FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST, N-30D, 2000-09-08

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
N-30D, 2000-09-08

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FRANKLIN TEMPLETON VARIABLE INSURANCE
PRODUCTS TRUST SEMIANNUAL REPORT
TABLE OF CONTENTS [GRAPHIC OMITTED]

Letter to Contract Owners ........................................ 2
Fund Summaries
Funds Seeking Capital Growth
Franklin Aggressive Growth Securities Fund ...................... FA-1
Franklin Global Health Care Securities Fund ..................... FGH-1
Franklin Large Cap Growth Securities Fund
(formerly Franklin Capital Growth Fund) ...................... FL-1
Prospectus Supplement ........................................ FL-5
Franklin S&P 500 Index Fund ..................................... FSP-1
Prospectus Supplement ........................................ FSP-4
Franklin Small Cap Fund ......................................... FS-1
Franklin Technology Securities Fund ............................. FT-1
Mutual Discovery Securities Fund ................................ MD-1
Templeton Developing Markets Securities Fund
(formerly Templeton Developing Markets Fund) ................. TD-1
Templeton Growth Securities Fund
(formerly Templeton Global Growth Fund) ...................... TG-1
Templeton International Securities Fund
(formerly Templeton International Fund) ...................... TI-1
Templeton International Smaller Companies Fund .................. TIS-1
Templeton Pacific Growth Securities Fund
(formerly Templeton Pacific Growth Fund) ..................... TP-1
Funds Seeking Growth and Income
Franklin Global Communications Securities Fund
(formerly Franklin Global Utilities Securities Fund) ......... FGC-1
Franklin Growth and Income Securities Fund
(formerly Franklin Growth and Income Fund) ................... FGI-1
Franklin Income Securities Fund ................................. FI-1
Franklin Natural Resources Securities Fund ...................... FN-1
Franklin Real Estate Fund ....................................... FRE-1
Franklin Rising Dividends Securities Fund ....................... FRD-1
Franklin Value Securities Fund .................................. FV-1
Mutual Shares Securities Fund ................................... MS-1
Templeton Asset Strategy Fund
(formerly Templeton Asset Allocation Fund) ................... TA-1
Funds Seeking Income
Franklin High Income Fund ....................................... FH-1
Franklin Strategic Income Securities Fund ....................... FSI-1
Franklin U.S. Government Fund ................................... FUS-1
Franklin Zero Coupon Funds ..................................... FZ-1
Templeton Global Income Securities Fund ......................... TGI-1
Fund Seeking Capital Preservation and Income
Franklin Money Market Fund ...................................... FM-1

Thank you for investing with Franklin Templeton Variable Insurance Products
Trust. We encourage our investors to maintain a long-term perspective, and
remember that all securities markets move both up and down, as do fund unit
prices. We appreciate your past support and look forward to serving your
investment needs in the years ahead.

<PAGE>

LETTER TO CONTRACT OWNERS

Dear Contract Owners:

We are pleased to bring you Franklin Templeton Variable Insurance Products
Trust's semiannual report for the period ended June 30, 2000.

During the first six months of 2000, many of the world's economies
strengthened, in contrast to the U.S. economy, which began to show the first
signs of slowing toward the period's end. Abroad, those countries in the
European Union were able to take advantage of the euro's weakness to bolster
exports and create jobs, pushing the region's unemployment to its lowest level
in seven years. Many Asian and Latin American emerging countries' economies
also enjoyed brisk growth during the period, with steadier consumer consumption
replacing exports and government spending as the principal foundation for
growth. The Japanese economy recently reported a 2.4% annualized increase in
its gross domestic product (GDP) for the first quarter of 2000, the highest in
four years.

It was a different story in the U.S., as the Federal Reserve Board (the Fed)
continued to raise short-term interest rates in an effort to stem what they
apparently believed was a rising inflation threat as a result of the
super-heated economy. The first signs of a slowdown appeared in March, when
retail sales, new vehicle sales and housing starts fell, and this trend
continued into June, reinforcing the possibility that the economy was indeed
decelerating.

In spite of the generally strong economic backdrop, most stock markets around
the globe ended the period in negative territory, weighed down by rising
interest rates. However, this environment affected various stocks differently,
and the end result does not tell the entire story.

For the stock markets, the beginning of the period witnessed the continuance of
many investors' ravenous appetites for "new economy" stocks -- technology,
biotechnology, telecommunications and Internet-related companies -- seemingly
at the expense of "old economy" stocks, which meant almost everything else.
Taking a cue from the end of 1999 and apparently fueled by a rapidly increasing
money supply and central bank reluctance to raise rates in anticipation of
potential Y2K problems, investors jumped into these new economy stocks, and
many rocketed in the first two months of 2000. This was most obvious

2
<PAGE>

in the U.S., where at its peak on March 10, 2000, the technology-heavy Nasdaq(R)
had increased 24.1% since the start of the year, but this "tech mania" also
included technology companies in Europe and Japan, which saw the prices of some
of their hottest stocks double, triple and more.(1) However, many of these
stocks ran out of gas in March with the Nasdaq falling 37.3% from its high, as
investor confidence waned following recurrent Fed interest-rate increases. For
the period, the Nasdaq returned -2.02%.

While new economy stocks were grabbing headlines, it was some of the old
economy stocks that were the best performers in the period. Supported by oil
prices hovering around $29 a barrel and natural gas prices at three-year highs,
many energy-related company stocks increased significantly. Likewise,
pharmaceutical stocks rose strongly, as investors seemed to feel that an aging
world population would likely increase the demand for such companies' products
regardless of the level of economic growth or interest rates.

U.S. Treasury and corporate bond prices were volatile in this rising
interest-rate environment, partially due to investor uncertainty over the U.S.
economy's strength. Surprisingly, many emerging market bonds posted solid
performances, bolstered by these countries' improving financial conditions.

It is important to remember, of course, that securities markets always have
been, and always will be, subject to volatility. No one can predict exactly how
they will perform in the future. For this reason, we urge you to exercise
patience and focus not on day-to-day market movements, but on your long-term
retirement and investment goals. As always, we appreciate your support, welcome
your questions and comments, and look forward to serving your investment needs
in the years ahead.

Sincerely,

/s/ RUPERT H. JOHNSON, JR.

Rupert H. Johnson, Jr.
Vice President
Franklin Templeton Variable Insurance Products Trust

(1) The Nasdaq Composite Index measures all Nasdaq domestic and non-U.S. based
common stocks listed on the Nasdaq Stock Market(R). The Index is market-value
weighted and includes over 5,000 companies (as of 6/30/00).

3
<PAGE>

FRANKLIN AGGRESSIVE GROWTH SECURITIES FUND

--------------------------------------------------------------------------------
Fund Goal and Primary Investments: Franklin Aggressive Growth Securities Fund
seeks capital appreciation. The Fund invests primarily in equity securities of
companies demonstrating accelerating growth, increasing profitability or
above-average growth or growth potential as compared with the overall economy.
--------------------------------------------------------------------------------
The six months ended June 30, 2000, proved to be an extremely volatile period
for the U.S. stock market. After reaching record highs in March, most of the
major market indexes fell dramatically, largely due to investor concerns about
inflationary pressures and continued interest-rate tightening by the Federal
Reserve Board. Although technology stocks were hit particularly hard, valuation
considerations, rather than any change in the sector's fundamentals, seemed to
account for the decline in these stocks' share prices. Global technology
spending, fueled in large part by the electronic commerce (e-commerce) and
communications infrastructure expansion, remained solid and growth for most
companies remained robust. This helped their stock prices recover late in the
period, as signs of a slowing economy fueled optimism that a "soft landing," or
return to more sustainable growth levels, was underway.

Since its inception on May 1, 2000, Franklin Aggressive Growth Securities Fund
significantly outperformed the Russell 3000(R) Growth Index and the S&P MidCap
400(R) Index.(1) We attribute the Fund's outperformance, relative to the
benchmarks, to the technology sector's strength late in the period. Hardware
stocks, particularly semiconductors and telecommunications equipment providers,
performed very well in June, as did software and Internet services stocks over
the same period. We overweighted semiconductors throughout the period. In our
opinion, the outlook for semiconductor companies remains strong, particularly
in areas where Internet infrastructure build-out is generating tremendous
demand. Some of our larger holdings in this sector included Broadcom, PMC
Sierra and Applied Micro Circuits.

(1) The Russell 3000 Growth Index measures the performance of those Russell 3000
Index companies with higher price-to-book ratios and higher forecasted growth
values. The stocks in this index are also members of either the Russell 1000
Growth or the Russell 2000 Growth indexes. The S&P MidCap 400 Index consists of
400 domestic stocks chosen for market size, liquidity, and industry group
representation. It is also a market-value weighted index and was the first
benchmark of midcap stock price movement. Indexes are unmanaged and include
reinvested dividends. One cannot invest directly in an index, nor is an index
representative of the Fund's portfolio.

This horizontal bar chart shows the sector breakdown based on the percentage of
total net assets on 6/30/00 for Franklin Aggressive Growth Securities Fund.

Electronic Technology 33.5%
Technology Services 24.7%
Health Technology 6.0%
Telecommunications 4.3%
Commercial Services 2.0%
Transportation 1.4%
Finance 1.2%
Retail Trade 1.0%
Producer Manufacturing 0.4%
Preferred Stocks 0.3%
Short-Term Investments
& Other Net Assets 25.2%

FA-1
<PAGE>

Top 10 Holdings
Franklin Aggressive Growth
Securities Fund

6/30/00
Company % of Total
Sector Net Assets
---------------------------------------
Cisco Systems Inc. 1.8%
Electronic Technology

Juniper Networks Inc. 1.8%
Electronic Technology

Dell Computer Corp. 1.7%
Electronic Technology

Niku Corp. 1.6%
Technology Services

SDL Inc. 1.6%
Electronic Technology

Redback Networks Inc. 1.6%
Electronic Technology

Sapient Corp. 1.5%
Technology Services

Viant Corp. 1.5%
Technology Services

Applied Micro
Circuits Corp. 1.5%
Electronic Technology

VERITAS Software Corp. 1.5%
Technology Services

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

The Fund's performance also benefited from our exposure to biotechnology
stocks, which delivered strong performance in June. Holdings in this group
included Abgenix and Inhale Therapeutics Systems. The technology and
biotechnology sectors host many of the market's fastest growing companies, and
we expect to maintain the Fund's exposure to this group for the foreseeable
future.

While the technology companies' returns were hard to match during the reporting
period, we also looked to other sectors for growth opportunities, and initiated
a position in Expeditors International, a leading global logistics management
company. We believe that Expeditors should benefit from companies looking to
improve their supply-chain efficiency in an environment of expanding
international trade.

Looking forward, we are encouraged by the continuing strength of the U.S.
economy. Although we expect fears of rising interest rates and inflation to
contribute to further market swings, we expect solid growth for many companies,
particularly those in the technology sectors. The market's weakness in March
and April brought prices of many of our favorite stocks back to what we believe
are very reasonable levels, and we will attempt to take advantage of any future
market volatility to buy stocks of well-positioned growth companies at what we
believe to be attractive valuations.

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change depending
on market and economic conditions. Although historical performance is no
guarantee of future results, these insights may help you understand our
investment and management philosophy.

FA-2
<PAGE>

PERFORMANCE SUMMARY AS OF 6/30/00

Franklin Aggressive Growth Securities Fund - Class 1 delivered a +12.10%
aggregate total return from inception on 5/1/00 through 6/30/00. Total return
of Class 1 shares represents the cumulative change in value, assuming
reinvestment of dividends and capital gains. Since the Fund has existed for
less than one year, average annual total returns are not provided. The manager
and administrator had agreed in advance to waive or limit their respective fees
and to assume as their own expenses certain expenses otherwise payable by the
Fund so that Total Fund Operating Expenses do not exceed 1.00% of the Fund's
Class 1 net assets through 2000. Had they not taken this action, the Fund's
total return would have been lower. After December 31, 2001, the manager and
administrator may end this arrangement at any time.

Franklin Aggressive Growth Securities Fund - Class 1
Period ended 6/30/00
Since
Inception
(5/1/00)
------------------------------------------------------------------
Aggregate Total Return +12.10%
Value of $10,000 Investment $11,210

These returns reflect periods of rapidly rising stock markets and such gains
may not continue. Ongoing stock market volatility, particularly in the
technology sector, can dramatically change the Fund's short-term performance;
current results may be lower.

Franklin Aggressive
Growth Securities
Fund - Class 1

Performance reflects the Fund's Class 1 operating expenses, but does not
include any contract fees, expenses or sales charges. If they had been
included, performance would be lower. These charges and deductions,
particularly for variable life policies, can have a significant effect on
contract values and insurance benefits. See the contract prospectus for a
complete description of these expenses, including sales charges.

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

Past performance does not guarantee future results.

FA-3
<PAGE>

FRANKLIN GLOBAL HEALTH CARE SECURITIES FUND

--------------------------------------------------------------------------------
Fund Goal and Primary Investments: Franklin Global Health Care Securities Fund
seeks capital appreciation. The Fund invests primarily in U.S. and foreign
equity securities issued by large and small capitalization health care
companies, including pharmaceutical, biotechnology, medical and health
services, and medical supply companies.
--------------------------------------------------------------------------------
This semiannual report of Franklin Global Health Care Securities Fund covers
the period ended June 30, 2000. The six months under review were among the most
volatile ever for the U.S. equity markets. Investors' apparent ambivalence
toward many "new economy" companies contributed to significant upswings and
downswings in technology stocks, as well as their "old economy" brethren.
Health care stocks participated in this volatility, particularly the
biotechnology sector, which doubled, then halved, then was on pace to double
again between the beginning of January and the end of June. Even the
traditionally steady pharmaceutical stocks were subject to severe volatility
during the period. Amid this turbulence, Franklin Global Health Care Securities
Fund outperformed the Standard & Poor's(R) (S&P(R)) Health Care Composite Index
and the S&P 500(R) Index.(1)

Our holdings in the biotechnology sector were particularly beneficial to the
Fund's performance. Because we believed new product launches and a growing
number of profitable companies would extend the sector's rally, which began in
1999, we increased our biotechnology weighting. As expected, prices of many of
these stocks soared. To hold on to these gains, we lightened our biotechnology
exposure and moved the assets into large-cap pharmaceutical stocks in March.
Later in the period, we added to our biotechnology positions, ending the period
with a substantial sector investment. Although we expect continued market
volatility, we believe biotechnology's favorable fundamentals should fuel the
group's long-term performance. Inhale Therapeutics, Amgen and COR Therapeutics
remained our favorite stocks in the sector during the review period.

(1) Source: Standard and Poor's Micropal (S&P 500 and S&P Health Care
Composite). The S&P 500 Composite Index consists of 500 domestic stocks,
consisting of four broad sectors: industrials, utilities, financials and
transportation. The S&P 500 serves as standard for measuring large-cap U.S.
stock performance. Since some industries are characterized by companies of
relatively small market capitalizataion, the Index is not composed of the 500
largest companies on the New York Stock Exchange. The S&P Health Care Composite
Index is a capitalization-weighted index of all of the stocks in the Standard &
Poor's 500 that are involved in the business of health care related products or
services. The index was developed with a base of 100 as of January 14, 1987. The
indexes are unmanaged and include reinvested dividends. One cannot invest
directly in an index, nor is an index representative of the Fund's portfolio.

FGH-1
<PAGE>
Top 10 Equity Holdings
Franklin Global Health Care
Securities Fund
6/30/00
% of Total
Company Net Assets
----------------------------------------
Schering-Plough Corp. 4.8%

Pfizer Inc. 4.7%

Abbott Laboratories 4.2%

Baxter International Inc. 4.1%

Inhale Therapeutic
Systems Inc. 3.9%

American Home
Products Corp. 3.8%

Pharmacia Corp. 3.7%

Bristol-Myers Squibb Co. 3.4%

Genentech Inc. 2.9%

Johnson & Johnson 2.4%

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

Our movement into pharmaceutical stocks was especially timely. Due partly to
rhetoric surrounding a possible federally funded Medicare drug benefit, the
group languished at the beginning of the year and, at one point, reached a 10%
discount to the S&P 500 Index -- well below historical valuation averages.
Because an earlier pharmaceuticals' trough, which discounted the sector 20%
during the early 1990s, resulted from what we believed to be an even greater
legislative threat, we felt the reporting period's valuations were compelling.
Consequently, we increased our exposure to the group from 17% of total net
assets at the end of February to 29% at the end of March.

The sector has performed extremely well since then, up over 50% from its low on
March 7. In comparison, the S&P 500 Index offered an approximate 7% return over
the same period. Although political considerations may keep the pressure on
pharmaceuticals, merger and acquisition activity should accelerate near-term
earnings per share growth. We believe the industry's high profitability, strong
cash flow generation and steady earnings growth offer an excellent long-term
outlook. Our belief in the sector led to substantial positions in
Schering-Plough, Pfizer (which recently acquired Warner Lambert) and Abbott
Labs, placing those companies as our top three holdings as of June 30, 2000.

The health care services sector also performed well during the period, due
largely to improving hospital management and managed care fundamentals. Managed
care companies' ability to obtain premium increases from employers, in excess
of costs, contributed to a general profitability upswing for the group.

This favorable premium environment also seemed to positively affect hospitals,
as did the first major Medicare reimbursement increase for service providers in
over 10 years. Investors' general inattention to these phenomena at the
beginning of the period resulted in what we felt were extremely attractive
prices for stocks of these companies. Later, as these companies exceeded their
earnings expectations, their stocks significantly outperformed the overall
equity market. Our sector holdings during the period included Cigna, Tenet
Healthcare, UnitedHealth Group, Universal Health Services and HCA-The
Healthcare Corp.

FGH-2
<PAGE>

Of course, not every investment in the portfolio proved to be successful. Our
major stock disappointment occurred late in the period when Omnicare, which
provides pharmacy services to long-term care facilities across the U.S.,
announced a revenue and earnings disappointment resulting in a steep decline in
its share price.

Looking forward, we anticipate continued favorable trends for health care
investors. An aging population and technological advances resulting in a wider
range of treatable conditions should continue to drive overall health care
expenditures. Furthermore, the inelastic demand for health care products and
services should provide protection against negative turns in the business
cycle. As always, we will strive to seize upon the investment opportunities
that present themselves in the health care sector in a timely and disciplined
fashion. By following this strategy, we feel we can provide our shareholders
with unique opportunities to invest in today's newest and fastest-growing
health care companies.

We think it is wise to maintain a healthy respect for the past history of the
American economy's business cycles and traditional methods of security
valuations. By any of these traditional measures, many stocks are selling at
unprecedented valuations. The volatility in the market we have seen during the
period may be a precursor of a return to traditional price/earnings and book
value analysis -- or it may be a temporary bump in the road. However, one thing
is clear. We cannot rely on the valuations and performance of these stocks to
continue in this manner indefinitely. We will try our hardest to deliver
positive performance every year -- but no one should expect that to be the case
for this, or any, Fund.

Thank you for your participation in Franklin Global Health Care Securities
Fund. We look forward to servicing your investment needs in the years to come.

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance
is no guarantee of future results, these insights may help you understand our
investment and management philosophy.

FGH-3
<PAGE>

Franklin Global
Health Care Securities
Fund - Class 1

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

PERFORMANCE SUMMARY AS OF 6/30/00

Franklin Global Health Care Securities Fund - Class 1 delivered a +48.74%
cumulative total return for the six-month period ended 6/30/00. Total return of
Class 1 shares represents the cumulative or average annual change in value,
assuming reinvestment of dividends and capital gains. Average returns smooth
out variations in returns, which can be significant; they are not the same as
year-by-year results.

Franklin Global Health Care Securities Fund - Class 1
Periods ended 6/30/00
Since
Inception
1-Year (5/1/98)
----------------------------------------------------------
Average Annual Total Return +60.52% +19.23%
Cumulative Total Return +60.52% +46.40%
Value of $10,000 Investment $16,052 $14,640

These returns reflect periods of rapidly rising stock markets and such gains
may not continue. Ongoing stock market volatility can dramatically change the
Fund's short-term performance; current results may be lower.

Past performance does not guarantee future results.

FGH-4
<PAGE>

FRANKLIN LARGE CAP GROWTH SECURITIES FUND

--------------------------------------------------------------------------------
Fund Goal and Primary Investments: Franklin Large Cap Growth Securities Fund
(formerly Franklin Capital Growth Fund) seeks capital appreciation. The Fund
invests primarily in equity securities of U.S. large-cap growth companies, with
significant positions expected in the technology sector (including computer
hardware and software, telecommunications and electronics).
--------------------------------------------------------------------------------
This semiannual report of Franklin Large Cap Growth Securities Fund covers the
six months ended June 30, 2000. During this time, U.S. gross domestic product
(GDP) continued to rise briskly, crude oil prices rose about 27%, natural gas
prices nearly doubled and the U.S. trade deficit continued to balloon. On the
other hand, the U.S. federal budget surplus grew to levels not seen in decades,
and partly due to productivity gains, the U.S. corporate earnings outlook
appeared to be positive. We believe such productivity gains are a primary
contributing factor to the lack of core inflation witnessed over the past nine
years. However, apparently fearful that inflation might be preparing to rear
its ugly head, the Federal Reserve Board raised the federal funds target rate
three separate times, and by period's end, the economy showed signs of cooling.

The U.S. equity markets continued to soar, reaching new highs until March and
April brought a sharp reversal -- especially for technology-laden indexes like
the Nasdaq-100 Index, which lost about 25% of its value in a mere three weeks'
time. However, when news of a possible cooling down of the economy was
released, many of these stocks recovered and on June 30, the index was 1.52%
higher than it had been on January 1.

The market's volatility presented us with an excellent opportunity to purchase
a number of stocks. As of June 30, 2000, the Fund held 106 positions across a
diverse group of sectors, including computer software, data networking, health
care, electric utilities, semiconductors, financial, energy and consumer
products, to name a few. However, we continued to focus on those companies we
found to be playing a large role in the proliferation of technology and
productivity-enhancement tools. We initiated positions in leading network
security companies such as VeriSign, Check Point Software, SonicWALL and
Watchguard Technologies. Each of these stocks posted double-digit gains since
we purchased them. We also purchased shares of leading specialized
semiconductor manufacturing companies SDL

Top 10 Sectors
Franklin Large Cap Growth
Securities Fund
6/30/00
% of Total
Sector Net Assets
-----------------------------------------
Electronic Technology 24.2%

Technology Services 13.8%

Health Technology 13.1%

Utilities 7.7%

Finance 7.1%

Telecommunications 7.0%

Industrial Services 3.9%

Retail Trade 3.7%

Consumer Non-Durables 3.1%

Consumer Services 2.3%

FL-1
<PAGE>
Top 10 Holdings
Franklin Large Cap Growth
Securities Fund
6/30/00

Company % of Total
Sector Net Assets
----------------------------------------
JDS Uniphase Corp. 2.2%
Electronic Technology

Genentech, Inc. 2.0%
Health Technology

EMC Corp. 1.9%
Electronic Technology

Johnson & Johnson 1.8%
Health Technology

Microsoft Corp. 1.7%
Technology Services

Amgen Inc. 1.6%
Health Technology

Enron Corp. 1.6%
Utilities

Concord EFS Inc. 1.5%
Commercial Services

Cisco Systems Inc. 1.5%
Electronic Technology

Entrust Technologies Inc. 1.5%
Technology Services

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

and PMC Sierra, at what we believe to be favorable prices. Other major
technology and telecommunications infrastructure providers whose shares we
owned at period's end included JDS Uniphase, EMC, Concord EFS, Juniper Networks
and Cisco Systems. In our opinion, these companies are well positioned to take
advantage of the rapidly growing global demand for telecommunications
equipment.

Recognizing the importance of managing the portfolio's risk, we continually
reassess our holdings, based on their risk/return attributes. When shares of
companies with outstanding growth prospects become fully valued in our view, we
do not hesitate to gradually reduce such holdings. Furthermore, we continually
look to counterbalance our more richly valued holdings with stocks we believe
represent great opportunities. Our decision early in the period to trim some of
our top technology stocks and purchase shares in a handful of what were in our
view attractively valued electric utility stocks, such as CMS Energy and
Pinnacle West, illustrates our determination to maintain balance and
diversification in the Fund's portfolio. We also added to our positions in
Johnson & Johnson and Abbott Labs early in the period.

We believe these portfolio changes contributed significantly to the Fund's
strong performance during the period, especially during the market's downturn
in late March and April. The Fund's performance also benefited from a variety
of other companies. Stocks that produced returns of 40% or more for the Fund
during the reporting period included EMC, Applied Materials, CIENA, Corning,
Xilinx, Oracle, Siebel Systems and Enron. Stocks producing returns of between
20% and 40% included Hewlett-Packard, Schlumberger, AES and Medtronic. Other
holdings, however, failed to meet our expectations. Retailers Costco and Home
Depot, electronic technology companies Lucent and Motorola, technology services
firm BMC Software and telecommunications company AT&T each declined
significantly in price during the period.

Looking forward, our long-term outlook for the domestic stock market remains
bullish, particularly for large-cap growth stocks. In our opinion, no other
sector of the U.S. market is better positioned to benefit from continued
recovery in the economies of countries around the world. Leading U.S. large-cap
companies often enjoy significant international distribution capabilities, as
well as superior access to

FL-2
<PAGE>

capital, regardless of prevailing financial market conditions. Although equity
markets may continue to experience the high levels of volatility seen during
the reporting period, we remain confident in our ability to utilize such
volatility to our advantage, opportunistically adjusting our stock position
weightings when we believe valuations reach unsustainable extremes in either
direction.

We think it is wise to maintain a healthy respect for the past history of the
American economy's business cycles and traditional methods of security
valuations. By any of these traditional measures, many technology companies are
selling at unusually high valuations. The volatility the market experienced
during the review period may be a precursor of a return to traditional
price/earnings and book value analysis -- or it may be a temporary bump in the
road. However, one thing is clear. None of us can realistically rely on these
valuations and the resulting performance to continue indefinitely. We will try
our hardest to deliver last year's performance every year -- but no one should
expect that to be the case for this, or any, Fund.

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any industry, security or the Fund. Our
strategies and the Fund's portfolio composition will change depending on
market and economic conditions. Although historical performance is no
guarantee of future results, these insights may help you understand our
investment and management philosophy.

FL-3
<PAGE>

Franklin Large Cap
Growth Securities Fund
Class 1

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

PERFORMANCE SUMMARY AS OF 6/30/00

Franklin Large Cap Growth Securities Fund - Class 1 delivered a +12.04%
cumulative total return for the six-month period ended 6/30/00. Total return of
Class 1 shares represents the cumulative or average annual change in value,
assuming reinvestment of dividends and capital gains. Average returns smooth
out variations in returns, which can be significant; they are not the same as
year-by-year results.

Franklin Large Cap Growth Securities Fund - Class 1
Periods ended 6/30/00
Since
Inception
1-Year 3-Year (5/1/96)
-----------------------------------------------------------------------
Average Annual Total Return +31.33% +24.09% +23.19%
Cumulative Total Return +31.33% +91.10% +138.46%
Value of $10,000 Investment $13,133 $19,110 $23,846

Past performance does not guarantee future results.

FL-4
<PAGE>

FRANKLIN LARGE CAP GROWTH SECURITIES FUND

CLASS 1 AND CLASS 2

(FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST)

SUPPLEMENT DATED AUGUST 25, 2000

TO PROSPECTUS DATED MAY 1, 2000

The prospectus is amended as follows:

I. Under "Goals and Strategies," the following is added to the Main
Investments discussion:

The fund may invest up to 25% of its total assets in foreign
securities.

II. Under "Main Risks," the following is added after the third paragraph:

FOREIGN SECURITIES Securities of companies located outside the U.S.
involve risks that can increase losses in the fund.

Currency Where the fund's investments are denominated in foreign
currencies, changes in foreign currency exchange rates will increase or
decrease the fund's returns from its foreign portfolio holdings.
Devaluations of currency by a country's government can significantly
decrease the value of securities denominated in that currency. The
economic impact of the euro, a relatively new currency adopted by
certain European countries to replace their national currencies, is
unclear.

Country and Company General securities market and interest rate
movements in any country where the fund has investments are likely to
affect the value of the securities the fund owns that trade in that
country. The political, economic and social structures of some
countries the fund invests in may be less stable and more volatile than
those in the U.S. The risks of investing in these countries include the
imposition of exchange controls, foreign ownership limitations,
expropriation, restrictions on removal of currency or other assets,
nationalization of assets, punitive taxes and certain custody and
settlement risks. Non-U.S. companies are not subject to the same
disclosure, accounting, auditing and financial reporting standards and
practices as U.S. companies and their securities may not be as liquid
as securities of similar U.S. companies, or may become illiquid.
Non-U.S. currency exchanges, trading systems, brokers, and companies
generally have less government supervision and regulation than in the
U.S.

Please keep this supplement with your current prospectus for future
reference.

FL-5
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN LARGE CAP GROWTH SECURITIES FUND

Financial Highlights

<TABLE>
<CAPTION>
Class 1
-----------------------------------------------------------------------------
Six Months Ended Year Ended December 31,
June 30, 2000 --------------------------------------------------------
(unaudited) 1999 1998 1997 1996(d)
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $21.07 $16.08 $13.42 $11.36 $10.00
----------------------------------------------------------------------
Income from investment operations:
Net investment income(a) ..................... .04 .11 .10 .06 .03
Net realized and unrealized gains ............ 2.44 4.96 2.62 2.02 1.33
----------------------------------------------------------------------
Total from investment operations .............. 2.48 5.07 2.72 2.08 1.36
----------------------------------------------------------------------
Less distributions from:
Net investment income ........................ (.11) (.08) (.06) (.02) --
Net realized gains ........................... (1.16) -- -- -- --
----------------------------------------------------------------------
Total distributions ........................... (1.27) (.08) (.06) (.02) --
----------------------------------------------------------------------
Net asset value, end of period ................ $22.28 $21.07 $16.08 $13.42 $11.36
======================================================================
Total return(b) ............................... 12.04% 31.65% 20.29% 18.31% 13.60%

Ratios/supplemental data
Net assets, end of period (000's) ............. $469,155 $407,515 $220,952 $109,355 $44,667
Ratios to average net assets:
Expenses ..................................... .80%(c) .77% .77% .77% .77%(c)
Net investment income ........................ .36%(c) .63% 1.00% .72% .96%(c)
Portfolio turnover rate ....................... 36.88% 41.78% 12.17% 19.90% 3.91%
</TABLE>

FL-6
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN LARGE CAP GROWTH SECURITIES FUND

Financial Highlights (continued)

<TABLE>
<CAPTION>
Class 2
---------------------------------------
Six Months Ended
June 30, 2000 Year Ended
(unaudited) December 31, 1999(d)
---------------------------------------
<S> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $21.01 $16.47
----------------------------
Income from investment operations:
Net investment income(a) ..................... .01 .04
Net realized and unrealized gains ............ 2.41 4.58
----------------------------
Total from investment operations .............. 2.42 4.62
----------------------------
Less distributions from:
Net investment income ........................ (.08) (.08)
Net realized gains ........................... (1.16) --
----------------------------
Total distributions ........................... (1.24) (.08)
----------------------------
Net asset value, end of period ................ $22.19 $21.01
============================
Total return(b) ............................... 11.91% 28.11%
Ratios/supplemental data
Net assets, end of period (000's) ............. $1,338 $542
Ratios to average net assets:
Expenses ..................................... 1.05%(c) 1.02%(c)
Net investment income ........................ .11%(c) .22%(c)
Portfolio turnover rate ....................... 36.88% 41.78%
</TABLE>

(a)Based on average shares outstanding.
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for periods less than one
year.
(c)Annualized
(d)For the period January 6, 1999 (effective date) to December 31, 1999.

See notes to financial statements.

FL-7
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN LARGE CAP GROWTH SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stocks 95.6%
Commercial Services 2.2%
(a) Concord EFS Inc. ............................... United States 271,200 $ 7,051,200
Equifax Inc. ................................... United States 130,000 3,412,500
------------
10,463,700
------------
Consumer Durables .6%
Maytag Corp. ................................... United States 75,700 2,791,438
------------
Consumer Non-Durables 3.1%
Coca-Cola Co. .................................. United States 51,000 2,929,313
Philip Morris Cos. Inc. ........................ United States 136,700 3,631,094
Procter & Gamble Co. ........................... United States 100,800 5,770,800
(a) Tommy Hilfiger Corp. ........................... United States 281,000 2,107,500
------------
14,438,707
------------
Consumer Services 2.3%
McDonald's Corp. ............................... United States 130,000 4,281,875
Time Warner Inc. ............................... United States 59,300 4,506,800
Tribune Co. .................................... United States 60,600 2,121,000
------------
10,909,675
------------
Electronic Technology 24.2%
(a) Applied Materials Inc. ......................... United States 40,400 3,661,250
(a) CIENA Corp. .................................... United States 20,350 3,392,091
(a) Cisco Systems Inc. ............................. United States 110,900 7,049,081
(a) Comverse Technology Inc. ....................... United States 30,500 2,836,500
Corning Inc. ................................... United States 15,200 4,102,100
(a) EMC Corp. ...................................... United States 117,000 9,001,688
Hewlett-Packard Co. ............................ United States 30,250 3,777,469
(a) Infineon Technologies AG, ADR .................. Germany 35,900 2,845,075
Intel Corp. .................................... United States 35,350 4,725,853
International Business Machines Corp. .......... United States 40,200 4,404,413
(a) JDS Uniphase Corp. ............................. United States 86,000 10,309,250
(a) Juniper Networks Inc. .......................... United States 48,000 6,987,000
(a) KLA-Tencor Corp. ............................... United States 75,000 4,392,188
Linear Technology Corp. ........................ United States 30,000 1,918,125
Lucent Technologies Inc. ....................... United States 100,500 5,954,625
Motorola Inc. .................................. United States 90,900 2,641,781
(a) Network Appliance Inc. ......................... United States 15,500 1,247,750
Nokia Corp., ADR ............................... Finland 74,800 3,735,325
Nortel Networks Corp. .......................... Canada 65,000 4,436,250
(a) PMC-Sierra Inc. ................................ Canada 16,750 2,976,266
(a) SDL Inc. ....................................... United States 12,000 3,422,250
(a) Sun Microsystems Inc. .......................... United States 35,600 3,237,375
(a) Synopsys Inc. .................................. United States 143,100 4,945,894
(a) Tellabs Inc. ................................... United States 45,450 3,110,484
United Technologies Corp. ...................... United States 60,000 3,532,500
(a) Xilinx Inc. .................................... United States 60,000 4,953,750
------------
113,596,333
------------
Energy Minerals 1.8%
(a) Barrett Resources Corp. ........................ United States 75,000 2,282,812
Royal Dutch Petroleum Co., N.Y. shs. ........... Netherlands 100,900 6,211,656
------------
8,494,468
------------
</TABLE>

FL-8
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN LARGE CAP GROWTH SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stocks (cont.)
Finance 7.1%
American International Group Inc. ............... United States 42,137 $ 4,951,098
Associates First Capital Corp., A ............... United States 105,000 2,342,813
Bank of America Corp. ........................... United States 50,000 2,150,000
Bank One Corp. .................................. United States 135,000 3,585,938
Citigroup Inc. .................................. United States 92,950 5,600,238
Fifth Third Bancorp ............................. United States 80,500 5,091,625
First Union Corp. ............................... United States 110,000 2,729,375
Marsh & McLennan Cos. Inc. ...................... United States 45,500 4,751,906
Wells Fargo & Co. ............................... United States 60,000 2,325,000
------------
33,527,993
------------
Health Services .7%
McKesson HBOC Inc. .............................. United States 160,050 3,351,047
------------
Health Technology 13.1%
Abbott Laboratories ............................. United States 139,100 6,198,644
American Home Products Corp. .................... United States 70,000 4,112,500
(a) Amgen Inc. ...................................... United States 110,400 7,755,600
Baxter International Inc. ....................... United States 90,400 6,356,250
Eli Lilly & Co. ................................. United States 60,400 6,032,450
(a) Genentech Inc. .................................. United States 55,000 9,460,000
Johnson & Johnson ............................... United States 85,000 8,659,375
Medtronic Inc. .................................. United States 135,500 6,749,594
Pfizer Inc. ..................................... United States 825 39,600
Schering-Plough Corp. ........................... United States 125,900 6,357,950
------------
61,721,963
------------
Industrial Services 3.9%
(a) AES Corp. ....................................... United States 151,600 6,916,750
(a) Republic Services Inc. .......................... United States 366,600 5,865,600
Schlumberger Ltd. ............................... United States 75,000 5,596,875
------------
18,379,225
------------
Process Industries .8%
General Electric Co. ............................ United States 67,800 3,593,400
------------
Producer Manufacturing 1.8%
Minnesota Mining & Manufacturing Co. ............ United States 25,000 2,062,500
Molex Inc. ...................................... United States 59,296 2,853,620
Tyco International Ltd. ......................... Bermuda 71,500 3,387,313
------------
8,303,433
------------
Retail Trade 3.7%
Albertson's Inc. ................................ United States 176,200 5,858,650
(a) Costco Wholesale Corp. .......................... United States 90,800 2,996,400
Home Depot Inc. ................................. United States 35,400 1,767,788
Wal-Mart Stores Inc. ............................ United States 120,500 6,943,813
------------
17,566,651
------------
Technology Services 13.8%
(a) America Online Inc. ............................. United States 55,000 2,901,250
Automatic Data Processing Inc. .................. United States 105,300 5,640,131
(a) BMC Software Inc. ............................... United States 51,000 1,860,703
(a) Check Point Software Technologies Ltd. .......... Israel 24,350 5,156,113
(a) Computer Sciences Corp. ......................... United States 50,000 3,734,375
(a) CyberSource Corp. ............................... United States 12,500 172,656
(a) Entrust Technologies Inc. ....................... United States 85,000 7,033,750
</TABLE>

FL-9
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN LARGE CAP GROWTH SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stocks (cont.)
Technology Services (cont.)
(a) Exodus Communications Inc. .............................. United States 80,000 $ 3,685,000
(a) Mercury Interactive Corp. ............................... United States 30,000 2,902,500
(a) Microsoft Corp. ......................................... United States 99,000 7,920,000
(a) Oracle Corp. ............................................ United States 40,000 3,362,500
(a) Siebel Systems Inc. ..................................... United States 17,300 2,829,631
(a) SonicWALL Inc. .......................................... United States 40,000 3,522,500
(a) StorageNetworks Inc. .................................... United States 29,100 2,626,275
(a) VeriSign Inc. ........................................... United States 26,400 4,659,600
(a) VERITAS Software Corp. .................................. United States 24,300 2,746,280
(a) WatchGuard Technologies Inc. ............................ United States 79,400 4,362,038
------------
65,115,302
------------
Telecommunications 7.0%
AT&T Corp. .............................................. United States 140,000 4,427,500
(a) KPNQwest NV ............................................. Netherlands 36,500 1,446,313
(a) Qwest Communications International Inc. ................. United States 125,600 6,240,750
SBC Communications Inc. ................................. United States 126,300 5,462,474
Sprint Corp. (FON Group) ................................ United States 55,000 2,805,000
(a) STET Hellas Telecommunications SA, ADR .................. Greece 200 3,975
Vodafone AirTouch PLC, ADR .............................. United Kingdom 135,450 5,612,707
(a) VoiceStream Wireless Corp. .............................. United States 20,600 2,395,714
(a) WorldCom Inc. ........................................... United States 96,050 4,406,294
------------
32,800,727
------------
Transportation 1.8%
Expeditors International of Washington Inc. ............. United States 120,000 5,700,000
United Parcel Service Inc., B ........................... United States 50,500 2,979,500
------------
8,679,500
------------
Utilities 7.7%
CMS Energy Corp. ........................................ United States 162,000 3,584,250
Dominion Resources Inc. ................................. United States 62,681 2,687,448
DTE Energy Co. .......................................... United States 115,000 3,514,687
Enron Corp. ............................................. United States 115,800 7,469,100
(a) Global Crossing Ltd. .................................... Bermuda 50,000 1,315,624
GPU Inc. ................................................ United States 175,000 4,735,937
GTE Corp. ............................................... United States 50,000 3,112,500
PECO Energy Co. ......................................... United States 155,800 6,280,687
Pinnacle West Capital Corp. ............................. United States 101,200 3,428,150
------------
36,128,383
------------
Total Long Term Investments (Cost $337,596,725).......... 449,861,945
------------
</TABLE>

FL-10
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN LARGE CAP GROWTH SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)
<TABLE>
<CAPTION>
PRINCIPAL
COUNTRY AMOUNT VALUE
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(b) Repurchase Agreement 4.3%
Joint Repurchase Agreement, 6.563%, 7/03/00, (Maturity Value $20,386,471)
(Cost $20,375,327) United States $20,375,327 $20,375,327
Banc of America Securities LLC
Barclays Capital Inc.
Bear, Stearns & Co. Inc.
Donaldson, Lufkin & Jenrette Securities Corp.
Dresdner Kleinwort Benson, North America, LLC
Goldman, Sachs & Co.
Greenwich Capital Markets Inc.
Lehman Brothers, Inc.
Nesbitt Burns Securities Inc.
Paine Webber Inc.
Paribas Corp.
UBS Warburg
Collateralized by U.S. Treasury Bills & Notes
Total Investments (Cost $357,972,052) 99.9%................................ 470,237,272
Other Assets, less Liabilities .1% ........................................ 255,363
------------
Net Assets 100.0% ......................................................... $470,492,635
============
</TABLE>

(a)Non-income producing
(b)Investment is through participation in a joint account with other funds
managed by the investment advisor. At June 30, 2000, all repurchase
agreements had been entered into on that date.

