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

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-05583

Franklin Templeton Variable Insurance Products Trust

(Exact name of registrant as specified in charter)

One Franklin Parkway, San Mateo, CA 94403-1906

(Address of principal executive offices) (Zip code)

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

(Name and address of agent for service)

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

Date of fiscal year end: 12/31

Date of reporting period: 12/31/13

Item 1. Reports to Stockholders.

DECEMBER 31, 2013

FRANKLIN TEMPLETON

VARIABLE INSURANCE PRODUCTS TRUST

ANNUAL

REPORT

FRANKLIN TEMPLETON VARIABLE INSURANCE

PRODUCTS TRUST ANNUAL REPORT

TABLEOF CONTENTS

Important Notes to Performance Information	i
Fund Summaries
Franklin Flex Cap Growth Securities Fund	FFC-1
*Prospectus Supplement	FFC-8
*Summary Prospectus Supplement	FFC-10
Franklin High Income Securities Fund	FH-1
Franklin Income Securities Fund	FI-1
*Prospectus Supplement	FI-8
*Statement of Additional Information Supplement	FI-10
Franklin Rising Dividends Securities Fund	FRD-1
*Prospectus Supplement	FRD-8
Franklin Small Cap Value Securities Fund	FSV-1
Franklin Small-Mid Cap Growth Securities Fund	FSC-1
Franklin Strategic Income Securities Fund	FSI-1
Franklin Templeton VIP Founding Funds Allocation Fund	FFA-1
Mutual Global Discovery Securities Fund	MGD-1
*Prospectus Supplement	MGD-9
Mutual Shares Securities Fund	MS-1
Templeton Developing Markets Securities Fund	TD-1
Templeton Foreign Securities Fund	TF-1
Templeton Global Bond Securities Fund	TGB-1
Templeton Growth Securities Fund	TG-1
Index Descriptions	I-1
Board Members and Officers	BOD-1
Shareholder Information	SI-1

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

NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE

MASTER CLASS – 4

IMPORTANT NOTESTO

PERFORMANCE INFORMATION

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

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

i

FRANKLIN FLEX CAP GROWTH SECURITIES FUND

We are pleased to bring you Franklin Flex Cap Growth Securities Fund’s annual report for the fiscal year ended December 31, 2013.

Performance Summary as of 12/31/13

Average annual total return of Class 4 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.

Periods ended 12/31/13

	1-Year		5-Year		Since Inception (3/1/05)
Average Annual Total Return		+37.28%		+17.04%		+6.95%

*For the period beginning 2/29/08, Class 4 performance reflects a 12b-1 fee expense of 0.35% per year, which affects future performance. Class 4 performance prior to 2/29/08 reflects historical Class 1 performance, which does not have a 12b-1 fee expense. Since 2/29/08 (effective date), the average annual total return of Class 4 shares was +8.51%. The Fund has an expense reduction contractually guaranteed through at least 4/30/14, and a fee waiver associated with its investments in a Franklin Templeton money fund, contractually guaranteed through at least its current fiscal year end. Fund investment results reflect the expense reduction and fee waiver, to the extent applicable; without these reductions, the results would have been lower.

Total Return Index Comparison

for a Hypothetical $10,000 Investment (3/1/05–12/31/13)

The graph below shows the change in value of a hypothetical $10,000 investment in the Fund over the indicated period and includes reinvestment of any income or distributions. The Fund’s performance* is compared to the performance of the Russell 1000^® Growth Index and the Russell 3000^® Growth Index. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Important Notes to Performance Information preceding the Fund Summaries.

**Source: © 2014 Morningstar. Please see Index Descriptions following the Fund Summaries.

Franklin Flex Cap Growth Securities Fund – Class 4

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

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

Current performance may differ from figures shown.

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Fund Goal and Main Investments: Franklin Flex Cap Growth Securities Fund seeks capital appreciation. Under normal market conditions, the Fund invests predominantly in equity securities of companies that the investment manager believes have the potential for capital appreciation.

Performance Overview

You can find the Fund’s one-year total return in the Performance Summary. In comparison, the Russell 1000^® Growth Index generated a +33.48% total return, and the Russell 3000^® Growth Index delivered a +34.23% total return, for the same period.¹

Economic and Market Overview

The U.S. economy showed ongoing signs of recovery during the 12-month period ended December 31, 2013, especially in the second half of the year. Business investment, net exports, and state and local government spending picked up in the second quarter, somewhat offsetting the impact of federal budget cuts. During the third quarter, the economy, as measured by gross domestic product, expanded at the strongest pace since the fourth quarter of 2011, underpinned by consumer spending and rising inventories. Historically low mortgage rates and improving sentiment aided the housing market recovery, evidenced by solid new and existing home sales, rising home prices, low inventories and multi-year lows in new foreclosures. Manufacturing expanded for most of the period under review, and the unemployment rate declined to 6.7% in December from 7.8% a year earlier.² Inflation remained well below the Federal Reserve Board’s (Fed’s) 2.0% target.

The year started on a positive note with Congress passing a budget bill that averted automatic federal budget cuts and income tax increases. However, Washington’s lack of consensus on proposed expenditure reductions resulted in federal spending cuts starting in March. Fed Chairman Ben Bernanke indicated in May that the Fed might reduce monthly asset purchases, assuming ongoing U.S. recovery. In September, however, he announced that any reduction of Fed purchases would be postponed until U.S. economic growth strengthened. A U.S. budget impasse, which led to a temporary shutdown of non-essential government services in October, ended after Congress agreed to fund the government until January 2014 and raise the debt limit until February. U.S. equity markets reached new highs after the resolution of the

1. Source: © 2014 Morningstar. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

2. Source: Bureau of Labor Statistics.

Fund Risks: All investments involve risks, including possible loss of principal. Investors should be comfortable with fluctuations in the value of their investments, as small and midsized company stocks can be volatile, especially over the short term. Smaller, midsized and relatively new or unseasoned companies can be particularly sensitive to changing economic conditions, and their prospects for growth are less certain than those of larger, more established companies. The Fund includes investments in technology securities, which can be highly volatile and involve special risks. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

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budget impasse and the Fed’s reassurance at its October meeting that it would continue its supportive monetary programs. In December, Congress passed a two-year budget deal that would ease automatic spending cuts in 2014 and lower the risk of another government shutdown. Meanwhile, the Fed announced it would reduce its monthly bond purchases by $10 billion beginning in January 2014. The Fed, however, committed to keeping interest rates low as long as the unemployment rate remained over 6.5% and inflation expectations remained low.

Rising corporate profits and generally favorable economic data bolstered investor confidence, helping markets overcome brief periods of sell-offs in reaction to Fed statements and to Washington’s fiscal negotiations. U.S. stocks generated strong 12-month returns as the Standard & Poor’s^® 500 Index and Dow Jones Industrial Average reached all-time highs during the period.³

Investment Strategy

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

Manager’s Discussion

During the 12 months under review, nearly all sectors contributed to performance relative to the Russell 3000^® Growth Index. Stock selection and overweightings in the information technology (IT) and health care sectors drove relative performance.⁴ In the IT sector,

3. Please see Index Descriptions following the Fund Summaries.

4. The information technology sector comprises semiconductors and semiconductor equipment, software and services, and technology hardware and equipment in the SOI. The health care sector comprises health care equipment and services; and pharmaceuticals, biotechnology and life sciences in the SOI.

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personal computing and mobile communication device manufacturer Apple and global payments and technology company MasterCard were among the top performers. Apple’s share price rallied late in the year based on strong sales of its new phones, a new sales agreement with China Mobile, and market expectations that the company could buy back more stock than originally announced. MasterCard’s share price rose after the company reported better-than-expected second- and third-quarter results driven by volume and transaction growth across geographies. The stock rose again after the company announced a new share repurchase program and an increased quarterly dividend toward year-end. In the health care sector, generic pharmaceutical company Actavis and biotechnology firms Celgene and Biogen Idec contributed to relative returns. The share price of Actavis rose after the company announced a merger with specialty drug maker Warner Chilcott and raised its 2013 earnings outlook. Celgene announced strong earnings that were driven by increased sales of its flagship drug Revlimid, which treats multiple myeloma, and company management was hopeful about favorable trial data for drugs in development, including psoriasis drug Apremilast. Multiple sclerosis drug Tecfidera increased sales and earnings for Biogen Idec after it received Food and Drug Administration (FDA) approval and was granted U.S. and European patents. Also supporting relative returns were an underweighting in consumer staples, particularly a lack of exposure to the tobacco industry, and stock selection in the beverage industry.⁵ Elsewhere, apparel and footwear manufacturer Under Armour in the consumer durables and apparel industry was a notable individual contributor to Fund performance.

In contrast, stock selection in the energy sector detracted from the Fund’s relative performance. Oil exploration and production company Cobalt International Energy, a key detractor, could not find commercially viable oil at one of its Gulf of Mexico wells, and toward year-end, its stock fell amid concerns the company may be unable to profit from its larger-than-expected natural gas discovery in Angola. IT companies F5 Networks⁶ and Nuance Communications,⁶ pharmaceutical companies ARIAD Pharmaceuticals⁶ and Allergan,⁶ and off-benchmark consumer durables and apparel company Lululemon Athletica (Canada) detracted from relative returns. The share price of computer network optimization products manufacturer F5 Networks declined amid slowing revenue growth based on reduced or delayed orders by its largest

5. The consumer staples sector comprises food and staples retailing; and food, beverage and tobacco in the SOI.

6. Sold by period-end.

Top 10 Holdings

Franklin Flex Cap Growth Securities Fund

12/31/13

Company Sector/Industry	% of Total Investments
Google Inc., A		3.0%
Software & Services
Apple Inc.		2.9%
Technology Hardware & Equipment
MasterCard Inc., A		2.5%
Software & Services
Gilead Sciences Inc.		2.1%
Pharmaceuticals, Biotechnology & Life Sciences
Celgene Corp.		1.9%
Pharmaceuticals, Biotechnology & Life Sciences
Ecolab Inc.		1.9%
Materials
Amazon.com Inc.		1.8%
Retailing
Visa Inc., A		1.8%
Software & Services
Actavis PLC		1.7%
Pharmaceuticals, Biotechnology & Life Sciences
Precision Castparts Corp.		1.6%
Capital Goods

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

FFC-4

customers and loss of market share to software-oriented businesses. Speech-software maker Nuance struggled with quarterly losses resulting from acquisition costs, higher expenses and lower margins despite revenue growth. ARIAD Pharmaceuticals’ share price fell after the biotechnology company halted trials on its leukemia drug Iclusig and the FDA suspended sales in response to reports of harmful side effects. Earnings for beauty drug maker Allergan were impacted by the sale of its obesity prevention business and the delay of new drug treatments pending FDA approval. The potential for earlier-than-expected FDA approval of generic alternatives to its eye drug Restasis also caused concern. The share price of technical athletic apparel maker Lululemon Athletica declined amid weak earnings after the company recalled a yoga pants line and endured related public relations issues that resulted in senior management turnover.

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

The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2013, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

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Fund Expenses

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

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

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

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

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

Actual Fund Expenses

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

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

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

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

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

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

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

Franklin Flex Cap Growth Securities Fund – Class 4

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Hypothetical Example for Comparison with Other Mutual Funds

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

Class 4	Beginning Account Value 7/1/13		Ending Account Value 12/31/13		Fund-Level Expenses Incurred During Period* 7/1/13–12/31/13
Actual	$	1,000	$	1,237.80	$	5.81
Hypothetical (5% return before expenses)	$	1,000	$	1,020.01	$	5.24

*Expenses are calculated using the most recent six-month annualized expense ratio, net of expense waivers, for the Fund’s Class 4 shares (1.03%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period.

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SUPPLEMENT DATED SEPTEMBER 1, 2013

TOTHE PROSPECTUS DATED MAY 1, 2013

OF

FRANKLIN FLEX CAP GROWTH SECURITIES FUND

(A series of Franklin Templeton Variable Insurance Products Trust)

The prospectus is amended as follows:

I.  The Fund Summary “Portfolio Managers” section on page FFC-S4 is revised to read as follows:

Portfolio Managers

CONRAD B. HERRMANN, CFA Senior Vice President of Advisers and portfolio manager of the Fund since inception (2005).

MATTHEW J. MOBERG, CPA Vice President of Advisers and portfolio manager of the Fund since inception (2005).

ROBERT STEVENSON, CFA Portfolio Manager and Research Analyst of Advisers and portfolio manager of the Fund since September 2013.

II.  For the Fund Details “Management” section disclosure concerning the portfolio management team beginning on page FFC-D4 is revised to read as follows:

The Fund is managed by a team of dedicated professionals focused on investments in sectors believed to have growth potential. The portfolio managers of the team are as follows:

CONRAD B. HERRMANN, CFA Senior Vice President of Advisers Mr. Herrmann has been the lead portfolio manager of the Fund since its inception (2005). He has primary responsibility for the investments of the Fund. He has final authority over all aspects of the Fund’s investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio risk assessment, and the management of daily cash balances in accordance with anticipated investment management requirements. The degree to which he may perform these functions, and the nature of these functions, may change from time to time. He joined Franklin Templeton Investments in 1989.

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MATTHEW J. MOBERG, CPA Vice President of Advisers	Mr. Moberg has been a portfolio manager of the Fund since its inception (2005), providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. He joined Franklin Templeton Investments in 1998.
ROBERT STEVENSON, CFA Portfolio Manager and Research Analyst of Advisers	Mr. Stevenson has been a portfolio manager of the Fund since September 2013, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. He joined Franklin Templeton Investments in 2004.

CFA^® and Chartered Financial Analyst^® are trademarks owned by CFA Institute.

Please keep this supplement for future reference.

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SUPPLEMENT DATED SEPTEMBER 1, 2013

TOTHE SUMMARY PROSPECTUS DATED MAY 1, 2013

OF

FRANKLIN FLEX CAP GROWTH SECURITIES FUND

(A series of Franklin Templeton Variable Insurance Products Trust)

The summary prospectus is amended as follows:

The “Portfolio Managers” section on page FFC-S4 is revised to read as follows:

Portfolio Managers

CONRAD B. HERRMANN, CFA  Senior Vice President of Advisers and portfolio manager of the Fund since inception (2005).

MATTHEW J. MOBERG, CPA  Vice President of Advisers and portfolio manager of the Fund since inception (2005).

ROBERT STEVENSON, CFA  Portfolio Manager and Research Analyst of Advisers and portfolio manager of the Fund since September 2013.

Please keep this supplement for future reference.

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Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Franklin Flex Cap Growth Securities Fund

	Year Ended December 31,
Class 2	2013			2012		2011			2010			2009
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	13.21		$	12.09	$	12.70		$	10.93		$	8.22
Income from investment operationsa:
Net investment income (loss)b		(0.01	)		0.01		(0.02	)		(0.02	)		(—	)c
Net realized and unrealized gains (losses)		4.95			1.11		(0.59	)		1.79			2.71
Total from investment operations		4.94			1.12		(0.61	)		1.77			2.71
Less distributions from:
Net investment income		(—	)c		—		—			—			—
Net realized gains		(0.04	)		—		—			—			—
Total distributions		(0.04	)		—		—			—			—
Net asset value, end of year	$	18.11		$	13.21	$	12.09		$	12.70		$	10.93
Total returnd		37.48%			9.26%		(4.80)%			16.19%			32.97%
Ratios to average net assets
Expenses before waiver and payments by affiliates		1.18%			1.18%		1.16%			1.18%			1.19%
Expenses net of waiver and payments by affiliates		0.93%			0.93%		0.93%			0.93%			0.93%	e
Net investment income (loss)		(0.09)%			0.09%		(0.14)%			(0.17)%			(0.01)%
Supplemental data
Net assets, end of year (000’s)	$	169,123		$	159,122	$	188,527		$	227,774		$	244,768
Portfolio turnover rate		52.15%			43.50%		63.99%			60.00%			33.64%

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

^bBased on average daily shares outstanding.

^cAmount rounds to less than $0.01 per share.

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

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

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

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Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin Flex Cap Growth Securities Fund

	Year Ended December 31,
Class 4	2013			2012			2011			2010			2009
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	13.12		$	12.01		$	12.63		$	10.88		$	8.21
Income from investment operationsa:
Net investment income (loss)b		(0.03	)		(—	)c		(0.03	)		(0.03	)		(0.01	)
Net realized and unrealized gains (losses)		4.91			1.11			(0.59	)		1.78			2.69
Total from investment operations		4.88			1.11			(0.62	)		1.75			2.68
Less distributions from:
Net investment income		—			—			—			—			(0.01	)
Net realized gains		(0.04	)		—			—			—			—
Total distributions		(0.04	)		—			—			—			(0.01	)
Net asset value, end of year	$	17.96		$	13.12		$	12.01		$	12.63		$	10.88
Total returnd		37.28%			9.24%			(4.91)%			16.08%			32.69%
Ratios to average net assets
Expenses before waiver and payments by affiliates		1.28%			1.28%			1.26%			1.28%			1.29%
Expenses net of waiver and payments by affiliates		1.03%			1.03%			1.03%			1.03%			1.03%	e
Net investment income (loss)		(0.19)%			(0.01)%			(0.24)%			(0.27)%			(0.11)%
Supplemental data
Net assets, end of year (000’s)	$	251,339		$	216,607		$	270,598		$	263,746		$	218,798
Portfolio turnover rate		52.15%			43.50%			63.99%			60.00%			33.64%

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

^bBased on average daily shares outstanding.

^cAmount rounds to less than $0.01 per share.

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

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

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

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Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013

Franklin Flex Cap Growth Securities Fund	Shares		Value
Common Stocks 100.4%
Automobiles & Components 0.9%
BorgWarner Inc.		56,650	$	3,167,302
a Tesla Motors Inc.		4,880		733,854
				3,901,156
Banks 1.7%
a Signature Bank/New York NY		39,070		4,196,899
Wells Fargo & Co.		66,410		3,015,014
				7,211,913
Capital Goods 11.0%
a Chart Industries Inc.		39,070		3,736,655
Danaher Corp.		48,830		3,769,676
a DigitalGlobe Inc.		36,630		1,507,325
Fastenal Co.		41,020		1,948,860
aHD Supply Holdings Inc.		28,570		685,966
Honeywell International Inc.		48,830		4,461,597
aJacobs Engineering Group Inc.		34,180		2,152,998
aThe Keyw Holding Corp.		24,420		328,205
The Manitowoc Co. Inc.		141,620		3,302,578
Pall Corp.		47,620		4,064,367
Precision Castparts Corp.		25,690		6,918,317
aProto Labs Inc.		29,300		2,085,574
Rockwell Automation Inc.		20,570		2,430,551
Roper Industries Inc.		26,370		3,656,992
aUnited Rentals Inc.		64,830		5,053,498
				46,103,159
Commercial & Professional Services 1.9%
a IHS Inc., A		16,600		1,987,020
Nielsen Holdings NV		58,600		2,689,154
aStericycle Inc.		19,530		2,268,800
aVerisk Analytics Inc., A		16,120		1,059,406
				8,004,380
Consumer Durables & Apparel 4.3%
a Lululemon Athletica Inc. (Canada)		20,510		1,210,705
aMichael Kors Holdings Ltd.		45,020		3,655,174
NIKE Inc., B		56,160		4,416,422
Ralph Lauren Corp.		18,010		3,180,026
aTRI Pointe Homes Inc.		76,190		1,518,467
aUnder Armour Inc., A		46,390		4,049,847
				18,030,641
Consumer Services 3.0%
a Bally Technologies Inc.		33,330		2,614,738
aChipotle Mexican Grill Inc.		3,860		2,056,531
aChuy’s Holdings Inc.		28,570		1,029,091
aHilton Worldwide Holdings Inc.		35,590		791,878
Las Vegas Sands Corp.		18,910		1,491,432
aNoodles & Co.		21,490		771,921
Wynn Resorts Ltd.		19,050		3,699,700
				12,455,291
Diversified Financials 3.4%
a Affiliated Managers Group Inc.		4,385		951,019

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Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin Flex Cap Growth Securities Fund	Shares			Value
Common Stocks (continued)
Diversified Financials (continued)
Discover Financial Services		48,830		$	2,732,039
Evercore Partners Inc.		22,500			1,345,050
Financial Engines Inc.		23,440			1,628,611
IntercontinentalExchange Group Inc.		14,210			3,196,113
T. Rowe Price Group Inc.		54,030			4,526,093
					14,378,925
Energy 3.5%
Anadarko Petroleum Corp.		24,420			1,936,995
aCobalt International Energy Inc.		35,000			575,750
aDiamondback Energy Inc.		23,440			1,239,038
aFMC Technologies Inc.		41,020			2,141,654
National Oilwell Varco Inc.		25,210			2,004,951
Noble Energy Inc.		36,140			2,461,496
Oceaneering International Inc.		13,180			1,039,638
Schlumberger Ltd.		38,270			3,448,510
					14,848,032
Food & Staples Retailing 1.1%
a,b Fairway Group Holdings Corp.		18,470			334,676
aSprouts Farmers Markets LLC		4,200			161,406
Whole Foods Market Inc.		69,520			4,020,342
					4,516,424
Food, Beverage & Tobacco 2.2%
aBoston Beer Inc., A		8,060			1,948,827
Mead Johnson Nutrition Co., A		32,180			2,695,397
aMonster Beverage Corp.		34,760			2,355,685
PepsiCo Inc.		24,420			2,025,395
					9,025,304
Health Care Equipment & Services 3.5%
Abbott Laboratories		78,130			2,994,723
aCerner Corp.		56,160			3,130,358
aDaVita HealthCare Partners Inc.		38,100			2,414,397
aEnvision Healthcare Holdings Inc.		21,490			763,325
aExpress Scripts Holding Co.		36,630			2,572,891
McKesson Corp.		14,650			2,364,510
a,b Veeva Systems Inc.		11,720			376,212
					14,616,416
Insurance 0.5%
Aflac Inc.		31,740			2,120,232
Materials 4.2%
Airgas Inc.		18,070			2,021,130
Cytec Industries Inc.		48,830			4,549,003
Ecolab Inc.		78,130			8,146,615
Praxair Inc.		23,440			3,047,903
					17,764,651
Media 5.9%
aCharter Communications Inc., A		19,530			2,670,923
aDiscovery Communications Inc., C		53,720			4,504,959
aImax Corp. (Canada)		56,270	��		1,658,840

FFC-14

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin Flex Cap Growth Securities Fund	Shares		Value
Common Stocks (continued)
Media (continued)
aSirius XM Holdings Inc.		1,269,680	$	4,431,183
Twenty-First Century Fox Inc., A		131,850		4,638,483
The Walt Disney Co.		87,900		6,715,560
				24,619,948
Pharmaceuticals, Biotechnology & Life Sciences 10.6%
aActavis PLC		43,950		7,383,600
aAlnylam Pharmaceuticals Inc.		29,300		1,884,869
aBiogen Idec Inc.		21,980		6,148,905
Bristol-Myers Squibb Co.		81,040		4,307,276
aCelgene Corp.		48,830		8,250,317
aCelldex Therapeutics Inc.		97,670		2,364,591
aGilead Sciences Inc.		122,090		9,175,063
aIllumina Inc.		25,390		2,808,642
aQuintiles Transnational Holdings Inc.		45,900		2,127,006
				44,450,269
Real Estate 0.5%
American Tower Corp.		28,570		2,280,457
Retailing 7.4%
aAmazon.com Inc.		19,530		7,788,369
aThe Container Store Group Inc.		14,650		682,837
Dick’s Sporting Goods Inc.		53,720		3,121,132
aDollar General Corp.		33,750		2,035,800
aHomeAway Inc.		71,300		2,914,744
Lithia Motors Inc.		14,650		1,017,003
aLKQ Corp.		38,100		1,253,490
aNetflix Inc.		2,930		1,078,738
aPriceline.com Inc.		4,690		5,451,656
Ross Stores Inc.		14,650		1,097,725
aShutterfly Inc.		19,530		994,663
Tractor Supply Co.		34,180		2,651,684
aTripAdvisor Inc.		14,450		1,196,893
				31,284,734
Semiconductors & Semiconductor Equipment 3.1%
aCavium Inc.		31,740		1,095,347
Microchip Technology Inc.		75,690		3,387,128
aNXP Semiconductors NV (Netherlands)		102,550		4,710,122
Xilinx Inc.		83,020		3,812,278
				13,004,875
Software & Services 19.5%
aAlliance Data Systems Corp.		12,210		3,210,375
aANSYS Inc.		34,670		3,023,224
aBottomline Technologies Inc.		34,180		1,235,949
aBroadSoft Inc.		41,510		1,134,883
aDemandware Inc.		17,380		1,114,406
aeBay Inc.		58,600		3,216,554
aElectronic Arts Inc.		34,180		784,089
aFacebook Inc., A		97,670		5,338,642
aFireEye Inc.		9,760		425,634
aFleetCor Technologies Inc.		26,860		3,147,186
aFortinet Inc.		49,520		947,318

FFC-15

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin Flex Cap Growth Securities Fund	Shares		Value
Common Stocks (continued)
Software & Services (continued)
aGlobal Eagle Entertainment Inc.		48,830	$	726,102
aGoogle Inc., A		11,720		13,134,721
aGuidewire Software Inc.		34,180		1,677,213
aLinkedIn Corp., A		18,560		4,024,365
MasterCard Inc., A		13,190		11,019,717
aNetSuite Inc.		40,950		4,218,669
aPandora Media Inc.		37,820		1,006,012
aSalesforce.com Inc.		81,040		4,472,598
aServiceNow Inc.		45,240		2,533,892
aSplunk Inc.		18,000		1,236,060
a,b Twitter Inc.		19,530		1,243,084
Visa Inc., A		34,180		7,611,202
aWorkday Inc.		14,280		1,187,525
aYahoo! Inc.		87,900		3,554,676
aYelp Inc.		12,110		834,985
				82,059,081
Technology Hardware & Equipment 6.8%
Apple Inc.		22,460		12,602,531
National Instruments Corp.		61,370		1,965,068
aPalo Alto Networks Inc.		17,090		982,162
QUALCOMM Inc.		92,780		6,888,915
aStratasys Ltd.		19,530		2,630,691
aTrimble Navigation Ltd.		85,570		2,969,279
a,b Ubiquiti Networks Inc.		12,690		583,232
				28,621,878
Telecommunication Services 0.9%
aSBA Communications Corp.		43,950		3,948,468
Transportation 4.3%
Canadian Pacific Railway Ltd. (Canada)		16,120		2,439,278
Expeditors International of Washington Inc.		27,010		1,195,193
aGenesee & Wyoming Inc.		32,720		3,142,756
aHub Group Inc., A		72,040		2,872,955
Kansas City Southern		23,440		2,902,575
aKirby Corp.		8,990		892,258
aSpirit Airlines Inc.		31,740		1,441,313
Union Pacific Corp.		19,530		3,281,040
				18,167,368
Utilities 0.2%
a Calpine Corp.		47,620		929,066
Total Common Stocks (Cost $252,878,108)				422,342,668
Short Term Investments 3.0%
Money Market Funds (Cost $10,328,559) 2.5%
a,c Institutional Fiduciary Trust Money Market Portfolio		10,328,559		10,328,559

FFC-16

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin Flex Cap Growth Securities Fund	Shares	Value
dInvestments from Cash Collateral Received for Loaned Securities 0.5%
Money Market Funds (Cost $2,060,390) 0.5%
e BNY Mellon Overnight Government Fund, 0.017%	2,060,390	$	2,060,390
Total Investments (Cost $265,267,057) 103.4%			434,731,617
Other Assets, less Liabilities (3.4)%			(14,270,104	)
Net Assets 100.0%		$	420,461,513

^aNon-income producing.

^bA portion or all of the security is on loan at December 31, 2013. See Note 1(b).

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

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

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

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

FFC-17

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

December 31, 2013

	Franklin Flex Cap Growth Securities Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	254,938,498
Cost - Sweep Money Fund (Note 7)		10,328,559
Total cost of investments	$	265,267,057
Value - Unaffiliated issuers	$	424,403,058
Value - Sweep Money Fund (Note 7)		10,328,559
Total value of investments (Includes securities loaned in the amount of $2,015,270)		434,731,617
Receivables:
Investment securities sold		1,512,567
Capital shares sold		119,568
Dividends and interest		243,501
Other assets		9
Total assets		436,607,262
Liabilities:
Payables:
Capital shares redeemed		13,550,514
Management fees		246,150
Distribution fees		217,410
Payable upon return of securities loaned		2,060,390
Accrued expenses and other liabilities		71,285
Total liabilities		16,145,749
Net assets, at value	$	420,461,513
Net assets consist of:
Paid-in capital	$	193,788,468
Undistributed net investment income (loss)		—
Net unrealized appreciation (depreciation)		169,464,560
Accumulated net realized gain (loss)		57,208,485
Net assets, at value	$	420,461,513
Class 2:
Net assets, at value	$	169,122,581
Shares outstanding		9,339,577
Net asset value and maximum offering price per share	$	18.11
Class 4:
Net assets, at value	$	251,338,932
Shares outstanding		13,993,419
Net asset value and maximum offering price per share	$	17.96

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

FFC-18

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the year ended December 31, 2013

	Franklin Flex Cap Growth Securities Fund
Investment income:
Dividends	$	3,248,936
Income from securities loaned		125,937
Total investment income		3,374,873
Expenses:
Management fees (Note 3a)		3,303,802
Administrative fees (Note 3b)		321,920
Distribution fees: (Note 3c)
Class 2		410,341
Class 4		828,555
Unaffiliated transfer agent fees		122
Custodian fees (Note 4)		3,411
Reports to shareholders		68,126
Professional fees		40,107
Trustees’ fees and expenses		1,567
Other		7,096
Total expenses		4,985,047
Expenses waived/paid by affiliates (Note 3f)		(1,019,759	)
Net expenses		3,965,288
Net investment income (loss)		(590,415	)
Realized and unrealized gains (losses):
Net realized gain (loss) from investments		60,105,842
Net change in unrealized appreciation (depreciation) on investments		67,788,666
Net realized and unrealized gain (loss)		127,894,508
Net increase (decrease) in net assets resulting from operations	$	127,304,093

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

FFC-19

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets

	Franklin Flex Cap Growth Securities Fund
	Year Ended December 31,
	2013			2012
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	(590,415	)	$	121,580
Net realized gain (loss) from investments		60,105,842			31,233,189
Net change in unrealized appreciation (depreciation) on investments		67,788,666			10,611,218
Net increase (decrease) in net assets resulting from operations		127,304,093			41,965,987
Distributions to shareholders from:
Net investment income:
Class 2		(6,555	)		—
Net realized gains:
Class 2		(449,397	)		—
Class 4		(654,813	)		—
Total distributions to shareholders		(1,110,765	)		—
Capital share transactions: (Note 2)
Class 2		(41,676,643	)		(46,599,479	)
Class 4		(39,784,837	)		(78,761,409	)
Total capital share transactions		(81,461,480	)		(125,360,888	)
Net increase (decrease) in net assets		44,731,848			(83,394,901	)
Net assets:
Beginning of year		375,729,665			459,124,566
End of year	$	420,461,513		$	375,729,665
Undistributed net investment income (loss) included in net assets:
End of year	$	—		$	170,117

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

FFC-20

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements

Franklin Flex Cap Growth Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment company, consisting of twenty separate funds. The Franklin Flex Cap Growth Securities Fund (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. At December 31, 2013, 77.84% of the Fund’s shares were held through one insurance company. Investment activities of these insurance company separate accounts could have a material impact on the Fund. The Fund offers two classes of shares: Class 2 and Class 4. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

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

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

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

b. Securities Lending

The Fund participates in an agency based securities lending program. The Fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the market value of the loaned securities. Collateral is maintained over the life

FFC-21

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin Flex Cap Growth Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

b. Securities Lending (continued)

of the loan in an amount not less than 100% of the market value of loaned securities, as determined at the close of fund business each day; any additional collateral required due to changes in security values is delivered to the Fund on the next business day. The collateral is invested in a non-registered money fund as indicated on the Statement of Investments. The Fund receives income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. The Fund bears the market risk with respect to the collateral investment, securities loaned, and the risk that the agent may default on its obligations to the Fund. The securities lending agent has agreed to indemnify the Fund in the event of default by a third party borrower.

c. Income and Deferred Taxes

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

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

The Fund recognizes the tax benefits of uncertain tax positions only when the position is “more likely than not” to be sustained upon examination by the tax authorities based on the technical merits of the tax position. As of December 31, 2013, and for all open tax years, the Fund has determined that no liability for unrecognized tax benefits is required in the Fund’s financial statements related to uncertain tax positions taken on a tax return (or expected to be taken on future tax returns). Open tax years are those that remain subject to examination and are based on each tax jurisdiction statute of limitation.

d. Security Transactions, Investment Income, Expenses and Distributions

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

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

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

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

FFC-22

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin Flex Cap Growth Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

e. Accounting Estimates (continued)

date of the financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

f. Guarantees and Indemnifications

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

2. SHARES OF BENEFICIAL INTEREST

At December 31, 2013, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:

	Year Ended December 31,
	2013						2012
Class 2 Shares:	Shares			Amount			Shares			Amount
Shares sold		1,113,999		$	16,865,422			2,132,121		$	28,565,855
Shares issued in reinvestment of distributions		30,996			455,952			—			—
Shares redeemed		(3,846,981	)		(58,998,017	)		(5,689,199	)		(75,165,334	)
Net increase (decrease)		(2,701,986	)	$	(41,676,643	)		(3,557,078	)	$	(46,599,479	)
Class 4 Shares:
Shares sold		1,584,158		$	24,181,871			3,802,626		$	49,894,849
Shares issued on reinvestment of distributions		44,850			654,813			—			—
Shares redeemed		(4,145,079	)		(64,621,521	)		(9,818,530	)		(128,656,258	)
Net increase (decrease)		(2,516,071	)	$	(39,784,837	)		(6,015,904	)	$	(78,761,409	)

3. TRANSACTIONS WITH AFFILIATES

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

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

FFC-23

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin Flex Cap Growth Securities Fund

3. TRANSACTIONS WITH AFFILIATES (continued)

a. Management Fees

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

Annualized Fee Rate	Net Assets
1.000%	Up to and including $100 million
0.900%	Over $100 million, up to and including $250 million
0.850%	Over $250 million, up to and including $10 billion
0.800%	Over $10 billion, up to and including $12.5 billion
0.775%	Over $12.5 billion, up to and including $15 billion
0.750%	In excess of $15 billion

Effective May 1, 2013, the Fund combined its investment management and administration agreements as approved by the Board. The fees paid under the combined agreement do not exceed the aggregate fees that were paid under the separate agreements.

Prior to May 1, 2013, the Fund paid an investment management fee to Advisers based on the average daily net assets of the Fund as follows:

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

b. Administrative Fees

Effective May 1, 2013, 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.

Prior to May 1, 2013, the Fund paid an administrative fee to FT Services of 0.25% per year of the average daily net assets of the Fund.

c. Distribution Fees

The Board has adopted distribution plans for Class 2 and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to 0.35% per year of its average daily net assets of each class. Some distribution fees are not charged on shares held by affiliates. The Board has agreed to limit the current rate to 0.25% per year for Class 2. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.

e. Transfer Agent Fees

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

FFC-24

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin Flex Cap Growth Securities Fund

3. TRANSACTIONS WITH AFFILIATES (continued)

f. Waiver and Expense Reimbursements

Advisers and FT Services have contractually agreed in advance to waive or limit their respective fees and to assume as their own expense certain expenses otherwise payable by the Fund so that the expenses (excluding distribution fees, and acquired fund fees and expenses) for Class 2 and Class 4 of the Fund does not exceed 0.68% based on the average net assets of each class (other than certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations, and liquidations) until April 30, 2014.

4. EXPENSE OFFSET ARRANGEMENT

The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses. During the year ended December 31, 2013, there were no credits earned.

5. INCOME TAXES

The tax character of distributions paid during the years ended December 31, 2013 and 2012 was as follows:

	2013		2012
Distributions paid from:
Ordinary income	$	6,555	$	—
Long term capital gain		1,104,210		—
	$	1,110,765	$	—

At December 31, 2013, the cost of investments, net unrealized appreciation (depreciation), and undistributed ordinary income and undistributed long term capital gains for income tax purposes were as follows:

Cost of investments	$	266,248,173
Unrealized appreciation	$	169,890,224
Unrealized depreciation		(1,406,780	)
Net unrealized appreciation (depreciation)	$	168,483,444
Undistributed ordinary income	$	5,891,303
Undistributed long term capital gains		52,298,301
Distributable earnings	$	58,189,604

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

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the year ended December 31, 2013, aggregated $204,366,802 and $ 269,694,947, respectively.

FFC-25

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin Flex Cap Growth Securities Fund

7. INVESTMENTS IN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO

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

8. CREDIT FACILITY

The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $1.5 billion (Global Credit Facility) which, after an extension of the original terms matured on February 14, 2014. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. Effective February 14, 2014, the Borrowers renewed the Global Credit Facility which matures on February 13, 2015.

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.07% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses on the Statement of Operations. During the year ended December 31, 2013, the Fund did not use the Global Credit Facility.

9. FAIR VALUE MEASUREMENTS

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

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

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

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

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

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

A summary of inputs used as of December 31, 2013, in valuing the Fund’s assets and liabilities carried at fair value, is as follows:

	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities:
Equity Investmentsa,b	$	422,342,668	$	—	$	—	$	422,342,668
Short Term Investments		10,328,559		2,060,390		—		12,388,949
Total Investments in Securities	$	432,671,227	$	2,060,390	$	—	$	434,731,617

^aIncludes common stocks.

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

FFC-26

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin Flex Cap Growth Securities Fund

10. NEW ACCOUNTING PRONOUNCEMENTS

In June 2013, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2013-08, Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements. The ASU modifies the criteria used in defining an investment company under U.S. Generally Accepted Accounting Principles and also sets forth certain measurement and disclosure requirements. Under the ASU, an entity that is registered under the 1940 Act automatically qualifies as an investment company. The ASU is effective for interim and annual reporting periods beginning after December 15, 2013. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the financial statements.

11. SUBSEQUENT EVENTS

The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure other than those already disclosed in the financial statements.

FFC-27

Franklin Templeton Variable Insurance Products Trust

Franklin Flex Cap Growth Securities Fund

Report of Independent Registered Public Accounting Firm

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 Franklin Flex Cap Growth Securities Fund (the “Fund”) at December 31, 2013, 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 five years in the period then ended, 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2013 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

February 14, 2014

FFC-28

Franklin Templeton Variable Insurance Products Trust

Tax Information (unaudited)

Franklin Flex Cap Growth Securities Fund

Under Section 852(b)(3)(C) of the Internal Revenue Code (Code), the Fund hereby reports the maximum amount allowable but no less than $1,104,210 as a long term capital gain dividend for the fiscal year ended December 31, 2013.

Under Section 854(b)(1)(A) of the Code, the Fund hereby reports 100.00% of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended December 31, 2013.

FFC-29

FRANKLIN HIGH INCOME SECURITIES FUND

We are pleased to bring you Franklin High Income Securities Fund’s annual report for the fiscal year ended December 31, 2013.

Performance Summary as of 12/31/13

Average annual total return of Class 4 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.

Periods ended 12/31/13

	1-Year		5-Year		10-Year
Average Annual Total Return		+7.72%		+15.94%		+7.53%

*For the period beginning 2/29/08, Class 4 performance reflects a 12b-1 fee expense of 0.35% per year, which affects future performance. Class 4 performance prior to 2/29/08 reflects historical Class 1 performance, which does not have a 12b-1 fee expense. Since 2/29/08 (effective date), the average annual total return of Class 4 shares was +8.93%.

Total Return Index Comparison

for a Hypothetical $10,000 Investment (1/1/04–12/31/13)

The graph below shows the change in value of a hypothetical $10,000 investment in the Fund over the indicated period and includes reinvestment of any income or distributions. The Fund’s performance* is compared to the performance of the Credit Suisse (CS) High Yield Index and the Lipper VIP High Yield Funds Classification Average. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Important Notes to Performance Information preceding the Fund Summaries.

**Source: © 2014 Morningstar. Please see Index Descriptions following the Fund Summaries.

***Source: Lipper Inc. Please see Index Descriptions following the Fund Summaries.

Franklin High Income Securities Fund – Class 4

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

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

Current performance may differ from figures shown.

FH-1

Fund Goals and Main Investments: Franklin High Income Securities Fund seeks a high level of current income with capital appreciation as a secondary goal. Under normal market conditions, the Fund invests predominantly in high yield, lower rated debt securities and preferred stocks.

Performance Overview

You can find the Fund’s one-year total return in the Performance Summary. In comparison, the Fund’s benchmark, the Credit Suisse (CS) High Yield Index, posted a +7.53% total return for the period under review.¹ The Fund’s peers, as measured by the Lipper VIP High Yield Funds Classification Average, delivered a +6.51% total return.²

Economic and Market Overview

The U.S. economy showed ongoing signs of recovery during the 12-month period ended December 31, 2013, especially in the second half, driven by consumer spending and rising inventories. In addition, business investment, net exports, and state and local government spending picked up in the second quarter, somewhat offsetting the impact of federal budget cuts. Historically low mortgage rates and improving sentiment aided the housing market recovery, evidenced by solid new and existing home sales, rising home prices, low inventories and multi-year lows in new foreclosures. Manufacturing expanded for most of the period under review, and the unemployment rate declined to 6.7% in December from 7.8% a year earlier.³ Inflation remained well below the Federal Reserve Board’s (Fed’s) 2.0% target.

At the start of 2013, the Fed expanded its asset purchase program to $85 billion per month from $40 billion of mortgage-backed securities. Fed Chairman Ben Bernanke indicated in May that the Fed might reduce monthly asset purchases, triggering a bond market sell-off that raised long-term U.S. Treasury yields to a two-year high. In September and October, long-term yields retreated after the Fed reassured investors it would maintain its current pace of purchases as it awaited more evidence of a sustainable economic expansion. In December, the Fed announced it would reduce its bond purchases $10 billion a month beginning in January 2014 while keeping interest rates low. After the announcement, yields on U.S. Treasuries remained largely stable.

1. Source: © 2014 Morningstar.

2. Source: Lipper Inc.

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

3. Source: Bureau of Labor Statistics.

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

FH-2

The year started on a positive note with Congress passing a budget bill that averted automatic federal budget cuts and income tax increases. However, Washington’s lack of consensus on proposed expenditure reductions resulted in federal spending cuts starting in March. A U.S. budget impasse, which led to a temporary shutdown of non-essential government services in October, ended after Congress agreed to fund the government until January 2014 and raise the debt limit until February. Congress passed a two-year budget deal in December that would ease automatic spending cuts in 2014 and reduce the risk of another government shutdown.

Although the Fed’s asset purchase program continued to put downward pressure on long-term interest rates, investor concerns about the eventual reduction of asset purchases pushed the 10-year U.S. Treasury note yield to 3.04% at period-end from 1.78% on December 31, 2012. Investors also anticipated higher interest rates and pulled back from the fixed income markets overall. For the year under review, most fixed income markets declined in value.

Investment Strategy

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

Manager’s Discussion

High yield bonds’ lower interest rate sensitivity compared to the broader bond market helped the high yield market generate solid absolute and relative performance, even as the benchmark 10-year Treasury rate rose. In our view, investors seemed mainly focused on the fundamental credit outlook, which allowed improving U.S. and European economic growth, healthy corporate balance sheets and liquidity, low default rates and rising equity markets to support the high yield sector.

FH-3

Indicative of what we viewed as fixed income investors’ aggressive search for yield, lower rated high yield bonds generally outperformed higher rated high yield bonds during the period. Although we were cognizant of rising valuations following a brief spring sell-off, our overall favorable view of the high yield market led us to underweight BB-rated bonds. This ratings positioning aided relative Fund performance, given the outperformance of bonds rated B and CCC.

Our fundamental research process guided the Fund’s industry allocations. As a result, we over- and underweighted certain industries relative to the Fund’s benchmark. For example, our utilities sector underweighting contributed to relative performance. Low natural gas prices continued to depress electricity costs and pressure utility company margins. In contrast, we maintained an overweighted chemicals industry position.⁴ We found the sector attractively valued as fundamentals slowly improved and its valuation remained below its historical average. The chemicals industry outperformed the benchmark. Although we remained favorable toward the industry, the Fund did not hold a certain chemical issuer that performed well, and our chemical holdings underperformed those in the benchmark index. Finally, we avoided the textile and apparel sector, which benefited relative returns. The industry continued to struggle with weak demand and underperformed the broader high yield market.

Conversely, certain industry weightings weighed on relative performance. For example, the supermarket sector faced pricing pressures and stiff competition, leading us to avoid the industry. However, the food retailing industry was buoyed by a rebound in the high yield bond prices for a supermarket chain that was not owned by the Fund, so our lack of exposure weighed on relative results. In contrast, we overweighted the wireless industry.⁵ With still significant capital spending demands and often volatile results, wireless industry bonds underperformed, and our industry positioning detracted from relative performance. Still, security selection within the sector aided the Fund’s relative performance. For example, Cricket Communications, which rallied based on AT&T’s purchase offer, was a positive contributor. We held a detractive overweighting to the cable sector as merger and acquisition activity, and its potential for increasing debt, pressured industry valuations.⁶ In addition, the industry generally offered lower

4. Chemicals are part of materials in the SOI.

5. Wireless is part of telecommunication services in the SOI.

6. Cable is part of media in the SOI.

Top 10 Sectors/Industries

Franklin High Income Securities Fund

12/31/13

	% of Total Net Assets
Energy		22.2%
Materials		12.0%
Telecommunication Services		11.0%
Media		8.3%
Diversified Financials		5.5%
Health Care Equipment & Services		5.3%
Software & Services		3.5%
Consumer Services		3.4%
Consumer Durables & Apparel		3.2%
Pharmaceuticals, Biotechnology & Life Sciences		2.9%

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

FH-4

coupon, longer maturity bonds, which the rising interest rate environment impacted more adversely.

To a small extent, the portfolio utilized derivatives, including currency forwards and credit derivatives via a high yield derivatives index. Currency forwards are principally used by the Fund as a tool to hedge currency risk. Credit derivatives are used to hedge against credit risk, to gain or increase exposure to certain high yield securities or segments of the high yield bond markets, or to otherwise enhance Fund returns. By period-end, the Fund held no credit derivatives.

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

The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2013, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

What is a currency forward contract?

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

What is a credit derivative?

A credit derivative is a contract agreement between the Fund and a counterparty that is principally used by the Fund to gain or increase exposure to certain high yield securities or segments of the high yield bond market and/or to hedge against credit risk.

FH-5

Fund Expenses

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

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

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

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

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

Actual Fund Expenses

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

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

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

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

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

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

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

Franklin High Income Securities Fund – Class 4

FH-6

Hypothetical Example for Comparison with Other Mutual Funds

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

Class 4	Beginning Account Value 7/1/13		Ending Account Value 12/31/13		Fund-Level Expenses Incurred During Period* 7/1/13–12/31/13
Actual	$	1,000	$	1,064.40	$	4.84
Hypothetical (5% return before expenses)	$	1,000	$	1,020.52	$	4.74

*Expenses are calculated using the most recent six-month annualized expense ratio for the Fund’s Class 4 shares (0.93%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period.

FH-7

Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Franklin High Income Securities Fund

	Year Ended December 31,
Class 1	2013			2012			2011			2010			2009
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	7.01		$	6.52		$	6.63		$	6.26		$	4.68
Income from investment operationsa:
Net investment incomeb		0.46			0.48			0.50			0.49			0.46
Net realized and unrealized gains (losses)		0.09			0.51			(0.19	)		0.32			1.50
Total from investment operations		0.55			0.99			0.31			0.81			1.96
Less distributions from net investment income		(0.54	)		(0.50	)		(0.42	)		(0.44	)		(0.38	)
Net asset value, end of year	$	7.02		$	7.01		$	6.52		$	6.63		$	6.26
Total returnc		8.17%			15.94%			4.63%			13.71%			42.99%
Ratios to average net assets
Expenses		0.58%	d		0.58%			0.58%			0.61%			0.63%	d
Net investment income		6.63%			7.15%			7.52%			7.71%			8.33%
Supplemental data
Net assets, end of year (000’s)	$	39,300		$	42,166		$	41,971		$	48,051		$	48,855
Portfolio turnover rate		30.78%			37.03%			45.11%			60.80%	��		26.41%

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

^bBased on average daily shares outstanding.

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

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

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

FH-8

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin High Income Securities Fund

	Year Ended December 31,
Class 2	2013			2012			2011			2010			2009
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	6.82		$	6.36		$	6.47		$	6.13		$	4.59
Income from investment operationsa:
Net investment incomeb		0.43			0.46			0.47			0.47			0.44
Net realized and unrealized gains (losses)		0.08			0.48			(0.18	)		0.30			1.47
Total from investment operations		0.51			0.94			0.29			0.77			1.91
Less distributions from net investment income		(0.52	)		(0.48	)		(0.40	)		(0.43	)		(0.37	)
Net asset value, end of year	$	6.81		$	6.82		$	6.36		$	6.47		$	6.13
Total returnc		7.83%			15.56%			4.56%			13.26%			42.70%
Ratios to average net assets
Expenses		0.83%	d		0.83%			0.83%			0.86%			0.88%	d
Net investment income		6.38%			6.90%			7.27%			7.46%			8.08%
Supplemental data
Net assets, end of year (000’s)	$	291,826		$	281,851		$	249,452		$	239,824		$	198,567
Portfolio turnover rate		30.78%			37.03%			45.11%			60.80%			26.41%

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

^bBased on average daily shares outstanding.

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

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

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

FH-9

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin High Income Securities Fund

	Year Ended December 31,
Class 4	2013			2012			2011			2010			2009
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	6.94		$	6.46		$	6.57		$	6.22		$	4.67
Income from investment operationsa:
Net investment incomeb		0.43			0.46			0.47			0.47			0.45
Net realized and unrealized gains (losses)		0.08			0.49			(0.18	)		0.31			1.48
Total from investment operations		0.51			0.95			0.29			0.78			1.93
Less distributions from net investment income		(0.51	)		(0.47	)		(0.40	)		(0.43	)		(0.38	)
Net asset value, end of year	$	6.94		$	6.94		$	6.46		$	6.57		$	6.22
Total returnc		7.72%			15.50%			4.39%			13.31%			42.36%
Ratios to average net assets
Expenses		0.93%	d		0.93%			0.93%			0.96%			0.98%	d
Net investment income		6.28%			6.80%			7.17%			7.36%			7.98%
Supplemental data
Net assets, end of year (000’s)	$	27,789		$	27,664		$	27,055		$	25,934		$	15,105
Portfolio turnover rate		30.78%			37.03%			45.11%			60.80%			26.41%

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

^bBased on average daily shares outstanding.

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

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

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

FH-10

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013

Franklin High Income Securities Fund	Country	Shares		Value
Common Stocks 0.3%
Materials 0.2%
a,b NewPage Holdings Inc.	United States		10,000	$	900,000
Transportation 0.1%
a CEVA Holdings LLC	United Kingdom		224		213,067
Total Common Stocks (Cost $2,606,786)					1,113,067
Convertible Preferred Stocks 0.1%
Transportation 0.1%
a CEVA Holdings LLC, cvt. pfd., A-1	United Kingdom		6		7,800
a CEVA Holdings LLC, cvt. pfd., A-2	United Kingdom		486		461,235
Total Convertible Preferred Stocks (Cost $731,856)					469,035
Preferred Stocks (Cost $770,000) 0.2%
Diversified Financials 0.2%
GMAC Capital Trust I, 8.125%, pfd.	United States		30,800		823,592
		Principal Amount*
Corporate Bonds 93.3%
Automobiles & Components 1.1%
The Goodyear Tire & Rubber Co., senior note, 6.50%, 3/01/21	United States		2,200,000		2,343,000
c International Automotive Components Group SL, senior secured note, 144A,
9.125%, 6/01/18	United States		1,600,000		1,679,000
					4,022,000
Banks 1.8%
CIT Group Inc., senior note,
5.375%, 5/15/20	United States		1,700,000		1,814,750
5.00%, 8/15/22	United States		2,700,000		2,643,740
Royal Bank of Scotland Group PLC, sub. note, 6.125%, 12/15/22	United Kingdom		2,000,000		2,051,250
					6,509,740
Capital Goods 2.6%
c Abengoa Finance SAU, senior note, 144A,
8.875%, 11/01/17	Spain		2,500,000		2,700,000
7.75%, 2/01/20	Spain		400,000		416,500
Meritor Inc., senior note, 10.625%, 3/15/18	United States		1,900,000		2,028,250
Navistar International Corp., senior note, 8.25%, 11/01/21	United States		1,500,000		1,560,000
Terex Corp., senior note, 6.00%, 5/15/21	United States		1,200,000		1,246,500
c Zachry Holdings Inc., senior note, 144A, 7.50%, 2/01/20	United States		1,400,000		1,470,000
					9,421,250
Commercial & Professional Services 1.6%
ADS Waste Holdings Inc., senior note, 8.25%, 10/01/20	United States		2,500,000		2,725,000
c Algeco Scotsman Global Finance PLC, senior secured note, first lien, 144A, 8.50%, 10/15/18	United Kingdom		1,700,000		1,829,625
c,d Darling Escrow Corp., senior note, 144A, 5.375%, 1/15/22	United States		500,000		504,375
e,f Goss Graphic Systems Inc., senior sub. note, 12.25%, 11/19/05	United States		1,912,374		191
c,g Igloo Holdings Corp., senior note, 144A, PIK, 8.25%, 12/15/17	United States		600,000		612,000
					5,671,191
Consumer Durables & Apparel 3.2%
KB Home,
senior bond, 7.50%, 9/15/22	United States		2,100,000		2,220,750
senior note, 7.00%, 12/15/21	United States		700,000		731,500

FH-11

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin High Income Securities Fund	Country	Principal Amount*		Value
Corporate Bonds (continued)
Consumer Durables & Apparel (continued)
M/I Homes Inc., senior note, 8.625%, 11/15/18	United States		1,000,000	$	1,087,500
c SIWF Merger Sub Inc./Springs Industries Inc., senior secured note, 144A, 6.25%, 6/01/21	United States		700,000		707,875
Standard Pacific Corp., senior note, 6.25%, 12/15/21	United States		1,500,000		1,565,625
c Taylor Morrison Communities Inc./Monarch Communities Inc., senior note, 144A,
7.75%, 4/15/20	United States		1,140,000		1,259,700
5.25%, 4/15/21	United States		900,000		877,500
Toll Brothers Finance Corp., senior bond, 5.625%, 1/15/24	United States		1,200,000		1,212,000
Visant Corp., senior note, 10.00%, 10/01/17	United States		2,000,000		1,950,000
					11,612,450
Consumer Services 3.4%
Caesars Entertainment Operating Co. Inc.,
first lien, 9.00%, 2/15/20	United States		800,000		782,000
senior secured note, 11.25%, 6/01/17	United States		3,000,000		3,060,000
c,e Fontainebleau Las Vegas, 144A, 11.00%, 6/15/15	United States		1,700,000		170
c Landry’s Inc., senior note, 144A, 9.375%, 5/01/20	United States		1,600,000		1,752,000
MGM Resorts International, senior note,
6.625%, 7/15/15	United States		2,000,000		2,155,000
6.875%, 4/01/16	United States		1,200,000		1,326,000
8.625%, 2/01/19	United States		400,000		471,000
6.625%, 12/15/21	United States		300,000		317,625
c Paris Las Vegas Holding LLC, senior secured note, first lien, 144A, 8.00%, 10/01/20	United States		500,000		522,500
Pinnacle Entertainment Inc., senior sub. note, 7.75%, 4/01/22	United States		1,100,000		1,204,500
c PNK Finance Corp., senior note, 144A, 6.375%, 8/01/21	United States		600,000		616,500
					12,207,295
Diversified Financials 5.3%
Ally Financial Inc., senior note, 7.50%, 9/15/20	United States		1,500,000		1,753,125
h Bank of America Corp., pfd., sub. bond, M, 8.125% to 5/15/18, FRN thereafter, Perpetual	United States		2,500,000		2,809,882
E*TRADE Financial Corp., senior note, 6.375%, 11/15/19	United States		1,400,000		1,510,250
c General Motors Financial Co. Inc., senior note, 144A, 3.25%, 5/15/18	United States		900,000		902,250
GMAC Inc., sub. note, 8.00%, 12/31/18	United States		800,000		948,000
h JPMorgan Chase & Co., junior sub. bond, 6.00% to 8/01/23, FRN thereafter, Perpetual	United States		2,500,000		2,403,125
c Neuberger Berman Group LLC/Finance Corp., senior note, 144A,
5.625%, 3/15/20	United States		500,000		527,500
5.875%, 3/15/22	United States		600,000		621,000
c Nuveen Investments Inc., senior note, 144A, 9.50%, 10/15/20	United States		2,000,000		2,015,000
c Provident Fund Associates LP/Finance Corp., senior note, 144A, 6.75%, 6/15/21	United States		700,000		700,000
SLM Corp., senior note,
8.45%, 6/15/18	United States		1,800,000		2,103,750
5.50%, 1/15/19	United States		2,500,000		2,595,908
					18,889,790
Energy 22.2%
c Antero Resources Corp., senior note, 144A, 5.375%, 11/01/21	United States		800,000		808,500
BreitBurn Energy Partners LP/Finance Corp., senior bond, 7.875%, 4/15/22	United States		1,000,000		1,045,000
Calumet Specialty Products Partners LP/Finance Corp., senior note,
9.375%, 5/01/19	United States		1,700,000		1,895,500
9.625%, 8/01/20	United States		600,000		676,500
Carrizo Oil & Gas Inc., senior note,
8.625%, 10/15/18	United States		2,000,000		2,175,000
7.50%, 9/15/20	United States		500,000		550,000

FH-12

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin High Income Securities Fund	Country	Principal Amount*		Value
Corporate Bonds (continued)
Energy (continued)
Chaparral Energy Inc., senior note,
9.875%, 10/01/20	United States		1,400,000	$	1,589,000
8.25%, 9/01/21	United States		600,000		654,000
CHC Helicopter SA,
senior note, 9.375%, 6/01/21	Canada		400,000		412,000
senior secured note, first lien, 9.25%, 10/15/20	Canada		3,000,000		3,236,250
Chesapeake Energy Corp., senior note,
6.625%, 8/15/20	United States		3,000,000		3,367,500
6.125%, 2/15/21	United States		1,000,000		1,077,500
Clayton Williams Energy Inc., senior note, 7.75%, 4/01/19	United States		2,400,000		2,478,000
CONSOL Energy Inc., senior note,
8.00%, 4/01/17	United States		500,000		528,750
8.25%, 4/01/20	United States		1,000,000		1,087,500
6.375%, 3/01/21	United States		300,000		311,250
c Drill Rigs Holdings Inc., secured note, 144A, 6.50%, 10/01/17	United States		1,700,000		1,844,500
Eagle Rock Energy Partners LP/Finance Corp., senior note, 8.375%, 6/01/19	United States		2,500,000		2,737,500
Energy Transfer Equity LP, senior note, 7.50%, 10/15/20	United States		3,000,000		3,382,500
EPL Oil & Gas Inc., senior note, 8.25%, 2/15/18	United States		1,400,000		1,512,000
Goodrich Petroleum Corp., senior note, 8.875%, 3/15/19	United States		2,500,000		2,612,500
Halcon Resources Corp., senior note,
8.875%, 5/15/21	United States		1,500,000		1,522,500
c 144A, 9.25%, 2/15/22	United States		1,100,000		1,124,750
c Kinder Morgan Finance Co. LLC, senior secured note, 144A, 6.00%, 1/15/18	United States		1,500,000		1,650,491
c Kinder Morgan Inc., senior secured note, 144A, 5.00%, 2/15/21	United States		600,000		593,275
Kodiak Oil & Gas Corp., senior note,
8.125%, 12/01/19	United States		1,400,000		1,561,000
5.50%, 1/15/21	United States		500,000		501,250
Linn Energy LLC/Finance Corp., senior note,
6.50%, 5/15/19	United States		600,000		615,000
8.625%, 4/15/20	United States		2,000,000		2,170,000
7.75%, 2/01/21	United States		700,000		743,750
Martin Midstream Partners LP/Martin Midstream Finance Corp., senior note,
8.875%, 4/01/18	United States		1,316,000		1,394,960
7.25%, 2/15/21	United States		1,100,000		1,127,500
Midstates Petroleum Co. Inc./LLC, senior note, 9.25%, 6/01/21	United States		1,000,000		1,050,000
c Murray Energy Corp., senior secured note, 144A, 8.625%, 6/15/21	United States		1,200,000		1,248,000
c Oasis Petroleum Inc., senior note, 144A, 6.875%, 3/15/22	United States		1,500,000		1,597,500
Offshore Group Investment Ltd.,
senior bond, first lien, 7.125%, 4/01/23	United States		1,000,000		1,025,000
senior secured note, first lien, 7.50%, 11/01/19	United States		1,400,000		1,522,500
PBF Holding Co. LLC, first lien, 8.25%, 2/15/20	United States		2,500,000		2,725,000
Peabody Energy Corp., senior note,
6.50%, 9/15/20	United States		1,700,000		1,797,750
6.25%, 11/15/21	United States		1,700,000		1,725,500
Penn Virginia Corp., senior note, 8.50%, 5/01/20	United States		1,200,000		1,296,000
Penn Virginia Resource Partners LP/Finance Corp. II, senior note,
8.375%, 6/01/20	United States		1,094,000		1,211,605
c 144A, 6.50%, 5/15/21	United States		600,000		624,000
QEP Resources Inc., senior note,
5.375%, 10/01/22	United States		1,500,000		1,451,250
5.25%, 5/01/23	United States		800,000		754,000
QR Energy LP/QRE Finance, senior note, 9.25%, 8/01/20	United States		1,800,000		1,872,000

FH-13

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin High Income Securities Fund	Country	Principal Amount*		Value
Corporate Bonds (continued)
Energy (continued)
Quicksilver Resources Inc.,
c,i secured note, second lien, 144A, FRN, 7.00%, 6/21/19	United States		1,300,000	$	1,280,500
senior note, 9.125%, 8/15/19	United States		1,000,000		1,020,000
c Sabine Pass Liquefaction LLC,
secured note, 144A, 5.625%, 2/01/21	United States		2,400,000		2,358,000
senior secured note, 144A, 5.625%, 4/15/23	United States		900,000		846,000
c Samson Investment Co., senior note, 144A, 9.75%, 2/15/20	United States		2,500,000		2,737,500
c Sanchez Energy Corp., senior note, 144A, 7.75%, 6/15/21	United States		1,800,000		1,849,500
W&T Offshore Inc., senior note, 8.50%, 6/15/19	United States		2,600,000		2,762,500
					79,739,831
Food & Staples Retailing 0.3%
Rite Aid Corp., senior secured note, 8.00%, 8/15/20	United States		1,000,000		1,130,000
Food, Beverage & Tobacco 2.8%
Del Monte Corp., senior note, 7.625%, 2/15/19	United States		3,000,000		3,123,750
c Dole Food Co. Inc., senior secured note, 144A, 7.25%, 5/01/19	United States		900,000		898,875
c JBS USA LLC/Finance Inc., senior note, 144A,
8.25%, 2/01/20	United States		2,600,000		2,834,000
7.25%, 6/01/21	United States		400,000		418,000
c Post Holdings Inc., senior note, 144A,
6.75%, 12/01/21	United States		200,000		207,500
7.375%, 2/15/22	United States		1,600,000		1,720,000
c Sun Merger Sub Inc., senior note, 144A, 5.875%, 8/01/21	United States		700,000		721,437
					9,923,562
Health Care Equipment & Services 5.3%
Alere Inc.,
senior note, 7.25%, 7/01/18	United States		2,200,000		2,428,250
senior sub. note, 6.50%, 6/15/20	United States		300,000		308,250
Aviv Healthcare Properties LP/Aviv Healthcare Capital Corp., senior note,
7.75%, 2/15/19	United States		1,500,000		1,620,000
c 144A, 6.00%, 10/15/21	United States		400,000		409,000
CHS/Community Health Systems Inc.,
senior note, 8.00%, 11/15/19	United States		1,700,000		1,853,000
senior note, 7.125%, 7/15/20	United States		700,000		727,125
senior secured note, 5.125%, 8/15/18	United States		1,500,000		1,552,500
ExamWorks Group Inc., senior note, 9.00%, 7/15/19	United States		1,300,000		1,413,750
HCA Inc.,
senior note, 7.50%, 2/15/22	United States		800,000		880,000
senior note, 5.875%, 5/01/23	United States		2,500,000		2,475,000
senior secured bond, 7.25%, 9/15/20	United States		900,000		983,250
senior secured note, 7.875%, 2/15/20	United States		1,000,000		1,076,250
senior secured note, 5.875%, 3/15/22	United States		1,000,000		1,035,000
Tenet Healthcare Corp., senior note, 8.125%, 4/01/22	United States		2,000,000		2,160,000
					18,921,375
Materials 11.8%
ArcelorMittal, senior note, 6.00%, 3/01/21	Luxembourg		1,400,000		1,483,587
c Ardagh Packaging Finance PLC, senior note, 144A, 9.125%, 10/15/20	Luxembourg		600,000		658,500
cArdagh Packaging Finance PLC/Ardagh MP Holdings USA Inc.,
secured note, 144A, 4.875%, 11/15/22	Luxembourg		200,000		198,875
senior note, 144A, 7.00%, 11/15/20	Luxembourg		1,000,000		1,010,000
senior secured note, first lien, 144A, 7.375%, 10/15/17	Luxembourg		600,000		645,750

FH-14

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin High Income Securities Fund	Country	Principal Amount*		Value
Corporate Bonds (continued)
Materials (continued)
c Barminco Finance Pty. Ltd., senior note, 144A, 9.00%, 6/01/18	Australia		1,500,000	$	1,389,787
c BlueScope Steel Ltd./BlueScope Steel Finance, senior note, 144A, 7.125%, 5/01/18	Australia		2,000,000		2,095,000
c Cemex SAB de CV, senior secured note, 144A, 9.00%, 1/11/18	Mexico		3,500,000		3,863,125
c Eldorado Gold Corp., senior note, 144A, 6.125%, 12/15/20	Canada		2,000,000		1,935,000
Euramax International Inc., senior secured note, 9.50%, 4/01/16	United States		800,000		806,000
c Exopack Holding Corp., senior note, 144A, 10.00%, 6/01/18	United States		1,600,000		1,744,000
c FMG Resources (August 2006) Pty. Ltd., senior note, 144A,
6.875%, 2/01/18	Australia		2,000,000		2,110,000
8.25%, 11/01/19	Australia		500,000		563,125
6.875%, 4/01/22	Australia		200,000		219,000
c Ineos Finance PLC, senior secured note, 144A,
8.375%, 2/15/19	Switzerland		200,000		223,250
7.50%, 5/01/20	Switzerland		500,000		547,813
c Ineos Group Holdings SA, senior note, 144A, 6.125%, 8/15/18	Switzerland		1,300,000		1,314,625
c Inmet Mining Corp., senior note, 144A,
8.75%, 6/01/20	Canada		2,500,000		2,725,000
7.50%, 6/01/21	Canada		300,000		315,000
Novelis Inc., senior note, 8.75%, 12/15/20	Canada		1,300,000		1,452,750
Olin Corp., senior bond, 5.50%, 8/15/22	United States		3,200,000		3,208,000
c Orion Engineered Carbons Bondco GmbH, senior secured note, first lien, 144A,
9.625%, 6/15/18	Germany		1,600,000		1,768,000
c,g Orion Engineered Carbons Finance & Co. SCA, senior note, 144A, PIK, 9.25%, 8/01/19	Germany		500,000		525,000
c Perstorp Holding AB, first lien, 144A, 8.75%, 5/15/17	Sweden		2,500,000		2,691,072
c Rain CII Carbon LLC/Corp., second lien, 144A, 8.25%, 1/15/21	United States		700,000		717,500
Reynolds Group Issuer Inc./LLC/SA,
first lien, 5.75%, 10/15/20	United States		1,400,000		1,435,000
senior note, 8.50%, 5/15/18	United States		2,800,000		2,968,000
senior note, 9.00%, 4/15/19	United States		200,000		215,500
senior note, 9.875%, 8/15/19	United States		200,000		223,500
senior note, 8.25%, 2/15/21	United States		400,000		429,000
c Sealed Air Corp., senior note, 144A,
8.125%, 9/15/19	United States		800,000		902,000
6.50%, 12/01/20	United States		500,000		540,000
8.375%, 9/15/21	United States		600,000		684,000
c U.S. Coatings Acquisition Inc./Flash Dutch 2 BV, senior note, 144A, 7.375%, 5/01/21	United States		700,000		749,875
					42,356,634
Media 8.3%
Cablevision Systems Corp., senior note, 7.75%, 4/15/18	United States		1,000,000		1,120,000
CCO Holdings LLC/CCO Holdings Capital Corp.,
senior bond, 5.25%, 9/30/22	United States		900,000		844,875
senior note, 6.50%, 4/30/21	United States		1,500,000		1,548,750
Clear Channel Communications Inc., senior secured bond, first lien, 9.00%, 3/01/21	United States		3,800,000		3,857,000
Clear Channel Worldwide Holdings Inc.,
senior note, 6.50%, 11/15/22	United States		1,000,000		1,026,250
senior sub. note, 7.625%, 3/15/20	United States		200,000		209,000
senior sub. note, 7.625%, 3/15/20	United States		1,100,000		1,161,875
CSC Holdings LLC, senior note, 6.75%, 11/15/21	United States		1,500,000		1,623,750
DISH DBS Corp., senior note,
7.125%, 2/01/16	United States		3,000,000		3,330,000
6.75%, 6/01/21	United States		1,500,000		1,597,500

FH-15

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin High Income Securities Fund	Country	Principal Amount*		Value
Corporate Bonds (continued)
Media (continued)
c Gannett Co. Inc.,
senior bond, 144A, 6.375%, 10/15/23	United States		2,000,000	$	2,075,000
senior note, 144A, 5.125%, 7/15/20	United States		700,000		712,250
c The Nielsen Co. (Luxembourg) Sarl, senior note, 144A, 5.50%, 10/01/21	United States		900,000		916,312
g Radio One Inc., senior sub. note, PIK, 12.50%, 5/24/16	United States		1,676,514		1,684,897
c Univision Communications Inc., senior secured note, 144A,
6.875%, 5/15/19	United States		2,500,000		2,684,375
7.875%, 11/01/20	United States		700,000		772,625
c UPCB Finance III Ltd., senior secured note, 144A, 6.625%, 7/01/20	Netherlands		1,000,000		1,067,500
c UPCB Finance VI Ltd., senior secured note, 144A, 6.875%, 1/15/22	Netherlands		500,000		532,188
c WMG Acquisition Corp., secured note, 144A, 6.00%, 1/15/21	United States		2,782,000		2,903,712
					29,667,859
Pharmaceuticals, Biotechnology & Life Sciences 2.9%
c inVentiv Health Inc., senior secured note, 144A, 9.00%, 1/15/18	United States		600,000		630,000
c,g Jaguar Holding Co. I, senior note, 144A, PIK, 9.375%, 10/15/17	United States		1,200,000		1,275,000
c Jaguar Holding Co. II/Merger Sub Inc., senior note, 144A, 9.50%, 12/01/19	United States		700,000		791,000
Par Pharmaceutical Cos. Inc., senior note, 7.375%, 10/15/20	United States		3,300,000		3,427,875
c Salix Pharmaceuticals Ltd., senior note, 144A, 6.00%, 1/15/21	United States		400,000		411,000
c Valeant Pharmaceuticals International Inc., senior note, 144A,
7.50%, 7/15/21	United States		200,000		220,500
5.625%, 12/01/21	United States		300,000		302,250
c VPI Escrow Corp., senior note, 144A, 6.375%, 10/15/20	United States		3,000,000		3,176,250
					10,233,875
Retailing 0.9%
c American Builders & Contractors Supply Co. Inc., senior note, 144A, 5.625%, 4/15/21	United States		2,100,000		2,115,750
c New Look Bondco I PLC, secured note, 144A, 8.375%, 5/14/18	United Kingdom		1,000,000		1,041,250
					3,157,000
Semiconductors & Semiconductor Equipment 1.0%
Freescale Semiconductor Inc., senior note,
8.05%, 2/01/20	United States		2,000,000		2,160,000
10.75%, 8/01/20	United States		1,104,000		1,258,560
					3,418,560
Software & Services 3.5%
c BMC Software Finance Inc., senior note, 144A, 8.125%, 7/15/21	United States		1,400,000		1,449,000
Equinix Inc., senior bond, 5.375%, 4/01/23	United States		2,500,000		2,456,250
First Data Corp.,
senior bond, 12.625%, 1/15/21	United States		1,500,000		1,768,125
c senior note, 144A, 11.25%, 1/15/21	United States		1,000,000		1,108,750
c senior secured bond, 144A, 8.25%, 1/15/21	United States		2,500,000		2,671,875
c Sitel LLC/Finance Corp., senior secured note, 144A, 11.00%, 8/01/17	United States		200,000		214,500
Sterling International Inc., senior note, 11.00%, 10/01/19	United States		1,200,000		1,254,000
West Corp., senior note, 7.875%, 1/15/19	United States		1,500,000		1,627,500
					12,550,000
Technology Hardware & Equipment 1.5%
c Alcatel-Lucent USA Inc., senior note, 144A, 6.75%, 11/15/20	United States		2,400,000		2,502,000
c Blackboard Inc., senior note, 144A, 7.75%, 11/15/19	United States		700,000		698,250
c,g CommScope Holdings Co. Inc., senior note, 144A, PIK, 6.625%, 6/01/20	United States		400,000		418,000
c CommScope Inc., senior note, 144A, 8.25%, 1/15/19	United States		1,746,000		1,922,783
					5,541,033

FH-16

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin High Income Securities Fund	Country	Principal Amount*			Value
Corporate Bonds (continued)
Telecommunication Services 10.5%
c Altice Financing SA, secured note, 144A, 6.50%, 1/15/22	Luxembourg		800,000		$	808,000
CenturyLink Inc.,
senior bond, 6.75%, 12/01/23	United States		100,000			101,750
senior note, 6.45%, 6/15/21	United States		400,000			418,000
senior note, 5.80%, 3/15/22	United States		2,500,000			2,481,250
Cricket Communications Inc., senior note, 7.75%, 10/15/20	United States		1,500,000			1,715,625
c Digicel Group Ltd., senior note, 144A, 8.25%, 9/30/20	Bermuda		2,000,000			2,081,250
c Digicel Ltd., senior note, 144A, 6.00%, 4/15/21	Bermuda		1,200,000			1,163,388
c eAccess Ltd., senior note, 144A, 8.25%, 4/01/18	Japan		1,800,000			1,974,375
Frontier Communications Corp.,
senior bond, 7.625%, 4/15/24	United States		200,000			200,500
senior note, 8.50%, 4/15/20	United States		2,000,000			2,250,000
senior note, 8.75%, 4/15/22	United States		900,000			1,003,500
senior note, 7.875%, 1/15/27	United States		200,000			193,000
Intelsat Jackson Holdings SA,
c senior bond, 144A, 5.50%, 8/01/23	Luxembourg		500,000			475,000
senior note, 7.25%, 10/15/20	Luxembourg		900,000			988,875
senior note, 7.50%, 4/01/21	Luxembourg		3,800,000			4,208,500
c Lynx II Corp., senior bond, 144A, 6.375%, 4/15/23	United Kingdom		1,700,000			1,738,250
c Millicom International Cellular SA, senior note, 144A, 6.625%, 10/15/21	Luxembourg		1,300,000			1,353,625
c Sprint Corp.,
senior bond, 144A, 7.125%, 6/15/24	United States		500,000			508,750
senior note, 144A, 7.875%, 9/15/23	United States		500,000			538,750
Sprint Nextel Corp., senior note,
8.375%, 8/15/17	United States		3,000,000			3,487,500
c 144A, 9.00%, 11/15/18	United States		3,000,000			3,622,500
c 144A, 7.00%, 3/01/20	United States		300,000			336,000
T-Mobile USA Inc.,
senior bond, 6.50%, 1/15/24	United States		400,000			406,000
senior note, 6.542%, 4/28/20	United States		1,600,000			1,710,000
senior note, 6.125%, 1/15/22	United States		200,000			204,000
c Wind Acquisition Finance SA, senior secured note, 144A, 11.75%, 7/15/17	Italy		2,000,000			2,130,000
c,g Wind Acquisition Holdings Finance SA, senior secured note, 144A, PIK, 12.25%,
7/15/17	Italy		612,263	EUR		840,916
7/15/17	Italy		634,219			634,862
						37,574,166
Transportation 1.3%
c CEVA Group PLC, senior note, first lien, 144A, 4.00%, 5/01/18	United Kingdom		1,500,000			1,252,500
Hertz Corp., senior note,
7.50%, 10/15/18	United States		1,100,000			1,190,750
6.75%, 4/15/19	United States		2,200,000			2,381,500
						4,824,750
Utilities 2.0%
c Calpine Corp.,
senior secured bond, first lien, 144A, 5.875%, 1/15/24	United States		400,000			393,000
senior secured note, 144A, 7.875%, 7/31/20	United States		654,000			719,400
senior secured note, 144A, 7.50%, 2/15/21	United States		1,170,000			1,282,613
senior secured note, 144A, 7.875%, 1/15/23	United States		782,000			858,245
senior secured, first lien, 144A, 6.00%, 1/15/22	United States		100,000			103,000
c InterGen NV, secured bond, 144A, 7.00%, 6/30/23	Netherlands		1,700,000			1,768,000

FH-17

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin High Income Securities Fund	Country	Principal Amount*		Value
Corporate Bonds (continued)
Utilities (continued)
c Texas Competitive Electric Holdings Co. LLC/Texas Competitive Electric Holdings Finance Inc.,
senior secured note, 144A, 11.50%, 10/01/20	United States		3,000,000	$	2,220,000
					7,344,258
Total Corporate Bonds (Cost $318,832,679)					334,716,619
i,jSenior Floating Rate Interests 1.6%
Capital Goods 0.2%
Navistar Inc., Tranche B Term Loan, 5.75%, 8/17/17	United States		760,128		773,193
Household & Personal Products 0.6%
Sun Products Corp., Tranche B Term Loan, 5.50%, 3/23/20	United States		2,382,000		2,262,900
Telecommunication Services 0.5%
Altice Financing SA, Loans, 5.50%, 6/24/19	Luxembourg		1,700,000		1,712,750
Utilities 0.3%
Texas Competitive Electric Holdings Co. LLC, 2017 Term Loan, 4.668% - 4.739%, 10/10/17	United States		1,431,288		988,662
Total Senior Floating Rate Interests (Cost $5,970,459)					5,737,505
		Shares
Litigation Trust (Cost $—) 0.0%
a,b,f NewPage Corp., Litigation Trust	United States		2,500,000		—
Total Investments before Short Term Investments (Cost $328,911,780)					342,859,818
		Principal Amount*
Short Term Investments (Cost $10,915,352) 3.1%
Repurchase Agreements 3.1%
k Joint Repurchase Agreement, 0.008%, 1/02/14 (Maturity Value $10,915,357)	United States		10,915,352		10,915,352
BNP Paribas Securities Corp. (Maturity Value $832,951)
Credit Suisse Securities (USA) LLC (Maturity Value $2,498,853)
Deutsche Bank Securities Inc. (Maturity Value $1,461,239)
HSBC Securities (USA) Inc. (Maturity Value $3,498,481)
Merrill Lynch, Pierce, Fenner & Smith Inc. (Maturity Value $1,624,314)
Morgan Stanley & Co. LLC (Maturity Value $999,519)
Collateralized by U.S. Government Agency Securities, 0.00% - 4.125%, 1/15/14 - 3/07/18; lU.S. Government Agency Discount Notes, 8/19/14; lU.S. Treasury Bills, 9/18/14; U.S. Treasury Bonds, 8.875% - 9.125%, 5/15/17 - 5/15/18; U.S. Treasury Notes, 0.25% - 4.75%, 1/15/15 - 12/31/18; and U.S. Treasury Notes, Index Linked, 1.375% - 1.625%, 1/15/18 - 7/15/18 (valued at $11,134,031)
Total Investments (Cost $339,827,132) 98.6%					353,775,170
Other Assets, less Liabilities 1.4%					5,139,879
Net Assets 100.0%				$	358,915,049

FH-18

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin High Income Securities Fund

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

^aNon-income producing.

^bAt December 31, 2013, pursuant to the Fund’s policies and the requirements of applicable securities law, the Fund may be restricted from trading these securities for a limited or extended period of time due to ownership limits and/or potential possession of material non-public information.

^cSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At December 31, 2013, the aggregate value of these securities was $135,034,664, representing 37.62% of net assets.

^dSecurity purchased on a when-issued basis. See Note 1(d).

^eSee Note 7 regarding defaulted securities.

^fSecurity has been deemed illiquid because it may not be able to be sold within seven days. At December 31, 2013, the aggregate value of these securities was $191, representing less than 0.01% of net assets.

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

^hPerpetual security with no stated maturity date.

ⁱThe coupon rate shown represents the rate at period end.

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

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

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

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

FH-19

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin High Income Securities Fund

Forward Exchange Contracts

At December 31, 2013, the Fund had the following forward exchange contracts outstanding. See Note 1(e).

Currency	Counterpartya		Type		Quantity		Contract Amount		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
Euro		DBAB		Sell		600,000	$	823,230		12/17/14	$	—	$	(2,567	)

^aMay be comprised of multiple contracts using the same currency and settlement date.

See Abbreviations on page FH-34.

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

FH-20

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

December 31, 2013

	Franklin High Income Securities Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	328,911,780
Cost - Repurchase agreements		10,915,352
Total cost of investments	$	339,827,132
Value - Unaffiliated issuers	$	342,859,818
Value - Repurchase agreements		10,915,352
Total value of investments		353,775,170
Cash		39,626
Receivables:
Capital shares sold		273,060
Interest		5,978,665
Other assets		8
Total assets		360,066,529
Liabilities:
Payables:
Investment securities purchased		500,000
Capital shares redeemed		252,507
Management fees		158,686
Distribution fees		137,782
Unrealized depreciation on forward exchange contracts		2,567
Accrued expenses and other liabilities		99,938
Total liabilities		1,151,480
Net assets, at value	$	358,915,049
Net assets consist of:
Paid-in capital	$	347,687,410
Undistributed net investment income		20,624,091
Net unrealized appreciation (depreciation)		13,945,476
Accumulated net realized gain (loss)		(23,341,928	)
Net assets, at value	$	358,915,049

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

FH-21

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Assets and Liabilities (continued)

December 31, 2013

	Franklin High Income Securities Fund
Class 1:
Net assets, at value	$	39,300,391
Shares outstanding		5,600,886
Net asset value and maximum offering price per share	$	7.02
Class 2:
Net assets, at value	$	291,825,563
Shares outstanding		42,845,091
Net asset value and maximum offering price per share	$	6.81
Class 4:
Net assets, at value	$	27,789,095
Shares outstanding		4,004,010
Net asset value and maximum offering price per share	$	6.94

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

FH-22

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the year ended December 31, 2013

	Franklin High Income Securities Fund
Investment income:
Dividends	$	169,842
Interest		25,236,130
Total investment income		25,405,972
Expenses:
Management fees (Note 3a)		1,836,744
Distribution fees: (Note 3c)
Class 2		708,598
Class 4		97,469
Unaffiliated transfer agent fees		87
Custodian fees (Note 4)		3,352
Reports to shareholders		98,619
Professional fees		47,237
Trustees’ fees and expenses		1,420
Other		50,417
Total expenses		2,843,943
Expense reductions (Note 4)		(29	)
Net expenses		2,843,914
Net investment income		22,562,058
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		5,567,320
Foreign currency transactions		(20,520	)
Net realized gain (loss)		5,546,800
Net change in unrealized appreciation (depreciation) on:
Investments		(1,215,896	)
Translation of other assets and liabilities denominated in foreign currencies		(1,022	)
Net change in unrealized appreciation (depreciation)		(1,216,918	)
Net realized and unrealized gain (loss)		4,329,882
Net increase (decrease) in net assets resulting from operations	$	26,891,940

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

FH-23

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets

	Franklin High Income Securities Fund
	Year Ended December 31,
	2013			2012
Increase (decrease) in net assets:
Operations:
Net investment income	$	22,562,058		$	23,416,924
Net realized gain (loss) from investments and foreign currency transactions and swap contracts		5,546,800			3,511,154
Net change in unrealized appreciation (depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies		(1,216,918	)		21,969,531
Net increase (decrease) in net assets resulting from operations		26,891,940			48,897,609
Distributions to shareholders from:
Net investment income:
Class 1		(2,998,716	)		(2,935,357	)
Class 2		(20,021,935	)		(18,731,686	)
Class 4		(1,982,283	)		(1,858,828	)
Total distributions to shareholders		(25,002,934	)		(23,525,871	)
Capital share transactions: (Note 2)
Class 1		(3,089,037	)		(3,084,036	)
Class 2		8,408,156			12,381,383
Class 4		25,255			(1,465,915	)
Total capital share transactions		5,344,374			7,831,432
Net increase (decrease) in net assets		7,233,380			33,203,170
Net assets:
Beginning of year		351,681,669			318,478,499
End of year	$	358,915,049		$	351,681,669
Undistributed net investment income included in net assets:
End of year	$	20,624,091		$	22,935,694

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

FH-24

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements

Franklin High Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment company, consisting of twenty separate funds. The Franklin High Income Securities Fund (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. At December 31, 2013, 83.96% of the Fund’s shares were held through one insurance company. Investment activities of these insurance company separate accounts could have a material impact on the Fund. The Fund offers three classes of shares: Class 1, Class 2, and Class 4. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

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

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

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

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

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

FH-25

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin High Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

a. Financial Instrument Valuation (continued)

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

Trading in securities on foreign securities stock exchanges and OTC markets may be completed before the daily NYSE close. In addition, trading in certain foreign markets may not take place on every NYSE business day. Occasionally, events occur between the time at which trading in a foreign security is completed and the close of the NYSE that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund’s portfolio securities as determined at the foreign market close and the latest indications of value at the close of the NYSE. In order to minimize the potential for these differences, the VLOC monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depositary Receipts, futures contracts and exchange traded funds). These price movements are measured against established trigger thresholds for each specific market proxy to assist in determining if an event has occurred that may call into question the reliability of the values of the foreign securities held by the Fund. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services.

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

b. Foreign Currency Translation

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

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

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

FH-26

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin High Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

c. Joint Repurchase Agreement

The Fund enters into a joint repurchase agreement whereby its uninvested cash balance is deposited into a joint cash account with other funds managed by the investment manager or an affiliate of the investment manager and is used to invest in one or more repurchase agreements. The value and face amount of the joint repurchase agreement are allocated to the funds based on their pro-rata interest. A repurchase agreement is accounted for as a loan by the Fund to the seller, collateralized by securities which are delivered to the Fund’s custodian. The market value, including accrued interest, of the initial collateralization is required to be at least 102% of the dollar amount invested by the funds, with the value of the underlying securities marked to market daily to maintain coverage of at least 100%. Repurchase agreements are subject to the terms of Master Repurchase Agreements (MRAs) with approved counterparties (sellers). The MRAs contain various provisions, including but not limited to events of default and maintenance of collateral for repurchase agreements. In the event of default by either the seller or the Fund, certain MRAs may permit the non-defaulting party to net and close-out all transactions, if any, traded under such agreements. The Fund may sell securities it holds as collateral and apply the proceeds towards the repurchase price and any other amounts owed by the seller to the Fund in the event of default by the seller. This could involve costs or delays in addition to a loss on the securities if their value falls below the repurchase price owed by the seller. The joint repurchase agreement held by the Fund at year end, as indicated in the Statement of Investments, had been entered into on December 31, 2013.

d. Securities Purchased on a When-Issued Basis

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

e. Derivative Financial Instruments

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

Derivative counterparty credit risk is managed through a formal evaluation of the creditworthiness of all potential counterparties. The Fund attempts to reduce its exposure to counterparty credit risk on OTC derivatives, whenever possible, by entering into International Swaps and Derivatives Association (ISDA) master agreements with certain counterparties. These agreements contain various provisions, including but not limited to collateral requirements, events of default, or early termination. Termination events applicable to the counterparty include certain deteriorations in the credit quality of the counterparty. Termination events applicable to the Fund include failure of the Fund to maintain certain net asset levels and/or limit the decline in net assets over various periods of time. In the event of default or early termination, the ISDA master agreement gives the non-defaulting party the right to net and close-out all transactions traded, whether or not arising under the ISDA agreement, to one net amount payable by one counterparty to the other. However, absent an event of default or early termination, OTC derivative assets and liabilities are presented gross and not offset in the Statement of Assets and Liabilities. Early termination by the counterparty may result in an immediate payment by the Fund of any net liability owed to that counterparty under the ISDA agreement. At December 31, 2013, the Fund had OTC derivatives in a net liability position for such contracts of $2,567.

FH-27

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin High Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

e. Derivative Financial Instruments (continued)

Collateral requirements differ by type of derivative. Collateral terms are contract specific for OTC derivatives. For OTC derivatives traded under an ISDA master agreement, posting of collateral is required by either the fund or the applicable counterparty if the total net exposure of all OTC derivatives with the applicable counterparty exceeds the minimum transfer amount, which typically ranges from $100,000 to $250,000, and can vary depending on the counterparty and the type of the agreement. Generally, collateral is determined at the close of fund business each day and any additional collateral required due to changes in derivative values may be delivered by the fund or the counterparty within a few business days. Collateral pledged and/or received by the fund, if any, is held in segregated accounts with the fund’s custodian/counterparty broker and can be in the form of cash and/or securities. Unrestricted cash may be invested according to the Fund’s investment objectives.

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

The Fund entered into credit default swap contracts primarily to manage and/or gain exposure to credit risk. A credit default swap is an agreement between the Fund and a counterparty whereby the buyer of the contract receives credit protection and the seller of the contract guarantees the credit worthiness of a referenced debt obligation. These agreements may be privately negotiated in the over-the-counter market (“OTC credit default swaps”) or may be executed in a multilateral trade facility platform, such as a registered exchange (“centrally cleared credit default swaps”). The underlying referenced debt obligation may be a single issuer of corporate or sovereign debt, a credit index, or a tranche of a credit index. In the event of a default of the underlying referenced debt obligation, the buyer is entitled to receive the notional amount of the credit default swap contract from the seller in exchange for the referenced debt obligation, a net settlement amount equal to the notional amount of the credit default swap less the recovery value of the referenced debt obligation, or other agreed upon amount. For centrally cleared credit default swaps, required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable. Over the term of the contract, the buyer pays the seller a periodic stream of payments, provided that no event of default has occurred. Such periodic payments are accrued daily as an unrealized appreciation or depreciation until the payments are made, at which time they are realized. Payments received or paid to initiate a credit default swap contract are reflected on the Statement of Assets and Liabilities and represent compensating factors between stated terms of the credit default swap agreement and prevailing market conditions (credit spreads and other relevant factors). These upfront payments are amortized over the term of the contract as a realized gain or loss on the Statement of Operations.

See Note 8 regarding other derivative information.

f. Senior Floating Rate Interests

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

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

g. Income and Deferred Taxes

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

FH-28

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin High Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

g. Income and Deferred Taxes (continued)

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

The Fund recognizes the tax benefits of uncertain tax positions only when the position is “more likely than not” to be sustained upon examination by the tax authorities based on the technical merits of the tax position. As of December 31, 2013, and for all open tax years, the Fund has determined that no liability for unrecognized tax benefits is required in the Fund’s financial statements related to uncertain tax positions taken on a tax return (or expected to be taken on future tax returns). Open tax years are those that remain subject to examination and are based on each tax jurisdiction statute of limitation.

h. Security Transactions, Investment Income, Expenses and Distributions

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

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

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

i. Accounting Estimates

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

j. Guarantees and Indemnifications

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

FH-29

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin High Income Securities Fund

2. SHARES OF BENEFICIAL INTEREST

At December 31, 2013, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:

	Year Ended December 31,
	2013						2012
Class 1 Shares:	Shares			Amount			Shares			Amount
Shares sold		296,126		$	2,094,060			237,071		$	1,594,666
Shares issued in reinvestment of distributions		448,910			2,998,716			461,534			2,935,357
Shares redeemed		(1,160,278	)		(8,181,813	)		(1,118,303	)		(7,614,059	)
Net increase (decrease)		(415,242	)	$	(3,089,037	)		(419,698	)	$	(3,084,036	)
Class 2 Shares:
Shares sold		8,384,624		$	56,291,181			6,520,319		$	43,016,960
Shares issued in reinvestment of distributions		3,085,044			20,021,935			3,021,240			18,731,686
Shares redeemed		(9,961,173	)		(67,904,960	)		(7,450,705	)		(49,367,263	)
Net increase (decrease)		1,508,495		$	8,408,156			2,090,854		$	12,381,383
Class 4 Shares:
Shares sold		232,056		$	1,586,635			86,672		$	581,663
Shares issued on reinvestment of distributions		299,438			1,982,283			294,584			1,858,828
Shares redeemed		(515,161	)		(3,543,663	)		(582,921	)		(3,906,406	)
Net increase (decrease)		16,333		$	25,255			(201,665	)	$	(1,465,915	)

3. TRANSACTIONS WITH AFFILIATES

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

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

a. Management Fees

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

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

FH-30

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin High Income Securities Fund

3. TRANSACTIONS WITH AFFILIATES (continued)

b. Administrative Fees

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

c. Distribution Fees

The Board has adopted distribution plans for Class 2 and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to 0.35% per year of its average daily net assets of each class. Some distribution fees are not charged on shares held by affiliates. The Board has agreed to limit the current rate to 0.25% per year for Class 2. The plan year, for purposes of monitoring compliance with the maximum annual plan rate, is February 1 through January 31.

d. Transfer Agent Fees

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

4. EXPENSE OFFSET ARRANGEMENT

The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses. During the year ended December 31, 2013, the custodian fees were reduced as noted in the Statement of Operations.

5. INCOME TAXES

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

At December 31, 2013, capital loss carryforwards were as follows:

Capital loss carryforwards expiring in:
2014	$	40,420
2015		4,493,289
2016		8,150,741
2017		10,621,353
	$	23,305,803

During the year ended December 31, 2013, the Fund utilized $5,607,494 of capital loss carryforwards.

On December 31, 2013, the Fund had expired capital loss carryforwards of $713,696, which were reclassified to paid-in capital.

The tax character of distributions paid during the years ended December 31, 2013 and 2012, was as follows:

	2013		2012
Distributions paid from ordinary income	$	25,002,934	$	23,525,871

FH-31

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin High Income Securities Fund

5. INCOME TAXES (continued)

At December 31, 2013, the cost of investments, net unrealized appreciation (depreciation) and undistributed ordinary income for income tax purposes were as follows:

Cost of investments	$	340,717,529
Unrealized appreciation	$	19,235,616
Unrealized depreciation		(6,177,975	)
Net unrealized appreciation (depreciation)	$	13,057,641
Distributable earnings – undistributed ordinary income	$	21,479,534

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

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the year ended December 31, 2013, aggregated $104,578,335 and $104,367,999 respectively.

7. CREDIT RISK AND DEFAULTED SECURITIES

At December 31, 2013, the Fund had 95.56% of its portfolio invested in high yield, senior secured floating rate notes, or other securities rated below investment grade. These securities may be more sensitive to economic conditions causing greater price volatility and are potentially subject to a greater risk of loss due to default than higher rated securities.

The Fund held defaulted securities and/or other securities for which the income has been deemed uncollectible. At December 31, 2013, the aggregate value of these securities represents less than 0.05% of the Fund’s net assets. The Fund discontinues accruing income on securities for which income has been deemed uncollectible and provides an estimate for losses on interest receivable. The securities have been identified on the accompanying Statement of Investments.

8. OTHER DERIVATIVE INFORMATION

At December 31, 2013, the Fund’s investments in derivative contracts are reflected on the Statement of Assets and Liabilities as follows:

	Asset Derivatives			Liability Derivatives
Derivative Contracts Not Accounted for as Hedging Instruments	Statement of Assets and Liabilities Location	Fair Value Amount		Statement of Assets and Liabilities Location	Fair Value Amount
Foreign exchange contracts	Unrealized appreciation on forward exchange contracts		$  —	Unrealized depreciation on forward exchange contracts	$	2,567

FH-32

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin High Income Securities Fund

8. OTHER DERIVATIVE INFORMATION (continued)

For the year ended December 31, 2013, the effect of derivative contracts on the Fund’s Statement of Operations was as follows:

Derivative Contracts Not Accounted for as Hedging Instruments	Statement of Operations Locations	Realized Gain (Loss) for the Year			Change in Unrealized Appreciation (Depreciation) for the Year
Foreign exchange contracts	Net realized gain (loss) from foreign currency transactions / Net change in unrealized appreciation (depreciation) on translation of other assets and liabilities denominated in foreign currencies	$	(20,520	)	$	(1,027	)

9. CREDIT FACILITY

The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $1.5 billion (Global Credit Facility) which, after extension of the original terms, matured on February 14, 2014. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. Effective February 14, 2014, the Borrowers renewed the Global Credit Facility which matures on February 13, 2015.

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.07% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses on the Statement of Operations. During the year ended December 31, 2013, the Fund did not use the Global Credit Facility.

10. FAIR VALUE MEASUREMENTS

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

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

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

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

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

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

FH-33

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin High Income Securities Fund

10. FAIR VALUE MEASUREMENTS (continued)

A summary of inputs used as of December 31, 2013, in valuing the Fund’s assets and liabilities carried at fair value, is as follows:

	Level 1		Level 2		Level 3			Total
Assets:
Investments in Securities:
Equity Investments:a
Materials	$	—	$	900,000	$	—		$	900,000
Transportation		—		682,102		—			682,102
All Other Equity Investmentsb		823,592		—		—			823,592
Corporate Bonds		—		334,716,428		191			334,716,619
Senior Floating Rate Interests		—		5,737,505		—			5,737,505
Litigation Trust		—		—		—	c		—
Short Term Investments		—		10,915,352		—			10,915,352
Total Investments in Securities	$	823,592	$	352,951,387	$	191		$	353,775,170
Liabilities:
Forward Exchange Contracts		—		2,567		—			2,567

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

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

^cIncludes securities determined to have no value at December 31, 2013.

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

11. NEW ACCOUNTING PRONOUNCEMENTS

In June 2013, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2013-08, Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements. The ASU modifies the criteria used in defining an investment company under U.S. Generally Accepted Accounting Principles and also sets forth certain measurement and disclosure requirements. Under the ASU, an entity that is registered under the 1940 Act automatically qualifies as an investment company. The ASU is effective for interim and annual reporting periods beginning after December 15, 2013. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the financial statements.

12. SUBSEQUENT EVENTS

The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure other than those already disclosed in the financial statements.

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

FH-34

Franklin Templeton Variable Insurance Products Trust

Franklin High Income Securities Fund

Report of Independent Registered Public Accounting Firm

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 Franklin High Income Securities Fund (the “Fund”) at December 31, 2013, 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 five years in the period then ended, 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2013 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

February 14, 2014

FH-35

FRANKLIN INCOME SECURITIES FUND

This annual report for Franklin Income Securities Fund covers the fiscal year ended December 31, 2013.

Performance Summary as of 12/31/13

Average annual total return of Class 4 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.

Periods ended 12/31/13

	1-Year		5-Year		10-Year
Average Annual Total Return		+13.85%		+14.84%		+7.24%

*For the period beginning 2/29/08, Class 4 performance reflects a 12b-1 fee expense of 0.35% per year, which affects future performance. Class 4 performance prior to 2/29/08 reflects historical Class 1 performance, which does not have a 12b-1 fee expense. Since 2/29/08 (effective date), the average annual total return of Class 4 shares was +6.77%.

Total Return Index Comparison

for a Hypothetical $10,000 Investment (1/1/04–12/31/13)

The graph below shows the change in value of a hypothetical $10,000 investment in the Fund over the indicated period and includes reinvestment of any income or distributions. The Fund’s performance* is compared to the performance of the Standard & Poor’s^® 500 Index (S&P 500^®) and the Barclays U.S. Aggregate Index. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Important Notes to Performance Information preceding the Fund Summaries.

**Source: © 2014 Morningstar. Please see Index Descriptions following the Fund Summaries.

Franklin Income Securities Fund – Class 4

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

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

Current performance may differ from figures shown.

FI-1

Fund Goal and Main Investments: Franklin Income Securities Fund seeks to maximize income while maintaining prospects for capital appreciation. Under normal market conditions, the Fund invests in both equity and debt securities.

Performance Overview

You can find the Fund’s one-year total return in the Performance Summary. For comparison, the Fund’s equity benchmark, the S&P 500, posted a +32.39% total return, and its fixed income benchmark, the Barclays U.S. Aggregate Index, had a -2.02% total return for the same period.¹

Economic and Market Overview

The U.S. economy recovered during the year ended December 31, 2013, especially in the second half. Improved business investment, net exports, and state and local government spending mitigated negative effects of federal budget cuts. Third-quarter U.S. gross domestic product growth was the highest since the end of 2011, underpinned by consumer spending and rising inventories. Historically low mortgage rates and positive sentiment aided the housing market, evidenced by solid new and existing home sales, rising home prices, low inventories and multi-year lows in new foreclosures. Manufacturing expanded in 2013, and the unemployment rate declined to 6.7% in December from 7.8% a year earlier.² Inflation remained below the Federal Reserve Board’s (Fed’s) 2.0% target.

In January, Washington averted automatic federal budget cuts and income tax increases, but automatic budget cuts started in March after Congress could not agree on expenditure reductions. Chairman Bernanke indicated in May that the Fed might reduce monthly asset purchases, assuming ongoing U.S. recovery but stated in September that reductions were postponed pending stronger economic growth. A U.S. budget impasse that shut down non-essential government services in October ended after Congress funded the government until early 2014. In December, Congress passed a two-year budget deal to ease automatic spending cuts in 2014 and avoid future government shutdowns, and the Fed announced it would reduce monthly bond purchases by $10 billion beginning in January 2014. The Fed reaffirmed supporting low

1. Source: © 2014 Morningstar. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

2. Source: Bureau of Labor Statistics.

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

FI-2

interest rates as long as the unemployment rate exceeded 6.5% and inflation expectations remained low.

Rising corporate profits and generally favorable economic data encouraged investors, helping mitigate sell-offs in reaction to Fed statements and Washington’s fiscal negotiations. U.S. stocks generated strong 12-month returns as the S&P 500 and Dow Jones Industrial Average reached all-time highs.³

Although the Fed’s asset purchase program continued to put downward pressure on long-term interest rates, investor concerns about the eventual reduction of asset purchases pushed the 10-year U.S. Treasury note yield to 3.04% at period-end from 1.78% on December 31, 2012. Investors also anticipated higher interest rates and pulled back from the fixed income markets overall. For the year under review, most fixed income markets declined in value.

Investment Strategy

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

Manager’s Discussion

During the fiscal year, the Fund meaningfully increased its equity securities weighting. This shift was driven by significant appreciation of underlying positions and reallocation of assets toward equities, given our view of attractive relative value as we sought current income while maintaining prospects for capital appreciation. Our largest equity allocations were in dividend paying common stocks followed by convertible securities.

Fixed income assets declined during the period. The Fund’s fixed income assets remained positioned largely in high yield corporate bonds,

3. Please see Index descriptions following the Fund Summaries.

Portfolio Breakdown

Franklin Income Securities Fund

12/31/13

	% of Total Net Assets
Equity*		60.0%
Utilities		12.7%
Energy		11.5%
Materials		9.6%
Financials		9.1%
Health Care		6.1%
Industrials		3.6%
Information Technology		3.1%
Other		4.3%
Fixed Income		35.7%
Energy		8.2%
Consumer Discretionary		6.6%
Information Technology		5.5%
Materials		3.4%
Telecommunication Services		3.3%
Financials		2.5%
Other		6.2%
Short-Term Investments & Other Net Assets		4.3%

*Includes convertible bonds.

FI-3

which performed well relative to other fixed income securities as higher coupons and continued strong credit trends helped mitigate the headwinds associated with rising long-term interest rates.

Most equity and fixed income sectors contributed positive returns during the year. Leading equity sectors included financials, energy, health care and utilities. Among fixed income investments, technology, communications and energy positions notably benefited performance.⁴

Within our equity investments, financials positions including Wells Fargo and JPMorgan Chase advanced partly because of favorable credit conditions and optimism about loan growth. Health care companies Merck & Co., Roche Holding and Johnson & Johnson benefited from strong cash flow that helped grow dividends and finance share buybacks. Leading individual contributors included Dow Chemical and LyondellBasell Industries in the materials sector. The companies made gains amid improved prospects for economic growth and better margin trends attributed to a favorable feedstock cost outlook driven by low natural gas prices. Notable individual detractors included metals and mining companies Barrick Gold,⁵ Newmont Mining and GoldCorp, which were hurt by falling commodity prices and a slowing growth outlook for many emerging market economies.

