed its fixed income benchmark, the J.P. Morgan Global Government Bond Index (JPM GGBI), which returned 14.51% for the same period.¹

Economic and Market Overview

In spring 2003, the end of major conflict in Iraq coincided with the start of a global equity market rally that produced the strongest annual total returns since 1986. The rally’s main catalyst was an improving global economy, underpinned by expansionary fiscal and monetary policies, corporate restructuring and consolidation, and more than two years of declining equity valuations that created potential opportunities in Asia, Europe and the Americas.

In many countries, including the U.S., China and Japan, gross domestic product (GDP) growth accelerated in 2003, particularly in the second half of the year. In the U.S., GDP grew at annualized rates of 3.1% and 8.2% in the second and third quarters. Over the same periods, consumer spending rose at annualized rates of 3.3% and 6.9% spurred largely by tax cuts, car-buying incentives and mortgage refinancing, as interest rates remained at the lowest level in more than four decades. Industrial production increased in the U.S., China, Japan and South Korea in the second half of the year, as did consumer sentiment in the U.S., U.K., Germany and Sweden, and business sentiment in the U.S., Australia, Germany and Japan. In short, a synchronized global economic recovery gained momentum in the second half of 2003.

1. Sources: Standard & Poor’s Micropal; J.P. Morgan. One cannot invest directly in an index, nor is an index representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

TGA-1

Further evidence of this recovery was the continued rise in the prices of base metals and other commodities. This was due, in part, to greater demand in China. On December 31, 2003, contracts for aluminum and other metals such as silver, gold, copper and zinc were anywhere from 19% to 50% higher than 12 months before.² While gold crossed the $400-an-ounce threshold for the first time in more than seven years, such agricultural commodities as cotton and soybeans gained approximately 40%.² Despite rising commodities prices, global inflation remained subdued throughout the year.

In 2003, the value of the U.S. dollar fell against most major currencies, including a 17% decline versus the euro.³ While the decline magnified top-line and earnings-per-share growth in the U.S., it had the opposite effect in Europe. The dollar decline also benefited U.S. investors in international equities because it increased the returns of investments denominated in currencies that appreciated against the dollar, such as the euro. Although the dollar’s decline significantly affected equity market returns, it was not the only reason for the past year’s gains. Equity markets in many countries, including emerging market countries, produced stronger gains than the U.S. equity market, even in their local currencies. These countries benefited from the improving economic and financial market conditions in 2003.

Global bond markets benefited from the low interest rate environment and currency developments as most major currencies appreciated against the U.S. dollar during the reporting period. The euro zone and other European countries had positive short-term yield differentials and stronger balance-of-payment positions relative to the U.S. For example, in contrast to a widening U.S. current account deficit during the year, the euro zone posted a trailing 12-month current account surplus in September 2003. In addition, export growth and current account surpluses supported international reserve accumulation in many countries.

Investment Strategy

Our investment philosophy is bottom-up, value-oriented and long-term. In choosing equity 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 consider are a company’s historical value measures, including price/earnings ratio, profit margins and liquidation value.

2. Source: Reuters, Commodity Research Bureau Index; London Metal Exchange.

3. Source: European Central Bank.

TGA-2

In choosing debt investments, we allocate our assets among issuers, geographic regions and currencies based upon our assessment of relative interest rates among currencies, our outlook for changes in interest rates, and credit risks. With respect to debt securities, we may also from time to time make use of forward currency exchange contracts (Hedging Instruments) for hedging purposes.

Manager’s Discussion

During the 12 months under review, the Fund’s overweighted equity position in the materials sector relative to the MSCI All Country World Free Index benefited performance as that sector outperformed the overall index, and the Fund’s equity holdings in materials posted better overall returns than the index’s overall materials sector return. The Fund’s equity positions in the industrials sector also benefited relative performance because they outperformed the overall index.

Despite the Fund’s double-digit returns, some equity sector positioning dampened performance. Detractors from Fund performance during the year included poor performance from several of the Fund’s consumer staples holdings. The Fund’s underweighted financials sector exposure, despite the outperformance of several of the Fund’s specific financials positions, also hindered overall relative performance because that sector outperformed the overall index for the period.

Regarding the Fund’s income allocation, developed market interest rate movements, currency returns and emerging market bonds, in addition to income, contributed to the Fund’s performance. Monetary easing by certain major central banks around the world provided a positive backdrop for local bond markets and positively impacted the Fund’s performance. Slow economic growth at the beginning of the year, accompanied by heightened geopolitical uncertainty, rising unemployment and disinflationary pressures provided a favorable environment for an accommodative monetary stance at many major central banks.

The U.S. dollar’s depreciation against the euro positively impacted Fund performance during the period, as the euro represented the largest currency exposure of the Fund’s fixed income securities throughout the reporting period. However, currencies from some regions, particularly Asia, did not experience similar appreciation against the U.S. dollar despite larger trade surpluses with the U.S. Consequently, the Fund reallocated some exposure toward the end of the reporting period away from the euro zone and into Asia seeking to position the Fund for

Top 5 Country Holdings

Templeton Global Asset Allocation Fund

Based on Total Net Assets 12/31/03

U.S.	13.1%
U.K.	7.5%
Germany	6.8%
France	6.8%
Sweden	6.5%

Top 5 Sectors/Industries

Templeton Global Asset Allocation Fund

Based on Equity Securities 12/31/03

	% of Total Net Assets
Diversified Telecommunication Services	4.7%
Insurance	4.7%
Pharmaceuticals	4.3%
Banks	3.5%
Media	3.0%

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

TGA-3

potential global economic recovery as well as to take advantage of the discrepancy between currency performance and macroeconomic trends.

The Australian dollar and New Zealand dollar were the top performing developed country currencies, appreciating 25.27% and 20.34%, respectively, against the U.S. dollar during the Fund’s fiscal year, bringing these countries’ bond returns in U.S. dollar terms to 37.32% and 33.75%.⁴ The Fund’s positions in the two countries contributed positively to the Fund’s performance during the period.

Japan underperformed other developed bond markets in U.S. dollar terms, returning only 9.84% during the year, with 9.69% appreciation of the yen against the U.S. dollar.⁵ Although Japan benefited during the past year from a cyclical economic recovery and improving export strength, concerns remained about the country’s banking sector health and structural reform progress. We sought exposure to Asia’s cyclical, regional economic recovery through a variety of currencies from the region without exposure to any country-specific risks in Japan.

Thank you for your participation in Templeton Global Asset Allocation Fund. We look forward to serving your future investment needs.

4. Source: JPM GGBI; Citigroup World Government Bond Index.

5. Source: J.P. Morgan Government Bond Index Monitor, December 2003.

This discussion reflects our analysis, opinions and portfolio holdings as of December 31, 2003, 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 advisor 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.

TGA-4

PERFORMANCE SUMMARYASOF 12/31/03

Total return of Class 2 shares represents the average annual change in value, assuming reinvestment of dividends and capital gains. Average returns smooth out variations in returns, which can be significant; they are not the same as year-by-year results.

Templeton Global Asset Allocation Fund – Class 2*

Periods ended 12/31/03

	1-Year	5-Year	10-Year
Average Annual Total Return	+31.95%	+6.85%	+9.19%

*Performance prior to the 5/1/00 merger reflects the historical performance of Templeton Asset Allocation Fund. Additionally, because Class 2 shares were not offered until 5/1/97, standardized Class 2 Fund performance for prior periods represents the historical results of Class 1 shares. For periods beginning on 5/1/97, Class 2’s results reflect an additional 12b-1 fee expense, which also affects future performance. Since 5/1/97 (effective date), the average annual total return of Class 2 shares was +7.47%.

Ongoing market volatility can significantly affect short-term performance; recent returns may differ.

Total Return Index Comparison for Hypothetical $10,000 Investment (1/1/94–12/31/03)

The graph compares the performance of Templeton Global Asset Allocation Fund – Class 2,* the MSCI All Country World Free Index and the J.P. Morgan Global Government Bond Index. One cannot invest directly in an index, nor is an index representative of the Fund’s portfolio. Please see Important Notes to Performance Information preceding the Fund Summaries.

**Sources: Standard & Poor’s Micropal; J.P. Morgan. Please see Index Descriptions following the Fund Summaries.

Templeton Global Asset Allocation Fund – Class 2

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.

Since markets can go down as well as up, investment return and the value of your principal will fluctuate with market conditions, and you may have a gain or loss when you sell your shares.

Past performance does not guarantee future results.

TGA-5

TEMPLETON GLOBAL ASSET ALLOCATION FUND

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

SUPPLEMENT DATED FEBRUARY 12, 2004

TOTHE PROSPECTUS DATED MAY 1, 2003

The Management section on page TGA-5 is replaced with the following:

Templeton Investment Counsel, LLC (Investment Counsel), Broward Financial Centre, Suite 2100, For Lauderdale, Florida 33394, is the Fund’s investment manager.

Under an agreement with TIC, Franklin Advisers, Inc. (Advisers), One Franklin Parkway, San Mateo, California 94403-1906, is the Fund’s sub-advisor. Advisers provides Investment Counsel with investment management advice and assistance with respect to the Fund’s investments in debt securities.

The team responsible for managing the equity portion of the Fund is:

Peter A. Nori, CFA EXECUTIVE VICE PRESIDENT/PORTFOLIO MANAGER—RESEARCH ANALYST	Mr. Nori has managed the equity portion of the Fund since 1996, and has been with Franklin Templeton Investments since 1987.
Tucker Scott, CFA SENIOR VICE PRESIDENT	Mr. Scott has managed the equity portion of the Fund since 1998, and has been with Franklin Templeton Investments since 1996.
Mark R. Beveridge, CFA EXECUTIVE VICE PRESIDENT/PORTFOLIO MANAGER—RESEARCH ANALYST	Mr. Beveridge has been a manager of the Fund since 2003, and has been with Franklin Templeton Investments since 1985.
The team responsible for managing the bond portion of the Fund is:
Alexander C. Calvo SENIOR VICE PRESIDENT OF ADVISERS	Mr. Calvo has managed the bond portion of the Fund since 1998, and has been with Franklin Templeton Investments since 1995.
Michael Hasenstab, PH.D. PORTFOLIO MANAGER/RESEARCH ANALYST OF ADVISERS	Dr. Hasenstab has been a manager of the bond portion of the Fund since 2002 and an analyst since 2001. He first joined Franklin Templeton Investments in 1995, rejoining again in 2001 after a three-year leave to obtain his PH.D.

The Fund pays Investment Counsel a fee for managing the Fund’s assets. For the fiscal year ended December 31, 2002, the management fee, before any reduction, was 0.62% of the Fund’s average daily net assets. Under an agreement by Investment Counsel to reduce its fee to reflect reduced services resulting from the Fund’s investment in a Franklin Templeton money fund, the Fund paid 0.60% of its average daily net assets to Investment Counsel for its services. This reduction is required by the Board and an SEC order.

Please keep this supplement for future reference.

TGA-6

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL ASSET ALLOCATION FUND

Financial Highlights^a

	Class 1
	Year Ended December 31,
	2003			2002			2001			2000			1999
Per share operating performance
(For a share outstanding throughout the year)
Net asset value, beginning of year	$	14.59		$	15.51		$	19.22		$	23.37		$	22.46
Income from investment operations:
Net investment incomeb		.41			.39			.38	d		.44			.44
Net realized and unrealized gains (losses)		4.23			(1.01	)		(2.16	)d		(.45	)		3.78
Total from investment operations		4.64			(.62	)		(1.78	)		(.01	)		4.22
Less distributions from:
Net investment income		(.45	)		(.30	)		(.26	)		(.52	)		(.50	)
Net realized gains		—			—			(1.67	)		(3.62	)		(2.81	)
Total distributions		(.45	)		(.30	)		(1.93	)		(4.14	)		(3.31	)
Net asset value, end of year	$	18.78		$	14.59		$	15.51		$	19.22		$	23.37
Total returnc		32.31%			(4.17	)%		(9.72	)%		.29%			22.86%
Ratios/supplemental data
Net assets, end of year (000’s)	$	572,798		$	425,470		$	501,074		$	628,244		$	671,549
Ratios to average net assets:
Expenses		.81%			.81%			.81%			.81%			.74%
Net investment income		2.54%			2.56%			2.28%	d		2.20%			2.06%
Portfolio turnover rate		34.25%			27.27%			35.63%			30.32%			45.34%

^a Financial highlights presented reflect historical financial information from Templeton Variable Products Series Fund (TVP)-Templeton Asset Allocation Fund as a result of a merger May 1, 2000.

^b Based on average daily shares outstanding.

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

^d Effective January 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide of Investment Companies and began amortizing all premium and discount on fixed-income securities, as required. The effect of this change was as follows:

Net investment income per share	$(0.018)
Net realized and unrealized gains per share	0.018
Ratio of net investment income to average net assets	(.10)%

Per share data and ratios for prior periods have not been restated to reflect this change in accounting policy.

TGA-7

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL ASSET ALLOCATION FUND

Financial Highlights^a(continued)

	Class 2
	Year Ended December 31,
	2003			2002			2001			2000			1999
Per share operating performance
(For a share outstanding throughout the year
Net asset value, beginning of year	$	14.49		$	15.41		$	19.13		$	23.27		$	22.38
Income from investment operations:
Net investment incomeb		.36			.34			0.33	d		.37			.36
Net realized and unrealized gains (losses)		4.20			(1.00	)		(2.15	)d		(.43	)		3.80
Total from investment operations		4.56			(.66	)		(1.82	)		(.06	)		4.16
Less distributions from:
Net investment income		(.41	)		(.26	)		(.23	)		(.46	)		(.46	)
Net realized gains		—			—			(1.67	)		(3.62	)		(2.81	)
Total distributions		(.41	)		(.26	)		(1.90	)		(4.08	)		(3.27	)
Net asset value, end of year	$	18.64		$	14.49		$	15.41		$	19.13		$	23.27
Total returnc		31.95%			(4.39	)%		(9.95	)%		.04%			22.54%
Ratios/supplemental data
Net assets, end of year (000’s)	$	55,754		$	39,926		$	38,974		$	32,346		$	20,962
Ratios to average net assets:
Expenses		1.06%			1.06%			1.06%			1.07%			.99%
Net investment income		2.29%			2.31%			1.99%	d		1.91%			1.71%
Portfolio turnover rate		34.25%			27.27%			35.63%			30.32%			45.34%

^a Financial highlights presented reflect historical financial information from Templeton Variable Products Series Fund (TVP)-Templeton Asset Allocation Fund as a result of a merger May 1, 2000.

^b Based on average daily shares outstanding.

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

^d Effective January 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide of Investment Companies and began amortizing all premium and discount on fixed-income securities, as required. The effect of this change was as follows:

Net investment income per share	$(0.018)
Net realized and unrealized gains per share	0.018
Ratio of net investment income to average net assets	(.10)%

Per share data and ratios for prior periods have not been restated to reflect this change in accounting policy.

See notes to financial statements.

TGA-8

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL ASSET ALLOCATION FUND

Statement of Investments, December 31, 2003

	COUNTRY	SHARES	VALUE
Common Stocks 63.5%
Aerospace & Defense 2.2%
BAE Systems PLC	United Kingdom	153,055	$	460,992
Boeing Co.	United States	116,600		4,913,524
Rolls-Royce Group PLC	United Kingdom	2,733,657		8,674,043
				14,048,559
Air Freight & Couriers 1.3%
Deutsche Post AG	Germany	382,790		7,879,835
Auto Components 1.7%
Autoliv Inc., SDR	Sweden	129,000		4,894,445
Valeo SA	France	140,790		5,638,348
				10,532,793
Automobiles .6%
Volkswagen AG	Germany	70,650		3,952,230
Banks 3.5%
DBS Group Holdings Ltd.	Singapore	476,000		4,120,120
Kookmin Bank, ADR	South Korea	164,670		6,231,113
Lloyds TSB Group PLC	United Kingdom	343,900		2,758,046
Nordea AB, FDR	Sweden	955,960		7,138,349
UBS AG	Switzerland	29,200		1,999,790
				22,247,418
Chemicals 2.9%
Akzo Nobel NV	Netherlands	63,665		2,457,302
BASF AG	Germany	100,840		5,691,965
Bayer AG, Br.	Germany	109,940		3,244,950
Dow Chemical Co.	United States	156,500		6,505,705
				17,899,922
Commercial Services & Supplies 1.0%
Adecco SA	Switzerland	53,000		3,406,913
R.R. Donnelley & Sons Co.	United States	103,660		3,125,349
				6,532,262
Computers & Peripherals .4%
NEC Corp.	Japan	319,000		2,348,521
Seiko Epson Corp., 144A	Japan	7,500		349,911
				2,698,432
Containers & Packaging 1.2%
Temple-Inland Inc.	United States	117,540		7,366,232
Diversified Financials 2.6%
ING Groep NV	Netherlands	312,632		7,291,329
Nomura Holdings Inc.	Japan	244,600		4,165,298
Swire Pacific Ltd., A	Hong Kong	780,000		4,812,458
				16,269,085
Diversified Telecommunication Services 4.7%
Cable & Wireless PLC	United Kingdom	975,500		2,331,309
Chunghwa Telecom Co. Ltd., ADR	Taiwan	141,200		2,047,400
KT Corp., ADR	South Korea	208,260		3,971,518

TGA-9

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL ASSET ALLOCATION FUND

Statement of Investments, December 31, 2003 (cont.)

	COUNTRY	SHARES	VALUE
Common Stocks (cont.)
Diversified Telecommunication Services (cont.)
Nippon Telegraph & Telephone Corp.	Japan	1,152	$	5,557,376
Nippon Telegraph & Telephone Corp., ADR	Japan	5,680		139,501
Telecom Corp. of New Zealand Ltd.	New Zealand	1,772,970		6,250,927
Telefonica SA, ADR	Spain	96,339		4,257,220
Telefonos de Mexico SA de CV (Telmex), L, ADR	Mexico	151,858		5,015,870
				29,571,121
Electric Utilities 1.6%
E.On AG	Germany	92,290		6,045,181
Endesa SA	Spain	122,000		2,346,746
Endesa SA, ADR	Spain	88,000		1,680,800
				10,072,727
Electrical Equipment .9%
Kidde PLC	United Kingdom	1,581,900		3,015,921
Vestas Wind Systems AS	Denmark	148,160		2,409,452
				5,425,373
Electronic Equipment & Instruments .8%
Hitachi Ltd.	Japan	845,000		5,093,496
Finance .7%
JP Morgan Chase & Co.	United States	76,000		2,791,480
Morgan Stanley	United States	30,900		1,788,183
				4,579,663
Food & Drug Retailing 1.0%
J Sainsbury PLC	United Kingdom	1,166,200		6,529,225
Food Products 2.7%
Cadbury Schweppes PLC	United Kingdom	37,230		273,422
Kraft Foods Inc., A	United States	133,290		4,294,604
Nestle SA	Switzerland	29,910		7,472,965
Unilever PLC	United Kingdom	513,650		4,788,372
				16,829,363
Health Care Providers & Services .5%
aWellpoint Health Networks Inc.	United States	35,030		3,397,560
Household Durables 2.3%
Koninklijke Philips Electronics NV	Netherlands	283,767		8,286,082
Sony Corp.	Japan	41,300		1,429,719
Sony Corp., ADR	Japan	136,900		4,746,323
				14,462,124
Insurance 4.7%
Ace Ltd.	Bermuda	101,700		4,212,414
AXA SA	France	316,124		6,766,680
aPICC Property & Casualty Co. Ltd., 144A	China	190,000		85,044
Riunione Adriatica di Sicurta SpA	Italy	387,122		6,592,012
Swiss Reinsurance Co.	Switzerland	95,570		6,452,472
XL Capital Ltd., A	Bermuda	68,810		5,336,216
				29,444,838

TGA-10

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL ASSET ALLOCATION FUND

Statement of Investments, December 31, 2003 (cont.)

	COUNTRY	SHARES	VALUE
Common Stocks (cont.)
Internet Software & Services .7%
aBearingpoint Inc.	United States	410,000	$	4,136,900
IT Consulting & Services 1.6%
aCeridian Corp.	United States	305,700		6,401,358
Satyam Computers Services Ltd.	India	431,198		3,471,794
				9,873,152
Leisure Equipment & Products .4%
Mattel Inc.	United States	131,100		2,526,297
Machinery 1.7%
Atlas Copco AB, A	Sweden	199,100		7,125,242
Volvo AB, B	Sweden	124,268		3,799,558
				10,924,800
Media 3.0%
aComcast Corp.	United States	62,636		2,058,845
John Fairfax Holdings Ltd.	Australia	2,021,680		5,361,779
Reed Elsevier NV	Netherlands	501,600		6,232,038
aTime Warner Inc.	United States	110,900		1,995,091
Wolters Kluwer NV	Netherlands	215,741		3,374,355
				19,022,108
Metals & Mining 1.8%
Barrick Gold Corp.	Canada	290		6,578
BHP Billiton Ltd.	Australia	551,100		5,061,601
POSCO, ADR	South Korea	180,000		6,114,600
				11,182,779
Multi-Utilities 1.2%
National Grid Transco PLC	United Kingdom	420,100		3,010,061
Suez SA	France	229,280		4,607,001
				7,617,062
Multiline Retail .7%
Target Corp.	United States	107,000		4,108,800
Oil & Gas 2.9%
BP PLC	United Kingdom	206,700		1,676,216
Eni SpA	Italy	307,225		5,797,283
Husky Energy Inc.	Canada	267,350		4,855,643
Shell Transport & Trading Co. PLC	United Kingdom	756,100		5,623,951
				17,953,093
Paper & Forest Products .9%
Stora Enso OYJ, R	Finland	416,260		5,607,539
Pharmaceuticals 4.3%
Abbott Laboratories	United States	118,000		5,498,800
Aventis SA	France	109,200		7,217,558
Bristol-Myers Squibb Co.	United States	217,420		6,218,212
GlaxoSmithKline PLC	United Kingdom	119,250		2,732,497
Ono Pharmaceutical Co. Ltd.	Japan	137,000		5,151,721
				26,818,788

TGA-11

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL ASSET ALLOCATION FUND

Statement of Investments, December 31,2003 (cont.)

	COUNTRY	SHARES		VALUE
Common Stocks (cont.)
Real Estate 1.3%
Cheung Kong Holdings Ltd.	Hong Kong	1,031,500		$	8,204,329
Road & Rail .5%
Nippon Express Co. Ltd.	Japan	660,000			3,116,171
Semiconductors & Semiconductor Equipment 1.0%
Samsung Electronics Co. Ltd.	South Korea	16,790			6,355,258
Software 2.9%
aBMC Software Inc.	United States	291,900			5,443,935
aCheck Point Software Technologies Ltd.	Israel	216,000			3,633,120
Nintendo Co. Ltd.	Japan	54,800			5,113,371
aSynopsys Inc.	United States	128,080			4,323,981
					18,514,407
Specialty Retail .4%
aToys R Us Inc.	United States	191,600			2,421,824
Wireless Telecommunication Services .9%
aAT&T Wireless Services Inc.	United States	370,000			2,956,300
China Mobile (Hong Kong) Ltd., fgn.	China	928,000			2,850,842
					5,807,142
Total Common Stocks (Cost $327,740,545)					399,022,707
Preferred Stock (Cost $1,226,665) .4%
Cia Vale do Rio Doce, A, ADR, pfd.	Brazil	46,840			2,412,729
		PRINCIPAL AMOUNTc
Bonds 30.6%
Buoni Poliennali Del Tesoro,
7.75%, 11/01/06	Italy	3,974,190	EUR		5,623,419
5.50%, 11/01/10	Italy	2,300,000	EUR		3,162,004
5.00%, 2/01/12	Italy	1,810,000	EUR		2,407,702
Federal Republic of Germany,
4.00%, 6/25/04	Germany	500,000	EUR		636,226
5.00%, 8/19/05	Germany	3,268,000	EUR		4,315,837
6.00%, 7/04/07	Germany	5,242,000	EUR		7,217,007
5.00%, 7/04/11	Germany	3,015,000	EUR		4,030,106
Federation of Russia, Reg S, 5.00% to 3/31/07, 7.50% thereafter, 3/31/30	Russia	10,400,000			9,991,800
Finland Govt, 3.00%, 07/04/08	Finland	1,850,000	EUR		2,288,465
French Treasury Note, 4.75%, 7/12/07	France	5,400,000	EUR		7,158,678
Government of Canada,
6.00%, 6/01/08	Canada	2,212,000	CAD		1,859,287
6.00%, 6/01/11	Canada	6,849,000	CAD		5,807,565
Government of France,
3.00%, 7/12/08	France	2,100,000	EUR		2,596,392
4.00%, 10/25/09	France	6,420,000	EUR		8,205,575
Government of Netherlands,
5.75%, 2/15/07	Netherlands	3,958,000	EUR		5,383,838
5.00%, 7/15/12	Netherlands	1,760,000	EUR		2,347,629
Government of New Zealand, 7.00%, 7/15/09	New Zealand	20,308,000	NZD		14,054,574

TGA-12

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL ASSET ALLOCATION FUND

Statement of Investments, December 31, 2003 (cont.)

	COUNTRY	PRINCIPAL AMOUNTc		VALUE
Bonds (cont.)
Government of Spain,
4.50%, 7/30/04	Spain	1,850,000	EUR	$	2,366,040
10.15%, 1/31/06	Spain	2,450,000	EUR		3,549,842
4.80%, 10/31/06	Spain	7,480,000	EUR		9,909,490
5.00%, 7/30/12	Spain	2,920,000	EUR		3,891,614
Kingdom of Belgium,
7.50%, 7/29/08	Belgium	4,193,000	EUR		6,167,328
5.00%, 9/28/12	Belgium	1,760,000	EUR		2,342,745
Kingdom of Denmark,
5.00%, 8/15/05	Denmark	11,696,000	DKK		2,054,029
6.00%, 11/15/11	Denmark	14,660,000	DKK		2,775,346
5.00%, 11/15/13	Denmark	25,080,000	DKK		4,428,082
Kingdom of Norway, 5.75%, 11/30/04	Norway	5,030,000	NOK		779,360
Kingdom of Sweden,
6.00%, 2/09/05	Sweden	35,430,000	SEK		5,084,572
5.50%, 10/08/12	Sweden	86,010,000	SEK		12,672,444
Kingdom of Thailand, 6.00%, 3/05/05	Thailand	172,000,000	THB		4,571,814
New South Wales Treasury Corp.,
6.50%, 5/01/06	Australia	9,688,000	AUD		7,443,211
8.00%, 3/01/08	Australia	2,430,000	AUD		1,985,916
Queensland Treasury Corp., 6.00%, 7/14/09	Australia	300,000	AUD		229,934
Republic of Austria,
5.00%, 1/15/08	Austria	4,900,000	EUR		6,560,734
5.00%, 7/15/12	Austria	4,800,000	EUR		6,396,067
Republic of Bulgaria, 144A, 8.25%, 1/15/15	Bulgaria	2,748,000			3,255,281
Republic of Indonesia, 14.00%, 6/15/09	Indonesia	18,000,000,000	IDR		2,216,207
Republic of Panama, 8.875%, 9/30/27	Panama	960,000			1,012,800
Republic of Peru, FRN, 5.00%, 3/07/17	Peru	1,034,000			965,154
Republic of Philippines,
9.875%, 1/15/19	Philippines	1,400,000			1,487,500
10.625%, 3/16/25	Philippines	1,070,000			1,180,344
United Kingdom, 7.50%, 12/07/06	United Kingdom	2,717,000	GBP		5,265,370
United Mexican States,
9.875%, 2/01/10	Mexico	724,000			912,016
11.375%, 9/15/16	Mexico	1,330,000			1,892,590
11.50%, 5/15/26	Mexico	2,895,000			4,204,988
Total Bonds (Cost $146,160,281)					192,686,922

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL ASSET ALLOCATION FUND

Statement of Investments, December 31, 2003 (cont.)

	COUNTRY	PRINCIPAL AMOUNTc		VALUE
Convertible Bond (Cost $295,091) .1%
Axa SA, cvt., zero cpn., 12/21/04	France	19,757	EUR	$	398,479
Total Long Term Investments (Cost $475,422,582)				$	594,520,837
		SHARES
Short Term Investments 4.7%
bFranklin Institutional Fiduciary Trust Money Market Portfolio	United States	25,296,859			25,296,859
		PRINCIPAL AMOUNTc
Thailand Treasury Bill, zero cpn., 9/30/04	Thailand	183,500,000	THB		4,576,527
Total Short Term Investments (Cost $29,843,136)					29,873,386
Total Investments (Cost $505,265,718) 99.3%					624,394,223
Other Assets, less Liabilities .7%					4,158,425
Net Assets 100.0%				$	628,552,648

Currency Abbreviations:

AUD - Australian Dollar

CAD - Canadian Dollar

DKK - Danish Krone

EUR - Euro

GBP - British Pound

IDR - Indonesian Rupiah

NOK - Norwegian Krone

NZD - New Zealand Dollar

SEK - Swedish Krona

THB - Thai Baht

^a Non-income producing.

^b See Note 6 regarding investments in the Franklin Institutional Fiduciary Trust Money Market Portfolio.

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

See notes to financial statements.

TGA-14

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL ASSET ALLOCATION FUND

Financial Statements

Statement of Assets and Liabilities

December 31, 2003

Assets:
Investments in securities:
Cost	$	505,265,718
Value		624,394,223
Cash		33,029
Foreign currency, at value (cost $132,838)		84,130
Receivables:
Capital shares sold		22,194
Dividends and interest		5,260,367
Total assets		629,793,943
Liabilities:
Payables:
Investment securities purchased		257,678
Capital shares redeemed		379,781
Affiliates		398,604
Deferred tax liability (Note 1f)		104,220
Other liabilities		101,012
Total liabilities		1,241,295
Net assets, at value	$	628,552,648
Net assets consist of:
Undistributed net investment income	$	14,496,244
Net unrealized appreciation (depreciation)		119,371,539
Accumulated net realized gain (loss)		(56,385,081	)
Capital shares		551,069,946
Net assets, at value	$	628,552,648
Class 1:
Net assets, at value	$	572,798,449
Shares outstanding		30,503,902
Net asset value and offering price per share	$	18.78
Class 2:
Net assets, at value	$	55,754,199
Shares outstanding		2,990,819
Net asset value and offering price per share	$	18.64

See notes to financial statements.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL ASSET ALLOCATION FUND

Financial Statements (continued)

Statement of Operations

for the year ended December 31, 2003

Investment income:
(net of foreign taxes and fees of $1,023,360)
Dividends	$	8,617,648
Interest		8,545,712
Total investment income		17,163,360
Expenses:
Management fees (Note 3)		3,073,575
Administrative fees (Note 3)		719,976
Distribution fees - Class 2 (Note 3)		112,664
Transfer Agent fees		2,740
Other		372,267
Total expenses		4,281,222
Net investment income		12,882,138
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		(48,100,795	)
Foreign currency transactions		370,532
Net realized gain (loss)		(47,730,263	)
Net unrealized appreciation (depreciation) on:
Investments		183,925,992
Translation of assets and liabilities denominated in foreign currencies		111,224
Deferred taxes (Note 1f)		(104,220)
Net unrealized appreciation (depreciation)		183,932,996
Net realized and unrealized gain (loss)		136,202,733
Net increase (decrease) in net assets resulting from operations	$	149,084,871

See notes to financial statements.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL ASSET ALLOCATION FUND

Financial Statements (continued)

Statements of Changes in Net Assets

for the years ended December 31, 2003 and 2002

	2003			2002
Increase (decrease) in net assets:
Operations:
Net investment income	$	12,882,138		$	12,861,961
Net realized gain (loss) from investments and foreign currency transactions		(47,730,263	)		3,691,354
Net unrealized appreciation (depreciation) on investments and translation of assets and liabilities denominated in foreign currencies, and deferred taxes		183,932,996			(38,051,023	)
Net increase (decrease) in net assets resulting from operations		149,084,871			(21,497,708	)
Distributions to shareholders from:
Net investment income:
Class 1		(12,872,007	)		(9,120,690	)
Class 2		(1,147,201	)		(750,622	)
Total distributions to shareholders		(14,019,208	)		(9,871,312	)
Capital share transactions: (Note 2)
Class 1		24,154,273			(46,847,936	)
Class 2		3,935,942			3,566,120
Total capital share transactions		28,090,215			(43,281,816	)
Net increase (decrease) in net assets		163,155,878			(74,650,836	)
Net assets:
Beginning of year		465,396,770			540,047,606
End of year	$	628,552,648		$	465,396,770
Undistributed net investment income included in net assets:
End of year	$	14,496,244		$	12,858,724

See notes to financial statements.

TGA-17

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL ASSET ALLOCATION FUND

Notes to Financial Statements

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (the Trust) is registered under the Investment Company Act of 1940 as an open-end investment company, consisting of twenty-two separate series (the Funds). Templeton Global Asset Allocation Fund (the Fund) included in this report is diversified. Shares of the Fund are sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. As of December 31, 2003, over 53% of the total Fund shares were sold through one insurance company. The Fund’s investment objective is high total return.