See notes to financial statements.

FL-11
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN LARGE CAP GROWTH SECURITIES FUND

Financial Statements

Statement of Assets and Liabilities
June 30, 2000 (unaudited)

Assets:
Investments in securities:
Cost ................................................ $357,972,052
============
Value ............................................... 470,237,272
Receivables:
Investment securities sold .......................... 9,206,002
Capital shares sold ................................. 162,959
Dividends ........................................... 342,684
------------
Total assets ....................................... 479,948,917
------------
Liabilities:
Payables:
Investment securities purchased ..................... 8,849,772
Capital shares redeemed ............................. 273,447
Affiliates .......................................... 285,699
Other liabilities .................................... 47,364
------------
Total liabilities .................................. 9,456,282
------------
Net assets, at value .............................. $470,492,635
============
Net assets consist of:
Undistributed net investment income .................. $ 780,957
Net unrealized appreciation .......................... 112,265,220
Accumulated net realized gain ........................ 50,667,813
Capital shares ....................................... 306,778,645
------------
Net assets, at value .............................. $470,492,635
============
Class 1:
Net assets, at value ................................. $469,154,502
============
Shares outstanding ................................... 21,060,666
============
Net asset value and offering price per share ......... $ 22.28
============
Class 2:
Net assets, at value ................................. $ 1,338,133
============
Shares outstanding ................................... 60,292
============
Net asset value and offering price per share ......... $ 22.19
============

See notes to financial statements.

FL-12
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN LARGE CAP GROWTH SECURITIES FUND

Financial Statements (continued)

Statement of Operations
for the six months ended June 30, 2000 (unaudited)

Investment income:
(net of foreign taxes and fees of $17,668)
Dividends ................................................... $ 1,759,244
Interest .................................................... 776,759
------------
Total investment income .................................... 2,536,003
------------
Expenses:
Management fees (Note 3) .................................... 1,652,616
Distribution fees - Class 2 (Note 3) ........................ 1,252
Custodian fees .............................................. 1,937
Reports to shareholders ..................................... 20,042
Professional fees (Note 3) .................................. 27,524
Trustees' fees and expenses ................................. 1,899
Other ....................................................... 48,618
------------
Total expenses ............................................. 1,753,888
------------
Net investment income ..................................... 782,115
------------
Realized and unrealized gains (losses):
Net realized gain from investments .......................... 50,765,420
Net unrealized depreciation on investments .................. (1,245,019)
------------
Net realized and unrealized gain ............................. 49,520,401
------------
Net increase in net assets resulting from operations ......... $ 50,302,516
============

See notes to financial statements.

FL-13
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN LARGE CAP GROWTH SECURITIES FUND

Financial Statements (continued)

Statements of Changes in Net Assets
for the six months ended June 30, 2000 (unaudited) and the year ended December
31, 1999

<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999
-------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income .................................................................. $ 782,115 $ 2,087,575
Net realized gain from investments and foreign currency transactions ................... 50,765,420 26,589,913
Net unrealized appreciation (depreciation) on investments and translation of assets and
liabilities denominated in foreign currencies ........................................ (1,245,019) 68,147,813
--------------------------------
Net increase in net assets resulting from operations .................................. 50,302,516 96,825,301
Distributions to shareholders from:
Net investment income:
Class 1 ............................................................................... (2,083,731) (1,509,956)
Class 2 ............................................................................... (3,736) (1,301)
Net realized gains:
Class 1 ............................................................................... (23,114,084) --
Class 2 ............................................................................... (53,174) --
--------------------------------
Total distributions to shareholders ..................................................... (25,254,725) (1,511,257)
Capital share transactions: (Note 2)
Class 1 ............................................................................... 36,626,565 91,430,051
Class 2 ............................................................................... 761,812 360,734
--------------------------------
Total capital share transactions ........................................................ 37,388,377 91,790,785
Net increase in net assets ............................................................ 62,436,168 187,104,829
Net assets:
Beginning of period ..................................................................... 408,056,467 220,951,638
--------------------------------
End of period ........................................................................... $ 470,492,635 $408,056,467
================================
Undistributed net investment income included in net assets:
End of period ........................................................................... $ 780,957 $ 2,086,309
================================
</TABLE>

See notes to financial statements.

FL-14
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN LARGE CAP GROWTH SECURITIES FUND

Notes to Financial Statements (unaudited)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The Franklin Large Cap Growth Securities Fund (the Fund) is a separate,
diversified series of the Franklin Templeton Variable Insurance Products Trust
(the Trust), which is an open-end investment company registered under the
Investment Company Act of 1940. Shares of the Fund are sold only to insurance
company separate accounts to fund the benefits of variable life insurance
policies or variable annuity contracts. As of June 30, 2000, 92% of the Fund's
shares were sold through one insurance company. The Fund's investment objective
is capital growth.

The following summarizes the Fund's significant accounting policies.

a. Security Valuation

Securities listed or traded on a recognized national exchange or NASDAQ are
valued at the latest reported sales price. Over-the-counter securities and
listed securities for which no sale is reported are valued within the range of
the latest quoted bid and asked prices. Securities for which market quotations
are not readily available are valued at fair value as determined by management
in accordance with procedures established by the Board of Trustees.

b. Foreign Currency Translation

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

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

c. Income Taxes

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

d. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and
losses on security transactions are determined on a specific identification
basis. Interest income and estimated expenses are accrued daily. Dividend
income and distributions to shareholders are recorded on the ex-dividend date.

Common expenses incurred by the Trust are allocated among the funds based on
the ratio of net assets of each fund to the combined net assets. Other expenses
are charged to each fund on a specific identification basis.

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

FL-15
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN LARGE CAP GROWTH SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

e. Accounting Estimates

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

2. SHARES OF BENEFICIAL INTEREST

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

At June 30, 2000, there were an unlimited number of shares authorized ($.01 par
value). Transactions in the Fund's shares were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999(a)
------------------------------------------------------------------
Shares Amount Shares Amount
Class 1 Shares: ------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ....................................... 2,948,615 $ 64,667,788 14,376,691 $ 244,620,121
Shares issued on merger (Note 6) .................. 211,448 4,482,695 -- --
Shares issued in reinvestment of distributions .... 1,194,775 25,197,815 84,591 1,509,956
Shares redeemed ................................... (2,632,278) (57,721,733) (8,863,652) (154,700,026)
-------------------------------------------------------------
Net increase ...................................... 1,722,560 $ 36,626,565 5,597,630 $ 91,430,051
=============================================================
Class 2 Shares:
Shares sold ....................................... 196,483 4,227,768 89,707 1,579,229
Shares issued in reinvestment of distributions .... 2,707 56,909 73 1,300
Shares redeemed ................................... (164,674) (3,522,865) (64,004) (1,219,795)
-------------------------------------------------------------
Net increase ...................................... 34,516 $ 761,812 25,776 $ 360,734
=============================================================
</TABLE>

(a)For the period January 6, 1999 (effective date) to December 31, 1999 for
Class 2.

3. TRANSACTIONS WITH AFFILIATES

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

<TABLE>
<CAPTION>
Entity Affiliation
----------------------------------------------------------------------------------
<S> <C>
Franklin Templeton Services, Inc. (FT Services) Administrative manager
Franklin Advisers, Inc. (Advisers) Investment manager
Franklin/Templeton Distributors, Inc. (Distributors) Principal underwriter
Franklin/Templeton Investor Services, Inc. (Investor Services) Transfer agent
</TABLE>

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

Annualized Fee Rate Daily Net Assets
-------------------------------------------------------------------------
.75% First $500 million
.625% over $500 million, up to and including $1 billion
.50% over $1 billion

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

FL-16
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN LARGE CAP GROWTH SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

3. TRANSACTIONS WITH AFFILIATES (cont.)

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

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

Included in professional fees are legal fees of $1,072 that were paid to a law
firm in which a partner of that firm was an officer of the Fund.

4. INCOME TAXES

At December 31, 1999, the Fund had deferred capital losses occurring subsequent
to October 31, 1999 of $65,023. For tax purposes, such losses will be reflected
in the year ending December 31, 2000.

Net investment income differs for financial statement and tax purposes
primarily due to differing treatment of merger related expenses.

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

At June 30, 2000, the net unrealized appreciation based on the cost of
investments for income tax purposes of $358,896,874 was as follows:

Unrealized appreciation ............. $ 139,072,897
Unrealized depreciation ............. (27,732,499)
-------------
Net unrealized appreciation ......... $ 111,340,398
=============

5. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities) for the
year ended June 30, 2000 aggregated $161,596,628 and $153,636,070,
respectively.

6. MERGER

On May 1, 2000, the Franklin Templeton Variable Insurance Products Trust
(FTVIPT) - Franklin Large Cap Growth Securities Fund acquired the net assets of
the Templeton Variable Products Services Fund (TVP) - Franklin Large Cap Growth
Investments Fund pursuant to a plan of reorganization approved by TVP -
Franklin Large Cap Growth Investments Fund's shareholders. The merger was
accomplished by a tax-free exchange of 211,448 Class 1 shares of the FTVIPT -
Franklin Large Cap Growth Securities Fund (valued at $21.20 per share) for the
net assets of the TVP - Franklin Large Cap Growth Investments Fund which
aggregated $4,482,695, including $452,216 of unrealized appreciation. The
merger was accounted for as a pooling-of-interests without restatement for
financial reporting purposes. The combined net assets of the FTVIPT - Franklin
Large Cap Growth Securities Fund immediately after the merger were
$451,317,918.

FL-17
<PAGE>

FRANKLIN S&P 500 INDEX FUND

--------------------------------------------------------------------------------
Fund Goal and Primary Investments: Franklin S&P 500 Index Fund seeks to match
the performance of the Standard & Poor's(R) 500 (S&P 500(R)) Composite Stock
Price Index before the deduction of Fund expenses. The Fund uses investment
"indexing" strategies and invests in the common stocks of the S&P 500 Index in
approximately the same proportion as the S&P 500 Index.
--------------------------------------------------------------------------------
This semiannual report of Franklin S&P 500 Index Fund covers the six months
ended June 30, 2000. During the reporting period, U.S. gross domestic product
rose an annualized 4.8% and 5.2% during the first and second quarters,
respectively. The core Consumer Price Index increased 1.46%, and the Goldman
Sachs Commodity Index, which is a composite index of a broadly diversified
spectrum of commodity sector returns, approached levels not seen in a decade.
Largely as a result of this growth, the Federal Reserve Board (the Fed) raised
the federal funds target rate three times during the six months under review.
These increases contributed to a softening in retail sales figures during the
period, and the Fed left rates steady at its meeting in late June.

Reflecting investor concerns about rising interest rates, U.S. equity markets,
which had broken record highs during the first half of the reporting period,
suffered severe declines in March and April. But when news was released in June
indicating that the economy might be cooling down, they rebounded significantly.
On June 30, the S&P 500 Index was down 0.42% for the six months under review.(1)
Other indexes also fell during the six months under review, with the Dow Jones
Industrial Average and Nasdaq Composite Index down 9.03% and 2.02%.

Due to the limited size of the Fund early in the period, we employed a
specialized strategy to minimize transaction costs while tracking the S&P 500
Index. The strategy utilized computer-based statistical data to select a
sampling of stocks that resembled the full index in terms of industry
weighting, market capitalization and other characteristics such as beta (a
measure of volatility), price-to-book ratios, price-to-earnings ratios and
dividend yields. As the Fund grew in asset size, we shifted

(1) Source: Standard and Poor's Micropal. The S&P 500 Composite Index consists
of 500 domestic stocks, consisting of four broad sectors: industrials,
utilities, financials and transportation. The S&P 500 serves as standard for
measuring large-cap U.S. stock market performance. Since some industries are
characterized by companies of relatively small stock capitalization, the index
is not composed of the 500 largest companies on the New York Stock Exchange. The
index is unmanaged and includes reinvested dividends. One cannot invest directly
in an index.

FSP-1
<PAGE>
Top 10 Holdings
Franklin S&P 500 Index Fund
6/30/00

Company % of Total
Sector Net Assets
-----------------------------------
General Electric Co. 4.0%
Process Industries

Intel Corp. 3.5%
Electronic Technology

Cisco Systems Inc. 3.4%
Electronic Technology

Microsoft Corp. 3.2%
Technology Services

Pfizer Inc. 2.3%
Health Technology

Exxon Mobil Corp. 2.1%
Energy Minerals

Wal-Mart Stores Inc. 2.0%
Retail Trade

Oracle Corp. 1.8%
Technology Services

Citigroup Inc. 1.6%
Finance

Nortel Networks Corp.
(Canada) 1.6%
Electronic Technology

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

to the current replication technique, wherein the Fund holds each constituent
of the index, with the exception of some minor securities, each in its
approximate capitalization weight. This replication strategy allows the Fund to
more tightly track the S&P 500 Index, with performance discrepancies generally
attributable to the Fund's cash flow and expenses. During the period under
review, the Fund slightly outperformed the index due to the positive influence
of cash inflows into the Fund as the market was declining.

As a result of changes to the S&P 500 Index, there were 24 deletions and 25
additions to the Fund's portfolio between January 1 and June 30, based upon
index rebalancing activity. Deletions to the index generally occur because of
merger and acquisition activity, bankruptcies and restructurings, or lack of
industry representation. Whenever a company is removed from the index, another
company is added to keep the number of index constituents at 500. However,
during the reporting period, we made one more addition than deletion because a
deletion to the index made on December 31, 1999, was not offset by an addition
until January 3, 2000.

Looking forward, we intend to keep the Fund's passively managed portfolio fully
invested in the S&P 500 Index by holding constituent securities. S&P 500
financial futures will be used to manage the Fund's liquidity while maintaining
exposure to the S&P 500 Index. Therefore, the Fund's performance should be
dictated by the performance of the S&P 500 Index and general U.S. equity market
conditions.

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any industry, security, indexing strategy
or the Fund. Our indexing strategy and the Fund's portfolio composition may
change depending on market and economic conditions and the composition of the
S&P 500 Index. Although historical performance is no guarantee of future
results, these insights may help you understand our management philosophy.

FSP-2
<PAGE>

PERFORMANCE SUMMARY AS OF 6/30/00

Franklin S&P 500 Index Fund - Class 1 delivered a +0.35% cumulative total
return for the six-month period ended 6/30/00. Aggregate total return
represents the cumulative change in value, assuming reinvestment of dividends
and capital gains. Since Class 1 shares have existed for less than one year,
average annual total returns are not provided.

Franklin S&P 500 Index Fund - Class 1
Periods ended 6/30/00

Since
Inception
(11/1/99)
---------------------------------------------------
Aggregate Total Return +5.97%
Value of $10,000 Investment $10,597

Ongoing stock market volatility can dramatically change the Fund's short-term
performance; current results may be lower.

Franklin S&P 500 Index
Fund - Class 1

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

Past performance does not guarantee future results.

FSP-3
<PAGE>

FRANKLIN S&P 500 INDEX FUND

CLASS 1, CLASS 2, AND CLASS 3

(FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST)

SUPPLEMENT DATED AUGUST 25, 2000

TO PROSPECTUS DATED MAY 1, 2000

Under "Management," the third paragraph is replaced with the following:

The fund's lead portfolio manager is:

T. Anthony Coffey, CFA Mr. Coffey has been a manager of the fund since
VICE PRESIDENT August 2000, and has been with Franklin Templeton
FRANKLIN ADVISERS, INC. Investments since 1989.

Please keep this supplement with your current prospectus for future reference.

FSP-4
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN S&P 500 INDEX FUND

Financial Highlights

<TABLE>
<CAPTION>
Class 1
---------------------------------------
Six Months Ended
June 30, 2000 Year Ended
(unaudited) December 31, 1999(d)
---------------------------------------
<S> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period .......................... $10.56 $10.00
---------------------------------------
Income from investment operations:
Net investment income(a) ..................................... .05 .03
Net realized and unrealized gains (losses) ................... (.01) .53
---------------------------------------
Total from investment operations .............................. .04 .56
---------------------------------------
Less distributions from net investment income ................. (.01) --
---------------------------------------
Net asset value, end of period ................................ $10.59 $10.56
=======================================
Total return(b) ............................................... .35% 5.60%

Ratios/supplemental data
Net assets, end of period (000's) ............................. $42,433 $14,888
Ratios to average net assets:
Expenses ..................................................... .47%(c) .55%(c)
Expenses, excluding waiver and payments by affiliate ......... .47%(c) .98%(c)
Net investment income ........................................ .98%(c) 1.77%(c)
Portfolio turnover rate ....................................... 10.41% --
</TABLE>

(a)Based on average shares outstanding.
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for periods less than one
year.
(c)Annualized
(d)For the period November 1, 1999 (effective date) to December 31, 1999.

FSP-5
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN S&P 500 INDEX FUND

Financial Highlights (continued)

<TABLE>
<CAPTION>
Class 2
---------------------------------------
Six Months Ended
June 30, 2000 Year Ended
(unaudited) December 31, 1999(d)
---------------------------------------
<S> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period .......................... $10.55 $10.00
----------------------------
Income from investment operations:
Net investment income(a) ..................................... .04 .04
Net realized and unrealized gains (losses) ................... (.02) .51
----------------------------
Total from investment operations .............................. .02 .55
----------------------------
Less distributions from net investment income ................. --(e) --
----------------------------
Net asset value, end of period ................................ $10.57 $10.55
============================
Total return(b) ............................................... .27% 5.50%
Ratios/supplemental data
Net assets, end of period (000's) ............................. $88 $88
Ratios to average net assets:
Expenses ..................................................... .72%(c) .80%(c)
Expenses, excluding waiver and payments by affiliate ......... .72%(c) 1.23%(c)
Net investment income ........................................ .72%(c) 2.17%(c)
Portfolio turnover rate ....................................... 10.41% --
</TABLE>

(a)Based on average shares outstanding.
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for periods less than one
year.
(c)Annualized
(d)For the period November 1, 1999 (effective date) to December 31, 1999.
(e)Includes distributions of net investment income in the amount of $.002.

FSP-6
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN S&P 500 INDEX FUND

Financial Highlights (continued)

<TABLE>
<CAPTION>
Class 3
---------------------------------------
Six Months Ended
June 30, 2000 Year Ended
(unaudited) December 31, 1999(d)
---------------------------------------
<S> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period .......................... $10.55 $ 10.00
----------------------------
Income from investment operations:
Net investment income(a) ..................................... .03 .03
Net realized and unrealized gains ............................ -- .52
----------------------------
Total from investment operations .............................. .03 .55
----------------------------
Less distributions from net investment income ................. (.01) --
----------------------------
Net asset value, end of period ................................ $10.57 $ 10.55
============================
Total return(b) ............................................... .24% 5.50%
Ratios/supplemental data
Net assets, end of period (000's) ............................. $9,530 $ 2,349
Ratios to average net assets:
Expenses ..................................................... .80%(c) .80%(c)
Expenses, excluding waiver and payments by affiliate ......... 1.87%(c) 4.16%(c)
Net investment income ........................................ .64%(c) 1.78%(c)
Portfolio turnover rate ....................................... 10.41% --
</TABLE>

(a)Based on average shares outstanding.
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for periods less than one
year.
(c)Annualized
(d)For the period November 1, 1999 (effective date) to December 31, 1999.

See notes to financial statements.

FSP-7
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN S&P 500 INDEX FUND

Statement of Investments, June 30, 2000 (unaudited)

<TABLE>
<CAPTION>
SHARES VALUE
---------------------------------------------------------------------
<S> <C> <C> <C>
Common Stocks 96.9%
Commercial Services .8%
(a) Convergys Corp. ......................... 600 $ 31,125
Deluxe Corp. ............................ 300 7,069
Dun & Bradstreet Corp. .................. 600 17,175
Equifax Inc. ............................ 500 13,125
Interpublic Group of Cos. Inc. .......... 1,200 51,600
Omnicom Group Inc. ...................... 700 62,344
Paychex Inc. ............................ 1,500 63,000
R. R. Donnelley & Sons Co. .............. 400 9,025
(a) Sabre Holdings Corp., A ................. 561 15,989
SUPERVALU Inc. .......................... 500 9,531
SYSCO Corp. ............................. 1,400 58,975
The McGraw-Hill Cos. Inc. ............... 800 43,200
W.W. Grainger Inc. ...................... 400 12,325
Young & Rubicam Inc. .................... 300 17,156
--------
411,639
--------
Consumer Durables 1.2%
Briggs & Stratton Corp. ................. 100 3,425
Brunswick Corp. ......................... 300 4,969
Centex Corp. ............................ 200 4,700
Cooper Tire & Rubber Co. ................ 400 4,450
Eastman Kodak Co. ....................... 1,300 77,350
Ford Motor Co. .......................... 4,847 208,421
General Motors Corp. .................... 2,148 124,718
Genuine Parts Co. ....................... 800 16,000
Goodyear Tire & Rubber Co. .............. 600 12,000
Harley-Davidson Inc. .................... 1,200 46,200
Hasbro Inc. ............................. 700 10,544
Kaufman & Broad Home Corp. .............. 200 3,963
Leggett & Platt Inc. .................... 800 13,200
Mattel Inc. ............................. 1,700 22,419
Maytag Corp. ............................ 400 14,750
Newell Rubbermaid Inc. .................. 1,100 28,325
Polaroid Corp. .......................... 200 3,613
Pulte Corp. ............................. 200 4,325
Snap-on Inc. ............................ 200 5,325
Stanley Works ........................... 300 7,125
The Black & Decker Corp. ................ 400 15,725
Tupperware Corp. ........................ 300 6,600
Whirlpool Corp. ......................... 300 13,988
--------
652,135
--------
Consumer Non-Durables 5.4%
(a) Adolph Coors Co., B ..................... 200 12,100
Alberto-Culver Co., B ................... 200 6,113
American Greetings Corp., A ............. 300 5,700
Anheuser-Busch Cos. Inc. ................ 1,800 134,438
Avon Products Inc. ...................... 1,000 44,500
Bestfoods ............................... 1,100 76,175
Brown-Forman Corp., B ................... 300 16,125
Campbell Soup Co. ....................... 1,749 50,940
Clorox Co. .............................. 1,000 44,813
Coca-Cola Co. ........................... 9,885 567,770
Coca-Cola Enterprises Inc. .............. 1,600 26,100
Colgate-Palmolive Co. ................... 2,300 137,713
Conagra Inc. ............................ 1,900 36,219
</TABLE>

FSP-8
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN S&P 500 INDEX FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
SHARES VALUE
-----------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stocks (cont.)
Consumer Non-Durables (cont.)
General Mills Inc. ................................. 1,200 $ 45,900
Gillette Co. ....................................... 4,216 147,297
H.J. Heinz Co. ..................................... 1,400 61,250
Hershey Foods Corp. ................................ 600 29,100
International Flavors & Fragrances Inc. ............ 400 12,075
Kellogg Co. ........................................ 1,600 47,600
Kimberly-Clark Corp. ............................... 2,216 127,143
Liz Claiborne Inc. ................................. 200 7,050
Nabisco Group Holdings Corp. ....................... 1,300 33,719
Nike Inc., B ....................................... 1,100 43,794
PepsiCo Inc. ....................................... 5,801 257,782
Philip Morris Cos. Inc. ............................ 9,346 248,253
Procter & Gamble Co. ............................... 5,200 297,700
Quaker Oats Co. .................................... 500 37,563
Ralston-Ralston Purina Group ....................... 1,200 23,925
(a) Reebok International Ltd. .......................... 300 4,781
(a) Russell Corp. ...................................... 200 4,000
Sara Lee Corp. ..................................... 3,545 68,463
Unilever NV, N.Y. shs., ADR (Netherlands) .......... 2,300 98,900
UST Inc. ........................................... 600 8,813
V. F. Corp. ........................................ 400 9,525
Wm. Wrigley Jr. Co. ................................ 500 40,094
----------
2,813,433
----------
Consumer Services 4.0%
Carnival Corp. ..................................... 2,424 47,268
(a) Cendant Corp. ...................................... 3,100 43,400
(a) Clear Channel Communications Inc. .................. 1,400 105,000
(a) Comcast Corp., A ................................... 3,658 148,149
Darden Restaurants Inc. ............................ 400 6,500
Dow Jones & Co. Inc. ............................... 400 29,300
Gannett Co. Inc. ................................... 1,101 65,854
H & R Block Inc. ................................... 400 12,950
Harcourt General Inc. .............................. 300 16,313
(a) Harrah's Entertainment Inc. ........................ 400 8,375
Hilton Hotels Corp. ................................ 1,500 14,063
Knight-Ridder Inc. ................................. 300 15,956
Marriott International Inc., A ..................... 1,000 36,063
McDonald's Corp. ................................... 5,305 174,733
Meredith Corp. ..................................... 200 6,750
Seagram Co. Ltd. (Canada) .......................... 1,800 104,400
(a) Starbucks Corp. .................................... 700 26,731
The New York Times Co., A .......................... 700 27,650
Time Warner Inc. ................................... 5,290 402,040
Tribune Co. ........................................ 1,180 41,500
(a) Tricon Global Restaurants Inc. ..................... 600 16,950
(a) Viacom Inc., B ..................................... 6,146 419,080
(a) Walt Disney Co. .................................... 8,359 324,434
Wendy's International Inc. ......................... 400 7,125
----------
2,100,584
----------
Electronic Technology 24.0%
(a) 3Com Corp. ......................................... 1,400 80,675
(a) Adaptec Inc. ....................................... 300 6,825
(a) ADC Telecommunications Inc. ........................ 1,400 117,425
</TABLE>

FSP-9
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN S&P 500 INDEX FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)
<TABLE>
<CAPTION>
SHARES VALUE
-------------------------------------------------------------------------------
Common Stocks (cont.)
Electronic Technology (cont.)
<S> <C> <C> <C>
(a) Advanced Micro Devices Inc. .................... 600 $ 46,350
(a) Agilent Technologies Inc. ...................... 1,812 133,635
(a) Altera Corp. ................................... 800 81,550
(a) Analog Devices Inc. ............................ 1,400 106,400
(a) Andrew Corp. ................................... 400 13,425
(a) Apple Computer Inc. ............................ 1,300 68,088
(a) Applied Materials Inc. ......................... 3,200 290,000
B.F. Goodrich Co. .............................. 400 13,625
Boeing Co. ..................................... 3,720 155,543
(a) Broadcom Corp., A .............................. 800 175,150
(a) Cabletron Systems Inc. ......................... 800 20,200
(a) Cisco Systems Inc. ............................. 27,918 1,774,538
Compaq Computer Corp. .......................... 6,787 173,493
(a) Comverse Technology Inc. ....................... 600 55,800
(a) Conexant Systems Inc. .......................... 900 43,763
Corning Inc. ................................... 1,100 296,863
(a) Dell Computer Corp. ............................ 10,362 510,976
(a) EMC Corp. ...................................... 8,720 670,895
(a) Gateway Inc. ................................... 1,300 73,775
General Dynamics Corp. ......................... 800 41,800
Hewlett-Packard Co. ............................ 3,966 495,254
Intel Corp. .................................... 13,481 1,802,241
International Business Machines Corp. .......... 7,160 784,468
(a) KLA-Tencor Corp. ............................... 800 46,850
(a) Lexmark International Inc. ..................... 500 33,625
Linear Technology Corp. ........................ 1,300 83,119
Lockheed Martin Corp. .......................... 1,600 39,700
(a) LSI Logic Corp. ................................ 1,200 64,950
Lucent Technologies Inc. ....................... 13,038 772,502
(a) Maxim Integrated Products Inc. ................. 1,100 74,731
(a) Micron Technology Inc. ......................... 2,300 202,544
Motorola Inc. .................................. 8,638 251,042
(a) National Semiconductor Corp. ................... 700 39,725
(a) NCR Corp. ...................................... 400 15,575
(a) Network Appliance Inc. ......................... 1,200 96,600
Nortel Networks Corp. (Canada) ................. 11,868 809,991
Northrop Grumman Corp. ......................... 300 19,875
(a) Novellus Systems Inc. .......................... 500 28,281
Perkinelmer Inc. ............................... 200 13,225
(a) QUALCOMM Inc. .................................. 3,000 180,000
Raytheon Co., B ................................ 1,400 26,950
Rockwell International Corp. ................... 700 22,050
(a) Sanmina Corp. .................................. 500 42,750
Scientific-Atlanta Inc. ........................ 600 44,700
(a) Seagate Technology Inc. ........................ 900 49,500
(a) Solectron Corp. ................................ 2,400 100,500
(a) Sun Microsystems Inc. .......................... 6,380 580,181
(a) Tektronix Inc. ................................. 200 14,800
(a) Tellabs Inc. ................................... 1,700 116,344
(a) Teradyne Inc. .................................. 700 51,450
(a) Texas Instruments Inc. ......................... 6,548 449,766
United Technologies Corp. ...................... 1,941 114,276
(a) Xilinx Inc. .................................... 1,300 107,331
-----------
12,525,690
-----------
</TABLE>

FSP-10
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN S&P 500 INDEX FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
SHARES VALUE
-------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stocks (cont.)
Energy Minerals 4.6%
Amerada Hess Corp. .......................................... 400 $ 24,700
Anadarko Petroleum Corp. .................................... 500 24,656
Apache Corp. ................................................ 500 29,406
Ashland Inc. ................................................ 300 10,519
Burlington Resources Inc. ................................... 900 34,425
Chevron Corp. ............................................... 2,600 220,513
Conoco Inc., B .............................................. 2,638 64,796
Exxon Mobil Corp. ........................................... 13,951 1,095,154
Kerr-McGee Corp. ............................................ 400 23,575
Occidental Petroleum Corp. .................................. 1,500 31,594
Phillips Petroleum Co. ...................................... 1,045 52,968
Royal Dutch Petroleum Co., N.Y. shs. (Netherlands) .......... 8,625 530,977
Sunoco Inc. ................................................. 300 8,831
Texaco Inc. ................................................. 2,200 117,150
Tosco Corp. ................................................. 600 16,988
Union Pacific Resources Group Inc. .......................... 1,100 24,200
Unocal Corp. ................................................ 900 29,813
USX-Marathon Group Inc. ..................................... 1,300 32,581
----------
2,372,846
----------
Finance 12.1%
Aflac Inc. .................................................. 1,100 50,531
Allstate Corp. .............................................. 2,975 66,194
American Express Co. ........................................ 5,323 277,461
American General Corp. ...................................... 1,000 61,000
American International Group Inc. ........................... 6,133 720,628
AmSouth Bancorporation ...................................... 1,600 25,200
AON Corp. ................................................... 1,000 31,063
Associates First Capital Corp., A ........................... 3,083 68,789
Bank of America Corp. ....................................... 6,616 284,488
Bank of New York Co. Inc. ................................... 2,982 138,663
Bank One Corp. .............................................. 4,582 121,709
BB&T Corp. .................................................. 1,500 35,813
Capital One Financial Corp. ................................. 800 35,700
(a) Charles Schwab Corp. ........................................ 5,528 185,879
(a) Charter One Financial Inc. .................................. 900 20,700
Chase Manhattan Corp. ....................................... 4,900 225,706
Chubb Corp. ................................................. 700 43,050
Cincinnati Financial Corp. .................................. 600 18,863
Citigroup Inc. .............................................. 13,567 817,412
Comerica Inc. ............................................... 600 26,925
Conseco Inc. ................................................ 1,100 10,725
Countrywide Credit Industries Inc. .......................... 400 12,125
Fannie Mae .................................................. 4,109 214,438
Fifth Third Bancorp ......................................... 1,300 82,225
First Union Corp. ........................................... 4,087 101,409
Firstar Corp. ............................................... 4,071 85,745
Fleet Boston Financial Corp. ................................ 3,719 126,446
Franklin Resources Inc. ..................................... 1,000 30,375
Freddie Mac ................................................. 2,723 110,282
Golden West Financial Corp. ................................. 700 28,569
Hartford Financial Services Group Inc. ...................... 900 50,344
Household International Inc. ................................ 1,933 80,340
Huntington Bancshares Inc. .................................. 800 12,650
J.P. Morgan & Co. Inc. ...................................... 600 66,075
</TABLE>

FSP-11
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN S&P 500 INDEX FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
SHARES VALUE
-------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stocks (cont.)
Finance (cont.)
Jefferson-Pilot Corp. ..................... 400 $ 22,575
KeyCorp ................................... 1,800 31,725
Lehman Brothers Holdings Inc. ............. 500 47,281
Lincoln National Corp. .................... 700 25,288
Loews Corp. ............................... 400 24,000
Marsh & McLennan Cos. Inc. ................ 1,100 114,881
MBIA Inc. ................................. 400 19,275
MBNA Corp. ................................ 3,268 88,645
Mellon Financial Corp. .................... 1,957 71,308
Merrill Lynch & Co. Inc. .................. 1,500 172,500
MGIC Investment Corp. ..................... 400 18,200
Morgan Stanley Dean Witter & Co. .......... 4,492 373,959
National City Corp. ....................... 2,449 41,786
Northern Trust Corp. ...................... 900 58,556
Old Kent Financial Corp. .................. 525 14,044
Paine Webber Group Inc. ................... 600 27,300
PNC Financial Services Group .............. 1,200 56,250
Providian Financial Corp. ................. 600 54,000
Regions Financial Corp. ................... 800 15,900
Ryder Systems Inc. ........................ 200 3,788
SAFECO Corp. .............................. 600 11,925
SLM Holding Corp. ......................... 600 22,463
Southtrust Corp. .......................... 600 13,575
St. Paul Cos. Inc. ........................ 900 30,713
State Street Corp. ........................ 600 63,638
Summit Bancorp. ........................... 800 19,700
SunTrust Banks Inc. ....................... 1,300 59,393
Synovus Financial Corp. ................... 1,100 19,387
T. Rowe Price Associates Inc. ............. 500 21,250
The Bear Stearns Cos. Inc. ................ 400 16,650
The Progressive Corp. ..................... 300 22,200
Torchmark Corp. ........................... 600 14,812
U.S. Bancorp. ............................. 3,182 61,253
Union Planters Corp. ...................... 500 13,968
Unumprovident Corp. ....................... 900 18,055
Wachovia Corp. ............................ 800 43,400
Washington Mutual Inc. .................... 2,270 65,545
Wells Fargo & Co. ......................... 6,397 247,883
----------
6,314,593
----------
Health Services .8%
Aetna Inc. ................................ 600 38,512
Cardinal Health Inc. ...................... 1,100 81,400
CIGNA Corp. ............................... 600 56,100
HCA-The Healthcare Corp. .................. 2,235 67,887
(a) HealthSouth Corp. ......................... 1,300 9,343
(a) Humana Inc. ............................... 700 3,412
IMS Health Inc. ........................... 1,300 23,400
(a) Manor Care Inc. ........................... 400 2,800
McKesson HBOC Inc. ........................ 1,200 25,124
(a) Quintiles Transnational Corp. ............. 300 4,237
Shared Medical Systems Corp. .............. 100 7,293
Tenet Healthcare Corp. .................... 1,200 32,400
</TABLE>

FSP-12
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN S&P 500 INDEX FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
SHARES VALUE
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stocks (cont.)
Health Services (cont.)
UnitedHealth Group Inc. ......................... 700 $ 60,024
(a) Wellpoint Health Networks Inc. .................. 300 21,731
----------
433,663
----------
Health Technology 10.8%
Abbott Laboratories ............................. 6,326 281,902
Allergan Inc. ................................... 500 37,250
(a) Alza Corp. ...................................... 400 23,650
American Home Products Corp. .................... 5,220 306,674
(a) Amgen Inc. ...................................... 4,100 288,024
Bausch & Lomb Inc. .............................. 200 15,474
Baxter International Inc. ....................... 1,200 84,374
Becton, Dickinson & Co. ......................... 1,000 28,687
(a) Biogen Inc. ..................................... 600 38,700
(a) Biomet Inc. ..................................... 500 19,218
(a) Boston Scientific Corp. ......................... 1,600 35,100
Bristol-Myers Squibb Co. ........................ 7,870 458,427
C. R. Bard Inc. ................................. 200 9,624
Eli Lilly & Co. ................................. 4,551 454,530
(a) Guidant Corp. ................................... 1,300 64,350
Johnson & Johnson ............................... 5,566 567,035
(a) Mallinckrodt Inc. ............................... 200 8,687
(a) MedImmune Inc. .................................. 800 59,200
Medtronic Inc. .................................. 4,873 242,735
Merck & Co. Inc. ................................ 9,225 706,865
Pall Corp. ...................................... 400 7,400
PE Corp.-PE Biosystems Group .................... 800 52,700
Pfizer Inc. ..................................... 25,269 1,212,911
Pharmacia Corp. ................................. 5,093 263,243
Schering-Plough Corp. ........................... 5,851 295,475
(a) St. Jude Medical Inc. ........................... 400 18,350
(a) Watson Pharmaceuticals Inc. ..................... 400 21,500
----------
5,602,085
----------
Industrial Services 1.0%
(a) AES Corp. ....................................... 1,800 82,124
(a) Allied Waste Industries Inc. .................... 900 9,000
Baker Hughes Inc. ............................... 1,300 41,600
Fluor Corp. ..................................... 300 9,487
Halliburton Co. ................................. 1,801 84,984
(a) Rowan Cos. Inc. ................................. 300 9,112
Schlumberger Ltd. ............................... 2,300 171,637
Transocean Sedco Forex Inc. ..................... 912 48,734
Waste Management Inc. ........................... 2,600 49,400
----------
506,078
----------
Non-Energy Minerals .6%
Alcan Aluminum Ltd. (Canada) .................... 900 27,900
Alcoa Inc. ...................................... 3,424 99,295
Allegheny Technologies Inc. ..................... 300 5,400
Barrick Gold Corp. (Canada) ..................... 1,500 27,280
(a) Bethlehem Steel Corp. ........................... 700 2,494
(a) Freeport-McMoRan Copper & Gold Inc., B .......... 600 5,550
Georgia-Pacific Corp. ........................... 700 18,374
(a) Homestake Mining Co. ............................ 1,000 6,874
(a) Inco Ltd. (Canada) .............................. 700 10,762
</TABLE>