Leading fixed income contributors, including First Data and Freescale Semiconductor in technology and CC Media Holdings⁶ in communications, benefited from accommodative capital markets that enabled significant refinancing of existing debt maturities. Record high yield bond issuance and favorable credit spreads drove outperformance relative to other fixed income securities. Texas Competitive Electric Holdings (TCEH) was a notable fixed income detractor. TCEH struggled with a highly leveraged balance sheet amid weak power market fundamentals and low natural gas prices and was sold by period-end.

Although the Fund was more heavily weighted toward equities, the rise in long-term interest rates and underperformance of several fixed income sectors allowed us to purchase some corporate bonds. We focused on higher yields and segments with lowered prices and discounts to par value we found attractive.

4. Technology fixed income holdings are in information technology in the SOI. Communications fixed income holdings are part of consumer discretionary and telecommunication services in the SOI.

5. Held in an equity-linked security.

6. CC Media Holdings comprises Clear Channel Communications, Inc. and Clear Channel Worldwide Holdings, Inc. in the SOI.

Top Five Equity Holdings*

Franklin Income Securities Fund

12/31/13

Company Sector/Industry	% of Total Net Assets
Wells Fargo & Co.		2.6%
Financials
Bank of America Corp.		2.2%
Financials
Merck & Co. Inc.		2.1%
Health Care
The Dow Chemical Co.		2.0%
Materials
Royal Dutch Shell PLC, A, ADR (U.K.)		1.9%
Energy

Top Five Fixed Income and Senior Floating Rate Interests Holdings*

Franklin Income Securities Fund

12/31/13

Issuer Sector/Industry	% of Total Net Assets
First Data Corp.		2.8%
Information Technology
Clear Channel Communications Inc.		1.6%
Consumer Discretionary
Freescale Semiconductor Inc.		1.6%
Information Technology
JPMorgan Chase & Co.		1.3%
Financials
Sprint Nextel Corp.		1.2%
Telecommunication Services

*Does not include convertible bonds.

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

FI-4

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

The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2013, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

FI-5

Fund Expenses

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

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

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

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

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

Actual Fund Expenses

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

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

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

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

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

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

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

Franklin Income Securities Fund – Class 4

FI-6

Hypothetical Example for Comparison with Other Mutual Funds

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

Class 4	Beginning Account Value 7/1/13		Ending Account Value 12/31/13		Fund-Level Expenses Incurred During Period* 7/1/13–12/31/13
Actual	$	1,000	$	1,092.90	$	4.33
Hypothetical (5% return before expenses)	$	1,000	$	1,021.07	$	4.18

*Expenses are calculated using the most recent six-month annualized expense ratio for the Fund’s Class 4 shares (0.82%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period.

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SUPPLEMENT DATED FEBRUARY 1, 2014

TOTHE PROSPECTUSES DATED MAY 1, 2013

OF

FRANKLIN INCOME SECURITIES FUND

(A series of Franklin Templeton Variable Insurance Products Trust)

The prospectus is amended as follows:

I.  The “Fund Summaries – Portfolio Managers” section on page FI-S5 is revised to read as follows:

Investment Manager

Franklin Advisers, Inc. (Advisers)

Portfolio Managers

EDWARD D. PERKS, CFA Executive Vice President of Advisers and portfolio manager of the Fund since 2002.

MATTHEW QUINLAN Portfolio Manager of Advisers and portfolio manager of the Fund since 2012.

ALEX W. PETERS, CFA Vice President of Advisers and portfolio manager of the Fund since 2012.

II.  The “Fund Details – Management” section disclosure concerning the portfolio management team beginning on page FI-D9 is revised to read as follows:

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

The Fund is managed by a team of dedicated professionals focused on investments in debt and equity securities. The portfolio managers of the team are as follows:

EDWARD D. PERKS, CFA Executive Vice President of Advisers Mr. Perks has been the lead portfolio manager of the Fund since 2002. He has primary responsibility for the investments of the Fund. He has final authority over all aspects of the Fund’s investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio risk assessment, and the management of daily cash balances in accordance with anticipated investment management requirements. The degree to which he may perform these functions, and the nature of these functions, may change from time to time. He joined Franklin Templeton Investments in 1992.

F1-8

MATTHEW QUINLAN Portfolio Manager of Advisers	Mr. Quinlan has been a portfolio manager of the Fund since 2012, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. He joined Franklin Templeton Investments in 2005.
ALEX W. PETERS, CFA Vice President of Advisers	Mr. Peters has been a portfolio manager of the Fund since 2012, providing research and advice on the purchases and sales of individual securities, and portfolio risk assessment. He joined Franklin Templeton Investments in 1992.

CFA^® and Chartered Financial Analyst^® are trademarks owned by CFA Institute.

Please keep this supplement for future reference.

F1-9

FI-10

SUPPLEMENT DATED NOVEMBER 18, 2013

TOTHE STATEMENT OF ADDITIONAL INFORMATION

DATED MAY 1, 2013

OF

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

The Statement of Additional Information is amended as follows:

I. The section on page five for Franklin Income Securities Fund under the heading “The Funds – Goals, Additional Strategies and Risks” is amended to reflect that the Fund may sell protection using credit default swaps.

II. In the section entitled “Derivative Instruments,” the text under the headings “Swap Agreements,” “Credit Default Swaps.” “Risks of swaps generally,” “Risks of uncleared swaps,” “Risks of cleared swaps” and “Risks of potential regulation of swaps and other derivatives” is replaced with the following:

Swaps. Generally, swap agreements are contracts between the Fund and another party (the swap counterparty) involving the exchange of payments on specified terms over periods ranging from a few days to multiple years. A swap agreement may be negotiated bilaterally and traded OTC between the two parties (for an uncleared swap) or, in some instances, must be transacted through an FCM and cleared through a clearinghouse that serves as a central counterparty (for a cleared swap). In a basic swap transaction, the Fund agrees with the swap counterparty to exchange the returns (or differentials in rates of return) and/or cash flows earned or realized on a particular “notional amount” or value of predetermined underlying reference instruments. The notional amount is the set dollar or other value selected by the parties to use as the basis on which to calculate the obligations that the parties to a swap agreement have agreed to exchange. The parties typically do not actually exchange the notional amount. Instead they agree to exchange the returns that would be earned or realized if the notional amount were invested in given investments or at given interest rates. Examples of returns that may be exchanged in a swap agreement are those of a particular security, a particular fixed or variable interest rate, a particular non-U.S. currency, or a “basket” of securities representing a particular index. Swaps can also be based on credit and other events.

The Fund will generally enter into swap agreements on a net basis, which means that the two payment streams that are to be made by the Fund and its counterparty with respect to a particular swap agreement are netted out, with the Fund receiving or paying, as the case may be, only the net difference in the two payments. The Fund’s obligations (or rights) under a swap agreement that is entered into on a net basis will generally be the net amount to be paid or received under the agreement based on the relative values of the obligations of each party upon termination of the agreement or at set valuation dates. The Fund will accrue its obligations under a swap agreement daily (offset by any amounts the counterparty owes the

Fund). If the swap agreement does not provide for that type of netting, the full amount of the Fund’s obligations will be accrued on a daily basis.

New swaps regulation. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the Dodd-Frank Act) and related regulatory developments have imposed comprehensive new regulatory requirements on swaps and swap market participants. The new regulatory framework includes: (1) registration and regulation of swap dealers and major swap participants; (2) requiring central clearing and execution of standardized swaps; (3) imposing margin requirements in swap transactions; (4) regulating and monitoring swap transactions through position limits and large trader reporting requirements; and (5) imposing record keeping and centralized and public reporting requirements, on an anonymous basis, for most swaps. The CFTC is responsible for the regulation of most swaps, and has completed most of its rules implementing the Dodd-Frank Act swap regulations. The SEC has jurisdiction over a small segment of the market referred to as “security-based swaps,” which includes swaps on single securities or credits, or narrow-based indices of securities or credits, but has not yet completed its rulemaking.

Uncleared swaps. In an uncleared swap, the swap counterparty is typically a brokerage firm, bank or other financial institution. The Fund customarily enters into uncleared swaps based on the standard terms and conditions of an International Swaps and Derivatives Association (ISDA) Master Agreement. ISDA is a voluntary industry association of participants in the over-the-counter derivatives markets that has developed standardized contracts used by such participants that have agreed to be bound by such standardized contracts.

In the event that one party to a swap transaction defaults and the transaction is terminated prior to its scheduled termination date, one of the parties may be required to make an early termination payment to the other. An early termination payment may be payable by either the defaulting or non-defaulting party, depending upon which of them is “in-the-money” with respect to the swap at the time of its termination. Early termination payments may be calculated in various ways, but are intended to approximate the amount the “in-the-money” party would have to pay to replace the swap as of the date of its termination.

During the term of an uncleared swap, the Fund is usually required to pledge to the swap counterparty, from time to time, an amount of cash and/or other assets equal to the total net amount (if any) that would be payable by the Fund to the counterparty if the swap were terminated on the date in question, including any early termination payments. Periodically, changes in the amount pledged are made to recognize changes in value of the contract resulting from, among other things, interest on the notional value of the contract, market value changes in the underlying investment, and/or dividends paid by the issuer of the underlying instrument. Likewise, the counterparty may be required to pledge cash or other assets to cover its obligations to the Fund. However, the amount pledged may not always be equal to or more than the amount due to the other party. Therefore, if a counterparty defaults in its obligations

FI-11

to the Fund, the amount pledged by the counterparty and available to the Fund may not be sufficient to cover all the amounts due to the Fund and the Fund may sustain a loss. If the Fund desires to terminate an uncleared swap prior to its expiration date, the Fund generally will have to negotiate with its swap counterparty.

Cleared swaps. Certain standardized swaps are subject to mandatory central clearing. The Dodd-Frank Act and implementing rules will ultimately require the clearing and exchange-trading of many swaps. Mandatory exchange-trading and clearing will occur on a phased-in basis based on the type of market participant and CFTC approval of contracts for central clearing. To date, the CFTC has designated only certain of the most common types of credit default index swaps and interest rate swaps as subject to mandatory clearing, but it is expected that additional categories of swaps will in the future be designated as subject to mandatory clearing. Central clearing is intended to reduce counterparty credit risk and increase liquidity, but central clearing does not eliminate these risks and may involve additional risks not involved with uncleared swaps. For more information, see “Risks of cleared swaps” below.

In a cleared swap, the Fund’s ultimate counterparty is a central clearinghouse rather than a brokerage firm, bank or other financial institution. The Fund initially will enter into cleared swaps through an executing broker. Such transactions will then be submitted for clearing and, if cleared, will be held at regulated FCMs that are members of the clearinghouse that serves as the central counterparty.

When the Fund enters into a cleared swap, it must deliver to the central counterparty (via the FCM) an amount referred to as “initial margin.” Initial margin requirements are determined by the central counterparty, but an FCM may require additional initial margin above the amount required by the central counterparty. During the term of the swap agreement, a “variation margin” amount may also be required to be paid by the Fund or may be received by the Fund in accordance with margin controls set for such accounts, depending upon changes in the price of the underlying reference instrument subject to the swap agreement. At the conclusion of the term of the swap agreement, if the Fund has a loss equal to or greater than the margin amount, the margin amount is paid to the FCM along with any loss in excess of the margin amount. If the Fund has a loss of less than the margin amount, the excess margin is returned to the Fund. If the Fund has a gain, the full margin amount and the amount of the gain is paid to the Fund.

Recently adopted CFTC rules will, when implemented, require the trading and execution of certain cleared swaps on public trading facilities, which will occur for each category of swaps subject to mandatory clearing once one or more trading facilities become accredited and make such category of swaps available to trade. Moving trading to an exchange-type system may increase market transparency and liquidity but may require the Fund to incur increased expenses to access the same types of swaps that it has used in the past. If the Fund desires to terminate a cleared swap prior to its expiration date, the Fund may do so by entering into a

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FI-13

second offsetting or close out transaction which is usually accomplished by buying or selling, as the case may be, an identical, offsetting swap. This transaction, which is effected through a member of an exchange, cancels the payment obligations under the swap.

Credit default swaps. The “buyer” of protection in a credit default swap agreement is obligated to pay the “seller” a periodic stream of payments over the term of the agreement in return for a payment by the “seller” that is contingent upon the occurrence of a credit event with respect to a specific underlying reference debt obligation (whether as a single debt instrument or as part of an index of debt instruments). The contingent payment by the seller generally is the face amount of the debt obligation, in return for the buyer’s obligation to make periodic cash payments and deliver in physical form the reference debt obligation or a cash payment equal to the then-current market value of that debt obligation at the time of the credit event. If no credit event occurs, the seller would receive a fixed rate of income throughout the term of the contract, while the buyer would lose the amount of its payments and recover nothing. The buyer is also subject to the risk that the seller will not satisfy its contingent payment obligation, if and when due.

Purchasing protection through a credit default swap may be used to attempt to hedge against a decline in the value of debt security or securities due to a credit event. The seller of protection under a credit default swap receives periodic payments from the buyer but is exposed to the risk that the value of the reference debt obligation declines due to a credit event and that it will have to pay the face amount of the reference obligation to the buyer. Selling protection under a credit default swap may also permit the seller to gain exposure that is similar to owning the reference debt obligation directly. As the seller of protection, the Fund would effectively add leverage to its portfolio because, in addition to its total assets, the Fund would be subject to the risk that there would be a credit event and the Fund would have to make a substantial payment in the future.

Generally, a credit event means bankruptcy, failure to timely pay interest or principal, obligation acceleration or default, or repudiation or restructuring of the reference debt obligation. There may be disputes between the buyer and seller of a credit default swap agreement or within the swaps market as a whole as to whether or not a credit event has occurred or what the payout should be which could result in litigation. In some instances where there is a dispute in the credit default swap market, a regional Determinations Committee set up by ISDA may make an official binding determination regarding the existence of credit events with respect to the reference debt obligation of a credit default swap agreement or, in the case of a credit default swap on an index, with respect to a component of the index underlying the credit default swap agreement. In the case of a credit default swap on an index, the existence of a credit event is determined according to the index methodology, which may in turn refer to determinations made by ISDA’s Determinations Committees with respect to particular components of the index.

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ISDA’s Determination Committees are comprised principally of dealers in the OTC derivatives markets which may have a conflicting interest in the determination regarding the existence of a particular credit event. In addition, in the sovereign debt market, a credit default swap agreement may not provide the protection generally anticipated because the government issuer of the sovereign debt instruments may be able to restructure or renegotiate the debt in such a manner as to avoid triggering a credit event. Moreover, (1) sovereign debt obligations may not incorporate common, commercially acceptable provisions, such as collective action clauses, or (2) the negotiated restructuring of the sovereign debt may be deemed non-mandatory on all holders. As a result, the determination committee might then not be able to determine, or may be able to avoid having to determine, that a credit event under the credit default agreement has occurred.

For these and other reasons, the buyer of protection in a credit default swap agreement is subject to the risk that certain occurrences, such as particular restructuring events affecting the value of the underlying reference debt obligation, or the restructuring of sovereign debt, may not be deemed credit events under the credit default swap agreement. Therefore, if the credit default swap was purchased as a hedge or to take advantage of an anticipated increase in the value of credit protection for the underlying reference obligation, it may not provide any hedging benefit or otherwise increase in value as anticipated. Similarly, the seller of protection in a credit default swap agreement is subject to the risk that certain occurrences may be deemed to be credit events under the credit default swap agreement, even if these occurrences do not adversely impact the value or creditworthiness of the underlying reference debt obligation.

Risks of swaps generally. The use of swap transactions is a highly specialized activity, which involves investment techniques and risks different from those associated with ordinary portfolio securities transactions. Whether the Fund will be successful in using swap agreements to achieve its investment goal depends on the ability of the investment manager correctly to predict which types of investments are likely to produce greater returns. If the investment manager, in using swap agreements, is incorrect in its forecasts of market values, interest rates, inflation, currency exchange rates or other applicable factors, the investment performance of the Fund will be less than its performance would have been if it had not used the swap agreements.

The risk of loss to the Fund for swap transactions that are entered into on a net basis depends on which party is obligated to pay the net amount to the other party. If the counterparty is obligated to pay the net amount to the Fund, the risk of loss to the Fund is loss of the entire amount that the Fund is entitled to receive. If the Fund is obligated to pay the net amount, the Fund’s risk of loss is generally limited to that net amount. If the swap agreement involves the exchange of the entire principal value of a security, the entire principal value of that security is subject to the risk that the other party to the swap will default on its contractual delivery

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obligations. In addition, the Fund’s risk of loss also includes any margin at risk in the event of default by the counterparty (in an uncleared swap) or the central counterparty or FCM (in a cleared swap), plus any transaction costs.

Because bilateral swap agreements are structured as two-party contracts and may have terms of greater than seven days, these swaps may be considered to be illiquid and, therefore, subject to the Fund’s limitation on investments in illiquid securities. If a swap transaction is particularly large or if the relevant market is illiquid, the Fund may not be able to establish or liquidate a position at an advantageous time or price, which may result in significant losses. Participants in the swap markets are not required to make continuous markets in the swap contracts they trade. Participants could refuse to quote prices for swap contracts or quote prices with an unusually wide spread between the price at which they are prepared to buy and the price at which they are prepared to sell. Some swap agreements entail complex terms and may require a greater degree of subjectivity in their valuation. However, the swap markets have grown substantially in recent years, with a large number of financial institutions acting both as principals and agents, utilizing standardized swap documentation. As a result, the swap markets have become increasingly liquid. In addition, central clearing and the trading of cleared swaps on public facilities are intended to increase liquidity. The Fund’s investment manager, under the supervision of the Board of Trustees, is responsible for determining and monitoring the liquidity of the Funds’ swap transactions.

Rules adopted under the Dodd-Frank Act require centralized reporting of detailed information about many swaps, whether cleared or uncleared. This information is available to regulators and also, to a more limited extent and on an anonymous basis, to the public. Reporting of swap data is intended to result in greater market transparency. This may be beneficial to funds that use swaps in their trading strategies. However, public reporting imposes additional recordkeeping burdens on these funds, and the safeguards established to protect anonymity are not yet tested and may not provide protection of trader identities as intended.

Certain Internal Revenue Service positions may limit the Fund’s ability to use swap agreements in a desired tax strategy. It is possible that developments in the swap markets and/or the laws relating to swap agreements, including potential government regulation, could adversely affect the Fund’s ability to benefit from using swap agreements, or could have adverse tax consequences. For more information about potentially changing regulation, see “Risks of potential regulation of swaps and other derivatives” below.

Risks of uncleared swaps. Uncleared swaps are not traded on exchanges. As a result, swap participants may not be as protected as participants on organized exchanges. Performance of a swap agreement is the responsibility only of the swap counterparty and not of any exchange or clearinghouse. As a result, the Fund is subject to the risk that a counterparty will be unable or will refuse to perform under such agreement, including because of the counterparty’s bankruptcy or insolvency. The Fund risks the loss of the accrued but unpaid amounts under a

FI-16

swap agreement, which could be substantial, in the event of a default, insolvency or bankruptcy by a swap counterparty. In such an event, the Fund will have contractual remedies pursuant to the swap agreements, but bankruptcy and insolvency laws could affect the Fund’s rights as a creditor. If the counterparty’s creditworthiness declines, the value of a swap agreement would likely decline, potentially resulting in losses. The Fund’s investment manager will only approve a swap agreement counterparty for the Fund if the investment manager deems the counterparty to be creditworthy under the Fund’s Counterparty Credit Review Standards, adopted and reviewed annually by the Fund’s board. However, in unusual or extreme market conditions, a counterparty’s creditworthiness and ability to perform may deteriorate rapidly, and the availability of suitable replacement counterparties may become limited.

Risks of cleared swaps. As noted above, under recent financial reforms, certain types of swaps are, and others eventually are expected to be, required to be cleared through a central counterparty, which may affect counterparty risk and other risks faced by the Fund.

Central clearing is designed to reduce counterparty credit risk and increase liquidity compared to bilateral swaps because central clearing interposes the central clearinghouse as the counterparty to each participant’s swap, but it does not eliminate those risks completely. There is also a risk of loss by the Fund of the initial and variation margin deposits in the event of bankruptcy of the FCM with which the Fund has an open position in a swap contract. The assets of the Fund may not be fully protected in the event of the bankruptcy of the FCM or central counterparty because the Fund might be limited to recovering only a pro rata share of all available funds and margin segregated on behalf of an FCM’s customers. If the FCM does not provide accurate reporting, the Fund is also subject to the risk that the FCM could use the Fund’s assets, which are held in an omnibus account with assets belonging to the FCM’s other customers, to satisfy its own financial obligations or the payment obligations of another customer to the central counterparty.

With cleared swaps, the Fund may not be able to obtain as favorable terms as it would be able to negotiate for a bilateral, uncleared swap. In addition, an FCM may unilaterally amend the terms of its agreement with the Fund, which may include the imposition of position limits or additional margin requirements with respect to the Fund’s investment in certain types of swaps. Central counterparties and FCMs generally can require termination of existing cleared swap transactions at any time, and can also require increases in margin above the margin that is required at the initiation of the swap agreement. Additionally, depending on a number of factors, the margin required under the rules of the clearinghouse and FCM may be in excess of the collateral required to be posted by the Fund to support its obligations under a similar uncleared swap. However, regulators are expected to adopt rules imposing certain margin requirements, including minimums, on uncleared swaps in the near future, which could change this comparison.

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Finally, the Fund is subject to the risk that, after entering into a cleared swap with an executing broker, no FCM or central counterparty is willing or able to clear the transaction. In such an event, the Fund may be required to break the trade and make an early termination payment to the executing broker.

Risks of potential regulation of swaps and other derivatives. The regulation of cleared and uncleared swaps, as well as other derivatives, is a rapidly changing area of law and is subject to modification by government and judicial action. In addition, the SEC, CFTC and the exchanges are authorized to take extraordinary actions in the event of a market emergency, including, for example, the implementation or reduction of speculative position limits, the implementation of higher margin requirements, the establishment of daily price limits and the suspension of trading.

It is not possible to predict fully the effects of current or future regulation. However, it is possible that developments in government regulation of various types of derivative instruments, such as speculative position limits on certain types of derivatives, or limits or restrictions on the counterparties with which the Funds engage in derivative transactions, may limit or prevent a Fund from using or limit a Fund’s use of these instruments effectively as a part of its investment strategy, and could adversely affect a Fund’s ability to achieve its investment goal(s). The investment manager will continue to monitor developments in the area, particularly to the extent regulatory changes affect the Fund’s ability to enter into desired swap agreements. New requirements, even if not directly applicable to the Fund, may increase the cost of a Fund’s investments and cost of doing business, which could adversely affect investors.

Please keep this supplement for future reference.

Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Franklin Income Securities Fund

	Year Ended December 31,
Class 1	2013			2012			2011			2010			2009
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	15.47		$	14.68		$	15.16		$	14.43		$	11.53
Income from investment operationsa:
Net investment incomeb		0.81			0.91			0.96			0.89			0.91
Net realized and unrealized gains (losses)		1.31			0.90			(0.54	)		0.85			3.08
Total from investment operations		2.12			1.81			0.42			1.74			3.99
Less distributions from net investment income		(1.06	)		(1.02	)		(0.90	)		(1.01	)		(1.09	)
Net asset value, end of year	$	16.53		$	15.47		$	14.68		$	15.16		$	14.43
Total returnc		14.18%			12.91%			2.71%			12.87%			35.88%
Ratios to average net assets
Expenses		0.47%	d		0.47%			0.47%	d		0.47%	d		0.47%	d
Net investment income		5.07%			6.03%			6.35%			6.28%			7.23%
Supplemental data
Net assets, end of year (000’s)	$	695,004		$	584,391		$	1,300,935		$	1,449,028		$	910,504
Portfolio turnover rate		21.71%			26.66%	e		28.65%			41.65%			42.30%

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

^bBased on average daily shares outstanding.

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

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

^eExcludes the value of portfolio securities delivered as a result of a redemption in-kind. See Note 10.

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

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Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin Income Securities Fund

	Year Ended December 31,
Class 2	2013			2012			2011			2010			2009
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	15.07		$	14.32		$	14.82		$	14.12		$	11.30
Income from investment operationsa:
Net investment incomeb		0.75			0.85			0.90			0.86			0.86
Net realized and unrealized gains (losses)		1.27			0.88			(0.53	)		0.82			3.01
Total from investment operations		2.02			1.73			0.37			1.68			3.87
Less distributions from net investment income		(1.02	)		(0.98	)		(0.87	)		(0.98	)		(1.05	)
Net asset value, end of year	$	16.07		$	15.07		$	14.32		$	14.82		$	14.12
Total returnc		13.94%			12.65%			2.38%			12.67%			35.59%
Ratios to average net assets
Expenses		0.72%	d		0.72%			0.72%	d		0.72%	d		0.72%	d
Net investment income		4.82%			5.78%			6.10%			6.03%			6.98%
Supplemental data
Net assets, end of year (000’s)	$	6,188,045		$	6,182,997		$	5,915,637		$	6,309,207		$	6,114,898
Portfolio turnover rate		21.71%			26.66%	e		28.65%			41.65%			42.30%

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

^bBased on average daily shares outstanding.

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

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

^eExcludes the value of portfolio securities delivered as a result of a redemption in-kind. See Note 10.

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

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Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin Income Securities Fund

	Year Ended December 31,
Class 4	2013			2012			2011			2010			2009
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	15.32		$	14.54		$	15.04		$	14.33		$	11.49
Income from investment operationsa:
Net investment incomeb		0.75			0.85			0.90			0.85			0.86
Net realized and unrealized gains (losses)		1.30			0.90			(0.54	)		0.84			3.06
Total from investment operations		2.05			1.75			0.36			1.69			3.92
Less distributions from net investment income		(1.01	)		(0.97	)		(0.86	)		(0.98	)		(1.08	)
Net asset value, end of year	$	16.36		$	15.32		$	14.54		$	15.04		$	14.33
Total returnc		13.85%			12.56%			2.29%			12.54%			35.37%
Ratios to average net assets
Expenses		0.82%	d		0.82%			0.82%	d		0.82%	d		0.82%	d
Net investment income		4.72%			5.68%			6.00%			5.93%			6.88%
Supplemental data
Net assets, end of year (000’s)	$	397,652		$	436,405		$	431,435		$	415,541		$	347,733
Portfolio turnover rate		21.71%			26.66%	e		28.65%			41.65%			42.30%

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

^bBased on average daily shares outstanding.

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

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

^eExcludes the value of portfolio securities delivered as a result of a redemption in-kind. See Note 10.

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

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Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013

Franklin Income Securities Fund	Country	Shares/ Warrants		Value
Common Stocks and Other Equity Interests 52.5%
Consumer Discretionary 1.0%
a,b Dex Media Inc.	United States		458,876	$	3,111,179
Ford Motor Co.	United States		1,000,000		15,430,000
General Motors Co.	United States		384,539		15,716,109
McDonald’s Corp.	United States		113,300		10,993,499
Target Corp.	United States		394,200		24,941,034
					70,191,821
Consumer Staples 1.3%
The Coca-Cola Co.	United States		729,800		30,148,038
PepsiCo Inc.	United States		584,000		48,436,960
Safeway Inc.	United States		445,700		14,516,449
					93,101,447
Energy 9.8%
BP PLC, ADR	United Kingdom		2,750,000		133,677,500
a Callon Petroleum Co.	United States		350,000		2,285,500
Canadian Oil Sands Ltd.	Canada		3,212,700		60,433,786
Chesapeake Energy Corp.	United States		581,500		15,781,910
Chevron Corp.	United States		561,000		70,074,510
Exxon Mobil Corp.	United States		884,850		89,546,820
a Halcon Resources Corp.	United States		34,489		133,128
Halliburton Co.	United States		1,151,700		58,448,775
Royal Dutch Shell PLC, A, ADR	United Kingdom		1,951,748		139,101,080
Schlumberger Ltd.	United States		446,600		40,243,126
Spectra Energy Corp.	United States		600,000		21,372,000
Total SA, B, ADR	France		732,900		44,904,783
Transocean Ltd.	United States		400,000		19,768,000
The Williams Cos. Inc.	United States		563,900		21,749,623
					717,520,541
Financials 6.0%
Banco Santander SA	Spain		2,255,788		20,187,053
Bank of America Corp.	United States		4,909,800		76,445,586
Barclays PLC	United Kingdom		3,473,166		15,637,555
Commonwealth Bank of Australia	Australia		374,700		26,022,229
HSBC Holdings PLC	United Kingdom		4,341,457		47,616,465
JPMorgan Chase & Co.	United States		1,606,400		93,942,272
MetLife Inc.	United States		258,509		13,938,805
Wells Fargo & Co.	United States		2,863,100		129,984,740
Westfield Retail Trust	Australia		5,543,693		14,697,276
					438,471,981
Health Care 6.1%
Eli Lilly & Co.	United States		434,800		22,174,800
Johnson & Johnson	United States		617,800		56,584,302
Merck & Co. Inc.	United States		3,023,200		151,311,160
Pfizer Inc.	United States		3,055,375		93,586,136
Roche Holding AG	Switzerland		257,719		71,995,488
Sanofi, ADR	France		868,292		46,566,500
					442,218,386
Industrials 3.4%
a CEVA Holdings LLC	United Kingdom		13,012		12,361,647
Deere & Co.	United States		100,000		9,133,000

FI-21

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin Income Securities Fund	Country	Shares/ Warrants		Value
Common Stocks and Other Equity Interests (continued)
Industrials (continued)
General Electric Co.	United States		4,341,500	$	121,692,245
Lockheed Martin Corp.	United States		253,200		37,640,712
Republic Services Inc.	United States		527,300		17,506,360
Waste Management Inc.	United States		1,028,200		46,135,334
					244,469,298
Information Technology 2.9%
Apple Inc.	United States		50,000		28,055,500
Cisco Systems Inc.	United States		1,534,600		34,451,770
Intel Corp.	United States		3,679,300		95,514,628
QUALCOMM Inc.	United States		200,000		14,850,000
Texas Instruments Inc.	United States		924,800		40,607,968
					213,479,866
Materials 8.2%
Agrium Inc.	Canada		650,000		59,462,000
AngloGold Ashanti Ltd., ADR	South Africa		199,655		2,339,957
BHP Billiton PLC	United Kingdom		2,566,292		79,359,841
The Dow Chemical Co.	United States		3,207,200		142,399,680
E. I. du Pont de Nemours and Co.	United States		1,047,500		68,056,075
Freeport-McMoRan Copper & Gold Inc., B	United States		500,000		18,870,000
Goldcorp Inc.	Canada		1,508,600		32,691,362
LyondellBasell Industries NV, A	United States		1,050,000		84,294,000
The Mosaic Co.	United States		200,000		9,454,000
Newmont Mining Corp.	United States		735,317		16,934,350
Rio Tinto PLC, ADR	United Kingdom		1,500,000		84,645,000
					598,506,265
Telecommunication Services 1.4%
AT&T Inc.	United States		1,736,600		61,058,856
Telstra Corp. Ltd.	Australia		4,946,331		23,180,548
Vodafone Group PLC	United Kingdom		3,878,012		15,224,008
					99,463,412
Utilities 12.4%
AGL Resources Inc.	United States		290,732		13,731,272
American Electric Power Co. Inc.	United States		1,300,000		60,762,000
Dominion Resources Inc.	United States		800,000		51,752,000
Duke Energy Corp.	United States		1,302,500		89,885,525
a,b Dynegy Inc.	United States		3,500,000		75,320,000
a,b Dynegy Inc., wts., 10/02/17	United States		242,666		330,026
Entergy Corp.	United States		738,100		46,699,587
Exelon Corp.	United States		2,500,000		68,475,000
FirstEnergy Corp.	United States		1,095,900		36,142,782
NextEra Energy Inc.	United States		651,300		55,764,306
PG&E Corp.	United States		1,736,600		69,950,248
Pinnacle West Capital Corp.	United States		260,500		13,785,660
PPL Corp.	United States		1,615,400		48,607,386
Public Service Enterprise Group Inc.	United States		1,823,500		58,424,940
Sempra Energy	United States		868,300		77,938,608
The Southern Co.	United States		1,375,600		56,550,916
TECO Energy Inc.	United States		1,753,700		30,233,788

FI-22

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin Income Securities Fund	Country	Shares/ Warrants		Value
Common Stocks and Other Equity Interests (continued)
Utilities (continued)
Xcel Energy Inc.	United States		1,710,964	$	47,804,334
					902,158,378
Total Common Stocks and Other Equity Interests (Cost $3,151,809,989)					3,819,581,395
c Equity-Linked Securities 2.6%
Energy 1.3%
d Barclays Bank PLC into Devon Energy Corp., 6.00%, 144A	United States		650,000		41,004,470
d Barclays Bank PLC into Weatherford International Inc., 7.50%, 144A	United States		850,000		13,623,290
d JPMorgan Chase & Co. into Anadarko Petroleum Corp., 5.00%, 144A	United States		450,000		36,236,385
					90,864,145
Information Technology 0.2%
d Wells Fargo & Co. into Broadcom Corp., 7.00%, 144A	United States		600,000		17,032,800
Materials 1.1%
d JPMorgan Chase & Co. into Freeport-McMoRan Copper & Gold Inc., 9.00%, 144A	United States		1,170,000		44,601,570
d Morgan Stanley into Barrick Gold Corp., 9.00%, 144A	Canada		1,980,000		37,192,518
					81,794,088
Total Equity-Linked Securities (Cost $206,867,600)					189,691,033
Convertible Preferred Stocks 3.4%
Energy 0.4%
Halcon Resources Corp., 5.75%, cvt. pfd., A	United States		10,000		7,940,000
d Sanchez Energy Corp., 6.50%, cvt. pfd., B, 144A	United States		200,000		13,080,000
SandRidge Energy Inc., 7.00%, cvt. pfd.	United States		121,600		12,087,040
					33,107,040
Financials 2.4%
Bank of America Corp., 7.25%, cvt. pfd., L	United States		78,200		82,970,200
FelCor Lodging Trust Inc., 7.80%, cvt. pfd., A	United States		347,325		8,422,631
a FNMA, 5.38%, cvt. pfd.	United States		525		14,962,500
MetLife Inc., 5.00%, cvt. pfd.	United States		455,925		14,379,875
Wells Fargo & Co., 7.50%, cvt. pfd., A	United States		53,000		58,649,800
					179,385,006
Industrials 0.2%
a CEVA Holdings LLC, cvt. pfd., A-1	United Kingdom		397		516,100
a CEVA Holdings LLC, cvt. pfd., A-2	United Kingdom		14,711		13,975,355
					14,491,455
Materials 0.1%
ArcelorMittal, 6.00%, cvt. pfd.	Luxembourg		160,000		4,162,400
Utilities 0.3%
Dominion Resources Inc., 6.00%, cvt. pfd., B	United States		145,000		7,860,450
Dominion Resources Inc., 6.13%, cvt. pfd., A	United States		145,000		7,847,400
NextEra Energy Inc., 5.89%, cvt. pfd.	United States		83,100		4,705,953
					20,413,803
Total Convertible Preferred Stocks (Cost $251,543,613)					251,559,704

FI-23

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin Income Securities Fund	Country	Shares/ Warrants			Value
Preferred Stocks 0.7%
Financials 0.7%
d Ally Financial Inc., 7.00%, pfd., 144A	United States		25,989		$	24,951,878
Ally Financial Inc., 8.50%, pfd., A	United States		65,125			1,748,606
a FHLMC, 8.375%, pfd., Z	United States		745,175			6,684,220
a FNMA, 6.75%, pfd.	United States		434,150			3,039,050
a FNMA, 7.625%, pfd., R	United States		694,650			5,459,949
a FNMA, 8.25%, pfd.	United States		739,375			6,469,531
Total Preferred Stocks (Cost $74,181,505)						48,353,234
		Principal Amount*
Convertible Bonds 0.8%
Consumer Discretionary 0.6%
d Volkswagen International Finance, cvt., sub. note, 144A, 5.50%, 11/09/15	Germany		25,000,000	EUR		42,754,492
Materials 0.2%
Cemex SAB de CV, cvt., sub. note,
3.25%, 3/15/16	Mexico		1,700,000			2,238,394
3.75%, 3/15/18	Mexico		7,920,000			10,761,300
						12,999,694
Total Convertible Bonds (Cost $41,000,787)						55,754,186
Corporate Bonds 32.5%
Consumer Discretionary 5.7%
d Academy Ltd./Finance Corp., senior note, 144A, 9.25%, 8/01/19	United States		5,300,000			5,883,000
Cablevision Systems Corp., senior note, 7.75%, 4/15/18	United States		10,000,000			11,200,000
Caesars Entertainment Operating Co. Inc.,
first lien, 9.00%, 2/15/20	United States		15,000,000			14,662,500
senior secured note, 11.25%, 6/01/17	United States		10,000,000			10,200,000
senior secured note, 8.50%, 2/15/20	United States		8,900,000			8,594,063
senior secured note, first lien, 9.00%, 2/15/20	United States		10,000,000			9,775,000
CCO Holdings LLC/CCO Holdings Capital Corp.,
senior bond, 5.75%, 1/15/24	United States		15,000,000			14,212,500
senior note, 6.50%, 4/30/21	United States		15,000,000			15,487,500
Chrysler Group LLC/CG Co-Issuer Inc., senior secured note,
8.00%, 6/15/19	United States		25,000,000			27,750,000
8.25%, 6/15/21	United States		12,800,000			14,624,000
Clear Channel Communications Inc.,
d,e senior note, 144A, PIK, 14.00%, 2/01/21	United States		13,200,000			11,945,459
senior secured bond, first lien, 9.00%, 3/01/21	United States		24,100,000			24,461,500
senior secured note, first lien, 9.00%, 12/15/19	United States		18,000,000			18,450,000
Clear Channel Worldwide Holdings Inc., senior sub. note, 7.625%, 3/15/20	United States		8,750,000			9,242,187
ClubCorp Club Operations Inc., senior note, 10.00%, 12/01/18	United States		9,684,000			10,773,450
CSC Holdings LLC, senior note, 6.75%, 11/15/21	United States		15,400,000			16,670,500
Cumulus Media Holdings Inc., senior note, 7.75%, 5/01/19	United States		10,000,000			10,600,000
e Dex Media Inc., senior sub. note, PIK, 14.00%, 1/29/17	United States		15,444,588			8,044,854
DISH DBS Corp., senior bond, 5.00%, 3/15/23	United States		15,000,000			14,062,500
The Goodyear Tire & Rubber Co., senior note,
8.25%, 8/15/20	United States		4,900,000			5,500,250
6.50%, 3/01/21	United States		12,600,000			13,419,000
HD Supply Inc., senior note, 7.50%, 7/15/20	United States		10,000,000			10,825,000
d Jaguar Land Rover PLC, 144A, 8.125%, 5/15/21	United Kingdom		2,118,000			2,426,296

FI-24

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin Income Securities Fund	Country	Principal Amount*			Value
Corporate Bonds (continued)
Consumer Discretionary (continued)
KB Home,
senior bond, 7.50%, 9/15/22	United States		6,500,000		$	6,873,750
senior note, 7.25%, 6/15/18	United States		10,600,000			11,739,500
d Landry’s Inc., senior note, 144A, 9.375%, 5/01/20	United States		2,500,000			2,737,500
d Laureate Education Inc., 144A, 9.25%, 9/01/19	United States		5,000,000			5,462,500
MGM Resorts International,
5.25%, 3/31/20	United States		5,000,000			4,975,000
senior note, 6.625%, 7/15/15	United States		3,200,000			3,448,000
senior note, 10.00%, 11/01/16	United States		20,000,000			24,100,000
senior note, 8.625%, 2/01/19	United States		3,700,000			4,356,750
senior note, 6.75%, 10/01/20	United States		5,500,000			5,898,750
Shea Homes LP/Funding Corp., senior secured note, 8.625%, 5/15/19	United States		6,700,000			7,453,750
d Univision Communications Inc., senior secured note, 144A,
6.875%, 5/15/19	United States		15,000,000			16,106,250
5.125%, 5/15/23	United States		10,000,000			10,037,500
d UPCB Finance III Ltd., senior secured note, 144A, 6.625%, 7/01/20	Netherlands		7,500,000			8,006,250
Visant Corp., senior note, 10.00%, 10/01/17	United States		20,000,000			19,500,000
						419,505,059
Consumer Staples 1.2%
Alliance One International Inc., secured note, second lien, 9.875%, 7/15/21	United States		10,000,000			9,425,000
d Boparan Finance PLC, senior note, 144A,
9.75%, 4/30/18	United Kingdom		2,000,000	EUR		3,019,222
9.875%, 4/30/18	United Kingdom		7,500,000	GBP		13,661,175
d Innovation Ventures LLC/Finance Corp., secured note, 144A, 9.50%, 8/15/19	United States		5,000,000			4,875,000
d JBS USA LLC/Finance Inc., senior note, 144A,
8.25%, 2/01/20	United States		10,000,000			10,900,000
7.25%, 6/01/21	United States		4,900,000			5,120,500
7.25%, 6/01/21	United States		12,500,000			13,093,750
SUPERVALU Inc., senior note, 8.00%, 5/01/16	United States		15,000,000			16,668,750
U.S. Foods Inc., 8.50%, 6/30/19	United States		10,000,000			10,962,500
						87,725,897
Energy 7.2%
Alpha Natural Resources Inc., senior note, 6.25%, 6/01/21	United States		2,500,000			2,150,000
d Antero Resources Corp., senior note, 144A, 5.375%, 11/01/21	United States		2,200,000			2,223,375
Antero Resources Finance Corp., senior note, 7.25%, 8/01/19	United States		2,534,000			2,736,720
Arch Coal Inc., senior note,
7.00%, 6/15/19	United States		5,500,000			4,400,000
7.25%, 6/15/21	United States		12,500,000			9,625,000
Bill Barrett Corp., senior note, 7.00%, 10/15/22	United States		5,000,000			5,212,500
Callon Petroleum Co., senior secured note, 13.00%, 9/15/16	United States		3,897,250			4,043,397
CGG, senior note, 6.50%, 6/01/21	France		12,500,000			12,875,000
CHC Helicopter SA, senior secured note, first lien, 9.25%, 10/15/20	Canada		25,000,000			26,968,750
Chesapeake Energy Corp., senior note,
7.25%, 12/15/18	United States		33,000,000			38,280,000
5.75%, 3/15/23	United States		21,500,000			22,252,500
CONSOL Energy Inc., senior note, 8.25%, 4/01/20	United States		1,800,000			1,957,500
El Paso Corp., senior note, MTN, 7.75%, 1/15/32	United States		22,000,000			22,390,522
Energy XXI Gulf Coast Inc., senior note, 9.25%, 12/15/17	United States		10,000,000			11,175,000
EP Energy LLC/Finance Inc., senior note, 9.375%, 5/01/20	United States		10,000,000			11,587,500
EXCO Resources Inc., senior note, 7.50%, 9/15/18	United States		10,500,000			10,027,500
d Expro Finance Luxembourg, senior secured note, 144A, 8.50%, 12/15/16	United Kingdom		16,840,000			17,639,900

FI-25

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin Income Securities Fund	Country	Principal Amount*		Value
Corporate Bonds (continued)
Energy (continued)
d Gibson Energy Inc., senior note, 144A, 6.75%, 7/15/21	Canada		7,000,000	$	7,437,500
Halcon Resources Corp., senior note,
9.75%, 7/15/20	United States		10,000,000		10,475,000
d 144A, 9.25%, 2/15/22	United States		5,800,000		5,930,500
d Kinder Morgan Inc.,
senior secured bond, first lien, 144A, 5.625%, 11/15/23	United States		9,800,000		9,523,238
senior secured note, 144A, 5.00%, 2/15/21	United States		2,400,000		2,373,101
Linn Energy LLC/Finance Corp., senior note, 8.625%, 4/15/20	United States		20,000,000		21,700,000
Magnum Hunter Resources Corp., senior note, 9.75%, 5/15/20	United States		5,000,000		5,425,000
Midstates Petroleum Co. Inc./LLC, senior note, 10.75%, 10/01/20	United States		5,000,000		5,462,500
Offshore Group Investment Ltd., senior secured note, first lien, 7.50%, 11/01/19	United States		17,900,000		19,466,250
Peabody Energy Corp., senior note, 6.25%, 11/15/21	United States		15,000,000		15,225,000
Penn Virginia Corp., senior note, 8.50%, 5/01/20	United States		8,600,000		9,288,000
Plains Exploration & Production Co., senior note, 6.50%, 11/15/20	United States		10,000,000		11,044,680
Quicksilver Resources Inc., senior note, 9.125%, 8/15/19	United States		20,000,000		20,400,000
d Sabine Pass Liquefaction LLC, secured note, 144A, 5.625%, 2/01/21	United States		15,100,000		14,835,750
Sabine Pass LNG LP,
first lien, 6.50%, 11/01/20	United States		10,000,000		10,425,000
senior secured note, 7.50%, 11/30/16	United States		10,000,000		11,350,000
d Samson Investment Co., senior note, 144A, 9.75%, 2/15/20	United States		26,300,000		28,798,500
d Sanchez Energy Corp., senior note, 144A, 7.75%, 6/15/21	United States		9,300,000		9,555,750
SandRidge Energy Inc., senior note,
8.75%, 1/15/20	United States		20,000,000		21,650,000
7.50%, 3/15/21	United States		15,000,000		15,787,500
8.125%, 10/15/22	United States		10,000,000		10,650,000
7.50%, 2/15/23	United States		6,600,000		6,732,000
W&T Offshore Inc., senior note, 8.50%, 6/15/19	United States		40,500,000		43,031,250
					522,111,683
Financials 2.5%
Ally Financial Inc., senior note, 6.25%, 12/01/17	United States		5,000,000		5,593,750
f Bank of America Corp., pfd., sub. bond, M, 8.125% to 5/15/18, FRN thereafter, Perpetual	United States		5,000,000		5,619,765
E*TRADE Financial Corp., senior note, 6.00%, 11/15/17	United States		12,500,000		13,343,750
International Lease Finance Corp., senior note, 8.75%, 3/15/17	United States		15,000,000		17,737,500
f JPMorgan Chase & Co., junior sub. note, 1, 7.90% to 4/30/19, FRN thereafter, Perpetual	United States		85,000,000		93,798,860
Morgan Stanley, senior note, 5.50%, 1/26/20	United States		15,000,000		16,842,495
Nationstar Mortgage LLC/Nationstar Capital Corp., senior note, 9.625%, 5/01/19	United States		5,000,000		5,650,000
d Nuveen Investments Inc., senior note, 144A, 9.50%, 10/15/20	United States		13,600,000		13,702,000
f PNC Financial Services Group Inc., junior sub. note, 4.85% to 6/01/23, FRN thereafter, Perpetual	United States		8,000,000		7,184,000
					179,472,120
Health Care 1.8%
Grifols Inc., senior note, 8.25%, 2/01/18	Spain		4,900,000		5,230,750
HCA Inc.,
senior note, 7.50%, 2/15/22	United States		25,000,000		27,500,000
senior note, 5.875%, 5/01/23	United States		7,500,000		7,425,000
senior secured note, 6.50%, 2/15/20	United States		16,500,000		18,170,625
d,e Jaguar Holding Co. I, senior note, 144A, PIK, 9.375%, 10/15/17	United States		10,200,000		10,837,500
Tenet Healthcare Corp., senior note,
8.00%, 8/01/20	United States		14,176,000		15,434,120
8.125%, 4/01/22	United States		22,500,000		24,300,000
g FRN, 9.25%, 2/01/15	United States		13,000,000		14,040,000

FI-26

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin Income Securities Fund	Country	Principal Amount*			Value
Corporate Bonds (continued)
Health Care (continued)
d Valeant Pharmaceuticals International Inc., senior note, 144A, 7.50%, 7/15/21	United States		7,700,000		$	8,489,250
						131,427,245
Industrials 1.3%
d Abengoa Finance SAU, senior note, 144A, 8.875%, 11/01/17	Spain		12,900,000			13,932,000
d Algeco Scotsman Global Finance PLC,
senior note, 144A, 10.75%, 10/15/19	United Kingdom		5,000,000			5,300,000
senior secured note, first lien, 144A, 8.50%, 10/15/18	United Kingdom		9,900,000			10,654,875
d Bombardier Inc., senior bond, 144A, 6.125%, 1/15/23	Canada		7,500,000			7,481,250
d CEVA Group PLC, senior note, first lien, 144A, 4.00%, 5/01/18	United Kingdom		32,691,882			27,297,721
Hertz Corp., senior note, 6.75%, 4/15/19	United States		4,500,000			4,871,250
Navistar International Corp., senior note, 8.25%, 11/01/21	United States		16,300,000			16,952,000
United Rentals North America Inc., senior sub. note, 8.375%, 9/15/20	United States		8,800,000			9,856,000
						96,345,096
Information Technology 4.8%
d BMC Software Finance Inc., senior note, 144A, 8.125%, 7/15/21	United States		12,600,000			13,041,000
CDW LLC/Finance Corp.,
senior note, 8.50%, 4/01/19	United States		13,725,000			15,234,750
senior sub. note, 12.535%, 10/12/17	United States		650,000			682,500
Ceridian Corp., senior note, 11.25%, 11/15/15	United States		4,500,000			4,556,250
d,e CommScope Holdings Co. Inc., senior note, 144A, PIK, 7.375%, 6/01/20	United States		11,200,000			11,704,000
d CommScope Inc., senior note, 144A, 8.25%, 1/15/19	United States		1,806,000			1,988,858
First Data Corp.,
senior bond, 12.625%, 1/15/21	United States		80,000,000			94,300,000
d senior secured bond, 144A, 8.25%, 1/15/21	United States		45,000,000			48,093,750
d,e senior secured note, 144A, PIK, 8.75%, 1/15/22	United States		33,188,000			35,594,130
Freescale Semiconductor Inc., senior note,
8.05%, 2/01/20	United States		30,000,000			32,400,000
10.75%, 8/01/20	United States		54,846,000			62,524,440
Infor U.S. Inc., senior note, 9.375%, 4/01/19	United States		4,100,000			4,633,000
d Sanmina Corp., senior note, 144A, 7.00%, 5/15/19	United States		15,000,000			16,031,250
Sterling International Inc., senior note, 11.00%, 10/01/19	United States		7,500,000			7,837,500
						348,621,428
Materials 3.4%
AngloGold Ashanti Holdings PLC, senior note, 8.50%, 7/30/20	South Africa		6,000,000			6,195,000
d Cemex Finance LLC, senior secured note, 144A, 9.375%, 10/12/22	Mexico		7,100,000			8,040,750
d Cemex SAB de CV, senior secured note, 144A,
9.00%, 1/11/18	Mexico		26,000,000			28,697,500
9.50%, 6/15/18	Mexico		12,000,000			13,642,500
Dynacast International LLC/Finance Inc., 9.25%, 7/15/19	United States		5,000,000			5,537,500
d FMG Resources (August 2006) Pty. Ltd., senior note, 144A,
6.875%, 2/01/18	Australia		11,900,000			12,554,500
8.25%, 11/01/19	Australia		15,000,000			16,893,750
HudBay Minerals Inc., senior note, 9.50%, 10/01/20	Canada		10,000,000			10,325,000
d Ineos Finance PLC, senior secured note, 144A, 8.375%, 2/15/19	Switzerland		5,100,000			5,692,875
d Ineos Group Holdings SA, secured note, second lien, 144A, 7.875%, 2/15/16	Switzerland		20,209,708	EUR		28,059,340
d Inmet Mining Corp., senior note, 144A, 8.75%, 6/01/20	Canada		4,000,000			4,360,000
d Kerling PLC, senior secured note, 144A, 10.625%, 2/01/17	United Kingdom		9,400,000	EUR		13,773,039
d Orion Engineered Carbons Bondco GmbH,
senior secured bond, 144A, 10.00%, 6/15/18	Germany		8,910,000	EUR		13,603,832
senior secured note, first lien, 144A, 9.625%, 6/15/18	Germany		11,100,000			12,265,500

FI-27

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin Income Securities Fund	Country	Principal Amount*		Value
Corporate Bonds (continued)
Materials (continued)
d,e Orion Engineered Carbons Finance & Co. SCA, senior note, 144A, PIK, 9.25%, 8/01/19	Germany		4,800,000	$	5,040,000
Reynolds Group Issuer Inc./LLC/SA,
first lien, 5.75%, 10/15/20	United States		14,200,000		14,555,000
senior note, 9.00%, 4/15/19	United States		5,000,000		5,387,500
senior note, 9.875%, 8/15/19	United States		16,800,000		18,774,000
senior note, 8.25%, 2/15/21	United States		5,200,000		5,577,000
senior secured note, 6.875%, 2/15/21	United States		10,000,000		10,825,000
Walter Energy Inc., senior note, 9.875%, 12/15/20	United States		7,000,000		6,090,000
					245,889,586
Telecommunication Services 3.3%
CenturyLink Inc., senior bond, 6.75%, 12/01/23	United States		1,700,000		1,729,750
Cricket Communications Inc., senior note, 7.75%, 10/15/20	United States		20,000,000		22,875,000
Frontier Communications Corp., senior note,
8.50%, 4/15/20	United States		12,900,000		14,512,500
9.25%, 7/01/21	United States		7,400,000		8,565,500
7.125%, 1/15/23	United States		8,800,000		8,778,000
d MetroPCS Wireless Inc., senior bond, 144A, 6.625%, 4/01/23	United States		15,000,000		15,543,750
d Sprint Corp.,
senior bond, 144A, 7.125%, 6/15/24	United States		8,200,000		8,343,500
senior note, 144A, 7.875%, 9/15/23	United States		37,500,000		40,406,250
Sprint Nextel Corp.,
11.50%, 11/15/21	United States		30,000,000		39,450,000
senior note, 9.125%, 3/01/17	United States		13,300,000		15,694,000
senior note, 7.00%, 8/15/20	United States		5,000,000		5,437,500
d senior note, 144A, 9.00%, 11/15/18	United States		20,000,000		24,150,000
T-Mobile USA Inc., senior note,
6.542%, 4/28/20	United States		11,200,000		11,970,000
6.633%, 4/28/21	United States		5,000,000		5,293,750
6.731%, 4/28/22	United States		5,000,000		5,231,250
Verizon Communications Inc.,
senior bond, 6.55%, 9/15/43	United States		7,300,000		8,542,591
senior note, 5.15%, 9/15/23	United States		6,900,000		7,411,014
					243,934,355
Utilities 1.3%
d Calpine Corp., senior secured note, 144A,
7.875%, 7/31/20	United States		4,542,000		4,996,200
7.50%, 2/15/21	United States		11,970,000		13,122,113
7.875%, 1/15/23	United States		4,448,000		4,881,680
GenOn Energy Inc., senior note, 7.875%, 6/15/17	United States		25,000,000		27,625,000
d InterGen NV, secured bond, 144A, 7.00%, 6/30/23	Netherlands		25,000,000		26,000,000
Niska Gas Storage U.S./Canada, senior note, 8.875%, 3/15/18	United States		15,000,000		15,675,000
					92,299,993
Total Corporate Bonds (Cost $2,162,781,025)					2,367,332,462
g,h Senior Floating Rate Interests 3.2%
Consumer Discretionary 0.9%
Clear Channel Communications Inc.,
Term Loan E, 7.669%, 7/31/19	United States		13,142,769		12,978,485
Tranche B Term Loan, 3.819%, 1/29/16	United States		711,676		691,305
Tranche D Term Loan, 6.919%, 1/30/19	United States		50,864,664		48,702,915

FI-28

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin Income Securities Fund	Country	Principal Amount*		Value
Senior Floating Rate Interests (continued)
Consumer Discretionary (continued)
Dex Media West LLC, Term Loan B, 8.00%, 12/30/16	United States		1,303,270	$	1,025,239
SuperMedia Inc., Exit Term Loan, 11.60%, 12/31/16	United States		858,471		640,992
					64,038,936
Consumer Staples 0.2%
U.S. Foods Inc., Term Loan, 4.50%, 3/31/19	United States		14,925,000		15,060,877
Energy 1.0%
Chesapeake Energy Corp., Senior Unsecured Term Loan, 5.75%, 12/02/17	United States		20,000,000		20,450,000
Drillships Financing Holding Inc., Tranche B-2 Term Loan, 5.50%, 7/15/16	Marshall Islands		14,962,500		15,214,992
Fieldwood Energy LLC, Second Lien Closing Date Loans, 8.375%, 9/30/20	United States		10,000,000		10,232,140
Quicksilver Resources Inc., Second Lien Loans, 7.00%, 6/21/19	United States		25,000,000		24,812,500
					70,709,632
Industrials 0.4%
Altegrity Inc.,
Term Loan B, 4.75%, 2/21/15	United States		12,332,706		12,113,036
Tranche D Term Loan, 7.75%, 2/21/15	United States		12,585,755		12,559,539
CEVA Group PLC, Dollar Tranche B L/C, 5.247%, 8/31/16	United Kingdom		2,105,263		2,060,653
Navistar Inc., Tranche B Term Loan, 5.75%, 8/17/17	United States		6,081,022		6,185,542
					32,918,770
Information Technology 0.7%
First Data Corp., 2018 Term Loan, 4.164%, 3/24/18	United States		22,436,455		22,491,155
Freescale Semiconductor Inc., Tranche B-4 Term Loan, 5.00%, 2/28/20	United States		19,850,000		20,096,061
SRA International Inc., Term Loan, 6.50%, 7/20/18	United States		8,171,429		8,106,735
					50,693,951
Total Senior Floating Rate Interests (Cost $226,981,649)					233,422,166
		Shares
Escrow and Litigation Trust 0.0%†
a,i Dynegy Holdings Inc., Escrow Account	United States		149,699,000		—
a Motors Liquidation Co., Escrow Account, pfd., C	United States		1,400,000		14,000
a,i SuperMedia Inc., Litigation Trust	United States		3,472,135		—
Total Escrow and Litigation Trust (Cost $101,664)					14,000
Total Investments before Short Term Investments (Cost $6,115,267,832)					6,965,708,180

FI-29

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin Income Securities Fund	Country		Principal Amount*		Value
Short Term Investments (Cost $111,064,830) 1.5%
Repurchase Agreements 1.5%
j Joint Repurchase Agreement, 0.008%, 1/02/14 (Maturity Value $111,064,877)		United States		111,064,830	$	111,064,830
BNP Paribas Securities Corp. (Maturity Value $8,475,361)
Credit Suisse Securities (USA) LLC (Maturity Value $25,426,082)
Deutsche Bank Securities Inc. (Maturity Value $14,868,255)
HSBC Securities (USA) Inc. (Maturity Value $35,597,404)
Merrill Lynch, Pierce, Fenner & Smith Inc. (Maturity Value $16,527,564)
Morgan Stanley & Co. LLC (Maturity Value $10,170,211)
Collateralized by U.S. Government Agency Securities, 0.00% - 4.125%, 1/15/14 - 3/07/18; kU.S. Government Agency Discount Notes, 8/19/14; kU.S. Treasury Bills, 9/18/14; U.S. Treasury Bonds, 8.875% - 9.125%, 5/15/17 - 5/15/18; U.S. Treasury Notes, 0.25% - 4.75%, 1/15/15 - 12/31/18; and U.S. Treasury Notes, Index Linked, 1.375% - 1.625%, 1/15/18 - 7/15/18 (valued at $113,289,908)
Total Investments (Cost $6,226,332,662) 97.2%						7,076,773,010
Other Assets, less Liabilities 2.8%						203,928,219
Net Assets 100.0%					$	7,280,701,229

See Abbreviations on page FI-43.

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

†Rounds to less than 0.1% of net assets.

^aNon-income producing.

^bAt December 31, 2013, pursuant to the Fund’s policies and the requirements of applicable securities law, the Fund may be restricted from trading these securities for a limited or extended period of time due to ownership limits and/or potential possession of material non-public information.

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

^dSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At December 31, 2013, the aggregate value of these securities was $1,006,284,082, representing 13.82% of net assets.

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

^fPerpetual security with no stated maturity date.

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

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

ⁱSecurity has been deemed illiquid because it may not be able to be sold within seven days.

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

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

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

FI-30

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

December 31, 2013

	Franklin Income Securities Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	6,115,267,832
Cost - Repurchase agreements		111,064,830
Total cost of investments	$	6,226,332,662
Value - Unaffiliated issuers	$	6,965,708,180
Value - Repurchase agreements		111,064,830
Total value of investments		7,076,773,010
Cash		148,774,364
Receivables:
Investment securities sold		130,039
Capital shares sold		3,735,695
Dividends and interest		63,776,442
Unrealized appreciation on unfunded loan commitments (Note 8)		7,350
Other assets		645
Total assets		7,293,197,545
Liabilities:
Payables:
Capital shares redeemed		6,110,207
Management fees		2,768,977
Distribution fees		2,787,192
Reports to shareholders		661,913
Accrued expenses and other liabilities		168,027
Total liabilities		12,496,316
Net assets, at value	$	7,280,701,229
Net assets consist of:
Paid-in capital	$	7,130,152,972
Undistributed net investment income		344,943,832
Net unrealized appreciation (depreciation)		850,561,671
Accumulated net realized gain (loss)		(1,044,957,246	)
Net assets, at value	$	7,280,701,229

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

FI-31

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Assets and Liabilities (continued)

December 31, 2013

	Franklin Income Securities Fund
Class 1:
Net assets, at value	$	695,003,818
Shares outstanding		42,057,305
Net asset value and maximum offering price per share	$	16.53
Class 2:
Net assets, at value	$	6,188,045,247
Shares outstanding		385,142,372
Net asset value and maximum offering price per share	$	16.07
Class 4:
Net assets, at value	$	397,652,164
Shares outstanding		24,312,395
Net asset value and maximum offering price per share	$	16.36

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

FI-32

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the year ended December 31, 2013

	Franklin Income Securities Fund
Investment income:
Dividends	$	137,259,068
Interest		265,044,238
Income from securities loaned		1,052,277
Total investment income		403,355,583
Expenses:
Management fees (Note 3a)		32,994,396
Distribution fees: (Note 3c)
Class 2		15,525,818
Class 4		1,499,611
Unaffiliated transfer agent fees		1,034
Custodian fees (Note 4)		124,270
Reports to shareholders		638,010
Professional fees		169,453
Trustees’ fees and expenses		37,346
Other		146,190
Total expenses		51,136,128
Expense reductions (Note 4)		(549	)
Net expenses		51,135,579
Net investment income		352,220,004
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		58,743,057
Foreign currency transactions		71,529
Net realized gain (loss)		58,814,586
Net change in unrealized appreciation (depreciation) on:
Investments		532,254,537
Translation of other assets and liabilities denominated in foreign currencies		49,945
Net change in unrealized appreciation (depreciation)		532,304,482
Net realized and unrealized gain (loss)		591,119,068
Net increase (decrease) in net assets resulting from operations	$	943,339,072

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

FI-33

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets

	Franklin Income Securities Fund
	Year Ended December 31,
	2013			2012
Increase (decrease) in net assets:
Operations:
Net investment income	$	352,220,004		$	454,020,826
Net realized gain (loss) from investments and foreign currency transactions		58,814,586			(46,865,158	)
Net change in unrealized appreciation (depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies		532,304,482			534,865,658
Net increase (decrease) in net assets resulting from operations		943,339,072			942,021,326
Distributions to shareholders from:
Net investment income:
Class 1		(40,171,484	)		(90,282,701	)
Class 2		(401,855,498	)		(392,684,736	)
Class 4		(27,978,841	)		(28,048,130	)
Total distributions to shareholders		(470,005,823	)		(511,015,567	)
Capital share transactions: (Note 2)
Class 1		66,533,168			(793,290,008	)
Class 2		(397,831,491	)		(63,192,261	)
Class 4		(65,127,276	)		(18,736,873	)
Total capital share transactions		(396,425,599	)		(875,219,142	)
Net increase (decrease) in net assets		76,907,650			(444,213,383	)
Net assets:
Beginning of year		7,203,793,579			7,648,006,962
End of year	$	7,280,701,229		$	7,203,793,579
Undistributed net investment income included in net assets:
End of year	$	344,943,832		$	445,550,700

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

FI-34

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements

Franklin Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

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

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

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

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

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

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

FI-35

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

a. Financial Instrument Valuation (continued)

Trading in securities on foreign securities stock exchanges and OTC markets may be completed before the daily NYSE close. In addition, trading in certain foreign markets may not take place on every NYSE business day. Occasionally, events occur between the time at which trading in a foreign security is completed and the close of the NYSE that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund’s portfolio securities as determined at the foreign market close and the latest indications of value at the close of the NYSE. In order to minimize the potential for these differences, the VLOC monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depositary Receipts, futures contracts and exchange traded funds). These price movements are measured against established trigger thresholds for each specific market proxy to assist in determining if an event has occurred that may call into question the reliability of the values of the foreign securities held by the Fund. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services.

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

b. Foreign Currency Translation

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

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

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

c. Joint Repurchase Agreement

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

FI-36

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

c. Joint Repurchase Agreement (continued)

Agreements (MRAs) with approved counterparties (sellers). The MRAs contain various provisions, including but not limited to events of default and maintenance of collateral for repurchase agreements. In the event of default by either the seller or the Fund, certain MRAs may permit the non-defaulting party to net and close-out all transactions, if any, traded under such agreements. The Fund may sell securities it holds as collateral and apply the proceeds towards the repurchase price and any other amounts owed by the seller to the Fund in the event of default by the seller. This could involve costs or delays in addition to a loss on the securities if their value falls below the repurchase price owed by the seller. The joint repurchase agreement held by the Fund at year end, as indicated in the Statement of Investments, had been entered into on December 31, 2013.

d. Equity-Linked Securities

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

e. Securities Lending

The Fund participates in an agency based securities lending program. The Fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the market value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the market value of loaned securities, as determined at the close of fund business each day; any additional collateral required due to changes in security values is delivered to the Fund on the next business day. The collateral is invested in a non-registered money fund as indicated on the Statement of Investments. The Fund receives income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. The Fund bears the market risk with respect to the collateral investment, securities loaned, and the risk that the agent may default on its obligations to the Fund. The securities lending agent has agreed to indemnify the Fund in the event of default by a third party borrower. At December 31, 2013, the Fund had no securities on loan.

f. Senior Floating Rate Interests

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

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

g. Income Taxes

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

FI-37

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

g. Income Taxes

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

The Fund recognizes the tax benefits of uncertain tax positions only when the position is “more likely than not” to be sustained upon examination by the tax authorities based on the technical merits of the tax position. As of December 31, 2013, and for all open tax years, the Fund has determined that no liability for unrecognized tax benefits is required in the Fund’s financial statements related to uncertain tax positions taken on a tax return (or expected to be taken on future tax returns). Open tax years are those that remain subject to examination and are based on each tax jurisdiction statute of limitation.

h. Security Transactions, Investment Income, Expenses and Distributions

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

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

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

i. Accounting Estimates

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

j. Guarantees and Indemnifications

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

FI-38

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin Income Securities Fund

2. SHARES OF BENEFICIAL INTEREST

At December 31, 2013, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:

	Year Ended December 31,
	2013						2012
Class 1 Shares:	Shares			Amount			Shares			Amount
Shares sold		4,144,696		$	65,962,113			39,214,078		$	586,304,676
Shares issued in reinvestment of distributions		2,620,449			40,171,484			6,331,185			90,282,701
Shares redeemed in-kind (Note 10)		—			—			(29,984,492	)		(458,420,903	)
Shares redeemed		(2,480,546	)		(39,600,429	)		(66,431,278	)		(1,011,456,482	)
Net increase (decrease)		4,284,599		$	66,533,168			(50,870,507	)	$	(793,290,008	)
Class 2 Shares:
Shares sold		35,402,352		$	551,266,014			37,383,185		$	550,351,184
Shares issued in reinvestment of distributions		26,915,974			401,855,498			28,230,391			392,684,736
Shares redeemed		(87,475,715	)		(1,350,953,003	)		(68,491,604	)		(1,006,228,181	)
Net increase (decrease)		(25,157,389	)	$	(397,831,491	)		(2,878,028	)	$	(63,192,261	)
Class 4 Shares:
Shares sold		3,337,474		$	52,791,548			2,795,409		$	41,861,767
Shares issued on reinvestment of distributions		1,839,503			27,978,841			1,982,200			28,048,130
Shares redeemed		(9,346,237	)		(145,897,665	)		(5,962,592	)		(88,646,770	)
Net increase (decrease)		(4,169,260	)	$	(65,127,276	)		(1,184,983	)	$	(18,736,873	)

3. TRANSACTIONS WITH AFFILIATES

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

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

a. Management Fees

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

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

FI-39

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin Income Securities Fund

3. TRANSACTIONS WITH AFFILIATES (continued)

a. Management Fees (continued)

Under a subadvisory agreement, TIC, an affiliate of Advisers, provides subadvisory services to the Fund. The subadvisory fee is paid by Advisers based on the average daily net assets, and is not an additional expense of the Fund.

b. Administrative Fees

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

c. Distribution Fees

The Board has adopted distribution plans for Class 2 and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to 0.35% per year of its average daily net assets of each class. Some distribution fees are not charged on shares held by affiliates. The Board has agreed to limit the current rate to 0.25% per year for Class 2. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.

d. Transfer Agent Fees

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

e. Other Affiliated Transactions

At December 31, 2013, Franklin Templeton Variable Insurance Products Trust – Franklin Templeton VIP Founding Funds Allocation Fund owned 5.42% of the Fund’s outstanding shares.

4. EXPENSE OFFSET ARRANGEMENT

The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses. During the year ended December 31, 2013, the custodian fees were reduced as noted in the Statement of Operations.

5. INCOME TAXES

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

At December 31, 2013, capital loss carryforwards were as follows:

Capital loss carryforwards subject to expiration:
2016	$	310,746,276
2017		521,405,875
2018		157,561,044
Capital loss carryforwards not subject to expiration:
Long term		54,314,457
Total capital loss carryforwards	$	1,044,027,652

FI-40

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin Income Securities Fund

5. INCOME TAXES (continued)

During the year ended December 31, 2013, the Fund utilized $39,440,127 of capital loss carryforwards.

The tax character of distributions paid during the years ended December 31, 2013 and 2012, was as follows:

	2013		2012
Distributions paid from ordinary income	$	470,005,823	$	511,015,567

At December 31, 2013, the cost of investments, net unrealized appreciation (depreciation), and undistributed ordinary income for income tax purposes were as follows:

Cost of investments	$	6,239,593,241
Unrealized appreciation	$	1,234,163,000
Unrealized depreciation		(396,983,231	)
Net unrealized appreciation (depreciation)	$	837,179,769
Distributable earnings - undistributed ordinary income	$	356,211,451

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of defaulted securities, passive foreign investment company shares, payments-in-kind, bond discounts and premiums, corporate actions and wash sales.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the year ended December 31, 2013, aggregated $1,531,457,969 and $2,272,508,246 respectively.

7. CREDIT RISK

At December 31, 2013, the Fund had 34.42% of its portfolio invested in high yield, senior secured floating rate notes, or other securities rated below investment grade. These securities may be more sensitive to economic conditions causing greater price volatility and are potentially subject to a greater risk of loss due to default than higher rated securities.

8. UNFUNDED LOAN COMMITMENTS

The Fund enters into certain credit agreements, all or a portion of which may be unfunded. The Fund is obligated to fund these loan commitments at the borrowers’ discretion. Funded portions of credit agreements are presented on the Statement of Investments.

At December 31, 2013, unfunded commitments were as follows:

Borrower	Unfunded Commitment
Community Health Systems Inc.	$	15,000,000

Unfunded loan commitments and funded portions of credit agreements are marked to market daily and any unrealized appreciation or depreciation is included in the Statement of Assets and Liabilities and the Statement of Operations.

FI-41

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin Income Securities Fund

9. CREDIT FACILITY

The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $1.5 billion (Global Credit Facility) which, after an extension of the original terms, matured on February 14, 2014. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. Effective February 14, 2014, the Borrowers renewed the Global Credit Facility which matures on February 13, 2015.

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.07% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses on the Statement of Operations. During the year ended December 31, 2013, the Fund did not use the Global Credit Facility.

10. REDEMPTION IN-KIND

During the year ended December 31, 2012, the Fund realized $38,277,774 of net gains resulting from redemption in-kind in which a shareholder redeemed fund shares for securities held by the Fund rather than for cash. Because such gains are not taxable to the Fund, and are not netted with capital gains that are distributed to remaining shareholders, they have been reclassified from accumulated net realized gains to paid-in capital.

11. FAIR VALUE MEASUREMENTS

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

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

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

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

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

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

FI-42

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin Income Securities Fund

11. FAIR VALUE MEASUREMENTS (continued)

A summary of inputs used as of December 31, 2013, in valuing the Fund’s assets carried at fair value, is as follows:

	Level 1		Level 2		Level 3			Total
Assets:
Investments in Securities:
Equity Investments:a
Energy	$	717,520,541	$	33,107,040	$	—		$	750,627,581
Financials		567,646,043		98,564,178		—			666,210,221
Industrials		232,107,651		26,853,102		—			258,960,753
Materials		598,506,265		4,162,400		—			602,668,665
All Other Equity Investmentsb		1,841,027,113		—		—			1,841,027,113
Equity-Linked Securities		—		189,691,033		—			189,691,033
Convertible Bonds		—		55,754,186		—			55,754,186
Corporate Bonds		—		2,367,332,462		—			2,367,332,462
Senior Floating Rate Interests		—		233,422,166		—			233,422,166
Escrow and Litigation Trust		—		14,000		—	c		14,000
Short Term Investments		—		111,064,830		—			111,064,830
Total Investments in Securities	$	3,956,807,613	$	3,119,965,397	$	—		$	7,076,773,010
Unfunded Loan Commitments	$	—	$	7,350	$	—		$	7,350

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

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

^cIncludes securities determined to have no value at December 31, 2013.

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

12. NEW ACCOUNTING PRONOUNCEMENTS

In June 2013, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2013-08, Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements. The ASU modifies the criteria used in defining an investment company under U.S. Generally Accepted Accounting Principles and also sets forth certain measurement and disclosure requirements. Under the ASU, an entity that is registered under the 1940 Act automatically qualifies as an investment company. The ASU is effective for interim and annual reporting periods beginning after December 15, 2013. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the financial statements.

13. SUBSEQUENT EVENTS

The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure other than those already disclosed in the financial statements.

ABBREVIATIONS
Currency	Selected Portfolio
EUR - Euro	ADR - American Depositary Receipt
GBP - British Pound	FHLMC - Federal Home Loan Mortgage Corp.
	FNMA - Federal National Mortgage Association
	FRN - Floating Rate Note
	L/C - Letter of Credit
	MTN - Medium Term Note
	PIK - Payment-In-Kind

FI-43

Franklin Templeton Variable Insurance Products Trust

Franklin Income Securities Fund

Report of Independent Registered Public Accounting Firm

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 Franklin Income Securities Fund (the “Fund”) at December 31, 2013, 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 five years in the period then ended, 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2013 by correspondence with the custodian and brokers, provides a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

February 14, 2014

FI-44

Franklin Templeton Variable Insurance Products Trust

Tax Information (unaudited)

Franklin Income Securities Fund

Under Section 854(b)(1)(A) of the Internal Revenue Code, the Fund hereby reports 20.92% of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended December 31, 2013.

FI-45

FRANKLIN RISING DIVIDENDS SECURITIES FUND

This annual report for Franklin Rising Dividends Securities Fund covers the fiscal year ended December 31, 2013.

Performance Summary as of 12/31/13

Average annual total return of Class 4 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.

Periods ended 12/31/13

	1-Year		5-Year		10-Year
Average Annual Total Return		+29.57%		+16.75%		+7.64%

*For the period beginning 2/29/08, Class 4 performance reflects a 12b-1 fee expense of 0.35% per year, which affects future performance. Class 4 performance prior to 2/29/08 reflects historical Class 1 performance, which does not have a 12b-1 fee expense. Since 2/29/08 (effective date), the average annual total return of Class 4 shares was +9.22%. The Fund has a fee waiver associated with its investments in a Franklin Templeton money fund, contractually guaranteed through at least its current fiscal year end. Fund investment results reflect the fee waiver, to the extent applicable; without this reduction, the results would have been lower.

Total Return Index Comparison

for a Hypothetical $10,000 Investment (1/1/04–12/31/13)

The graph below shows the change in value of a hypothetical $10,000 investment in the Fund over the indicated period and includes reinvestment of any income or distributions. The Fund’s performance* is compared to the performance of the Standard & Poor’s^® 500 Index (S&P 500^®). One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Important Notes to Performance Information preceding the Fund Summaries.

**Source: © 2014 Morningstar. Please see Index Descriptions following the Fund Summaries.

Franklin Rising Dividends Securities Fund – Class 4

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

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

Current performance may differ from figures shown.

FRD-1

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

Performance Overview

You can find the Fund’s one-year total return in the Performance Summary. In comparison, the S&P 500 rose 32.39% for the same period.¹ Please note the Fund employs a bottom-up stock selection process, and the managers invest in securities without regard to benchmark comparisons.

Economic and Market Overview

The U.S. economy showed ongoing signs of recovery during the 12-month period ended December 31, 2013, especially in the second half of the year. Business investment, net exports, and state and local government spending picked up in the second quarter, somewhat offsetting the impact of federal budget cuts. During the third quarter, the economy, as measured by gross domestic product, expanded at the strongest pace since the fourth quarter of 2011, underpinned by consumer spending and rising inventories. Historically low mortgage rates and improving sentiment aided the housing market recovery, evidenced by solid new and existing home sales, rising home prices, low inventories and multi-year lows in new foreclosures. Manufacturing expanded for most of the period under review, and the unemployment rate declined to 6.7% in December from 7.8% a year earlier.² Inflation remained well below the Federal Reserve Board’s (Fed’s) 2.0% target.

The year started on a positive note with Congress passing a budget bill that averted automatic federal budget cuts and income tax increases. However, Washington’s lack of consensus on proposed expenditure reductions resulted in federal spending cuts starting in March. Fed Chairman Ben Bernanke indicated in May that the Fed might reduce monthly asset purchases, assuming ongoing U.S. recovery. In September, however, he announced that any reduction of Fed purchases would be postponed until U.S. economic growth strengthened. A U.S. budget impasse, which led to a temporary shutdown of non-essential government services in October, ended after Congress agreed to fund the government until January 2014 and raise the debt limit

1. Source: © 2014 Morningstar. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

2. Source: Bureau of Labor Statistics.

Fund Risks: All investments involve risks, including possible loss of principal. Value securities may not increase in price as anticipated or may decline further in value. While smaller and midsized companies may offer substantial opportunities for capital growth, they also involve heightened risks and should be considered speculative. Historically, smaller and midsized company securities have been more volatile in price than larger company securities, especially over the short term. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

FRD-2

until February. U.S. equity markets reached new highs after the resolution of the budget impasse and the Fed’s reassurance at its October meeting that it would continue its supportive monetary programs. In December, Congress passed a two-year budget deal that would ease automatic spending cuts in 2014 and lower the risk of another government shutdown. Meanwhile, the Fed announced it would reduce its monthly bond purchases by $10 billion beginning in January 2014. The Fed, however, committed to keeping interest rates low as long as the unemployment rate remained over 6.5% and inflation expectations remained low.

Rising corporate profits and generally favorable economic data bolstered investor confidence, helping markets overcome brief periods of sell-offs in reaction to Fed statements and to Washington’s fiscal negotiations. U.S. stocks generated strong 12-month returns as the S&P 500 and Dow Jones Industrial Average reached all-time highs during the period.³

Investment Strategy

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

Manager’s Discussion

During the 12 months under review, overweighting in the booming health care and industrials sectors and no exposure to the underperforming utilities and telecommunication services sectors benefited performance relative to the benchmark.⁴ Three holdings that helped Fund performance were West Pharmaceutical Services, Dover and United Technologies. The stock price of West Pharmaceutical Services, a medical devices manufacturer, rose as the company raised its earnings

3. Please see Index Descriptions following the Fund Summaries.

4. The health care sector comprises health care equipment and services; and pharmaceuticals, biotechnology and life sciences in the SOI. The industrials sector comprises aerospace and defense, commercial and professional services, electrical equipment, industrial conglomerates, machinery, trading companies and distributors, and transportation in the SOI.

FRD-3

guidance as its business mix continued to shift toward higher value packaging systems products and as sales of its delivery systems products increased. West Pharmaceutical Services has raised its dividend for the past 21 years. Dover, a manufacturer of equipment and industrial products, recovered during the period with increased earnings and profits, particularly in segments related to oil drilling and refining, refrigeration and food equipment, and printing and identification. The company sought to optimize its product offerings with acquisitions that boosted results and a planned spin-off of certain communications technologies businesses. Dover has had 58 consecutive years of dividend increases. Profits rose for United Technologies, an aerospace and building industries products manufacturer, aided by its acquisition of aircraft-component maker Goodrich and sale of its non-core businesses in 2012, stronger revenue from its Pratt & Whitney and UTC Aerospace Systems businesses, and restructuring and cost control measures including staff reduction. The company has raised its dividend for the past 20 years.

The Fund’s stock selection in the financials and consumer discretionary sectors and overweighting in the materials sector hindered relative performance.⁵ Although most positions held by the Fund aided absolute performance, Brady and Kid Brands detracted from results. Brady, a manufacturer of industrial identification solutions, experienced lower earnings resulting from plans to divest its Asian die cut business. The company also incurred higher expenses from restructuring to focus on its identification solutions and workplace safety businesses. Kid Brands, a designer and producer of infant consumer products, reported lower earnings resulting from sales declines at large customers of its LaJobi and Soft Home businesses, discontinuation of product lines and brands, and closure of its U.K. operations. The company hopes to translate the success of its Sassy division products to its other businesses.

During the period, we initiated six new positions: Bunge, a global agribusiness and food company, which has 13 years of consecutive dividend increases; Target, a mass-market discount retailer with 46 years of consecutive dividend increases; QUALCOMM, a leading developer and innovator of advanced wireless technologies with a long history of dividend increases; Honeywell International, a diversified technology and manufacturing company, which has raised its dividend in eight of the

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

Top 10 Holdings

Franklin Rising Dividends Securities Fund 12/31/13

Company Sector/Industry	% of Total Net Assets
United Technologies Corp.		4.4%
Aerospace & Defense
Dover Corp.		4.4%
Machinery
Roper Industries Inc.		4.4%
Electrical Equipment
Praxair Inc.		4.3%
Materials
Chevron Corp.		3.9%
Energy
International Business Machines Corp.		3.8%
Software & Services
Johnson & Johnson		3.4%
Pharmaceuticals, Biotechnology & Life Sciences
Pentair Ltd.		3.4%
Machinery
Air Products and Chemicals Inc.		3.4%
Materials
Becton, Dickinson and Co.		3.2%
Health Care Equipment & Services

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

FRD-4

past 10 years; United Parcel Service, the world’s largest package delivery company, which also has a long history of dividend increases; and Texas Instruments, a semiconductor manufacturer with 10 years of consecutive dividend increases. We did not add to or completely liquidate any existing positions. However, we did reduce our holdings in West Pharmaceutical Services, United Technologies, Dover, Roper Industries and Family Dollar Stores, among several others.

Our 10 largest positions on December 31, 2013, represented 38.6% of the Fund’s total net assets. It is interesting to note how these 10 companies would respond, in aggregate, to the Fund’s screening criteria based on a simple average of statistical measures. On average, these 10 companies have raised their dividends 32 years in a row and by 250% in the past 10 years. Their most recent year-over-year dividend increases averaged 11.4% with a yield of 1.8% on December 31, 2013, and a dividend payout ratio of 32%, based on estimates of calendar year 2013 operating earnings. The average price/earnings ratio was 18.6 times calendar year 2013 estimates versus 17.4 for that of the unmanaged S&P 500.

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

The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2013, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

FRD-5

Fund Expenses

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

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

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

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

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

Actual Fund Expenses

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

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

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

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

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

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

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

Franklin Rising Dividends Securities Fund – Class 4

FRD-6

Hypothetical Example for Comparison with Other Mutual Funds

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

Class 4	Beginning Account Value 7/1/13		Ending Account Value 12/31/13		Fund-Level Expenses Incurred During Period* 7/1/13–12/31/13
Actual	$	1,000	$	1,145.70	$	5.19
Hypothetical (5% return before expenses)	$	1,000	$	1,020.37	$	4.89

*Expenses are calculated using the most recent six-month annualized expense ratio for the Fund’s Class 4 shares (0.96%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period.

FRD-7

SUPPLEMENT DATED FEBRUARY 1, 2014

TOTHE PROSPECTUSES

DATED MAY 1, 2013

OF

FRANKLIN RISING DIVIDENDS SECURITIES FUND

(A series of Franklin Templeton Variable Insurance Products Trust)

The prospectus is amended as follows:

I.  The “Fund Summaries – Portfolio Managers” section on page FRD-S4 is revised to read as follows:

Portfolio Managers

DONALD G. TAYLOR, CPA Chief Investment Officer of Advisory Services and portfolio manager of the Fund since 1996.

NICHOLAS P.B. GETAZ, CFA Research Analyst of Advisory Services and portfolio manager of the Fund since February 2014.

BRUCE C. BAUGHMAN, CPA Senior Vice President of Advisory Services and portfolio manager of the Fund since inception (1992).

WILLIAM J. LIPPMAN President of Advisory Services and portfolio manager of the Fund since inception (1992).

II.  The “Fund Details – Management” section disclosure concerning the portfolio management team beginning on page FRD-D6 is revised to read as follows:

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

DONALD G. TAYLOR, CPA Chief Investment Officer of Advisory Services

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

NICHOLAS P.B. GETAZ, CFA Research Analyst of Advisory Services

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

FRD-8

BRUCE C. BAUGHMAN, CPA Senior Vice President of Advisory Services	Mr. Baughman has been a portfolio manager of the Fund since its inception, providing support to the lead portfolio manager(s) as needed. He joined Franklin Templeton Investments in 1988.
WILLIAM J. LIPPMAN President of Advisory Services	Mr. Lippman has been a portfolio manager of the Fund since its inception, providing support to the lead portfolio manager(s) as needed. He joined Franklin Templeton Investments in 1988.

Please keep this supplement for future reference.

FRD-9

Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Franklin Rising Dividends Securities Fund

	Year Ended December 31,
Class 1	2013			2012			2011			2010			2009
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	22.03		$	20.01		$	19.15		$	16.13		$	13.96
Income from investment operationsa:
Net investment incomeb		0.40			0.41			0.36			0.32			0.14	c
Net realized and unrealized gains (losses)		6.16			2.00			0.83			3.01			2.28
Total from investment operations		6.56			2.41			1.19			3.33			2.42
Less distributions from net investment income		(0.45	)		(0.39	)		(0.33	)		(0.31	)		(0.25	)
Net asset value, end of year	$	28.14		$	22.03		$	20.01		$	19.15		$	16.13
Total returnd		30.05%			12.18%			6.29%			20.94%			17.67%
Ratios to average net assets
Expenses		0.61%			0.63%			0.63%			0.64%			0.65%	e
Net investment income		1.59%			1.96%			1.87%			1.88%			0.99%	c
Supplemental data
Net assets, end of year (000’s)	$	168,380		$	141,455		$	140,297		$	148,544		$	139,816
Portfolio turnover rate		0.07%			11.19%			12.76%			8.97%			16.99%

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

^bBased on average daily shares outstanding.

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

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

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

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

FRD-10

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin Rising Dividends Securities Fund

	Year Ended December 31,
Class 2	2013			2012			2011			2010			2009
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	21.64		$	19.65		$	18.82		$	15.86		$	13.72
Income from investment operationsa:
Net investment incomeb		0.33			0.35			0.31			0.28			0.10	c
Net realized and unrealized gains (losses)		6.04			1.98			0.81			2.95			2.24
Total from investment operations		6.37			2.33			1.12			3.23			2.34
Less distributions from net investment income		(0.39	)		(0.34	)		(0.29	)		(0.27	)		(0.20	)
Net asset value, end of year	$	27.62		$	21.64		$	19.65		$	18.82		$	15.86
Total returnd		29.69%			11.96%			6.00%			20.64%			17.34%
Ratios to average net assets
Expenses		0.86%			0.88%			0.88%			0.89%			0.90%	e
Net investment income		1.34%			1.71%			1.62%			1.63%			0.74%	c
Supplemental data
Net assets, end of year (000’s)	$	1,752,012		$	1,550,084		$	1,523,396		$	1,572,732		$	1,371,351
Portfolio turnover rate		0.07%			11.19%			12.76%			8.97%			16.99%

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

^bBased on average daily shares outstanding.

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

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

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

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

FRD-11

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin Rising Dividends Securities Fund

	Year Ended December 31,
Class 4	2013			2012			2011			2010			2009
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	21.78		$	19.83		$	19.04		$	16.09		$	13.92
Income from investment operationsa:
Net investment incomeb		0.32			0.35			0.31			0.32			0.13	c
Net realized and unrealized gains (losses)		6.07			1.96			0.80			2.94			2.24
Total from investment operations		6.39			2.31			1.11			3.26			2.37
Less distributions from net investment income		(0.41	)		(0.36	)		(0.32	)		(0.31	)		(0.20	)
Net asset value, end of year	$	27.76		$	21.78		$	19.83		$	19.04		$	16.09
Total returnd		29.57%			11.78%			5.89%			20.62%			17.22%
Ratios to average net assets
Expenses		0.96%			0.98%			0.98%			0.99%			1.00%	e
Net investment income		1.24%			1.61%			1.52%			1.53%			0.64%	c
Supplemental data
Net assets, end of year (000’s)	$	12,028		$	6,432		$	3,020		$	1,007		$	15
Portfolio turnover rate		0.07%			11.19%			12.76%			8.97%			16.99%

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

^bBased on average daily shares outstanding.

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

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

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

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

FRD-12

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013

Franklin Rising Dividends Securities Fund	Shares		Value
Common Stocks 98.4%
Aerospace & Defense 4.6%
General Dynamics Corp.		38,000	$	3,630,900
Honeywell International Inc.		2,500		228,425
United Technologies Corp.		744,000		84,667,200
				88,526,525
Automobiles & Components 2.8%
Johnson Controls Inc.		1,040,500		53,377,650
Commercial & Professional Services 2.1%
ABM Industries Inc.		934,288		26,711,294
Cintas Corp.		225,700		13,449,463
				40,160,757
Consumer Durables & Apparel 3.2%
a Kid Brands Inc.		265,947		271,266
Leggett & Platt Inc.		471,800		14,597,492
NIKE Inc., B		554,000		43,566,560
Superior Uniform Group Inc.		237,100		3,670,308
				62,105,626
Consumer Services 3.0%
Hillenbrand Inc.		1,091,300		32,106,046
Matthews International Corp., A		39,000		1,661,790
McDonald’s Corp.		254,345		24,679,095
				58,446,931
Diversified Financials 0.4%
State Street Corp.		110,500		8,109,595
Electrical Equipment 5.8%
Brady Corp., A		878,579		27,174,449
Roper Industries Inc.		606,750		84,144,090
				111,318,539
Energy 7.2%
Chevron Corp.		601,000		75,070,910
Exxon Mobil Corp.		330,500		33,446,600
Occidental Petroleum Corp.		312,190		29,689,269
				138,206,779
Food & Staples Retailing 4.5%
Wal-Mart Stores Inc.		728,800		57,349,272
Walgreen Co.		531,300		30,517,872
				87,867,144
Food, Beverage & Tobacco 4.8%
Archer-Daniels-Midland Co.		713,000		30,944,200
Bunge Ltd.		5,000		410,550
McCormick & Co. Inc.		441,000		30,393,720
PepsiCo Inc.		363,900		30,181,866
				91,930,336
Health Care Equipment & Services 14.7%
Abbott Laboratories		681,800		26,133,394
Becton, Dickinson and Co.		565,143		62,442,650
Hill-Rom Holdings Inc.		117,103		4,841,038

FRD-13

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin Rising Dividends Securities Fund	Shares		Value
Common Stocks (continued)
Health Care Equipment & Services (continued)
Medtronic Inc.		730,000	$	41,894,700
Stryker Corp.		630,400		47,368,256
Teleflex Inc.		484,753		45,498,917
West Pharmaceutical Services Inc.		1,132,233		55,547,351
				283,726,306
Household & Personal Products 3.6%
Colgate-Palmolive Co.		191,000		12,455,110
The Procter & Gamble Co.		707,600		57,605,716
				70,060,826
Industrial Conglomerates 0.4%
Carlisle Cos. Inc.		96,261		7,643,123
Insurance 6.2%
Aflac Inc.		276,200		18,450,160
Arthur J. Gallagher & Co.		744,000		34,915,920
The Chubb Corp.		45,000		4,348,350
Erie Indemnity Co., A		526,085		38,467,335
Mercury General Corp.		60,200		2,992,542
Old Republic International Corp.		830,708		14,346,327
RLI Corp.		62,071		6,044,474
				119,565,108
Machinery 8.5%
Donaldson Co. Inc.		350,068		15,213,955
Dover Corp.		872,000		84,182,880
Pentair Ltd.		844,000		65,553,480
				164,950,315
Materials 12.4%
Air Products and Chemicals Inc.		580,700		64,910,646
Albemarle Corp.		694,700		44,037,033
Bemis Co. Inc.		323,300		13,242,368
Ecolab Inc.		66,000		6,881,820
Nucor Corp.		499,002		26,636,727
Praxair Inc.		646,260		84,033,188
				239,741,782
Media 0.3%
John Wiley & Sons Inc., A		116,500		6,430,800
Pharmaceuticals, Biotechnology & Life Sciences 7.7%
AbbVie Inc.		505,300		26,684,893
Johnson & Johnson		726,100		66,503,499
Pfizer Inc.		1,783,100		54,616,353
				147,804,745
Retailing 2.4%
Family Dollar Stores Inc.		711,835		46,247,920
Ross Stores Inc.		3,000		224,790
Target Corp.		3,000		189,810
				46,662,520

FRD-14

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin Rising Dividends Securities Fund	Shares		Value
Common Stocks (continued)
Semiconductors & Semiconductor Equipment 0.0%†
Cohu Inc.		50,300	$	528,150
Texas Instruments Inc.		4,500		197,595
				725,745
Software & Services 3.8%
International Business Machines Corp.		388,000		72,777,160
Technology Hardware & Equipment 0.0%†
QUALCOMM Inc.		3,000		222,750
Trading Companies & Distributors 0.0%†
W.W. Grainger Inc.		1,000		255,420
Transportation 0.0%†
United Parcel Service Inc., B		2,000		210,160
Total Common Stocks (Cost $993,255,991)				1,900,826,642
Short Term Investments (Cost $29,912,786) 1.5%
Money Market Funds 1.5%
a,b Institutional Fiduciary Trust Money Market Portfolio		29,912,786		29,912,786
Total Investments (Cost $1,023,168,777) 99.9%				1,930,739,428
Other Assets, less Liabilities 0.1%				1,679,692
Net Assets 100.0%			$	1,932,419,120

† Rounds to less than 0.1% of net assets.

^a Non-income producing.

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

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

FRD-15

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

December 31, 2013

	Franklin Rising Dividends Securities Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	993,255,991
Cost - Sweep Money Fund (Note 7)		29,912,786
Total cost of investments	$	1,023,168,777
Value - Unaffiliated issuers	$	1,900,826,642
Value - Sweep Money Fund (Note 7)		29,912,786
Total value of investments		1,930,739,428
Receivables:
Investment securities sold		2,551,613
Capital shares sold		199,514
Dividends		3,016,773
Other assets		40
Total assets		1,936,507,368
Liabilities:
Payables:
Capital shares redeemed		2,188,598
Management fees		968,555
Distribution fees		731,600
Accrued expenses and other liabilities		199,495
Total liabilities		4,088,248
Net assets, at value	$	1,932,419,120
Net assets consist of:
Paid-in capital	$	965,100,554
Undistributed net investment income		25,044,982
Net unrealized appreciation (depreciation)		907,570,651
Accumulated net realized gain (loss)		34,702,933
Net assets, at value	$	1,932,419,120
Class 1:
Net assets, at value	$	168,379,553
Shares outstanding		5,983,438
Net asset value and maximum offering price per share	$	28.14
Class 2:
Net assets, at value	$	1,752,011,768
Shares outstanding		63,425,838
Net asset value and maximum offering price per share	$	27.62
Class 4:
Net assets, at value	$	12,027,799
Shares outstanding		433,229
Net asset value and maximum offering price per share	$	27.76

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

FRD-16

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the year ended December 31, 2013

	Franklin Rising Dividends Securities Fund
Investment income:
Dividends	$	40,621,408
Expenses:
Management fees (Note 3a)		11,067,678
Distribution fees: (Note 3c)
Class 2		4,197,729
Class 4		34,259
Unaffiliated transfer agent fees		814
Custodian fees (Note 4)		16,234
Reports to shareholders		156,563
Professional fees		61,999
Trustees’ fees and expenses		7,215
Other		27,705
Total expenses		15,570,196
Net investment income		25,051,212
Realized and unrealized gains (losses):
Net realized gain (loss) from investments		109,495,187
Net change in unrealized appreciation (depreciation) on investments		341,536,473
Net realized and unrealized gain (loss)		451,031,660
Net increase (decrease) in net assets resulting from operations	$	476,082,872

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

FRD-17

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets

	Franklin Rising Dividends Securities Fund
	Year Ended December 31,
	2013			2012
Increase (decrease) in net assets:
Operations:
Net investment income	$	25,051,212		$	29,425,590
Net realized gain (loss) from investments		109,495,187			50,961,507
Net change in unrealized appreciation (depreciation) on investments		341,536,473			110,558,680
Net increase (decrease) in net assets resulting from operations		476,082,872			190,945,777
Distributions to shareholders from:
Net investment income:
Class 1		(2,772,388	)		(2,577,724	)
Class 2		(26,490,890	)		(24,994,784	)
Class 4		(163,605	)		(85,528	)
Total distributions to shareholders		(29,426,883	)		(27,658,036	)
Capital share transactions: (Note 2)
Class 1		(11,198,645	)		(12,542,862	)
Class 2		(204,341,308	)		(122,472,505	)
Class 4		3,331,799			2,986,631
Total capital share transactions		(212,208,154	)		(132,028,736	)
Net increase (decrease) in net assets		234,447,835			31,259,005
Net assets:
Beginning of year		1,697,971,285			1,666,712,280
End of year	$	1,932,419,120		$	1,697,971,285
Undistributed net investment income included in net assets:
End of year	$	25,044,982		$	29,420,653

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

FRD-18

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements

Franklin Rising Dividends Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment company, consisting of twenty separate funds. The Franklin Rising Dividends Securities Fund (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. At December 31, 2013, 45.69% of the Fund’s shares were held through one insurance company. Investment activities of these insurance company separate accounts could have a material impact on the Fund. The Fund offers three classes of shares: Class 1, Class 2, and Class 4. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

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

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

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

b. Income Taxes

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

The Fund recognizes the tax benefits of uncertain tax positions only when the position is “more likely than not” to be sustained upon examination by the tax authorities based on the technical merits of the tax position. As of December 31, 2013, and for all

FRD-19

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin Rising Dividends Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

b. Income Taxes (continued)

open tax years, the Fund has determined that no liability for unrecognized tax benefits is required in the Fund’s financial statements related to uncertain tax positions taken on a tax return (or expected to be taken on future tax returns). Open tax years are those that remain subject to examination and are based on each tax jurisdiction statute of limitation.

c. Security Transactions, Investment Income, Expenses and Distributions

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

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

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

d. Accounting Estimates

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

e. Guarantees and Indemnifications

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

FRD-20

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin Rising Dividends Securities Fund

2. SHARES OF BENEFICIAL INTEREST

At December 31, 2013, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:

	Year Ended December 31,
	2013						2012
Class 1 Shares:	Shares			Amount			Shares			Amount
Shares sold		425,367		$	10,754,937			217,372		$	4,539,862
Shares issued in reinvestment of distributions		111,610			2,772,388			125,681			2,577,724
Shares redeemed		(973,756	)		(24,725,970	)		(935,039	)		(19,660,448	)
Net increase (decrease)		(436,779	)	$	(11,198,645	)		(591,986	)	$	(12,542,862	)
Class 2 Shares:
Shares sold		6,187,499		$	153,726,999			5,224,743		$	107,681,716
Shares issued in reinvestment of distributions		1,085,247			26,490,890			1,239,206			24,994,784
Shares redeemed		(15,483,753	)		(384,559,197	)		(12,335,885	)		(255,149,005	)
Net increase (decrease)		(8,211,007	)	$	(204,341,308	)		(5,871,936	)	$	(122,472,505	)
Class 4 Shares:
Shares sold		216,130		$	5,332,125			179,113		$	3,742,720
Shares issued on reinvestment of distributions		6,664			163,605			4,211			85,528
Shares redeemed		(84,878	)		(2,163,931	)		(40,291	)		(841,617	)
Net increase (decrease)		137,916		$	3,331,799			143,033		$	2,986,631

3. TRANSACTIONS WITH AFFILIATES

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

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

a. Management Fees

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

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

FRD-21

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin Rising Dividends Securities Fund

3. TRANSACTIONS WITH AFFILIATES (continued)

b. Administrative Fees

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

c. Distribution Fees

The Board has adopted distribution plans for Class 2 and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to 0.35% per year of its average daily net assets of each class. Some distribution fees are not charged on shares held by affiliates. The Board has agreed to limit the current rate to 0.25% per year for Class 2. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.

d. Transfer Agent Fees

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

4. EXPENSE OFFSET ARRANGEMENT

The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses. During the year ended December 31, 2013, there were no credits earned.

5. INCOME TAXES

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

During the year ended December 31, 2013, the Fund utilized $73,203,872 of capital loss carryforwards.

The tax character of distributions paid during the years ended December 31, 2013 and 2012, was as follows:

	2013		2012
Distributions paid from ordinary income	$	29,426,883	$	27,658,036

At December 31, 2013, 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	$	1,024,755,445
Unrealized appreciation	$	913,474,786
Unrealized depreciation		(7,490,803	)
Net unrealized appreciation (depreciation)	$	905,983,983
Undistributed ordinary income	$	25,044,979
Undistributed long term capital gains		36,289,604
Distributable earnings	$	61,334,583

FRD-22

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin Rising Dividends Securities Fund

5. INCOME TAXES (continued)

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

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the year ended December 31, 2013, aggregated $1,296,016 and $220,987,287, respectively.

7. INVESTMENTS IN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO

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

8. CREDIT FACILITY

The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $1.5 billion (Global Credit Facility) which, after an extension of the original terms, matured on February 14, 2014. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. Effective February 14, 2014, the Borrowers renewed the Global Credit Facility which matures on February 13, 2015.

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.07% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses on the Statement of Operations. During the year ended December 31, 2013, the Fund did not use the Global Credit Facility.

9. FAIR VALUE MEASUREMENTS

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

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

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

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

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

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

FRD-23

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin Rising Dividends Securities Fund

9. FAIR VALUE MEASUREMENTS (continued)

At December 31, 2013, all of the Fund’s investments in financial instruments carried at fair value were valued using Level 1 inputs. For detailed categories, see the accompanying Statement of Investments.

10. NEW ACCOUNTING PRONOUNCEMENTS

In June 2013, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2013-08, Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements. The ASU modifies the criteria used in defining an investment company under U.S. Generally Accepted Accounting Principles and also sets forth certain measurement and disclosure requirements. Under the ASU, an entity that is registered under the 1940 Act automatically qualifies as an investment company. The ASU is effective for interim and annual reporting periods beginning after December 15, 2013. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the financial statements.

11. SUBSEQUENT EVENTS

The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure other than those already disclosed in the financial statements.

FRD-24

Franklin Templeton Variable Insurance Products Trust

Franklin Rising Dividends Securities Fund

Report of Independent Registered Public Accounting Firm

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 Franklin Rising Dividends Securities Fund (the “Fund”) at December 31, 2013, 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 five years in the period then ended, 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2013 by correspondence with the custodian, transfer agent and brokers, provides a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

February 14, 2014

FRD-25

Franklin Templeton Variable Insurance Products Trust

Tax Information (unaudited)

Franklin Rising Dividends Securities Fund

Under Section 854(b)(1)(A) of the Internal Revenue Code, the Fund hereby reports 100% of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended December 31, 2013.

FRD-26

FRANKLIN SMALL CAP VALUE SECURITIES FUND

We are pleased to bring you Franklin Small Cap Value Securities Fund’s annual report for the fiscal year ended December 31, 2013.