The following summarizes the Fund’s significant accounting policies.

a. Security Valuation

Securities listed or traded on a recognized national exchange or NASDAQ are valued at the last reported sales price. Over-the-counter securities and listed securities for which no sale is reported are valued within the range of the latest quoted bid and asked prices. Foreign securities are valued at the close of trading of the foreign exchange or the NYSE, whichever is earlier. If events occur that materially affect the values of securities after the prices or foreign exchange rates are determined, or if market quotations are not readily available, the securities will be valued at fair value as determined following procedures approved by the Board of Trustees.

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. Purchases and sales of securities and income items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.

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.

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. Foreign Currency Contracts

When the Fund purchases or sells foreign securities it may enter into foreign exchange contracts to minimize foreign exchange risk from the trade date to the settlement date of the transactions. A foreign exchange contract is an agreement between two parties to exchange different currencies at an agreed upon exchange rate on a specified date. Realized and unrealized gains and losses are included in the Statement of Operations.

The risks of these contracts include movement in the values of the foreign currencies relative to the U.S. dollar and the possible inability of the counterparties to fulfill their obligations under the contracts.

d. Income Taxes

No provision has been made for income taxes because the Fund’s policy is to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable income.

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. Certain income from foreign securities is recorded as soon as information is available to the Fund.

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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL ASSET ALLOCATION FUND

Notes to Financial Statements (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

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

Interest income and estimated expenses are accrued daily. Discounts and premiums on securities purchased are amortized over the lives of the respective securities. Dividend income and distributions to shareholders are recorded on the ex-dividend date.

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. Other expenses are charged to each Fund on a specific identification basis.

Realized and unrealized gains and losses and net investment income, other than class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class.

f. Deferred Taxes

The Fund is subject to a tax imposed on net realized gains of securities of certain foreign countries. The Fund records an estimated deferred tax liability for net unrealized gains on these securities as reflected in the accompanying financial statements.

g. Accounting Estimates

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

h. Guarantees and Indemnifications

Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust 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. However, based on experience, the Trust expects the risk of loss to be remote.

2. SHARES OF BENEFICIAL INTEREST

The Fund offers two classes of shares: Class 1 and Class 2. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

At December 31, 2003, there were an unlimited number of shares authorized ($.01 par value). Transactions in the Fund’s shares were as follows:

	Year Ended December 31,
	2003					2002
Class 1 Shares:	Shares		Amount			Shares		Amount
Shares sold	2,924,694		$	48,227,589		526,225		$	7,952,010
Shares issued in reinvestment of distributions	795,550			12,872,007		578,357			9,120,690
Shares redeemed	(2,381,733	)		(36,945,323	)	(4,250,902	)		(63,920,636	)
Net increase (decrease)	1,338,511		$	24,154,273		(3,146,320	)	$	(46,847,936	)
Class 2 Shares:
Shares sold	949,657		$	15,396,855		2,038,410		$	29,793,094
Shares issued in reinvestment of distributions	71,299			1,147,201		47,872			750,622
Shares redeemed	(785,835	)		(12,608,114	)	(1,859,712	)		(26,977,596	)
Net increase (decrease)	235,121		$	3,935,942		226,570		$	3,566,120

TGA-19

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL ASSET ALLOCATION FUND

Notes to Financial Statements (continued)

3. TRANSACTIONS WITH AFFILIATES

Certain officers and trustees of the Fund are also officers and/or directors of the following entities:

Entity	Affiliation
Franklin Templeton Services LLC (FT Services)	Administrative manager
Templeton Investment Counsel LLC (TIC)	Investment manager
Franklin/Templeton Distributors Inc. (Distributors)	Principal underwriter
Franklin/Templeton Investor Services LLC (Investor Services)	Transfer agent

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
.65%	First $200 million
.585%	Over $200 million, up to and including $1.3 billion
.52%	Over $1.3 billion

Under a subadvisory agreement, Advisers, an affiliate of TIC, provides subadvisory services to the Fund and receives from TIC fees based on the average daily net assets of the Fund.

The Fund pays business management fees to FT Services based on the average daily net assets of the Fund as follows:

Annualized Fee Rate	Net Assets
.15%	First $200 million
.135%	Over $200 million, up to and including $700 million
.10%	Over $700 million, up to and including $1.2 billion

Fees are further reduced on net assets over $1.2 billion.

The Fund reimburses Distributors up to .25% per year of its average daily net assets of Class 2, for costs incurred in marketing the Fund’s shares.

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

4. INCOME TAXES

At December 31, 2003, the Fund had tax basis capital losses of $55,040,780 which may be carried over to offset future capital gains. Such losses expire as follows:

Capital loss carryovers expiring in:

2009	$	5,082,133
2010		443,666
2011		49,514,981
	$	55,040,780

At December 31, 2003, the Fund has deferred capital losses occurring subsequent to October 31, 2003 of $1,342,049. For tax purposes, such losses will be reflected in the year ending December 31, 2004.

TGA-20

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL ASSET ALLOCATION FUND

Notes to Financial Statements (continued)

4. INCOME TAXES (cont.)

The tax character of distributions paid during the years ended December 31, 2003 and 2002, was as follows:

	2003		2002
Distributions paid from:
Ordinary income	$	14,019,208	$	9,871,312
Long term capital gain		—		—
	$	14,019,208	$	9,871,312

At December 31, 2003, the cost of investments, net unrealized appreciation (depreciation), undistributed ordinary income and undistributed long term capital gains for income tax purposes were as follows:

Cost of investments	$	507,515,139
Unrealized appreciation	$	139,515,607
Unrealized depreciation		(22,636,523	)
Net unrealized appreciation (depreciation)	$	116,879,084
Undistributed ordinary income	$	16,743,414
Undistributed long term capital gains		—
Distributable earnings	$	16,743,414

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

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

5. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities) for the period ended December 31, 2003 aggregated $168,260,830 and $168,677,960, respectively.

6. INVESTMENT IN FRANKLIN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO

The Fund may invest in the Franklin Institutional Fiduciary Trust Money Market Portfolio (the Sweep Money Fund), an open-end investment company managed by Advisers. Management fees paid by the Fund are reduced on assets invested in the Sweep Money Fund, in an amount not to exceed the management fees paid by the Sweep Money Fund. The Fund earned $109,039 of dividend income from investment in the Sweep Money Fund for the period ended December 31, 2003.

7. REGULATORY MATTERS

On February 4, 2004, the Securities Division of the Office of the Secretary of the Commonwealth of Massachusetts filed an administrative complaint against Franklin Resources, Inc. and certain of its subsidiaries (the “Company”), alleging violations of the Massachusetts Uniform Securities Act. The complaint arises from activity that occurred in 2001 during which time an officer of a Company subsidiary was negotiating an agreement with an investor relating to investments in a mutual fund and a hedge fund.

TGA-21

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL ASSET ALLOCATION FUND

Notes to Financial Statements (continued)

7. REGULATORY MATTERS (cont.)

The Company, in addition to other entities within Franklin Templeton Investments, has been named in shareholder class actions related to the matter described above. The Company believes that the claims made in the lawsuit are without merit and it intends to defend vigorously against the allegations. The Company and the Fund may be named in similar civil actions related to the matter described above.

In addition, as part of ongoing investigations by the U.S. Securities and Exchange Commission (the “SEC”), the U.S. Attorney for the Northern District of California, the New York Attorney General, the California Attorney General, the U.S. Attorney for the District of Massachusetts, the Florida Department of Financial Services, and the Commissioner of Securities and the Attorney General of the State of West Virginia, relating to certain practices in the mutual fund industry, including late trading, market timing and sales compensation arrangements, the Company and its subsidiaries, as well as certain current or former executives and employees of the Company, have received requests for information and/or subpoenas to testify or produce documents. The Company and its current employees are providing documents and information in response to these requests and subpoenas. In addition, the Company has responded to requests for similar kinds of information from regulatory authorities in some of the foreign countries where the Company conducts its global asset management business.

The Staff of the SEC has informed the Company that it intends to recommend that the Commission authorize an action against an affiliate of the Fund’s adviser and a senior executive officer relating to the frequent trading issues that are the subject of the SEC’s investigation. These issues were previously disclosed as being under investigation by government authorities and the subject of an internal inquiry by the Company in its Annual Report on Form 10-K and on its public website. The Company currently is in discussions with the SEC Staff in an effort to resolve the issues raised in their investigation. Such discussions are preliminary and the Fund’s management has been advised that the Company cannot predict the likelihood of whether those discussions will result in a settlement and, if so, the terms of such settlement. The impact, if any, of these matters on the Fund is uncertain at this time. If the Company finds that it bears responsibility for any unlawful or improper conduct, it has committed to making the Fund or its shareholders whole, as appropriate.

TGA-22

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL ASSET ALLOCATION FUND

Independent Auditors’ Report

To the Board of Trustees and Shareholders

of Franklin Templeton Variable Insurance Products Trust

In our opinion, the accompanying statement of assets and liabilities, including the statement of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Templeton Global Asset Allocation Fund (the Fund) (one of the funds constituting the Franklin Templeton Variable Insurance Products Trust) at December 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

February 5, 2004, except for Note 7 as to which the date is February 12, 2004

TGA-23

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL ASSET ALLOCATION FUND

Tax Designation (unaudited)

Under Section 854(b)(2) of the Code, the Fund hereby designates 7.00% of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended December 31, 2003.

At December 31, 2003, more than 50% of the Fund’s total assets were invested in securities of foreign issuers. In most instances, foreign taxes were withheld from dividends paid to the Fund on these investments. The Fund elects to treat foreign taxes paid under Section 853 of the Internal Revenue Code. This election will allow shareholders of record in June 2004, 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 foreign tax information will be disclosed in the June 30, 2004, semi-annual report of the Fund.

TGA-24

TEMPLETON GLOBAL INCOME SECURITIES FUND

Fund Goals and Primary Investments: Templeton Global Income Securities Fund seeks high current income, consistent with preservation of capital. Capital appreciation is a secondary consideration. The Fund invests mainly in debt securities of governments and their political subdivisions and agencies, supranational organizations and companies located anywhere in the world, including emerging markets. The Fund may also invest in lower-rated “junk bonds.”

We are pleased to bring you Templeton Global Income Securities Fund’s annual report for the fiscal year ended December 31, 2003.

Performance Overview

You can find the Fund’s one-year total return in the Performance Summary following this report. The Fund outperformed its benchmark, the J.P. Morgan Global Government Bond Index (JPM GGBI), which delivered cumulative total returns of 2.22% in local currency terms and 14.51% in U.S. dollar terms for the same period.¹

Economic and Market Overview

During the year under review, many global developed economies showed signs of recovery and benign inflationary pressures following an environment of low growth and disinflation that facilitated monetary easing in many major economies. Economic growth accelerated in the U.S., remained strong in Asia and was weak, yet positive, in Europe. Despite these signs of economic recovery, inflationary pressures remained benign, supported by productivity growth and excess capacity in labor and capital. Global bond markets benefited from the low interest rate environment and currency developments as most major currencies appreciated against the U.S. dollar.

The U.S. dollar depreciated 15.26% relative to the nation’s major trading partners for the 12 months ended December 31, 2003.² The U.S. experienced deteriorating balance of payment fundamentals during the year, as record trade deficit levels drove the U.S. current account deficit to $135 billion for third quarter 2003, or 4.9% of gross domestic product (GDP) on an annualized basis.³ The current account deficit combined with a fiscal deficit created a “twin-deficit” problem similar to previous periods when the U.S. dollar came under pressure.

1. Source: J.P. Morgan. One cannot invest directly in an index, nor is an index representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

2. Source: Federal Reserve.

3. Source: Bureau of Economic Analysis.

TGI-1

Despite generally lower economic growth rates than those of the U.S., the euro zone and other European countries had positive short-term yield differentials and stronger balance of payment positions relative to the U.S. For example, in contrast to the widening U.S. current account deficit during the year, the euro zone posted a trailing 12-month current account surplus in September 2003 of 2.0% of GDP.⁴ In the Scandinavian countries of Norway and Sweden, short-term government securities offered higher yields than similar maturity U.S. Treasuries despite aggressive monetary easing during the past year. Export strength and relatively high commodity prices helped Norway and Sweden maintain current account surpluses.

In Asia, economic growth improved in many countries over the past year, accompanied by low inflationary pressures. Export growth and current account surpluses in many of the countries supported international reserve accumulation, particularly in Japan and among the newly industrialized economies of South Korea, Thailand and Indonesia. By the end of the year, these reserve levels represented increases of 44.6%, 28.0%, 11.1% and 14.8%, respectively, over year-ago figures.⁵

Reduced interest rates in developed economies generally benefit emerging market borrowers through lower borrowing costs and positive investment flows from investors seeking higher returns outside developed countries. Additionally, emerging market credit fundamentals remained favorable, highlighted by the past year’s large number of sovereign credit upgrades. For example, independent credit rating agency Moody’s Investors Service upgraded Russia’s long-term foreign currency rating to investment grade. Standard & Poor’s, another independent credit rating agency, raised Indonesia’s and Thailand’s foreign currency sovereign ratings during the year.

Investment Strategy

We allocate the Fund’s assets among issuers, geographic regions, and currencies based upon our assessment of relative interest rates among currencies, our outlook for changes in interest rates, and credit risks. In considering these factors, we evaluate a country’s changing market, economic and political conditions, such as inflation rate, growth prospects, global trade patterns and government policies. We intend to manage the Fund’s exposure to various currencies, and may from time to time seek to hedge (protect) against currency risk by using forward currency exchange contracts.

4. Source: European Central Bank, Eurostat.

5. Sources: Japan Ministry of Finance; Bank of Korea; Bank of Thailand; Bank of Indonesia.

TGI-2

Manager’s Discussion

In addition to income, developed market interest rate movements, currency returns and emerging market bonds contributed to the Fund’s strong one-year performance.

Monetary easing by certain major central banks around the world provided a positive backdrop for local bond markets and positively impacted the Fund’s performance. Slow economic growth at the beginning of the year, accompanied by heightened geopolitical uncertainty, rising unemployment and disinflationary pressures provided a favorable environment for an accommodative monetary stance at many major central banks. In the U.S., the Federal Reserve Board lowered the federal funds target rate 25 basis points (0.25%) to 1.00%. However, the yield curve steepened on prospects of stronger economic growth later in the year and the U.S. Treasury market declined 2.44% for the full year. As a result, the Fund benefited from its underweighted allocation to the U.S. In Europe, policymakers at the European Central Bank (ECB) reduced its reference rate 75 basis points (0.75%) to 2.00% and euro-zone bond markets returned 3.98% in local currency terms.⁶ Similarly, Denmark, Sweden and Norway lowered rates and those countries’ bonds returned 4.55%, 5.04% and 11.08%, respectively, in local currency terms.⁷ Additionally, the Reserve Bank of New Zealand reduced its official reference rate 75 basis points (0.75%) to 4.75%, driving 6.56% local currency return.⁸

The U.S. dollar’s depreciation against most major currencies positively impacted Fund performance during the period. Throughout the reporting period, the euro represented the Fund’s largest currency exposure. The euro appreciated 16.80% against the U.S. dollar, with EMU bond markets returning 24.98%.⁹ The Fund benefited from its exposure to other European countries. During the year, the Swedish krona appreciated 17.42% against the U.S. dollar, while the Danish krone was up 16.60% and the Norwegian krone rose 3.97%. The strong currency appreciation combined with local market returns helped produce bond market returns of 27.19%, 25.36% and 15.67% in U.S. dollar terms for Sweden, Denmark and Norway, respectively.⁷ Currencies from other regions, particularly Asia, did not experience similar appreciation against the U.S. dollar despite larger trade surpluses with the U.S. Of

6. Sources: European Central Bank; J.P. Morgan Government Bond Index Monitor, December 2003.

7. Sources: JPM GGBI; Citigroup World Government Bond Index.

8. Sources: Reserve Bank of New Zealand; J.P. Morgan Government Bond Index Monitor, December 2003.

9. Source: J.P. Morgan Government Bond Index Monitor, December 2003.

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

TGI-3

the roughly $41 billion monthly U.S. trade deficit, Asia accounted for about $22 billion versus $8 billion in western Europe.¹⁰ Consequently, the Fund reallocated some exposure toward the end of the reporting period away from the euro zone and into Asia seeking to position the Fund for potential global economic recovery as well as to take advantage of the discrepancy between currency performance and macroeconomic trends.

The Australian dollar and New Zealand dollar were the top performing developed country currencies, appreciating 25.27% and 20.34%, respectively, against the U.S. dollar during the Fund’s fiscal year, bringing these countries’ bond returns in U.S. dollar terms to 37.32% and 33.75%.¹¹ The Fund’s overweighted positions in the two countries contributed to the Fund’s outperformance during the period. Australia and New Zealand, although running relatively large current account deficits, differed from the U.S. in that they had balanced fiscal accounts, thus not creating a “twin-deficit” condition. From a balance of payments perspective, their current account deficits were balanced by strong foreign investment flows in an economic environment of high yields relative to other developed nations, as well as fiscal surpluses. Australia and New Zealand also each exhibited strong economic growth during the year, reporting 2.6% and 3.5% annual growth in third quarter 2003.¹²

Japan underperformed other developed bond markets in U.S. dollar terms, returning only 9.84% during the year, with 9.69% appreciation of the yen against the U.S. dollar.⁹ Although Japan benefited during the past year from a cyclical economic recovery and improving export strength, concerns remained about the country’s banking sector health and structural reform progress. We sought exposure to Asia’s cyclical, regional economic recovery through a variety of currencies from the region without exposure to any country-specific risks in Japan.

The Fund also invested in emerging market sovereign debt that is typically non-investment grade and compensates for greater credit risk by offering higher income or coupon. During the 12-month period, emerging market returns contributed to Fund performance as the J.P. Morgan Emerging Markets Bond Index Global (JPM EMBIG) delivered strong returns. Emerging bond markets, as measured by JPM EMBIG, returned 25.66% during the 12-month period. Sovereign interest rate spreads declined from 7.25 percentage points greater than the U.S. Treasury

10. Source: U.S. Census Bureau, 10/31/03.

11. Sources: JPM GGBI; J.P. Morgan Government Bond Index Broad.

12. Sources: Australia Bureau of Statistics; Statistics New Zealand.

TGI-4

market at the beginning of the reporting period to 4.03 percentage points by period-end.¹³ Reduced interest rates in developed economies generally benefit emerging market borrowers through lower borrowing costs and positive investment flows from investors seeking higher returns outside developed countries. Regionally, Latin American sovereign debt returned 32.97%, eastern Europe 22.07% and Asia 9.02%.¹³

The Fund increased allocation to emerging markets during the period, largely through increased exposure to euro and local currency denominated debt markets we believe have opportunities for potential currency appreciation as well as attractive yield characteristics. Primarily, we expanded and diversified the Fund’s Asian exposure later in the reporting period to include South Korea, Thailand and Indonesia. The regional cyclical recovery in Asia supported growth rates while current account surpluses from competitive trade conditions contributed to international reserve accumulation.

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

13. Source: J.P. Morgan. Please see Index Descriptions following the Fund Summaries.

This discussion reflects our analysis, opinions and portfolio holdings as of December 31, 2003, 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 advisor 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.

TGI-5

PERFORMANCE SUMMARYASOF 12/31/03

Total return of Class 2 shares represents the average annual change in value, assuming reinvestment of dividends and capital gains. Average returns smooth out variations in returns, which can be significant; they are not the same as year-by-year results.

Templeton Global Income Securities Fund – Class 2*

Periods ended 12/31/03

	1-Year	5-Year	10-Year
Average Annual Total Return	+22.44%	+8.20%	+6.87%

*Because Class 2 shares were not offered until 1/6/99, standardized Class 2 Fund performance for prior periods represents the historical results of Class 1 shares. For periods beginning on 1/6/99, Class 2’s results reflects an additional 12b-1 fee expense, which also affects future performance. Since 1/6/99 (effective date), the average annual total return of Class 2 shares was +8.13%.

Ongoing market volatility can significantly affect short-term performance; recent returns may differ.

Total Return Index Comparison

for Hypothetical $10,000 Investment (1/1/94–12/31/03)

The graph compares the performance of Templeton Global Income Securities Fund – Class 2* and the J.P. Morgan Global Government Bond Index, as well as the Consumer Price Index (CPI). One cannot invest directly in an index, nor is an index representative of the Fund’s portfolio. Please see Important Notes to Performance Information preceding the Fund Summaries.

**Source: Standard & Poor’s Micropal. Please see Index Descriptions following the Fund Summaries.

Templeton Global Income Securities Fund – Class 2

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.

Since markets can go down as well as up, investment return and the value of your principal will fluctuate with market conditions, and you may have a gain or loss when you sell your shares.

Past performance does not guarantee future results.

TGI-6

TEMPLETON GLOBAL INCOME SECURITIES FUND

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

SUPPLEMENT DATED FEBRUARY 12, 2004

TO THE PROSPECTUS DATED MAY 1, 2003

The Management section on page TGI-5 is replaced with the following:

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

The team responsible for the Fund’s management is:

Alexander C. Calvo SENIOR VICE PRESIDENT OF ADVISERS	Mr. Calvo has been a manager of the Fund since 1998, and has been with Franklin Templeton Investments since 1995.
Michael Hasenstab, Ph.D. PORTFOLIO MANAGER/RESEARCH ANALYST OF ADVISERS	Dr. Hasenstab has been a manager of the Fund since 2002 and an analyst since 2001. He first joined Franklin Templeton Investments in 1995, rejoining again in 2001 after a three-year leave to obtain his Ph.D.

The Fund pays Advisers a fee for managing the Fund’s assets and providing certain administrative facilities and services for the Fund. For the fiscal year ended December 31, 2002, the Fund paid 0.63% of its average daily net assets to Advisers for its services.

Please keep this supplement for future reference

TGI-7

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL INCOME SECURITIES FUND

Financial Highlights

	Class 1
	Year Ended December 31,
	2003			2002			2001			2000			1999
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	13.67		$	11.39		$	11.53		$	11.07		$	12.87
Income from investment operations:
Net investment incomea		.69			.59			.59	c		.68			.68
Net realized and unrealized gains (losses)		2.35			1.83			(.32	)c		(.20	)		(1.42	)
Total from investment operations		3.04			2.42			.27			.48			(.74	)
Less distributions from net investment income		(1.17	)		(.14	)		(.41	)		(.02	)		(1.06	)
Net asset value, end of year	$	15.54		$	13.67		$	11.39		$	11.53		$	11.07
Total returnb		22.72%			21.44%			2.55%			4.32%			(5.79)%
Ratios/supplemental data
Net assets, end of year (000’s)	$	52,842		$	50,622		$	63,781		$	81,171		$	90,537
Ratios to average net assets:
Expenses		.76%			.73%			.71%			.72%			.65%
Net investment income		4.72%			4.88%			5.22%	c		6.22%			5.65%
Portfolio turnover rate		53.01%			27.91%			122.45%			40.43%			80.76%

^a Based on average daily shares outstanding.

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

^c Effective January 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide of Investment Companies and began amortizing all premium and discount on fixed-income securities, as required. The effect of this change was as follows:

Net investment income (loss) per share	$(.059)
Net realized and unrealized gains (losses) per share	.059
Ratio of net investment income to average net assets	(.53)%

Per share data and ratios for prior periods have not been restated to reflect this change in accounting policy.

TGI-8

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL INCOME SECURITIES FUND

Financial Highlights (continued)

	Class 2
	Year Ended December 31,
	2003			2002			2001			2000			1999d
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	13.59		$	11.33		$	11.48		$	11.04		$	12.93
Income from investment operations:
Net investment incomea		.65			.54			.55	c		.65			.60
Net realized and unrealized gains (losses)		2.33			1.84			(.31	)c		(.19	)		(1.44	)
Total from investment operations		2.98			2.38			.24			.46			(.84	)
Less distributions from net investment income		(1.15	)		(.12	)		(.39	)		(.02	)		(1.05	)
Net asset value, end of year	$	15.42		$	13.59		$	11.33		$	11.48		$	11.04
Total returnb		22.44%			21.15%			2.24%			4.14%			(6.53)%
Ratios/supplemental data
Net assets, end of year (000’s)	$	5,181		$	2,119		$	1,286		$	1,237		$	443
Ratios to average net assets:
Expenses		1.01%			.98%			.96%			.97%			.91%	e
Net investment income		4.47%			4.63%			4.95%	c		5.94%			5.36%	e
Portfolio turnover rate		53.01%			27.91%			122.45%			40.43%			80.76%

^a Based on average daily shares outstanding.

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

^c Effective January 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide of Investment Companies and began amortizing all premium and discount on fixed-income securities, as required. The effect of this change was as follows:

Net investment income (loss) per share	$(.059)
Net realized and unrealized gains (losses) per share	.059
Ratio of net investment income to average net assets	(.53)%

Per share data and ratios for prior periods have not been restated to reflect this change in accounting policy.

^d For the period January 6, 1999 (effective date) to December 31, 1999.

^e Annualized.

See notes to financial statements.

TGI-9

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL INCOME SECURITIES FUND

Statement of Investments, December 31, 2003

	PRINCIPAL AMOUNTa		VALUE
Long Term Investments 97.2%
Australia 6.0%
New South Wales Treasury Corp.,
6.50%, 5/01/06	200,000	AUD	153,658
8.00%, 3/01/08	1,990,000	AUD	1,626,327
Queensland Treasury Corp., 6.00%, 8/14/13	2,200,000	AUD	1,685,269
			3,465,254
Austria 4.1%
Republic of Austria,
5.00%, 7/15/12	850,000	EUR	1,132,637
4.65%, 1/15/18	1,000,000	EUR	1,267,280
			2,399,917
Belgium 3.9%
Kingdom of Belgium, 7.50%, 7/29/08	1,531,000	EUR	2,251,891
Bulgaria .2%
Republic of Bulgaria, FRN, 1.9375%, 7/28/11	122,550		120,291
Canada 1.4%
Government of Canada, 6.00%, 6/01/11	937,000	CAD	794,523
Colombia .6%
Republic of Colombia,
10.00%, 1/23/12	132,000		144,911
11.75%, 2/25/20	159,000		189,505
			334,416
Denmark 1.7%
Kingdom of Denmark,
5.00%, 11/15/13	3,950,000	DKK	697,405
7.00%, 11/10/24	1,300,000	DKK	279,758
			977,163
Finland 3.9%
Government of Finland,
5.00%, 4/25/09	660,000	EUR	886,147
5.375%, 7/04/13	1,000,000	EUR	1,367,936
			2,254,083
France 4.7%
Government of France,
4.00%, 10/25/09	1,055,000	EUR	1,348,424
4.00%, 4/25/13	930,000	EUR	1,150,986
4.25%, 4/25/19	200,000	EUR	240,549
			2,739,959
Germany 2.7%
Federal Republic of Germany,
3.25%, 2/17/04	657,000	EUR	829,951
5.00%, 7/04/11	532,000	EUR	711,117
			1,541,068

TGI-10

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL INCOME SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	PRINCIPAL AMOUNTa		VALUE
Long Term Investments (cont.)
Greece 3.1%
Hellenic Republic,
4.60%, 5/20/13	700,000	EUR	894,469
6.50%, 10/22/19	600,000	EUR	893,226
			1,787,695
Hungary .8%
Government of Hungary, 8.50%, 10/12/05	101,100,000	HUF	470,643
Indonesia 5.3%
Indonesia Recapital Bond,
12.125%, 2/15/06	1,800,000,000	IDR	216,385
13.15%, 3/15/10	6,005,000,000	IDR	716,536
Republic of Indonesia, 14.00%, 6/15/09	17,407,000,000	IDR	2,143,195
			3,076,116
Irish Republic 3.2%
Republic of Ireland, 5.00%, 4/18/13	1,400,000	EUR	1,865,225
Italy 2.8%
Buoni Poliennali Del Tesoro, 7.75%, 11/01/06	1,131,293	EUR	1,600,763
Mexico 2.8%
United Mexican States,
9.875%, 2/01/10	800,000		1,007,752
144A, 7.50%, 3/08/10	450,000	EUR	631,833
			1,639,585
Netherlands 4.7%
Government of Netherlands, 5.75%, 2/15/07	2,008,000	EUR	2,731,366
New Zealand 7.6%
Government of New Zealand,
7.00%, 7/15/09	5,140,000	NZD	3,557,244
6.00%, 11/15/11	1,300,000	NZD	859,813
			4,417,057
Norway 3.1%
Kingdom of Norway,
6.75%, 1/15/07	7,350,000	NOK	1,213,323
5.50%, 5/15/09	3,600,000	NOK	578,658
			1,791,981
Philippines 3.6%
Republic of Philippines,
9.00%, 2/15/13	700,000		731,045
10.625%, 3/16/25	1,200,000		1,323,750
			2,054,795
Russia 3.3%
Federation of Russia,
12.75%, 6/24/28	105,000		168,073
Reg S, 11.00%, 7/24/18	1,250,000		1,694,469
Reg S, 5.00% to 3/31/07, 7.50% thereafter, 3/31/30	34,000		32,666
			1,895,208

TGI-11

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL INCOME SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	PRINCIPAL AMOUNTa		VALUE
Long Term Investments (cont.)
South Africa .4%
Republic of South Africa, 5.25%, 5/16/13	200,000	EUR	243,063
South Korea 4.4%
Korea Treasury Bond,
4.50%, 9/03/06	160,000,000	KRW	135,192
4.75%, 3/12/08	2,883,000,000	KRW	2,435,307
			2,570,499
Spain 3.3%
Bonos Y Oblig Del Estado,
6.00%, 1/31/08	200,000	EUR	277,790
5.50%, 7/30/17	400,000	EUR	551,766
Government of Spain,
10.15%, 1/31/06	378,000	EUR	547,690
5.00%, 7/30/12	410,000	EUR	546,425
			1,923,671
Sweden 7.9%
Kingdom of Sweden,
6.00%, 2/09/05	5,500,000	SEK	789,307
3.50%, 4/20/06	1,200,000	SEK	167,195
5.50%, 10/08/12	24,780,000	SEK	3,651,008
			4,607,510
Thailand 5.0%
Kingdom of Thailand,
6.00%, 3/05/05	8,000,000	THB	212,642
8.50%, 10/14/05	63,500,000	THB	1,795,020
8.00%, 12/08/06	3,500,000	THB	103,018
4.125%, 2/12/08	9,000,000	THB	241,181
8.50%, 12/08/08	1,000,000	THB	31,872
4.80%, 4/09/10	20,000,000	THB	534,757
			2,918,490
Ukraine 2.0%
Republic of Ukraine, 144A, 7.65%, 6/11/13	1,130,000		1,176,963
United Kingdom .6%
United Kingdom, 7.50%, 12/07/06	175,000	GBP	339,139

TGI-12

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL INCOME SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	PRINCIPAL AMOUNTa			VALUE
Long Term Investments (cont.)
Venezuela 4.1%
Republic of Venezuela,
9.25%, 9/15/27	$	2,390,000		$	2,178,640
144A, 10.75%, 9/19/13		200,000			213,000
					2,391,640
Total Long Term Investments (Cost $46,912,583)					56,379,974
Short Term Investment (Cost $189,207) .3%
New Zealand Treasury Bill, 5.15%, 6/16/04		300,000	NZD		196,552
Total Investments (Cost $47,101,790) 97.5%					56,576,526
Other Assets, less Liabilities 2.5%					1,446,161
Net Assets 100.0%				$	58,022,687

Currency Abbreviations:

AUD - Australian Dollar

CAD - Canadian Dollar

DKK - Danish Krone

EUR - Euro

GBP - British Pound

HUF - Hungarian Forint

IDR - Indonesian Rupiah

KRW - Korean Won

NOK - Norwegian Krone

NZD - New Zealand Dollar

SEK - Swedish Krona

THB - Thai Baht

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

TGI-13

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL INCOME SECURITIES FUND

Financial Statements

Statement of Assets and Liabilities

December 31, 2003

Assets:
Investments in securities:
Cost	$	47,101,790
Value		56,576,526
Cash		69,023
Foreign currency, at value (cost $21,941)		21,164
Receivables:
Capital shares sold		5,995
Interest		1,437,463
Total assets		58,110,171
Liabilities:
Payables:
Capital shares redeemed		27,196
Affiliates		32,310
Custodian fees		8,400
Professional fees		15,934
Other liabilities		3,644
Total liabilities		87,484
Net assets, at value	$	58,022,687
Net assets consist of:
Undistributed net investment income	$	5,047,873
Net unrealized appreciation (depreciation)		9,556,787
Accumulated net realized gain (loss)		(10,279,568	)
Capital shares		53,697,595
Net assets, at value	$	58,022,687
Class 1:
Net assets, at value	$	52,841,926
Shares outstanding		3,400,132
Net asset value and offering price per share	$	15.54
Class 2:
Net assets, at value	$	5,180,761
Shares outstanding		335,983
Net asset value and offering price per share	$	15.42

See notes to financial statements.