FSP-13
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN S&P 500 INDEX FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
SHARES VALUE
-------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stocks (cont.)
Non-Energy Minerals (cont.)
Louisiana-Pacific Corp. ................... 400 $ 4,350
Newmont Mining Corp. ...................... 700 15,137
Nucor Corp. ............................... 400 13,274
Owens Corning ............................. 300 2,774
Phelps Dodge Corp. ........................ 300 11,155
(a) Placer Dome Inc. (Canada) ................. 1,100 10,518
USX-U. S. Steel Group ..................... 300 5,568
Vulcan Materials Co. ...................... 400 17,074
Weyerhaeuser Co. .......................... 900 38,700
Worthington Industries Inc. ............... 400 4,200
----------
326,679
----------
Process Industries 5.5%
Air Products & Chemicals Inc. ............. 900 27,730
Archer-Daniels-Midland Co. ................ 2,400 23,550
Ball Corp. ................................ 200 6,437
Bemis Co. Inc. ............................ 200 6,724
Boise Cascade Corp. ....................... 200 5,174
Crane Co. ................................. 300 7,293
Crown Cork & Seal Co. Inc. ................ 400 6,000
Dow Chemical Co. .......................... 2,800 84,524
E. I. du Pont de Nemours and Co. .......... 4,290 187,687
Eastman Chemical Co. ...................... 300 14,324
Ecolab Inc. ............................... 500 19,530
Engelhard Corp. ........................... 400 6,824
(a) FMC Corp. ................................. 100 5,800
Fort James Corp. .......................... 800 18,500
Fortune Brands Inc. ....................... 600 13,837
General Electric Co. ...................... 39,719 2,105,106
Great Lakes Chemical Corp. ................ 200 6,300
Hercules Inc. ............................. 400 5,624
International Paper Co. ................... 2,037 60,725
Millipore Corp. ........................... 200 15,074
(a) Owens-Illinois Inc. ....................... 600 7,012
(a) Pactiv Corp. .............................. 700 5,512
Potlatch Corp. ............................ 100 3,312
PPG Industries Inc. ....................... 683 30,264
Praxair Inc. .............................. 600 22,462
Rohm & Haas Co. ........................... 900 31,050
(a) Sealed Air Corp. .......................... 300 15,712
Sherwin-Williams Co. ...................... 600 12,712
Sigma-Aldrich Corp. ....................... 400 11,700
Springs Industries Inc., A ................ 100 3,218
Temple-Inland Inc. ........................ 200 8,400
Textron Inc. .............................. 600 32,587
The Mead Corp. ............................ 400 10,100
Union Carbide Corp. ....................... 600 29,700
(a) W.R. Grace & Co. .......................... 400 4,850
Westvaco Corp. ............................ 400 9,924
Willamette Industries Inc. ................ 400 10,900
----------
2,876,178
----------
Producer Manufacturing 2.6%
(a) American Power Conversion Corp. ........... 700 28,568
Armstrong Holdings Inc. ................... 200 3,062
Avery Dennison Corp. ...................... 500 33,562
</TABLE>

FSP-14
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN S&P 500 INDEX FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
SHARES VALUE
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stocks (cont.)
Producer Manufacturing (cont.)
Caterpillar Inc. ................................ 1,466 $ 49,660
Cooper Industries Inc. .......................... 300 9,768
Cummins Engine Co. Inc. ......................... 200 5,450
Dana Corp. ...................................... 700 14,830
Danaher Corp. ................................... 600 29,662
Deere & Co. ..................................... 900 33,300
Delphi Automotive Systems Corp. ................. 2,400 34,950
Dover Corp. ..................................... 800 32,450
Eaton Corp. ..................................... 300 20,100
Emerson Electric Co. ............................ 1,740 105,052
Honeywell International Inc. .................... 3,225 108,641
Illinois Tool Works Inc. ........................ 1,200 68,400
Ingersoll-Rand Co. .............................. 700 28,174
ITT Industries Inc. ............................. 300 9,112
Johnson Controls Inc. ........................... 400 20,524
Masco Corp. ..................................... 1,800 32,512
Minnesota Mining & Manufacturing Co. ............ 1,600 132,000
Molex Inc. ...................................... 825 39,702
(a) National Service Industries Inc. ................ 200 3,900
(a) Navistar International Corp. .................... 200 6,212
PACCAR Inc. ..................................... 300 11,905
Parker Hannifin Corp. ........................... 400 13,700
Pitney Bowes Inc. ............................... 1,100 44,000
(a) Thermo Electron Corp. ........................... 700 14,743
Thomas & Betts Corp. ............................ 200 3,824
Timken Co. ...................................... 300 5,587
TRW Inc. ........................................ 500 21,687
Tyco International Ltd. (Bermuda) ............... 6,755 320,017
Visteon Corp. ................................... 635 7,694
Xerox Corp. ..................................... 2,816 58,431
----------
1,351,179
----------
Retail Trade 5.5%
Albertson's Inc. ................................ 1,815 60,348
(a) AutoZone Inc. ................................... 500 11,000
(a) Bed Bath & Beyond Inc. .......................... 600 21,750
(a) Best Buy Co. Inc. ............................... 800 50,600
Circuit City Stores-Circuit City Group .......... 800 26,550
Consolidated Stores Corp. ....................... 500 6,000
(a) Costco Wholesale Corp. .......................... 1,900 62,700
CVS Corp. ....................................... 1,500 60,000
Dillards Inc., A ................................ 400 4,900
Dollar General Corp. ............................ 1,375 26,812
(a) Federated Department Stores Inc. ................ 900 30,374
GAP Inc. ........................................ 3,539 110,593
Home Depot Inc. ................................. 9,294 464,118
J.C. Penney Co. Inc. ............................ 1,000 18,437
(a) Kmart Corp. ..................................... 1,800 12,262
(a) Kohl's Corp. .................................... 1,300 72,312
Longs Drug Stores Inc. .......................... 200 4,350
Lowe's Cos. Inc. ................................ 1,605 65,904
May Department Stores Co. ....................... 1,300 31,200
Nordstrom Inc. .................................. 500 12,062
(a) Office Depot Inc. ............................... 1,100 6,874
Radioshack Corp. ................................ 800 37,900
</TABLE>

FSP-15
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN S&P 500 INDEX FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
SHARES VALUE
-----------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stocks (cont.)
Retail Trade (cont.)
(a) Rite Aid Corp. ..................................... 1,000 $ 6,562
(a) Safeway Inc. ....................................... 2,069 93,363
Sears, Roebuck & Co. ............................... 1,500 48,937
Staples Inc. ....................................... 2,000 30,750
Target Corp. ....................................... 1,846 107,067
(a) The Great Atlantic & Pacific Tea Co. Inc. .......... 200 3,324
(a) The Kroger Co. ..................................... 3,448 76,071
The Limited Inc. ................................... 1,900 41,087
The TJX Companies Inc. ............................. 1,400 26,250
(a) Tiffany & Co. ...................................... 300 20,250
Toys R Us Inc. ..................................... 1,000 14,562
Walgreen Co. ....................................... 4,100 131,968
Wal-Mart Stores Inc. ............................... 17,934 1,033,446
Winn-Dixie Stores Inc. ............................. 600 8,587
----------
2,839,270
----------
Technology Services 8.6%
Adobe Systems Inc. ................................. 500 65,012
(a) America Online Inc. ................................ 9,170 483,717
Autodesk Inc. ...................................... 200 6,937
Automatic Data Processing Inc. ..................... 2,578 138,083
(a) BMC Software Inc. .................................. 1,000 36,483
(a) Ceridian Corp. ..................................... 600 14,437
(a) Citrix Systems Inc. ................................ 700 13,255
Computer Associates International Inc. ............. 2,400 122,850
(a) Computer Sciences Corp. ............................ 700 52,280
(a) Compuware Corp. .................................... 1,700 17,637
(a) Electronic Data Systems Corp. ...................... 1,900 78,374
First Data Corp. ................................... 1,647 81,731
(a) Mercury Interactive Corp. .......................... 300 29,024
(a) Microsoft Corp. .................................... 21,138 1,691,040
(a) Novell Inc. ........................................ 1,300 12,024
(a) Oracle Corp. ....................................... 11,410 959,152
(a) Parametric Technology Corp. ........................ 900 9,900
(a) Peoplesoft Inc. .................................... 1,100 18,424
(a) Sapient Corp. ...................................... 200 21,387
(a) Siebel Systems Inc. ................................ 800 130,850
(a) Unisys Corp. ....................................... 1,200 17,474
(a) VERITAS Software Corp. ............................. 1,600 180,824
(a) Yahoo! Inc. ........................................ 2,200 272,524
----------
4,453,419
----------
Transportation .6%
(a) AMR Corp. .......................................... 600 15,862
Burlington Northern Santa Fe Corp. ................. 1,875 43,007
CSX Corp. .......................................... 900 19,068
Delta Air Lines Inc. ............................... 500 25,280
Fedex Corp. ........................................ 1,200 45,600
(a) Kansas City Southern Industries Inc. ............... 400 35,474
Norfolk Southern Corp. ............................. 1,500 22,312
Southwest Airlines Co. ............................. 2,000 37,874
Union Pacific Corp. ................................ 1,028 38,228
(a) US Airways Group Inc. .............................. 300 11,700
----------
294,405
----------
</TABLE>

FSP-16
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN S&P 500 INDEX FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
SHARES VALUE
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stocks (cont.)
Utilities 8.8%
Alltel Corp. ................................... 1,300 $ 80,518
Ameren Corp. ................................... 500 16,874
American Electric Power Co. Inc. ............... 1,340 39,697
AT&T Corp. ..................................... 15,015 474,849
BellSouth Corp. ................................ 7,551 321,860
Centurytel Inc. ................................ 500 14,374
Cinergy Corp. .................................. 700 17,805
CMS Energy Corp. ............................... 400 8,850
Coastal Corp. .................................. 900 54,787
Columbia Energy Group .......................... 300 19,687
Consolidated Edison Inc. ....................... 800 23,700
Constellation Energy Group Inc. ................ 600 19,537
(a) CP&L Energy Inc. ............................... 600 19,162
Dominion Resources Inc. ........................ 1,000 42,874
DTE Energy Co. ................................. 500 15,280
Duke Energy Corp. .............................. 1,529 86,196
Eastern Enterprises ............................ 100 6,300
Edison International ........................... 1,400 28,700
El Paso Energy Corp. ........................... 900 45,843
Enron Corp. .................................... 2,974 191,822
Entergy Corp. .................................. 900 24,468
FirstEnergy Corp. .............................. 900 21,037
Florida Progress Corp. ......................... 400 18,750
FPL Group Inc. ................................. 700 34,650
(a) Global Crossing Ltd. (Bermuda) ................. 3,621 95,277
GPU Inc. ....................................... 500 13,531
GTE Corp. ...................................... 3,929 244,580
New Century Energies Inc. ...................... 400 12,000
(a) Nextel Communications Inc., A .................. 3,100 189,681
(a) Niagara Mohawk Holdings Inc. ................... 600 8,362
Nicor Inc. ..................................... 200 6,524
Northern States Power Co. ...................... 600 12,112
(a) ONEOK Inc. ..................................... 200 5,187
PECO Energy Co. ................................ 700 28,218
Peoples Energy Corp. ........................... 200 6,474
PG&E Corp. ..................................... 1,600 39,400
Pinnacle West Capital Corp. .................... 300 10,163
PPL Corp. ...................................... 500 10,968
Public Service Enterprise Group Inc. ........... 800 27,700
Reliant Energy Inc. ............................ 1,200 35,474
SBC Communications Inc. ........................ 13,683 591,790
Sempra Energy .................................. 700 11,900
Southern Co. ................................... 2,660 62,011
Sprint Corp. (FON Group) ....................... 3,516 179,315
(a) Sprint Corp. (PCS Group) ....................... 3,700 220,150
TXU Corp. ...................................... 1,100 32,450
U.S. West Inc. ................................. 2,009 172,271
Unicom Corp. ................................... 700 27,081
Verizon Communications ......................... 6,184 314,224
Williams Cos. Inc. ............................. 1,771 73,828
(a) Worldcom Inc. .................................. 11,517 528,341
-----------
4,586,632
-----------
Total Common Stocks (Cost $49,128,250).......... 50,460,508
===========
</TABLE>

FSP-17
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN S&P 500 INDEX FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
SHARES VALUE
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stocks (cont.)
Short Term Investments 2.8%
(c) U.S. Treasury Bill, 9/14/00 ............................................ 150,000 $ 148,284
(b) Franklin Institutional Fiduciary Trust Money Market Portfolio .......... 1,289,884 1,289,884
-----------
Total Short Term Investments (Cost $1,437,698).......................... 1,438,168
-----------
Total Investments (Cost $50,565,948) 99.7%.............................. 51,898,676
Other Assets, less Liabilities .3% ..................................... 152,233
-----------
Net Assets 100.0% ...................................................... $52,050,909
===========
</TABLE>

(a)Non-income producing
(b)The Franklin Institutionary Fiduciary Trust Money Market Portfolio is managed
by Franklin Advisers Inc.
(c)On deposit with broker for initial margin on futures contracts (Note 1b).

See notes to financial statements.

FSP-18
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN S&P 500 INDEX FUND

Financial Statements

Statement of Assets and Liabilities
June 30, 2000 (unaudited)

Assets:
Investments in securities:
Cost ................................................ $50,565,948
===========
Value ............................................... 51,898,676
Cash ................................................. 90,675
Receivables:
Investment securities sold .......................... 3,800
Capital shares sold ................................. 268,201
Dividends ........................................... 38,621
Variation margin (Note 1) ........................... 10,100
Offering costs ....................................... 20,052
Other assets ......................................... 6,100
-----------
Total assets ...................................... 52,336,225
-----------
Liabilities:
Payables:
Investment securities purchased ..................... 217,247
Capital shares redeemed ............................. 22,675
Affiliates .......................................... 15,999
Other liabilities .................................... 29,395
-----------
Total liabilities ................................. 285,316
-----------
Net assets, at value ............................. $52,050,909
===========
Net assets consist of:
Undistributed net investment income .................. $ 186,906
Net unrealized appreciation .......................... 1,313,408
Accumulated net realized loss ........................ (440,634)
Capital shares ....................................... 50,991,229
-----------
Net assets, at value ............................. $52,050,909
===========
Class 1:
Net assets, at value ................................. $42,433,168
===========
Shares outstanding ................................... 4,006,398
===========
Net asset value and offering price per share ......... $ 10.59
===========
Class 2:
Net assets, at value ................................. $ 88,128
===========
Shares outstanding ................................... 8,335
===========
Net asset value and offering price per share ......... $ 10.57
===========
Class 3:
Net assets, at value ................................. $ 9,529,613
===========
Shares outstanding ................................... 901,758
===========
Net asset value and offering price per share ......... $ 10.57
===========

See notes to financial statements.

FSP-19
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN S&P 500 INDEX FUND

Financial Statements (continued)

Statement of Operations
for the six months ended June 30, 2000 (unaudited)

Investment income:
Dividends ................................................... $ 294,023
----------
Expenses:
Management fees (Note 3) .................................... 26,278
Administrative fees (Note 3) ................................ 20,514
Distribution fees (Note 3)
Class 2 .................................................... 108
Class 3 .................................................... 8,806
Transfer agent fees - Class 3 (Note 3) ..................... 6,705
Custodian fees ............................................. 553
Reports to shareholders .................................... 24,277
Registration and filing fees - Class 3 ..................... 25,920
Professional fees (Note 3) ................................. 6,830
Trustees' fees and expenses ................................ 212
Amortization of offering costs (Note 1) .................... 12,011
Amortization of offering costs - Class 3 (Note 1) .......... 7,937
Other ...................................................... 4,574
----------
Total expenses ............................................. 144,725
Expenses waived/paid by affiliate (Note 3) ................. (37,886)
----------
Net expenses ............................................ 106,839
----------
Net investment income .................................. 187,184
----------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ................................................ (511,265)
Financial futures contracts ................................ 70,631
----------
Net realized loss ........................................ (440,634)
Net unrealized appreciation on investments .................. 843,476
----------
Net realized and unrealized gain ............................. 402,842
----------
Net increase in net assets resulting from operations ......... $ 590,026
==========

See notes to financial statements.

FSP-20
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN S&P 500 INDEX FUND

Financial Statements (continued)

Statements of Changes in Net Assets
for the six months ended June 30, 2000 (unaudited) and the year ended December
31, 1999

<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999(a)
----------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ................................................ $ 187,184 $ 19,760
Net realized loss from investments and financial futures transactions (440,634) --
Net unrealized appreciation on investments ........................... 843,476 469,932
---------------------------------
Net increase in net assets resulting from operations ................ 590,026 489,692
Distributions to shareholders from:
Net investment income:
Class 1 ............................................................. (18,826) --
Class 2 ............................................................. (15) --
Class 3 ............................................................. (3,250) --
---------------------------------
Total distributions to shareholders .................................... (22,091) --
Capital share transactions: (Note 2)
Class 1 ............................................................. 27,100,706 14,487,738
Class 2 ............................................................. 15 83,330
Class 3 ............................................................. 7,057,486 2,264,007
---------------------------------
Total capital share transactions ....................................... 34,158,207 16,835,075
Net increase in net assets .......................................... 34,726,142 17,324,767
Net assets:
Beginning of period .................................................... 17,324,767 --
---------------------------------
End of period .......................................................... $52,050,909 $17,324,767
=================================
Undistributed net investment income included in net assets:
End of period .......................................................... $ 186,906 $ 21,813
=================================
</TABLE>

(a)For the period November 1, 1999 (effective date) to December 31, 1999.

See notes to financial statements.

FSP-21
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN S&P 500 INDEX FUND

Notes to Financial Statements (unaudited)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin S&P 500 Index Fund (the Fund) is a separate, diversified series of
Franklin Templeton Variable Insurance Products Trust (the Trust), which is an
open-end investment company registered under the Investment Company Act of
1940. As of June 30, 2000, 77% of the Fund's shares were sold through one
insurance company. The Fund seeks to match the performance of S&P 500 Index.

Effective May 1, 2000, the name of the Templeton Variable Products Series Fund
- Franklin S&P 500 Index Fund changed to Franklin Templeton Variable Insurance
Products Trust - Franklin S&P 500 Index Fund. The Fund's investment objectives
and other policies did not change as a result of the name change.

The following summarizes the Fund's significant accounting policies.

a. Security Valuation

b. Futures Contracts

The Fund may enter into futures contracts and options on futures contracts to
hedge the risk of changes in interest rates. Required initial margin deposits
of cash or securities are maintained by the Fund's custodian in segregated
accounts as disclosed in the Statement of Investments. Subsequent payments,
known as variation margin, are made or received by the Fund depending on the
daily fluctuations in the value of the underlying securities. Such variation
margin is accounted for as unrealized gains or losses until the contract is
closed, at which time the gains or losses are reclassified to realized.
Realized and unrealized gains and losses are included in the Statement of
Operations.

c. Income Taxes

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

e. Offering Costs

Offering costs are amortized on a straight-line basis over twelve months.

FSP-22
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN S&P 500 INDEX FUND

Notes to Financial Statements (unaudited) (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

f. Accounting Estimates

2. SHARES OF BENEFICIAL INTEREST

The Fund offers three classes of shares: Class 1, Class 2 and Class 3. Each
class of shares differs by its distribution fees, registration fees,
shareholder servicing costs, voting rights on matters affecting a single class,
and its exchange privilege.

At June 30, 2000, there were an unlimited number of shares authorized ($.01 par
value). Transactions in the Fund's shares were as follows:

<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999(a)
-------------------------------------------------------------
Shares Amount Shares Amount
Class 1 Shares: -------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ................................... 3,781,072 $ 39,349,416 1,433,132 $14,724,579
Shares issued in reinvestment of distributions 1,894 18,826 -- --
Shares redeemed ............................... (1,186,572) (12,267,536) (23,128) (236,841)
--------------------------------------------------------
Net increase .................................. 2,596,394 $ 27,100,706 1,410,004 $14,487,738
========================================================
Class 2 Shares:
Shares sold ................................... -- $ -- 8,333 $ 83,330
Shares issued in reinvestment of distributions 2 15 -- --
--------------------------------------------------------
Net increase .................................. 2 $ 15 8,333 $ 83,330
========================================================
Class 3 Shares:
Shares sold ................................... 972,705 $ 10,095,873 232,129 $ 2,362,095
Shares issued in reinvestment of distributions 327 3,250 -- --
Shares redeemed ............................... (293,863) (3,041,637) (9,540) (98,088)
--------------------------------------------------------
Net increase .................................. 679,169 $ 7,057,486 222,589 $ 2,264,007
========================================================
</TABLE>

(a)For the period November 1, 1999 (effective date) to December 31, 1999.

Templeton Funds Annuity Company, the Fund's subadministrative manager, is the
record owner of 8,335 of the Fund's Class 2 shares as of June 30, 2000.

3. TRANSACTIONS WITH AFFILIATES

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

<TABLE>
<CAPTION>
Entity Affiliation
----------------------------------------------------------------------------------------
<S> <C>
Franklin Templeton Services, Inc. (FT Services) Administrative manager
Franklin Advisers, Inc. (Advisers) Investment manager
Franklin/Templeton Distributors, Inc. (Distributors) Principal underwriter
Franklin/Templeton Investor Services, Inc. (Investor Services) Transfer agent
</TABLE>

The Fund pays an investment management fee to Advisers of .15% per year of the
average daily net assets of the Fund.

FSP-23
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN S&P 500 INDEX FUND

Notes to Financial Statements (unaudited) (continued)

3. TRANSACTIONS WITH AFFILIATES (cont.)

Management fees were reduced on assets invested in the Franklin Institutional
Fiduciary Trust Money Market Portfolio.

The Fund pays an administrative fee to FT Services of .10% per year of the
Fund's average daily net assets.

Under a subadvisory agreement, State Street Global Advisors (SSgA) provides
subadvisory services to the Fund and receives from Advisers fees based on the
average daily net assets of the Fund.

Advisers and FT Services have agreed in advance to limit total expenses of the
Fund to an annual rate of .55%, .80%, and .80% of average daily net assets of
Class 1, Class 2, and Class 3, respectively, through December 31, 2000, as
noted in the Statement of Operations.

The Fund reimburses Distributors up to .25% per year of its average daily net
assets of Class 2 and Class 3, for costs incurred in marketing the Fund's
shares.

Included in professional fees are legal fees of $180 that were paid to a law
firm in which a partner of that firm was an officer of the Fund.

4. INCOME TAXES

Net investment income differs for financial statement and tax purposes
primarily due to differing treatments of offering costs. Net realized capital
gains and losses differ for financial statements and tax purposes primarily due
to differing treatment of wash sales.

At June 30, 2000, the net unrealized appreciation based on the cost of
investments for income tax purposes of $50,097,742 was as follows:

Unrealized appreciation ............. $ 5,794,302
Unrealized depreciation ............. (3,993,368)
------------
Net unrealized appreciation ......... $ 1,800,934
============

5. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities) for the
period ended June 30, 2000 aggregated $38,974,910 and $3,947,074, respectively.

6. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

A financial futures contract is an agreement between parties to buy or sell a
security for a set price on a future date. The use of futures transactions
involves risk of imperfect correlation in movements in the price of future
contracts, interest rates, and the underlying hedged assets.

As of June 30, 2000, the Fund had the following futures contracts outstanding:

<TABLE>
<CAPTION>
Contracts to Buy Number of Contracts Delivery Dates Contract Face Value Unrealized Loss
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
S&P 500 Index, Sep 00 ......... 4 9/15/00 $1,487,420 $ (19,320)
</TABLE>

FSP-24
<PAGE>

FRANKLIN SMALL CAP FUND

--------------------------------------------------------------------------------
Fund Goal and Primary Investments: Franklin Small Cap Fund seeks long-term
capital growth. The Fund invests primarily in equity securities of U.S. small
capitalization companies, which for this Fund are those companies with market
capitalization values not exceeding (i) $1.5 billion; or (ii) the highest
market capitalization value in the Russell 2000 Index, whichever is greater, at
the time of purchase.
--------------------------------------------------------------------------------
During the first six months of 2000, U.S. economic growth was fueled by strong
global demand, solid consumer confidence, and increased manufacturing
productivity. In fact, growth was so strong that inflation threatened to rear
its head. The apparent concern in equity markets was the prospect of frequent
Federal Reserve rate hikes throughout 2000, following three 0.25% rate
increases in 1999. While the nation's economy was expanding, U.S. equity
markets were in turmoil, first rising steeply and then falling sharply. Within
the first 10 weeks of the year, the Russell 2000 Growth Index, a leading
indicator of growth-oriented domestic small-cap stock performance, rose 30.65%.
In the following 10 weeks, it gave up all of that gain -- and then some --
before rebounding slightly to end the period up just 1.23% for the year-to-date
through June 30, 2000.(1)

Although no industry sector was a completely safe haven, the most volatile
issues were technology and Internet-related stocks. The market appeared to
swing from late 1999's fear of not owning these stocks to a fear of owning
them, followed by a wholesale dumping of shares of Internet-related companies,
some of which had been managing themselves towards sales but not earnings
growth. Unfortunately, in our opinion, shares of some good companies were, like
the proverbial baby, thrown out with the bath water.

Ironically, this decline occurred in an environment of aggressive buying by
individual investors and healthy cash flows into technology and growth funds.
However, for the first time in many years, "buying on the dip" did not seem to
rescue the market as half-hearted rallies were followed by sharp corrections to
lower lows. Faced with the prospect of higher interest rates, and the belief
that many stocks were finally being fairly valued, some investors turned
towards value stocks, restraining the upside in the technology market and
making it resistant

(1) Source: Standard & Poor's Micropal. The Russell 2000 Growth Index measures
the performance of those Russell 2000 companies with higher price-to-book ratios
and higher forecasted growth values.

Top 10 Sector Breakdown
Franklin Small Cap Fund
6/30/00
% of Total
Sector Net Assets
--------------------------------------
Electronic Technology 30.0%

Technology Services 23.6%

Telecommunications 6.1%

Finance 4.8%

Industrial Services 3.1%

Real Estate 2.6%

Transportation 2.2%

Energy Minerals 2.1%

Consumer Services 1.8%

Health Technology 1.6%

FS-1
<PAGE>

Top 10 Holdings
Franklin Small Cap Fund
6/30/00

Company % of Total
Sector, Country Net Assets
---------------------------------------
JDS Uniphase Corp. 5.9%
Electronic Technology,
United States

PMC-Sierra Inc. 4.3%
Electronic Technology,
Canada

i2Technologies Inc. 2.4%
Technology Services,
United States

VERITAS Software Corp. 2.3%
Technology Services,
United States

Micromuse Inc. 2.0%
Technology Services,
United States

BroadVision Inc. 1.6%
Technology Services,
United States

VoiceStream Wireless
Corp. 1.5%
Telecommunications,
United States

RSA Security Inc. 1.3%
Electronic Technology,
United States

Coherent Inc. 1.3%
Electronic Technology,
United States

Waters Corp. 1.2%
Electronic Technology,
United States

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

to rallies. Toward the end of the reporting period, news that the U.S. economy
might be beginning to cool contributed to a revival in the technology sector
during late May and June amid sharply declining trading volumes.

During the reporting period, the Fund's share price rose and fell with the
general market, but outperformed the Russell 2000, its benchmark index, which
returned 3.04%. We used the early part of the year to cut back the number of
our positions, especially those relating to the Internet. Although we were not
completely successful in this effort, we had converted many of them to cash by
the April correction in the overall market. Fortunately, we also held real
estate investment trusts and energy stocks, both of which moderated the
performance swings in our tech investments.

As the market stabilized toward the end of the reporting period, we began
initiating new positions and adding to existing holdings in all sectors.
Although we focused on the technology and technology services areas, where we
think valuations are now more rational than they were in January and February,
we also added selectively to the energy and professional services sectors. We
believe that as investors increasingly understand the merits of diversification
beyond technology, the many non-technology stocks owned by the Fund will be
recognized as high-quality growth stocks.

Looking forward, we remain optimistic about growth prospects in the small-cap
universe. Although a weak dollar brought on by equity market turbulence could
exacerbate inflationary pressures, and low liquidity can pose problems in the
sale of small-cap stocks, we are often able to purchase shares of what we
believe are great companies at fire-sale prices. Global economies are currently
strong, and we will continue searching for companies that we believe possess
competitive advantages such as intellectual property, barriers to market entry
for competitors or a faster-than-average growth trend.

FS-2
<PAGE>

We think it is wise to maintain a healthy respect for the past history of the
U.S. economy's business cycles, and for realistic limits to uninterrupted
growth of America's fastest growing companies. Last year's strong portfolio
gains reflect an extended period of unusually high earnings growth and returns
on capital of leading technology companies. Some investors expect this to
continue. However, one thing is certain: This rate of growth may not be
attainable for many companies in the future, and we can not realistically rely
on such performance results to continue indefinitely. We will try our hardest
to deliver the past year's performance every time, but no one should expect
that to be the case for this, or any, Fund.

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance
is no guarantee of future results, these insights may help you understand our
investment and management philosophy.

Franklin Small Cap Fund buys small cap stocks that the managers believe will
appreciate in value. When our strategy is successful, our small cap holdings
grow to be mid- and sometimes large-cap stocks. For this reason, the Fund's
average market cap has tended to grow as many holdings in excellent small cap
companies have grown, sometimes dramatically. Given the Fund's strategy, the
managers believe the Fund's average market cap has, and likely will continue
to, range from small to mid cap.

FS-3
<PAGE>

Franklin Small Cap Fund
Class 1

Performance reflects the Fund's Class 1 operating expenses, but does not
include any contract fees, expenses, or sales charges. If they had been
included, performance would be lower. These charges and deductions,
particularly for variable life policies, can have a significant effect on
contract values and insurance benefits. See the contract prospectus for a
complete description of these expenses, including sales charges.

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

PERFORMANCE SUMMARY AS OF 6/30/00

Franklin Small Cap Fund - Class 1 delivered a +6.58% cumulative total return
for the six-month period ended 6/30/00. Total return of Class 1 shares
represents the cumulative or average annual change in value, assuming
reinvestment of dividends and capital gains. Average returns smooth out
variations in returns, which can be significant; they are not the same as
year-by-year results.

Franklin Small Cap Fund - Class 1
Periods ended 6/30/00
Since
Inception
1-Year 3-Year (11/1/95)
--------------------------------------------------------------------
Average Annual Total Return +80.21% +31.20% +28.51%
Cumulative Total Return +80.21% +125.85% +222.26%
Value of $10,000 Investment $18,021 $22,585 $32,226

Past performance does not guarantee future results.

FS-4
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN SMALL CAP FUND

Financial Highlights

<TABLE>
<CAPTION>
Class 1
----------------------------------------------------------------------------------
Six Months Ended Year Ended December 31,
June 30, 2000 ---------------------------------------------------------------
(unaudited) 1999 1998 1997 1996 1995(d)
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $26.87 $13.72 $15.05 $13.20 $10.24 $10.00
----------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss)(c) .............. .02 (.01) .07 .01 .02 .03
Net realized and unrealized gains (losses) ... 1.55 13.25 (.20) 2.24 2.95 .21
----------------------------------------------------------------------------------
Total from investment operations .............. 1.57 13.24 (.13) 2.25 2.97 .24
----------------------------------------------------------------------------------
Less distributions from:
Net investment income ........................ -- (.08) (.01) (.03) (.01) --
Net realized gains ........................... (1.92) (.01) (1.19) (.37) -- --
----------------------------------------------------------------------------------
Total distributions ........................... (1.92) (.09) (1.20) (.40) (.01) --
----------------------------------------------------------------------------------
Net asset value, end of period ................ $26.52 $26.87 $13.72 $ 15.05 $13.20 $10.24
==================================================================================
Total return(a) ............................... 6.58% 96.94% (.98%) 17.42% 28.95% 2.30%
Ratios/supplemental data
Net assets, end of period (000's) ............. $510,752 $488,062 $315,460 $313,462 $170,969 $13,301

Ratios to average net assets:
Expenses ..................................... .76%(b) .77% .77% .77% .77% .90%(b)
Net investment income (loss) ................. .14%(b) (.05%) .51% .06% .63% 2.70%(b)
Portfolio turnover rate ....................... 8.54% 39.49% 53.01% 64.07% 63.72% 16.04%

</TABLE>

(a)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for periods less than one
year.
(b)Annualized
(c)Based on average shares outstanding effective year ended December 31, 1999.
(d)For the period November 1, 1995 (effective date) to December 31, 1995.

FS-5
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN SMALL CAP FUND

Financial Highlights (continued)

<TABLE>
<CAPTION>
Class 2
---------------------------------------
Six Months Ended
June 30, 2000 Year Ended
(unaudited) December 31, 1999(d)
---------------------------------------
<S> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $26.80 $14.25
---------------------------------------
Income from investment operations:
Net investment income (loss)(c) .............. .05 (.04)
Net realized and unrealized gains ............ 1.49 12.68
---------------------------------------
Total from investment operations .............. 1.54 12.64
---------------------------------------
Less distributions from:
Net investment income ........................ -- (.08)
Net realized gains ........................... (1.92) (.01)
---------------------------------------
Total distributions ........................... (1.92) (.09)
---------------------------------------
Net asset value, end of period ................ $26.42 $26.80
=======================================
Total return(a) ............................... 6.48% 89.05%

Ratios/supplemental data
Net assets, end of period (000's) ............. $203,158 $6,156
Ratios to average net assets:
Expenses ..................................... 1.01%(b) 1.02%(b)
Net investment income (loss) ................. .36%(b) (.18%)(b)
Portfolio turnover rate ....................... 8.54% 39.49%
</TABLE>

(a)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for periods less than one
year.
(b)Annualized
(c)Based on average shares outstanding.
(d)For the period January 6, 1999 (effective date) to December 31, 1999.

See notes to financial statements.