Performance Summary as of 12/31/13

Average annual total return of Class 4 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.

Periods ended 12/31/13

	1-Year		5-Year		10-Year
Average Annual Total Return		+36.12%		+20.67%		+10.28%

*For the period beginning 2/29/08, Class 4 performance reflects a 12b-1 fee expense of 0.35% per year, which affects future performance. Class 4 performance prior to 2/29/08 reflects historical Class 1 performance, which does not have a 12b-1 fee expense. Since 2/29/08 (effective date), the average annual total return of Class 4 shares was +10.73%. The Fund has a fee waiver associated with its investments in a Franklin Templeton money fund, contractually guaranteed through at least its current fiscal year end. Fund investment results reflect the fee waiver, to the extent applicable; without this reduction, the results would have been lower.

Total Return Index Comparison for a Hypothetical $10,000 Investment (1/1/04–12/31/13)

The graph below shows the change in value of a hypothetical $10,000 investment in the Fund over the indicated period and includes reinvestment of any income or distributions. The Fund’s performance* is compared to the performance of the Russell 2500™ Value Index. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Important Notes to Performance Information preceding the Fund Summaries.

**Source: © 2014 Morningstar. Please see Index Descriptions following the Fund Summaries.

Franklin Small Cap Value Securities Fund – Class 4

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

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

Current performance may differ from figures shown.

FSV-1

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

Performance Overview

You can find the Fund’s one-year total return in the Performance Summary. For comparison, the Fund’s benchmark, the Russell 2500^™ Value Index, rose 33.32% for the same period.¹ Please note the Fund employs a bottom-up stock selection process, and the managers invest in securities without regard to benchmark comparisons.

Economic and Market Overview

The U.S. economy showed ongoing signs of recovery during the 12-month period ended December 31, 2013, especially in the second half of the year. Business investment, net exports, and state and local government spending picked up in the second quarter, somewhat offsetting the impact of federal budget cuts. During the third quarter, the economy, as measured by gross domestic product, expanded at the strongest pace since the fourth quarter of 2011, underpinned by consumer spending and rising inventories. Historically low mortgage rates and improving sentiment aided the housing market recovery, evidenced by solid new and existing home sales, rising home prices, low inventories and multi-year lows in new foreclosures. Manufacturing expanded for most of the period under review, and the unemployment rate declined to 6.7% in December from 7.8% a year earlier.² Inflation remained well below the Federal Reserve Board’s (Fed’s) 2.0% target.

The year started on a positive note with Congress passing a budget bill that averted automatic federal budget cuts and income tax increases. However, Washington’s lack of consensus on proposed expenditure reductions resulted in federal spending cuts starting in March. Fed Chairman Ben Bernanke indicated in May that the Fed might reduce monthly asset purchases, assuming ongoing U.S. recovery. In September, however, he announced that any reduction of Fed purchases would be postponed until U.S. economic growth strengthened.

1. Source: © 2014 Morningstar. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

2. Source: Bureau of Labor Statistics.

Fund Risks: All investments involve risks, including possible loss of principal. The Fund’s investments in smaller company stocks carry special risks as such stocks have historically exhibited greater price volatility than large-company stocks, particularly over the short term. Additionally, smaller companies often have relatively small revenues, limited product lines and a small market share. In addition, the Fund may invest up to 25% of its total assets in foreign securities, which involve special risks, including currency fluctuations and economic and political uncertainty. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

FSV-2

A U.S. budget impasse, which led to a temporary shutdown of non-essential government services in October, ended after Congress agreed to fund the government until January 2014 and raise the debt limit until February. U.S. equity markets reached new highs after the resolution of the budget impasse and the Fed’s reassurance at its October meeting that it would continue its supportive monetary programs. In December, Congress passed a two-year budget deal that would ease automatic spending cuts in 2014 and lower the risk of another government shutdown. Meanwhile, the Fed announced it would reduce its monthly bond purchases by $10 billion beginning in January 2014. The Fed, however, committed to keeping interest rates low as long as the unemployment rate remained over 6.5% and inflation expectations remained low.

Rising corporate profits and generally favorable economic data bolstered investor confidence, helping markets overcome brief periods of sell-offs in reaction to Fed statements and to Washington’s fiscal negotiations. U.S. stocks generated strong 12-month returns as the Standard & Poor’s^® 500 Index and Dow Jones Industrial Average reached all-time highs during the period.³

Investment Strategy

We generally invest in stocks that we believe are undervalued and have the potential for capital appreciation. We consider a stock price a “value” when it trades at less than the price at which we believe it would trade if the market reflected all factors relating to the company’s worth. Accordingly, we invest in companies that we believe have, for example, stock prices that are low relative to current, or historical or future earnings, book value, cash flow or sales; recent sharp price declines but the potential for good long-term earnings prospects; and valuable intangibles not reflected in the stock price. Companies in which we may invest include those that may be considered out of favor, such as companies attempting to recover from bankruptcy, business setbacks, adverse events or cyclical downturns, or that may be considered potential takeover targets.

Manager’s Discussion

Stock selection in the financials and materials sectors, along with an overweighting and stock selection in the consumer discretionary sector

3. Please see Index Descriptions following the Fund Summaries.

FSV-3

aided performance relative to the benchmark.⁴ Contributors included insurer Protective Life, furniture retailer La-Z-Boy and recreational vehicle manufacturer Thor Industries. Protective Life rallied based on earnings growth from its annuities business, a potential benefit from acquisitions and higher long-term interest rates. La-Z-Boy experienced earnings growth from increased sales and productivity. Thor Industries benefited from strong demand for towable recreational vehicles and growing sales of motorized vehicles.

Stock selection in the industrials and information technology sectors hindered relative performance.⁵ Detractors included Multi-Fineline Electronix, a flexible circuit materials maker; Regis, a hair care salon operator; and M.D.C. Holdings, a single family home builder. Multi-Fineline Electronix experienced weaker-than-expected demand and disappointing earnings. Regis posted lower-than-expected earnings as its restructuring had not yet gained traction. M.D.C. Holdings suffered from an uncertain outlook for new housing demand as a result of higher interest rates.

During the period, we initiated new positions in eight holdings, including Regal-Beloit, an electric motor manufacturer; Carpenter Technology, a high performance and specialty metals manufacturer; Genesco, a specialty retailer; Lindsay, a manufacturer of irrigation equipment and road construction products; and Stepan, a global chemical manufacturer, among others. We added to existing positions in Cabot, a specialty chemicals and materials company; Unit Corp., a diversified energy company; and Sensient Technologies, a manufacturer and marketer of colors, flavors and fragrances; among others.

The Fund eliminated positions in Graco, Circor International, West Pharmaceutical Services, A.O. Smith Corp., Teekay and several other positions. We also reduced holdings in several other securities including Protective Life, Benchmark Electronics and GameStop.

There were three all cash takeovers completed during the period: Maidenform Brands was acquired by HanesBrands, Kaydon was acquired by SKF, and NV Energy was acquired by Berkshire Hathaway.

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

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

Top 10 Holdings

Franklin Small Cap Value Securities Fund

12/31/13

Company Sector/Industry	% of Total Net Assets
Thor Industries Inc.		2.4%
Automobiles & Components
Trinity Industries Inc.		2.2%
Machinery
Protective Life Corp.		1.8%
Insurance
The Men’s Wearhouse Inc.		1.8%
Retailing
Reliance Steel & Aluminum Co.		1.8%
Materials
StanCorp Financial Group Inc.		1.8%
Insurance
Cabot Corp.		1.8%
Materials
Bristow Group Inc.		1.8%
Energy
La-Z-Boy Inc.		1.7%
Consumer Durables & Apparel
Group 1 Automotive Inc.		1.7%
Retailing

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

FSV-4

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

The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2013, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

FSV-5

Fund Expenses

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

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

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

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

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

Actual Fund Expenses

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

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

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

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

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

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

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

Franklin Small Cap Value Securities Fund – Class 4

FSV-6

Hypothetical Example for Comparison with Other Mutual Funds

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

Class 4	Beginning Account Value 7/1/13		Ending Account Value 12/31/13		Fund-Level Expenses Incurred During Period* 7/1/13–12/31/13
Actual	$	1,000	$	1,213.00	$	5.35
Hypothetical (5% return before expenses)	$	1,000	$	1,020.37	$	4.89

*Expenses are calculated using the most recent six-month annualized expense ratio for the Fund’s Class 4 shares (0.96%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period.

FSV-7

Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Franklin Small Cap Value Securities Fund

	Year Ended December 31,
Class 1	2013			2012			2011			2010			2009
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	18.58		$	15.82		$	16.55		$	13.00		$	10.73
Income from investment operationsa:
Net investment incomeb		0.19			0.29	c		0.16			0.14			0.15
Net realized and unrealized gains (losses)		6.45			2.64			(0.74	)		3.54			2.86
Total from investment operations		6.64			2.93			(0.58	)		3.68			3.01
Less distributions from:
Net investment income		(0.32	)		(0.17	)		(0.15	)		(0.13	)		(0.22	)
Net realized gains		(0.36	)		—			—			—			(0.52	)
Total distributions		(0.68	)		(0.17	)		(0.15	)		(0.13	)		(0.74	)
Net asset value, end of year	$	24.54		$	18.58		$	15.82		$	16.55		$	13.00
Total returnd		36.50%			18.75%			(3.53)%			28.49%			29.54%
Ratios to average net assets
Expenses		0.63%			0.67%			0.66%			0.67%			0.68%	e
Net investment income		0.90%			1.70%	c		1.02%			0.98%			1.29%
Supplemental data
Net assets, end of year (000’s)	$	62,408		$	40,133		$	39,374		$	47,300		$	42,428
Portfolio turnover rate		10.44%			5.84%			14.39%			15.92%			6.68%

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

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $0.10 per share received in the form of special dividends. Excluding these amounts, the ratio of net investment income to average net assets would have been 1.10%

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

^eBenefit of expense reduction rounds to less than 0.01%

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

FSV-8

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin Small Cap Value Securities Fund

	Year Ended December 31,
Class 2	2013			2012			2011			2010			2009
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	18.23		$	15.53		$	16.25		$	12.77		$	10.55
Income from investment operationsa:
Net investment incomeb		0.14			0.24	c		0.12			0.10			0.12
Net realized and unrealized gains (losses)		6.34			2.59			(0.73	)		3.48			2.81
Total from investment operations		6.48			2.83			(0.61	)		3.58			2.93
Less distributions from:
Net investment income		(0.28	)		(0.13	)		(0.11	)		(0.10	)		(0.19	)
Net realized gains		(0.36	)		—			—			—			(0.52	)
Total distributions		(0.64	)		(0.13	)		(0.11	)		(0.10	)		(0.71	)
Net asset value, end of year	$	24.07		$	18.23		$	15.53		$	16.25		$	12.77
Total returnd		36.24%			18.39%			(3.76)%			28.22%			29.16%
Ratios to average net assets
Expenses		0.88%			0.92%			0.91%			0.92%			0.93%	e
Net investment income		0.65%			1.45%	c		0.77%			0.73%			1.04%
Supplemental data
Net assets, end of year (000’s)	$	1,606,802		$	1,286,573		$	1,211,168		$	1,362,292		$	1,109,855
Portfolio turnover rate		10.44%			5.84%			14.39%			15.92%			6.68%

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

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $0.10 per share received in the form of special dividends. Excluding these amounts, the ratio of net investment income to average net assets would have been 0.85%

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

^eBenefit of expense reduction rounds to less than 0.01%

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

FSV-9

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin Small Cap Value Securities Fund

	Year Ended December 31,
Class 4	2013			2012			2011			2010			2009
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	18.44		$	15.71		$	16.44		$	12.92		$	10.70
Income from investment operationsa:
Net investment incomeb		0.12			0.22	c		0.11			0.09			0.11
Net realized and unrealized gains (losses)		6.42			2.63			(0.75	)		3.53			2.84
Total from investment operations		6.54			2.85			(0.64	)		3.62			2.95
Less distributions from:
Net investment income		(0.25	)		(0.12	)		(0.09	)		(0.10	)		(0.21	)
Net realized gains		(0.36	)		—			—			—			(0.52	)
Total distributions		(0.61	)		(0.12	)		(0.09	)		(0.10	)		(0.73	)
Net asset value, end of year	$	24.37		$	18.44		$	15.71		$	16.44		$	12.92
Total returnd		36.12%			18.27%			(3.87)%			28.14%			29.04%
Ratios to average net assets
Expenses		0.98%			1.02%			1.01%			1.02%			1.03%	e
Net investment income		0.55%			1.35%	c		0.67%			0.63%			0.94%
Supplemental data
Net assets, end of year (000’s)	$	35,936		$	32,424		$	34,284		$	39,075		$	28,599
Portfolio turnover rate		10.44%			5.84%			14.39%			15.92%			6.68%

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

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $0.10 per share received in the form of special dividends. Excluding these amounts, the ratio of net investment income to average net assets would have been 0.75%

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

^eBenefit of expense reduction rounds to less than 0.01%

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

FSV-10

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013

Franklin Small Cap Value Securities Fund	Shares		Value
Common Stocks 96.1%
Aerospace & Defense 1.6%
AAR Corp.		955,000	$	26,749,550
Automobiles & Components 6.7%
Autoliv Inc.		273,000		25,061,400
Drew Industries Inc.		220,000		11,264,000
Gentex Corp.		787,300		25,973,027
Thor Industries Inc.		745,000		41,146,350
a Winnebago Industries Inc.		378,300		10,384,335
				113,829,112
Banks 2.2%
Chemical Financial Corp.		360,854		11,428,246
OFG Bancorp.		602,000		10,438,680
Peoples Bancorp Inc.		158,000		3,556,580
TrustCo Bank Corp. NY		1,690,000		12,134,200
				37,557,706
Building Products 4.7%
Apogee Enterprises Inc.		610,000		21,905,100
a Gibraltar Industries Inc.		842,300		15,658,357
Simpson Manufacturing Co. Inc.		433,400		15,918,782
Universal Forest Products Inc.		504,700		26,315,058
				79,797,297
Commercial & Professional Services 2.8%
Insperity Inc.		263,100		9,505,803
McGrath RentCorp		371,018		14,766,517
Mine Safety Appliances Co.		328,300		16,812,243
Schawk Inc.		464,100		6,901,167
				47,985,730
Construction & Engineering 2.1%
EMCOR Group Inc.		272,700		11,573,388
Granite Construction Inc.		694,000		24,276,120
				35,849,508
Consumer Durables & Apparel 5.7%
Brunswick Corp.		445,000		20,496,700
Harman International Industries Inc.		280,000		22,918,000
Hooker Furniture Corp.		445,000		7,422,600
La-Z-Boy Inc.		930,000		28,830,000
a M.D.C. Holdings Inc.		213,800		6,892,912
a M/I Homes Inc.		435,900		11,093,655
				97,653,867
Consumer Services 1.3%
Hillenbrand Inc.		495,000		14,562,900
Regis Corp.		522,400		7,580,024
				22,142,924
Electrical Equipment 4.4%
Brady Corp., A		404,900		12,523,557
EnerSys		24,100		1,689,169
Franklin Electric Co. Inc.		398,464		17,787,433
General Cable Corp.		103,500		3,043,935

FSV-11

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin Small Cap Value Securities Fund	Shares		Value
Common Stocks (continued)
Electrical Equipment (continued)
Powell Industries Inc.		195,000	$	13,063,050
Regal-Beloit Corp.		355,000		26,170,600
				74,277,744
Energy 10.4%
a Atwood Oceanics Inc.		363,000		19,380,570
Bristow Group Inc.		400,000		30,024,000
Energen Corp.		220,000		15,565,000
a Helix Energy Solutions Group Inc.		755,000		17,500,900
a Oil States International Inc.		224,300		22,815,796
a Rowan Cos. PLC		567,500		20,066,800
Tidewater Inc.		415,000		24,597,050
a Unit Corp.		515,000		26,584,300
				176,534,416
Health Care Equipment & Services 3.6%
Hill-Rom Holdings Inc.		405,800		16,775,772
STERIS Corp.		490,000		23,544,500
Teleflex Inc.		227,900		21,390,694
				61,710,966
Industrial Conglomerates 1.6%
Carlisle Cos. Inc.		334,800		26,583,120
Insurance 10.2%
Arthur J. Gallagher & Co.		168,200		7,893,626
Aspen Insurance Holdings Ltd.		407,800		16,846,218
Assurant Inc.		51,800		3,437,966
The Hanover Insurance Group Inc.		345,000		20,599,950
HCC Insurance Holdings Inc.		188,200		8,683,548
Montpelier Re Holdings Ltd.		585,000		17,023,500
Old Republic International Corp.		1,296,900		22,397,463
Protective Life Corp.		620,000		31,409,200
StanCorp Financial Group Inc.		460,000		30,475,000
Validus Holdings Ltd. (Bermuda)		395,000		15,914,550
				174,681,021
Machinery 11.7%
Astec Industries Inc.		380,000		14,679,400
Briggs & Stratton Corp.		740,000		16,102,400
a EnPro Industries Inc.		365,000		21,042,250
Kennametal Inc.		370,000		19,265,900
Lincoln Electric Holdings Inc.		370,000		26,395,800
Lindsay Corp.		56,500		4,675,375
Mueller Industries Inc.		325,000		20,478,250
Nordson Corp.		34,400		2,555,920
Pentair Ltd.		195,000		15,145,650
Trinity Industries Inc.		690,000		37,618,800
a Wabash National Corp.		1,264,000		15,610,400
Watts Water Technologies Inc., A		107,700		6,663,399
				200,233,544
Materials 11.6%
A. Schulman Inc.		504,266		17,780,419
AMCOL International Corp.		18,200		618,436

FSV-12

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin Small Cap Value Securities Fund	Shares		Value
Common Stocks (continued)
Materials (continued)
AptarGroup Inc.		65,000	$	4,407,650
Cabot Corp.		590,000		30,326,000
Carpenter Technology Corp.		350,000		21,770,000
H.B. Fuller Co.		450,000		23,418,000
Reliance Steel & Aluminum Co.		405,000		30,715,200
RPM International Inc.		620,000		25,736,200
Sensient Technologies Corp.		370,000		17,952,400
Steel Dynamics Inc.		1,150,000		22,471,000
Stepan Co.		44,100		2,894,283
				198,089,588
Retailing 9.5%
Brown Shoe Co. Inc.		800,000		22,512,000
The Cato Corp., A		438,600		13,947,480
GameStop Corp., A		405,100		19,955,226
a Genesco Inc.		115,100		8,409,206
Group 1 Automotive Inc.		404,200		28,706,284
a Jos. A. Bank Clothiers Inc.		180,000		9,851,400
The Men’s Wearhouse Inc.		603,700		30,836,996
a The Pep Boys - Manny, Moe & Jack		1,173,600		14,247,504
Pier 1 Imports Inc.		235,000		5,423,800
a West Marine Inc.		610,700		8,690,261
				162,580,157
Semiconductors & Semiconductor Equipment 0.5%
Cohu Inc.		736,000		7,728,000
Technology Hardware & Equipment 3.0%
a Benchmark Electronics Inc.		764,100		17,635,428
a Ingram Micro Inc., A		507,100		11,896,566
a Multi-Fineline Electronix Inc.		274,100		3,807,249
a Rofin-Sinar Technologies Inc.		674,900		18,235,798
				51,575,041
Trading Companies & Distributors 0.5%
Applied Industrial Technologies Inc.		165,000		8,099,850
Transportation 2.0%
a Genesee & Wyoming Inc.		210,800		20,247,340
SkyWest Inc.		990,000		14,681,700
				34,929,040
Total Common Stocks (Cost $924,111,750)				1,638,588,181
Short Term Investments (Cost $66,928,784) 3.9%
Money Market Funds 3.9%
a,b Institutional Fiduciary Trust Money Market Portfolio		66,928,784		66,928,784
Total Investments (Cost $991,040,534) 100.0%				1,705,516,965
Other Assets, less Liabilities (0.0)%†				(371,182	)
Net Assets 100.0%			$	1,705,145,783

†Rounds to less than 0.1% of net assets.

^aNon-income producing.

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

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

FSV-13

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

December 31, 2013

	Franklin Small Cap Value Securities Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	924,111,750
Cost - Sweep Money Fund (Note 7)		66,928,784
Total cost of investments	$	991,040,534
Value - Unaffiliated issuers	$	1,638,588,181
Value - Sweep Money Fund (Note 7)		66,928,784
Total value of investments		1,705,516,965
Receivables:
Investment securities sold		2,455,877
Capital shares sold		505,609
Dividends		1,461,047
Other assets		33
Total assets		1,709,939,531
Liabilities:
Payables:
Investment securities purchased		709,803
Capital shares redeemed		2,220,791
Management fees		694,220
Administrative fees		155,879
Distribution fees		680,296
Reports to shareholders		277,642
Accrued expenses and other liabilities		55,117
Total liabilities		4,793,748
Net assets, at value	$	1,705,145,783
Net assets consist of:
Paid-in capital	$	861,850,561
Undistributed net investment income		9,437,652
Net unrealized appreciation (depreciation)		714,476,431
Accumulated net realized gain (loss)		119,381,139
Net assets, at value	$	1,705,145,783

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

FSV-14

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Assets and Liabilities (continued)

December 31, 2013

	Franklin Small Cap Value Securities Fund
Class 1:
Net assets, at value	$	62,407,746
Shares outstanding		2,542,832
Net asset value and maximum offering price per share	$	24.54
Class 2:
Net assets, at value	$	1,606,801,860
Shares outstanding		66,766,643
Net asset value and maximum offering price per share	$	24.07
Class 4:
Net assets, at value	$	35,936,177
Shares outstanding		1,474,729
Net asset value and maximum offering price per share	$	24.37

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

FSV-15

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the year ended December 31, 2013

	Franklin Small Cap Value Securities Fund
Investment income:
Dividends	$	23,024,269
Income from securities loaned		330,830
Total investment income		23,355,099
Expenses:
Management fees (Notes 3a)		7,570,556
Administrative fees (Notes 3b)		1,722,129
Distribution fees: (Notes 3c)
Class 2		3,611,287
Class 4		119,812
Unaffiliated transfer agent fees		1,524
Custodian fees (Notes 4)		12,973
Reports to shareholders		220,706
Professional fees		58,192
Trustees’ fees and expenses		5,799
Other		22,968
Total expenses		13,345,946
Net investment income		10,009,153
Realized and unrealized gains (losses):
Net realized gain (loss) from investments		119,472,862
Net change in unrealized appreciation (depreciation) on investments		344,133,096
Net realized and unrealized gain (loss)		463,605,958
Net increase (decrease) in net assets resulting from operations	$	473,615,111

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

FSV-16

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets

	Franklin Small Cap Value Securities Fund
	Year Ended December 31,
	2013			2012
Increase (decrease) in net assets:
Operations:
Net investment income	$	10,009,153		$	19,229,549
Net realized gain (loss) from investments		119,472,862			44,247,459
Net change in unrealized appreciation (depreciation) on investments		344,133,096			158,357,883
Net increase (decrease) in net assets resulting from operations		473,615,111			221,834,891
Distributions to shareholders from:
Net investment income:
Class 1		(615,112	)		(407,505	)
Class 2		(18,772,536	)		(9,757,412	)
Class 4		(406,547	)		(256,129	)
Net realized gains:
Class 1		(681,161	)		—
Class 2		(24,226,581	)		—
Class 4		(585,151	)		—
Total distributions to shareholders		(45,287,088	)		(10,421,046	)
Capital share transactions: (Note 2)
Class 1		7,328,882			(5,634,630	)
Class 2		(83,608,654	)		(124,579,807	)
Class 4		(6,031,999	)		(6,896,088	)
Total capital share transactions		(82,311,771	)		(137,110,525	)
Net increase (decrease) in net assets		346,016,252			74,303,320
Net assets:
Beginning of year		1,359,129,531			1,284,826,211
End of year	$	1,705,145,783		$	1,359,129,531
Undistributed net investment income included in net assets:
End of year	$	9,437,652		$	19,222,694

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

FSV-17

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements

Franklin Small Cap Value Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

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

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

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

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

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

b. Securities Lending

The Fund participates in an agency based securities lending program. The Fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the market value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the market value of loaned securities, as determined at the close of fund business each day; any additional collateral required due to changes in security values is delivered to the Fund on the next business day.

FSV-18

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin Small Cap Value Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

The collateral is invested in repurchase agreements. The Fund receives income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. The Fund bears the market risk with respect to the collateral investment, securities loaned, and the risk that the agent may default on its obligations to the Fund. The securities lending agent has agreed to indemnify the Fund in the event of default by a third party borrower. At December 31, 2013, the Fund had no securities on loan.

c. Income and Deferred Taxes

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

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

The Fund recognizes the tax benefits of uncertain tax positions only when the position is “more likely than not” to be sustained upon examination by the tax authorities based on the technical merits of the tax position. As of December 31, 2013, and for all open tax years, the Fund has determined that no liability for unrecognized tax benefits is required in the Fund’s financial statements related to uncertain tax positions taken on a tax return (or expected to be taken on future tax returns). Open tax years are those that remain subject to examination and are based on each tax jurisdiction statute of limitation.

d. Security Transactions, Investment Income, Expenses and Distributions

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

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

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

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.

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin Small Cap Value Securities Fund

f. Guarantees and Indemnifications

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

2. SHARES OF BENEFICIAL INTEREST

At December 31, 2013, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:

	Year Ended December 31,
	2013						2012
Class 1 Shares:	Shares			Amount			Shares			Amount
Shares sold		854,519		$	17,437,814			120,340		$	2,031,518
Shares issued in reinvestment of distributions		64,172			1,296,273			26,308			407,505
Shares redeemed		(536,406	)		(11,405,205	)		(474,365	)		(8,073,653	)
Net increase (decrease)		382,285		$	7,328,882			(327,717	)	$	(5,634,630	)
Class 2 Shares:
Shares sold		6,730,565		$	138,529,743			8,509,192		$	140,217,286
Shares issued in reinvestment of distributions		2,167,294			42,999,117			641,091			9,757,412
Shares redeemed		(12,704,970	)		(265,137,514	)		(16,570,761	)		(274,554,505	)
Net increase (decrease)		(3,807,111	)	$	(83,608,654	)		(7,420,478	)	$	(124,579,807	)
Class 4 Shares:
Shares sold		205,689		$	4,293,023			402,254		$	6,818,504
Shares issued on reinvestment of distributions		49,338			991,698			16,621			256,129
Shares redeemed		(538,222	)		(11,316,720	)		(843,050	)		(13,970,721	)
Net increase (decrease)		(283,195	)	$	(6,031,999	)		(424,175	)	$	(6,896,088	)

3. TRANSACTIONS WITH AFFILIATES

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

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

a. Management Fees

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

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

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin Small Cap Value Securities Fund

3. TRANSACTIONS WITH AFFILIATES (continued)

b. Administrative Fees

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

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

c. Distribution Fees

The Board has adopted distribution plans for Class 2 and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to 0.35% per year of its average daily net assets of each class. Some distribution fees are not charged on shares held by affiliates. The Board has agreed to limit the current rate to 0.25% per year for Class 2. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.

d. Transfer Agent Fees

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

4. EXPENSE OFFSET ARRANGEMENT

The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses. During the year ended December 31, 2013, there were no credits earned.

5. INCOME TAXES

The tax character of distributions paid during the years ended December 31, 2013 and 2012 was as follows:

	2013		2012
Distributions paid from:
Ordinary income	$	19,794,195	$	10,421,046
Long term capital gain		25,492,893		—
	$	45,287,088	$	10,421,046

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin Small Cap Value Securities Fund

5. INCOME TAXES (continued)

At December 31, 2013, 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		$	994,087,645
Unrealized appreciation		$	730,962,524
Unrealized depreciation			(19,533,204	)
Net unrealized appreciation (depreciation)		$	711,429,320
Undistributed ordinary income		$	18,583,845
Undistributed long term capital gains	��		113,282,058
Distributable earnings		$	131,865,903

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

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the year ended December 31, 2013, aggregated $154,031,719 and $290,672,942, respectively.

7. INVESTMENTS IN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO

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

8. CREDIT FACILITY

The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $1.5 billion (Global Credit Facility) which, after an extension of the original terms, matured on February 14, 2014. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. Effective February 14, 2014, the Borrowers renewed the Global Credit Facility which matures on February 13, 2015.

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.07% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses on the Statement of Operations. During the year ended December 31, 2013, the Fund did not use the Global Credit Facility.

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin Small Cap Value Securities Fund

9. FAIR VALUE MEASUREMENTS

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

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

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

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

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

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

At December 31, 2013, all of the Fund’s investments in financial instruments carried at fair value were valued using Level 1 inputs. For detailed categories, see the accompanying Statement of Investments.

10. NEW ACCOUNTING PRONOUNCEMENTS

In June 2013, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2013-08, Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements. The ASU modifies the criteria used in defining an investment company under U.S. Generally Accepted Accounting Principles and also sets forth certain measurement and disclosure requirements. Under the ASU, an entity that is registered under the 1940 Act automatically qualifies as an investment company. The ASU is effective for interim and annual reporting periods beginning after December 15, 2013. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the financial statements.

11. SUBSEQUENT EVENTS

The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure other than those already disclosed in the financial statements.

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Franklin Templeton Variable Insurance Products Trust

Franklin Small Cap Value Securities Fund

Report of Independent Registered Public Accounting Firm

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 Franklin Small Cap Value Securities Fund (the “Fund”) at December 31, 2013, 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 five years in the period then ended, 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2013 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

February 14, 2014

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Franklin Templeton Variable Insurance Products Trust

Tax Information (unaudited)

Franklin Small Cap Value Securities Fund

Under Section 852(b)(3)(C) of the Internal Revenue Code (Code), the Fund hereby reports the maximum amount allowable but no less than $25,492,893 as a long term capital gain dividend for the fiscal year ended December 31, 2013.

Under Section 854(b)(1)(A) of the Code, the Fund hereby reports 100% of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended December 31, 2013.

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FRANKLIN SMALL-MID CAP GROWTH SECURITIES FUND

We are pleased to bring you Franklin Small-Mid Cap Growth Securities Fund’s annual report for the fiscal year ended December 31, 2013.

Performance Summary as of 12/31/13

Average annual total return of Class 4 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.

Periods ended 12/31/13

	1-Year		5-Year		10-Year
Average Annual Total Return		+37.99%		+21.58%		+8.09%

*For the period beginning 2/29/08, Class 4 performance reflects a 12b-1 fee expense of 0.35% per year, which affects future performance. Class 4 performance prior to 2/29/08 reflects historical Class 1 performance, which does not have a 12b-1 fee expense. Since 2/29/08 (effective date), the average annual total return of Class 4 shares was +9.89%. The Fund has a fee waiver associated with its investments in a Franklin Templeton money fund, contractually guaranteed through at least its current fiscal year end. Fund investment results reflect the fee waiver, to the extent applicable; without this reduction, the results would have been lower.

Total Return Index Comparison for a Hypothetical $10,000 Investment (1/1/04–12/31/13)

The graph below shows the change in value of a hypothetical $10,000 investment in the Fund over the indicated period and includes reinvestment of any income or distributions. The Fund’s performance* is compared to the performance of the Standard & Poor’s^® 500 Index (S&P 500^®) and the Russell Midcap^® Growth Index. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Important Notes to Performance Information preceding the Fund Summaries.

**Source: © 2014 Morningstar. Please see Index Descriptions following the Fund Summaries.

Franklin Small-Mid Cap Growth Securities Fund Class 4

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

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

Current performance may differ from figures shown.

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

Performance Overview

You can find the Fund’s one-year total return in the Performance Summary. In comparison, the Fund’s narrow benchmark, the Russell Midcap^® Growth Index, generated a +35.74% total return, and its broad benchmark, the S&P 500, produced a +32.39% total return, for the same period.²

Economic and Market Overview

The U.S. economy showed ongoing signs of recovery during the 12-month period ended December 31, 2013, especially in the second half of the year. Business investment, net exports, and state and local government spending picked up in the second quarter, somewhat offsetting the impact of federal budget cuts. During the third quarter, the economy, as measured by gross domestic product, expanded at the strongest pace since the fourth quarter of 2011, underpinned by consumer spending and rising inventories. Historically low mortgage rates and improving sentiment aided the housing market recovery, evidenced by solid new and existing home sales, rising home prices, low inventories and multi-year lows in new foreclosures. Manufacturing expanded for most of the period under review, and the unemployment rate declined to 6.7% in December from 7.8% a year earlier.³ Inflation remained well below the Federal Reserve Board’s (Fed’s) 2.0% target.

The year started on a positive note with Congress passing a budget bill that averted automatic federal budget cuts and income tax increases. However, Washington’s lack of consensus on proposed expenditure reductions resulted in federal spending cuts starting in March. Fed Chairman Ben Bernanke indicated in May that the Fed might reduce monthly asset purchases, assuming ongoing U.S. recovery. In

Fund Risks: All investments involve risks, including possible loss of principal. Investors should be comfortable with fluctuations in the value of their investment, as small and midsized company stocks can be volatile, especially over the short term. Smaller or relatively new or unseasoned companies can be particularly sensitive to changing economic conditions, and their prospects for growth are less certain than those of larger, more established companies. The Fund may focus on particular sectors of the market from time to time, which can carry greater risks of adverse developments in such sectors. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

1. Please see Index Descriptions following the Fund Summaries.

2. Source: © 2014 Morningstar. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

3. Source: Bureau of Labor Statistics.

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September, however, he announced that any reduction of Fed purchases would be postponed until U.S. economic growth strengthened. A U.S. budget impasse, which led to a temporary shutdown of non-essential government services in October, ended after Congress agreed to fund the government until January 2014 and raise the debt limit until February. U.S. equity markets reached new highs after the resolution of the budget impasse and the Fed’s reassurance at its October meeting that it would continue its supportive monetary programs. In December, Congress passed a two-year budget deal that would ease automatic spending cuts in 2014 and lower the risk of another government shutdown. Meanwhile, the Fed announced it would reduce its monthly bond purchases by $10 billion beginning in January 2014. The Fed, however, committed to keeping interest rates low as long as the unemployment rate remained over 6.5% and inflation expectations remained low.

Rising corporate profits and generally favorable economic data bolstered investor confidence, helping markets overcome brief periods of sell-offs in reaction to Fed statements and to Washington’s fiscal negotiations. U.S. stocks generated strong 12-month returns as the S&P 500 and Dow Jones Industrial Average reached all-time highs during the period.¹

Investment Strategy

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

Manager’s Discussion

All sectors represented in the Fund’s portfolio delivered positive returns during the 12 months under review as the broad market rallied. Stock

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selection, especially in the consumer discretionary, information technology (IT) and financials sectors, was a major contributor to performance relative to the Russell Midcap^® Growth Index.

In the consumer discretionary sector, off-benchmark positions in Buffalo Wild Wings, a restaurant owner, operator and franchiser, and Wolverine World Wide, a designer and manufacturer of branded footwear, apparel and accessories, benefited relative results, as did a position in GNC Holdings, a specialty retailer of health and wellness products. Buffalo Wild Wings delivered strong third-quarter earnings, supported by double-digit revenue growth and higher operating margins resulting from lower chicken wing costs and better cost control. The company also raised its earnings guidance for the year 2013. Wolverine raised its full-year 2013 profit outlook as it continued to generate better-than-expected earnings, driven largely by the strength of its international business and solid performance of recent acquisitions, particularly Sperry Top-Sider. GNC’s share price reached an all-time high as the company continued to report solid earnings results. The company also authorized a $500 million share repurchase program toward year-end.

Among the Fund’s IT holdings, major contributors included a position in FleetCor Technologies, a leading provider of payment products to commercial fleets and major oil companies, and an off-benchmark investment in ViaSat, a provider of fixed and mobile satellite network services. FleetCor continued to generate stronger-than-expected earnings, driven by higher domestic and international transactions, larger revenue per transaction and lower operating expenses. Having demonstrated an ability to develop acquired businesses, FleetCor made acquisitions in several countries, including Australia, New Zealand, the U.K. and Brazil. ViaSat generated robust revenues and improved earnings in recent quarters, resulting from strong growth across all its business segments, including government systems.

In the financials sector, key contributors included asset management company Affiliated Managers Group, which reported better-than-expected earnings during the period, driven by solid revenue growth, and increased its earnings guidance for 2013 and 2014. Stock selection in industrials, along with an underweighting and stock selection in materials, also aided relative returns. Key individual contributors included a new, off-benchmark investment in biotechnology company Celldex Therapeutics.

Top 10 Holdings

Franklin Small-Mid Cap Growth Securities Fund

12/31/13

Company Sector/Industry	% of Total Net Assets
AMETEK Inc.		1.9%
Industrials
Affiliated Managers Group Inc.		1.7%
Financials
Wolverine World Wide Inc.		1.7%
Consumer Discretionary
Roper Industries Inc.		1.6%
Industrials
Jarden Corp.		1.6%
Consumer Discretionary
Actavis PLC		1.4%
Health Care
Wynn Resorts Ltd.		1.3%
Consumer Discretionary
Alliance Data Systems Corp.		1.3%
Information Technology
Trimble Navigation Ltd.		1.3%
Information Technology
Perrigo Co., PLC		1.2%
Health Care

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

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In contrast, key detractors from the Fund’s relative performance included stock selection in the health care and energy sectors. Notable health care detractors included a position in ARIAD Pharmaceuticals and an off-benchmark investment in U.K.-listed Amarin. ARIAD Pharmaceuticals’ share price fell after the biotechnology firm halted trials on its leukemia drug Iclusig and the U.S. Federal Drug Administration (FDA) suspended sales in response to reports of harmful side effects. Amarin’s share price declined after the FDA denied approval to expand the use of the biopharmaceutical company’s fish-oil drug Vascepa to heart-disease patients. In the energy sector, a position in Cobalt International Energy hurt relative results. The oil exploration and production company could not find commercially viable oil at one of its Gulf of Mexico wells, and toward year-end, its stock price fell amid concerns the company may be unable to profit from its larger-than-expected natural gas discovery in Angola. We closed the Fund’s positions in these three companies during the period.

Although the Fund’s overall IT holdings outperformed the index and contributed to relative performance, some investments lost value. Notable detractors included positions in voice recognition software solutions provider Nuance Communications and computer network optimization products manufacturer F5 Networks, both of which we sold during the period. Nuance’s acquisition costs and higher expenses pressured margins despite revenue growth. Shares of F5 Networks declined in value amid slowing revenue growth based on reduced or delayed orders by its largest customers and loss of market share to software-oriented businesses. Key individual detractors included an off-benchmark holding in Canadian athletic apparel maker Lululemon Athletica, whose share price declined after it announced a management change in June and provided a weak fourth quarter earnings outlook.

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

The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2013, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

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Fund Expenses

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

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

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

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

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

Actual Fund Expenses

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

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

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

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

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

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

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

Franklin Small-Mid Cap Growth Securities Fund Class 4

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Hypothetical Example for Comparison with Other Mutual Funds

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

Class 4	Beginning Account Value 7/1/13		Ending Account Value 12/31/13		Fund-Level Expenses Incurred During Period* 7/1/13–12/31/13
Actual	$	1,000	$	1,203.60	$	6.33
Hypothetical (5% return before expenses)	$	1,000	$	1,019.46	$	5.80

*Expenses are calculated using the most recent six-month annualized expense ratio for the Fund’s Class 4 shares (1.14%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period.

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Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Franklin Small-Mid Cap Growth Securities Fund

	Year Ended December 31,
Class 1	2013			2012			2011			2010			2009
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	21.87		$	21.19		$	22.21		$	17.36		$	12.06
Income from investment operationsa:
Net investment income (loss)b		(0.09	)		(0.01	)c		(0.05	)		(0.01	)		(0.10	)d
Net realized and unrealized gains (losses)		8.19			2.27			(0.97	)		4.86			5.40
Total from investment operations		8.10			2.26			(1.02	)		4.85			5.30
Less distributions from net realized gains		(1.59	)		(1.58	)		—			—			—
Net asset value, end of year	$	28.38		$	21.87		$	21.19		$	22.21		$	17.36
Total returne		38.50%			11.12%			(4.59)%			27.94%			43.95%
Ratios to average net assets
Expenses		0.80%	f		0.80%			0.79%			0.79%			0.80%	f
Net investment income (loss)		(0.35)%			(0.03)%	c		(0.21)%			(0.07)%			(0.72)%	d
Supplemental data
Net assets, end of year (000’s)	$	98,020		$	75,977		$	76,384		$	89,826		$	79,670
Portfolio turnover rate	��	42.77%			41.44%			45.00%			46.69%			63.93%

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

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $0.03 per share received in the form of special dividends. Excluding these amounts, the ratio of net investment income to average net assets would have been (0.16)%.

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

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

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

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

FSC-8

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin Small-Mid Cap Growth Securities Fund

	Year Ended December 31,
Class 2	2013			2012			2011			2010			2009
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	21.04		$	20.49		$	21.54		$	16.87		$	11.75
Income from investment operationsa:
Net investment income (loss)b		(0.14	)		(0.06	)c		(0.10	)		(0.06	)		(0.13	)d
Net realized and unrealized gains (losses)		7.85			2.19			(0.95	)		4.73			5.25
Total from investment operations		7.71			2.13			(1.05	)		4.67			5.12
Less distributions from net realized gains		(1.59	)		(1.58	)		—			—			—
Net asset value, end of year	$	27.16		$	21.04		$	20.49		$	21.54		$	16.87
Total returne		38.15%			10.85%			(4.87)%			27.68%			43.57%
Ratios to average net assets
Expenses		1.05%	f		1.05%			1.04%			1.04%			1.05%	f
Net investment income (loss)		(0.60)%			(0.28)%	c		(0.46)%			(0.32)%			(0.97)%	d
Supplemental data
Net assets, end of year (000’s)	$	660,806		$	670,193		$	717,086		$	939,481		$	813,480
Portfolio turnover rate		42.77%			41.44%			45.00%			46.69%			63.93%

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

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $0.03 per share received in the form of special dividends. Excluding these amounts, the ratio of net investment income to average net assets would have been (0.41)%.

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

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

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

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

FSC-9

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin Small-Mid Cap Growth Securities Fund

	Year Ended December 31,
Class 4	2013			2012			2011			2010			2009
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	21.47		$	20.90		$	21.98		$	17.24		$	12.02
Income from investment operationsa:
Net investment income (loss)b		(0.17	)		(0.09	)c		(0.12	)		(0.07	)		(0.15	)d
Net realized and unrealized gains (losses)		8.01			2.24			(0.96	)		4.81			5.37
Total from investment operations		7.84			2.15			(1.08	)		4.74			5.22
Less distributions from net realized gains		(1.59	)		(1.58	)		—			—			—
Net asset value, end of year	$	27.72		$	21.47		$	20.90		$	21.98		$	17.24
Total returne		37.99%			10.79%			(4.91)%			27.49%			43.43%
Ratios to average net assets
Expenses		1.15%	f		1.15%			1.14%			1.14%			1.15%	f
Net investment income (loss)		(0.70)%			(0.38)%	c		(0.56)%			(0.42)%			(1.07)%	d
Supplemental data
Net assets, end of year (000’s)	$	19,132		$	12,000		$	12,664		$	15,413		$	11,029
Portfolio turnover rate		42.77%			41.44%			45.00%			46.69%			63.93%

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

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $0.03 per share received in the form of special dividends. Excluding these amounts, the ratio of net investment income to average net assets would have been (0.51)%.

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

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

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

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

FSC-10

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013

Franklin Small-Mid Cap Growth Securities Fund	Country	Shares		Value
Common Stocks 98.8%
Consumer Discretionary 24.9%
a AMC Networks Inc., A	United States		68,200	$	4,645,102
a Bally Technologies Inc.	United States		36,100		2,832,045
BorgWarner Inc.	United States		142,800		7,983,948
a BRP Inc.	Canada		224,600		6,375,456
a Buffalo Wild Wings Inc.	United States		36,300		5,343,360
a Charter Communications Inc., A	United States		25,700		3,514,732
a Chipotle Mexican Grill Inc.	United States		14,300		7,618,754
Dick’s Sporting Goods Inc.	United States		161,200		9,365,720
a Dollar General Corp.	United States		151,700		9,150,544
GNC Holdings Inc., A	United States		127,500		7,452,375
Harman International Industries Inc.	United States		67,800		5,549,430
a HomeAway Inc.	United States		150,300		6,144,264
a Imax Corp.	Canada		83,800		2,470,424
a Jarden Corp.	United States		204,900		12,570,615
a Liberty Media Corp., A	United States		30,400		4,452,080
a Lululemon Athletica Inc.	Canada		73,900		4,362,317
a Michael Kors Holdings Ltd.	United States		71,600		5,813,204
a Netflix Inc.	United States		12,000		4,418,040
PetSmart Inc.	United States		72,300		5,259,825
Ralph Lauren Corp.	United States		44,100		7,786,737
Ross Stores Inc.	United States		78,400		5,874,512
The Ryland Group Inc.	United States		80,300		3,485,823
a Shutterfly Inc.	United States		79,100		4,028,563
Starwood Hotels & Resorts Worldwide Inc.	United States		85,900		6,824,755
a Starz, A	United States		98,100		2,868,444
a Tenneco Inc.	United States		129,800		7,342,786
Tractor Supply Co.	United States		101,000		7,835,580
a Under Armour Inc., A	United States		100,288		8,755,142
Wolverine World Wide Inc.	United States		382,200		12,979,512
Wynn Resorts Ltd.	United States		52,900		10,273,709
					193,377,798
Consumer Staples 4.8%
a Boston Beer Inc., A	United States		34,200		8,269,218
Mead Johnson Nutrition Co., A	United States		111,000		9,297,360
a Monster Beverage Corp.	United States		89,500		6,065,415
a TreeHouse Foods Inc.	United States		85,900		5,920,228
Whole Foods Market Inc.	United States		139,800		8,084,634
					37,636,855
Energy 4.7%
Cabot Oil & Gas Corp., A	United States		141,800		5,496,168
a Cameron International Corp.	United States		93,000		5,536,290
a Diamondback Energy Inc.	United States		105,200		5,560,872
a FMC Technologies Inc.	United States		61,100		3,190,031
Oceaneering International Inc.	United States		44,500		3,510,160
a,b Sanchez Energy Corp.	United States		106,100		2,600,511
SM Energy Co.	United States		33,900		2,817,429
a Southwestern Energy Co.	United States		94,700		3,724,551
a Superior Energy Services Inc.	United States		142,600		3,794,586
					36,230,598
Financials 6.5%
a Affiliated Managers Group Inc.	United States		60,600		13,142,928

FSC-11

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin Small-Mid Cap Growth Securities Fund	Country	Shares		Value
Common Stocks (continued)
Financials (continued)
b Digital Realty Trust Inc.	United States		40,700	$	1,999,184
IntercontinentalExchange Group Inc.	United States		42,108		9,470,931
Jones Lang LaSalle Inc.	United States		35,300		3,614,367
Lazard Ltd., A	United States		168,100		7,618,292
a Signature Bank/New York NY	United States		88,300		9,485,186
T. Rowe Price Group Inc.	United States		67,300		5,637,721
					50,968,609
Health Care 16.2%
a Actavis PLC	United States		63,100		10,600,800
Agilent Technologies Inc.	United States		99,100		5,667,529
a Alexion Pharmaceuticals Inc.	United States		42,900		5,708,274
a Alnylam Pharmaceuticals Inc.	United States		55,300		3,557,449
a BioMarin Pharmaceutical Inc.	United States		30,500		2,143,235
a CareFusion Corp.	United States		74,300		2,958,626
a Catamaran Corp.	Canada		116,200		5,517,176
a Celldex Therapeutics Inc.	United States		227,500		5,507,775
a Cerner Corp.	United States		111,400		6,209,436
The Cooper Cos. Inc.	United States		40,700		5,040,288
a DaVita HealthCare Partners Inc.	United States		114,600		7,262,202
a Edwards Lifesciences Corp.	United States		38,100		2,505,456
a Envision Healthcare Holdings Inc.	United States		155,900		5,537,568
a HCA Holdings Inc.	United States		160,200		7,643,142
a HeartWare International Inc.	United States		33,406		3,138,828
a HMS Holdings Corp.	United States		42,900		975,117
a Illumina Inc.	United States		45,700		5,055,334
a Laboratory Corp. of America Holdings	United States		34,200		3,124,854
a Medivation Inc.	United States		55,846		3,564,092
a Mettler-Toledo International Inc.	United States		32,200		7,811,398
Perrigo Co., PLC	United States		62,686		9,619,761
a Sagent Pharmaceuticals Inc.	United States		167,800		4,258,764
St. Jude Medical Inc.	United States		80,900		5,011,755
a Vertex Pharmaceuticals Inc.	United States		51,900		3,856,170
Zoetis Inc.	United States		120,900		3,952,221
					126,227,250
Industrials 20.4%
a The Advisory Board Co.	United States		34,300		2,183,881
Allegiant Travel Co.	United States		49,712		5,241,633
AMETEK Inc.	United States		285,100		15,016,217
a B/E Aerospace Inc.	United States		85,800		7,467,174
a Colfax Corp.	United States		101,600		6,470,904
Delta Air Lines Inc.	United States		159,200		4,373,224
a DigitalGlobe Inc.	United States		184,000		7,571,600
Flowserve Corp.	United States		120,300		9,483,249
a Genesee & Wyoming Inc.	United States		61,400		5,897,470
a Hertz Global Holdings Inc.	United States		139,900		4,003,938
a Hexcel Corp.	United States		144,800		6,471,112
Hubbell Inc., B	United States		29,600		3,223,440
a IHS Inc., A	United States		73,800		8,833,860
Interface Inc.	United States		95,800		2,103,768
J.B. Hunt Transport Services Inc.	United States		68,400		5,287,320
a Jacobs Engineering Group Inc.	United States		53,300		3,357,367
Kansas City Southern	United States		47,100		5,832,393

FSC-12

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin Small-Mid Cap Growth Securities Fund	Country	Shares		Value
Common Stocks (continued)
Industrials (continued)
The Manitowoc Co. Inc.	United States		283,400	$	6,608,888
Pall Corp.	United States		76,900		6,563,415
Robert Half International Inc.	United States		161,400		6,777,186
Rockwell Automation Inc.	United States		34,300		4,052,888
Roper Industries Inc.	United States		91,870		12,740,532
a Spirit Airlines Inc.	United States		95,200		4,323,032
a United Rentals Inc.	United States		102,300		7,974,285
a Verisk Analytics Inc., A	United States		55,500		3,647,460
W.W. Grainger Inc.	United States		13,700		3,499,254
					159,005,490
Information Technology 17.2%
a Alliance Data Systems Corp.	United States		38,300		10,070,219
a ANSYS Inc.	United States		99,100		8,641,520
Avago Technologies Ltd.	Singapore		155,000		8,197,950
a Bottomline Technologies Inc.	United States		121,900		4,407,904
a Demandware Inc.	United States		32,300		2,071,076
a Electronic Arts Inc.	United States		107,200		2,459,168
a FleetCor Technologies Inc.	United States		48,800		5,717,896
a Global Eagle Entertainment Inc.	United States		112,200		1,668,414
Intersil Corp., A	United States		315,000		3,613,365
a JDS Uniphase Corp.	United States		343,300		4,456,034
a Lam Research Corp.	United States		108,500		5,907,825
a LinkedIn Corp., A	United States		34,200		7,415,586
Maxim Integrated Products Inc.	United States		130,400		3,639,464
National Instruments Corp.	United States		78,300		2,507,166
a NetSuite Inc.	United States		36,100		3,719,022
a Nortel Networks Corp.	Canada		4		—
a NXP Semiconductors NV	Netherlands		201,600		9,259,488
a Palo Alto Networks Inc.	United States		41,900		2,407,993
a Pandora Media Inc.	United States		121,500		3,231,900
a Red Hat Inc.	United States		60,800		3,407,232
a Semtech Corp.	United States		102,500		2,591,200
a ServiceNow Inc.	United States		94,200		5,276,142
a Silicon Laboratories Inc.	United States		103,000		4,460,930
a Stratasys Ltd.	United States		20,104		2,708,009
a Trimble Navigation Ltd.	United States		285,300		9,899,910
a,b Twitter Inc.	United States		32,800		2,087,720
a ViaSat Inc.	United States		72,500		4,542,125
a Workday Inc.	United States		21,200		1,762,992
Xilinx Inc.	United States		120,700		5,542,544
a Yelp Inc.	United States		33,400		2,302,930
					133,973,724
Materials 2.1%
Airgas Inc.	United States		55,900		6,252,415
Cytec Industries Inc.	United States		57,200		5,328,752
H.B. Fuller Co.	United States		85,713		4,460,505
					16,041,672
Telecommunication Services 1.2%
a SBA Communications Corp.	United States		100,200		9,001,968

FSC-13

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin Small-Mid Cap Growth Securities Fund	Country	Shares		Value
Common Stocks (continued)
Utilities 0.8%
a Calpine Corp.	United States		333,700	$	6,510,487
Total Common Stocks (Cost $447,472,979)					768,974,451
Short Term Investments 2.1%
Money Market Funds (Cost $9,817,245) 1.3%
a,c Institutional Fiduciary Trust Money Market Portfolio	United States		9,817,245		9,817,245
dInvestments from Cash Collateral Received for Loaned Securities (Cost $6,112,575) 0.8%
Money Market Funds 0.8%
e BNY Mellon Overnight Government Fund, 0.017%	United States		6,112,575		6,112,575
Total Investments (Cost $463,402,799) 100.9%					784,904,271
Other Assets, less Liabilities (0.9)%					(6,945,787	)
Net Assets 100.0%				$	777,958,484

^aNon-income producing.

^bA portion or all of the security is on loan at December 31, 2013. See Note 1(c).

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

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

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

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

FSC-14

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

December 31, 2013

	Franklin Small-Mid Cap Growth Securities Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	453,585,554
Cost - Sweep Money Fund (Note 7)		9,817,245
Total cost of investments	$	463,402,799
Value - Unaffiliated issuers	$	775,087,026
Value - Sweep Money Fund (Note 7)		9,817,245
Total value of investments (includes securities loaned in the amount of $6,115,761)		784,904,271
Receivables:
Investment securities sold		1,000,636
Capital shares sold		117,783
Dividends and interest		288,194
Other assets		75
Total assets		786,310,959
Liabilities:
Payables:
Investment securities purchased		103,498
Capital shares redeemed		1,147,510
Management fees		494,488
Distribution fees		280,575
Payable upon return of securities loaned		6,112,575
Accrued expenses and other liabilities		213,829
Total liabilities		8,352,475
Net assets, at value	$	777,958,484
Net assets consist of:
Paid-in capital	$	314,807,747
Undistributed net investment income		2,662
Net unrealized appreciation (depreciation)		321,501,472
Accumulated net realized gain (loss)		141,646,603
Net assets, at value	$	777,958,484
Class 1:
Net assets, at value	$	98,019,912
Shares outstanding		3,453,316
Net asset value and maximum offering price per share	$	28.38
Class 2:
Net assets, at value	$	660,806,191
Shares outstanding		24,330,254
Net asset value and maximum offering price per share	$	27.16
Class 4:
Net assets, at value	$	19,132,381
Shares outstanding		690,212
Net asset value and maximum offering price per share	$	27.72

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

FSC-15

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the year ended December 31, 2013

	Franklin Small-Mid Cap Growth Securities Fund
Investment income:
Dividends	$	3,282,357
Income from securities loaned		76,531
Total investment income		3,358,888
Expenses:
Management fees (Note 3a)		5,130,037
Administrative fees (Note 3b)		656,155
Distribution fees: (Note 3c)
Class 2		1,639,537
Class 4		52,187
Unaffiliated transfer agent fees		981
Custodian fees (Note 4)		6,906
Reports to shareholders		175,194
Professional fees		46,946
Trustees’ fees and expenses		3,030
Other		20,848
Total expenses		7,731,821
Expense reductions (Note 4)		(14	)
Net expenses		7,731,807
Net investment income (loss)		(4,372,919	)
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		148,347,375
Foreign currency transactions		13,360
Net realized gain (loss)		148,360,735
Net change in unrealized appreciation (depreciation) on investments		103,931,403
Net realized and unrealized gain (loss)		252,292,138
Net increase (decrease) in net assets resulting from operations	$	247,919,219

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

FSC-16

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets

	Franklin Small-Mid Cap Growth Securities Fund
	Year Ended December 31,
	2013			2012
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	(4,372,919	)	$	(2,100,633	)
Net realized gain (loss) from investments and foreign currency transactions		148,360,735			45,009,702
Net change in unrealized appreciation (depreciation) on investments		103,931,403			40,911,343
Net increase (decrease) in net assets resulting from operations		247,919,219			83,820,412
Distributions to shareholders from:
Net realized gains:
Class 1		(5,305,025	)		(5,398,642	)
Class 2		(39,304,696	)		(51,973,132	)
Class 4		(836,392	)		(1,174,175	)
Total distributions to shareholders		(45,446,113	)		(58,545,949	)
Capital share transactions: (Note 2)
Class 1		(739,844	)		(3,317,419	)
Class 2		(185,107,692	)		(69,375,316	)
Class 4		3,163,185			(546,347	)
Total capital share transactions		(182,684,351	)		(73,239,082	)
Net increase (decrease) in net assets		19,788,755			(47,964,619	)
Net assets:
Beginning of year		758,169,729			806,134,348
End of year	$	777,958,484		$	758,169,729
Undistributed net investment income included in net assets:
End of year	$	2,662		$	825

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

FSC-17

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements

Franklin Small-Mid Cap Growth Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment company, consisting of twenty separate funds. The Franklin Small-Mid Cap Growth Securities Fund (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. At December 31, 2013, 45.10% of the Fund’s shares were held through one insurance company. Investment activities of these insurance company separate accounts could have a material impact on the Fund. The Fund offers three classes of shares: Class 1, Class 2, and Class 4. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

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

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

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

Trading in securities on foreign securities stock exchanges and OTC markets may be completed before the daily NYSE close. In addition, trading in certain foreign markets may not take place on every NYSE business day. Occasionally, events occur between the time at which trading in a foreign security is completed and the close of the NYSE that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund’s portfolio securities as determined at the foreign market close and the latest indications of value at the close of the NYSE. In order to minimize the potential for these differences, the VLOC monitors price movements following the close of trading in foreign stock

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin Small-Mid Cap Growth Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

a. Financial Instrument Valuation (continued)

markets through a series of country specific market proxies (such as baskets of American Depositary Receipts, futures contracts and exchange traded funds). These price movements are measured against established trigger thresholds for each specific market proxy to assist in determining if an event has occurred that may call into question the reliability of the values of the foreign securities held by the Fund. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services.

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

b. Foreign Currency Translation

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

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

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

c. Securities Lending

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

d. Income and Deferred Taxes

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

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin Small-Mid Cap Growth Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

d. Income and Deferred Taxes (continued)

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

The Fund recognizes the tax benefits of uncertain tax positions only when the position is “more likely than not” to be sustained upon examination by the tax authorities based on the technical merits of the tax position. As of December 31, 2013, and for all open tax years, the Fund has determined that no liability for unrecognized tax benefits is required in the Fund’s financial statements related to uncertain tax positions taken on a tax return (or expected to be taken on future tax returns). Open tax years are those that remain subject to examination and are based on each tax jurisdiction statute of limitation.

e. Security Transactions, Investment Income, Expenses and Distributions

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

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

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

f. Accounting Estimates

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

g. Guarantees and Indemnifications

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

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin Small-Mid Cap Growth Securities Fund

2. SHARES OF BENEFICIAL INTEREST

At December 31, 2013, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:

	Year Ended December 31,
	2013						2012
Class 1 Shares:	Shares			Amount			Shares			Amount
Shares sold		208,707		$	5,257,737			113,036		$	2,509,688
Shares issued in reinvestment of distributions		224,030			5,305,025			261,943			5,398,642
Shares redeemed		(452,875	)		(11,302,606	)		(505,605	)		(11,225,749	)
Net increase (decrease)		(20,138	)	$	(739,844	)		(130,626	)	$	(3,317,419	)
Class 2 Shares:
Shares sold		1,537,143		$	36,852,173			2,025,093		$	43,908,851
Shares issued in reinvestment of distributions		1,732,248			39,304,696			2,618,294			51,973,132
Shares redeemed		(10,791,872	)		(261,264,561	)		(7,781,173	)		(165,257,299	)
Net increase (decrease)		(7,522,481	)	$	(185,107,692	)		(3,137,786	)	$	(69,375,316	)
Class 4 Shares:
Shares sold		272,840		$	6,706,822			217,367		$	4,998,926
Shares issued on reinvestment of distributions		36,098			836,392			57,955			1,174,175
Shares redeemed		(177,757	)		(4,380,029	)		(322,353	)		(6,719,448	)
Net increase (decrease)		131,181		$	3,163,185			(47,031	)	$	(546,347	)

3. TRANSACTIONS WITH AFFILIATES

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

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

a. Management Fees

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

Annualized Fee Rate	Net Assets
0.800%	Up to and including $500 million
0.700%	Over $500 million, up to and including $1 billion
0.650%	Over $1 billion, up to and including $1.5 billion
0.600%	Over $1.5 billion, up to and including $6.5 billion
0.575%	Over $6.5 billion, up to and including $11.5 billion
0.550%	Over $11.5 billion, up to and including $16.5 billion
0.540%	Over $16.5 billion, up to and including $19 billion
0.530%	Over $19 billion, up to and including $21.5 billion
0.520%	In excess of $21.5 billion

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin Small-Mid Cap Growth Securities Fund

3. TRANSACTIONS WITH AFFILIATES (continued)

a. Management Fees (continued)

Effective May 1, 2013, the Fund combined its investment management and administration agreements as approved by the Board. The fees paid under the combined agreement do not exceed the aggregate fees that were paid under the separate agreements.

Prior to May 1, 2013, the Fund paid fees to Advisers based on the average daily net assets of the Fund as follows:

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

b. Administrative Fees

Effective May 1, 2013, 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.

Prior to May 1, 2013, the Fund paid administrative fees to FT Services of 0.25% per year of the average daily net assets of the Fund.

c. Distribution Fees

The Board has adopted distribution plans for Class 2 and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to 0.35% per year of its average daily net assets of each class. Some distribution fees are not charged on shares held by affiliates. The Board has agreed to limit the current rate to 0.25% per year for Class 2. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.

d. Transfer Agent Fees

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

4. EXPENSE OFFSET ARRANGEMENT

The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses. During the year ended December 31, 2013, the custodian fees were reduced as noted in the Statement of Operations.

5. INCOME TAXES

The tax character of distributions paid during the years ended December 31, 2013 and 2012, was as follows:

	2013		2012
Distributions paid from long term capital gain:	$	45,446,113	$	58,545,949

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin Small-Mid Cap Growth Securities Fund

5. INCOME TAXES (continued)

At December 31, 2013, 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	$	463,856,844
Unrealized appreciation	$	325,491,570
Unrealized depreciation	$	(4,444,143	)
Net unrealized appreciation (depreciation)	$	321,047,427
Undistributed ordinary income	$	16,710,176
Undistributed long term capital gains		125,393,135
Distributable earnings	$	142,103,311

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

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the year ended December 31, 2013, aggregated $317,073,888 and $548,237,796, respectively.

7. INVESTMENTS IN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO

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

8. CREDIT FACILITY

The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $1.5 billion (Global Credit Facility) which, after an extension of the original terms, matured on February 14, 2014. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. Effective February 14, 2014, the Borrowers renewed the Global Credit Facility which matures on February 13, 2015.

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.07% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses on the Statement of Operations. During the year ended December 31, 2013, the Fund did not use the Global Credit Facility.

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin Small-Mid Cap Growth Securities Fund

9. FAIR VALUE MEASUREMENTS

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

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

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

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

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

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

A summary of inputs used as of December 31, 2013, in valuing the Fund’s assets carried at fair value, is as follows:

	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities:
Equity Investmentsa	$	768,974,451	$	—	$	—	$	768,974,451
Short Term Investments		9,817,245		6,112,575		—		15,929,820
Total Investments in Securities	$	778,791,696	$	6,112,575	$	—	$	784,904,271

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

10. NEW ACCOUNTING PRONOUNCEMENTS

In June 2013, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2013-08, Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements. The ASU modifies the criteria used in defining an investment company under U.S. Generally Accepted Accounting Principles and also sets forth certain measurement and disclosure requirements. Under the ASU, an entity that is registered under the 1940 Act automatically qualifies as an investment company. The ASU is effective for interim and annual reporting periods beginning after December 15, 2013. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the financial statements.

11. SUBSEQUENT EVENTS

The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure other than those already disclosed in the financial statements.

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Franklin Templeton Variable Insurance Products Trust

Franklin Small-Mid Cap Growth Securities Fund

Report of Independent Registered Public Accounting Firm

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-Mid Cap Growth Securities Fund (the “Fund”) at December 31, 2013, 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 five years in the period then ended, 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2013 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

February 14, 2014

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Franklin Templeton Variable Insurance Products Trust

Tax Information (unaudited)

Franklin Small-Mid Cap Growth Securities Fund

Under Section 852(b)(3)(C) of the Internal Revenue Code, the Fund hereby reports the maximum amount allowable but no less than $45,446,113 as a long term capital gain dividend for the fiscal year ended December 31, 2013.

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FRANKLIN STRATEGIC INCOME SECURITIES FUND

We are pleased to bring you Franklin Strategic Income Securities Fund’s annual report for the fiscal year ended December 31, 2013.

Performance Summary as of 12/31/13

Average annual total return of Class 4 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.

Periods ended 12/31/13

	1-Year		5-Year		10-Year
Average Annual Total Return		+3.17%		+10.63%		+6.61%

*For the period beginning 2/29/08, Class 4 performance reflects a 12b-1 fee expense of 0.35% per year, which affects future performance. Class 4 performance prior to 2/29/08 reflects historical Class 1 performance, which does not have a 12b-1 fee expense. Since 2/29/08 (effective date), the average annual total return of Class 4 shares was +6.74%. The Fund has a fee waiver associated with its investments in a Franklin Templeton money fund, contractually guaranteed through at least its current fiscal year end. Fund investment results reflect the fee waiver, to the extent applicable; without this reduction, the results would have been lower.

Total Return Index Comparison

for a Hypothetical $10,000 Investment (1/1/04–12/31/13)

The graph below shows the change in value of a hypothetical $10,000 investment in the Fund over the indicated period and includes reinvestment of any income or distributions. The Fund’s performance* is compared to the performance of the Barclays U.S. Aggregate Index and the Lipper Multi-Sector Income Funds Classification Average. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Important Notes to Performance Information preceding the Fund Summaries.

**Source: © 2014 Morningstar. Please see Index Descriptions following the Fund Summaries.

***Source: Lipper Inc. Please see Index Descriptions following the Fund Summaries.

Franklin Strategic Income Securities Fund – Class 4

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

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

Current performance may differ from figures shown.

FSI-1

Fund Goals and Main Investments: Franklin Strategic Income Securities Fund seeks a high level of current income, with capital appreciation over the long term as a secondary goal. Under normal market conditions, the Fund invests primarily to predominantly in U.S. and foreign debt securities, including those in emerging markets.

Performance Overview

You can find the Fund’s one-year total return in the Performance Summary. For comparison, the Fund’s benchmark, the Barclays U.S. Aggregate Index, had a -2.02% total return for the period under review.¹ The Fund’s peers, as measured by the Lipper Multi-Sector Income Funds Classification Average, posted a +1.70% return.²

Economic and Market Overview

The U.S. economy showed ongoing signs of recovery during the 12-month period ended December 31, 2013, especially in the second half, driven by consumer spending and rising inventories. In addition, business investment, net exports, and state and local government spending picked up in the second quarter, somewhat offsetting the impact of federal budget cuts. Historically low mortgage rates and improving sentiment aided the housing market recovery, evidenced by solid new and existing home sales, rising home prices, low inventories and multi-year lows in new foreclosures. Manufacturing expanded for most of the period under review, and the unemployment rate declined to 6.7% in December from 7.8% a year earlier.³ Inflation remained well below the Federal Reserve Board’s (Fed’s) 2.0% target.

At the start of 2013, the Fed expanded its asset purchase program to $85 billion per month from $40 billion of mortgage-backed securities. Fed Chairman Ben Bernanke indicated in May that the Fed might reduce monthly asset purchases, triggering a bond market sell-off that raised long-term U.S. Treasury yields to a two-year high. In September and October, long-term yields retreated after the Fed reassured investors it would maintain its current pace of purchases as it awaited more evidence of a sustainable economic expansion. In December, the Fed announced it would reduce its bond purchases $10 billion a month beginning in January 2014 while keeping interest rates low. After the announcement, yields on U.S. Treasuries remained largely stable.

1. Source: © 2014 Morningstar.

2. Source: Lipper Inc.

One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio.

Please see Index Descriptions following the Fund Summaries.

3. Source: Bureau of Labor Statistics.

Fund Risks: All investments involve risks, including possible loss of principal. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in the Fund adjust to a rise in interest rates, the Fund’s share price may decline. High yields reflect the higher credit risks associated with certain lower rated securities held in the portfolio. Floating rate loans and high yield corporate bonds are rated below investment grade and are subject to greater risk of default, which could result in loss of principal — a risk that may be heightened in a slowing economy. The risks of foreign securities include currency fluctuations and political uncertainty. Investments in developing markets involve heightened risks related to the same factors, in addition to those associated with their relatively small size and lesser liquidity. Investing in derivative securities and the use of foreign currency techniques involve special risks as such may not achieve the anticipated benefits and/or may result in losses to the Fund. Changes in the financial strength of a bond issuer or in a bond’s credit rating may affect its value. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

FSI-2

Although the Fed’s asset purchase program continued to put downward pressure on long-term interest rates, investor concerns about the eventual reduction of asset purchases pushed the 10-year U.S. Treasury note yield to 3.04% at period-end from 1.78% on December 31, 2012.

Outside of the U.S., economic recovery was mixed during the year under review. The recovery in emerging markets moderated after many economies had previously returned to and exceeded pre-crisis activity levels. Although some developed economies, such as those of Australia and some Scandinavian countries, have enjoyed relatively strong recoveries in the aftermath of the global financial crisis, growth in the eurozone and Japan continued to be slow by the standards of previous recoveries. Improving sentiment, relatively strong fundamentals continued provision of global liquidity supported assets perceived risky and equity markets performed well.

Investment Strategy

We allocate our investments among the various types of debt available based on our assessment of changing economic, global market, industry and issuer conditions. We use a top-down analysis of macroeconomic trends, combined with a bottom-up fundamental analysis of market sectors, industries and issuers, seeking to take advantage of varying sector reactions to economic events. For example, we may evaluate business cycles, yield curves, country risk, and the relative interest rates among currencies, and values between and within markets. In selecting debt securities, we generally conduct our own analysis of the security’s intrinsic value rather than simply relying on the coupon rate or rating. We may also enter into various transactions involving certain currency-, interest rate- or credit-related derivative instruments for hedging purposes, to enhance returns or to obtain exposure to various market sectors.

Manager’s Discussion

Global economic and political headlines affected fixed income markets in 2013. In the U.S., the Fed chairman’s comments regarding the potential tapering of the Fed’s quantitative easing program led to financial market volatility. Consequently, U.S. longer term interest rates rose and the 10-year Treasury note yield climbed. Investors turned their attention toward the U.S. budget and debt ceiling during the second half of the year. Although decisions on these issues were essentially delayed until early 2014, uncertainty contributed to market volatility. The stock market largely shrugged off these concerns amid earnings growth and

FSI-3

stocks’ lesser rate sensitivity, and U.S. stocks, as measured by the Standard & Poor’s^® 500 Index, gained 32.39% during the period.⁴

The Fund’s overweighted exposure to noninvestment-grade corporate credit sectors positively impacted performance compared to the longer duration and more interest rate-sensitive Barclays U.S. Aggregate Index. Compared to the Lipper peer average, the Fund’s overweighted floating rate loan market allocation bolstered relative Fund returns.

Healthy balance sheet liquidity, issuers’ easy access to public debt markets for capital, rising equity markets and generally increasing corporate earnings supported corporate credit sectors. In this environment, high yield and leveraged corporate loan sector default rates remained below their long-term averages. However, continued shareholder-friendly activity, including dividend increases, share repurchases, and merger and acquisition activity as the global economic recovery sustained its momentum, could lead to higher default rates over time. Overall, spread sector valuations relative to fundamental credit trends still appeared attractive to us, and the Fund maintained significant weightings in the high yield, investment-grade and leveraged loan credit sectors. Given leveraged loans’ outperformance during mid-2013 as U.S. interest rates rose, the Fund reduced its loan exposure and added exposure to high yield corporate bonds.

Concerns regarding a potential slowdown in China’s economic growth and investment demand resulted in mixed performance for non-U.S. bonds held in underlying currencies. The rise in U.S. interest rates strengthened the U.S. dollar, weighing on certain Fund non-dollar holdings. Investor redemptions from certain dedicated emerging market debt funds also pressured hard currency- and local currency-denominated emerging market bonds. In particular, certain Asian currency positions, such as the Indian rupee and Indonesian rupiah, fell in value against the U.S. dollar, as did Latin American positions based in the Brazilian real and Chilean peso. In contrast, weakness in the Japanese yen, which was exacerbated by the country’s major quantitative easing program, positively contributed to Fund performance. (The Fund held a short position in the yen, achieved through currency forward contracts.) Although we found opportunities in select foreign currencies and yield curves, the Fund reduced its foreign non-dollar global bond exposure during the period. For U.S. dollar-denominated emerging market sovereign bonds, the rise in U.S. interest rates weighed on bond prices. However, the Fund maintained a fairly modest sector position.

4. Please see Index descriptions following the Fund summaries.

What is a credit derivative?

A credit derivative is a contract agreement between the Fund and a counterparty that is principally used by the Fund to gain or increase exposure to certain high yield securities or segments of the high yield bond market and/or to hedge against credit risk.

What is a currency forward contract?

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

FSI-4

With the rise in intermediate and longer term interest rates, the more rate-sensitive U.S. fixed income sectors such as Treasuries, agencies and mortgage-backed securities had negative total returns during the period. Considering historically low U.S. interest rates, the Fund held an underweighted exposure to these sectors as we preferred higher income opportunities in the corporate and global bond markets. In the municipal bond market, the U.S. interest rate rise and negative headlines regarding Detroit and Puerto Rico contributed to investor outflows from dedicated municipal bond funds, pressuring bond prices. As valuations cheapened relative to other investment-grade bond sectors, the Fund added to its municipal bond exposure.

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

The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2013, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

FSI-5

Fund Expenses

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

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

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

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

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

Actual Fund Expenses

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

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

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

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

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

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

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

Franklin Strategic Income Securities Fund – Class 4

FSI-6

Hypothetical Example for Comparison with Other Mutual Funds

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

Class 4	Beginning Account Value 7/1/13		Ending Account Value 12/31/13		Fund-Level Expenses Incurred During Period* 7/1/13–12/31/13
Actual	$	1,000	$	1,034.70	$	4.92
Hypothetical (5% return before expenses)	$	1,000	$	1,020.37	$	4.89

*Expenses are calculated using the most recent six-month annualized expense ratio for the Fund’s Class 4 shares (0.96%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period.

FSI-7

Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Franklin Strategic Income Securities Fund

	Year Ended December 31,
Class 1	2013			2012			2011			2010			2009
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	13.17		$	12.55		$	12.99		$	12.28		$	10.58
Income from investment operationsa:
Net investment incomeb		0.59			0.65			0.69			0.72			0.70
Net realized and unrealized gains (losses)		(0.15	)		0.92			(0.32	)		0.61			1.95
Total from investment operations		0.44			1.57			0.37			1.33			2.65
Less distributions from:
Net investment income and net of foreign currency gains		(0.80	)		(0.93	)		(0.81	)		(0.62	)		(0.95	)
Net realized gains		(0.17	)		(0.02	)		—			—			—
Total distributions		(0.97	)		(0.95	)		(0.81	)		(0.62	)		(0.95	)
Net asset value, end of year	$	12.64		$	13.17		$	12.55		$	12.99		$	12.28
Total returnc		3.52%			13.12%			2.78%			11.21%			26.11%
Ratios to average net assets
Expenses		0.60%	d		0.58%			0.60%	d		0.59%	d		0.58%	d
Net investment income		4.58%			5.04%			5.36%			5.71%			6.13%
Supplemental data
Net assets, end of year (000’s)	$	705,493		$	1,019,537		$	1,043,690		$	1,195,149		$	1,173,313
Portfolio turnover rate		48.06%			49.98%			55.65%			56.46%			56.19%
Portfolio turnover rate excluding mortgage dollar rollse		47.01%			48.75%			55.65%			56.46%			56.19%

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

^bBased on average daily shares outstanding.

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

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

^eSee Note 1(h) regarding mortgage dollar rolls.

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

FSI-8

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin Strategic Income Securities Fund

	Year Ended December 31,
Class 2	2013			2012			2011			2010			2009
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	12.84		$	12.27		$	12.72		$	12.05		$	10.41
Income from investment operationsa:
Net investment incomeb		0.54			0.60			0.64			0.68			0.66
Net realized and unrealized gains (losses)		(0.13	)		0.89			(0.30	)		0.59			1.91
Total from investment operations		0.41			1.49			0.34			1.27			2.57
Less distributions from:
Net investment income and net of foreign currency gains		(0.78	)		(0.90	)		(0.79	)		(0.60	)		(0.93	)
Net realized gains		(0.17	)		(0.02	)		—			—			—
Total distributions		(0.95	)		(0.92	)		(0.79	)		(0.60	)		(0.93	)
Net asset value, end of year	$	12.30		$	12.84		$	12.27		$	12.72		$	12.05
Total returnc		3.32%			12.75%			2.57%			10.91%			25.75%
Ratios to average net assets
Expenses		0.85%	d		0.83%			0.85%	d		0.84%	d		0.83%	d
Net investment income		4.33%			4.79%			5.11%			5.46%			5.88%
Supplemental data
Net assets, end of year (000’s)	$	175,307		$	158,451		$	123,749		$	101,347		$	68,240
Portfolio turnover rate		48.06%			49.98%			55.65%			56.46%			56.19%
Portfolio turnover rate excluding mortgage dollar rollse		47.01%			48.75%			55.65%			56.46%			56.19%

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

^bBased on average daily shares outstanding.

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

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

^eSee Note 1(h) regarding mortgage dollar rolls.

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

FSI-9

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin Strategic Income Securities Fund

	Year Ended December 31,
Class 4	2013			2012			2011			2010			2009
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	13.04		$	12.44		$	12.88		$	12.20		$	10.54
Income from investment operationsa:
Net investment incomeb		0.54			0.60			0.64			0.67			0.66
Net realized and unrealized gains (losses)		(0.14	)		0.91			(0.31	)		0.60			1.94
Total from investment operations		0.40			1.51			0.33			1.27			2.60
Less distributions from:
Net investment income and net of foreign currency gains		(0.76	)		(0.89	)		(0.77	)		(0.59	)		(0.94	)
Net realized gains		(0.17	)		(0.02	)		—			—			—
Total distributions		(0.93	)		(0.91	)		(0.77	)		(0.59	)		(0.94	)
Net asset value, end of year	$	12.51		$	13.04		$	12.44		$	12.88		$	12.20
Total returnc		3.17%			12.67%			2.46%			10.88%			25.52%
Ratios to average net assets
Expenses		0.95%	d		0.93%			0.95%	d		0.94%	d		0.93%	d
Net investment income		4.23%			4.69%			5.01%			5.36%			5.78%
Supplemental data
Net assets, end of year (000’s)	$	134,970		$	196,479		$	188,786		$	188,178		$	162,074
Portfolio turnover rate		48.06%			49.98%			55.65%			56.46%			56.19%
Portfolio turnover rate excluding mortgage dollar rollse		47.01%			48.75%			55.65%			56.46%			56.19%

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

^bBased on average daily shares outstanding.

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

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

^eSee Note 1(h) regarding mortgage dollar rolls.

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

FSI-10

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013

Franklin Strategic Income Securities Fund	Country	Shares			Value
Common Stocks and Other Equity Interests 0.3%
Consumer Services 0.2%
a,b,c Turtle Bay Resort	United States		1,901,449		$	1,749,333
Energy 0.0%†
a Bennu Oil & Gas LLC, A	United States		1,439			92,096
a Bennu Oil & Gas LLC, B	United States		225			—
						92,096
Materials 0.1%
a,c NewPage Holdings Inc.	United States		10,000			900,000
Transportation 0.0%†
a CEVA Holdings LLC	United Kingdom		224			213,066
Total Common Stocks and Other Equity Interests (Cost $4,785,349)						2,954,495
Convertible Preferred Stocks 0.0%†
Transportation 0.0%†
a CEVA Holdings LLC, cvt. pfd., A-1	United Kingdom		6			7,800
a CEVA Holdings LLC, cvt. pfd., A-2	United Kingdom		486			461,234
Total Convertible Preferred Stocks (Cost $731,856)						469,034
Preferred Stocks (Cost $625,000) 0.1%
Diversified Financials 0.1%
GMAC Capital Trust I, 8.125%, pfd.	United States		25,000			668,500
		Principal Amount*
Corporate Bonds 39.7%
Automobiles & Components 0.9%
d Avis Budget Finance PLC, senior note, 144A, 6.00%, 3/01/21	United States		1,400,000	EUR		2,056,888
Ford Motor Credit Co. LLC, senior note,
5.00%, 5/15/18	United States		1,000,000			1,114,501
8.125%, 1/15/20	United States		1,200,000			1,500,871
d General Motors Co., senior bond, 144A, 4.875%, 10/02/23	United States		2,400,000			2,442,000
The Goodyear Tire & Rubber Co., senior note, 6.50%, 3/01/21	United States		2,200,000			2,343,000
						9,457,260
Banks 1.6%
d Banco do Brasil SA, sub. note, 144A, 5.875%, 1/26/22	Brazil		3,500,000			3,377,500
CIT Group Inc., senior note,
5.375%, 5/15/20	United States		1,600,000			1,708,000
5.00%, 8/15/22	United States		2,500,000			2,447,907
HSBC USA Inc., sub. note, 5.00%, 9/27/20	United States		2,500,000			2,673,350
Regions Bank, sub. note, 7.50%, 5/15/18	United States		1,000,000			1,185,786
Royal Bank of Scotland Group PLC, sub. note, 6.125%, 12/15/22	United Kingdom		1,000,000			1,025,625
The Royal Bank of Scotland PLC, sub. note, 6.934%, 4/09/18	United Kingdom		2,300,000	EUR		3,598,652
						16,016,820
Capital Goods 1.2%
d Abengoa Finance SAU, senior note, 144A,
8.875%, 11/01/17	Spain		2,500,000			2,700,000
7.75%, 2/01/20	Spain		200,000			208,250
d KM Germany Holdings GmbH, secured note, 144A, 8.75%, 12/15/20	Germany		1,500,000	EUR		2,314,709
d Loxam SAS, senior sub. note, 144A, 7.375%, 1/24/20	France		1,000,000	EUR		1,473,504
Meritor Inc., senior note, 10.625%, 3/15/18	United States		2,500,000			2,668,750

FSI-11

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin Strategic Income Securities Fund	Country	Principal Amount*			Value
Corporate Bonds (continued)
Capital Goods (continued)
Navistar International Corp., senior note, 8.25%, 11/01/21	United States		1,500,000		$	1,560,000
Terex Corp., senior note, 6.00%, 5/15/21	United States		1,000,000			1,038,750
						11,963,963
Commercial & Professional Services 0.2%
d Algeco Scotsman Global Finance PLC, senior secured note, first lien, 144A,
8.50%, 10/15/18	United Kingdom		1,700,000			1,829,625
Consumer Durables & Apparel 0.7%
KB Home, senior note, 7.00%, 12/15/21	United States		1,600,000			1,672,000
M/I Homes Inc., senior note, 8.625%, 11/15/18	United States		1,800,000			1,957,500
Shea Homes LP/Funding Corp., senior secured note, 8.625%, 5/15/19	United States		1,000,000			1,112,500
Toll Brothers Finance Corp., senior bond, 5.625%, 1/15/24	United States		1,000,000			1,010,000
Visant Corp., senior note, 10.00%, 10/01/17	United States		1,600,000			1,560,000
						7,312,000
Consumer Services 1.0%
Caesars Entertainment Operating Co. Inc., senior secured note, 11.25%, 6/01/17	United States		3,500,000			3,570,000
ClubCorp Club Operations Inc., senior note, 10.00%, 12/01/18	United States		988,000			1,099,150
d,e Fontainebleau Las Vegas, 144A, 11.00%, 6/15/15	United States		2,500,000			250
MGM Resorts International, senior note,
6.625%, 7/15/15	United States		3,000,000			3,232,500
6.75%, 10/01/20	United States		200,000			214,500
6.625%, 12/15/21	United States		500,000			529,375
d Paris Las Vegas Holding LLC, senior secured note, first lien, 144A, 8.00%, 10/01/20	United States		500,000			522,500
d PNK Finance Corp., senior note, 144A, 6.375%, 8/01/21	United States		700,000			719,250
						9,887,525
Diversified Financials 4.2%
Ally Financial Inc., senior note, 7.50%, 9/15/20	United States		3,000,000			3,506,250
Bank of America Corp.,
f pfd., sub. bond, M, 8.125% to 5/15/18, FRN thereafter, Perpetual	United States		3,000,000			3,371,859
senior note, 5.65%, 5/01/18	United States		1,500,000			1,708,296
Citigroup Inc.,
senior note, 5.375%, 8/09/20	United States		1,500,000			1,706,892
sub. bond, 5.50%, 9/13/25	United States		1,500,000			1,580,471
sub. note, 4.05%, 7/30/22	United States		300,000			296,752
Deutsche Bank AG, sub. bond, 4.296% to 5/24/23, FRN thereafter, 5/24/28	Germany		4,000,000			3,625,200
E*TRADE Financial Corp., senior note, 6.375%, 11/15/19	United States		1,400,000			1,510,250
General Electric Capital Corp., senior note, A, 8.50%, 4/06/18	United States		29,000,000	MXN		2,484,447
sub. note, 5.30%, 2/11/21	United States		500,000			559,460
d General Motors Financial Co. Inc., senior note, 144A, 3.25%, 5/15/18	United States		900,000			902,250
GMAC Inc., sub. note, 8.00%, 12/31/18	United States		900,000			1,066,500
The Goldman Sachs Group Inc., senior note, 2.375%, 1/22/18	United States		2,500,000			2,510,800
JPMorgan Chase & Co.,
f junior sub. bond, 6.00% to 8/01/23, FRN thereafter, Perpetual	United States		1,500,000			1,441,875
senior note, 4.25%, 10/15/20	United States		2,500,000			2,650,790
sub. note, 3.375%, 5/01/23	United States		1,000,000			932,327
d KKR Group Finance Co., senior note, 144A, 6.375%, 9/29/20	United States		2,500,000			2,808,070
Morgan Stanley, senior note,
6.00%, 4/28/15	United States		1,000,000			1,065,376
5.50%, 7/24/20	United States		1,500,000			1,678,018

FSI-12

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin Strategic Income Securities Fund	Country	Principal Amount*		Value
Corporate Bonds (continued)
Diversified Financials (continued)
d Neuberger Berman Group LLC/Finance Corp., senior note, 144A,
5.625%, 3/15/20	United States		600,000	$	633,000
5.875%, 3/15/22	United States		1,400,000		1,449,000
d Nuveen Investments Inc., senior note, 144A,
9.125%, 10/15/17	United States		200,000		201,000
9.50%, 10/15/20	United States		1,800,000		1,813,500
SLM Corp., senior note,
8.45%, 6/15/18	United States		1,800,000		2,103,750
5.50%, 1/15/19	United States		1,400,000		1,453,708
					43,059,841
Energy 8.7%
Access Midstream Partner LP/ACMP Finance Corp., senior note,
5.875%, 4/15/21	United States		1,500,000		1,605,000
6.125%, 7/15/22	United States		600,000		645,000
d Antero Resources Corp., senior note, 144A, 5.375%, 11/01/21	United States		700,000		707,438
BreitBurn Energy Partners LP/Finance Corp., senior bond, 7.875%, 4/15/22	United States		900,000		940,500
CGG, senior note,
7.75%, 5/15/17	France		500,000		516,250
6.50%, 6/01/21	France		2,000,000		2,060,000
CHC Helicopter SA, senior note, 9.375%, 6/01/21	Canada		400,000		412,000
senior secured note, first lien, 9.25%, 10/15/20	Canada		2,500,000		2,696,875
Chesapeake Energy Corp., senior note,
6.625%, 8/15/20	United States		2,000,000		2,245,000
6.125%, 2/15/21	United States		1,500,000		1,616,250
5.75%, 3/15/23	United States		1,000,000		1,035,000
d Clayton Williams Energy Inc., senior note, 144A, 7.75%, 4/01/19	United States		1,500,000		1,548,750
CONSOL Energy Inc., senior note,
8.00%, 4/01/17	United States		500,000		528,750
8.25%, 4/01/20	United States		1,500,000		1,631,250
6.375%, 3/01/21	United States		200,000		207,500
Crosstex Energy LP/Crosstex Energy Finance Corp., senior note, 8.875%, 2/15/18	United States		1,500,000		1,578,750
El Paso Corp., senior bond, 6.50%, 9/15/20	United States		1,500,000		1,614,186
Energy Transfer Equity LP, senior note, 7.50%, 10/15/20	United States		4,000,000		4,510,000
Energy Transfer Partners LP, senior note, 5.20%, 2/01/22	United States		1,000,000		1,053,097
Energy XXI Gulf Coast Inc., senior note, 9.25%, 12/15/17	United States		2,500,000		2,793,750
Enterprise Products Operating LLC, junior sub. note, 7.034% to 1/15/18, FRN thereafter, 1/15/68	United States		1,500,000		1,658,965
d Expro Finance Luxembourg, senior secured note, 144A, 8.50%, 12/15/16	United Kingdom		2,500,000		2,618,750
d,g Gaz Capital SA (OJSC Gazprom), loan participation,
senior bond, 144A, 6.51%, 3/07/22	Russia		500,000		539,375
senior note, 144A, 5.092%, 11/29/15	Russia		3,000,000		3,194,325
senior note, 144A, 3.85%, 2/06/20	Russia		1,000,000		968,505
Halcon Resources Corp., senior note,
9.75%, 7/15/20	United States		200,000		209,500
8.875%, 5/15/21	United States		2,000,000		2,030,000
d 144A, 9.25%, 2/15/22	United States		800,000		818,000
d Kinder Morgan Finance Co. LLC, senior secured note, 144A, 6.00%, 1/15/18	United States		2,000,000		2,200,654
Linn Energy LLC/Finance Corp., senior note,
8.625%, 4/15/20	United States		2,500,000		2,712,500
7.75%, 2/01/21	United States		1,500,000		1,593,750
d LUKOIL International Finance BV, senior note, 144A, 4.563%, 4/24/23	Russia		3,500,000		3,297,087

FSI-13

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin Strategic Income Securities Fund	Country	Principal Amount*			Value
Corporate Bonds (continued)
Energy (continued)
Martin Midstream Partners LP/Martin Midstream Finance Corp., senior note,
8.875%, 4/01/18	United States		1,254,000		$	1,329,240
7.25%, 2/15/21	United States		600,000			615,000
Midstates Petroleum Co. Inc./LLC, senior note, 9.25%, 6/01/21	United States		1,500,000			1,575,000
d Oasis Petroleum Inc., senior note, 144A, 6.875%, 3/15/22	United States		1,300,000			1,384,500
Offshore Group Investment Ltd.,
senior bond, first lien, 7.125%, 4/01/23	United States		700,000			717,500
senior secured note, first lien, 7.50%, 11/01/19	United States		2,000,000			2,175,000
PBF Holding Co. LLC, first lien, 8.25%, 2/15/20	United States		2,400,000			2,616,000
Peabody Energy Corp., senior note,
6.00%, 11/15/18	United States		700,000			749,000
6.50%, 9/15/20	United States		2,500,000			2,643,750
6.25%, 11/15/21	United States		1,500,000			1,522,500
Penn Virginia Corp., senior note, 8.50%, 5/01/20	United States		1,500,000			1,620,000
Penn Virginia Resource Partners LP/Finance Corp. II, senior note,
8.375%, 6/01/20	United States		1,426,000			1,579,295
d 144A, 6.50%, 5/15/21	United States		400,000			416,000
Plains Exploration & Production Co., senior note,
6.125%, 6/15/19	United States		600,000			656,419
6.875%, 2/15/23	United States		1,000,000			1,120,000
QR Energy LP/QRE Finance, senior note, 9.25%, 8/01/20	United States		2,000,000			2,080,000
Quicksilver Resources Inc.,
d,h secured note, second lien, 144A, FRN, 7.00%, 6/21/19	United States		1,800,000			1,773,000
senior note, 9.125%, 8/15/19	United States		500,000			510,000
d Sabine Pass Liquefaction LLC,
secured note, 144A, 5.625%, 2/01/21	United States		3,000,000			2,947,500
senior secured note, 144A, 5.625%, 4/15/23	United States		900,000			846,000
d Samson Investment Co., senior note, 144A, 9.75%, 2/15/20	United States		2,500,000			2,737,500
d Sanchez Energy Corp., senior note, 144A, 7.75%, 6/15/21	United States		1,700,000			1,746,750
W&T Offshore Inc., senior note, 8.50%, 6/15/19	United States		2,800,000			2,975,000
						88,121,711
Food & Staples Retailing 0.6%
d Cencosud SA, senior note, 144A, 4.875%, 1/20/23	Chile		2,500,000			2,336,675
Rite Aid Corp., senior secured note, 8.00%, 8/15/20	United States		1,300,000			1,469,000
Safeway Inc., senior bond, 3.95%, 8/15/20	United States		2,500,000			2,499,727
						6,305,402
Food, Beverage & Tobacco 1.2%
d Boparan Finance PLC, senior note, 144A, 9.75%, 4/30/18	United Kingdom		1,500,000	EUR		2,264,417
Constellation Brands Inc., senior note, 4.25%, 5/01/23	United States		1,000,000			935,000
Del Monte Corp., senior note, 7.625%, 2/15/19	United States		2,500,000			2,603,125
d JBS USA LLC/Finance Inc., senior note, 144A,
8.25%, 2/01/20	United States		2,400,000			2,616,000
7.25%, 6/01/21	United States		300,000			313,500
Kraft Foods Group Inc., senior bond, 3.50%, 6/06/22	United States		2,500,000			2,437,270
d Post Holdings Inc., senior note, 144A, 6.75%, 12/01/21	United States		400,000			415,000
d Sun Merger Sub Inc., senior note, 144A, 5.875%, 8/01/21	United States		600,000			618,375
						12,202,687
Health Care Equipment & Services 1.5%
Alere Inc., senior sub. note, 6.50%, 6/15/20	United States		800,000			822,000
d Cegedim SA, senior note, 144A, 6.75%, 4/01/20	France		1,400,000	EUR		1,997,914

FSI-14

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin Strategic Income Securities Fund	Country	Principal Amount*			Value
Corporate Bonds (continued)
Health Care Equipment & Services (continued)
CHS/Community Health Systems Inc.,
senior note, 8.00%, 11/15/19	United States		1,500,000		$	1,635,000
senior secured note, 5.125%, 8/15/18	United States		1,100,000			1,138,500
DaVita HealthCare Partners Inc., senior note, 5.75%, 8/15/22	United States		1,500,000			1,526,250
HCA Inc.,
senior note, 7.50%, 2/15/22	United States		2,000,000			2,200,000
senior note, 5.875%, 5/01/23	United States		1,500,000			1,485,000
senior secured note, 5.875%, 3/15/22	United States		1,400,000			1,449,000
Hologic Inc., senior note, 6.25%, 8/01/20	United States		900,000			954,000
Tenet Healthcare Corp., senior note, 8.125%, 4/01/22	United States		1,700,000			1,836,000
						15,043,664
Insurance 0.5%
MetLife Inc., junior sub. note, 6.40% to 12/15/36, FRN thereafter, 12/15/66	United States		2,500,000			2,581,250
d Mitsui Sumitomo Insurance Co. Ltd., junior sub. note, 144A, 7.00% to 3/15/22, FRN
thereafter, 3/15/72	Japan		2,500,000			2,839,275
						5,420,525
Materials 4.6%
ArcelorMittal, senior note,
6.00%, 3/01/21	Luxembourg		3,500,000			3,708,967
6.75%, 2/25/22	Luxembourg		1,000,000			1,090,630
d Ardagh Packaging Finance PLC, senior note, 144A, 9.125%, 10/15/20	Luxembourg		900,000			987,750
d Ardagh Packaging Finance PLC/Ardagh MP Holdings USA Inc.,
secured note, 144A, 4.875%, 11/15/22	Luxembourg		200,000			198,875
senior note, 144A, 7.00%, 11/15/20	Luxembourg		600,000			606,000
senior secured note, first lien, 144A, 7.375%, 10/15/17	Luxembourg		600,000			645,750
Ashland Inc., senior note, 4.75%, 8/15/22	United States		700,000			668,500
d Barminco Finance Pty. Ltd., senior note, 144A, 9.00%, 6/01/18	Australia		1,500,000			1,389,787
d Cemex SAB de CV,
secured note, 144A, 5.875%, 3/25/19	Mexico		1,000,000			1,005,000
senior secured note, 144A, 9.00%, 1/11/18	Mexico		3,000,000			3,311,250
Euramax International Inc., senior secured note, 9.50%, 4/01/16	United States		800,000			806,000
d Faenza GmbH, senior note, 144A, 8.25%, 8/15/21	Germany		900,000	EUR		1,340,855
d FMG Resources (August 2006) Pty. Ltd., senior note, 144A,
6.00%, 4/01/17	Australia		500,000			531,550
6.875%, 2/01/18	Australia		2,500,000			2,637,500
8.25%, 11/01/19	Australia		1,000,000			1,126,250
d Glencore Funding LLC, senior note, 144A, 4.125%, 5/30/23	United States		1,000,000			934,834
d Ineos Finance PLC, senior secured note, 144A,
8.375%, 2/15/19	Switzerland		200,000			223,250
7.50%, 5/01/20	Switzerland		300,000			328,688
d Ineos Group Holdings SA, secured note,
second lien, 144A, 7.875%, 2/15/16	Switzerland		1,010,485	EUR		1,402,967
senior note, 144A, 6.125%, 8/15/18	Switzerland		700,000			707,875
senior note, 144A, 6.50%, 8/15/18	Switzerland		700,000	EUR		989,497
d Inmet Mining Corp., senior note, 144A, 8.75%, 6/01/20	Canada		3,000,000			3,270,000
d Kerling PLC, senior secured note, 144A, 10.625%, 2/01/17	United Kingdom		1,000,000	EUR		1,465,217
Novelis Inc., senior note,
8.375%, 12/15/17	Canada		1,000,000			1,069,375
8.75%, 12/15/20	Canada		1,600,000			1,788,000
d Orion Engineered Carbons Bondco GmbH, senior secured bond, 144A, 10.00%, 6/15/18	Germany		2,250,000	EUR		3,435,311
d,i Orion Engineered Carbons Finance & Co. SCA, senior note, 144A, PIK, 9.25%, 8/01/19	Germany		200,000			210,000

FSI-15

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin Strategic Income Securities Fund		Country		Principal Amount*			Value
Corporate Bonds (continued)
Materials (continued)
Reynolds Group Issuer Inc./LLC/SA, first lien, 5.75%, 10/15/20			United States		900,000		$	922,500
senior note, 8.50%, 5/15/18			United States		1,500,000			1,590,000
senior note, 8.25%, 2/15/21			United States		1,000,000			1,072,500
senior secured note, 7.125%, 4/15/19			United States		1,000,000			1,070,000
d Sealed Air Corp., senior note, 144A,
8.125%, 9/15/19			United States		1,000,000			1,127,500
8.375%, 9/15/21			United States		800,000			912,000
d U.S. Coatings Acquisition Inc./Flash Dutch 2 BV, 144A, 5.75%, 2/01/21			United States		1,000,000	EUR		1,444,275
d Xstrata Finance Canada Ltd., senior note, 144A, 4.95%, 11/15/21			Canada		2,500,000			2,533,065
								46,551,518
Media 3.2%
CCO Holdings LLC/CCO Holdings Capital Corp., senior bond, 5.25%, 9/30/22			United States		1,400,000			1,314,250
Clear Channel Communications Inc., senior secured bond, first lien, 9.00%, 3/01/21			United States		4,500,000			4,567,500
Clear Channel Worldwide Holdings Inc., senior note, 6.50%, 11/15/22			United States		1,000,000			1,026,250
senior sub. note, 7.625%, 3/15/20			United States		200,000			209,000
senior sub. note, 7.625%, 3/15/20			United States		1,000,000			1,056,250
CSC Holdings Inc., senior deb., 7.625%, 7/15/18			United States		1,500,000			1,723,125
CSC Holdings LLC, senior note, 6.75%, 11/15/21			United States		3,000,000			3,247,500
DISH DBS Corp., senior note,
7.125%, 2/01/16			United States		3,500,000			3,885,000
6.75%, 6/01/21			United States		500,000			532,500
5.875%, 7/15/22			United States		500,000			502,500
d Gannett Co. Inc.,
senior bond, 144A, 6.375%, 10/15/23			United States		1,600,000			1,660,000
senior note, 144A, 5.125%, 7/15/20			United States		700,000			712,250
i Radio One Inc., senior sub. note, PIK, 12.50%, 5/24/16			United States		1,200,000			1,206,000
Time Warner Inc., 7.625%, 4/15/31			United States		1,500,000			1,898,659
d Unitymedia Hessen GmbH & Co.KG/Unitymedia NRW GmbH, senior secured note, 144A,
5.625%, 4/15/23			Germany		800,000	EUR		1,125,159
d Univision Communications Inc.,
senior secured bond, 144A, 6.75%, 9/15/22			United States		500,000			550,000
senior secured note, 144A, 7.875%, 11/01/20			United States		2,500,000			2,759,375
d UPC Holding BV, senior note, 144A, 6.375%, 9/15/22			Netherlands		500,000	EUR		701,935
d UPCB Finance II Ltd., senior secured note, 144A, 6.375%, 7/01/20			Netherlands		2,000,000	EUR		2,951,823
d UPCB Finance VI Ltd., senior secured note, 144A, 6.875%, 1/15/22			Netherlands		500,000			532,188
	��							32,161,264
Pharmaceuticals, Biotechnology & Life Sciences 1.4%
d Capsugel FinanceCo SCA, senior note, 144A, 9.875%, 8/01/19			United States		2,000,000	EUR		3,084,559
Gilead Sciences Inc., senior note,
4.50%, 4/01/21			United States		500,000			532,673
4.40%, 12/01/21			United States		1,000,000			1,068,260
Grifols Inc., senior note, 8.25%, 2/01/18			Spain		1,500,000			1,601,250
d inVentiv Health Inc., senior secured note, 144A, 9.00%, 1/15/18			United States		600,000			630,000
d,i Jaguar Holding Co. I, senior note, 144A, PIK, 9.375%, 10/15/17			United States		1,900,000			2,018,750
d Valeant Pharmaceuticals International Inc., senior note, 144A, 7.50%, 7/15/21			United States		1,200,000			1,323,000
d VPI Escrow Corp., senior note, 144A, 6.375%, 10/15/20			United States		2,400,000			2,541,000
Zoetis Inc., senior bond, 3.25%, 2/01/23			United States		2,000,000			1,871,990
								14,671,482