TGI-14

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL INCOME SECURITIES FUND

Financial Statements (continued)

Statement of Operations

for the year ended December 31, 2003

Interest income (net of foreign taxes of $7,986)	$	3,034,021
Expenses:
Management fees (Note 3)		345,404
Distribution fees - Class 2 (Note 3)		9,820
Transfer agent fees		280
Custodian fees		31,765
Reports to shareholders		23,939
Professional fees		16,682
Trustees’ fees and expenses		535
Other		3,619
Total expenses		432,044
Net investment income		2,601,977
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		3,654,666
Foreign currency transactions		160,681
Net realized gain (loss)		3,815,347
Net unrealized appreciation (depreciation) on:
Investments		4,915,997
Translation of assets and liabilities denominated in foreign currencies		24,640
Net unrealized appreciation (depreciation)		4,940,637
Net realized and unrealized gain (loss)		8,755,984
Net increase (decrease) in net assets resulting from operations	$	11,357,961

See notes to financial statements.

TGI-15

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL INCOME SECURITIES FUND

Financial Statements (continued)

Statements of Changes in Net Assets

for the years ended December 31, 2003 and 2002

	2003			2002
Increase (decrease) in net assets:
Operations:
Net investment income	$	2,601,977		$	2,843,587
Net realized gain (loss) from investments and foreign currency transactions		3,815,347			1,188,208
Net unrealized appreciation (depreciation) on investments and translation of assets and liabilities denominated in foreign currencies		4,940,637			7,043,474
Net increase (decrease) in net assets resulting from operations		11,357,961			11,075,269
Distributions to shareholders from:
Net investment income:
Class 1		(3,980,291	)		(721,350	)
Class 2		(323,749	)		(15,678	)
Total distributions to shareholders		(4,304,040	)		(737,028	)
Capital share transactions: (Note 2)
Class 1		(4,386,768	)		(23,182,049	)
Class 2		2,614,619			518,247
Total capital share transactions		(1,772,149	)		(22,663,802	)
Net increase (decrease) in net assets		5,281,772			(12,325,561	)
Net assets:
Beginning of year		52,740,915			65,066,476
End of year	$	58,022,687		$	52,740,915
Undistributed net investment income included in net assets:
End of year	$	5,047,873		$	3,745,859

See notes to financial statements.

TGI-16

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL INCOME SECURITIES FUND

Notes to Financial Statements

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (the Trust) is registered under the Investment Company Act of 1940 as an open-end investment company, consisting of twenty-two separate series (the Funds). The Templeton Global Income Securities Fund (the Fund) included in this report is non-diversified. Shares of the Fund are sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. As of December 31, 2003, 76% of the total Fund shares were sold through one insurance company. The Fund’s investment objective is current income.

The following summarizes the Fund’s significant accounting policies.

a. Security Valuation

Securities listed or traded on a recognized national exchange or NASDAQ are valued at the last reported sales price. Over-the-counter securities and listed securities for which no sale is reported are valued within the range of the latest quoted bid and asked prices. Foreign securities are valued at the close of trading of the foreign exchange or the NYSE, whichever is earlier. If events occur that materially affect the values of securities after the prices or foreign exchange rates are determined, or if market quotations are not readily available, the securities will be valued at fair value as determined following procedures approved by the Board of Trustees.

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. Purchases and sales of securities and income items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.

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.

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. Foreign Currency Contracts

When the Fund purchases or sells foreign securities it may enter into foreign exchange contracts to minimize foreign exchange risk from the trade date to the settlement date of the transactions. A foreign exchange contract is an agreement between two parties to exchange different currencies at an agreed upon exchange rate on a specified date. Realized and unrealized gains and losses are included in the Statement of Operations.

The risks of these contracts include movement in the values of the foreign currencies relative to the U.S. dollar and the possible inability of the counterparties to fulfill their obligations under the contracts.

d. Income Taxes

No provision has been made for income taxes because the Fund’s policy is to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable income.

TGI-17

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL INCOME SECURITIES FUND

Notes to Financial Statements (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

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. Certain income from foreign securities is recorded as soon as information is available to the Fund. Interest income and estimated expenses are accrued daily. Discounts and premiums on securities purchased are amortized over the lives of the respective securities. Distributions to shareholders are recorded on the ex-dividend date.

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. Other expenses are charged to each fund on a specific identification basis.

Realized and unrealized gains and losses and net investment income, other than class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class.

f. Accounting Estimates

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

g. Guarantees and Indemnifications

Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust 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. However, based on experience, the Trust expects the risk of loss to be remote.

2. SHARES OF BENEFICIAL INTEREST

The Fund offers two classes of shares: Class 1 and Class 2. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class, and its exchange privilege.

At December 31, 2003, there were an unlimited number of shares authorized ($.01 par value). Transactions in the Fund’s shares were as follows:

	Year Ended December 31,
	2003					2002
Class 1 Shares:	Shares		Amount			Shares		Amount
Shares sold	157,660		$	2,314,617		256,364		$	3,077,773
Shares issued in reinvestment of distributions	271,137			3,980,291		60,012			721,350
Shares redeemed	(733,010	)		(10,681,676	)	(2,210,800	)		(26,981,172	)
Net increase (decrease)	(304,213	)	$	(4,386,768	)	(1,894,424	)	$	(23,182,049	)
Class 2 Shares:
Shares sold	255,207		$	3,668,776		54,900		$	671,632
Shares issued in reinvestment of distributions	22,205			323,749		1,310			15,678
Shares redeemed	(97,419	)		(1,377,906	)	(13,677	)		(169,063	)
Net increase (decrease)	179,993		$	2,614,619		42,533		$	518,247

TGI-18

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL INCOME SECURITIES FUND

Notes to Financial Statements (continued)

3. TRANSACTIONS WITH AFFILIATES

Certain officers and trustees of the Fund are also officers and/or directors of the following entities:

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

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
.625%	First $100 million
.500%	Over $100 million, up to and including $250 million
.450%	Over $250 million, up to and including $10 billion

Fees are further reduced on net assets over $10 billion.

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

The Fund reimburses Distributors up to .25% per year of its average daily net assets of Class 2, for costs incurred in marketing the Fund’s shares.

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

4. INCOME TAXES

At December 31, 2003, the Fund had tax basis capital losses of $10,067,343, which may be carried over to offset future capital gains. Such losses expire as follows:

2007	$	5,870,061
2008		2,370,518
2009		1,649,034
2010		177,730
Total	$	10,067,343

On December 31, 2003 the Fund had expired capital loss carryovers of $633,271, which were reclassified to paid-in capital.

At December 31, 2003, the Fund has deferred capital losses occurring subsequent to October 31, 2003 of $160,781. For tax purposes, such losses will be reflected in the year ending December 31, 2004.

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

Net realized gains and losses differ for financial statement and tax purposes primarily due to differing treatments of wash sales, foreign currency transactions, and bond discounts and premiums.

TGI-19

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL INCOME SECURITIES FUND

Notes to Financial Statements (continued)

4. INCOME TAXES (cont.)

The tax character of distributions paid during the years ended December 31, 2003 and 2002, was as follows:

	2003		2002
Distributions paid from:
Ordinary income	$	4,304,040	$	737,028
Long term capital gain		—		—
	$	4,304,040	$	737,028

At December 31, 2003, the cost of investments, net unrealized appreciation (depreciation), undistributed ordinary income and undistributed long term capital gains for income tax purposes were as follows:

Cost of investments	$	47,708,770
Unrealized appreciation	$	9,098,185
Unrealized depreciation		(230,429	)
Net unrealized appreciation (depreciation)	$	8,867,756
Undistributed ordinary income	$	5,603,410
Undistributed long term capital gains		—
Distributable earnings	$	5,603,410

5. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short-term securities) for the year ended December 31, 2003 aggregated $28,184,223 and $29,905,911, respectively.

6. REGULATORY MATTERS

On February 4, 2004, the Securities Division of the Office of the Secretary of the Commonwealth of Massachusetts filed an administrative complaint against Franklin Resources, Inc. and certain of its subsidiaries (the “Company”), alleging violations of the Massachusetts Uniform Securities Act. The complaint arises from activity that occurred in 2001 during which time an officer of a Company subsidiary was negotiating an agreement with an investor relating to investments in a mutual fund and a hedge fund.

The Company, in addition to other entities within Franklin Templeton Investments, has been named in shareholder class actions related to the matter described above. The Company believes that the claims made in the lawsuit are without merit and it intends to defend vigorously against the allegations. The Company and the Fund may be named in similar civil actions related to the matter described above.

In addition, as part of ongoing investigations by the U.S. Securities and Exchange Commission (the “SEC”), the U.S. Attorney for the Northern District of California, the New York Attorney General, the California Attorney General, the U.S. Attorney for the District of Massachusetts, the Florida Department of Financial Services, and the Commissioner of Securities and the Attorney General of the State of West Virginia, relating to certain practices in the mutual fund industry, including late trading, market timing and sales compensation arrangements, the Company and its subsidiaries, as well as certain current or former executives and employees of the Company, have received requests for information and/or subpoenas to testify or produce documents. The Company and its current employees are providing documents and information in response to these requests and subpoenas. In addition, the Company has responded to requests for similar kinds of information from regulatory authorities in some of the foreign countries where the Company conducts its global asset management business.

TGI-20

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL INCOME SECURITIES FUND

Notes to Financial Statements (continued)

6. REGULATORY MATTERS (cont.)

The Staff of the SEC has informed the Company that it intends to recommend that the Commission authorize an action against the Fund’s investment adviser and a senior executive officer relating to the frequent trading issues that are the subject of the SEC’s investigation. These issues were previously disclosed as being under investigation by government authorities and the subject of an internal inquiry by the Company in its Annual Report on Form 10-K and on its public website. The Company currently is in discussions with the SEC Staff in an effort to resolve the issues raised in their investigation. Such discussions are preliminary and the Fund’s management has been advised that the Company cannot predict the likelihood of whether those discussions will result in a settlement and, if so, the terms of such settlement. The impact, if any, of these matters on the Fund is uncertain at this time. If the Company finds that it bears responsibility for any unlawful or improper conduct, it has committed to making the Fund or its shareholders whole, as appropriate.

TGI-21

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL INCOME SECURITIES FUND

Independent Auditors’ Report

To the Board of Trustees and Shareholders of

Franklin Templeton Variable Insurance Products Trust

In our opinion, the accompanying statement of assets and liabilities, including the statement of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Templeton Global Income Securities Fund (the Fund) (one of the funds constituting the Franklin Templeton Variable Insurance Products Trust) at December 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

February 5, 2004, except for Note 6 as to which the date is February 12, 2004

TGI-22

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL INCOME SECURITIES FUND

Tax Designation (unaudited)

At December 31, 2003, more than 50% of the Fund’s total assets were invested in securities of foreign issuers. In most instances, foreign taxes were withheld from interest paid to the Fund on these investments. The Fund elects to treat foreign taxes paid under Section 853 of the Internal Revenue Code. This election will allow shareholders of record in June, 2004, 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 foreign tax information will be disclosed in the June 30, 2004 semi-annual report of the Fund.

TGI-23

TEMPLETON GROWTH SECURITIES FUND

Fund Goal and Primary Investments: Templeton Growth Securities Fund seeks long-term capital growth. The Fund invests mainly in equity securities of companies located anywhere in the world, including those in the U.S. and emerging markets.

This annual report for Templeton Growth Securities Fund covers the period ended December 31, 2003.

Performance Overview

You can find the Fund’s one-year total return in the Performance Summary following this report. The Fund underperformed its benchmark, the Morgan Stanley Capital International (MSCI) All Country World Free Index, which returned 34.63% for the year under review.¹

Economic and Market Overview

In spring 2003, the end of major conflict in Iraq coincided with the start of a global equity market rally that produced the strongest annual total returns since 1986. The rally’s main catalyst was an improving global economy, underpinned by expansionary fiscal and monetary policies, corporate restructuring and consolidation, and more than two years of declining equity valuations that created potential opportunities in Asia, Europe and the Americas.

In many countries, including the U.S., China and Japan, gross domestic product (GDP) growth accelerated in 2003, particularly in the second half of the year. In the U.S., GDP grew at annualized rates of 3.1% and 8.2% in the second and third quarters. Over the same periods, consumer spending rose at annualized rates of 3.3% and 6.9% spurred largely by tax cuts, car-buying incentives and mortgage refinancing, as interest rates remained at the lowest level in more than four decades. Industrial production increased in the U.S., China, Japan and South Korea in the second half of the year, as did consumer sentiment in the U.S., U.K., Germany and Sweden, and business sentiment in the U.S., Australia, Germany and Japan. In short, a synchronized global economic recovery gained momentum in the second half of 2003.

Further evidence of this recovery was the continued rise in the prices of base metals and other commodities. This was due, in part, to greater demand in China. On December 31, 2003, contracts for aluminum and other metals such silver, gold, copper and zinc were anywhere from

1. Source: Standard & Poor’s Micropal. One cannot invest directly in an index, nor is an index representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

TG-1

19% to 50% higher than 12 months before.² While gold crossed the $400-an-ounce threshold for the first time in more than seven years, such agricultural commodities as cotton and soybeans gained approximately 40%.² Despite rising commodities prices, global inflation remained subdued throughout the year.

In 2003, the value of the U.S. dollar fell against most major currencies, including a 17% decline versus the euro.³ While the decline magnified top-line and earnings-per-share growth in the U.S., it had the opposite effect in Europe. The dollar decline also benefited U.S. investors in international equities because it increased the returns of investments denominated in currencies that appreciated against the dollar, such as the euro. Although the dollar’s decline significantly affected equity market returns, it was not the only reason for the past year’s gains. Equity markets in many countries, including emerging market countries, produced stronger gains than the U.S. equity market, even in their local currencies. These countries benefited from the improving economic and financial market conditions in 2003.

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 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 year under review, Fund performance benefited from several areas of the market. For example, the Fund’s energy and utilities sector exposure contributed to performance, as our holdings in those sectors outperformed the benchmark MSCI All Country World Free Index.⁴ Our health care holdings also outperformed the overall index, and during the period, we purchased shares of such health care sector companies as pharmaceuticals GlaxoSmithKline, Aventis and Novartis. In addition, the Fund’s consumer discretionary holdings benefited relative performance as they outperformed the benchmark index’s return.⁵

2. Source: Reuters, Commodity Research Bureau Index; London Metal Exchange.

3. Source: European Central Bank.

4. The energy sector comprises energy equipment and services, and oil and gas, and the utilities sector comprises electric utilities, gas utilities and multi-utilities in the Statement of Investments.

5. The consumer discretionary sector comprises automobiles; hotels, restaurants and leisure; household durables; media; multi-line retail and specialty retail in the Statement of Investments.

TG-2

From a regional standpoint, our relatively overweighted European exposure benefited Fund performance, as did the fact that many of our specific European holdings outperformed the index’s European stocks.

Hindering the Fund’s performance relative to the index were the Fund’s materials sector holdings, which underperformed those of the index during the fiscal year.⁶ In addition, the consumer staples sector underperformed the index; therefore, our exposure to that sector detracted from overall performance.⁷ Regionally, our Asian holdings, which underperformed those of the index during the period, hindered relative performance.

We generally found more value in European and Asian stocks, which traded at 13 times estimated 2004 earnings at period-end, than in U.S. stocks, which traded at 18 times estimated 2004 earnings at period-end. Consistent with our strategy, during the fiscal year we sold for a profit shares of EMC, Volvo, Komatsu, BHP Billiton, Burlington Resources, Mylan Labs and Merrill Lynch, and we purchased shares of TDC, BP PLC, Unilever, Nintendo, Reuters, National Grid and Reed Elsevier.

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

6. The materials sector comprises chemicals, containers and packaging, metals and mining, and paper and forest products in the Statement of Investments.

7. The consumer staples sector comprises food products in the Statement of Investments.

This discussion reflects our analysis, opinions and portfolio holdings as of December 31, 2003, 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 advisor makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

Top 10 Holdings

Templeton Growth Securities Fund 12/31/03

Company Sector/Industry, Country	% of Total Net Assets
BP PLC	1.8%
Oil & Gas, U.K.
Shell Transport & Trading Co. PLC	1.7%
Oil & Gas, U.K.
E.ON AG	1.7%
Electric Utilities, Germany
Bristol-Myers Squibb Co.	1.6%
Pharmaceuticals, U.S.
Aventis SA	1.6%
Pharmaceuticals, France
Eni SpA	1.6%
Oil & Gas, Italy
Nestle SA	1.6%
Food Products, Switzerland
GlaxoSmithKline PLC	1.5%
Pharmaceuticals, U.K.
J Sainsbury PLC	1.4%
Food & Drug Retailing, U.K.
Cheung Kong Holdings Ltd.	1.3%
Real Estate, Hong Kong

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

TG-3

PERFORMANCE SUMMARYASOF 12/31/03

Total return of Class 2 shares represents the average annual change in value, assuming reinvestment of dividends and capital gains. Average returns smooth out variations in returns, which can be significant; they are not the same as year-by-year results.

Templeton Growth Securities Fund – Class 2*

Periods ended 12/31/03

	1-Year	5-Year	Since Inception (3/15/94)
Average Annual Total Return	+32.13%	+5.44%	+8.74%

*Because Class 2 shares were not offered until 1/6/99, standardized Class 2 Fund performance for prior periods represents the historical results of Class 1 shares. For periods beginning on 1/6/99, Class 2’s results reflect an additional 12b-1 fee expense, which also affects future performance. Since 1/6/99 (effective date), the average annual total return of Class 2 shares was +4.66%.

Ongoing market volatility can significantly affect short-term performance; recent returns may differ.

Total Return Index Comparison

for Hypothetical $10,000 Investment (3/15/94–12/31/03)

The graph compares the performance of Templeton Growth Securities Fund – Class 2* and the MSCI All Country World Free Index. One cannot invest directly in an index, nor is an index representative of the Fund’s portfolio. Please see Important Notes to Performance Information preceding the Fund Summaries.

**Source: Standard & Poor’s Micropal. Please see Index Descriptions following the Fund Summaries.

Templeton Growth Securities Fund – Class 2

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.

Since markets can go down as well as up, investment return and the value of your principal will fluctuate with market conditions, and you may have a gain or loss when you sell your shares.

Past performance does not guarantee future results.

TG-4

TEMPLETON GROWTH SECURITIES FUND

(FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST)

SUPPLEMENT DATED DECEMBER 17, 2003

TOTHE PROSPECTUS DATED MAY 1, 2003

The prospectus is amended by replacing the MANAGEMENT section (page TG-5) with the following:

MANAGEMENT

Templeton Global Advisors Limited (TGAL), Lyford Cay, Nassau, Bahamas, is the Fund’s investment manager. Under an agreement with TGAL, Templeton Asset Management Limited (TAML), #7 Temasek Boulevard #38-3, Suntec Tower One, Singapore 038987, serves as the fund’s sub-advisor. TAML provides TGAL with investment management advice and assistance.

MANAGEMENT TEAM    The team responsible for the Fund’s management is:

Alan Chua, CFA PORTFOLIO MANAGER, TAML	Mr. Chua has been a manager of the Fund since January 2004 and has been with Franklin Templeton Investments since 2000. Previously, he was an associate director with UBS Asset Management.
Dale Winner, CFA SENIOR VICE PRESIDENT, TGAL	Mr. Winner has been a manager of the Fund since 2001, and has been with Franklin Templeton Investments since 1995.
Murdo Murchison, CFA EXECUTIVE VICE PRESIDENT, TGAL	Mr. Murchison has been a manager of the Fund since 2001, and has been with Franklin Templeton Investments since 1993.

The Fund pays TGAL a fee for managing its assets and providing certain administrative facilities and services to the Fund. For the fiscal year ended December 31, 2002, the Fund paid 0.81% of its average net assets to TGAL for its services.

Please keep this supplement for future reference.

TG-5

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Financial Highlights

	Class 1
	Year Ended December 31,
	2003			2002			2001			2000			1999
Per share operating performance
(For a share outstanding throughout the year)
Net asset value, beginning of year	$	8.67		$	11.09		$	13.76		$	15.63		$	14.77
Income from investment operations:
Net investment incomea		.17			.17			.26			.30			.28
Net realized and unrealized gains (losses)		2.63			(2.13	)		(.36	)		(.15	)		2.66
Total from investment operations		2.80			(1.96	)		(.10	)		.15			2.94
Less distributions from:
Net investment income		(.16	)		(.24	)		(.28	)		(.27	)		(.36	)
Net realized gains		—			(.22	)		(2.29	)		(1.75	)		(1.72	)
Total distributions		(.16	)		(.46	)		(2.57	)		(2.02	)		(2.08	)
Net asset value, end of year	$	11.31		$	8.67		$	11.09		$	13.76		$	15.63
Total returnb		32.62%			(18.32)%			(.98)%			1.74%			21.04%
Ratios/supplemental data
Net assets, end of year (000’s)	$	769,339		$	665,537		$	966,725		$	1,163,637		$	708,310
Ratios to average net assets:
Expenses		.88%			.87%			.85%			.88%			.88%
Net investment income		1.74%			1.69%			2.13%			2.18%			1.87%
Portfolio turnover rate		37.43%			30.67%			31.05%			69.67%			46.54%

^aBased on average daily shares outstanding.

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

TG-6

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Financial Highlights (continued)

	Class 2
	Year Ended December 31,
	2003			2002			2001			2000			1999c
Per share operating performance
(For a share outstanding throughout the year)
Net asset value, beginning of year	$	8.59		$	11.01		$	13.69		$	15.60		$	15.34
Income from investment operations:
Net investment incomea		.13			.13			.21			.25			.17
Net realized and unrealized gains (losses)		2.62			(2.10	)		(.34	)		(.15	)		2.17
Total from investment operations		2.75			(1.97	)		(.13	)		.10			2.34
Less distributions from:
Net investment income		(.15	)		(.23	)		(.26	)		(.26	)		(.36	)
Net realized gains		—			(.22	)		(2.29	)		(1.75	)		(1.72	)
Total distributions		(.15	)		(.45	)		(2.55	)		(2.01	)		(2.08	)
Net asset value, end of year	$	11.19		$	8.59		$	11.01		$	13.69		$	15.60
Total returnb		32.13%			(18.49)%			(1.31)%			1.47%			16.35%
Ratios/supplemental data
Net assets, end of year (000’s)	$	511,659		$	190,054		$	113,925		$	79,043		$	4,483
Ratios to average net assets:
Expenses		1.13%			1.12%			1.10%			1.12%			1.14%	d
Net investment income		1.49%			1.44%			1.80%			1.87%			1.17%	d
Portfolio turnover rate		37.43%			30.67%			31.05%			69.67%			46.54%

^a Based on average daily shares outstanding.

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

^c For the period January 6, 1999 (effective date) to December 31, 1999.

^d Annualized.

See notes to financial statements.

TG-7

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Statement of Investments, December 31, 2003

	COUNTRY	SHARES	VALUE
Common Stocks 85.9%
Aerospace & Defense 2.6%
BAE Systems PLC	United Kingdom	3,247,043	$	9,779,900
BAE Systems PLC, 144A	United Kingdom	35,823		107,897
Boeing Co.	United States	289,000		12,178,460
Rolls-Royce Group PLC	United Kingdom	3,661,602		11,618,463
				33,684,720
Airlines .8%
Singapore Airlines Ltd.	Singapore	1,560,100		10,288,595
Automobiles .7%
Volkswagen AG	Germany	165,400		9,252,636
Banks 7.5%
Abbey National PLC	United Kingdom	1,703,959		16,197,387
DBS Group Holdings Ltd.	Singapore	725,000		6,275,393
HSBC Holdings PLC	Hong Kong	461,601		7,283,492
Kookmin Bank	South Korea	323,500		12,122,765
Lloyds TSB Group PLC	United Kingdom	1,924,424		15,433,701
Nordea AB	Sweden	1,610,770		12,088,666
Standard Chartered PLC	United Kingdom	691,455		11,418,830
UBS AG	Switzerland	213,966		14,653,665
				95,473,899
Chemicals 3.7%
Akzo Nobel NV	Netherlands	355,200		13,709,788
BASF AG	Germany	145,200		8,195,888
Bayer AG, Br.	Germany	418,290		12,346,097
Syngenta AG	Switzerland	196,100		13,208,110
				47,459,883
Commercial Services & Supplies 1.7%
Brambles Industries PLC	United Kingdom	1,784,500		6,500,882
Securitas AB	Sweden	503,790		6,791,604
Waste Management Inc.	United States	297,408		8,803,277
				22,095,763
Computers & Peripherals .3%
Hewlett-Packard Co.	United States	144,590		3,321,232
Containers & Packaging .3%
Temple-Inland Inc.	United States	59,950		3,757,067
Diversified Financials 2.5%
Morgan Stanley	United States	100,000		5,787,000
Nomura Holdings Inc.	Japan	899,000		15,309,088
Swire Pacific Ltd., A	Hong Kong	1,748,800		10,789,778
				31,885,866
Diversified Telecommunication Services 7.1%
BCE Inc.	Canada	344,317		7,700,338
KT Corp., ADR	South Korea	688,360		13,127,025
Nippon Telegraph & Telephone Corp.	Japan	3,501		16,889,213
Portugal Telecom SGPS SA	Portugal	543,450		5,470,145
SBC Communications Inc.	United States	441,280		11,504,170
TDC AS	Denmark	430,274		15,525,332

TG-8

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	COUNTRY	SHARES	VALUE
Common Stocks (cont.)
Diversified Telecommunication Services (cont)
aTelefonica SA	Spain	540,160	$	7,930,704
Telefonos de Mexico SA de CV (Telmex), L, ADR	Mexico	368,216		12,162,174
				90,309,101
Electric Utilities 4.2%
E.On AG	Germany	323,600		21,196,453
Endesa SA	Spain	600,000		11,541,372
Hong Kong Electric Holdings Ltd.	Hong Kong	2,680,498		10,599,630
Iberdrola SA, Br.	Spain	331,200		6,546,297
Korea Electric Power Corp.	South Korea	229,100		4,114,763
				53,998,515
Electronic Equipment & Instruments 1.6%
aCelestica Inc.	Canada	445,040		6,706,753
Hitachi Ltd.	Japan	2,191,500		13,209,937
				19,916,690
Energy Equipment & Services .9%
aNoble Corp.	United States	327,600		11,721,528
Food & Drug Retailing 3.3%
Albertson’s Inc.	United States	537,800		12,181,170
J Sainsbury PLC	United Kingdom	3,133,140		17,541,568
aKroger Co.	United States	654,190		12,109,057
				41,831,795
Food Products 5.5%
Cadbury Schweppes PLC	United Kingdom	1,880,000		13,806,949
General Mills Inc.	United States	205,670		9,316,851
H.J. Heinz Co.	United States	278,585		10,148,852
Nestle SA	Switzerland	80,399		20,087,561
Unilever NV	Netherlands	263,257		17,217,300
				70,577,513
Gas Utilities .5%
TransCanada Corp.	Canada	300,000		6,472,432
Health Care Providers & Services .6%
AmerisourceBergen Corp.	United States	3,400		190,910
CIGNA Corp.	United States	126,750		7,288,125
HCA Inc.	United States	3,500		150,360
				7,629,395
Hotels Restaurants & Leisure 1.2%
Accor SA	France	213,300		9,658,767
Carnival Corp.	United States	157,373		6,252,429
				15,911,196
Household Durables 1.5%
Koninklijke Philips Electronics NV	Netherlands	315,570		9,214,740
Sony Corp.	Japan	299,100		10,354,213
				19,568,953

TG-9

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	COUNTRY	SHARES	VALUE
Common Stocks (cont.)
Industrial Conglomerates 1.9%
Hutchison Whampoa Ltd.	Hong Kong	1,068,000	$	7,875,599
Smiths Group PLC	United Kingdom	850,100		10,059,184
Tyco International Ltd.	United States	262,920		6,967,380
				24,902,163
Insurance 4.4%
Ace Ltd.	Bermuda	302,000		12,508,840
AXA SA	France	348,340		7,456,269
Swiss Reinsurance Co.	Switzerland	223,730		15,105,280
Willis Group Holdings Ltd.	United States	270,398		9,212,460
XL Capital Ltd., A	Bermuda	155,300		12,043,515
				56,326,364
IT Consulting & Services 1.4%
Electronic Data Systems Corp.	United States	525,302		12,890,911
Satyam Computers Services Ltd.	India	686,066		5,523,865
				18,414,776
Machinery
Volvo AB, B	Sweden	993		30,362
Media 3.5%
Pearson PLC	United Kingdom	1,063,752		11,844,646
Reed Elsevier NV	Netherlands	1,005,800		12,496,380
Reuters Group PLC	United Kingdom	2,141,933		9,010,835
aTime Warner Inc.	United States	300,000		5,397,000
Wolters Kluwer NV	Netherlands	349,853		5,471,969
				44,220,830
Metals & Mining 1.8%
Barrick Gold Corp.	Canada	348,800		7,921,248
BHP Billiton PLC	United Kingdom	1,065,996		9,312,509
POSCO	South Korea	39,792		5,443,639
				22,677,396
Multi-Utilities 1.3%
National Grid Transco PLC	United Kingdom	2,334,378		16,726,066
Multiline Retail .4%
Marks & Spencer Group PLC	United Kingdom	1,099,900		5,690,394
Oil & Gas 5.8%
BP PLC	United Kingdom	2,873,817		23,304,973
Eni SpA	Italy	1,081,305		20,404,040
Repsol YPF SA	Spain	424,530		8,278,549
Shell Transport & Trading Co. PLC	United Kingdom	2,982,593		22,184,841
				74,172,403
Paper & Forest Products 3.2%
Bowater Inc.	United States	191,800		8,882,258
International Paper Co.	United States	240,000		10,346,400
Stora Enso OYJ, R	Finland	763,800		10,289,334
UPM-Kymmene Corp.	Finland	624,400		11,908,335
				41,426,327

TG-10

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	COUNTRY	SHARES		VALUE
Common Stocks (cont.)
Pharmaceuticals 8.8%
Abbott Laboratories	United States	283,510		$	13,211,566
Aventis SA	France	308,743			20,406,323
Bristol-Myers Squibb Co.	United States	737,730			21,099,078
GlaxoSmithKline PLC	United Kingdom	815,888			18,695,273
Novartis AG	Switzerland	297,700			13,515,953
Pfizer Inc.	United States	420,000			14,838,600
aShire Pharmaceuticals Group PLC	United Kingdom	1,111,940			10,798,723
					112,565,516
Real Estate 1.3%
Cheung Kong Holdings Ltd.	Hong Kong	2,166,499			17,231,866
Semiconductors & Semiconductor Equipment .8%
Samsung Electronics Co. Ltd.	South Korea	26,320			9,962,501
Software 1.7%
aCheck Point Software Technologies Ltd.	Israel	390,510			6,568,378
Nintendo Co. Ltd.	Japan	160,000			14,929,551
					21,497,929
Specialty Retail .4%
aToys R Us Inc.	United States	375,000			4,740,000
Wireless Telecommunication Services 2.7%
aAT&T Wireless Services Inc.	United States	1,522,000			12,160,780
China Mobile (Hong Kong) Ltd., fgn.	China	3,598,500			11,054,694
SK Telecom Co. Ltd.	South Korea	61,223			10,225,243
SK Telecom Co. Ltd., ADR	South Korea	54,400			1,015,038
					34,455,755
Total Common Stocks (Cost $968,463,184)					1,100,197,427
Preferred Stocks 1.2%
Cia Vale do Rio Doce, ADR, pfd., A	Brazil	138,500			7,134,135
Petroleo Brasileiro SA, ADR, pfd.	Brazil	173,100			4,614,846
Volkswagen AG, pfd.	Germany	108,300			3,947,868
Total Preferred Stocks (Cost $10,732,153)					15,696,849
Convertible Bond (Cost $325,173) .1%		PRINCIPAL AMOUNTc
AXA SA, cvt., zero cpn., 12/21/04	France	21,771	EUR		439,100
Total Investments before Repurchase Agreements (Cost $979,520,510)					1,116,333,376
Repurchase Agreements 11.8%
b BZW Securities Inc. 0.84%, 1/02/04 (Maturity Value $70,003,267) Collateralized by U.S. Treasury Bills, Notes and Bonds, and U.S. Government Agency Securities	United States	70,000,000			70,000,000
b Federal Home Loan Bank .75%, 1/02/04 (Maturity Value $11,470,000) Collateralized by U.S. Treasury Bills, Notes and Bonds, and U.S. Government Agency Securities	United States	11,470,000			11,469,522
b Paribas Corp .93%, 1/02/04 (Maturity Value $70,003,617) Collateralized by U.S. Treasury Bills, Notes and Bonds, and Government Agency Securities	United States	70,000,000			70,000,000

TG-11

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Statement of Investments, December 31, 2003 (cont.)