FS-6
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN SMALL CAP FUND

Statement of Investments, June 30, 2000 (unaudited)

<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stocks 84.1%
Commercial Services 1.6%
(a) Aether Systems Inc. ......................... United States 4,600 $ 943,000
(a) Answerthink Inc. ............................ United States 118,900 1,976,713
(a) Careerbuilder Inc. .......................... United States 37,200 123,225
(a) Corporate Executive Board Co. ............... United States 14,700 880,163
(a) DigitalThink Inc. ........................... United States 3,400 121,975
FactSet Research Systems Inc. ............... United States 25,000 706,250
(a) GetThere.com Inc. ........................... United States 3,300 34,856
(a) Hotjobs.com Ltd. ............................ United States 26,100 360,506
(a) Interep National Radio Sales Inc. ........... United States 26,200 139,188
(a) Internet Pictures Corp. ..................... United States 54,830 829,304
(a) Netcentives Inc. ............................ United States 4,800 89,400
(a) NOVA Corp. .................................. United States 60,900 1,701,394
(a) ProBusiness Services Inc. ................... United States 3,000 79,688
(a) Smith-Gardner & Associates Inc. ............. United States 7,400 35,613
(a) SOS Staffing Services Inc. .................. United States 37,900 116,069
(a) Stamps.com Inc. ............................. United States 28,300 206,944
(a) Ventro Corp. ................................ United States 10,400 196,300
Viad Corp. .................................. United States 94,100 2,564,225
(a) Wink Communications Inc. .................... United States 200 6,100
-----------
11,110,913
-----------
Consumer Durables
D.R. Horton Inc. ............................ United States 16,000 217,000
Ethan Allen Interiors Inc. .................. United States 3,000 72,000
-----------
289,000
-----------
Consumer Non-Durables .3%
(a) Tommy Hilfiger Corp. ........................ United States 128,600 964,500
Wolverine World Wide Inc. ................... United States 84,800 837,400
-----------
1,801,900
-----------
(a) Consumer Services 1.8%
Acme Communications Inc. .................... United States 11,700 213,525
ARTISTdirect Inc. ........................... United States 3,300 10,313
Classic Communications Inc., A .............. United States 4,500 40,219
Cumulus Media Inc., A ....................... United States 71,900 656,088
DeVry Inc. .................................. United States 67,800 1,792,463
Entercom Communications Corp. ............... United States 2,300 112,125
Insight Communications Co. Inc., A .......... United States 100,400 1,568,750
Jack in the Box Inc. ........................ United States 72,200 1,777,925
MeriStar Hotels & Resorts Inc. .............. United States 120,000 345,000
Quokka Sports Inc. .......................... United States 1,800 14,456
Quotesmith.com Inc. ......................... United States 34,100 73,528
Radio One Inc. .............................. United States 15,800 467,088
Radio One Inc., D ........................... United States 31,600 697,175
SFX Entertainment Inc. ...................... United States 70,275 3,184,336
Spanish Broadcasting Systems Inc. ........... United States 19,400 398,913
Vail Resorts Inc. ........................... United States 33,700 549,731
XM Satellite Radio Holdings Inc. ............ United States 24,700 924,706
-----------
12,826,341
-----------
</TABLE>

FS-7
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN SMALL CAP FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stocks (cont.)
Electronic Technology 30.0%
(a) Accelerated Networks Inc. ................... United States 9,200 $ 388,125
(a) Adaptec Inc. ................................ United States 13,300 302,575
(a) Advanced Energy Industries Inc. ............. United States 52,600 3,100,113
(a) Aeroflex Inc. ............................... United States 12,600 626,063
(a) Alpha Industries Inc. ....................... United States 40,000 1,762,500
(a) Alteon Websystems Inc. ...................... United States 12,800 1,280,800
(a) Anaren Microwave Inc. ....................... United States 2,100 275,592
(a) Apex Inc. ................................... United States 12,700 555,625
(a) Applied Materials Inc. ...................... United States 46,968 4,256,475
(a) Applied Science & Technology Inc. ........... United States 3,000 77,625
(a) AVT Corp. ................................... United States 78,900 581,888
(a) Carrier Access Corp. ........................ United States 24,600 1,300,725
(a) Catapult Communications Corp. ............... United States 38,600 388,413
(a) C-COR.net Corp. ............................. United States 24,800 669,600
(a) Celeritek Inc. .............................. United States 6,000 244,875
(a) Celestica Inc. .............................. Canada 6,900 342,413
(a) Cobalt Networks Inc. ........................ United States 35,800 2,071,925
(a) Coherent Inc. ............................... United States 106,400 8,924,300
(a) Com21 Inc. .................................. United States 40,000 1,000,000
(a) Conexant Systems Inc. ....................... United States 6,534 317,716
(a) Copper Mountain Networks Inc. ............... United States 5,500 484,688
CTS Corp. ................................... United States 11,200 504,000
(a) DDi Corp. ................................... United States 12,200 347,700
(a) Digital Microwave Corp. ..................... United States 61,100 2,329,438
(a) Ditech Communications Corp. ................. United States 49,700 4,699,756
Elcoteq Network Corp., A .................... Finland 7,000 153,991
(a) Electro Scientific Industries Inc. .......... United States 9,700 427,103
(a) eMachines Inc. .............................. United States 7,600 20,425
(a) EMCORE Corp. ................................ United States 30,200 3,624,000
(a) Flextronics International Ltd. .............. Singapore 105,236 7,228,398
(a) FLIR Systems Inc. ........................... United States 101,500 659,750
(a) Foundry Networks Inc. ....................... United States 15,800 1,745,900
(a) FVC.COM Inc. ................................ United States 12,600 97,650
(a) Gemstar International Group Ltd. ............ United States 120,000 7,374,375
(a) Handspring Inc. ............................. United States 11,200 302,400
(a) Harmonic Inc. ............................... United States 28,000 693,000
(a) Integral Systems Inc. ....................... United States 14,600 244,550
(a) Integrated Circuit Systems Inc. ............. United States 48,500 830,563
(a) Jabil Circuit Inc. .......................... United States 81,600 4,049,400
(a) JDS Uniphase Corp. .......................... United States 351,108 42,089,072
(a) Juniper Networks Inc. ....................... United States 2,400 349,350
Keithley Instruments Inc. ................... United States 30,000 2,613,750
(a) Komag Inc. .................................. United States 262,000 458,500
(a) Kopin Corp. ................................. United States 4,800 332,400
(a) Lam Research Corp. .......................... United States 16,000 600,000
(a) Lattice Semiconductor Corp. ................. United States 27,000 1,866,375
(a) MCK Communications Inc. ..................... United States 12,300 284,438
(a) Mettler-Toledo International Inc. ........... Switzerland 160,300 6,412,000
(a) Micrel Inc. ................................. United States 36,000 1,563,750
(a) MMC Networks Inc. ........................... United States 11,300 603,844
(a) Nanometrics Inc. ............................ United States 8,000 329,500
(a) Natural MicroSystems Corp. .................. United States 7,200 809,550
(a) Netopia Inc. ................................ United States 1,000 40,250
(a) Netro Corp. ................................. United States 6,800 390,150
(a) NICE Systems Ltd., ADR ...................... Israel 12,300 949,406
</TABLE>

FS-8
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN SMALL CAP FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stocks (cont.)
Electronic Technology (cont.)
(a) Novellus Systems Inc. ................................... United States 57,000 $ 3,224,063
(a) Numerical Technologies Inc. ............................. United States 2,700 131,288
(a) Paradyne Networks Inc. .................................. United States 2,400 78,150
(a) P-Com Inc. .............................................. United States 600 3,188
(a) PC-Tel Inc. ............................................. United States 22,800 866,400
(a) Perceptron Inc. ......................................... United States 62,100 211,528
PerkinElmer Inc. ........................................ United States 1,000 66,125
(a) Photronics Inc. ......................................... United States 28,400 805,850
(a) Pinnacle Systems Inc. ................................... United States 23,400 526,134
(a) Pixelworks Inc. ......................................... United States 6,000 136,500
(a) PLX Technology Inc. ..................................... United States 22,800 946,200
(a) PMC-Sierra Inc. ......................................... Canada 172,000 30,562,250
(a) Polycom Inc. ............................................ United States 53,700 5,052,834
(a) Power Integrations Inc. ................................. United States 15,000 353,438
(a) Powerwave Technologies Inc. ............................. United States 13,800 607,200
(a) Proxim Inc. ............................................. United States 24,800 2,454,425
(a) PSi Technologies Holdings Inc., ADR ..................... Philippines 2,100 43,575
(a) QLogic Corp. ............................................ United States 6,800 449,225
(a) Quantum Effect Devices Inc. ............................. United States 6,500 370,500
(a) QuickLogic Corp. ........................................ United States 49,800 1,108,050
(a) Radiant Systems Inc. .................................... United States 1,350 32,400
(a) Redback Networks Inc. ................................... United States 8,300 1,477,400
(a) RSA Security Inc. ....................................... United States 133,700 9,258,725
(a) Sanmina Corp. ........................................... United States 37,600 3,214,800
(a) Semtech Corp. ........................................... United States 21,000 1,606,172
(a) Sierra Wireless Inc. .................................... Canada 24,800 1,334,550
(a) Silicon Laboratories Inc. ............................... United States 300 15,938
(a) Stanford Microdevices Inc. .............................. United States 7,400 321,438
(a) Synopsys Inc. ........................................... United States 67,600 2,336,425
(a) Tekelec ................................................. United States 101,000 4,866,938
(a) Tektronix Inc. .......................................... United States 17,800 1,317,200
(a) Telaxis Communications Corp. ............................ United States 600 18,750
(a) Triquint Semiconductor Inc. ............................. United States 18,100 1,731,944
(a) Varian Inc. ............................................. United States 37,300 1,720,463
(a) Varian Semiconductor Equipment Associates Inc. .......... United States 25,400 1,595,438
(a) Veeco Instruments Inc. .................................. United States 28,560 2,092,020
(a) Visual Networks Inc. .................................... United States 11,000 313,500
(a) Waters Corp. ............................................ United States 68,000 8,487,250
(a) Westell Technologies Inc. ............................... United States 10,500 157,500
(a) Western Digital Corp. ................................... United States 66,500 332,500
(a) Xircom Inc. ............................................. United States 2,400 114,000
------------
214,319,044
------------
Energy Minerals 2.1%
(a) Barrett Resources Corp. ................................. United States 90,400 2,751,550
(a) Basin Exploration Inc. .................................. United States 41,800 747,175
Cabot Oil & Gas Corp., A ................................ United States 16,500 349,594
(a) Chesapeake Energy Corp. ................................. United States 101,300 785,075
(a) Denbury Resources Inc. .................................. United States 83,500 433,156
(a) Forest Oil Corp. ........................................ United States 46,400 739,500
(a) Louis Dreyfus Natural Gas Corp. ......................... United States 15,500 485,344
(a) Newfield Exploration Co. ................................ United States 80,900 3,165,213
(a) Pennaco Energy Inc. ..................................... United States 93,000 1,522,875
(a) Pure Resources Inc. ..................................... United States 52,057 930,519
Range Resources Corp. ................................... United States 173,400 541,875
</TABLE>

FS-9
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN SMALL CAP FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stocks (cont.)
Energy Minerals (cont.)
(a) Santa Fe Snyder Corp. ............................... United States 66,210 $ 753,139
(a) Tom Brown Inc. ...................................... United States 80,300 1,851,919
-----------
15,056,934
-----------
Finance 4.8%
(a) Affiliated Managers Group Inc. ...................... United States 46,800 2,129,400
Allied Capital Corp. ................................ United States 89,000 1,513,000
(a) Arch Capital Group Ltd. ............................. United States 49,500 739,406
Bank United Corp., A ................................ United States 53,200 1,871,975
(a) Catellus Development Corp. .......................... United States 30,300 454,500
City National Corp. ................................. United States 36,500 1,268,375
Commerce Bancorp Inc. ............................... United States 21,420 985,320
(a) DLJdirect ........................................... United States 34,100 242,963
(a) eSPEED Inc., A ...................................... United States 8,400 364,875
Federated Investors Inc., B ......................... United States 128,600 4,509,038
Financial Security Assurance Holdings Ltd. .......... United States 67,000 5,083,625
(a) Golden State Bancorp Inc. ........................... United States 109,000 1,962,000
Greater Bay Bancorp Inc. ............................ United States 1,700 79,475
HCC Insurance Holdings Inc. ......................... United States 35,300 666,288
(a) Knight Trading Group Inc. ........................... United States 26,200 781,088
(a) LaBranche & Co. Inc. ................................ United States 8,500 122,188
Metris Cos. Inc. .................................... United States 9,300 233,663
(a) Mortgage.com Inc. ................................... United States 1,800 2,700
Mutual Risk Management Ltd. ......................... Bermuda 49,700 860,431
(a) National Discount Brokers Group Inc. ................ United States 1,000 31,875
Protective Life Corp. ............................... United States 13,100 348,788
Radian Group Inc. ................................... United States 31,038 1,606,217
Reinsurance Group of America Inc. ................... United States 78,000 2,349,750
(a) Silicon Valley Bancshares ........................... United States 138,400 5,899,300
Tucker Anthony Sutro Corp. .......................... United States 26,300 473,400
Westamerica Bancorp. ................................ United States 200 5,225
-----------
34,584,865
-----------
(a) Health Services 1.1%
American Dental Partners Inc. ....................... United States 20,300 142,100
Beverly Enterprises Inc. ............................ United States 146,900 413,156
Oxford Health Plans Inc. ............................ United States 96,500 2,297,906
PAREXEL International Corp. ......................... United States 68,000 650,250
Pharmaceutical Product Development Inc. ............. United States 91,700 1,925,700
Renal Care Group Inc. ............................... United States 97,350 2,380,512
SciQuest.com Inc. ................................... United States 7,400 84,638
-----------
7,894,262
-----------
(a) Health Technology 1.6%
Alexion Pharmaceuticals Inc. ........................ United States 19,100 1,365,650
Epoch Pharmaceuticals Inc. .......................... United States 54,000 479,250
Heska Corp. ......................................... United States 39,300 83,513
ImClone Systems Inc. ................................ United States 6,100 466,269
INAMED Corp. ........................................ United States 14,200 520,075
Inhale Therapeutic Systems Inc. ..................... United States 47,600 4,829,913
Intermune Pharmaceuticals Inc. ...................... United States 1,000 41,313
Luminex Corp. ....................................... United States 2,800 116,550
Packard BioScience Co. .............................. United States 20,500 348,500
Serologicals Corp. .................................. United States 155,750 778,750
St. Jude Medical Inc. ............................... United States 5,000 229,375
Summit Technology Inc. .............................. United States 9,300 175,538
</TABLE>

FS-10
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN SMALL CAP FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stocks (cont.)
(a) Health Technology (cont.)
SuperGen Inc. ................................. United States 20,000 $ 725,000
Texas Biotechnology Corp. ..................... United States 8,900 169,100
Thoratec Laboratories Corp. ................... United States 4,700 76,081
Varian Medical Systems Inc. ................... United States 4,000 156,500
Ventana Medical Systems Inc. .................. United States 22,700 533,450
Visible Genetics Inc. ......................... Canada 8,400 379,050
Wesley Jessen Visioncare Inc. ................. United States 5,300 199,081
-----------
11,672,958
-----------
(a) Industrial Services 3.1%
Atwood Oceanics Inc. .......................... United States 9,400 417,125
Casella Waste Systems Inc., A ................. United States 4,500 48,375
Catalytica Inc. ............................... United States 123,733 1,361,063
Core Laboratories NV .......................... Netherlands 83,400 2,418,600
Dycom Industries Inc. ......................... United States 24,150 1,110,900
Grey Wolf Inc. ................................ United States 321,100 1,605,500
Marine Drilling Cos. Inc. ..................... United States 81,000 2,268,000
Pride International Inc. ...................... United States 8,900 220,275
Rowan Cos. Inc. ............................... United States 56,500 1,716,188
Superior Energy Services Inc. ................. United States 125,000 1,296,875
Trico Marine Services Inc. .................... United States 115,700 1,475,175
US Liquids Inc. ............................... United States 52,200 287,100
Varco International Inc. ...................... United States 325,645 7,571,246
-----------
21,796,422
-----------
Non-Energy Minerals
Reliance Steel & Aluminum Co. ................. United States 13,500 258,188
-----------
Process Industries .5%
(a) Cabot Microelectronics Corp. .................. United States 1,700 77,775
ChemFirst Inc. ................................ United States 85,100 2,053,038
(a) CUNO Inc. ..................................... United States 36,600 846,375
(a) Packaging Corp. of America .................... United States 41,700 422,213
(a) Symyx Technologies Inc. ....................... United States 4,200 178,959
-----------
3,578,360
-----------
Producer Manufacturing 1.2%
(a) American Power Conversion Corp. ............... United States 45,600 1,861,050
(a) Gentex Corp. .................................. United States 148,100 3,721,013
Gibraltar Steel Corp. ......................... United States 52,800 739,200
Roper Industries Inc. ......................... United States 62,000 1,588,750
(a) Tower Automotive Inc. ......................... United States 30,000 375,000
-----------
8,285,013
-----------
Real Estate 2.6%
Alexandria Real Estate Equities Inc. .......... United States 18,600 638,213
Arden Realty Inc. ............................. United States 82,100 1,929,350
Brandywine Realty Trust ....................... United States 16,100 307,913
Camden Property Trust ......................... United States 70,600 2,073,875
CBL & Associates Properties Inc. .............. United States 13,300 331,669
Colonial Properties Trust ..................... United States 15,400 421,575
Developers Diversified Realty Corp. ........... United States 57,600 860,400
FelCor Lodging Trust Inc. ..................... United States 50,800 939,800
General Growth Properties Inc. ................ United States 67,600 2,146,300
Glenborough Realty Trust Inc. ................. United States 54,500 950,344
Health Care Property Investors Inc. ........... United States 44,500 1,212,625
Healthcare Realty Trust Inc. .................. United States 10,400 177,450
Innkeepers USA Trust .......................... United States 98,900 902,463
</TABLE>

FS-11
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN SMALL CAP FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stocks (cont.)
Real Estate (cont.)
Liberty Property Trust .......................... United States 2,700 $ 70,031
MeriStar Hospitality Corp. ...................... United States 138,000 2,898,000
Reckson Associates Realty Corp. ................. United States 46,200 1,097,250
SL Green Realty Corp. ........................... United States 42,700 1,142,225
Urban Shopping Centers Inc. ..................... United States 7,100 239,181
-----------
18,338,664
-----------
Retail Trade 1.5%
(a) 1-800-FLOWERS.COM Inc. .......................... United States 62,600 320,825
(a) BJ's Wholesale Club Inc. ........................ United States 44,600 1,471,800
Dollar General Corp. ............................ United States 310,000 6,045,000
(a) Drugstore.com Inc. .............................. United States 7,000 52,719
Family Dollar Stores Inc. ....................... United States 141,100 2,760,269
(a) HomeGrocer.Com. ................................. United States 27,300 164,653
(a) The Men's Wearhouse Inc. ........................ United States 8,000 178,500
-----------
10,993,766
-----------
(a) Technology Services 23.6%
724 Solutions Inc. .............................. Canada 7,100 311,513
About.com Inc. .................................. United States 12,600 396,900
Accrue Software Inc. ............................ United States 22,300 791,650
Active Software Inc. ............................ United States 6,600 512,738
Actuate Corp. ................................... United States 7,000 373,625
Affiliated Computer Services Inc., A ............ United States 167,900 5,551,194
Allaire Corp. ................................... United States 13,800 507,150
AppNet Inc. ..................................... United States 32,200 1,159,200
Art Technology Group Inc. ....................... United States 23,100 2,331,656
Aspect Communications Corp. ..................... United States 62,600 2,460,963
Aspen Technology Inc. ........................... United States 27,000 1,039,500
BEA Systems Inc. ................................ United States 11,600 573,475
BindView Development Corp. ...................... United States 50,000 600,000
Brightpoint Inc. ................................ United States 11,500 99,547
Brio Technology Inc. ............................ United States 36,600 775,463
BroadVision Inc. ................................ United States 231,000 11,737,688
Check Point Software Technologies Ltd. .......... Israel 23,400 4,954,950
Citrix Systems Inc. ............................. United States 78,400 1,484,700
Clarus Corp. .................................... United States 23,800 925,225
Complete Business Solutions Inc. ................ United States 119,600 2,100,475
Concord Communications Inc. ..................... United States 31,000 1,236,125
Critical Path Inc. .............................. United States 11,500 670,594
CyberSource Corp. ............................... United States 51,200 707,200
Cysive Inc. ..................................... United States 29,000 692,375
Deltek Systems Inc. ............................. United States 6,700 39,572
Digital Island Inc. ............................. United States 1,000 48,625
Documentum Inc. ................................. United States 29,300 2,618,688
eFunds Corp. .................................... United States 27,100 315,038
Embarcadero Technologies Inc. ................... United States 2,000 58,750
Entrust Technologies Inc. ....................... United States 62,200 5,147,050
Exodus Communications Inc. ...................... United States 4,000 184,250
FirstWorld Communications Inc., B ............... United States 1,200 12,600
H.T.E. Inc. ..................................... United States 38,500 50,531
High Speed Access Corp. ......................... United States 10,200 66,938
HNC Software Inc. ............................... United States 99,000 6,113,250
i2 Technologies Inc. ............................ United States 166,600 17,370,653
Inet Technologies Inc. .......................... United States 2,800 151,900
Inforte Corp. ................................... United States 81,000 2,916,000
</TABLE>

FS-12
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN SMALL CAP FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stocks (cont.)
(a) Technology Services (cont.)
Internap Network Services Corp. ............... United States 5,800 $ 240,791
Intertrust Technologies Corp. ................. United States 6,700 137,769
Interwoven Inc ................................ United States 1,800 197,972
Intuit Inc. ................................... United States 67,800 2,805,225
ISS Group Inc. ................................ United States 8,400 829,369
ITXC Corp. .................................... United States 9,500 336,359
Keane Inc. .................................... United States 31,600 683,350
Keynote Systems Inc. .......................... United States 5,600 395,150
Liberate Technologies Inc. .................... United States 41,200 1,207,675
Lightspan Inc. ................................ United States 21,400 117,700
Liquid Audio Inc. ............................. United States 47,700 451,659
Luminant Worldwide Corp. ...................... United States 9,200 82,225
MarchFirst Inc. ............................... United States 62,100 1,133,325
McAfee.com Corp. .............................. United States 2,900 75,581
Mercury Interactive Corp. ..................... United States 13,100 1,267,425
Micromuse Inc. ................................ United States 87,680 14,509,670
N2H2 Inc. ..................................... United States 28,100 140,500
National Information Consortium Inc. .......... United States 15,700 178,588
National Instruments Corp. .................... United States 150 6,544
Navisite Inc. ................................. United States 9,800 409,763
NBC Internet Inc., A .......................... United States 20,000 250,000
Netegrity Inc. ................................ United States 15,000 1,129,688
Netiq Corp. ................................... United States 20,749 1,237,158
NetSolve Inc. ................................. United States 40,600 1,055,600
Predictive Systems Inc. ....................... United States 53,000 1,904,687
Proxicom Inc. ................................. United States 34,200 1,637,324
PSINet Inc. ................................... United States 121,560 3,054,194
Quest Software Inc. ........................... United States 200 11,074
Rare Medium Group Inc. ........................ United States 36,300 573,993
Rational Software Corp. ....................... United States 9,000 836,437
Sapient Corp. ................................. United States 56,800 6,074,050
Selectica Inc. ................................ United States 200 14,012
Serena Software Inc. .......................... United States 34,050 1,546,082
Software.com Inc. ............................. United States 2,500 324,687
Sonic Foundry Inc. ............................ United States 3,000 60,000
SonicWALL Inc. ................................ United States 1,500 132,093
StarMedia Network Inc. ........................ United States 24,800 468,100
Tanning Technology Corp. ...................... United States 209,500 4,032,874
TenFold Corp. ................................. United States 3,500 57,530
Tumbleweed Communications Corp. ............... United States 25,900 1,317,662
U.S. Interactive Inc. ......................... United States 19,900 257,455
Verio Inc. .................................... United States 97,600 5,415,274
VERITAS Software Corp. ........................ United States 143,550 16,223,392
Verity Inc. ................................... United States 91,400 3,473,200
Versata Inc. .................................. United States 1,200 48,374
Viant Corp. ................................... United States 9,200 272,550
Vicinity Corp. ................................ United States 19,800 388,574
Vignette Corp. ................................ United States 91,800 4,775,033
Vitria Technology Inc. ........................ United States 11,200 684,600
Wind River Systems Inc. ....................... United States 215,092 8,146,610
Xpedior Inc. .................................. United States 48,100 664,380
------------
168,361,078
------------
</TABLE>

FS-13
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN SMALL CAP FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stocks (cont.)
(a) Telecommunications 6.1%
Alaska Communications Systems Holdings Inc. .............................. United States 86,900 $ 901,587
AT&T Canada Inc., B ...................................................... Canada 15,000 497,812
Choice One Communications Inc. ........................................... United States 3,300 134,680
Clearnet Communications Inc., A .......................................... Canada 39,000 1,082,858
DSL.net Inc. ............................................................. United States 32,200 332,062
Efficient Networks Inc. .................................................. United States 9,000 662,062
ICG Communications Inc. .................................................. United States 131,000 2,890,187
Intermedia Communications Inc. ........................................... United States 49,500 1,472,624
ITC Deltacom Inc. ........................................................ United States 19,400 432,862
MGC Communications Inc. .................................................. United States 24,600 1,474,462
Millicom International Cellular SA ....................................... Luxembourg 42,400 1,484,000
Pinnacle Holdings Inc. ................................................... United States 95,300 5,146,200
Primus Telecommunications Group Inc. ..................................... United States 139,600 3,472,550
Rural Cellular Corp., A .................................................. United States 88,900 6,806,405
Time Warner Telecom Inc., A .............................................. United States 11,600 746,750
Triton PCS Holdings Inc., A .............................................. United States 1,700 98,174
VoiceStream Wireless Corp. ............................................... United States 89,100 10,362,051
WebLink Wireless Inc., A ................................................. United States 50,000 662,500
Western Wireless Corp., A ................................................ United States 86,100 4,692,450
------------
43,352,276
------------
Transportation 2.2%
(a) Alaska Air Group Inc. .................................................... United States 18,200 493,674
(a) Atlantic Coast Airlines Holdings Inc. .................................... United States 124,000 3,937,000
C.H. Robinson Worldwide Inc. ............................................. United States 98,400 4,870,800
Expeditors International of Washington Inc. .............................. United States 136,300 6,474,250
------------
15,775,724
------------
Total Common Stocks (Cost $320,151,623)................................... 600,295,708
------------
Convertible Preferred Stocks .1%
Bank United Corp., 8.00%, cvt. pfd. (Cost $1,000,000)..................... United States 20,000 930,000
------------
Total Long Term Investments (Cost $321,151,623)........................... 601,225,708
------------
Short Term Investments 16.6%
(b) Franklin Institutional Fiduciary Trust Money Market Portfolio
(Cost $118,615,801)....................................................... United States 118,615,801 118,615,801
------------
Total Investments (Cost $439,767,424) 100.8%.............................. 719,841,509
Other Assets, less Liabilities (.8%) ..................................... (5,930,823)
------------
Net Assets 100.0% ........................................................ $713,910,686
============
</TABLE>

(a)Non-income producing
(b)See Note 3 regarding investments in the "Sweep Money Fund."

See notes to financial statements.

FS-14
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN SMALL CAP FUND

Financial Statements

Statement of Assets and Liabilities
June 30, 2000 (unaudited)

Assets:
Investments in securities:
Cost ................................................ $439,767,424
============
Value ............................................... 719,841,509
Receivables:
Investment securities sold .......................... 283,293
Capital shares sold ................................. 734,815
Dividends ........................................... 195,120
------------
Total assets ....................................... 721,054,737
------------
Liabilities:
Payables:
Investment securities purchased ..................... 5,955,208
Capital shares redeemed ............................. 610,858
Affiliates .......................................... 519,386
Other liabilities .................................... 58,599
------------
Total liabilities .................................. 7,144,051
------------
Net assets, at value .............................. $713,910,686
============
Net assets consist of:
Undistributed net investment income .................. $ 479,833
Net unrealized appreciation .......................... 280,074,085
Accumulated net realized loss ........................ (5,596,021)
Capital shares ....................................... 438,952,789
------------
Net assets, at value .............................. $713,910,686
============
Class 1:
Net assets, at value ................................. $510,752,400
============
Shares outstanding ................................... 19,256,477
============
Net asset value and offering price per share ......... $ 26.52
============
Class 2:
Net assets, at value ................................. $203,158,286
============
Shares outstanding ................................... 7,690,910
============
Net asset value and offering price per share ......... $ 26.42
============

See notes to financial statements.

FS-15
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN SMALL CAP FUND

Financial Statements (continued)

Statement of Operations
for the six months ended June 30, 2000 (unaudited)

Investment income:
Dividends ................................................... $ 2,054,683
Interest .................................................... 722,683
------------
Total investment income .................................... 2,777,366
------------
Expenses:
Management fees (Note 3) .................................... 1,849,324
Administration fees (Note 3) ................................ 271,734
Distribution fees - Class 2 (Note 3) ........................ 82,528
Custodian fees .............................................. 2,066
Reports to shareholders ..................................... 12,262
Professional fees (Note 3) .................................. 14,589
Trustees' fees and expenses ................................. 1,907
Other ....................................................... 63,020
------------
Total expenses ............................................. 2,297,430
------------
Net investment income ..................................... 479,936
------------
Realized and unrealized losses:
Net realized loss from:
Investments ................................................ (5,416,616)
Foreign currency transactions .............................. (3,813)
------------
Net realized loss ......................................... (5,420,429)
Net unrealized appreciation on investments .................. 46,549,010
------------
Net realized and unrealized gain ............................. 41,128,581
------------
Net increase in net assets resulting from operations ......... $ 41,608,517
============

See notes to financial statements.

FS-16
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN SMALL CAP FUND

Financial Statements (continued)

Statements of Changes in Net Assets
for the six months ended June 30, 2000 (unaudited) and the year ended December
31, 1999

<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999
---------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income (loss) ............................................... $ 479,936 $ (161,672)
Net realized gain (loss) from investments and foreign currency transactions (5,420,429) 36,534,411
Net unrealized appreciation on investments ................................. 46,549,010 205,811,890
----------------------------------
Net increase in net assets resulting from operations ...................... 41,608,517 242,184,629
Distributions to shareholders from:
Net investment income:
Class 1 ................................................................... -- (1,492,353)
Class 2 ................................................................... -- (619)
Net realized gains:
Class 1 ................................................................... (34,605,736) (208,580)
Class 2 ................................................................... (1,438,764) (53)
----------------------------------
Total distributions to shareholders ......................................... (36,044,500) (1,701,605)
Capital share transactions: (Note 2)
Class 1 ................................................................... 26,862,962 (66,396,634)
Class 2 ................................................................... 187,264,845 4,672,614
----------------------------------
Total capital share transactions ............................................ 214,127,807 (61,724,020)
Net increase in net assets ................................................ 219,691,824 178,759,004
Net assets:
Beginning of period ......................................................... 494,218,862 315,459,858
----------------------------------
End of period ............................................................... $ 713,910,686 $ 494,218,862
==================================
Undistributed net investment income (accumulated net operating loss)
included in net assets:
End of period ............................................................... $ 479,833 $ (103)
==================================
</TABLE>

See notes to financial statements.

FS-17
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN SMALL CAP FUND

Notes to Financial Statements (unaudited)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The Franklin Small Cap Fund (the Fund) is a separate, diversified series of the
Franklin Templeton Variable Insurance Products Trust (the Trust), which is an
open-end investment company registered under the Investment Company Act of
1940. Shares of the Fund are sold only to insurance company separate accounts
to fund the benefits of variable life insurance policies or variable annuity
contracts. As of June 30, 2000, 68% of the Fund's shares were sold through one
insurance company. The Fund seeks long-term capital growth.

The following summarizes the Fund's significant accounting policies.

a. Security Valuation

b. Foreign Currency Translation

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

c. Income Taxes

d. Security Transactions, Investment Income, Expenses and Distributions

Distributions received by the Trust from securities may be a return of capital
(ROC). Such distributions reduce the cost basis of the securities, and any
distributions in excess of the cost basis are recognized as capital gains.

FS-18
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN SMALL CAP FUND

Notes to Financial Statements (unaudited) (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

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

e. Accounting Estimates

2. SHARES OF BENEFICIAL INTEREST

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

At June 30, 2000, there were an unlimited number of shares authorized ($.01 par
value). Transactions in the Fund's shares were as follows:

<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999(a)
--------------------------------------------------------------------
Shares Amount Shares Amount
Class 1 Shares: --------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ........................................ 3,597,900 $ 100,098,343 5,623,402 $ 95,075,835
Shares issued on merger (Note 6) ................... 162,686 4,046,010 -- --
Shares issued in reinvestment of distributions ..... 1,438,908 34,605,736 106,977 1,700,933
Shares redeemed .................................... (4,108,032) (111,887,127) (10,564,693) (163,173,402)
---------------------------------------------------------------
Net increase (decrease) ............................ 1,091,462 $ 26,862,962 (4,834,314) $ (66,396,634)
===============================================================
Class 2 Shares:
Shares sold ........................................ 4,746,737 $ 124,321,476 237,253 $ 4,844,539
Shares issued on merger (Note 6) ................... 5,283,033 130,913,570 -- --
Shares issued in reinvestment of distributions ..... 60,049 1,438,764 42 673
Shares redeemed .................................... (2,628,621) (69,408,965) (7,583) (172,598)
---------------------------------------------------------------
Net increase ....................................... 7,461,198 $ 187,264,845 229,712 $ 4,672,614
===============================================================
</TABLE>

(a)For the period January 6, 1999 (effective date) to December 31, 1999, for
Class 2.

FS-19
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN SMALL CAP FUND

Notes to Financial Statements (unaudited) (continued)

3. TRANSACTIONS WITH AFFILIATES

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

The Fund may invest in the Franklin Institutional Fiduciary Trust Money Market
Portfolio (the Sweep Money Fund) which is managed by Advisers.

The Fund earned dividend income of $1,148,631 from the investment in the Sweep
Money Fund.

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

Annualized Fee Rate Daily Net Assets
------------------------------------------------------------------------
.55% First $500 million
.45% Over $500 million, up to and including $1 billion
.40% Over $1 billion, up to and including $1.5 billion

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

Effective May 1, 2000, the Fund's annualized fee rate was reduced from .75%,
.625%, and .50% to .55%, .45%, and .40%, respectively.

Effective May 1, 2000, the Fund pays an administrative fee to FT Services of
.25% per year of the average daily net assets of the Fund.

Management fees were reduced on assets invested in Sweep Money Fund.

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

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

Included in professional fees are legal fees of $1,101 that were paid to a law
firm in which a partner of that firm was an officer of the Fund.

4. INCOME TAXES

At December 31, 1999, the Fund had deferred currency losses occurring
subsequent to October 31, 1999 of $103. For tax purposes, such losses will be
reflected in the year ending December 31, 2000.

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

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

FS-20
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST FRANKLIN SMALL CAP FUND

Notes to Financial Statements (unaudited) (continued)

4. INCOME TAXES (cont.)
At June 30, 2000, the net unrealized appreciation based on the cost of
investments for income tax purposes of $439,832,899 was as follows:

Unrealized appreciation ............. $ 325,651,502
Unrealized depreciation ............. (45,642,892)
-------------
Net unrealized appreciation ......... $ 280,008,610
=============

5. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities) for the
period ended June 30, 2000 aggregated $65,534,902 and $43,719,164,
respectively.

6. MERGERS

On May 1, 2000, the Franklin Templeton Variable Insurance Products Trust
(FTVIPT) - Franklin Small Cap Fund acquired the net assets of the Templeton
Variable Products Series Fund (TVP) - Franklin Small Cap Investments Fund
pursuant to a plan of reorganization approved by TVP - Franklin Small Cap
Investments Fund's shareholders. The merger was accomplished by a tax-free
exchange of 162,686 Class 1 shares and 5,283,033 Class 2 shares of the FTVIPT -
Franklin Small Cap Fund (valued at $24.87 per share and $24.78 per share,
respectively) for the net assets of the TVP - Franklin Small Cap Investments
Fund which aggregated $134,959,580, including $11,452,838 of unrealized
appreciation. The merger was accounted for as a pooling-of-interests without
restatement for financial reporting purposes. The combined net assets of the
FTVIPT - Franklin Small Cap Fund immediately after the merger were
$640,938,780.

FS-21
<PAGE>

FRANKLIN TECHNOLOGY SECURITIES FUND

--------------------------------------------------------------------------------
Fund Goal and Primary Investments: Franklin Technology Securities Fund seeks
capital appreciation. The Fund invests in equity securities of companies
expected to benefit from the development, advancement and use of technology.
The Fund may also invest in foreign securities, including emerging markets.
--------------------------------------------------------------------------------
We are pleased to bring you this inaugural report for Franklin Technology
Securities Fund, which covers the two months since the Fund's inception on May
1, 2000. During the first half of this year, industrial production rose more
than many investors had anticipated, consumer incomes increased and the labor
market tightened. Concerned about the possibility of future inflation, the
Federal Reserve Board (the Fed) boosted the federal funds target rate to 6.5%
on May 16, 2000 -- its highest level in nine years.

However in June, new economic data suggested that the red-hot U.S. economy was
cooling down, reducing the likelihood that the Fed would continue to raise
interest rates. Consequently, many investors seemed to refocus their attention
on quality growth companies, particularly technology stocks. And the
technology-laden Nasdaq Composite Index (Nasdaq(R)), which dropped from 3958.08
on May 1, 2000, to 3164.55 on May 23, 2000, rebounded strongly in June, ending
the period at 3966.11.(1)

Taking advantage of this volatility, we purchased stocks on weak market days,
and by June 30, were 86.4% invested in equities. We invested in industry
leaders with large capitalizations such as Cisco Systems, as well as in smaller
companies such as Predictive Systems, which we believe have the potential to
become industry leaders.

We avoided technology stocks trading at valuations we believed to be
irrational. However, we did select from companies trading at relatively high
prices compared to the broader market, if we believed they also offered
sustainable competitive advantages and visible revenue and earnings growth.

This chart shows in pie format the asset allocation of Franklin Technology
Securities Fund as a percentage of total net assets on 6/30/00.

Equity Securities 86.4%
Short-Term Investments & Other Net Assets 13.6%

Top 10 Sector Breakdown
Franklin Technology Securities Fund
6/30/00

% of Total
Sector Net Assets
------------------------------------------
Computer Software 15.4%

Semiconductors 10.5%

Telecommunications
Equipment 9.6%

Electronic Data Processing 7.1%

Computer
Communications 6.7%

EDP Peripherals 6.3%

Internet Services 5.3%

Biotechnology 4.8%

Electronic Components 4.8%

EDP Services 4.6%

FT-1
<PAGE>

Top 10 Holdings
Franklin Technology Securities Fund
6/30/00

% of Total
Sector Net Assets
------------------------------------------
EMC Corp. 2.4%
EDP Peripherals

Corning Inc. 2.1%
Telecommunications
Equipment

Nokia Corp. 2.0%
Telecommunications
Equipment

BEA Systems Inc. 2.0%
EDP Services

Applied Micro
Circuits Corp. 2.0%
Semiconductors

PMC-Sierra Inc. 2.0%
Semiconductors

Flextronics International
Ltd. 2.0%
Electronic Components

Nortel Networks Corp. 1.9%
Telecommunications
Equipment

New Era Of Networks Inc. 1.9%
Computer Software

Tektronix Inc. 1.9%
Precision Instruments

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

Our largest holdings at the end of the period were in computer software,
semiconductors and telecommunications equipment. In our opinion, these sectors
offered the most attractive prospects, but we intend to maintain a diverse mix
of holdings. Diversifying across a broad range of technology sectors should
enable the Fund to benefit from continuing sector growth at reduced risk.

Our largest positions on June 30, were EMC, a leading manufacturer of data
storage systems, Corning, a telecommunications hardware supplier, and Nokia, a
cellular handset and equipment manufacturer. Other large positions included
e-commerce infrastructure software provider BEA Systems, communications
semiconductor provider PMC-Sierra and global communications equipment supplier
Nortel Networks.

Looking forward, we are optimistic about the Fund's ability to provide
attractive long-term returns for its shareholders. Dramatic economic upheavals,
such as the Industrial Revolution, lasted for decades. We believe the
Technology Revolution, which we are currently experiencing, is just such an
event. While we have witnessed spectacular technological advances in the last
10 years, we think we are presently at the end of the beginning of this cycle
-- not the beginning of the end. We expect the next 10 years will be just as
exciting and the opportunities for investing in technology will be even more
promising.

Thank you for your support. We welcome your comments and look forward to
serving your investment needs in the future.

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance
is no guarantee of future results, these insights may help you understand our
investment and management philosophy.

FT-2
<PAGE>

PERFORMANCE SUMMARY AS OF 6/30/00

Franklin Technology Securities Fund - Class 1 delivered a +12.50% aggregate
total return from inception on 5/1/00 through 6/30/00. Total return of Class 1
shares represents the cumulative change in value, assuming reinvestment of
dividends and capital gains. Since the Fund has existed for less than one year,
average annual total returns are not provided. The manager and administrator
had 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 Total
Fund Operating Expenses do not exceed 1.05% of the Fund's Class 1 net assets
through 2000. Had they not taken this action, the Fund's total return would
have been lower. After December 31, 2001, the manager and administrator may end
this arrangement at any time.

Franklin Technology Securities Fund - Class 1
Period ended 6/30/00
Since
Inception
(5/1/00)
-----------------------------------------------------------
Aggregate Total Return +12.50%
Value of $10,000 Investment $11,250

Franklin Technology
Securities Fund - Class 1

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

Past performance does not guarantee future results.
FT-3
<PAGE>

MUTUAL DISCOVERY SECURITIES FUND

--------------------------------------------------------------------------------
Fund Goal and Primary Investments: Mutual Discovery Securities Fund seeks
capital appreciation. Using a value-driven approach, the Fund invests primarily
in U.S. and foreign equity securities. Investments include securities of small
capitalization companies, undervalued stocks, restructuring companies and
distressed companies.
--------------------------------------------------------------------------------
During the six months under review, global markets were generally volatile,
experiencing dramatic gyrations in individual securities and a roller coaster
ride in the popular averages. The U.S. Nasdaq Composite Index, which has
apparently become a global obsession, was whipsawed by wild bouts of gains and
losses throughout the reporting period. After reaching a record high on March
10 with an approximate 24% year-to-date return, the Nasdaq(R) declined 37% from
that peak before recovering somewhat in late May and June. On June 30, it was
2.54% lower than it had been at the start of the reporting period.(1) The
apparent catalysts for this volatility were interest rate hikes by the Federal
Reserve Board (the Fed), earnings disappointments from several major
telecommunications companies, the introduction of legislative proposals adverse
to the interests of drug companies and shakeouts within various
Internet-related companies. Overlaying these factors were signs of accelerating
inflation as labor markets tightened, energy prices soared, and companies
appeared to demonstrate an ability to raise prices. The Fund's benchmarks, the
Standard & Poor's 500(R) (S&P 500(R)) Composite Index and the Russell 2000(R)
Index, returned -0.42% and 3.04% during the six-month period, respectively.(2)
The Fund's strong performance relative to its benchmarks was due largely to our
disciplined value approach to investing, which combines undervalued stocks,
bankruptcies and deal arbitrage.