FSI-16

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin Strategic Income Securities Fund	Country	Principal Amount*			Value
Corporate Bonds (continued)
Retailing 0.6%
d Edcon Pty. Ltd., secured note, 144A, 9.50%, 3/01/18	South Africa		2,400,000	EUR	$	3,390,959
d New Look Bondco I PLC, 144A, 8.75%, 5/14/18	United Kingdom		1,300,000	GBP		2,280,033
						5,670,992
Semiconductors & Semiconductor Equipment 0.4%
Freescale Semiconductor Inc.,
d secured note, 144A, 5.00%, 5/15/21	United States		500,000			487,500
senior note, 8.05%, 2/01/20	United States		1,600,000			1,728,000
senior note, 10.75%, 8/01/20	United States		1,382,000			1,575,480
						3,790,980
Software & Services 1.0%
d BMC Software Finance Inc., senior note, 144A, 8.125%, 7/15/21	United States		1,200,000			1,242,000
Equinix Inc., senior bond, 5.375%, 4/01/23	United States		2,500,000			2,456,250
First Data Corp., senior bond, 12.625%, 1/15/21	United States		300,000			353,625
d senior secured bond, 144A, 8.25%, 1/15/21	United States		4,500,000			4,809,375
Sterling International Inc., senior note, 11.00%, 10/01/19	United States		1,100,000			1,149,500
						10,010,750
Technology Hardware & Equipment 0.6%
d Alcatel-Lucent USA Inc., senior note, 144A, 6.75%, 11/15/20	United States		2,000,000			2,085,000
CDW LLC/Finance Corp., senior note, 8.50%, 4/01/19	United States		2,000,000			2,220,000
d,i CommScope Holdings Co. Inc., senior note, 144A, PIK, 6.625%, 6/01/20	United States		200,000			209,000
d CommScope Inc., senior note, 144A, 8.25%, 1/15/19	United States		1,834,000			2,019,692
						6,533,692
Telecommunication Services 4.2%
d Altice Financing SA, senior secured note, 144A, 6.50%, 1/15/22	Luxembourg		800,000	EUR		1,111,404
CC Holdings GS V LLC/Crown Castle GS III Corp., senior secured bond, 3.849%, 4/15/23	United States		1,000,000			936,423
CenturyLink Inc., senior bond, 6.75%, 12/01/23	United States		200,000			203,500
senior note, 6.00%, 4/01/17	United States		1,500,000			1,661,250
senior note, 6.45%, 6/15/21	United States		1,000,000			1,045,000
Crown Castle International Corp., senior bond, 5.25%, 1/15/23	United States		500,000			492,500
d Digicel Group Ltd., senior note, 144A, 8.25%, 9/30/20	Bermuda		2,000,000			2,081,250
d Digicel Ltd., senior note, 144A,
8.25%, 9/01/17	Bermuda		300,000			313,500
6.00%, 4/15/21	Bermuda		800,000			775,592
d eAccess Ltd., senior note, 144A,
8.25%, 4/01/18	Japan		1,400,000			1,535,625
8.375%, 4/01/18	Japan		600,000	EUR		918,662
Frontier Communications Corp., senior bond, 7.625%, 4/15/24	United States		600,000			601,500
senior note, 8.50%, 4/15/20	United States		2,000,000			2,250,000
senior note, 8.75%, 4/15/22	United States		1,000,000			1,115,000
senior note, 7.875%, 1/15/27	United States		400,000			386,000
Intelsat Jackson Holdings SA, senior bond, 6.625%, 12/15/22	Luxembourg		1,600,000			1,650,000
senior note, 7.25%, 10/15/20	Luxembourg		2,000,000			2,197,500
senior note, 7.50%, 4/01/21	Luxembourg		1,000,000			1,107,500
d Millicom International Cellular SA, senior note, 144A, 6.625%, 10/15/21	Luxembourg		1,100,000			1,145,375
d,i Mobile Challenger Intermediate Group SA, secured note, 144A, PIK, 8.75%, 3/15/19	Switzerland		600,000	EUR		862,438

FSI-17

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin Strategic Income Securities Fund	Country	Principal Amount*			Value
Corporate Bonds (continued)
Telecommunication Services (continued)
d Nokia Siemens Networks Finance BV, senior note, 144A, 7.125%, 4/15/20	Netherlands		1,000,000	EUR	$	1,571,509
d Sprint Corp., senior note, 144A, 7.875%, 9/15/23	United States		500,000			538,750
Sprint Nextel Corp., senior note,
8.375%, 8/15/17	United States		2,500,000			2,906,250
6.00%, 11/15/22	United States		500,000			490,000
d 144A, 9.00%, 11/15/18	United States		1,500,000			1,811,250
d 144A, 7.00%, 3/01/20	United States		800,000			896,000
T-Mobile USA Inc., senior bond, 6.50%, 1/15/24	United States		300,000			304,500
senior note, 6.542%, 4/28/20	United States		1,400,000			1,496,250
senior note, 6.125%, 1/15/22	United States		200,000			204,000
Telefonica Emisiones SAU, senior note,
5.462%, 2/16/21	Spain		800,000			852,268
4.57%, 4/27/23	Spain		2,000,000			1,983,440
Verizon Communications Inc., senior note, 5.15%, 9/15/23	United States		3,000,000			3,222,180
d Wind Acquisition Finance SA, senior secured note, 144A, 11.75%, 7/15/17	Italy		3,000,000			3,195,000
d,i Wind Acquisition Holdings Finance SA, senior secured note, 144A, PIK, 12.25%, 7/15/17	Italy		765,332	EUR		1,051,150
						42,912,566
Transportation 0.4%
d CEVA Group PLC, senior note, first lien, 144A, 4.00%, 5/01/18	United Kingdom		1,700,000			1,419,500
HDTFS Inc., 6.25%, 10/15/22	United States		1,500,000			1,556,250
Hertz Corp., senior note, 6.75%, 4/15/19	United States		1,500,000			1,623,750
						4,599,500
Utilities 1.0%
d Calpine Corp.,
senior secured bond, first lien, 144A, 5.875%, 1/15/24	United States		600,000			589,500
senior secured note, 144A, 7.875%, 7/31/20	United States		454,000			499,400
senior secured note, 144A, 7.50%, 2/15/21	United States		1,492,000			1,635,605
senior secured, first lien, 144A, 6.00%, 1/15/22	United States		100,000			103,000
d,f EDF SA, sub. note, 144A, 5.25% to 1/29/23, FRN thereafter, Perpetual	France		3,000,000			2,988,828
d InterGen NV, secured bond, 144A, 7.00%, 6/30/23	Netherlands		1,700,000			1,768,000
d Texas Competitive Electric Holdings Co. LLC/Texas Competitive Electric Holdings Finance Inc.,
senior secured note, 144A, 11.50%, 10/01/20	United States		3,500,000			2,590,000
						10,174,333
Total Corporate Bonds (Cost $380,602,110)						403,698,100
h,jSenior Floating Rate Interests 11.9%
Automobiles & Components 0.4%
August LuxUK Holding Co., Lux Second Lien, 10.50%, 4/27/19	Luxembourg		1,246,997			1,281,290
August U.S. Holding Co. Inc., U.S. Second Lien, 10.50%, 4/27/19	United States		408,309			419,537
FRAM Group Holdings Inc. (Autoparts Holdings), Second Lien Term Loan, 10.50%, 1/29/18	United States		2,529,436			2,409,287
						4,110,114
Capital Goods 0.8%
k Air Distribution Technologies (Tomkins Air Distribution), Second Lien Initial Loan,
9.25%, 5/09/20	United States		1,119,131			1,142,912
l Erickson Air-Crane Inc., Purchase Price Notes, 6.00%, 11/02/20	United States		190,406			178,471
Quikrete Holdings Inc., First Lien Initial Loan, Inc., 4.00%, 9/26/20	United States		1,252,200			1,260,412
Sensus USA Inc., Second Lien Term Loan, 8.50%, 5/09/18	United States		2,582,186			2,575,730
Terex Corp., Term Loan, 3.50%, 4/28/17	United States		1,697,356			1,714,329

FSI-18

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin Strategic Income Securities Fund	Country	Principal Amount*			Value
h,jSenior Floating Rate Interests (continued)
Capital Goods (continued)
TransDigm Inc., Tranche C Term Loan, 3.75%, 2/28/20	United States		493,406		$	495,359
k Wesco Distribution Inc., Tranche B-1 Loan, 3.75%, 12/12/19	United States		1,328,614			1,333,596
						8,700,809
Commercial & Professional Services 0.5%
k Altegrity Inc., Tranche D Term Loan, 7.75%, 2/21/15	United States		2,354,336			2,349,432
ARAMARK Corp.,
Extended Synthetic L/C, 3.519%, 7/26/16	United States		143,344			143,657
Synthetic L/C-3, 3.519%, 7/26/16	United States		91,726			92,051
Term Loan B Extended, 3.747%, 7/26/16	United States		1,195,362			1,197,977
U.S. Term C Loan, 3.747%, 7/26/16	United States		113,094			113,494
Interactive Data Corp., Term B Loan, 3.75%, 2/11/18	United States		1,517,199			1,521,467
Pacific Industrial Services US Finco LLC (Spotless), Second Lien Initial Term Loan, 8.75%, 4/02/19	United States		39,900			40,923
						5,459,001
Consumer Services 0.9%
Caesars Entertainment Operating Co. Inc., Term Loan B-4, 9.50%, 10/31/16	United States		857,996			866,398
Hilton Worldwide Finance LLC, Initial Term Loan, 3.75%, 10/25/20	United States		1,184,760			1,195,621
k PF Chang's China Bistro Inc., Term Loan B, 5.50%, 6/22/19	United States		377,245			378,659
c,i Turtle Bay Holdings LLC, Term Loan B, PIK, 3.00%, 3/01/15	United States		6,225,893			5,882,411
Weight Watchers International Inc., Initial Tranche B-2 Term Loan, 3.75%, 4/02/20	United States		1,081,711			968,582
						9,291,671
Diversified Financials 0.4%
Asurion LLC, Incremental Tranche B-1 Term Loan, 4.50%, 5/24/19	United States		2,025,283			2,026,915
Guggenheim Partners Investment Management Holdings LLC, Initial Term Loan, 4.25%, 7/22/20	United States		246,607			249,257
k Trans Union LLC, 2013 Replacement Term Loan, 4.25%, 2/10/19	United States		2,361,891			2,379,014
						4,655,186
Energy 0.2%
e,i,l ATP Oil & Gas Corp.,
Additional NM Loans (DIP), PIK, 4.50%, 2/28/14	United States		1,746			—
New Money (DIP), PIK, 4.50%, 2/28/14	United States		12,370			—
Refinancing Loan (DIP), PIK, 4.50%, 2/28/14	United States		26,414			—
Bennu Oil & Gas LLC, Second Lien Loans, 10.25%, 11/01/18	United States		341,552			344,683
Bowie Resource Holdings LLC, 2nd Lien Initial Term Loan, 11.75%, 2/16/21	United States		285,714			280,000
Pacific Drilling SA, Term Loan, 4.50%, 6/03/18	Luxembourg		1,069,341			1,082,262
						1,706,945
				��
Food & Staples Retailing 0.1%
AdvancePierre Foods Inc., Second Lien Term Loan, 9.50%, 10/10/17	United States		1,619,009			1,570,439
Food, Beverage & Tobacco 0.5%
k Del Monte Foods Co., Initial Term Loans, 4.00%, 3/08/18	United States		4,825,677			4,845,047
Health Care Equipment & Services 1.0%
Carestream Health Inc., Second Lien Loan, 9.50%, 12/07/19	United States		660,000			670,725
Community Health Systems Inc., New Extended Term Loan, 3.737% - 3.747%, 1/25/17	United States		5,281,206			5,327,417
DaVita HealthCare Partners Inc.,
Tranche B Term Loan, 4.50%, 10/20/16	United States		2,633,171			2,655,800
Tranche B-2 Term Loan, 4.00%, 8/24/19	United States		1,124,235			1,133,369
						9,787,311

FSI-19

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin Strategic Income Securities Fund	Country	Principal Amount*		Value
h,jSenior Floating Rate Interests (continued)
Household & Personal Products 0.4%
k FGI Operating Co. LLC (Freedom Group), Term B Loans, 6.50%, 4/19/19	United States		2,512,031	$	2,540,291
k Otter Products LLC, Loans, 5.25%, 4/29/19	United States		1,132,663		1,134,787
					3,675,078
Materials 2.7%
k American Rock Salt Co. LLC, Initial Loan, 4.75%, 4/25/17	United States		2,145,790		2,158,665
Arysta Lifescience SPC LLC,
Initial Term Loan, 4.50%, 5/29/20	United States		2,942,573		2,965,255
k Second Lien Initial Term Loan, 8.25%, 11/30/20	United States		1,911,853		1,947,079
Axalta Coating Systems U.S. Holdings Inc., Initial Term B Loans, 4.75%, 2/01/20	United States		2,925,830		2,950,617
k Exopack Holdings SA, USD Term Loan, 5.25%, 5/08/19	Luxembourg		717,457		731,358
FMG America Finance Inc. (Fortescue Metals Group), Loans, 4.25%, 6/30/19	United States		904,909		918,671
Ineos U.S. Finance LLC, Dollar Term Loan, 4.00%, 5/04/18	United States		1,548,391		1,555,285
k MacDermid Inc. LLC, First Lien Tranche B Term Loan, 4.00%, 6/07/20	United States		2,108,659		2,125,792
OCI Beaumont LLC, Term B-2 Loans, 6.25%, 8/20/19	United States		531,155		538,458
Oxbow Carbon LLC, First Lien Tranche B Term Loan, 4.25%, 7/19/19	United States		1,147,546		1,156,869
OXEA GmbH, Second Lien Term Loan, 8.25%, 7/15/20	Luxembourg		765,404		778,799
Reynolds Group Holdings Inc., U.S. Term Loan, 4.00%, 12/01/18	United States		2,902,487		2,931,512
Road Infrastructure Investment LLC (Ennis Flint), Second Lien Term Loan, 10.25%, 9/30/18	United States		5,522,220		5,591,248
Tronox Pigments (Netherlands) BV, Term Loan, 4.50%, 3/19/20	Netherlands		1,103,588		1,119,452
					27,469,060
Media 0.4%
k Cumulus Media Holdings Inc., Term Loans, 5.50%, 12/23/20	United States		351,900		354,979
Entravision Communications Corp., Tranche B Term Loans, 3.50%, 5/31/20	United States		1,013,307		1,002,858
NEP/NCP Holdco Inc., Second Lien Term Loan, 9.50%, 7/22/20	United States		299,222		308,198
Radio One Inc., Term Loan, 7.50%, 3/31/16	United States		252,127		258,982
UPC Financing Partnership, Facility AF, 4.00%, 1/31/21	Netherlands		736,600		741,511
WMG Acquisition Corp., Tranche B Term Loan, 3.75%, 7/01/20	United States		637,523		639,317
k Zuffa LLC, Initial Term Loan, 4.50%, 2/25/20	United States		383,740		387,455
					3,693,300
Pharmaceuticals, Biotechnology & Life Sciences 0.1%
Aptalis Pharma Inc. (Axcan), Term B Loans, 6.00%, 10/04/20	United States		914,109		931,249
Valeant Pharmaceuticals International Inc., Series E Tranche B Term Loan, 4.50%, 8/05/20	Canada		277,900		280,071
					1,211,320
Retailing 1.6%
BJ’s Wholesale Club Inc.,
2013 (Nov) Replacement Loans, 4.50%, 9/26/19	United States		4,281,652		4,313,383
Second Lien 2013 (Nov) Replacement Loans, 8.50%, 3/26/20	United States		1,198,229		1,225,788
Evergreen AcqCo. 1 LP (Savers), Term Loan, 5.00%, 7/09/19	United States		2,508,932		2,523,421
Harbor Freight Tools USA Inc., Loans, 4.75%, 7/26/19	United States		999,631		1,013,246
Hudson's Bay Co., Initial Term Loan, 4.75%, 11/04/20	Canada		791,072		804,641
k The Neiman Marcus Group Ltd. Inc., Term Loan, 5.00%, 10/25/20	United States		548,566		556,256
Party City Holdings Inc., 2013 Replacement Term Loan, 4.25%, 7/27/19	United States		3,215,685		3,232,969
Sears Roebuck Acceptance Corp., Term Loan, 5.50%, 6/30/18	United States		2,638,659		2,657,507
					16,327,211
Software & Services 0.9%
BMC Software Finance Inc., Initial U.S. Term Loans, 5.00%, 9/10/20	United States		2,903,206		2,922,434
k MoneyGram International Inc., Term Loan, 4.25%, 3/28/20	United States		4,023,777		4,067,760
Vertafore Inc., Second Lien Term Loan, 9.75%, 10/27/17	United States		1,720,657		1,754,640
					8,744,834

FSI-20

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin Strategic Income Securities Fund	Country	Principal Amount*			Value
h,jSenior Floating Rate Interests (continued)
Technology Hardware & Equipment 0.2%
Dell International LLC, Term B Loan, 4.50%, 4/29/20	United States		1,757,014		$	1,763,603
Telecommunication Services 0.5%
k Intelsat Jackson Holdings SA, Tranche B-2 Term Loan, 3.75%, 6/30/19	Luxembourg		5,119,849			5,171,047
Transportation 0.3%
Delta Air Lines Inc., Second New Term Loan B, 3.50%, 4/20/17	United States		726,938			733,444
Global Tip Finance BV/Finance America LLC, Facility C Commitment, 6.50%, 10/16/20	United States		1,390,000			1,355,250
YRC Worldwide Inc., U.S. Tranche Term Loan, 10.50%, 3/21/15	United States		998,014			954,663
						3,043,357
Total Senior Floating Rate Interests (Cost $119,947,177)						121,225,333
		Shares
Escrow and Litigation Trust 0.0%
a,l Comfort Co. Inc., Escrow Account	United States		13,427			—
a,c,l NewPage Corp., Litigation Trust	United States		2,500,000			—
Total Escrow and Litigation Trust (Cost $—)						—
		Principal Amount*
Foreign Government and Agency Securities 18.7%
Government of Canada,
2.25%, 8/01/14	Canada		701,000	CAD		664,853
1.00%, 11/01/14	Canada		591,000	CAD		556,496
2.00%, 12/01/14	Canada		1,420,000	CAD		1,349,264
1.00%, 5/01/15	Canada		5,080,000	CAD		4,781,604
Government of Hungary,
5.50%, 2/12/16	Hungary		1,864,700,000	HUF		8,946,567
5.50%, 12/22/16	Hungary		46,690,000	HUF		224,817
6.50%, 6/24/19	Hungary		206,000,000	HUF		1,030,574
7.50%, 11/12/20	Hungary		313,570,000	HUF		1,639,098
5.375%, 2/21/23	Hungary		1,020,000			1,011,381
A, 6.75%, 11/24/17	Hungary		4,470,000	HUF		22,426
A, 5.50%, 12/20/18	Hungary		34,100,000	HUF		163,366
A, 7.00%, 6/24/22	Hungary		930,000	HUF		4,691
A, 6.00%, 11/24/23	Hungary		1,270,000	HUF		6,025
senior note, 6.25%, 1/29/20	Hungary		4,597,000			4,973,379
senior note, 6.375%, 3/29/21	Hungary		1,550,000			1,676,906
d Government of Iceland, 144A, 5.875%, 5/11/22	Iceland		3,480,000			3,575,700
Government of Indonesia,
FR26, 11.00%, 10/15/14	Indonesia		1,800,000,000	IDR		152,256
FR34, 12.80%, 6/15/21	Indonesia		17,235,000,000	IDR		1,759,776
Government of Ireland,
5.00%, 10/18/20	Ireland		3,562,000	EUR		5,512,585
senior bond, 5.00%, 3/13/25	Ireland		2,883,710	EUR		4,516,365
Government of Malaysia,
3.434%, 8/15/14	Malaysia		6,410,000	MYR		1,961,028
3.741%, 2/27/15	Malaysia		7,310,000	MYR		2,246,401
3.835%, 8/12/15	Malaysia		4,675,000	MYR		1,440,930
4.72%, 9/30/15	Malaysia		7,768,000	MYR		2,430,743
3.197%, 10/15/15	Malaysia		4,730,000	MYR		1,442,877
senior bond, 3.814%, 2/15/17	Malaysia		2,500,000	MYR		770,474
senior bond, 4.24%, 2/07/18	Malaysia		600,000	MYR		186,927

FSI-21

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin Strategic Income Securities Fund	Country	Principal Amount*			Value
Foreign Government and Agency Securities (continued)
Government of Mexico,
7.00%, 6/19/14	Mexico		192,800	m MXN	$	1,503,643
9.50%, 12/18/14	Mexico		679,620	m MXN		5,504,552
6.00%, 6/18/15	Mexico		18,020	m MXN		142,871
8.00%, 12/17/15	Mexico		573,560	m MXN		4,753,688
6.25%, 6/16/16	Mexico		199,310	m MXN		1,607,547
7.25%, 12/15/16	Mexico		360,330	m MXN		2,980,413
Government of Poland,
5.75%, 4/25/14	Poland		26,520,000	PLN		8,875,128
5.50%, 4/25/15	Poland		7,018,000	PLN		2,406,962
6.25%, 10/24/15	Poland		9,134,000	PLN		3,206,337
h FRN, 2.71%, 1/25/17	Poland		1,660,000	PLN		548,070
h FRN, 2.71%, 1/25/21	Poland		1,683,000	PLN		544,503
Strip, 5.00%, 1/25/14	Poland		12,830,000	PLN		4,242,890
Strip, 5.00%, 7/25/14	Poland		295,000	PLN		96,434
Strip, 5.00%, 7/25/15	Poland		2,052,000	PLN		651,387
Strip, 5.00%, 1/25/16	Poland		1,066,000	PLN		332,141
d Government of Serbia, senior note, 144A,
4.875%, 2/25/20	Serbia		4,410,000			4,195,012
7.25%, 9/28/21	Serbia		1,820,000			1,925,960
Government of Sri Lanka,
A, 7.00%, 3/01/14	Sri Lanka		7,020,000	LKR		53,568
A, 11.75%, 3/15/15	Sri Lanka		1,160,000	LKR		9,182
A, 6.50%, 7/15/15	Sri Lanka		28,980,000	LKR		214,771
A, 11.00%, 8/01/15	Sri Lanka		116,400,000	LKR		920,205
A, 6.40%, 8/01/16	Sri Lanka		19,500,000	LKR		139,745
A, 8.00%, 11/15/18	Sri Lanka		70,220,000	LKR		498,898
A, 9.00%, 5/01/21	Sri Lanka		73,580,000	LKR		525,632
B, 11.75%, 4/01/14	Sri Lanka		6,990,000	LKR		53,873
B, 6.60%, 6/01/14	Sri Lanka		7,100,000	LKR		53,939
B, 6.40%, 10/01/16	Sri Lanka		16,000,000	LKR		114,135
B, 8.50%, 7/15/18	Sri Lanka		15,280,000	LKR		110,654
C, 8.50%, 4/01/18	Sri Lanka		8,070,000	LKR		58,898
D, 8.50%, 6/01/18	Sri Lanka		54,050,000	LKR		394,652
Government of Sweden, 6.75%, 5/05/14	Sweden		127,770,000	SEK		20,263,825
Government of the Philippines, senior note, 6.25%, 1/27/14	Philippines		129,180,000	PHP		2,917,878
d Government of Ukraine,
144A, 7.75%, 9/23/20	Ukraine		3,850,000			3,575,688
senior bond, 144A, 7.80%, 11/28/22	Ukraine		2,790,000			2,531,925
senior note, 144A, 7.95%, 2/23/21	Ukraine		2,120,000			1,967,625
senior note, 144A, 7.50%, 4/17/23	Ukraine		2,945,000			2,668,906
n Government of Uruguay, senior bond, Index Linked, 4.375%, 12/15/28	Uruguay		147,179,883	UYU		7,120,517
d Government of Vietnam, 144A, 6.75%, 1/29/20	Vietnam		1,045,000			1,135,131
Korea Monetary Stabilization Bond, senior bond, 3.47%, 2/02/14	South Korea		2,916,950,000	KRW		2,764,994
senior bond, 3.59%, 4/02/14	South Korea		4,287,030,000	KRW		4,071,019
senior bond, 2.47%, 4/02/15	South Korea		4,622,600,000	KRW		4,366,399
senior bond, 2.80%, 8/02/15	South Korea		1,324,510,000	KRW		1,255,999
senior note, 3.28%, 6/02/14	South Korea		5,082,540,000	KRW		4,827,384
senior note, 2.57%, 6/09/14	South Korea		648,000,000	KRW		613,715
senior note, 2.82%, 8/02/14	South Korea		509,400,000	KRW		483,057
senior note, 2.78%, 10/02/14	South Korea		2,030,900,000	KRW		1,925,454
senior note, 2.84%, 12/02/14	South Korea		841,710,000	KRW		798,635

FSI-22

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin Strategic Income Securities Fund	Country	Principal Amount*			Value
Foreign Government and Agency Securities (continued)
Korea Monetary Stabilization Bond, (continued)
senior note, 2.74%, 2/02/15	South Korea		117,220,000	KRW	$	111,092
senior note, 2.76%, 6/02/15	South Korea		5,045,300,000	KRW		4,781,519
Korea Treasury Bond, senior bond, 3.50%, 6/10/14	South Korea		2,788,920,000	KRW		2,652,077
senior note, 3.25%, 12/10/14	South Korea		1,261,950,000	KRW		1,201,944
senior note, 3.25%, 6/10/15	South Korea		210,800,000	KRW		201,140
senior note, 2.75%, 12/10/15	South Korea		897,900,000	KRW		850,154
senior note, 3.00%, 12/10/16	South Korea		3,000,000,000	KRW		2,854,903
Nota Do Tesouro Nacional,
10.00%, 1/01/17	Brazil		1,200	o BRL		480,748
p Index Linked, 6.00%, 5/15/15	Brazil		1,390	o BRL		1,416,218
p Index Linked, 6.00%, 8/15/16	Brazil		1,604	o BRL		1,619,429
p Index Linked, 6.00%, 8/15/18	Brazil		1,525	o BRL		1,519,562
d Russia Foreign Bond, senior bond, 144A, 7.50%, 3/31/30	Russia		1,859,715			2,170,334
Uruguay Notas del Tesoro,
9.00%, 1/27/14	Uruguay		7,570,000	UYU		350,814
10.50%, 3/21/15	Uruguay		1,700,000	UYU		76,336
10.25%, 8/22/15	Uruguay		59,720,000	UYU		2,641,404
9.50%, 1/27/16	Uruguay		9,220,000	UYU		392,537
n 18, Index Linked, 2.25%, 8/23/17	Uruguay		24,212,743	UYU		1,025,626
Uruguay Treasury Bill, Strip, 5.00%,
7/02/15	Uruguay		510,000	UYU		19,384
8/20/15	Uruguay		65,364,000	UYU		2,445,453
Total Foreign Government and Agency Securities (Cost $185,601,846)						189,812,024
U.S. Government and Agency Securities 2.1%
U.S. Treasury Bond,
4.50%, 2/15/16	United States		3,000,000			3,259,686
7.875%, 2/15/21	United States		900,000			1,223,578
7.125%, 2/15/23	United States		1,980,000			2,667,199
U.S. Treasury Note,
4.625%, 2/15/17	United States		600,000			669,258
4.75%, 8/15/17	United States		2,900,000			3,275,979
3.75%, 11/15/18	United States		7,000,000			7,679,490
n Index Linked, 0.125%, 4/15/16	United States		2,433,747			2,500,675
Total U.S. Government and Agency Securities (Cost $20,252,931)						21,275,865
Asset-Backed Securities and Commercial Mortgage-Backed Securities 4.1%
Banks 2.4%
Banc of America Commercial Mortgage Trust, 2006-4, AJ, 5.695%, 7/10/46	United States		1,807,000			1,865,912
Bear Stearns Commercial Mortgage Securities Inc.,
h 2006-PW11, AJ, FRN, 5.452%, 3/11/39	United States		500,000			520,117
h 2006-PW12, AJ, FRN, 5.932%, 9/11/38	United States		1,440,000			1,509,714
2006-PW13, AJ, 5.611%, 9/11/41	United States		5,100,000			5,201,291
Citigroup Commercial Mortgage Trust,
2006-C5, AJ, 5.482%, 10/15/49	United States		1,700,000			1,671,831
h 2007-C6, AM, FRN, 5.885%, 6/10/17	United States		4,900,000			5,409,740
h Citigroup/Deutsche Bank Commercial Mortgage Trust, 2006-CD3, AJ, FRN,
5.688%, 10/15/48	United States		2,120,000			1,987,065

FSI-23

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin Strategic Income Securities Fund	Country	Principal Amount*			Value
Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued)
Banks (continued)
Countrywide Asset-Backed Certificates, 2005-11, AF4, 5.192%, 3/25/34	United States		1,275,000		$	1,082,564
h Greenwich Capital Commercial Funding Corp., 2006-GG7, AJ, FRN, 5.867%, 7/10/38	United States		2,560,000			2,635,971
h Morgan Stanley Capital I Trust, 2006-HQ8, AJ, FRN, 5.68%, 3/12/44	United States		200,000			205,934
Wells Fargo Mortgage Backed Securities Trust,
h 2004-W, A9, FRN, 2.762%, 11/25/34	United States		1,458,281			1,488,237
2007-3, 3A1, 5.50%, 4/25/37	United States		614,273			635,085
						24,213,461
Diversified Financials 1.7%
d,h ARES CLO Funds, 2007-12A, B, 144A, FRN, 1.238%, 11/25/20	United States		1,380,000			1,328,705
d,h Atrium CDO Corp., 10A, C, 144A, FRN, 2.876%, 7/16/25	United States		1,400,000			1,357,229
d,h Catamaran CLO Ltd., 2013-1A, C, 144A, FRN, 3.071%, 1/27/25	Cayman Islands		1,130,000			1,092,917
d,h Cent CDO Ltd., 2007-15A, A2B, 144A, FRN, 0.583%, 3/11/21	United States		1,251,000			1,194,167
d,h Cent CLO LP, 2013-17A, D, 144A, FRN, 3.236%, 1/30/25	Cayman Islands		784,314			779,306
d,h CIFC Funding Ltd., 2007-3A, A1J, 144A, FRN, 0.638%, 7/26/21	United States		960,000			926,482
d,h Columbus Nova CLO Ltd., 2007-2A, A2, 144A, FRN, 1.244%, 10/15/21	United States		860,000			839,983
d,h CT CDO IV Ltd., 2006-4A, A1, 144A, FRN, 0.477%, 10/20/43	United States		1,806,864			1,717,406
d G-Force LLC, 2005-RRA, C, 144A, 5.20%, 8/22/36	United States		2,000,000			1,858,580
d,h ING Investment Management CLO Ltd.,
2013-1A, B, 144A, FRN, 3.144%, 4/15/24	Cayman Islands		270,000			265,516
2013-1A, C, 144A, FRN, 3.744%, 4/15/24	Cayman Islands		440,000			428,596
2013-2A, B, 144A, FRN, 2.918%, 4/25/25	United States		1,080,000			1,056,851
d,h Newcastle CDO Ltd., 2004-5A, 1, 144A, FRN, 0.588%, 12/24/39	United States		1,318,369			1,269,221
Residential Asset Securities Corp., 2004-KS1, AI4, 4.213%, 4/25/32	United States		56,269			56,245
h,q Talisman 6 Finance, Reg S, FRN, 0.404%, 10/22/16	Ireland		2,288,970	EUR		2,963,505
						17,134,709
Total Asset-Backed Securities and Commercial Mortgage-Backed Securities (Cost $38,794,159)						41,348,170
Mortgage-Backed Securities 4.4%
hFederalHome Loan Mortgage Corp. (FHLMC) Adjustable Rate 0.0%†
FHLMC, 2.459%, 1/01/33	United States		71,498			75,197
Federal Home Loan Mortgage Corp. (FHLMC) Fixed Rate 0.7%
FHLMC Gold 15 Year, 4.50%, 10/01/18 - 6/01/19	United States		507,451			538,828
FHLMC Gold 15 Year, 5.00%, 12/01/17 - 9/01/19	United States		721,106			765,091
FHLMC Gold 15 Year, 5.50%, 7/01/17 - 7/01/19	United States		129,330			138,531
FHLMC Gold 15 Year, 6.00%, 5/01/17	United States		6,516			6,895
FHLMC Gold 15 Year, 6.50%, 5/01/16	United States		1,046			1,085
FHLMC Gold 30 Year, 3.00%, 11/01/42	United States		2,712,538			2,578,092
FHLMC Gold 30 Year, 3.50%, 4/01/42	United States		160,738			159,970
FHLMC Gold 30 Year, 5.00%, 4/01/34 - 8/01/35	United States		514,824			557,789
FHLMC Gold 30 Year, 5.50%, 3/01/33 - 6/01/36	United States		1,497,824			1,652,146
FHLMC Gold 30 Year, 6.00%, 4/01/33 - 2/01/36	United States		427,535			477,704
FHLMC Gold 30 Year, 6.50%, 12/01/23 - 6/01/36	United States		94,192			105,755
FHLMC Gold 30 Year, 7.00%, 9/01/21 - 4/01/30	United States		38,566			42,594
FHLMC Gold 30 Year, 7.50%, 3/01/30 - 7/01/31	United States		1,511			1,641
						7,026,121
h Federal National Mortgage Association (FNMA) Adjustable Rate 0.0%†
FNMA, 2.31% - 2.33%, 4/01/20 - 12/01/34	United States		253,712			268,065

FSI-24

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin Strategic Income Securities Fund	Country	Principal Amount*		Value
Mortgage-Backed Securities (continued)
Federal National Mortgage Association (FNMA) Fixed Rate 3.3%
FNMA 15 Year, 2.50%, 7/01/22 - 6/01/27	United States		695,017	$	693,149
FNMA 15 Year, 3.00%, 10/01/27 - 11/01/27	United States		8,447,420		8,651,681
FNMA 15 Year, 3.50%, 1/01/26	United States		404,610		424,136
FNMA 15 Year, 4.50%, 6/01/19 - 3/01/20	United States		160,970		171,581
FNMA 15 Year, 5.00%, 10/01/17 - 6/01/18	United States		141,931		151,408
FNMA 15 Year, 5.50%, 9/01/14 - 11/01/18	United States		878,488		935,060
FNMA 15 Year, 6.00%, 4/01/16 - 7/01/16	United States		1,452		1,470
FNMA 30 Year, 3.00%, 12/01/42 - 5/01/43	United States		4,828,549		4,598,101
FNMA 30 Year, 3.50%, 5/01/43	United States		3,839,808		3,825,519
FNMA 30 Year, 4.00%, 2/01/41	United States		8,879,312		9,151,391
FNMA 30 Year, 5.00%, 4/01/30 - 9/01/39	United States		2,121,002		2,329,860
FNMA 30 Year, 5.50%, 8/01/33 - 9/01/35	United States		828,045		912,436
FNMA 30 Year, 6.00%, 6/01/34 - 5/01/38	United States		1,211,089		1,356,622
FNMA 30 Year, 6.50%, 6/01/28 - 10/01/37	United States		572,173		637,279
					33,839,693
Government National Mortgage Association (GNMA) Fixed Rate 0.4%
GNMA I SF 30 Year, 5.00%, 11/15/33 - 7/15/34	United States		520,056		569,044
GNMA I SF 30 Year, 5.50%, 12/15/32 - 6/15/36	United States		767,757		848,131
GNMA I SF 30 Year, 6.50%, 2/15/32	United States		2,234		2,497
GNMA I SF 30 Year, 7.00%, 10/15/28 - 6/15/32	United States		40,035		42,896
GNMA I SF 30 Year, 7.50%, 9/15/30	United States		1,689		1,949
GNMA II SF 30 Year, 3.50%, 5/20/42	United States		1,445,534		1,461,052
GNMA II SF 30 Year, 5.00%, 9/20/33 - 11/20/33	United States		158,620		174,034
GNMA II SF 30 Year, 6.00%, 11/20/34	United States		185,274		210,056
GNMA II SF 30 Year, 6.50%, 4/20/31 - 2/20/34	United States		83,040		93,424
GNMA II SF 30 Year, 7.50%, 1/20/28 - 4/20/32	United States		20,743		24,104
					3,427,187
Total Mortgage-Backed Securities (Cost $44,876,669)					44,636,263
Municipal Bonds 5.6%
Arkansas State GO, Four-Lane Highway Construction and Improvement Bonds, 3.25%, 6/15/22	United States		1,300,000		1,327,651
California State GO, Various Purpose,
6.00%, 4/01/38	United States		2,500,000		2,775,425
6.00%, 11/01/39	United States		160,000		178,946
5.25%, 11/01/40	United States		560,000		595,582
Refunding, 5.25%, 3/01/38	United States		1,500,000		1,549,635
Refunding, 5.00%, 4/01/38	United States		3,000,000		3,058,320
Refunding, NATL Insured, 4.50%, 12/01/32	United States		300,000		299,988
Refunding, Series 1, AGMC Insured, 4.75%, 9/01/31	United States		290,000		299,303
Colorado State ISD, GO, Mitchell and Scurry Counties, Unlimited Tax School Building Bonds, PSF Guarantee, 5.00%, 8/15/43	United States		300,000		312,066
Evanville Local Public Improvement Bond Bank Revenue, Sewer Works Project, Series A, 5.00%, 7/01/36	United States		675,000		697,511
Florida Hurricane Catastrophe Fund Finance Corp. Revenue, Series A, 2.995%, 7/01/20	United States		4,700,000		4,453,109
Hawaii State GO, Series EH, 5.00%, 8/01/30	United States		700,000		765,716
Illinois State GO,
5.877%, 3/01/19	United States		3,000,000		3,279,060
Build America Bonds, 7.35%, 7/01/35	United States		1,000,000		1,101,930

FSI-25

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin Strategic Income Securities Fund	Country	Principal Amount*			Value
Municipal Bonds (continued)
Kansas State Development Finance Authority Revenue, Wichita State University Union Corp. Student Housing Project, Refunding, Series F-1,
5.25%, 6/01/38	United States		820,000		$	848,921
5.25%, 6/01/42	United States		800,000			824,176
5.00%, 6/01/46	United States		1,000,000			998,360
Marco Island Utility System Revenue, Refunding, 4.625%,
10/01/30	United States		350,000			358,950
10/01/31	United States		325,000			330,977
k Massachusetts State GO, Series A, 4.50%, 12/01/43	United States		2,300,000			2,219,270
Metropolitan Boston Transit Parking Corp. Systemwide Parking Revenue, senior lien, 5.00%, 7/01/41	United States		500,000			511,270
Minnesota State GO, Various Purpose, Refunding, Series F, 4.00%, 10/01/24	United States		2,650,000			2,851,479
Mississippi State GO, Series B, 5.00%, 12/01/31	United States		780,000			849,280
Nassau County GO, General Improvement Bonds, Series B, 5.00%,
4/01/39	United States		1,500,000			1,512,045
4/01/43	United States		1,600,000			1,594,992
New Jersey EDA Revenue, School Facilities Construction, Refunding, Series NN, 5.00%, 3/01/30	United States		700,000			730,254
New York City HDC Revenue, Series B1, 5.00%, 7/01/33	United States		500,000			514,070
New York City Municipal Water Finance Authority Water and Sewer System Revenue, Second General Resolution, Fiscal 2014, Refunding, Series BB, 5.00%, 6/15/46	United States		2,430,000			2,481,322
New York GO, Sub. Series G-1, 5.00%, 4/01/27	United States		1,750,000			1,899,922
New York State Urban Development Corp. Revenue, State Personal Income Tax, General Purpose, Series C, 5.00%, 3/15/29	United States		1,500,000			1,625,145
Puerto Rico Electric Power Authority Power Revenue,
Series A, 6.75%, 7/01/36	United States		3,465,000			2,495,112
Series XX, 5.25%, 7/01/40	United States		165,000			103,146
Puerto Rico Sales Tax FICO Sales Tax Revenue,
first subordinate, Series A, 5.75%, 8/01/37	United States		1,000,000			741,980
first subordinate, Series A, 6.50%, 8/01/44	United States		2,500,000			1,982,275
Refunding, Series A, NATL RE, FGIC Insured, zero cpn., 8/01/45	United States		3,700,000			409,923
Refunding, Series B, 6.05%, 8/01/37	United States		915,000			713,435
Refunding, Series B, 6.05%, 8/01/38	United States		1,120,000			866,992
Red River Education Financing Corp. Education Revenue, Higher Education, Texas Christian University, 5.00%, 3/15/43	United States		625,000			636,019
South Carolina State Public Service Authority Revenue, Refunding, Series B, 5.00%, 12/01/38	United States		1,000,000			1,008,510
University of California Revenues, General, Series AK, 5.00%, 5/15/48	United States		4,320,000			5,004,979
Washington State GO, Various Purpose,
Refunding, Series R-C, 5.00%, 7/01/24	United States		900,000			1,035,720
Series D, 5.00%, 2/01/23	United States		775,000			890,235
Total Municipal Bonds (Cost $56,887,739)						56,733,001
Total Investments before Short Term Investments (Cost $853,104,836)						882,820,785
Short Term Investments 11.7%
h,j Senior Floating Rate Interests (Cost $2,011) 0.0%†
r Patriot Coal Corp., Reimbursement Obligation, 9.50%, 1/17/14	United States		2,044			2,044
Foreign Government and Agency Securities 3.1%
s Bank of Negara Monetary Notes, 1/09/14 - 11/06/14	Malaysia		30,559,000	MYR		9,226,160
Korea Monetary Stabilization Bond, senior bond, 2.55%, 5/09/14	South Korea		1,050,200,000	KRW		994,623
s Malaysia Treasury Bill, 5/30/14	Malaysia		590,000	MYR		177,801

FSI-26

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin Strategic Income Securities Fund	Country	Principal Amount*			Value
Foreign Government and Agency Securities (continued)
s Mexico Treasury Bills, 1/09/14 - 4/30/14	Mexico		4,937,100	t MXN	$	3,765,406
s Monetary Authority of Singapore Treasury Bill, 2/03/14	Singapore		400,000	SGD		316,950
s Philippine Treasury Bills, 3/05/14 - 11/05/14	Philippines		365,300,000	PHP		8,208,552
s Singapore Treasury Bills, 1/10/14 - 5/30/14	Singapore		10,009,000	SGD		7,926,708
s Uruguay Treasury Bills, 5/16/14 - 8/29/14	Uruguay		8,648,000	UYU		367,770
Total Foreign Government and Agency Securities (Cost $31,948,897)						30,983,970
Total Investments before Money Market Funds (Cost $885,055,744)						913,806,799
		Shares
Money Market Funds (Cost $87,788,340) 8.6%
a,u Institutional Fiduciary Trust Money Market Portfolio	United States		87,788,340			87,788,340
Total Investments (Cost $972,844,084) 98.6%						1,001,595,139
Other Assets, less Liabilities 1.4%						14,174,980
Net Assets 100.0%					$	1,015,770,119

See Abbreviations on page FSI-49.

†Rounds to less than 0.1% of net assets.

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

^aNon-income producing.

^bThe security is owned by FT Holdings Corporation III, a wholly-owned subsidiary of the Fund. See Note 1(g).

^cAt December 31, 2013, pursuant to the Fund’s policies and the requirements of applicable securities law, the Fund may be restricted from trading these securities for a limited or extended period of time due to ownership limits and/or potential possession of material non-public information.

^dSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At December 31, 2013, the aggregate value of these securities was $203,737,808, representing 20.06% of net assets.

^eSee Note 8 regarding defaulted securities.

^fPerpetual security with no stated maturity date.

^gSee Note 1(f) regarding loan participation notes.

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

ⁱIncome may be received in additional securities and/or cash.

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

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

^lSecurity has been deemed illiquid because it may not be able to be sold within seven days. At December 31, 2013, the aggregate value of these securities was $178,471, representing 0.02% of net assets.

^mPrincipal amount is stated in 100 Mexican Peso Units.

ⁿPrincipal amount of security is adjusted for inflation. See Note 1(k).

^oPrincipal amount is stated in 1,000 Brazilian Real Units.

^pRedemption price at maturity is adjusted for inflation. See Note 1(k).

^qSecurity was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. This security has been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At December 31, 2013, the value of this security was $2,963,505, representing 0.29% of net assets.

^rSee Note 9 regarding unfunded loan commitments.

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

^tPrincipal amount is stated in 10 Mexican Peso Units.

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

FSI-27

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin Strategic Income Securities Fund

At December 31, 2013, the Fund had the following forward exchange contracts outstanding. See Note 1(d).

Forward Exchange Contracts

Currency	Counterparya		Type		Quantity		Contract Amount		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
Euro		DBAB		Buy		239,450	$	329,244		1/03/14	$	119	$	—
Euro		DBAB		Sell		239,450		317,415		1/03/14		—		(11,948	)
Indian Rupee		CITI		Buy		4,493,000		69,490		1/06/14		3,079		—
Indian Rupee		HSBC		Buy		32,771,000		511,284		1/06/14		18,015		—
Indian Rupee		HSBC		Buy		32,400,000		510,358		1/07/14		12,844		—
Malaysian Ringgit		DBAB		Buy		952,100		307,794		1/08/14		—		(17,496	)
Euro		DBAB		Buy		40,550		54,341		1/09/14		1,435		—
Euro		DBAB		Sell		40,550		54,098		1/09/14		—		(1,679	)
Chilean Peso		DBAB		Buy		1,449,000,000		2,942,729		1/10/14		—		(188,369	)
Chilean Peso		DBAB		Sell		1,449,000,000		2,801,895		1/10/14		47,535		—
Japanese Yen		HSBC		Sell		183,560,000		2,105,046		1/10/14		361,747		—
Euro		UBSW		Buy		5,616,719		7,468,443		1/13/14		257,862		(557	)
Euro		DBAB		Sell		108,735		142,606		1/13/14		—		(6,958	)
Euro		UBSW		Sell		5,631,484		7,374,472		1/13/14		—		(371,585	)
Euro		DBAB		Buy		1,865,041		2,526,571		1/14/14		38,775		—
Euro		DBAB		Sell		1,865,041		2,470,992		1/14/14		—		(94,353	)
Euro		JPHQ		Sell		1,802,953		2,360,516		1/14/14		—		(119,429	)
Indian Rupee		DBAB		Buy		20,841,000		333,019		1/15/14		2,991		—
Euro		DBAB		Buy		221,087		303,972		1/16/14		130		—
Malaysian Ringgit		JPHQ		Buy		175,000		57,031		1/16/14		—		(3,693	)
Euro		DBAB		Sell		870,051		1,162,992		1/16/14		—		(33,755	)
Japanese Yen		UBSW		Sell		460,675,000		5,192,459		1/16/14		817,221		—
Indian Rupee		DBAB		Buy		16,691,000		266,295		1/17/14		2,699		—
Indian Rupee		JPHQ		Buy		29,466,000		466,730		1/21/14		7,771		—
Euro		DBAB		Buy		400,945		540,890		1/22/14		10,603		—
Indian Rupee		DBAB		Buy		10,360,000		165,347		1/22/14		1,450		—
Indian Rupee		JPHQ		Buy		14,719,000		234,955		1/22/14		2,023		—
Euro		DBAB		Sell		1,700,000		2,270,605		1/22/14		—		(67,720	)
Euro		JPHQ		Sell		2,912,410		3,880,349		1/22/14		—		(125,627	)
Singapore Dollar		JPHQ		Buy		700,000		564,516		1/24/14		—		(9,755	)
Singapore Dollar		JPHQ		Sell		126,000		100,000		1/24/14		143		—
Euro		BZWS		Sell		1,007,118		1,332,885		1/27/14		—		(52,387	)
Indian Rupee		JPHQ		Buy		54,590,000		868,846		1/28/14		9,014		—
Euro		DBAB		Buy		4,032,721		5,463,531		1/30/14		83,396		—
Euro		DBAB		Sell		4,032,721		5,438,326		1/30/14		—		(108,601	)
Euro		DBAB		Sell		3,014,151		4,066,180		1/31/14		—		(79,726	)
Euro		DBAB		Buy		196,964		266,287		2/06/14		4,633		—
Euro		DBAB		Sell		2,316,000		3,120,347		2/06/14		—		(65,275	)
Chilean Peso		DBAB		Buy		725,000,000		1,468,206		2/07/14		—		(94,506	)
Chilean Peso		DBAB		Sell		585,000,000		1,111,139		2/07/14		2,705		—
Chilean Peso		BZWS		Buy		743,650,000		1,407,895		2/10/14		696		—
Indian Rupee		HSBC		Buy		186,760,000		2,943,304		2/10/14		51,989		—
Chilean Peso		BZWS		Sell		266,000,000		499,906		2/10/14		—		(3,940	)
Indian Rupee		HSBC		Sell		62,078,000		989,764		2/10/14		—		(5,855	)
Indian Rupee		HSBC		Buy		5,576,000		86,663		2/12/14		2,730		—
Japanese Yen		HSBC		Sell		64,350,000		691,846		2/12/14		80,604		—
Japanese Yen		JPHQ		Sell		64,319,000		691,877		2/12/14		80,929		—
Indian Rupee		HSBC		Buy		14,080,000		216,497		2/13/14		9,181		—
Japanese Yen		CITI		Sell		85,250,000		922,544		2/13/14		112,775		—

FSI-28

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin Strategic Income Securities Fund

Forward Exchange Contracts (continued)

Currency	Counterparya		Type		Quantity		Contract Amount		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
Japanese Yen		JPHQ		Sell		42,690,000	$	461,279		2/13/14	$	55,777	$	—
Euro		UBSW		Sell		2,151,000		2,885,136		2/13/14		—		(73,541	)
Indian Rupee		DBAB		Buy		14,156,000		215,942		2/18/14		10,721		—
Japanese Yen		JPHQ		Sell		42,710,000		461,271		2/18/14		55,569		—
Japanese Yen		CITI		Sell		42,570,000		461,221		2/19/14		56,847		—
Japanese Yen		GSCO		Sell		42,760,000		461,290		2/19/14		55,112		—
Indian Rupee		DBAB		Buy		12,894,000		200,326		2/20/14		6,045		—
Euro		BZWS		Sell		2,084,000		2,781,807		2/20/14		—		(84,723	)
Japanese Yen		BZWS		Sell		21,350,000		230,626		2/25/14		27,816		—
Euro		BZWS		Buy		3,340,073		4,595,339		2/26/14		—		(1,076	)
Indian Rupee		DBAB		Buy		10,466,000		163,294		2/26/14		4,011		—
Euro		BZWS		Sell		3,340,073		4,452,866		2/26/14		—		(141,397	)
Japanese Yen		UBSW		Sell		34,903,000		354,489		2/26/14		22,933		—
Singapore Dollar		DBAB		Buy		940,000		735,064		2/27/14		9,917		—
Japanese Yen		BZWS		Sell		80,260,000		862,890		2/27/14		100,469		—
Euro		BZWS		Sell		1,025,079		1,369,247		2/27/14		—		(40,748	)
Japanese Yen		DBAB		Sell		14,279,000		155,996		2/27/14		20,354		—
Indian Rupee		JPHQ		Buy		23,701,000		370,422		2/28/14		8,297		—
Singapore Dollar		DBAB		Buy		723,000		573,989		2/28/14		4,586		(5,573	)
Euro		UBSW		Sell		708,181		948,438		2/28/14		—		(25,664	)
Euro		UBSW		Buy		1,747,000		2,403,872		3/03/14		—		(877	)
Indian Rupee		CITI		Buy		4,537,000		70,091		3/03/14		2,354		—
Euro		DBAB		Sell		1,228,589		1,616,516		3/03/14		—		(73,406	)
Japanese Yen		JPHQ		Sell		85,800,000		943,521		3/03/14		128,456		—
Euro		UBSW		Sell		2,581,000		3,387,175		3/03/14		—		(162,985	)
Japanese Yen		DBAB		Sell		257,790,000		2,801,974		3/04/14		353,060		—
Japanese Yen		HSBC		Sell		85,800,000		942,339		3/04/14		127,270		—
Japanese Yen		UBSW		Sell		95,700,000		1,041,009		3/04/14		131,893		—
Euro		DBAB		Sell		1,400,000		1,828,820		3/05/14		—		(96,874	)
Euro		DBAB		Sell		324,000		420,406		3/06/14		—		(25,254	)
Euro		DBAB		Sell		2,741,981		3,560,641		3/17/14		—		(210,910	)
Euro		DBAB		Sell		479,200		621,863		3/18/14		—		(37,269	)
Singapore Dollar		DBAB		Buy		973,400		763,188		3/19/14		8,271		—
Singapore Dollar		HSBC		Buy		1,113,000		892,149		3/19/14		—		(10,052	)
Singapore Dollar		JPHQ		Buy		694,000		541,663		3/19/14		8,360		—
Singapore Dollar		HSBC		Sell		1,113,000		883,403		3/19/14		1,306		—
Euro		JPHQ		Sell		143,700		188,283		3/19/14		—		(9,374	)
Euro		DBAB		Buy		1,997,000		2,700,244		3/20/14		46,592		—
Euro		DBAB		Sell		1,997,000		2,597,758		3/20/14		—		(149,078	)
Euro		JPHQ		Sell		240,000		311,998		3/20/14		—		(18,118	)
Euro		JPHQ		Sell		240,000		310,568		3/21/14		—		(19,547	)
Euro		JPHQ		Sell		240,000		311,730		3/24/14		—		(18,384	)
Euro		JPHQ		Sell		192,000		248,564		3/25/14		—		(15,527	)
Euro		DBAB		Sell		333,108		433,807		3/26/14		—		(24,375	)
Euro		DBAB		Buy		4,372,555		5,861,847		4/03/14		152,494		—
Euro		DBAB		Sell		4,372,555		5,619,389		4/03/14		—		(394,952	)
Euro		BZWS		Sell		132,570		170,624		4/07/14		—		(11,723	)
Euro		DBAB		Sell		800,000		1,050,160		4/10/14		—		(50,230	)
Euro		DBAB		Sell		949,814		1,243,069		4/11/14		—		(63,390	)
Chilean Peso		MSCO		Buy		116,230,000		237,616		4/14/14		—		(18,949	)
Euro		HSBC		Sell		142,717		186,807		4/16/14		—		(9,500	)

FSI-29

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin Strategic Income Securities Fund

Forward Exchange Contracts (continued)

Currency	Counterparya		Type		Quantity		Contract Amount		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
Chilean Peso		MSCO		Buy		104,150,000	$	211,451		4/21/14	$	—	$	(15,650	)
Euro		DBAB		Buy		29,378		39,211		4/22/14		1,199		—
Euro		BZWS		Sell		130,134		171,384		4/22/14		—		(7,617	)
Euro		DBAB		Sell		2,272,254		2,983,015		4/22/14		—		(142,491	)
Euro		JPHQ		Sell		36,314		47,536		4/22/14		—		(2,414	)
Euro		BZWS		Sell		1,659,340		2,167,430		4/25/14		—		(115,016	)
Chilean Peso		JPHQ		Buy		234,301,000		471,668		4/28/14		—		(31,500	)
British Pound Sterling		DBAB		Buy		223,551		344,671		4/29/14		25,178		—
British Pound Sterling		DBAB		Sell		223,551		346,750		4/29/14		—		(23,099	)
Singapore Dollar		DBAB		Buy		6,168,500		4,985,654		4/30/14		—		(96,512	)
Euro		BZWS		Sell		91,515		119,354		4/30/14		—		(6,527	)
Singapore Dollar		DBAB		Sell		2,560,000		1,997,815		4/30/14		—		(31,236	)
Euro		DBAB		Sell		870,275		1,155,395		4/30/14		—		(41,689	)
Euro		DBAB		Sell		71,000		93,969		5/05/14		—		(3,694	)
Japanese Yen		DBAB		Buy		97,107,500		982,869		5/07/14		—		(60,004	)
Japanese Yen		DBAB		Sell		97,107,500		1,000,000		5/07/14		77,135		—
British Pound Sterling		DBAB		Buy		1,217,294		1,879,811		5/09/14		133,943		—
Chilean Peso		DBAB		Buy		574,000,000		1,167,972		5/09/14		—		(90,844	)
British Pound Sterling		DBAB		Sell		1,300,000		2,010,190		5/09/14		—		(140,384	)
Chilean Peso		DBAB		Sell		260,000,000		492,891		5/09/14		4,993		—
Euro		DBAB		Sell		700,000		918,925		5/09/14		—		(43,953	)
Singapore Dollar		DBAB		Buy		3,707,640		3,013,410		5/12/14		—		(74,661	)
Euro		DBAB		Sell		212,145		280,583		5/12/14		—		(11,232	)
British Pound Sterling		DBAB		Buy		130,318		200,911		5/15/14		14,661		—
British Pound Sterling		DBAB		Sell		130,318		198,930		5/15/14		—		(16,642	)
Euro		JPHQ		Sell		201,376		260,361		5/23/14		—		(16,645	)
Japanese Yen		DBAB		Sell		50,435,000		500,000		5/28/14		20,619		—
Singapore Dollar		JPHQ		Buy		4,945,200		3,933,816		6/05/14		—		(13,936	)
Euro		DBAB		Sell		992		1,291		6/05/14		—		(74	)
Japanese Yen		BZWS		Sell		75,370,000		774,486		6/10/14		58,036		—
Japanese Yen		HSBC		Sell		80,270,000		829,818		6/10/14		66,790		—
Japanese Yen		JPHQ		Sell		54,440,000		553,272		6/10/14		35,778		—
Japanese Yen		DBAB		Buy		26,600,000		271,734		6/11/14		—		(18,878	)
Japanese Yen		DBAB		Sell		26,600,000		276,807		6/11/14		23,951		—
Japanese Yen		JPHQ		Sell		74,370,000		774,497		6/11/14		67,548		—
Japanese Yen		JPHQ		Sell		31,400,000		332,328		6/17/14		33,832		—
Singapore Dollar		HSBC		Buy		837,000		664,813		6/20/14		—		(1,331	)
Euro		DBAB		Sell		320,700		420,454		6/27/14		—		(20,710	)
Japanese Yen		BZWS		Buy		396,000,000		4,006,516		6/30/14		—		(241,702	)
Japanese Yen		BZWS		Sell		620,288,000		6,375,005		6/30/14		477,862		—
Euro		UBSW		Sell		4,274,000		5,581,117		6/30/14		—		(298,342	)
Japanese Yen		DBAB		Sell		97,929,000		1,000,000		7/01/14		68,970		—
British Pound Sterling		DBAB		Sell		297,656		444,222		7/09/14		—		(47,929	)
Euro		DBAB		Sell		312,984		404,094		7/10/14		—		(26,469	)
Euro		DBAB		Sell		190,862		252,893		7/25/14		—		(9,681	)
Euro		BZWS		Sell		1,993,000		2,639,529		7/28/14		—		(102,308	)
Euro		CITI		Sell		648,569		858,916		7/28/14		—		(33,342	)
British Pound Sterling		DBAB		Sell		169,385		257,905		7/30/14		—		(22,101	)
Euro		DBAB		Sell		900,000		1,191,825		8/01/14		—		(46,348	)
Euro		JPHQ		Sell		667,276		882,608		8/06/14		—		(35,407	)
Euro		CITI		Sell		317,220		422,315		8/08/14		—		(14,108	)

FSI-30

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin Strategic Income Securities Fund

Forward Exchange Contracts (continued)

Currency	Counterparya		Type		Quantity		Contract Amount		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
Chilean Peso		BZWS		Buy		743,650,000	$	1,382,121		8/11/14	$	56	$	—
Euro		CITI		Sell		92,411		123,136		8/11/14		—		(4,001	)
Chilean Peso		JPHQ		Buy		1,141,336,600		2,148,196		8/20/14		—		(28,803	)
Japanese Yen		HSBC		Sell		65,957,000		679,969		8/20/14		52,604		—
Japanese Yen		JPHQ		Sell		47,983,000		493,588		8/20/14		37,187		—
Euro		JPHQ		Sell		3,500,000		4,678,783		8/21/14		—		(136,583	)
Japanese Yen		BZWS		Sell		15,895,000		163,934		8/22/14		12,742		—
Euro		BZWS		Sell		704,462		944,395		8/25/14		—		(24,827	)
Japanese Yen		CITI		Sell		31,757,000		326,915		8/25/14		24,836		—
Japanese Yen		HSBC		Sell		31,524,000		323,685		8/25/14		23,823		—
Japanese Yen		BZWS		Sell		44,152,000		449,156		8/26/14		29,170		—
Euro		DBAB		Sell		527,245		704,399		8/26/14		—		(21,004	)
Japanese Yen		JPHQ		Sell		31,689,000		322,365		8/26/14		20,931		—
Singapore Dollar		DBAB		Buy		940,000		735,352		8/27/14		9,909		—
Japanese Yen		DBAB		Sell		27,184,000		275,420		8/27/14		16,836		—
Japanese Yen		HSBC		Sell		50,145,000		508,122		8/27/14		31,124		—
Japanese Yen		JPHQ		Sell		15,991,000		162,242		8/27/14		10,130		—
Euro		JPHQ		Sell		211,135		281,762		8/27/14		—		(8,726	)
Euro		DBAB		Sell		1,174,984		1,568,731		8/28/14		—		(47,863	)
Japanese Yen		JPHQ		Sell		15,743,000		162,024		8/29/14		12,268		—
Euro		BZWS		Sell		178,354		238,281		9/19/14		—		(7,120	)
Euro		UBSW		Sell		2,137,312		2,856,732		9/22/14		—		(84,065	)
Euro		DBAB		Sell		275,651		374,008		9/23/14		—		(5,269	)
Euro		BZWS		Sell		469,210		635,198		9/24/14		—		(10,407	)
Euro		DBAB		Sell		1,550,000		2,093,074		9/30/14		—		(39,671	)
Euro		JPHQ		Sell		2,850,000		3,886,730		10/07/14		—		(34,860	)
Euro		DBAB		Sell		185,654		251,914		10/08/14		—		(3,546	)
Euro		BZWS		Sell		2,749,000		3,718,627		10/14/14		—		(64,077	)
Euro		DBAB		Sell		121,043		163,672		10/15/14		—		(2,887	)
Euro		DBAB		Sell		587,951		795,880		10/17/14		—		(13,166	)
Malaysian Ringgit		JPHQ		Buy		763,000		235,851		10/20/14		—		(6,593	)
Chilean Peso		CITI		Buy		377,668,000		724,891		10/24/14		—		(28,195	)
Malaysian Ringgit		DBAB		Buy		6,892,000		2,140,040		10/24/14		—		(69,780	)
Malaysian Ringgit		HSBC		Buy		6,809,796		2,103,087		10/24/14		—		(57,520	)
Japanese Yen		JPHQ		Sell		270,990,000		2,763,554		10/24/14		184,191		—
Euro		BZWS		Sell		217,715		299,754		10/27/14		159		—
Euro		GSCO		Sell		369,000		509,146		10/29/14		1,366		—
Euro		DBAB		Sell		243,767		329,122		10/30/14		—		(6,327	)
Euro		DBAB		Sell		744,524		1,028,195		10/31/14		3,649		—
Euro		BZWS		Sell		529,706		716,374		11/05/14		—		(12,571	)
Japanese Yen		JPHQ		Sell		360,360,000		3,678,695		11/05/14		248,181		—
Japanese Yen		DBAB		Sell		245,702,500		2,500,000		11/07/14		160,933		—
Euro		DBAB		Sell		740,000		997,705		11/07/14		—		(20,640	)
Euro		JPHQ		Sell		473,670		631,611		11/12/14		—		(20,237	)
Euro		DBAB		Sell		800,000		1,076,736		11/14/14		—		(24,203	)
Japanese Yen		MSCO		Sell		12,500,000		125,800		11/14/14		6,791		—
Euro		DBAB		Sell		227,970		306,442		11/17/14		—		(7,288	)
Malaysian Ringgit		DBAB		Buy		623,200		191,242		11/19/14		—		(4,374	)
Euro		DBAB		Sell		63,419		85,419		11/19/14		—		(1,858	)
Malaysian Ringgit		HSBC		Buy		376,000		115,479		11/20/14		—		(2,742	)
Euro		JPHQ		Sell		1,702,433		2,304,430		11/20/14		—		(38,462	)

FSI-31

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Franklin Strategic Income Securities Fund

Forward Exchange Contracts (continued)

Currency	Counterpartya		Type		Quantity		Contract Amount		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
Euro		DBAB		Sell		1,245,000	$	1,688,936		12/04/14	$	—	$	(24,517	)
Euro		DBAB		Sell		3,400,000		4,645,114		12/09/14		—		(34,274	)
Euro		DBAB		Sell		800,000		1,097,800		12/11/14		—		(3,240	)
Euro		DBAB		Sell		1,200,000		1,652,520		12/12/14		955		—
Japanese Yen		JPHQ		Sell		187,760,000		1,833,764		12/12/14		45,545		—
Euro		CITI		Sell		3,868,000		5,309,874		12/17/14		—		(13,761	)
Euro		DBAB		Sell		486,875		667,993		12/17/14		—		(2,107	)
Euro		DBAB		Sell		501,617		689,772		12/18/14		—		(619	)
Unrealized appreciation (depreciation)												5,467,485		(6,077,369	)
Net unrealized appreciation (depreciation)													$	(609,884	)

^aMay be comprised of multiple contracts using the same currency and settlement date.

At December 31, 2013, the Fund had the following credit default swap contracts outstanding. See Note 1(d).

Credit Default Swap Contracts

Description	Counterparty/ Exchange		Notional Amounta		Periodic Payment Rate		Expiration Date		Upfront Premiums Paid (Received)			Unrealized Appreciation		Unrealized Depreciation		Market Value			Ratingb
OTC Swaps
Contracts to Sell Protectionc
Traded Index
CMBX.NA.AJ.2		FBCO		6,000,000		1.09%		3/15/49	$	(832,641	)	$	216,038	$	—	$	(616,603	)	Non Investment Grade
MCDX.NA.20		CITI		13,000,000		1.00%		6/20/18		(243,671	)		31,262		—		(212,409	)	Non Investment Grade
Net unrealized appreciation (depreciation)												$	247,300

^aIn U.S. dollars unless otherwise indicated. For contracts to sell protection, the notional amount is equal to the maximum potential amount of the future payments and no recourse provisions have been entered into in association with the contracts.

^bBased on Standard and Poor's (S&P) Rating for single name swaps and internal ratings for index swaps. Internal ratings based on mapping into equivalent ratings from external vendors.

^cThe fund enters contracts to sell protection to create a long credit position. Performance triggers include failure to pay or bankruptcy of the underlying securities for traded index swaps.

See Note 10 regarding other derivative information.

See Abbreviations on page FSI-49.

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

FSI-32

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

December 31, 2013

	Franklin Strategic Income Securities Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	885,055,744
Cost - Sweep Money Fund (Note 7)		87,788,340
Total cost of investments	$	972,844,084
Value - Unaffiliated issuers	$	913,806,799
Value - Sweep Money Fund (Note 7)		87,788,340
Total value of investments		1,001,595,139
Cash		598,393
Restricted cash (Note 1e)		50,400
Foreign currency, at value (cost and $7,729,923)		7,735,869
Receivables:
Investment securities sold		6,347,654
Capital shares sold		281,076
Interest		12,459,008
Due from brokers		3,010,000
Unrealized appreciation on forward exchange contracts		5,467,485
Unrealized appreciation on OTC swap contracts		247,300
Unrealized appreciation on unfunded loan commitments (Note 9)		4,611
Other assets		32
Total assets		1,037,796,967
Liabilities:
Payables:
Investment securities purchased		12,687,637
Capital shares redeemed		1,229,563
Management fees		490,893
Distribution fees		152,977
Due to brokers		50,400
OTC Swaps (premiums received $1,104,423)		1,076,312
Unrealized depreciation on forward exchange contracts		6,077,369
Deferred tax		11,129
Accrued expenses and other liabilities		250,568
Total liabilities		22,026,848
Net assets, at value	$	1,015,770,119
Net assets consist of:
Paid-in capital	$	918,320,098
Undistributed net investment income		50,393,655
Net unrealized appreciation (depreciation)		28,472,814
Accumulated net realized gain (loss)		18,583,552
Net assets, at value	$	1,015,770,119

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

FSI-33

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Assets and Liabilities (continued)

December 31, 2013

	Franklin Strategic Income Securities Fund
Class 1:
Net assets, at value	$	705,493,101
Shares outstanding		55,803,693
Net asset value and maximum offering price per share	$	12.64
Class 2:
Net assets, at value	$	175,306,946
Shares outstanding		14,252,287
Net asset value and maximum offering price per share	$	12.30
Class 4:
Net assets, at value	$	134,970,072
Shares outstanding		10,786,004
Net asset value and maximum offering price per share	$	12.51

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

FSI-34

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the year ended December 31, 2013

	Franklin Strategic Income Securities Fund
Investment income:
Dividends	$	61,311
Interest		62,431,314
Total investment income		62,492,625
Expenses:
Management fees (Note 3a)		5,775,493
Administrative fees (Note 3b)		889,691
Distribution fees: (Note 3c)
Class 2		425,624
Class 4		597,536
Unaffiliated transfer agent fees		273
Custodian fees (Note 4)		194,855
Reports to shareholders		189,635
Registration and filing fees		1,357
Professional fees		79,050
Trustees’ fees and expenses		5,245
Other		96,506
Total expenses		8,255,265
Expense reductions (Note 4)		(822	)
Net expenses		8,254,443
Net investment income		54,238,182
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		19,771,356
Foreign currency transactions		1,396,950
Swap contracts		852,627
Net realized gain (loss)		22,020,933
Net change in unrealized appreciation (depreciation) on:
Investments		(36,683,141	)
Translation of other assets and liabilities denominated in foreign currencies		(1,506,950	)
Change in deferred taxes on unrealized appreciation		198,274
Net change in unrealized appreciation (depreciation)		(37,991,817	)
Net realized and unrealized gain (loss)		(15,970,884	)
Net increase (decrease) in net assets resulting from operations	$	38,267,298

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

FSI-35

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets

	Franklin Strategic Income Securities Fund
	Year Ended December 31,
	2013			2012
Increase (decrease) in net assets:
Operations:
Net investment income	$	54,238,182		$	68,402,114
Net realized gain (loss) from investments, foreign currency transactions and swap contracts		22,020,933			28,045,425
Net change in unrealized appreciation (depreciation) on investments, translation of other assets and liabilities denominated in foreign currencies and deferred taxes		(37,991,817	)		71,828,011
Net increase (decrease) in net assets resulting from operations		38,267,298			168,275,550
Distributions to shareholders from:
Net investment income and net foreign currency gains:
Class 1		(54,987,119	)		(72,486,947	)
Class 2		(10,246,664	)		(9,567,293	)
Class 4		(10,775,092	)		(13,446,008	)
Net realized gains:
Class 1		(11,433,439	)		(1,182,191	)
Class 2		(2,203,428	)		(160,795	)
Class 4		(2,384,488	)		(230,338	)
Total distributions to shareholders		(92,030,230	)		(97,073,572	)
Capital share transactions: (Note 2)
Class 1		(275,817,937	)		(78,499,832	)
Class 2		23,867,593			27,715,617
Class 4		(52,983,286	)		(2,176,836	)
Total capital share transactions		(304,933,630	)		(52,961,051	)
Net increase (decrease) in net assets		(358,696,562	)		18,240,927
Net assets:
Beginning of year		1,374,466,681			1,356,225,754
End of year	$	1,015,770,119		$	1,374,466,681
Undistributed net investment income included in net assets:
End of year	$	50,393,655		$	68,571,868

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

FSI-36

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements

Franklin Strategic Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment company, consisting of twenty separate funds. The Franklin Strategic Income Securities Fund (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. At December 31, 2013, 83.74% of the Fund’s shares were held through one insurance company. Investment activities of these insurance company separate accounts could have a material impact on the Fund. The Fund offers three classes of shares: Class 1, Class 2, and Class 4. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

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

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

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

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

The Fund has procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the VLOC convenes on a regular basis to review such financial instruments and considers a number of factors, including significant unobservable valuation inputs, when arriving at fair value. The VLOC primarily employs

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin Strategic Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

a. Financial Instrument Valuation (continued)

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

Trading in securities on foreign securities stock exchanges and OTC markets may be completed before the daily NYSE close. In addition, trading in certain foreign markets may not take place on every NYSE business day. Occasionally, events occur between the time at which trading in a foreign security is completed and the close of the NYSE that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund’s portfolio securities as determined at the foreign market close and the latest indications of value at the close of the NYSE. In order to minimize the potential for these differences, the VLOC monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depositary Receipts, futures contracts and exchange traded funds). These price movements are measured against established trigger thresholds for each specific market proxy to assist in determining if an event has occurred that may call into question the reliability of the values of the foreign securities held by the Fund. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services.

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

b. Foreign Currency Translation

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

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

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

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin Strategic Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

c. Securities Purchased on a When-Issued and Delayed Delivery Basis

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

d. Derivative Financial Instruments

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

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

Collateral requirements differ by type of derivative. Collateral terms are contract specific for OTC derivatives. For OTC derivatives traded under an ISDA master agreement, posting of collateral is required by either the fund or the applicable counterparty if the total net exposure of all OTC derivatives with the applicable counterparty exceeds the minimum transfer amount, which typically ranges from $100,000 to $250,000, and can vary depending on the counterparty and the type of the agreement. Generally, collateral is determined at the close of fund business each day and any additional collateral required due to changes in derivative values may be delivered by the fund or the counterparty within a few business days. Collateral pledged and/or received by the fund, if any, is held in segregated accounts with the fund’s custodian/counterparty broker and can be in the form of cash and/or securities. Unrestricted cash may be invested according to the Fund’s investment objectives.

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

The Fund entered into credit default swap contracts primarily to manage exposure to credit risk. A credit default swap is an agreement between the Fund and a counterparty whereby the buyer of the contract receives credit protection and the seller of the contract guarantees the credit worthiness of a referenced debt obligation. These agreements may be privately negotiated in the over-the-counter market (“OTC credit default swaps”) or may be executed in a multilateral trade facility platform, such as a registered exchange (“centrally cleared credit default swaps”). The underlying referenced debt obligation may be a single issuer of corporate or sovereign debt, a credit index, or a tranche of a credit index. In the event of a default of the underlying referenced

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin Strategic Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

d. Derivative Financial Instruments (continued)

debt obligation, the buyer is entitled to receive the notional amount of the credit default swap contract from the seller in exchange for the referenced debt obligation, a net settlement amount equal to the notional amount of the credit default swap less the recovery value of the referenced debt obligation, or other agreed upon amount. For centrally cleared credit default swaps, required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable on the Statement of Assets and Liabilities. Over the term of the contract, the buyer pays the seller a periodic stream of payments, provided that no event of default has occurred. Such periodic payments are accrued daily as an unrealized appreciation or depreciation until the payments are made, at which time they are realized. Payments received or paid to initiate a credit default swap contract are reflected on the Statement of Assets and Liabilities and represent compensating factors between stated terms of the credit default swap agreement and prevailing market conditions (credit spreads and other relevant factors). These upfront payments are amortized over the term of the contract as a realized gain or loss on the Statement of Operations.

See Note 10 regarding other derivative information.

e. Restricted Cash

At December 31, 2013, the Fund received restricted cash in connection with investments in certain derivative securities. Restricted cash is held in a segregated account with the Fund’s custodian and is reflected in the Statement of Assets and Liabilities.

f. Loan Participation Notes

The Fund invests in loan participation notes (“Participations”). Participations are loans originally issued to a borrower by one or more financial institutions (the “Lender”) and subsequently sold to other investors, such as the Fund. Participations typically result in the Fund having a contractual relationship only with the Lender and not with the borrower. The Fund has the right to receive from the Lender any payments of principal, interest and fees which the Lender received from the borrower. The Fund generally has no rights to either enforce compliance by the borrower with the terms of the loan agreement or to any collateral relating to the original loan. As a result, the Fund assumes the credit risk of both the borrower and the Lender that is selling the Participation. The Participations may also involve interest rate risk and liquidity risk, including the potential default or insolvency of the borrower and/or the Lender.

g. FT Holdings Corporation III (FT Subsidiary)

The Fund invests in certain financial instruments through its investment in the FT Subsidiary. The FT Subsidiary is a Delaware Corporation, is a wholly-owned subsidiary of the Fund, and is able to invest in certain financial instruments consistent with the investment objective of the Fund. At December 31, 2013, the FT Subsidiary’s investment, Turtle Bay Resort, as well as any other assets and liabilities of the FT Subsidiary are reflected in the Fund’s Statement of Investments and Statement of Assets and Liabilities. The financial statements have been consolidated and include the accounts of the Fund and the FT Subsidiary. All intercompany transactions and balances have been eliminated.

h. Mortgage Dollar Rolls

The Fund enters into mortgage dollar rolls, typically on a to-be-announced basis. Mortgage dollar rolls are agreements between the Fund and a financial institution to simultaneously sell and repurchase mortgage-backed securities at a future date. Gains or losses are realized on the initial sale, and the difference between the repurchase price and the sale price is recorded as an unrealized gain or loss to the Fund upon entering into the mortgage dollar roll. In addition, the Fund may invest the cash

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin Strategic Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

h. Mortgage Dollar Rolls (continued)

proceeds that are received from the initial sale. During the period between the sale and repurchase, the Fund is not entitled to principal and interest paid on the mortgage backed securities. The risks of mortgage dollar roll transactions include the potential inability of the counterparty to fulfill its obligations.

i. Senior Floating Rate Interests.

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

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

j. Income and Deferred Taxes

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

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

The Fund recognizes the tax benefits of uncertain tax positions only when the position is “more likely than not” to be sustained upon examination by the tax authorities based on the technical merits of the tax position. As of December 31, 2013, and for all open tax years, the Fund has determined that no liability for unrecognized tax benefits is required in the Fund’s financial statements related to uncertain tax positions taken on a tax return (or expected to be taken on future tax returns). Open tax years are those that remain subject to examination and are based on each tax jurisdiction statute of limitation.

k. Security Transactions, Investment Income, Expenses and Distributions

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

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

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Notes to Financial Statements (continued)

Franklin Strategic Income Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

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

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

Inflation-indexed bonds are adjusted for inflation through periodic increases or decreases in the security’s interest accruals, face amount, or principal redemption value, by amounts corresponding to the rate of inflation as measured by an index. Any increase or decrease in the face amount or principal redemption value will be included as interest income on the Statement of Operations.

l. 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.

m. Guarantees and Indemnifications

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

2. SHARES OF BENEFICIAL INTEREST

At December 31, 2013, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:

	Year Ended December 31,
	2013						2012
Class 1 Shares:	Shares			Amount			Shares			Amount
Shares sold		782,903		$	10,091,023			3,209,922		$	41,235,226
Shares issued in reinvestment of distributions		5,373,832			66,420,558			6,063,304			73,669,138
Shares redeemed		(27,765,536	)		(352,329,518	)		(14,997,522	)		(193,404,196	)
Net increase (decrease)		(21,608,801	)	$	(275,817,937	)		(5,724,296	)	$	(78,499,832	)
Class 2 Shares:
Shares sold		4,461,765		$	56,022,684			3,441,994		$	43,341,865
Shares issued in reinvestment of distributions		1,034,061			12,450,092			819,552			9,728,087
Shares redeemed		(3,579,730	)		(44,605,183	)		(2,012,180	)		(25,354,335	)
Net increase (decrease)		1,916,096		$	23,867,593			2,249,366		$	27,715,617
Class 4 Shares:
Shares sold		930,235		$	11,782,444			1,353,603		$	17,206,420
Shares issued on reinvestment of distributions		1,074,251			13,159,580			1,134,025			13,676,347
Shares redeemed		(6,283,838	)		(77,925,310	)		(2,599,542	)		(33,059,603	)
Net increase (decrease)		(4,279,352	)	$	(52,983,286	)		(111,914	)	$	(2,176,836	)

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Notes to Financial Statements (continued)

Franklin Strategic Income Securities Fund

3. TRANSACTIONS WITH AFFILIATES

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

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

a. Management Fees

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

Annualized Fee Rate	Net Assets
0.625%	Up to and including $500 million
0.525%	Over $500 million, up to and including $1 billion
0.480%	Over $1 billion, up to and including $1.5 billion
0.435%	Over $1.5 billion, up to and including $6.5 billion
0.415%	Over $6.5 billion, up to and including $11.5 billion
0.400%	Over $11.5 billion, up to and including $16.5 billion
0.390%	Over $16.5 billion, up to and including $19 billion
0.380%	Over $19 billion, up to and including $21.5 billion
0.370%	In excess of $21.5 billion

Effective May 1, 2013, the Fund combined its investment management and administration agreements as approved by the Board. The fees paid under the combined agreement do not exceed the aggregate fees that were paid under the separate agreements.

Prior to May 1, 2013, the Fund paid fees to Advisers based on the average daily net assets of the Fund as follows:

Annualized Fee Rate	Net Assets
0.425%	Up to and including $500 million
0.325%	Over $500 million, up to and including $1 billion
0.280%	Over $1 billion, up to and including $1.5 billion
0.235%	Over $1.5 billion, up to and including $6.5 billion
0.215%	Over $6.5 billion, up to and including $11.5 billion
0.200%	Over $11.5 billion, up to and including $16.5 billion
0.190%	Over $16.5 billion, up to and including $19 billion
0.180%	Over $19 billion, up to and including $21.5 billion
0.170%	In excess of $21.5 billion

b. Administrative Fees

Effective May 1, 2013, 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.

Prior to May 1, 2013, the Fund paid administrative fees to FT Services of 0.20% per year of the average daily net assets of the Fund.

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin Strategic Income Securities Fund

3. TRANSACTIONS WITH AFFILIATES (continued)

c. Distribution Fees

The Board has adopted distribution plans for Class 2 and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to 0.25%, and 0.35% per year of its average daily net assets of Class 2 and Class 4, respectively. Some distribution fees are not charged on shares held by affiliates.

d. Transfer Agent Fees

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

4. EXPENSE OFFSET ARRANGEMENT

The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses. During the year ended December 31, 2013, the custodian fees were reduced as noted in the Statement of Operations.

5. INCOME TAXES

The tax character of distributions paid during the years ended December 31, 2013 and 2012, was as follows:

	2013		2012
Distributions paid from:
Ordinary income	$	79,686,221	$	95,500,248
Long term capital gain		12,344,009		1,573,324
	$	92,030,230	$	97,073,572

At December 31, 2013, 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	$	976,533,231
Unrealized appreciation	$	42,642,179
Unrealized depreciation		(17,580,271	)
Net unrealized appreciation (depreciation)	$	25,061,908
Undistributed ordinary income	$	55,929,395
Undistributed long term capital gains		17,502,629
Distributable earnings	$	73,432,024

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

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the year ended December 31, 2013, aggregated $511,601,048 and $817,698,989, respectively.

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin Strategic Income Securities Fund

7. INVESTMENTS IN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO

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

8. CREDIT RISK AND DEFAULTED SECURITIES

At December 31, 2013, the Fund had 51.61% of its portfolio invested in high yield securities, senior secured floating rate notes, or other securities rated below investment grade. These securities may be more sensitive to economic conditions causing greater price volatility and are potentially subject to a greater risk of loss due to default than higher rated securities.

The Fund held a defaulted security and/or other securities for which the income has been deemed uncollectible. At December 31, 2013, the value of this security represents less than 0.05% of the Fund’s net assets. The Fund discontinues accruing income on securities for which income has been deemed uncollectible and provides an estimate for losses on interest receivable. The security has been identified on the accompanying Statement of Investments.

9. UNFUNDED LOAN COMMITMENTS

The Fund enters into certain credit agreements, all or a portion of which may be unfunded. The Fund is obligated to fund these loan commitments at the borrowers’ discretion. Funded portions of credit agreements are presented on the Statement of Investments.

At December 31, 2013, unfunded commitments were as follows:

Borrower	Unfunded Commitment
Patriot Coal Corp., Reimbursement Obligation, 9.50%, 1/17/14	$	285,464

Unfunded loan commitments and funded portions of credit agreements are marked to market daily and any unrealized appreciation or depreciation is included in the Statement of Assets and Liabilities and the Statement of Operations.

10. OTHER DERIVATIVE INFORMATION

At December 31, 2013 the Fund's investments in derivative contracts are reflected on the Statement of Assets and Liabilities as follows:

	Asset Derivatives			Liability Derivatives
Derivative Contracts Not Accounted for as Hedging Instruments	Statement of Assets and Liabilities Location	Fair Value Amount		Statement of Assets and Liabilities Location	Fair Value Amount
Foreign exchange contracts	Unrealized appreciation on forward exchange contracts	$	5,467,485	Unrealized depreciation on forward exchange contracts	$	6,077,369
Credit contracts	Unrealized appreciation on OTC swap contracts		247,300	Unrealized depreciation on OTC swap contracts		—

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Notes to Financial Statements (continued)

Franklin Strategic Income Securities Fund

10. OTHER DERIVATIVE INFORMATION (continued)

For the period ended December 31, 2013 the effect of derivative contracts on the Fund’s Statement of Operations was as follows:

Derivative Contracts Not Accounted for as Hedging Instruments	Statement of Operations Locations	Realized Gain (Loss) for the Year		Change in Unrealized Appreciation (Depreciation) for the Year
Foreign exchange contracts	Net realized gain (loss) from foreign currency transactions / Net change in unrealized appreciation (depreciation) on translation of other assets and liabilities denominated in foreign currencies	$	2,250,891	($	1,478,379	)
Credit contracts	Net realized gain (loss) from swap contracts / Net change in unrealized appreciation (depreciation) on investments		852,627		240,077

At December 31, 2013 the Fund's OTC derivative assets and liabilities, are as follows:

	Gross and Net Amounts of Assets and Liabilities Presented in the Statement of Assets and Liabilities
	Assetsa		Liabilitiesa
Derivatives
Forward exchange contracts	$	5,467,485	$	6,077,369
Swap Contracts		247,300		1,076,312
Total	$	5,714,785	$	7,153,681

^a  Absent an event of default or early termination, OTC derivative assets and liabilities are presented gross and not offset in the Statement of Assets & Liabilities.

At December 31, 2013 the Fund's OTC derivative assets which may be offset against the Fund's derivative liabilities, and collateral received from the counterparty, is as follows:

			Amounts Not Offset in the Statement of Assets & Liabilities
	Gross and Net Amounts of Assets Presented in the Statement of Assets & Liabilities		Financial Instruments Available for Offset			Financial Instruments Collateral Received a,b			Cash Collateral Receivedb		Net Amount (Not less than zero)
Counterparty
BZWS	$	707,006	$	(707,006	)	$	—		$	—	$	—
CITI		231,153		(231,153	)		—			—
DBAB		1,375,453		(1,375,453	)		—			—		—
FBCO		216,038		(216,038	)		—			—		—
GSCO		56,478		—			—			—		56,478
HSBC		840,027		(87,000	)		(691,773	)		—		61,254
JPHQ		1,051,930		(713,620	)		(338,310	)		—		—
MSCO		6,791		(6,791	)		—			—		—
UBSW		1,229,909		(1,017,616	)		(120,002	)		—		92,291
Total	$	5,714,785	$	(4,354,677	)	$	(1,150,085	)	$	—	$	210,023

^aAt December 31, 2013 the Fund received United Kingdom Treasury Bonds and Notes and U.S. Treasury Bonds and Notes as collateral for derivatives.

FSI-46

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin Strategic Income Securities Fund

10. OTHER DERIVATIVE INFORMATION (continued)

^bIn some instances, the collateral amounts disclosed in the table above were adjusted due to the requirement to limit the collateral amounts to avoid the effect of overcollateralization. Actual collateral received and/or pledged may be more than the amounts disclosed herein.

At December 31, 2013 the Fund's OTC derivative liabilities which may be offset against the Fund's derivative assets, and collateral pledged to the counterparty, is as follows:

			Amounts Not Offset in the Statement of Assets & Liabilities
	Gross and Net Amounts of Liabilities Presented in the Statement of Assets & Liabilities		Financial Instruments Available for Offset			Financial Instruments Collateral Pledged		Cash Collateral Pledgeda			Net Amount (Not less than zero)
Counterparty
BZWS	$	928,166	$	(707,006	)	$	—	$	(221,160	)	$	—
CITI		337,078		(231,153	)		—		(105,925	)		—
DBAB		3,202,961		(1,375,453	)		—		(1,740,000	)		87,508
FBCO		832,641		(216,038	)		—		(616,603	)		—
GSCO		—		—			—		—			—
HSBC		87,000		(87,000	)		—		—			—
JPHQ		713,620		(713,620	)		—		—			—
MSCO		34,599		(6,791	)		—		—			27,808
UBSW		1,017,616		(1,017,616	)		—		—			—
Total	$	7,153,681	$	(4,354,677	)	$	—	$	(2,683,688	)	$	115,316

^aIn some instances, the collateral amounts disclosed in the table above were adjusted due to the requirement to limit the collateral amounts to avoid the effect of overcollateralization. Actual collateral received and/or pledged may be more than the amounts disclosed herein.

For the year ended December 31, 2013 the average month end fair value of derivatives represented 0.94% of average month end net assets. The average month end number of open derivative contracts for the year was 233.

See Note 1(d) regarding derivative financial instruments.

11. CREDIT FACILITY

The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $1.5 billion (Global Credit Facility) which, after an extension of the original terms, matured on February 14, 2014. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. Effective February 14, 2014, the Borrowers renewed the Global Credit Facility which matures on January 16, 2015.

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.07% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses on the Statement of Operations. During the year ended December 31, 2013, the Fund did not use the Global Credit Facility.

FSI-47

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin Strategic Income Securities Fund

12. FAIR VALUE MEASUREMENTS

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

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

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

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

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

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

A summary of inputs used as of December 31, 2013, in valuing the Fund’s assets and liabilities carried at fair value, is as follows:

	Level 1		Level 2		Level 3			Total
Assets:
Investments in Securities:
Equity Investments:a
Consumer Services	$	—	$	1,749,333	$	—		$	1,749,333
Energy		—		92,096		—			92,096
Materials		—		900,000		—			900,000
Transportation		—		682,100		—			682,100
Other Equity Investmentsb		668,500		—		—	c		668,500
Corporate Bonds		—		403,698,100		—			403,698,100
Senior Floating Rate Interests		—		121,046,862		178,471	c		121,225,333
Foreign Government and Agency Securities		—		189,812,024		—			189,812,024
U.S. Government and Agency Securities		—		21,275,865		—			21,275,865
Asset-Backed Securities and Commercial Mortgage-Backed Securities		—		41,348,170		—			41,348,170
Mortgage-Backed Securities		—		44,636,263		—			44,636,263
Municipal Bonds		—		56,733,001		—			56,733,001
Short Term Investments		87,788,340		30,986,014		—			118,774,354
Total Investments in Securities	$	88,456,840	$	912,959,828	$	178,471		$	1,001,595,139
Forward Exchange Contracts		—		5,467,485		—			5,467,485
Unfunded Loan Commitments		—		4,611		—			4,611
Swaps		—		247,300		—			247,300
Liabilities:
Forward Exchange Contracts		—		6,077,369		—			6,077,369

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

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

^cIncludes securities determined to have no value at December 31, 2013.

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

FSI-48

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin Strategic Income Securities Fund

13. NEW ACCOUNTING PRONOUNCEMENTS

In June 2013, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2013-08, Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements. The ASU modifies the criteria used in defining an investment company under U.S. Generally Accepted Accounting Principles and also sets forth certain measurement and disclosure requirements. Under the ASU, an entity that is registered under the 1940 Act automatically qualifies as an investment company. The ASU is effective for interim and annual reporting periods beginning after December 15, 2013. Management has reveiwed the requirements and believes the adoption of this ASU will not have a material impact on the financial statements.

14. SUBSEQUENT EVENTS

The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure other than those already disclosed in the financial statements.

ABBREVIATIONS
Counterparty	Currency	Selected Portfolio
BZWS - Barclays Bank PLC	BRL - Brazilian Real	AGMC - Assured Guaranty Municipal Corp.
CITI - Citigroup, Inc.	CAD - Canadian Dollar	CDO - Collateralized Debt Obligation
DBAB - Deutsche Bank AG	EUR - Euro	CLO - Collateralized Loan Obligation
FBCO - Credit Suisse Group AG	GBP - British Pound	DIP - Debtor-In-Possession
GSCO - The Goldman Sachs Group, Inc.	HUF - Hungarian Forint	EDA - Economic Development Authority
HSBC - HSBC Bank USA, N.A.	IDR - Indonesian Rupiah	FGIC - Financial Guaranty Insurance Co.
JPHQ - JP Morgan Chase & Co.	KRW - South Korean Won	FICO - Financing Corp.
MSCO - Morgan Stanley	LKR - Sri Lankan Rupee	FRN - Floating Rate Note
UBSW - UBS AG	MXN - Mexican Peso	GO - General Obligation
	MYR - Malaysian Ringgit	HDC - Housing Development Corp.
	PHP - Philippine Peso	ISD - Independent School District
	PLN - Polish Zloty	L/C - Letter of Credit
	SEK - Swedish Krona	NATL - National Public Financial Guarantee Corp.
	SGD - Singapore Dollar	NATL RE - National Public Financial Guarantee Corp. Reinsured
	UYU - Uruguayan Peso	PIK - Payment-In-Kind
		PSF - Permanent School Fund
		SF - Single Family

FSI-49

Franklin Templeton Variable Insurance Products Trust

Franklin Strategic Income Securities Fund

Report of Independent Registered Public Accounting Firm

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 Franklin Strategic Income Securities Fund (the "Fund") at December 31, 2013, 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 five years in the period then ended, 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2013 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

February 14, 2014

FSI-50

Franklin Templeton Variable Insurance Products Trust

Tax Information (unaudited)

Franklin Strategic Income Securities Fund

Under Section 852(b)(3)(C) of the Internal Revenue Code, the Fund hereby reports the maximum amount allowable but no less than $12,344,009 as a long term capital gain dividend for the fiscal year ended December 31, 2013.

FSI-51

FRANKLIN TEMPLETON VIP FOUNDING FUNDS ALLOCATION FUND

This annual report for Franklin Templeton VIP Founding Funds Allocation Fund covers the period ended December 31, 2013.

Performance Summary as of 12/31/13

Average annual total return of Class 4 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.

Periods ended 12/31/13

	1-Year		5-Year		Inception (7/2/07)
Average Annual Total Return		+23.68%		+14.96%		+2.87%

*For the period beginning 2/29/08, Class 4 performance reflects a 12b-1 fee expense of 0.35% per year, which affects future performance. Class 4 performance prior to 2/29/08 reflects historical Class 1 performance, which does not have a 12b-1 fee expense. Since 2/29/08 (effective date), the average annual total return of Class 4 shares was +5.80%. The Fund has an expense reduction contractually guaranteed through at least 4/30/14. Fund investment results reflect the expense reduction, to the extent applicable; without this reduction, the results would have been lower.

Total Return Index Comparison for a Hypothetical $10,000 Investment (7/2/07–12/31/13)

The graph below shows the change in value of a hypothetical $10,000 investment in the Fund over the indicated period and includes reinvestment of any income or distributions. The Fund’s performance* is compared to the performance of the Standard & Poor’s^® 500 Index (S&P 500^®) and the MSCI World Index. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Important Notes to Performance Information preceding the Fund Summaries.

**Source: © 2014 Morningstar. Please see Index Descriptions following the Fund Summaries.

Franklin Templeton VIP Founding Funds Allocation Fund – Class 4

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

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

Current performance may differ from figures shown.

FFA-1

Fund Goals and Main Investments: Franklin Templeton VIP Founding Funds Allocation Fund seeks capital appreciation, with income as a secondary goal. Under normal market conditions, the Fund invests equal portions in Class 1 shares of Franklin Income Securities Fund, Mutual Shares Securities Fund and Templeton Growth Securities Fund.

Performance Overview

You can find the Fund’s one-year total return in the Performance Summary. In comparison, the S&P 500 generated a +32.39% total return and the MSCI World Index produced a +27.36% total return for the same period.¹

Economic and Market Overview

The 12 months under review were characterized by reinvigorated policy support and an economic recovery in developed markets. However, differences in global economic trends corresponded with increasingly divergent monetary policies, and growth in emerging market economies tended to slow. The central banks of key developed markets generally reaffirmed their accommodative monetary stances while some emerging market counterparts tightened policy rates as they sought to control inflation and currency depreciation.

In the U.S., economic growth and employment trends generally exceeded expectations, underpinned by consumer and business spending and rising inventories. Historically low mortgage rates and improving sentiment aided the housing market recovery, evidenced by solid new and existing home sales, rising home prices, low inventories and multi-year lows in new foreclosures. The U.S. Federal Reserve Board (Fed) expanded its asset purchase program to $85 billion per month from $40 billion early in the year. After encouraging economic and employment reports, the Fed announced in December it would reduce its monthly bond purchases by $10 billion beginning in January 2014; however, the Fed committed to keeping interest rates low. In October, the federal government temporarily shut down after Congress failed to authorize routine federal funding amid a disagreement over a new health care law. However, Congress subsequently agreed to fund the government through early 2014 and later passed a two-year budget deal that could ease automatic spending cuts and lower the risk of another shutdown.

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

1. Source: © 2014 Morningstar. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

FFA-2

Outside the U.S., the eurozone emerged from its longest recession on record during the second half of 2013 and Japan’s growth moderated. The European Central Bank reduced its policy rate to a record low and pledged to maintain systemic support following political turmoil in Greece, Spain, Portugal and Italy. Germany’s re-election of Chancellor Angela Merkel was largely perceived as a vote of support for ongoing eurozone reform measures. In Asia, the Bank of Japan set an explicit inflation target and pledged to double bond purchases in an unprecedented wave of policy reform. The U.S. dollar fell versus the euro but rose versus the Japanese yen in 2013.

Growth in many emerging markets moderated based on lower domestic demand, falling exports and weakening commodity prices. Political turmoil in certain emerging markets, the Fed’s potential tapering of its asset purchase program and the Chinese central bank’s effort to tighten liquidity to curb real estate and credit speculation led to a sell-off in emerging market equities and a sharp depreciation in regional currencies against the U.S. dollar. Central banks in Brazil, India and Indonesia raised interest rates in the second half of 2013 as they sought to curb inflation.

The stock market rally in developed markets accelerated during 2013 amid redoubled central bank commitments, continued corporate earnings strength and increasing signs of economic progress. Emerging market stocks rebounded toward period-end, although Latin American stocks trailed their emerging market peers. Oil prices rallied in the third quarter and rose for the year mainly owing to supply concerns related to geopolitical turmoil, but gold posted its largest annual price decline in more than three decades. Increasingly divergent economic and political circumstances during the period resulted in declining market correlations, which many bottom-up investors perceived as more favorable.

Investment Strategy

The Fund normally invests its assets in an equally weighted combination of Class 1 shares of Franklin Income Securities Fund, Mutual Shares Securities Fund and Templeton Growth Securities Fund. These underlying funds, in turn, invest in a variety of U.S. and foreign equity securities and, to a lesser extent, fixed income and money market securities. As market conditions affect the underlying funds, we rebalance the Fund’s allocations seeking to maintain equal weightings of approximately 33 ¹⁄₃% of total net assets in each underlying fund whenever the actual allocations exceed plus or minus 3% of the fixed allocation percentages.

FFA-3

Manager’s Discussion

The Fund’s performance can be attributed largely to its allocation among the underlying funds and their investments in domestic and foreign equities, fixed income securities, and short-term investments and other net assets.

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

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

The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2013, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

FFA-4

Fund Expenses

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

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

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

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

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

Actual Fund Expenses

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

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

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

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

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

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

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

Franklin Templeton VIP Founding Funds Allocation Fund – Class 4

FFA-5

Hypothetical Example for Comparison with Other Mutual Funds

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

Class 4	Beginning Account Value 7/1/13		Ending Account Value 12/31/13		Expenses Paid During Period* 7/1/13–12/31/13		Expenses Paid During Period** 7/1/13–12/31/13
Actual	$	1,000	$	1,140.70	$	2.43	$	5.99
Hypothetical (5% return before expenses)	$	1,000	$	1,022.94	$	2.29	$	5.65

*Expenses are calculated using the most recent six-month annualized expense ratio excluding expenses of the underlying funds, net of expense waivers, for the Fund’s Class 4 shares (0.45%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period.

**Expenses are calculated using the most recent six-month annualized expense ratio including expenses of the underlying funds, net of expense waivers, for the Fund’s Class 4 shares (1.11%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period.

FFA-6

Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Franklin Templeton VIP Founding Funds Allocation Fund

	Year Ended December 31,
Class 1	2013			2012			2011			2010			2009
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	8.55		$	7.63		$	7.73		$	7.15		$	5.61
Income from investment operationsa:
Net investment incomeb,c		0.30			0.26			0.25			0.24			0.26
Net realized and unrealized gains (losses)		1.42			0.90			(0.35	)		0.52			1.46
Total from investment operations		1.72			1.16			(0.10	)		0.76			1.72
Less distributions from:
Net investment income		(1.15	)		(0.24	)		—	d		(0.18	)		(0.18	)
Net realized gains		(1.65	)		—			—			—	d		—
Total distributions		(2.80	)		(0.24	)		—	d		(0.18	)		(0.18	)
Net asset value, end of year	$	7.47		$	8.55		$	7.63		$	7.73		$	7.15
Total returne		24.14%			15.56%			(1.28)%			10.64%			30.47%
Ratios to average net assets
Expenses before waiver and payments by affiliatesf		0.11%			0.11%			0.11%			0.11%			0.12%
Expenses net of waiver and payments by affiliatesf		0.10%			0.10%			0.10%			0.10%			0.10%
Net investment incomec		3.67%			4.06%			3.44%			3.04%			4.16%
Supplemental data
Net assets, end of year (000’s)	$	952		$	767		$	470		$	437		$	629
Portfolio turnover rate		3.91%			28.46%	g		58.42%			17.81%			4.23%

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

^bBased on average daily shares outstanding.

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

^dAmount rounds to less than $0.01 per share.

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

^fDoes not include expenses of the Underlying Funds in which the Fund invests. The weighted average indirect expenses of the Underlying Funds was 0.66% for the year ended December 31, 2013.

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

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

FFA-7

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin Templeton VIP Founding Funds Allocation Fund

	Year Ended December 31,
Class 2	2013			2012			2011			2010			2009
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	8.51		$	7.59		$	7.71		$	7.14		$	5.61
Income from investment operationsa:
Net investment incomeb,c		0.27			0.25			0.23			0.21			0.26
Net realized and unrealized gains (losses)		1.42			0.89			(0.35	)		0.52			1.44
Total from investment operations		1.69			1.14			(0.12	)		0.73			1.70
Less distributions from:
Net investment income		(1.13	)		(0.22	)		—	d		(0.16	)		(0.17	)
Net realized gains		(1.65	)		—			—			—	d		—
Total distributions		(2.78	)		(0.22	)		—	d		(0.16	)		(0.17	)
Net asset value, end of year	$	7.42		$	8.51		$	7.59		$	7.71		$	7.14
Total returne		23.77%			15.33%			(1.54)%			10.25%			30.25%
Ratios to average net assets
Expenses before waiver and payments by affiliatesf		0.36%			0.36%			0.36%			0.36%			0.37%
Expenses net of waiver and payments by affiliatesf		0.35%			0.35%			0.35%			0.35%			0.35%
Net investment incomec		3.42%			3.81%			3.19%			2.79%			3.91%
Supplemental data
Net assets, end of year (000’s)	$	547,506		$	472,686		$	448,101		$	488,057		$	474,176
Portfolio turnover rate		3.91%			28.46%	g		58.42%			17.81%			4.23%

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

^bBased on average daily shares outstanding.

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

^dAmount rounds to less than $0.01 per share.

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

^fDoes not include expenses of the Underlying Funds in which the Fund invests. The weighted average indirect expenses of the Underlying Funds was 0.66% for the year ended December 31, 2013.

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

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

FFA-8

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Franklin Templeton VIP Founding Funds Allocation Fund

	Year Ended December 31,
Class 4	2013			2012			2011			2010			2009
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	8.49		$	7.58		$	7.71		$	7.14		$	5.62
Income from investment operationsa:
Net investment incomeb,c		0.26			0.30			0.24			0.19			0.23
Net realized and unrealized gains (losses)		1.43			0.83			(0.37	)		0.54			1.46
Total from investment operations		1.69			1.13			(0.13	)		0.73			1.69
Less distributions from:
Net investment income		(0.99	)		(0.22	)		—	d		(0.16	)		(0.17	)
Net realized gains		(1.65	)		—			—			—	d		—
Total distributions		(2.64	)		(0.22	)		—	d		(0.16	)		(0.17	)
Net asset value, end of year	$	7.54		$	8.49		$	7.58		$	7.71		$	7.14
Total returne		23.68%			15.17%			(1.67)%			10.24%			30.06%
Ratios to average net assets
Expenses before waiver and payments by affiliatesf		0.46%			0.46%			0.46%			0.46%			0.47%
Expenses net of waiver and payments by affiliatesf		0.45%			0.45%			0.45%			0.45%			0.45%
Net investment incomec		3.32%			3.71%			3.09%			2.69%			3.81%
Supplemental data
Net assets, end of year (000’s)	$	676,781		$	493,813		$	2,860,928		$	3,036,272		$	1,424,479
Portfolio turnover rate		3.91%			28.46%	g		58.42%			17.81%			4.23%

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

^bBased on average daily shares outstanding.

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

^dAmount rounds to less than $0.01 per share.

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

^fDoes not include expenses of the Underlying Funds in which the Fund invests. The weighted average indirect expenses of the Underlying Funds was 0.66% for the year ended December 31, 2013.