	COUNTRY	SHARES	VALUE
Repurchase Agreements (cont.)
Total Repurchase Agreements (Cost $151,469,522)			$	151,469,522
Total Investments (Cost $1,130,990,032) 99.0%				1,267,802,898
Other Assets, less Liabilities 1.0%				13,194,830
Net Assets 100.0%			$	1,280,997,728

Currency Abbreviations:

EUR - Euro

^a Non-income producing.

^b See Note 1(c) regarding repurchase agreements.

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

See notes to financial statements.

TG-12

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Financial Statements

Statement of Assets and Liabilities

December 31, 2003

Assets:
Investments in securities:
Cost	$	979,520,510
Value		1,116,333,376
Repurchase agreements, at value and cost		151,469,522
Cash		76,092
Foreign currency, at value (cost $6,829,852)		7,061,422
Receivables:
Investment securities sold		4,086,363
Capital shares sold		1,340,813
Dividends and Interest		2,685,276
Total assets		1,283,052,864
Liabilities:
Payables:
Investment securities purchased		195,143
Capital shares redeemed		373,015
Affiliates		1,020,837
Deferred tax liability (Note 1g)		258,124
Other liabilities		208,017
Total liabilities		2,055,136
Net assets, at value	$	1,280,997,728
Net assets consist of:
Undistributed net investment income	$	16,602,943
Net unrealized appreciation (depreciation)		136,894,643
Accumulated net realized gain (loss)		(78,853,936)
Capital shares		1,206,354,078
Net assets, at value	$	1,280,997,728
Class 1:
Net assets, at value	$	769,339,086
Shares outstanding		68,049,173
Net asset value and offering price per share	$	11.31
Class 2:
Net assets, at value	$	511,658,642
Shares outstanding		45,705,756
Net asset value and offering price per share	$	11.19

See notes to financial statements.

TG-13

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Financial Statements (continued)

Statement of Operations

for the year ended December 31, 2003

Investment income:
(net of foreign taxes and fees of $2,469,013)
Dividends		$  24,724,072
Interest		1,037,496
Total investment income		25,761,568
Expenses:
Management fees (Note 3)		7,964,686
Distribution fees - Class 2 (Note 3)		768,510
Transfer agent fees		5,244
Other		634,281
Total expenses		9,372,721
Net investment income		16,388,847
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments (net of foreign taxes of $84,349) (Note 1g)		(17,384,016	)
Foreign currency transactions		252,727
Net realized gain (loss)		(17,131,289	)
Net unrealized appreciation (depreciation) on:
Investments		296,364,236
Translation of assets and liabilities denominated in foreign currencies		693,277
Deferred taxes (Note 1g)		(258,124	)
Net unrealized appreciation (depreciation)		296,799,389
Net realized and unrealized gain (loss)		279,668,100
Net increase (decrease) in net assets resulting from operations	$	296,056,947

See notes to financial statements.

TG-14

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Financial Statements (continued)

Statements of Changes in Net Assets

for the years ended December 31, 2003 and 2002

	2003			2002
Increase (decrease) in net assets:
Operations:
Net investment income	$	16,388,847		$	16,151,877
Net realized gain (loss) from investments and foreign currency transactions		(17,131,289	)		(59,721,285	)
Net unrealized appreciation (depreciation) on investments and translation of assets and liabilities denominated in foreign currencies, and deferred taxes		296,799,389			(148,198,002	)
Net increase (decrease) in net assets resulting from operations		296,056,947			(191,767,410	)
Distributions to shareholders from:
Net investment income:
Class 1		(11,363,488	)		(20,070,527	)
Class 2		(4,553,762	)		(3,259,082	)
Net realized gains:
Class 1		—			(18,428,918	)
Class 2		—			(3,204,573	)
Total distributions to shareholders		(15,917,250)			(44,963,100	)
Capital share transactions: (Note 2)
Class 1		(80,154,599	)		(102,174,647	)
Class 2		225,420,705			113,847,109
Total capital share transactions		145,266,106			11,672,462
Net increase (decrease) in net assets		425,405,803			(225,058,048	)
Net assets:
Beginning of year		855,591,925			1,080,649,973
End of year	$	1,280,997,728		$	855,591,925
Undistributed net investment income included in net assets:
End of year		$16,602,943		$	15,907,519

See notes to financial statements.

TG-15

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Notes to Financial Statements

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (the Trust) is registered under the Investment Company Act of 1940 as an open-end investment company consisting of twenty-two separate series (the Funds). Templeton Growth Securities Fund (the Fund) included in this report is diversified. Shares of the Fund are sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. The Fund’s investment objective is capital growth.

The following summarizes the Fund’s significant accounting policies.

a. Security Valuation

Securities listed or traded on a recognized national exchange or NASDAQ are valued at the last reported sales price. Over-the-counter securities and listed securities for which no sale is reported are valued within the range of the latest quoted bid and asked prices. Foreign securities are valued at the close of trading of the foreign exchange or the NYSE, whichever is earlier. If events occur that materially affect the values of securities after the prices or foreign exchange rates are determined, or if market quotations are not readily available, the securities will be valued at fair value as determined following procedures approved by the Board of Trustees.

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. Purchases and sales of securities and income items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.

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.

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. Repurchase Agreements

The Fund may enter into repurchase agreements, which are accounted for as a loan by the Fund to the seller, collateralized by securities which are delivered to the Fund’s custodian. The market value, including accrued interest, of the initial collateralization is required to be at least 102% of the dollar amount invested by the Fund, with the value of the underlying securities marked to market daily to maintain coverage of at least 100%. At December 31, 2003, all repurchase agreements held by the Fund had been entered into on that date.

d. Foreign Currency Contracts

When the Fund purchases or sells foreign securities it may enter into foreign exchange contracts to minimize foreign exchange risk from the trade date to the settlement date of the transactions. A foreign exchange contract is an agreement between two parties to exchange different currencies at an agreed upon exchange rate on a specified date. Realized and unrealized gains and losses are included in the Statement of Operations.

The risks of these contracts include movement in the values of the foreign currencies relative to the U.S. dollar and the possible inability of the counterparties to fulfill their obligations under the contracts.

TG-16

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Notes to Financial Statements (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

e. Income Taxes

No provision has been made for income taxes because the Fund’s policy is to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable income.

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. Certain income from foreign securities is recorded as soon as information is available to the Fund. Interest income and estimated expenses are accrued daily. Dividend income and distributions to shareholders are recorded on the ex-dividend date.

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. Other expenses are charged to each Fund on a specific identification basis.

Realized and unrealized gains and losses and net investment income, other than class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class.

g. Deferred Taxes

The Fund is subject to a tax imposed on net realized gains of securities of certain foreign countries. The Fund records an estimated deferred tax liability for net unrealized gains on these securities as reflected in the accompanying financial statements.

h. Accounting Estimates

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

i. Guarantees and Indemnifications

Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust 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. However, based on experience, the Trust expects the risk of loss to be remote.

2. SHARES OF BENEFICIAL INTEREST

The Fund offers two classes of shares: Class 1 and Class 2. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

TG-17

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Notes to Financial Statements (continued)

2. SHARES OF BENEFICIAL INTEREST (cont.)

At December 31, 2003, there were an unlimited number of shares authorized ($.01 par value). Transactions in the Fund’s shares were as follows:

	Year Ended December 31,
	2003					2002
Class 1 Shares:	Shares		Amount			Shares		Amount
Shares sold	1,110,988		$	10,553,604		27,335,041		$	291,949,245
Shares issued in reinvestment of distributions	1,181,236			11,363,488		3,694,764			38,499,445
Shares redeemed	(11,030,466	)		(102,071,691	)	(41,405,187	)		(432,623,337	)
Net increase (decrease)	(8,738,242	)	$	(80,154,599	)	(10,375,382	)	$	(102,174,647	)
Class 2 Shares:
Shares sold	30,448,582		$	289,636,811		21,239,772		$	207,175,310
Shares issued in reinvestment of distributions	477,333			4,553,762		624,508			6,463,655
Shares redeemed	(7,334,303	)		(68,769,868	)	(10,095,406	)		(99,791,856	)
Net increase (decrease)	23,591,612		$	225,420,705		11,768,874		$	113,847,109

3. TRANSACTIONS WITH AFFILIATES

Certain officers and trustees of the Fund are also officers and/or directors of the following entities:

Entity	Affiliation
Franklin Templeton Services LLC (FT Services)	Administrative manager
Templeton Asset Management Ltd. (TAML)	Investment manager
Templeton Global Advisors Ltd. (TGAL)	Investment manager
Franklin/Templeton Distributors Inc. (Distributors)	Principal underwriter
Franklin/Templeton Investor Services LLC (Investor Services)	Transfer agent

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
1.00%	First $100 million
.90%	Over $100 million, up to and including $250 million
.80% .75%	Over $250 million, up to and including $500 million Over $500 million

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

Under a subadvisory agreement, TAML, an affiliate of TGAL, provides subadvisory services to the Fund and receives from TGAL fees based on the average daily net assets of the Fund.

The Fund reimburses Distributors up to .25% per year of its average daily net assets of Class 2 shares for costs incurred in marketing the Fund’s shares.

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

TG-18

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Notes to Financial Statements (continued)

4. INCOME TAXES

At December 31, 2003, the Fund had tax basis capital losses of $78,798,487, which may be carried over to offset future capital gains. Such losses expire as follows:

Capital loss carryovers expiring in:
2010	$	52,333,376
2011		26,465,111
	$	78,798,487

At December 31, 2003, the Fund had deferred currency losses occurring subsequent to October 31, 2003 of $55,449. For tax purposes, such losses will be reflected in the year ending December 31, 2004.

The tax character of distributions paid during the years ended December 31, 2003 and 2002, was as follows:

	2003		2002
Distributions paid from:
Ordinary income	$	15,917,250	$	33,239,449
Long term capital gain		—		11,723,651
	$	15,917,250	$	44,963,100

At December 31, 2003, the cost of investments, net unrealized appreciation (depreciation), undistributed ordinary income and undistributed long term capital gains for income tax purposes were as follows:

Cost of investments	$	1,130,978,446
Unrealized appreciation	$	195,803,036
Unrealized depreciation		(58,978,584	)
Net unrealized appreciation (depreciation)	$	136,824,452
Undistributed ordinary income	$	16,591,356
Undistributed long term capital gains		—
Distributable earnings	$	16,591,356

Net investment income (loss) differs for financial statements and tax purposes primarily due to differing treatment of foreign currency transactions.

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

5. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities) for the period ended December 31, 2003 aggregated $355,356,084 and $327,926,441, respectively.

6. REGULATORY MATTERS

On February 4, 2004, the Securities Division of the Office of the Secretary of the Commonwealth of Massachusetts filed an administrative complaint against Franklin Resources, Inc. and certain of its subsidiaries (the “Company”), alleging violations of the Massachusetts Uniform Securities Act. The complaint arises from activity that occurred in 2001 during which time an officer of a Company subsidiary was negotiating an agreement with an investor relating to investments in a mutual fund and a hedge fund.

TG-19

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Notes to Financial Statements (continued)

6. REGULATORY MATTERS (cont.)

The Company, in addition to other entities within Franklin Templeton Investments, has been named in shareholder class actions related to the matter described above. The Company believes that the claims made in the lawsuit are without merit and it intends to defend vigorously against the allegations. The Company and the Fund may be named in similar civil actions related to the matter described above.

In addition, as part of ongoing investigations by the U.S. Securities and Exchange Commission (the “SEC”), the U.S. Attorney for the Northern District of California, the New York Attorney General, the California Attorney General, the U.S. Attorney for the District of Massachusetts, the Florida Department of Financial Services, and the Commissioner of Securities and the Attorney General of the State of West Virginia, relating to certain practices in the mutual fund industry, including late trading, market timing and sales compensation arrangements, the Company and its subsidiaries, as well as certain current or former executives and employees of the Company, have received requests for information and/or subpoenas to testify or produce documents. The Company and its current employees are providing documents and information in response to these requests and subpoenas. In addition, the Company has responded to requests for similar kinds of information from regulatory authorities in some of the foreign countries where the Company conducts its global asset management business.

The Staff of the SEC has informed the Company that it intends to recommend that the Commission authorize an action against an affiliate of the Fund’s adviser and a senior executive officer relating to the frequent trading issues that are the subject of the SEC’s investigation. These issues were previously disclosed as being under investigation by government authorities and the subject of an internal inquiry by the Company in its Annual Report on Form 10-K and on its public website. The Company currently is in discussions with the SEC Staff in an effort to resolve the issues raised in their investigation. Such discussions are preliminary and the Fund’s management has been advised that the Company cannot predict the likelihood of whether those discussions will result in a settlement and, if so, the terms of such settlement. The impact, if any, of these matters on the Fund is uncertain at this time. If the Company finds that it bears responsibility for any unlawful or improper conduct, it has committed to making the Fund or its shareholders whole, as appropriate.

TG-20

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Independent Auditors’ Report

To the Board of Trustees and Shareholders

of Franklin Templeton Variable Insurance Products Trust

In our opinion, the accompanying statement of assets and liabilities, including the statement of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Templeton Growth Securities Fund (the Fund) (one of the funds constituting the Franklin Templeton Variable Insurance Products Trust) at December 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

February 5, 2004, except for Note 6 as to which the date is February 12, 2004

TG-21

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Tax Designation (unaudited)

Under Section 854(b)(2) of the Code, the Fund hereby designates 28.40% of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended December 31, 2003.

At December 31, 2003, more than 50% of the Fund’s total assets were invested in securities of foreign issuers. In most instances, foreign taxes were withheld from dividends paid to the Fund on these investments. The Fund elects to treat foreign taxes paid under Section 853 of the Internal Revenue Code. This election will allow shareholders of record in June 2004, to treat their proportionate share of foreign taxes paid by the 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 foreign tax information will be disclosed in the June 30, 2004, semi-annual report of the Fund.

TG-22

INDEX DESCRIPTIONS

The indexes are unmanaged and include reinvested distributions.

Consumer Price Index (CPI) is a measure of the average changes in price for a fixed basket of goods and services regularly bought by U.S. consumers; published by the Bureau of Labor Statistics.

Credit Suisse First Boston (CSFB) High Yield Index is designed to mirror the investable universe of the U.S. dollar denominated high yield debt market.

Dow Jones Industrial Average (the Dow) is price-weighted based on the average market price of 30 blue chip stocks of companies that are generally industry leaders. The average is found by adding the prices of the 30 stocks and dividing by a denominator that has been adjusted for stock splits and other corporate actions.

J.P. Morgan Emerging Markets Bond Index Global (EMBIG) tracks total returns for U.S. dollar-denominated debt instruments issued by emerging markets sovereign and quasi-sovereign entities: Brady bonds, loans and Eurobonds.

J.P. Morgan EMU Government Bond Index is a euro-aggregated index weighted by market capitalization. The index includes only liquid bullet euro-denominated fixed-rate debt, which has been issued by participating governments. No callable, puttable or convertible features are allowed. Bonds must have at least 12 months remaining maturity. The EMU bond index is fully invested. All coupons received are immediately invested back into the entire index until the next index rebalancing.

J.P. Morgan Global Government Bond Index (JPM GGBI) tracks total returns of government bonds in developed countries globally. The bonds included in the index are weighted according to their market capitalization. The index is unhedged and expressed in terms of $US.

J.P. Morgan U.S. Government Bond Total Return Index includes only actively traded fixed-rate bonds with a remaining maturity of one year or longer. The index is based on the gross price (net price plus accrued interest) of bonds in the index. The index is expressed in terms of $US.

Lehman Brothers Intermediate U.S. Government Bond Index includes securities issued by the U.S. Treasury or agency. These include public obligations of the U.S. Treasury with remaining maturity of one year or more and publicly issued debt of U.S. governmental agencies, quasi-federal corporations, and corporate or foreign debt. All issues included must have one to ten years to final maturity and must be rated investment grade (Baa3 or better) by Moody’s Investors Service. They must also be dollar-denominated and non-convertible. Total return includes price appreciation/depreciation and income as a percentage of the original investment. The index is rebalanced monthly by market capitalization.

Lehman Brothers Mortgage-Backed Securities (MBS) Index covers the mortgage-backed pass-through securities of Ginnie Mae (GNMA), Fannie Mae (FNMA) and Freddie Mac (FHLMC). The securities must have a weighted average maturity of at least one year, have at least $200 million par amount outstanding and be fixed rate. The index excludes buydowns, graduated equity mortgages and project loans. Non-agency (whole loan), 20-year securities, ARM securities and CMOs are also excluded.

IND-1

Lehman Brothers U.S. Treasury Index includes public obligations of the U.S. Treasury with a remaining maturity of one year or more. All issues must have at least one year to final maturity regardless of call features, have at least $200 million par amount outstanding and rated investment grade (Baa3 or better) by Moody’s Investors Service. They must also be dollar-denominated, non-convertible and publicly issued. The index excludes Treasury bills (because of the maturity constraint), flower bonds, targeted investor notes, and state and local government series bonds, STRIPS and Treasury Inflation-Protection Securities.

Lehman Brothers U.S. Aggregate Index represents securities that are SEC-registered, taxable and dollar denominated. The index covers the U.S. investment grade fixed-rate bond market, with index components for government and corporate securities, mortgage pass-through securities and asset-backed securities. All issues included must have at least one year to final maturity and must be rated investment grade (Baa3 or better) by Moody’s Investors Service. They must also be dollar-denominated and non-convertible. Total return includes price appreciation/depreciation and income as a percentage of the original investment. The index is rebalanced monthly by market capitalization.

Lehman Brothers U.S. Government/Credit Index includes securities issued by the U.S. Treasury or agency and publicly issued U.S. corporate and specified foreign debentures and secured notes that meet the specified maturity, liquidity and quality requirements. These include public obligations of the U.S. Treasury with remaining maturity of one year or more and publicly issued debt of U.S. governmental agencies, quasi-federal corporations, and corporate or foreign debt. The credit portion includes both corporate and non-corporate sectors. The corporate sectors are industrial, utility, and finance, which includes both U.S. and non-U.S. corporations. The non-corporate sectors are sovereign, supranational, foreign agency, and foreign local government. All issues included must have at least one year to final maturity and must be rated investment grade (Baa3 or better) by Moody’s Investors Service. They must also be dollar-denominated and non-convertible. Total return includes price appreciation/depreciation and income as a percentage of the original investment. The index is rebalanced monthly by market capitalization.

Lipper Multi-Sector Income Funds Objective Average is an equally weighted average calculation of performance figures for all funds within the Lipper Multi-Sector Income Funds classification in the Lipper Open-End underlying funds universe. Lipper Multi-Sector Income Funds are defined as funds that seek current income by allocating assets among different fixed income securities sectors (not primarily in one sector except for defensive purposes), including U.S. and foreign governments, with a significant portion rated below investment grade. For the one-year period ended 12/31/03, there were 112 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.

IND-2

Lipper VIP Equity Income Funds Objective 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 are defined as funds that seek relatively high current income and growth of income through investing at least 60% of their portfolios in equity securities. For the one-year period ended 12/31/03, there were 56 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 Objective Average is an equally weighted average calculation of performance figures for all funds within the Lipper U.S. Government Funds classification in the Lipper VIP underlying funds universe. Lipper U.S. Government Funds are defined as funds that invest primarily in U.S. government and Agency issues. For the one-year period ended 12/31/03, there were 48 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 Income Funds Objective Average is an equally weighted average calculation of performance figures for all funds within the Lipper Income Funds classification in the Lipper VIP underlying funds universe. Lipper Income Funds seek a high level of current income by investing in income-producing stocks, bonds and money market instruments. For the one-year period ended 12/31/03, there were 14 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 Multi-Cap Value Funds Objective Average is an equally weighted average calculation of performance figures for all funds within the Lipper Multi-Cap Value Funds classification in the Lipper VIP underlying funds universe. Lipper Multi-Cap Value Funds are defined as funds that invest in a variety of market capitalization ranges without concentrating 75% of their equity assets in any one market capitalization range over an extended period of time. For the one-year period ended 12/31/03, there were 107 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 Target Maturity Funds Objective Average is an equally weighted average calculation of performance figures for all funds within the Lipper Target Maturity Funds classification in the Lipper VIP underlying funds universe. Lipper Target Maturity Funds are defined as funds that invest principally in zero coupon U.S. Treasury securities or in coupon-bearing U.S. government securities targeted to mature in a specific year. For the one-year period ended 12/31/03, there were 9 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 Utility Funds Objective Average is an equally weighted average calculation of performance figures for all funds within the Lipper Utility Funds classification in the Lipper VIP underlying funds universe. Lipper Utility Funds are defined as funds that invest primarily in utility shares. For the one-year period ended 12/31/03, there were 25 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.

IND-3

Merrill Lynch 2-, 5- and 10-Year Zero Coupon Bond Indexes include zero coupon bonds that pay no interest and are issued at a discount from redemption price.

Morgan Stanley Capital International (MSCI) All Country (AC) World Free Index is market capitalization-weighted and measures total returns of equity securities available to foreign (non-local) investors in developed and emerging markets globally.

Morgan Stanley Capital International (MSCI) Emerging Markets Free Index is market capitalization-weighted and measures total returns of equity securities available to foreign (non-local) investors in emerging markets globally.

Morgan Stanley Capital International (MSCI) Europe Australasia Far East (EAFE) Index is market capitalization-weighted and measures total returns of equity securities in developed markets in Europe, Australasia and the Far East.

Morgan Stanley Capital International (MSCI) Japan Index is market capitalization-weighted and measures total returns of equity securities in Japan.

Morgan Stanley Capital International (MSCI) Korea Index is market capitalization-weighted and measures total returns of equity securities in Korea.

Morgan Stanley Capital International (MSCI) World Financial Index is market capitalization-weighted and measures total returns of financial securities in developed markets globally.

Morgan Stanley Capital International (MSCI) World Index is market capitalization-weighted and measures total returns of equity securities in developed markets globally.

Mortgage Bankers Association Refinancing Index covers all mortgage applications to refinance an existing mortgage. It is the best overall gauge of mortgage refinancing activity.

Nasdaq Telecommunications Index is a capitalization-weighted index designed to measure performance of all Nasdaq stocks in the telecommunications sector. The index was developed with a base value of 100 as of February 5, 1971.

National Association of Securities Dealers Automated Quotations (Nasdaq) Composite Index measures all domestic and international common stocks listed on The Nasdaq Stock Market. The index is market value-weighted and includes over 3,000 companies.

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 1,000 largest companies in the Russell 3000 Index, which represented approximately 92% of total market capitalization of the Russell 3000 Index, as of 12/31/03.

Russell 1000 Value Index is market capitalization-weighted and measures performance of those Russell 1000 Index companies with lower price-to-book ratios and lower forecasted growth values.

IND-4

Russell 2000^® Index is market capitalization-weighted and measures performance of the 2,000 smallest companies in the Russell 3000 Index, which represented approximately 8% of total market capitalization of the Russell 3000 Index, as of 12/31/03.

Russell 2000 Value Index is market capitalization-weighted and measures performance of those Russell 2000 Index companies with lower price-to-book ratios and lower forecasted growth values.

Russell 2500^™ Growth Index is market capitalization-weighted and measures performance of those Russell 2500 Index companies with higher price-to-book ratios and higher forecasted growth values.

Russell 3000^® Growth Index is market capitalization-weighted and measures performance of those Russell 3000 Index companies with higher price-to-book ratios and higher forecasted growth values.

Russell 3000 Index is market capitalization-weighted and measures performance of the 3,000 largest U.S. companies based on total market capitalization, which represented approximately 98% of the investable U.S. equity market, as of 12/31/03.

Russell 3000 Value Index is market capitalization-weighted and measures performance of those Russell 3000 Index companies with lower price-to-book ratios and lower forecasted growth values.

Russell Midcap^® Value Index is market capitalization-weighted and measures performance of those Russell Midcap companies with lower price-to-book ratios and lower forecasted growth values.

Standard & Poor’s 500 Composite Index (S&P 500) consists of 500 stocks chosen for market size, liquidity and industry group representation. Each stock’s weight in the index is proportionate to its market value. The S&P 500 is one of the most widely used benchmarks of U.S. equity performance.

S&P/International Finance Corporation Investable (IFCI) Composite Index is a market capitalization weighted index designed to measure the performance of emerging market stocks. It tracks approximately 2,000 securities in countries such as Brazil, Mexico, China and South Korea. Performance represents total return in $US.

Wilshire Real Estate Securities Index is a broad measure of the performance of publicly traded real estate securities, such as real estate investment trusts and real estate operating companies. The index is capitalization-weighted and rebalanced monthly, and returns are calculated on a buy-and-hold basis.

IND-5

Board Members and Officers

Independent Board Members

Name, Age and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held
FRANK H. ABBOTT, III (82) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 1988	113	None
Principal Occupation During Past 5 Years: President and Director, Abbott Corporation (an investment company).
HARRIS J. ASHTON (71) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 1988	142	Director, Bar-S Foods (meat packing company).
Principal Occupation During Past 5 Years: Director of various companies; and formerly, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and President, Chief Executive Officer and Chairman of the Board, General Host Corporation (nursery and craft centers) (until 1998).
ROBERT F. CARLSON (75) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 1998	52	None
Principal Occupation During Past 5 Years: Senior Member and past President, Board of Administration, California Public Employees Retirement Systems (CALPERS); and formerly, member and Chairman of the Board, Sutter Community Hospitals; member, Corporate Board, Blue Shield of California; and Chief Counsel, California Department of Transportation.
S. JOSEPH FORTUNATO (71) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 1989	143	None
Principal Occupation During Past 5 Years: Attorney; and formerly, member of the law firm of Pitney, Hardin, Kipp & Szuch.
FRANK W.T. LAHAYE (74) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 1988	115	Director, The California Center for Land Recycling (redevelopment).
Principal Occupation During Past 5 Years: General Partner, Las Olas L.P. (Asset Management); and formerly, Chairman, Peregrine Venture Management Company (venture capital).
GORDON S. MACKLIN (75) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 1993	142	Director, White Mountains Insurance Group, Ltd. (holding company); Martek Biosciences Corporation; MedImmune, Inc. (biotechnology); Overstock.com (Internet services); and Spacehab, Inc. (aerospace services); and formerly, Director, MCI Communication Corporation (subsequently known as MCI WorldCom, Inc. and WorldCom, Inc.) (communications services) (1988-2002).
Principal Occupation During Past 5 Years: Deputy Chairman, White Mountains Insurance Group, Ltd. (holding company); and formerly, Chairman, White River Corporation (financial services) (1993-1998) and Hambrecht & Quist Group (investment banking) (1987-1992); and President, National Association of Securities Dealers, Inc. (1970-1987).

BOD-1

Interested Board Members and Officers

Name, Age and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held
**CHARLES B. JOHNSON (70) One Franklin Parkway San Mateo, CA 94403-1906	Trustee and Chairman of the Board	Since 1988	142	None
Principal Occupation During Past 5 Years: Chairman of the Board, Member—Office of the Chairman and Director, Franklin Resources, Inc.; Vice President, Franklin Templeton Distributors, Inc.; Director, Fiduciary Trust Company International; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 46 of the investment companies in Franklin Templeton Investments.
**RUPERT H. JOHNSON, JR. (63) One Franklin Parkway San Mateo, CA 94403-1906	Trustee, President and Chief Executive Officer—Investment Management	Trustee since 1988 and President and Chief Executive Officer—Investment Management since 2002	125	None
Principal Occupation During Past 5 Years: Vice Chairman, Member—Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director, Franklin Templeton Distributors, Inc.; Director, Franklin Advisers, Inc. and Franklin Investment Advisory Services, Inc.; Senior Vice President, Franklin Advisory Services, LLC; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 49 of the investment companies in Franklin Templeton Investments.
**CHRISTOPHER H. PINKERTON (45) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 2001	22	None
Principal Occupation During Past 5 Years: President, Chairman and Chief Executive Officer, USAllianz Investor Services, LLC and USAllianz Advisors; President and Chief Executive Officer, USAllianz Investment Advisor and USAllianz VIP Trust; Senior Vice President, Variable Products Division, Allianz Life Insurance Company of North America; fellow, Life Management Institute; and formerly, Vice President of Marketing, Nationwide Financial Services (until 1999).
HARMON E. BURNS (58) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 1988	Not Applicable	None
Principal Occupation During Past 5 Years: Vice Chairman, Member—Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director, Franklin Templeton Distributors, Inc.; Executive Vice President, Franklin Advisers, Inc.; Director, Franklin Investment Advisory Services, Inc.; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 49 of the investment companies in Franklin Templeton Investments.
MARTIN L. FLANAGAN (43) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 1995	Not Applicable	None
Principal Occupation During Past 5 Years: Co-President and Chief Executive Officer, Franklin Resources, Inc.; Senior Vice President and Chief Financial Officer, Franklin Mutual Advisers, LLC; Executive Vice President, Chief Financial Officer and Director, Templeton Worldwide, Inc.; Executive Vice President and Chief Operating Officer, Templeton Investment Counsel, LLC; President and Director, Franklin Advisers, Inc.; Executive Vice President, Franklin Investment Advisory Services, Inc. and Franklin Templeton Investor Services, LLC; Chief Financial Officer, Franklin Advisory Services, LLC; Chairman, Franklin Templeton Services, LLC; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 49 of the investment companies in Franklin Templeton Investments.

BOD-2

Name, Age and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held
JIMMY D. GAMBILL (56) 500 East Broward Blvd. Suite 2100 Fort Lauderdale, FL 33394-3091	Senior Vice President and Chief Executive Officer—Finance and Administration	Since 2002	Not Applicable	None
Principal Occupation During Past 5 Years: President, Franklin Templeton Services, LLC; Senior Vice President, Templeton Worldwide, Inc.; and officer of 51 of the investment companies in Franklin Templeton Investments.
DAVID P. GOSS (56) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2000	Not Applicable	None
Principal Occupation During Past 5 Years: Associate General Counsel, Franklin Resources, Inc.; officer and director of one of the subsidiaries of Franklin Resources, Inc.; officer of 51 of the investment companies in Franklin Templeton Investments; and formerly, President, Chief Executive Officer and Director, Property Resources Equity Trust (until 1999) and Franklin Select Realty Trust (until 2000).
BARBARA J. GREEN (56) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2000	Not Applicable	None
Principal Occupation During Past 5 Years: Vice President, Deputy General Counsel and Secretary, Franklin Resources, Inc.; Secretary and Senior Vice President, Templeton Worldwide, Inc.; Secretary, Franklin Advisers, Inc., Franklin Advisory Services, LLC, Franklin Investment Advisory Services, Inc., Franklin Mutual Advisers, LLC, Franklin Templeton Alternative Strategies, Inc., Franklin Templeton Investor Services, LLC, Franklin Templeton Services, LLC, Franklin Templeton Distributors, Inc., Templeton Investment Counsel, LLC, and Templeton/Franklin Investment Services, Inc.; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 51 of the investment companies in Franklin Templeton Investments; and formerly, Deputy Director, Division of Investment Management, Executive Assistant and Senior Advisor to the Chairman, Counselor to the Chairman, Special Counsel and Attorney Fellow, U.S. Securities and Exchange Commission (1986-1995); Attorney, Rogers & Wells (until 1986); and Judicial Clerk, U.S. District Court (District of Massachusetts) (until 1979).
MICHAEL O. MAGDOL (66) 600 Fifth Avenue Rockefeller Center New York, NY 10048-0772	Vice President—AML Compliance	Since 2002	Not Applicable	Director, FTI Banque, Arch Chemicals, Inc. and Lingnan Foundation.
Principal Occupation During Past 5 Years: Vice Chairman, Chief Banking Officer and Director, Fiduciary Trust Company International; and officer and/or director, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 48 of the investment companies in Franklin Templeton Investments.
KIMBERLEY H. MONASTERIO (40) One Franklin Parkway San Mateo, CA 94403-1906	Treasurer and Chief Financial Officer	Treasurer since 2000 and Chief Financial Officer since 2002	Not Applicable	None
Principal Occupation During Past 5 Years: Senior Vice President, Franklin Templeton Services, LLC; and officer of 51 of the investment companies in Franklin Templeton Investments.

BOD-3

Name, Age and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held
MURRAY L. SIMPSON (66) One Franklin Parkway San Mateo, CA 94403-1906	Vice President and Secretary	Since 2000	Not Applicable	None
Principal Occupation During Past 5 Years: Executive Vice President and General Counsel, Franklin Resources, Inc.; officer and/or director, as the case may be, of some of the subsidiaries of Franklin Resources, Inc. and of 51 of the investment companies in Franklin Templeton Investments; and formerly, Chief Executive Officer and Managing Director, Templeton Franklin Investment Services (Asia) Limited (until 2000); and Director, Templeton Asset Management Ltd. (until 1999).

  *We base the number of portfolios on each separate series of the U.S. registered investment companies within the Franklin Templeton Investments fund complex. These portfolios have a common investment adviser or affiliated investment advisers.