(1) Source: Standard & Poor's Micropal. The Nasdaq Composite Index measures all
Nasdaq domestic and non-U.S. based common stocks listed on the Nasdaq Stock
Market(R). The Index is market-value weighted and includes over 5,000 companies
(as of 6/30/00).

(2) Source: Standard & Poor's Micropal. The S&P 500 Composite Index consists of
500 domestic stocks, consisting of four broad sectors: industrials, utilities,
financials and transportation. The S&P 500 serves as a standard for measuring
large-cap U.S. stock market performance. Since some industries are
characterized by companies of relatively small stock capitalization, the Index
is not composed of the 500 largest companies on the New York Stock Exchange.
The Russell 2000 Index measures the performance of the 2,000 smallest companies
in the Russell 3000 Index, which contains the 3,000 largest companies
incorporated in the U.S. and its territories.

This horizontal bar chart shows the geographic distribution as a percentage of
total net assets on 6/30/00 for Mutual Discovery Securities Fund.

United States 29.0%
France 13.6%
United Kingdom 9.9%
Sweden 7.5%
Canada 3.6%
Switzerland 2.8%
Japan 1.6%
Irish Republic 1.3%
Spain 1.3%
Netherlands 1.1%
Other Countries 2.5%
Fixed-Income Securities 4.9%
Government Agencies
& Other Net Assets 20.9%

MD-1
<PAGE>
Top 10 Holdings
Mutual Discovery Securities Fund
6/30/00

Company % of Total
Sector, Country Net Assets
-----------------------------------
Lagardere SCA 3.6%
Multi-Industry, France

Investor AB 2.7%
Multi-Industry, Sweden

Railtrack Group PLC 2.4%
Transportation,
United Kingdom

Aventis SA 2.3%
Health & Personal Care,
France

Suez Lyonnaise Des
Eaux SA 2.3%
Business & Public
Services, France

Williams PLC 2.2%
Electronic Components &
Instruments,
United Kingdom

Modern Times Group AB 1.7%
Broadcasting &
Publishing, Sweden

Thermo Electron Corp. 1.4%
Multi-Industry,
United States

Invik & Co. AB 1.3%
Multi-Industry, Sweden

Delphi Automotive
Systems Corp. 1.3%
Automobiles,
United States

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

During the six months under review, the Fund was invested primarily in Europe
and the United States. Investors in both regions seemed to be mesmerized by a
narrow segment of securities in the telecom, media and technology sectors,
particularly those involved with the Internet. Attempting to take advantage of
this mania, we sold shares of several companies we had purchased earlier as
undervalued asset plays within these sectors. Once again, we found that buying
what we believe to be out-of-favor shares of high-quality companies usually
proves to be profitable. On June 30, the Fund's portfolio contained several
special situations issues that, in our opinion, could provide excellent
long-term returns for our shareholders. Included in this category are:

o Washington Post, a diversified media company trading at a significant
discount to what we believe to be its intrinsic value. Management has a
major personal investment, an excellent long-term record, high integrity
and a commitment to developing "new media" platforms. Believing that
Washington Post had first-class assets available at a very cheap price, we
purchased its stock when its price was substantially below a recent tender
offer to repurchase shares.

o Cheung Kong Holdings, a Hong Kong company with operations in real estate,
cellular telecommunications and other businesses was removed from a major
index during the reporting period, prompting indiscriminant investor
selling. In our opinion, the company is well positioned to capitalize on
the growth of global trade and cellular phone use. We think Cheung Kong
offers compelling value due to management's ability to create value over
time and the large discount to asset value of the shares.

o Irish Life & Permanent is the largest provider of insurance, pensions and
mortgages in Ireland. Although this market was expanding rapidly, Irish
Life's stock was trading at a discount to the company's takeover value in
the first half of 2000. Because it has excess capital and new management
has been restructuring the business to improve profitability, we believe
there are many ways to win with Irish Life.

Although we believe the wave of recent speculative activity has diminished,
many securities remain adored for their promise in spite of price. For them,
momentum is the mantra. Conversely, we continue to find other securities which
investors seem to ignore despite low valuations and favorable prospects. The
current market environment

MD-2
<PAGE>

has become increasingly two-tiered as a select group of companies achieve
over-the-top success while the majority of publicly traded equities languish.
This environment should provide Mutual Discovery Securities Fund with ample
opportunities in the remainder of 2000.

Deal activity is accelerating as corporate buyers step in to purchase 100% of
attractively priced companies. The discrepancy between depressed public markets
and higher private market valuations has helped prompt several companies to put
themselves up for sale. For example, Bush Boake Allen, a portfolio holding in
the flavoring and fragrance business, recently hired CS First Boston to explore
sale or merger.

We expect to continue to think of ourselves as owners of the companies whose
shares the Fund purchases, examining our investments and, when appropriate,
making suggestions to management on how to unlock value. For example, one
long-time investment of ours, MediaOne, recently merged with AT&T. We
originally purchased the predecessor company, U.S. West, and were instrumental
in prodding for the eventual spin-off of the media assets which became
MediaOne.

Looking forward, we are optimistic about the prospects for Mutual Discovery
Securities Fund. As the Fed has raised interest rates, the economy has shown
signs that it may be starting to slow down, more companies are defaulting on
their financial obligations, and the supply of distressed bonds and bank debt
has increased. In the near future, this could be a fertile area for the Fund to
mine for discrepancies between price and value. Bankruptcy, when correctly
analyzed, can be a competitive advantage. Historically, this has been an
excellent area to explore for good risk/reward opportunities.

With our strong fundamental analytical work, we are prepared to identify what
we believe to be compelling undervalued situations in distressed bonds and bank
debt, as well as in undervalued equities, and are confident we are well
positioned to capitalize on future possibilities for the benefit of the Fund's
shareholders.

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance
is no guarantee of future results, these insights may help you understand our
investment and management philosophy.

Top 10 Sectors
Mutual Discovery Securities Fund
Based on Equity Securities
6/30/00

% of Total
Sector Net Assets
------------------------------------------
Multi-Industry 17.0%

Broadcasting & Publishing 7.0%

Telecommunications 4.6%

Business & Public Services 4.4%

Food & Household
Products 3.6%

Transportation 3.6%

Beverages & Tobacco 3.4%

Financial Services 3.2%

Health & Personal Care 3.0%

Machinery & Engineering 2.7%

MD-3
<PAGE>

Mutual Discovery
Securities Fund - Class 1

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

PERFORMANCE SUMMARY AS OF 6/30/00

Mutual Discovery Securities Fund - Class 1 delivered a +6.54% cumulative total
return for the six-month period ended 6/30/00. Total return of Class 1 shares
represents the cumulative or average annual change in value, assuming
reinvestment of dividends and capital gains. Average returns smooth out
variations in returns, which can be significant; they are not the same as
year-by-year results.

Mutual Discovery Securities Fund - Class 1
Periods ended 6/30/00

Since
Inception
1-Year 3-Year (11/8/96)
-------------------------------------------------------------------
Average Annual Total Return +17.80% +10.47% +12.32%
Cumulative Total Return +17.80% +34.82% +52.68%
Value of $10,000 Investment $11,780 $13,482 $15,268

Ongoing stock market volatility can dramatically change the Fund's short-term
performance; current results may be lower.

Past performance does not guarantee future results.

MD-4
<PAGE>

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

--------------------------------------------------------------------------------
Fund Goal and Primary Investments: Templeton Developing Markets Securities Fund
(formerly Templeton Developing Markets Fund) seeks long-term capital
appreciation. The Fund invests primarily in emerging market equity securities.
--------------------------------------------------------------------------------
During the reporting period, emerging market economies generally performed
well. In Asia, China was granted permanent trade status by the U.S. Congress,
putting it one step closer to entering the World Trade Organization. The
economies of South Korea and Thailand continued to recover and the
International Monetary Fund, commending Indonesia for its efforts in bringing
about economic reforms, resumed loan disbursements to the country. Elsewhere in
the region, Hong Kong's unemployment rate fell as its economy expanded by an
annualized rate of 14.3% in the first quarter of 2000. However, trade figures
indicated that imports were rising more rapidly than exports, which could lead
to a widening trade deficit.

Most Latin American economies performed relatively well. Investor confidence in
Mexico appeared to increase due to slower inflation and lower interest rates.
Moreover, Moody's(R), an independent credit rating agency, assigned Mexico a
coveted investment-grade rating, potentially lowering the country's financing
costs as well as making it eligible for investment by a broad group of U.S.
institutional investors normally unable to invest in emerging markets. Investor
confidence in Argentina also seemed to rise partly due to support from the
International Monetary Fund's higher than expected US$7.4 billion standby
facility arrangement. In addition, the country's Lower House approved a labor
reform bill, which could lead to increased productivity and employment. And in
Brazil, economic figures released during the period indicated a narrowing trade
deficit, falling unemployment and strong gross domestic product (GDP) growth --
all signs of a steady recovery.

During the six months under review, South Africa's economy was marked by
falling interest rates and rising commodity prices. Its government announced
plans to accelerate the privatization of state-owned companies and to raise
US$6 billion by 2004, primarily through foreign direct investment.

In Eastern Europe, Russia's first-quarter GDP jumped an annualized 8.4%, while
investment growth, GDP growth and slowing inflation continued to demonstrate
the strength of Hungary's economy.

This chart in pie format shows the geographic distribution of Templeton
Developing Markets Securities Fund as a percentage of total net assets on
6/30/00.

Asia 42.0%
Latin America 26.6%
Mid-East/Africa 13.6%
Europe 12.2%
Short-Term Investments
& Other Net Assets 5.6%

TD-1
<PAGE>

Top 10 Countries
Templeton Developing Markets
Securities Fund
6/30/00

% of Total
Country Net Assets
---------------------------
Brazil 11.7%

South Africa 11.5%

South Korea 11.3%

Mexico 9.6%

Thailand 6.6%

Singapore 5.4%

Hong Kong 4.7%

Turkey 4.6%

Indonesia 4.2%

Poland 4.0%

Despite the improving economic environment and after recovering strongly in
1999, equity markets in most emerging-market countries fell during the first
half of 2000. Rising interest rates, a significant correction in technology
stocks and other equities, and an apparent lack of confidence in developing
countries' equity markets contributed to their negative performances. For the
period, the MSCI Emerging Markets Free Index, one of the Fund's benchmarks, was
down 9.0%.(1)

Throughout the period, we selectively sold holdings and increased the Fund's
cash position from 3.5% of total net assets on January 1, 2000, to 5.5% at the
period's end. However, taking advantage of declining equity prices and the
bargains we believed they represented, we did add several European positions to
the Fund's portfolio. In our opinion, aspirations for membership in the
European Union will probably push most Eastern European economies to strive for
better results, which could lead to further reforms and restructuring. This, in
turn, should lead to positive gains for Eastern Europe and its neighbors. On
June 30, our holdings in Brazil comprised the Fund's largest weighting at 11.7%
of total net assets, followed by South Africa (11.5%), South Korea (11.3%),
Mexico (9.6%) and Thailand (6.6%).

Looking forward, we will continue with our bottom-up investment style, choosing
stocks that are selling at prices below our estimate of their true value.
Although we cannot predict what any particular stock will do in the short term,
we believe that over the long term most emerging-market economies should
continue to grow and that, despite volatility, improved corporate governance
and better economic efficiencies should benefit prices of emerging-market
stocks for years to come.

(1) Source: Morgan Stanley Capital International. MSCI Emerging Markets Free
Index is a market capitalization-weighted equity index comprising 26 of the 48
countries in the MSCI universe. "Free" denotes investment opportunities in the
developing world available to foreign investors.

TD-2
<PAGE>

Of course, investing in any emerging market means accepting a certain amount of
volatility and, in some cases, severe market corrections. While short-term
volatility can be disconcerting, declines in excess of 50% are not unusual in
emerging markets. The Fund's definition of "emerging markets" as used by the
Fund's manager may differ from the definition of the same terms as used in
managing other Franklin Templeton funds.

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance
is no guarantee of future results, these insights may help you understand our
investment and management philosophy.

Top 10 Holdings
Templeton Developing Markets
Securities Fund
6/30/00

Company % of Total
Sector, Country Net Assets
--------------------------------------------
Cemex SA 3.7%
Building Materials and
Components, Mexico

Grupo Financiero 3.0%
Banamex Accival SA
de CV
Banking, Mexico

Centrais Eletricas 3.0%
Brasileiras SA (Eletrobras)
Utilities Electrical and
Gas, Brazil

Samsung Electronics Co. 2.7%
Ltd.
Electrical and Electronics,
South Korea

Korea Electric Power Corp. 2.4%
Utilities Electrical & Gas,
South Korea

Cheung Kong Holdings 1.9%
Ltd.
Multi-Industry, Hong
Kong

Telefonos de Mexico SA 1.8%
(Telmex)
Telecommunications,
Mexico

Akbank 1.8%
Banking, Turkey

Tele Norte Leste 1.6%
Participacoes SA
Telecommunications,
Brazil

Banco Bradesco SA 1.6%
Banking, Brazil

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

TD-3
<PAGE>

Templeton Developing
Markets Securities
Fund - Class 1

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

PERFORMANCE SUMMARY AS OF 6/30/00

Templeton Developing Markets Securities Fund - Class 1 delivered a -16.94%
cumulative total return for the six-month period ended 6/30/00. Total return of
Class 1 shares represents the cumulative or average annual change in value,
assuming reinvestment of dividends and capital gains. Average returns smooth
out variations in returns, which can be significant; they are not the same as
year-by-year results.

Templeton Developing Markets Securities Fund - Class 1*
Periods ended 6/30/00

Since
Inception
1-Year 3-Year (3/4/96)
------------------------------------------------------------------
Average Annual Total Return -10.74% -12.27% -8.71%
Cumulative Total Return -10.74% -32.48% -32.57%
Value of $10,000 Investment $8,926 $6,752 $6,743

* Performance prior to the 5/1/00 merger reflects the historical performance of
the Templeton Developing Markets Fund.

Ongoing stock market volatility can dramatically change the Fund's short-term
performance; current results may be lower.

Past performance does not guarantee future results.

TD-4
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Financial Highlights

<TABLE>
<CAPTION>
Class 1
----------------------------------------------------------------------------
Six Months Ended Year Ended December 31,
June 30, 2000 ---------------------------------------------------------
(unaudited) 1999 1998 1997 1996(c)
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period .................. $7.77 $5.13 $6.63 $9.43 $10.00
--------------------------------------------------------------------
Income from investment operations:
Net investment income(d) ............................. .05 .05 .07 .09 .05
Net realized and unrealized gains (losses) ........... (1.36) 2.67 (1.42) (2.82) (.62)
--------------------------------------------------------------------
Total from investment operations ...................... (1.31) 2.72 (1.35) (2.73) (.57)
--------------------------------------------------------------------
Less distributions from:
Net investment income ................................ (.07) (.08) (.09) (.04) --
Net realized gains ................................... -- -- (.06) (.03) --
--------------------------------------------------------------------
Total distributions ................................... (.07) (.08) (.15) (.07) --
--------------------------------------------------------------------
Net asset value, end of period ........................ $6.39 $7.77 $5.13 $6.63 $9.43
====================================================================
Total return(b) ....................................... (16.94%) 53.84% (20.94%) (29.22%) (5.70%)

Ratios/supplemental data
Net assets, end of period (000's) ..................... $396,373 $297,605 $180,684 $163,459 $72,245
Ratios to average net assets:
Expenses ............................................. 1.52%(a) 1.50% 1.66% 1.58% 1.70%(a)
Expenses, excluding waiver and payments by affiliate.. 1.52%(a) 1.50% 1.66% 1.58% 1.78%(a)
Net investment income ................................ 1.36%(a) .82% 1.67% 1.63% 1.52%(a)
Portfolio turnover rate ............................... 71.01% 60.27% 23.22% 23.82% 9.95%

</TABLE>

(a)Annualized
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for periods less than one
year.
(c)For the period March 4, 1996 (effective date) to December 31, 1996.
(d)Based on average shares outstanding effective year ended December 31, 1999.

TD-5
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Financial Highlights (continued)

<TABLE>
<CAPTION>
Class 2
----------------------------------------------------------------
Six Months Ended Year Ended December 31,
June 30, 2000 -------------------------------------------
(unaudited) 1999 1998 1997(c)
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period ................ $7.74 $5.12 $6.62 $9.85
--------------------------------------------------------
Income from investment operations:
Net investment income(d) ........................... .04 .03 .07 .04
Net realized and unrealized gains (losses) ......... (1.36) 2.66 (1.42) (3.27)
--------------------------------------------------------
Total from investment operations .................... (1.32) 2.69 (1.35) (3.23)
--------------------------------------------------------
Less distributions from:
Net investment income .............................. (.05) (.07) (.09) --
Net realized gains ................................. -- -- (.06) --
--------------------------------------------------------
Total distributions ................................. (.05) (.07) (.15) --
--------------------------------------------------------
Net asset value, end of period ...................... $6.37 $7.74 $5.12 $6.62
========================================================
Total return(b) ..................................... (17.07%) 53.27% (21.03%) (32.79%)

Ratios/supplemental data
Net assets, end of period (000's) ................... $63,163 $49,654 $17,287 $9,569
Ratios to average net assets:
Expenses ........................................... 1.77%(a) 1.75% 1.91% 1.77%(a)
Net investment income .............................. 1.07%(a) .52% 1.44% 1.48%(a)
Portfolio turnover rate ............................. 71.01% 60.27% 23.22% 23.82%
</TABLE>

(a)Annualized
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for periods less than one
year.
(c)For the period May 1, 1997 (effective date) to December 31, 1997.
(d)Based on average shares outstanding effective year ended December 31, 1999.

See notes to financial statements.

TD-6
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited)

<TABLE>
<CAPTION>
SHARES/
INDUSTRY WARRANTS VALUE
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long Term Securities 94.5%
Argentina 3.2%
Banco Frances SA ....................................... Banking 34,370 $ 252,670
(a) Capex SA, A ............................................ Utilities Electrical & Gas 58,860 353,231
(a) Molinos Rio de la Plata SA, B .......................... Food & Household Products 908,459 1,726,417
PC Holdings SA, B ...................................... Energy Sources 1,909,452 3,494,996
Quilmes Industrial SA, ADR, pfd. ....................... Beverages & Tobacco 210,350 2,340,144
Telecom Argentina Stet-France Telecom SA, ADR .......... Telecommunications 217,560 5,982,900
Transportadora de Gas del Sur SA, B, ADR ............... Utilities Electrical & Gas 78,690 708,210
-----------
14,858,568
-----------
Austria 2.2%
Austria Tabak AG ....................................... Beverages & Tobacco 6,400 238,027
Bank Austria AG ........................................ Banking 127,580 6,239,342
Bbag Oesterreichische Brau-Beteiligungs AG ............. Beverages & Tobacco 2,130 96,961
Mayr-Melnhof Karton AG ................................. Forest Products & Paper 14,284 678,437
OMV AG ................................................. Energy Sources 30,805 2,687,066
-----------
9,939,833
-----------
Brazil 11.7%
Banco Bradesco SA, pfd. ................................ Banking 835,642,112 7,272,493
Brasil Telecom Participacoes SA, pfd. .................. Telecommunications 130,553,000 1,888,821
Centrais Eletricas Brasileiras SA (Electrobras) ........ Utilities Electrical & Gas 22,895,000 469,576
Centrais Eletricas Brasileiras SA (Electrobras) B, pfd. Utilities Electrical & Gas 593,008,000 13,115,864
CIA Cervejaria Brahma, pfd. ............................ Beverages & Tobacco 433,000 367,234
Cia Energetica de Minas Gerais, pfd. ................... Utilities Electrical & Gas 115,734,000 2,020,854
Cia Vale do Rio Doce, A, pfd. .......................... Metals & Mining 148,470 4,189,093
Companhia Paranaense de Energia-Copel, B, pfd. ......... Utilities Electrical & Gas 237,975,000 2,242,557
(a) Companhia Riograndense de Telecom, A, pfd. ............. Telecommunications 4,264,000 1,441,818
Copene-Petroquimica do Nordeste SA, A, pfd. ............ Chemicals 2,956,700 1,101,469
Duratex SA, pfd. ....................................... Forest Products & Paper 52,441,800 1,671,510
Eletropaulo Metropolitana SA, pfd. ..................... Utilities Electrical & Gas 13,263,000 933,703
Empresa Brasileira de Aeronautica SA ................... Aerospace & Military Tech 350,200 2,133,425
Investimentos Itau SA (Itausa), pfd. ................... Multi-Industry 4,260,836 4,133,294
Tele Celular Sul Participacoes SA, pfd. ................ Telecommunications 25,177,000 121,419
Tele Norte Leste Participacoes SA, pfd. ................ Telecommunications 310,828,976 7,279,670
Unibanco Uniao de Bancos Brasileiros SA, GDR ........... Banking 110,080 3,164,800
-----------
53,547,600
-----------
Chile .9%
Cia de Telecomunicaciones de Chile SA, ADR ............. Telecommunications 175,394 3,179,016
(a) Enersis SA, ADR ........................................ Utilities Electrical & Gas 22,134 441,297
(a) Madeco Manufacturera de Cobre SA, ADR .................. Industrial Components 50,250 383,156
-----------
4,003,469
-----------
China .1%
China Resources Enterprises Ltd. ....................... Multi-Industry 122,000 146,332
Shandong Huaneng Power Development Co. Ltd., ADR ....... Utilities Electrical & Gas 90,450 378,759
Shanghai Petrochemical Co. Ltd., H ..................... Chemicals 288,000 39,162
-----------
564,253
-----------
Colombia .1%
Bavaria SA ............................................. Beverages & Tobacco 1,607 5,041
Cementos Argos SA ...................................... Building Materials & Components 222,800 395,365
-----------
400,406
-----------
</TABLE>

TD-7
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
SHARES/
INDUSTRY WARRANTS VALUE
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long Term Securities (cont.)
Croatia
Pliva D D, GDR, Reg S ..................................... Health & Personal Care 19,100 $ 197,208
-----------
Czech Republic 1.5%
(a) Cesky Telecom AS .......................................... Telecommunications 29,950 507,534
(a) CEZ AS .................................................... Utilities Electrical & Gas 2,462,805 6,527,278
Tabak AS .................................................. Beverages & Tobacco 225 35,114
-----------
7,069,926
-----------
Egypt .9%
(a) Al Ahram Beverages Co., GDR ............................... Beverages & Tobacco 58,906 1,011,711
Commercial International Bank Ltd. ........................ Banking 201,750 2,150,443
(a) Suez Cement Co. ........................................... Building Materials & Components 71,710 749,483
(a) Suez Cement Co., GDR ...................................... Building Materials & Components 20,130 201,300
-----------
4,112,937
-----------
Estonia .2%
Eesti Telekom AS, GDR ..................................... Telecommunications 4,900 98,490
Hansabank Ltd. ............................................ Banking 103,450 777,441
-----------
875,931
-----------
Finland
Hartwall OYJ, A ........................................... Beverages & Tobacco 6,520 131,245
-----------
Greece .4%
Hellenic Telecommunications Organization SA ............... Telecommunications 75,040 1,892,922
-----------
Hong Kong 4.7%
Cheung Kong Holdings Ltd. ................................. Multi-Industry 788,000 8,718,715
(a) China Aerospace International Holdings Ltd. ............... Electronic Components & Instruments 2,285,200 354,713
Dairy Farm International Holdings Ltd. .................... Merchandising 1,561,333 936,800
Hang Lung Development Co. Ltd. ............................ Real Estate 1,650,000 1,280,579
Hong Kong & Shanghai Hotels Ltd. .......................... Leisure & Tourism 1,015,000 589,185
Hong Kong Land Holdings Ltd. .............................. Real Estate 789,000 1,262,400
HSBC Holdings PLC ......................................... Banking 203,654 2,325,145
Hutchison Whampoa Ltd. .................................... Multi-Industry 227,400 2,858,800
Jardine Matheson Holdings Ltd. ............................ Multi-Industry 501,861 2,198,151
Jardine Strategic Holdings Ltd. ........................... Multi-Industry 110,000 328,900
Shangri-La Asia Ltd. ...................................... Leisure & Tourism 158,000 186,471
Swire Pacific Ltd., A ..................................... Multi-Industry 79,500 465,049
-----------
21,504,908
-----------
Hungary 2.2%
Borsodchem RT ............................................. Chemicals 78,919 2,447,992
Egis RT ................................................... Multi-Industry 10,638 447,032
(a) Fotex First Hungarian American Photo Service Co. .......... Multi-Industry 2,485 2,904
Gedeon Richter Ltd. ....................................... Health & Personal Care 53,450 2,894,301
(a) Graphisoft NV ............................................. Data Processing & Reproduction 1,300 24,549
Matav RT .................................................. Telecommunications 59,500 415,624
Mol Magyar Olay-Es Gazipari RT ............................ Energy Sources 81,300 1,125,317
OTP Bank .................................................. Banking 19,960 1,044,776
Tiszai Vegyi Kombinat RT .................................. Chemicals 117,573 1,627,390
-----------
10,029,885
-----------
</TABLE>

TD-8
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
SHARES/
INDUSTRY WARRANTS VALUE
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long Term Securities (cont.)
India .9%
Associated Cement Cos. Ltd. ............................. Building Materials & Components 85,350 $ 225,352
BSES Ltd. ............................................... Utilities Electrical & Gas 47,900 263,237
(a) Colgate-Palmolive (INDIA) Ltd. .......................... Health & Personal Care 5,000 20,158
Gas Authority Of India Ltd., GDR ........................ Energy Sources 25,200 170,100
Grasim Industries Ltd. .................................. Multi-Industry 5,962 38,196
Hindalco Industries Inc. ................................ Metals & Mining 31,500 556,807
Hindustan Petroleum Corporation Ltd. .................... Energy Sources 48,850 134,229
Mahanagar Telephone Nigam Ltd. .......................... Telecommunications 289,800 1,391,831
NIIT Ltd. ............................................... Data Processing & Reproduction 15,228 753,466
Tata Engineering & Locomotive Co. ....................... Machinery & Engineering 129,900 358,535
(a) Wipro Ltd. .............................................. Data Processing & Reproduction 5,600 363,535
-----------
4,275,446
-----------
Indonesia 4.2%
(a) Asia Pulp & Paper Co. Ltd., ADR ......................... Forest Products & Paper 396,230 2,005,914
(a) PT Barito Pacific Timber TBK ............................ Forest Products & Paper 1,644,000 70,437
PT Gudang Garamm ........................................ Beverages & Tobacco 521,000 842,291
(a) PT Indah Kiat Pulp & Paper Corp. ........................ Forest Products & Paper 11,463,750 2,324,839
(a) PT Indocement Tunggal Prakarsa .......................... Building Materials & Components 2,790,500 1,028,205
(a) PT Indofoods Sukses Makmurr ............................. Food & Household Products 3,552,705 1,938,208
PT Indosat .............................................. Telecommunications 1,854,000 2,181,799
PT Semen Gresik (Persero) ............................... Building Materials & Components 1,493,618 1,356,671
(a) PT Sinar Mas Agro Resources & Technology Corp. .......... Food & Household Products 268,800 117,470
PT Telekomunikasi Indonesia (Persero), B ................ Telecommunications 18,738,900 6,583,504
PT Timah TBK ............................................ Metals & Mining 1,788,500 531,288
(a) PT Tjiwi Kimia .......................................... Forest Products & Paper 2,233,380 369,997
-----------
19,350,623
-----------
Israel 1.2%
(a) Ampal-American Israel Corp. ............................. Financial Services 4,150 62,250
(a) Crystal Systems Solutions Ltd. .......................... Electronic Components & Instruments 4,230 39,921
Elron Electronic Industries Ltd. ........................ Financial Services 20,010 747,373
(a) Formula Systems Ltd. .................................... Data Processing & Reproduction 15,910 859,600
(a) Fundtech Ltd. ........................................... Data Processing & Reproduction 61,150 1,589,900
Koor Industries Ltd. .................................... Multi-Industry 2,452 263,817
(a) Nice Systems Ltd. ....................................... Telecommunications 9,880 768,525
(a) Sapiens International Corp. ............................. Data Processing & Reproduction 600 3,788
(a) Tecnomatix Technologies Ltd. ............................ Data Processing & Reproduction 27,989 381,350
(a) TTI Team Telecom International Ltd. ..................... Telecommunications 15,000 540,000
(a) Vocaltec Communications Ltd. ............................ Data Processing & Reproduction 19,550 449,650
-----------
5,706,174
-----------
</TABLE>

TD-9
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
SHARES/
INDUSTRY WARRANTS VALUE
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long Term Securities (cont.)
Malaysia .9%
Genting Bhd. ......................................... Leisure & Tourism 629,800 $ 2,320,316
Golden Hope Plantations Bhd. ......................... Misc Materials & Commodities 189,000 209,889
IOI Corp. Bhd. ....................................... Misc Materials & Commodities 926,000 728,616
Resorts World Bhd. ................................... Leisure & Tourism 286,000 782,737
------------
4,041,558
------------
Mexico 9.6%
Alfa SA de CV, A ..................................... Multi-Industry 359,500 821,735
Cemex SA ............................................. Building Materials & Components 3,601,555 16,885,433
DESC SA de CV DESC, B ................................ Multi-Industry 602,400 385,546
(a) Fomento Economico Mexicano SA de CV Femsa ............ Beverages & Tobacco 45,570 1,962,358
Grupo Bimbo SA de CV, A .............................. Food & Household Products 434,500 684,182
(a) Grupo Financiero Banamex Accival SA de CV ............ Banking 3,278,853 13,790,269
(a) Grupo Financiero Bancomer SA de CV ................... Banking 2,680,000 1,361,304
Telefonos de Mexico SA (Telmex), ADR ................. Telecommunications 142,234 8,125,117
Vitro SA de CV, A .................................... Food & Household Products 238,349 266,352
------------
44,282,296
------------
Pakistan .9%
(a) Hub Power Co. Ltd. ................................... Energy Sources 5,254,000 1,463,636
Pakistan Telecommunications Corp., A ................. Telecommunications 5,577,500 2,883,257
------------
4,346,893
------------
Peru
Credicorp Ltd. ....................................... Banking 13,100 117,900
------------
Philippines 1.9%
(a) Filinvest Development Corp. .......................... Real Estate 1,296,000 41,971
Philippine Long Distance Telephone Co., ADR .......... Telecommunications 117,890 2,092,548
(a) Philippine National Bank ............................. Banking 1,369,861 1,790,357
RFM Corp. ............................................ Food & Household Products 1,190,715 63,351
San Miguel Corp., B .................................. Food & Household Products 3,659,800 4,529,246
------------
8,517,473
------------
Poland 4.0%
Bank Rozwoju Eksportu SA ............................. Banking 38,125 1,181,831
(a) Bank Slaski SA W Katowicach .......................... Banking 29,820 1,605,692
Elektrim SA .......................................... Multi-Industry 239,250 2,746,843
Impexmetal SA ........................................ Metals & Mining 93,892 627,384
(a) Orbis SA ............................................. Leisure & Tourism 74,000 577,727
Polski Koncern Naftowy Orlen SA ...................... Energy Sources 488,607 2,356,084
Prokom Software SA ................................... Data Processing & Reproduction 68,016 3,560,884
(a) Telekomunikacja Polska SA ............................ Telecommunications 567,801 4,067,828
Warta SA ............................................. Insurance 43,104 1,445,048
------------
18,169,321
------------
</TABLE>

TD-10
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
SHARES/
INDUSTRY WARRANTS VALUE
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long Term Securities (cont.)
Russia 1.6%
GAZ Auto Works .............................. Automobiles 2,330 $ 60,697
Lukoil Holdings ............................. Energy Sources 18,700 238,986
Lukoil Holdings, ADR ........................ Energy Sources 64,410 3,188,295
Mosenergo, ADR .............................. Utilities Electrical & Gas 103,450 362,075
Mosenergo, GDR .............................. Utilities Electrical & Gas 23,100 88,349
Novorosissk Sea Shipping .................... Transportation 28,000 2,520
Novorosissk Sea Shipping, pfd. .............. Transportation 224,000 9,184
Rostelecom, ADR ............................. Telecommunications 172,930 2,356,171
Rostelecom, pfd. ............................ Telecommunications 257,300 184,227
(a) Unified Energy Systems ...................... Utilities Electrical & Gas 5,581,800 641,907
(a) Unified Energy Systems, pfd. ................ Utilities Electrical & Gas 18,000 819
-----------
7,133,230
-----------
Singapore 5.4%
Cycle & Carriage Ltd. ....................... Automobiles 28,000 65,749
DBS Group Holdings Ltd. ..................... Banking 176,608 2,267,610
First Capital Corp. Ltd. .................... Real Estate 152,000 145,055
Fraser and Neave Ltd. ....................... Beverages & Tobacco 1,140,100 4,055,301
(a) Golden Agri-Resources Ltd. .................. Misc Materials & Commodities 1,780,000 355,176
Keppel Corp., Ltd. .......................... Transportation 2,380,600 5,149,476
MCL Land Ltd. ............................... Real Estate 29,000 22,308
Natsteel Ltd. ............................... Metals & Mining 1,876,000 2,582,348
Oversea Chinese Banking Corp. Ltd. .......... Banking 538,350 3,705,243
Overseas Union Enterprise Ltd. .............. Leisure & Tourism 261,300 634,737
Sembcorp Industries Ltd. .................... Multi-Industry 1,631,694 1,774,196
Sembcorp Marine Ltd. ........................ Machinery & Engineering 3,501,000 1,316,165
United Industrial Corporation Ltd. .......... Multi-Industry 1,654,000 779,647
United Overseas Bank Ltd. ................... Banking 297,000 1,941,064
-----------
24,794,075
-----------
Slovak Republic .1%
(a) Slovnaft AS ................................. Chemicals 39,010 465,011
(a) Vychodoslovenske Zeleziarne AS .............. Metals & Mining 31,257 78,034
-----------
543,045
-----------
South Africa 11.5%
(a) African Bank Investments Ltd. ............... Financial Services 1,084,000 1,416,555
Anglo American PLC .......................... Metals & Mining 135,267 6,428,175
Barlow Ltd. ................................. Multi-Industry 741,700 4,463,327
CG Smith Ltd. ............................... Multi-Industry 1,143,900 16,872
Comparex Holdings Ltd. ...................... Data Processing & Reproduction 130,000 229,130
De Beers Centenary AG ....................... Misc Materials & Commodities 75,190 1,829,845
(a) Dimension Data Holdings Ltd. ................ Multi-Industry 21,350 176,657
Fedsure Holdings Ltd. ....................... Insurance 360,299 1,753,668
Firstrand Ltd. .............................. Insurance 115,000 118,732
(a) Imperial Holdings Ltd. ...................... Multi-Industry 110,900 902,903
Iscor Ltd. .................................. Metals & Mining 922,984 1,572,340
Kersaf Investments Ltd. ..................... Leisure & Tourism 188,867 740,983
Liberty Group Ltd. .......................... Insurance 290,762 2,766,105
Nampak Ltd. ................................. Forest Products & Paper 544,894 1,177,388
Nedcor Ltd. ................................. Financial Services 15,400 323,445
Old Mutual PLC .............................. Financial Services 1,106,470 2,432,971
Palabora Mining Co. Ltd. .................... Metals & Mining 89,700 488,190
</TABLE>

TD-11
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
SHARES/
INDUSTRY WARRANTS VALUE
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long Term Securities (cont.)
South Africa (cont.)
Rembrandt Group Ltd. ................................ Multi-Industry 429,170 $ 4,139,781
Reunert Ltd. ........................................ Electrical & Electronics 78,000 115,044
Sanlam Ltd. ......................................... Financial Services 1,334,000 1,576,009
Sappi Ltd. .......................................... Forest Products & Paper 270,124 2,031,906
Sasol Ltd. .......................................... Energy Sources 986,200 6,618,304
South African Breweries PLC ......................... Beverages & Tobacco 855,924 6,387,869
Super Group Ltd. .................................... Transportation 197,000 233,320
Tiger Brands Ltd. ................................... Food & Household Products 468,638 4,202,536
Tongaat-Hulett Group Ltd. ........................... Multi-Industry 179,995 789,801
------------
52,931,856
------------
South Korea 11.3%
Cheil Jedang Corp. .................................. Food & Household Products 27,450 1,257,994
Hana Bank ........................................... Banking 396,568 2,471,826
(a) Hyundai Electronics Industries Co. .................. Electrical & Electronics 150,760 2,974,570
(a) Hyundai Heavy Industries ............................ Energy Equipment & Services 38,440 723,966
Hyundai Motor Co. Ltd. .............................. Automobiles 131,090 1,681,206
(a) Korea Data Systems .................................. Data Processing & Reproduction 164,610 817,865
Korea Electric Power Corp. .......................... Utilities Electrical & Gas 350,170 10,866,018
Korea Telecom Corp., ADR ............................ Telecommunications 18,119 876,507
L.G. Chemical Ltd. .................................. Chemicals 57,510 1,150,174
LG Electronics Inc. ................................. Electrical & Electronics 163,040 4,562,093
Samsung Corp. ....................................... Multi-Industry 77,680 669,496
Samsung Electronics Co. Ltd. ........................ Electrical & Electronics 37,656 12,461,661
(a) Samsung Heavy Industries Co. Ltd. ................... Machinery & Engineering 855,507 3,997,391
Samsung SDI Co. Ltd. ................................ Electrical & Electronics 64,693 3,104,034
SK Corp. ............................................ Energy Sources 186,840 3,426,720
(a) SK Global ........................................... Wholesale & International Trade 47,810 572,421
------------
51,613,942
------------
Taiwan .5%
(a) Accton Technology Corp. ............................. Data Processing & Reproduction 134,000 298,019
(a) Hon Hai Precision Industry Co. Ltd. ................. Electrical & Electronics 92,000 830,390
(a) UNI-President Enterprises Corp. ..................... Food & Household Products 528,000 401,143
(a) Via Technologies Inc. ............................... Electronic Components & Instruments 52,000 801,948
------------
2,331,500
------------
Thailand 6.6%
(a) Advanced Info Service Public Co. Ltd., fgn. ......... Telecommunications 20,300 252,553
(a) American Standard Sanitaryware Public Co. Ltd. fgn. . Building Materials & Components 24,500 112,428
(a) Bangkok Bank Public Co. Ltd. ........................ Banking 28,287 21,995
(a) Bangkok Bank Public Co. Ltd., fgn. .................. Banking 1,589,700 1,945,331
BEC World Public Co Ltd., fgn. ...................... Telecommunications 121,890 714,715
Charoen Pokphand Foods Public Co. Ltd., fgn. ........ Food & Household Products 2,091,360 3,145,704
(a) Charoen Pokphand Foods Public Co. Ltd.,
fgn., wts., 4/29/02 ............................... Food & Household Products 1,079,130 3
Electricity Generating Public Co. Ltd. .............. Energy Sources 264,400 283,105
Hana Microelectronics Co. Ltd., fgn. ................ Electrical & Electronics 145,200 1,110,146
(a) Italian-Thai Development Public Co. Ltd., fgn. ...... Construction & Housing 50,300 24,044
(a) Jasmine International Public Co. Ltd., fgn. ......... Telecommunications 824,400 220,681
(a) Land and House Public Co. Ltd., fgn. ................ Real Estate 530,826 277,423
PTT Exploration & Production Public Co. Ltd., fgn. .. Energy Sources 330,400 1,600,408
</TABLE>

TD-12
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
--------------
<S> <C> <C>
Short Term Investments (Cost $35,461,207) 7.7%
U.S. Treasury Bills, 5.41% - 5.94%, with maturities to 9/07/00 .......... $35,734,000 35,484,458
------------
Total Investments (Cost $459,139,220) 102.2%............................. 469,911,455
Other Assets, less Liabilities (2.2%) ................................... (10,376,016)
------------
Total Net Assets 100.0% ................................................. $459,535,439
============
</TABLE>

(a)Non-income producing

See notes to financial statements.