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

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

FFA-9

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013

Franklin Templeton VIP Founding Funds Allocation Fund	Shares		Value
Investments in Underlying Fundsa
Domestic Equity 33.1%
Mutual Shares Securities Fund, Class 1		18,485,942	$	405,211,843
Domestic Hybrid 33.0%
Franklin Income Securities Fund, Class 1		24,462,601		404,122,168
Foreign Equity 33.2%
Templeton Growth Securities Fund, Class 1		26,312,175		407,049,352
Total Investments in Underlying Funds (Cost $865,558,414) 99.3%				1,216,383,363
Other Assets, less Liabilities 0.7%				8,854,633
Net Assets 100.0%			$	1,225,237,996

^aSee Note 7 regarding investments in Underlying Funds.

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

FFA-10

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

December 31, 2013

	Franklin Templeton VIP Founding Funds Allocation Fund
Assets:
Investments in Underlying Funds: (Note 7)
Cost	$	865,558,414
Value	$	1,216,383,363
Cash		10,734,628
Receivables:
Investment securities sold		101,998
Capital shares sold		499,211
Other assets		24
Total assets		1,227,719,224
Liabilities:
Payables:
Capital shares redeemed		1,587,895
Administrative fees		101,998
Distribution fees		609,376
Accrued expenses and other liabilities		181,959
Total liabilities		2,481,228
Net assets, at value	$	1,225,237,996
Net assets consist of:
Paid-in capital	$	894,399,778
Undistributed net investment income		33,877,400
Net unrealized appreciation (depreciation)		350,824,949
Accumulated net realized gain (loss)		(53,864,131	)
Net assets, at value	$	1,225,237,996
Class 1:
Net assets, at value	$	951,562
Shares outstanding		127,402
Net asset value and maximum offering price per share	$	7.47
Class 2:
Net assets, at value	$	547,505,858
Shares outstanding		73,770,699
Net asset value and maximum offering price per share	$	7.42
Class 4:
Net assets, at value	$	676,780,576
Shares outstanding		89,774,728
Net asset value and maximum offering price per share	$	7.54

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

FFA-11

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the year ended December 31, 2013

	Franklin Templeton VIP Founding Funds Allocation Fund
Investment income:
Dividends from Underlying Funds (Note 7)	$	41,026,041
Expenses:
Administrative fees (Note 3a)		1,088,163
Distribution fees: (Note 3b)
Class 2		1,272,748
Class 4		2,022,562
Unaffiliated transfer agent fees		727
Reports to shareholders		24,362
Professional fees		24,651
Trustees’ fees and expenses		4,163
Other		17,005
Total expenses		4,454,381
Expenses waived/paid by affiliates (Note 3d)		(70,907	)
Net expenses		4,383,474
Net investment income		36,642,567
Realized and unrealized gains (losses):
Net realized gain (loss) from sale of investments in Underlying Funds (Note 7)		3,163,496
Net change in unrealized appreciation (depreciation) on investments in Underlying Funds		190,487,276
Net realized and unrealized gain (loss)		193,650,772
Net increase (decrease) in net assets resulting from operations	$	230,293,339

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

FFA-12

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets

	Franklin Templeton VIP Founding Funds Allocation Fund
	Year Ended December 31,
	2013			2012
Increase (decrease) in net assets:
Operations:
Net investment income	$	36,642,567		$	117,257,889
Net realized gain (loss) from Underlying Funds		3,163,496			493,521,519
Net change in unrealized appreciation (depreciation) on investments in Underlying Funds		190,487,276			(130,850,160	)
Net increase (decrease) in net assets resulting from operations		230,293,339			479,929,248
Distributions to shareholders from:
Net investment income:
Class 1		(113,893	)		(14,007	)
Class 2		(60,502,595	)		(12,894,473	)
Class 4		(59,385,848	)		(102,116,912	)
Net realized gains:
Class 1		(162,965	)		—
Class 2		(88,234,067	)		—
Class 4		(98,339,718	)		—
Total distributions to shareholders		(306,739,086	)		(115,025,392	)
Capital share transactions: (Note 2)
Class 1		268,891			221,759
Class 2		115,298,186			(28,591,508	)
Class 4		218,850,531			(2,678,766,884	)
Total capital share transactions		334,417,608			(2,707,136,633	)
Net increase (decrease) in net assets		257,971,861			(2,342,232,777	)
Net assets:
Beginning of year		967,266,135			3,309,498,912
End of year	$	1,225,237,996		$	967,266,135
Undistributed net investment income included in net assets:
End of year	$	33,877,400		$	117,237,169

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

FFA-13

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements

Franklin Templeton VIP Founding Funds Allocation Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

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

The accounting policies of the Underlying Funds are outlined in their respective shareholder reports. A copy of the Underlying Funds’ shareholder reports is available on the U.S. Securities and Exchange Commission (SEC) website at sec.gov or at the SEC’s Public Reference Room in Washington, D.C. The Underlying Funds’ shareholder reports are not covered by this report.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

The Fund’s investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Fund calculates the net asset value (NAV) per share at the close of the New York Stock Exchange (NYSE), generally at 4p.m. Eastern time (NYSE close) on each day the NYSE is open for trading. Under procedures approved by the Trust’s Board of Trustees (the Board), the Fund’s administrator and other affiliates have formed the Valuation and Liquidity Oversight Committee (VLOC). The VLOC provides administration and oversight of the Fund’s valuation policies and procedures, which are approved annually by the Board. Investments in the Underlying Funds are valued at their closing net asset value each trading day.

b. Income Taxes

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

The Fund recognizes the tax benefits of uncertain tax positions only when the position is “more likely than not” to be sustained upon examination by the tax authorities based on the technical merits of the tax position. As of December 31, 2013, and for all open tax years, the Fund has determined that no liability for unrecognized tax benefits is required in the Fund’s financial statements related to uncertain tax positions taken on a tax return (or expected to be taken on future tax returns). Open tax years are those that remain subject to examination and are based on each tax jurisdiction statute of limitation.

c. Security Transactions, Investment Income, Expenses and Distributions

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

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

FFA-14

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin Templeton VIP Founding Funds Allocation Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

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

The Fund indirectly bears its proportionate share of expenses from the Underlying Funds. Since the Underlying Funds have varied expense levels and the Fund may own different proportions of the Underlying Funds at different times, the amount of expenses incurred indirectly by the Fund will vary.

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

d. Accounting Estimates

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

e. Guarantees and Indemnifications

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

2. SHARES OF BENEFICIAL INTEREST

At December 31, 2013, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:

	Year Ended December 31,
	2013						2012
Class 1 Shares:	Shares			Amount			Shares			Amount
Shares sold		24,967		$	213,393			49,376		$	392,149
Shares issued in reinvestment of distributions		41,633			276,858			1,805			14,007
Shares redeemed		(28,865	)		(221,360	)		(23,150	)		(184,397	)
Net increase (decrease)		37,735		$	268,891			28,031		$	221,759
Class 2 Shares:
Shares sold		9,475,437		$	72,686,096			2,983,614		$	23,927,917
Shares issued in reinvestment of distributions		22,467,774			148,736,662			1,665,953			12,894,473
Shares redeemed		(13,700,538	)		(106,124,572	)		(8,143,086	)		(65,413,898	)
Net increase (decrease)		18,242,673		$	115,298,186			(3,493,519	)	$	(28,591,508	)

FFA-15

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin Templeton VIP Founding Funds Allocation Fund

2. SHARES OF BENEFICIAL INTEREST (continued)

	Year Ended December 31,
	2013						2012
Class 4 Shares:	Shares			Amount			Shares			Amount
Shares sold		14,101,836		$	107,566,000			204,285,414		$	1,616,018,782
Shares issued on reinvestment of distributions		23,436,191			157,725,566			13,227,579			102,116,912
Shares redeemed in-kind (Note 9)		—			—			(291,650,709	)		(2,437,937,443	)
Shares redeemed		(5,915,495	)		(46,441,035	)		(245,221,948	)		(1,958,965,135	)
Net increase (decrease)		31,622,532		$	218,850,531			(319,359,664	)	$	(2,678,766,884	)

3. TRANSACTIONS WITH AFFILIATES

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

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

a. Administrative Fees

The Fund pays an administrative fee to FT Services of 0.10% per year of the average daily net assets of the Fund for administrative services including monitoring and rebalancing the percentage of the Fund’s investments in the Underlying Funds.

b. Distribution Fees

The Board has adopted distribution plans for Class 2 and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to 0.35% per year of its average daily net assets of each class. Some distribution fees are not charged on shares held by affiliates. The Board has agreed to limit the current rate to 0.25% per year for Class 2. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.

c. Transfer Agent Fees

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

d. Waiver and Expense Reimbursements

FT Services contractually agreed in advance to waive or limit its fees and to assume as its own expense certain expenses otherwise payable by the Fund so that the expenses (excluding distribution fees, and acquired fund fees and expenses) for each class of the Fund do not exceed 0.10% based on the average net assets of each class (other than certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations, and liquidations) until April 30, 2014.

FFA-16

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin Templeton VIP Founding Funds Allocation Fund

4. EXPENSE OFFSET ARRANGEMENT

The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses. During the year ended December 31, 2013, there were no credits earned.

5. INCOME TAXES

The tax character of distributions paid during the years ended December 31, 2013 and 2012, was as follows:

	2013		2012
Distributions paid from:
Ordinary income	$	120,002,336	$	115,025,392
Long term capital gain		186,736,750		—
	$	306,739,086	$	115,025,392

At December 31, 2013, 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	$	920,504,987
Unrealized appreciation	$	295,878,376
Unrealized depreciation		—
Net unrealized appreciation (depreciation)	$	295,878,376
Undistributed ordinary income	$	34,795,058
Undistributed long term capital gains		164,775
Distributable earnings	$	34,959,833

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

6. INVESTMENT TRANSACTIONS

Purchases and sales of Underlying Funds (excluding short term securities) for the year ended December 31, 2013, aggregated $106,026,041 and $42,206,902, respectively.

FFA-17

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin Templeton VIP Founding Funds Allocation Fund

7. INVESTMENTS IN UNDERLYING FUNDS

The Fund invests primarily in the Underlying Funds which are managed by affiliates of the Fund’s administrative manager, FT Services. The Fund does not invest in the Underlying Funds for the purpose of exercising a controlling influence over the management or policies. Investments in Underlying Funds for the year ended December 31, 2013, were as follows:

Underlying Funds	Number of Shares Held at Beginning of Year		Gross Additions		Gross Reductions		Number of Shares Held at End of Year		Value at End of Year		Investment Income		Realized Capital Gain (Loss)			% of Underlying Fund Shares Outstanding Held at End of Year
Franklin Income Securities Fund, Class 1		20,629,424		4,171,757		338,580		24,462,601	$	404,122,168	$	22,456,917	$	(88,950	)		5.42%
Mutual Shares Securities Fund, Class 1		18,291,713		982,120		787,891		18,485,942		405,211,843		8,239,696		1,395,774			7.56%
Templeton Growth Securities Fund, Class 1		26,363,969		1,524,464		1,576,258		26,312,175		407,049,352		10,329,428		1,856,672			19.07%
Total									$	1,216,383,363	$	41,026,041	$	3,163,496

8. CREDIT FACILITY

The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $1.5 billion (Global Credit Facility) which, after an extension of the original terms, matured on February 14, 2014. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. Effective February 14, 2014, the Borrowers renewed the Global Credit Facility which matures on February 13, 2015.

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.07% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses on the Statement of Operations. During the year ended December 31, 2013, the Fund did not use the Global Credit Facility.

9. REDEMPTION IN-KIND

During the year ended December 31, 2012, the Fund realized $516,992,768 of net gains resulting from a redemption in-kind in which a shareholder redeemed fund shares for cash and securities held by the Underlying Funds.

10. FAIR VALUE MEASUREMENTS

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

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

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

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

FFA-18

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Franklin Templeton VIP Founding Funds Allocation Fund

10. FAIR VALUE MEASUREMENTS (continued)

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

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

At December 31, 2013, all of the Fund’s investments in financial instruments carried at fair value were valued using Level 1 inputs. For detailed categories, see the accompanying Statement of Investments.

11. NEW ACCOUNTING PRONOUNCEMENTS

In June 2013, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2013-08, Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements. The ASU modifies the criteria used in defining an investment company under U.S. Generally Accepted Accounting Principles and also sets forth certain measurement and disclosure requirements. Under the ASU, an entity that is registered under the 1940 Act automatically qualifies as an investment company. The ASU is effective for interim and annual reporting periods beginning after December 15, 2013. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on its financial statements.

12. SUBSEQUENT EVENTS

The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure other than those already disclosed in the financial statements.

FFA-19

Franklin Templeton Variable Insurance Products Trust

Franklin Templeton VIP Founding Funds Allocation Fund

Report of Independent Registered Public Accounting Firm

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 Franklin Templeton VIP Founding Funds Allocation Fund (the “Fund”) at December 31, 2013, 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 five years in the period then ended, 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2013 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

February 14, 2014

FFA-20

Franklin Templeton Variable Insurance Products Trust

Tax Information (unaudited)

Franklin Templeton VIP Founding Funds Allocation Fund

Under Section 852(b)(3)(C) of the Internal Revenue Code (Code), the Fund hereby reports the maximum amount allowable but no less than $186,736,750 as a long term capital gain dividend for the fiscal year ended December 31, 2013.

Under Section 854(b)(1)(A) of the Code, the Fund hereby reports 9.91% of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended December 31, 2013.

At December 31, 2013, the Fund, a qualified fund of funds under Sections 852(g)(2) of the Code, received an allocation of foreign taxes paid from one or more of its underlying funds. The Fund elects to treat foreign taxes paid as allowed under Section 853 of the Code. This election will allow shareholders of record as of the 2014 distribution date, to treat their proportionate share of foreign taxes paid by the underlying funds as having been paid directly by them. The shareholder shall consider these amounts as foreign taxes paid in the tax year in which they receive the Fund distribution.

FFA-21

MUTUAL GLOBAL DISCOVERY SECURITIES FUND

This annual report for Mutual Global Discovery Securities Fund covers the fiscal year ended December 31, 2013.

Performance Summary as of 12/31/13

Average annual total return of Class 4 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.

Periods ended 12/31/13

	1-Year		5-Year		10-Year
Average Annual Total Return		+27.52%		+14.05%		+10.15%

*For the period beginning 2/29/08, Class 4 performance reflects a 12b-1 fee expense of 0.35% per year, which affects future performance. Class 4 performance prior to 2/29/08 reflects historical Class 1 performance, which does not have a 12b-1 fee expense. Since 2/29/08 (effective date), the average annual total return of Class 4 shares was +6.90%.

Total Return Index Comparison for a Hypothetical $10,000 Investment (1/1/04–12/31/13)

The graph below shows the change in value of a hypothetical $10,000 investment in the Fund over the indicated period and includes reinvestment of any income or distributions. The Fund’s performance* is compared to the performance of the Standard & Poor’s^® 500 Index (S&P 500^®) and the MSCI World Index. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Important Notes to Performance Information preceding the Fund Summaries.

**Source: © 2014 Morningstar. Please see Index Descriptions following the Fund Summaries.

Mutual Global Discovery Securities Fund – Class 4

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

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

Current performance may differ from figures shown.

MGD-1

Fund Goal and Main Investments: Mutual Global Discovery Securities Fund seeks capital appreciation. Under normal market conditions, the Fund invests primarily in U.S. and foreign equity securities that the investment manager believes are undervalued.

Performance Overview

You can find the Fund’s one-year total return in the Performance Summary. For comparison, the Fund’s benchmark, the MSCI World Index, generated a +27.36% total return and the S&P 500 posted a +32.39% total return for the same period.¹

Economic and Market Overview

The 12 months under review were characterized by reinvigorated policy support and an economic recovery in developed markets. However, differences in global economic trends corresponded with increasingly divergent monetary policies, and growth in emerging market economies tended to slow. The central banks of key developed markets generally reaffirmed their accommodative monetary stances while some emerging market counterparts tightened policy rates as they sought to control inflation and currency depreciation.

In the U.S., economic growth and employment trends generally exceeded expectations. The U.S. Federal Reserve Board (Fed) expanded its asset purchase program to $85 billion per month from $40 billion early in the year. After encouraging economic and employment reports, the Fed announced in December it would reduce its monthly bond purchases by $10 billion beginning in January 2014; however, the Fed committed to keeping interest rates low. In October, the federal government temporarily shut down after Congress failed to authorize routine federal funding amid a disagreement over a new health care law. However, Congress subsequently agreed to fund the government through early 2014 and later passed a two-year budget deal that could ease automatic spending cuts and lower the risk of another shutdown.

Outside the U.S., the eurozone emerged from its longest recession on record during 2013’s second half and Japan’s growth moderated. The European Central Bank reduced its policy rate to a record low and pledged to maintain systemic support following political turmoil in Greece, Spain, Portugal and Italy. Germany’s re-election of Chancellor

1. Source: © 2014 Morningstar. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

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

MGD-2

Angela Merkel was largely perceived as a vote of support for ongoing eurozone reform measures. In Asia, the Bank of Japan set an explicit inflation target and pledged to double bond purchases in an unprecedented wave of policy reform. The U.S. dollar fell versus the euro but rose versus the Japanese yen in 2013.

Growth in many emerging markets moderated based on lower domestic demand, falling exports and weakening commodity prices. Political turmoil in certain emerging markets, the Fed’s potential tapering of its asset purchase program and the Chinese central bank’s effort to tighten liquidity to curb real estate and credit speculation led to a sell-off in emerging market equities and a sharp depreciation in regional currencies against the U.S. dollar. Central banks in Brazil, India and Indonesia raised interest rates in the second half of 2013 as they sought to curb inflation.

The stock market rally in developed markets accelerated during 2013 amid redoubled central bank commitments, continued corporate earnings strength and increasing signs of economic progress. Emerging market stocks rebounded toward period-end, although Latin American stocks trailed their emerging market peers. Oil prices rallied in the third quarter and rose for the year mainly owing to supply concerns related to geopolitical turmoil, but gold posted its largest annual price decline in more than three decades. Increasingly divergent economic and political circumstances during the period resulted in declining market correlations, which many bottom-up investors perceived as more favorable.

Investment Strategy

At Mutual Series, we are committed to our distinctive value approach to investing. Our major investment strategy is investing in undervalued stocks. When selecting undervalued equities, we are attracted to fundamentally strong companies with healthy balance sheets, high-quality assets, substantial free cash flow and shareholder-oriented management teams and whose stocks are trading at discounts to our assessment of the companies’ intrinsic or business value. We also look for asset-rich companies whose shares may be trading at depressed levels due to concerns over short-term earnings disappointments, litigation, management strategy or other perceived negatives. While the vast majority of our undervalued equity investments are made in publicly traded companies globally, we may invest occasionally in privately held companies as well.

MGD-3

We complement this more traditional investment strategy with two others. One is distressed investing, which is complex and can take many forms. The most common distressed investment the Fund undertakes is the purchase of financially troubled or bankrupt companies’ debt at a substantial discount to face value. After the financially distressed company is reorganized, often in bankruptcy court, the old debt is typically replaced with new securities issued by the financially stronger company.

The other piece of our investment strategy is participating in arbitrage situations, another highly specialized field. When companies announce proposed mergers or takeovers, commonly referred to as “deals,” the target company may trade at a discount to the bid it ultimately accepts. One form of arbitrage involves purchasing the target company’s stock when it is trading below the value we believe it would receive in a deal. In keeping with our commitment to a relatively conservative investment approach, we typically focus our arbitrage efforts on announced deals, and eschew rumored deals or other situations we consider relatively risky.

In addition, it is our practice to hedge the Fund’s currency exposure when we deem it advantageous for our shareholders.

Manager’s Discussion

In an environment of generally rising equity prices, many Fund investments increased in value during the year. Top contributors included U.K.-based mobile telephony operator Vodafone Group, U.S.-based managed health care company Cigna and Germany-based retailer Metro.

Vodafone Group is a global mobile telecommunications company that provides a range of services, including voice and data communications. The company’s stock rallied in the second half of the year, driven largely by the long-anticipated sale of its 45% stake in Verizon Wireless to Verizon Communications at what we considered to be an attractive price. Vodafone said it planned to return two-thirds of the capital from the sale to shareholders and use the balance to invest in growth initiatives in its core markets and to reduce debt. Following the deal, we continued to view Vodafone as a potentially compelling stock, given that the economic environment in Europe has shown signs of stabilizing, the regulatory environment is easing and we believe the company may be close to monetizing its investments in data services.

What is meant by “hedge”?

To hedge a position is to seek to reduce the risk of adverse price movements in an asset. Normally, a hedge is implemented as an offsetting position in a related security, such as a currency forward contract.

What is a currency forward contract?

A currency forward contract, also called a “currency forward,” is an agreement between the Fund and a counterparty to buy or sell a foreign currency at a specific exchange rate on a future date.

MGD-4

Shares of Cigna benefited from improved investor sentiment early in the period following the company’s divestiture of its legacy run-off insurance business. Partially as a result of the divestiture, three major independent credit rating agencies issued positive outlooks for the company’s debt. Additionally, operational performance also improved as Cigna reported strong results in its core businesses. In October, Cigna increased its outlook for fiscal year 2013 consolidated adjusted income from operations. In our assessment, the outlook was among the more favorable in the managed care industry, owing to the company’s low exposure to potentially negative elements of upcoming health care reforms.

Metro, which runs Europe’s largest cash and carry business as well as Germany’s largest department store chain, benefited from ongoing restructuring efforts led by a revamped management team. Management’s plans to create value by exiting non-core markets while improving profitability in Germany supported improved investor sentiment as quarterly operating profits exceeded consensus estimates. A rise in net cash flow from operations and proceeds from the disposal of various business units allowed Metro to significantly reduce its net debt. At period-end, the company was also considering a spin-off of its Russian operations, a move we believed could potentially unlock further value. Additionally, shares were positively affected by rising sentiment that European consumer spending stands to grow.

During the 12 months under review, some of the Fund’s investments lost value and negatively affected performance. Key detractors included Hong Kong-based conglomerate Jardine Matheson Holdings, French power and transportation firm Alstom and U.K.-based metals and mining company Anglo American.

Exposure to emerging markets in Asia negatively affected Jardine Matheson Holdings. A growing belief that the Fed was close to winding down its quantitative easing program, which the central bank confirmed in December, contributed to capital outflows from those markets during the year. Operationally, strong performance at the company’s Hong Kong Land business was offset by weak results for Indonesian automotive producer and distributor Astra International, which struggled amid poor demand for heavy machinery and a weakening Indonesian rupiah. We viewed the recent headwinds as a cyclical issue for emerging markets, and at period-end we remained confident in our investment thesis given Jardine Matheson’s cash generation ability and robust balance sheet.

Top 10 Equity Holdings

Mutual Global Discovery Securities Fund 12/31/13

Company Sector/Industry, Country	% of Total Net Assets
Vodafone Group PLC		3.3%
Wireless Telecommunication Services, U. K.
Microsoft Corp.		2.4%
Software, U.S.
Merck & Co. Inc.		2.3%
Pharmaceuticals, U.S.
A.P. Moeller-Maersk AS, B		2.2%
Marine, Denmark
ACE Ltd.		2.2%
Insurance, U.S.
Apple Inc.		2.2%
Computers & Peripherals, U.S.
Royal Dutch Shell PLC, A		2.2%
Oil, Gas & Consumable Fuels, U.K.
American International Group Inc.		2.2%
Insurance, U.S.
ING Groep NV, IDR		2.1%
Diversified Financial Services, Netherlands
Metro AG		2.0%
Food & Staples Retailing, Germany

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

MGD-5

Alstom is an industrial conglomerate with a focus on power generation, transmission and transportation. Shares declined as the company reduced its organic sales growth estimates during the year and also pushed out its operating margin target by one to two years. Later, investors grew more concerned about the company’s ability to generate sufficient free cash flow to reduce its debt level.

The share price of Anglo American was negatively affected by declining prices for several of the commodities it produces. Uncertainty surrounding possible restructuring actions also weighed on the stock price. In January, the company appointed a new chief executive officer, tasked with a mandate to improve operations and capital discipline. Despite the price decline during the year, at period-end, we maintained a favorable outlook for the stock as the new management team remained focused on improving operational performance and returns with the aim of increasing shareholder value.

During the year, the Fund held currency forwards and futures to somewhat hedge the currency risk of the Fund’s non-U.S. dollar investments. The hedges had a minor negative impact on the Fund’s performance during the period.

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

The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2013, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

Top 10 Sectors/Industries

Mutual Global Discovery Securities Fund 12/31/13

	% of Total Net Assets
Commercial Banks		9.5%
Insurance		7.5%
Oil, Gas & Consumable Fuels		7.5%
Diversified Financial Services		5.9%
Pharmaceuticals		5.5%
Food & Staples Retailing		5.5%
Tobacco		4.8%
Software		4.5%
Media		3.7%
Wireless Telecommunication Services		3.3%

What is a futures contract?

A futures contract, also called a “future,” is an agreement between the Fund and a counterparty made through a U.S. or foreign futures exchange to buy or sell an asset at a specific price on a future date.

MGD-6

Fund Expenses

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

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

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

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

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

Actual Fund Expenses

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

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

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

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

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

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

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

Mutual Global Discovery Securities Fund – Class 4

MGD-7

Hypothetical Example for Comparison with Other Mutual Funds

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

Class 4	Beginning Account Value 7/1/13		Ending Account Value 12/31/13		Fund-Level Expenses Incurred During Period* 7/1/13–12/31/13
Actual	$	1,000	$	1,140.90	$	7.12
Hypothetical (5% return before expenses)	$	1,000	$	1,018.55	$	6.72

*Expenses are calculated using the most recent six-month annualized expense ratio for the Fund’s Class 4 shares (1.32%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period.

MGD-8

SUPPLEMENT DATED JANUARY 2, 2014

TOTHE PROSPECTUS

DATED MAY 1, 2013

OF

MUTUAL GLOBAL DISCOVERY SECURITIES FUND

(A series of Franklin Templeton Variable Insurance Products Trust)

The prospectus is amended as follows:

I.  The Fund Details “Management” section disclosure concerning the portfolio management team beginning on page MGD-D8 is revised to read as follows:

The Fund is managed by a team of dedicated professionals focused on investments in equity securities they consider to be undervalued. The portfolio managers of the team are as follows:

PETER A. LANGERMAN Chairman, President and Chief Executive Officer of Franklin Mutual	Mr. Langerman has been a co-lead portfolio manager since 2009. He joined Franklin Templeton Investments in 1996, serving in various capacities, including President and Chief Executive Officer of Franklin Mutual and member of the management team of the Fund, before leaving in 2002 and serving as director of New Jersey’s Division of Investment, overseeing employee pension funds. Between 1986 and 1996, he was employed at Heine Securities Corporation, the Funds’ former manager.
PHILIPPE BRUGERE-TRELAT Executive Vice President of Franklin Mutual	Mr. Brugere-Trelat has been a co-lead portfolio manager of the Fund since 2009. He has been a member of the management team of the Fund since 2004, when he rejoined Franklin Templeton Investments. Between 1984 and 1994, he was employed at Heine Securities Corporation, the Funds’ former manager.
TIMOTHY RANKIN, CFA Portfolio Manager of Franklin Mutual	Mr. Rankin has been a portfolio manager of the Fund since 2010 and assumed the duties of co-lead portfolio manager in January 2014. He rejoined Franklin Templeton Investments in June 2010. Prior to rejoining Franklin Templeton Investments, he was managing director of Blue Harbour Group, LLC, a private investment firm focused on small- and mid-cap North American companies. Previously, he worked at Franklin Templeton Investments from 1997 through 2004.

As co-lead portfolio managers of the Fund, Mr. Langerman, Mr. Brugere-Trelat and Mr. Rankin have equal authority over all aspects of the Fund’s investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio risk assessment, and the management of daily cash balances in accordance with anticipated investment management requirements. The degree to which either may perform these functions, and the nature of these functions, may change from time to time.

CFA^® and Chartered Financial Analyst^® are trademarks owned by CFA Institute.

Please keep this supplement for future reference.

MGD-9

Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Mutual Global Discovery Securities Fund

	Year Ended December 31,
Class 1	2013			2012			2011			2010			2009
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	20.55		$	19.66		$	21.16		$	19.14		$	16.12
Income from investment operationsa:
Net investment incomeb		0.46			0.43			0.52			0.38			0.19	c
Net realized and unrealized gains (losses)		5.03			2.21			(1.09	)		1.94			3.57
Total from investment operations		5.49			2.64			(0.57	)		2.32			3.76
Less distributions from:
Net investment income		(0.58	)		(0.64	)		(0.50	)		(0.30	)		(0.26	)
Net realized gains		(2.15	)		(1.11	)		(0.43	)		—			(0.48	)
Total distributions		(2.73	)		(1.75	)		(0.93	)		(0.30	)		(0.74	)
Net asset value, end of year	$	23.31		$	20.55		$	19.66		$	21.16		$	19.14
Total returnd		27.95%			13.63%			(2.73)%			12.24%			23.63%
Ratios to average net assets
Expensese		0.97%	f		0.99%			0.97%	f		1.00%	f		1.06%	f
Expenses incurred in connection with securities sold short		—%	g		—%	g		—%	g		0.02%			0.09%
Net investment income		2.13%			2.12%			2.34%			1.93%			1.07%	c
Supplemental data
Net assets, end of year (000’s)	$	2,465		$	1,136		$	974		$	84,213		$	86,755
Portfolio turnover rate		15.58%			25.63%			26.17%	h		49.31%			43.35%

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

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $(0.03) per share related to an adjustment for uncollectible interest as disclosed on the Statement of Operations. Excluding the effect of this adjustment, the ratio of net investment income to average net assets would have been 1.26%.

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

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

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

^gRounds to less than 0.01%.

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

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

MGD-10

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Mutual Global Discovery Securities Fund

	Year Ended December 31,
Class 2	2013			2012			2011			2010			2009
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	20.17		$	19.30		$	20.80		$	18.81		$	15.85
Income from investment operationsa:
Net investment incomeb		0.42			0.38			0.43			0.33			0.14	c
Net realized and unrealized gains (losses)		4.92			2.15			(1.04	)		1.91			3.50
Total from investment operations		5.34			2.53			(0.61	)		2.24			3.64
Less distributions from:
Net investment income		(0.52	)		(0.55	)		(0.46	)		(0.25	)		(0.20	)
Net realized gains		(2.15	)		(1.11	)		(0.43	)		—			(0.48	)
Total distributions		(2.67	)		(1.66	)		(0.89	)		(0.25	)		(0.68	)
Net asset value, end of year	$	22.84		$	20.17		$	19.30		$	20.80		$	18.81
Total returnd		27.61%			13.36%			(2.96)%			11.96%			23.31%
Ratios to average net assets
Expensese		1.22%	f		1.24%			1.22%	f		1.25%	f		1.31%	f
Expenses incurred in connection with securities sold short		—%	g		—%	g		—%	g		0.02%			0.09%
Net investment income		1.88%			1.87%			2.09%			1.68%			0.82%	c
Supplemental data
Net assets, end of year (000’s)	$	684,780		$	660,465		$	712,161		$	1,351,223		$	1,309,852
Portfolio turnover rate		15.58%			25.63%			26.17%	h		49.31%			43.35%

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

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $(0.03) per share related to an adjustment for uncollectible interest. Excluding the effect of this adjustment, the ratio of net investment income to average net assets would have been 1.01%.

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

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

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

^gRounds to less than 0.01%.

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

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

MGD-11

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Mutual Global Discovery Securities Fund

	Year Ended December 31,
Class 4	2013			2012			2011			2010			2009
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	20.38		$	19.50		$	21.02		$	19.02		$	16.07
Income from investment operationsa:
Net investment incomeb		0.40			0.36			0.40			0.31			0.11	c
Net realized and unrealized gains (losses)		4.97			2.19			(1.05	)		1.94			3.56
Total from investment operations		5.37			2.55			(0.65	)		2.25			3.67
Less distributions from:
Net investment income		(0.50	)		(0.56	)		(0.44	)		(0.25	)		(0.24	)
Net realized gains		(2.15	)		(1.11	)		(0.43	)		—			(0.48	)
Total distributions		(2.65	)		(1.67	)		(0.87	)		(0.25	)		(0.72	)
Net asset value, end of year	$	23.10		$	20.38		$	19.50		$	21.02		$	19.02
Total returnd		27.52%			13.27%			(3.08)%			11.87%			23.19%
Ratios to average net assets
Expensese		1.32%	f		1.34%			1.32%	f		1.35%	f		1.41%	f
Expenses incurred in connection with securities sold short		—%	g		—%	g		—%	g		0.02%			0.09%
Net investment income		1.78%			1.77%			1.99%			1.58%			0.72%	c
Supplemental data
Net assets, end of year (000’s)	$	70,354		$	62,346		$	66,695		$	70,613		$	59,178
Portfolio turnover rate		15.58%			25.63%			26.17%	h		49.31%			43.35%

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

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $(0.03) per share related to an adjustment for uncollectible interest. Excluding the effect of this adjustment, the ratio of net investment income to average net assets would have been 0.91%.

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

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

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

^gRounds to less than 0.01%.

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

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

MGD-12

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013

Mutual Global Discovery Securities Fund	Country	Shares/ Units		Value
Common Stocks and Other Equity Interests 90.8%
Aerospace & Defense 1.0%
Safran SA	France		107,185	$	7,446,839
Auto Components 0.8%
Continental AG	Germany		17,853		3,914,354
a,b International Automotive Components Group Brazil LLC	Brazil		424,073		82,618
a,b,c International Automotive Components Group North America, LLC	United States		4,052,916		2,293,221
					6,290,193
Automobiles 0.7%
aGeneral Motors Co.	United States		136,940		5,596,738
Beverages 1.2%
Coca-Cola Enterprises Inc.	United Kingdom		96,500		4,258,545
Dr. Pepper Snapple Group Inc.	United States		91,753		4,470,206
					8,728,751
Capital Markets 0.6%
aChina Cinda Asset Management Co. Ltd., H	China		341,392		212,204
Morgan Stanley	United States		140,030		4,391,341
					4,603,545
Commercial Banks 9.5%
a,b,d The Bankshares Inc.	United States		800,000		3,815,192
Barclays PLC	United Kingdom		990,101		4,457,823
BNP Paribas SA	France		107,180		8,351,688
aCapital Bank Financial Corp., A	United States		78,494		1,785,739
a,e Capital Bank Financial Corp., B, 144A, non-voting	United States		269,922		6,140,725
CIT Group Inc.	United States		108,462		5,654,124
HSBC Holdings PLC	United Kingdom		586,355		6,431,056
KB Financial Group Inc.	South Korea		101,400		4,058,017
PNC Financial Services Group Inc.	United States		112,821		8,752,653
Societe Generale	France		64,534		3,747,722
SunTrust Banks Inc.	United States		139,468		5,133,817
Wells Fargo & Co.	United States		307,140		13,944,156
					72,272,712
Communications Equipment 1.1%
Cisco Systems Inc.	United States		359,180		8,063,591
Computers & Peripherals 3.0%
Apple Inc.	United States		29,121		16,340,084
Hewlett-Packard Co.	United States		215,217		6,021,772
					22,361,856
Construction & Engineering 0.9%
Vinci SA	France		99,255		6,514,985
Consumer Finance 0.0%†
aComdisco Holding Co. Inc.	United States		44		238
Diversified Financial Services 5.4%
Citigroup Inc.	United States		229,050		11,935,796
Deutsche Boerse AG	Germany		60,838		5,037,696
aING Groep NV, IDR	Netherlands		1,161,320		16,133,695
JPMorgan Chase & Co.	United States		131,280		7,677,255
					40,784,442

MGD-13

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Mutual Global Discovery Securities Fund	Country	Shares/ Units		Value
Common Stocks and Other Equity Interests (continued)
Diversified Telecommunication Services 0.7%
a,f,g Global Crossing Holdings Ltd., Contingent Distribution	United States		2,236,777	$	—
Vivendi SA	France		201,673		5,313,620
					5,313,620
Electric Utilities 0.8%
Exelon Corp.	United States		215,010		5,889,124
Electrical Equipment 0.2%
Alstom SA	France		41,228		1,501,374
Energy Equipment & Services 2.5%
Baker Hughes Inc.	United States		147,071		8,127,143
Ensco PLC, A	United States		83,364		4,766,754
Transocean Ltd.	United States		120,473		5,953,776
					18,847,673
Food & Staples Retailing 5.5%
China Resources Enterprise Ltd.	China		1,266,000		4,204,027
CVS Caremark Corp.	United States		78,301		5,604,003
Empire Co. Ltd., A	Canada		68,050		4,650,067
Metro AG	Germany		318,004		15,396,990
Tesco PLC	United Kingdom		686,623		3,802,342
Walgreen Co.	United States		135,422		7,778,640
					41,436,069
Health Care Equipment & Supplies 2.4%
Medtronic Inc.	United States		257,934		14,802,832
Stryker Corp.	United States		46,588		3,500,622
					18,303,454
Health Care Providers & Services 2.4%
Cigna Corp.	United States		152,861		13,372,280
WellPoint Inc.	United States		51,010		4,712,814
					18,085,094
Hotels, Restaurants & Leisure 1.5%
Accor SA	France		233,246		11,004,464
Independent Power Producers & Energy Traders 1.1%
NRG Energy Inc.	United States		299,277		8,595,235
Industrial Conglomerates 2.6%
Jardine Matheson Holdings Ltd.	Hong Kong		141,097		7,380,784
Jardine Strategic Holdings Ltd.	Hong Kong		371,698		11,894,336
Siemens AG	Germany		3,785		516,930
					19,792,050
Insurance 7.5%
ACE Ltd.	United States		163,160		16,891,955
aAlleghany Corp.	United States		2,730		1,091,891
American International Group Inc.	United States		319,563		16,313,691
E-L Financial Corp. Ltd.	Canada		5,378		3,721,537
a,b Imagine Group Holdings Ltd.	Bermuda		56,213		410,692
MetLife Inc.	United States		63,096		3,402,136
a,b Olympus Re Holdings Ltd.	United States		2,140		—
PartnerRe Ltd.	Bermuda		94,940		10,009,524
Zurich Insurance Group AG	Switzerland		17,558		5,087,992
					56,929,418

MGD-14

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Mutual Global Discovery Securities Fund	Country	Shares/ Units		Value
Common Stocks and Other Equity Interests (continued)
Marine 2.2%
A.P. Moeller-Maersk AS, B	Denmark		1,565	$	16,981,387
Media 3.7%
CBS Corp., B	United States		57,392		3,658,166
Comcast Corp., Special A	United States		48,623		2,425,315
Daekyo Co. Ltd.	South Korea		3,075		21,263
Reed Elsevier PLC	United Kingdom		276,908		4,121,056
Time Warner Cable Inc.	United States		48,159		6,525,544
aTribune Co., A	United States		43,818		3,391,513
aTribune Co., B	United States		26,867		2,071,446
Twenty-First Century Fox Inc., B	United States		170,160		5,887,536
					28,101,839
Metals & Mining 2.6%
Anglo American PLC	United Kingdom		275,805		6,029,654
Freeport-McMoRan Copper & Gold Inc., B	United States		135,280		5,105,467
aThyssenKrupp AG	Germany		344,296		8,377,615
					19,512,736
Multi-Utilities 0.9%
GDF Suez	France		296,982		6,983,286
Multiline Retail 0.7%
Kohl’s Corp.	United States		99,870		5,667,622
Office Electronics 1.2%
Xerox Corp.	United States		720,967		8,774,168
Oil, Gas & Consumable Fuels 7.5%
Apache Corp.	United States		149,500		12,848,030
BG Group PLC	United Kingdom		235,965		5,070,756
BP PLC	United Kingdom		1,028,014		8,309,721
CONSOL Energy Inc.	United States		185,226		7,045,997
Marathon Oil Corp.	United States		178,885		6,314,641
Royal Dutch Shell PLC, A	United Kingdom		458,527		16,338,383
aWPX Energy Inc.	United States		41,146		838,555
					56,766,083
Paper & Forest Products 0.2%
a,c NewPage Holdings Inc.	United States		19,416		1,747,440
Personal Products 0.8%
Avon Products Inc.	United States		334,038		5,752,134
Pharmaceuticals 5.5%
Eli Lilly & Co.	United States		76,608		3,907,008
Merck & Co. Inc.	United States		346,558		17,345,228
Novartis AG, ADR	Switzerland		126,364		10,157,138
Teva Pharmaceutical Industries Ltd., ADR	Israel		257,877		10,335,710
					41,745,084
Real Estate Management & Development 0.5%
gCanary Wharf Group PLC	United Kingdom		487,324		2,518,473
Great Eagle Holdings Ltd.	Hong Kong		200,333		685,917
Swire Pacific Ltd., B	Hong Kong		309,263		697,944
					3,902,334

MGD-15

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Mutual Global Discovery Securities Fund	Country	Shares/ Units			Value
Common Stocks and Other Equity Interests (continued)
Semiconductors & Semiconductor Equipment 0.2%
aSK Hynix Semiconductor Inc.	South Korea		53,632		$	1,869,481
Software 4.5%
aCheck Point Software Technologies Ltd.	Israel		130,472			8,418,054
Microsoft Corp.	United States		487,458			18,245,553
Symantec Corp.	United States		312,280			7,363,562
						34,027,169
Specialty Retail 0.8%
Kingfisher PLC	United Kingdom		973,910			6,202,435
Tobacco 4.8%
Altria Group Inc.	United States		176,234			6,765,624
British American Tobacco PLC	United Kingdom		220,778			11,834,028
Lorillard Inc.	United States		218,909			11,094,308
Philip Morris International Inc.	United States		75,124			6,545,554
						36,239,514
Wireless Telecommunication Services 3.3%
Vodafone Group PLC	United Kingdom		6,354,031			24,944,178
Total Common Stocks and Other Equity Interests (Cost $491,250,720)						687,578,355
Preferred Stocks (Cost $5,430,000) 0.5%
Diversified Financial Services 0.5%
a,b Hightower Holding LLC, pfd., A, Series 2	United States		2,172,000			4,131,361
		Principal Amount*
Corporate Bonds, Notes and Senior Floating Rate Interests 4.2%
eAmerican Airlines Inc., senior secured note, 144A, 7.50%, 3/15/16	United States		3,845,000			4,008,413
Clear Channel Communications Inc.,
senior secured note, first lien, 9.00%, 12/15/19	United States		5,184,000			5,313,600
h,i Tranche B Term Loan, 3.819%, 1/29/16	United States		102,224			99,297
h,i Tranche C Term Loan, 3.819%, 1/29/16	United States		16,816			16,138
h,i Tranche D Term Loan, 6.919%, 1/30/19	United States		6,889,154			6,596,365
h,i Tranche E Term Loan, 7.669%, 7/30/19	United States		2,213,881			2,186,207
h,i JC Penney Corp. Inc., Term Loan, 6.00%, 5/22/18	United States		730,330			714,607
eNGPL PipeCo LLC,
secured note, 144A, 7.119%, 12/15/17	United States		1,086,000			988,260
jsenior secured note, 144A, 9.625%, 6/01/19	United States		2,369,000			2,327,543
h,i Texas Competitive Electric Holdings Co. LLC, Extended Term Loan, 4.668%, 10/10/17	United States		5,912,264			4,083,896
Texas Competitive Electric Holdings Co. LLC/Texas Competitive Electric Holdings Finance Inc.,
senior note, A, 10.25%, 11/01/15	United States		6,359,000			445,130
esenior secured note, 144A, 11.50%, 10/01/20	United States		5,895,000			4,362,300
eWind Acquisition Finance SA,
senior secured note, 144A, 11.75%, 7/15/17	Italy		135,000			143,775
third lien, 144A, 11.75%, 7/15/17	Italy		394,000	EUR		577,239
Total Corporate Bonds, Notes and Senior Floating Rate Interests (Cost $33,831,008)						31,862,770
Corporate Notes in Reorganization 0.2%
b,k Broadband Ventures III LLC, secured promissory note, 5.00%, 2/01/12	United States		595			—
h,k Cengage Learning Acquisitions Inc., FRN, 2.70%, 7/03/14	United States		1,512,445			1,187,269
Total Corporate Notes in Reorganization (Cost $1,213,245)						1,187,269

MGD-16

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Mutual Global Discovery Securities Fund	Country	Shares		Value
Companies in Liquidation 1.0%
aAdelphia Recovery Trust	United States		5,379,562	$	10,759
a,f Adelphia Recovery Trust, Arahova Contingent Value Vehicle, Contingent Distribution	United States		386,774		194
a,f,g Century Communications Corp., Contingent Distribution	United States		1,074,000		—
a,b FIM Coinvestor Holdings I, LLC	United States		2,077,368		—
a,l Lehman Brothers Holdings Inc., Bankruptcy Claim	United States		17,348,669		7,806,901
a,f,g NewPage Corp., Litigation Trust, Contingent Distribution	United States		4,854,000		—
a,f,g Tribune Litigation Trust, Contingent Distribution	United States		56,883		—
Total Companies in Liquidation (Cost $8,239,386)					7,817,854
Total Investments before Short Term Investments (Cost $539,964,359)					732,577,609
		Principal Amount*
Short Term Investments 3.3%
U.S. Government and Agency Securities 3.2%
mU.S. Treasury Bills,
1/02/14	United States		9,900,000		9,900,000
n3/20/14 - 6/26/14	United States		14,500,000		14,496,810
Total U.S. Government and Agency Securities (Cost $24,395,997)					24,396,810
Total Investments before Money Market Funds (Cost $564,360,356)					756,974,419
		Shares
oInvestments from Cash Collateral Received for Loaned Securities (Cost $391,880) 0.1%
Money Market Funds 0.1%
p BNY Mellon Overnight Government Fund, 0.017%	United States		391,880		391,880
Total Investments (Cost $564,752,236) 100.0%					757,366,299
Securities Sold Short (0.6)%					(4,371,298	)
Other Assets, less Liabilities 0.6%					4,603,857
Net Assets 100.0%				$	757,598,858
qSecurities Sold Short (Proceeds $4,207,572) (0.6)%
Common Stocks (0.6)%
Diversified Telecommunication Services (0.6)%
Verizon Communications Inc.	United States		88,956	$	(4,371,298	)

See Abbreviations on page MGD-37.

MGD-17

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Mutual Global Discovery Securities Fund

†Rounds to less than 0.1% of net assets.

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

^aNon-income producing.

^bSee Note 9 regarding restricted securities.

^cAt December 31, 2013, pursuant to the Fund’s policies and the requirements of applicable securities law, the Fund may be restricted from trading this security for a limited or extended period of time due to ownership limits and/or potential possession of material non-public information.

^dSee Note 11 regarding holdings of 5% voting securities.

^eSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At December 31, 2013, the aggregate value of these securities was $18,548,255, representing 2.45% of net assets.

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

^gSecurity has been deemed illiquid because it may not be able to be sold within seven days. At December 31, 2013, the aggregate value of these securities was $2,518,473, representing 0.33% of net assets.

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

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

^jA portion or all of the security is on loan at December 31, 2013. See Note 1(f).

^kSee Note 7 regarding credit risk and defaulted securities.

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

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

ⁿSecurity or a portion of the security has been pledged as collateral for securities sold short, open futures and forward contracts. At December 31, 2013, the aggregate value of these securities and/or cash pledged as collateral was $9,694,110, representing 1.28% of net assets.

^oSee Note 1(f) regarding securities on loan.

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

^qSee Note 1(e) regarding securities sold short.

MGD-18

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Mutual Global Discovery Securities Fund

At December 31, 2013, the Fund had the following futures contracts outstanding. See Note 1(c).

Futures Contracts

Description	Type		Number of Contracts		Notional Value		Expiration Date		Unrealized Appreciation		Unrealized Depreciation
Currency Contracts
EUR/USD		Short		239	$	41,191,650		3/17/2014	$	—	$	(177,302	)
GBP/USD		Short		174		18,006,825		3/17/2014		—		(167,744	)
Net unrealized appreciation (depreciation)											$	(345,046	)

At December 31, 2013, the Fund had the following forward exchange contracts outstanding. See Note 1(c).

Forward Exchange Contracts

Currency	Counterpartya		Type		Quantity		Contract Amount		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
Euro		HSBC		Buy		175,279	$	240,503		1/17/14	$	590	$	—
Euro		BOFA		Sell		4,739,416		6,220,818		1/17/14		183		(298,377	)
Euro		BONY		Sell		90,035		123,350		1/17/14		—		(492	)
Euro		BZWS		Sell		3,962,322		5,174,238		1/17/14		—		(275,891	)
Euro		FBCO		Sell		1,493,347		1,978,900		1/17/14		—		(75,181	)
Euro		DBAB		Sell		2,681,495		3,548,648		1/17/14		—		(139,717	)
Euro		HSBC		Sell		1,029,783		1,369,599		1/17/14		—		(46,856	)
Euro		SCBT		Sell		1,229,369		1,634,481		1/17/14		—		(56,502	)
Euro		SSBT		Sell		80,618		110,281		1/17/14		—		(609	)
British Pound		BOFA		Sell		7,475,556		11,373,657		1/21/14		—		(1,003,369	)
British Pound		FBCO		Sell		1,110,515		1,758,817		1/21/14		—		(79,825	)
British Pound		DBAB		Sell		818,058		1,241,894		1/21/14		—		(112,537	)
British Pound		HSBC		Sell		129,815		208,254		1/21/14		—		(6,676	)
South Korean Won		BOFA		Buy		145,086,196		135,719		2/12/14		1,316		—
South Korean Won		FBCO		Buy		129,444,725		116,348		2/12/14		5,914		—
South Korean Won		HSBC		Buy		225,428,121		209,251		2/12/14		3,667		—
Swiss Franc		FBCO		Buy		648,838		706,814		2/12/14		20,801		—
Swiss Franc		HSBC		Buy		4,280,392		4,647,700		2/12/14		152,383		—
Swiss Franc		SCBT		Buy		1,832,003		1,965,453		2/12/14		88,977		—
South Korean Won		BOFA		Sell		2,156,238,993		2,001,512		2/12/14		4,666		(39,733	)
Swiss Franc		BOFA		Sell		6,654,229		7,252,566		2/12/14		—		(209,567	)
South Korean Won		FBCO		Sell		1,718,695,111		1,542,699		2/12/14		—		(80,619	)
Swiss Franc		FBCO		Sell		107,004		114,817		2/12/14		—		(5,178	)
South Korean Won		DBAB		Sell		1,280,493,937		1,140,263		2/12/14		—		(69,171	)
South Korean Won		HSBC		Sell		1,601,523,001		1,487,974		2/12/14		697		(25,371	)
British Pound		SCBT		Buy		4,494,750		6,972,346		2/19/14		467,989		—
British Pound		BOFA		Sell		6,022,171		9,366,417		2/19/14		—		(602,317	)
British Pound		BZWS		Sell		2,915,254		4,532,054		2/19/14		—		(293,680	)
British Pound		FBCO		Sell		607,752		962,386		2/19/14		—		(43,650	)
British Pound		HSBC		Sell		878,039		1,391,442		2/19/14		—		(62,011	)
British Pound		SCBT		Sell		1,115,900		1,796,164		2/19/14		—		(51,029	)
Euro		BOFA		Sell		989,760		1,318,829		2/28/14		—		(42,584	)
Euro		BONY		Sell		1,007,522		1,343,642		2/28/14		—		(42,204	)
Euro		BZWS		Sell		4,181,967		5,571,949		2/28/14		—		(180,344	)
Euro		FBCO		Sell		1,148,618		1,533,358		2/28/14		—		(46,565	)
Euro		HSBC		Sell		5,524,073		7,383,063		2/28/14		—		(215,295	)
Euro		SCBT		Sell		1,056,188		1,414,914		2/28/14		—		(37,872	)
Euro		SSBT		Sell		410,646		549,163		2/28/14		—		(15,680	)
Canadian Dollar		HSBC		Buy		66,274		61,784		3/18/14		495		—

MGD-19

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Mutual Global Discovery Securities Fund

Forward Exchange Contracts (continued)

Currency	Counterpartya		Type		Quantity		Contract Amount		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
Canadian Dollar		SCBT		Buy		315,000	$	295,159		3/18/14	$	851	$	—
Canadian Dollar		BOFA		Sell		879,539		848,613		3/18/14		22,095		—
Canadian Dollar		HSBC		Sell		30,328		29,316		3/18/14		816		—
Canadian Dollar		SCBT		Sell		8,166,239		7,875,021		3/18/14		202,553		(1,483	)
Euro		BOFA		Buy		552,053		756,947		4/16/14		2,565		(164	)
Euro		BONY		Buy		298,950		411,394		4/16/14		—		(189	)
Euro		BZWS		Buy		93,680		128,619		4/16/14		238		—
Euro		HSBC		Buy		571,394		783,867		4/16/14		2,460		(375	)
Euro		SCBT		Buy		225,950		310,628		4/16/14		299		(133	)
Euro		SSBT		Buy		187,516		258,008		4/16/14		9		(89	)
Euro		BOFA		Sell		1,956,565		2,659,216		4/16/14		—		(32,036	)
Euro		BONY		Sell		178,239		244,020		4/16/14		—		(1,148	)
Euro		BZWS		Sell		2,153,191		2,927,705		4/16/14		—		(34,006	)
Euro		FBCO		Sell		614,295		839,989		4/16/14		—		(4,973	)
Euro		HSBC		Sell		849,359		1,159,440		4/16/14		26		(8,878	)
Euro		SCBT		Sell		468,686		637,630		4/16/14		—		(7,047	)
Euro		SSBT		Sell		242,983		332,590		4/16/14		—		(1,633	)
British Pound		BOFA		Sell		207,154		339,577		4/22/14		—		(3,164	)
British Pound		BONY		Sell		2,286,221		3,688,543		4/22/14		—		(94,061	)
British Pound		FBCO		Sell		1,953,134		3,148,452		4/22/14		—		(83,052	)
British Pound		HSBC		Sell		203,244		332,758		4/22/14		—		(3,513	)
British Pound		SCBT		Sell		3,417,985		5,509,792		4/22/14		—		(145,342	)
Euro		BOFA		Sell		11,377,449		15,317,017		5/15/14		1,479		(334,715	)
Euro		BONY		Sell		287,354		396,503		5/15/14		1,234		—
Euro		BZWS		Sell		250,774		344,244		5/15/14		214		(922	)
Euro		HSBC		Sell		352,244		484,821		5/15/14		1,321		(1,029	)
Euro		SCBT		Sell		282,352		388,685		5/15/14		801		(506	)
Euro		SSBT		Sell		81,986		112,359		5/15/14		—		(417	)
Euro		BONY		Sell		800,000		1,083,393		5/19/14		—		(17,053	)
British Pound		BZWS		Sell		4,350,966		6,994,396		5/21/14		—		(202,632	)
British Pound		HSBC		Sell		3,071,759		4,939,388		5/21/14		—		(141,675	)
Unrealized appreciation (depreciation)												984,639		(5,279,137	)
Net unrealized appreciation (depreciation)													$	(4,294,498	)

^aMay be comprised of multiple contracts using the same currency and settlement date

See Abbreviations on page MGD-37

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

MGD-20

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

December 31, 2013

	Mutual Global Discovery Securities Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	556,752,236
Cost - Non-controlled affiliated issuers (Note 11)		8,000,000
Total cost of investments	$	564,752,236
Value - Unaffiliated issuers	$	753,551,107
Value - Non-controlled affiliated issuers (Note 11)		3,815,192
Total value of investments (includes securities loaned in the amount of $381,210)		757,366,299
Cash		97,505
Restricted cash (Note 1d)		530,000
Foreign currency, at value (cost $4,287,431)		4,295,247
Receivables:
Investment securities sold		109,914
Capital shares sold		102,004
Dividends and interest		2,574,263
Due from brokers		4,519,058
Unrealized appreciation on forward exchange contracts		984,639
Other assets		158,929
Total assets		770,737,858
Liabilities:
Payables:
Capital shares redeemed		1,422,940
Management fees		506,473
Administrative fees		86,665
Distribution fees		321,836
Variation margin		8,200
Securities sold short, at value (proceeds $4,207,572)		4,371,298
Payable upon return of securities loaned		391,880
Due to brokers		530,000
Unrealized depreciation on forward exchange contracts		5,279,137
Accrued expenses and other liabilities		220,571
Total liabilities		13,139,000
Net assets, at value	$	757,598,858
Net assets consist of:
Paid-in capital	$	504,520,871
Undistributed net investment income		15,025,568
Net unrealized appreciation (depreciation)		187,846,828
Accumulated net realized gain (loss)		50,205,591
Net assets, at value	$	757,598,858

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

MGD-21

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Assets and Liabilities (continued)

December 31, 2013

	Mutual Global Discovery Securities Fund
Class 1:
Net assets, at value	$	2,465,035
Shares outstanding		105,735
Net asset value and maximum offering price per share	$	23.31
Class 2:
Net assets, at value	$	684,779,884
Shares outstanding		29,977,635
Net asset value and maximum offering price per share	$	22.84
Class 4:
Net assets, at value	$	70,353,939
Shares outstanding		3,045,999
Net asset value and maximum offering price per share	$	23.10

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

MGD-22

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the year ended December 31, 2013

	Mutual Global Discovery Securities Fund
Investment income:
Dividends	$	18,129,322
Interest		5,064,160
Income from securities loaned		80,640
Total investment income		23,274,122
Expenses:
Management fees (Note 3a)		5,989,198
Administrative fees (Note 3b)		1,023,488
Distribution fees: (Note 3c)
Class 2		1,700,321
Class 4		234,176
Unaffiliated transfer agent fees		1,166
Custodian fees (Note 4)		35,240
Reports to shareholders		63,459
Professional fees		162,248
Trustees’ fees and expenses		3,000
Dividends and interest on securities sold short		2,508
Other		16,559
Total expenses		9,231,363
Expense reductions (Note 4)		(158	)
Net expenses		9,231,205
Net investment income		14,042,917
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		56,476,932
Written options		6,664
Foreign currency transactions		(2,470,252	)
Futures contracts		(2,574,373	)
Net realized gain (loss)		51,438,971
Net change in unrealized appreciation (depreciation) on:
Investments		116,496,377
Translation of other assets and liabilities denominated in foreign currencies		344,610
Net change in unrealized appreciation (depreciation)		116,840,987
Net realized and unrealized gain (loss)		168,279,958
Net increase (decrease) in net assets resulting from operations	$	182,322,875

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

MGD-23

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets

	Mutual Global Discovery Securities Fund
	Year Ended December 31,
	2013			2012
Increase (decrease) in net assets:
Operations:
Net investment income	$	14,042,917		$	14,067,363
Net realized gain (loss) from investments, written options, foreign currency transactions and futures contracts		51,438,971			86,155,202
Net change in unrealized appreciation (depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies		116,840,987			(5,719,893	)
Net increase (decrease) in net assets resulting from operations		182,322,875			94,502,672
Distributions to shareholders from:
Net investment income:
Class 1		(52,604	)		(32,000	)
Class 2		(14,417,027	)		(17,455,646	)
Class 4		(1,382,402	)		(1,713,076	)
Net realized gains:
Class 1		(195,304	)		(55,531	)
Class 2		(59,917,989	)		(35,238,248	)
Class 4		(5,990,316	)		(3,402,551	)
Total distributions to shareholders		(81,955,642	)		(57,897,052	)
Capital share transactions: (Note 2)
Class 1		1,149,200			115,172
Class 2		(67,039,527	)		(85,201,977	)
Class 4		(825,524	)		(7,400,610	)
Total capital share transactions		(66,715,851	)		(92,487,415	)
Net increase (decrease) in net assets		33,651,382			(55,881,795	)
Net assets:
Beginning of year		723,947,476			779,829,271
End of year	$	757,598,858		$	723,947,476
Undistributed net investment income included in net assets:
End of year	$	15,025,568		$	15,327,129

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

MGD-24

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements

Mutual Global Discovery Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment company, consisting of twenty separate funds. The Mutual Global Discovery Securities (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. At December 31, 2013, 69.47% of the Fund’s shares were held through one insurance company. The Fund offers three classes of shares: Class 1, Class 2, and Class 4. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

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

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

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

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

The Fund has procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the VLOC convenes on a regular basis to review such financial instruments and considers a number of factors, including significant unobservable valuation inputs, when arriving at fair value. The VLOC primarily employs

MGD-25

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Mutual Global Discovery Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

a. Financial Instrument Valuation (continued)

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

Trading in securities on foreign securities stock exchanges and OTC markets may be completed before the daily NYSE close. In addition, trading in certain foreign markets may not take place on every NYSE business day. Occasionally, events occur between the time at which trading in a foreign security is completed and the close of the NYSE that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund’s portfolio securities as determined at the foreign market close and the latest indications of value at the close of the NYSE. In order to minimize the potential for these differences, the VLOC monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depositary Receipts, futures contracts and exchange traded funds). These price movements are measured against established trigger thresholds for each specific market proxy to assist in determining if an event has occurred that may call into question the reliability of the values of the foreign securities held by the Fund. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services.

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

b. Foreign Currency Translation

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

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

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

MGD-26

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Mutual Global Discovery Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

c. Derivative Financial Instruments

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

Derivative counterparty credit risk is managed through a formal evaluation of the creditworthiness of all potential counterparties. The Fund attempts to reduce its exposure to counterparty credit risk on OTC derivatives, whenever possible, by entering into International Swaps and Derivatives Association (ISDA) master agreements with certain counterparties. These agreements contain various provisions, including but not limited to collateral requirements, events of default, or early termination. Termination events applicable to the counterparty include certain deteriorations in the credit quality of the counterparty. Termination events applicable to the Fund include failure of the Fund to maintain certain net asset levels and/or limit the decline in net assets over various periods of time. In the event of default or early termination, the ISDA master agreement gives the non-defaulting party the right to net and close-out all transactions traded, whether or not arising under the ISDA agreement, to one net amount payable by one counterparty to the other. However, absent an event of default or early termination, OTC derivative assets and liabilities are presented gross and not offset in the Statement of Assets and Liabilities. Early termination by the counterparty may result in an immediate payment by the Fund of any net liability owed to that counterparty under the ISDA agreement. At December 31, 2013, the Fund had OTC derivatives in a net liability position of $4,756,054 and the aggregate value of collateral pledged for such contracts was $4,322,203.

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

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

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

The Fund purchased or wrote exchange traded option contracts primarily to manage exposure to equity price risk. An option is a contract entitling the holder to purchase or sell a specific amount of shares or units of an asset or notional amount of a swap (swaption), at a specified price. Options purchased are recorded as an asset while options written are recorded as a liability. Upon exercise of an option, the acquisition cost or sales proceeds of the underlying investment is adjusted by any premium

MGD-27

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Mutual Global Discovery Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

c. Derivative Financial Instruments (continued)

received or paid. Upon expiration of an option, any premium received or paid is recorded as a realized gain or loss. Upon closing an option other than through expiration or exercise, the difference between the premium and the cost to close the position is recorded as a realized gain or loss.

See Notes 6 and 10 regarding investment transactions and other derivative information, respectively.

d. Restricted Cash

At December 31, 2013, the Fund received restricted cash in connection with investments in certain derivative securities. Restricted cash is held in a segregated account with the Fund’s custodian and is reflected in the Statement of Assets and Liabilities.

e. Securities Sold Short

The Fund is engaged in selling securities short, which obligates the Fund to replace a borrowed security with the same security at current market value. The Fund incurs a loss if the price of the security increases between the date of the short sale and the date on which the Fund replaces the borrowed security. The Fund realizes a gain if the price of the security declines between those dates. Gains are limited to the price at which the Fund sold the security short, while losses are potentially unlimited in size.

The Fund is required to establish a margin account with the broker lending the security sold short. While the short sale is outstanding, the broker retains the proceeds of the short sale to the extent necessary to meet margin requirements until the short position is closed out. A deposit must also be maintained with the Fund’s custodian/counterparty broker consisting of cash and/or securities having a value equal to a specified percentage of the value of the securities sold short. The Fund is obligated to pay fees for borrowing the securities sold short and is required to pay the counterparty any dividends or interest due on securities sold short. Such dividends or interest and any security borrowing fees are recorded as an expense to the Fund.

f. Securities Lending

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

g. Senior Floating Rate Interests

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

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

MGD-28

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Mutual Global Discovery Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

h. Income and Deferred Taxes

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

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

The Fund recognizes the tax benefits of uncertain tax positions only when the position is “more likely than not” to be sustained upon examination by the tax authorities based on the technical merits of the tax position. As of December 31, 2013, and for all open tax years, the Fund has determined that no liability for unrecognized tax benefits is required in the Fund’s financial statements related to uncertain tax positions taken on a tax return (or expected to be taken on future tax returns). Open tax years are those that remain subject to examination and are based on each tax jurisdiction statute of limitation.

i. Security Transactions, Investment Income, Expenses and Distributions

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

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

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

j. Accounting Estimates

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

k. Guarantees and Indemnifications

Under the Trust’s organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust, on behalf of the

MGD-29

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Mutual Global Discovery Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

k. Guarantees and Indemnifications (continued)

Fund, enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.

2. SHARES OF BENEFICIAL INTEREST

At December 31, 2013, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:

	Year Ended December 31,
	2013						2012
Class 1 Shares:	Shares			Amount			Shares			Amount
Shares sold		44,760		$	1,035,207			11,112		$	227,652
Shares issued in reinvestment of distributions		11,601			247,908			4,331			87,532
Shares redeemed		(5,936	)		(133,915	)		(9,680	)		(200,012	)
Net increase (decrease)		50,425		$	1,149,200			5,763		$	115,172
Class 2 Shares:
Shares sold		4,182,129		$	92,856,510			1,636,877		$	33,107,971
Shares issued in reinvestment of distributions		3,546,518			74,335,016			2,653,268			52,693,893
Shares redeemed		(10,488,139	)		(234,231,053	)		(8,457,161	)		(171,003,841	)
Net increase (decrease)		(2,759,492	)	$	(67,039,527	)		(4,167,016	)	$	(85,201,977	)
Class 4 Shares:
Shares sold		372,331		$	8,412,949			79,532		$	1,636,846
Shares issued on reinvestment of distributions		347,770			7,372,718			255,016			5,115,627
Shares redeemed		(733,968	)		(16,611,191	)		(694,727	)		(14,153,083	)
Net increase (decrease)		(13,867	)	$	(825,524	)		(360,179	)	$	(7,400,610	)

3. TRANSACTIONS WITH AFFILIATES

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

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

a. Management Fees

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

Annualized Fee Rate	Net Assets
0.800%	Up to and including $4 billion
0.770%	Over $4 billion, up to and including $7 billion
0.750%	Over $7 billion, up to and including $10 billion
0.730%	In excess of $10 billion

MGD-30

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Mutual Global Discovery Securities Fund

3. TRANSACTIONS WITH AFFILIATES (continued)

b. Administrative Fees

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

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

c. Distribution Fees

The Board has adopted distribution plans for Class 2 and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to 0.35% per year of its average daily net assets of each class. Some distribution fees are not charged on shares held by affiliates. The Board has agreed to limit the current rate to 0.25% per year for Class 2. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.

d. Transfer Agent Fees

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

4. EXPENSE OFFSET ARRANGEMENT

The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses. During the year ended December 31, 2013, the custodian fees were reduced as noted in the Statement of Operations.

5. INCOME TAXES

The tax character of distributions paid during the years ended December 31, 2013 and 2012, was as follows:

	2013		2012
Distributions paid from:
Ordinary income	$	18,220,656	$	25,422,950
Long term capital gain		63,734,986		32,474,102
	$	81,955,642	$	57,897,052

MGD-31

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Mutual Global Discovery Securities Fund

5. INCOME TAXES (continued)

At December 31, 2013, 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	$	566,658,386
Unrealized appreciation	$	220,317,485
Unrealized depreciation		(29,609,572	)
Net unrealized appreciation (depreciation)	$	190,707,913
Undistributed ordinary income	$	23,423,360
Undistributed long term capital gains		42,716,047
Distributable earnings	$	66,139,407

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

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities and securities sold short) for the year ended December 31, 2013, aggregated $111,343,831 and $253,160,301, respectively.

Transactions in options written during the year ended December 31, 2013, were as follows:

	Number of Contracts			Premiums Received
Options outstanding at December 31, 2012		—		$	—
Options written		108			23,165
Options expired		—			—
Options exercised		(99	)		(13,860	)
Options closed		(9	)		(9,305	)
Options outstanding at December 31, 2013		—		$	—

See Notes 1(c) and 10 regarding derivative financial instruments and other derivative information, respectively.

7. CREDIT RISK AND DEFAULTED SECURITIES

The Fund may purchase the pre-default or defaulted debt of distressed companies. Distressed companies are financially troubled and are about to be or are already involved in financial restructuring or bankruptcy. Risks associated with purchasing these securities include the possibility that the bankruptcy or other restructuring process takes longer than expected, or that distributions in restructuring are less than anticipated, either or both of which may result in unfavorable consequences to the Fund. If it becomes probable that the income on debt securities, including those of distressed companies, will not be collected, the Fund discontinues accruing income and recognizes an adjustment for uncollectible interest.

At December 31, 2013, the aggregate value of distressed company securities for which interest recognition has been discontinued was $1,187,269, representing 0.16% 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

Notes to Financial Statements (continued)

Mutual Global Discovery Securities Fund

8. CONCENTRATION OF RISK

Investing in foreign securities may include certain risks and considerations not typically associated with investing in U.S. securities, such as fluctuating currency values and changing local and regional economic, political and social conditions, which may result in greater market volatility. In addition, certain foreign securities may not be as liquid as U.S. securities.

9. RESTRICTED SECURITIES

The Fund invests in securities that are restricted under the Securities Act of 1933 (1933 Act) or which are subject to legal, contractual, or other agreed upon restrictions on resale. Restricted securities are often purchased in private placement transactions, and cannot be sold without prior registration unless the sale is pursuant to an exemption under the 1933 Act. Disposal of these securities may require greater effort and expense, and prompt sale at an acceptable price may be difficult. The Fund may have registration rights for restricted securities. The issuer generally incurs all registration costs.

At December 31, 2013, the Fund held investments in restricted securities, excluding certain securities exempt from registration under the 1933 Act deemed to be liquid, as follows:

Principal Amount/ Shares		Issuer	Acquisition Dates		Cost		Value
	800,000	The Bankshares Inc.		3/22/07	$	8,000,000	$	3,815,192
	595	Broadband Ventures III LLC, secured promissory note, 5.00%, 2/01/12		7/01/10 – 11/30/12		595		—
	2,077,368	FIM Coinvestor Holdings I, LLC		11/20/06 – 6/02/09		—		—
	2,172,000	Hightower Holding LLC, pfd., A, Series 2		6/10/10 – 5/10/12		5,430,000		4,131,361
	56,213	Imagine Group Holdings Ltd.		8/31/04		575,705		410,692
	424,073	International Automotive Components Group Brazil LLC		4/13/06 – 12/26/08		281,629		82,618
	4,052,916	International Automotive Components Group North America, LLC		1/12/06 – 3/18/13		3,247,714		2,293,221
	2,140	Olympus Re Holdings Ltd.		12/19/01		200,477		—
		Total Restricted Securities (Value is 1.42% of Net Assets)			$	17,736,120	$	10,733,084

10. OTHER DERIVATIVE INFORMATION

At December 31, 2013, the Fund’s investments in derivative contracts are reflected on the Statement of Assets and Liabilities as follows:

	Asset Derivatives			Liability Derivatives
Derivative Contracts Not Accounted for as Hedging Instruments	Statement of Assets and Liabilities Location	Fair Value Amount		Statement of Assets and Liabilities Location	Fair Value Amount
Foreign exchange contracts	Unrealized appreciation on forward exchange contracts	$	984,639	Unrealized depreciation on forward exchange contracts / Net assets consist of – net unrealized appreciation (depreciation)	$	5,624,183a

^aIncludes cumulative appreciation (depreciation) of futures contracts as reported in the Statement of Investments. Only current day’s variation margin is separately reported within the Statement of Assets and Liabilities.

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Mutual Global Discovery Securities Fund

10. OTHER DERIVATIVE INFORMATION (continued)

For the year ended December 31, 2013, the effect of derivative contracts on the Fund’s Statement of Operations was as follows:

Derivative Contracts Not Accounted for as Hedging Instruments	Statement of Operations Locations	Realized Gain (Loss) for the Year			Change in Unrealized Appreciation (Depreciation) for the Year
Foreign exchange contracts	Net realized gain (loss) from foreign currency transactions and futures contracts / Net change in unrealized appreciation (depreciation) on translation of other assets and liabilities denominated in foreign currencies	$	(4,976,630	)	$	386,744
Equity contracts	Net realized gain (loss) from written options / Net change in unrealized appreciation (depreciation) on investments		6,664			—

For the year ended December 31, 2013, the average month end market value of derivatives represented 0.66% of month end net assets. The average month end number of open derivative contracts for the year was 148.

See Notes 1(c) and 6 regarding derivative financial instruments and investment transactions, respectively.

11. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES

The 1940 Act defines “affiliated companies” to include investments in portfolio companies in which a fund owns 5% or more of the outstanding voting securities. Investments in “affiliated companies” for the Fund for the year ended December 31, 2013, were as shown below.

Name of Issuer	Number of Shares Held at Beginning of Year		Gross Additions		Gross Reductions		Number of Shares Held at End of Year		Value at End of Year		Investment Income		Realized Capital Gain (Loss)
Non-Controlled Affiliates
The Bankshares Inc. (Value is 0.50% of Net Assets)		800,000		—		—		800,000	$	3,815,192	$	—	$	—

12. CREDIT FACILITY

The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $1.5 billion (Global Credit Facility) which, after an extension of the original terms, matured on February 14, 2014. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. Effective February 14, 2014, the Borrowers renewed the Global Credit Facility which matures on February 13, 2015.

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.07% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses on the Statement of Operations. During the year ended December 31, 2013, the Fund did not use the Global Credit Facility.

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Mutual Global Discovery Securities Fund

13. FAIR VALUE MEASUREMENTS

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

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

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

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

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

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

A summary of inputs used as of December 31, 2013, in valuing the Fund’s assets and liabilities carried at fair value, is as follows:

	Level 1		Level 2		Level 3			Total
Assets:
Investments in Securities
Equity Investments:a
Auto Components	$	3,914,354	$	—	$	2,375,839		$	6,290,193
Commercial Banks		62,316,795		6,140,725		3,815,192			72,272,712
Diversified Financial Services		40,784,442		—		4,131,361			44,915,803
Insurance		56,518,726		—		410,692	b		56,929,418
Media		26,030,393		2,071,446		—			28,101,839
Paper & Forest Products		—		1,747,440		—			1,747,440
Real Estate Management & Development		1,383,861		—		2,518,473			3,902,334
All Other Equity Investmentsc		477,549,977		—		—	b		477,549,977
Corporate Bonds, Notes and Senior Floating Rate Interests		—		31,862,770		—			31,862,770
Corporate Notes in Reorganization		—		1,187,269		—	b		1,187,269
Companies in Liquidation		10,759		7,807,095		—	b		7,817,854
Short Term Investments		24,396,810		391,880		—			24,788,690
Total Investments in Securities	$	692,906,117	$	51,208,625	$	13,251,557		$	757,366,299
Forward Exchange Contracts		—		984,639		—			984,639
Liabilities:
Securities Sold Short		4,371,298		—		—			4,371,298
Futures Contracts		345,046		—		—			345,046
Forward Exchange Contracts		—		5,279,137		—			5,279,137

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

^bIncludes securities determined to have no value at December 31, 2013.

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

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Mutual Global Discovery Securities Fund

13. FAIR VALUE MEASUREMENTS (continued)

A reconciliation of assets in which Level 3 inputs are used in determining fair value is presented when there are significant Level 3 investments at the end of the period. At December 31, 2013, the reconciliation of assets is as follows:

	Balance at Beginning of Year			Purchases		Sales			Trans fers Into Level 3		Trans fers Out of Level 3a			Cost Basis Adjust mentsb			Net Realized Gain (Loss)		Net Unrealized Gain (Loss)			Balance at End of Year			Net Change in Unrealized Appreciation (Depreciation) on Assets Held at Year End
Assets
Investments in Securities:
Equity Investments:c
Auto Components	$	1,600,592		$	368,443	$	—		$	—	$	—		$	—		$	—	$	406,804		$	2,375,839		$	406,804
Commercial Banks		8,957,064	d		—		—			—		(5,954,429	)		—			—		812,557			3,815,192			508,216
Diversified Financial Services		4,239,527			—		—			—		—			—			—		(108,166	)		4,131,361			(108,166	)
Diversified Telecommunication Services		32,587	d		—		—			—		—			—			69,570		(102,157	)		—	d		—
Insurance		648,760	d		—		—			—		—			(520	)		—		(237,548	)		410,692	d		(237,548	)
Real Estate Management & Development		3,812,118			—		—			—		(2,276,952	)		—			—		983,307			2,518,473			670,516
Corporate Notes in Reorganization		—	d		—		(66	)		—		—			—			—		66			—	d		—
Total	$	19,290,648		$	368,443	$	(66	)	$	—	$	(8,231,381	)	$	(520	)	$	69,570	$	1,754,863		$	13,251,557		$	1,239,822

^aThe investments were transferred out of Level 3 as a result of the removal of a significant unobservable valuation input and/or the availability of a quoted market price in an active market for identical securities.

^bMay include accretion, amortization, partnership adjustments, and/or other cost basis adjustments.

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

^dIncludes securities determined to have no value.

Significant unobservable valuation inputs developed by the VLOC for material Level 3 investments and impact to fair value as a result of changes in unobservable valuation inputs as of December 31, 2013, are as follows:

Description	Fair Value at End of Period		Valuation Technique	Unobservable Inputs	Amount/ Range		Impact to Fair Value if Input Increasesa
Assets:
Investments in Securities:
Equity Investments:b
Auto Components	$	2,293,221	Market comparables	Discount for lack of marketability		15%	Decrease
				EV / EBITDA multiple		5.1x	Increasec
Commercial Banks		3,815,192	Market comparables	Discount for lack of marketability		10%	Decreasec
				Price / tangible book multiple		1.4x	Increasec
Diversified Financial Services		4,131,361	Discounted cash flow model	Cost of equity		17%	Decrease
				Long-term revenue growth rate		6.2% - 34.9%	Increased
				Adjusted EBITDA margin		8% - 22%	Increase
Real Estate Management & Development		2,518,473	Market comparables	Discount for lack of marketability		8%	Decreasec
All Other Investmentse		493,310
Total	$	13,251,557

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Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Mutual Global Discovery Securities Fund

13. FAIR VALUE MEASUREMENTS (continued)

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

^b Includes common and convertible preferred stocks.

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

^d Represents a significant impact to fair value and net assets.

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

14. NEW ACCOUNTING PRONOUNCEMENTS

In June 2013, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2013-08, Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements. The ASU modifies the criteria used in defining an investment company under U.S. Generally Accepted Accounting Principles and also sets forth certain measurement and disclosure requirements. Under the ASU, an entity that is registered under the 1940 Act automatically qualifies as an investment company. The ASU is effective for interim and annual reporting periods beginning after December 15, 2013. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the financial statements.

15. SUBSEQUENT EVENTS

The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure other than those already disclosed in the financial statements.

ABBREVIATIONS
Counterparty	Currency	Selected Notes	Selected Portfolio
BOFA - Bank of America N.A.	EUR - Euro	EBITDA - Earnings before interest, taxes, depreciation and amortization	ADR - American Depositary Receipt
BZWS - Barclays Bank PLC	GBP - British Pound		FRN - Floating Rate Note
BONY - Bank of New York Mellon	USD - United States Dollar	EV - Enterprise value	IDR - International Depositary Receipt
DBAB - Deutsche Bank AG
FBCO - Credit Suisse Group AG
HSBC - HSBC Bank USA, N.A.
SCBT - Standard Chartered Bank
SSBT - State Street Bank and Trust Co.

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Franklin Templeton Variable Insurance Products Trust

Mutual Global Discovery Securities Fund

Report of Independent Registered Public Accounting Firm

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 Mutual Global Discovery Securities Fund (the “Fund”) at December 31, 2013, 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 five years in the period then ended, 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2013 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

February 14, 2014

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Franklin Templeton Variable Insurance Products Trust

Tax Information (unaudited)

Mutual Global Discovery Securities Fund

Under Section 852(b)(3)(C) of the Internal Revenue Code (Code), the Fund hereby reports the maximum amount allowable but no less than $63,734,986 as a long term capital gain dividend for the fiscal year ended December 31, 2013.

Under Section 854(b)(1)(A) of the Code, the Fund hereby reports 40.46% of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended December 31, 2013.

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MUTUAL SHARES SECURITIES FUND

This annual report for Mutual Shares Securities Fund covers the fiscal year ended December 31, 2013.

Performance Summary as of 12/31/13

Average annual total return of Class 4 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.

Periods ended 12/31/13

	1-Year		5-Year		10-Year
Average Annual Total Return		+28.05%		+15.13%		+6.95%

*For the period beginning 2/29/08, Class 4 performance reflects a 12b-1 fee expense of 0.35% per year, which affects future performance. Class 4 performance prior to 2/29/08 reflects historical Class 1 performance, which does not have a 12b-1 fee expense. Since 2/29/08 (effective date), the average annual total return of Class 4 shares was +5.58%.

Total Return Index Comparison for a Hypothetical $10,000 Investment (1/1/04–12/31/13)

The graph below shows the change in value of a hypothetical $10,000 investment in the Fund over the indicated period and includes reinvestment of any income and distributions. The Fund’s performance* is compared to the performance of the Standard & Poor’s^® 500 Index (S&P 500^®). One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Important Notes to Performance Information preceding the Fund Summaries.

**Source: © 2014 Morningstar. Please see Index Descriptions following the Fund Summaries.

Mutual Shares Securities Fund – Class 4

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

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

Current performance may differ from figures shown.

MS-1

Fund Goals and Main Investments: Mutual Shares Securities Fund seeks capital appreciation, with income as a secondary goal. Under normal market conditions, the Fund invests primarily in U.S. and foreign equity securities that the investment manager believes are undervalued.

Performance Overview

You can find the Fund’s one-year total return in the Performance Summary. In comparison, the Fund’s benchmark, the S&P 500, delivered a +32.39% total return for the period under review.¹

Economic and Market Overview

The 12 months under review were characterized by reinvigorated policy support and an economic recovery in developed markets. However, differences in global economic trends corresponded with increasingly divergent monetary policies, and growth in emerging market economies tended to slow. The central banks of key developed markets generally reaffirmed their accommodative monetary stances while some emerging market counterparts tightened policy rates as they sought to control inflation and currency depreciation.

In the U.S., economic growth and employment trends generally exceeded expectations, underpinned by consumer and business spending and rising inventories. Historically low mortgage rates and improving sentiment aided the housing market recovery, evidenced by solid new and existing home sales, rising home prices, low inventories and multi-year lows in new foreclosures. The U.S. Federal Reserve Board (Fed) expanded its asset purchase program to $85 billion per month from $40 billion early in the year. After encouraging economic and employment reports, the Fed announced in December it would reduce its monthly bond purchases by $10 billion beginning in January 2014; however, the Fed committed to keeping interest rates low. In October, the federal government temporarily shut down after Congress failed to authorize routine federal funding amid a disagreement over a new health care law. However, Congress subsequently agreed to fund the government through early 2014 and later passed a two-year budget deal that could ease automatic spending cuts and lower the risk of another shutdown.

Outside the U.S., the eurozone emerged from its longest recession on record during 2013’s second half and Japan’s growth moderated. The European Central Bank reduced its policy rate to a record low and

1. Source: © 2014 Morningstar. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

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

MS-2

pledged to maintain systemic support following political turmoil in Greece, Spain, Portugal and Italy. Germany’s re-election of Chancellor Angela Merkel was largely perceived as a vote of support for ongoing eurozone reform measures. In Asia, the Bank of Japan set an explicit inflation target and pledged to double bond purchases in an unprecedented wave of policy reform. The U.S. dollar fell versus the euro but rose versus the Japanese yen in 2013.

Growth in many emerging markets moderated based on lower domestic demand, falling exports and weakening commodity prices. Political turmoil in certain emerging markets, the Fed’s potential tapering of its asset purchase program and the Chinese central bank’s effort to tighten liquidity to curb real estate and credit speculation led to a sell-off in emerging market equities and a sharp depreciation in regional currencies against the U.S. dollar. Central banks in Brazil, India and Indonesia raised interest rates in the second half of 2013 as they sought to curb inflation.

The stock market rally in developed markets accelerated during 2013 amid redoubled central bank commitments, continued corporate earnings strength and increasing signs of economic progress. Emerging market stocks rebounded toward period-end, although Latin American stocks trailed their emerging market peers. Oil prices rallied in the third quarter and rose for the year mainly owing to supply concerns related to geopolitical turmoil, but gold posted its largest annual price decline in more than three decades. Increasingly divergent economic and political circumstances during the period resulted in declining market correlations, which many bottom-up investors perceived as more favorable.

Investment Strategy

At Mutual Series, we are committed to our distinctive value approach to investing. Our major investment strategy is investing in undervalued stocks. When selecting undervalued equities, we are attracted to fundamentally strong companies with healthy balance sheets, high-quality assets, substantial free cash flow and shareholder-oriented management teams and whose stocks are trading at discounts to our assessment of the companies’ intrinsic or business value. We also look for asset-rich companies whose shares may be trading at depressed levels due to concerns over short-term earnings disappointments, litigation, management strategy or other perceived negatives. While the vast majority of our undervalued equity investments are made in publicly traded companies globally, we may invest occasionally in privately held companies as well.

MS-3

We complement this more traditional investment strategy with two others. One is distressed investing, which is complex and can take many forms. The most common distressed investment the Fund undertakes is the purchase of financially troubled or bankrupt companies’ debt at a substantial discount to face value. After the financially distressed company is reorganized, often in bankruptcy court, the old debt is typically replaced with new securities issued by the financially stronger company.

The other piece of our investment strategy is participating in arbitrage situations, another highly specialized field. When companies announce proposed mergers or takeovers, commonly referred to as “deals,” the target company may trade at a discount to the bid it ultimately accepts. One form of arbitrage involves purchasing the target company’s stock when it is trading below the value we believe it would receive in a deal. In keeping with our commitment to a relatively conservative investment approach, we typically focus our arbitrage efforts on announced deals, and eschew rumored deals or other situations we consider relatively risky.

In addition, it is our practice to hedge the Fund’s currency exposure when we deem it advantageous for our shareholders.

Manager’s Discussion

During the year under review, several holdings supported performance. Top contributors included U.K.-based mobile telephony operator Vodafone Group, software firm Microsoft and managed health care company Cigna.

Vodafone Group is a global mobile telecommunications company that provides a range of services, including voice and data communications. The company’s stock rallied in the second half of the year, driven largely by the long-anticipated sale of its 45% stake in Verizon Wireless to Verizon Communications at what we considered to be an attractive price. Vodafone said it planned to return two-thirds of the capital from the sale to shareholders and use the balance to invest in growth initiatives in its core markets and to reduce debt. Following the deal, we continued to view Vodafone as a potentially compelling stock, given that the economic environment in Europe has shown signs of stabilizing, the regulatory environment is easing and we believe the company may be close to monetizing its investments in data services.

Microsoft shares benefited from improved investor sentiment. In the first half of 2013, the company reported earnings that modestly beat

Top 10 Sectors/Industries

Mutual Shares Securities Fund

Based on Equity Securities

12/31/13

	% of Total Net Assets
Oil, Gas & Consumable Fuels		8.9%
Insurance		8.4%
Media		6.8%
Pharmaceuticals		5.4%
Commercial Banks		5.3%
Food & Staples Retailing		5.3%
Tobacco		5.1%
Diversified Financial Services		3.9%
Software		3.8%
Computers & Peripherals		3.2%

What is meant by “hedge”?

To hedge a position is to seek to reduce the risk of adverse price movements in an asset. Normally, a hedge is implemented as an offsetting position in a related security, such as a currency forward contract.

What is a currency forward contract?

A currency forward contract, also called a “currency forward,” is an agreement between the Fund and a counterparty to buy or sell a foreign currency at a specific exchange rate on a future date.

MS-4

expectations, generally reassuring the market of its status as a stable business with a reasonable future. The stock also rallied following chief executive officer (CEO) Steve Ballmer’s announcement that he would retire in 2014. At period-end, we remained optimistic about the company’s plans to shift toward a subscription model for its business software such as the Office suite. In our view, if implemented broadly, such a move may have the potential to generate greater revenues and higher profits.

Shares of Cigna also benefited from improved investor sentiment early in the period following the company’s divestiture of its legacy run-off insurance business. Partially as a result of the divestiture, three major independent credit rating agencies issued positive outlooks for the company’s debt. Additionally, operational performance also improved as Cigna reported strong results in its core businesses. In October, Cigna increased its outlook for fiscal year 2013 consolidated adjusted income from operations. In our assessment, the outlook was among the more favorable in the managed care industry, owing to the company’s low exposure to potentially negative elements of upcoming health

care reforms.

During the period under review, some of the Fund’s investments negatively affected performance. These included Brazilian integrated energy firm Petroleo Brasileiro (Petrobras), U.K.-based metals and mining company Anglo American and Netherlands-incorporated heavy equipment manufacturer CNH Industrial.

Although Petrobras possesses several exploration and production assets we believe to be highly attractive, its refining and marketing (downstream) operations hurt results during the year and led the stock to decline. The Brazilian government regulates domestic fuel prices, and its reluctance to increase them continued to result in significant losses in Petrobras’s downstream business. Although the government did allow some modest price increases, recent protests against bus fare hikes, particularly in light of sluggish economic growth and a weakening Brazilian real, contributed to political pressure, limiting the company’s ability to bring domestic prices in line with global prices.

The share price of Anglo American was negatively affected by declining prices for several of the commodities it produces. Uncertainty surrounding possible restructuring actions also weighed on the stock price. In January, the company appointed a new CEO, tasked with a mandate to improve operations and capital discipline. Despite the price

Top 10 Equity Holdings

Mutual Shares Securities Fund 12/31/13

Company Sector/Industry, Country	% of Total Net Assets
Merck & Co. Inc.		2.8%
Pharmaceuticals, U.S.
Microsoft Corp.		2.6%
Software, U.S.
Vodafone Group PLC		2.4%
Wireless Telecommunication Services, U.K.
Apple Inc.		2.3%
Computers & Peripherals, U.S.
American International Group Inc.		2.1%
Insurance, U.S.
Medtronic Inc.		1.9%
Health Care Equipment & Supplies, U.S
Cigna Corp.		1.9%
Health Care Providers & Services, U.S.
Twenty-First Century Fox Inc.		1.8%
Media, U.S.
CVS Caremark Corp.		1.7%
Food & Staples Retailing, U.S.
PNC Financial Services Group Inc.		1.7%
Commercial Banks, U.S.

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

MS-5

decline during the year, at period-end, we maintained a favorable outlook for the stock as the new management team remained focused on improving operational performance and returns with the aim of increasing shareholder value.

CNH Industrial was formed from the integration of Fiat Industrial and CNH Global. Late in the year, the manufacturer of heavy machinery reported quarterly earnings that missed consensus estimates. Although operating performance improved in the company’s agricultural segment, declining agricultural commodity prices contributed to an unenthusiastic market outlook for agricultural equipment makers and weighed on the stock price. At period-end, our investment thesis remained intact and we believed CNH Industrial was one of Europe’s more attractively priced capital goods stocks, given upside potential from the restructuring of its European truck business, lower financial expenses and a lower tax rate following the company’s recent reorganization.

During the year, the Fund held currency forwards to somewhat hedge the currency risk of the Fund’s non-U.S. dollar investments. The hedges had a minor negative impact on the Fund’s performance during the period.

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

The foregoing information reflects our analysis, opinions and portfolio holdings as of

December 31, 2013, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

MS-6

Fund Expenses

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

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

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

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

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

Actual Fund Expenses

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

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

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

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

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

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

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

Mutual Shares Securities Fund – Class 4

MS-7

Hypothetical Example for Comparison with Other Mutual Funds

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

Class 4	Beginning Account Value 7/1/13		Ending Account Value 12/31/13		Fund-Level Expenses Incurred During Period* 7/1/13–12/31/13
Actual	$	1,000	$	1,138.50	$	5.66
Hypothetical (5% return before expenses)	$	1,000	$	1,019.91	$	5.35

*Expenses are calculated using the most recent six-month annualized expense ratio for the Fund’s Class 4 shares (1.05%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period.

MS-8

Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Mutual Shares Securities Fund

	Year Ended December 31,
Class 1	2013			2012			2011			2010			2009
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	17.45		$	15.57		$	16.14		$	14.75		$	11.92
Income from investment operationsa:
Net investment incomeb		0.42			0.35			0.38	c		0.40	d		0.23	e
Net realized and unrealized gains (losses)		4.52			1.92			(0.53	)		1.27			2.89
Total from investment operations		4.94			2.27			(0.15	)		1.67			3.12
Less distributions from net investment income		(0.47	)		(0.39	)		(0.42	)		(0.28	)		(0.29	)
Net asset value, end of year	$	21.92		$	17.45		$	15.57		$	16.14		$	14.75
Total returnf		28.53%			14.61%			(0.79)%			11.47%			26.35%
Ratios to average net assets
Expensesg		0.71%	h		0.71%			0.73%	h		0.74%	h		0.78%	h
Expenses incurred in connection with securities sold short		—%	i		—%	i		—%	i		0.02%			0.06%
Net investment income		2.08%			2.06%			2.28%	c		2.66%	d		1.85%	e
Supplemental data
Net assets, end of year (000’s)	$	552,163		$	449,343		$	1,170,781		$	1,301,520		$	767,553
Portfolio turnover rate		24.05%			34.07%	j		41.02%			32.05%			49.33%

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

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $0.02 per share related to interest income received that had previously been deemed uncollectible. Excluding this amount, the ratio of net investment income to average net assets would have been 2.14%.

^dNet investment income per share includes approximately $0.11 per share received in the form of a special dividend paid in connection with a corporate real estate investment trust (REIT) conversion. Excluding this non-recurring amount, the ratio of the net investment income to average net assets would have been 1.93%.

^eNet investment income per share includes approximately $(0.03) per share related to an adjustment for uncollectible interest. Excluding the effect of this adjustment, the ratio of net investment income to average net assets would have been 2.08%.

^fTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which the Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.

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

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

ⁱRounds to less than 0.01%.

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

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

MS-9

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Mutual Shares Securities Fund

	Year Ended December 31,
Class 2	2013			2012			2011			2010			2009
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	17.23		$	15.38		$	15.95		$	14.58		$	11.78
Income from investment operationsa:
Net investment incomeb		0.36			0.30			0.32	c		0.36	d		0.20	e
Net realized and unrealized gains (losses)		4.46			1.90			(0.51	)		1.25			2.85
Total from investment operations		4.82			2.20			(0.19	)		1.61			3.05
Less distributions from net investment income		(0.42	)		(0.35	)		(0.38	)		(0.24	)		(0.25	)
Net asset value, end of year	$	21.63		$	17.23		$	15.38		$	15.95		$	14.58
Total returnf		28.26%			14.24%			(1.04)%			11.19%			26.05%
Ratios to average net assets
Expensesg		0.96%	h		0.96%			0.98%	h		0.99%	h		1.03%	h
Expenses incurred in connection with securities sold short		—%	i		—%	i		—%	i		0.02%			0.06%
Net investment income		1.83%			1.81%			2.03%	c		2.41%	d		1.60%	e
Supplemental data
Net assets, end of year (000’s)	$	4,558,547		$	4,069,803		$	3,913,220		$	4,188,821		$	3,953,435
Portfolio turnover rate		24.05%			34.07%	j		41.02%			32.05%			49.33%

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

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $0.02 per share related to interest income received that had previously been deemed uncollectible. Excluding this amount, the ratio of net investment income to average net assets would have been 1.89%.

^dNet investment income per share includes approximately $0.11 per share received in the form of a special dividend paid in connection with a corporate REIT conversion. Excluding this non-recurring amount, the ratio of the net investment income to average net assets would have been 1.68%.

^eNet investment income per share includes approximately $(0.03) per share related to an adjustment for uncollectible interest. Excluding the effect of this adjustment, the ratio of net investment income to average net assets would have been 1.83%.

^fTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which the Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.

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

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

ⁱRounds to less than 0.01%.

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

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

MS-10

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Mutual Shares Securities Fund

	Year Ended December 31,
Class 4	2013			2012			2011			2010			2009
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	17.31		$	15.45		$	16.03		$	14.66		$	11.88
Income from investment operationsa:
Net investment incomeb		0.34			0.28			0.30	c		0.35	d		0.19	e
Net realized and unrealized gains (losses)		4.49			1.91			(0.51	)		1.26			2.87
Total from investment operations		4.83			2.19			(0.21	)		1.61			3.06
Less distributions from net investment income		(0.40	)		(0.33	)		(0.37	)		(0.24	)		(0.28	)
Net asset value, end of year	$	21.74		$	17.31		$	15.45		$	16.03		$	14.66
Total returnf		28.05%			14.20%			(1.12)%			11.06%			25.94%
Ratios to average net assets
Expensesg		1.06%	h		1.06%			1.08%	h		1.09%	h		1.13%	h
Expenses incurred in connection with securities sold short		—%	i		—%	i		—%	i		0.02%			0.06%
Net investment income		1.73%			1.71%			1.93%	c		2.31%	d		1.50%	e
Supplemental data
Net assets, end of year (000’s)	$	188,153		$	165,015		$	162,049		$	167,274		$	141,446
Portfolio turnover rate		24.05%			34.07%	j		41.02%			32.05%	��		49.33%

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

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $0.02 per share related to interest income received that had previously been deemed uncollectible. Excluding this amount, the ratio of net investment income to average net assets would have been 1.79%.

^dNet investment income per share includes approximately $0.11 per share received in the form of a special dividend paid in connection with a corporate REIT conversion. Excluding this non-recurring amount, the ratio of the net investment income to average net assets would have been 1.58%.

^eNet investment income per share includes approximately $(0.03) per share related to an adjustment for uncollectible interest. Excluding the effect of this adjustment, the ratio of net investment income to average net assets would have been 1.73%.

^fTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which the Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.

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

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

ⁱRounds to less than 0.01%.