**Charles B. Johnson and Rupert H. Johnson, Jr. are considered interested persons of the Trust under the federal securities laws due to their positions as officers and directors and major shareholders of Franklin Resources, Inc., which is the parent company of the Trusts’ adviser and distributor. Mr. Pinkerton is considered an interested person of the Trust because of the share ownership of Allianz Life in the Trust.

Note: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers.

The Sarbanes-Oxley Act of 2002 and Rules adopted by the Securities and Exchange Commission require the Fund to disclose whether the Fund’s Audit Committee includes at least one member who is an audit committee financial expert within the meaning of such Act and Rules. The Fund’s Board of Directors have determined that there is at least one such financial expert on the Audit Committee and has designated Frank W.T. LaHaye as its audit committee financial expert. The Board believes that Mr. LaHaye qualifies as such an expert in view of his extensive business background and experience, including service as President and Director of McCormick Selph Associates from 1954 through 1965; Director and Chairman of Teledyne Canada Ltd. from 1966 through 1971; Director and Chairman of Quarterdeck Corporation from 1982 through 1998; and services as a Director of various other public companies including U.S. Telephone Inc. (1981-1984), Fisher Imaging Inc. (1991-1998) and Digital Transmissions Systems (1995-1999). In addition, Mr. LaHaye served from 1981 to 2000 as a Director and Chairman of Peregrine Venture Management Co., a venture capital firm, and has been a Member and Chairman of the Fund’s Audit Committee since its inception. As a result of such background and experience, the Board of Directors believes that Mr. LaHaye has acquired an understanding of generally accepted accounting principles and financial statements, the general application of such principles in connection with the accounting estimates, accruals and reserves, and analyzing and evaluating financial statements that present a breadth and level of complexity of accounting issues generally comparable to those of the Fund, as well as an understanding of internal controls and procedures for financial reporting and an understanding of audit committee functions. Mr. LaHaye is an independent Director as that term is defined under the relevant Securities and Exchange Commission Rules and Releases.

The Statement of Additional Information (SAI) Includes additional information about the board members and is available, without charge, upon request. Contract owners may call 1-800/321-8563 or their insurance companies to request the SAI.

BOD-4

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Proxy Voting Policies and Procedures

The Fund has established Proxy Voting Policies and Procedures (“Policies”) that the Fund uses to determine how to vote proxies relating to portfolio securities. Shareholders may view the Fund’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 1-954/847-2268 or by sending a written request to: Franklin Templeton Companies, LLC, 500 East Broward Boulevard, Suite 1500, Fort Lauderdale, FL 33394, Attention: Proxy Group.

PV-1

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 10(a), the Registrant is attaching as an exhibit a copy of its code of ethics that applies to its principal executive officers financial and accounting officer.

FRANKLIN TEMPLETON INVESTMENTS

CODE OF ETHICS

AND

POLICY STATEMENT ON INSIDER TRADING

TABLE OF CONTENTS

CODE OF ETHICS	1
PART 1 - STATEMENT OF PRINCIPLES	2
PART 2 - PURPOSES, AND CONSEQUENCES OF NON-COMPLIANCE	2
PART 3 - COMPLIANCE REQUIREMENTS FOR ALL ACCESS PERSONS	3
PART 4 - ADDITIONAL COMPLIANCE REQUIREMENTS APPLICABLE TO PORTFOLIO PERSONS.	7
PART 5 - REPORTING REQUIREMENTS FOR ALL ACCESS PERSONS	8
PART 6 - PRE-CLEARANCE REQUIREMENTS	10
PART 7 - PENALTIES FOR VIOLATIONS OF THE CODE	13
PART 8 - A REMINDER ABOUT THE FRANKLIN TEMPLETON INVESTMENTS INSIDER TRADING POLICY	14
PART 9 - FOREIGN COUNTRY SUPPLEMENTS (CANADA)	14
APPENDIX A: COMPLIANCE PROCEDURES AND DEFINITIONS	16
I. RESPONSIBILITIES OF EACH DESIGNATED COMPLIANCE OFFICER	16
II. COMPILATION OF DEFINITIONS OF IMPORTANT TERMS	20
III. SECURITIES EXEMPT FROM THE PROHIBITED, REPORTING, AND PRE-CLEARANCE PROVISIONS	21
IV. LEGAL REQUIREMENT	22
APPENDIX B: ACKNOWLEGMENT FORM AND SCHEDULES	23
ACKNOWLEDGMENT FORM	23
SCHEDULE A: LEGAL AND COMPLIANCE OFFICERS AND PRECLEARANCE DESK TELEPHONE & FAX NUMBERS	24
SCHEDULE B - TRANSACTIONS REPORT	24
SCHEDULE C - INITIAL, ANNUAL, & UPDATED DISCLOSURE OF ACCESS PERSONS SECURITIES HOLDINGS	25
SCHEDULE D - NOTIFICATION OF SECURITIES ACCOUNT	27
SCHEDULE E - NOTIFICATION OF DIRECT OR INDIRECT BENEFICIAL INTEREST	28
SCHEDULE F - INITIAL, ANNUAL, & UPDATED DISCLOSURE OF SECURITIES ACCOUNTS	29
SCHEDULE G - INITIAL AND ANNUAL CERTIFICATION OF DISCRETIONARY AUTHORITY	30
SCHEDULE H: CHECKLIST FOR INVESTMENTS IN PARTNERSHIPS AND SECURITIES ISSUED IN PRIVATE PLACEMENTS MADE BY PORTFOLIO PERSONS	31
APPENDIX C: INVESTMENT ADVISOR AND BROKER-DEALER AND OTHER SUBSIDIARIES OF FRANKLIN RESOURCES, INC. - DECEMBER 2002	33
POLICY STATEMENT ON INSIDER TRADING	35
A. LEGAL REQUIREMENT	35
B. WHO IS AN INSIDER?	35
C. WHAT IS MATERIAL INFORMATION?	36
D. WHAT IS NON-PUBLIC INFORMATION?	36
E. BASIS FOR LIABILITY	36
F. PENALTIES FOR INSIDER TRADING	37
G. INSIDER TRADING PROCEDURES	37
FAIR DISCLOSURE POLICIES AND PROCEDURES
A. WHAT IS REGULATION FD?	38

Page 1

B. FTI’S CORPORAE POLICY FOR REGULATION FD	39
C. GENERAL PROVISIONS OF REGULATION FD	39
D. PERSONS TO WHOM SELECTIVE DISCLOSURE MAY NOT BE MADE	40
E. EXCLUSIONS FROM REGULATION FD	40
F. METHODS OF PUBLIC DISCLOSUREG	40
G. TRAINING	41
H. QUESTIONS	41
I. FREQUENTLY ASKED QUESTIONS:	41
J. SUPPLEMENTAL INFORMATION—SEC’S DIVISION OF CORPORATE FINANCE	43
(1) INTERPRETATIONS ISSUED OCTOBER 2000	43
(2) ADDITIONAL INTERPRETATIONS ISSUED DECEMBER 2000	46
SUPPLEMENTAL MEMORANDUM	46
CHINESE WALL PROCEDURES	46

CODE OF ETHICS

Franklin Resources, Inc. and all of its subsidiaries, and the funds in the Franklin Templeton Group of Funds (the “Funds”) (collectively, “Franklin Templeton Investments”) will follow this Code of Ethics (the “Code”) and Policy Statement on Insider Trading (the “Insider Trading Policy”), including any supplemental memoranda. Additionally, the subsidiaries listed in Appendix C of this Code, together with Franklin Resources, Inc., the Funds, the Fund’s investment advisers and principal underwriter, have adopted the Code and Insider Trading Policy.

PART 1 - STATEMENT OF PRINCIPLES

Franklin Templeton Investments’ policy is that the interests of shareholders and clients are paramount and come before the interests of any director, officer or employee of Franklin Templeton Investments.¹

Personal investing activities of ALL directors, officers and employees of Franklin Templeton Investments should be conducted in a manner to avoid actual OR potential conflicts of interest with Franklin Templeton Investments, Fund shareholders, and other clients of any Franklin Templeton adviser.

Directors, officers and employees of Franklin Templeton Investments shall use their positions with Franklin Templeton Investments and any investment opportunities they learn of because of their positions with Franklin Templeton Investments, in a manner consistent with their fiduciary duties for the benefit of Fund shareholders, and clients.

PART 2 - PURPOSES, AND CONSEQUENCES OF NON-COMPLIANCE

It is important that you read and understand this document, because its overall purpose is to help all of us comply with the law and to preserve and protect the outstanding reputation of Franklin Templeton Investments. This document was adopted to comply with Securities and Exchange Commission rules under the Investment Company Act of 1940 (“1940 Act”), the Investment Advisers Act of 1940 (“Advisers Act”), the Insider Trading and Securities Fraud Enforcement Act of 1988 (“ITSFEA”), industry practice and the recommendations contained in the ICI’s Report of the Advisory Group on Personal Investing. Any violation of the Code or Insider Trading Policy, including engaging in a prohibited transaction or failing to file required reports, may result in disciplinary action, and, when appropriate, termination of employment and/or referral to appropriate governmental agencies.

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PART 3 - COMPLIANCE REQUIREMENTS FOR ALL ACCESS PERSONS

3.1 WHO IS COVERED BY THE CODE AND HOW DOES IT WORK?

The principles contained in the Code must be observed by ALL directors, officers and employees² of Franklin Templeton Investments. However, there are different categories of restrictions on personal investing activities. The category in which you have been placed generally depends on your job function, although unique circumstances may result in you being placed in a different category.

The Code covers the following categories of employees who are described below:

(1) ACCESS PERSONS: Access Persons are those employees who have “ACCESS TO INFORMATION” concerning recommendations made to a Fund or client with regard to the purchase or sale of a security. Examples of “ACCESS TO INFORMATION” would include having access to trading systems, portfolio accounting systems, research databases or settlement information. Access Persons would typically include employees, including Futures Associates, in the following departments:

• fund accounting;

• investment operations;

• information services & technology;

• product management;

• legal and legal compliance

• and anyone else designated by the Director, Global Compliance

In addition, you are an Access Person if you are any of the following:

• an officer or and directors of funds;

• an officer or director of an investment advisor or broker-dealer subsidiary in Franklin Templeton Investments;

• a person that controls those entities; and

• any Franklin Resources’ Proprietary Account (“Proprietary Account”)³

(2) PORTFOLIO PERSONS: Portfolio Persons are a subset of Access Persons and are those employees of Franklin Templeton Investments, who, in connection with his or her regular functions or duties, makes or participates in the decision to purchase or sell a security by a Fund in Franklin Templeton Investments, or any other client or if his or her functions relate to the making of any recommendations about those purchases or sales. Portfolio Persons include:

• portfolio managers;

• research analysts;

• traders;

• employees serving in equivalent capacities (such as Futures Associates);

• employees supervising the activities of Portfolio Persons; and anyone else

• designated by the Director, Global Compliance

(3) NON-ACCESS PERSONS: If you are an employee of Franklin Templeton Investments AND you do not fit into any of the above categories, you are a Non-Access Person. Because you do not normally receive confidential information about Fund portfolios, you are subject only to the prohibited transaction provisions described in 3.4 of this Code and the Franklin Resources, Inc.’s Standards of Business Conduct contained in the Employee Handbook.

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Please contact the Legal Compliance Department if you are unsure as to what category you fall in or whether you should be considered to be an Access Person or Portfolio Person.

The Code works by prohibiting some transactions and requiring pre-clearance and reporting of most others. NON-ACCESS PERSONS do not have to pre-clear their security transactions, and, in most cases, do not have to report their transactions. “INDEPENDENT DIRECTORS” need not pre-clear or report any securities transaction unless you knew, or should have known that, during the 15-day period before or after the transaction, the security was purchased or sold or considered for purchase or sale by a Fund or Franklin Resources for a Fund. (SEE Section 5.2.B below.) HOWEVER, PERSONAL INVESTING ACTIVITIES OF ALL EMPLOYEES AND INDEPENDENT DIRECTORS ARE TO BE CONDUCTED IN COMPLIANCE WITH THE PROHIBITED TRANSACTIONS PROVISIONS CONTAINED IN 3.4 BELOW. If you have any questions regarding your personal securities activity, contact the Legal Compliance Department.

3.2 WHAT ACCOUNTS AND TRANSACTIONS ARE COVERED?

The Code covers all of your personal securities accounts and transactions, as well as transactions by any of Franklin Resource’s Proprietary Accounts. It also covers all securities and accounts in which you have “beneficial ownership.”⁴ A transaction by or for the account of your spouse, or any other family member living in your home is considered to be the same as a transaction by you. Also, a transaction for any account in which you have any economic interest (other than the account of an unrelated client for which advisory fees are received) AND have or share investment control is generally considered the same as a transaction by you. For example, if you invest in a corporation that invests in securities and you have or share control over its investments, that corporation’s securities transactions are considered yours.

However, you are not deemed to have a pecuniary interest in any securities held by a partnership, corporation, trust or similar entity unless you control, or share control of such entity, or have, or share control over its investments. For example, securities transactions of a trust or foundation in which you do not have an economic interest (i.e., you are not the trustor or beneficiary) but of which you are a trustee are not considered yours unless you have voting or investment control of its assets. Accordingly, each time the words “you” or “your” are used in this document, they apply not only to your personal transactions and accounts, but also to all transactions and accounts in which you have any direct or indirect beneficial interest. If it is not clear whether a particular account or transaction is covered, ask a Preclearance Officer for guidance.

3.3 WHAT SECURITIES ARE EXEMPT FROM THE CODE OF ETHICS?

You do not need to pre-clear OR report transactions of the following securities:

(1) securities that are direct obligations of the U. S. Government (i.e., issued or guaranteed by the U.S. Government, such as Treasury bills, notes and bonds, including U.S. Savings Bonds and derivatives thereof);

(2) high quality short-term instruments, including but not limited to bankers’ acceptances, bank certificates of deposit, commercial paper and repurchase agreements;

(3) shares of registered open-end investment companies (“mutual funds”); and

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(4) commodity futures (excluding futures on individual securities), currencies, currency forwards and derivatives thereof.

Such transactions are also exempt from: (i) the prohibited transaction provisions contained in Part 3.4 such as front-running; (ii) the additional compliance requirements applicable to portfolio persons contained in Part 4; and (iii) the applicable reporting requirements contained in Part 5.

3.4 PROHIBITED TRANSACTIONS FOR ALL ACCESS PERSONS

A. “INTENT” IS IMPORTANT

Certain transactions described below have been determined by the courts and the SEC to be prohibited by law. The Code reiterates that these types of transactions are a violation of the Statement of Principals and are prohibited. Preclearance, which is a cornerstone of our compliance efforts, cannot detect transactions which are dependent upon INTENT, or which by their nature, occur before any order has been placed for a fund or client. A Preclearance Officer, who is there to assist you with compliance with the Code, CANNOT guarantee any transaction or transactions comply with the Code or the law. The fact that your transaction receives preclearance, shows evidence of good faith, but depending upon all the facts, may not provide a full and complete defense to any accusation of violation of the Code or of the law. For example, if you executed a transaction for which you received approval, or if the transaction was exempt from preclearance (e.g., a transaction for 100 shares or less), would not preclude a subsequent finding that front-running or scalping occurred because such activity are dependent upon your intent. Intent cannot be detected during preclearance, but only after a review of all the facts.

In the final analysis, compliance remains the responsibility of EACH individual effecting personal securities transactions.

B. FRONT-RUNNING: TRADING AHEAD OF A FUND OR CLIENT

You cannot front-run any trade of a Fund or client. The term “front-run” means knowingly trading before a contemplated transaction by a Fund or client of any Franklin Templeton adviser, whether or not your trade and the Fund’s or client’s trade take place in the same market. Thus, you may not:

(1) purchase a security if you intend, or know of Franklin Templeton Investments’ intention, to purchase that security or a related security on behalf of a Fund or client, or

(2) sell a security if you intend, or know of Franklin Templeton Investments’ intention, to sell that security or a related security on behalf of a Fund or client.

C. SCALPING.

You cannot purchase a security (or its economic equivalent) with the intention of recommending that the security be purchased for a Fund, or client, or sell short a security (or its economic equivalent) with the intention of recommending that the security be sold for a Fund or client. Scalping is prohibited whether or not you realize a profit from such transaction.

D. TRADING PARALLEL TO A FUND OR CLIENT

You cannot buy a security if you know that the same or a related security is being bought contemporaneously by a Fund or client, or sell a security if you know that the same or a related security is being sold contemporaneously by a Fund or client.

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E. TRADING AGAINST A FUND OR CLIENT

You cannot:

(1) buy a security if you know that a Fund or client is selling the same or a related security, or has sold the security, until seven (7) calendar days after the Fund’s or client’s order has either been executed or withdrawn, or

(2) sell a security if you know that a Fund or client is buying the same or a related security, or has bought the security until seven (7) calendar days after the Fund’s or client’s order has either been executed or withdrawn.

Refer to Section I.A., “Pre-Clearance Standards,” of Appendix A of the Code for more details regarding the preclearance of personal securities transactions.

F. USING PROPRIETARY INFORMATION FOR PERSONAL TRANSACTIONS

You cannot buy or sell a security based on Proprietary Information ⁵ without disclosing the information and receiving written authorization. If you wish to purchase or sell a security about which you obtained such information, you must report all of the information you obtained regarding the security to the Appropriate Analyst(s)⁶, or to the Director, Global Compliance for dissemination to the Appropriate Analyst(s).

You will be permitted to purchase or sell such security if the Appropriate Analyst(s) confirms to the Preclearance Desk that there is no intention to engage in a transaction regarding the security within seven (7) calendar days on behalf of an Associated Client⁷ and you subsequently preclear such security in accordance with Part 6 below.

G. CERTAIN TRANSACTIONS IN SECURITIES OF FRANKLIN RESOURCES, INC., AND AFFILIATED CLOSED-END FUNDS, AND REAL ESTATE INVESTMENT TRUST

If you are an employee of Franklin Resources, Inc. or any of its affiliates, including Franklin Templeton Investments, you cannot effect a short sale of the securities, including “short sales against the box” of Franklin Resources, Inc., or any of the Franklin or Templeton closed-end funds, or any other security issued by Franklin Resources, Inc. or its affiliates. This prohibition would also apply to effecting economically equivalent transactions, including, but not limited to purchasing and selling call or put options and “swap” transactions or other derivatives. Officers and directors of Franklin Templeton Investments who may be covered by Section 16 of the Securities Exchange Act of 1934, are reminded that their obligations under that section are in addition to their obligations under this Code.

3.5 SERVICE AS A DIRECTOR

As an employee of Franklin Templeton Investments, you may not serve as a director, trustee, or in a similar capacity for any public or private company (excluding not-for-profit companies, charitable groups, and eleemosynary organizations) unless you receive approval from Franklin Resources, Inc. Presidents (excluding the vote of any member who is seeking such approval for himself) and it is determined that your service is consistent with the interests of the clients of Franklin Templeton Investments. You must notify the Legal Compliance Department in writing of your interest in serving as a director, which includes the justification for such directorship. Legal Compliance will process the request through Franklin Resources, Inc. Presidents.

Legal Compliance will advise you of Franklin Resources, Inc. Presidents decision. If approved, the Legal Compliance Department will furnish procedures applicable to serving as an outside director to you.

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PART 4 - ADDITIONAL COMPLIANCE REQUIREMENTS APPLICABLE TO PORTFOLIO PERSONS8

4.1 REQUIREMENT TO DISCLOSE INTEREST AND METHOD OF DISCLOSURE

As a Portfolio Person, you must promptly disclose your direct or indirect beneficial interest in a security whenever you learn that the security is under consideration for purchase or sale by an Associated Client in the Franklin Templeton Group and you;

(1) Have or share investment control of the Associated Client;

(2) Make any recommendation or participate in the determination of which recommendation shall be made on behalf of the Associated Client; or

(3) Have functions or duties that relate to the determination of which recommendation shall be made to the Associated Client.

In such instances, you must initially disclose that beneficial interest orally to the primary portfolio manager (or other Appropriate Analyst) of the Associated Client(s) considering the security, the Director of Research and Trading or the Director, Global Compliance. Following that oral disclosure, you must send a written acknowledgment of that interest on Schedule E (or on a form containing substantially similar information) to the primary portfolio manager (or other Appropriate Analyst), with a copy to the Legal Compliance Department.

4.2 SHORT SALES OF SECURITIES

You cannot sell short ANY security held by your Associated Clients, including “short sales against the box”. Additionally, Portfolio Persons associated with the Templeton Group of Funds and clients cannot sell short any security on the Templeton “Bargain List”. This prohibition would also apply to effecting economically equivalent transactions, including, but not limited to, sales of uncovered call options, purchases of put options while not owning the underlying security and short sales of bonds that are convertible into equity positions.

4.3 SHORT SWING TRADING

Portfolio Persons cannot profit from the purchase and sale or sale and purchase within sixty calendar days of any security, including derivatives. Portfolio Persons are responsible for transactions that may occur in margin and option accounts and all such transactions must comply with this restriction.⁸ This restriction does NOT apply to:

(1) trading within a shorter period if you do not realize a profit and if you do not violate any other provisions of this Code; AND

(2) profiting on the purchase and sale or sale and purchase within sixty calendar days of the following securities:

¨ securities that are direct obligations of the U.S. Government, such as Treasury bills, notes and bonds, and U.S. Savings Bonds and derivatives thereof;

¨ high quality short-term instruments (“money market instruments”) including but not limited to (i) bankers’ acceptances, (ii) U.S. bank certificates of deposit; (iii) commercial paper; and (iv) repurchase agreements;

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¨ shares of registered open-end investment companies including Exchange Traded Funds (EFT) and Holding Company Depository Receipts (Hldrs);

¨ commodity futures, currencies, currency forwards and derivatives thereof.

Calculation of profits during the 60-calendar day holding period generally will be based on “last-in, first-out” (“LIFO”). Portfolio Persons may elect to calculate their 60 calendar day profits on either a LIFO or FIFO (“first-in, first-out”) basis when there has not been any activity in such security by their Associated Clients during the previous 60 calendar days.

4.4 SECURITIES SOLD IN A PUBLIC OFFERING

Portfolio Persons cannot buy securities in any initial public offering, or a secondary offering by an issuer, INCLUDING initial public offerings of securities made by closed-end funds and real estate investment trusts advised by Franklin Templeton Investments. Purchases of open-end mutual funds are excluded from this prohibition.

4.5 INTERESTS IN PARTNERSHIPS AND SECURITIES ISSUED IN PRIVATE PLACEMENTS

Portfolio Persons cannot acquire limited partnership interests or other securities in private placements unless they:

(1) complete the Private Placement Checklist (Schedule H);

(2) provide supporting documentation (e.g., a copy of the offering memorandum); and

(3) obtain approval of the appropriate Chief Investment Officer; and

(4) submit all documents to the Legal Compliance Department

Approval will only be granted after the Director of Global Compliance consults with an executive officer of Franklin Resources, Inc.

PART 5 - REPORTING REQUIREMENTS FOR ALL ACCESS PERSONS

5.1 REPORTING OF BENEFICIAL OWNERSHIP AND SECURITIES TRANSACTIONS

Compliance with the following personal securities transaction reporting procedures is essential to enable us to meet our responsibilities to Funds and other clients and to comply with regulatory requirements. You are expected to comply with both the letter and spirit of these requirements, including completing and filing all reports required under the Code in a timely manner.

5.2 INITIAL HOLDINGS AND BROKERAGE ACCOUNT REPORTS

A. ALL ACCESS PERSONS (EXCEPT INDEPENDENT DIRECTORS)

Every employee (new or transfer) of Franklin Templeton Investments who becomes an Access Person, must file:

(1) An Acknowledgement Form;

(2) Schedule C: Initial, Annual & Updated Disclosure of Securities Holdings; and

(3) Schedule F: Initial, Annual & Updated Disclosure of Securities Accounts

The Acknowledgement Form, Schedule C and Schedule F MUST be completed and returned to the Legal Compliance Department within 10 CALENDAR DAYS of the date the employee becomes an access person.

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5.3 QUARTERLY TRANSACTION REPORTS

A. ALL ACCESS PERSONS (EXCEPT INDEPENDENT DIRECTORS)

You MUST report ALL securities transactions by; (i) providing the Legal Compliance Department with copies of ALL broker’s confirmations and statements within 10 calendar days after the end of the calendar quarter (which may be sent under separate cover by the broker) showing ALL transactions and holdings in securities AND (ii) certifying by January 30th of each year that you have disclosed all such brokerage accounts on Schedule F to the Legal Compliance Department. The brokerage statements and confirmations must include all transactions in securities in which you have, or by reason of the transaction acquire any direct or indirect beneficial ownership, including transactions in a discretionary account and transactions for any account in which you have any economic interest AND have or share investment control. Also, if you acquire securities by any other method which is not being reported to the Legal Compliance Department by a duplicate confirmation statement at or near the time of the acquisition, you must report that acquisition to the Legal Compliance Department on Schedule B within 10 calendar days after you are notified of the acquisition. Such acquisitions include, among other things, securities acquired by gift, inheritance, vesting,⁹ stock splits, merger or reorganization of the issuer of the security.

You must file these documents with the Legal Compliance Department not later than 10 calendar days after the end of each quarter, but you need not show or report transactions for any account over which you had no direct or indirect influence or control.¹⁰ Failure to timely report transactions is a violation of Rule 17j-1 as well as the Code, and may be reported to the Fund’s Board of Directors and may also result, among other things, in denial of future personal security transaction requests.

B. INDEPENDENT DIRECTORS

If you are a director of a Fund within Franklin Templeton Investments but you are not an “interested person” of the Fund, you are not required to file transaction reports unless you knew or should have known that, during the 15-day period before or after a transaction, the security was purchased or sold, or considered for purchase or sale, by a Fund or by Franklin Templeton Investments on behalf of a Fund.

5.4 ANNUAL REPORTS - ALL ACCESS PERSONS

A. SECURITIES ACCOUNTS REPORTS (EXCEPT INDEPENDENT DIRECTORS)

As an access person, you must file a report of all personal securities accounts on Schedule F, with the Legal Compliance Department, annually by January 30th. You must report the name and description of each securities account in which you have a direct or indirect beneficial interest, including securities accounts of a spouse and minor children. You must also report any account in which you have any economic interest AND have or share investment control (e.g., trusts, foundations, etc.) other than an account for a Fund in, or a client of, Franklin Templeton Investments.

B. SECURITIES HOLDINGS REPORTS (EXCEPT INDEPENDENT DIRECTORS)

You must file a report of personal securities holdings on Schedule C, with the Legal Compliance Department, by January 30th of each year. This report should include ALL of your securities holdings, including any security acquired by a transaction, gift, inheritance, vesting, merger or reorganization of the issuer of the security, in which you have any direct or indirect beneficial ownership, including securities holdings in a discretionary account and for any account in which you have any economic interest AND have or share investment control. Your securities holding information must be current as of a date no more than 30 days before the report is submitted. You may attach copies of

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year-end brokerage statements to the Schedule C in lieu of listing each security position on the schedule.

C. CERTIFICATION OF COMPLIANCE WITH THE CODE OF ETHICS (INCLUDING INDEPENDENT DIRECTORS)

All access persons, including independent directors, will be asked to certify that they will comply with FRANKLIN TEMPLETON INVESTMENTS’ CODE OF ETHICS AND POLICY STATEMENT ON INSIDER TRADING by filing the Acknowledgment Form with the Legal Compliance Department within 10 business days of receipt of the Code. Thereafter, you will be asked to certify that you have complied with the Code during the preceding year by filing a similar Acknowledgment Form by January 30 of each year.

5.5 BROKERAGE ACCOUNTS AND CONFIRMATIONS OF SECURITIES TRANSACTIONS (EXCEPT INDEPENDENT DIRECTORS)

If you are an access person, in Franklin Templeton Investments, before or at a time contemporaneous with opening a brokerage account with a registered broker-dealer, or a bank, or placing an initial order for the purchase or sale of securities with that broker-dealer or bank, you must:

(1) notify the Legal Compliance Department, in writing, by completing Schedule D or by providing substantially similar information; and

(2) notify the institution with which the account is opened, in writing, of your association with Franklin Templeton Investments.

The Compliance Department will request the institution in writing to send to it duplicate copies of confirmations and statements for all transactions effected in the account simultaneously with their mailing to you.

If you have an existing account on the effective date of this Code or upon becoming an access person, you must comply within 10 days with conditions (1) and (2) above.

PART 6 - PRE-CLEARANCE REQUIREMENTS

6.1 PRIOR APPROVAL OF SECURITIES TRANSACTIONS

A. LENGTH OF APPROVAL

Unless you are covered by Paragraph C or D below, you cannot buy or sell any security, without first contacting a Preclearance Officer by fax, phone, or e-mail and obtaining his or her approval. Approval is good until the close of the business day following the day clearance is granted but may be extended in special circumstances, shortened or rescinded, as explained in Appendix A.

B. SECURITIES NOT REQUIRING PRECLEARANCE

The securities enumerated below do not require preclearance under the Code. However, all other provisions of the Code apply, including, but not limited to: (i) the prohibited transaction provisions contained in Part 3.4 such as front-running; (ii) the additional compliance requirements applicable to portfolio persons contained in Part 4, (iii) the applicable reporting requirements contained in Part 5; and (iv) insider trading prohibitions. You need NOT pre-clear transactions in the following securities:

(1) FRANKLIN RESOURCES, INC., AND ITS AFFILIATES. Purchases and sales of securities of Franklin Resources, Inc., closed-end funds of the Franklin Templeton Group, or real estate investment trusts advised by Franklin Properties Inc., as these securities cannot be purchased on behalf of our advisory clients.¹¹

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(2) SMALL QUANTITIES.

• Transactions of 500 shares or less of any security, regardless of where it is traded in any 30 day period; or

• Transactions of 1000 shares or less of the top 50 securities by volume during the previous calendar quarter on the NYSE or NASDAQ NMS (does not include Small Cap or OTC) in any 30 day period.

• Transactions in municipal bonds with a face value of $100,000 or less.

HOWEVER, YOU MAY NOT EXECUTE ANY TRANSACTION, REGARDLESS OF QUANTITY, IF YOU LEARN THAT THE FUNDS ARE ACTIVE IN THE SECURITY. IT WILL BE PRESUMED THAT YOU HAVE KNOWLEDGE OF FUND ACTIVITY IN THE SECURITY IF, AMONG OTHER THINGS, YOU ARE DENIED APPROVAL TO GO FORWARD WITH A TRANSACTION REQUEST.

(3) DIVIDEND REINVESTMENT PLANS: Transactions made pursuant to dividend reinvestment plans (“DRIPs”) do not require preclearance regardless of quantity or Fund activity.

(4) GOVERNMENT OBLIGATIONS. Transactions in securities issued or guaranteed by the governments of the United States, Canada, the United Kingdom, France, Germany, Switzerland, Italy and Japan, or their agencies or instrumentalities, or derivatives thereof.

(5) PAYROLL DEDUCTION PLANS. Securities purchased by an employee’s spouse pursuant to a payroll deduction program, provided the access person has previously notified the Compliance Department in writing that the spouse will be participating in the payroll deduction program.

(6) EMPLOYER STOCK OPTION PROGRAMS. Transactions involving the exercise and/or purchase by an access person or an access person’s spouse of securities pursuant to a program sponsored by a corporation employing the access person or spouse.

(7) PRO RATA DISTRIBUTIONS. Purchases effected by the exercise of rights issued pro rata to all holders of a class of securities or the sale of rights so received.

(8) TENDER OFFERS. Transactions in securities pursuant to a bona fide tender offer made for any and all such securities to all similarly situated shareholders in conjunction with mergers, acquisitions, reorganizations and/or similar corporate actions. However, tenders pursuant to offers for less than all outstanding securities of a class of securities of an issuer must be precleared.

(9) NOT ELIGIBLE FOR FUNDS AND CLIENTS. Transactions in any securities that are prohibited investments for all Funds and clients advised by the entity employing the access person.

(10) NO INVESTMENT CONTROL. Transactions effected for an account or entity over which you do not have or share investment control (i.e., an account where someone else exercises complete investment control).

(11) NO BENEFICIAL OWNERSHIP. Transactions in which you do not acquire or dispose of direct or indirect beneficial ownership (i.e., an account where in you have no financial interest).

(12) ETFS AND HOLDRS. Transactions in Exchange-Traded Funds and Holding Company Depository Receipts (Holdrs).

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Although an access person’s securities transaction may be exempt from preclearing, such transactions must comply with the prohibited transaction provisions of Section 3.4 above. Additionally, you may not trade any securities as to which you have “inside information” (see attached FRANKLIN TEMPLETON INVESTMENTS’ POLICY STATEMENT ON INSIDER TRADING). If you have any questions, contact a Preclearance Officer before engaging in the transaction. If you have any doubt whether you have or might acquire direct or indirect beneficial ownership or have or share investment control over an account or entity in a particular transaction, or whether a transaction involves a security covered by the Code, you should consult with a Preclearance Officer before engaging in the transaction.