TD-13
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Financial Statements

Statement of Assets and Liabilities
June 30, 2000 (unaudited)

Assets:
Investments in securities:
Cost ................................................ $ 459,139,220
=============
Value ............................................... 469,911,455
Cash ................................................. 1,411,278
Receivables:
Capital shares sold ................................ 1,912,426
Dividends and interest ............................. 1,354,428
-------------
Total assets ...................................... 474,589,587
-------------
Liabilities:
Payables:
Investment securities purchased .................... 13,909,145
Capital shares redeemed ............................ 376,377
Affiliates ......................................... 537,159
Other liabilities .................................... 231,467
-------------
Total liabilities ................................. 15,054,148
-------------
Net assets, at value ............................. $ 459,535,439
=============
Net assets consist of:
Undistributed net investment income .................. $ 1,037,972
Net unrealized appreciation .......................... 10,772,235
Accumulated net realized loss ........................ (68,608,406)
Capital shares ....................................... 516,333,638
-------------
Net assets, at value ............................. $ 459,535,439
=============
Class 1:
Net assets, at value ................................. $ 396,372,661
=============
Shares outstanding ................................... 62,026,011
=============
Net asset value and offering price per share ......... $ 6.39
=============
Class 2:
Net assets, at value ................................. $ 63,162,778
=============
Shares outstanding ................................... 9,913,603
=============
Net asset value and offering price per share ......... $ 6.37
=============

See notes to financial statements. See notes to financial statements.

TD-14
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Financial Statements (continued)

Statement of Operations
for the six months ended June 30, 2000 (unaudited)

<TABLE>
<S> <C>
Investment income:
(net of foreign taxes of $888,412)
Dividends ................................................................ $ 4,338,136
Interest ................................................................. 1,043,471
-------------
Total investment income ................................................ 5,381,607
-------------
Expenses:
Management fees (Note 3) ................................................. 2,333,184
Administrative fees (Note 3) ............................................. 211,459
Distribution fees - Class 2 (Note 3) ..................................... 70,090
Custodian fees ........................................................... 232,000
Reports to shareholders .................................................. 32,050
Professional fees (Note 3) ............................................... 20,800
Trustees' fees and expenses .............................................. 1,500
Other .................................................................... 15,849
-------------
Total expenses ......................................................... 2,916,932
-------------
Net investment income ................................................. 2,464,675
-------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ............................................................ 4,538,488
Foreign currency transactions .......................................... (1,024,771)
-------------
Net realized gain ..................................................... 3,513,717
Net unrealized depreciation on:
Investments ............................................................ (68,742,450)
Translation of assets and liabilities denominated in foreign currencies (235,725)
-------------
Net unrealized depreciation ........................................... (68,978,175)
-------------
Net realized and unrealized loss .......................................... (65,464,458)
-------------
Net decrease in net assets resulting from operations ...................... $ (62,999,783)
=============
</TABLE>

See notes to financial statements.

TD-15
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Financial Statements (continued)

Statements of Changes in Net Assets
for the six months ended June 30, 2000 (unaudited) and the year ended December
31, 1999

<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999
-------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ................................................................. $ 2,464,675 $ 2,058,823
Net realized gain (loss) from investments and foreign currency transactions ........... 3,513,717 (41,927,283)
Net unrealized appreciation (depreciation) on investments and translation of assets
and liabilites denominated in foreign currencies ..................................... (68,978,175) 153,871,630
--------------------------------
Net increase (decrease) in net assets resulting from operations ...................... (62,999,783) 114,003,170
Distributions to shareholders from:
Net investment income:
Class 1 .............................................................................. (2,663,594) (2,683,606)
Class 2 .............................................................................. (412,198) (248,619)
--------------------------------
Total distributions to shareholders ..................................................... (3,075,792) (2,932,225)
Capital share transactions: (Note 2)
Class 1 .............................................................................. 154,255,416 18,804,002
Class 2 .............................................................................. 24,096,992 19,412,917
--------------------------------
Total capital share transactions ........................................................ 178,352,408 38,216,919
Net increase in net assets ........................................................... 112,276,833 149,287,864
Net assets:
Beginning of period ..................................................................... 347,258,606 197,970,742
--------------------------------
End of period ........................................................................... $ 459,535,439 $ 347,258,606
================================
Undistributed net investment income included in net assets:
End of period ........................................................................... $ 1,037,972 $ 1,649,089
================================
</TABLE>

See notes to financial statements.

TD-16
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Notes to Financial Statements (unaudited)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The Templeton Developing Markets Securities Fund (the Fund) is a separate,
diversified series of Franklin Templeton Variable Insurance Products Trust (the
Trust), which is an open-end investment company registered under the Investment
Company Act of 1940. Shares of the Fund are sold only to insurance company
separate accounts to fund the benefits of variable life insurance policies or
variable annuity contracts. The Fund seeks long-term capital appreciation. The
portfolio invests primarily in developing markets equity securities.

Effective May 1, 2000, the name of the Templeton Developing Markets Equity Fund
changed to Templeton Developing Markets Securities Fund, as a result of fund
mergers, as discussed in Note 6. The Fund's investment objectives and other
policies did not change as a result of the name change.

The following summarizes the Fund's significant accounting policies.

a. Security Valuation

b. Foreign Currency Translation

Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the exchange rate of such
currencies against U.S. dollars on the date of valuation. Purchases and sales
of securities and income items denominated in foreign currencies are translated
into U.S. dollars at the exchange rate in effect on the transaction date. When
the Fund purchases or sells foreign securities, the Fund will customarily enter
into a foreign exchange contract to minimize foreign exchange risk from the
trade date to the settlement date of such transactions.

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 currency denominated assets and liabilities other than investments
in securities held at the end of the reporting period.

Certain countries in which the Fund invests have imposed restrictions on the
repatriation of their currencies. Other countries have previously instituted
currency exchange controls in the past during periods of serious imbalance in
their balance of payments or upon the occurrence of other destabilizing events.
Exchange control regulations may restrict the Fund's ability to convert
investment income, capital, or the proceeds of securities into U.S. dollars. As
of June 30, 2000 the Fund has investments with a value of approximately $8.6
million in countries with restrictions on the repatriation of their currencies
or formal exchange controls currently in place.

c. Income Taxes

TD-17
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

d. Security Transactions, Investment Income, Expenses and Distributions

Common expenses incurred by the Trust are allocated among the Funds based on
the ratio of net assets of each fund to the combined net assets. Other expenses
are charged to each fund on a specific identification basis.

e. Accounting Estimates

2. SHARES OF BENEFICIAL INTEREST

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

At June 30, 2000, there were an unlimited number of shares authorized ($.01 par
value). Transactions in the Fund's shares were as follows:

<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999
-----------------------------------------------------------------
Shares Amount Shares Amount
Class 1 Shares: -----------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ....................................... 4,246,841 $ 28,300,214 5,134,763 $ 32,419,782
Shares issued on merger (Note 6) .................. 23,685,284 153,007,317 -- --
Shares issued on reinvestment of distributions .... 385,260 2,663,594 562,601 2,683,606
Shares redeemed ................................... (4,590,335) (29,715,709) (2,600,039) (16,299,386)
------------------------------------------------------------
Net increase ...................................... 23,727,050 $ 154,255,416 3,097,325 $ 18,804,002
============================================================
Class 2 Shares:
Shares sold ....................................... 13,665,026 $ 91,709,861 9,564,512 $ 65,272,741
Shares issued on merger (Note 6) .................. 66,980 431,354 -- --
Shares issued on reinvestment of distributions .... 59,774 412,198 52,231 248,619
Shares redeemed ................................... (10,294,252) (68,456,421) (6,579,693) (46,108,443)
-------------------------------------------------------------
Net increase ...................................... 3,497,528 $ 24,096,992 3,037,050 $ 19,412,917
=============================================================
</TABLE>

TD-18
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

3. TRANSACTIONS WITH AFFILIATES

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

<TABLE>
<CAPTION>
Entity Affiliation
---------------------------------------------------------------------------------------
<S> <C>
Franklin Templeton Services, Inc. (FT Services) Administrative manager
Templeton Asset Management Ltd. (TAML) Investment manager
Franklin/Templeton Distributors, Inc. (Distributors) Principal underwriter
Franklin/Templeton Investor Services, Inc. (Investor Services) Transfer agent
</TABLE>

The Fund pays an investment management fee to TAML of 1.25% per year of the
average daily net assets of the Fund.

The Fund pays administrative fees to FT Services based on the average net
assets of the Fund as follows:

Annualized Fee Rate Daily Net Assets
-------------------------------------------------------------------------
.15% First $200 million
.135% Over $200 million, up to and including $700 million
.10% Over $700 million, up to and including $1.2 billion

Fees are further reduced on net assets over $1.2 billion.

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

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

Included in professional fees are legal fees of $5,749 that were paid to a law
firm in which a partner of that firm was an officer of the Fund.

4. INCOME TAXES

As of December 31, 1999, Franklin Templeton Variable Insuance Products Trust
(FTVIPT)-Templeton Developing Markets Securities Fund had tax basis capital
losses. The capital loss carryovers of the FTVIPT-Templeton Developing Markets
Securities Fund include December 31, 1999 capital loss carryovers of
$64,368,808 acquired as a result of the reorganization with the Templeton
Variable Products Series Fund (TVP), Templeton Developing Markets Fund (See
Note 6). The capital loss carryovers are available to offset future realized
capital gains to the extent provided in the Internal Revenue Code and
regulations thereunder.

Capital loss carryover expiring in:
2006 .............................. $ 43,807,774
2007 .............................. 88,451,296
------------
$132,259,070
============

At December 31, 1999, the Fund had $1,522,503 deferred capital losses and
currency losses occurring subsequent to October 31, 1999. For tax purposes,
such losses will be reflected in the year ending December 31, 2000.

Net investment income and net realized capital gains differ for financial
statement and tax purposes primarily due to differing tax treatments of wash
sales, foreign currency transactions, passive foreign investment company
shares, and merger related expenses.

TD-19
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

4. INCOME TAXES (cont.)

At June 30, 2000, the net unrealized appreciation based on the cost of
investments for income tax purposes of $465,549,221 was as follows:

Unrealized appreciation ............. $ 54,726,429
Unrealized depreciation ............. (50,364,195)
-------------
Net unrealized appreciation ......... $ 4,362,234
=============

5. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities) for the
period ended June 30, 2000 aggregated $228,427,678 and $267,654,610,
respectively.

6. MERGERS

On May 1, 2000, the Franklin Templeton Variable Insurance Products Trust
(FTVIPT) - Templeton Developing Markets Securities Fund acquired the net assets
of Templeton Variable Products Series Fund (TVP) - Templeton Developing Markets
Fund pursuant to a plan of reorganization approved by the TVP - Templeton
Developing Markets Fund's shareholders. The merger was accounted for by the
method of accounting for tax-free business combinations of investment
companies. The financial statements of TVP - Templeton Developing Markets Fund
survived the reorganization, therefore, the financial statements of FTVIPT -
Templeton Developing Markets Securities Fund reflect the financial statements
of TVP - Templeton Developing Markets Fund. Immediately preceding the merger,
FTVIPT - Templeton Developing Markets Securities Fund completed a split of its
shares in the ratio of one new Class 1 share for each 1.3959 existing Class 1
share and one new Class 2 share for each 1.3996 existing Class 2 share. As a
result, the FTVIPT - Templeton Developing Markets Securities Fund net asset
value per share was $6.46 for Class 1 and $6.44 for Class 2 on May 1, 2000. TVP
- Templeton Developing Markets Fund's shareholders contributed net assets
having an aggregate value of $308,060,631 (including $7,715,560 of unrealized
appreciation) in exchange for 23,685,284 Class 1 shares and 66,980 Class 2
shares (post-split) of the FTVIPT - Templeton Developing Markets Securities
Fund. Immediately prior to the merger, FTVIPT - Templeton Developing Markets
Securities Fund had net assets of $153,438,671 (including unrealized
appreciation of $14,920,668). Upon completion of the merger, the combined net
assets of the FTVIPT - Templeton Developing Markets Securities Fund were
$461,499,302.

TD-20
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Tax Designation

At December 31, 1999, more than 50% of the Fund's total assets were invested in
securities of foreign issuers. In most instances, foreign taxes were withheld
from dividends paid to the Fund on these investments. The Fund intends to make
an election under Section 853 of the Internal Revenue Code. This election will
allow shareholders to treat their proportionate share of foreign taxes paid by
the Fund as having been paid directly by them.

The following table provides a breakdown by country of foreign source income
and foreign taxes paid, as designated by the Fund, to Class 1 and Class 2
shareholders of record on April 26, 2000.

Class 1 Class 2
----------------------------------------------------------
Foreign Tax Foreign Foreign Tax Foreign
Paid Source Income Paid Source Income
Country Per Share Per Share Per Share Per Share
--------------------------------------------------------------------------------
Argentina ........... 0.0000 0.0067 0.0000 0.0056
Austria ............. 0.0002 0.0005 0.0002 0.0005
Brazil .............. 0.0065 0.0188 0.0065 0.0155
Chile ............... 0.0009 0.0015 0.0009 0.0013
China ............... 0.0000 0.0022 0.0000 0.0018
Colombia ............ 0.0000 0.0020 0.0000 0.0017
Ghana ............... 0.0001 0.0003 0.0001 0.0003
Hong Kong ........... 0.0000 0.0100 0.0000 0.0084
Hungary ............. 0.0007 0.0020 0.0007 0.0017
India ............... 0.0002 0.0019 0.0002 0.0016
Indonesia ........... 0.0007 0.0021 0.0007 0.0018
Israel .............. 0.0012 0.0020 0.0012 0.0017
Malaysia ............ 0.0015 0.0024 0.0015 0.0020
Mexico .............. 0.0013 0.0130 0.0013 0.0109
Panama .............. 0.0004 0.0011 0.0004 0.0009
Peru ................ 0.0000 0.0010 0.0000 0.0009
Philippines ......... 0.0005 0.0010 0.0005 0.0008
Poland .............. 0.0003 0.0010 0.0003 0.0008
Singapore ........... 0.0056 0.0108 0.0056 0.0091
South Africa ........ 0.0000 0.0145 0.0000 0.0122
South Korea ......... 0.0010 0.0025 0.0010 0.0021
Sri Lanka ........... 0.0001 0.0003 0.0001 0.0003
Thailand ............ 0.0002 0.0007 0.0002 0.0006
Turkey .............. 0.0000 0.0097 0.0000 0.0081
Venezuela ........... 0.0000 0.0050 0.0000 0.0042
----------------------------------------------------
TOTAL ............... $0.0214 $0.1130 $0.0214 $0.0948
====================================================

Shareholders are advised to check with their tax advisors for information on
the treatment of these amounts on their individual income tax returns.

TD-21
<PAGE>

TEMPLETON GROWTH SECURITIES FUND

--------------------------------------------------------------------------------
Fund Goal and Primary Investments: Templeton Growth Securities Fund (formerly
Templeton Global Growth Fund) seeks long-term capital growth. The Fund invests
primarily in equity securities of companies of any nation, including those in
the U.S. and emerging markets.
--------------------------------------------------------------------------------
During the six months under review, global economies appeared to be improving,
although most trailed the U.S. economy's growth rate. Europe displayed slow but
steady improvement in manufacturing output, unemployment rates slightly
declined and consumer confidence increased. The euro has fallen significantly
since its introduction, but a more positive economic outlook for Europe should
help benefit the currency.

In the U.S., the economy continued to post solid gross domestic product (GDP)
gains during the six months under review, but began to show signs of modest
deceleration. During this period, the Federal Reserve Board raised the federal
funds target rate three separate times to 6.5%, up from 5.5%. While by no means
necessarily signaling a major slowdown, some core economic indicators, such as
housing starts and unemployment claims, finally registered signs of slowing.

As the U.S. stock market advanced during the past decade, domestic household
net worth increased, consumer consumption rose, annual savings rates dropped
and many investors borrowed money to purchase stocks (margin debt). During the
reporting period, margin debt reached its highest point ever as a percentage of
total stock market capitalization. As a percentage of GDP, margin debt exceeded
2.4% at the end of the period after hovering at less than 1% for several
decades.

As margin debt has grown, so has the Nasdaq Composite Index. More than half of
the index's stocks are in the telecommunications and technology sectors that
have attracted margin buying. This focus on technology and telecom stocks
during the past several years is due partly to these sectors' earnings growth,
which has far exceeded non-technology companies' earnings growth. Despite the
difference in earnings growth, global technology and telecom companies' share
of world net income was not substantially different from the early 1980s.
However, these stocks comprise over a third of world stock market
capitalization, up from about 15% in the early 1980s, indicating that

This chart in pie format shows the geographic distribution of Templeton Growth
Securities Fund, as a percentage of total net assets as of 6/30/00.

North America 34.5%
Europe 32.8%
Asia 14.6%
Latin America 4.5%
Australia/New Zealand 4.0%
Short-Term Investments & Other Net Assets 9.6%

TG-1
<PAGE>

Top 10 Holdings
Templeton Growth Securities Fund
6/30/00

Company % of Total
Sector, Country Net Assets
---------------------------------------
H.J. Heinz Co. 2.1%
Food & Household
Products, U.S.

Cheung Kong
Holdings Ltd. 1.8%
Multi-Industry,
Hong Kong

Australia & New Zealand
Banking Group Ltd. 1.7%
Banking, Australia

HSBC Holdings PLC 1.6%
Banking, Hong Kong

Kroger Co. 1.5%
Merchandising, U.S.

Abbott Laboratories 1.5%
Health & Personal Care,
U.S.

Aventis SA 1.5%
Health & Personal Care,
France

Fuji Photo Film Co. Ltd. 1.4%
Electrical & Electronics,
Japan

Ford Motor Co. 1.3%
Automobiles, U.S.

Albertson's Inc. 1.3%
Merchandising, U.S.

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

while such companies' stock prices have soared, their share of world net income
has not experienced the same climb. At Templeton, we have a history of avoiding
what we believe are the most speculative parts of the markets. During the
reporting period, we continued to consider telecommunications and technology
speculative. While we sold most of the Fund's holdings in these sectors too
early, we did so in an attempt to avoid the downside risks.

During the reporting period, the most substantial change to the Fund was an
increase in U.S. exposure. Although this move may appear unusual given
historically high domestic stock market valuations, we believe most risks in
the U.S. are narrowly focused and that those indexes that appear highly priced
actually mask many undervalued securities. Many investors and financial leaders
were concerned about the state of U.S. financial markets partly due to the
combination of many stocks' historically high valuations, the market's size
relative to the overall economy, relatively large margin debt and the rapid
turnover of investments. However, despite these risks, we are comfortable with
the Fund's holdings and with increasing its U.S. exposure.

At the period's end, we believe Templeton Growth Securities Fund's holdings are
substantially less expensive than overall market averages. Generally speaking,
we feel that indexes were expensive because parts of the market were priced
excessively. However, behind the overall market advances, most stocks have been
declining in value. For example, since 1998 more stocks on the New York Stock
Exchange have actually been falling in value rather than increasing, even while
indexes have hit all-time highs. Because of the two-tier nature of valuations,
we were able to identify several securities that had what we believed were low
prices.

Despite a price-to-earnings ratio for the Standard & Poor's 500(R) Composite
Index of 29 times at period-end, the average stock's decline has left the
median price-to-earnings ratio for U.S. stocks at about 13 times. We increased
our U.S. holdings in an attempt to take advantage of such investment
opportunities. Additions to the Fund's portfolio include H.J. Heinz,
BankAmerica, Albertson's and K-Mart. We added each of these stocks after they
suffered substantial price declines and traded at what we believed were
exceptional valuations.

TG-2
<PAGE>

Overseas, we perceived a similar divergence in values. The Hong Kong Stock
Market, for example, had a price-to-earnings ratio in the high 20s early in the
period, but when technology and new economy stocks are removed from the index,
the ratio falls to about 13 -- in our opinion, a reasonable number, and one not
much higher than where the market was during 1998's Asian financial crisis. The
same holds true for South Korea, with the index there, minus technology and
telecommunications stocks, falling below 10 times earnings, also to a level
similar to that during the Asian financial crisis. The Fund's Asian exposure
declined from 20% of total net assets at the beginning of the period to less
than 15% by the end. Many of our Asian positions performed well and we
attempted to take advantage of dramatic price increases by reducing our
holdings.

In Latin America, the Fund's holdings fell from 7.9% of total net assets at the
beginning of the period to 4.5%. Latin American markets were hard hit during
the period, due in large part to rising U.S. interest rates and local election
concerns.

The Fund's exposure to Europe decreased during the six months under review, as
we sold several positions. Our total holdings in Europe declined from 37.6% at
the beginning of the period to 32.8% by the end. However, we found a large
number of companies we believe are inexpensive based on cash flow. During the
latest economic cycle, free cash flow as a percentage of sales in Europe was
twice as high as during the previous cycle. This contributed to a substantial
increase in mergers and acquisitions. In fact, most of the recent global merger
activity involved European companies purchasing American assets. Looking
forward, we believe this trend will continue, and that it should benefit many
of the Fund's holdings.

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance
is no guarantee of future results, these insights may help you understand our
investment and management philosophy.

TG-3
<PAGE>

Templeton Growth Securities Fund - Class 1

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

PERFORMANCE SUMMARY AS OF 6/30/00

Templeton Growth Securities Fund - Class 1 delivered a -1.96% cumulative total
return for the six-month period ended 6/30/00. Total return of Class 1 shares
represents the cumulative or average annual change in value, assuming
reinvestment of dividends and capital gains. Average returns smooth out
variations in returns, which can be significant; they are not the same as
year-by-year results.

Templeton Growth Securities Fund - Class 1
Periods ended 6/30/00
Since
Inception
1-Year 5-Year (3/15/94)
--------------------------------------------------------------------
Average Annual Total Return +5.97% +13.37% +12.25%
Cumulative Total Return +5.97% +87.26% +106.98%
Value of $10,000 Investment $10,597 $18,726 $20,698

Ongoing stock market volatility can dramatically change the Fund's short-term
performance; current results may be lower.

Past performance does not guarantee future results.

TG-4
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Financial Highlights (continued)

<TABLE>
<CAPTION>
Class 1
------------------------------------------------------------------------------------
Six Months Ended Year Ended December 31,
June 30, 2000 -----------------------------------------------------------------
(unaudited) 1999 1998 1997 1996 1995
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $15.63 $14.77 $15.34 $13.80 $11.75 $10.48
------------------------------------------------------------------------------------
Income from investment operations:
Net investment income(c) ..................... .20 .28 .35 .33 .25 .16
Net realized and unrealized gains (losses) ... (.55) 2.66 .98 1.53 2.22 1.17
------------------------------------------------------------------------------------
Total from investment operations .............. (.35) 2.94 1.33 1.86 2.47 1.33
------------------------------------------------------------------------------------
Less distributions from:
Net investment income ........................ (.27) (.36) (.41) (.24) (.21) (.06)
Net realized gains ........................... (1.75) (1.72) (1.49) (.08) (.21) --
------------------------------------------------------------------------------------
Total distributions ........................... (2.02) (2.08) (1.90) (.32) (.42) (.06)
------------------------------------------------------------------------------------
Net asset value, end of period ................ $13.26 $15.63 $14.77 $15.34 $13.80 $11.75
====================================================================================
Total return(b) ............................... (1.96%) 21.04% 8.98% 13.50% 21.28% 12.72%

Ratios/supplemental data
Net assets, end of period (000's) ............. $1,243,828 $708,310 $747,080 $758,445 $579,877 $338,755
Ratios to average net assets:
Expenses ..................................... .88%(a) .88% .88% .88% .93% .97%
Net investment income ........................ 2.87%(a) 1.87% 2.27% 2.49% 2.20% 2.46%
Portfolio turnover rate ....................... 64.71% 46.54% 32.30% 24.81% 12.32% 30.92%
</TABLE>

(a)Annualized
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for period less than one
year.
(c)Based on average shares outstanding effective year ended December 31, 1999.

TG-5
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Financial Highlights (continued)

<TABLE>
<CAPTION>
Class 2
---------------------------------------
Six Months Ended
June 30, 2000 Year Ended
(unaudited) December 31, 1999(c)
---------------------------------------
<S> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period ................ $15.60 $15.34
---------------------------------------
Income from investment operations:
Net investment income(d) ........................... .20 .17
Net realized and unrealized gains (losses) ......... (.58) 2.17
---------------------------------------
Total from investment operations .................... (.38) 2.34
---------------------------------------
Less distributions from:
Net investment income .............................. (.25) (.36)
Net realized gains ................................. (1.75) (1.72)
---------------------------------------
Total distributions ................................. (2.00) (2.08)
---------------------------------------
Net asset value, end of period ...................... $13.22 $15.60
=======================================
Total return(b) ..................................... (2.08%) 16.35%
Ratios/supplemental data
Net assets, end of period (000's) ................... $72,156 $4,483
Ratios to average net assets:
Expenses ........................................... 1.13%(a) 1.14%(a)
Net investment income .............................. 3.08%(a) 1.17%(a)
Portfolio turnover rate ............................. 64.71% 46.54%
</TABLE>

(a)Annualized
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for periods less than one
year.
(c)For the period January 6, 1999 (effective date) to December 31, 1999.
(d)Based on average shares outstanding.

See notes to financial statements.

TG-6
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited)

<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stocks 89.1%
Aerospace & Military Technology 4.5%
BAE Systems PLC ...................................... United Kingdom 2,090,590 $ 12,944,144
Boeing Co. ........................................... United States 182,500 7,630,781
Lockheed Martin Corp. ................................ United States 612,500 15,197,656
Raytheon Co., A ...................................... United States 483,374 9,395,582
Rolls-Royce PLC ...................................... United Kingdom 3,988,521 14,174,203
-------------
59,342,366
-------------
Appliances & Household Durables
Guangdong Kelon Electrical Holdings Ltd., H .......... China 1,123,000 608,658
-------------
Automobiles 4.5%
Bayerische Motorenwerke AG ........................... Germany 203,600 6,225,643
Ford Motor Co. ....................................... United States 407,000 17,501,000
General Motors Corp. ................................. United States 140,000 8,128,750
Regie Nationale des Usines Renault SA ................ France 165,000 7,528,469
(a) Visteon Corp. ........................................ United States 53,290 646,138
Volkswagen AG ........................................ Germany 165,400 6,389,345
Volvo AB, B .......................................... Sweden 571,100 12,469,006
-------------
58,888,351
-------------
Banking 8.1%
Australia & New Zealand Banking Group Ltd. ........... Australia 2,844,184 21,874,923
Banca Nazionale del Lavoro SpA ....................... Italy 1,781,960 6,268,733
Banco Popular Espanol SA ............................. Spain 140,000 4,347,993
Bank Austria AG ...................................... Austria 109,065 5,333,860
Bank of America Corp. ................................ United States 395,000 16,985,000
Deutsche Bank AG ..................................... Germany 150,700 12,646,932
Foreningssparbanken AB, A ............................ Sweden 200,000 2,941,512
HSBC Holdings PLC .................................... Hong Kong 1,800,801 20,559,990
National Australia Bank Ltd. ......................... Australia 465,000 7,788,714
U.S. Bancorp. ........................................ United States 425,000 8,181,250
-------------
106,928,907
-------------
Broadcasting & Publishing .4%
Wolters Kluwer NV .................................... Netherlands 215,100 5,752,550
-------------
Building Materials & Components .6%
Caradon PLC .......................................... United Kingdom 2,805,290 6,412,625
Owens Corning ........................................ United States 200,000 1,850,000
-------------
8,262,625
-------------
Business & Public Services .6%
(a) Gartner Group Inc., B ................................ United States 224,400 2,215,950
(a) Humana Inc. .......................................... United States 250,000 1,218,750
Waste Management Inc. ................................ United States 250,000 4,750,000
-------------
8,184,700
-------------
Chemicals 4.3%
Akzo Nobel NV ........................................ Netherlands 355,200 15,151,260
BASF AG .............................................. Germany 253,200 10,314,980
DSM NV, Br. .......................................... Netherlands 300,000 9,662,206
Eastman Chemical Co. ................................. United States 125,000 5,968,750
Kemira OY ............................................ Finland 447,900 2,189,611
Lyondell Chemical Co. ................................ United States 770,500 12,905,875
-------------
56,192,682
-------------
</TABLE>

TG-7
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stocks (cont.)
Data Processing & Reproduction .9%
Compaq Computer Corp. ....................... United States 400,000 $ 10,225,000
Fujitsu Ltd. ................................ Japan 30,000 1,040,594
-------------
11,265,594
-------------
Electrical & Electronics 5.0%
ABB Ltd. .................................... Switzerland 25,975 3,026,616
Alcatel SA .................................. France 187,175 12,325,948
Fuji Photo Film Co. Ltd. .................... Japan 450,000 18,458,485
Hitachi Ltd. ................................ Japan 1,003,500 14,511,176
(a) Hyundai Electronics Industries Co. .......... South Korea 100,000 1,973,050
Koninklijke Philips Electronics NV .......... Netherlands 124,928 5,915,650
Marconi PLC ................................. United Kingdom 237,900 3,091,832
Motorola Inc. ............................... United States 30,300 880,594
Sony Corp. .................................. Japan 57,900 5,417,608
-------------
65,600,959
-------------
Electronic Components & Instruments .1%
(a) Agilent Technologies Inc. ................... United States 3,814 281,283
Hewlett-Packard Co. ......................... United States 10,000 1,248,750
-------------
1,530,033
-------------
Energy Equipment & Services .4%
TransCanada PipeLines Ltd. .................. Canada 623,900 4,758,095
-------------
Energy Sources 6.6%
Amerada Hess Corp. .......................... United States 87,928 5,429,554
Burlington Resources Inc. ................... United States 193,400 7,397,550
Eni SpA ..................................... Italy 2,469,050 14,294,948
Norsk Hydro ASA ............................. Norway 47,000 1,979,480
Occidental Petroleum Corp. .................. United States 623,100 13,124,044
Petroleo Brasileiro SA, ADR ................. Brazil 170,000 5,059,200
(a) Ranger Oil Ltd. ............................. Canada 273,050 1,455,824
(a) Renaissance Energy Ltd. ..................... Canada 254,800 2,467,693
Repsol SA ................................... Spain 200,000 3,997,163
Shell Transport & Trading Co. PLC ........... United Kingdom 1,632,853 13,830,196
Societe Elf Aquitaine SA, Br. ............... France 37,072 7,622,353
Texaco Inc. ................................. United States 180,000 9,585,000
Valero Energy Corp. ......................... United States 28,500 904,875
-------------
87,147,880
-------------
Financial Services 3.3%
AXA SA ...................................... France 20,880 3,302,404
ING Groep NV ................................ Netherlands 164,034 11,132,249
Lend Lease Corp. Ltd. ....................... Australia 485,500 6,211,145
Merrill Lynch & Co. Inc. .................... United States 125,000 14,375,000
Nomura Securities Co. Ltd. .................. Japan 340,000 8,338,925
-------------
43,359,723
-------------
Food & Household Products 5.3%
Archer-Daniels-Midland Co. .................. United States 912,196 8,950,923
H.J. Heinz Co. .............................. United States 630,000 27,562,500
Nabisco Group Holdings Corp. ................ United States 443,900 11,513,656
Newell Rubbermaid Inc. ...................... United States 75,000 1,931,250
Northern Foods PLC .......................... United Kingdom 2,208,797 4,004,170
PanAmerican Beverages Inc., A ............... Mexico 150,000 2,240,625
Sara Lee Corp. .............................. United States 400,000 7,725,000
Tate & Lyle PLC ............................. United Kingdom 450,000 2,285,526
Unilever NV ................................. Netherlands 545,900 3,307,696
-------------
69,521,346
-------------
</TABLE>

TG-8
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stocks (cont.)
Forest Products & Paper 2.9%
Assidoman AB ........................ Sweden 192,100 $ 2,748,666
Assidoman AB, 144A .................. Sweden 57,630 824,600
Bowater Inc. ........................ United States 225,000 9,928,125
Carter Holt Harvey Ltd. ............. New Zealand 1,155,252 1,006,094
Georgia-Pacific Timber Co. .......... United States 222,200 4,805,075
International Paper Co. ............. United States 200,000 5,962,500
Metsa Serla OY, B ................... Finland 270,000 2,005,770
Stora Enso OYJ, R ................... Finland 132,700 1,214,759
UPM-Kymmene Corp. ................... Finland 400,000 9,968,943
------------
38,464,532
------------
Health & Personal Care 4.4%
Abbott Laboratories ................. United States 445,370 19,846,801
Aventis SA .......................... France 260,002 19,053,289
(a) CellTech Group PLC .................. United Kingdom 796,142 15,330,588
Pharmacia Corp. ..................... United States 69,000 3,566,438
------------
57,797,116
------------
Industrial Components 1.2%
Goodyear Tire & Rubber Co. .......... United States 269,000 5,380,000
Michelin SA, B ...................... France 120,000 3,866,033
Sandvik AB .......................... Sweden 200,000 4,218,447
Yamato Kogyo Co. Ltd. ............... Japan 539,000 2,496,196
------------
15,960,676
------------
Insurance 5.4%
Ace Ltd. ............................ Bermuda 302,000 8,456,000
Aetna Inc. .......................... United States 110,000 7,060,625
Allstate Corp. ...................... United States 457,700 10,183,825
Partnerre Ltd. ...................... Bermuda 214,500 7,601,344
Scor ................................ France 8,542 373,453
Torchmark Corp. ..................... United States 273,400 6,749,563
Unumprovident Corp. ................. United States 81,100 1,627,069
XL Capital Ltd., A .................. Bermuda 127,100 6,879,288
Zurich Allied AG .................... Switzerland 11,500 5,700,141
Zurich Allied PLC ................... United Kingdom 1,386,000 16,302,920
------------
70,934,228
------------
Leisure & Tourism .3%
Galileo International Inc. .......... United States 160,000 3,340,000
------------
Machinery & Engineering .9%
CNH Global NV ....................... Netherlands 106,800 987,900
Invensys PLC ........................ United Kingdom 1,769,383 6,629,461
METSO OYJ ........................... Finland 392,800 4,744,143
------------
12,361,504
------------
Merchandising 6.4%
Albertson's Inc. .................... United States 512,800 17,050,600
J.C. Penney Co. Inc. ................ United States 180,000 3,318,750
(a) Kmart Corp. ......................... United States 1,100,000 7,493,750
(a) Kroger Co. .......................... United States 910,000 20,076,875
Marks & Spencer PLC ................. United Kingdom 3,261,000 11,428,335
Safeway PLC ......................... United Kingdom 3,223,718 12,542,131
Sears, Roebuck & Co. ................ United States 255,900 8,348,738
W.H. Smith PLC ...................... United Kingdom 673,850 4,014,109
------------
84,273,288
------------
</TABLE>

TG-9
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stocks (cont.)
Metals & Mining 3.3%
AK Steel Holding Corp. ................................... United States 695,400 $ 5,563,200
Barrick Gold Corp. ....................................... Canada 668,800 12,120,948
Companhia Siderurgica Nacional Sid Nacional CSN .......... Brazil 129,100,000 4,049,045
Corus Group PLC .......................................... United Kingdom 2,000,000 2,914,150
Industrias Penoles SA .................................... Mexico 1,875,300 3,029,133
Pohang Iron & Steel Co. Ltd. ............................. South Korea 127,102 11,053,066
USX-U. S. Steel Group .................................... United States 250,000 4,640,625
------------
43,370,167
------------
Multi-Industry 4.4%
Amoy Properties Ltd. ..................................... Hong Kong 2,935,500 1,977,009
Beijing Datang Power Generation Co. Ltd., H .............. China 6,860,000 1,540,031
Broken Hill Proprietary Co. Ltd. ......................... Australia 231,654 2,746,924
Cheung Kong Holdings Ltd. ................................ Hong Kong 2,114,500 23,395,585
Cheung Kong Infrastructure Holdings Ltd. ................. Hong Kong 1,768,000 2,903,083
DESC SA de CV DESC, B .................................... Mexico 5,237,300 3,351,957
DESC SA de CV DESC, C .................................... Mexico 2,671,800 1,682,853
Hutchison Whampoa Ltd. ................................... Hong Kong 207,570 2,609,503
Pacific Dunlop Ltd. ...................................... Australia 1,979,000 1,770,402
Swire Pacific Ltd., A .................................... Hong Kong 2,463,800 14,412,438
Swire Pacific Ltd., B .................................... Hong Kong 1,304,000 1,062,230
------------
57,452,015
------------
Real Estate 1.4%
China Resources Beijing Land Ltd. ........................ China 4,652,000 620,641
General Growth Properties Inc. ........................... United States 164,500 5,222,875
Hang Lung Development Co. Ltd. ........................... Hong Kong 3,624,000 2,812,618
Highwoods Properties Inc. ................................ United States 107,900 2,589,600
National Health Investors Inc. ........................... United States 311,100 3,422,100
New World Development Co. Ltd. ........................... Hong Kong 13,457 15,019
Rouse Co. ................................................ United States 180,000 4,455,000
------------
19,137,853
------------
Recreation & Other Consumer Goods .4%
Eastman Kodak Co. ........................................ United States 89,600 5,331,200
------------
Telecommunications 3.3%
Cable & Wireless HKT Ltd. ................................ Hong Kong 209,746 461,450
(a) General Motors Corp., H .................................. United States 18,000 526,500
Nippon Telegraph & Telephone Corp. ....................... Japan 848 11,300,789
SK Telecom Co. Ltd., ADR ................................. South Korea 100,000 3,631,250
Smartone Telecommunications Holdings Ltd. ................ Hong Kong 310,000 685,990
Telecom Corp. of New Zealand Ltd. ........................ New Zealand 2,362,716 8,286,251
Telecomunicacoes de Sao Paulo SA ......................... Brazil 276,690,000 3,021,504
Telefonica de Argentina SA, ADR .......................... Argentina 67,000 2,127,250
Telefonos de Mexico SA (Telmex), ADR ..................... Mexico 229,855 13,130,467
------------
43,171,451
------------
Textiles & Apparel .3%
Adidas-Salomon AG ........................................ Germany 80,000 4,417,009
------------
Transportation 1.9%
Airborne Freight Corp. ................................... United States 272,000 5,151,000
British Airways PLC ...................................... United Kingdom 1,745,832 10,036,479
Peninsular & Oriental Steam Navigation Co. ............... United Kingdom 294,200 2,507,450
Singapore Airlines Ltd. .................................. Singapore 703,100 6,953,736
------------
24,648,665
------------
</TABLE>

TG-10
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stocks (cont.)
Utilities Electrical & Gas 8.0%
Centrais Eletricas Brasileiras SA (Eletrobras), ADR ....................... Brazil 514,400 $ 5,144,000
CLP Holdings Ltd. ......................................................... Hong Kong 2,043,000 9,513,540
E.On AG ................................................................... Germany 258,000 12,488,977
Endesa SA ................................................................. Spain 200,000 3,889,805
Entergy Corp. ............................................................. United States 97,900 2,661,656
Evn AG .................................................................... Austria 83,370 3,116,665
Hong Kong Electric Holdings Ltd. .......................................... Hong Kong 2,944,000 9,479,353
Iberdrola SA, Br. ......................................................... Spain 981,200 12,697,174
Korea Electric Power Corp. ................................................ South Korea 458,200 14,218,264
National Grid Group PLC ................................................... United Kingdom 275,100 2,157,255
National Power PLC ........................................................ United Kingdom 1,802,600 11,474,837
Potomac Electric Power Co. ................................................ United States 100,000 2,500,000
Powergen PLC .............................................................. United Kingdom 600,000 5,054,725
Thames Water Group PLC .................................................... United Kingdom 530,800 6,826,144
Transportadora de Gas del Sur SA, B, ADR .................................. Argentina 386,900 3,482,100
--------------
104,704,495
--------------
Total Common Stocks (Cost $1,115,126,998).................................. 1,172,708,668
--------------
Preferred Stocks 1.3%
Centrais Eletricas Brasileiras SA (Electrobras), ADR, pfd. ................ Brazil 158,760 1,686,825
Embotelladora Andina SA, B, ADR, pfd. ..................................... Chile 302,900 2,896,481
News Corp. Ltd., pfd. ..................................................... Australia 185,422 2,244,911
Petroleo Brasileiro SA, pfd. .............................................. Brazil 157,470 4,757,270
Telecomunicacoes de Sao Paulo SA, ADR, pfd. ............................... Brazil 205,300 3,798,050
Volkswagen AG, pfd. ....................................................... Germany 60,000 1,432,077
--------------
Total Preferred Stocks (Cost $18,882,057).................................. 16,815,614
--------------
Total Investments before Repurchase Agreements (Cost $1,134,009,055)....... 1,189,524,282
--------------
</TABLE>

TG-11
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
PRINCIPAL
COUNTRY AMOUNT VALUE
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(b) Repurchase Agreements 9.4%
Deutsche Bank AG, 6.80%, 7/03/00 (Maturity Value $40,022,667)
Collaterized by U.S. Treasury Notes and Bonds .................. United States $40,000,000 $ 40,000,000
Dresdner Bank AG, 6.40%, 7/03/00 (Maturity Value $43,794,345)
Collaterized by U.S. Treasury Notes and Bonds .................. United States 43,771,000 43,771,000
HSBC Securities Inc., 6.80%, 7/03/00 (Maturity Value $40,022,667)
Collaterized by U.S. Treasury Notes and Bonds .................. United States 40,000,000 40,000,000
--------------
Total Repurchase Agreements (Cost $123,771,000).................. 123,771,000
--------------
Total Investments (Cost $1,257,780,055) 99.8%.................... 1,313,295,282
Other Assets, less Liabilities .2% .............................. 2,688,014
--------------
Total Net Assets 100.0% ......................................... $1,315,983,296
==============
</TABLE>

(a)Non-income producing
(b)At June 30, 2000, all repurchase agreements held by the Fund had been entered
into on that date.