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

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

MS-11

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013

Mutual Shares Securities Fund	Country	Shares		Value
Common Stocks and Other Equity Interests 87.7%
Aerospace & Defense 1.2%
Huntington Ingalls Industries Inc.	United States		693,088	$	62,384,851
Auto Components 0.2%
a,b International Automotive Components Group Brazil LLC	Brazil		1,730,515		337,139
a,b,c International Automotive Components Group North America, LLC	United States		15,382,424		8,703,683
					9,040,822
Automobiles 1.2%
aGeneral Motors Co.	United States		1,508,060		61,634,412
Beverages 1.7%
Coca-Cola Enterprises Inc.	United Kingdom		893,011		39,408,575
Dr. Pepper Snapple Group Inc.	United States		629,704		30,679,179
Pernod Ricard SA	France		163,635		18,638,869
					88,726,623
Capital Markets 0.6%
aChina Cinda Asset Management Co. Ltd., H	China		2,400,861		1,492,343
Morgan Stanley	United States		955,408		29,961,595
					31,453,938
Chemicals 0.0%
a,d,e Dow Corning Corp., Contingent Distribution	United States		100,000		—
Commercial Banks 5.3%
a,f Bond Street Holdings LLC, A, 144A	United States		493,723		7,405,845
CIT Group Inc.	United States		717,853		37,421,677
Columbia Banking System Inc.	United States		163,162		4,488,586
a,b First Southern Bancorp Inc.	United States		140,952		679,417
Guaranty Bancorp	United States		209,583		2,944,641
KB Financial Group Inc.	South Korea		809,531		32,397,343
PNC Financial Services Group Inc.	United States		1,137,209		88,224,674
Societe Generale	France		424,812		24,670,365
State Bank Financial Corp.	United States		352,200		6,406,518
SunTrust Banks Inc.	United States		1,233,522		45,405,945
Wells Fargo & Co.	United States		708,330		32,158,182
					282,203,193
Communications Equipment 1.1%
Cisco Systems Inc.	United States		2,714,540		60,941,423
Computers & Peripherals 3.2%
Apple Inc.	United States		219,930		123,404,923
Hewlett-Packard Co.	United States		1,720,337		48,135,029
					171,539,952
Consumer Finance 0.0%†
aComdisco Holding Co. Inc.	United States		180		972
Containers & Packaging 0.7%
MeadWestvaco Corp.	United States		1,092,772		40,356,070
Diversified Financial Services 3.9%
Citigroup Inc.	United States		1,120,389		58,383,471
Deutsche Boerse AG	Germany		383,353		31,743,581
aING Groep NV, IDR	Netherlands		3,463,355		48,114,830
JPMorgan Chase & Co.	United States		1,186,260		69,372,485
					207,614,367

MS-12

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Mutual Shares Securities Fund	Country	Shares		Value
Common Stocks and Other Equity Interests (continued)
Diversified Telecommunication Services 0.0%
a,d,e Global Crossing Holdings Ltd., Contingent Distribution	United States		9,005,048	$	—
Electric Utilities 0.9%
Entergy Corp.	United States		291,000		18,411,570
Exelon Corp.	United States		1,008,329		27,618,131
					46,029,701
Electronic Equipment, Instruments & Components 0.5%
TE Connectivity Ltd.	United States		516,772		28,479,305
Energy Equipment & Services 2.5%
Baker Hughes Inc.	United States		1,084,998		59,956,989
Ensco PLC, A	United States		364,874		20,863,495
Transocean Ltd.	United States		1,011,287		49,977,804
					130,798,288
Food & Staples Retailing 5.3%
CVS Caremark Corp.	United States		1,287,093		92,117,246
The Kroger Co.	United States		1,964,742		77,666,251
Tesco PLC	United Kingdom		9,238,863		51,162,455
Walgreen Co.	United States		1,009,955		58,011,815
					278,957,767
Health Care Equipment & Supplies 2.4%
Medtronic Inc.	United States		1,792,402		102,865,951
Stryker Corp.	United States		298,778		22,450,179
					125,316,130
Health Care Providers & Services 2.7%
Cigna Corp.	United States		1,137,324		99,493,104
UnitedHealth Group Inc.	United States		57,328		4,316,798
WellPoint Inc.	United States		426,624		39,415,791
					143,225,693
Independent Power Producers & Energy Traders 0.8%
NRG Energy Inc.	United States		1,462,424		42,000,817
Insurance 8.4%
ACE Ltd.	United States		799,175		82,738,588
Aegon NV	Netherlands		4,289,414		40,486,408
aAlleghany Corp.	United States		124,988		49,990,200
American International Group Inc.	United States		2,211,866		112,915,759
MetLife Inc.	United States		982,953		53,000,826
a,b Olympus Re Holdings Ltd.	United States		16,280		—
White Mountains Insurance Group Ltd.	United States		114,635		69,134,076
Zurich Insurance Group AG	Switzerland		120,520		34,924,522
					443,190,379
Machinery 2.0%
Caterpillar Inc.	United States		362,996		32,963,667
aCNH Industrial NV, special voting (EUR Traded)	Netherlands		1,844,814		21,023,531
aCNH Industrial NV (EUR Traded)	Netherlands		1,378,290		15,707,016
aFederal Signal Corp.	United States		757,221		11,093,288
Stanley Black & Decker Inc.	United States		321,044		25,905,040
					106,692,542

MS-13

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Mutual Shares Securities Fund	Country	Shares		Value
Common Stocks and Other Equity Interests (continued)
Marine 1.4%
A.P. Moeller-Maersk AS, B	Denmark		6,716	$	72,873,479
Media 6.8%
British Sky Broadcasting Group PLC	United Kingdom		369,722		5,168,690
CBS Corp., B	United States		871,847		55,571,528
Comcast Corp., Special A	United States		278,448		13,888,986
Reed Elsevier PLC	United Kingdom		5,432,460		80,848,050
Time Warner Cable Inc.	United States		502,786		68,127,503
aTribune Co., A	United States		303,318		23,476,813
aTribune Co., B	United States		185,976		14,338,750
Twenty-First Century Fox Inc., B	United States		2,816,309		97,444,291
					358,864,611
Metals & Mining 2.8%
Anglo American PLC	United Kingdom		1,378,690		30,140,948
Freeport-McMoRan Copper & Gold Inc., B	United States		2,113,606		79,767,490
aThyssenKrupp AG	Germany		1,522,235		37,039,926
					146,948,364
Multi-Utilities 0.5%
GDF Suez	France		1,121,503		26,371,214
Multiline Retail 0.8%
Kohl’s Corp.	United States		734,130		41,661,878
Office Electronics 1.4%
Xerox Corp.	United States		6,323,724		76,959,721
Oil, Gas & Consumable Fuels 8.9%
Apache Corp.	United States		946,870		81,374,008
BG Group PLC	United Kingdom		2,026,347		43,545,067
BP PLC	United Kingdom		5,114,242		41,339,829
CONSOL Energy Inc.	United States		1,287,570		48,979,163
Marathon Oil Corp.	United States		2,289,358		80,814,338
Murphy Oil Corp.	United States		543,830		35,283,690
Petroleo Brasileiro SA, ADR	Brazil		1,541,270		21,238,701
Royal Dutch Shell PLC, A	United Kingdom		2,375,753		84,653,604
Talisman Energy Inc. (CAD Traded)	Canada		202,643		2,356,203
Talisman Energy Inc. (USD Traded)	Canada		2,303,599		26,836,928
aWPX Energy Inc.	United States		378,074		7,705,148
					474,126,679
Paper & Forest Products 1.7%
Domtar Corp.	United States		194,469		18,346,206
International Paper Co.	United States		1,454,146		71,296,778
					89,642,984
Personal Products 0.7%
Avon Products Inc.	United States		2,144,712		36,931,941
Pharmaceuticals 5.4%
Eli Lilly & Co.	United States		624,078		31,827,978
aHospira Inc.	United States		587,508		24,252,330
Merck & Co. Inc.	United States		2,960,158		148,155,908
Teva Pharmaceutical Industries Ltd., ADR	Israel		2,042,367		81,858,069
					286,094,285

MS-14

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Mutual Shares Securities Fund	Country	Shares		Value
Common Stocks and Other Equity Interests (continued)
Real Estate Investment Trusts (REITs) 0.2%
Alexander’s Inc.	United States		40,126	$	13,241,580
Real Estate Management & Development 0.5%
Brookfield Office Properties Inc.	United States		667,524		12,849,837
eCanary Wharf Group PLC	United Kingdom		1,535,898		7,937,467
aForestar Group Inc.	United States		261,053		5,552,597
					26,339,901
Semiconductors & Semiconductor Equipment 0.7%
Samsung Electronics Co. Ltd.	South Korea		30,351		39,443,579
Software 3.8%
Microsoft Corp.	United States		3,643,207		136,365,238
Symantec Corp.	United States		2,715,717		64,036,607
					200,401,845
Tobacco 5.1%
Altria Group Inc.	United States		1,312,068		50,370,290
British American Tobacco PLC	United Kingdom		1,614,717		86,551,226
Imperial Tobacco Group PLC	United Kingdom		1,271,537		49,216,954
Lorillard Inc.	United States		1,129,533		57,244,732
Philip Morris International Inc.	United States		315,520		27,491,258
					270,874,460
Wireless Telecommunication Services 2.4%
Vodafone Group PLC	United Kingdom		32,091,085		125,980,773
Total Common Stocks and Other Equity Interests (Cost $3,304,424,361)					4,647,344,539
Convertible Preferred Stocks (Cost $241,000) 0.0%†
Commercial Banks 0.0%†
a,b First Southern Bancorp Inc., cvt. pfd., C	United States		241		449,909
		Principal Amount*
Corporate Bonds, Notes and Senior Floating Rate Interests 6.1%
fAmerican Airlines Inc., senior secured note, 144A, 7.50%, 3/15/16	United States		30,836,000		32,146,530
Avaya Inc.,
fsenior note, 144A, 10.50%, 3/01/21	United States		18,403,000		17,850,910
fsenior secured note, 144A, 7.00%, 4/01/19	United States		12,923,000		12,729,155
g,h Tranche B-3 Term Loan, 4.736%, 10/26/17	United States		19,636,899		19,203,258
g,h Tranche B-5 Term Loan, 8.00%, 3/31/18	United States		4,789,076		4,857,919
g,h Caesars Entertainment Operating Co. Inc., Senior Tranche Term Loan,
B5, first lien, 4.488%, 1/28/18	United States		3,440,000		3,247,934
B6, first lien, 5.488%, 1/28/18	United States		16,401,000		15,692,378
Clear Channel Communications Inc.,
senior secured note, first lien, 9.00%, 12/15/19	United States		26,449,000		27,110,225
g,h Tranche B Term Loan, 3.819%, 1/29/16	United States		537,126		521,751
g,h Tranche C Term Loan, 3.819%, 1/29/16	United States		64,409		61,813
g,h Tranche D Term Loan, 6.919%, 1/30/19	United States		34,746,619		33,269,888
g,h Tranche E Term Loan, 7.669%, 7/30/19	United States		11,168,253		11,028,650
g,h JC Penney Corp. Inc., Term Loan, 6.00%, 5/22/18	United States		22,142,411		21,665,729

MS-15

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Mutual Shares Securities Fund	Country	Principal Amount*			Value
Corporate Bonds, Notes and Senior Floating Rate Interests (continued)
NGPL PipeCo LLC,
fsecured note, 144A, 7.119%, 12/15/17	United States		9,756,000		$	8,877,960
f,i senior secured note, 144A, 9.625%, 6/01/19	United States		14,481,000			14,227,583
g,h Term Loan B, 6.75%, 9/15/17	United States		860,063			804,428
g,h Texas Competitive Electric Holdings Co. LLC, Extended Term Loan, 4.668%, 10/10/17	United States		90,618,405			62,594,663
Texas Competitive Electric Holdings Co. LLC/Texas Competitive Electric Holdings Finance Inc.,
senior note, A, 10.25%, 11/01/15	United States		44,249,000			3,097,430
fsenior secured note, 144A, 11.50%, 10/01/20	United States		39,308,000			29,087,920
fWind Acquisition Finance SA,
senior secured note, 144A, 11.75%, 7/15/17	Italy		1,256,000			1,337,640
third lien, 144A, 11.75%, 7/15/17	Italy		2,930,000	EUR		4,292,662
Total Corporate Bonds, Notes and Senior Floating Rate Interests (Cost $340,980,061)						323,706,426
Corporate Bonds and Notes in Reorganization 0.3%
b,j Broadband Ventures III LLC, secured promissory note, 5.00%, 2/01/12	United States		1,754			—
g,j Cengage Learning Acquisitions Inc., FRN, 2.70%, 7/03/14	United States		19,251,289			15,112,262
Total Corporate Bonds and Notes in Reorganization (Cost $15,283,626)						15,112,262
		Shares
Companies in Liquidation 1.2%
aAdelphia Recovery Trust	United States		29,283,354			58,567
a,d Adelphia Recovery Trust, Arahova Contingent Value Vehicle, Contingent Distribution	United States		1,955,453			978
a,b,c,k CB FIM Coinvestors LLC	United States		6,400,507			—
a,d,e Century Communications Corp., Contingent Distribution	United States		5,487,000			—
a,b FIM Coinvestor Holdings I, LLC	United States		8,006,950			—
a,l Lehman Brothers Holdings Inc., Bankruptcy Claim	United States		144,058,799			64,826,459
a,d,e Tribune Litigation Trust, Contingent Distribution	United States		393,761			—
a,d,e Tropicana Litigation Trust, Contingent Distribution	United States		18,305,000			—
		Principal Amount*
e,j Peregrine Investments Holdings Ltd., 1/15/98	Hong Kong		5,000,000	JPY		—
e,j PIV Investment Finance (Cayman) Ltd., 12/01/00	Hong Kong		12,200,000			—
Total Companies in Liquidation (Cost $66,366,158)						64,886,004
Total Investments before Short Term Investments (Cost $3,727,295,206)						5,051,499,140
Short Term Investments 5.0%
U.S. Government and Agency Securities (Cost $262,676,970) 4.9%
m,n U.S. Treasury Bills, 1/02/14 - 6/26/14	United States		262,700,000			262,686,594
Total Investments before Money Market Funds (Cost $3,989,972,176)						5,314,185,734

MS-16

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Mutual Shares Securities Fund	Country	Shares		Value
Short Term Investments (continued)
o Investments from Cash Collateral Received for Loaned Securities (Cost $2,731,040) 0.1%
Money Market Funds 0.1%
pBNY Mellon Overnight Government Fund, 0.017%	United States		2,731,040	$	2,731,040
Total Investments (Cost $3,992,703,216) 100.3%					5,316,916,774
Securities Sold Short (0.4)%					(22,077,374	)
Other Assets, less Liabilities 0.1%					4,023,282
Net Assets 100.0%				$	5,298,862,682
qSecurities Sold Short (Proceeds $21,250,473) (0.4)%
Common Stocks (0.4)%
Diversified Telecommunication Services (0.4)%
Verizon Communications Inc.	United States		449,275	$	(22,077,374	)

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

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

^aNon-income producing.

^bSee Note 8 regarding restricted securities.

^cAt December 31, 2013, pursuant to the Fund’s policies and the requirements of applicable securities law, the Fund may be restricted from trading these securities for a limited or extended period of time due to ownership limits and/or potential possession of material non-public information.

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

^eSecurity has been deemed illiquid because it may not be able to be sold within seven days. At December 31, 2013, the aggregate value of these securities was $7,937,467, representing 0.15% of net assets.

^fSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At December 31, 2013, the aggregate value of these securities was $127,956,205, representing 2.41% of net assets.

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

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

ⁱA portion or all of the security is on loan at December 31, 2013. See Note 1(e).

^jSee Note 7 regarding credit risk and defaulted securities.

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

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

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

ⁿSecurity or a portion of the security has been pledged as collateral for securities sold short, open futures, forward contracts. At December 31, 2013, the aggregate value of these securities and/or cash pledged as collateral was $49,032,229, representing 0.93% of net assets.

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

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

^qSee Note 1(e) regarding securities sold short.

MS-17

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Mutual Shares Securities Fund

At December 31, 2013, the Fund had the following futures contracts outstanding. See Note 1(c).

Futures Contracts

Description	Type		Number of Contracts		Notional Value		Expiration Date		Unrealized Appreciation		Unrealized Depreciation
Currency Contracts
EUR/USD		Short		474	$	81,693,900		3/17/14	$	—	$	(351,334	)
GBP/USD		Short		957		99,037,538		3/17/14		—		(921,355	)
Net unrealized appreciation (depreciation)											$	(1,272,689	)

At December 31, 2013, the Fund had the following forward exchange contracts outstanding. See Note 1(c).

Forward Exchange Contracts

Currency	Counterpartya		Type		Quantity		Contract Amount		Settlement Date			Unrealized Appreciation		Unrealized Depreciation
Euro		BBU		Sell		18,143,601	$	23,693,003		1/17/14		$	—	$	(1,263,313	)
Euro		BOFA		Sell		21,128,952		27,728,755		1/17/14			397		(1,334,274	)
Euro		BONY		Sell		337,248		462,037		1/17/14			—		(1,844	)
Euro		DBAB		Sell		1,271,513		1,678,547		1/17/14			—		(70,405	)
Euro		FBCO		Sell		2,536,652		3,385,762		1/17/14			—		(103,375	)
Euro		HSBC		Buy		125,000		170,015		1/17/14	��		1,921		—
Euro		HSBC		Sell		1,316,930		1,800,794		1/17/14			—		(10,629	)
Euro		SSBT		Sell		393,401		538,149		1/17/14			—		(2,970	)
British Pound		BBU		Sell		1,492,298		2,412,792		1/21/14			—		(57,956	)
British Pound		BOFA		Sell		35,360,751		53,962,198		1/21/14			—		(4,583,410	)
British Pound		DBAB		Sell		8,725,951		13,246,866		1/21/14			—		(1,200,398	)
British Pound		FBCO		Sell		6,955,419		11,152,900		1/21/14			—		(362,953	)
British Pound		HSBC		Sell		2,362,082		3,786,290		1/21/14			—		(124,529	)
British Pound		SSBT		Sell		916,576		1,466,050		1/21/14			—		(51,494	)
South Korean Won		BOFA		Buy		1,621,025,976		1,517,930		2/12/14			13,139		—
South Korean Won		BOFA		Sell		14,695,766,498		13,080,039		2/12/14			—		(800,194	)
South Korean Won		DBAB		Sell		22,096,007,739		19,670,823		2/12/14			—		(1,198,979	)
South Korean Won		FBCO		Buy		303,854,000		280,412		2/12/14			6,580		—
South Korean Won		FBCO		Sell		30,427,525,553		27,275,589		2/12/14			—		(1,463,378	)
South Korean Won		HSBC		Buy		4,930,420,831		4,603,234		2/12/14			55,480		(1,903	)
South Korean Won		HSBC		Sell		14,248,226,851		12,851,791		2/12/14			—		(605,739	)
British Pound		BBU		Buy		1,250,202		2,024,341		2/19/14			45,167		—
British Pound		BBU		Sell		20,499,252		31,953,162		2/19/14			—		(1,980,051	)
British Pound		BOFA		Buy		1,717,529		2,772,486		2/19/14			70,607		—
British Pound		BOFA		Sell		39,469,601		61,388,670		2/19/14			—		(3,946,904	)
British Pound		FBCO		Sell		1,940,964		3,051,458		2/19/14			—		(161,496	)
British Pound		HSBC		Sell		3,000,726		4,682,406		2/19/14			—		(284,813	)
British Pound		SSBT		Sell		1,253,062		1,984,924		2/19/14			—		(89,319	)
Euro		BBU		Sell		11,718,955		15,614,043		2/28/14			—		(505,371	)
Euro		BOFA		Sell		3,726,675		4,981,771		2/28/14			—		(144,268	)
Euro		BONY		Sell		191,928		252,417		2/28/14			—		(11,580	)
Euro		FBCO		Sell		4,593,952		6,142,493		2/28/14			—		(176,484	)
Euro		HSBC		Sell		15,105,018		20,188,796		2/28/14			—		(588,146	)
Euro		SSBT		Sell		2,148,825		2,892,862		2/28/14			—		(62,845	)
Euro		SSBT		Sell		487,709		654,098		2/28/14			—		(16,746	)
Euro		BBU		Buy		1,244,224		1,710,034		4/16/14			1,394		—
Euro		BBU		Sell		1,638,747		2,228,213		4/16/14			—		(25,881	)
Euro		BOFA		Buy		1,217,972		1,674,679		4/16/14			1,283		(644	)
Euro		BOFA		Sell		1,489,099		2,023,872		4/16/14			—		(24,382	)

MS-18

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Mutual Shares Securities Fund

Forward Exchange Contracts (continued)

Currency	Counterpartya		Type		Quantity		Contract Amount		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
Euro		BONY		Buy		603,108	$	829,943		4/16/14	$	—	$	(369	)
Euro		BONY		Sell		328,468		449,653		4/16/14		—		(2,155	)
Euro		FBCO		Sell		1,222,232		1,669,091		4/16/14		—		(12,087	)
Euro		HSBC		Buy		1,466,688		2,013,675		4/16/14		4,757		(1,005	)
Euro		HSBC		Sell		1,724,164		2,349,884		4/16/14		42		(21,743	)
Euro		SSBT		Buy		839,677		1,154,514		4/16/14		981		(521	)
Euro		SSBT		Sell		1,146,553		1,558,606		4/16/14		—		(18,476	)
Euro		SSBT		Buy		535,554		736,814		4/16/14		34		(194	)
Euro		SSBT		Sell		419,318		573,874		4/16/14		—		(2,898	)
British Pound		BBU		Sell		110,040		180,168		4/22/14		—		(1,895	)
British Pound		BOFA		Sell		14,514,118		23,497,154		4/22/14		—		(516,783	)
British Pound		BONY		Sell		587,838		961,365		4/22/14		—		(11,226	)
British Pound		FBCO		Sell		12,770,332		20,585,775		4/22/14		—		(543,029	)
British Pound		HSBC		Sell		501,468		803,763		4/22/14		—		(25,927	)
British Pound		SSBT		Sell		22,348,080		36,025,105		4/22/14		—		(950,300	)
Euro		BBU		Sell		848,341		1,164,060		5/15/14		576		(3,452	)
Euro		BOFA		Sell		42,831,369		57,632,325		5/15/14		3,752		(1,288,124	)
Euro		BONY		Sell		750,107		1,035,028		5/15/14		3,219		—
Euro		HSBC		Sell		1,041,714		1,432,862		5/15/14		3,329		(3,397	)
Euro		SSBT		Sell		831,009		1,143,241		5/15/14		2,040		(1,894	)
Euro		SSBT		Sell		307,101		420,870		5/15/14		—		(1,563	)
Euro		BOFA		Sell		448,800		606,995		5/19/14		—		(10,355	)
British Pound		BBU		Buy		1,607,143		2,626,715		5/21/14		31,696		—
British Pound		BBU		Sell		33,376,309		53,654,086		5/21/14		—		(1,554,393	)
British Pound		BOFA		Buy		5,541,429		9,062,052		5/21/14		104,146		—
British Pound		HSBC		Buy		1,521,428		2,486,264		5/21/14		30,363		—
British Pound		HSBC		Sell		23,563,492		37,890,095		5/21/14		—		(1,086,789	)
Unrealized appreciation (depreciation)												380,903		(27,315,248	)
Net unrealized appreciation (depreciation)													$	(26,934,345	)

^aMay be comprised of multiple contracts using the same currency and settlement date.

See Abbreviations on page MS-35.

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

MS-19

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

December 31, 2013

	Mutual Shares Securities Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	3,992,703,216
Value - Unaffiliated issuers (includes securities loaned in the amount of $2,656,680)	$	5,316,916,774
Cash		431,150
Foreign currency, at value (cost $1,671,843)		1,675,912
Receivables:
Investment securities sold		1,906,478
Capital shares sold		372,962
Dividends and interest		17,205,554
Due from brokers		22,581,748
Unrealized appreciation on forward exchange contracts		380,903
Other assets		1,408
Total assets		5,361,472,889
Liabilities:
Payables:
Investment securities purchased		38,191
Capital shares redeemed		4,346,573
Management fees		2,656,564
Administrative fees		381,621
Distribution fees		1,989,205
Variation margin		192,188
Securities sold short, at value (proceeds $21,250,473)		22,077,374
Payable upon return of securities loaned		2,731,040
Unrealized depreciation on forward exchange contracts		27,315,248
Accrued expenses and other liabilities		882,203
Total liabilities		62,610,207
Net assets, at value	$	5,298,862,682
Net assets consist of:
Paid-in capital	$	3,889,248,227
Undistributed net investment income		91,100,656
Net unrealized appreciation (depreciation)		1,295,275,148
Accumulated net realized gain (loss)		23,238,651
Net assets, at value	$	5,298,862,682

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

MS-20

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Assets and Liabilities (continued)

December 31, 2013

	Mutual Shares Securities Fund
Class 1:
Net assets, at value	$	552,162,822
Shares outstanding		25,189,923
Net asset value and maximum offering price per share	$	21.92
Class 2:
Net assets, at value	$	4,558,547,063
Shares outstanding		210,731,195
Net asset value and maximum offering price per share	$	21.63
Class 4:
Net assets, at value	$	188,152,797
Shares outstanding		8,656,494
Net asset value and maximum offering price per share	$	21.74

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

MS-21

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the year ended December 31, 2013

	Mutual Shares Securities Fund
Investment income:
Dividends	$	102,474,476
Interest		38,650,858
Income from securities loaned		168,526
Total investment income		141,293,860
Expenses:
Management fees (Note 3a)		30,354,246
Administrative fees (Note 3b)		4,372,679
Distribution fees: (Note 3c)
Class 2		10,959,930
Class 4		628,902
Unaffiliated transfer agent fees		745
Custodian fees (Note 4)		130,845
Reports to shareholders		598,484
Professional fees		213,648
Trustees’ fees and expenses		19,812
Dividends and interest on securities sold short		12,668
Other		69,372
Total expenses		47,361,331
Expense reductions (Note 4)		(804	)
Net expenses		47,360,527
Net investment income		93,933,333
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		384,579,749
Written options		42,621
Foreign currency transactions		(8,920,652	)
Futures contracts		(6,687,621	)
Securities sold short		(4,261	)
Net realized gain (loss)		369,009,836
Net change in unrealized appreciation (depreciation) on:
Investments		799,141,213
Translation of other assets and liabilities denominated in foreign currencies		(12,316,056	)
Net change in unrealized appreciation (depreciation)		786,825,157
Net realized and unrealized gain (loss)		1,155,834,993
Net increase (decrease) in net assets resulting from operations	$	1,249,768,326

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

MS-22

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets

	Mutual Shares Securities Fund
	Year Ended December 31,
	2013			2012
Increase (decrease) in net assets:
Operations:
Net investment income	$	93,933,333		$	99,008,766
Net realized gain (loss) from investments, written options, foreign currency transactions, futures contracts and securities sold short		369,009,836			398,833,480
Net change in unrealized appreciation (depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies		786,825,157			239,569,243
Net increase (decrease) in net assets resulting from operations		1,249,768,326			737,411,489
Distributions to shareholders from:
Net investment income:
Class 1		(11,380,461	)		(33,342,789	)
Class 2		(90,294,700	)		(82,893,175	)
Class 4		(3,535,676	)		(3,198,551	)
Total distributions to shareholders		(105,210,837	)		(119,434,515	)
Capital share transactions: (Note 2)
Class 1		(9,960,888	)		(865,246,582	)
Class 2		(502,396,967	)		(298,991,452	)
Class 4		(17,497,568	)		(15,628,562	)
Total capital share transactions		(529,855,423	)		(1,179,866,596	)
Net increase (decrease) in net assets		614,702,066			(561,889,622	)
Net assets:
Beginning of year		4,684,160,616			5,246,050,238
End of year	$	5,298,862,682		$	4,684,160,616
Undistributed net investment income included in net assets:
End of year	$	91,100,656		$	101,815,540

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

MS-23

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements

Mutual Shares Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

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

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

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

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

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

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

The Fund has procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the VLOC convenes on a regular basis to review such financial instruments and considers a number of factors, including significant unobservable valuation inputs, when arriving at fair value. The VLOC primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based

MS-24

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Mutual Shares Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

a. Financial Instrument Valuation (continued)

valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. The VLOC employs various methods for calibrating these valuation approaches including a regular review of key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.

Trading in securities on foreign securities stock exchanges and OTC markets may be completed before the daily NYSE close. In addition, trading in certain foreign markets may not take place on every NYSE business day. Occasionally, events occur between the time at which trading in a foreign security is completed and the close of the NYSE that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund’s portfolio securities as determined at the foreign market close and the latest indications of value at the close of the NYSE. In order to minimize the potential for these differences, the VLOC monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depositary Receipts, futures contracts and exchange traded funds). These price movements are measured against established trigger thresholds for each specific market proxy to assist in determining if an event has occurred that may call into question the reliability of the values of the foreign securities held by the Fund. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services.

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

b. Foreign Currency Translation

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

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

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

MS-25

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Mutual Shares Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

c. Derivative Financial Instruments

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

Derivative counterparty credit risk is managed through a formal evaluation of the creditworthiness of all potential counterparties. The Fund attempts to reduce its exposure to counterparty credit risk on OTC derivatives, whenever possible, by entering into International Swaps and Derivatives Association (ISDA) master agreements with certain counterparties. These agreements contain various provisions, including but not limited to collateral requirements, events of default, or early termination. Termination events applicable to the counterparty include certain deteriorations in the credit quality of the counterparty. Termination events applicable to the Fund include failure of the Fund to maintain certain net asset levels and/or limit the decline in net assets over various periods of time. In the event of default or early termination, the ISDA master agreement gives the non-defaulting party the right to net and close-out all transactions traded, whether or not arising under the ISDA agreement, to one net amount payable by one counterparty to the other. However, absent an event of default or early termination, OTC derivative assets and liabilities are presented gross and not offset in the Statement of Assets and Liabilities. Early termination by the counterparty may result in an immediate payment by the Fund of any net liability owed to that counterparty under the ISDA agreement. However, absent an event of default or early termination, OTC derivative assets and liabilities are presented gross and not offset in the Statement of Assets and Liabilities. Early termination by the counterparty may result in an immediate payment by the Fund of any net liability owed to that counterparty under the ISDA agreement. At December 31, 2013, the Fund had OTC derivatives in a net liability position of $26,934,345 and the aggregate value of collateral pledged for such contracts was $23,885,805.

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

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

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

The Fund purchased or wrote exchange traded option contracts primarily to manage exposure to equity price risk. An option is a contract entitling the holder to purchase or sell a specific amount of shares or units of an asset or notional amount of a swap (swaption), at a specified price. Options purchased are recorded as an asset while options written are recorded as a liability.

MS-26

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Mutual Shares Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

c. Derivative Financial Instruments (continued)

Upon exercise of an option, the acquisition cost or sales proceeds of the underlying investment is adjusted by any premium received or paid. Upon expiration of an option, any premium received or paid is recorded as a realized gain or loss. Upon closing an option other than through expiration or exercise, the difference between the premium and the cost to close the position is recorded as a realized gain or loss.

See Notes 6 and 9 regarding investment transactions and other derivative information, respectively.

d. Securities Sold Short

The Fund is engaged in selling securities short, which obligates the Fund to replace a borrowed security with the same security at current market value. The Fund incurs a loss if the price of the security increases between the date of the short sale and the date on which the Fund replaces the borrowed security. The Fund realizes a gain if the price of the security declines between those dates. Gains are limited to the price at which the Fund sold the security short, while losses are potentially unlimited in size.

The Fund is required to establish a margin account with the broker lending the security sold short. While the short sale is outstanding, the broker retains the proceeds of the short sale to the extent necessary to meet margin requirements until the short position is closed out. A deposit must also be maintained with the Fund’s custodian/counterparty broker consisting of cash and/or securities having a value equal to a specified percentage of the value of the securities sold short. The Fund is obligated to pay fees for borrowing the securities sold short and is required to pay the counterparty any dividends or interest due on securities sold short. Such dividends or interest and any security borrowing fees are recorded as an expense to the Fund.

e. Securities Lending

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

f. Senior Floating Rate Interests

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

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

g. Income and Deferred Taxes

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

MS-27

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Mutual Shares Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

g. Income and Deferred Taxes (continued)

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

The Fund recognizes the tax benefits of uncertain tax positions only when the position is “more likely than not” to be sustained upon examination by the tax authorities based on the technical merits of the tax position. As of December 31, 2013, and for all open tax years, the Fund has determined that no liability for unrecognized tax benefits is required in the Fund’s financial statements related to uncertain tax positions taken on a tax return (or expected to be taken on future tax returns). Open tax years are those that remain subject to examination and are based on each tax jurisdiction statute of limitation.

h. Security Transactions, Investment Income, Expenses and Distributions

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

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

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

i. Accounting Estimates

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

j. Guarantees and Indemnifications

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

MS-28

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Mutual Shares Securities Fund

2. SHARES OF BENEFICIAL INTEREST

At December 31, 2013, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:

	Year Ended December 31,
	2013						2012
Class 1 Shares:	Shares			Amount			Shares			Amount
Shares sold		1,271,063		$	25,943,160			30,409,042		$	503,225,918
Shares issued in reinvestment of distributions		565,348			11,380,461			1,941,921			33,342,789
Shares redeemed in-kind (Note 12)		—			—			(52,704,789	)		(918,607,583	)
Shares redeemed		(2,402,608	)		(47,284,509	)		(29,093,625	)		(483,207,706	)
Net increase (decrease)		(566,197	)	$	(9,960,888	)		(49,447,451	)	$	(865,246,582	)
Class 2 Shares:
Shares sold		9,115,759		$	176,951,746			18,569,762		$	304,904,655
Shares issued in reinvestment of distributions		4,541,987			90,294,700			4,887,569			82,893,175
Shares redeemed		(39,198,203	)		(769,643,413	)		(41,692,641	)		(686,789,282	)
Net increase (decrease)		(25,540,457	)	$	(502,396,967	)		(18,235,310	)	$	(298,991,452	)
Class 4 Shares:
Shares sold		622,201		$	12,228,440			310,070		$	5,137,019
Shares issued on reinvestment of distributions		176,961			3,535,676			187,598			3,198,551
Shares redeemed		(1,677,249	)		(33,261,684	)		(1,453,214	)		(23,964,132	)
Net increase (decrease)		(878,087	)	$	(17,497,568	)		(955,546	)	$	(15,628,562	)

3. TRANSACTIONS WITH AFFILIATES

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

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

a. Management Fees

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

Annualized Fee Rate	Net Assets
0.600%	Up to and including $5 billion
0.570%	Over $5 billion, up to and including $10 billion
0.550%	Over $10 billion, up to and including $15 billion
0.530%	Over $15 billion, up to and including $20 billion
0.510%	In excess of $20 billion

MS-29

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Mutual Shares Securities Fund

3. TRANSACTIONS WITH AFFILIATES (continued)

b. Administrative Fees

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

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

c. Distribution Fees

The Board has adopted distribution plans for Class 2 and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to 0.35% per year of its average daily net assets of each class. Some distribution fees are not charged on shares held by affiliates. The Board has agreed to limit the current rate to 0.25% per year for Class 2. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.

d. Transfer Agent Fees

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

e. Other Affiliated Transactions

At December 31, 2013, Franklin Templeton Variable Insurance Products Trust – Franklin Templeton VIP Founding Funds Allocation Fund owned 7.56% of the Fund’s outstanding shares.

4. EXPENSE OFFSET ARRANGEMENT

The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses. During the year ended December 31, 2013, the custodian fees were reduced as noted in the Statement of Operations.

5. INCOME TAXES

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

During the year ended December 31, 2013, the Fund utilized $325,941,709 of capital loss carryforwards.

The tax character of distributions paid during the years ended December 31, 2013 and 2012, was as follows:

	2013		2012
Distributions paid from ordinary income	$	105,210,837	$	119,434,515

MS-30

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Mutual Shares Securities Fund

5. INCOME TAXES (continued)

At December 31, 2013, 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	$	4,038,395,386
Unrealized appreciation	$	1,457,975,609
Unrealized depreciation		(179,454,221	)
Net unrealized appreciation (depreciation)	$	1,278,521,388
Undistributed ordinary income	$	105,335,240
Undistributed long term capital gains		26,534,084
Distributable earnings	$	131,869,324

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

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities and securities sold short) for the year ended December 31, 2013, aggregated $1,106,361,292 and $1,489,085,114, respectively.

Transactions in options written during the year ended December 31, 2013, were as follows:

	Options
	Number of Contracts			Premiums Received
Options outstanding at December 31, 2012		—		$	—
Options written		391			106,103
Options expired		—			—
Options exercised		(334	)		(46,760	)
Options closed		(57	)		(59,343	)
Options outstanding at December 31, 2013		—		$	—

See Notes 1(c) and 9 regarding derivative financial instruments and other derivative information, respectively.

7. CREDIT RISK AND DEFAULTED SECURITIES

The Fund may purchase the pre-default or defaulted debt of distressed companies. Distressed companies are financially troubled and are about to be or are already involved in financial restructuring or bankruptcy. Risks associated with purchasing these securities include the possibility that the bankruptcy or other restructuring process takes longer than expected, or that distributions in restructuring are less than anticipated, either or both of which may result in unfavorable consequences to the Fund. If it becomes probable that the income on debt securities, including those of distressed companies, will not be collected, the Fund discontinues accruing income and recognizes an adjustment for uncollectible interest.

At December 31, 2013, the aggregate value of distressed company securities for which interest recognition has been discontinued was $15,112,262, representing 0.29% of the Fund’s net assets. For information as to specific securities, see the accompanying Statement of Investments.

MS-31

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Mutual Shares Securities Fund

8. RESTRICTED SECURITIES

The Fund invests in securities that are restricted under the Securities Act of 1933 (1933 Act) or which are subject to legal, contractual, or other agreed upon restrictions on resale. Restricted securities are often purchased in private placement transactions, and cannot be sold without prior registration unless the sale is pursuant to an exemption under the 1933 Act. Disposal of these securities may require greater effort and expense, and prompt sale at an acceptable price may be difficult. The Fund may have registration rights for restricted securities. The issuer generally incurs all registration costs.

At December 31, 2013, the Fund held investments in restricted securities, excluding certain securities exempt from registration under the 1933 Act deemed to be liquid, as follows:

Principal Amount/ Shares		Issuer	Acquisition Dates	Cost		Value
	1,754	Broadband Ventures III LLC, secured promissory note, 5.00%, 2/01/12	7/01/10	$	1,754	$	—
	6,400,507	CB FIM Coinvestors LLC	1/15/09 - 6/02/09		—		—
	8,006,950	FIM Coinvestor Holdings I, LLC	11/20/06 - 6/02/09		—		—
	140,952	First Southern Bancorp Inc.	1/27/10 - 7/07/10		2,974,087		679,417
	241	First Southern Bancorp Inc., cvt. pfd., C	1/27/10 - 7/07/10		241,000		449,909
	1,730,515	International Automotive Components Group Brazil LLC	4/13/06 - 12/26/08		1,149,241		337,139
	15,382,424	International Automotive Components Group North America, LLC	1/12/06 - 3/18/13		12,591,586		8,703,683
	16,280	Olympus Re Holdings Ltd.	12/19/01		1,525,128		—
		Total Restricted Securities (Value is 0.19% of Net Assets)		$	18,482,796	$	10,170,148

9. OTHER DERIVATIVE INFORMATION

At December 31, 2013, the Fund’s investments in derivative contracts are reflected on the Statement of Assets and Liabilities as follows:

	Asset Derivatives			Liability Derivatives
Derivative Contracts Not Accounted for as Hedging Instruments	Statement of Assets and Liabilities Location	Fair Value Amount		Statement of Assets and Liabilities Location	Fair Value Amount
Foreign exchange contracts	Unrealized appreciation on forward exchange contracts	$	380,903	Unrealized depreciation on forward exchange contracts/Net assets consist of – net unrealized appreciation (depreciation)	$	28,587,937a

^aIncludes cumulative appreciation (depreciation) of futures contracts as reported in the Statement of Investments. Only current day’s variation margin is separately reported within the Statement of Assets and Liabilities.

MS-32

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Mutual Shares Securities Fund

9. OTHER DERIVATIVE INFORMATION (continued)

For the year ended December 31, 2013, the effect of derivative contracts on the Fund’s Statement of Operations was as follows:

Derivative Contracts Not Accounted for as Hedging Instruments	Statement of Operations Locations	Realized Gain (Loss) for the Year			Change in Unrealized Appreciation (Depreciation) for the Year
Foreign exchange contracts	Net realized gain (loss) from foreign currency transactions and futures contracts / Net change in unrealized appreciation (depreciation) on translation of other assets and liabilities denominated in foreign currencies	$	(16,040,875	)	$	(12,375,422	)
Equity contracts	Net realized gain (loss) from written options / Net change in unrealized appreciation (depreciation) on investments		42,621			—

For the year ended December 31, 2013 the average month end fair value of derivatives represented 0.34% of average month end net assets. The average month end number of open derivative contracts for the year was 126.

See Notes 1(c) and 6 regarding derivative financial instruments and investment transactions, respectively.

10. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES

The 1940 Act defines “affiliated companies” to include investments in portfolio companies in which a fund owns 5% or more of the outstanding voting securities. Investments in “affiliated companies” for the Fund for the year ended December 31, 2013, were as shown below.

Name of Issuer	Number of Shares Held at Beginning of Year		Gross Additions		Gross Reductions		Number of Shares Held at End of Year		Value at End of Year		Investment Income		Realized Capital Gain (Loss)
Non-Controlled Affiliates
CB FIM Coinvestors LLC (Value is 0.00% of Net Assets)		6,400,507		—		—		6,400,507	$	—	$	—	$	—

11. CREDIT FACILITY

The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $1.5 billion (Global Credit Facility) which, after an extension of the original terms, matured on February 14, 2014. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. Effective February 14, 2014, the Borrowers renewed the Global Credit Facility which matures on February 13, 2015.

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.07% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses on the Statement of Operations. During the year ended December 31, 2013, the Fund did not use the Global Credit Facility.

MS-33

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Mutual Shares Securities Fund

12. REDEMPTION IN-KIND

During the year ended December 31, 2012, the Fund realized $139,199,450 of net gains resulting from a redemption in-kind in which a shareholder redeemed fund shares for securities held by the Fund rather than for cash. Because such gains are not taxable to the Fund, and are not netted with capital gains that are distributed to remaining shareholders, they have been reclassified from accumulated net realized gains to paid-in capital.

13. FAIR VALUE MEASUREMENTS

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

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

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

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

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

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

A summary of inputs used as of December 31, 2013, in valuing the Fund’s assets and liabilities carried at fair value, is as follows:

	Level 1		Level 2		Level 3			Total
Assets:
Investments in Securities
Equity Investments:a
Auto Components	$	—	$	—	$	9,040,822		$	9,040,822
Commercial Banks		274,117,931		—		8,535,171			282,653,102
Machinery		85,669,011		21,023,531		—			106,692,542
Media		344,525,861		14,338,750		—			358,864,611
Real Estate Management & Development		18,402,434		—		7,937,467			26,339,901
All Other Equity Investmentsb		3,864,203,470		—		—	c		3,864,203,470
Corporate Bonds, Notes and Senior Floating Rate Interests		—		323,706,426		—			323,706,426
Corporate Notes in Reorganization		—		15,112,262		—	c		15,112,262
Companies in Liquidation		58,567		64,827,437		—	c		64,886,004
Short Term Investments		262,686,594		2,731,040		—			265,417,634
Total Investments in Securities	$	4,849,663,868	$	441,739,446	$	25,513,460		$	5,316,916,774
Forward Exchange Contracts	$	—	$	380,903	$	—		$	380,903
Liabilities:
Security Sold Short		22,077,374		—		—			22,077,374
Futures Contracts		1,272,689		—		—			1,272,689
Forward Exchange Contracts		—		27,315,248		—			27,315,248

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

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

^cIncludes securities determined to have no value at December 31, 2013.

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

MS-34

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Mutual Shares Securities Fund

14. NEW ACCOUNTING PRONOUNCEMENTS

In June 2013, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2013-08, Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements. The ASU modifies the criteria used in defining an investment company under U.S. Generally Accepted Accounting Principles and also sets forth certain measurement and disclosure requirements. Under the ASU, an entity that is registered under the 1940 Act automatically qualifies as an investment company. The ASU is effective for interim and annual reporting periods beginning after December 15, 2013. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the financial statements.

15. SUBSEQUENT EVENTS

The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure other than those already disclosed in the financial statements.

ABBREVIATIONS
Counterparty	Currency	Selected Portfolio
BBU - Barclays Bank PLC	CAD - Canadian Dollar	ADR - American Depositary Receipts
BOFA - Bank of America Corp	EUR - Euro	FRN - Floating Rate Note
BONY - Bank of New York Mellon	GBP - British Pound	IDR - International Depositary Receipts
DBAB - Deutsche Bank AG	JPY - Japanese Yen
FBCO - Credit Suisse Group AG	USD - United States Dollar
HSBC - HSBC Bank USA, N.A.
SSBT - State Street Bank and Trust Co.

MS-35

Franklin Templeton Variable Insurance Products Trust

Mutual Shares Securities Fund

Report of Independent Registered Public Accounting Firm

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 Mutual Shares Securities Fund (the “Fund”) at December 31, 2013, 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 five years in the period then ended, 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2013 by correspondence with the custodian and brokers, provides a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

February 14, 2014

MS-36

Franklin Templeton Variable Insurance Products Trust

Tax Information (unaudited)

Mutual Shares Securities Fund

Under Section 854(b)(1)(A) of the Code, the Fund hereby reports 61.78% of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended December 31, 2013.

MS-37

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

This annual report for Templeton Developing Markets Securities Fund covers the fiscal year ended December 31, 2013.

Performance Summary as of 12/31/13

Average annual total return of Class 4 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.

Periods ended 12/31/13

	1-Year		5-Year		10-Year
Average Annual Total Return		-1.07%		+13.76%		+9.06%

*For the period beginning 2/29/08, Class 4 performance reflects a 12b-1 fee expense of 0.35% per year, which affects future performance. Class 4 performance prior to 2/29/08 reflects historical Class 1 performance, which does not have a 12b-1 fee expense. Since 2/29/08 (effective date), the average annual total return of Class 4 shares was -0.38%. The Fund has a fee waiver associated with its investments in a Franklin Templeton money fund, contractually guaranteed through at least its current fiscal year end. Fund investment results reflect the fee waiver, to the extent applicable; without this reduction, the results would have been lower.

Total Return Index Comparison

for a Hypothetical $10,000 Investment (1/1/04–12/31/13)

The graph below shows the change in value of a hypothetical $10,000 investment in the Fund over the indicated period and includes reinvestment of any income or distributions. The Fund’s performance* is compared to the performance of the MSCI Emerging Markets (EM) Index and the Standard & Poor’s^®/International Finance Corporation Investable (S&P^®/IFCI) Composite Index. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Important Notes to Performance Information preceding the Fund Summaries.

**Source: © 2014 Morningstar. Please see Index Descriptions following the Fund Summaries.

Templeton Developing Markets Securities Fund Class 4

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

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

Current performance may differ from figures shown.

TD-1

Fund Goal and Main Investments: Templeton Developing Markets Securities Fund seeks long-term capital appreciation. Under normal market conditions, the Fund invests at least 80% of its net assets in emerging market investments.

Performance Overview

You can find the Fund’s one-year total return in the Performance Summary. In comparison, the MSCI EM Index had a -2.27% total return, and the S&P/IFCI Composite Index had a -0.57% total return for the same period.¹ Please note index performance numbers are for reference and we do not attempt to track an index but rather undertake investments on the basis of fundamental research.

Economic and Market Overview

The 12 months under review were characterized by reinvigorated policy support, an economic recovery in developed markets and a slowdown in emerging markets. Although several emerging market countries faced headwinds such as soft domestic demand, weak exports, market volatility and social unrest, emerging market economies overall continued to grow faster than developed market economies. Following a relatively subdued first half, China’s growth rate stabilized in the second half. Economic growth rates moderated in Russia, India and Indonesia but improved in Brazil, South Korea and Turkey. However, emerging market stock performance during the period appeared to be driven less by economic growth and corporate fundamentals and more by the fiscal and monetary policies in developed market countries.

After a weak start to 2013 as many investors locked in 2012 gains, emerging market stocks experienced a sharp sell-off in May and June amid concerns about a spike in China’s interbank rates and the U.S. Federal Reserve Board’s (Fed’s) potential tapering of its asset purchase program. When these fears were not realized, investor confidence rose in late June, leading to a partial rebound in emerging market stock prices. Financial markets grew volatile again in late August but recovered as tension surrounding Syria was defused and as the Fed announced it would delay tapering its asset purchase program. A U.S. budget impasse in late September and its resolution in October also moved the markets. The Chinese government’s announcement of social, economic and financial reforms boosted Chinese stocks in November.

1. Source: © 2014 Morningstar. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

Fund Risks: All investments involve risks, including possible loss of principal. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments. Investments in developing markets, of which frontier markets are a subset, involve heightened risks related to the same factors, in addition to those associated with these markets’ smaller size, lesser liquidity and lack of established legal, political, business and social frameworks to support securities markets. Because these frameworks are typically even less developed in frontier markets, as well as various factors including the increased potential for extreme price volatility, illiquidity, trade barriers and exchange controls, the risks associated with developing markets are magnified in frontier markets. The Fund is designed for the aggressive portion of a well-diversified portfolio. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

TD-2

Emerging market stocks overall remained resilient despite the Fed’s December announcement that it would reduce its monthly bond purchases beginning in January 2014.

For the 12 months ended December 31, 2013, emerging market stocks, as measured by the MSCI EM Index, had a -2.27% total return in U.S. dollar terms, as weaker emerging market currencies hindered returns.¹ Asia and Eastern Europe produced modest gains, while Latin America declined. In Asia, Taiwan, Malaysia, South Korea and China delivered gains, while Indonesia, Thailand, India and the Philippines posted losses. In Eastern Europe, Poland and Russia generated gains, while the Czech Republic and Hungary posted losses. Latin American markets such as Peru, Chile, Colombia and Brazil were among the worst performers, partly because of generally weak commodity prices and local currencies. In the largely frontier markets of the Middle East and Africa, the United Arab Emirates (UAE), Ghana and Kenya outperformed many of their global peers, while Lebanon, Tunisia and South Africa underperformed.

At year-end, global liquidity conditions continued to be accommodative. The Fed committed to keeping interest rates low as long as the U.S. unemployment rate remained over 6.5% and inflation expectations remained low. Furthermore, there were no signs at period-end indicating the Bank of Japan or the European Central Bank would tighten policy. We believe emerging and frontier market countries with strong economic fundamentals could continue to benefit from the high liquidity provided by major central banks, as investors seek higher yielding assets in a low interest rate environment. We viewed greater cooperation among major emerging and developed market countries as potentially beneficial for economic growth and financial markets. For example, in August, Brazil, Russia, India, China and South Africa (BRICS) decided on a capital structure for a proposed development bank aimed at supporting emerging market countries’ financing needs for infrastructure projects. In September, the BRICS countries committed $100 billion for a joint currency reserve to protect their economies from global financial market volatility and currency shocks. Toward year-end, China and the European Union agreed to negotiate a bilateral investment treaty in an effort to increase bilateral trade and improve access to each other’s markets.

TD-3

Investment Strategy

We employ a fundamental research, value-oriented, long-term investment approach. We focus on the market price of a company’s securities relative to our evaluation of its long-term earnings, asset value and cash flow potential. We also consider a company’s profit and loss outlook, balance sheet strength, cash flow trends and asset value in relation to the current price. Our analysis considers the company’s corporate governance behavior as well as its position in its sector, the economic framework and political environment. We invest in securities without regard to benchmark comparisons.

Manager’s Discussion

During the 12 months under review, key contributors to the Fund’s absolute performance included Emaar Properties, a major property developer and manager with operations throughout the Middle East, notably in Dubai, UAE; Tata Consultancy Services, one of India’s largest information technology (IT) consulting and services firms; and Melco Crown Entertainment, one of Macau’s leading casino operators.

We believe that Emaar Properties provides an attractive exposure to Dubai’s recovering real estate market. With a substantial income stream from its shopping mall and hotel properties, Emaar has a greater measure of financial security than some of its peers, in our assessment. Solid growth in all sectors of Dubai’s real estate market and the Emirate’s winning bid to host the 2020 World Expo benefited the shares of real estate companies in the region, notably Emaar. Furthermore, in our analysis, Dubai’s rising tourism could continue to support Emaar’s hotel and retail operations.

Tata Consultancy Services reported strong corporate results in 2013 amid the IT outsourcing industry’s continued growth. Moreover, the company benefited from the rupee’s significant weakness against major currencies such as the U.S. dollar and euro, as its revenues are primarily based in foreign currencies, while most costs are in rupees. In our view, Tata Consultancy is a well-managed, attractively valued service provider that is well positioned to potentially benefit from the IT outsourcing industry’s continued growth.

Melco Crown Entertainment’s solid earnings results and favorable growth outlook helped boost the casino resort operator’s share price. Macau casinos continued to report strong visitor numbers and

TD-4

gambling revenue growth, which supported the share prices of Macau-focused casino operators as investors anticipated higher earnings. We believe that Chinese consumers’ rising disposable income could potentially benefit leisure businesses such as Melco Crown. Additionally, recent improvements to the transportation links between China’s population centers and Macau could potentially lead to strong revenue growth.

In contrast, key detractors from the Fund’s absolute performance included Souza Cruz, a major Brazilian cigarette company; Brazil-based Ambev, one of the world’s largest beer and soft drink producers; and Antofagasta, a Chilean copper mining group.

Brazil’s weak consumer demand, currency depreciation and higher taxes resulted in a challenging operating environment for Souza Cruz and Ambev in 2013, leading to share price declines. In our longer term view, however, we considered these companies to be attractive investments based on our belief that they have strong operations, low debt levels, dominant market shares and popular brands. Moreover, Brazil’s hosting of the 2014 FIFA World Cup and 2016 Summer Olympics could potentially support consumer demand.

Concerns about copper prices and weak demand pressured the stocks of many copper mining companies, including Antofagasta. We divested the Fund’s holdings in the company to raise funds for investment opportunities that we considered to be more attractive within our investment universe.

It is important to recognize the effect of currency movements on the Fund’s performance. In general, if the value of the U.S. dollar goes up compared with a foreign currency, an investment traded in that foreign currency will go down in value because it will be worth fewer U.S. dollars. This can have a negative effect on Fund performance. Conversely, when the U.S. dollar weakens in relation to a foreign currency, an investment traded in that foreign currency will increase in value, which can contribute to Fund performance. For the 12 months ended December 31, 2013, the U.S. dollar rose in value relative to most currencies. As a result, the Fund’s performance was negatively affected by the portfolio’s investment predominantly in securities with non-U.S. currency exposure.

In the past 12 months, our continued search for investments we considered to be attractively valued led us to increase the Fund’s exposure to Hong Kong, South Korea and Macau and to initiate a position in the

Top 10 Holdings

Templeton Developing Markets Securities Fund

12/31/13

Company Sector/Industry, Country	% of Total Net Assets
Ambev SA		10.6%
Beverages, Brazil
Souza Cruz SA		4.5%
Tobacco, Brazil
Remgro Ltd.		4.4%
Diversified Financial Services, South Africa
Emaar Properties PJSC		4.3%
Real Estate Management & Development, UAE
Melco Crown Entertainment Ltd., ADR		3.7%
Hotels, Restaurants & Leisure, China
Tata Consultancy Services Ltd.		3.7%
IT Services, India
SJM Holdings Ltd.		3.5%
Hotels, Restaurants & Leisure, Hong Kong
Sands China Ltd.		3.3%
Hotels, Restaurants & Leisure, Macau
Compagnie Financiere Richemont SA		3.0%
Textiles, Apparel & Luxury Goods, Switzerland
Samsung Electronics Co. Ltd.		2.9%
Semiconductors & Semiconductor Equipment, South Korea

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

TD-5

Philippines. We also made some purchases in the U.K., Switzerland and Belgium as we identified companies listed in these developed countries that have significant emerging market operations, giving them the potential to benefit from emerging market countries’ stronger personal income and consumer demand growth. Moreover, we added to the Fund’s investments in Saudi Arabia, Qatar, the UAE and Nigeria as we identified companies in these frontier market countries that we believe have solid growth potential. We made some of the largest additions in hotels, restaurants and leisure; beverages; tobacco; real estate management and development; and textiles, apparel and luxury goods companies. Key purchases included new positions in Unilever, a U.K.-listed global consumer products company with more than 50% of its sales in emerging and frontier markets; Sands China and Melco Crown Entertainment, two of Macau’s leading casino operators; and Belgium-listed Anheuser-Busch InBev, the world’s largest brewer.

Conversely, we reduced the Fund’s investments in Russia, Indonesia, India and China via China H shares as certain stocks reached their target prices and as we focused on stocks we considered to be more attractively valued within our investment universe.² We reduced the Fund’s holdings largely in oil, gas and consumable fuels; commercial banking; and automobile companies. Key sales included the Fund’s positions in Indonesian car and motorcycle manufacturer Astra International, Chinese oil and gas company PetroChina and Thai commercial bank Kasikornbank.

Thank you for your participation in Templeton Developing Markets Securities Fund. We look forward to serving your future investment needs.

2. “China H” denotes shares of China-incorporated, Hong Kong Stock Exchange-listed companies with most businesses in China.

The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2013, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

Top 10 Countries

Templeton Developing Markets Securities Fund

12/31/13

	% of Total Net Assets
Brazil		16.6%
Hong Kong		11.4%
China		11.2%
U.K.		5.6%
India		5.1%
South Africa		5.0%
Russia		4.9%
UAE		4.3%
South Korea		4.3%
Macau		3.3%

TD-6

Fund Expenses

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

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

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

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

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

Actual Fund Expenses

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

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

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

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

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

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

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

Templeton Developing Markets Securities Fund Class 4

TD-7

Hypothetical Example for Comparison with Other Mutual Funds

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

Class 4	Beginning Account Value 7/1/13		Ending Account Value 12/31/13		Fund-Level Expenses Incurred During Period* 7/1/13–12/31/13
Actual	$	1,000	$	1,072.60	$	8.83
Hypothetical (5% return before expenses)	$	1,000	$	1,016.69	$	8.59

*Expenses are calculated using the most recent six-month annualized expense ratio for the Fund’s Class 4 shares (1.69%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period.

TD-8

Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Templeton Developing Markets Securities Fund

	Year Ended December 31,
Class 1	2013			2012			2011			2010			2009
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	10.58		$	9.50		$	11.40		$	9.86		$	6.11
Income from investment operationsa:
Net investment incomeb		0.13			0.19			0.17			0.09			0.12
Net realized and unrealized gains (losses)		(0.22	)		1.06			(1.94	)		1.63			4.02
Total from investment operations		(0.09	)		1.25			(1.77	)		1.72			4.14
Less distributions from:
Net investment income		(0.23	)		(0.17	)		(0.13	)		(0.18	)		(0.36	)
Net realized gains		—			—			—			—			(0.03	)
Total distributions		(0.23	)		(0.17	)		(0.13	)		(0.18	)		(0.39	)
Redemption feesc		—			—			—			—			—
Net asset value, end of year	$	10.26		$	10.58		$	9.50		$	11.40		$	9.86
Total returnd		(0.73)%			13.40%			(15.67)%			17.83%			73.32%
Ratios to average net assets
Expenses		1.35%			1.35%			1.40%			1.49%	e		1.45%	e
Net investment income		1.25%			1.93%			1.57%			0.87%			1.64%
Supplemental data
Net assets, end of year (000’s)	$	145,707		$	203,568		$	232,544		$	347,242		$	325,927
Portfolio turnover rate		44.59%			24.45%			14.90%			24.41%			56.58%	f

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

^bBased on average daily shares outstanding.

^cAmount rounds to less than $0.01 per share.

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

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

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

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

TD-9

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Templeton Developing Markets Securities Fund

	Year Ended December 31,
Class 2	2013			2012			2011			2010			2009
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	10.50		$	9.42		$	11.30		$	9.78		$	6.04
Income from investment operationsa:
Net investment incomeb		0.10			0.17			0.14			0.06			0.11
Net realized and unrealized gains (losses)		(0.21	)		1.05			(1.92	)		1.62			3.98
Total from investment operations		(0.11	)		1.22			(1.78	)		1.68			4.09
Less distributions from:
Net investment income		(0.20	)		(0.14	)		(0.10	)		(0.16	)		(0.32	)
Net realized gains		—			—			—			—			(0.03	)
Total distributions		(0.20	)		(0.14	)		(0.10	)		(0.16	)		(0.35	)
Redemption feesc		—			—			—			—			—
Net asset value, end of year	$	10.19		$	10.50		$	9.42		$	11.30		$	9.78
Total returnd		(0.92)%			13.16%			(15.86)%			17.58%			72.59%
Ratios to average net assets
Expenses		1.60%			1.60%			1.65%			1.74%	e		1.70%	e
Net investment income		1.00%			1.68%			1.32%			0.62%			1.39%
Supplemental data
Net assets, end of year (000’s)	$	274,683		$	291,638		$	295,223		$	392,546		$	435,947
Portfolio turnover rate		44.59%			24.45%			14.90%			24.41%			56.58%	f

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

^bBased on average daily shares outstanding.

^cAmount rounds to less than $0.01 per share.

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

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

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

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

TD-10

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Templeton Developing Markets Securities Fund

	Year Ended December 31,
Class 3	2013			2012			2011			2010			2009
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	10.43		$	9.36		$	11.23		$	9.73		$	6.02
Income from investment operationsa:
Net investment incomeb		0.11			0.17			0.14			0.06			0.10
Net realized and unrealized gains (losses)		(0.22	)		1.04			(1.91	)		1.60			3.97
Total from investment operations		(0.11	)		1.21			(1.77	)		1.66			4.07
Less distributions from:
Net investment income		(0.20	)		(0.14	)		(0.10	)		(0.16	)		(0.33	)
Net realized gains		—			—			—			—			(0.03	)
Total distributions		(0.20	)		(0.14	)		(0.10	)		(0.16	)		(0.36	)
Redemption feesc		—			—			—			—			—
Net asset value, end of year	$	10.12		$	10.43		$	9.36		$	11.23		$	9.73
Total returnd		(0.97)%			13.16%			(15.86)%			17.51%			72.63%
Ratios to average net assets
Expenses		1.60%			1.60%			1.65%			1.74%	e		1.70%	e
Net investment income		1.00%			1.68%			1.32%			0.62%			1.39%
Supplemental data
Net assets, end of year (000’s)	$	34,651		$	48,277		$	44,702		$	66,484		$	66,718
Portfolio turnover rate		44.59%			24.45%			14.90%			24.41%			56.58%	f

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

^bBased on average daily shares outstanding.

^cAmount rounds to less than $0.01 per share.

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

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

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

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

TD-11

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Templeton Developing Markets Securities Fund

	Year Ended December 31,
Class 4	2013			2012			2011			2010			2009
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	10.50		$	9.42		$	11.30		$	9.80		$	6.09
Income from investment operationsa:
Net investment incomeb		0.10			0.16			0.13			0.05			0.09
Net realized and unrealized gains (losses)		(0.21	)		1.04			(1.91	)		1.61			4.00
Total from investment operations		(0.11	)		1.20			(1.78	)		1.66			4.09
Less distributions from:
Net investment income		(0.19	)		(0.12	)		(0.10	)		(0.16	)		(0.35	)
Net realized gains		—			—			—			—			(0.03	)
Total distributions		(0.19	)		(0.12	)		(0.10	)		(0.16	)		(0.38	)
Redemption feesc		—			—			—			—			—
Net asset value, end of year	$	10.20		$	10.50		$	9.42		$	11.30		$	9.80
Total returnd		(1.07)%			13.06%			(15.88)%			17.41%			72.45%
Ratios to average net assets
Expenses		1.70%			1.70%			1.75%			1.84%	e		1.80%	e
Net investment income		0.90%			1.58%			1.22%			0.52%			1.29%
Supplemental data
Net assets, end of year (000’s)	$	15,225		$	23,341		$	24,380		$	37,198		$	26,362
Portfolio turnover rate		44.59%			24.45%			14.90%			24.41%			56.58%	f

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

^bBased on average daily shares outstanding.

^cAmount rounds to less than $0.01 per share.

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

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

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

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

TD-12

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013

Templeton Developing Markets Securities Fund	Industry	Shares		Value
Closed End Funds 0.4%
Romania 0.4%
SIF Moldova	Diversified Financial Services		1,326,345	$	599,363
SIF Oltenia	Diversified Financial Services		1,975,791		1,205,032
Total Closed End Funds (Cost $1,309,811)					1,804,395
Common Stocks 91.0%
Argentina 0.1%
a,b Grupo Clarin SA, B, GDR, Reg S	Media		47,911		275,488
Australia 0.4%
BHP Billiton Ltd.	Metals & Mining		56,757		1,924,731
Belgium 2.2%
Anheuser-Busch InBev NV	Beverages		95,309		10,128,595
Brazil 16.6%
Ambev SA	Beverages		6,811,750		49,946,874
M Dias Branco SA	Food Products		173,700		7,353,626
Souza Cruz SA	Tobacco		2,053,928		20,964,482
					78,264,982
China 11.2%
AAC Technologies Holdings Inc.	Communications Equipment		889,600		4,319,310
aAngang Steel Co. Ltd., H	Metals & Mining		5,129,000		3,809,867
China Overseas Land & Investment Ltd.	Real Estate Management & Development		2,002,900		5,630,803
aChina Shipping Development Co. Ltd., H	Marine		6,062,800		4,691,148
CNOOC Ltd.	Oil, Gas & Consumable Fuels		1,191,400		2,215,529
Great Wall Motor Co. Ltd., H	Automobiles		867,077		4,774,635
Lenovo Group Ltd.	Computers & Peripherals		3,904,700		4,748,473
aMelco Crown Entertainment Ltd., ADR	Hotels, Restaurants & Leisure		448,443		17,587,934
aNetEase Inc., ADR	Internet Software & Services		63,300		4,975,380
					52,753,079
Colombia 0.4%
Ecopetrol SA, ADR	Oil, Gas & Consumable Fuels		46,835		1,800,806
Egypt 0.0%†
Egyptian International Pharmaceutical Industries Co.	Pharmaceuticals		23,609		147,290
Georgia 0.1%
Bank of Georgia Holdings PLC	Commercial Banks		11,994		475,171
Hong Kong 11.4%
Dairy Farm International Holdings Ltd.	Food & Staples Retailing		966,133		9,178,264
aEsprit Holdings Ltd.	Specialty Retail		572,600		1,107,636
Giordano International Ltd.	Specialty Retail		4,631,000		4,138,687
I.T Ltd.	Specialty Retail		1,321,100		340,738
Luk Fook Holdings (International) Ltd.	Specialty Retail		2,224,513		8,462,751
cLuk Fook Holdings (International) Ltd., 144A	Specialty Retail		130,000		494,561
MGM China Holdings Ltd.	Hotels, Restaurants & Leisure		2,826,100		12,081,634
SJM Holdings Ltd.	Hotels, Restaurants & Leisure		4,909,930		16,399,464
aSummit Ascent Holdings Ltd.	Trading Companies & Distributors		927,000		1,482,368
					53,686,103
India 5.1%
Tata Consultancy Services Ltd.	IT Services		495,500		17,394,982
Tata Motors Ltd.	Automobiles		1,063,000		6,470,136
					23,865,118

TD-13

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Templeton Developing Markets Securities Fund	Industry		Shares		Value
Common Stocks (continued)
Indonesia 0.4%
Bank Rakyat Indonesia Persero Tbk PT	Commercial Banks	��		3,203,600	$	1,908,472
Kenya 1.5%
East African Breweries Ltd.	Beverages			210,500		707,358
Equity Bank Ltd.	Commercial Banks			8,986,101		3,201,884
Kenya Commercial Bank Ltd.	Commercial Banks			5,335,900		2,936,909
						6,846,151
Macau 3.3%
Sands China Ltd.	Hotels, Restaurants & Leisure			1,905,000		15,624,520
Mexico 0.3%
Kimberly Clark de Mexico SAB de CV, A	Household Products			489,532		1,395,388
Nigeria 1.7%
Ecobank Transnational Inc.	Commercial Banks			2,631,065		265,985
FBN Holdings PLC	Commercial Banks			36,527,236		3,722,375
Nigerian Breweries PLC	Beverages			3,770,084		3,957,469
						7,945,829
Philippines 1.1%
Ayala Corp.	Diversified Financial Services			429,820		5,014,567
Qatar 2.5%
Industries Qatar QSC	Industrial Conglomerates			255,782		11,863,677
Romania 0.2%
Nuclearelectrica SA	Independent Power Producers & Energy Traders			43,925		151,098
a,c Societatea Nationala de Gaze Naturale ROMGAZ SA, 144A	Oil, Gas & Consumable Fuels			85,800		901,783
						1,052,881
Russia 3.5%
cAlrosa AO, 144A	Metals & Mining			3,445,400		3,740,600
d LUKOIL Holdings, ADR	Oil, Gas & Consumable Fuels			29,958		1,870,877
d LUKOIL Holdings, ADR (London Stock Exchange)	Oil, Gas & Consumable Fuels			174,418		10,892,404
						16,503,881
Singapore 1.0%
K-REIT Asia	Real Estate Investment Trusts (REITs)			5,248,511		4,929,058
South Africa 5.0%
MTN Group Ltd.	Wireless Telecommunication Services			134,100		2,774,297
Remgro Ltd.	Diversified Financial Services			1,041,324		20,629,929
						23,404,226
South Korea 4.3%
Grand Korea Leisure Co. Ltd.	Hotels, Restaurants & Leisure			170,220		6,513,901
Samsung Electronics Co. Ltd.	Semiconductors & Semiconductor Equipment			10,508		13,655,996
						20,169,897
Sweden 0.6%
Oriflame Cosmetics SA, SDR	Personal Products			87,856		2,697,336
Switzerland 3.0%
Compagnie Financiere Richemont SA	Textiles, Apparel & Luxury Goods			143,641		14,298,886
Taiwan 1.0%
Taiwan Semiconductor Manufacturing Co. Ltd.	Semiconductors & Semiconductor Equipment			1,325,500		4,687,671

TD-14

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Templeton Developing Markets Securities Fund	Industry	Shares		Value
Common Stocks (continued)
Thailand 1.7%
Shin Corp. PCL, fgn.	Wireless Telecommunication Services		1,306,200	$	2,774,478
Thai Beverage PCL	Beverages		12,053,200		5,158,288
					7,932,766
Turkey 0.1%
Yazicilar Holding AS	Industrial Conglomerates		43,862		382,856
Turkmenistan 0.1%
Dragon Oil PLC	Oil, Gas & Consumable Fuels		65,784		619,005
United Arab Emirates 4.3%
Emaar Properties PJSC	Real Estate Management & Development		9,763,577		20,308,665
United Kingdom 5.6%
British American Tobacco PLC	Tobacco		249,100		13,352,129
Unilever PLC	Food Products		316,084		12,993,492
					26,345,621
United States 1.4%
Avon Products Inc.	Personal Products		391,680		6,744,730
Vietnam 0.2%
DHG Pharmaceutical JSC	Pharmaceuticals		95,800		517,715
Dong Phu Rubber JSC	Chemicals		104,160		231,576
					749,291
Zimbabwe 0.7%
Delta Corp. Ltd.	Beverages		2,209,976		3,096,176
Total Common Stocks (Cost $299,958,882)					427,842,913
eParticipatory Notes 2.8%
Saudi Arabia 2.8%
c Deutsche Bank AG/London, Saudi Dairy & Foodstuff Co., 144A, 5/13/14	Food Products		55,781		1,282,809
cHSBC Bank PLC,
Al Mouwasat Medical Services, 144A, 4/13/15	Health Care Providers & Services		19,800		485,702
Etihad Etisalat Co., 144A, 12/05/14	Wireless Telecommunication Services		515,329		11,748,091
Total Participatory Notes (Cost $10,815,443)					13,516,602
Preferred Stocks 3.0%
Chile 1.6%
Embotelladora Andina SA, pfd., A	Beverages		2,068,717		7,283,521
Russia 1.4%
Sberbank of Russia, pfd.	Commercial Banks		2,752,211		6,719,064
Total Preferred Stocks (Cost $11,239,911)					14,002,585
Total Investments before Short Term Investments (Cost $323,324,047)					457,166,495

TD-15

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Templeton Developing Markets Securities Fund	Shares		Value
Short Term Investments (Cost $12,277,809) 2.6%
Money Market Funds 2.6%
United States 2.6%
a,f Institutional Fiduciary Trust Money Market Portfolio		12,277,809	$	12,277,809
Total Investments (Cost $335,601,856) 99.8%				469,444,304
Other Assets, less Liabilities 0.2%				821,406
Net Assets 100.0%			$	470,265,710

See Abbreviations on page TD-28.

†Rounds to less than 0.1% of net assets.

^aNon-income producing.

^bSecurity was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. This security has been deemed liquid under guidelines approved by the Trust’s Board of Trustees.

^cSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At December 31, 2013, the aggregate value of these securities was $18,653,546, representing 3.97% of net assets.

^dAt December 31, 2013, pursuant to the Fund’s policies and the requirements of applicable securities law, the Fund may be restricted from trading these securities for a limited or extended period of time due to ownership limits and/or potential possession of material non-public information.

^eSee Note 1(c) regarding Participatory Notes.

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

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

TD-16

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

December 31, 2013

	Templeton Developing Markets Securities Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	323,324,047
Cost - Sweep Money Fund (Note 7)		12,277,809
Total cost of investments	$	335,601,856
Value - Unaffiliated issuers	$	457,166,495
Value - Sweep Money Fund (Note 7)		12,277,809
Total value of investments		469,444,304
Cash		852
Foreign currency, at value (cost $47,388)		47,388
Receivables:
Investment securities sold		2,415,950
Capital shares sold		142,999
Dividends		210,342
Foreign tax		25,179
Other assets		12
Total assets		472,287,026
Liabilities:
Payables:
Investment securities purchased		458,487
Capital shares redeemed		516,507
Management fees		433,361
Administrative fees		55,772
Distribution fees		137,500
Custodian fees		149,186
Reports to shareholders		214,744
Accrued expenses and other liabilities		55,759
Total liabilities		2,021,316
Net assets, at value	$	470,265,710
Net assets consist of:
Paid-in capital	$	363,881,784
Distributions in excess of net investment income		(481,395	)
Net unrealized appreciation (depreciation)		133,819,737
Accumulated net realized gain (loss)		(26,954,416	)
Net assets, at value	$	470,265,710

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

TD-17

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Assets and Liabilities (continued)

December 31, 2013

	Templeton Developing Markets Securities Fund
Class 1:
Net assets, at value	$	145,707,342
Shares outstanding		14,195,852
Net asset value and maximum offering price per share	$	10.26
Class 2:
Net assets, at value	$	274,682,503
Shares outstanding		26,966,823
Net asset value and maximum offering price per share	$	10.19
Class 3:
Net assets, at value	$	34,650,803
Shares outstanding		3,422,536
Net asset value and maximum offering price per sharea	$	10.12
Class 4:
Net assets, at value	$	15,225,062
Shares outstanding		1,493,241
Net asset value and maximum offering price per share	$	10.20

^aRedemption price is equal to net asset value less redemption fees retained by the Fund.

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

TD-18

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the year ended December 31, 2013

	Templeton Developing Markets Securities Fund
Investment income:
Dividends (net of foreign taxes of $1,022,583)	$	13,364,543
Income from securities loaned		14,539
Total investment income		13,379,082
Expenses:
Management fees (Note 3a)		5,647,955
Administrative fees (Note 3b)		724,451
Distribution fees: (Note 3c)
Class 2		703,863
Class 3		102,353
Class 4		67,695
Unaffiliated transfer agent fees		911
Custodian fees (Note 4)		349,498
Reports to shareholders		142,286
Professional fees		58,627
Trustees’ fees and expenses		2,160
Other		23,136
Total expenses		7,822,935
Net investment income		5,556,147
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		68,533,153
Foreign currency transactions		(570,528	)
Net realized gain (loss)		67,962,625
Net change in unrealized appreciation (depreciation) on:
Investments		(79,209,837	)
Translation of other assets and liabilities denominated in foreign currencies		(468	)
Change in deferred taxes on unrealized appreciation		21,147
Net change in unrealized appreciation (depreciation)		(79,189,158	)
Net realized and unrealized gain (loss)		(11,226,533	)
Net increase (decrease) in net assets resulting from operations	$	(5,670,386	)

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

TD-19

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets

	Templeton Developing Markets Securities Fund
	Year Ended December 31,
	2013			2012
Increase (decrease) in net assets:
Operations:
Net investment income	$	5,556,147		$	10,321,744
Net realized gain (loss) from investments and foreign currency transactions		67,962,625			37,187,656
Net change in unrealized appreciation (depreciation) on investments, translation of other assets and liabilities denominated in foreign currencies and deferred taxes		(79,189,158	)		25,533,270
Net increase (decrease) in net assets resulting from operations		(5,670,386	)		73,042,670
Distributions to shareholders from:
Net investment income:
Class 1		(3,816,779	)		(3,523,272	)
Class 2		(5,449,449	)		(4,111,805	)
Class 3		(777,644	)		(716,639	)
Class 4		(373,848	)		(295,623	)
Total distributions to shareholders		(10,417,720	)		(8,647,339	)
Capital share transactions: (Note 2)
Class 1		(52,075,044	)		(52,933,691	)
Class 2		(8,867,643	)		(36,646,633	)
Class 3		(12,240,084	)		(1,195,085	)
Class 4		(7,287,727	)		(3,647,744	)
Total capital share transactions		(80,470,498	)		(94,423,153	)
Redemption fees		1,204			1,457
Net increase (decrease) in net assets		(96,557,400	)		(30,026,365	)
Net assets:
Beginning of year		566,823,110			596,849,475
End of year	$	470,265,710		$	566,823,110
Undistributed net investment income (distributions in excess of net investment income) included in net assets:
End of year	$	(481,395	)	$	3,581,480

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

TD-20

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements

Templeton Developing Markets Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment company, consisting of twenty separate funds. The Templeton Developing Markets Securities Fund (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. The Fund offers four classes of shares: Class 1, Class 2, Class 3, and Class 4. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

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

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

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

Trading in securities on foreign securities stock exchanges and OTC markets may be completed before the daily NYSE close. In addition, trading in certain foreign markets may not take place on every NYSE business day. Occasionally, events occur between the time at which trading in a foreign security is completed and the close of the NYSE that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund’s portfolio securities as determined at the foreign market close and the latest indications of value at the close of the NYSE. In order to minimize the potential for these differences, the VLOC monitors price movements following the close of trading in foreign stock

TD-21

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Templeton Developing Markets Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

a. Financial Instrument Valuation (continued)

markets through a series of country specific market proxies (such as baskets of American Depositary Receipts, futures contracts and exchange traded funds). These price movements are measured against established trigger thresholds for each specific market proxy to assist in determining if an event has occurred that may call into question the reliability of the values of the foreign securities held by the Fund. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services.

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

b. Foreign Currency Translation

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

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

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

c. Participatory Notes

The Fund invests in Participatory Notes (P-Notes). P-notes are promissory notes that are designed to offer a return linked to the performance of a particular underlying equity security or market. P-Notes are issued by banks or broker-dealers and allow the fund to gain exposure to common stocks in markets where direct investment is not allowed. Income received from P-Notes is recorded as dividend income in the Statement of Operations. P-Notes may contain various risks including the potential inability of the counterparty to fulfill their obligations under the terms of the contract. These securities may be more volatile and less liquid than other investments held by the Fund.

d. Securities Lending

The Fund participates in an agency based securities lending program. The Fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the market value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the market value of loaned securities, as determined at the close of fund business each day; any additional collateral required due to changes in security values is delivered to the Fund on the next business

TD-22

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Templeton Developing Markets Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

d. Securities Lending (continued)

day. The collateral is invested in a non-registered money fund. The Fund receives income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. The Fund bears the market risk with respect to the collateral investment, securities loaned, and the risk that the agent may default on its obligations to the Fund. The securities lending agent has agreed to indemnify the Fund in the event of default by a third party borrower. At December 31, 2013, the Fund had no securities on loan.

e. Income and Deferred Taxes

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

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

The Fund recognizes the tax benefits of uncertain tax positions only when the position is “more likely than not” to be sustained upon examination by the tax authorities based on the technical merits of the tax position. As of December 31, 2013, and for all open tax years, the Fund has determined that no liability for unrecognized tax benefits is required in the Fund’s financial statements related to uncertain tax positions taken on a tax return (or expected to be taken on future tax returns). Open tax years are those that remain subject to examination and are based on each tax jurisdiction statute of limitation.

f. Security Transactions, Investment Income, Expenses and Distributions

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

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

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

g. Accounting Estimates

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

TD-23

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Templeton Developing Markets Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

h. Redemption Fees

Redemptions and exchanges of interests in an insurance company subaccount that invests in Class 3 shares of the Fund will be subject to a 1.0% short term trading fee if the interest in the subaccount has been held for less than 60 days. Such fees are retained by the Fund and accounted for as an addition to paid-in capital, allocated to each class of shares based upon the relative proportion of net assets of each class.

i. Guarantees and Indemnifications

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

2. SHARES OF BENEFICIAL INTEREST

At December 31, 2013, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:

	Year Ended December 31,
	2013						2012
Class 1 Shares:	Shares			Amount			Shares			Amount
Shares sold		1,118,729		$	11,636,774			1,107,285		$	11,165,172
Shares issued in reinvestment of distributions		392,673			3,816,779			385,901			3,523,272
Shares redeemed		(6,552,381	)		(67,528,597	)		(6,733,412	)		(67,622,135	)
Net increase (decrease)		(5,040,979	)	$	(52,075,044	)		(5,240,226	)	$	(52,933,691	)
Class 2 Shares:
Shares sold		5,110,513		$	51,867,557			3,879,555		$	38,012,902
Shares issued in reinvestment of distributions		564,125			5,449,449			453,341			4,111,805
Shares redeemed		(6,483,017	)		(66,184,649	)		(7,891,630	)		(78,771,340	)
Net increase (decrease)		(808,379	)	$	(8,867,643	)		(3,558,734	)	$	(36,646,633	)
Class 3 Shares:
Shares sold		410,783		$	4,328,836			998,194		$	10,036,984
Shares issued in reinvestment of distributions		81,005			777,644			79,538			716,639
Shares redeemed		(1,696,602	)		(17,346,564	)		(1,224,195	)		(11,948,708	)
Net increase (decrease)		(1,204,814	)	$	(12,240,084	)		(146,463	)	$	(1,195,085	)
Class 4 Shares:
Shares sold		206,201		$	2,099,934			257,374		$	2,544,613
Shares issued on reinvestment of distributions		38,661			373,848			32,558			295,623
Shares redeemed		(973,500	)		(9,761,509	)		(656,835	)		(6,487,980	)
Net increase (decrease)		(728,638	)	$	(7,287,727	)		(366,903	)	$	(3,647,744	)

TD-24

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Templeton Developing Markets Securities Fund

3. TRANSACTIONS WITH AFFILIATES

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

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

a. Management Fees

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

Annualized Fee Rate	Net Assets
1.100%	Up to and including $1 billion
1.050%	Over $1 billion, up to and including $5 billion
1.000%	Over $5 billion, up to and including $10 billion
0.950%	Over $10 billion, up to and including $15 billion
0.900%	Over $15 billion, up to and including $20 billion
0.850%	In excess of $20 billion

b. Administrative Fees

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

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

c. Distribution Fees

The Board has adopted distribution plans for Class 2, Class 3, and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to 0.25%, 0.35%, and 0.35% per year of its average daily net assets of Class 2, Class 3, and Class 4, respectively. Some distribution fees are not charged on shares held by affiliates. The Board has agreed to limit the current rate to 0.25% per year for Class 3. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.

d. Transfer Agent Fees

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

4. EXPENSE OFFSET ARRANGEMENT

The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses. During the year ended December 31, 2013, there were no credits earned.

TD-25

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Templeton Developing Markets Securities Fund

5. INCOME TAXES

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

At December 31, 2013, the Fund had capital loss carryforwards of $21,512,788 expiring in 2017.

During the year ended December 31, 2013, the Fund utilized $66,613,489 of capital loss carryforwards.

The tax character of distributions paid during the years ended December 31, 2013 and 2012, was as follows:

	2013		2012
Distributions paid from ordinary income	$	10,417,720	$	8,647,339

At December 31, 2013, the cost of investments, net unrealized appreciation (depreciation) and undistributed ordinary income for income tax purposes were as follows:

Cost of investments	$	348,373,004
Unrealized appreciation	$	129,012,176
Unrealized depreciation		(7,940,876	)
Net unrealized appreciation (depreciation)	$	121,071,300
Undistributed ordinary income	$	6,847,606

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of foreign currency transactions, passive foreign investment company shares, corporate actions and wash sales.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the year ended December 31, 2013, aggregated $224,131,604 and $314,267,484, respectively.

7. INVESTMENTS IN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO

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

8. CONCENTRATION OF RISK

Investing in foreign securities may include certain risks and considerations not typically associated with investing in U.S. securities, such as fluctuating currency values and changing local and regional economic, political and social conditions, which may result in greater market volatility. In addition, certain foreign securities may not be as liquid as U.S. securities.

9. CREDIT FACILITY

The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $1.5 billion (Global Credit

TD-26

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Templeton Developing Markets Securities Fund

9. CREDIT FACILITY (continued)

Facility) which, after an extension of the original terms, matured on February 14, 2014. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. Effective February 14, 2014, the Borrowers renewed the Global Credit Facility which matures on February 13, 2015.

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.07% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses on the Statement of Operations. During the year ended December 31, 2013, the Fund did not use the Global Credit Facility.

10. FAIR VALUE MEASUREMENTS

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

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

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

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

The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.

For movements between the levels within the fair value hierarchy, the Fund has adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.

A summary of inputs used as of December 31, 2013, in valuing the Fund’s assets carried at fair value, is as follows:

	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities:
Closed End Funds	$	1,804,395	$	—	$	—	$	1,804,395
Equity Investments:a
Russia		21,352,068		1,870,877		—		23,222,945
All Other Equity Investmentsb		418,622,553		—		—		418,622,553
Participatory Notes		—		13,516,602		—		13,516,602
Short Term Investments		12,277,809		—		—		12,277,809
Total Investments in Securities	$	454,056,825	$	15,387,479	$	—	$	469,444,304

^aIncludes common and preferred stocks.

^bFor detailed categories, see the accompanying Statement of Investments.

11. NEW ACCOUNTING PRONOUNCEMENTS

In June 2013, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2013-08, Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements. The ASU modifies the criteria

TD-27

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Templeton Developing Markets Securities Fund

11. NEW ACCOUNTING PRONOUNCEMENTS (continued)

used in defining an investment company under U.S. Generally Accepted Accounting Principles and also sets forth certain measurement and disclosure requirements. Under the ASU, an entity that is registered under the 1940 Act automatically qualifies as an investment company. The ASU is effective for interim and annual reporting periods beginning after December 15, 2013. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the financial statements.

12. SUBSEQUENT EVENTS

The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure other than those already disclosed in the financial statements.

ABBREVIATIONS

Selected Portfolio

ADR - American Depositary Receipt

GDR - Global Depositary Receipt

SDR - Swedish Depositary Receipt

TD-28

Franklin Templeton Variable Insurance Products Trust

Templeton Developing Markets Securities Fund

Report of Independent Registered Public Accounting Firm

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 Templeton Developing Markets Securities Fund (the “Fund”) at December 31, 2013, 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 five years in the period then ended, 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2013 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

February 14, 2014

TD-29

Franklin Templeton Variable Insurance Products Trust

Tax Information (unaudited)

Templeton Developing Markets Securities Fund

At December 31, 2013, more than 50% of the Fund’s total assets were invested in securities of foreign issuers. In most instances, foreign taxes were withheld from income paid to the Fund on these investments. The Fund elects to treat foreign taxes paid as allowed under Section 853 of the Internal Revenue Code (Code). This election will allow shareholders of record as of the 2014 distribution date, 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.

TD-30

TEMPLETON FOREIGN SECURITIES FUND

This annual report for Templeton Foreign Securities Fund covers the fiscal year ended December 31, 2013.

Performance Summary as of 12/31/13

Average annual total return of Class 4 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.

Periods ended 12/31/13

	1-Year		5-Year		10-Year
Average Annual Total Return		+22.86%		+13.95%		+7.79%

*For the period beginning 2/29/08, Class 4 performance reflects a 12b-1 fee expense of 0.35% per year, which affects future performance. Class 4 performance prior to 2/29/08 reflects historical Class 1 performance, which does not have a 12b-1 fee expense. Since 2/29/08 (effective date), the average annual total return of Class 4 shares was +3.84%. The Fund has a fee waiver associated with its investments in a Franklin Templeton money fund, contractually guaranteed through at least its current fiscal year end. Fund investment results reflect the fee waiver, to the extent applicable; without this reduction, the results would have been lower.

Total Return Index Comparison

for a Hypothetical $10,000 Investment (1/1/04–12/31/13)

The graph below shows the change in value of a hypothetical $10,000 investment in the Fund over the indicated period and includes reinvestment of any income or distributions. The Fund’s performance* is compared to the performance of the MSCI Europe, Australasia, Far East (EAFE) Index. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Important Notes to Performance Information preceding the Fund Summaries.

**Source: © 2014 Morningstar. Please see Index Descriptions following the Fund Summaries.

Templeton Foreign Securities Fund – Class 4

Performance reflects the Fund’s Class 4 operating expenses, but does not include any contract fees, expenses or sales charges. If they had been included, performance would be lower. These charges and deductions, particularly for variable life policies, can have a significant effect on contract values and insurance benefits. See the contract prospectus for a complete description of these expenses, including sales charges.

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares.

Current performance may differ from figures shown.

TF-1

Fund Goal and Main Investments: Templeton Foreign Securities Fund seeks long-term capital growth. Under normal market conditions, the Fund invests at least 80% of its net assets in investments of issuers located outside the U.S., including those in emerging markets.

Performance Overview

You can find the Fund’s one-year total return in the Performance Summary. In comparison, the Fund’s benchmark, the MSCI EAFE Index, produced a +23.29% total return for the same period.¹ Please note, index performance information is provided for reference and we do not attempt to track the index but rather undertake investments on the basis of fundamental research.

Economic and Market Overview

The 12 months under review were characterized by reinvigorated policy support and an economic recovery in developed markets. However, differences in global economic trends corresponded with increasingly divergent monetary policies, and growth in emerging market economies tended to slow. The central banks of key developed markets generally reaffirmed their accommodative monetary stances while some emerging market counterparts tightened policy rates as they sought to control inflation and currency depreciation.

In the U.S., economic growth and employment trends generally exceeded expectations. The U.S. Federal Reserve Board (Fed) expanded its asset purchase program to $85 billion per month from $40 billion early in the year. After encouraging economic and employment reports, the Fed announced in December it would reduce its monthly bond purchases by $10 billion beginning in January 2014; however, the Fed committed to keeping interest rates low. In October, the federal government temporarily shut down after Congress failed to authorize routine federal funding amid a disagreement over a new health care law. However, Congress subsequently agreed to fund the government through early 2014 and later passed a two-year budget deal that could ease automatic spending cuts and lower the risk of another shutdown.

Outside the U.S., the eurozone emerged from its longest recession on record during 2013’s second half and Japan’s growth moderated. The European Central Bank reduced its policy rate to a record low and pledged to maintain systemic support following political turmoil in

1. Source: © 2014 Morningstar. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

Fund Risks: All investments involve risks, including possible loss of principal. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments; investments in emerging markets involve heightened risks related to the same factors. To the extent the Fund focuses on particular countries, regions, industries, sectors or types of investment from time to time, it may be subject to greater risks of adverse developments in such areas of focus than a fund that invests in a wider variety of countries, regions, industries, sectors or investments. Current political uncertainty surrounding the European Union (EU) and its membership may increase market volatility. The financial instability of some countries in the EU, including Greece, Italy and Spain, together with the risk of that impacting other more stable countries, may increase the economic risk of investing in companies in Europe. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

TF-2

Greece, Spain, Portugal and Italy. Germany’s re-election of Chancellor Angela Merkel was largely perceived as a vote of support for ongoing eurozone reform measures. In Asia, the Bank of Japan set an explicit inflation target and pledged to double bond purchases in an unprecedented wave of policy reform. The U.S. dollar fell versus the euro but rose versus the Japanese yen in 2013.

Growth in many emerging markets moderated based on lower domestic demand, falling exports and weakening commodity prices. Political turmoil in certain emerging markets, the Fed’s potential tapering of its asset purchase program and the Chinese central bank’s effort to tighten liquidity to curb real estate and credit speculation led to a sell-off in emerging market equities and a sharp depreciation in regional currencies against the U.S. dollar. Central banks in Brazil, India and Indonesia raised interest rates in the second half of 2013 as they sought to curb inflation.

The stock market rally in developed markets accelerated during 2013 amid redoubled central bank commitments, continued corporate earnings strength and increasing signs of economic progress. Emerging market stocks rebounded toward period-end, although Latin American stocks trailed their emerging market peers. Oil prices rallied in the third quarter and rose for the year mainly owing to supply concerns related to geopolitical turmoil, but gold posted its largest annual price decline in more than three decades. Increasingly divergent economic and political circumstances during the period resulted in declining market correlations, which many bottom-up investors perceived as more favorable.

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, all sectors in the MSCI EAFE Index delivered positive returns as the broad market rallied. Our stock selection in the financials sector, especially in insurance, diversified financial services and commercial banks, was a major contributor to

TF-3

Fund performance relative to its benchmark index.² Among the top sector contributors were insurance providers AXA (France) and Aegon (Netherlands), diversified financial services providers ING Groep (Netherlands) and ING U.S.,³ a new holding, and commercial banks Lloyds Banking Group (U.K.), BNP Paribas (France) and UniCredit (Italy). AXA’s shares advanced through the year as the insurer reported moderate revenue growth across all its business segments and continued to focus on higher margin products. The insurer also continued to expand its presence in emerging markets by acquiring domestic insurers in China and Colombia. Our underweighting in the underperforming materials sector, especially in metals and mining, contributed to relative results.⁴ Stock selection in the health care sector also aided relative performance, with pharmaceutical company Roche Holding (Switzerland) as a notable contributor.⁵ The company reported encouraging earnings results through the year, driven by demand for its cancer drugs, especially Avastin. The drug maker also progressed on its product pipeline and launched cancer drugs Perjeta in the U.S. and Kadcyla in the European Union. Underweightings in utilities, a sector we eliminated by period-end, and in consumer staples also aided returns.⁶ Other individual contributors included telecommunication services provider Vodafone Group (U.K.), specialty retailer Kingfisher (U.K.) and Japanese automobile manufacturer Mazda Motor.⁷ Vodafone’s stock price advanced as the company entered into an agreement to sell a joint venture interest to its partner Verizon Communications and planned to return a large portion of the sale to Vodafone’s shareholders.

In contrast, our overweighting and stock selection in the energy sector detracted from Fund performance.⁸ Our positions in energy equipment and services companies Aker Solutions (Norway) and Trican Well Service³ (Canada) as well as Norwegian oil and natural gas producer Statoil suffered from oil price fluctuations stemming from Middle East political tensions. Our stock selection in telecommunication services companies such as wireless telecommunication provider China Mobile³ and diversified telecommunication provider China Telecom³ weighed

2. The financials sector comprises capital markets, commercial banks, diversified financial services, insurance, and real estate management and development in the SOI.

3. Not part of the index.

4. The materials sector comprises chemicals, construction materials, containers and packaging, and metals and mining in the SOI.

5. The health care sector comprises health care equipment and supplies, health care providers and services, life sciences tools and services, and pharmaceuticals in the SOI.

6. The consumer staples sector comprises food and staples retailing in the SOI.

7. Sold by period-end.

8. The energy sector comprises energy equipment and services; and oil, gas and consumable fuels in the SOI.

Top 10 Holdings

Templeton Foreign Securities Fund

12/31/13

Company Sector/Industry, Country	% of Total Net Assets
BNP Paribas SA		3.2%
Commercial Banks, France
ING Groep NV, IDR		3.0%
Diversified Financial Services, Netherlands
GlaxoSmithKline PLC		2.7%
Pharmaceuticals, U.K.
Sanofi		2.6%
Pharmaceuticals, France
Aviva PLC		2.5%
Insurance, U.K.
Tesco PLC		2.4%
Food & Staples Retailing, U.K.
Credit Suisse Group AG		2.4%
Capital Markets, Switzerland
Samsung Electronics Co. Ltd.		2.2%
Semiconductors & Semiconductor Equipment, South Korea
Total SA, B		2.2%
Oil, Gas & Consumable Fuels, France
AXA SA		2.1%
Insurance, France

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).

TF-4

on results.⁹ China Mobile’s stock price fell after the company reported lower-than-expected second- and third-quarter earnings because of rising network costs. Stock selection in the information technology sector detracted from relative performance, with an off-benchmark position in South Korean electronic products manufacturer Samsung Electronics as a major detractor.¹⁰ In other sectors, the Fund’s off-benchmark positions in POSCO (South Korea) and Potash Corp. of Saskatchewan⁷ (Canada) as well as holdings in food and staples retailer Tesco (U.K.) and Brazilian metals and mining company Vale hindered relative performance.

From a geographic perspective, our stock selection in Europe benefited the Fund’s relative performance, as a number of our investments in the U.K., Switzerland, the Netherlands, France and Italy performed well. A lack of exposure to Australia, an off-benchmark allocation to the U.S. and stock selection in Hong Kong also contributed to relative returns. However, elsewhere in Asia, off-benchmark allocations to South Korea and China detracted from relative performance. Our exposure to off-benchmark nation Canada and a few European countries, led by Norway, also hurt performance.

Thank you for your participation in Templeton Foreign Securities Fund. We look forward to serving your future investment needs.

9. The telecommunication services sector comprises diversified telecommunication services and wireless telecommunication services in the SOI.

10. The information technology sector comprises communications equipment; computers and peripherals; electronic equipment, instruments and components; semiconductors and semiconductor equipment; and software in the SOI.

The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2013, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

TF-5

Fund Expenses

As an investor in a variable insurance contract (Contract) that indirectly provides for investment in an underlying mutual fund, you can incur transaction and/or ongoing expenses at both the Fund level and the Contract level.

• Transaction expenses can include sales charges (loads) on purchases, redemption fees, surrender fees, transfer fees and premium taxes.

• Ongoing expenses can include management fees, distribution and service (12b-1) fees, contract fees, annual maintenance fees, mortality and expense risk fees and other fees and expenses. All mutual funds and Contracts have some types of ongoing expenses.

The expenses shown in the table are meant to highlight ongoing expenses at the Fund level only and do not include ongoing expenses at the Contract level, or transaction expenses at either the Fund or Contract level. While the Fund does not have transaction expenses, if the transaction and ongoing expenses at the Contract level were included, the expenses shown below would be higher. You should consult your Contract prospectus or disclosure document for more information.

The table shows Fund-level ongoing expenses and can help you understand these expenses and compare them with those of other mutual funds offered through the Contract. The table assumes a $1,000 investment held for the six months indicated. Please refer to the Fund prospectus for additional information on operating expenses.

Actual Fund Expenses

The first line (Actual) of the table provides actual account values and expenses. The “Ending Account Value” is derived from the Fund’s actual return, which includes the effect of ongoing Fund expenses, but does not include the effect of ongoing Contract expenses.

You can estimate the Fund-level expenses you incurred during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:

1. Divide your account value by $1,000.

If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6.

2. Multiply the result by the number under the heading “Fund-Level Expenses Incurred During Period.”

If Fund-Level Expenses Incurred During Period were $7.50, then 8.6 x $7.50 = $64.50.

In this illustration, the estimated expenses incurred this period at the Fund level are $64.50.

Templeton Foreign Securities Fund – Class 4

TF-6

Hypothetical Example for Comparison with Other Mutual Funds

Information in the second line (Hypothetical) of the table can help you compare ongoing expenses of the Fund with those of other mutual funds offered through the Contract. This information may not be used to estimate the actual ending account balance or expenses you incurred during the period. The hypothetical “Ending Account Value” is based on the Fund’s actual expense ratio and an assumed 5% annual rate of return before expenses, which does not represent the Fund’s actual return. The figure under the heading “Fund-Level Expenses Incurred During Period” shows the hypothetical expenses your account would have incurred under this scenario. You can compare this figure with the 5% hypothetical examples that appear in shareholder reports of other funds offered through a Contract.

Class 4	Beginning Account Value 7/1/13		Ending Account Value 12/31/13		Fund-Level Expenses Incurred During Period* 7/1/13–12/31/13
Actual	$	1,000	$	1,201.20	$	6.21
Hypothetical (5% return before expenses)	$	1,000	$	1,019.56	$	5.70

*Expenses are calculated using the most recent six-month annualized expense ratio for the Fund’s Class 4 shares (1.12%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period.

TF-7

Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Templeton Foreign Securities Fund

	Year Ended December 31,
Class 1	2013			2012			2011			2010			2009
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	14.63		$	12.78		$	14.54		$	13.68		$	10.95
Income from investment operationsa:
Net investment incomeb		0.34			0.38			0.42			0.28			0.25
Net realized and unrealized gains (losses)		3.00			1.91			(1.90	)		0.86			3.39
Total from investment operations		3.34			2.29			(1.48	)		1.14			3.64
Less distributions from:
Net investment income		(0.41	)		(0.44	)		(0.28	)		(0.28	)		(0.43	)
Net realized gains		—			—			—			—			(0.48	)
Total distributions		(0.41	)		(0.44	)		(0.28	)		(0.28	)		(0.91	)
Redemption feesc		—			—			—			—			—
Net asset value, end of year	$	17.56		$	14.63		$	12.78		$	14.54		$	13.68
Total returnd		23.27%			18.60%			(10.44)%			8.67%			37.34%
Ratios to average net assets
Expenses		0.78%			0.79%			0.79%	e		0.78%	e		0.78%	e
Net investment income		2.16%			2.84%			2.92%			2.10%			2.28%
Supplemental data
Net assets, end of year (000’s)	$	298,468		$	265,924		$	254,292		$	321,282		$	318,173
Portfolio turnover rate		23.61%			12.53%			21.09%			19.16%			22.50%

^aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.

^bBased on average daily shares outstanding.

^cAmount rounds to less than $0.01 per share.

^dTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which the Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.

^eBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

TF-8

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Templeton Foreign Securities Fund

	Year Ended December 31,
Class 2	2013			2012			2011			2010			2009
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	14.37		$	12.56		$	14.29		$	13.45		$	10.76
Income from investment operationsa:
Net investment incomeb		0.30			0.34			0.37			0.25			0.22
Net realized and unrealized gains (losses)		2.94			1.87			(1.86	)		0.84			3.34
Total from investment operations		3.24			2.21			(1.49	)		1.09			3.56
Less distributions from:
Net investment income		(0.37	)		(0.40	)		(0.24	)		(0.25	)		(0.39	)
Net realized gains		—			—			—			—			(0.48	)
Total distributions		(0.37	)		(0.40	)		(0.24	)		(0.25	)		(0.87	)
Redemption feesc		—			—			—			—			—
Net asset value, end of year	$	17.24		$	14.37		$	12.56		$	14.29		$	13.45
Total returnd		22.97%			18.23%			(10.63)%			8.41%			37.04%
Ratios to average net assets
Expenses		1.03%			1.04%			1.04%	e		1.03%	e		1.03%	e
Net investment income		1.91%			2.59%			2.67%			1.85%			2.03%
Supplemental data
Net assets, end of year (000’s)	$	1,873,586		$	1,744,231		$	1,679,412		$	2,090,757		$	2,010,268
Portfolio turnover rate		23.61%			12.53%			21.09%			19.16%			22.50%

^aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.

^bBased on average daily shares outstanding.

^cAmount rounds to less than $0.01 per share.

^dTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which the Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.

^eBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

TF-9

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Templeton Foreign Securities Fund

	Year Ended December 31,
Class 3	2013			2012			2011			2010			2009
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	14.32		$	12.51		$	14.24		$	13.37		$	10.70
Income from investment operationsa:
Net investment incomeb		0.30			0.34			0.37			0.25			0.25
Net realized and unrealized gains (losses)		2.93			1.87			(1.86	)		0.84			3.30
Total from investment operations		3.23			2.21			(1.49	)		1.09			3.55
Less distributions from:
Net investment income		(0.37	)		(0.40	)		(0.24	)		(0.22	)		(0.40	)
Net realized gains		—			—			—			—			(0.48	)
Total distributions		(0.37	)		(0.40	)		(0.24	)		(0.22	)		(0.88	)
Redemption feesc		—			—			—			—			—
Net asset value, end of year	$	17.18		$	14.32		$	12.51		$	14.24		$	13.37
Total returnd		22.98%			18.30%			(10.68)%			8.41%			37.20%
Ratios to average net assets
Expenses		1.03%			1.04%			1.04%	e		1.03%	e		1.03%	e
Net investment income		1.91%			2.59%			2.67%			1.85%			2.03%
Supplemental data
Net assets, end of year (000’s)	$	95,405		$	91,642		$	88,380		$	108,766		$	115,364
Portfolio turnover rate		23.61%			12.53%			21.09%			19.16%			22.50%

^aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.

^bBased on average daily shares outstanding.

^cAmount rounds to less than $0.01 per share.

^dTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which the Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.

^eBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

TF-10

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Templeton Foreign Securities Fund

	Year Ended December 31,
Class 4	2013			2012			2011			2010			2009
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	14.48		$	12.66		$	14.43		$	13.59		$	10.91
Income from investment operationsa:
Net investment incomeb		0.28			0.33			0.36			0.17			0.21
Net realized and unrealized gains (losses)		2.97			1.89			(1.88	)		0.92			3.37
Total from investment operations		3.25			2.22			(1.52	)		1.09			3.58
Less distributions from:
Net investment income		(0.36	)		(0.40	)		(0.25	)		(0.25	)		(0.42	)
Net realized gains		—			—			—			—			(0.48	)
Total distributions		(0.36	)		(0.40	)		(0.25	)		(0.25	)		(0.90	)
Redemption feesc		—			—			—			—			—
Net asset value, end of year	$	17.37		$	14.48		$	12.66		$	14.43		$	13.59
Total returnd		22.86%			18.14%			(10.74)%			8.38%			36.84%
Ratios to average net assets
Expenses		1.13%			1.14%			1.14%	e		1.13%	e		1.13%	e
Net investment income		1.81%			2.49%			2.57%			1.75%			1.93%
Supplemental data
Net assets, end of year (000’s)	$	513,098		$	416,277		$	353,346		$	305,505		$	48,501
Portfolio turnover rate		23.61%			12.53%			21.09%			19.16%			22.50%

^aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.

^bBased on average daily shares outstanding.

^cAmount rounds to less than $0.01 per share.

^dTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which the Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.

^eBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

TF-11

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013

Templeton Foreign Securities Fund	Country	Shares		Value
Common Stocks 97.1%
Aerospace & Defense 1.1%
BAE Systems PLC	United Kingdom		4,201,030	$	30,243,321
Airlines 0.8%
a Deutsche Lufthansa AG	Germany		1,080,990		22,928,024
Auto Components 1.8%
Cie Generale des Etablissements Michelin, B	France		222,570		23,649,703
Hyundai Mobis	South Korea		100,634		27,977,057
					51,626,760
Automobiles 1.7%
Nissan Motor Co. Ltd.	Japan		1,341,500		11,261,975
Toyota Motor Corp., ADR	Japan		291,181		35,500,788
					46,762,763
Building Products 0.6%
Compagnie de Saint-Gobain	France		296,890		16,324,678
Capital Markets 2.8%
Credit Suisse Group AG	Switzerland		2,190,208		66,954,736
GAM Holding Ltd.	Switzerland		505,110		9,824,179
					76,778,915
Chemicals 1.6%
Akzo Nobel NV	Netherlands		594,220		46,049,475
Commercial Banks 14.2%
BNP Paribas SA	France		1,124,120		87,593,758
a Commerzbank AG	Germany		793,900		12,787,430
DBS Group Holdings Ltd.	Singapore		2,174,520		29,469,244
Hana Financial Group Inc.	South Korea		1,255,380		52,202,214
HSBC Holdings PLC	United Kingdom		4,015,600		43,577,184
KB Financial Group Inc., ADR	South Korea		1,189,645		48,192,519
a Lloyds Banking Group PLC	United Kingdom		19,072,470		24,875,644
Societe Generale	France		480,870		27,925,855
UniCredit SpA	Italy		6,991,743		51,740,224
United Overseas Bank Ltd.	Singapore		985,000		16,580,599
					394,944,671
Communications Equipment 0.4%
Ericsson, B, ADR	Sweden		997,972		12,215,177
Computers & Peripherals 0.5%
Compal Electronics Inc.	Taiwan		16,699,431		12,791,244
Construction & Engineering 0.7%
Carillion PLC	United Kingdom		3,750,730		20,520,595
Construction Materials 0.6%
CRH PLC	Ireland		659,820		16,608,757
Containers & Packaging 0.9%
Rexam PLC	United Kingdom		2,719,161		23,875,348
Diversified Financial Services 4.4%
a ING Groep NV, IDR	Netherlands		6,093,334		84,651,943
ING U.S. Inc.	United States		1,076,240		37,829,836
					122,481,779

TF-12

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Templeton Foreign Securities Fund	Country	Shares		Value
Common Stocks (continued)
Diversified Telecommunication Services 5.6%
China Telecom Corp. Ltd., H	China		47,482,357	$	24,003,410
Orange SA	France		1,396,683		17,290,236
Singapore Telecommunications Ltd.	Singapore		9,394,000		27,248,407
b Telefonica SA, ADR	Spain		2,270,951		37,107,339
Telenor ASA	Norway		1,103,354		26,305,418
Vivendi SA	France		928,427		24,461,917
					156,416,727
Electrical Equipment 0.9%
Alstom SA	France		438,720		15,976,586
Shanghai Electric Group Co. Ltd., H	China		23,792,000		8,590,997
					24,567,583
Electronic Equipment, Instruments & Components 1.8%
a Flextronics International Ltd.	Singapore		2,385,970		18,538,987
Kingboard Chemical Holdings Ltd.	Hong Kong		11,646,000		30,337,707
					48,876,694
Energy Equipment & Services 3.7%
Aker Solutions ASA	Norway		1,617,940		28,917,033
Ensign Energy Services Inc.	Canada		1,965,300		30,955,580
Fugro NV, IDR	Netherlands		253,200		15,085,600
Trican Well Service Ltd.	Canada		2,373,000		28,999,237
					103,957,450
Food & Staples Retailing 3.2%
Metro AG	Germany		437,967		21,205,310
Tesco PLC	United Kingdom		12,226,930		67,709,603
					88,914,913
Health Care Equipment & Supplies 1.1%
Getinge AB, B	Sweden		417,870		14,290,929
Nobel Biocare Holding AG	Switzerland		974,135		15,179,055
					29,469,984
Health Care Providers & Services 0.5%
Shanghai Pharmaceuticals Holding Co. Ltd., H	China		5,268,500		12,881,900
Industrial Conglomerates 2.6%
Hutchison Whampoa Ltd.	Hong Kong		2,500,239		34,016,418
Siemens AG	Germany		285,414		38,979,957
					72,996,375
Insurance 10.1%
ACE Ltd.	United States		307,649		31,850,901
Aegon NV	Netherlands		5,507,530		51,983,816
AIA Group Ltd.	Hong Kong		7,789,600		39,076,833
Aviva PLC	United Kingdom		9,258,670		68,937,783
AXA SA	France		2,056,508		57,168,564
Muenchener Rueckversicherungs-Gesellschaft AG	Germany		68,060		14,992,686
Swiss Re AG	Switzerland		174,680		16,066,918
					280,077,501

TF-13

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Templeton Foreign Securities Fund	Country	Shares		Value
Common Stocks (continued)
Leisure Equipment & Products 1.0%
Namco Bandai Holdings Inc.	Japan		977,800	$	21,673,174
Nikon Corp.	Japan		386,100		7,366,333
					29,039,507
Life Sciences Tools & Services 0.6%
Lonza Group AG	Switzerland		175,440		16,638,332
Metals & Mining 2.6%
HudBay Minerals Inc.	Canada		2,891,000		23,788,862
Mining and Metallurgical Co. Norilsk Nickel OJSC, ADR	Russia		317,022		5,264,151
POSCO	South Korea		136,907		42,340,700
					71,393,713
Multiline Retail 1.0%
Marks & Spencer Group PLC	United Kingdom		4,066,900		29,146,395
Oil, Gas & Consumable Fuels 11.4%
BP PLC	United Kingdom		5,946,135		48,064,250
China Shenhua Energy Co. Ltd., H	China		8,462,000		26,626,706
Eni SpA	Italy		1,159,640		27,898,032
LUKOIL Holdings, ADR	Russia		109,772		6,855,261
Royal Dutch Shell PLC, A	United Kingdom		16,803		601,696
Royal Dutch Shell PLC, B	United Kingdom		1,094,263		41,308,844
Statoil ASA	Norway		1,816,110		44,017,109
Suncor Energy Inc.	Canada		901,700		31,614,469
Talisman Energy Inc.	Canada		2,554,600		29,703,253
Total SA, B	France		979,926		60,021,459
					316,711,079
Pharmaceuticals 8.4%
GlaxoSmithKline PLC	United Kingdom		2,772,585		73,997,433
Novartis AG	Switzerland		328,730		26,237,964
Roche Holding AG	Switzerland		179,480		50,138,912
Sanofi	France		670,755		71,152,721
Teva Pharmaceutical Industries Ltd., ADR	Israel		333,815		13,379,305
					234,906,335
Real Estate Management & Development 0.0%†
Cheung Kong (Holdings) Ltd.	Hong Kong		922		14,565
Semiconductors & Semiconductor Equipment 3.1%
Infineon Technologies AG	Germany		1,103,225		11,775,691
Samsung Electronics Co. Ltd.	South Korea		46,744		60,747,607
Taiwan Semiconductor Manufacturing Co. Ltd.	Taiwan		4,151,526		14,681,997
					87,205,295
Software 1.7%
Capcom Co. Ltd.	Japan		1,211,400		21,708,564
Trend Micro Inc.	Japan		713,300		24,928,243
					46,636,807
Specialty Retail 1.2%
Kingfisher PLC	United Kingdom		5,160,616		32,865,855
Trading Companies & Distributors 1.7%
ITOCHU Corp.	Japan		3,753,600		46,305,094

TF-14

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Templeton Foreign Securities Fund	Country	Shares		Value
Common Stocks (continued)
Wireless Telecommunication Services 2.8%
China Mobile Ltd.	China		2,340,000	$	24,216,730
Vodafone Group PLC, ADR	United Kingdom		1,340,319		52,687,940
					76,904,670
Total Common Stocks (Cost $2,052,849,016)					2,700,078,281
Preferred Stocks 0.6%
Metals & Mining 0.3%
Vale SA, ADR, pfd., A	Brazil		664,832		9,314,297
Oil, Gas & Consumable Fuels 0.3%
Petroleo Brasileiro SA, ADR, pfd.	Brazil		517,880		7,607,657
Total Preferred Stocks (Cost $12,298,385)					16,921,954
Total Investments before Short Term Investments (Cost $2,065,147,401)					2,717,000,235
Short Term Investments 2.7%
Money Market Funds (Cost $69,592,541) 2.5%
a,c Institutional Fiduciary Trust Money Market Portfolio	United States		69,592,541		69,592,541
dInvestments from Cash Collateral Received for Loaned Securities (Cost $6,432,000) 0.2%
Money Market Funds 0.2%
e BNY Mellon Overnight Government Fund, 0.017%	United States		6,432,000		6,432,000
Total Investments (Cost $2,141,171,942) 100.4%					2,793,024,776
Other Assets, less Liabilities (0.4)%					(12,466,730	)
Net Assets 100.0%				$	2,780,558,046

See Abbreviations on page TF-27.

†Rounds to less than 0.1% of net assets.

^aNon-income producing.

^bA portion or all of the security is on loan at December 31, 2013. See Note 1(c).

^cSee Note 7 regarding investments in the Institutional Fiduciary Trust Money Market Portfolio.

^dSee Note 1(c) regarding securities on loan.

^eThe rate shown is the annualized seven-day yield at period end.

The accompanying notes are an integral part of these financial statements.

TF-15

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

December 31, 2013

	Templeton Foreign Securities Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	2,071,579,401
Cost - Sweep Money Fund (Note 7)		69,592,541
Total cost of investments	$	2,141,171,942
Value - Unaffiliated issuers	$	2,723,432,235
Value - Sweep Money Fund (Note 7)		69,592,541
Total value of investments (includes securities loaned in the amount $6,274,560)		2,793,024,776
Receivables:
Investment securities sold		515,083
Capital shares sold		982,086
Dividends		4,477,585
Other assets		60
Total assets		2,798,999,590
Liabilities:
Payables:
Investment securities purchased		495,501
Capital shares redeemed		7,960,888
Management fees		1,477,136
Administrative fees		222,190
Distribution fees		1,104,444
Payable upon return of securities loaned		6,432,000
Accrued expenses and other liabilities		749,385
Total liabilities		18,441,544
Net assets, at value	$	2,780,558,046
Net assets consist of:
Paid-in capital	$	2,147,551,858
Undistributed net investment income		49,005,172
Net unrealized appreciation (depreciation)		651,936,806
Accumulated net realized gain (loss)		(67,935,790	)
Net assets, at value	$	2,780,558,046

The accompanying notes are an integral part of these financial statements.

TF-16

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Assets and Liabilities (continued)

December 31, 2013

	Templeton Foreign Securities Fund
Class 1:
Net assets, at value	$	298,468,465
Shares outstanding		16,995,615
Net asset value and maximum offering price per share	$	17.56
Class 2:
Net assets, at value	$	1,873,586,040
Shares outstanding		108,656,664
Net asset value and maximum offering price per share	$	17.24
Class 3:
Net assets, at value	$	95,405,319
Shares outstanding		5,553,970
Net asset value and maximum offering price per sharea	$	17.18
Class 4:
Net assets, at value	$	513,098,222
Shares outstanding		29,544,388
Net asset value and maximum offering price per share	$	17.37

^aRedemption price is equal to net asset value less redemption fees retained by the Fund.

The accompanying notes are an integral part of these financial statements.

TF-17

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the year ended December 31, 2013

	Templeton Foreign Securities Fund
Investment income:
Dividends (net of foreign taxes of $6,946,517)	$	75,267,252
Income from securities loaned		1,510,201
Total investment income		76,777,453
Expenses:
Management fees (Note 3a)		16,712,881
Administrative fees (Note 3b)		2,535,512
Distribution fees: (Note 3c)
Class 2		4,453,331
Class 3		230,038
Class 4		1,623,277
Unaffiliated transfer agent fees		1,774
Custodian fees (Note 4)		377,540
Reports to shareholders		436,387
Registration and filing fees		1,094
Professional fees		138,372
Trustees’ fees and expenses		10,256
Other		56,693
Total expenses		26,577,155
Net investment income		50,200,298
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		40,989,015
Foreign currency transactions		(465,033	)
Net realized gain (loss)		40,523,982
Net change in unrealized appreciation (depreciation) on:
Investments		454,907,975
Translation of other assets and liabilities denominated in foreign currencies		77,388
Net change in unrealized appreciation (depreciation)		454,985,363
Net realized and unrealized gain (loss)		495,509,345
Net increase (decrease) in net assets resulting from operations	$	545,709,643

The accompanying notes are an integral part of these financial statements.

TF-18

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets

	Templeton Foreign Securities Fund
	Year Ended December 31,
	2013			2012
Increase (decrease) in net assets:
Operations:
Net investment income	$	50,200,298		$	63,456,029
Net realized gain (loss) from investments and foreign currency transactions		40,523,982			19,998,467
Net change in unrealized appreciation (depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies		454,985,363			333,368,769
Net increase (decrease) in net assets resulting from operations		545,709,643			416,823,265
Distributions to shareholders from:
Net investment income:
Class 1		(7,042,374	)		(8,240,958	)
Class 2		(42,339,120	)		(51,055,731	)
Class 3		(2,189,476	)		(2,656,996	)
Class 4		(10,745,373	)		(11,448,483	)
Total distributions to shareholders		(62,316,343	)		(73,402,168	)
Capital share transactions: (Note 2)
Class 1		(18,682,478	)		(24,104,168	)
Class 2		(199,579,456	)		(174,931,568	)
Class 3		(13,135,502	)		(9,153,115	)
Class 4		10,467,967			7,407,804
Total capital share transactions		(220,929,469	)		(200,781,047	)
Redemption fees		19,703			4,388
Net increase (decrease) in net assets		262,483,534			142,644,438
Net assets:
Beginning of year		2,518,074,512			2,375,430,074
End of year	$	2,780,558,046		$	2,518,074,512
Undistributed net investment income included in net assets:
End of year	$	49,005,172		$	61,586,250

The accompanying notes are an integral part of these financial statements.

TF-19

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements

Templeton Foreign Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment company, consisting of twenty separate funds. The Templeton Foreign Securities Fund (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. The Fund offers four classes of shares: Class 1, Class 2, Class 3, and Class 4. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

The Fund’s investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Fund calculates the net asset value (NAV) per share at the close of the New York Stock Exchange (NYSE), generally at 4p.m. Eastern time (NYSE close) on each day the NYSE is open for trading. Under procedures approved by the Trust’s Board of Trustees (the Board), the Fund’s administrator, investment manager and other affiliates have formed the Valuation and Liquidity Oversight Committee (VLOC). The VLOC provides administration and oversight of the Fund’s valuation policies and procedures, which are approved annually by the Board. Among other things, these procedures allow the Fund to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

Equity securities listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded or as of the NYSE close, whichever is earlier. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at the NYSE close on the day that the value of the security is determined. Over-the-counter (OTC) securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities. Investments in open-end mutual funds and non-registered money market funds are valued at the closing net asset value.

The Fund has procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the VLOC convenes on a regular basis to review such financial instruments and considers a number of factors, including significant unobservable valuation inputs, when arriving at fair value. The VLOC primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. The VLOC employs various methods for calibrating these valuation approaches including a regular review of key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.

Trading in securities on foreign securities stock exchanges and OTC markets may be completed before the daily NYSE close. In addition, trading in certain foreign markets may not take place on every NYSE business day. Occasionally, events occur between the time at which trading in a foreign security is completed and the close of the NYSE that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund’s portfolio securities as determined at the foreign market close and the latest indications of value at the close of the NYSE. In order to minimize the potential for these differences, the VLOC monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depositary Receipts, futures contracts

TF-20

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Templeton Foreign Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

a. Financial Instrument Valuation (continued)

and exchange traded funds). These price movements are measured against established trigger thresholds for each specific market proxy to assist in determining if an event has occurred that may call into question the reliability of the values of the foreign securities held by the Fund. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services.

Also, when the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the NYSE is closed, which could result in differences between the value of the Fund’s portfolio securities on the last business day and the last calendar day of the reporting period. Any significant security valuation changes due to an open foreign market are adjusted and reflected by the Fund for financial reporting purposes.

b. Foreign Currency Translation

Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Fund may enter into foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. Portfolio securities and assets and liabilities denominated in foreign currencies contain risks that those currencies will decline in value relative to the U.S. dollar. Occasionally, events may impact the availability or reliability of foreign exchange rates used to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Board.

The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments on the Statement of Operations.

Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period.

c. Securities Lending

The Fund participates in an agency based securities lending program. The Fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the market value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the market value of loaned securities, as determined at the close of fund business each day; any additional collateral required due to changes in security values is delivered to the Fund on the next business day. The collateral is invested in a non-registered money fund. The Fund receives income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. The Fund bears the market risk with respect to the collateral investment, securities loaned, and the risk that the agent may default on its obligations to the Fund. The securities lending agent has agreed to indemnify the Fund in the event of default by a third party borrower.

d. Income and Deferred Taxes

It is the Fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and if applicable, excise taxes. As a result, no provision for U.S. federal income taxes is required.

TF-21

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Templeton Foreign Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

d. Income and Deferred Taxes (continued)

The Fund may be subject to foreign taxation related to income received, capital gains on the sale of securities and certain foreign currency transactions in the foreign jurisdictions in which it invests. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests. When a capital gain tax is determined to apply the Fund records an estimated deferred tax liability in an amount that would be payable if the securities were disposed of on the valuation date.

The Fund recognizes the tax benefits of uncertain tax positions only when the position is “more likely than not” to be sustained upon examination by the tax authorities based on the technical merits of the tax position. As of December 31, 2013, and for all open tax years, the Fund has determined that no liability for unrecognized tax benefits is required in the Fund’s financial statements related to uncertain tax positions taken on a tax return (or expected to be taken on future tax returns). Open tax years are those that remain subject to examination and are based on each tax jurisdiction statute of limitation.

e. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Estimated expenses are accrued daily. Dividend income is recorded on the ex-dividend date except that certain dividends from foreign securities are recognized as soon as the Fund is notified of the ex-dividend date. Distributions to shareholders are recorded on the ex-dividend date and are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with accounting principles generally accepted in the United States of America. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.

Common expenses incurred by the Trust are allocated among the funds based on the ratio of net assets of each fund to the combined net assets of the Trust. Fund specific expenses are charged directly to the fund that incurred the expense.

Realized and unrealized gains and losses and net investment income, not including class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions, by class, are generally due to differences in class specific expenses.

f. Accounting Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

g. Redemption Fees

Redemptions and exchanges of interests in an insurance company subaccount that invests in Class 3 shares of the Fund will be subject to a 1.0% short term trading fee if the interest in the subaccount has been held for less than 60 days. Such fees are retained by the Fund and accounted for as an addition to paid-in capital, allocated to each class of shares based upon the relative proportion of net assets of each class.

TF-22

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Templeton Foreign Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

h. Guarantees and Indemnifications

Under the Trust’s organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust, on behalf of the Fund, enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.

2. SHARES OF BENEFICIAL INTEREST

At December 31, 2013, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:

	Year Ended December 31,
	2013						2012
Class 1 Shares:	Shares			Amount			Shares			Amount
Shares sold		496,052		$	7,884,222			437,702		$	5,851,468
Shares issued in reinvestment of distributions		468,554			7,042,374			676,598			8,240,958
Shares redeemed		(2,142,399	)		(33,609,074	)		(2,835,243	)		(38,196,594	)
Net increase (decrease)		(1,177,793	)	$	(18,682,478	)		(1,720,943	)	$	(24,104,168	)
Class 2 Shares:
Shares sold		9,932,214		$	152,564,880			12,784,843		$	164,850,484
Shares issued in reinvestment of distributions		2,864,622			42,339,120			4,261,747			51,055,731
Shares redeemed		(25,480,434	)		(394,483,456	)		(29,457,075	)		(390,837,783	)
Net increase (decrease)		(12,683,598	)	$	(199,579,456	)		(12,410,485	)	$	(174,931,568	)
Class 3 Shares:
Shares sold		558,566		$	8,455,794			414,387		$	5,363,853
Shares issued in reinvestment of distributions		148,742			2,189,476			222,529			2,656,996
Shares redeemed		(1,552,340	)		(23,780,772	)		(1,302,161	)		(17,173,964	)
Net increase (decrease)		(845,032	)	$	(13,135,502	)		(665,245	)	$	(9,153,115	)
Class 4 Shares:
Shares sold		5,690,758		$	88,119,947			6,234,278		$	81,740,548
Shares issued on reinvestment of distributions		721,650			10,745,373			947,722			11,448,483
Shares redeemed		(5,613,738	)		(88,397,353	)		(6,356,073	)		(85,781,227	)
Net increase (decrease)		798,670		$	10,467,967			825,927		$	7,407,804

3. TRANSACTIONS WITH AFFILIATES

Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton Investments. Certain officers and trustees of the Fund are also officers and/or directors of the following subsidiaries:

Subsidiary	Affiliation
Templeton Investment Counsel, LLC (TIC)	Investment manager
Franklin Templeton Services, LLC (FT Services)	Administrative manager
Franklin Templeton Distributors, Inc. (Distributors)	Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services)	Transfer agent

TF-23

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Templeton Foreign Securities Fund

3. TRANSACTIONS WITH AFFILIATES (continued)

a. Management Fees

The Fund pays an investment management fee to TIC based on the average daily net assets of the Fund as follows:

Annualized Fee Rate	Net Assets
0.750%	Up to and including $200 million
0.675%	Over $200 million, up to and including $1.3 billion
0.600%	Over $1.3 billion, up to and including $10 billion
0.580%	Over $10 billion, up to and including $15 billion
0.560%	Over $15 billion, up to and including $20 billion
0.540%	In excess of $20 billion

b. Administrative Fees

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
0.150%	Up to and including $200 million
0.135%	Over $200 million, up to and including $700 million
0.100%	Over $700 million, up to and including $1.2 billion
0.075%	In excess of $1.2 billion

c. Distribution Fees

The Board has adopted distribution plans for Class 2, Class 3, and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to 0.25%, 0.35%, and 0.35% per year of its average daily net assets of Class 2, Class 3, and Class 4, respectively. Some distribution fees are not charged on shares held by affiliates. The Board has agreed to limit the current rate to 0.25% per year for Class 3. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.

d. Transfer Agent Fees

Investor Services, under terms of an agreement, performs shareholder servicing for the Fund and is not paid by the Fund for the services.

4. EXPENSE OFFSET ARRANGEMENT

The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses. During the year ended December 31, 2013, there were no credits earned.

5. INCOME TAXES

For tax purposes, capital losses may be carried over to offset future capital gains. Capital loss carryforwards with no expiration, if any, must be fully utilized before those losses with expiration dates.

TF-24

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Templeton Foreign Securities Fund

5. INCOME TAXES (continued)

At December 31, 2013, the Fund had capital loss carryforwards of $59,815,020 expiring in 2017. During the year ended December 31, 2013, the Fund utilized $40,989,015 of capital loss carryforwards.

The tax character of distributions paid during the years ended December 31, 2013 and 2012, was as follows:

	2013		2012
Distributions paid from ordinary income	$	62,316,343	$	73,402,168

At December 31, 2013, the cost of investments, net unrealized appreciation (depreciation), and undistributed ordinary income for income tax purposes were as follows:

Cost of investments	$	2,149,983,787
Unrealized appreciation	$	707,876,713
Unrealized depreciation		(64,835,724	)
Net unrealized appreciation (depreciation)	$	643,040,989
Distributable earnings – undistributed ordinary income	$	49,729,731

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of foreign currency transactions and wash sales.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the year ended December 31, 2013, aggregated $592,406,211 and $841,981,365, respectively.

7. INVESTMENTS IN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO

The Fund invests in the Institutional Fiduciary Trust Money Market Portfolio (Sweep Money Fund), an open-end investment company managed by Franklin Advisers, Inc. (an affiliate of the investment manager). Management fees paid by the Fund are reduced on assets invested in the Sweep Money Fund, in an amount not to exceed the management and administrative fees paid by the Sweep Money Fund.

8. CONCENTRATION OF RISK

Investing in foreign securities may include certain risks and considerations not typically associated with investing in U.S. securities, such as fluctuating currency values and changing local and regional economic, political and social conditions, which may result in greater market volatility. In addition, certain foreign securities may not be as liquid as U.S. securities.

9. CREDIT FACILITY

The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $1.5 billion (Global Credit Facility) which, after an extension of the original terms, matured on February 14, 2014. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. Effective February 14, 2014, the Borrowers renewed the Global Credit Facility which matures on February 13, 2015.

TF-25

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Templeton Foreign Securities Fund

9. CREDIT FACILITY (continued)

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.07% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses on the Statement of Operations. During the year ended December 31, 2013, the Fund did not use the Global Credit Facility.

10. FAIR VALUE MEASUREMENTS

The Fund follows a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Fund’s own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund’s financial instruments and are summarized in the following fair value hierarchy:

• Level 1 – quoted prices in active markets for identical financial instruments

• Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)

• Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of financial instruments)

The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.

For movements between the levels within the fair value hierarchy, the Fund has adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.

A summary of inputs used as of December 31, 2013, in valuing the Fund’s assets carried at fair value, is as follows:

	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities:
Equity Investmentsa,b	$	2,717,000,235	$	—	$	—	$	2,717,000,235
Short Term Investments		69,592,541		6,432,000		—		76,024,541
Total Investments in Securities	$	2,786,592,776	$	6,432,000	$	—	$	2,793,024,776

^aIncludes common and preferred stocks.

^bFor detailed categories, see the accompanying Statement of Investments.

11. NEW ACCOUNTING PRONOUNCEMENTS

In June 2013, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2013-08, Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements. The ASU modifies the criteria used in defining an investment company under U.S. Generally Accepted Accounting Principles and also sets forth certain measurement and disclosure requirements. Under the ASU, an entity that is registered under the 1940 Act automatically qualifies as an investment company. The ASU is effective for interim and annual reporting periods beginning after December 15, 2013. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the financial statements.

TF-26

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Templeton Foreign Securities Fund

12. SUBSEQUENT EVENTS

The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure other than those already disclosed in the financial statements.

ABBREVIATIONS

Selected Portfolio

ADR - American Depositary Receipt

IDR - International Depositary Receipt

TF-27

Franklin Templeton Variable Insurance Products Trust

Templeton Foreign Securities Fund

Report of Independent Registered Public Accounting Firm

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 Templeton Foreign Securities Fund (the “Fund”) at December 31, 2013, 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 five years in the period then ended, 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2013 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

February 14, 2014

TF-28

Franklin Templeton Variable Insurance Products Trust

Tax Information (unaudited)

Templeton Foreign Securities Fund

At December 31, 2013, more than 50% of the Fund’s total assets were invested in securities of foreign issuers. In most instances, foreign taxes were withheld from income paid to the Fund on these investments. The Fund elects to treat foreign taxes paid as allowed under Section 853 of the Internal Revenue Code (Code). This election will allow shareholders of record as of the 2014 distribution date, 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.

TF-29

TEMPLETON GLOBAL BOND SECURITIES FUND

We are pleased to bring you Templeton Global Bond Securities Fund’s annual report for the fiscal year ended December 31, 2013.

Performance Summary as of 12/31/13

Average annual total return of Class 4 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.

Periods ended 12/31/13

	1-Year		5-Year		10-Year
Average Annual Total Return		+1.54%		+9.40%		+8.87%

*For the period beginning 2/29/08, Class 4 performance reflects a 12b-1 fee expense of 0.35% per year, which affects future performance. Class 4 performance prior to 2/29/08 reflects historical Class 1 performance, which does not have a 12b-1 fee expense. Since 2/29/08 (effective date), the average annual total return of Class 4 shares was +8.04%.

Total Return Index Comparison for a Hypothetical $10,000 Investment (1/1/04–12/31/13)

The graph below shows the change in value of a hypothetical $10,000 investment in the Fund over the indicated period and includes reinvestment of any income or distributions. The Fund’s performance* is compared to the performance of the J.P. Morgan (JPM) Global Government Bond Index (GGBI), the Citigroup World Government Bond Index (WGBI) and the Consumer Price Index (CPI). One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Important Notes to Performance Information preceding the Fund Summaries.

**Source: © 2014 Morningstar. Please see Index Descriptions following the Fund Summaries.

Templeton Global Bond Securities Fund – Class 4

Performance reflects the Fund’s Class 4 operating expenses, but does not include any contract fees, expenses or sales charges. If they had been included, performance would be lower. These charges and deductions, particularly for variable life policies, can have a significant effect on contract values and insurance benefits. See the contract prospectus for a complete description of these expenses, including sales charges.

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares.

Current performance may differ from figures shown.

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Fund Goal and Main Investments: Templeton Global Bond Securities Fund seeks high current income, consistent with preservation of capital, with capital appreciation as a secondary consideration. Under normal market conditions, the Fund invests at least 80% of its net assets in bonds, which include debt securities of any maturity, such as bonds, notes, bills and debentures.

Performance Overview

You can find the Fund’s one-year total return in the Performance Summary. For comparison, the Fund’s benchmarks, the JPM GGBI and the Citigroup WGBI, had -4.50% and -4.00% total returns for the same period.¹

Economic and Market Overview

The global economic recovery was mixed during the year under review. The recovery in emerging markets moderated after many economies had previously returned to and exceeded pre-crisis activity levels. Although some developed economies, such as those of Australia and some Scandinavian countries, have enjoyed relatively strong recoveries in the aftermath of the global financial crisis, growth in the eurozone and Japan continued to be slow by the standards of previous recoveries. Improving sentiment, relatively strong fundamentals and continued provision of global liquidity supported assets perceived as risky and equity markets performed well.

Fears of possible reductions in stimulative government policies contributed to periods of risk aversion, when credit spreads widened and assets perceived as risky sold off, alternating with periods of heightened risk appetite, when spreads narrowed and investors again favored risk assets. Against this backdrop, extensive liquidity creation continued, in particular from the Bank of Japan’s commitment to raise its inflation target, as well as from the European Central Bank’s interest rate cuts.

During the period, the U.S. Federal Reserve Board (Fed) announced it might reduce the size of its quantitative easing program at subsequent meetings. The announcement led risk assets, particularly those in emerging markets, to sell off as market participants’ expectations of global liquidity conditions began to change. The Fed later confirmed it would begin tapering its asset purchases from $85 billion per month to $75 billion per month beginning in January 2014.

1. Source: © 2014 Morningstar. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

Fund Risks: All investments involve risks, including possible loss of principal. Currency rates may fluctuate significantly over short periods of time, and can reduce returns. Derivatives, including currency management strategies, involve costs and can create economic leverage in the portfolio that may result in significant volatility and cause the Fund to participate in losses (as well as enable gains) on an amount that exceeds the Fund’s initial investment. The Fund may not achieve the anticipated benefits and may realize losses when a counterparty fails to perform as promised. Foreign securities involve special risks, including currency fluctuations and economic and political uncertainties. Investments in emerging markets involve heightened risks related to the same factors, in addition to those associated with these markets’ smaller size and lesser liquidity. Investments in lower rated bonds include higher risk of default and loss of principal. Changes in interest rates will affect the value of the Fund’s portfolio and its share price and yield. Bond prices generally move in the opposite direction of interest rates. As prices of bonds in the Fund adjust to a rise in interest rates, the Fund’s share price may decline. The Fund is also nondiversified, which involves the risk of greater price fluctuation than a more diversified portfolio. Changes in the financial strength of a bond issuer or in a bond’s credit rating may affect its value. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

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Global financial market volatility increased toward the end of the period as the U.S. federal government partially shut down and the U.S. Treasury approached its debt ceiling. As the government shutdown ended and the debt ceiling was raised, market volatility quickly subsided.

Investment Strategy

We invest selectively in bonds around the world based upon our assessment of changing market, political and economic conditions. While seeking opportunities, we monitor various factors including changes in interest rates, currency exchange rates and credit risks. We seek to manage the Fund’s exposure to various currencies and may utilize currency forward contracts.

Manager’s Discussion

The Fund’s total return was influenced by various factors, including interest rate developments, currency movements and exposure to sovereign debt markets. During the year under review, each of these sources of return benefited absolute and relative performance.

Interest Rate Strategy

As part of the Fund’s interest rate strategy we use interest rate swaps to manage duration. We maintained a defensive posture with respect to interest rate risk in developed and emerging markets. At period-end, the Fund had a shorter duration position than the JPM GGBI given our assessment that there was limited scope for further global interest rate reductions from historically low levels and improving economic conditions. However, we maintained some duration exposure in countries where we believed long-term bond yields could benefit from declining risk premiums, and select duration exposures in Europe and Latin America contributed to performance relative to the JPM GGBI.

Currency Strategy

As part of the Fund’s investment strategy, we used currency forward contracts seeking to hedge or gain exposure to various currencies. Overall, our diversified currency exposure contributed to absolute performance and performance relative to the JPM GGBI. As the Japanese yen depreciated against the U.S. dollar during the year, the Fund’s net negative position in the currency, achieved via the use of currency forward contracts, contributed meaningfully in terms of absolute and relative performance. Our net negative position in the yen reflected our pessimistic view on the relative prospects for the Japanese economy and

What is duration?

Duration is a measure of a bond’s price sensitivity to interest rate changes. In general, a portfolio of securities with a lower duration can be expected to be less sensitive to interest rate changes than a portfolio with a higher duration.

What is an interest rate swap?

An interest rate swap is an agreement between two parties to exchange interest rate obligations, generally one based on an interest rate fixed to maturity while the other is based on an interest rate that changes in accordance with changes in a designated benchmark (for example, LIBOR, prime, commercial paper or other benchmarks).

What is a currency forward contract?

A currency forward contract is an agreement between the Fund and a counterparty to buy or sell a foreign currency at a specific exchange rate on a future date.

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was meant as an implicit hedge against potentially rising yields in the U.S., given the yen’s historically strong correlation to long-term U.S. Treasury yields. However, as the euro appreciated against the U.S. dollar during the year, our net negative position in the monetary union’s currency detracted from performance.

Global Sovereign Debt Strategy

The Fund purchased investment-grade and subinvestment-grade hard currency-denominated sovereign debt that has historically typically compensated for greater credit risk by offering higher yields relative to U.S. Treasury and European benchmark bonds. Overall, the Fund’s sovereign credit exposures contributed to performance. These exposures were concentrated in non-eurozone Europe.

Thank you for your participation in Templeton Global Bond Securities Fund. We look forward to serving your future investment needs.

The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2013, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

Currency Breakdown

Templeton Global Bond Securities Fund

12/31/13

	% of Total Net Assets
Americas		82.1%
U.S. Dollar		58.2%
Mexican Peso		11.7%
Brazilian Real		4.4%
Canadian Dollar		4.0%
Chilean Peso		3.7%
Peruvian Nuevo Sol		0.1%
Asia Pacific		24.6%
South Korean Won		16.4%
Malaysian Ringgit		12.7%
Singapore Dollar		8.5%
Indonesian Rupiah		2.4%
Indian Rupee		2.3%
Philippine Peso		1.4%
Sri Lankan Rupee		1.2%
Japanese Yen*		-20.3%
Europe*		-6.7%
Polish Zloty		10.6%
Swedish Krona		8.1%
Hungarian Forint		2.3%
Euro*		-27.7%

*A negative figure reflects net “short” exposure, designed to benefit if the value of the associated currency decreases. Conversely, the Fund’s value would potentially decline if the value of the associated currency increases.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments.

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Fund Expenses

As an investor in a variable insurance contract (Contract) that indirectly provides for investment in an underlying mutual fund, you can incur transaction and/or ongoing expenses at both the Fund level and the Contract level.

• Transaction expenses can include sales charges (loads) on purchases, redemption fees, surrender fees, transfer fees and premium taxes.

• Ongoing expenses can include management fees, distribution and service (12b-1) fees, contract fees, annual maintenance fees, mortality and expense risk fees and other fees and expenses. All mutual funds and Contracts have some types of ongoing expenses.

The expenses shown in the table are meant to highlight ongoing expenses at the Fund level only and do not include ongoing expenses at the Contract level, or transaction expenses at either the Fund or Contract level. While the Fund does not have transaction expenses, if the transaction and ongoing expenses at the Contract level were included, the expenses shown below would be higher. You should consult your Contract prospectus or disclosure document for more information.

The table shows Fund-level ongoing expenses and can help you understand these expenses and compare them with those of other mutual funds offered through the Contract. The table assumes a $1,000 investment held for the six months indicated. Please refer to the Fund prospectus for additional information on operating expenses.

Actual Fund Expenses

The first line (Actual) of the table provides actual account values and expenses. The “Ending Account Value” is derived from the Fund’s actual return, which includes the effect of ongoing Fund expenses, but does not include the effect of ongoing Contract expenses.

You can estimate the Fund-level expenses you incurred during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:

1. Divide your account value by $1,000.

If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6.

2. Multiply the result by the number under the heading “Fund-Level Expenses Incurred During Period.”

If Fund-Level Expenses Incurred During Period were $7.50, then 8.6 x $7.50 = $64.50.

In this illustration, the estimated expenses incurred this period at the Fund level are $64.50.

Templeton Global Bond Securities Fund – Class 4

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Hypothetical Example for Comparison with Other Mutual Funds

Information in the second line (Hypothetical) of the table can help you compare ongoing expenses of the Fund with those of other mutual funds offered through the Contract. This information may not be used to estimate the actual ending account balance or expenses you incurred during the period. The hypothetical “Ending Account Value” is based on the Fund’s actual expense ratio for each class and an assumed 5% annual rate of return before expenses, which does not represent the Fund’s actual return. The figure under the heading “Fund-Level Expenses Incurred During Period” shows the hypothetical expenses your account would have incurred under this scenario. You can compare this figure with the 5% hypothetical examples that appear in shareholder reports of other funds offered through a Contract.

Class 4	Beginning Account Value 7/1/13		Ending Account Value 12/31/13		Fund-Level Expenses Incurred During Period* 7/1/13–12/31/13
Actual	$	1,000	$	1,033.20	$	4.30
Hypothetical (5% return before expenses)	$	1,000	$	1,020.97	$	4.28

*Expenses are calculated using the most recent six-month annualized expense ratio for the Fund’s Class 4 shares (0.84%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period.

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Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Templeton Global Bond Securities Fund

	Year Ended December 31,
Class 1	2013			2012			2011			2010			2009
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	20.01		$	18.61		$	19.94		$	17.72		$	17.42
Income from investment operationsa:
Net investment incomeb		0.64			0.72			0.87			1.00			0.99
Net realized and unrealized gains (losses)		(0.30	)		1.99			(0.92	)		1.58			2.01
Total from investment operations		0.34			2.71			(0.05	)		2.58			3.00
Less distributions from:
Net investment income and net foreign currency gains		(0.96	)		(1.28	)		(1.15	)		(0.31	)		(2.70	)
Net realized gains		(0.24	)		(0.03	)		(0.13	)		(0.05	)		—
Total distributions		(1.20	)		(1.31	)		(1.28	)		(0.36	)		(2.70	)
Redemption feesc		—			—			—			—			—
Net asset value, end of year	$	19.15		$	20.01		$	18.61		$	19.94		$	17.72
Total returnd		1.89%			15.31%			(0.61)%			14.71%			18.98%
Ratios to average net assets
Expensese		0.51%			0.55%			0.56%			0.55%			0.54%
Net investment income		3.26%			3.71%			4.40%			5.27%			5.73%
Supplemental data
Net assets, end of year (000’s)	$	280,963		$	307,142		$	269,819		$	272,232		$	195,662
Portfolio turnover rate		34.39%			43.26%			34.18%			8.77%			20.84%

^aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.

^bBased on average daily shares outstanding.

^cAmount rounds to less than $0.01 per share.

^dTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which the Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.

^eBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

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Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Templeton Global Bond Securities Fund

	Year Ended December 31,
Class 2	2013			2012			2011			2010			2009
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	19.47		$	18.15		$	19.49		$	17.34		$	17.10
Income from investment operationsa:
Net investment incomeb		0.57			0.65			0.79			0.93			0.93
Net realized and unrealized gains (losses)		(0.27	)		1.94			(0.89	)		1.54			1.98
Total from investment operations		0.30			2.59			(0.10	)		2.47			2.91
Less distributions from:
Net investment income and net foreign currency gains		(0.93	)		(1.24	)		(1.11	)		(0.27	)		(2.67	)
Net realized gains		(0.24	)		(0.03	)		(0.13	)		(0.05	)		—
Total distributions		(1.17	)		(1.27	)		(1.24	)		(0.32	)		(2.67	)
Redemption feesc		—			—			—			—			—
Net asset value, end of year	$	18.60		$	19.47		$	18.15		$	19.49		$	17.34
Total returnd		1.63%			15.07%			(0.87)%			14.45%			18.68%
Ratios to average net assets
Expensese		0.76%			0.80%			0.81%			0.80%			0.79%
Net investment income		3.01%			3.46%			4.15%			5.02%			5.48%
Supplemental data
Net assets, end of year (000’s)	$	2,826,039		$	2,418,229		$	1,812,814		$	1,490,794		$	1,262,783
Portfolio turnover rate		34.39%			43.26%			34.18%			8.77%			20.84%

^aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.

^bBased on average daily shares outstanding.

^cAmount rounds to less than $0.01 per share.

^dTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which the Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.

^eBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

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Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Templeton Global Bond Securities Fund

	Year Ended December 31,
Class 3	2013			2012			2011			2010			2009
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	19.48		$	18.15		$	19.48		$	17.33		$	17.08
Income from investment operationsa:
Net investment incomeb		0.57			0.65			0.80			0.93			0.93
Net realized and unrealized gains (losses)		(0.27	)		1.94			(0.90	)		1.54			1.98
Total from investment operations		0.30			2.59			(0.10	)		2.47			2.91
Less distributions from:
Net investment income and net foreign currency gains		(0.92	)		(1.23	)		(1.10	)		(0.27	)		(2.66	)
Net realized gains		(0.24	)		(0.03	)		(0.13	)		(0.05	)		—
Total distributions		(1.16	)		(1.26	)		(1.23	)		(0.32	)		(2.66	)
Redemption feesc		—			—			—			—			—
Net asset value, end of year	$	18.62		$	19.48		$	18.15		$	19.48		$	17.33
Total returnd		1.64%			15.06%			(0.83)%			14.38%			18.69%
Ratios to average net assets
Expensese		0.76%			0.80%			0.81%			0.80%			0.79%
Net investment income		3.01%			3.46%			4.15%			5.02%			5.48%
Supplemental data
Net assets, end of year (000’s)	$	194,122		$	198,077		$	185,811		$	183,380		$	143,264
Portfolio turnover rate		34.39%			43.26%			34.18%			8.77%			20.84%

^aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.

^bBased on average daily shares outstanding.

^cAmount rounds to less than $0.01 per share.

^dTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which the Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.

^eBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

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Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Templeton Global Bond Securities Fund

	Year Ended December 31,
Class 4	2013			2012			2011			2010			2009
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	19.82		$	18.44		$	19.78		$	17.61		$	17.37
Income from investment operationsa:
Net investment incomeb		0.56			0.64			0.79			0.93			0.93
Net realized and unrealized gains (losses)		(0.28	)		1.98			(0.91	)		1.56			2.00
Total from investment operations		0.28			2.62			(0.12	)		2.49			2.93
Less distributions from:
Net investment income and net foreign currency gains		(0.89	)		(1.21	)		(1.09	)		(0.27	)		(2.69	)
Net realized gains		(0.24	)		(0.03	)		(0.13	)		(0.05	)		—
Total distributions		(1.13	)		(1.24	)		(1.22	)		(0.32	)		(2.69	)
Redemption feesc		—			—			—			—			—
Net asset value, end of year	$	18.97		$	19.82		$	18.44		$	19.78		$	17.61
Total returnd		1.54%			14.97%			(0.96)%			14.28%			18.58%
Ratios to average net assets
Expensese		0.86%			0.90%			0.91%			0.90%			0.89%
Net investment income		2.91%			3.36%			4.05%			4.92%			5.38%
Supplemental data
Net assets, end of year (000’s)	$	118,145		$	163,241		$	151,695		$	150,891		$	108,910
Portfolio turnover rate		34.39%			43.26%			34.18%			8.77%			20.84%

^aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.

^bBased on average daily shares outstanding.

^cAmount rounds to less than $0.01 per share.

^dTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which the Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.

^eBenefit of expense reduction rounds to less than 0.01%.

The accompanying notes are an integral part of these financial statements.

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Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013

Templeton Global Bond Securities Fund	Principal Amount*			Value
Foreign Government and Agency Securities 65.7%
Brazil 4.1%
Letra Tesouro Nacional, Strip,
1/01/15		3,971	a BRL	$	1,517,952
1/01/16		26,160	a BRL		8,866,995
1/01/17		46,660	a BRL		13,913,524
Nota Do Tesouro Nacional,
10.00%, 1/01/14		7,100	a BRL		3,005,713
10.00%, 1/01/17		22,490	a BRL		9,010,015
10.00%, 1/01/21		9,240	a BRL		3,398,793
10.00%, 1/01/23		26,700	a BRL		9,526,924
b Index Linked, 6.00%, 5/15/15		30,226	a BRL		30,796,127
b Index Linked, 6.00%, 8/15/16		14,388	a BRL		14,526,395
b Index Linked, 6.00%, 5/15/17		202	a BRL		202,885
b Index Linked, 6.00%, 8/15/18		12,725	a BRL		12,679,621
b Index Linked, 6.00%, 8/15/22		14,400	a BRL		14,056,509
b Index Linked, 6.00%, 5/15/45		10,825	a BRL		10,079,341
senior note, 10.00%, 1/01/19		21,390	a BRL		8,192,766
					139,773,560
Canada 2.7%
Government of Canada,
2.25%, 8/01/14		10,628,000	CAD		10,079,965
1.00%, 11/01/14		20,887,000	CAD		19,667,584
2.00%, 12/01/14		17,861,000	CAD		16,971,271
1.00%, 2/01/15		48,972,000	CAD		46,108,326
					92,827,146
Hungary 4.2%
Government of Hungary,
5.50%, 2/12/14		653,440,000	HUF		3,030,175
7.75%, 8/24/15		672,690,000	HUF		3,331,052
5.50%, 2/12/16		436,800,000	HUF		2,095,705
5.50%, 12/22/16		236,640,000	HUF		1,139,444
4.125%, 2/19/18		14,310,000			14,462,044
6.50%, 6/24/19		389,700,000	HUF		1,949,586
7.50%, 11/12/20		317,540,000	HUF		1,659,850
5.375%, 2/21/23		26,430,000			26,206,666
A, 8.00%, 2/12/15		280,000,000	HUF		1,364,846
A, 6.75%, 11/24/17		2,049,040,000	HUF		10,280,148
A, 5.50%, 12/20/18		446,060,000	HUF		2,136,985
A, 7.00%, 6/24/22		512,570,000	HUF		2,585,322
A, 6.00%, 11/24/23		173,290,000	HUF		822,136
B, 6.75%, 2/24/17		394,700,000	HUF		1,961,662
D, 6.75%, 8/22/14		1,856,440,000	HUF		8,782,954
senior note, 6.25%, 1/29/20		6,420,000			6,945,638
senior note, 6.375%, 3/29/21		14,820,000			16,033,387
c senior note, Reg S, 3.50%, 7/18/16		1,055,000	EUR		1,500,165
c senior note, Reg S, 4.375%, 7/04/17		7,480,000	EUR		10,771,024
c senior note, Reg S, 5.75%, 6/11/18		14,475,000	EUR		21,677,406
c senior note, Reg S, 3.875%, 2/24/20		3,120,000	EUR		4,302,289
					143,038,484
Iceland 0.2%
dGovernment of Iceland, 144A, 5.875%, 5/11/22		7,660,000			7,870,650

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Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Templeton Global Bond Securities Fund	Principal Amount*			Value
Foreign Government and Agency Securities (continued)
Indonesia 2.4%
Government of Indonesia,
FR31, 11.00%, 11/15/20		170,808,000,000	IDR	$	15,972,581
FR34, 12.80%, 6/15/21		208,649,000,000	IDR		21,304,064
FR35, 12.90%, 6/15/22		67,421,000,000	IDR		6,974,170
FR36, 11.50%, 9/15/19		31,754,000,000	IDR		2,994,348
FR39, 11.75%, 8/15/23		5,491,000,000	IDR		541,430
FR40, 11.00%, 9/15/25		46,856,000,000	IDR		4,464,505
FR43, 10.25%, 7/15/22		69,179,000,000	IDR		6,264,366
FR44, 10.00%, 9/15/24		4,454,000,000	IDR		397,343
FR46, 9.50%, 7/15/23		226,780,000,000	IDR		19,656,723
FR48, 9.00%, 9/15/18		16,920,000,000	IDR		1,442,232
senior bond, FR53, 8.25%, 7/15/21		11,270,000,000	IDR		919,895
Indonesia Retail Bond, senior note, 8.50%, 10/15/16		3,358,000,000	IDR		276,243
					81,207,900
Ireland 8.9%
Government of Ireland,
5.50%, 10/18/17		27,708,700	EUR		43,369,903
5.90%, 10/18/19		20,597,000	EUR		33,280,628
4.50%, 4/18/20		19,512,000	EUR		29,375,017
5.00%, 10/18/20		58,588,000	EUR		90,671,337
senior bond, 4.50%, 10/18/18		8,090,000	EUR		12,354,689
senior bond, 4.40%, 6/18/19		20,943,000	EUR		31,673,977
senior bond, 5.40%, 3/13/25		40,422,910	EUR		63,308,941
					304,034,492
Lithuania 1.2%
dGovernment of Lithuania, 144A,
6.75%, 1/15/15		19,480,000			20,600,587
7.375%, 2/11/20		12,690,000			15,267,656
6.125%, 3/09/21		3,240,000			3,676,315
					39,544,558
Malaysia 3.8%
Government of Malaysia,
3.434%, 8/15/14		59,260,000	MYR		18,129,565
3.741%, 2/27/15		61,480,000	MYR		18,893,122
3.835%, 8/12/15		36,620,000	MYR		11,287,025
4.72%, 9/30/15		230,000	MYR		71,971
3.197%, 10/15/15		14,220,000	MYR		4,337,783
senior bond, 5.094%, 4/30/14		187,985,000	MYR		57,734,359
senior bond, 3.814%, 2/15/17		18,885,000	MYR		5,820,163
senior bond, 4.24%, 2/07/18		44,360,000	MYR		13,820,132
					130,094,120
Mexico 3.7%
Government of Mexico,
7.00%, 6/19/14		286,280e	MXN		2,232,692
9.50%, 12/18/14		1,774,400e	MXN		14,371,673
6.00%, 6/18/15		732,200e	MXN		5,805,212
8.00%, 12/17/15		4,996,150e	MXN		41,408,288
6.25%, 6/16/16		733,810e	MXN		5,918,589
7.25%, 12/15/16		250,000e	MXN		2,067,835

TGB-12

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Templeton Global Bond Securities Fund	Principal Amount*			Value
Foreign Government and Agency Securities (continued)
Mexico (continued)
7.75%, 12/14/17		4,473,000	e MXN	$	37,709,388
fMexican Udibonos, Index Linked,
4.50%, 12/18/14		222,190	g MXN		1,783,563
5.00%, 6/16/16		569,208	g MXN		4,827,172
3.50%, 12/14/17		570,675	g MXN		4,734,753
4.00%, 6/13/19		391,698	g MXN		3,328,978
2.50%, 12/10/20		308,481	g MXN		2,405,497
					126,593,640
Peru 0.1%
Government of Peru, senior bond, 7.84%, 8/12/20		11,090,000	PEN		4,535,287
Philippines 0.2%
Government of the Philippines,
senior bond, 7.00%, 1/27/16		53,190,000	PHP		1,292,639
senior bond, 9.125%, 9/04/16		31,840,000	PHP		821,907
senior note, 6.25%, 1/27/14		35,720,000	PHP		806,832
senior note, 1.625%, 4/25/16		236,480,000	PHP		5,278,929
					8,200,307
Poland 9.1%
Government of Poland,
5.75%, 4/25/14		336,990,000	PLN		112,776,374
5.50%, 4/25/15		31,408,000	PLN		10,771,993
6.25%, 10/24/15		75,580,000	PLN		26,531,088
5.00%, 4/25/16		45,810,000	PLN		15,820,591
5.75%, 9/23/22		48,750,000	PLN		17,824,390
hFRN, 2.71%, 1/25/17		59,279,000	PLN		19,571,709
hFRN, 2.71%, 1/25/21		60,135,000	PLN		19,455,558
Strip, 1/25/14		49,315,000	PLN		16,308,506
Strip, 7/25/14		35,420,000	PLN		11,578,650
Strip, 7/25/15		23,822,000	PLN		7,562,053
Strip, 1/25/16		169,757,000	PLN		52,892,364
					311,093,276
Russia 1.7%
dRussia Foreign Bond, senior bond, 144A, 7.50%, 3/31/30		50,648,455			59,108,013
Serbia 0.7%
dGovernment of Serbia, senior note, 144A,
5.25%, 11/21/17		4,590,000			4,627,294
4.875%, 2/25/20		8,800,000			8,371,000
7.25%, 9/28/21		9,670,000			10,232,987
					23,231,281
Singapore 0.8%
Government of Singapore, senior note,
3.625%, 7/01/14		21,650,000	SGD		17,442,766
1.125%, 4/01/16		11,000,000	SGD		8,876,166
					26,318,932
Slovenia 0.4%
dGovernment of Slovenia, senior note, 144A,
5.50%, 10/26/22		8,140,000			8,166,455

TGB-13

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Templeton Global Bond Securities Fund	Principal Amount*			Value
Foreign Government and Agency Securities (continued)
Slovenia (continued)
5.85%, 5/10/23		5,030,000		$	5,143,276
					13,309,731
South Korea 14.0%
The Export-Import Bank of Korea, senior note,
4.625%, 2/20/17		230,000	EUR		346,546
d144A, 1.45%, 5/19/14		40,580,000	SEK		6,318,181
Korea Monetary Stabilization Bond,
senior bond, 3.47%, 2/02/14		20,416,550,000	KRW		19,352,968
senior bond, 3.59%, 4/02/14		20,432,530,000	KRW		19,402,992
senior bond, 2.47%, 4/02/15		22,461,930,000	KRW		21,217,011
senior bond, 2.80%, 8/02/15		68,737,030,000	KRW		65,181,566
senior bond, 2.81%, 10/02/15		2,932,000,000	KRW		2,780,860
senior note, 3.28%, 6/02/14		24,224,170,000	KRW		23,008,056
senior note, 2.57%, 6/09/14		14,607,000,000	KRW		13,834,163
senior note, 2.82%, 8/02/14		31,785,420,000	KRW		30,141,691
senior note, 2.78%, 10/02/14		13,357,000,000	KRW		12,663,495
senior note, 2.84%, 12/02/14		22,065,270,000	KRW		20,936,073
senior note, 2.74%, 2/02/15		47,745,950,000	KRW		45,249,715
senior note, 2.76%, 6/02/15		51,516,200,000	KRW		48,822,799
senior note, 2.90%, 12/02/15		54,164,800,000	KRW		51,439,336
Korea Treasury Bond,
senior bond, 4.00%, 3/10/16		1,283,100,000	KRW		1,245,888
senior bond, 5.00%, 9/10/16		2,806,000,000	KRW		2,802,925
senior note, 3.25%, 12/10/14		13,830,700,000	KRW		13,173,046
senior note, 4.50%, 3/10/15		641,500,000	KRW		620,482
senior note, 3.25%, 6/10/15		4,668,800,000	KRW		4,454,846
senior note, 4.00%, 9/10/15		3,390,100,000	KRW		3,275,674
senior note, 2.75%, 12/10/15		32,942,000,000	KRW		31,190,316
senior note, 3.00%, 12/10/16		26,530,400,000	KRW		25,247,236
Korea Treasury Note, senior note, 2.75%, 6/10/16		18,308,100,000	KRW		17,318,320
					480,024,185
Sri Lanka 1.2%
Government of Sri Lanka,
A, 7.00%, 3/01/14		43,380,000	LKR		331,025
A, 11.25%, 7/15/14		773,000,000	LKR		6,001,358
A, 11.75%, 3/15/15		8,520,000	LKR		67,440
A, 6.50%, 7/15/15		239,920,000	LKR		1,778,049
A, 11.00%, 8/01/15		1,349,700,000	LKR		10,670,111
A, 6.40%, 8/01/16		109,200,000	LKR		782,571
A, 5.80%, 1/15/17		112,300,000	LKR		781,236
A, 8.00%, 11/15/18		512,300,000	LKR		3,639,778
A, 9.00%, 5/01/21		861,720,000	LKR		6,155,846
B, 11.75%, 4/01/14		68,370,000	LKR		526,938
B, 6.60%, 6/01/14		65,500,000	LKR		497,602
B, 6.40%, 10/01/16		119,100,000	LKR		849,589
B, 8.50%, 7/15/18		146,350,000	LKR		1,059,835
C, 8.50%, 4/01/18		241,930,000	LKR		1,765,710
D, 8.50%, 6/01/18		633,000,000	LKR		4,621,916
					39,529,004

TGB-14

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Templeton Global Bond Securities Fund	Principal Amount*			Value
Foreign Government and Agency Securities (continued)
iSupranational 0.5%
Inter-American Development Bank, senior note, 7.50%, 12/05/24		200,000,000	MXN	$	16,379,549
Sweden 2.4%
Government of Sweden, 6.75%, 5/05/14		391,220,000	SEK		62,045,971
Kommuninvest I Sverige AB, 2.25%, 5/05/14		123,520,000	SEK		19,294,378
					81,340,349
Ukraine 3.0%
dFinancing of Infrastructure Projects State Enterprise, 144A,
8.375%, 11/03/17		1,100,000			1,017,357
7.40%, 4/20/18		840,000			754,202
dGovernment of Ukraine,
144A, 9.25%, 7/24/17		25,550,000			25,454,188
144A, 7.75%, 9/23/20		17,227,000			15,999,576
senior bond, 144A, 6.58%, 11/21/16		12,541,000			11,796,692
senior bond, 144A, 7.80%, 11/28/22		10,110,000			9,174,825
senior note, 144A, 4.95%, 10/13/15		290,000	EUR		381,826
senior note, 144A, 6.25%, 6/17/16		8,760,000			8,250,825
senior note, 144A, 7.95%, 2/23/21		24,098,000			22,365,956
senior note, 144A, 7.50%, 4/17/23		8,160,000			7,395,000
					102,590,447
Vietnam 0.4%
dGovernment of Vietnam, 144A, 6.75%, 1/29/20		13,110,000			14,240,738
Total Foreign Government and Agency Securities (Cost $2,141,644,799)					2,244,885,649
Municipal Bonds (Cost $1,293,641) 0.0%†
United States 0.0%†
Bexar County Revenue, Venue Project, Refunding, Series A, BHAC Insured, 5.25%, 8/15/47		1,450,000			1,510,654
Total Investments before Short Term Investments (Cost $2,142,938,440)					2,246,396,303
Short Term Investments 25.0%
Foreign Government and Agency Securities 14.4%
Brazil 0.2%
Letra Tesouro Nacional, Strip, 4/01/14		18,450	a BRL		7,628,846
Canada 1.3%
Government of Canada,
1.00%, 2/01/14		33,882,000	CAD		31,899,130
2.00%, 3/01/14		7,354,000	CAD		6,935,463
0.75%, 5/01/14		6,298,000	CAD		5,926,569
					44,761,162
Hungary 0.1%
jHungary Treasury Bills, 1/08/14 - 6/25/14		356,460,000	HUF		1,637,274
Malaysia 4.4%
jBank of Negara Monetary Notes, 1/09/14 - 11/18/14		496,745,000	MYR		149,780,015
jMalaysia Treasury Bill, 5/30/14		1,140,000	MYR		343,547
					150,123,562

TGB-15

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Templeton Global Bond Securities Fund	Principal Amount*			Value
Short Term Investments (continued)
Foreign Government and Agency Securities (continued)
Mexico 3.0%
jMexico Treasury Bills,
1/09/14 - 4/30/14		31,812,220	k MXN	$	24,223,335
10/16/14		46,859,000	k MXN		34,960,785
12/11/14		59,641,100	k MXN		44,250,070
					103,434,190
Philippines 0.9%
jPhilippine Treasury Bills, 1/08/14 - 10/08/14		1,289,295,000	PHP		28,952,151
Singapore 3.8%
Government of Singapore, senior bond, 0.25%, 2/01/14		21,600,000	SGD		17,116,947
jMonetary Authority of Singapore Treasury Bills, 1/03/14 - 2/14/14		46,732,000	SGD		37,030,791
jSingapore Treasury Bills, 1/10/14 - 5/30/14		96,960,000	SGD		76,800,680
					130,948,418
South Korea 0.7%
Korea Monetary Stabilization Bond, senior bond,
2.55%, 5/09/14		10,064,000,000	KRW		9,531,413
2.72%, 9/09/14		14,437,000,000	KRW		13,682,266
					23,213,679
Total Foreign Government and Agency Securities (Cost $503,106,917)					490,699,282
Total Investments before Repurchase Agreements (Cost $2,646,045,357)					2,737,095,585
Repurchase Agreements (Cost $362,770,388) 10.6%
United States 10.6%
lJoint Repurchase Agreement, 0.008%, 1/02/14 (Maturity Value $362,770,540)		362,770,388			362,770,388
BNP Paribas Securities Corp. (Maturity Value $27,683,020) Credit Suisse Securities (USA) LLC (Maturity Value $83,049,060) Deutsche Bank Securities Inc. (Maturity Value $48,564,092) HSBC Securities (USA) Inc. (Maturity Value $116,271,586) Merrill Lynch, Pierce, Fenner & Smith Inc. (Maturity Value $53,983,884) Morgan Stanley & Co. LLC (Maturity Value $33,218,898)
Collateralized by U.S. Government Agency Securities, 0.00% - 4.125%, 1/15/14 - 3/07/18; jU.S. Government Agency Discount Notes, 8/19/14; jU.S. Treasury Bills, 9/18/14; U.S. Treasury Bonds, 8.875% - 9.125%, 5/15/17 - 5/15/18; U.S. Treasury Notes, 0.25% - 4.75%, 1/15/15 - 12/31/18; and U.S. Treasury Notes, Index Linked, 1.375% - 1.625%, 1/15/18 - 7/15/18 (valued at $370,038,148)
Total Investments (Cost $3,008,815,745) 90.7%					3,099,865,973
Other Assets, less Liabilities 9.3%					319,403,073
Net Assets 100.0%				$	3,419,269,046

See Abbreviations on page TGB-41.

TGB-16

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Templeton Global Bond Securities Fund

†Rounds to less than 0.1% of net assets.

*The principal amount is stated in U.S. dollars unless otherwise indicated.

^aPrincipal amount is stated in 1,000 Brazilian Real Units.

^bRedemption price at maturity is adjusted for inflation. See Note 1(g).

^cSecurity was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At December 31, 2013, the aggregate value of these securities was $38,250,884, representing 1.12% of net assets.

^dSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At December 31, 2013, the aggregate value of these securities was $266,213,599, representing 7.79% of net assets.

^ePrincipal amount is stated in 100 Mexican Peso Units.

^fPrincipal amount of security is adjusted for inflation. See Note 1(g).

^gPrincipal amount is stated in Unidad de Inversion Units.

^hThe coupon rate shown represents the rate at period end.

ⁱA supranational organization is an entity formed by two or more central governments through international treaties.

^jThe security is traded on a discount basis with no stated coupon rate.

^kPrincipal amount is stated in 10 Mexican Peso Units.

^lSee Note 1(c) regarding joint repurchase agreement.

TGB-17

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Templeton Global Bond Securities Fund

At December 31, 2013, the Fund had the following forward exchange contracts outstanding. See Note 1(d).

Forward Exchange Contracts

Currency	Counterpartya		Type		Quantity		Contract Amount*			Settlement Date		Unrealized Appreciation		Unrealized Depreciation
Indian Rupee		CITI		Buy		34,491,000		533,446			1/06/14	$	23,633	$	—
Indian Rupee		HSBC		Buy		251,448,000		3,923,021			1/06/14		138,225		—
Indian Rupee		CITI		Sell		34,491,000		555,769			1/06/14		—		(1,311	)
Indian Rupee		HSBC		Sell		251,448,000		4,045,825			1/06/14		—		(15,422	)
Indian Rupee		DBAB		Buy		217,594,000		3,426,958			1/07/14		86,798		—
Japanese Yen		DBAB		Sell		770,370,000		8,897,885			1/07/14		1,581,670		—
Indian Rupee		DBAB		Sell		217,594,000		3,498,296			1/07/14		—		(15,460	)
Euro		DBAB		Sell		2,285,618		3,003,759			1/07/14		—		(140,098	)
Indian Rupee		DBAB		Buy		40,529,000		644,084			1/08/14		10,257		—
Malaysian Ringgit		DBAB		Buy		8,862,500		2,865,063			1/08/14		—		(162,856	)
Swedish Krona		DBAB		Buy		136,332,733		15,821,369	EUR		1/09/14		—		(572,377	)
Mexican Peso		CITI		Buy		109,357,558		8,363,867			1/10/14		24,207		—
Japanese Yen		CITI		Sell		138,680,000		1,589,474			1/10/14		272,408		—
Euro		CITI		Sell		5,040,000		6,611,220			1/10/14		—		(321,266	)
Chilean Peso		MSCO		Buy		2,254,600,000		4,581,124			1/13/14		—		(296,950	)
Euro		UBSW		Sell		15,572,000		20,393,838			1/13/14		—		(1,025,311	)
Euro		DBAB		Sell		9,460,000		12,533,554			1/14/14		—		(478,587	)
Euro		JPHQ		Sell		937,000		1,226,767			1/14/14		—		(62,067	)
Japanese Yen		UBSW		Sell		415,980,000		4,756,980			1/14/14		806,271		—
Indian Rupee		DBAB		Buy		239,338,000		3,824,390			1/15/14		34,344		—
Japanese Yen		HSBC		Sell		536,380,000		6,109,112			1/15/14		1,014,895		—
Malaysian Ringgit		JPHQ		Buy		1,856,000		604,856			1/16/14		—		(39,167	)
Japanese Yen		DBAB		Sell		139,110,000		1,567,896			1/16/14		246,706		—
Japanese Yen		UBSW		Sell		707,660,000		7,973,544			1/16/14		1,252,578		—
Indian Rupee		DBAB		Buy		383,041,000		6,111,193			1/17/14		61,943		—
Japanese Yen		DBAB		Sell		719,030,000		8,111,032			1/17/14		1,282,045		—
Euro		DBAB		Sell		4,856,000		6,497,328			1/17/14		—		(182,044	)
Japanese Yen		JPHQ		Sell		1,305,790,000		14,747,457			1/17/14		2,345,718		—
Indian Rupee		JPHQ		Buy		226,092,000		3,581,207			1/21/14		59,624		—
Euro		BZWS		Sell		2,638,000		3,467,255			1/21/14		—		(161,276	)
Chilean Peso		DBAB		Buy		2,227,910,000		4,528,272			1/22/14		—		(299,335	)
Indian Rupee		DBAB		Buy		79,271,000		1,265,178			1/22/14		11,095		—
Indian Rupee		JPHQ		Buy		152,363,000		2,432,127			1/22/14		20,936		—
Euro		JPHQ		Sell		300,000		403,658			1/22/14		—		(8,988	)
Chilean Peso		DBAB		Buy		3,160,140,000		6,428,929			1/24/14		—		(431,889	)
Singapore Dollar		JPHQ		Buy		5,740,000		4,629,032			1/24/14		—		(79,990	)
Japanese Yen		UBSW		Sell		944,420,000		10,705,282			1/27/14		1,735,197		—
Chilean Peso		DBAB		Buy		1,967,720,000		4,001,871			1/28/14		—		(269,473	)
Euro		CITI		Sell		4,998,400		6,690,208			1/28/14		—		(184,997	)
Japanese Yen		DBAB		Sell		897,860,782		10,026,363			1/28/14		1,498,453		—
Japanese Yen		HSBC		Sell		1,162,462,488		12,988,408			1/28/14		1,947,302		—
Chilean Peso		DBAB		Buy		635,690,000		1,295,608			1/29/14		—		(89,966	)
Indian Rupee		HSBC		Buy		531,272,000		8,425,533			1/29/14		116,138		—
Chilean Peso		JPHQ		Buy		675,370,000		1,372,703			1/30/14		—		(91,956	)
Malaysian Ringgit		JPHQ		Buy		11,703,000		3,767,869			1/30/14		—		(203,250	)
Chilean Peso		DBAB		Buy		1,271,380,000		2,582,793			1/31/14		—		(172,050	)
Euro		DBAB		Sell		65,773,000		88,728,713			1/31/14		—		(1,740,768	)
Chilean Peso		DBAB		Buy		1,186,400,000		2,402,106			2/03/14		—		(153,212	)
Euro		UBSW		Sell		5,540,000		7,513,071			2/03/14		—		(107,102	)

TGB-18

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Templeton Global Bond Securities Fund

Forward Exchange Contracts (continued)

Currency	Counterpartya		Type		Quantity		Contract Amount*			Settlement Date		Unrealized Appreciation		Unrealized Depreciation
Malaysian Ringgit		JPHQ		Buy		9,715,000		3,085,596			2/04/14	$	—	$	(127,164	)
Indian Rupee		JPHQ		Buy		21,500,000		339,360			2/06/14		5,746		—
Malaysian Ringgit		HSBC		Buy		19,888,085		6,268,900			2/06/14		—		(213,078	)
Singapore Dollar		DBAB		Buy		6,207,000		4,875,348			2/07/14		43,827		—
Singapore Dollar		HSBC		Buy		6,206,000		5,016,571			2/07/14		—		(98,189	)
Indian Rupee		DBAB		Buy		39,609,000		624,182			2/10/14		11,075		—
South Korean Won		HSBC		Buy		21,363,430,000		18,962,746			2/10/14		1,217,420		—
Japanese Yen		CITI		Sell		366,860,000		3,724,013			2/10/14		239,348		—
Euro		CITI		Sell		6,572,000		8,899,605			2/10/14		—		(140,097	)
Euro		HSBC		Sell		1,800,000		2,434,230			2/10/14		—		(41,647	)
Euro		UBSW		Sell		4,929,000		6,673,472			2/10/14		—		(106,305	)
Chilean Peso		BZWS		Buy		1,142,900,000		2,317,315			2/11/14		—		(152,712	)
Polish Zloty		BZWS		Buy		17,528,000		4,066,538	EUR		2/11/14		195,525		—
Polish Zloty		DBAB		Buy		17,528,000		4,075,237	EUR		2/11/14		183,560		—
Euro		BZWS		Sell		1,412,000		1,907,753			2/11/14		—		(34,436	)
Euro		DBAB		Sell		1,738,000		2,332,274			2/11/14		—		(58,324	)
Chilean Peso		DBAB		Buy		1,145,000,000		2,318,283			2/12/14		—		(149,931	)
Indian Rupee		HSBC		Buy		42,784,000		664,952			2/12/14		20,944		—
Singapore Dollar		BZWS		Buy		1,717,028		1,353,269			2/12/14		7,516		—
Japanese Yen		GSCO		Sell		394,373,000		4,248,793			2/12/14		502,757		—
Japanese Yen		HSBC		Sell		1,035,240,000		11,130,177			2/12/14		1,296,727		—
Japanese Yen		JPHQ		Sell		1,034,700,000		11,130,223			2/12/14		1,301,902		—
Indian Rupee		HSBC		Buy		108,000,000		1,660,632			2/13/14		70,424		—
Japanese Yen		CITI		Sell		1,371,360,000		14,840,354			2/13/14		1,814,134		—
Japanese Yen		JPHQ		Sell		686,710,000		7,420,122			2/13/14		897,228		—
Euro		UBSW		Sell		657,000		881,234			2/13/14		—		(22,462	)
Chilean Peso		DBAB		Buy		964,250,000		1,956,001			2/14/14		—		(130,332	)
Chilean Peso		MSCO		Buy		2,590,220,000		5,239,648			2/14/14		—		(335,438	)
Malaysian Ringgit		DBAB		Buy		97,443,480		30,906,965			2/14/14		—		(1,246,514	)
Polish Zloty		DBAB		Buy		17,528,000		4,068,048	EUR		2/14/14		192,440		—
Chilean Peso		DBAB		Buy		2,188,820,000		4,439,527			2/18/14		—		(297,062	)
Indian Rupee		DBAB		Buy		108,614,000		1,656,850			2/18/14		82,258		—
Indian Rupee		JPHQ		Buy		127,745,000		1,949,576			2/18/14		95,855		—
Singapore Dollar		HSBC		Buy		3,667,000		2,901,108			2/18/14		5,090		—
Japanese Yen		GSCO		Sell		123,057,280		1,322,059			2/18/14		153,140		—
Japanese Yen		JPHQ		Sell		831,970,000		8,977,211			2/18/14		1,074,340		—
Malaysian Ringgit		HSBC		Buy		4,899,000		1,551,593			2/19/14		—		(60,738	)
Japanese Yen		CITI		Sell		684,870,000		7,420,164			2/19/14		914,563		—
Japanese Yen		GSCO		Sell		687,820,000		7,420,129			2/19/14		886,506		—
Euro		JPHQ		Sell		3,942,000		5,268,404			2/19/14		—		(153,790	)
Chilean Peso		CITI		Buy		2,285,090,000		4,646,381			2/20/14		—		(322,633	)
Indian Rupee		DBAB		Buy		98,937,000		1,537,124			2/20/14		46,387		—
Euro		BZWS		Sell		6,280,000		8,382,795			2/20/14		—		(255,307	)
Chilean Peso		JPHQ		Buy		1,055,800,000		2,145,935			2/21/14		—		(148,407	)
Euro		GSCO		Sell		2,038,000		2,728,067			2/21/14		—		(75,191	)
Chilean Peso		JPHQ		Buy		1,792,000,000		3,635,257			2/24/14		—		(245,945	)
Chilean Peso		MSCO		Buy		1,273,240,000		2,575,584			2/24/14		—		(167,432	)
Japanese Yen		HSBC		Sell		385,460,000		4,124,773			2/24/14		463,189		—
Chilean Peso		DBAB		Buy		1,455,470,000		2,942,721			2/25/14		—		(190,198	)
Japanese Yen		BZWS		Sell		343,460,000		3,710,113			2/25/14		447,483		—
Japanese Yen		JPHQ		Sell		385,700,000		4,160,621			2/25/14		496,741		—

TGB-19

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Templeton Global Bond Securities Fund

Forward Exchange Contracts (continued)

Currency		Counterpartya		Type		Quantity		Contract Amount*		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
Chilean Peso			DBAB		Buy		1,435,490,000		2,899,980		2/26/14	$	—	$	(185,529	)
Chilean Peso			MSCO		Buy		1,559,200,000		3,152,128		2/26/14		—		(203,746	)
Indian Rupee			DBAB		Buy		130,201,000		2,031,439		2/26/14		49,896		—
Euro			BZWS		Sell		9,771,593		13,027,122		2/26/14		—		(413,684	)
Japanese Yen			UBSW		Sell		937,086,000		9,517,428		2/26/14		615,724		—
Euro			UBSW		Sell		13,581,483		18,149,614		2/26/14		—		(531,687	)
Chilean Peso			DBAB		Buy		2,094,920,000		4,235,584		2/27/14		—		(274,597	)
Indian Rupee			DBAB		Buy		700,705,481		10,929,226		2/27/14		269,638		—
Indian Rupee			HSBC		Buy		148,257,000		2,311,207		2/27/14		58,276		—
Malaysian Ringgit			HSBC		Buy		2,087,700		622,265		2/27/14		12,833		—
Singapore Dollar			DBAB		Buy		7,749,500		6,059,978		2/27/14		81,757		—
Japanese Yen			BZWS		Sell		1,576,550,000		16,929,882		2/27/14		1,953,617		—
Euro			BZWS		Sell		3,902,180		5,212,328		2/27/14		—		(155,115	)
Japanese Yen			DBAB		Sell		229,660,000		2,508,999		2/27/14		327,369		—
Euro			DBAB		Sell		1,530,900		2,024,646		2/27/14		—		(81,105	)
Chilean Peso			DBAB		Buy		790,050,000		1,595,158		2/28/14		—		(101,522	)
Chilean Peso			JPHQ		Buy		593,800,000		1,200,445		2/28/14		—		(77,831	)
Indian Rupee	��		DBAB		Buy		211,714,000		3,313,364		2/28/14		69,613		—
Indian Rupee			JPHQ		Buy		181,822,000		2,841,685		2/28/14		63,647		—
Singapore Dollar			BZWS		Buy		21,427,761		16,716,930		2/28/14		265,293		—
Singapore Dollar			DBAB		Buy		5,960,000		4,731,641		2/28/14		37,801		(45,941	)
Euro			UBSW		Sell		2,694,506		3,608,644		2/28/14		—		(97,647	)
Chilean Peso			DBAB		Buy		1,253,970,000		2,533,529		3/03/14		—		(163,605	)
Indian Rupee			CITI		Buy		34,827,000		538,035		3/03/14		18,073		—
Indian Rupee			HSBC		Buy		240,033,500		3,705,936		3/03/14		126,852		—
Euro			DBAB		Sell		2,579,651		3,394,176		3/03/14		—		(154,129	)
Japanese Yen			JPHQ		Sell		401,100,000		4,410,794		3/03/14		600,508		—
Japanese Yen			HSBC		Sell		400,800,000		4,401,977		3/04/14		594,519		—
Japanese Yen			UBSW		Sell		447,200,000		4,864,571		3/04/14		616,329		—
Chilean Peso			BZWS		Buy		3,010,700,000		6,079,152		3/05/14		—		(390,393	)
Chilean Peso			DBAB		Buy		1,253,970,000		2,526,637		3/05/14		—		(157,243	)
Euro			DBAB		Sell		1,536,000		2,000,640		3/05/14		—		(112,122	)
Chilean Peso			DBAB		Buy		1,328,230,000		2,673,840		3/06/14		—		(164,412	)
Chilean Peso			DBAB		Buy		1,320,220,000		2,665,765		3/07/14		—		(171,748	)
Japanese Yen			BZWS		Sell		1,712,605,900		17,274,115		3/07/14		1,004,686		—
Euro			BZWS		Sell		3,441,044		4,502,400		3/07/14		—		(230,735	)
Chilean Peso			MSCO		Buy		662,100,000		1,337,576		3/10/14		—		(87,228	)
Mexican Peso			HSBC		Buy		135,500,950		10,314,452		3/10/14		30,526		—
Euro			BZWS		Sell		3,785,232		4,931,173		3/10/14		—		(275,379	)
Euro			CITI		Sell		31,404,613		41,028,557		3/10/14		—		(2,168,203	)
Euro			GSCO		Sell		21,480,000		28,010,350		3/10/14		—		(1,535,195	)
Euro			HSBC		Sell		1,844,000		2,406,420		3/10/14		—		(129,985	)
Euro			MSCO		Sell		5,225,000		6,827,769		3/10/14		—		(359,171	)
Singapore Dollar			CITI		Buy		21,075,381		16,932,505		3/11/14		—		(229,476	)
Chilean Peso			DBAB		Buy		1,284,460,000		2,596,967		3/13/14		—		(172,131	)
Euro			JPHQ		Sell		541,000		713,081		3/13/14		—		(31,058	)
Mexican Peso			CITI		Buy		25,894,900		1,967,204		3/14/14		9,139		—
Singapore Dollar			HSBC		Buy		10,521,600		8,436,177		3/14/14		—		(97,405	)
Euro			BZWS		Sell		1,161,439		1,511,346		3/17/14		—		(86,195	)
Japanese Yen			CITI		Sell		286,112,008		2,988,583		3/17/14		270,417		—
Chilean Peso			DBAB		Buy		2,600,220,000		5,271,072		3/18/14		—		(365,051	)

TGB-20

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Templeton Global Bond Securities Fund

Forward Exchange Contracts (continued)

Currency	Counterpartya		Type		Quantity		Contract Amount*			Settlement Date			Unrealized Appreciation		Unrealized Depreciation
Indian Rupee		JPHQ		Buy		230,330,000		3,633,401			3/18/14		$	30,696	$	—
Euro		CITI		Sell		861,168		1,117,955			3/18/14			—		(66,566	)
Hungarian Forint		DBAB		Buy		2,348,675,000		7,437,753	EUR		3/19/14			584,620		—
Hungarian Forint		JPHQ		Buy		703,907,450		2,231,326	EUR		3/19/14			172,185		—
Singapore Dollar		DBAB		Buy		7,978,100		6,255,175			3/19/14			67,789		—
Singapore Dollar		HSBC		Buy		9,120,000		7,310,328			3/19/14			—		(82,364	)
Singapore Dollar		JPHQ		Buy		5,686,000		4,437,888			3/19/14			68,494		—
Japanese Yen		CITI		Sell		1,866,452,000		19,634,407			3/19/14			1,902,246		—
Japanese Yen		MSCO		Sell		575,230,000		6,012,962			3/19/14			548,010		—
Hungarian Forint		JPHQ		Buy		1,177,657,000		3,718,878	EUR		3/20/14			307,298		—
Chilean Peso		JPHQ		Buy		1,065,000,000		2,153,691			3/21/14			—		(144,951	)
Hungarian Forint		JPHQ		Buy		1,171,335,000		3,718,878	EUR		3/21/14			277,893		—
Euro		BZWS		Sell		744,197		966,414			3/21/14			—		(57,214	)
Mexican Peso		CITI		Buy		75,637,200		5,547,527			3/24/14			220,620		—
Japanese Yen		BZWS		Sell		740,940,000		7,832,595			3/24/14			793,119		—
Japanese Yen		DBAB		Sell		725,287,000		7,682,067			3/24/14			791,306		—
Japanese Yen		BZWS		Sell		242,774,840		2,559,566			3/25/14			253,013		—
Indian Rupee		DBAB		Buy		130,201,000		2,046,864			3/26/14			20,256		—
Malaysian Ringgit		DBAB		Buy		8,012,500		2,524,576			3/26/14			—		(90,645	)
Malaysian Ringgit		HSBC		Buy		7,634,000		2,404,107			3/26/14			—		(85,152	)
Euro		CITI		Sell		1,532,964		1,993,926			3/26/14			—		(114,627	)
Euro		DBAB		Sell		2,736,000		3,554,748			3/26/14			—		(208,551	)
Euro		BZWS		Sell		6,085,000		8,216,880			3/27/14			—		(152,879	)
Indian Rupee		DBAB		Buy		24,950,000		393,968			3/28/14			1,951		—
Indian Rupee		JPHQ		Buy		79,054,000		1,244,357			3/28/14	��		10,110		—
Chilean Peso		DBAB		Buy		1,330,940,000		2,695,302			4/04/14			—		(188,789	)
Euro		DBAB		Sell		6,200,000		7,980,330			4/04/14			—		(547,627	)
Indian Rupee		CITI		Buy		34,491,000		545,226			4/07/14			847		—
Indian Rupee		DBAB		Buy		217,594,000		3,435,333			4/07/14			9,690		—
Indian Rupee		HSBC		Buy		251,448,000		3,969,814			4/07/14			11,198		—
Euro		HSBC		Sell		8,692,000		11,359,314			4/10/14			—		(596,425	)
Euro		DBAB		Sell		7,243,000		9,479,276			4/11/14			—		(483,394	)
Euro		UBSW		Sell		4,346,000		5,690,001			4/11/14			—		(287,877	)
Chilean Peso		MSCO		Buy		2,645,530,000		5,408,423			4/14/14			—		(431,293	)
Euro		JPHQ		Sell		3,907,000		5,120,878			4/14/14			—		(253,181	)
Malaysian Ringgit		DBAB		Buy		16,369,588		5,106,241			4/16/14			—		(139,221	)
Euro		HSBC		Sell		6,919,000		9,056,487			4/16/14			—		(460,587	)
Chilean Peso		MSCO		Buy		2,370,410,000		4,812,527			4/21/14			—		(356,185	)
Malaysian Ringgit		JPHQ		Buy		15,728,213		5,098,286			4/21/14			—		(327,125	)
Japanese Yen		BZWS		Sell		700,840,000		7,204,618			4/21/14			544,890		—
Japanese Yen		JPHQ		Sell		421,090,000		4,322,751			4/21/14			321,346		—
Japanese Yen		CITI		Sell		261,800,000		2,675,387			4/22/14			187,617		—
Japanese Yen		JPHQ		Sell		496,560,000		5,072,581			4/22/14			353,990		—
Euro		DBAB		Sell		4,545,000		5,957,132			4/23/14			—		(294,566	)
Euro		BZWS		Sell		4,954,399		6,471,436			4/25/14			—		(343,412	)
Chilean Peso		JPHQ		Buy		1,501,938,000		3,023,529			4/28/14			—		(201,925	)
Swedish Krona		BZWS		Buy		122,773,200		14,205,258	EUR		4/30/14			—		(493,221	)
Euro		BZWS		Sell		6,575,679		8,576,001			4/30/14			—		(469,000	)
Euro		DBAB		Sell		11,263,000		14,952,984			4/30/14			—		(539,536	)
Euro		BZWS		Sell		7,026,829		9,313,640			5/05/14			—		(351,990	)
Euro		BZWS		Sell		1,259,000		1,652,249			5/07/14			—		(79,551	)

TGB-21

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Templeton Global Bond Securities Fund

Forward Exchange Contracts (continued)

Currency	Counterpartya		Type		Quantity		Contract Amount*			Settlement Date		Unrealized Appreciation		Unrealized Depreciation
Euro		GSCO		Sell		2,990,000		3,933,644			5/07/14	$	—	$	(179,208	)
Euro		GSCO		Sell		2,045,000		2,678,152			5/08/14		—		(134,822	)
Chilean Peso		MSCO		Buy		1,150,200,000		2,333,063			5/12/14		—		(175,339	)
Japanese Yen		CITI		Sell		366,861,000		3,718,550			5/12/14		231,951		—
Euro		GSCO		Sell		1,259,000		1,663,328			5/12/14		—		(68,483	)
Euro		UBSW		Sell		629,000		830,516			5/12/14		—		(34,702	)
Euro		CITI		Sell		5,658,426		7,468,274			5/13/14		—		(315,155	)
Japanese Yen		GSCO		Sell		490,555,000		4,954,250			5/13/14		292,047		—
Euro		GSCO		Sell		4,115,000		5,502,990			5/13/14		—		(157,385	)
Japanese Yen		UBSW		Sell		366,681,000		3,702,540			5/13/14		217,627		—
Japanese Yen		CITI		Sell		366,680,000		3,644,713			5/14/14		159,786		—
Euro		BZWS		Sell		8,551,980		11,291,103			5/16/14		—		(472,589	)
Singapore Dollar		DBAB		Buy		3,667,000		2,891,728			5/19/14		14,856		—
Euro		GSCO		Sell		4,454,000		5,771,271			5/20/14		—		(355,470	)
Euro		BZWS		Sell		11,375,532		14,643,154			5/21/14		—		(1,004,583	)
Chilean Peso		MSCO		Buy		420,740,000		836,794			5/22/14		—		(48,310	)
Malaysian Ringgit		HSBC		Buy		298,500		96,950			5/22/14		—		(6,547	)
Euro		JPHQ		Sell		4,730,771		6,116,461			5/23/14		—		(391,019	)
Malaysian Ringgit		HSBC		Buy		1,229,300		397,484			5/28/14		—		(25,295	)
Euro		BZWS		Sell		2,836,669		3,664,976			5/30/14		—		(237,080	)
Euro		GSCO		Sell		463,000		596,969			5/30/14		—		(39,923	)
Euro		BZWS		Sell		7,895,591		10,294,504			6/05/14		—		(566,574	)
Mexican Peso		CITI		Buy		78,317,430		5,917,359			6/09/14		19,203		—
Japanese Yen		CITI		Sell		1,370,500,000		13,819,704			6/09/14		792,137		—
Euro		GSCO		Sell		2,033,100		2,667,793			6/09/14		—		(128,929	)
Japanese Yen		HSBC		Sell		2,052,400,000		20,729,219			6/09/14		1,219,714		—
Japanese Yen		JPHQ		Sell		1,375,900,000		13,819,113			6/09/14		740,216		—
Mexican Peso		CITI		Buy		78,230,000		5,901,657			6/10/14		27,814		—
Swedish Krona		DBAB		Buy		41,300,000		4,737,325	EUR		6/10/14		—		(113,951	)
Japanese Yen		BZWS		Sell		1,689,110,000		17,356,925			6/10/14		1,300,636		—
Japanese Yen		HSBC		Sell		1,798,900,000		18,596,742			6/10/14		1,496,814		—
Japanese Yen		JPHQ		Sell		1,219,900,000		12,397,806			6/10/14		801,719		—
Polish Zloty		CITI		Buy		5,990,000		1,365,927	EUR		6/11/14		84,980		—
Swedish Krona		MSCO		Buy		13,064,000		1,488,181	EUR		6/11/14		—		(21,875	)
Japanese Yen		DBAB		Sell		595,700,000		6,199,009			6/11/14		536,384		—
Euro		GSCO		Sell		8,105,300		10,738,712			6/11/14		—		(410,925	)
Japanese Yen		JPHQ		Sell		1,666,680,000		17,356,983			6/11/14		1,513,799		—
Mexican Peso		CITI		Buy		159,085,880		12,019,635			6/12/14		36,453		—
Polish Zloty		DBAB		Buy		30,704,000		7,052,392	EUR		6/12/14		365,071		—
Swedish Krona		MSCO		Buy		42,305,800		4,810,926	EUR		6/12/14		—		(59,504	)
Mexican Peso		CITI		Buy		99,058,800		7,396,698			6/13/14		109,740		—
Swedish Krona		BZWS		Buy		24,372,000		2,756,016	EUR		6/13/14		—		(13,004	)
Swedish Krona		MSCO		Buy		28,654,000		3,185,687	EUR		6/13/14		65,080		(5,339	)
Euro		DBAB		Sell		8,383,000		11,130,528			6/13/14		—		(401,143	)
Swedish Krona		MSCO		Buy		21,328,100		2,430,774	EUR		6/16/14		—		(37,648	)
Japanese Yen		CITI		Sell		310,702,000		3,270,547			6/16/14		316,964		—
Japanese Yen		JPHQ		Sell		702,800,000		7,438,218			6/17/14		757,241		—
Malaysian Ringgit		HSBC		Buy		36,880,000		11,242,874			6/20/14		—		(90,267	)
Mexican Peso		CITI		Buy		61,535,000		4,622,938			6/20/14		37,490		—
Singapore Dollar		HSBC		Buy		6,864,000		5,451,946			6/20/14		—		(10,917	)
Euro		BZWS		Sell		1,124,367		1,509,688			6/20/14		—		(37,008	)

TGB-22

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Templeton Global Bond Securities Fund

Forward Exchange Contracts (continued)

Currency	Counterpartya		Type		Quantity		Contract Amount*			Settlement Date		Unrealized Appreciation		Unrealized Depreciation
Japanese Yen		DBAB		Sell		1,455,820,000		14,169,116			6/20/14	$	329,474	$	—
Singapore Dollar		DBAB		Buy		8,589,700		6,844,928			6/23/14		—		(35,905	)
Philippine Peso		JPHQ		Buy		392,700,000		8,866,561			6/25/14		—		(8,445	)
South Korean Won		DBAB		Buy		21,440,000,000		18,351,451			6/27/14		1,761,549		—
Swedish Krona		UBSW		Buy		302,991,000		34,200,332	EUR		6/30/14		—		(90,475	)
Mexican Peso		CITI		Buy		105,786,172		7,970,207			7/10/14		29,333		—
Malaysian Ringgit		DBAB		Buy		18,006,622		5,550,404			7/14/14		—		(111,679	)
Malaysian Ringgit		DBAB		Buy		13,610,000		4,232,360			7/15/14		—		(121,792	)
Euro		BZWS		Sell		2,243,000		2,932,498			7/16/14		—		(153,176	)
Euro		MSCO		Sell		9,679,000		12,627,320			7/16/14		—		(687,991	)
Euro		UBSW		Sell		17,930,000		23,415,056			7/16/14		—		(1,251,081	)
Malaysian Ringgit		DBAB		Buy		2,637,000		815,651			7/18/14		—		(19,326	)
Malaysian Ringgit		DBAB		Buy		11,455,000		2,704,841	EUR		7/18/14		—		(261,846	)
Euro		BZWS		Sell		3,518,000		4,627,050			7/18/14		—		(212,656	)
Malaysian Ringgit		DBAB		Buy		4,160,000		1,280,867			7/22/14		—		(24,868	)
Malaysian Ringgit		DBAB		Buy		12,933,000		3,029,870	EUR		7/22/14		—		(263,462	)
Euro		DBAB		Sell		1,935,000		2,538,372			7/22/14		—		(123,631	)
Euro		MSCO		Sell		12,182,000		15,957,689			7/22/14		—		(801,236	)
Euro		DBAB		Sell		1,759,000		2,311,361			7/23/14		—		(108,523	)
Japanese Yen		CITI		Sell		913,412,000		9,181,286			7/24/14		495,395		—
Japanese Yen		JPHQ		Sell		1,407,000,000		14,122,252			7/24/14		742,695		—
Malaysian Ringgit		DBAB		Buy		5,058,000		1,570,466			7/25/14		—		(43,564	)
Malaysian Ringgit		DBAB		Buy		16,628,000		3,903,470	EUR		7/25/14		—		(350,453	)
Euro		DBAB		Sell		4,715,000		6,236,219			7/25/14		—		(250,314	)
Euro		GSCO		Sell		4,711,000		6,236,704			7/25/14		—		(244,326	)
Japanese Yen		JPHQ		Sell		490,100,000		4,944,262			7/25/14		283,720		—
Euro		CITI		Sell		1,935,410		2,563,112			7/28/14		—		(99,496	)
Japanese Yen		BZWS		Sell		1,079,470,000		10,875,395			7/29/14		609,923		—
Malaysian Ringgit		JPHQ		Buy		5,318,000		1,632,139			7/30/14		—		(27,139	)
Malaysian Ringgit		JPHQ		Buy		16,628,000		3,857,826	EUR		7/30/14		—		(288,949	)
Chilean Peso		MSCO		Buy		1,963,430,000		3,690,311			7/31/14		—		(36,916	)
Malaysian Ringgit		HSBC		Buy		3,005,000		916,354			7/31/14		—		(9,473	)
Euro		JPHQ		Sell		11,263,000		14,973,201			7/31/14		—		(521,804	)
Euro		GSCO		Sell		11,263,000		14,951,745			8/01/14		—		(543,300	)
Euro		BZWS		Sell		282,898		375,646			8/04/14		—		(13,553	)
Euro		HSBC		Sell		11,263,000		14,928,318			8/04/14		—		(566,847	)
Euro		BZWS		Sell		7,003,000		9,287,659			8/05/14		—		(346,801	)
Malaysian Ringgit		JPHQ		Buy		1,100,000		331,655			8/06/14		218		—
Euro		JPHQ		Sell		5,724,900		7,572,342			8/06/14		—		(303,777	)
Euro		CITI		Sell		1,210,637		1,611,721			8/08/14		—		(53,840	)
Euro		CITI		Sell		351,512		468,384			8/11/14		—		(15,220	)
Euro		DBAB		Sell		4,845,000		6,460,081			8/11/14		—		(205,588	)
Euro		JPHQ		Sell		6,343,900		8,447,664			8/11/14		—		(280,166	)
Malaysian Ringgit		HSBC		Buy		6,100,000		1,853,146			8/12/14		—		(13,296	)
Singapore Dollar		DBAB		Buy		12,363,000		9,768,489			8/12/14		32,888		—
South Korean Won		HSBC		Buy		11,980,000,000		1,018,568,902	JPY		8/12/14		1,532,531		—
Euro		GSCO		Sell		30,376,000		40,668,604			8/12/14		—		(1,122,292	)
Euro		MSCO		Sell		1,962,500		2,604,218			8/15/14		—		(95,784	)
Singapore Dollar		BZWS		Buy		4,886,000		3,847,244			8/18/14		26,435		—
Polish Zloty		DBAB		Buy		59,155,000		13,693,287	EUR		8/19/14		474,018		—
Singapore Dollar		DBAB		Buy		3,667,000		2,892,412			8/19/14		14,837		—

TGB-23

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Templeton Global Bond Securities Fund

Forward Exchange Contracts (continued)

Currency	Counterpartya		Type		Quantity		Contract Amount*			Settlement Date		Unrealized Appreciation		Unrealized Depreciation
Singapore Dollar		HSBC		Buy		3,667,000		2,892,868			8/19/14	$	14,380	$	—
Euro		BZWS		Sell		7,066,000		9,363,510			8/19/14		—		(357,974	)
Japanese Yen		DBAB		Sell		838,612,000		8,543,578			8/19/14		567,004		—
Chilean Peso		MSCO		Buy		981,300,000		1,843,960			8/20/14		—		(21,745	)
Euro		DBAB		Sell		3,964,000		5,294,081			8/20/14		—		(159,650	)
Japanese Yen		HSBC		Sell		1,621,372,000		16,715,175			8/20/14		1,293,124		—
Japanese Yen		JPHQ		Sell		1,135,828,000		11,683,964			8/20/14		880,276		—
Euro		JPHQ		Sell		7,851,000		10,489,250			8/20/14		—		(312,274	)
Japanese Yen		BZWS		Sell		376,247,000		3,880,435			8/22/14		301,607		—
Euro		BZWS		Sell		2,680,925		3,594,021			8/25/14		—		(94,483	)
Japanese Yen		CITI		Sell		751,731,000		7,738,515			8/25/14		587,913		—
Japanese Yen		DBAB		Sell		371,821,000		3,825,870			8/25/14		289,041		—
Japanese Yen		HSBC		Sell		746,218,000		7,662,084			8/25/14		563,922		—
Malaysian Ringgit		HSBC		Buy		1,223,000		363,124			8/26/14		5,500		—
Swedish Krona		UBSW		Buy		30,000,000		3,417,246	EUR		8/26/14		—		(56,907	)
Japanese Yen		BZWS		Sell		1,085,075,000		11,038,403			8/26/14		716,873		—
Japanese Yen		JPHQ		Sell		750,133,000		7,630,942			8/26/14		495,471		—
Malaysian Ringgit		JPHQ		Buy		8,340,000		2,483,399			8/27/14		30,235		—
Singapore Dollar		DBAB		Buy		7,749,500		6,062,348			8/27/14		81,693		—
Euro		CITI		Sell		6,136,805		8,203,374			8/27/14		—		(239,887	)
Japanese Yen		DBAB		Sell		685,950,000		6,949,848			8/27/14		424,842		—
Japanese Yen		HSBC		Sell		1,247,125,000		12,637,176			8/27/14		774,069		—
Euro		HSBC		Sell		18,537,726		24,780,677			8/27/14		—		(724,268	)
Japanese Yen		JPHQ		Sell		751,903,000		7,628,692			8/27/14		476,317		—
Euro		JPHQ		Sell		14,996,625		20,054,025			8/27/14		—		(578,930	)
Euro		DBAB		Sell		1,058,312		1,413,270			8/29/14		—		(42,806	)
Japanese Yen		JPHQ		Sell		372,662,000		3,835,372			8/29/14		290,408		—
Euro		DBAB		Sell		1,732,000		2,293,688			9/03/14		—		(89,310	)
Euro		DBAB		Sell		8,105,300		10,696,483			9/05/14		—		(455,371	)
Japanese Yen		BZWS		Sell		285,057,504		2,895,749			9/18/14		183,609		—
Euro		BZWS		Sell		678,250		906,142			9/19/14		—		(27,077	)
Hungarian Forint		JPHQ		Buy		1,156,013,000		3,813,337	EUR		9/23/14		27,163		—
Euro		DBAB		Sell		8,070,000		10,949,537			9/23/14		—		(154,264	)
Euro		BZWS		Sell		1,647,381		2,230,159			9/24/14		—		(36,538	)
Hungarian Forint		JPHQ		Buy		925,405,000		3,021,829	EUR		9/25/14		63,697		—
Malaysian Ringgit		DBAB		Buy		11,080,500		3,390,087			9/26/14		—		(55,338	)
Malaysian Ringgit		HSBC		Buy		11,490,000		3,513,224			9/26/14		—		(55,234	)
South Korean Won		HSBC		Buy		9,530,000,000		8,719,122			9/26/14		192,355		—
Euro		DBAB		Sell		3,753,000		5,064,392			9/26/14		—		(99,535	)
Euro		BZWS		Sell		6,085,000		8,220,531			9/29/14		—		(152,182	)
Japanese Yen		JPHQ		Sell		285,510,329		2,905,810			9/29/14		189,062		—
Chilean Peso		DBAB		Buy		1,252,750,000		2,393,028			9/30/14		—		(76,402	)
Euro		DBAB		Sell		14,880,000		20,093,506			9/30/14		—		(380,838	)
Euro		GSCO		Sell		4,020,000		5,424,226			9/30/14		—		(107,149	)
Euro		HSBC		Sell		5,430,000		7,340,763			9/30/14		—		(130,722	)
Japanese Yen		JPHQ		Sell		172,207,000		1,746,477			9/30/14		107,837		—
Swedish Krona		DBAB		Buy		445,104,500		69,296,379			10/03/14		—		(431,145	)
Mexican Peso		HSBC		Buy		377,048,070		27,679,754			10/07/14		638,852		—
Euro		JPHQ		Sell		6,370,000		8,687,183			10/07/14		—		(77,915	)
Euro		DBAB		Sell		12,680,000		17,224,258			10/09/14		—		(223,497	)
Mexican Peso		DBAB		Buy		259,112,000		19,136,780			10/14/14		312,605		—
Chilean Peso		CITI		Buy		921,291,798		1,770,693			10/20/14		—		(70,470	)

TGB-24

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Templeton Global Bond Securities Fund

Forward Exchange Contracts (continued)

Currency	Counterpartya		Type		Quantity		Contract Amount*		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
Malaysian Ringgit		JPHQ		Buy		8,104,000		2,505,023		10/20/14	$	—	$	(70,029	)
Euro		HSBC		Sell		12,569,000		17,069,079		10/20/14		—		(226,585	)
Japanese Yen		JPHQ		Sell		1,233,160,000		12,562,755		10/20/14		825,740		—
Malaysian Ringgit		HSBC		Buy		14,613,000		4,556,311		10/22/14		—		(166,169	)
Japanese Yen		BZWS		Sell		735,200,000		7,538,966		10/22/14		541,283		—
Chilean Peso		CITI		Buy		2,420,966,000		4,646,768		10/24/14		—		(180,741	)
Malaysian Ringgit		DBAB		Buy		10,811,000		3,356,932		10/24/14		—		(109,459	)
Malaysian Ringgit		HSBC		Buy		7,209,825		2,226,629		10/24/14		—		(60,899	)
Chilean Peso		BZWS		Buy		199,342,000		381,370		10/27/14		—		(13,750	)
Euro		BZWS		Sell		649,907		894,805		10/27/14		474		—
Chilean Peso		DBAB		Buy		398,486,000		758,732		10/29/14		—		(24,006	)
Malaysian Ringgit		JPHQ		Buy		7,468,000		2,335,210		10/31/14		—		(93,001	)
Euro		DBAB		Sell		3,319,244		4,583,909		10/31/14		16,269		—
Euro		DBAB		Sell		224,556		309,000		11/03/14		—		(16	)
Euro		BZWS		Sell		1,581,109		2,138,292		11/05/14		—		(37,523	)
Japanese Yen		CITI		Sell		341,992,119		3,478,711		11/10/14		222,856		—
Japanese Yen		HSBC		Sell		413,563,000		4,194,351		11/12/14		257,026		—
Euro		JPHQ		Sell		8,969,211		11,959,905		11/12/14		—		(383,206	)
Japanese Yen		JPHQ		Sell		335,950,000		3,397,209		11/13/14		198,760		—
Japanese Yen		MSCO		Sell		300,000,000		3,019,202		11/14/14		162,984		—
Japanese Yen		CITI		Sell		429,663,000		4,339,154		11/17/14		248,301		—
Euro		DBAB		Sell		10,778,730		14,488,984		11/17/14		—		(344,573	)
Euro		MSCO		Sell		1,962,500		2,641,103		11/17/14		—		(59,666	)
Japanese Yen		SCNY		Sell		340,600,700		3,436,315		11/17/14		193,431		—
Malaysian Ringgit		DBAB		Buy		7,197,960		2,208,844		11/19/14		—		(50,517	)
Japanese Yen		CITI		Sell		986,239,000		9,872,460		11/19/14		482,177		—
Japanese Yen		DBAB		Sell		796,770,000		7,970,888		11/19/14		384,598		—
Euro		DBAB		Sell		3,953,398		5,324,831		11/19/14		—		(115,824	)
Malaysian Ringgit		HSBC		Buy		4,326,000		1,328,624		11/20/14		—		(31,550	)
Japanese Yen		CITI		Sell		1,107,834,000		11,116,135		11/20/14		567,981		—
Euro		DBAB		Sell		3,887,000		5,260,471		11/20/14		—		(88,825	)
Japanese Yen		HSBC		Sell		207,909,000		2,085,116		11/20/14		105,527		—
Japanese Yen		JPHQ		Sell		715,709,000		7,176,440		11/20/14		361,873		—
Euro		JPHQ		Sell		15,309,581		20,722,858		11/20/14		—		(346,216	)
Euro		DBAB		Sell		837,570		1,134,907		11/28/14		—		(17,789	)
Euro		DBAB		Sell		5,440,000		7,369,350		12/04/14		—		(117,543	)
Euro		HSBC		Sell		2,155,292		2,941,973		12/09/14		—		(24,334	)
Euro		SCNY		Sell		2,400,751		3,279,738		12/09/14		—		(24,393	)
Euro		JPHQ		Sell		5,095,000		7,027,712		12/15/14		15,369		—
Mexican Peso		CITI		Buy		95,083,400		7,164,750		12/16/14		—		(65,397	)
Malaysian Ringgit		JPHQ		Buy		13,361,013		4,058,384		12/17/14		—		(59,696	)
Mexican Peso		CITI		Buy		45,585,080		3,424,103		12/18/14		—		(21,087	)
Malaysian Ringgit		JPHQ		Buy		14,772,000		4,472,704		12/19/14		—		(52,338	)
Japanese Yen		DBAB		Sell		1,453,310,000		14,169,165		12/22/14		326,205		—
Japanese Yen		HSBC		Sell		1,455,540,000		14,169,149		12/22/14		304,948		—
Japanese Yen		BZWS		Sell		696,650,000		6,718,260		12/26/14		82,259		—
Japanese Yen		CITI		Sell		1,086,780,000		10,480,503		12/26/14		128,284		—
Unrealized appreciation (depreciation)												74,197,203		(52,426,649	)
Net unrealized appreciation (depreciation)											$	21,770,554

^aMay be comprised of multiple contracts using the same currency and settlement date.

*In U.S. dollars unless otherwise indicated.

TGB-25

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Templeton Global Bond Securities Fund

At December 31, 2013, the Fund had the following interest rate swap contracts outstanding. See Note 1(d).

Description	Counterparty/ Exchange		Expiration Date		Notional Amount		Unrealized Appreciation		Unrealized Depreciation
Centrally Cleared Swaps
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 2.775%		DBAB		10/4/23	$	13,090,000	$	227,372	$	—
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 2.795%		DBAB		10/4/23		13,090,000		203,607		—
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 2.765%		HSBC		10/7/23		13,090,000		245,363		—
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 3.668%		DBAB		10/4/43		6,370,000		241,141		—
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 3.687%		DBAB		10/4/43		6,370,000		218,732		—
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 3.675%		HSBC		10/7/43		6,370,000		234,539		—
Centrally Cleared Swaps unrealized appreciation (depreciation)								1,370,754		—
OTC Swaps
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 3.558%		JPHQ		3/4/21	$	3,240,000	$	—	$	(266,148	)
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 3.523%		DBAB		3/28/21		14,630,000		—		(1,124,007	)
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 4.347%		CITI		2/25/41		7,460,000		—		(713,354	)
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 4.349%		JPHQ		2/25/41		7,460,000		—		(716,953	)
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 4.320%		JPHQ		2/28/41		5,600,000		—		(516,449	)
Receive Floating rate 3-month USD BBA LIBOR Pay Fixed rate 4.299%		JPHQ		3/1/41		1,870,000		—		(161,314	)
OTC Swaps unrealized appreciation (depreciation)								—		(3,498,225	)
Total Interest Rate Swaps unrealized appreciation (depreciation)								1,370,754		(3,498,225	)
Net unrealized appreciation (depreciation)									$	(2,127,471	)

The accompanying notes are an integral part of these financial statements.