C. DISCRETIONARY ACCOUNTS

You need not pre-clear transactions in any discretionary account for which a registered broker-dealer, a registered investment adviser, or other investment manager acting in a similar fiduciary capacity, which is not affiliated with Franklin Templeton Investments, exercises sole investment discretion, if the following conditions are met:¹²

(1) The terms of each account relationship (“Agreement”) must be in writing and filed with a Preclearance Officer prior to any transactions.

(2) Any amendment to each Agreement must be filed with a Preclearance Officer prior to its effective date.

(3) The Portfolio Person certifies to the Compliance Department at the time such account relationship commences, and annually thereafter, as contained in Schedule G of the Code that such Portfolio Person does not have direct or indirect influence or control over the account, other than the right to terminate the account.

(4) Additionally, any discretionary account that you open or maintain with a registered broker-dealer, a registered investment adviser, or other investment manager acting in a similar fiduciary capacity must provide duplicate copies of confirmations and statements for all transactions effected in the account simultaneously with their delivery to you., If your discretionary account acquires securities which are not reported to a Preclearance Officer by a duplicate confirmation, such transaction must be reported to a Preclearance Officer on Schedule B within 10 days after you are notified of the acquisition.¹³

However, if you make ANY request that the discretionary account manager enter into or refrain from a specific transaction or class of transactions, you must first consult with a Preclearance Officer and obtain approval prior to making such request.

D. DIRECTORS WHO ARE NOT ADVISORY PERSONS OR ADVISORY REPRESENTATIVES

You need not pre-clear any securities if:

(1) You are a director of a Fund in Franklin Templeton Investments and a director of the fund’s advisor;

(2) You are not an “advisory person”¹⁴ of a Fund in Franklin Templeton Investments; and

(3) You are not an employee of any Fund,

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or

(1) You are a director of a Fund in the Franklin Templeton Group;

(2) You are not an “advisory representative”¹⁵ of Franklin Resources or any subsidiary; and

(3) You are not an employee of any Fund,

unless you know or should know that, during the 15-day period before the transaction, the security was purchased or sold, or considered for purchase or sale, by a Fund or by Franklin Resources on behalf of a Fund or other client.

Directors, other than independent Directors, qualifying under this paragraph are required to comply with all applicable provisions of the Code including reporting their initial holdings and brokerage accounts in accordance with 5.2, personal securities transactions and accounts in accordance with 5.3 and 5.5, and annual reports in accordance with 5.4 of the Code.

E. LIMITED EXCEPTION FOR CERTAIN PROPRIETARY ACCOUNTS

Franklin Templeton Investments may sponsor private partnerships and other pooled investment accounts (“affiliated accounts”) intended for distribution to unaffiliated persons. At the outset of operations of such affiliated accounts, Franklin Templeton Investments will likely have a significant ownership interest, thereby causing the affiliated account to be a Proprietary Account. Though considered a Proprietary Account for all other purposes of this Code, an affiliated account need not pre-clear any securities transaction during the first full 12 month period after its commencement of operations.

PART 7 - PENALTIES FOR VIOLATIONS OF THE CODE

The Code is designed to assure compliance with applicable law and to maintain shareholder confidence in Franklin Templeton Investments.

In adopting this Code, it is the intention of the Boards of Directors/Trustees, to attempt to achieve 100% compliance with all requirements of the Code - but it is recognized that this may not be possible. Incidental failures to comply with the Code are not necessarily a violation of the law or the Franklin Templeton Investment’s Statement of Principles. Such isolated or inadvertent violations of the Code not resulting in a violation of law or the Statement of Principles will be referred to the Director, Global Compliance and/or management personnel, and disciplinary action commensurate with the violation, if warranted, will be imposed. Additionally, if you violate any of the enumerated prohibited transactions contained in Parts 3 and 4 of the Code, you will be expected to give up ANY profits realized from these transactions to Franklin Resources for the benefit of the affected Funds or other clients. If Franklin Resources cannot determine which Fund(s) or client(s) were affected, the proceeds will be donated to a charity chosen by Franklin Resources. Please refer to the following page for guidance of the types of sanctions that would likely be imposed for isolated or inadvertent violations of the Code.

However, failure to disgorge profits when requested or a pattern of violations that individually do not violate the law or Statement of Principles, but which taken together demonstrate a lack of respect for the Code of Ethics, may result in more significant disciplinary action including termination of employment. A violation of the Code resulting in a violation of the law will be severely sanctioned, with disciplinary action including, but not limited to, referral of the matter to the board of directors of the affected Fund, termination of employment or referral of the matter to the appropriate regulatory agency for civil and/or criminal investigation.

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CODE OF ETHICS SANCTION GUIDELINES

VIOLATION	SANCTION IMPOSED
•        Failure to preclear but otherwise would have been approved (i.e., no conflict with the fund’s transactions).	Reminder Memo
•        Failure to preclear but otherwise would have been approved (i.e., no conflict with the fund’s transactions) twice within 12 calendar months -	30 Day Personal Securities Trading Suspension
•        Failure to preclear and the transaction would have been disapproved:
•        Failure to preclear but otherwise would have been approved (i.e., no conflict with the fund’s transactions) three times or more within 12 calendar months	Greater Than 30 Day Personal Securities Trading Suspension (e.g., 60 or 90 Days)
•        Failure to preclear and the transaction would have been disapproved twice or more within 12 calendar months
•        Profiting from short-swing trades (profiting on purchase & sale/sale & purchase within 60 days	Profits are donated to The United Way (or charity of employee’s choice)
•        Repeated violations of the Code of after Ethics even if each individual violation might be considered deminimis	Fines levied discussion with the General Counsel and and appropriate CIO.

PART 8 - A REMINDER ABOUT THE FRANKLIN TEMPLETON INVESTMENTS INSIDER TRADING POLICY

The Code of Ethics is primarily concerned with transactions in securities held or to be acquired by any of the Funds or Franklin Resources’ clients, regardless of whether those transactions are based on inside information or actually harm a Fund or a client.

The Insider Trading Policy (attached to this document) deals with the problem of insider trading in securities that could result in harm to a Fund, a client, or members of the public, and applies to all directors, officers and employees of any entity in the Franklin Templeton Investments. Although the requirements of the Code and the Insider Trading Policy are similar, you must comply with both.

PART 9 - FOREIGN COUNTRY SUPPLEMENTS (CANADA)

The Investment Funds Institute of Canada (“IFIC”) has implemented a new Model Code of Ethics for Personal Investing (the “IFIC Code”) to be adopted by all IFIC members. Certain provisions in the IFIC Code differ from the provisions of Franklin Templeton Investments Code of Ethics (the “FT Code”). This Supplementary Statement of Requirements for Canadian Employees (the “Canadian Supplement”) describes certain further specific requirements that govern the

Page 14

activities of Franklin Templeton Investments Corp. (“FTIC”). It is important to note that the Canadian Supplement does not replace the FT Code but adds certain restrictions on trading activities, which must be read in conjunction with the Code.

All capitalized terms in this Canadian Supplement, unless defined in this Canadian Supplement, have the meaning set forth in the FT Code.

INITIAL PUBLIC AND SECONDARY OFFERINGS

Access Persons cannot buy securities in any initial public offering, or a secondary offering by an issuer. Public offerings of securities made by Franklin Templeton Investments, including open-end and closed-end mutual funds, real estate investment trusts and securities of Franklin Resources, Inc, are excluded from this prohibition.

NOTE: THE FT CODE PRESENTLY PROHIBITS PORTFOLIO PERSONS FROM BUYING SECURITIES IN ANY INITIAL PUBLIC OFFERING, OR A SECONDARY OFFERING BY AN ISSUER (SEE SECTION 4.5 OF THE FT CODE). THIS PROVISION EXTENDS SECTION 4.5 OF THE FT CODE TO ALL ACCESS PERSONS.

INTERESTS IN PARTNERSHIPS AND SECURITIES ISSUED IN PRIVATE PLACEMENTS

Access Persons and Portfolio Persons cannot acquire limited partnership interests or other securities in private placements unless they obtain approval of the Compliance Officer after he or she consults with an executive officer of Franklin Resources, Inc. Purchases of limited partnership interests or other securities in private placements will not be approved, unless in addition to the requirements for the approval of other trades and such other requirements as the executive officer of Franklin Resources, Inc. may require, the Compliance Officer is satisfied that the issuer is a “private company” as defined in the SECURITIES ACT (Ontario) and the Access Person has no reason to believe that the issuer will make a public offering of its securities in the foreseeable future.

NOTE: THE FT CODE PRESENTLY PROHIBITS AS A GENERAL RULE PORTFOLIO PERSONS FROM BUYING LIMITED PARTNERSHIP INTERESTS OR OTHER SECURITIES IN PRIVATE PLACEMENTS (SEE SECTION 4.6 OF THE FT CODE). THIS SECTION EXTENDS THE AMBIT OF THE PROHIBITION TO ACCESS PERSONS AND LIMITS THE EXCEPTION TO THE GENERAL RULE CONTAINED IN SECTION 4.6 OF THE FT CODE.

ADDITIONAL REQUIREMENTS TO OBTAIN APPROVAL FOR PERSONAL TRADES Prior to an Access Person obtaining approval for a personal trade he or she must advise the Compliance Officer that he or she:

• Does not possess material non-public information relating to the security;

• Is not aware of any proposed trade or investment program relating to that security by any of the Franklin Templeton Group of Funds;

• Believes that the proposed trade has not been offered because of the Access Person’s position in Franklin Templeton Investments and is available to any market participant on the same terms;

• Believes that the proposed trade does not contravene any of the prohibited activities set out in Section 3.4 of the FT Code, and in the case of Portfolio Persons does not violate any of the additional requirements set out in Part 4 of the FT Code; and

• Will provide any other information requested by the Compliance Officer concerning the proposed personal trade.

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An Access Person may contact the Compliance Officer by fax, phone or e-mail to obtain his or her approval.

NOTE: THE METHOD OF OBTAINING APPROVAL IS PRESENTLY SET OUT IN SECTION 6.1A OF THE FT CODE AND PROVIDES THAT AN ACCESS PERSON MAY CONTACT THE COMPLIANCE OFFICER BY FAX, PHONE OR E-MAIL. THE ADDITIONAL REQUIREMENT DESCRIBED ABOVE MAKES IT CLEAR THAT AN ACCESS PERSON MAY CONTINUE TO CONTACT THE COMPLIANCE OFFICER IN THE SAME MANNER AS BEFORE. THE ACCESS PERSON WILL HAVE DEEMED TO HAVE CONFIRMED COMPLIANCE WITH THE ABOVE REQUIREMENTS PRIOR TO OBTAINING APPROVAL FROM THE COMPLIANCE OFFICER.

APPOINTMENT OF INDEPENDENT REVIEW PERSON

FTIC shall appoint an independent review person who will be responsible for approval of all personal trading rules and other provisions of the FT Code with respect to FTIC and for monitoring the administration of the FT Code from time to time with respect to FTIC employees. The Compliance Officer will provide a written report to the Independent Review Person, at least annually, summarizing:

• Compliance with the FT Code for the period under review

• Violations of the FT Code for the period under review

• Sanctions imposed by Franklin Templeton Investments for the period under review

• Changes in procedures recommended by the FT Code

• Any other information requested by the Independent Review Person

APPENDIX A: COMPLIANCE PROCEDURES AND DEFINITIONS

This appendix sets forth the additional responsibilities and obligations of Compliance Officers, and the Legal/Administration and Legal/Compliance Departments, under Franklin Templeton Investments’ Code of Ethics and Policy Statement on Insider Trading.

I. RESPONSIBILITIES OF EACH DESIGNATED COMPLIANCE OFFICER

A. PRE-CLEARANCE STANDARDS

1. GENERAL PRINCIPLES

The Director, Global Compliance, or a Preclearance Officer, shall only permit an access person to go forward with a proposed security/16/ transaction if he or she determines that, considering all of the facts and circumstances, the transaction does not violate the provisions of Rule 17j-1, or of this Code and there is no likelihood of harm to a client.

2. ASSOCIATED CLIENTS

Unless there are special circumstances that make it appropriate to disapprove a personal securities transaction request, a Preclearance Officer shall consider only those securities transactions of the “Associated Clients” of the access person, including open and executed orders and recommendations, in determining whether to approve such a request. “Associated Clients” are those Funds or clients whose trading information would be available to the access person during the course of his or her regular functions or duties. Currently, there are three groups of Associated Clients: (i) the Franklin Mutual Series Funds and clients advised by Franklin Mutual Advisers, LLC (“Mutual Clients”); (ii) the Franklin Group of Funds and the clients advised by the various Franklin investment advisers (“Franklin Clients”); and (iii) the Templeton Group of Funds and the clients advised by the various Templeton investment advisers (“Templeton Clients”). Thus, persons who have access to the trading information of Mutual Clients generally will be precleared solely against the securities transactions of the Mutual Clients, including open and executed orders and recommendations. Similarly, persons who have access to the trading information of Franklin

Page 16

Clients or Templeton Clients generally will be precleared solely against the securities transactions of Franklin Clients or Templeton Clients, as appropriate.

Certain officers of Franklin Templeton Investments, as well as legal, compliance, fund accounting, investment operations and other personnel who generally have access to trading information of the funds and clients of Franklin Templeton Investments during the course of their regular functions and duties, will have their personal securities transactions precleared against executed transactions, open orders and recommendations of the entire Franklin Templeton Investments.

3. SPECIFIC STANDARDS

(a) SECURITIES TRANSACTIONS BY FUNDS OR CLIENTS

No clearance shall be given for any transaction in any security on any day during which an Associated Client of the access person has executed a buy or sell order in that security, until seven (7) calendar days after the order has been executed. Notwithstanding a transaction in the previous seven days, clearance may be granted to sell if all Associated Clients have disposed of the security.

(b) SECURITIES UNDER CONSIDERATION

OPEN ORDERS

No clearance shall be given for any transaction in any security on any day which an Associated Client of the access person has a pending buy or sell order for such security, until seven (7) calendar days after the order has been executed.

RECOMMENDATIONS

No clearance shall be given for any transaction in any security on any day on which a recommendation for such security was made by a Portfolio Person, until seven (7) calendar days after the recommendation was made and no orders have subsequently been executed or are pending.

(c) PRIVATE PLACEMENTS

In considering requests by Portfolio Personnel for approval of limited partnerships and other private placement securities transactions, the Director, Global Compliance shall consult with an executive officer of Franklin Resources, Inc. In deciding whether to approve the transaction, the Director, Global Compliance and the executive officer shall take into account, among other factors, whether the investment opportunity should be reserved for a Fund or other client, and whether the investment opportunity is being offered to the Portfolio Person by virtue of his or her position with Franklin Templeton Investments. If the Portfolio Person receives clearance for the transaction, an investment in the same issuer may only be made for a Fund or client if an executive officer of Franklin Resources, Inc., who has been informed of the Portfolio Person’s pre-existing investment and who has no interest in the issuer, approves the transaction.

(d) DURATION OF CLEARANCE

If a Preclearance Officer approves a proposed securities transaction, the order for the transaction must be placed and effected by the close of the next business day following the day approval was granted. The Director, Global Compliance may, in his or her discretion, extend the clearance period up to seven calendar days, beginning on the date of the approval, for a securities

Page 17

transaction of any access person who demonstrates that special circumstances make the extended clearance period necessary and appropriate.¹⁷ The Director, Global Compliance may, in his or her discretion, after consultation with a member of senior management for Franklin Resources, Inc., renew the approval for a particular transaction for up to an additional seven calendar days upon a similar showing of special circumstances by the access person. The Director, Global Compliance may shorten or rescind any approval or renewal of approval under this paragraph if he or she determines it is appropriate to do so.

B. WAIVERS BY THE DIRECTOR, GLOBAL COMPLIANCE

The Director, Global Compliance may, in his or her discretion, after consultation with an executive officer of Franklin Resources, Inc., waive compliance by any access person with the provisions of the Code, if he or she finds that such a waiver:

(1) is necessary to alleviate undue hardship or in view of unforeseen circumstances or is otherwise appropriate under all the relevant facts and circumstances;

(2) will not be inconsistent with the purposes and objectives of the Code;

(3) will not adversely affect the interests of advisory clients of Franklin Templeton Investments, the interests of Franklin Templeton Investments or its affiliates; and

(4) will not result in a transaction or conduct that would violate provisions of applicable laws or regulations.

Any waiver shall be in writing, shall contain a statement of the basis for it, and the Director, Global Compliance, shall promptly send a copy to the General Counsel of Franklin Resources, Inc.

C. CONTINUING RESPONSIBILITIES OF THE LEGAL COMPLIANCE DEPARTMENT

A Preclearance Officer shall make a record of all requests for pre-clearance regarding the purchase or sale of a security, including the date of the request, the name of the access person, the details of the proposed transaction, and whether the request was approved or denied. A Preclearance Officer shall keep a record of any waivers given, including the reasons for each exception and a description of any potentially conflicting Fund or client transactions.

A Preclearance Officer shall also collect the signed initial acknowledgments of receipt and the annual acknowledgments from each access person of receipt of a copy of the Code and Insider Trading Policy, as well as reports, as applicable, on Schedules B, C, D, E and F of the Code. In addition, a Preclearance Officer shall request copies of all confirmations, and other information with respect to an account opened and maintained with the broker-dealer by any access person of the Franklin Templeton Group. A Preclearance Officer shall preserve those acknowledgments and reports, the records of consultations and waivers, and the confirmations, and other information for the period required by applicable regulation.

A Preclearance Officer shall review brokerage transaction confirmations, account statements, Schedules B, C, D, E, F and Private Placement Checklists of Access Persons for compliance with the Code. The reviews shall include, but are not limited to;

(1) Comparison of brokerage confirmations, Schedule Bs, and/or brokerage statements to preclearance request worksheets or, if a private placement, the Private Placement Checklist;

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(2) Comparison of brokerage statements and/or Schedule Cs to current securities holding information;

(3) Comparison of Schedule F to current securities account information;

(4) Conducting periodic “back-testing” of access person transactions, Schedule Es and/or Schedule Gs in comparison to fund and client transactions;

A Preclearance Officer shall evidence review by initialing and dating the appropriate document. Any apparent violations of the Code detected by a Preclearance Officer during his or her review shall be promptly brought to the attention of the Director, Global Compliance.

D. PERIODIC RESPONSIBILITIES OF THE LEGAL COMPLIANCE DEPARTMENT

The Legal Compliance Department shall consult with the General Counsel and the Human Resources Department, as the case may be, to assure that:

(1) Adequate reviews and audits are conducted to monitor compliance with the reporting, pre-clearance, prohibited transaction and other requirements of the Code.

(2) Adequate reviews and audits are conducted to monitor compliance with the reporting, pre-clearance, prohibited transaction and other requirements of the Code.

(3) All access persons and new employees of the Franklin Templeton Group are adequately informed and receive appropriate education and training as to their duties and obligations under the Code.

(4) There are adequate educational, informational and monitoring efforts to ensure that reasonable steps are taken to prevent and detect unlawful insider trading by access persons and to control access to inside information.

(5) Written compliance reports are submitted to the Board of Directors of Franklin Resources, Inc., and the Board of each relevant Fund at least annually. Such reports will describe any issues arising under the Code or procedures since the last report, including, but not limited to, information about material violations of the Code or procedures and sanctions imposed in response to the material violations.

(6) The Legal Compliance Department will certify at least annually to the Fund’s board of directors that Franklin Templeton Investments has adopted procedures reasonably necessary to prevent Access Persons from violating the Code, and

(7) Appropriate records are kept for the periods required by law.

E. APPROVAL BY FUND’S BOARD OF DIRECTORS

(1) Basis for Approval

The Board of Directors/Trustees must base its approval of the Code on a determination that the Code contains provisions reasonably necessary to prevent access persons from engaging in any conduct prohibited by rule 17j-1.

(2) New Funds

At the time a new fund is organized, the Legal Compliance Department will provide the Fund’s board of directors, a certification that the investment adviser and principal underwriter has adopted procedures reasonably necessary to

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prevent Access Persons from violating the Code. Such certification will state that the Code contains provisions reasonably necessary to prevent Access Persons from violating the Code.

(3) Material Changes to the Code of Ethics

The Legal Compliance Department will provide the Fund’s board of directors a written description of all material changes to the Code no later than six months after adoption of the material change by Franklin Templeton Investments.

II. COMPILATION OF DEFINITIONS OF IMPORTANT TERMS

For purposes of the Code of Ethics and Insider Trading Policy, the terms below have the following meanings:

1934 ACT - The Securities Exchange Act of 1934, as amended.

1940 ACT - The Investment Company Act of 1940, as amended.

ACCESSPERSON - Each director, trustee, general partner or officer, and any other person that directly or indirectly controls (within the meaning of Section 2(a)(9) of the 1940 Act) the Franklin Templeton Group or a person, including an Advisory Representative, who has access to information concerning recommendations made to a Fund or client with regard to the purchase or sale of a security.

ADVISORY REPRESENTATIVE - Any officer or director of Franklin Resources; any employee who makes any recommendation, who participates in the determination of which recommendation shall be made, or whose functions or duties relate to the determination of which recommendation shall be made; any employee who, in connection with his or her duties, obtains any information concerning which securities are being recommended prior to the effective dissemination of such recommendations or of the information concerning such recommendations; and any of the following persons who obtain information concerning securities recommendations being made by Franklin Resources prior to the effective dissemination of such recommendations or of the information concerning such recommendations: (i) any person in a control relationship to Franklin Resources, (ii) any affiliated person of such controlling person, and (iii) any affiliated person of such affiliated person.

AFFILIATED PERSON - it meaning as Section 2(a)(3) of the Investment Company Act of 1940. An “affiliated person” of an investment company includes directors, officers, employees, and the investment adviser. In addition, it includes any person owning 5% of the company’s voting securities, any person in which the investment company owns 5% or more of the voting securities, and any person directly or indirectly controlling, controlled by, or under common control with the company.

APPROPRIATE ANALYST – With respect to any access person, any securities analyst or portfolio manager making investment recommendations or investing funds on behalf of an Associated Client and who may be reasonably expected to recommend or consider the purchase or sale of a security.

ASSOCIATED CLIENT – A Fund or client whose trading information would be available to the access person during the course of his or her regular functions or duties.

BENEFICIAL OWNERSHIP – Has the same meaning as in Rule 16a-1(a)(2) under the 1934 Act. Generally, a person has a beneficial ownership in a security if he or she, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares a direct or indirect pecuniary interest in the security. There is a presumption of a pecuniary interest in a security held or acquired by a member of a person’s immediate family sharing the same household.

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EXCHANGE TRADED FUNDS AND HOLDING COMPANY DEPOSITORY RECEIPTS - An Exchange - Traded Fund or “ETF” is a basket of securities that is designed to generally track an index—broad stock or bond market, stock industry sector, or international stock. Holding Company Depository Receipts “Holdrs” are securities that represent an investor’s ownership in the common stock or American Depository Receipts of specified companies in a particular industry, sector or group.

FUNDS - Investment companies in the Franklin Templeton Group of Funds.

HELD OR TO BE ACQUIRED - A security is “held or to be acquired” if within the most recent 15 days it (i) is or has been held by a Fund, or (ii) is being or has been considered by a Fund or its investment adviser for purchase by the Fund.

PORTFOLIO PERSON - Any employee of Franklin Templeton Investments, who, in connection with his or her regular functions or duties, makes or participates in the decision to purchase or sell a security by a Fund in Franklin Templeton Investments, or any other client or if his or her functions relate to the making of any recommendations about those purchases or sales. Portfolio Persons include portfolio managers, research analysts, traders, persons serving in equivalent capacities (such as Management Trainees), persons supervising the activities of Portfolio Persons, and anyone else designated by the Director, Global Compliance

PROPRIETARY ACCOUNTS - Any corporate account or other account including, but not limited to, a limited partnership, a corporate hedge fund, a limited liability company or any other pooled investment vehicle in which Franklin Resources or its affiliates, owns 25 percent or more of the outstanding capital or is entitled to 25% or more of the profits or losses in the account (excluding any asset based investment management fees based on average periodic net assets in accounts).

SECURITY - Any stock, note, bond, evidence of indebtedness, participation or interest in any profit-sharing plan or limited or general partnership, investment contract, certificate of deposit for a security, fractional undivided interest in oil or gas or other mineral rights, any put, call, straddle, option, or privilege on any security (including a certificate of deposit), guarantee of, or warrant or right to subscribe for or purchase any of the foregoing, and in general any interest or instrument commonly known as a security, except commodity futures, currency and currency forwards. For the purpose of this Code, “security” does not include:

(1) Direct obligations of the Government of the United States;

(2) Bankers’ acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments, including repurchase agreements; and

(3) Shares issued by open-end funds.

SEE Section III of Appendix A for a summary of different requirements for different types of securities.

III. SECURITIES EXEMPT FROM THE PROHIBITED, REPORTING, AND PRE-CLEARANCE PROVISIONS

A. PROHIBITED TRANSACTIONS

Securities that are EXEMPT from the prohibited transaction provisions of Section 3.4 include:

(1) securities that are direct obligations of the U.S. Government, such as Treasury bills, notes and bonds, and U.S. Savings Bonds and derivatives thereof;

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(2) high quality short-term instruments (“money market instruments”) including but not limited to (i) bankers’ acceptances, (ii) U.S. bank certificates of deposit; (iii) commercial paper; and (iv) repurchase agreements;

(3) shares of registered open-end investment companies;

(4) commodity futures, currencies, currency forwards and derivatives thereof;

(5) securities that are prohibited investments for all Funds and clients advised by the entity employing the access person; and

(6) transactions in securities issued or guaranteed by the governments or their agencies or instrumentalities of Canada, the United Kingdom, France, Germany, Switzerland, Italy and Japan and derivatives thereof.

B. REPORTING AND PRECLEARANCE

Securities that are EXEMPT from both the reporting requirements of Section 5 and preclearance requirements of Section 6 of the Code include:

(1) securities that are direct obligations of the U.S. Government, such as Treasury bills, notes and bonds, and U.S. Savings Bonds and derivatives thereof;

(2) high quality short-term instruments (“money market instruments”) including but not limited to (i) bankers’ acceptances, (ii) U.S. bank certificates of deposit; (iii) commercial paper; and (iv) repurchase agreements;

(3) shares of registered open-end investment companies; and

(4) commodity futures, currencies, currency forwards and derivatives thereof.

IV. LEGAL REQUIREMENT

Rule 17j-1 under the Investment Company Act of 1940 (“1940 Act”) makes it unlawful for any affiliated person of Franklin Templeton Investments in connection with the purchase or sale of a security, including any option to purchase or sell, and any security convertible into or exchangeable for, any security that is “held or to be acquired” by a Fund in Franklin Templeton Investments:

A. To employ any device, scheme or artifice to defraud a Fund;

B. To make to a Fund any untrue statement of a material fact or omit to state to a Fund a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading;

C. To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon a Fund; or

D. To engage in any manipulative practice with respect to a Fund.

A security is “held or to be acquired” if within the most recent 15 days it (i) is or has been held by a Fund, or (ii) is being or has been considered by a Fund or its investment adviser for purchase by the Fund.

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APPENDIX B: ACKNOWLEGMENT FORM AND SCHEDULES

ACKNOWLEDGMENT FORM

CODE OF ETHICS AND POLICY STATEMENT ON INSIDER TRADING

TO: DIRECTOR OF GLOBAL COMPLIANCE, LEGAL COMPLIANCE DEPARTMENT

I HEREBY ACKNOWLEDGE RECEIPT OF A COPY OF FRANKLIN TEMPLETON INVESTMENTS CODE OF ETHICS AND POLICY STATEMENT ON INSIDER TRADING, Amended and Restated, May 2003, WHICH I HAVE READ AND UNDERSTAND. I WILL COMPLY FULLY WITH ALL PROVISIONS OF THE CODE AND THE INSIDER TRADING POLICY TO THE EXTENT THEY APPLY TO ME DURING THE PERIOD OF MY EMPLOYMENT. ADDITIONALLY, I AUTHORIZE ANY BROKER-DEALER, BANK OR INVESTMENT ADVISER WITH WHOM I HAVE SECURITIES ACCOUNTS AND ACCOUNTS IN WHICH I HAVE BENEFICIAL OWNERSHIP, TO PROVIDE BROKERAGE CONFIRMATIONS AND STATEMENTS AS REQUIRED FOR COMPLIANCE WITH THE CODE. I FURTHER UNDERSTAND AND ACKNOWLEDGE THAT ANY VIOLATION OF THE CODE OR INSIDER TRADING POLICY, INCLUDING ENGAGING IN A PROHIBITED TRANSACTION OR FAILURE TO FILE REPORTS AS REQUIRED (SEE SCHEDULES B, C, D, E, F AND G), MAY SUBJECT ME TO DISCIPLINARY ACTION, INCLUDING TERMINATION OF EMPLOYMENT.

Instructions:

1. Complete all sections of this form.

2. Print the completed form, sign, and date.

3. Submit completed form to Legal Compliance via:

Inter-office Mail to: Preclearance

                                 L-Comp SM-920/2

U.S. Mail to: Franklin Templeton Investments

Attn: Legal-Compliance/Preclearance

P.O. Box 25050

San Mateo, CA 94402-5050

Telephone: (650) 312-3693 Fax: (650) 312-5646

E-mail: Preclear, Legal (internal address);

             Lpreclear@frk.com (external address)

EMPLOYEE’S NAME:	SIGNATURE
TITLE:
DEPARTMENT:
LOCATION:
INITIAL DISCLOSURE DATE OR YEAR END:

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SCHEDULE A: LEGAL AND COMPLIANCE OFFICERS AND PRECLEARANCE DESK TELEPHONE & FAX NUMBERS¹⁸

LEGAL OFFICER

MURRAY L. SIMPSON

EXECUTIVE VICE PRESIDENT & GENERAL COUNSEL

FRANKLIN TEMPLETON INVESTMENTS

ONE FRANKLIN PARKWAY

SAN MATEO, CA 94403-1906

(650) 525 -7331

COMPLIANCE OFFICERS

DIRECTOR, GLOBAL COMPLIANCE	PRECLEARANCE OFFICERS
James M. Davis	Stephanie Harwood, Supervisor
Franklin Templeton Investments	Lisa Del Carlo
One Franklin Parkway	Darlene Nisby
San Mateo, CA 94403-1906	Legal Compliance Department
(650) 312-2832	Franklin Templeton Investments
	One Franklin Parkway
	San Mateo, CA 94403-1906
	(650) 312-3693 (telephone)
	(650) 312-5646 (facsimile)
	Preclear, Legal (internal e-mail address)
	Lpreclear@frk.com (external e-mail address)

SCHEDULE B - TRANSACTIONS REPORT

This report of personal securities transactions not reported by duplicate confirmations and brokerage statements pursuant to Section 5.3 of the Code is required pursuant to Rule 204-2(a) of the Investment Advisers Act of 1940 or Rule 17j-1(c) of the Investment Company Act of 1940. The report must be completed and submitted to the Compliance Department no later than 10 calendar days after the end of the calendar quarter. Refer to Section 5.3 of the Code of Ethics for further instructions.

Instructions:

1. Complete all sections of this form.

2. Print completed form, sign, and date.

3. Submit completed form to Legal Compliance via:

Inter-office Mail to: Preclearance

                                 L-Comp SM-920/2

U.S. Mail to: Franklin Templeton Investments

Attn: Legal-Compliance/Preclearance

P.O. Box 25050

San Mateo, CA 94402-5050

Telephone: (650) 312-3693 Fax: (650) 312-5646

E-mail: Preclear, Legal (internal address); Lpreclear@frk.com

(external address)

Page 24

PRE-CLEARED THROUGH
COMPLIANCE TRADE
BUY, SELL DEPARTMENT
DATE OR OTHER (DATE
OR N/A) SECURITY NAME
DESCRIPTION AND
TYPE OF SECURITY
(COMMON, BOND,
OPTION, ETC.) QUANTITY PRICE
PRINCIPAL AMOUNT
BROKER-DEALER OR
BANK AND
ACCOUNT NUMBER

THE REPORT OR RECORDING OF ANY TRANSACTIONS ABOVE SHALL NOT BE CONSTRUED AS AN ADMISSION THAT I HAVE ANY DIRECT OR INDIRECT OWNERSHIP IN THE SECURITIES.

EMPLOYEE’S NAME:

QUARTER ENDING:

SIGNATURE DATE

SCHEDULE C - INITIAL, ANNUAL, & UPDATED DISCLOSURE OF ACCESS PERSONS SECURITIES HOLDINGS

This report shall set forth the security name or description and security class of each security holding in which you have a direct or indirect beneficial interest, including holdings by a spouse, minor children, trusts, foundations, and any account for which trading authority has been delegated to you, other than authority to trade for a Fund in or a client of Franklin Templeton Investments. In lieu of listing each security position below, you may instead attach copies of brokerage statements, sign below and return Schedule C and brokerage statements to the Legal Compliance Department within 10 days if an initial report or by January 30th of each year if an annual report. Refer to Sections 5.2.A and 5.4.A of the Code for additional filing instructions.