See notes to financial statements.

TG-12
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Financial Statements

Statement of Assets and Liabilities
June 30, 2000 (unaudited)

Assets:
Investments in securities:
Cost ................................................ $1,257,780,055
==============
Value ............................................... 1,313,295,282
Receivables:
Investment securities sold ......................... 4,786,463
Capital shares sold ................................ 3,533,236
Dividends and interest ............................. 5,960,655
--------------
Total assets ...................................... 1,327,575,636
--------------
Liabilities:
Payables:
Investment securities purchased .................... 4,655,301
Capital shares redeemed ............................ 5,668,779
Affiliates ......................................... 897,842
Funds advanced by custodian .......................... 130,936
Other liabilities .................................... 239,482
--------------
Total liabilities ................................. 11,592,340
--------------
Net assets, at value ........................... $1,315,983,296
==============
Net assets consist of:
Undistributed net investment income .................. $ 12,535,658
Net unrealized appreciation .......................... 55,515,227
Accumulated net realized gain ........................ 149,380,456
Capital shares ....................................... 1,098,551,955
--------------
Net assets, at value ........................... $1,315,983,296
==============
Class 1:
Net assets, at value ................................. $1,243,827,684
==============
Shares outstanding ................................... 93,801,883
==============
Net asset value and offering price per share ......... $ 13.26
==============
Class 2:
Net assets, at value ................................. $ 72,155,612
==============
Shares outstanding ................................... 5,459,676
==============
Net asset value and offering price per share ......... $ 13.22
==============

See notes to financial statements.

TG-13
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Financial Statements (continued)

Statement of Operations
for the six months ended June 30, 2000 (unaudited)

Investment income:
(net of foreign taxes of $1,390,890)
Dividends ................................................. $ 14,731,773
Interest .................................................. 1,669,919
--------------
Total investment income ................................ 16,401,692
--------------
Expenses:
Management fees (Note 3) .................................. 3,568,968
Distribution fees - Class 2 (Note 3) ...................... 34,064
Custodian fees ............................................ 176,100
Reports to shareholders ................................... 34,000
Professional fees (Note 3) ................................ 38,200
Trustees' fees and expenses ............................... 2,900
Other ..................................................... 8,351
--------------
Total expenses ......................................... 3,862,583
--------------
Net investment income ................................. 12,539,109
--------------
Realized and unrealized gains (losses):
Net realized gain from:
Investments .............................................. 149,442,355
Foreign currency transactions ............................ 105,598
--------------
Net realized gain ...................................... 149,547,953
Net unrealized depreciation on investments ................ (160,733,474)
--------------
Net realized and unrealized loss ........................... (11,185,521)
--------------
Net increase in net assets resulting from operations ....... $ 1,353,588
==============

See notes to financial statements.

TG-14
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Financial Statements (continued)

Statements of Changes in Net Assets
for the six months ended June 30, 2000 (unaudited) and the year ended December
31, 1999

<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999
-----------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ............................................... $ 12,539,109 $ 13,240,797
Net realized gain from investments and foreign currency transactions 149,547,953 72,994,064
Net unrealized appreciation (depreciation) on investments ........... (160,733,474) 47,953,928
-----------------------------------
Net increase in net assets resulting from operations ............. 1,353,588 134,188,789
Distributions to shareholders from:
Net investment income:
Class 1 ........................................................... (11,099,754) (15,661,321)
Class 2 ........................................................... (152,094) (19,742)
Net realized gains:
Class 1 ........................................................... (73,119,422) (75,768,827)
Class 2 ........................................................... (1,029,478) (95,513)
-----------------------------------
Total distributions to shareholders .................................. (85,400,748) (91,545,403)
Capital share transactions (Note 2):
Class 1 ........................................................... 620,018,983 (80,925,896)
Class 2 ........................................................... 67,218,023 3,995,606
-----------------------------------
Total capital share transactions ..................................... 687,237,006 (76,930,290)
Net increase (decrease) in net assets ............................ 603,189,846 (34,286,904)
Net assets:
Beginning of period .................................................. 712,793,450 747,080,354
-----------------------------------
End of period ........................................................ $1,315,983,296 $ 712,793,450
===================================
Undistributed net investment income included in net assets:
End of period ........................................................ $ 12,535,658 $ 11,248,397
===================================
</TABLE>

See notes to financial statements.

TG-15
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Notes to Financial Statements (unaudited)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The Templeton Growth Securities Fund (the Fund) is a separate, diversified
series of the Franklin Templeton Variable Insurance Products Trust (the Trust),
which is an open-end investment company registered under the Investment Company
Act of 1940. Shares of the Fund are sold only to insurance company separate
accounts to fund the benefits of variable life insurance policies or variable
annuity contracts. The Fund seeks long-term capital growth. The portfolio
invests primarily in equity securities of issuers in foreign countries with
emerging markets.

Effective May 1, 2000, the name of the Templeton Global Growth Fund changed to
Templeton Growth Securities Fund, as a result of Fund mergers, as discussed in
Note 6. The Fund's investment objectives and other policies did not change as a
result of the name change.

The following summarizes the Fund's significant accounting policies.

a. Security Valuation

b. Foreign Currency Translation

c. Income Taxes

d. Security Transactions, Investment Income, Expenses and Distributions

TG-16
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

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

e. Accounting Estimates

2. SHARES OF BENEFICIAL INTEREST

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

At June 30, 2000, there were an unlimited number of shares authorized ($.01 par
value). Transactions in the Fund's shares were as follows:

<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999(a)
--------------------------------------------------------------------
Shares Amount Shares Amount
Class 1 Shares: --------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ........................................ 6,155,205 $ 82,942,043 3,559,626 $ 53,423,886
Shares issued on merger (Note 6) ................... 48,592,348 628,298,597 -- --
Shares issued in reinvestment of distributions ..... 6,513,470 84,219,176 6,314,237 91,430,148
Shares redeemed .................................... (12,780,815) (175,440,833) (15,136,586) (225,779,930)
--------------------------------------------------------------------
Net increase (decrease) ............................ 48,480,208 $ 620,018,983 (5,262,723) $ (80,925,896)
====================================================================
Class 2 Shares:
Shares sold ........................................ 5,301,315 $ 73,217,208 3,228,083 $ 46,873,543
Shares issued on merger (Note 6) ................... 4,308,381 55,535,000 -- --
Shares issued in reinvestment of distributions ..... 91,595 1,181,572 7,976 115,255
Shares redeemed .................................... (4,528,932) (62,715,757) (2,948,742) (42,993,192)
--------------------------------------------------------------------
Net increase ....................................... 5,172,359 $ 67,218,023 287,317 $ 3,995,606
====================================================================
</TABLE>

(a)For the period January 6, 1999 (effective date) to December 31, 1999, for
Class 2.

TG-17
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

3. TRANSACTIONS WITH AFFILIATES

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

<TABLE>
<CAPTION>
Entity Affiliation
--------------------------------------------------------------------------------------
<S> <C>
Franklin Templeton Services, Inc. (FT Services) Administrative manager
Templeton Global Advisors Ltd. (TGAL) Investment manager
Franklin/Templeton Distributors, Inc. (Distributors) Principal underwriter
Franklin/Templeton Investor Services, Inc. (Investor Services) Transfer agent
</TABLE>

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

Annualized Fee Rate Daily Net Assets
------------------------------------------------------------------
1.00% First $100 million
.90% Over $100 million, up to and including $250 million
.80% Over $250 million, up to and including $500 million
.75% Over $500 million

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

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

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

Included in professional fees are legal fees of $616 that were paid to a law
firm in which a partner of that firm was an officer of the Fund.

4. INCOME TAXES

Net investment income and net realized capital gains differ for financial
statement and tax purposes primarily due to differing treatments of foreign
currency transactions and merger related expenses.

At June 30, 2000, the net unrealized appreciation based on the cost of
investments for income tax purposes of $1,259,349,622 was as follows:

Unrealized appreciation ............. $ 181,924,154
Unrealized depreciation ............. (127,978,494)
--------------
Net unrealized appreciation ......... $ 53,945,660
==============

5. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities) for the
period ended June 30, 2000 aggregated $912,419,966 and $512,178,868,
respectively.

TG-18
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

6. MERGERS

On May 1, 2000, the Franklin Templeton Variable Insurance Products Trust
(FTVIPT) - Templeton Growth Securities Fund acquired the net assets of the
Templeton Variable Products Series Fund (TVP) - Templeton Stock Fund pursuant
to a plan of reorganization approved by TVP - Templeton Stock Fund's
shareholders. The merger was accomplished by a tax-free exchange of 48,592,348
Class 1 shares and 4,308,381 Class 2 shares of the FTVIPT - Templeton Growth
Securities Fund (valued at $12.93 per share and $12.89 per share, respectively)
for the net assets of the TVP - Templeton Stock Fund which aggregated
$683,833,597, including $122,735,093 of unrealized appreciation. The merger was
accounted for as a pooling-of-interests without restatement for financial
reporting purposes. The combined net assets of the FTVIPT - Templeton Growth
Securities Fund immediately after the merger were $1,325,793,044.

TG-19
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Tax Designation

The following table provides a breakdown by country of foreign source income
and foreign taxes paid, as designated by the Fund, to Class 1 and Class 2
shareholders of record on April 26, 2000.

<TABLE>
<CAPTION>
Class 1 Class 2
---------------------------------------------------------
Foreign Tax Foreign Foreign Tax Foreign
Paid Source Income Paid Source Income
Country Per Share Per Share Per Share Per Share
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Argentina .................... 0.0000 0.0177 0.0000 0.0175
Australia .................... 0.0011 0.0226 0.0011 0.0224
Austria ...................... 0.0011 0.0068 0.0011 0.0067
Belgium ...................... 0.0011 0.0060 0.0011 0.0059
Bermuda ...................... 0.0000 0.0035 0.0000 0.0034
Brazil ....................... 0.0026 0.0167 0.0026 0.0166
Canada ....................... 0.0004 0.0022 0.0004 0.0021
China ........................ 0.0000 0.0042 0.0000 0.0041
Ecuador ...................... 0.0000 0.0003 0.0000 0.0003
Finland ...................... 0.0030 0.0165 0.0030 0.0163
France ....................... 0.0017 0.0115 0.0017 0.0114
Germany ...................... 0.0003 0.0024 0.0003 0.0024
Hong Kong .................... 0.0000 0.0410 0.0000 0.0406
Hungary ...................... 0.0005 0.0019 0.0005 0.0019
India ........................ 0.0000 0.0059 0.0000 0.0058
Italy ........................ 0.0004 0.0024 0.0004 0.0023
Japan ........................ 0.0017 0.0094 0.0017 0.0093
Mexico ....................... 0.0003 0.0044 0.0003 0.0043
Netherlands .................. 0.0020 0.0108 0.0020 0.0107
New Zealand .................. 0.0002 0.0008 0.0002 0.0008
Norway ....................... 0.0004 0.0022 0.0004 0.0022
Philippines .................. 0.0002 0.0008 0.0002 0.0008
Singapore .................... 0.0011 0.0040 0.0011 0.0040
South Africa ................. 0.0000 0.0072 0.0000 0.0071
South Korea .................. 0.0013 0.0065 0.0013 0.0064
Spain ........................ 0.0014 0.0074 0.0014 0.0073
Sweden ....................... 0.0016 0.0100 0.0016 0.0099
Switzerland .................. 0.0006 0.0033 0.0006 0.0033
Thailand ..................... 0.0003 0.0026 0.0003 0.0025
United Kingdom ............... 0.0103 0.0780 0.0103 0.0772
----------------------------------------------------
TOTAL ........................ $0.0336 $0.3090 $0.0336 $0.3055
====================================================
</TABLE>

Shareholders are advised to check with their tax advisors for information on
the treatment of these amounts on their individual income tax returns.

TG-20
<PAGE>

TEMPLETON INTERNATIONAL SECURITIES FUND

--------------------------------------------------------------------------------
Fund Goal and Primary Investments: Templeton International Securities Fund
(formerly Templeton International Fund) seeks long-term capital growth. The
Fund invests primarily in equity securities of companies located outside the
U.S., including those in emerging markets.
--------------------------------------------------------------------------------
During the six months under review, global economies appeared to be improving,
although most trailed the U.S. economy's growth rate. In our view, Europe
displayed slow but steady improvement in manufacturing output, unemployment
rates slightly declined and consumer confidence increased. The euro has fallen
significantly since its introduction, but a more positive economic outlook for
Europe should help benefit the currency. The U.K. was the exception to the
European recovery, where the strong pound negatively impacted the manufacturing
sector, as it made exports more expensive. However, we believe U.K. interest
rate hikes are near an end because of its sluggish economy.

It was hard to find evidence of Japan's recovery as economists and strategists
argued whether the Japanese economy was actually recovering after a 10-year
slumber. Latin American countries, particularly Brazil, made steady gains but
seemed to remain closely tied to U.S. interest-rate cycles, making them
vulnerable to further interest-rate hikes.

Extreme market volatility characterized the first half of 2000. Statistics
indicate that 1998 and 1999 were the worst two years since 1975 for value
investors like us.(1) The first quarter of 2000 continued this trend, with high
growth stocks significantly outperforming value stocks regardless of valuation.
This trend appeared to moderate near the end of the quarter as many investors
seemed to assess the varying impacts of accelerating global economic growth,
higher commodity prices and global central bank tightening. The resultant
market broadening to include more economically sensitive stocks benefited the
Fund in the second quarter of 2000.

(1) Source: Morgan Stanley Capital International.

This chart in pie format shows the geographic distribution of Templeton
International Securities Fund as a percentage of total net assets on 6/30/00.

Europe 60.1%
Asia 17.8%
Latin America 7.2%
Australia/New Zealand 4.4%
North America 3.8%
Mid-East/Africa 1.7%
Short-Term Investments & Other Net Assets 5.0%

TI-1
<PAGE>
Top 10 Holdings
Templeton International
Securities Fund
6/30/00

Company % of Total
Sector, Country Net Assets
----------------------------------------
Cheung Kong
Holdings Ltd. 2.3%
Multi-Industry,
Hong Kong

Total Fina Elf SA, B 2.1%
Energy Sources, France

AXA SA 2.0%
Financial Services, France

Nomura Securities Co. Ltd. 1.9%
Financial Services, Japan

Nordic Baltic Holding AB 1.9%
Banking, Sweden

Elan Corp., PLC, ADR 1.9%
Health & Personal Care,
Irish Republic

Aventis SA 1.9%
Health & Personal Care,
France

Nippon Telegraph &
Telephone Corp. 1.8%
Telecommunications,
Japan

Koninklijke Philips
Electronics NV 1.8%
Electrical & Electronics,
Netherlands

Muenchener
Rueckversicherungs- 1.7%
Gesellschaft
Insurance, Germany

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

During the period, especially in the first three months, the Fund sought to
take advantage of the extreme market conditions to decrease our
telecommunications and technology positions. We reduced our holdings in
Portugal Telecom, while eliminating our holdings in Nintendo and Telefonica de
Argentina. As a result of these changes, our telecommunications weighting
declined slightly from 8.9% of total net assets on January 1, 2000, to 8.3% at
the end of the period. We reinvested proceeds from the sale of these securities
in a number of what we consider to be out-of-favor sectors with solid growth
expectations, including pharmaceuticals (Elan Corp. and Merck KGAA), aerospace
(BAE Systems), energy (Eni SpA and Repsol), transportation (Stagecoach
Holdings) and machinery and engineering (Komatsu).

We also benefited from corporate merger activity during the six months under
review, as Alcatel acquired Fund position Newbridge Networks, and three of our
Latin American telecommunications holdings -- Telefonica de Argentina,
Telefonica del Peru and Telecomunicacoes de Sao Paulo -- were acquired by
Spain's Telefonica SA. Our exposure to Latin America will likely decline as
Telefonica SA consumes these stocks, and we were recently unable to identify
bargains in the region and reinvest the proceeds. We continue to believe that
if valuation gaps between growth and value stocks remain at historically high
levels, the consequence will be increased merger, acquisition and buyout
activity.

Looking forward, we expect global markets to remain volatile due to questions
surrounding the direction of interest rates, the U.S. economy's health and the
sustainability of growth rates needed to maintain historically high valuations
in the technology, media and telecommunications sectors. We see tremendous
value opportunities in the U.K. market's utilities, engineering and retail
sectors. Furthermore, we do not hedge our currency exposure and stand to
benefit from any recovery in the euro. In Japan, ongoing market uncertainty
created opportunities to purchase economically sensitive stocks while providing
us the ability to reduce our holdings in highly valued, "new economy" stocks.

TI-2
<PAGE>

We are primarily invested in what we view as low price-to-earnings (P/E)
multiple stocks and feel well-positioned to take advantage of any declines in
the high P/E sectors, as our long-term outlook allows us to purchase growth
stocks at low valuations. In our opinion, the historically high valuation
levels placed on growth companies represent a potential risk. If the global
economic trends turn unfavorable, it would potentially limit corporate earnings
growth or lead to higher interest rates. As always, the Templeton research team
will scour the world seeking those shares selling at the lowest value in
relation to their long-term earnings potential, since such shares can help
reduce risk while offering the potential for attractive, long-term returns.

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance
is no guarantee of future results, these insights may help you understand our
investment and management philosophy.

TI-3
<PAGE>

Templeton International
Securities Fund
Class 1

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

PERFORMANCE SUMMARY AS OF 6/30/00

Templeton International Securities Fund - Class 1 delivered a +0.57% cumulative
total return for the six-month period ended 6/30/00. Total return of Class 1
shares represents the cumulative or average annual change in value, assuming
reinvestment of dividends and capital gains. Average returns smooth out
variations in returns, which can be significant; they are not the same as
year-by-year results.

Templeton International Securities Fund - Class 1*
Periods ended 6/30/00
Since
Inception
1-Year 5-Year (5/1/92)
----------------------------------------------------------------------
Average Annual Total Return +12.73% +15.54% +14.44%
Cumulative Total Return +12.73% +105.87% +200.80%
Value of $10,000 Investment $11,273 $20,587 $30,080

*Performance prior to the 5/1/00 merger reflects the historical performance of
Templeton International Fund.

Ongoing stock market volatility can dramatically change the Fund's short-term
performance; current results may be lower.

Past performance does not guarantee future results.

TI-4
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SECURITIES FUND

Financial Highlights

<TABLE>
<CAPTION>
Class 1
-------------------------------------------------------------------------------------
Six Months Ended Year Ended December 31,
June 30, 2000 -------------------------------------------------------------------
(unaudited) 1999 1998 1997 1996 1995
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $22.25 $20.69 $20.18 $18.40 $15.13 $13.22
-------------------------------------------------------------------------------------
Income from investment operations:
Net investment income(c) ..................... .25 .33 .60 .49 .43 .23
Net realized and unrealized gains (losses) ... (.27) 3.78 1.29 2.01 3.15 1.83
-------------------------------------------------------------------------------------
Total from investment operations .............. (.02) 4.11 1.89 2.50 3.58 2.06
-------------------------------------------------------------------------------------
Less distributions from:
Net investment income ........................ (.43) (.57) (.49) (.51) (.24) (.10)
Net realized gains ........................... (2.49) (1.98) (.89) (.21) (.07) (.05)
-------------------------------------------------------------------------------------
Total distributions ........................... (2.92) (2.55) (1.38) (.72) (.31) (.15)
-------------------------------------------------------------------------------------
Net asset value, end of period ................ $19.31 $22.25 $20.69 $20.18 $18.40 $15.13
=====================================================================================
Total return(b) ............................... .57% 23.61% 9.33% 13.95% 24.04% 15.78%

Ratios/supplemental data
Net assets, end of period (000's) ............. $1,652,815 $1,056,798 $980,470 $938,410 $682,984 $353,141
Ratios to average net assets:
Expenses ..................................... .84%(a) .85% .86% .81% .65% .71%
Net investment income ........................ 2.57%(a) 1.69% 2.81% 2.70% 3.23% 2.36%
Portfolio turnover rate ....................... 21.83% 30.04% 29.56% 16.63% 9.46% 5.19%
</TABLE>

(a)Annualized
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for periods less than one
year.
(c)Based on average shares outstanding effective year ended December 31, 1999.

TI-5
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SECURITIES FUND

Financial Highlights (continued)

<TABLE>
<CAPTION>
Class 2
-------------------------------------------------------------
Six Months Ended Year Ended December 31,
June 30, 2000 ----------------------------------------
(unaudited) 1999 1998 1997(c)
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period ................ $22.13 $20.61 $20.14 $18.40
-------------------------------------------------------------
Income from investment operations:
Net investment income(d) ........................... .22 .25 .59 .07
Net realized and unrealized gains (losses) ......... (.26) 3.78 1.25 1.67
-------------------------------------------------------------
Total from investment operations .................... (.04) 4.03 1.84 1.74
-------------------------------------------------------------
Less distributions from:
Net investment income .............................. (.38) (.53) (.48) --
Net realized gains ................................. (2.49) (1.98) (.89) --
-------------------------------------------------------------
Total distributions ................................. (2.87) (2.51) (1.37) --
-------------------------------------------------------------
Net asset value, end of period ...................... $19.22 $22.13 $20.61 $20.14
=============================================================
Total return(b) ..................................... .50% 23.23% 9.08% 9.46%
Ratios/supplemental data
Net assets, end of period (000's) ................... $157,908 $101,365 $39,886 $17,606
Ratios to average net assets:
Expenses ........................................... 1.09%(a) 1.10% 1.11% 1.13%(a)
Net investment income .............................. 2.30%(a) 1.26% 2.69% 1.14%(a)
Portfolio turnover rate ............................. 21.83% 30.04% 29.56% 16.63%
</TABLE>

(a)Annualized
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for periods less than one
year.
(c)For the period May 1, 1997 (effective date) to December 31, 1997.
(d)Based on average shares outstanding effective year ended December 31,1999.

See notes to financial statements.

TI-6
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited)

<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stocks 91.2%
Aerospace & Military Technology 2.1%
BAE Systems PLC ............................................ United Kingdom 4,744,725 $ 29,377,546
Hong Kong Aircraft Engineering Co. Ltd. .................... Hong Kong 947,080 1,822,406
Saab AB, B ................................................. Sweden 726,900 6,132,778
------------
37,332,730
------------
Automobiles 2.6%
Autoliv Inc., SDR .......................................... Sweden 675,450 16,634,044
Volkswagen AG .............................................. Germany 312,000 12,052,452
Volvo AB, B ................................................ Sweden 843,780 18,422,514
------------
47,109,010
------------
Banking 8.5%
Australia & New Zealand Banking Group Ltd. ................. Australia 2,938,850 22,603,010
Banca Nazionale del Lavoro SpA ............................. Italy 5,635,000 19,823,291
Banco Popular Espanol SA ................................... Spain 124,800 3,875,925
Bank Austria AG ............................................ Austria 96,320 4,710,562
Bank Austria AG, 144A ...................................... Austria 230,146 11,255,367
BPI Socieda de Gestora de Participacoes Socias SA .......... Portugal 1,609,890 5,709,705
Credicorp Ltd. ............................................. Peru 292,160 2,629,440
Foreningssparbanken AB, A .................................. Sweden 472,500 6,949,322
HSBC Holdings PLC .......................................... Hong Kong 636,400 7,265,865
HSBC Holdings PLC, ADR ..................................... Hong Kong 180,600 10,463,513
National Bank of Canada .................................... Canada 897,620 13,388,272
Nordic Baltic Holding AB, FDR .............................. Sweden 4,763,875 34,796,142
Unibanco Uniao de Bancos Brasileiros SA, GDR ............... Brazil 358,700 10,312,625
------------
153,783,039
------------
Broadcasting & Publishing 1.5%
Wolters Kluwer NV .......................................... Netherlands 1,030,100 27,548,589
------------
Building Materials & Components .6%
Caradon PLC ................................................ United Kingdom 3,265,240 7,464,027
Hepworth PLC ............................................... United Kingdom 1,330,100 3,795,568
------------
11,259,595
------------
Chemicals 4.2%
Akzo Nobel NV .............................................. Netherlands 564,580 24,082,483
BASF AG .................................................... Germany 474,430 19,327,552
Clariant AG ................................................ Switzerland 54,500 20,310,559
Imperial Chemical Industries PLC ........................... United Kingdom 857,000 6,584,124
Kemira OY .................................................. Finland 1,088,632 5,321,904
------------
75,626,622
------------
Construction & Housing .4%
Fletcher Challenge Building Ltd. ........................... New Zealand 6,285,000 6,686,579
------------
Electrical & Electronics 8.5%
ABB Ltd. ................................................... Switzerland 64,840 7,785,505
Alcatel SA ................................................. France 245,175 16,145,396
Alcatel SA, ADR ............................................ France 338,791 22,529,575
Hitachi Ltd. ............................................... Japan 1,850,000 26,752,044
(a) Hyundai Electronics Industries Co. ......................... South Korea 875,000 17,264,187
Koninklijke Philips Electronics NV ......................... Netherlands 694,974 32,908,742
Nokia Corp., A ............................................. Finland 153,800 7,879,884
Sony Corp. ................................................. Japan 237,900 22,259,912
------------
153,525,245
------------
</TABLE>

TI-7
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stocks (cont.)
Electronic Components & Instruments 1.5%
Williams PLC ........................................ United Kingdom 4,674,600 $ 27,209,589
------------
Energy Sources 6.3%
Eni SpA ............................................. Italy 3,631,060 21,022,586
PC Holdings SA, ADR ................................. Argentina 316,142 5,789,350
Repsol SA, Br. ...................................... Spain 1,253,400 25,050,219
Shell Transport & Trading Co. PLC ................... United Kingdom 2,882,342 24,413,315
Total Fina Elf SA, B ................................ France 243,338 37,460,299
------------
113,735,769
------------
Financial Services 6.4%
AXA SA .............................................. France 208,400 32,960,776
AXA SA, 144A ........................................ France 17,366 2,746,626
ING Groep NV ........................................ Netherlands 386,631 26,238,905
Nomura Securities Co. Ltd. .......................... Japan 1,432,425 35,132,015
(a) Royal Bank of Scotland Group PLC .................... United Kingdom 1,118,729 18,612,451
------------
115,690,773
------------
Food & Household Products 1.5%
Northern Foods PLC .................................. United Kingdom 3,278,607 5,943,552
Panamerican Beverages Inc., A ....................... Mexico 290,000 4,331,875
Tate & Lyle PLC ..................................... United Kingdom 3,303,500 16,778,301
------------
27,053,728
------------
Forest Products & Paper 1.0%
Stora Enso OYJ, R ................................... Finland 1,002,730 9,203,029
UPM-Kymmene Corporation ............................. Finland 351,000 8,747,747
------------
17,950,776
------------
Health & Personal Care 9.0%
Aventis SA .......................................... France 464,880 34,067,018
(a) CellTech Group PLC .................................. United Kingdom 1,003,271 19,319,084
(a) Elan Corp. PLC, ADR ................................. Irish Republic 718,225 34,789,023
Internatio-Muller NV ................................ Netherlands 240,308 4,146,260
Mayne Nickless Ltd., A .............................. Australia 5,353,320 11,024,453
Merck KGAA .......................................... Germany 636,150 19,513,055
Nycomed Amersham PLC ................................ United Kingdom 1,575,700 15,300,385
Teva Pharmaceutical Industries Ltd., ADR ............ Israel 462,545 25,642,338
------------
163,801,616
------------
Insurance 5.9%
Ace Ltd. ............................................ Bermuda 853,045 23,885,260
Muenchener Rueckversicherungs-Gesellschaft .......... Germany 95,520 30,031,977
Scor ................................................ France 250,000 10,929,891
XL Capital Ltd., A .................................. Bermuda 170,450 9,225,606
Zurich Allied AG .................................... Switzerland 44,800 22,205,768
Zurich Allied PLC ................................... United Kingdom 920,100 10,822,739
------------
107,101,241
------------
Machinery & Engineering 2.4%
IHC Caland NV ....................................... Netherlands 187,500 9,166,155
Invensys PLC ........................................ United Kingdom 3,139,529 11,763,075
Komatsu Ltd. ........................................ Japan 3,191,000 22,498,804
------------
43,428,034
------------
</TABLE>

TI-8
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stocks (cont.)
Merchandising 2.4%
Hudsons Bay Co. ...................................... Canada 360,774 $ 3,822,739
Marks & Spencer PLC .................................. United Kingdom 4,772,000 16,723,708
Safeway PLC .......................................... United Kingdom 4,943,186 19,231,857
Storehouse ........................................... United Kingdom 6,812,781 4,486,367
------------
44,264,671
------------
Metals & Mining 3.7%
Anglo American Platinum Corp. Ltd. ................... South Africa 145,609 4,196,460
Barrick Gold Corp. ................................... Canada 1,042,900 18,828,086
Boehler-Uddeholm AG .................................. Austria 64,505 2,266,121
Boehler-Uddeholm AG, 144A ............................ Austria 60,855 2,137,894
Corus Group PLC ...................................... United Kingdom 8,123,200 11,836,111
Industrias Penoles SA ................................ Mexico 1,893,000 3,057,723
Ispat International NV, A ............................ Netherlands 227,600 2,162,200
Pohang Iron & Steel Co. Ltd. ......................... South Korea 128,901 11,209,511
WMC Ltd. ............................................. Australia 2,399,500 10,766,027
------------
66,460,133
------------
Multi-Industry 4.4%
Broken Hill Proprietary Co. Ltd. ..................... Australia 945,543 11,212,129
Cheung Kong Holdings Ltd. ............................ Hong Kong 3,792,825 41,965,179
Elementis PLC ........................................ United Kingdom 5,428,174 6,450,666
Hanson PLC ........................................... United Kingdom 446,211 3,147,802
Next PLC ............................................. United Kingdom 775,500 6,814,989
Swire Pacific Ltd., B ................................ Hong Kong 13,622,100 11,096,473
------------
80,687,238
------------
Telecommunications 8.3%
Cia de Telecomunicaciones de Chile SA, ADR ........... Chile 431,500 7,820,938
Korea Telecom Corp., ADR ............................. South Korea 163,020 7,886,093
Nippon Telegraph & Telephone Corp. ................... Japan 2,510 33,449,270
Philippine Long Distance Telephone Co., ADR .......... Philippines 722,400 12,822,600
Portugal Telecom SA .................................. Portugal 808,010 9,108,352
Smartone Telecommunications Holdings Ltd. ............ Hong Kong 7,652,000 16,932,895
Telecom Corp. of New Zealand Ltd. .................... New Zealand 5,087,400 17,841,955
Telecom Italia SpA, di Risp .......................... Italy 1,887,750 12,545,311
Telefonica del Peru SA, ADR .......................... Peru 267,700 3,045,088
Telefonica del Peru SA, B ............................ Peru 5,365,602 7,722,836
Telefonos de Mexico SA (Telmex), L, ADR .............. Mexico 360,760 20,608,415
------------
149,783,753
------------
Transportation 2.9%
British Airways PLC .................................. United Kingdom 2,575,000 14,803,219
Koninklijke Nedlloyd Groep NV ........................ Netherlands 216,300 4,206,824
Peninsular & Oriental Steam Navigation Co. ........... United Kingdom 1,355,414 11,552,115
Seino Transportation Co. Ltd. ........................ Japan 552,000 2,785,955
Stagecoach Holdings PLC .............................. United Kingdom 16,914,690 18,756,544
------------
52,104,657
------------
</TABLE>

TI-9
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stocks (cont.)
Utilities Electrical & Gas 7.1%
CLP Holdings Ltd. ......................................................... Hong Kong 4,081,000 $ 19,003,797
E.On AG ................................................................... Germany 465,650 22,540,667
Evn AG .................................................................... Austria 23,475 877,579
Gener SA, ADR ............................................................. Chile 303,800 4,462,063
Hong Kong Electric Holdings Ltd. .......................................... Hong Kong 4,062,365 13,080,364
Iberdrola SA, Br. ......................................................... Spain 1,575,700 20,390,275
Korea Electric Power Corp. ................................................ South Korea 250,000 7,757,674
National Power PLC ........................................................ United Kingdom 1,972,900 12,558,918
Thames Water Group PLC .................................................... United Kingdom 2,223,811 28,598,444
--------------
129,269,781
--------------
Total Common Stocks (Cost $1,444,014,133).................................. 1,651,413,168
--------------
Preferred Stocks 3.8%
Cia Vale do Rio Doce, A, ADR, pfd. ........................................ Brazil 350,400 9,898,800
Embratel Participacoes SA, ADR, pfd. ...................................... Brazil 420,490 9,934,076
Petroleo Brasileiro SA, pfd. .............................................. Brazil 300,000 9,063,193
Telecomunicacoes Brasileiras SA (Telebras), ADR, pfd. ..................... Brazil 221,950 21,556,894
Telecomunicacoes de Sao Paulo SA, ADR, pfd. ............................... Brazil 556,750 10,299,875
Telemig Celular SA, C, pfd. ............................................... Brazil 1,705,000 43,476
Tele Norte Leste Participacoes SA, ADR, pfd. .............................. Brazil 11,702 276,460
Volkswagen AG, pfd. ....................................................... Germany 275,000 6,563,686
--------------
Total Preferred Stocks (Cost $57,239,299).................................. 67,636,460
--------------
Total Investments before Repurchase Agreements (Cost $1,501,253,432)....... 1,719,049,628
--------------
PRINCIPAL
AMOUNT
---------
(b) Repurchase Agreements 4.4%
Dresdner Bank AG, 6.40%, 7/03/00 (Maturity Value $20,111,721)
Collateralized by U.S. Treasury Notes and Bonds ........................... United States 20,101,000 20,101,000
Paribas Corp., 6.85%, 7/03/00 (Maturity Value $60,034,250)
Collateralized by U.S. Treasury Notes and Bonds ........................... United States 60,000,000 60,000,000
--------------
Total Repurchase Agreements (Cost $80,101,000)............................. 80,101,000
--------------
Total Investments (Cost $1,581,354,432) 99.4%.............................. 1,799,150,628
Other Assets, less Liabilities .6% ........................................ 11,571,531
--------------
Total Net Assets 100.0% ................................................... $1,810,722,159
==============
</TABLE>

(a)Non-income producing
(b)At June 30, 2000, all repurchase agreements held by the Fund had been entered
into on that date.

See notes to financial statements.

TI-10
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SECURITIES FUND

Financial Statements

Statement of Assets and Liabilities
June 30, 2000 (unaudited)

Assets:
Investments in securities:
Cost ................................................ $1,581,354,432
==============
Value ............................................... 1,799,150,628
Receivables:
Investment securities sold .......................... 2,267,482
Capital shares sold ................................. 6,717,850
Dividends and interest .............................. 6,526,687
--------------
Total assets ....................................... 1,814,662,647
--------------
Liabilities:
Payables:
Investment securities purchased ..................... 437,841
Capital shares redeemed ............................. 1,933,327
Affiliates .......................................... 1,193,236
Funds advanced by custodian .......................... 30,240
Other liabilities .................................... 345,844
--------------
Total liabilities .................................. 3,940,488
--------------
Net assets, at value .............................. $1,810,722,159
==============
Net assets consist of:
Undistributed net investment income .................. $ 11,204,261
Net unrealized appreciation .......................... 217,796,196
Accumulated net realized gain ........................ 30,262,822
Capital shares ....................................... 1,551,458,880
--------------
Net assets, at value .............................. $1,810,722,159
==============
Class 1:
Net assets, at value ................................. $1,652,814,646
==============
Shares outstanding ................................... 85,603,213
==============
Net asset value and offering price per share ......... $ 19.31
==============
Class 2:
Net assets, at value ................................. $ 157,907,513
==============
Shares outstanding ................................... 8,217,632
==============
Net asset value and offering price per share ......... $ 19.22
==============

See notes to financial statements.