TGB-26

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

December 31, 2013

	Templeton Global Bond Securities Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	2,646,045,357
Cost - Repurchase agreements		362,770,388
Total cost of investments	$	3,008,815,745
Value - Unaffiliated issuers	$	2,737,095,585
Value - Repurchase agreements		362,770,388
Total value of investments		3,099,865,973
Cash		200,014,736
Restricted Cash (Note 1e)		1,130,000
Foreign currency, at value (cost $55,664,573)		55,784,724
Receivables:
Capital shares sold		2,159,575
Interest		35,402,500
Due from brokers		15,102,968
Variation margin		235,528
Unrealized appreciation on forward exchange contracts		74,197,203
Other assets		72
Total assets		3,483,893,279
Liabilities:
Payables:
Capital shares redeemed		2,184,639
Management fees		1,316,004
Distribution fees		1,314,835
Due to brokers		1,130,000
Unrealized depreciation on forward exchange contracts		52,426,649
Unrealized depreciation on OTC swap contracts		3,498,225
Deferred tax		1,660,320
Accrued expenses and other liabilities		1,093,561
Total liabilities		64,624,233
Net assets, at value	$	3,419,269,046
Net assets consist of:
Paid-in capital	$	3,209,576,714
Undistributed net investment income		104,975,944
Net unrealized appreciation (depreciation)		109,051,786
Accumulated net realized gain (loss)		(4,335,398	)
Net assets, at value	$	3,419,269,046

The accompanying notes are an integral part of these financial statements.

TGB-27

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Assets and Liabilities (continued)

December 31, 2013

	Templeton Global Bond Securities Fund
Class 1:
Net assets, at value	$	280,962,552
Shares outstanding		14,668,077
Net asset value and maximum offering price per share	$	19.15
Class 2:
Net assets, at value	$	2,826,039,424
Shares outstanding		151,940,953
Net asset value and maximum offering price per share	$	18.60
Class 3:
Net assets, at value	$	194,121,714
Shares outstanding		10,427,807
Net asset value and maximum offering price per sharea	$	18.62
Class 4:
Net assets, at value	$	118,145,356
Shares outstanding		6,229,133
Net asset value and maximum offering price per share	$	18.97

^aRedemption price is equal to net asset value less redemption fees retained by the Fund.

The accompanying notes are an integral part of these financial statements.

TGB-28

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the year ended December 31, 2013

	Templeton Global Bond Securities Fund
Investment income:
Interest (net of foreign taxes of $3,046,677)	$	125,459,123
Expenses:
Management fees (Note 3a)		15,206,841
Distribution fees: (Note 3c)
Class 2		6,709,408
Class 3		494,110
Class 4		512,425
Unaffiliated transfer agent fees		1,833
Custodian fees (Note 4)		1,262,335
Reports to shareholders		460,112
Professional fees		104,376
Trustees’ fees and expenses		13,018
Other		49,965
Total expenses		24,814,423
Expense reductions (Note 4)		(3,497	)
Net expenses		24,810,926
Net investment income		100,648,197
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		(4,233,228	)
Foreign currency transactions		52,343,687
Swap contracts		(996,665	)
Net realized gain (loss)		47,113,794
Net change in unrealized appreciation (depreciation) on:
Investments		(91,405,625	)
Translation of other assets and liabilities denominated in foreign currencies		(10,160,429	)
Change in deferred taxes on unrealized appreciation		3,057,943
Net change in unrealized appreciation (depreciation)		(98,508,111	)
Net realized and unrealized gain (loss)		(51,394,317	)
Net increase (decrease) in net assets resulting from operations	$	49,253,880

The accompanying notes are an integral part of these financial statements.

TGB-29

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets

	Templeton Global Bond Securities Fund
	Year Ended December 31,
	2013			2012
Increase (decrease) in net assets:
Operations:
Net investment income	$	100,648,197		$	95,705,827
Net realized gain (loss) from investments, foreign currency transactions and swap contracts		47,113,794			113,860,368
Net change in unrealized appreciation (depreciation) on investments, translation of other assets and liabilities denominated in foreign currencies and deferred taxes		(98,508,111	)		173,490,240
Net increase (decrease) in net assets resulting from operations		49,253,880			383,056,435
Distributions to shareholders from:
Net investment income and net foreign currency gains:
Class 1		(14,463,879	)		(18,014,760	)
Class 2		(128,696,606	)		(133,749,946	)
Class 3		(9,351,774	)		(12,114,860	)
Class 4		(7,129,387	)		(9,763,141	)
Net realized gains:
Class 1		(3,587,066	)		(438,387	)
Class 2		(33,227,731	)		(3,357,784	)
Class 3		(2,438,218	)		(306,543	)
Class 4		(1,906,223	)		(251,144	)
Total distributions to shareholders		(200,800,884	)		(177,996,565	)
Capital share transactions: (Note 2)
Class 1		(13,273,114	)		15,415,298
Class 2		529,969,403			448,524,053
Class 3		4,794,164			(2,060,465	)
Class 4		(37,369,362	)		(394,730	)
Total capital share transactions		484,121,091			461,484,156
Redemption fees		7,288			6,086
Net increase (decrease) in net assets		332,581,375			666,550,112
Net assets:
Beginning of year		3,086,687,671			2,420,137,559
End of year	$	3,419,269,046		$	3,086,687,671
Undistributed net investment income included in net assets:
End of year	$	104,975,944		$	114,278,705

The accompanying notes are an integral part of these financial statements.

TGB-30

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements

Templeton Global Bond Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment company, consisting of twenty separate funds. The Templeton Global Bond Securities Fund (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. The Fund offers four classes of shares: Class 1, Class 2, Class 3, and Class 4. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

The Fund’s investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Fund calculates the net asset value (NAV) per share at the close of the New York Stock Exchange (NYSE), generally at 4p.m. Eastern time (NYSE close) on each day the NYSE is open for trading. Under procedures approved by the Trust’s Board of Trustees (the Board), the Fund’s administrator, investment manager and other affiliates have formed the Valuation and Liquidity Oversight Committee (VLOC). The VLOC provides administration and oversight of the Fund’s valuation policies and procedures, which are approved annually by the Board. Among other things, these procedures allow the Fund to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

Debt securities generally trade in the Over-the-counter (OTC) market rather than on a securities exchange. The Fund’s pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value. Securities denominated in a foreign currency are converted into their U.S. dollar equivalent at the foreign exchange rate in effect at the NYSE close on the date that the values of the foreign debt securities are determined. Repurchase agreements are valued at cost, which approximates market value.

Derivative financial instruments (derivatives) listed on an exchange are valued at the official closing price of the day. Certain derivatives trade in the OTC market. The Fund’s pricing services use various techniques including industry standard option pricing models and proprietary discounted cash flow models to determine the fair value of those instruments. The Fund’s net benefit or obligation under the derivative contract, as measured by the fair value of the contract, is included in net assets.

The Fund has procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the VLOC convenes on a regular basis to review such financial instruments and considers a number of factors, including significant unobservable valuation inputs, when arriving at fair value. The VLOC primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. The VLOC employs various methods for calibrating these valuation approaches including a regular review of key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.

TGB-31

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Templeton Global Bond Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

b. Foreign Currency Translation

Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Fund may enter into foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. Portfolio securities and assets and liabilities denominated in foreign currencies contain risks that those currencies will decline in value relative to the U.S. dollar. Occasionally, events may impact the availability or reliability of foreign exchange rates used to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Board.

The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments on the Statement of Operations.

Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period.

c. Joint Repurchase Agreement

The Fund enters into a joint repurchase agreement whereby its uninvested cash balance is deposited into a joint cash account with other funds managed by the investment manager or an affiliate of the investment manager and is used to invest in one or more repurchase agreements. The value and face amount of the joint repurchase agreement are allocated to the funds based on their pro-rata interest. A repurchase agreement is accounted for as a loan by the Fund to the seller, collateralized by securities which are delivered to the Fund’s custodian. The market value, including accrued interest, of the initial collateralization is required to be at least 102% of the dollar amount invested by the funds, with the value of the underlying securities marked to market daily to maintain coverage of at least 100%. Repurchase agreements are subject to the terms of Master Repurchase Agreements (MRAs) with approved counterparties (sellers). The MRAs contain various provisions, including but not limited to events of default and maintenance of collateral for repurchase agreements. In the event of default by either the seller or the Fund, certain MRAs may permit the non-defaulting party to net and close-out all transactions, if any, traded under such agreements. The Fund may sell securities it holds as collateral and apply the proceeds towards the repurchase price and any other amounts owed by the seller to the Fund in the event of default by the seller. This could involve costs or delays in addition to a loss on the securities if their value falls below the repurchase price owed by the seller. The joint repurchase agreement held by the Fund at year end, as indicated in the Statement of Investments, had been entered into on December 31, 2013.

d. Derivative Financial Instruments

The Fund invested in derivatives in order to manage risk or gain exposure to various other investments or markets. Derivatives are financial contracts based on an underlying or notional amount, require no initial investment or an initial net investment that is smaller than would normally be required to have a similar response to changes in market factors, and require or permit net settlement. Derivatives contain various risks including the potential inability of the counterparty to fulfill their obligations under the terms of the contract, the potential for an illiquid secondary market, and/or the potential for market movements which expose the Fund to gains or losses in excess of the amounts shown on the Statement of Assets and Liabilities. Realized gain and loss and unrealized appreciation and depreciation on these contracts for the period are included in the Statement of Operations.

TGB-32

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Templeton Global Bond Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

d. Derivative Financial Instruments (continued)

Derivative counterparty credit risk is managed through a formal evaluation of the creditworthiness of all potential counterparties. The Fund attempts to reduce its exposure to counterparty credit risk on OTC derivatives, whenever possible, by entering into International Swaps and Derivatives Association (ISDA) master agreements with certain counterparties. These agreements contain various provisions, including but not limited to collateral requirements, events of default, or early termination. Termination events applicable to the counterparty include certain deteriorations in the credit quality of the counterparty. Termination events applicable to the Fund include failure of the Fund to maintain certain net asset levels and/or limit the decline in net assets over various periods of time. In the event of default or early termination, the ISDA master agreement gives the non-defaulting party the right to net and close-out all transactions traded, whether or not arising under the ISDA agreement, to one net amount payable by one counterparty to the other. However, absent an event of default or early termination, OTC derivative assets and liabilities are presented gross and not offset in the Statement of Assets and Liabilities. Early termination by the counterparty may result in an immediate payment by the Fund of any net liability owed to that counterparty under the ISDA agreement.

Collateral requirements differ by type of derivative. Collateral or initial margin requirements are set by the broker or exchange clearing house for exchange traded and centrally cleared derivatives. Initial margin deposited is held at the exchange and can be in the form of cash and/or securities. For OTC derivatives traded under an ISDA master agreement, posting of collateral is required by either the fund or the applicable counterparty if the total net exposure of all OTC derivatives with the applicable counterparty exceeds the minimum transfer amount, which typically ranges from $100,000 to $250,000, and can vary depending on the counterparty and the type of the agreement. Generally, collateral is determined at the close of fund business each day and any additional collateral required due to changes in derivative values may be delivered by the fund or the counterparty within a few business days. Collateral pledged and/or received by the fund for OTC derivatives, if any, is held in segregated accounts with the fund’s custodian/counterparty broker and can be in the form of cash and/or securities. Unrestricted cash may be invested according to the Fund’s investment objectives.

The Fund entered into OTC forward exchange contracts primarily to manage and/or gain exposure to certain foreign currencies. A forward exchange contract is an agreement between the Fund and a counterparty to buy or sell a foreign currency at a specific exchange rate on a future date.

The Fund entered into interest rate swap contracts primarily to manage interest rate risk. An interest rate swap is an agreement between the Fund and a counterparty to exchange cash flows based on the difference between two interest rates, applied to a notional amount. These agreements may be privately negotiated in the over-the-counter market (“OTC interest rate swaps”) or may be executed on a registered exchange (“centrally cleared interest rate swaps”). For centrally cleared interest rate swaps, required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable on the Statement of Assets and Liabilities. Over the term of the contract, contractually required payments to be paid and to be received are accrued daily and recorded as unrealized depreciation and appreciation until the payments are made, at which time they are realized.

See Note 9 regarding other derivative information.

e. Restricted Cash

At December 31, 2013, the Fund received restricted cash in connection with investments in certain derivative securities. Restricted cash is held in a segregated account with the Fund’s counterparty broker and is reflected in the Statement of Assets and Liabilities.

TGB-33

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Templeton Global Bond Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

f. Income and Deferred Taxes

It is the Fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and if applicable, excise taxes. As a result, no provision for U.S. federal income taxes is required.

The Fund may be subject to foreign taxation related to income received, capital gains on the sale of securities and certain foreign currency transactions in the foreign jurisdictions in which it invests. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests. When a capital gain tax is determined to apply the Fund records an estimated deferred tax liability in an amount that would be payable if the securities were disposed of on the valuation date.

The Fund recognizes the tax benefits of uncertain tax positions only when the position is “more likely than not” to be sustained upon examination by the tax authorities based on the technical merits of the tax position. As of December 31, 2013, and for all open tax years, the Fund has determined that no liability for unrecognized tax benefits is required in the Fund’s financial statements related to uncertain tax positions taken on a tax return (or expected to be taken on future tax returns). Open tax years are those that remain subject to examination and are based on each tax jurisdiction statute of limitation.

g. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Amortization of premium and accretion of discount on debt securities are included in interest income. Distributions to shareholders are recorded on the ex-dividend date and are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with accounting principles generally accepted in the United States of America. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.

Common expenses incurred by the Trust are allocated among the funds based on the ratio of net assets of each fund to the combined net assets of the Trust. Fund specific expenses are charged directly to the fund that incurred the expense.

Realized and unrealized gains and losses and net investment income, not including class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions, by class, are generally due to differences in class specific expenses.

Inflation-indexed bonds are adjusted for inflation through periodic increases or decreases in the security’s interest accruals, face amount, or principal redemption value, by amounts corresponding to the rate of inflation as measured by an index. Any increase or decrease in the face amount or principal redemption value will be included as interest income on the Statement of Operations.

h. Accounting Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

TGB-34

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Templeton Global Bond Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

i. Redemption Fees

Redemptions and exchanges of interests in an insurance company subaccount that invests in Class 3 shares of the Fund will be subject to a 1.0% short term trading fee if the interest in the subaccount has been held for less than 60 days. Such fees are retained by the Fund and accounted for as an addition to paid-in capital, allocated to each class of shares based upon the relative proportion of net assets of each class.

j. Guarantees and Indemnifications

Under the Trust’s organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust, on behalf of the Fund, enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.

2. SHARES OF BENEFICIAL INTEREST

At December 31, 2013, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:

	Year Ended December 31,
	2013						2012
Class 1 Shares:	Shares			Amount			Shares			Amount
Shares sold		1,918,229		$	37,822,305			2,650,014		$	51,366,352
Shares issued in reinvestment of distributions		962,717			18,050,945			1,028,604			18,453,147
Shares redeemed		(3,563,965	)		(69,146,364	)		(2,823,320	)		(54,404,201	)
Net increase (decrease)		(683,019	)	$	(13,273,114	)		855,298		$	15,415,298
Class 2 Shares:
Shares sold		34,876,621		$	667,964,958			28,727,828		$	540,675,595
Shares issued in reinvestment of distributions		8,877,431			161,924,337			7,843,692			137,107,730
Shares redeemed		(16,008,448	)		(299,919,892	)		(12,232,820	)		(229,259,272	)
Net increase (decrease)		27,745,604		$	529,969,403			24,338,700		$	448,524,053
Class 3 Shares:
Shares sold		1,022,231		$	19,570,327			835,292		$	15,856,382
Shares issued in reinvestment of distributions		646,027			11,789,991			710,200			12,421,403
Shares redeemed		(1,409,425	)		(26,566,154	)		(1,613,494	)		(30,338,250	)
Net increase (decrease)		258,833		$	4,794,164			(68,002	)	$	(2,060,465	)
Class 4 Shares:
Shares sold		892,452		$	17,199,730			871,336		$	16,701,133
Shares issued on reinvestment of distributions		485,524			9,035,611			562,284			10,014,286
Shares redeemed		(3,385,215	)		(63,604,703	)		(1,421,448	)		(27,110,149	)
Net increase (decrease)		(2,007,239	)	$	(37,369,362	)		12,172		$	(394,730	)

TGB-35

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Templeton Global Bond Securities Fund

3. TRANSACTIONS WITH AFFILIATES

Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton Investments. Certain officers and trustees of the Fund are also officers and/or directors of the following subsidiaries:

Subsidiary	Affiliation
Franklin Advisers, Inc. (Advisers)	Investment manager
Franklin Templeton Services, LLC (FT Services)	Administrative manager
Franklin Templeton Distributors, Inc. (Distributors)	Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services)	Transfer agent

a. Management Fees

The Fund pays an investment management fee to Advisers based on the average daily net assets of the Fund as follows:

Annualized Fee Rate	Net Assets
0.625%	Up to and including $100 million
0.500%	Over $100 million, up to and including $250 million
0.450%	Over $250 million, up to and including $7.5 billion
0.440%	Over $7.5 billion, up to and including $10 billion
0.430%	Over $10 billion, up to and including $12.5 billion
0.420%	Over $12.5 billion, up to and including $15 billion
0.400%	In excess of $15 billion

b. Administrative Fees

Under an agreement with Advisers, FT Services provides administrative services to the Fund. The fee is paid by Advisers based on the Fund’s average daily net assets, and is not an additional expense of the Fund.

c. Distribution Fees

The Board has adopted distribution plans for Class 2, Class 3, and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to 0.25%, 0.35%, and 0.35% per year of its average daily net assets of Class 2, Class 3, and Class 4, respectively. Some distribution fees are not charged on shares held by affiliates. The Board has agreed to limit the current rate to 0.25% per year for Class 3. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.

d. Transfer Agent Fees

Investor Services, under terms of an agreement, performs shareholder servicing for the Fund and is not paid by the Fund for the services.

4. EXPENSE OFFSET ARRANGEMENT

The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses. During the year ended December 31, 2013, the custodian fees were reduced as noted in the Statement of Operations.

TGB-36

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Templeton Global Bond Securities Fund

5. INCOME TAXES

For tax purposes, capital losses may be carried over to offset future capital gains. At December 31, 2013, the Fund had long-term capital loss carryforwards of $4,268,308.

The tax character of distributions paid during the years ended December 31, 2013 and 2012, was as follows:

	2013		2012
Distributions paid from:
Ordinary income	$	159,641,646	$	173,642,707
Long term capital gain		41,159,238		4,353,858
	$	200,800,884	$	177,996,565

At December 31, 2013, the cost of investments, net unrealized appreciation (depreciation) and undistributed ordinary income for income tax purposes were as follows:

Cost of investments	$	3,028,483,990
Unrealized appreciation	$	143,431,341
Unrealized depreciation		(72,049,358	)
Net unrealized appreciation (depreciation)	$	71,381,983
Distributable earnings - undistributed ordinary income	$	177,849,072

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of foreign currency transactions, bond discounts and premiums, tax straddles.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the year ended December 31, 2013, aggregated $1,063,004,404 and $826,160,004, respectively.

7. CREDIT RISK

At December 31, 2013, the Fund had 10.46% of its portfolio invested in high yield or other securities rated below investment grade. These securities may be more sensitive to economic conditions causing greater price volatility and are potentially subject to a greater risk of loss due to default than higher rated securities.

8. CONCENTRATION OF RISK

Investing in foreign securities may include certain risks and considerations not typically associated with investing in U.S. securities, such as fluctuating currency values and changing local and regional economic, political and social conditions, which may result in greater market volatility. In addition, certain foreign securities may not be as liquid as U.S. securities.

TGB-37

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Templeton Global Bond Securities Fund

9. OTHER DERIVATIVE INFORMATION

At December 31, 2013, the Fund’s investments in derivative contracts are reflected on the Statement of Assets and Liabilities as follows:

	Asset Derivatives			Liability Derivatives
Derivative Contracts Not Accounted for as Hedging Instruments	Statement of Assets and Liabilities Location	Fair Value Amount		Statement of Assets and Liabilities Location	Fair Value Amount
Interest rate contracts	Variation margin / Net assets consist of – net unrealized appreciationa	$	1,370,754	Unrealized depreciation on swap contracts / Net assets consist of – net unrealized depreciation	$	3,498,225
Foreign exchange contracts	Unrealized appreciation on forward exchange contracts / Net assets consist of – net unrealized appreciation		74,197,203	Unrealized depreciation on forward exchange contracts / Net assets consist of – net unrealized depreciation		52,426,649

^aIncludes cumulative appreciation (depreciation) of centrally cleared swaps as reported in the Statement of Investments. Only current day’s variation margin is separately reported within the Statement of Assets and Liabilities.

For the year ended December 31, 2013, the effect of derivative contracts on the Fund’s Statement of Operations was as follows:

Derivative Contracts Not Accounted for as Hedging Instruments	Statement of Operations Locations	Realized Gain (Loss) for the Year			Change in Unrealized Appreciation (Depreciation) for the Year
Interest rate contracts	Net realized gain (loss) from swap contracts / Net change in unrealized appreciation (depreciation) on investments	$	(996,665	)	$	8,336,928
Foreign exchange contracts	Net realized gain (loss) from foreign currency transactions / Net change in unrealized appreciation (depreciation) on translation of other assets and liabilities denominated in foreign currencies		55,154,098			(9,671,096	)

At December 31, 2013, the Fund’s OTC derivative assets and liabilities, are as follows:

	Gross and Net Amounts of Assets and Liabilities Presented in the Statement of Assets and Liabilities
	Assetsa		Liabilitiesa
Derivatives
Forward Exchange Contracts	$	74,197,203	$	52,426,649
Swap Contracts		—		3,498,225
Total	$	74,197,203	$	55,924,874

^a  Absent an event of default or early termination, OTC derivative assets and liabilities are presented gross and not offset in the Statement of Assets and Liabilities.

TGB-38

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Templeton Global Bond Securities Fund

9. OTHER DERIVATIVE INFORMATION (continued)

At December 31, 2013, the Fund’s OTC derivative assets which may be offset against the Fund’s OTC derivative liabilities and collateral received from the counterparty, is as follows:

			Amounts Not Offset in the Statement of Assets and Liabilities
	Gross and Net Amounts of Assets Presented in the Statement of Assets and Liabilities		Financial Instruments Available for Offset			Financial Instruments Collateral Receiveda			Cash Collateral Received			Net Amount (Not less than zero)
Counterparty
BZWS	$	9,228,241	$	(7,879,050	)	$	—		$	(1,130,000	)	$	219,191
CITI		10,476,010		(5,323,823	)		(4,651,652	)		—			500,535
DBAB		13,615,878		(13,615,878	)		—			—			—
GSCO		1,834,450		(1,834,450	)		—			—			—
HSBC		15,523,320		(4,023,395	)		(10,901,026	)		—			598,899
JPHQ		17,306,073		(7,652,563	)		(9,142,201	)		—			511,309
MSCO		776,074		(776,074	)		—			—			—
SCNY		193,431		(24,393	)		—			—			169,038
UBSW		5,243,726		(3,611,556	)		(989,024	)		—			643,146
Total	$	74,197,203	$	(44,741,182	)	$	(25,683,903	)	$	(1,130,000	)	$	2,642,118

^a  At December 31, 2013, the Fund received United Kingdom Treasury Bonds and United States Treasury Notes as collateral for derivatives.

At December 31, 2013, the Fund’s OTC derivative liabilities which may be offset against the Fund’s OTC derivative assets and collateral pledged to the counterparty, is as follows:

			Amounts Not Offset in the Statement of Assets and Liabilities
	Gross and Net Amounts of Liabilities Presented in the Statement of Assets and Liabilities		Financial Instruments Available for Offset			Financial Instruments Collateral Pledged		Cash Collateral Pledgeda			Net Amount (Not less than zero)
Counterparty
BZWS	$	7,879,050	$	(7,879,050	)	$	—	$	—		$	—
CITI		5,323,823		(5,323,823	)		—		—			—
DBAB		18,018,700		(13,615,878	)		—		(4,402,822	)		—
GSCO		5,102,598		(1,834,450	)		—		(3,080,000	)		188,148
HSBC		4,023,395		(4,023,395	)		—		—			—
JPHQ		7,652,563		(7,652,563	)		—		—			—
MSCO		4,288,796		(776,074	)		—		(3,512,722	)		—
SCNY		24,393		(24,393	)		—		—			—
UBSW		3,611,556		(3,611,556	)		—		—			—
Total	$	55,924,874	$	(44,741,182	)	$	—	$	(10,995,544	)	$	188,148

^a  In some instances, the collateral amounts disclosed in the table above were adjusted due to the requirement to limit the collateral amounts to avoid the effect of overcollateralization. Actual collateral received and/or pledged may be more than the amounts disclosed herein.

TGB-39

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Templeton Global Bond Securities Fund

9. OTHER DERIVATIVE INFORMATION (continued)

For the year ended December 31, 2013, the average month end fair value of derivatives represented 3.58% of average month end net assets. The average month end number of open derivative contracts for the year was 454.

See Note 1(d) regarding derivative financial instruments.

10. CREDIT FACILITY

The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $1.5 billion (Global Credit Facility) which, after an extension of the original terms, matured on February 14, 2014. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. Effective February 14, 2014, the Borrowers renewed the Global Credit Facility which matures on February 13, 2015.

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.07% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses on the Statement of Operations. During the year ended December 31, 2013, the Fund did not use the Global Credit Facility.

11. FAIR VALUE MEASUREMENTS

The Fund follows a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Fund’s own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund’s financial instruments and are summarized in the following fair value hierarchy:

• Level 1 – quoted prices in active markets for identical financial instruments

• Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)

• Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of financial instruments)

The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.

For movements between the levels within the fair value hierarchy, the Fund has adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.

TGB-40

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Templeton Global Bond Securities Fund

11. FAIR VALUE MEASUREMENTS (continued)

A summary of inputs used as of December 31, 2013, in valuing the Fund’s assets and liabilities carried at fair value, is as follows:

	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities:
Foreign Government and Agency Securities	$	—	$	2,244,885,649	$	—	$	2,244,885,649
Municipal Bonds		—		1,510,654		—		1,510,654
Short Term Investments		—		853,469,670		—		853,469,670
Total Investments in Securities	$	—	$	3,099,865,973	$	—	$	3,099,865,973
Forward Exchange Contracts		—		74,197,203		—		74,197,203
Swaps		—		1,370,754		—		1,370,754
Liabilities:
Forward Exchange Contracts		—		52,426,649		—		52,426,649
Swaps		—		3,498,225		—		3,498,225

12. NEW ACCOUNTING PRONOUNCEMENTS

In June 2013, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2013-08, Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements. The ASU modifies the criteria used in defining an investment company under U.S. Generally Accepted Accounting Principles and also sets forth certain measurement and disclosure requirements. Under the ASU, an entity that is registered under the 1940 Act automatically qualifies as an investment company. The ASU is effective for interim and annual reporting periods beginning after December 15, 2013. Management has reviewed the requirements and believe the adoption of this ASU will not have a material impact on the financial statements.

13. SUBSEQUENT EVENTS

The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure other than those already disclosed in the financial statements.

ABBREVIATIONS
Counterparty	Currency	Selected Portfolio
BZWS - Barclays Bank PLC	BRL - Brazilian Real	BHAC - Berkshire Hathaway Assurance Corp.
CITI - Citigroup, Inc.	CAD - Canadian Dollar	FRN - Floating Rate Note
DBAB - Deutsche Bank AG	EUR - Euro
GSCO - Goldman Sachs Bank	HUF - Hungarian Forint
HSBC - HSBC Bank USA, N.A.	IDR - Indonesian Rupiah
JPHQ - JPMorgan Chase & Co.	KRW - South Korean Won
MSCO - Morgan Stanley	LKR - Sri Lankan Rupee
SCNY - Standard Chartered Bank	MXN - Mexican Peso
UBSW - UBS AG	MYR - Malaysian Ringgit
	PEN - Peruvian Nuevo Sol
	PHP - Philippine Peso
	PLN - Polish Zloty
	SEK - Swedish Krona
	SGD - Singapore Dollar

TGB-41

Franklin Templeton Variable Insurance Products Trust

Templeton Global Bond Securities Fund

Report of Independent Registered Public Accounting Firm

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 Bond Securities Fund (the “Fund”) at December 31, 2013, 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 five years in the period then ended, 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2013 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

February 14, 2014

TGB-42

Franklin Templeton Variable Insurance Products Trust

Tax Information (unaudited)

Templeton Global Bond Securities Fund

Under Section 852(b)(3)(C) of the Internal Revenue Code (Code), the Fund hereby reports the maximum amount allowable but no less than $41,159,238 as a long term capital gain dividend for the fiscal year ended December 31, 2013.

At December 31, 2013, more than 50% of the Fund’s total assets were invested in securities of foreign issuers. In most instances, foreign taxes were withheld from income paid to the Fund on these investments. The Fund elects to treat foreign taxes paid as allowed under Section 853 of the Code. This election will allow shareholders of record as of the 2014 distribution date, 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.

TGB-43

TEMPLETON GROWTH SECURITIES FUND

We are pleased to bring you Templeton Growth Securities Fund’s annual report for the fiscal year ended December 31, 2013.

Performance Summary as of 12/31/13

Average annual total return of Class 4 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.

Periods ended 12/31/13

	1-Year		5-Year		10-Year
Average Annual Total Return		+30.64%		+15.59%		+6.57%

*For the period beginning 2/29/08, Class 4 performance reflects a 12b-1 fee expense of 0.35% per year, which affects future performance. Class 4 performance prior to 2/29/08 reflects historical Class 1 performance, which does not have a 12b-1fee expense. Since 2/29/08 (effective date), the average annual total return of Class 4 shares was +4.94%.

Total Return Index Comparison

for a Hypothetical $10,000 Investment (1/1/04–12/31/13)

The graph below shows the change in value of a hypothetical $10,000 investment in the Fund over the indicated period and includes reinvestment of any income or distributions. The Fund’s performance* is compared to the performance of the MSCI World Index and the MSCI All Country World Index (ACWI). One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Important Notes to Performance Information preceding the Fund Summaries.

**Source: © 2014 Morningstar. Please see Index Descriptions following the Fund Summaries.

Templeton Growth Securities Fund – Class 4

Performance reflects the Fund’s Class 4 operating expenses, but does not include any contract fees, expenses or sales charges. If they had been included, performance would be lower. These charges and deductions, particularly for variable life policies, can have a significant effect on contract values and insurance benefits. See the contract prospectus for a complete description of these expenses, including sales charges.

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares.

Current performance may differ from figures shown.

TG-1

Fund Goal and Main Investments: Templeton Growth Securities Fund seeks long-term capital growth. Under normal market conditions, the Fund invests predominantly in equity securities of companies located anywhere in the world, including those in the U.S. and in emerging markets.

Performance Overview

You can find the Fund’s one-year total return in the Performance Summary. For comparison, the Fund’s benchmarks, the MSCI ACWI and the MSCI World Index, had total returns of +23.44% and +27.36% for the period under review.¹

Economic and Market Overview

The 12 months under review were characterized by reinvigorated policy support and an economic recovery in developed markets. However, differences in global economic trends corresponded with increasingly divergent monetary policies, and growth in emerging market economies tended to slow. The central banks of key developed markets generally reaffirmed their accommodative monetary stances while some emerging market counterparts tightened policy rates as they sought to control inflation and currency depreciation.

In the U.S., economic growth and employment trends generally exceeded expectations. The U.S. Federal Reserve Board (Fed) expanded its asset purchase program to $85 billion per month from $40 billion early in the year. After encouraging economic and employment reports, the Fed announced in December it would reduce its monthly bond purchases by $10 billion beginning in January 2014; however, the Fed committed to keeping interest rates low. In October, the federal government temporarily shut down after Congress failed to authorize routine federal funding amid a disagreement over a new health care law. However, Congress subsequently agreed to fund the government through early 2014 and later passed a two-year budget deal that could ease automatic spending cuts and lower the risk of another shutdown.

Outside the U.S., the eurozone emerged from its longest recession on record during 2013’s second half and Japan’s growth moderated. The European Central Bank reduced its policy rate to a record low and pledged to maintain systemic support following political turmoil in Greece, Spain, Portugal and Italy. Germany’s re-election of Chancellor

1. Source: © 2014 Morningstar. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.

Fund Risks: All investments involve risks, including possible loss of principal. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments; investments in emerging markets involve heightened risks related to the same factors. To the extent that the Fund focuses on particular countries, regions, industries, sectors or types of investment from time to time, it may be subject to greater risks of adverse developments in such areas of focus than a fund that invests in a wider variety of countries, regions, industries, sectors or investments. Current political uncertainty surrounding the European Union (EU) and its membership may increase market volatility. The financial instability of some countries in the EU, including Greece, Italy and Spain, together with the risk of that impacting other more stable countries, may increase the economic risk of investing in companies in Europe. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

TG-2

Angela Merkel was largely perceived as a vote of support for ongoing eurozone reform measures. In Asia, the Bank of Japan set an explicit inflation target and pledged to double bond purchases in an unprecedented wave of policy reform. The U.S. dollar fell versus the euro but rose versus the Japanese yen in 2013.

Growth in many emerging markets moderated based on lower domestic demand, falling exports and weakening commodity prices. Political turmoil in certain emerging markets, the Fed’s potential tapering of its asset purchase program and the Chinese central bank’s effort to tighten liquidity to curb real estate and credit speculation led to a sell-off in emerging market equities and a sharp depreciation in regional currencies against the U.S. dollar. Central banks in Brazil, India and Indonesia raised interest rates in the second half of 2013 as they sought to curb inflation.

The stock market rally in developed markets accelerated during 2013 amid redoubled central bank commitments, continued corporate earnings strength and increasing signs of economic progress. Emerging market stocks rebounded toward period-end, although Latin American stocks trailed their emerging market peers. Oil prices rallied in the third quarter and rose for the year mainly owing to supply concerns related to geopolitical turmoil, but gold posted its largest annual price decline in more than three decades. Increasingly divergent economic and political circumstances during the period resulted in declining market correlations, which many bottom-up investors perceived as more favorable.

Investment Strategy

Our investment philosophy is bottom up, value oriented and long term. In choosing investments, we will focus on the market price of a company’s securities relative to our evaluation of the company’s potential long-term earnings, asset value and cash flow. Among factors we may consider are a company’s historical value measures, including price/earnings ratio, profit margins and liquidation value. We do in-depth research to construct a bargain list from which we buy.

Manager’s Discussion

The year 2013 brought progress to financial markets and the global economy as stabilization for key financial institutions and declining equity correlations allowed investors to refocus on fundamentals, benefiting bottom-up stock pickers like us.

TG-3

All of the Fund’s major stock sectors and most regional positions delivered double-digit returns. The Fund performed better than its benchmarks during the review period. Encouragingly for us as bottom-up investors, stock selection helped drive performance relative to the MSCI ACWI as market conditions seemed to us to permit value recognition at the stock level following a prolonged period of high stock correlations. Also encouraging to us was the fact that many of the Fund’s highest conviction, long-term holdings aided results.

Financials was a top sector contributor, particularly in Europe, where in recent years we acquired positions in out-of-favor banks and insurers amid extreme investor pessimism.² For example, French insurer AXA was a leading contributor as its share price reached a post-financial crisis high. In our view, AXA management’s focus on margin expansion helped drive cash flow improvements and kept the company on track to meet operating targets. AXA managed its balance sheet and peripheral debt exposure well during the financial crisis and recently benefited from robust earnings momentum created during that uncertain economic environment. Although our European financials stocks rallied from historically low valuations, they continued to trade at significant discounts to their global peers and the broader European market. To us, European financials offered further upside potential as restructuring continued amid an improving economic outlook. Our financials positions also included well-capitalized U.S. and Asian banks with what we viewed as competitive advantages across domestic and international markets.

Economically sensitive industrials holdings also benefited from strategic initiatives and a stabilizing global economy.³ European airlines were leading sector contributors, including International Consolidated Airlines Group (IAG). The U.K.-based airline conglomerate’s share price reached a six-year high and earnings rose as the parent company of British Airways cut costs, rationalized capacity and benefited from recovering air passenger traffic. We believe IAG made significant strides in improving labor relations at its Iberia unit, in completing the acquisition of profitable, low-cost airline Vueling, and in meeting its medium-term operating targets. Although we remained optimistic given the stock’s discount to our projection of IAG’s long-term business value, we

2. The financials sector comprises capital markets, commercial banks, consumer finance, diversified financial services and insurance in the SOI.

3. The industrials sector comprises aerospace and defense, air freight and logistics, airlines, commercial services and supplies, construction and engineering, electrical equipment, industrial conglomerates, machinery, professional services, and trading companies and distributors in the SOI.

TG-4

reduced exposure to realize significant gains after the stock price doubled in value in 2013. Dutch staffing firm Randstad Holding, another top industrials sector holding, rallied after strong operating results attested to many investors the company’s ability to preserve profitability despite continued labor market tightness.

Health care was a long-standing overweighting that bolstered relative performance, led by Swiss biotechnology specialist Roche Holding.⁴ Roche’s share price rose to a record level after the company reported higher oncology sales, and we think investors appeared to recognize the depth we see in Roche’s product pipeline. In our opinion, shares remained undervalued given Roche’s stable outlook, rising margins and strong free cash-flow generation. The company returned much of the cash flow to shareholders as dividends. We continued to find a number of biotechnology stocks like Roche with what we viewed as undervalued growth prospects to complement our more mature pharmaceuticals holdings. In our view, major pharmaceuticals firms still offered opportunities, but have become more fully valued in recent quarters; consistent with our investment thesis in the sector, cost cutting, productivity improvements and strategic mergers and acquisitions have helped big pharmaceutical firms survive the much-feared patent cliffs.

Below-benchmark allocations and stock selection in the materials and consumer staples sectors also contributed to relative performance.⁵ Our caution in the sectors was rewarded as what we viewed as expensive materials stocks with dubious fundamentals and consumer staples stocks facing margin pressures trailed broader market gains. We found what we believe to be more attractive opportunities in the consumer discretionary sector as concerns tempered consumer spending expectations.⁶ In our view, this uncertainty allowed us to buy valuable brands at discounted prices. Japanese automaker Mazda Motor was a leading sector performer as its share price rose to its highest level since 2009 after yen weakness boosted sales, helping the firm earn its first annual profit in five years. Elsewhere in the sector, we continued to incrementally reduce exposure as what we viewed as lofty valuations allowed us to realize gains on certain contrarian investments made during periods of extreme economic pessimism.

4. The health care sector comprises biotechnology, life sciences tools and services, and pharmaceuticals in the SOI.

5. The materials sector comprises chemicals, construction materials, and metals and mining in the SOI. The consumer staples sector comprises food and staples retailing in the SOI.

6. The consumer discretionary sector comprises auto components, automobiles, media, multiline retail and specialty retail in the SOI.

TG-5

The Fund’s information technology (IT) and telecommunication services holdings supported relative performance.⁷ In the IT sector, U.S. PC manufacturer Hewlett-Packard’s shares rallied as restructuring initiatives began to positively impact operating results. In contrast, South Korean semiconductor and consumer electronics manufacturer Samsung Electronics was a major detractor, declining amid currency depreciation and concerns about the sustainability of handset margins. We continued to hold Samsung despite weak stock performance during the period. Based on our analysis, the company had a reasonable valuation, self-funding cash position and market leadership across highly profitable business lines. In telecommunication services, U.K. mobile telephone operator Vodafone Group’s share price surged after the company divested its stake in U.S. wireless firm Verizon Wireless for $130 billion. However, Turkish mobile telephone operator Turkcell Iletisim Hizmetleri notably detracted from performance as a shareholder dispute and regional political turmoil weighed on the stock. Tuckcell’s valuation remained very attractive to us and we identified potential value catalysts, including a more rational Turkish pricing environment and the potential for Turkcell to deploy cash to increase dividends once the shareholder dispute is resolved.

Although stock selection for energy stocks drove sector performance, Brazilian oil multinational Petroleo Brasileiro’s (Petrobras) share price retreated after the Brazilian government failed to specify details for phasing out a domestic fuel subsidy that has weighed on earnings and increased debt at the state-controlled company.⁸ We continued to view the price subsidy as a temporary headwind and believed that Petrobras neared an inflection point at which the value of its significant exploration and production assets might finally be unlocked. More broadly, our analysis indicated depressed energy sector valuations might understate the long-term cash-flow and shareholder return potential of oil companies with falling capital expenditures and improving production prospects. In addition to finding certain major oil companies, we found what we believed were attractively valued opportunities among oil services firms that could benefit from increased shale gas activity and an improving supply-and-demand balance in major pressure-pumping markets.

7. The IT sector comprises communications equipment; computers and peripherals; electronic equipment, instruments and components; semiconductors and semiconductor equipment; and software in the SOI. The telecommunication services sector comprises diversified telecommunication services and wireless telecommunication services in the SOI.

8. The energy sector comprises energy equipment and services; and oil, gas and consumable fuels in the SOI.

Top 10 Holdings

Templeton Growth Securities Fund

12/31/13

Company Sector/Industry, Country	% of Total Net Assets
Microsoft Corp.		1.9%
Software, U.S.
Samsung Electronics Co. Ltd.		1.9%
Semiconductors & Semiconductor Equipment, South Korea
Citigroup Inc.		1.9%
Diversified Financial Services, U.S.
BNP Paribas SA		1.8%
Commercial Banks, France
Total SA, B		1.8%
Oil, Gas & Consumable Fuels, France
Sanofi		1.7%
Pharmaceuticals, France
Baker Hughes Inc.		1.7%
Energy Equipment & Services, U.S.
Roche Holding AG		1.7%
Pharmaceuticals, Switzerland
Deutsche Lufthansa AG		1.6%
Airlines, Germany
Pfizer Inc.		1.6%
Pharmaceuticals, U.S.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).

TG-6

From a regional standpoint, stock selection in Europe helped drive performance. We identified many of our European investments during periods of deep pessimism, and we believe our valuation discipline during the European debt crisis served the Fund well. Fundamental improvements we previously anticipated came to fruition during the review period. With valuations still selectively attractive to us, we believe further upside potential exists. From our perspective, policymakers remained committed to growth and stability, fiscal tightening lessened and the ECB’s balance sheet returned to near pre-crisis levels, attesting to the continued normalization of financial conditions. Rising domestic demand, improving competitiveness and a current account surplus in peripheral countries helped the eurozone exit its worst recession on record. Even after these notable improvements, eurozone companies overall traded at a material discount relative to their historical valuation average and U.S. peers. Profit margins also remained significantly below those of many U.S. companies, although operating leverage in Europe is considerably greater, further enhancing the potential positive impact of revenue recovery on European corporate profitability. Although the Fund’s U.S. holdings contributed to performance, the Fund’s underweighting in the U.S. weighed on relative results.

Although considerable risks remained, European companies with globally diversified revenues remained attractive to us as earnings recover over the long term. We had less geographical conviction outside of Europe as regions progressed with reform and recovery at different levels. In our view, this healthy divergence of global economic and financial conditions, combined with a more even overall valuation environment, could continue to favor discerning investors capable of uncovering individual values at the bottom-up level.

Thank you for your participation in Templeton Growth Securities Fund. We look forward to serving your future investment needs.

The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2013, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

TG-7

Fund Expenses

As an investor in a variable insurance contract (Contract) that indirectly provides for investment in an underlying mutual fund, you can incur transaction and/or ongoing expenses at both the Fund level and the Contract level.

• Transaction expenses can include sales charges (loads) on purchases, redemption fees, surrender fees, transfer fees and premium taxes.

• Ongoing expenses can include management fees, distribution and service (12b-1) fees, contract fees, annual maintenance fees, mortality and expense risk fees and other fees and expenses. All mutual funds and Contracts have some types of ongoing expenses.

The expenses shown in the table are meant to highlight ongoing expenses at the Fund level only and do not include ongoing expenses at the Contract level, or transaction expenses at either the Fund or Contract level. While the Fund does not have transaction expenses, if the transaction and ongoing expenses at the Contract level were included, the expenses shown below would be higher. You should consult your Contract prospectus or disclosure document for more information.

The table shows Fund-level ongoing expenses and can help you understand these expenses and compare them with those of other mutual funds offered through the Contract. The table assumes a $1,000 investment held for the six months indicated. Please refer to the Fund prospectus for additional information on operating expenses.

Actual Fund Expenses

The first line (Actual) of the table provides actual account values and expenses. The “Ending Account Value” is derived from the Fund’s actual return, which includes the effect of ongoing Fund expenses, but does not include the effect of ongoing Contract expenses.

You can estimate the Fund-level expenses you incurred during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:

1. Divide your account value by $1,000.

If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6.

2. Multiply the result by the number under the heading “Fund-Level Expenses Incurred During Period.”

If Fund-Level Expenses Incurred During Period were $7.50, then 8.6 x $7.50 = $64.50.

In this illustration, the estimated expenses incurred this period at the Fund level are $64.50.

Templeton Growth Securities Fund – Class 4

TG-8

Hypothetical Example for Comparison with Other Mutual Funds

Information in the second line (Hypothetical) of the table can help you compare ongoing expenses of the Fund with those of other mutual funds offered through the Contract. This information may not be used to estimate the actual ending account balance or expenses you incurred during the period. The hypothetical “Ending Account Value” is based on the Fund’s actual expense ratio and an assumed 5% annual rate of return before expenses, which does not represent the Fund’s actual return. The figure under the heading “Fund-Level Expenses Incurred During Period” shows the hypothetical expenses your account would have incurred under this scenario. You can compare this figure with the 5% hypothetical examples that appear in shareholder reports of other funds offered through a Contract.

Class 4	Beginning Account Value 7/1/13		Ending Account Value 12/31/13		Fund-Level Expenses Incurred During Period* 7/1/13–12/31/13
Actual	$	1,000	$	1,199.20	$	6.26
Hypothetical (5% return before expenses)	$	1,000	$	1,019.51	$	5.75

*Expenses are calculated using the most recent six-month annualized expense ratio for the Fund’s Class 4 shares (1.13%), which does not include any ongoing expenses of the Contract for which the Fund is an investment option, multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period.

TG-9

Franklin Templeton Variable Insurance Products Trust

Financial Highlights

Templeton Growth Securities Fund

	Year Ended December 31,
Class 1	2013			2012			2011			2010			2009
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	12.16		$	10.27		$	11.19		$	10.56		$	8.34
Income from investment operationsa:
Net investment incomeb		0.22			0.27			0.25			0.17			0.17
Net realized and unrealized gains (losses)		3.49			1.88			(0.99	)		0.62			2.36
Total from investment operations		3.71			2.15			(0.74	)		0.79			2.53
Less distributions from net investment income		(0.40	)		(0.26	)		(0.18	)		(0.16	)		(0.31	)
Net asset value, end of year	$	15.47		$	12.16		$	10.27		$	11.19		$	10.56
Total returnc		31.05%			21.40%			(6.80)%			7.74%			31.33%
Ratios to average net assets
Expensesd		0.78%			0.78%			0.78%			0.77%			0.79%
Net investment income		1.62%			2.31%			2.22%			1.71%			2.00%
Supplemental data
Net assets, end of year (000’s)	$	588,409		$	476,954		$	1,200,682		$	1,348,622		$	824,575
Portfolio turnover rate		11.60%			18.73%	e		42.13%	e		9.61%			14.95%

^aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.

^bBased on average daily shares outstanding.

^cTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which the Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.

^dBenefit of expense reduction rounds to less than 0.01%.

^eExcludes the value of portfolio securities delivered as a result of a redemption in-kind.

The accompanying notes are an integral part of these financial statements.

TG-10

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Templeton Growth Securities Fund

	Year Ended December 31,
Class 2	2013			2012			2011			2010			2009
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	11.97		$	10.11		$	11.01		$	10.40		$	8.20
Income from investment operationsa:
Net investment incomeb		0.19			0.21			0.21			0.15			0.16
Net realized and unrealized gains (losses)		3.44			1.88			(0.96	)		0.60			2.32
Total from investment operations		3.63			2.09			(0.75	)		0.75			2.48
Less distributions from net investment income		(0.37	)		(0.23	)		(0.15	)		(0.14	)		(0.28	)
Net asset value, end of year	$	15.23		$	11.97		$	10.11		$	11.01		$	10.40
Total returnc		30.82%			21.07%			(6.97)%			7.39%			31.10%
Ratios to average net assets
Expensesd		1.03%			1.03%			1.03%			1.02%			1.04%
Net investment income		1.37%			2.06%			1.97%			1.46%			1.75%
Supplemental data
Net assets, end of year (000’s)	$	1,450,304		$	1,352,554		$	1,254,193		$	1,626,885		$	1,718,894
Portfolio turnover rate		11.60%			18.73%	e		42.13%	e		9.61%			14.95%

^aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.

^bBased on average daily shares outstanding.

^cTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which the Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.

^dBenefit of expense reduction rounds to less than 0.01%.

^eExcludes the value of portfolio securities delivered as a result of redemption in-kind.

The accompanying notes are an integral part of these financial statements.

TG-11

Franklin Templeton Variable Insurance Products Trust

Financial Highlights (continued)

Templeton Growth Securities Fund

	Year Ended December 31,
Class 4	2013			2012			2011			2010			2009
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	12.07		$	10.19		$	11.11		$	10.50		$	8.31
Income from investment operationsa:
Net investment incomeb		0.17			0.20			0.20			0.14			0.14
Net realized and unrealized gains (losses)		3.47			1.90			(0.98	)		0.61			2.36
Total from investment operations		3.64			2.10			(0.78	)		0.75			2.50
Less distributions from net investment income		(0.36	)		(0.22	)		(0.14	)		(0.14	)		(0.31	)
Net asset value, end of year	$	15.35		$	12.07		$	10.19		$	11.11		$	10.50
Total returnc		30.64%			21.02%			(7.14)%			7.31%			30.98%
Ratios to average net assets
Expensesd		1.13%			1.13%			1.13%			1.12%			1.14%
Net investment income		1.27%			1.96%			1.87%			1.36%			1.65%
Supplemental data
Net assets, end of year (000’s)	$	72,683		$	67,158		$	56,170		$	60,569		$	56,218
Portfolio turnover rate		11.60%			18.73%	e		42.13%	e		9.61%			14.95%

^aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.

^bBased on average daily shares outstanding.

^cTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which the Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.

^dBenefit of expense reduction rounds to less than 0.01%.

^eExcludes the value of portfolio securities delivered as a result of a redemption in-kind.

The accompanying notes are an integral part of these financial statements.

TG-12

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013

Templeton Growth Securities Fund	Country	Shares		Value
Common Stocks 95.7%
Aerospace & Defense 0.6%
BAE Systems PLC	United Kingdom		1,730,147	$	12,455,372
Air Freight & Logistics 2.2%
FedEx Corp.	United States		100,270		14,415,818
TNT Express NV	Netherlands		646,272		5,998,615
aTNT Express NV, 144A	Netherlands		441,000		4,093,306
United Parcel Service Inc., B	United States		213,890		22,475,561
					46,983,300
Airlines 3.0%
bDeutsche Lufthansa AG	Germany		1,609,064		34,128,584
bInternational Consolidated Airlines Group SA	United Kingdom		4,391,327		29,180,924
					63,309,508
Auto Components 1.2%
Cie Generale des Etablissements Michelin, B	France		237,229		25,207,329
Automobiles 2.4%
bMazda Motor Corp.	Japan		2,351,180		12,146,647
Nissan Motor Co. Ltd.	Japan		2,342,720		19,667,279
Toyota Motor Corp.	Japan		312,490		19,052,097
					50,866,023
Biotechnology 1.5%
Amgen Inc.	United States		272,230		31,077,777
Capital Markets 2.9%
Credit Suisse Group AG	Switzerland		1,026,980		31,394,815
Morgan Stanley	United States		985,150		30,894,304
					62,289,119
Chemicals 1.5%
Akzo Nobel NV	Netherlands		397,282		30,787,633
Commercial Banks 10.1%
BNP Paribas SA	France		501,247		39,058,204
bCommerzbank AG	Germany		875,260		14,097,904
bCredit Agricole SA	France		2,131,406		27,279,923
DBS Group Holdings Ltd.	Singapore		932,690		12,639,879
HSBC Holdings PLC	United Kingdom		1,913,864		20,769,201
ICICI Bank Ltd., ADR	India		261,909		9,735,158
Intesa Sanpaolo SpA	Italy		7,041,594		17,376,167
KB Financial Group Inc.	South Korea		657,984		26,332,448
SunTrust Banks Inc.	United States		478,520		17,614,321
UniCredit SpA	Italy		3,979,321		29,447,730
					214,350,935
Commercial Services & Supplies 0.2%
Serco Group PLC	United Kingdom		587,700		4,871,701
Communications Equipment 3.5%
bBrocade Communications Systems Inc.	United States		2,133,070		18,920,331
Cisco Systems Inc.	United States		1,266,680		28,436,966
Ericsson, B	Sweden		2,161,202		26,373,125
					73,730,422
Computers & Peripherals 1.4%
Hewlett-Packard Co.	United States		1,036,700		29,006,866

TG-13

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Templeton Growth Securities Fund	Country	Shares		Value
Common Stocks (continued)
Construction & Engineering 0.6%
Carillion PLC	United Kingdom		506,846	$	2,773,002
FLSmidth & Co. AS	Denmark		196,370		10,720,768
					13,493,770
Construction Materials 1.5%
CRH PLC	Ireland		1,277,393		32,154,088
Diversified Financial Services 4.4%
Citigroup Inc.	United States		770,990		40,176,289
b ING Groep NV, IDR	Netherlands		1,899,376		26,387,174
JPMorgan Chase & Co.	United States		440,760		25,775,645
					92,339,108
Diversified Telecommunication Services 3.4%
China Telecom Corp. Ltd., ADR	China		179,195		9,061,891
Singapore Telecommunications Ltd.	Singapore		7,063,710		20,489,126
Telefonica SA	Spain		1,371,960		22,334,194
Vivendi SA	France		739,654		19,488,182
					71,373,393
Electrical Equipment 1.3%
Alstom SA	France		600,827		21,879,933
Dongfang Electric Corp. Ltd., H	China		2,016,600		3,536,822
bOsram Licht AG	Germany		20,171		1,137,554
					26,554,309
Electronic Equipment, Instruments & Components 0.5%
bFlextronics International Ltd.	Singapore		1,241,008		9,642,632
Energy Equipment & Services 4.5%
Baker Hughes Inc.	United States		657,950		36,358,317
Fugro NV, IDR	Netherlands		286,233		17,053,699
Halliburton Co.	United States		461,224		23,407,118
Noble Corp. PLC	United States		470,410		17,626,263
					94,445,397
Food & Staples Retailing 2.5%
CVS Caremark Corp.	United States		330,420		23,648,159
Metro AG	Germany		156,280		7,566,702
Tesco PLC	United Kingdom		4,054,493		22,452,743
					53,667,604
Health Care Equipment & Supplies 2.1%
Getinge AB, B	Sweden		438,720		15,003,987
Medtronic Inc.	United States		497,540		28,553,821
					43,557,808
Industrial Conglomerates 2.1%
Koninklijke Philips NV	Netherlands		459,718		16,848,755
Siemens AG	Germany		201,712		27,548,491
					44,397,246
Insurance 5.4%
American International Group Inc.	United States		221,040		11,284,092
Aviva PLC	United Kingdom		3,976,260		29,606,255
AXA SA	France		1,091,068		30,330,440

TG-14

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Templeton Growth Securities Fund	Country	Shares		Value
Common Stocks (continued)
Insurance (continued)
Muenchener Rueckversicherungs-Gesellschaft AG	Germany		78,511	$	17,294,899
Swiss Re AG	Switzerland		270,006		24,834,922
					113,350,608
Life Sciences Tools & Services 0.5%
Lonza Group AG	Switzerland		120,746		11,451,277
Machinery 1.3%
bNavistar International Corp.	United States		725,430		27,704,172
Media 4.3%
Comcast Corp., Special A	United States		457,122		22,801,245
bNews Corp., A	United States		319,435		5,756,219
Time Warner Cable Inc.	United States		130,120		17,631,260
Twenty-First Century Fox Inc., A	United States		610,902		21,491,532
The Walt Disney Co.	United States		296,070		22,619,748
					90,300,004
Metals & Mining 1.3%
Mining and Metallurgical Co. Norilsk Nickel OJSC, ADR	Russia		326,600		5,423,193
POSCO	South Korea		63,730		19,709,531
POSCO, ADR	South Korea		27,740		2,163,720
					27,296,444
Multiline Retail 0.6%
Target Corp.	United States		191,680		12,127,594
Oil, Gas & Consumable Fuels 8.6%
BP PLC	United Kingdom		2,807,128		22,690,790
Chevron Corp.	United States		137,470		17,171,378
China Shenhua Energy Co. Ltd., H	China		3,388,200		10,661,381
Eni SpA	Italy		776,759		18,686,875
Galp Energia SGPS SA, B	Portugal		1,575,520		25,821,326
LUKOIL Holdings, ADR	Russia		83,570		5,218,946
Royal Dutch Shell PLC, B	United Kingdom		299,573		11,308,995
Talisman Energy Inc.	Canada		2,690,800		31,286,899
Total SA, B	France		618,659		37,893,489
					180,740,079
Pharmaceuticals 10.2%
b Forest Laboratories Inc.	United States		276,650		16,607,299
GlaxoSmithKline PLC	United Kingdom		1,260,103		33,630,849
Merck & Co. Inc.	United States		558,641		27,959,982
Merck KGaA	Germany		114,777		20,563,317
Pfizer Inc.	United States		1,111,443		34,043,499
Roche Holding AG	Switzerland		128,303		35,842,282
Sanofi	France		346,687		36,776,056
Teva Pharmaceutical Industries Ltd., ADR	Israel		268,460		10,759,877
					216,183,161
Professional Services 0.6%
Hays PLC	United Kingdom		2,280		4,889
Randstad Holding NV	Netherlands		188,460		12,222,540
					12,227,429

TG-15

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Templeton Growth Securities Fund	Country	Shares		Value
Common Stocks (continued)
Semiconductors & Semiconductor Equipment 1.9%
Samsung Electronics Co. Ltd.	South Korea		31,260	$	40,624,897
Software 3.1%
Microsoft Corp.	United States		1,099,279		41,146,013
Nintendo Co. Ltd.	Japan		99,240		13,203,727
Oracle Corp.	United States		122,950		4,704,067
SAP AG	Germany		80,912		6,934,757
					65,988,564
Specialty Retail 1.2%
Kingfisher PLC	United Kingdom		4,083,541		26,006,404
Trading Companies & Distributors 0.5%
ITOCHU Corp.	Japan		770,990		9,511,073
Noble Group Ltd.	Hong Kong		1,602,200		1,358,658
					10,869,731
Wireless Telecommunication Services 2.8%
b Sprint Corp.	United States		1,017,459		10,937,684
b Turkcell Iletisim Hizmetleri AS, ADR	Turkey		1,477,723		19,727,602
Vodafone Group PLC	United Kingdom		7,430,079		29,168,447
					59,833,733
Total Common Stocks (Cost $1,466,967,898)					2,021,265,437
Preferred Stocks 1.3%
Metals & Mining 0.2%
Vale SA, ADR, pfd., A	Brazil		372,875		5,223,979
Oil, Gas & Consumable Fuels 1.1%
Petroleo Brasileiro SA, ADR, pfd.	Brazil		1,528,452		22,452,960
Total Preferred Stocks (Cost $34,879,238)					27,676,939
Non-Registered Mutual Funds (Cost $11,942,900) 0.7%
Diversified Financial Services 0.7%
b,c,d,e Templeton China Opportunities Fund Ltd., Reg D	Cayman Islands		1,195,196		14,031,606
Total Investments before Short Term Investments (Cost $1,513,790,036)					2,062,973,982
		Principal Amount*
Short Term Investments (Cost $49,000,000) 2.3%
Time Deposits 2.3%
Royal Bank of Canada, 0.01%, 1/02/14	Canada		49,000,000		49,000,000
Total Investments (Cost $1,562,790,036) 100.0%					2,111,973,982
Other Assets, less Liabilities (0.0)%†					(578,324	)
Net Assets 100.0%				$	2,111,395,658

TG-16

Franklin Templeton Variable Insurance Products Trust

Statement of Investments, December 31, 2013 (continued)

Templeton Growth Securities Fund

See Abbreviations on page TG-30.

*The principal amount is stated in U.S. dollars unless otherwise indicated.

†Rounds to less than 0.1% of net assets.

^aSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. This security has been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At December 31, 2013, the value of this security was $4,093,306, representing 0.19% of net assets.

^bNon-income producing.

^cSee Note 1(d) regarding investment in Templeton China Opportunities Fund, Ltd.

^dSee Note 8 regarding restricted securities.

^eSee Note 9 regarding holdings of 5% voting securities.

The accompanying notes are an integral part of these financial statements.

TG-17

Franklin Templeton Variable Insurance Products Trust

Financial Statements

Statement of Assets and Liabilities

December 31, 2013

	Templeton Growth Securities Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	1,550,847,136
Cost - Non-controlled affiliated issuers (Note 9)		11,942,900
Total cost of investments	$	1,562,790,036
Value - Unaffiliated issuers	$	2,097,942,376
Value - Non-controlled affiliated issuers (Note 9)		14,031,606
Total value of investments		2,111,973,982
Cash		472,849
Receivables:
Investment securities sold		68,378
Capital shares sold		392,962
Dividends and interest		2,864,435
Other assets		18,352
Total assets		2,115,790,958
Liabilities:
Payables:
Investment securities purchased		143,009
Capital shares redeemed		1,837,474
Management fees		1,325,266
Distribution fees		641,845
Reports to shareholders		284,132
Accrued expenses and other liabilities		163,574
Total liabilities		4,395,300
Net assets, at value	$	2,111,395,658
Net assets consist of:
Paid-in capital	$	1,729,691,692
Undistributed net investment income		26,566,772
Net unrealized appreciation (depreciation)		549,231,460
Accumulated net realized gain (loss)		(194,094,266	)
Net assets, at value	$	2,111,395,658

The accompanying notes are an integral part of these financial statements.

TG-18

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Assets and Liabilities (continued)

December 31, 2013

	Templeton Growth Securities Fund
Class 1:
Net assets, at value	$	588,408,710
Shares outstanding		38,027,031
Net asset value and maximum offering price per share	$	15.47
Class 2:
Net assets, at value	$	1,450,304,170
Shares outstanding		95,237,568
Net asset value and maximum offering price per share	$	15.23
Class 4:
Net assets, at value	$	72,682,778
Shares outstanding		4,734,503
Net asset value and maximum offering price per share	$	15.35

The accompanying notes are an integral part of these financial statements.

TG-19

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statement of Operations

for the year ended December 31, 2013

	Templeton Growth Securities Fund
Investment income:
Dividends (net of foreign taxes $3,216,346)	$	47,694,922
Interest		26,037
Income from securities loaned		741,078
Total investment income		48,462,037
Expenses:
Management fees (Note 3a)		15,215,428
Distribution fees: (Note 3c)
Class 2		3,533,134
Class 4		250,125
Unaffiliated transfer agent fees		526
Custodian fees (Note 4)		191,874
Reports to shareholders		257,607
Registration and filing fees		2,000
Professional fees		102,517
Trustees’ fees and expenses		7,864
Other		50,001
Total expenses		19,611,076
Expense reductions (Note 4)		(32	)
Net expenses		19,611,044
Net investment income		28,850,993
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		99,244,604
Foreign currency transactions		(519,265	)
Net realized gain (loss)		98,725,339
Net change in unrealized appreciation (depreciation) on:
Investments		412,364,156
Translation of other assets and liabilities denominated in foreign currencies		11,414
Net change in unrealized appreciation (depreciation)		412,375,570
Net realized and unrealized gain (loss)		511,100,909
Net increase (decrease) in net assets resulting from operations	$	539,951,902

The accompanying notes are an integral part of these financial statements.

TG-20

Franklin Templeton Variable Insurance Products Trust

Financial Statements (continued)

Statements of Changes in Net Assets

	Templeton Growth Securities Fund
	Year Ended December 31,
	2013			2012
Increase (decrease) in net assets:
Operations:
Net investment income	$	28,850,993		$	54,813,475
Net realized gain (loss) from investments and foreign currency transactions		98,725,339			52,034,520
Net change in unrealized appreciation (depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies		412,375,570			384,863,694
Net increase (decrease) in net assets resulting from operations		539,951,902			491,711,689
Distributions to shareholders from:
Net investment income:
Class 1		(15,214,157	)		(30,925,492	)
Class 2		(38,639,867	)		(26,587,764	)
Class 4		(1,946,523	)		(1,228,892	)
Total distributions to shareholders		(55,800,547	)		(58,742,148	)
Capital share transactions: (Note 2)
Class 1		(17,266,459	)		(922,021,789	)
Class 2		(240,507,877	)		(125,611,247	)
Class 4		(11,647,677	)		284,692
Total capital share transactions		(269,422,013	)		(1,047,348,344	)
Net increase (decrease) in net assets		214,729,342			(614,378,803	)
Net assets:
Beginning of year		1,896,666,316			2,511,045,119
End of year	$	2,111,395,658		$	1,896,666,316
Undistributed net investment income included in net assets:
End of year	$	26,566,772		$	54,035,591

The accompanying notes are an integral part of these financial statements.

TG-21

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements

Templeton Growth Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment company, consisting of twenty separate funds. The Templeton Growth Securities Fund (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. The Fund offers three classes of shares: Class 1, Class 2, and Class 4. Each class of shares differs by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

The Fund’s investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Fund calculates the net asset value (NAV) per share at the close of the New York Stock Exchange (NYSE), generally at 4 p.m. Eastern time (NYSE close) on each day the NYSE is open for trading. Under procedures approved by the Trust’s Board of Trustees (the Board), the Fund’s administrator, investment manager and other affiliates have formed the Valuation and Liquidity Oversight Committee (VLOC). The VLOC provides administration and oversight of the Fund’s valuation policies and procedures, which are approved annually by the Board. Among other things, these procedures allow the Fund to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

Equity securities listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded or as of the NYSE close, whichever is earlier. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at the NYSE close on the day that the value of the security is determined. Over-the-counter (OTC) securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities. Time deposits are valued at cost, which approximates market value.

The Fund has procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the VLOC convenes on a regular basis to review such financial instruments and considers a number of factors, including significant unobservable valuation inputs, when arriving at fair value. The VLOC primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. The VLOC employs various methods for calibrating these valuation approaches including a regular review of key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.

Trading in securities on foreign securities stock exchanges and OTC markets may be completed before the daily NYSE close. In addition, trading in certain foreign markets may not take place on every NYSE business day. Occasionally, events occur between the time at which trading in a foreign security is completed and the close of the NYSE that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund’s portfolio securities as determined at the foreign market close and the latest indications of value at the close of the NYSE. In order to minimize the potential for these differences, the VLOC monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depositary Receipts, futures contracts

TG-22

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Templeton Growth Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

a. Financial Instrument Valuation (continued)

and exchange traded funds). These price movements are measured against established trigger thresholds for each specific market proxy to assist in determining if an event has occurred that may call into question the reliability of the values of the foreign securities held by the Fund. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services.

Also, when the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the NYSE is closed, which could result in differences between the value of the Fund’s portfolio securities on the last business day and the last calendar day of the reporting period. Any significant security valuation changes due to an open foreign market are adjusted and reflected by the Fund for financial reporting purposes.

b. Foreign Currency Translation

Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Fund may enter into foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. Portfolio securities and assets and liabilities denominated in foreign currencies contain risks that those currencies will decline in value relative to the U.S. dollar. Occasionally, events may impact the availability or reliability of foreign exchange rates used to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Board.

The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments on the Statement of Operations.

Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period.

c. Securities Lending

The Fund participates in an agency based securities lending program. The Fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the market value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the market value of loaned securities, as determined at the close of fund business each day; any additional collateral required due to changes in security values is delivered to the Fund on the next business day. The collateral is invested in a non-registered money fund. The Fund receives income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. The Fund bears the market risk with respect to the collateral investment, securities loaned, and the risk that the agent may default on its obligations to the Fund. The securities lending agent has agreed to indemnify the Fund in the event of default by a third party borrower. At December 31, 2013, the Fund had no securities on loan.

d. Investment in Templeton China Opportunities Fund, Ltd.

The Fund invests in Templeton China Opportunities Fund, Ltd. (China Fund), a private offering of unregistered shares in a Cayman Islands Exempt Company. The China Fund investment objective is to seek capital growth primarily through

TG-23

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Templeton Growth Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

d. Investment in Templeton China Opportunities Fund, Ltd. (continued)

investments in A-shares of Chinese companies listed on the Shanghai and Shenzhen stock exchanges. Chinese A-shares are traded in Chinese Renminbi and are only available as an investment to domestic (Chinese) investors and holders of a Qualified Foreign Institutional Investors license. The China Fund is managed by Templeton Investment Counsel, LLC (an affiliate of the investment manager). No additional management or administrative fees are incurred on assets invested in the China Fund.

The China Fund may be subject to certain restrictions and administrative processes relating to its ability to repatriate cash balances, investment proceeds and earnings associated with its investment, as such activities are subject to approval by agencies of the Chinese government and thus the Fund may incur delays in redeeming its investment in the China Fund. The Fund’s investment in the China Fund is valued based upon the fair value of the China Fund’s portfolio securities and other assets and liabilities.

e. Income and Deferred Taxes

It is the Fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and if applicable excise taxes. As a result, no provision for U.S. federal income taxes is required.

The Fund may be subject to foreign taxation related to income received, capital gains on the sale of securities and certain foreign currency transactions in the foreign jurisdictions in which it invests. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests. When a capital gain tax is determined to apply the Fund records an estimated deferred tax liability in an amount that would be payable if the securities were disposed of on the valuation date.

The Fund recognizes the tax benefits of uncertain tax positions only when the position is “more likely than not” to be sustained upon examination by the tax authorities based on the technical merits of the tax position. As of December 31, 2013, and for all open tax years, the Fund has determined that no liability for unrecognized tax benefits is required in the Fund’s financial statements related to uncertain tax positions taken on a tax return (or expected to be taken on future tax returns). Open tax years are those that remain subject to examination and are based on each tax jurisdiction statute of limitation.

f. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Dividend income is recorded on the ex-dividend date except that certain dividends from foreign securities are recognized as soon as the Fund is notified of the ex-dividend date. Distributions to shareholders are recorded on the ex-dividend date and are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with accounting principles generally accepted in the United States of America. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.

Common expenses incurred by the Trust are allocated among the funds based on the ratio of net assets of each fund to the combined net assets of the Trust. Fund specific expenses are charged directly to the fund that incurred the expense.

Realized and unrealized gains and losses and net investment income, not including class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions, by class, are generally due to differences in class specific expenses.

TG-24

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Templeton Growth Securities Fund

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

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 by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust, on behalf of the Fund, enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.

2. SHARES OF BENEFICIAL INTEREST

At December 31, 2013, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:

	Year Ended December 31,
	2013						2012
Class 1 Shares:	Shares			Amount			Shares			Amount
Shares sold		896,927		$	12,053,666			39,146,115		$	423,930,779
Shares issued in reinvestment of distributions		1,149,106			15,214,157			3,052,862			30,925,492
Shares redeemed in-kind (Note 11)		—			—			(90,515,836	)		(1,060,908,757	)
Shares redeemed		(3,250,296	)		(44,534,282	)		(29,409,088	)		(315,969,303	)
Net increase (decrease)		(1,204,263	)	$	(17,266,459	)		(77,725,947	)	$	(922,021,789	)
Class 2 Shares:
Shares sold		7,540,783		$	101,234,976			9,278,139		$	99,327,364
Shares issued in reinvestment of distributions		2,963,180			38,639,867			2,661,438			26,587,764
Shares redeemed		(28,236,625	)		(380,382,720	)		(23,060,322	)		(251,526,375	)
Net increase (decrease)		(17,732,662	)	$	(240,507,877	)		(11,120,745	)	$	(125,611,247	)
Class 4 Shares:
Shares sold		683,745		$	9,107,528			712,668		$	7,687,691
Shares issued on reinvestment of distributions		147,912			1,946,523			121,914			1,228,892
Shares redeemed		(1,660,931	)		(22,701,728	)		(782,111	)		(8,631,891	)
Net increase (decrease)		(829,274	)	$	(11,647,677	)		52,471		$	284,692

TG-25

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Templeton Growth Securities Fund

3. TRANSACTIONS WITH AFFILIATES

Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton Investments. Certain officers and trustees of the Fund are also officers and/or directors of the following subsidiaries:

Subsidiary	Affiliation
Templeton Global Advisors Limited (TGAL)	Investment manager
Franklin Templeton Services, LLC (FT Services)	Administrative manager
Franklin Templeton Distributors, Inc. (Distributors)	Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services)	Transfer agent

a. Management Fees

The Fund pays an investment management fee to TGAL based on the average daily net assets of the Fund as follows:

Annualized Fee Rate	Net Assets
1.000%	Up to and including $100 million
0.900%	over $100 million, up to and including $250 million
0.800%	over $250 million, up to and including $500 million
0.750%	over $500 million, up to and including $1 billion
0.700%	over $1 billion, up to and including $5 billion
0.675%	over $5 billion, up to and including $10 billion
0.655%	over $10 billion, up to and including $15 billion
0.635%	over $15 billion, up to and including $20 billion
0.615%	In excess of $20 billion

b. Administrative Fees

Under an agreement with TGAL, FT Services provides administrative services to the Fund. The fee is paid by TGAL based on the Fund’s average daily net assets, and is not an additional expense of the Fund.

c. Distribution Fees

The Board has adopted distribution plans for Class 2 and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to 0.35% per year of its average daily net assets each class. Some distribution fees are not charged on shares held by affiliates. The Board has agreed to limit the current rate to 0.25% per year for Class 2. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.

d. Transfer Agent Fees

Investor Services, under terms of an agreement, performs shareholder servicing for the Fund and is not paid by the Fund for the services.

e. Other Affiliated Transactions

At December 31, 2013, Franklin Templeton Variable Insurance Products Trust – Franklin Templeton VIP Founding owned 19.07% of the Fund’s outstanding shares. Investment activities of this investment company could have a material impact on the Fund.

TG-26

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Templeton Growth Securities Fund

4. EXPENSE OFFSET ARRANGEMENT

The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses. During the year ended December 31, 2013, the custodian fees were reduced as noted in the Statement of Operations.

5. INCOME TAXES

For tax purposes, capital losses may be carried over to offset future capital gains. Capital loss carryforwards with no expiration, if any, must be fully utilized before those losses with expiration dates.

At December 31, 2013, capital loss carryforwards were as follows:

Capital loss carryforwards expiring in:
2017	$	117,602,940
2018		55,299,629
	$	172,902,569

During the year ended December 31, 2013, the Fund utilized $97,674,285 of capital loss carryforwards.

The tax character of distributions paid during the years ended December 31, 2013 and 2012, was as follows:

	2013		2012
Distributions paid from ordinary income	$	55,800,547	$	58,742,148

At December 31, 2013, the cost of investments, net unrealized appreciation (depreciation), undistributed ordinary income for income tax purposes were as follows:

Cost of investments	$	1,586,070,444
Unrealized appreciation	$	589,015,063
Unrealized depreciation		(63,111,525	)
Net unrealized appreciation (depreciation)	$	525,903,538
Distributable earnings – undistributed ordinary income	$	28,655,514

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of foreign currency transactions, passive foreign investment company shares and wash sales.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the year ended December 31, 2013, aggregated $228,082,993 and $551,098,938, respectively.

7. CONCENTRATION OF RISK

Investing in foreign securities may include certain risks and considerations not typically associated with investing in U.S. securities, such as fluctuating currency values and changing local and regional economic, political and social conditions, which may result in greater market volatility. In addition, certain foreign securities may not be as liquid as U.S. securities.

TG-27

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Templeton Growth Securities Fund

8. RESTRICTED SECURITIES

The Fund invests in securities that are restricted under the Securities Act of 1933 (1933 Act) or which are subject to legal, contractual, or other agreed upon restrictions on resale. Restricted securities are often purchased in private placement transactions, and cannot be sold without prior registration unless the sale is pursuant to an exemption under the 1933 Act. Disposal of these securities may require greater effort and expense, and prompt sale at an acceptable price may be difficult. The Fund may have registration rights for restricted securities. The issuer generally incurs all registration costs.

At December 31, 2013, the Fund held investments in restricted securities, excluding certain securities exempt from registration under the 1933 Act deemed to be liquid, as follows:

Shares		Issuer	Acquisition Dates		Cost		Value
	1,195,196	Templeton China Opportunities Fund Ltd., Reg D (Value is 0.66% of Net Assets)		3/17/10-10/9/13	$	11,942,900	$	14,031,606

9. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES

The 1940 Act defines “affiliated companies” to include investments in portfolio companies in which a fund owns 5% or more of the outstanding voting securities. Investments in “affiliated companies” for the Fund for the year ended December 31, 2013, were as shown below.

Name of Issuer	Number of Shares Held at Beginning of Year		Gross Additions		Gross Reductions		Number of Shares Held at End of Year		Value at End of Year		Investment Income		Realized Capital Gain (Loss)
Non-Controlled Affiliates
Templeton China Opportunities Fund Ltd., Reg D		1,194,518		678		—		1,195,196	$	14,031,606	$	—	$	—
Total Affiliated Securities (Value is 0.66% of Net Assets)

10. CREDIT FACILITY

The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $1.5 billion (Global Credit Facility) which, after an extension of the original terms, matured on February 14, 2014. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. Effective February 14, 2014, the Borrowers renewed the Global Credit Facility which matures on February 13, 2015.

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.07% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses on the Statement of Operations.

11. REDEMPTION IN-KIND

During the year ended December 31, 2012, the Fund realized $18,346,694 of net gains resulting from a redemption in-kind in which a shareholder redeemed fund shares for securities held by the Fund rather than for cash. Because such gains are not taxable to the Fund, and are not distributed to remaining shareholders, they have been reclassified from accumulated net realized gains to paid-in capital.

TG-28

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Templeton Growth Securities Fund

12. FAIR VALUE MEASUREMENTS

The Fund follows a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Fund’s own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund’s financial instruments and are summarized in the following fair value hierarchy:

• Level 1 – quoted prices in active markets for identical financial instruments

• Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)

• Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of financial instruments)

The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.

For movements between the levels within the fair value hierarchy, the Fund has adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.

A summary of inputs used as of December 31, 2013, in valuing the Fund’s assets carried at fair value, is as follows:

	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities:
Equity Investments:a
Diversified Financial Services	$	92,339,108	$	—	$	14,031,606	$	106,370,714
All Other Equity Investmentsb		1,956,603,268		—		—		1,956,603,268
Short term investments		—		49,000,000		—		49,000,000
Total Investments in Securities	$	2,048,942,376	$	49,000,000	$	14,031,606	$	2,111,973,982

^aIncludes common stocks as well as other equity investments.

^bFor detailed categories, see the accompanying Statement of Investments.

A reconciliation of assets in which Level 3 inputs are used in determining fair value is presented when there are significant Level 3 investments at the end of the period.

13. NEW ACCOUNTING PRONOUNCEMENTS

In June 2013, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2013-08, Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements. The ASU modifies the criteria used in defining an investment company under U.S. Generally Accepted Accounting Principles and also sets forth certain measurement and disclosure requirements. Under the ASU, an entity that is registered under the 1940 Act automatically qualifies as an investment company. The ASU is effective for interim and annual reporting periods beginning after December 15, 2013. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the financial statements.

TG-29

Franklin Templeton Variable Insurance Products Trust

Notes to Financial Statements (continued)

Templeton Growth Securities Fund

14. SUBSEQUENT EVENTS

The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure other than those already disclosed in the financial statements.

ABBREVIATIONS

Selected Portfolio

ADR - American Depositary Receipt

IDR - International Depositary Receipt

TG-30

Franklin Templeton Variable Insurance Products Trust

Templeton Growth Securities Fund

Report of Independent Registered Public Accounting Firm

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 Templeton Growth Securities Fund (the “Fund”) at December 31, 2013, 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 five years in the period then ended, 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2013 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

February 14, 2014

TG-31

Franklin Templeton Variable Insurance Products Trust

Tax Information (unaudited)

Templeton Growth Securities Fund

Under Section 854(b)(1)(A) of the Internal Revenue Code (Code), the Fund hereby reports 20.31% of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended December 31, 2013.

At December 31, 2013, more than 50% of the Fund’s total assets were invested in securities of foreign issuers. In most instances, foreign taxes were withheld from income paid to the Fund on these investments. The Fund elects to treat foreign taxes paid as allowed under Section 853 of the Code. This election will allow shareholders of record as of the 2014 distribution date, 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.

TG-32

INDEX DESCRIPTIONS

The indexes are unmanaged and include reinvested distributions.

For indexes sourced by Morningstar: © 2014 Morningstar. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.

Russell^® is a trademark and Russell^TM is a servicemark of the Frank Russell Company.

Barclays U.S. Aggregate Index is a market capitalization-weighted index representing the U.S. investment-grade, fixed-rate, taxable bond market with index components for government and corporate, mortgage pass-through and asset-backed securities. All issues included are SEC registered, taxable, dollar denominated and nonconvertible, must have at least one year to final maturity and must be rated investment grade (Baa3/BBB-/BBB- or higher) using the middle rating of Moody’s, Standard & Poor’s and Fitch, respectively.

Barclays U.S. Government Index: Intermediate Component is the intermediate component of the Barclays U.S. Government Index, which includes public obligations of the U.S. Treasury with at least one year to final maturity and publicly issued debt of U.S. government agencies, quasi-federal corporations, and corporate or foreign debt guaranteed by the U.S. government.

Citigroup World Government Bond Index is a market capitalization-weighted index consisting of investment-grade world government bond markets.

Consumer Price Index (CPI), calculated by the Bureau of Labor Statistics, is a commonly used measure of the inflation rate.

Credit Suisse (CS) High Yield Index is designed to mirror the investable universe of the U.S. dollar-denominated high yield debt market.

Dow Jones Industrial Average is a price-weighted average of blue-chip stocks that are generally the leaders in their industry.

Dow Jones-UBS Commodity Index is a broadly diversified index designed to allow investors to track commodity futures through a single, simple measure. The index reflects the return on fully collateralized positions in the underlying futures contracts on physical commodities, which are reweighted and rebalanced annually on a price-percentage basis. The Dow Jones-UBS Commodity Indices^SM are a joint product of DJI Opco, LLC, a subsidiary of S&P Dow Jones Indices LLC, and UBS Securities LLC (“UBS”) and have been licensed for use to S&P Opco, LLC and Franklin Templeton Companies, LLC. S&P^® is a registered trademark of Standard & Poor’s Financial Services LLC, Dow Jones^® and DJ are registered trademarks of Dow Jones Trademark Holdings LLC, and “UBS” is a registered trademark of UBS AG. All content of the Dow Jones-UBS Commodity Indices^SM © S&P Dow Jones Indices LLC and UBS and their respective affiliates 2014. Reproduction of Dow Jones-UBS Commodity Indices^SM in any form is prohibited except with the prior written permission of S&P. S&P does not guarantee the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions, regardless of the cause or for the results obtained from the use of such information. S&P DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall S&P be liable for any direct, indirect, special or consequential damages, costs, expenses, legal fees, or losses (including lost income or lost profit and opportunity costs) in connection with subscriber’s or others’ use of Dow Jones-UBS Commodity Indices^SM.

FTSE EPRA/NAREIT Developed Index is a free float-adjusted index designed to measure the performance of publicly traded real estate securities in the North American, European and Asian real estate markets. FTSE^® is a trademark of London Stock Exchange Plc and The Financial Times Limited and is used by FTSE under license.

J.P. Morgan (JPM) Global Government Bond Index (GGBI) tracks total returns for liquid, fixed-rate, domestic government bonds with maturities greater than one year issued by developed countries globally.

Lipper Multi-Sector Income Funds Classification Average is calculated by averaging the total returns of all funds within the Lipper Multi-Sector Income Funds classification in the Lipper Open-End underlying funds universe. Lipper Multi-Sector Income Funds are defined as funds that seek current income by allocating assets among different fixed income securities sectors (not primarily in one sector except for defensive purposes), including U.S. and foreign governments, with a significant portion rated below investment grade. For the 12-month period ended 12/31/13, there were 226 funds in this category. Lipper calculations do not include contract fees, expenses or sales charges, and may have been different if such charges had been considered.

Lipper VIP Equity Income Funds Classification Average is an equally weighted average calculation of performance figures for all funds within the Lipper Equity Income Funds classification in the Lipper VIP underlying funds universe. Lipper Equity

I-1

Income Funds seek relatively high current income and growth of income through investing 60% or more of their portfolios in equities. For the 12-month period ended 12/31/13, there were 66 funds in this category. Lipper calculations do not include contract fees, expenses or sales charges, and may have been different if such charges had been considered.

Lipper VIP General U.S. Government Funds Classification Average is an equally weighted average calculation of performance figures for all funds within the Lipper General U.S. Government Funds classification in the Lipper VIP underlying funds universe. Lipper General U.S. Government Funds invest primarily in U.S. government and agency issues. For the 12-month period ended 12/31/13, there were 50 funds in this category. Lipper calculations do not include contract fees, expenses or sales charges, and may have been different if such charges had been considered.

Lipper VIP High Yield Funds Classification Average is an equally weighted average calculation of performance figures for all funds within the Lipper High Yield Funds Classification in the Lipper VIP underlying funds universe. Lipper High Yield Funds aim at high (relative) current yield from fixed income securities, have no quality or maturity restrictions, and tend to invest in lower grade debt issues. For the 12-month period ended 12/31/13, there were 110 funds in this category. Lipper calculations do not include contract fees, expenses or sales charges, and may have been different if such charges had been considered.

MSCI All Country World Index (ACWI) is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed and emerging markets.

MSCI Emerging Markets (EM) Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global emerging markets.

MSCI Europe, Australasia, Far East (EAFE) Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed markets excluding the U.S. and Canada.

MSCI Europe, Australasia, Far East (EAFE) Index Net Return (Local Currency) is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance of global developed markets excluding the U.S. and Canada. The index is calculated in local currency and includes reinvested daily net dividends.

MSCI World Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed markets.

Russell 1000^® Growth Index is market capitalization weighted and measures performance of those Russell 1000^® Index companies with higher price-to-book ratios and higher forecasted growth values.

Russell 1000^® Index is market capitalization weighted and measures performance of the largest companies in the Russell 3000^® Index, which represents the majority of the U.S. market’s total capitalization.

Russell 1000^® Value Index is market capitalization weighted and measures performance of those Russell 1000^® Index companies with lower price-to-book ratios and lower forecasted growth values.

Russell 2500™ Index is market capitalization weighted and measures performance of the smallest companies in the Russell 3000^® Index, which represent a modest amount of the Russell 3000^® Index’s total market capitalization.

Russell 2500™ Value Index is market capitalization weighted and measures performance of those Russell 2500™ Index companies with lower price-to-book ratios and lower forecasted growth values.

Russell 3000^® Growth Index is market capitalization weighted and measures performance of those Russell 3000^® Index companies with higher price-to-book ratios and higher forecasted growth values.

Russell 3000^® Index is market capitalization weighted and measures performance of the largest U.S. companies based on total market capitalization and represents the majority of the investable U.S. equity market.

Russell Midcap^® Growth Index is market capitalization weighted and measures performance of those Russell Midcap^® Index companies with higher price-to-book ratios and higher forecasted growth values.

Russell Midcap^® Index is market capitalization weighted and measures performance of the smallest companies in the Russell 1000^® Index, which represent a modest amount of the Russell 1000^® Index’s total market capitalization.

I-2

Standard & Poor’s 500 Index (S&P 500) is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance. STANDARD & POOR’S^®, S&P^® and S&P 500^® are registered trademarks of Standard & Poor’s Financial Services LLC.

Standard & Poor’s/International Finance Corporation Investable (S&P/IFCI) Composite Index is a free float-adjusted, market capitalization-weighted index designed to measure equity performance in global emerging markets.

I-3

Board Members and Officers

The name, year of birth and address of the officers and board members, as well as their affiliations, positions held with the Trust, principal occupation during at least the past five years and number of portfolios overseen in the Franklin Templeton Investments fund complex are shown below. Generally, each board member serves until that person’s successor is elected and qualified.

Independent Board Members

Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years
Harris J. Ashton (1932) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 1988	141	Bar-S Foods (meat packing company) (1981-2010).
Principal Occupation During at Least the 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).
Sam Ginn (1937) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 2007	114	ICO Global Communications (Holdings) Limited (satellite company) (2006-2010), Chevron Corporation (global energy company) (1989-2009), Hewlett-Packard Company (technology company) (1996-2002), Safeway, Inc. (grocery retailer) (1991-1998) and TransAmerica Corporation (insurance company) (1989-1999).
Principal Occupation During at Least the Past 5 Years: Private investor; Chairman, First Responder Network Authority (FirstNet) (interoperable wireless broadband network) (2012); and formerly, Chairman of the Board, Vodafone AirTouch, PLC (wireless company) (1999-2000); Chairman of the Board and Chief Executive Officer, AirTouch Communications (cellular communications) (1993-1998) and Pacific Telesis Group (telephone holding company) (1988-1994).
Edith E. Holiday (1952) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 2005	141	Hess Corporation (exploration and refining of oil and gas), H.J. Heinz Company (processed foods and allied products)(1994-2013), RTI International Metals, Inc. (manufacture and distribution of titanium), Canadian National Railway (railroad) and White Mountains Insurance Group, Ltd. (holding company).
Principal Occupation During at Least the Past 5 Years: Director or Trustee of various companies and trusts; and formerly, Assistant to the President of the United States and Secretary of the Cabinet (1990-1993); General Counsel to the United States Treasury Department (1989-1990); and Counselor to the Secretary and Assistant Secretary for Public Affairs and Public Liaison – United States Treasury Department (1988-1989).
J. Michael Luttig (1954) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 2009	141	Boeing Capital Corporation (aircraft financing) (2006-2013).
Principal Occupation During at Least the Past 5 Years: Executive Vice President, General Counsel and member of Executive Council, The Boeing Company (aerospace company); and formerly, Federal Appeals Court Judge, U.S. Court of Appeals for the Fourth Circuit (1991-2006).
Frank A. Olson (1932) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 2005	141	Hess Corporation (exploration and refining of oil and gas) (1998-2013).
Principal Occupation During at Least the Past 5 Years: Chairman Emeritus, The Hertz Corporation (car rental) (since 2000) (Chairman of the Board (1980-2000) and Chief Executive Officer (1977-1999)); and formerly, Chairman of the Board, President and Chief Executive Officer, UAL Corporation (airlines) (until 1987).

BOD-1

Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years
Larry D. Thompson (1945) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 2007	141	Cbeyond, Inc. (business communications provider) (2010-2012), The Southern Company (energy company) (2010-2012) and The Washington Post Company (education and media organization).
Principal Occupation During at Least the Past 5 Years: Executive Vice President – Government Affairs, General Counsel and Corporate Secretary, PepsiCo, Inc. (consumer products) (July 2012); and formerly, John A. Sibley Professor of Corporate and Business Law, University of Georgia School of Law (2011-2012); Senior Vice President – Government Affairs, General Counsel and Secretary, PepsiCo, Inc. (2004-2011); Senior Fellow of The Brookings Institution (2003-2004); Visiting Professor, University of Georgia School of Law (2004); and Deputy Attorney General, U.S. Department of Justice (2001-2003).
John B. Wilson (1959) One Franklin Parkway San Mateo, CA 94403-1906	Lead Independent Trustee	Trustee since 2007 and Lead Independent Trustee since 2008	114	None
Principal Occupation During at Least the Past 5 Years: President, Staples Europe (office supplies) (2012); President and Founder, Hyannis Port Capital, Inc. (real estate and private equity investing); serves on private and non-profit boards; and formerly, Chief Operating Officer and Executive Vice President, Gap, Inc. (retail) (1996-2000); Chief Financial Officer and Executive Vice President – Finance and Strategy, Staples, Inc. (1992-1996); Senior Vice President – Corporate Planning, Northwest Airlines, Inc. (airlines) (1990-1992); and Vice President and Partner, Bain & Company (consulting firm) (1986-1990).

Interested Board Members and Officers

Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years
**Gregory E. Johnson (1961) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since June 2013	152	None
Principal Occupation During at Least the Past 5 Years: Chairman of the Board, Member – Office of the Chairman, Director, President and Chief Executive Officer, Franklin Resources, Inc.; officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 44 of the investment companies in Franklin Templeton Investments; and Chairman, Investment Company Institute.
**Rupert H. Johnson, Jr. (1940) One Franklin Parkway San Mateo, CA 94403-1906	Chairman of the Board and Trustee	Chairman of the Board since June 2013 and Trustee since 1988	141	None
Principal Occupation During at Least the Past 5 Years: Vice Chairman, Member – Office of the Chairman and Director, Franklin Resources, Inc.; Director, Franklin Advisers, 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 41 of the investment companies in Franklin Templeton Investments.
Alison E. Baur (1964) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2012	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years: Deputy General Counsel, Franklin Templeton Investments; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 46 of the investment companies in Franklin Templeton Investments.

BOD-2

Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years
Laura F. Fergerson (1962) One Franklin Parkway San Mateo, CA 94403-1906	Chief Executive Officer – Finance and Administration	Since 2009	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years: Senior Vice President, Franklin Templeton Services, LLC; and officer of 46 of the investment companies in Franklin Templeton Investments.
Gaston Gardey (1967) One Franklin Parkway San Mateo, CA 94403-1906	Treasurer, Chief Financial Officer and Chief Accounting Officer	Since 2009	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years: Director, Fund Accounting, Franklin Templeton Investments; and officer of 27 of the investment companies in Franklin Templeton Investments.
Aliya S. Gordon (1973) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2009	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years: Senior Associate General Counsel, Franklin Templeton Investments; officer of 46 of the investment companies in Franklin Templeton Investments; and formerly, Litigation Associate, Steefel, Levitt & Weiss, LLP (2000-2004).
Steven J. Gray (1955) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2009	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years: Senior Associate General Counsel, Franklin Templeton Investments; Vice President, Franklin Templeton Distributors, Inc.; and officer of 46 of the investment companies in Franklin Templeton Investments.
Selena L. Holmes (1965) 100 Fountain Parkway St. Petersburg, FL 33716-1205	Vice President – AML Compliance	Since 2012	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years: Director, Global Compliance Monitoring; and officer of 46 of the investment companies in Franklin Templeton Investments.
Edward B. Jamieson (1948) One Franklin Parkway San Mateo, CA 94403-1906	President and Chief Executive Officer – Investment Management	Since 2010	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years: President, Chief Investment Officer and Director, Franklin Advisers, Inc.; Executive Vice President, Franklin Templeton Institutional, LLC; and officer and/or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 10 of the investment companies in Franklin Templeton Investments.
Kimberly H. Novotny (1972) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923	Vice President	Since March 2013	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years: Associate General Counsel, Franklin Templeton Investments; Vice President and Secretary, Fiduciary Trust International of the South; Vice President, Templeton Investment Counsel, LLC; Assistant Secretary, Franklin Resources, Inc.; and officer of 46 of the investment companies in Franklin Templeton Investments.

BOD-3

Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years
Robert C. Rosselot (1960) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923	Chief Compliance Officer	Since March 2013	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years: Director, Global Compliance, Franklin Templeton Investments; officer of 46 of the investment companies in Franklin Templeton Investments; and formerly, Senior Associate General Counsel, Franklin Templeton Investments (2007-2013); and Secretary and Vice President, Templeton Group of Funds (2004-2013).
Karen L. Skidmore (1952) One Franklin Parkway San Mateo, CA 94403-1906	Vice President and Secretary	Since 2006	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years: Senior Associate General Counsel, Franklin Templeton Investments; and officer of 46 of the investment companies in Franklin Templeton Investments.
Craig S. Tyle (1960) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2005	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years: General Counsel and Executive Vice President, Franklin Resources, Inc.; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 46 of the investment companies in Franklin Templeton Investments.
Lori A. Weber (1964) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923	Vice President	Since 2011	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years: Senior Associate General Counsel, Franklin Templeton Investments; Assistant Secretary, Franklin Resources, Inc.; Vice President and Secretary, Templeton Investment Counsel, LLC; Vice President, Fiduciary Trust International of the South; and officer of 46 of the investment companies in Franklin Templeton Investments.

  * 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 manager or affiliated investment managers.

** Gregory E. Johnson is considered to be an interested person of the Fund under the federal securities laws due to his position as an officer and director of Franklin Resources, Inc. (Resources), which is the parent company of the Fund’s investment manager and distributor. Rupert H. Johnson, Jr. is considered to be an interested person of the Fund under the federal securities laws due to his position as officer and director and major shareholder of Resources.

Note 1: Rupert H. Johnson, Jr. is the uncle of Gregory E. Johnson.

Note 2: Officer information is current as of the date of this report. It is possible that after this date, information about officers may change.

Note 3: Effective June 13, 2013, Charles B. Johnson ceased to be a trustee of the Fund.

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 has determined that there is at least one such financial expert on the Audit Committee and has designated John B. Wilson as its audit committee financial expert. The Board believes that Mr. Wilson qualifies as such an expert in view of his extensive business background and experience, including service as chief financial officer of Staples, Inc. from 1992 to 1996. Mr. Wilson has been a Member and Chairman of the Fund’s Audit Committee since 2007. As a result of such background and experience, the Board believes that Mr. Wilson 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. Wilson is an independent Board member 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. Shareholders may call (800) 321-8563 or their insurance companies to request the SAI.

BOD-4

Franklin Templeton Variable Insurance Products Trust

Shareholder Information

Proxy Voting Policies and Procedures

The Trust’s investment manager has established Proxy Voting Policies and Procedures (Policies) that the Trust uses to determine how to vote proxies relating to portfolio securities. Shareholders may view the Trust’s complete Policies online at franklintempleton.com. Alternatively, shareholders may request copies of the Policies free of charge by calling the Proxy Group collect at (954) 527-7678 or by sending a written request to: Franklin Templeton Companies, LLC, 300 S.E. 2nd Street, Fort Lauderdale, FL 33301, Attention: Proxy Group. Copies of the Trust’s proxy voting records are also made available online at franklintempleton.com and posted on the U.S. Securities and Exchange Commission’s website at sec.gov and reflect the most recent 12-month period ended June 30.

Quarterly Statement of Investments

The Trust files a complete statement of investments with the U.S. Securities and Exchange Commission for the first and third quarters for each fiscal year on Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission’s website at sec.gov. The filed form may also be viewed and copied at the Commission’s Public Reference Room in Washington, DC. Information regarding the operations of the Public Reference Room may be obtained by calling (800) SEC-0330.

SI-1

VALUE BLEND GROWTH SECTOR GLOBAL INTERNATIONAL HYBRID ASSET ALLOCATION FIXED INCOME

< GAIN FROM OUR PERSPECTIVE^® >

Annual Report

FRANKLIN TEMPLETON

VARIABLE INSURANCE PRODUCTS TRUST

Investment Managers

Franklin Advisers, Inc.

Franklin Advisory Services, LLC

Franklin Mutual Advisers, LLC

Franklin Templeton Institutional, LLC

Templeton Asset Management Ltd.

Templeton Global Advisors Limited

Templeton Investment Counsel, LLC

Fund Administrator

Franklin Templeton Services, LLC

Distributor

Franklin Templeton Distributors, Inc.

Franklin Templeton Variable Insurance Products Trust (FTVIP) shares are not offered to the public; they are offered and sold only to: (1) insurance company separate accounts (Separate Account) to serve as the underlying investment vehicle for variable contracts; (2) certain qualified plans; and (3) other mutual funds (funds of funds).

Authorized for distribution to investors in Separate Accounts only when accompanied or preceded by the current prospectus for the applicable contract, which includes the Separate Account and the FTVIP prospectuses. Investors should carefully consider a fund’s investment goals, risks, charges and expenses before investing. The prospectus contains this and other information; please read it carefully before investing.

To ensure the highest quality of service, telephone calls to or from our service departments may be monitored, recorded and accessed. These calls can be identified by the presence of a regular beeping tone.

© 2014 Franklin Templeton Investments. All rights reserved. VIP4 A 02/14

Item 2. Code of Ethics.

(a) The Registrant has adopted a code of ethics that applies to its principal executive officers and principal financial and accounting officer.

(c) N/A

(d) N/A

(f) Pursuant to Item 12(a)(1), the Registrant is attaching as an exhibit a copy of its code of ethics that applies to its principal executive officers and principal financial and accounting officer.

Item 3. Audit Committee Financial Expert.

(a)	(1)    The Registrant has an audit committee financial expert serving on its audit committee.
	(2)    The audit committee financial expert is John B. Wilson and he is “independent” as defined under the relevant Securities and  Exchange Commission Rules and Releases.

Item 4. Principal Accountant Fees and Services.

(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 $883,945 for the fiscal year ended December 31, 2013 and $917,092 for the fiscal year ended December 31, 2012.

(b) Audit-Related Fees

There were no 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.

There were no 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 their financial statements.

(c) Tax Fees

The aggregate 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 were $0 for the fiscal year ended December 31, 2013 and $7,040 for the fiscal year ended December 31, 2012. The services for which these fees were paid included preparation of tax returns for foreign governments and consultation on foreign withholding tax reporting.

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 $6,930 for the fiscal year ended December 31, 2013 and $4,600 for the fiscal year ended December 31, 2012. The services for which these fees were paid included technical tax consultation for capital gain tax and withholding tax reporting for foreign governments and requirements on local country’s self certification forms.

(d) All Other Fees

The aggregate fees paid to the principal accountant for products and services rendered by the principal accountant to the registrant not reported in paragraphs (a)-(c) of Item 4 were $0 for the fiscal year ended December 31, 2013 and $17,390 for the fiscal year ended December 31, 2012. The services for which these fees were paid include review of materials provided to the fund Board in connection with the investment management contract renewal process and review on amortization/accretion matters.

The aggregate 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 services reported in paragraphs (a)-(c) of Item 4 were $59,809 for the fiscal year ended December 31, 2013 and $158,267 for the fiscal year ended December 31, 2012. The services for which these fees were paid included preparation and review of materials provided to the fund Board in connection with the investment management contract renewal process, certifying asset under management, and XBRL tagging on financial statements.

(e) (1) The registrant’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 registrant by the auditors to the registrant’s investment adviser or to any entity that controls, is controlled by or is under common control with the registrant’s investment adviser and that provides ongoing services to the registrant where the non-audit services relate directly to the operations or financial reporting of the registrant; 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 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 $66,739 for the fiscal year ended December 31, 2013 and $187,297 for the fiscal year ended December 31, 2012.

(h) The registrant’s audit committee of the board has considered whether the provision of non-audit services that were rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.

Item 5.     Audit Committee of Listed Registrants.	N/A
Item 6.     Schedule of Investments.	N/A
Item 7.     Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.	N/A
Item 8.     Portfolio Managers of Closed-End Management Investment Companies.	N/A
Item 9.     Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated  Purchasers.	N/A
Item 10.  Submission of Matters to a Vote of Security Holders.

There have been no changes to the procedures by which shareholders may recommend nominees to the Registrant’s Board of Trustees that would require disclosure herein.

Item 11. Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures. The Registrant maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Registrant’s filings under the Securities Exchange Act of 1934 and the Investment Company Act of 1940 is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission. Such information is accumulated and communicated to the Registrant’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. The Registrant’s management, including the principal executive officer and the principal financial officer, recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Within 90 days prior to the filing date of this Shareholder Report on Form N-CSR, the Registrant had carried out an evaluation, under the supervision and with the participation of the Registrant’s management, including the Registrant’s principal executive officer and the Registrant’s principal financial officer, of the effectiveness of the design and operation of the Registrant’s disclosure controls and procedures. Based on such evaluation, the Registrant’s principal executive officer and principal financial officer concluded that the Registrant’s disclosure controls and procedures are effective.

(b) Changes in Internal Controls. There have been no changes in the Registrant’s internal controls or in other factors that could materially affect the internal controls over financial reporting subsequent to the date of their evaluation in connection with the preparation of this Shareholder Report on Form N-CSR.

Item 12. Exhibits.

(a) (1) Code of Ethics

(a) (2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and Gaston Gardey, Chief Financial Officer and Chief Accounting Officer

(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and Gaston Gardey, Chief Financial Officer and Chief Accounting Officer

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

By	/s/ LAURA F. FERGERSON
	Laura F. Fergerson
	Chief Executive Officer –
	Finance and Administration
Date February 27, 2014

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By	/s/ LAURA F. FERGERSON
	Laura F. Fergerson
	Chief Executive Officer –
	Finance and Administration
Date February 27, 2014

By	/s/ GASTON GARDEY
	Gaston Gardey
	Chief Financial Officer and
	Chief Accounting Officer
Date February 27, 2014