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Instructions:

1. Complete all sections of this form.

2. Print completed form, sign, and date.

3. Submit completed form to Legal Compliance via:

Inter-office Mail to: Preclearance

                         L-Comp SM-920/2

U.S. Mail to: Franklin Templeton Investments

              Attn: Legal-Compliance/Preclearance

              P.O. Box 25050

              San Mateo, CA 94402-5050

Telephone: (650) 312-3693 Fax: (650) 312-5646

E-mail: Preclear, Legal (internal address); Lpreclear@frk.com

                                                                          (external address)

Securities that are EXEMPT from being reported on Schedule C include: (i) securities that are direct obligations of the U.S. Government, such as Treasury bills, notes and bonds, and U.S. Savings Bonds and derivatives thereof; (ii) high quality short-term instruments (“money market instruments”) including but not limited to bankers’ acceptances, U.S. bank certificates of deposit; commercial paper; and repurchase agreements; (iii) shares of registered open-end investment companies; and (iv) commodity futures, currencies, currency forwards and derivatives thereof.

¨ I DID NOT HAVE ANY PERSONAL SECURITIES HOLDINGS FOR YEAR ENDED:                     (OR CURRENT DATE IF INITIAL DISCLOSURE)

¨ I HAVE ATTACHED STATEMENTS CONTAINING ALL MY PERSONAL SECURITIES HOLDINGS FOR YEAR ENDED:                     (OR CURRENT DATE IF INITIAL DISCLOSURE)

¨ I HAVE LISTED BELOW ALL MY PERSONAL SECURITIES HOLDINGS FOR YEAR ENDED:                     (OR CURRENT DATE IF INITIAL DISCLOSURE)

Security Description,
including interest rate and
Account
maturity (if appropriate)
Number Security Type
(Stock, Bond,
Option, etc.) Quantity &
Principal
Amount Name of Broker-
Dealer or Bank

TO THE BEST OF MY KNOWLEDGE I HAVE DISCLOSED ALL OF MY SECURITIES ACCOUNTS AND/OR INVESTMENTS IN WHICH I HAVE A DIRECT OR INDIRECT BENEFICIAL INTEREST, INCLUDING SECURITY ACCOUNTS OF A SPOUSE, MINOR CHILDREN, TRUSTS, FOUNDATIONS, AND ANY ACCOUNT FOR WHICH TRADING AUTHORITY HAS BEEN DELEGATED AN UNAFFILIATED PARTY.

EMPLOYEE’S NAME: Print: Signature: Date:

YEAR ENDED OR CURRENT

DATE IF INITIAL

DISCLOSURE:

Page 26

SCHEDULE D – NOTIFICATION OF SECURITIES ACCOUNT

All Franklin registered representatives and Access Persons, PRIOR TO OPENING A BROKERAGE ACCOUNT OR PLACING AN INITIAL ORDER, are required to notify the Legal Compliance Preclearance Department and the executing broker-dealer in writing. This includes accounts in which the registered representative or access person has or will have a financial interest in (e.g., a spouse’s account) or discretionary authority (e.g., a trust account for a minor child).

UPON RECEIPT OF THE NOTIFICATION OF SECURITIES ACCOUNT FORM, THE LEGAL COMPLIANCE PRECLEARANCE DEPARTMENT WILL CONTACT THE BROKER-DEALER IDENTIFIED BELOW AND REQUEST THAT DUPLICATE CONFIRMATIONS AND STATEMENTS OF YOUR BROKERAGE ACCOUNT ARE SENT TO FRANKLIN TEMPLETON INVESTMENTS.

Instructions:

1. Complete all sections of this form.

2. Print the completed form, sign, and date.

3. Submit completed form to Legal Compliance via:

Inter-office Mail to: Preclearance

                         L-Comp SM-920/2

U.S. Mail to: Franklin Templeton Investments

              Attn: Legal-Compliance/Preclearance

              P.O. Box 25050

              San Mateo, CA 94402-5050

Telephone: (650) 312-3693 Fax: (650) 312-5646

E-mail: Preclear, Legal (internal address); Lpreclear@frk.com

(external address)

EMPLOYEE INFORMATION:

EMPLOYEE’S NAME:

EXTENSION:

DEPARTMENT:

INTEROFFICE MAIL CODE:

ARE YOU A REGISTERED REPRESENTATIVE? (NASD LICENSED, I.E. SERIES 6, 7)	¨ Yes	¨ No
ARE YOU AN ACCESS PERSON?	¨ Yes	¨ No

ACCOUNT INFORMATION:

ACCOUNT NAME:

(IF OTHER THAN EMPLOYEE, STATE RELATIONSHIP I.E., SPOUSE)

ACCOUNT# OR SOCIAL SECURITY #:

FIRM NAME:

ATTENTION (OPTIONAL):

FIRM ADDRESS:

CITY/STATE/ZIP CODE:

SIGNATURE DATE

Page 27

SCHEDULE E – NOTIFICATION OF DIRECT OR INDIRECT BENEFICIAL INTEREST

If you have any beneficial ownership in a security and you recommend to the Appropriate Analyst that the security be considered for purchase or sale by an Associated Client, or if you carry out a purchase or sale of that security for an Associated Client, you must disclose your beneficial ownership to the Legal-Compliance Department and the Appropriate Analyst in writing on Schedule E (or an equivalent form containing similar information) before the purchase or sale, or before or simultaneously with the recommendation.

Instructions:

1. Complete all sections of this form.

2. Print completed form, sign, and date.

3. Submit completed form to Legal Compliance via:

Inter-office Mail to: Preclearance

                         L-Comp SM-920/2

U.S. Mail to: Franklin Templeton Investments

              Attn: Legal-Compliance/Preclearance

              P.O. Box 25050

              San Mateo, CA 94402-5050

Telephone: (650) 312-3693 Fax: (650) 312-5646

E-mail: Preclear, Legal (internal address); Lpreclear@frk.com

(external address)

OF DATE OF
SECURITY PERSON
DESCRIPTION
NOTIFIED OWNERSHIP
TYPE: (DIRECT OR
VERBAL
INDIRECT
NOTIFICATION) YEAR
ACQUIRED METHOD OF
ACQUISITION
(PURCHASE
/GIFT/OTHER) DATE AND
METHOD
LEARNED
THAT SECURITY’S
UNDER
CONSIDERATION
BY FUNDS PRIMARY
MANAGER OR
PORTFOLIO
ANALYST NAME

EMPLOYEE’S NAME:
SIGNATURE	DATE

Page 28

SCHEDULE F – INITIAL, ANNUAL, & UPDATED DISCLOSURE OF SECURITIES ACCOUNTS

This report shall set forth the name and description of each securities account in which you have a direct or indirect beneficial interest, including securities accounts of a spouse, minor children, trusts, foundations, and any account for which trading authority has been delegated to you, other than authority to trade for a Fund in or a client of the Franklin Templeton Group. In lieu of listing each securities account below, you may instead attach copies of the brokerage statements, sign below and return Schedule F and brokerage statements to the Compliance Department.

Instructions:

1. Complete all sections of this form.

2. Print completed form, sign, and date.

3. Submit completed form to Legal Compliance via:

Inter-office Mail to: Preclearance

                         L-Comp SM-920/2

U.S. Mail to: Franklin Templeton Investments

              Attn: Legal-Compliance/Preclearance

              P.O. Box 25050

              San Mateo, CA 94402-5050

Telephone: (650) 312-3693 Fax: (650) 312-5646

E-mail: Preclear, Legal (internal address); Lpreclear@frk.com

(external address)

ACCOUNT NAME(S) (REGISTRATION
SHOWN ACCOUNT ON
STATEMENT) NUMBER NAME OF
BROKERAGE FIRM,
BANK OR
INVESTMENT
ADVISER ADDRESS OF BROKERAGE
FIRM, BANK OR
INVESTMENT
ADVISER (STREET/CITY
/STATE/ZIP CODE) NAME OF
ACCOUNT
EXECUTIVE/
REPRESENTATIVE

Page 29

TO THE BEST OF MY KNOWLEDGE I HAVE DISCLOSED ALL OF MY SECURITIES ACCOUNTS IN WHICH I HAVE A DIRECT OR INDIRECT BENEFICIAL INTEREST, INCLUDING SECURITY ACCOUNTS OF A SPOUSE, MINOR CHILDREN, TRUSTS, FOUNDATIONS, AND ANY ACCOUNT FOR WHICH TRADING AUTHORITY HAS BEEN DELEGATED TO ME.

EMPLOYEE’S NAME:
YEAR ENDED OR CURRENT DATE IF INITIAL DISCLOSURE:
SIGNATURE	DATE

SCHEDULE G - INITIAL AND ANNUAL CERTIFICATION OF DISCRETIONARY AUTHORITY

This report shall set forth the account name or description in which you have a direct or indirect beneficial interest, including holdings by a spouse, minor children, trusts, foundations, and as to which trading authority has been delegated by you to an unaffiliated registered broker-dealer, registered investment adviser, or other investment manager acting in a similar fiduciary capacity, who exercises sole investment discretion.

Instructions:

1. Complete all sections of this form.

2. Print completed form, sign, and date.

3. Submit completed form to Legal Compliance via:

Inter-office Mail to: Preclearance

                                 L-Comp SM-920/2

U.S. Mail to: Franklin Templeton Investments

                      Attn: Legal-Compliance/Preclearance

                      P.O. Box 25050

                      San Mateo, CA 94402-5050

Telephone: (650) 312-3693 Fax: (650) 312-5646

E-mail: Preclear, Legal (internal address); Lpreclear@frk.com

(external address)

NAME(S) SHOWN ON ACCOUNT OR INVESTMENT NAME DESCRIPTION OF BROKERAGE FIRM, BANK,
INVESTMENT ADVISER OR INVESTMENT TYPE OF OWNERSHIP: DIRECT OWNERSHIP (DO) INDIRECT OWNERSHIP (IO) ACCOUNT NUMBER (IF APPLICABLE)

Page 30

TO THE BEST OF MY KNOWLEDGE I HAVE DISCLOSED ALL OF MY SECURITIES ACCOUNTS AND/OR INVESTMENTS IN WHICH I HAVE A DIRECT OR INDIRECT BENEFICIAL INTEREST, INCLUDING SECURITY ACCOUNTS OF A SPOUSE, MINOR CHILDREN, TRUSTS, FOUNDATIONS, AND ANY ACCOUNT FOR WHICH TRADING AUTHORITY HAS BEEN DELEGATED AN UNAFFILIATED PARTY. FURTHER, I CERTIFY THAT I DO NOT HAVE ANY DIRECT OR INDIRECT INFLUENCE OR CONTROL OVER THE ACCOUNTS LISTED ABOVE.

EMPLOYEE’S NAME:
YEAR ENDED:
SIGNATURE	DATE

SCHEDULE H: CHECKLIST FOR INVESTMENTS IN PARTNERSHIPS AND SECURITIES ISSUED IN PRIVATE PLACEMENTS MADE BY PORTFOLIO PERSONS

In considering requests by portfolio personnel for approval of limited partnerships and other private placement securities transactions, the Compliance officer shall consult with an executive officer of Franklin Resources, Inc. In deciding whether to approve the transaction, the Compliance officer and the executive officer shall take into account, among other factors, whether the is being offered to the access person by virtue of his or her position with Franklin Templeton Investments. IF THE ACCESS PERSON RECEIVES CLEARANCE FOR THE TRANSACTION, NO INVESTMENT IN THE SAME ISSUER MAY BE MADE FOR A FUND OR CLIENT UNLESS AN EXECUTIVE OFFICER OF FRANKLIN RESOURCES, INC., WITH NO INTEREST IN THE ISSUER, APPROVES THE TRANSACTION.

Instructions:

1. Complete all sections of this form.

2. Print the completed form, sign, and date.

3. Submit completed form to Legal Compliance via:

Inter-office Mail to: Preclearance

                                 L-Comp SM-920/2

U.S. Mail to: Franklin Templeton Investments

                      Attn: Legal-Compliance/Preclearance

                      P.O. Box 25050

                      San Mateo, CA 94402-5050

Telephone: (650) 312-3693 Fax: (650) 312-5646

E-mail: Preclear, Legal (internal address); Lpreclear@frk.com

(external address)

IN ORDER TO EXPEDITE YOUR REQUEST, PLEASE PROVIDE THE FOLLOWING INFORMATION:

NAME/DESCRIPTION OF PROPOSED INVESTMENT:

PROPOSED INVESTMENT AMOUNT:

Page 31

1) PLEASE ATTACH PAGES OF THE OFFERING MEMORANDUM (OR OTHER DOCUMENTS) SUMMARIZING THE INVESTMENT OPPORTUNITY, INCLUDING:

i) Name of the partnership/hedge fund/issuer;

ii) Name of the general partner, location & telephone number;

iii) Summary of the offering; including the total amount the offering/issuer;

iv) Percentage your investment will represent of the total offering;

v) Plan of distribution; and

vi) Investment objective and strategy,

2) PLEASE RESPOND TO THE FOLLOWING QUESTIONS:

a) Was this investment opportunity presented to you in your capacity as a portfolio manager? If no, please explain the relationship, if any, you have to the issuer or principals of the issuer.

b) Is this investment opportunity suitable for any fund/client that you advise?/19/ If yes, why isn’t the investment being made on behalf of the fund/client? If no, why isn’t the investment opportunity suitable for the fund/clients?

c) Do any of the fund/clients that you advise presently hold securities of the issuer of this proposed investment (e.g., common stock, preferred stock, corporate debt, loan participations, partnership interests, etc.)? If yes, please provide the names of the funds/clients and security description.

d) Do you presently have or will you have any managerial role with the company/issuer as a result of your investment? If yes, please explain in detail your responsibilities, including any compensation you will receive.

e) Will you have any investment control or input to the investment decision making process?

f) Will you receive reports of portfolio holdings? If yes, when and how frequently will these be provided?

3) REMINDER: PERSONAL SECURITIES TRANSACTIONS THAT DO NOT GENERATE BROKERAGE CONFIRMATIONS (E.G., INVESTMENTS PRIVATE PLACEMENTS) MUST BE REPORTED TO THE LEGAL-COMPLIANCE DEPARTMENT ON THE SCHEDULE B FORM WITHIN 10 CALENDAR DAYS AFTER YOU ARE NOTIFIED.

PORTFOLIO PERSON’S NAME	SIGNATURE	DATE
APPROVED BY:
CHIEF INVESTMENT OFFICER’S NAME	SIGNATURE	DATE
LEGAL COMPLIANCE USE ONLY

DATE RECEVIED :                                  DATE ENTERED IN LOTUS NOTES:                                 

Page 32

DATE FORWARDED TO FRI OFFICER:                         

APPROVED BY:
JAMES M. DAVIS, DIRECTOR, GLOBAL COMPLIANCE	DATE
MURRAY L. SIMPSON, EVP-GENERAL COUNSEL	DATE

DATE ENTERED IN EXAMINER:	PRECLEAED:	¨¨
		YES        NO (ATTACH E-MAIL)

APPENDIX C: INVESTMENT ADVISOR AND BROKER-DEALER AND OTHER

SUBSIDIARIES OF FRANKLIN RESOURCES, INC. - MAY 2003

Franklin Advisers, Inc. FIA	IA	Closed Joint-Stock Company Templeton (Russia)
Franklin Advisory Services, LLC FBD	IA	Templeton Unit Trust Management Ltd. (UK)
Franklin Investment Advisory FIA Services, Inc.	IA	Orion Fund Management Ltd.
Franklin Private Client Group, Inc. IA	IA	Templeton Global Advisors Ltd. (Bahamas)
Franklin Mutual Advisers, LLC FIA/FBD	IA	Templeton Asset Management (India) Pvt. Ltd.
Franklin Properties, Inc. FBD	REA	Templeton Italia SIM S.P.A. (Italy)
Franklin/Templeton Distributors, FBD Inc.	BD	Franklin Templeton Investment Services Gmbh (Germany)
Templeton (Switzerland), Ltd. Trust Co	FBD	Fiduciary Trust International of the South
Franklin Templeton International BM Services S.A. (Luxembourg)	FBD	Franklin Templeton Services, LLC

Page 33

Franklin Templeton Investments IA/FIA Australia Limited	FIA	Franklin Templeton Investments Corp. (Ontario)
Franklin/Templeton Investor IA Services, LLC	TA	Templeton Global Advisors Limited (Bahamas)
Franklin Templeton Alternative IA/FIA Strategies, LLC	IA	Templeton Asset Management Ltd. (Singapore)
FTI Institutional, LLC Trust Co.	IA	Fiduciary Trust Company International
Franklin Templeton Asset IA Strategies LLC	IA	Fiduciary International, Inc
Fiduciary Financial Services, Corp. IA	BD	Fiduciary Investment Management International Inc.
Franklin Templeton Asset FIA Management S.A. (France)	FIA	Fiduciary Trust International Australia Limited
Franklin Templeton Investments FIA (Asia) Limited (Hong Kong)	FBD/IA	Fiduciary Trust International Asia Limited (Hong Kong)
Franklin Templeton Investment IA/FIA Management Limited (UK)	IA/FIA	Fiduciary Trust International Limited (UK)
Franklin Templeton Investments FIA Corp. (Canada)	IA/FIA	Fiduciary Trust International Investment Management, Inc. (Japan)
Templeton/Franklin Investment Services, Inc	IA/BD
Templeton Investment Counsel, LLC	IA
Templeton Asset Management, Ltd.	IA/FIA
Franklin Templeton Investments Japan Ltd.	FIA

Codes:	IA:	US registered investment adviser
	BD:	US registered broker-dealer
	FIA:	Foreign equivalent investment adviser
	FBD:	Foreign equivalent broker-dealer
	TA:	US registered transfer agent
	BM:	Business manager to the funds
	REA:	Real estate adviser
	Trust:	Trust company

Page 34

POLICY STATEMENT ON INSIDER TRADING

A. LEGAL REQUIREMENT

Pursuant to the Insider Trading and Securities Fraud Enforcement Act of 1988, it is the policy of Franklin Templeton Investments to forbid any officer, director, employee, consultant acting in a similar capacity, or other person associated with Franklin Templeton Investments from trading, either personally or on behalf of clients, including all client assets managed by the entities in Franklin Templeton Investments, on material non-public information or communicating material non-public information to others in violation of the law. This conduct is frequently referred to as “insider trading.” Franklin Templeton Investment’s Policy Statement on Insider Trading applies to every officer, director, employee or other person associated with Franklin Templeton Investments and extends to activities within and outside their duties with Franklin Templeton Investments. Every officer, director and employee must read and retain this policy statement. Any questions regarding Franklin Templeton Investments Policy Statement on Insider Trading or the Compliance Procedures should be referred to the Legal Department.

The term “insider trading” is not defined in the federal securities laws, but generally is used to refer to the use of material non-public information to trade in securities (whether or not one is an “insider”) or to communications of material non-public information to others.

While the law concerning insider trading is not static, it is generally understood that the law prohibits:

(1) trading by an insider, while in possession of material non-public information; or

(2) trading by a non-insider, while in possession of material non-public information, where the information either was disclosed to the non-insider in violation of an insider’s duty to keep it confidential or was misappropriated; or

(3) communicating material non-public information to others.

The elements of insider trading and the penalties for such unlawful conduct are discussed below. If, after reviewing this policy statement, you have any questions, you should consult the Legal Department.

B. WHO IS AN INSIDER?

The concept of “insider” is broad. It includes officers, directors and employees of a company. In addition, a person can be a “temporary insider” if he or she enters into a special confidential relationship in the conduct of a company’s affairs and as a result is given access to information solely for the company’s purposes. A temporary insider can include, among others, a company’s outside attorneys, accountants, consultants, bank lending officers, and the employees of such organizations. In addition, an investment adviser may become a temporary insider of a company it advises or for which it performs other services. According to the U.S. Supreme Court, the company must expect the outsider to keep the disclosed non-public information confidential and the relationship must at least imply such a duty before the outsider will be considered an insider.

Page 35

C. WHAT IS MATERIAL INFORMATION?

Trading on inside information is not a basis for liability unless the information is material. “Material information” generally is defined as information for which there is a substantial likelihood that a reasonable investor would consider it important in making his or her investment decisions, or information that is reasonably certain to have a substantial effect on the price of the company’s securities. Information that officers, directors and employees should consider material includes, but is not limited to: dividend changes, earnings estimates, changes in previously released earnings estimates, significant merger or acquisition proposals or agreements, major litigation, liquidation problems, and extraordinary management developments.

Material information does not have to relate to a company’s business. For example, in CARPENTER V. U.S., 108 U.S. 316 (1987), the Supreme Court considered as material certain information about the contents of a forthcoming newspaper column that was expected to affect the market price of a security. In that case, a WALL STREET JOURNAL reporter was found criminally liable for disclosing to others the dates that reports on various companies would appear in the WALL STREET JOURNAL and whether those reports would be favorable or not.

D. WHAT IS NON-PUBLIC INFORMATION?

Information is non-public until it has been effectively communicated to the marketplace. One must be able to point to some fact to show that the information is generally public. For example, information found in a report filed with the Securities and Exchange Commission (“SEC”), or appearing in Dow Jones, Reuters Economic Services, THE WALL STREET JOURNAL or other publications of general circulation would be considered public.

E. BASIS FOR LIABILITY

1. FIDUCIARY DUTY THEORY

In 1980, the Supreme Court found that there is no general duty to disclose before trading on material non-public information, but that such a duty arises only where there is a fiduciary relationship. That is, there must be a relationship between the parties to the transaction such that one party has a right to expect that the other party will not disclose any material non-public information or refrain from trading. CHIARELLA V. U.S., 445 U.S. 22 (1980).

In DIRKS V. SEC, 463 U.S. 646 (1983), the Supreme Court stated alternate theories under which non-insiders can acquire the fiduciary duties of insiders. They can enter into a confidential relationship with the company through which they gain information (E.G., attorneys, accountants), or they can acquire a fiduciary duty to the company’s shareholders as “tippees” if they are aware or should have been aware that they have been given confidential information by an insider who has violated his fiduciary duty to the company’s shareholders.

However, in the “tippee” situation, a breach of duty occurs only if the insider personally benefits, directly or indirectly, from the disclosure. The benefit does not have to be pecuniary but can be a gift, a reputational benefit that will translate into future earnings, or even evidence of a relationship that suggests a quid pro quo.

2. MISAPPROPRIATION THEORY

Another basis for insider trading liability is the “misappropriation” theory, under which liability is established when trading occurs on material non-public information that was stolen or misappropriated from any other person. In U.S. V. CARPENTER, SUPRA, the Court found, in 1987, a columnist defrauded THE WALL STREET JOURNAL when he stole information from the WALL STREET JOURNAL and used it for trading in the securities markets. It should be noted that the misappropriation theory can be used to reach a variety of individuals not previously thought to be encompassed under the fiduciary duty theory.

Page 36

F. PENALTIES FOR INSIDER TRADING

Penalties for trading on or communicating material non-public information are severe, both for individuals involved in such unlawful conduct and their employers. A person can be subject to some or all of the penalties below even if he or she does not personally benefit from the violation. Penalties include:

• civil injunctions;

• treble damages;

• disgorgement of profits;

• jail sentences;

• fines for the person who committed the violation of up to three times the profit gained or loss avoided, whether or not the person actually benefited; and

• fines for the employer or other controlling person of up to the greater of $1,000,000 or three times the amount of the profit gained or loss avoided.

In addition, any violation of this policy statement can result in serious sanctions by the Franklin Templeton Group, including dismissal of any person involved.

G. INSIDER TRADING PROCEDURES

Each access person, Compliance Officer, the Risk Management Department, and the Legal Department, as the case may be, shall comply with the following procedures.

1. IDENTIFYING INSIDE INFORMATION

Before trading for yourself or others, including investment companies or private accounts managed by the Franklin Templeton Group, in the securities of a company about which you may have potential inside information, ask yourself the following questions:

• Is the information material?

• Is this information that an investor would consider important in making his or her investment decisions?

• Is this information that would substantially affect the market price of the securities if generally disclosed?

• Is the information non-public?

• To whom has this information been provided?

• Has the information been effectively communicated to the marketplace (e.g., published in REUTERS, THE WALL STREET JOURNAL or other publications of general circulation)?

If, after consideration of these questions, you believe that the information may be material and non-public, or if you have questions as to whether the information is material and non-public, you should take the following steps:

(i) Report the matter immediately to the designated Compliance Officer, or if he or she is not available, to the Legal Department.

(ii) Do not purchase or sell the securities on behalf of yourself or others, including investment companies or private accounts managed by Franklin Templeton Investments.

Page 37

(iii) Do not communicate the information inside or outside Franklin Templeton Investments , other than to the Compliance Officer or the Legal Department.

(iv) The Compliance Officer shall immediately contact the Legal Department for advice concerning any possible material, non-public information.

(v) After the Legal Department has reviewed the issue and consulted with the Compliance Officer, you will be instructed either to continue the prohibitions against trading and communication noted in (ii) and (iii), or you will be allowed to trade and communicate the information.

(vi) In the event the information in your possession is determined by the Legal Department or the Compliance Officer to be material and non-public, it may not be communicated to anyone, including persons within Franklin Templeton Investments, except as provided in (i) above. In addition, care should be taken so that the information is secure. For example, files containing the information should be sealed and access to computer files containing material non-public information should be restricted to the extent practicable.

2. RESTRICTING ACCESS TO OTHER SENSITIVE INFORMATION

All Franklin Templeton Investments personnel also are reminded of the need to be careful to protect from disclosure other types of sensitive information that they may obtain or have access to as a result of their employment or association with Franklin Templeton Investments.

(I) GENERAL ACCESS CONTROL PROCEDURES

Franklin Templeton Investments has established a process by which access to company files that may contain sensitive or non-public information such as the Bargain List and the Source of Funds List is carefully limited. Since most of the Franklin Templeton Group files, which contain sensitive information, are stored in computers, personal identification numbers, passwords and/or code access numbers are distributed to Franklin Templeton Investments computer access persons only. This activity is monitored on an ongoing basis. In addition, access to certain areas likely to contain sensitive information is normally restricted by access codes.

A. WHAT IS REGULATION FD?

Regulation FD under the Securities Exchange Act of 1934, as amended (the “1934 Act”), prohibits certain persons associated with Franklin Resources, Inc., its affiliates, subsidiaries (collectively, “FTI”) and closed-end fund advised by an investment advisory subsidiary of Resources (“FTI Closed-End Funds”) and persons associated with the FTI investment adviser to the FTI Closed-End Funds, from selectively disclosing material nonpublic information about Resources and the FTI Closed-End Funds to certain securities market professionals and shareholders. Regulation FD is designed to promote the full and fair disclosure of information by issuers such as Resources and the FTI Closed-End Funds.

The scope of Regulation FD is limited. Regulation FD applies to Resources and FTI Closed-End Funds, but does not apply to open-end investment companies managed by the FTI investment advisers. The rule also does not apply to all communications about the Resources or FTI Closed-End Funds with outside persons. Rather, Regulation FD applies only to communications to securities market professionals and to any shareholder of the Resources or FTI Closed-End Funds under circumstances in which it is reasonably foreseeable that such shareholder

Page 38

will trade on the basis of the information. In addition, Regulation FD does not apply to all employees and officers. It only applies to certain senior officials of Resources and the FTI Closed-End Funds and those persons who regularly communicate with securities market professionals or with shareholders. Consequently, Regulation FD and the Franklin Templeton Investments Fair Disclosure Policies and Procedures (the “Policies and Procedures”) will not apply to a variety of legitimate, ordinary-course business communications or to disclosures made to the media. Irrespective of Regulation FD, all Franklin personnel must comply with the “Franklin Templeton Investment Policy Statement on Insider Trading” and should be aware that disclosure of material nonpublic information to another person may constitute a form of illegal insider trading called “tipping.”

B. FTI’S CORPORATE POLICY FOR REGULATION FD

Franklin Templeton Investments is committed to complying with Regulation FD by making fair disclosure of information about Resources or FTI Closed-End Funds without advantage to any particular securities market professional, shareholder or investor. It is not the intention of these Policies and Procedures, however, to interfere with legitimate, ordinary-course business communications or disclosures made to the media or governmental agencies. FTI believes it is in its best interest to maintain an active and open dialogue with securities market professionals, shareholders and investors regarding Resources and the FTI Closed-End Funds. FTI will continue to provide current and potential shareholders access to key information reasonably required for making an informed decision on whether to invest in shares of Resources or FTI Closed-End Funds. FTI personnel will make appropriate announcements and conduct interviews about Resources and FTI Closed-End Funds with the media, in accordance with Corporate Communication’s policies and procedures regarding such announcements or interviews.

C. GENERAL PROVISIONS OF REGULATION FD

WHENEVER:

(1) AN ISSUER, OR PERSON ACTING ON ITS BEHALF (i.e. any senior official or any other officer, employee or agent of an issuer (or issuer’s investment adviser) who regularly communicates with securities professionals or shareholders, or any employee directed to make a disclosure by a member of senior management)

(2) DISCLOSES MATERIAL NON-PUBLIC INFORMATION

(3) TO CERTAIN SPECIFIED PERSONS (generally, securities market professionals or holders of the issuer’s securities who may trade on the basis of the information)

THEN:

(4) the issuer must make public disclosure of that same information:

• simultaneously (for intentional disclosures), or

• promptly (for non-intentional disclosures).

In the case of non-intentional disclosures, “promptly” means no later than 24 hours (or the commencement of the next day’s trading on the NYSE, whichever is later), after a senior official learns of the disclosure and knows, or is reckless in not knowing, that the information is both material and non-public.

Page 39

D. PERSONS TO WHOM SELECTIVE DISCLOSURE MAY NOT BE MADE:

(1) BROKER-DEALERS and their associated persons;

(2) INVESTMENT ADVISERS, certain institutional investment managers and their associated persons,

(3) INVESTMENT COMPANIES, hedge funds and their affiliated persons, and

(4) HOLDERS OF THE ISSUER’S SECURITIES, under circumstances where it is reasonably foreseeable that such person would purchase or sell securities on the basis of the information.

The Regulation is designed to cover sell-side analysts, buy-side analysts, institutional investment managers, and other market professionals who may be likely to trade on the basis of selectively disclosed information.

E. EXCLUSIONS FROM REGULATION FD

SELECTIVE DISCLOSURES MAY BE MADE TO THE FOLLOWING AND NOT VIOLATE REGULATION FD:

(1) communications to “temporary insiders” who owe a duty of trust or confidence to the issuer (i.e. attorneys, investment bankers, or accountants);

(2) any person who expressly agrees to maintain the information in confidence (i.e., disclosures by a public company to private investors in private offerings);

(3) an entity whose primary business is the issuance of a credit rating, if the information is disclosed for the sole purpose of developing such ratings and the entity’s ratings are publicly available; and

(4) communications made in connection with most offerings of securities registered under the Securities Act of 1933.

F. METHODS OF PUBLIC DISCLOSURE:

An issuer’s disclosure obligation may be met by any method reasonably designed to provide broad, non-exclusionary distribution of the information to the public. Acceptable methods of public disclosure include:

• Furnishing or filing with the SEC a Form 8-K (not applicable to closed-end investment companies);

• press releases distributed through a widely circulated news or wire service; or

• announcements made through press conferences or conference calls that interested members of the public may attend or listen to either in person, by telephonic transmission, or by other electronic transmission (including use of the Internet), of which the public has adequate notice and means of access.

Posting of new information on an issuer’s own website is NOT by itself a sufficient method of public disclosure. It may be used in combination with other methods.

Page 40

G. TRAINING

Appropriate training will be provided to certain employees identified as follows:

• Corporate Communications Department

• Portfolio managers of FTI Closed-End Funds and their assistants;

• Managers and supervisors of Customer Services Representatives.

As part of this training, each employee will be notified that they should not communicate on substantive matters involving Franklin Resources Inc., or the FTI Closed-End Funds except in accordance with these Policies and Procedures.

H. QUESTIONS

All inquiries regarding these Policie and Procedures should be addressed to Barbara Green, Deputy General Counel (650-525-7188, or Jim Davis, Director, Global Compliance (650-312-2832).

I. FREQUENTLY ASKED QUESTIONS:

(1) WHEN IS DISCLOSURE CONSIDERED INTENTIONAL WITHIN THE MEANING OF REGULATION FD?

Under Regulation FD, selective disclosure is considered intentional when the issuer (or person acting on its behalf) knows, or is reckless in not knowing, that the information disclosed is BOTH material and non-public. For example, non-intentional selective disclosures may occur when company officials inadvertently disclose material information in response to questions from analysts or shareholders or when a decision is made to selectively disclose information that the company does not view as material but the market moves in response to the disclosure.

(2) WHAT IS NON-PUBLIC INFORMATION?

Information is non-public if it has not been disseminated in a manner making it available to investors generally.

(3) WHAT IS MATERIAL INFORMATION?

Regulation FD deems information material if “there is a substantial likelihood that a reasonable shareholder would consider it important” in making an investment decision or if there a substantial likelihood that a fact would be viewed by a reasonable investor as having “significantly altered the ‘total mix’ of information made available.”

(4) ARE THERE SPECIFIC TYPES OF INFORMATION THAT ARE CONSIDERED MATERIAL?

There is no bright line test to determine materiality. However, below is a list of items that should be reviewed carefully to determine whether they are material.

• An impending departure of a portfolio manager who is primarily responsible for day-to-day management of a Closed-End Fund;

• A plan to convert a Closed-End Fund from a closed-end investment company to an open-end investment company;

• A plan to merge a Closed-End Fund into another investment company;

• Impending purchases or sales of particular portfolio securities;

Page 41

• Information about Resources related to earnings or earnings forecasts;

• Mergers, acquisitions, tender offers, joint ventures, or material change in assets;

• Changes in control or in management;

• Change in auditors or auditor notification that the issuer may no longer rely on an auditor’s audit report;

• Events regarding Resources or an FTI Closed-End Fund’s securities - e.g., repurchase plans, stock splits or changes in dividends, calls of securities for redemption, changes to the rights of security holders, public or private sales of additional securities; and

• Bankruptcies or receiverships.

(5) ARE ALL ISSUER COMMUNICATIONS COVERED BY THE RULE?

No. Regulation FD applies only to communications by the issuer’s senior management, its investor relations professionals and others who regularly communicate with securities market professionals and security holders when those communications are made to securities market professionals and security holders under circumstances in which it is reasonably foreseeable that the holders will trade on the basis of the information. Regulation FD isn’t intended to apply to persons who are engaged in ordinary-course business communications with the issuer or to interfere with disclosures to the media. However, the traditional disclosure concerns (such as “tipping” material non-public information and leaking disclosure into the market) still apply.

(6) ARE COMMUNICATIONS TO THE MEDIA COVERED BY REGULATION FD?

No. However, an interview with a reporter is not the best way to disseminate material information to the public and is not a method of public disclosure mentioned by the SEC as a means to satisfy Regulation FD.

(7) ARE ONE-ON-ONE DISCUSSIONS WITH ANALYSTS PERMITTED?

Yes. Regulation FD is not intended to undermine the role of analysts in “sifting through and extracting information that may not be significant to the ordinary investor to reach material conclusions.” However, persons covered by Regulation FD must be cautious not to selectively provide material non-public information in one-on-one discussions. (This may be confusing to some - perhaps this should be deleted).

(8) MAY ISSUERS PROVIDE GUIDANCE ON EARNINGS?

Not selectively. Although many issuers have historically provided earnings guidance, the SEC observed in Regulation FD’s adopting release that an issuer that has a private conversation with an analyst in which the issuer provides direct or indirect guidance as to whether earnings will be higher than, lower than or even the same as forecasted will likely violate the rule. Regulation FD may be violated simply by confirming in a non-public manner an earnings forecast that is already public, because such confirmation may be material.

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J. SUPPLEMENTAL INFORMATION—SEC’S DIVISION OF COPORATE FINANCE

(1) INTERPRETATIONS ISSUED OCTOBER 2000

1. CAN AN ISSUER EVER CONFIRM SELECTIVELY A FORECAST IT HAS PREVIOUSLY MADE TO THE PUBLIC WITHOUT TRIGGERING THE RULE’S PUBLIC REPORTING REQUIREMENTS?

Yes. In assessing the materiality of an issuer’s confirmation of its own forecast, the issuer should consider whether the confirmation conveys any information above and beyond the original forecast and whether that additional information is itself material. That may depend on, among other things, the amount of time that has elapsed between the original forecast and the confirmation (or the amount of time elapsed since the last public confirmation, if applicable). For example, a confirmation of expected quarterly earnings made near the end of a quarter might convey information about how the issuer actually performed. In that respect, the inference a reasonable investor may draw from such a confirmation may differ significantly from the inference he or she may have drawn from the original forecast early in the quarter. The materiality of a confirmation also may depend on, among other things, intervening events. For example, if it is clear that the issuer’s forecast is highly dependent on a particular customer and the customer subsequently announces that it is ceasing operations, a confirmation by the issuer of a prior forecast may be material.

We note that a statement by an issuer that it has “not changed,” or that it is “still comfortable with,” a prior forecast is no different than a confirmation of a prior forecast. Moreover, under certain circumstances, an issuer’s reference to a prior forecast may imply that the issuer is confirming the forecast. If, when asked about a prior forecast, the issuer does not want to confirm it, the issuer may simply wish to say “no comment.” If an issuer wishes to refer back to the prior estimate without implicitly confirming it, the issuer should make clear that the prior estimate was as of the date it was given and is not being updated as of the time of the subsequent statement.

2. DOES REGULATION FD CREATE A DUTY TO UPDATE?

No. Regulation FD does not change existing law with respect to any duty to update.

3. IF AN ISSUER WANTS TO MAKE PUBLIC DISCLOSURE OF MATERIAL NONPUBLIC INFORMATION UNDER REGULATION FD BY MEANS OF A CONFERENCE CALL, WHAT INFORMATION MUST THE ISSUER PROVIDE IN THE NOTICE AND HOW FAR IN ADVANCE SHOULD NOTICE BE GIVEN?

An adequate advance notice under Regulation FD must include the date, time, and call-in information for the conference call. Issuers also should consider the following non-exclusive factors in determining what constitutes adequate advance notice of a conference call:

• TIMING: Public notice should be provided a reasonable period of time ahead of the conference call. For example, for a quarterly earnings announcement that the issuer makes on a regular basis, notice of several days would be reasonable. We recognize, however, that the period of notice may be shorter when unexpected events occur and the information is critical or time sensitive.

• AVAILABILITY: If a transcript or re-play of the conference call will be available after it has occurred, for instance via the issuer’s website, we encourage issuers to indicate in the notice how, and for how long, such a record will be available to the public.

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4. CAN AN ISSUER SATISFY REGULATION FD’S PUBLIC DISCLOSURE REQUIREMENT BY DISCLOSING MATERIAL NONPUBLIC INFORMATION AT A SHAREHOLDER MEETING THAT IS OPEN TO ALL SHAREHOLDERS, BUT NOT TO THE PUBLIC?

No. If a shareholder meeting is not accessible by the public, an issuer’s selective disclosure of material nonpublic information at the meeting would not satisfy Regulation FD’s public disclosure requirement.

5. COULD AN EXCHANGE ACT FILING OTHER THAN A FORM 8-K, SUCH AS A FORM 10-Q OR PROXY STATEMENT, CONSTITUTE PUBLIC DISCLOSURE?

Yes. In general, including information in a document publicly filed on EDGAR with the SEC within the time frames that Regulation FD requires would satisfy the rule. In considering whether that disclosure is sufficient, however, companies must take care to bring the disclosure to the attention of readers of the document, must not bury the information, and must not make the disclosure in a piecemeal fashion throughout the filing.

6. FOR PURPOSES OF REGULATION FD, MUST AN ISSUER WAIT SOME PERIOD OF TIME AFTER MAKING A FILING OR FURNISHING A REPORT ON EDGAR THAT COMPLIES WITH THE EXCHANGE ACT BEFORE MAKING DISCLOSURE OF THE SAME INFORMATION TO A SELECT AUDIENCE?

Prior to making disclosure to a select audience, the issuer need only confirm that the filing or furnished report has received a filing date (as determined in accordance with Rules 12 and 13 of Regulation S-T) that is no later than the date of the selective disclosure.

7. CAN AN ISSUER EVER REVIEW AND COMMENT ON AN ANALYST’S MODEL PRIVATELY WITHOUT TRIGGERING REGULATION FD’S DISCLOSURE REQUIREMENTS?

Yes. It depends on whether, in so doing, the issuer communicates material nonpublic information. For example, an issuer ordinarily would not be conveying material nonpublic information if it corrected historical facts that were a matter of public record. An issuer also would not be conveying such information if it shared seemingly inconsequential data which, pieced together with public information by a skilled analyst with knowledge of the issuer and the industry, helps form a mosaic that reveals material nonpublic information. It would not violate Regulation FD to reveal this type of data even if, when added to the analyst’s own fund of knowledge, it is used to construct his or her ultimate judgments about the issuer. An issuer may not, however, use the discussion of an analyst’s model as a vehicle for selectively communicating - either expressly or in code - material nonpublic information.

8. DURING A NONPUBLIC MEETING WITH ANALYSTS, AN ISSUER’S CEO PROVIDES MATERIAL NONPUBLIC INFORMATION ON A SUBJECT SHE HAD NOT PLANNED TO COVER. ALTHOUGH THE CEO HAD NOT PLANNED TO DISCLOSE THIS INFORMATION WHEN SHE ENTERED THE MEETING, AFTER HEARING THE DIRECTION OF THE DISCUSSION, SHE DECIDED TO PROVIDE IT, KNOWING THAT THE INFORMATION WAS MATERIAL AND NONPUBLIC. WOULD THIS BE CONSIDERED AN INTENTIONAL DISCLOSURE THAT VIOLATED REGULATION FD BECAUSE NO SIMULTANEOUS PUBLIC DISCLOSURE WAS MADE?

Yes. A disclosure is “intentional” under Regulation FD when the person making it either knows, or is reckless in not knowing, that the information he or she is communicating is both material and nonpublic. In this example, the CEO knew that the information was material and nonpublic, so the disclosure was “intentional” under Regulation FD, even though she did not originally plan to make it.

9. MAY AN ISSUER PROVIDE MATERIAL NONPUBLIC INFORMATION TO ANALYSTS AS LONG AS THE ANALYSTS EXPRESSLY AGREE TO MAINTAIN CONFIDENTIALITY UNTIL THE INFORMATION IS PUBLIC?

Yes.

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10. IF AN ISSUER GETS AN AGREEMENT TO MAINTAIN MATERIAL NONPUBLIC INFORMATION IN CONFIDENCE, MUST IT ALSO GET THE ADDITIONAL STATEMENT THAT THE RECIPIENT AGREES NOT TO TRADE ON THE INFORMATION IN ORDER TO RELY ON THE EXCLUSION IN RULE 100(B)(2)(II) OF REGULATION FD?

No. An express agreement to maintain the information in confidence is sufficient. If a recipient of material nonpublic information subject to such a confidentiality agreement trades or advises others to trade, he or she could face insider trading liability.

11. IF AN ISSUER WISHES TO RELY ON THE CONFIDENTIALITY AGREEMENT EXCLUSION OF REGULATION FD, IS IT SUFFICIENT TO GET AN ACKNOWLEDGMENT THAT THE RECIPIENT OF THE MATERIAL NONPUBLIC INFORMATION WILL NOT USE THE INFORMATION IN VIOLATION OF THE FEDERAL SECURITIES LAWS?

No. The recipient must expressly agree to keep the information confidential.

12. MUST ROAD SHOW MATERIALS IN CONNECTION WITH A REGISTERED PUBLIC OFFERING BE DISCLOSED UNDER REGULATION FD?

Any disclosure made “in connection with” a registered public offering of the type excluded from Regulation FD is not subject to Regulation FD. That includes road shows in those offerings. All other road shows are subject to Regulation FD in the absence of another applicable exclusion from Regulation FD. For example, a disclosure in a road show in an unregistered offering is subject to Regulation FD. Also, a disclosure in a road show made while the issuer is not in registration and is not otherwise engaged in a securities offering is subject to Regulation FD. If, however, those who receive road show information expressly agree to keep the material nonpublic information confidential, disclosure to them is not subject to Regulation FD.

13. CAN AN ISSUER DISCLOSE MATERIAL NONPUBLIC INFORMATION TO ITS EMPLOYEES (WHO MAY ALSO BE SHAREHOLDERS) WITHOUT MAKING PUBLIC DISCLOSURE OF THE INFORMATION?

Yes. Rule 100(b)(1) states that Regulation FD applies to disclosures made to “any person outside the issuer.” Regulation FD does not apply to communications of confidential information to employees of the issuer. An issuer’s officers, directors, and other employees are subject to duties of trust and confidence and face insider trading liability if they trade or tip.

14. IF AN ISSUER HAS A POLICY THAT LIMITS WHICH SENIOR OFFICIALS ARE AUTHORIZED TO SPEAK TO PERSONS ENUMERATED IN RULE 100(B)(1)(I) - (B)(1)(IV), WILL DISCLOSURES BY SENIOR OFFICIALS NOT AUTHORIZED TO SPEAK UNDER THE POLICY BE SUBJECT TO REGULATION FD?

No. Selective disclosures of material nonpublic information by senior officials not authorized to speak to enumerated persons are made in breach of a duty of trust or confidence to the issuer and are not covered by Regulation FD. Such disclosures may, however, trigger liability under existing insider trading law.

15. A PUBLICLY TRADED COMPANY HAS DECIDED TO CONDUCT A PRIVATE PLACEMENT OF SHARES AND THEN SUBSEQUENTLY REGISTER THE RESALE BY THOSE SHAREHOLDERS ON A FORM S-3 REGISTRATION STATEMENT. THE COMPANY AND ITS INVESTMENT BANKERS CONDUCT MINI-ROAD SHOWS OVER A THREE-DAY PERIOD DURING THE PRIVATE PLACEMENT. DOES THE RESALE REGISTRATION STATEMENT FILED AFTER COMPLETION OF

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THE PRIVATE PLACEMENT AFFECT WHETHER DISCLOSURE AT THE ROAD SHOWS IS COVERED BY REGULATION FD?

No. The road shows are made in connection with an offering by the issuer that is not registered (i.e., the private placement), regardless of whether a registration statement is later filed for an offering by those who purchased in the private placement.

( 2) ADDITIONAL INTERPRETATIONS ISSUED DECEMBER 2000

16. DOES THE MERE PRESENCE OF THE PRESS AT AN OTHERWISE NON-PUBLIC MEETING ATTENDED BY PERSONS OUTSIDE THE ISSUER DESCRIBED IN PARAGRAPH (B)(1) OF RULE 100 UNDER REGULATION FD RENDER THE MEETING PUBLIC FOR PURPOSES OF REGULATION FD?

Regulation FD states that a company can make public disclosure by filing or furnishing a Form 8-K or by disseminating information through another method (or combination of methods) that is reasonably designed to provide broad, non-exclusionary distribution of the information to the public. Some companies may attempt to satisfy the latter method for public dissemination by merely having the press in attendance at a meeting to which the public is not invited or otherwise present. If it is attended by persons outside the issuer described in paragraph (b)(1) of Rule 100 under Regulation FD and if it is not otherwise public, the meeting will not necessarily be deemed public for purposes of Regulation FD by the mere presence of the press at the meeting. Whether or not the meeting would be deemed public would depend, among other things, on when, what and how widely the press reports on the meeting.

17. IS REGULATION FD INTENDED TO REPLACE THE PRACTICE OF USING A PRESS RELEASE TO DISSEMINATE EARNINGS INFORMATION IN ADVANCE OF A CONFERENCE CALL OR WEBCAST AT WHICH EARNINGS INFORMATION WILL BE DISCUSSED?

No. In adopting Regulation FD, the Commission specifically indicated that it did not intend the regulation to alter or supplant the rules of self-regulatory organizations with respect to the use of press releases to announce material developments. In this regard, the Commission specifically endorsed a model for the planned disclosure of material information, such as earnings, in which the conference call or webcast is preceded by a press release containing the earnings information.

SUPPLEMENTAL MEMORANDUM

CHINESE WALL PROCEDURES

Under The Chinese Wall, access persons from Advisory Groups (as defined in Appendix A) are prohibited from having access to investment information of an Advisory Group other than his or her own Advisory Group with the following exception: Access persons to Floating Rate may have access to Investment Information of Franklin Templeton, but access persons to Franklin Templeton may not have access to Floating Rate.

The Chinese Wall applies to all access persons, including part-time employees, and consultants, and are in addition to those obligations prescribed by Franklin Templeton Code of Ethics (the “Code of Ethics”).

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Questions regarding these procedures should be directed to the attention of Jim Davis, Legal Compliance Department, at 650-312-2832 or e-mailed to:

jdavis@frk.com.

GENERAL PROCEDURES

CONFIDENTIALITY. Access persons within one Advisory Group (e.g., Franklin Templeton) may not disclose Investment Information to access persons of the other Advisory Group (e.g., Franklin Mutual). Any communication of Investment Information outside an Advisory Group should be limited to persons (such as Accounting, Investment Operations, Legal and Compliance personnel) who have a valid “need to know” such information and each of whom is specifically prohibited from disclosing Investment Information from one to another except when necessary for regulatory purposes. Nothing contained herein is designed to prohibit the proper exchange of accounting, operational, legal or compliance information among such persons in the normal course of performing his or her duties.

DISCUSSIONS. Access persons within one Advisory Group should avoid discussing Investment Information in the presence of persons who do not have a need to know the information. Extreme caution should be taken with discussions in public places such as hallways, elevators, taxis, airplanes, airports, restaurants, and social gatherings. Avoid discussing confidential information on speakerphones. Mobile telephones should be used with great care because they are not secure.

ACCESS. Access persons should limit physical access to areas where confidential or proprietary information may be present or discussed. Only persons with a valid business reason for being in such an area should be permitted. In this regard, meetings with personnel who are not members of the same Advisory Group should be conducted in conference rooms rather than employee offices. Work on confidential projects should take place in areas that are physically separate and secure.

OUTSIDE INQUIRIES. Any person not specifically authorized to respond to press or other outside inquiries concerning a particular matter should refer all calls relating to the matter to the attention of Holly Gibson-Brady, Director, Corporate Communications, Franklin Templeton Investments, in San Mateo, California, at (650) 312-4701.

DOCUMENTS AND DATABASES. Confidential documents should not be stored in common office areas where unauthorized persons may read them. Such documents should be stored in secure locations and not left exposed overnight on desks or in workrooms.

Confidential databases and other confidential information accessible by computer should be protected by passwords or otherwise secured against access by unauthorized persons.

FAXING PROCEDURES. Confidential documents should not be faxed to locations where they may be read by unauthorized persons, including to other FRI offices outside the Advisory Group, unless steps have been taken to remove or redact any confidential information included in such documents. Prior to faxing a document that includes confidential information, the sender should confirm that the recipient is attending the machine that receives such documents.

THE CHINESE WALL

GENERAL. FRI has adopted the Chinese Wall to separate investment management activities conducted by certain investment advisory subsidiaries of FRI. The Chinese Wall may be amended or supplemented from time to time by memoranda circulated by the Legal Compliance Department.

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CHINESE WALL RESTRICTIONS. Except in accordance with the Wall-crossing procedures described below or in accordance with such other procedures as may be developed by the Legal Compliance Department for a particular department or division:

• No access person in any Advisory Group (as defined in Appendix A) should disclose Investment Information to any access person in the any other Advisory Group, or give such access persons access to any file or database containing such Investment Information; and

• No access person in any Advisory Group should obtain or make any effort to obtain Investment Information within the any other Advisory Group from any person.

An access person who obtains Investment Information of an Advisory Group other than his or her own in a manner other than in accordance with the Chinese Wall procedures described herein, should immediately notify an appropriate supervisory person in his or her department who, in turn, should consult with the Legal Compliance Department concerning what, if any, action should be taken. Unless expressly advised to the contrary by the Legal Compliance Department, such employee should refrain from engaging in transactions in the related securities or other securities of the related issuer for any account and avoid further disclosure of the information.

CROSSING PROCEDURES. Disclosure of Investment Information of one Advisory Group to an access person in another Advisory Group on a “need to know” basis in the performance of his or her duties, should be made only if absolutely necessary. In such instance, the disclosure of such information may be made only in accordance with the specific procedures set forth below.

An access person within one Advisory Group must obtain prior approval from the Legal Compliance Department before making any disclosure of Investment Information to an access person within the other Advisory Group.

Before approval is granted, the Legal Compliance Department must be notified in writing by an Executive Officer within the Advisory Group (the “Originating Group”) which proposes to cross the Chinese Wall of (1) the identity of the Advisory Group access person(s) who are proposed to cross the Chinese Wall, (2) the identity of the access person(s) in the other Advisory Group (the “Receiving Group”) who are proposed to receive the Investment Information, (3) the applicable issuer(s), (4) the nature of the information to be discussed, and (5) the reason for crossing the Chinese Wall. The form of notice is attached to this Memorandum as Appendix B.

The Legal Compliance Department will notify an Executive Officer within the Receiving Group of the identity of the access person(s) who are proposed to cross the Chinese Wall. The Legal Compliance Department may not disclose any additional information to such person.

If approval is obtained from an Executive Officer within the Receiving Group, the Legal Compliance Department will notify the requesting Executive Officer in the Originating Group that the proposed Wall-crosser(s) may be contacted. Personnel from the Legal Compliance Department or their designees must attend all meetings where Wall-crossing communications are made. Communications permitted by these crossing procedures should be conducted in a manner not to be overheard or received by persons not authorized to receive confidential information.

The Legal Compliance Department will maintain a record of Wall-crossings.

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An access person who has crossed the Chinese Wall under these procedures must maintain the confidentiality of the Investment Information received and may use it only for the purposes for which it was disclosed.

Any questions or issues arising in connection with these crossing procedures will be resolved between the appropriate Executive Officers(s), the Legal Compliance Department and the Legal Department.

APPENDIX A

FRANKLIN TEMPLETON INVESTMENT’S ADVISORY GROUPS (12/02)

1. FRANKLIN/TEMPLETON ADVISORY GROUP

Franklin Advisers, Inc.

Franklin Advisory Services, LLC

Franklin Investment Advisory Services, Inc.

Franklin Private Client Group, Inc.

Franklin Templeton Investments Corp (Canada)

Franklin Templeton Investment Management, Limited (UK)

Franklin Templeton Investments Japan, Ltd.

Franklin Templeton Investments Australia Limited

FTI Institutional, LLC

Franklin Templeton Asset Strategies, LLC

Franklin Templeton Investments (Asia) Limited

Franklin Templeton Asset Management S.A., (France)

Templeton/Franklin Investment Services, Inc.

Templeton Investment Counsel, LLC

Templeton Asset Management, Limited.

Templeton Global Advisors Limited (Bahamas)

Templeton Asset Management (India) Pvt. Ltd.

Fiduciary Trust Company International (NY)

Fiduciary International, Inc.

Fiduciary Investment Management International, Inc.

Fiduciary Trust International Asia Limited (Hong Kong)

Fiduciary Trust International Australia Limited

Fiduciary Trust International Limited (UK)

Fiduciary Trust International Investment Management, Inc. (Japan)

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Fiduciary Trust International of California

Fiduciary Trust International of the South (Florida)

FTI -Banque Fiduciary Trust (Switzerland)

2. FRANKLIN FLOATING RATE TRUST ADVISORY GROUP

3. FRANKLIN MUTUAL ADVISORY GROUP

APPENDIX B

M E M O R A N D U M

TO:                         The Legal Compliance Department - San Mateo

FROM:

RE:                         Chinese Wall Crossing

DATE:

The following access person(s)

Name                                                  Title                                                  Department

within the                                 Advisory Group are proposing to cross the Chinese Wall and communicate certain Investment Information to the access persons within the                                 Advisory Group identified below.

                    Name                                                  Title                                                  Department

Such access person(s) will cross the Chinese Wall with respect to the following issuer:

The following is a description of the nature of the information to be discussed by such access person(s):

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Modified on

Code of Ethics Revised 12-03-02 Readonly.doc

APPROVED:
	EXECUTIVE OFFICER (ORIGINATING GROUP)
	Executive Officer (Receiving Group)

¹ “Director” includes trustee.

² The term “employee or employees” includes futures associates, as well as regular employees of Franklin Templeton Investments.

³ SEE Appendix A. II., for definition of “Proprietary Accounts.”

⁴ Generally, a person has “beneficial ownership” in a security if he or she, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares a direct or indirect pecuniary interest in the security. There is a presumption of a pecuniary interest in a security held or acquired by a member of a person’s immediate family sharing the same household.

⁵ Proprietary Information: Information that is obtained or developed during the ordinary course of employment with Franklin Templeton Investments, whether by you or someone else, and is not available to persons outside of Franklin Templeton Investments. Examples of such Proprietary Information include, among other things, internal research reports, research materials supplied to Franklin Templeton Investments by vendors and broker-dealers not generally available to the public, minutes of departmental/research meetings and conference calls, and communications with company officers (including confidentiality agreements). Examples of non-Proprietary Information include mass media publications (e.g., The Wall Street Journal, Forbes, and Fortune), certain specialized publications available to the public (e.g., Morningstar, Value Line, Standard and Poors), and research reports available to the general public.

⁶ The Director, Global Compliance is designated on Schedule A. The “Appropriate Analyst” means any securities analyst or portfolio manager, other than you,

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making recommendations or investing funds on behalf of any associated client, who may be reasonably expected to recommend or consider the purchase or sale of the security in question.

⁷ Associated Client: A Fund or client who’s trading information would be available to the access person during the course of his or her regular functions or duties.

⁸ This restriction applies equally to transactions occurring in margin and option accounts, which may not be due to direct actions by the Portfolio Person. For example, a stock held less than 60 days that is sold to meet a margin call or the underlying stock of a covered call option held less than 60 days that is called away, would be a violation of this restriction if these transactions resulted in a profit for the Portfolio Person.

⁹ You are not required to separately report the vesting of shares or options of Franklin Resources, Inc., received pursuant to a deferred compensation plan as such information is already maintained.

¹⁰ See Sections 3.2 and 4.6 of the Code. Also, confirmations and statements of transactions in open-end mutual funds, including mutual funds sponsored by Franklin Templeton Investments are not required. See Section 3.3 above for a list of other securities that need not be reported. If you have any beneficial ownership in a discretionary account, transactions in that account are treated as yours and must be reported by the manager of that account (see Section 6.1.C below).

¹¹ Officers, directors and certain other key management personnel who perform significant policy-making functions of Franklin Resources, Inc., the closed-end funds, and/or real estate investment trusts may have ownership reporting requirements in addition to these reporting requirements. Contact the Legal Compliance Department for additional information. SEE also the “Insider Trading Policy” attached.

¹² Please note that these conditions apply to any discretionary account in existence prior to the effective date of this Code or prior to your becoming an access person. Also, the conditions apply to transactions in any discretionary account, including pre-existing accounts, in which you have any direct or indirect beneficial ownership, even if it is not in your name.

¹³ Any pre-existing agreement must be promptly amended to comply with this condition. The required reports may be made in the form of an account statement if they are filed by the applicable deadline.

¹⁴ An “advisory person” of a registered investment company or an investment adviser is any employee, who in connection with his or her regular functions or duties, makes, participates in, or obtains information regarding the purchase or sale of a security by an advisory client, or whose functions relate to the making of any recommendations with respect to such purchases or sales. Advisory person also includes any natural person in a control relationship to such company or investment adviser who obtains information concerning recommendations made to such company with regard to the purchase or sale of a security.

¹⁵ Generally, an “advisory representative” is any person who makes any recommendation, who participates in the determination of which recommendation shall be made, or whose functions or duties relate to the determination of which recommendation shall be made, or who, in connection with his duties, obtains any information concerning which securities are being recommended prior to the effective dissemination of such recommendations or of the information concerning such recommendations. See Section II of Appendix A for the legal definition of “Advisory Representative.”

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¹⁶ Security includes any option to purchase or sell, and any security that is exchangeable for or convertible into, any security that is held or to be acquired by a fund.

¹⁷ Special circumstances include but are not limited to, for example, differences in time zones, delays due to travel, and the unusual size of proposed trades or limit orders. Limit orders must expire within the applicable clearance period.

¹⁸ As of August 2002

¹⁹ If an investment opportunity is presented to you in your capacity as a portfolio manager AND the investment opportunity is suitable for the fund/ client, it must first be offered to the fund/client before any personal securities transaction can be effected.

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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 Frank W.T. LaHaye, and he is “independent” as defined under the relevant Securities and Exchange Commission Rules and Releases.

Item 4. Principal Accountant Fees and Services

(a) Audit Fees

The aggregate fees paid to the principal accountant for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or for services that are normally provided by the principal accountant in connection with statutory and regulatory filings or engagements were $430,529 for the fiscal year ended December 31, 2003 and $446,500 for the fiscal year ended December 31, 2002.

(b) Audit-Related Fees

The aggregate fees paid to the principal accountant for assurance and related services rendered by the principal accountant to the registrant that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of Item 4 were $0 for the fiscal year ended December 31, 2003 and $5,998 for the fiscal year ended December 31, 2002. The services for which these fees were paid included payments for internal control examination pursuant to the Statement of Auditing Standards No. 70 and other attestation services.

The aggregate fees paid to the principal accountant for assurance and related services rendered by the principal accountant to the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant that are reasonably related to the performance of the audit of the their financial statements were $337,344 for the fiscal year ended December 31, 2003 and $357,762 for the fiscal year ended December 31, 2002. The services for which these fees were paid included payments for internal control examination pursuant to the Statement of Auditing Standards No. 70 and other attestation services.

(c) Tax Fees

There were no fees paid to the principal accountant for professional services rendered by the principal accountant to the registrant for tax compliance, tax advice and tax planning.

The aggregate fees paid to the principal accountant for professional services rendered by the principal accountant to the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant for tax compliance, tax advice and tax planning were $2,760 for the fiscal year ended December 31, 2003 and $84,424 for the fiscal year ended December 31, 2002. The services for which these fees were paid included payments for tax compliance and advice.

(d) All Other Fees

There were no fees paid to the principal accountant for products and services rendered by the principal accountant to the registrant, other than the services reported in paragraphs (a)-(c) of Item 4.

There were no fees paid to the principal accountant for products and services rendered by the principal accountant to the registrant’s investment adviser and any entity controlling, controlled by or under

common control with the investment adviser that provides ongoing services to the registrant, other than the services reported in paragraphs (a)-(c) of Item 4.

(e) (1) The Fund’s audit committee is directly responsible for approving the services to be provided by the auditors, including:

(i) pre-approval of all audit and audit related services;

(ii) pre-approval of all non-audit related services to be provided to the Fund by the auditors;

(iii) pre-approval of all non-audit related services to be provided to the Fund by the auditors to the Fund’s investment adviser or to any entity that controls, is controlled by or is under common control with the Fund’s investment adviser and that provides ongoing services to the Fund where the non-audit services relate directly to the operations or financial reporting of the Fund; and

(iv) establishment by the audit committee, if deemed necessary or appropriate, as an alternative to committee pre-approval of services to be provided by the auditors, as required by paragraphs (ii) and (iii) above, of policies and procedures to permit such services to be pre-approved by other means, such as through establishment of guidelines or by action of a designated member or members of the committee; provided the policies and procedures are detailed as to the particular service and the committee is informed of each service and such policies and procedures do not include delegation of audit committee responsibilities, as contemplated under the Securities Exchange Act of 1934, to management; subject, in the case of (ii) through (iv), to any waivers, exceptions or exemptions that may be available under applicable law or rules.

(e) (2) None of the services provided to the registrant described in paragraphs (b)-(d) of Item 4 were pre-approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of regulation S-X.

(f) No disclosures are required by this Item 4(f).

(g) The aggregate non-audit fees paid to the principal accountant for services rendered by the principal accountant to the registrant and the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant were $340,104 for the fiscal year ended December 31, 2003 and $448,184 for the fiscal year ended December 31, 2002.

(h) No disclosures are required by this Item 4(h).

Item 5. Audit Committee of Listed Registrants. N/A

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. N/A

Item 9. Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures. The Registrant maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Registrant’s

filings under the Securities Exchange Act of 1934 and the Investment Company Act of 1940 is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission. Such information is accumulated and communicated to the Registrant’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. The Registrant’s management, including the principal executive officer and the principal financial officer, recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Within 90 days prior to the filing date of this Shareholder Report on Form N-CSR, the Registrant had carried out an evaluation, under the supervision and with the participation of the Registrant’s management, including the Registrant’s principal executive officer and the Registrant’s principal financial officer, of the effectiveness of the design and operation of the Registrant’s disclosure controls and procedures. Based on such evaluation, the Registrant’s principal executive officer and principal financial officer concluded that the Registrant’s disclosure controls and procedures are effective.

(b) Changes in Internal Controls. There have been no significant changes in the Registrant’s internal controls or in other factors that could significantly affect the internal controls subsequent to the date of their evaluation in connection with the preparation of this Shareholder Report on Form N-CSR.

Item 10. Exhibits.

(A) Code of Ethics for Principal Executive and Senior Financial Officers.

(B) (1) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and Kimberley H. Monasterio, Chief Financial Officer

(B) (2) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and Kimberley H. Monasterio, Chief Financial 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/ Jimmy D. Gambill
	Jimmy D. Gambill
	Chief Executive Officer - Finance and Administration
Date	February 27, 2004

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/ Jimmy D. Gambill
	Jimmy D. Gambill
	Chief Executive Officer - Finance and Administration
Date	February 27, 2004

Company Name
By	/s/ Kimberley H. Monasterio
	Kimberley H. Monasterio
	Chief Financial Officer
Date	February 27, 2004