TI-11
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SECURITIES FUND

Financial Statements (continued)

Statement of Operations
for the six months ended June 30, 2000 (unaudited)

Investment Income:
(net of foreign taxes of $2,589,021)
Dividends ................................................... $ 20,559,326
Interest .................................................... 2,063,681
-------------
Total investment income .................................... 22,623,007
-------------
Expenses:
Management fees (Note 3) .................................... 4,489,442
Administrative fees (Note 3) ................................ 665,140
Distribution fees - Class 2 (Note 3) ........................ 153,708
Custodian fees .............................................. 263,000
Reports to shareholders ..................................... 124,000
Professional fees (Note 3) .................................. 35,400
Trustees' fees and expenses ................................. 6,500
Other ....................................................... 3,227
-------------
Total expenses ............................................. 5,740,417
-------------
Net investment income ..................................... 16,882,590
-------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ................................................ 79,041,160
Foreign currency transactions .............................. (1,372,970)
-------------
Net realized gain ......................................... 77,668,190
Net unrealized depreciation on investments .................. (47,373,112)
-------------
Net realized and unrealized gain ............................. 30,295,078
-------------
Net increase in net assets resulting from operations ......... $ 47,177,668
=============

See notes to financial statements.

TI-12
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SECURITIES FUND

Financial Statements (continued)

Statements of Changes in Net Assets
for the six months ended June 30, 2000 (unaudited) and the year ended December
31, 1999

<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999
---------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ............................................... $ 16,882,590 $ 17,320,878
Net realized gain from investments and foreign currency transactions 77,668,190 84,997,543
Net unrealized appreciation (depreciation) on investments ........... (47,373,112) 128,046,409
---------------------------------------
Net increase in net assets resulting from operations ............... 47,177,668 230,364,830
Distributions to shareholders from:
Net investment income:
Class 1 ........................................................... (20,195,709) (26,406,410)
Class 2 ........................................................... (2,255,259) (1,047,921)
Net realized gains:
Class 1 ........................................................... (118,600,706) (91,727,528)
Class 2 ........................................................... (14,798,195) (3,898,692)
---------------------------------------
Total distributions to shareholders .................................. (155,849,869) (123,080,551)
Capital share transactions: (Note 2)
Class 1 ........................................................... 692,644,895 (14,797,710)
Class 2 ........................................................... 68,586,998 45,319,734
---------------------------------------
Total capital share transactions ..................................... 761,231,893 30,522,024
Net increase in net assets ....................................... 652,559,692 137,806,303
Net assets:
Beginning of period .................................................. 1,158,162,467 1,020,356,164
---------------------------------------
End of period ........................................................ $1,810,722,159 $1,158,162,467
=======================================
Undistributed net investment income included in net assets:
End of period ........................................................ $ 11,204,261 $ 16,772,639
=======================================
</TABLE>

See notes to financial statements.

TI-13
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SECURITIES FUND

Notes to Financial Statements (unaudited)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The Templeton International Securities Fund (the Fund) is a separate,
diversified series of the Franklin Templeton Variable Insurance Products Trust
(the Trust), which is an open-end investment company registered under the
Investment Company Act of 1940. Shares of the Fund are sold only to insurance
company separate accounts to fund the benefits of variable life insurance
policies or variable annuity contracts. The Fund seeks long-term capital
growth. The portfolio invests primarily in equity securities of smaller
companies outside the U.S., including emerging markets.

Effective May 1, 2000, the name of the Templeton International Equity Fund
changed to Templeton International Securities Fund, as a result of fund
mergers, as discussed in Note 6. The Fund's investment objectives and other
policies did not change as a result of the name change.

The following summarizes the Fund's significant accounting policies.

a. Security Valuation

b. Foreign Currency Translation

c. Income Taxes

d. Security Transactions, Investment Income, Expenses and Distributions

TI-14
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

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

e. Accounting Estimates

2. SHARES OF BENEFICIAL INTEREST

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

At June 30, 2000, there were an unlimited number of shares authorized ($.01 par
value). Transactions in the Fund's shares were as follows:

<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999
-----------------------------------------------------------------------
Shares Amount Shares Amount
Class 1 Shares: -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ........................................ 6,115,864 $ 117,487,707 4,898,075 $ 98,598,572
Shares issued on merger (Note 6) ................... 35,794,416 651,458,377 -- --
Shares issued on reinvestment of distributions ..... 7,326,842 138,796,415 6,924,615 118,133,938
Shares redeemed .................................... (11,133,746) (215,097,604) (11,722,543) (231,530,220)
------------------------------------------------------------------
Net increase (decrease) ............................ 38,103,376 $ 692,644,895 100,147 $ (14,797,710)
==================================================================
Class 2 Shares:
Shares sold ........................................ 21,038,739 $ 409,844,354 57,320,488 $ 1,117,974,227
Shares issued on merger (Note 6) ................... 177,521 3,216,683 -- --
Shares issued on reinvestment of distributions ..... 904,695 17,053,454 290,806 4,946,613
Shares redeemed .................................... (18,483,041) (361,527,493) (54,967,087) (1,077,601,106)
------------------------------------------------------------------
Net increase ....................................... 3,637,914 $ 68,586,998 2,644,207 $ 45,319,734
==================================================================
</TABLE>

TI-15
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

3. TRANSACTIONS WITH AFFILIATES

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

<TABLE>
<CAPTION>
Entity Affiliation
---------------------------------------------------------------------------------------------
<S> <C>
Franklin Templeton Services, Inc. (FT Services) Administrative manager
Templeton Investment Counsel, Inc. (TICI) Investment manager
Franklin/Templeton Distributors, Inc. (Distributors) Principal underwriter
Franklin/Templeton Investor Services, Inc. (Investor Services) Transfer agent
</TABLE>

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

Annualized Fee Rate Daily Net Assets
-------------------------------------------------------------------------
.75% First $200 million
.675% Over $200 million, up to and including $1.3 billion
.60% Over $1.3 billion

The Fund pays administrative fees to FT Services based on the average net
assets of the fund as follows:

Fees are further reduced on net assets over $1.2 billion.

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

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

Included in professional fees are legal fees of $97 that were paid to a law
firm in which a partner of that firm was an officer of the Fund.

4. INCOME TAXES

At December 31, 1999, the Fund had deferred capital losses and/or deferred
currency losses of $1,004,292 occurring subsequent to October 31, 1999. For tax
purposes, such losses will be reflected in the year ending December 31, 2000.

Net investment income and net realized capital gains (losses) differ for
financial statement and tax purposes primarily due to differing treatments of
wash sales, foreign currency transactions, passive foreign investment company
shares, and merger related expenses.

The cost of securities for income tax purposes is the same as that shown in the
Statement of Investments. At June 30, 2000, the net unrealized appreciation
based on the cost of investments for income tax purposes was as follows:

Unrealized appreciation ............. $ 399,857,380
Unrealized depreciation ............. (182,061,184)
--------------
Net unrealized appreciation ......... $ 217,796,196
==============

TI-16
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

5. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities) for the
period ended June 30, 2000 aggregated $267,634,383 and $325,183,049,
respectively.

6. MERGERS

On May 1, 2000, the Franklin Templeton Variable Insurance Products Trust
(FTVIPT) - Templeton International Securities Fund acquired the net assets of
Templeton Variable Products Series Fund (TVP) - Templeton International Fund
pursuant to a plan of reorganization approved by the TVP - Templeton
International Fund's shareholders. The merger was accounted for by the method
of accounting for tax-free business combinations of investment companies. The
financial statements of TVP - Templeton International Fund survived the
reorganization; therefore, the financial statements of FTVIPT - Templeton
International Securities Fund reflect the financial statements of TVP -
Templeton International Fund. Immediately preceding the merger, FTVIPT -
Templeton International Securities Fund completed a reverse split of its shares
in the ratio of one new Class 1 share for each .6496 existing Class 1 share and
one new Class 2 share for each .6496 existing Class 2 share. As a result, the
FTVIPT - Templeton International Securities Fund net asset value per share was
$18.20 for Class 1 and $18.12 for Class 2 on May 1, 2000. TVP - Templeton
International Fund's shareholders contributed net assets having an aggregate
value of $1,071,394,151 (including $137,586,448 of unrealized appreciation) in
exchange for 35,794,416 Class 1 shares and 177,521 Class 2 shares (post-split)
of the FTVIPT - Templeton International Securities Fund. Immediately prior to
the merger, FTVIPT - Templeton International Securities Fund had net assets of
$654,675,060 (including unrealized appreciation of $16,819,111). Upon
completion of the merger, the combined net assets of the FTVIPT - Templeton
International Securities Fund were $1,726,069,211.

TI-17
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SECURITIES FUND

Tax Designation

The following table provides a breakdown by country of foreign source income
and foreign taxes paid, as designated by the Fund, to Class 1 and Class 2
shareholders of record on December 29, 1999.

<TABLE>
<CAPTION>
Class 1 Class 2
----------------------------------------------------------
Foreign Tax Foreign Foreign Tax Foreign
Paid Source Income Paid Source Income
Country Per Share Per Share Per Share Per Share
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Argentina ................... 0.0000 0.0137 0.0000 0.0130
Australia ................... 0.0016 0.0290 0.0016 0.0276
Austria ..................... 0.0007 0.0034 0.0007 0.0033
Bermuda ..................... 0.0000 0.0039 0.0000 0.0037
Brazil ...................... 0.0047 0.0386 0.0047 0.0367
Canada ...................... 0.0011 0.0059 0.0011 0.0056
China ....................... 0.0000 0.0030 0.0000 0.0029
Czech Republic .............. 0.0004 0.0000 0.0004 0.0000
Finland ..................... 0.0032 0.0169 0.0032 0.0161
France ...................... 0.0025 0.0175 0.0025 0.0166
Germany ..................... 0.0001 0.0006 0.0001 0.0006
Hong Kong ................... 0.0000 0.0256 0.0000 0.0243
Italy ....................... 0.0036 0.0187 0.0036 0.0179
Japan ....................... 0.0001 0.0006 0.0001 0.0005
Mexico ...................... 0.0004 0.0044 0.0004 0.0042
Netherlands ................. 0.0060 0.0490 0.0060 0.0467
New Zealand ................. 0.0021 0.0108 0.0021 0.0103
Norway ...................... 0.0016 0.0088 0.0016 0.0084
Peru ........................ 0.0000 0.0035 0.0000 0.0033
Portugal .................... 0.0007 0.0035 0.0007 0.0033
South Africa ................ 0.0000 0.0059 0.0000 0.0056
South Korea ................. 0.0006 0.0027 0.0006 0.0026
Spain ....................... 0.0036 0.0206 0.0036 0.0197
Sweden ...................... 0.0032 0.0202 0.0032 0.0192
Switzerland ................. 0.0023 0.0141 0.0023 0.0134
United Kingdom .............. 0.0178 0.1568 0.0178 0.1497
---------------------------------------------------------
TOTAL ....................... $0.0563 $0.4777 $0.0563 $0.4552
=========================================================
</TABLE>

Shareholders are advised to check with their tax advisors for information on
the treatment of these amounts on their individual income tax returns.

TI-18
<PAGE>

TEMPLETON INTERNATIONAL SMALLER COMPANIES FUND

--------------------------------------------------------------------------------
Fund Goal and Primary Investments: Templeton International Smaller Companies
Fund seeks long-term capital appreciation. The Fund invests primarily in equity
securities of smaller companies located outside the U.S., including those in
emerging markets.
--------------------------------------------------------------------------------
Concerns about rising U.S. interest rates during the six months under review
seemed to temper market performance despite otherwise favorable economic and
corporate fundamentals globally. Accordingly, world markets saw highly mixed
performance for the first half of 2000. For much of the period, technology,
media and telecommunications stocks led markets lower, maintaining their
dominant global influence.

In Asia, economic recovery seemed soundly established following the fallout
from the 1997 currency crisis. Hong Kong most visibly evidenced the positive
effects of the turnaround, where consumer demand and rising occupancy rates
appeared to demonstrate a sustained, full-fledged recovery. Similarly, in China
and Japan, indications of rising domestic demand signaled that the recovery's
export-driven stage may have come full circle. Despite these positive
indications, Japan's market performance was mixed as ripple effects from choppy
U.S. markets helped to upset expansions in that country's key index, the Nikkei
225, which ended the reporting period down 10.93%. While overall corporate
profits came in much stronger during the six months under review, Japan's
market participants also moved to take profits as restructuring efforts seemed
to be focused on a narrow set of corporations. In contrast, many small- to
medium-sized enterprises apparently failed to restructure quickly enough to
avert bankruptcy during the reporting period, contributing to some of the
highest bankruptcy rates in Japan's history.

In Latin America, we think that fears of a U.S. economic slowdown tempered
Brazilian stocks, despite improvements in the region's economic fundamentals.
Nevertheless, telecommunications stocks continued to perform favorably.

European market performance was mixed -- although an improving economic outlook
helped to push share prices higher, this was partially offset, in U.S.-dollar
terms, by the euro's continuously falling value, which hit all-time lows toward
the end of April. France and Sweden's markets generally fared better than those
in most other European

This chart in pie format shows the geographic distribution for Templeton
International Smaller Companies Fund, as a percentage of total net assets on
6/30/00.

Europe 41.4%
Asia 26.4%
North America 5.3%
Australia/New Zealand 4.1%
Latin America/Caribbean 3.4%
Mid-East/Africa 1.4%
Short-Term Investments
& Other Net Assets 18.0%

TIS-1
<PAGE>

Top 10 Holdings
Templeton International Smaller
Companies Fund
6/30/00

Company % of Total
Sector, Country Net Assets
---------------------------------------
Giordano
International Ltd. 4.1%
Merchandising,
Hong Kong

Li & Fung Ltd. 3.0%
Merchandising,
Hong Kong

Sa des Galeries Lafayette 2.7%
Merchandising, France

GTC Transcontinental
Group 2.4%
Broadcasting &
Publishing, Canada

Kardex AG 1.9%
Business & Public
Services, Switzerland

Dah Sing Financial
Holdings Ltd. 1.6%
Financial Services,
Hong Kong

Ono Pharmaceutical
Co. Ltd. 1.6%
Health & Personal Care,
Japan

VTech Holdings Ltd. 1.6%
Electronic Components &
Instruments, Hong Kong

Swisslog Holding AG 1.5%
Electronic Components &
Instruments, Switzerland

Observer AB 1.4%
Business & Public
Services, Sweden

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

countries, while Germany, the U.K. and Spain were hit hard by a mixture of
financial uncertainties despite the positive economic climate.

For the six months under review, the Fund's performance was significantly above
that of our benchmark, the Salomon Global ex-U.S. less than $1 Billion Index,
which had a return of -0.46%.(1) This outperformance was due largely to our
continued low exposure to the technology sector and Japanese stocks, both of
which were highly volatile and offered generally poor results during the
reporting period. In fact, the Fund benefited from the correction in
technology-related issues as investor attention seemed to shift to more
traditional value stocks representative of our core investment style.

Stock-specific performance, as opposed to general market performance, was most
influential to the Fund's returns. Topping the list of contributors were two
Hong Kong merchandisers, Li & Fung (international merchandising) and Giordano
International (casual apparel merchandising), which benefited from improving
domestic demand. Two Swiss companies, Kardex (data storage and retrieval
systems) and Swisslog (an Internet-technology driven logistics and supply chain
specialist), also contributed greatly, owing, in our opinion, to high-quality
company fundamentals as well as investors' general flight out of euro-based
stocks into "safe haven" currencies like the Swiss franc. In Latin America,
telecommunications issues such as Brazil's Telemig Celular aided the Fund's
performance considerably. Telemig has become a market leader in analog and
digital mobile phone service since the recent breakup of Brazil's Telebras
telecommunications monopoly. Where appropriate, we took the opportunity to trim
positions in some stocks, notably in Asia, where we felt stock prices fully
reflected the business prospects.

Detractors from performance were mainly companies that had fallen into what we
deem a "value trap," whereby they are recognized as cheap, but are simply too
small to be interesting to some investors. However, we are optimistic about the
prospects surrounding the growing pace of mergers and acquisitions worldwide,
which we feel should help unlock bargains in some of these undervalued
businesses.

(1) Source: Salomon Brothers. The Salomon Brothers Global Ex-U.S. <$1 Billion
Index is designed to measure the performance of global stocks with a market
capitalization of less than $1 billion and includes all developed and emerging
countries except the United States. The Index is unmanaged and includes
reinvested dividends. One cannot invest directly in an index, nor is an index
representative of the Fund's portfolio.

TIS-2
<PAGE>

Given the recent market volatility, we tried to be particularly selective in
buying shares this past six months. We added to or initiated positions in
stocks, primarily in Asia and Europe, that we believed met our value-oriented
investment strategy. For example, we initiated a position in Orient Overseas
International, a Hong Kong-based global shipping company.

In the coming six months, we will continue to focus on company fundamentals as
the basis for stock selection. However, we believe that based on the divergence
in valuations between the small- and large-cap sectors, there is tremendous
upside potential in small-cap stocks globally. More specifically, we will focus
our search on companies we feel are able to avert the threat of pricing
pressures to small businesses by producing value-added rather than commodity
products.

Regionally, we believe Europe continues to hold tremendous potential due to
positive earnings prospects and a renewed focus on delivering value to
shareholders. In Japan, we will focus on newer, entrepreneurial companies while
remaining cautious about that country's economic fundamentals. We also believe
that China's agreement with the U.S. on entry into the World Trade Organization
may provide interesting investment opportunities as foreign direct investment
returns to Asia's largest nation.

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance
is no guarantee of future results, these insights may help you understand our
investment and management philosophy.

Top 10 Sectors
Templeton International Smaller
Companies Fund
Based on Equity Securities
6/30/00

% of Total
Sector Net Assets
------------------------------------------
Merchandising 13.1%

Health & Personal Care 5.8%
Building Materials &
Components 5.7%

Financial Services 5.4%

Transportation 4.6%

Business & Public Services 4.1%

Industrial Components 4.0%

Electronic Components &
Instruments 3.8%

Food & Household
Products 3.4%

Textiles & Apparel 3.4%

TIS-3
<PAGE>

Templeton International
Smaller Companies
Fund - Class 1

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

PERFORMANCE SUMMARY AS OF 6/30/00

Templeton International Smaller Companies Fund - Class 1 delivered a +6.23%
cumulative total return for the six-month period ended 6/30/00. Total return of
Class 1 shares represents the cumulative or average annual change in value,
assuming reinvestment of dividends and capital gains. Average returns smooth
out variations in returns, which can be significant; they are not the same as
year-by-year results.

Templeton International Smaller Companies Fund - Class 1
Periods ended 6/30/00
Since
Inception
1-Year 3-Year (5/1/96)
------------------------------------------------------------------
Average Annual Total Return +12.82% +2.46% +6.18%
Cumulative Total Return +12.82% +7.57% +28.39%
Value of $10,000 Investment $11,282 $10,757 $12,839

Ongoing stock market volatility can dramatically change the Fund's short-term
performance; current results may be lower.

Past performance does not guarantee future results.

TIS-4
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SMALLER COMPANIES FUND

Financial Highlights

<TABLE>
<CAPTION>
Class 1
---------------------------------------------------------------------
Six Months Ended Year Ended December 31,
June 30, 2000 --------------------------------------------------
(unaudited) 1999 1998 1997 1996(c)
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period ................ $11.07 $9.20 $11.02 $11.25 $10.00
-------------------------------------------------------------------
Income from investment operations:
Net investment income(d) ........................... .20 .26 .25 .23 .10
Net realized and unrealized gains (losses) ......... .48 1.93 (1.52) (.39) 1.15
-------------------------------------------------------------------
Total from investment operations .................... .68 2.19 (1.27) (.16) 1.25
-------------------------------------------------------------------
Less distributions from:
Net investment income .............................. (.20) (.32) (.25) (.07) --
Net realized gains ................................. -- -- (.30) -- --
-------------------------------------------------------------------
Total distributions ................................. (.20) (.32) (.55) (.07) --
-------------------------------------------------------------------
Net asset value, end of period ...................... $11.55 $11.07 $9.20 $11.02 $11.25
===================================================================
Total return(b) ..................................... 6.23% 23.90% (12.27%) (1.50%) 12.50%

Ratios/supplemental data
Net assets, end of period (000's) ................... $23,878 $23,541 $24,999 $32,201 $16,255
Ratios to average net assets:
Expenses ........................................... 1.10%(a) 1.11% 1.10% 1.06% 1.16%(a)
Net investment income .............................. 3.60%(a) 2.52% 2.26% 2.74% 2.51%(a)
Portfolio turnover rate ............................. 19.29% 15.80% 18.45% 21.38% --
</TABLE>

(a)Annualized
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying vehicle.
Total return is not annualized for periods less than one year.
(c)For the period May 1, 1996 (effective date) to December 31, 1996.
(d)Based on average shares outstanding effective year ended December 31, 1999.

TIS-5
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SMALLER COMPANIES FUND

Financial Highlights (continued)

<TABLE>
<CAPTION>
Class 2
---------------------------------------
Six Months Ended
June 30, 2000 For Year Ended
(unaudited) December 31, 1999c
---------------------------------------
<S> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period ............. $11.07 $9.44
---------------------------------------
Income from investment operations:
Net investment income(d) ........................ .21 .13
Net realized and unrealized gains ............... .47 1.82
---------------------------------------
Total from investment operations ................. .68 1.95
---------------------------------------
Distributions from net investment income ......... (.20) (.32)
---------------------------------------
Net asset value, end of period ................... $11.55 $11.07
=======================================
Total return(b) .................................. 6.21% 20.75%

Ratios/supplemental data
Net assets, end of period (000's) ................ $9,155 $2,049
Ratios to average net assets:
Expenses ........................................ 1.35%(a) 1.38%(a)
Net investment income ........................... 3.72%(a) 1.21%(a)
Portfolio turnover rate .......................... 19.29% 15.80%
</TABLE>

(a)Annualized
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for periods less than one
year.
(c)For the period January 6, 1999 (effective date) to December 31, 1999.
(d)Based on average shares outstanding.

See notes to financial statements.

TIS-6
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SMALLER COMPANIES FUND

Statement of Investments, June 30, 2000 (unaudited)

<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stocks 78.0%
Appliances & Household Durables .8%
Fisher & Paykel Ltd. ....................................... New Zealand 70,222 $ 221,482
Guangdong Kelon Electrical Holdings Ltd., H ................ China 92,000 49,863
----------
271,345
----------
Automobiles 1.5%
Athlon Groep NV ............................................ Netherlands 15,500 276,351
Bilia AB, A ................................................ Sweden 28,100 214,651
----------
491,002
----------
Banking 2.9%
Banco de Valencia SA ....................................... Spain 9,816 80,730
(a) Banco de Valencia SA, new .................................. Spain 981 8,068
Banco Pastor SA ............................................ Spain 8,000 338,561
Bank Austria AG, 144A ...................................... Austria 6,000 293,432
BPI Socieda de Gestora de Participacoes Socias SA .......... Portugal 65,740 233,156
----------
953,947
----------
Broadcasting & Publishing 2.4%
GTC Transcontinental Group Ltd., B ......................... Canada 63,300 790,342
----------
Building Materials & Components 5.7%
Caradon PLC ................................................ United Kingdom 117,500 268,594
Cristaleria Espanola SA, Br. ............................... Spain 1,291 43,065
Danske Traelast AS ......................................... Denmark 4,672 450,247
Gujarat Ambuja Cements Ltd. ................................ India 104,020 454,058
Sarna Kunststoff Holding AG ................................ Switzerland 52 63,957
Schuttersveld NV ........................................... Netherlands 11,146 183,231
(a) Siam City Cement Public Co. Ltd., fgn. ..................... Thailand 112,701 425,233
----------
1,888,385
----------
Business & Public Services 4.1%
Kardex AG, Br. ............................................. Switzerland 1,494 615,571
Lex Service PLC ............................................ United Kingdom 54,100 272,314
Observer AB, B ............................................. Sweden 33,192 465,468
----------
1,353,353
----------
Chemicals 1.0%
Energia e Industrias Aragonesas Eia SA ..................... Spain 34,500 163,035
Yule Catto & Company PLC ................................... United Kingdom 61,600 165,990
----------
329,025
----------
Construction & Housing 2.0%
Grupo Dragados SA .......................................... Spain 42,465 305,694
Leighton Holdings Ltd. ..................................... Australia 108,180 349,437
----------
655,131
----------
Data Processing & Reproduction .7%
(a) Stepstone ASA .............................................. Norway 75,600 250,299
----------
Electrical & Electronics 2.5%
(a) ST Assembly Test Services Ltd., ADR ........................ Singapore 3,000 77,250
Techtronic Industries Co. Ltd. ............................. Hong Kong 1,646,000 427,585
Varitronix International Ltd. .............................. Hong Kong 187,500 325,918
----------
830,753
----------
</TABLE>

TIS-7
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SMALLER COMPANIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stocks (cont.)
Electronic Components & Instruments 3.8%
Swisslog Holding AG ................................... Switzerland 1,000 $ 491,975
Twentsche Kabel Holdings NV ........................... Netherlands 6,850 256,077
VTech Holdings Ltd. ................................... Hong Kong 136,000 514,669
----------
1,262,721
----------
Energy Sources 2.0%
Fletcher Challenge Energy Ltd. ........................ New Zealand 138,820 454,179
Gas Authority of India Ltd., 144A, GDR ................ India 29,000 195,750
----------
649,929
----------
Financial Services 5.2%
Dah Sing Financial Holdings Ltd. ...................... Hong Kong 134,800 542,984
Housing Development Finance Corp. Ltd. ................ India 36,710 459,404
Laurentian Bank of Canada ............................. Canada 21,000 320,308
Morgan Stanley Growth Fund ............................ India 6,800 1,804
Mutual Risk Management Ltd. ........................... Bermuda 23,350 404,247
----------
1,728,747
----------
Food & Household Products 3.4%
Chareon Pokphand Foods Public Co. Ltd., fgn. .......... Thailand 86,273 129,767
Geest PLC ............................................. United Kingdom 44,750 332,626
Hazlewood Foods PLC ................................... United Kingdom 111,770 145,514
Illovo Sugar Ltd. ..................................... South Africa 187,000 136,527
McBride PLC ........................................... United Kingdom 64,100 80,056
Perkins Foods PLC ..................................... United Kingdom 189,240 293,642
----------
1,118,132
----------
Forest Products & Paper .8%
Crown Van Gelder Papierfabrieken NV ................... Netherlands 6,115 89,096
(a) Empaques Ponderosa SA de CV, B ........................ Mexico 151,800 86,051
Munksjo AB ............................................ Sweden 12,995 85,932
----------
261,079
----------
Health & Personal Care 5.8%
Apothekers Cooperatie OPG VA .......................... Netherlands 16,110 409,220
Internatio-Muller NV .................................. Netherlands 5,844 100,832
(a) Medison Co Ltd. ....................................... South Korea 40,000 435,865
Moulin International Holdings Ltd. .................... Hong Kong 2,271,176 195,206
Ono Pharmaceutical Co Ltd. ............................ Japan 12,000 516,044
(a) Skyepharma PLC ........................................ United Kingdom 200,000 263,409
----------
1,920,576
----------
Industrial Components 3.6%
Aalberts Industries NV ................................ Netherlands 20,980 417,291
Sapa AB ............................................... Sweden 14,679 259,405
Weir Group PLC ........................................ United Kingdom 120,900 340,424
Yamato Kogyo Co. Ltd. ................................. Japan 41,000 189,878
----------
1,206,998
----------
Machinery & Engineering 3.3%
Arcadis NV ............................................ Netherlands 39,625 284,870
Fives-Lille Cie De .................................... France 3,984 297,872
Laird Group PLC ....................................... United Kingdom 62,000 227,606
METSO OYJ ............................................. Finland 22,780 275,131
----------
1,085,479
----------
</TABLE>

TIS-8
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SMALLER COMPANIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stocks (cont.)
Merchandising 13.1%
Debenhams PLC ............................................... United Kingdom 109,700 $ 360,784
(a) Dickson Concepts International Ltd. ......................... Hong Kong 339,000 308,763
Giordano International Ltd. ................................. Hong Kong 901,000 1,369,652
Li & Fung Ltd. .............................................. Hong Kong 195,000 975,588
North West Company Fund ..................................... Canada 31,365 245,552
Sa des Galeries Lafayette ................................... France 4,300 875,877
Samas-Groep NV .............................................. Netherlands 11,125 178,087
-----------
4,314,303
-----------
Metals & Mining 3.3%
Arbed SA .................................................... Luxembourg 1,448 133,108
Boehler-Uddeholm AG ......................................... Austria 4,993 175,409
Elkem ASA, A ................................................ Norway 23,850 449,226
Iluka Resources Ltd. ........................................ Australia 110,370 316,818
-----------
1,074,561
-----------
Multi-Industry 2.3%
Amer Group Ltd., A .......................................... Finland 11,300 311,951
Elementis PLC ............................................... United Kingdom 142,000 168,748
Zehnder Holding AG, Br. ..................................... Switzerland 465 284,816
-----------
765,515
-----------
Real Estate .5%
(a) Corporacion Geo SA, Series B ................................ Mexico 100,000 163,560
-----------
Textiles & Apparel 2.1%
Gamma Holding NV ............................................ Netherlands 3,000 115,026
(a) Inner Mongolia Erdos Cashmere Products Co. Ltd., B .......... China 497,000 172,956
(a) Tefron Ltd. ................................................. Israel 19,920 341,130
Yizheng Chemical Fibre Co. Ltd., H .......................... China 326,000 64,821
-----------
693,933
-----------
Transportation 4.6%
(a) Anangel-American Shipholdings Ltd., ADR ..................... Greece 20,000 96,250
(a) Neptune Orient Lines Ltd. ................................... Singapore 269,000 248,930
Orient Overseas International Ltd. .......................... Hong Kong 825,000 415,395
Stagecoach Holdings PLC ..................................... United Kingdom 300,870 333,632
Stolt Nielsen SA, ADR ....................................... Norway 15,000 269,063
(a) Transportes Azkar SA ........................................ Spain 16,785 140,781
-----------
1,504,051
-----------
Utilities Electrical & Gas .6%
Guangdong Electric Power Development Co Ltd., B ............. China 338,520 213,657
-----------
Total Common Stocks (Cost $22,211,613)....................... 25,776,823
-----------
Preferred Stocks 4.0%
Confab Industrial SA, pfd. .................................. Brazil 212,800 125,038
Fertilizantes Fosfatados SA, pfd. ........................... Brazil 12,895,000 38,599
Hugo Boss AG, pfd. .......................................... Germany 2,430 423,929
Telemig Celular Participacoes SA, ADR, pfd. ................. Brazil 6,285 449,378
Weg SA, pfd. ................................................ Brazil 507,200 275,530
-----------
Total Preferred Stocks (Cost $1,024,718)..................... 1,312,474
-----------
</TABLE>

TIS-9
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SMALLER COMPANIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
PRINCIPAL
COUNTRY AMOUNT VALUE
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Short Term Investments (Cost $4,431,409) 13.4%
U.S. Treasury Bills, 5.65% - 5.66%, with maturities to 9/07/00 .......... United States $4,480,000 $ 4,433,516
-----------
Total Investments before Repurchase Agreement (Cost $27,667,740) 31,522,813
-----------
(b) Repurchase Agreement (Cost $600,000) 1.8%
HSBC Securities Inc., 6.80%, 7/03/00 (Maturity Value $600,340)
Collateralized by U.S. Treasury Notes and Bonds ......................... United States 600,000 600,000
-----------
Total Investments (Cost $28,267,740) 97.2%............................... 32,122,813
Other Assets, less Liabilities 2.8% ..................................... 910,314
-----------
Total Net Assets 100.0% ................................................. $33,033,127
===========
</TABLE>

(a)Non-income producing
(b)At June 30, 2000, all repurchase agreements held by the Fund had been entered
into on that date.

See notes to financial statements.

TIS-10
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SMALLER COMPANIES FUND

Financial Statements

Statement of Assets and Liabilities
June 30, 2000 (unaudited)

Assets:
Investments in securities:
Cost ................................................ $ 28,267,740
============
Value ............................................... 32,122,813
Cash ................................................. 7,777
Receivables:
Investment securities sold .......................... 207,793
Capital shares sold ................................. 1,437,874
Dividends and interest .............................. 70,153
------------
Total assets ...................................... 33,846,410
------------
Liabilities:
Payables:
Investment securities purchased ..................... 734,293
Capital shares redeemed ............................. 42,618
Affiliates .......................................... 28,832
Other liabilities .................................... 7,540
------------
Total liabilities ................................. 813,283
------------
Net assets, at value ............................. $ 33,033,127
============
Net assets consist of:
Undistributed net investment income .................. $ 506,306
Net unrealized appreciation .......................... 3,855,073
Accumulated net realized loss ........................ (3,983,239)
Capital shares ....................................... 32,654,987
------------
Net assets, at value ................................ $ 33,033,127
============
Class 1:
Net assets, at value ................................. $ 23,878,403
============
Shares outstanding ................................... 2,066,652
============
Net asset value and offering price per share ......... $ 11.55
============
Class 2:
Net assets, at value ................................. $ 9,154,724
============
Shares outstanding ................................... 792,428
============
Net asset value and offering price per share ......... $ 11.55
============

See notes to financial statements.

TIS-11
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SMALLER COMPANIES FUND

Financial Statements (continued)

Statement of Operations
for the six months ended June 30, 2000 (unaudited)

Investment income:
(net of foreign taxes of $53,519)
Dividends ................................................... $ 556,524
Interest .................................................... 137,765
----------
Total investment income .................................... 694,289
----------
Expenses:
Management fees (Note 3) .................................... 123,685
Administrative fees (Note 3) ................................ 21,830
Distribution fees - Class 2 (Note 3) ........................ 6,600
Custodian fees .............................................. 6,000
Reports to shareholders ..................................... 800
Professional fees (Note 3) .................................. 5,790
Trustees' fees and expenses ................................. 120
Other ....................................................... 1,438
----------
Total expenses ............................................. 166,263
----------
Net investment income ..................................... 528,026
----------
Realized and unrealized gains:
Net realized gain from:
Investments ................................................ 551,201
Foreign currency transactions .............................. 2,801
----------
Net realized gain ......................................... 554,002
Net unrealized appreciation on investments .................. 891,575
----------
Net realized and unrealized gain ............................. 1,445,577
----------
Net increase in net assets resulting from operations ......... $1,973,603
==========

See notes to financial statements.

TIS-12
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SMALLER COMPANIES FUND

Financial Statements (continued)

Statements of Changes in Net Assets
for the six months ended June 30, 2000 (unaudited) and the year ended December
31, 1999

<TABLE>
<CAPTION>
Six Months
Ended Year Ended
June 30, 2000 December 31, 1999
------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ...................................................... $ 528,026 $ 593,413
Net realized gain (loss) from investments and foreign currency transactions 554,002 (2,013,654)
Net unrealized appreciation on investments ................................. 891,575 6,488,119
-------------------------------
Net increase in net assets resulting from operations ..................... 1,973,603 5,067,878
Distributions to shareholders from:
Net investment income:
Class 1 .................................................................... (425,397) (690,707)
Class 2 .................................................................... (99,182) (424)
-------------------------------
Total distributions to shareholders .......................................... (524,579) (691,131)
Capital share transactions: (Note 2)
Class 1 .................................................................... (636,452) (5,614,919)
Class 2 .................................................................... 6,630,406 1,828,877
-------------------------------
Total capital share transactions ............................................. 5,993,954 (3,786,042)
Net increase in net assets ............................................... 7,442,978 590,705
Net assets:
Beginning of period ......................................................... 25,590,149 24,999,444
-------------------------------
End of period ............................................................... $33,033,127 $ 25,590,149
===============================
Undistributed net investment income included in net assets:
End of period ............................................................... $ 506,306 $ 502,859
===============================
</TABLE>

See notes to financial statements.

TIS-13
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SMALLER COMPANIES FUND

Notes to Financial Statements (unaudited)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The Templeton International Smaller Companies Fund (the Fund) is a separate,
diversified series of the Franklin Templeton Variable Insurance Products Trust
(the Trust), which is an open-end investment company registered under the
Investment Company Act of 1940. Shares of the Fund are sold only to insurance
company separate accounts to fund the benefits of variable life insurance
policies or variable annuity contracts. As of June 30, 2000, 74% of the Fund's
shares were sold through one insurance company. The Fund seeks long-term
capital appreciation. The portfolio invests primarily in equity securities of
smaller companies outside the U.S., including emerging markets.

The following summarizes the Fund's significant accounting policies.

a. Security Valuation

b. Foreign Currency Translation

c. Income Taxes

d. Security Transactions, Investment Income, Expenses and Distributions

TIS-14
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SMALLER COMPANIES FUND

Notes to Financial Statements (unaudited) (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

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

e. Accounting Estimates

2. SHARES OF BENEFICIAL INTEREST

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

At June 30, 2000, there were an unlimited number of shares authorized ($.01 par
value). Transactions in the Fund's shares were as follows:

<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999(a)
-----------------------------------------------------------------
Shares Amount Shares Amount
Class 1 Shares: -----------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ................................... 642,461 $ 7,229,762 583,886 $ 6,152,029
Shares issued on reinvestment of distributions 38,637 425,397 64,794 690,707
Shares redeemed ............................... (741,078) (8,291,611) (1,240,556) (12,457,655)
-----------------------------------------------------------------
Net decrease .................................. (59,980) $ (636,452) (591,876) $ (5,614,919)
=================================================================
Class 2 Shares:
Shares sold ................................... 3,994,528 $ 44,856,918 2,831,182 $ 29,929,003
Shares issued on reinvestment of distributions 9,008 99,182 40 424
Shares redeemed ............................... (3,396,129) (38,325,694) (2,646,201) (28,100,550)
-----------------------------------------------------------------
Net increase .................................. 607,407 $ 6,630,406 185,021 $ 1,828,877
=================================================================
</TABLE>

(a)For the period January 6, 1999 (effective date) to December 31, 1999 for
Class 2.

3. TRANSACTIONS WITH AFFILIATES

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

<TABLE>
<CAPTION>
Entity Affiliation
--------------------------------------------------------------------------------------
<S> <C>
Franklin Templeton Services, Inc. (FT Services) Administrative manager
Templeton Investment Counsel, Inc. (TICI) Investment manager
Franklin/Templeton Distributors, Inc. (Distributors) Principal underwriter
Franklin/Templeton Investor Services, Inc. (Investor Services) Transfer agent
</TABLE>

TIS-15
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SMALLER COMPANIES FUND

Notes to Financial Statements (unaudited) (continued)

3. TRANSACTIONS WITH AFFILIATES (cont.)

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

Annualized Fee Rate Daily Net Assets
-------------------------------------------------------------------------
.85% First $200 million
.765% Over $200 million, up to and including $1.3 billion
.68% Over $1.3 billion

The Fund pays administrative fees to FT Services based on the average net
assets of the Fund as follows:

Fees are further reduced on net assets over $1.2 billion.

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

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

Included in professional fees are legal fees of $45 that were paid to a law
firm in which a partner of that firm was an officer of the Fund.

4. INCOME TAXES

At December 31, 1999, the Fund had tax basis capital losses, which may be
carried over to offset future capital gains. Such losses expire as follows:

Capital loss carryover expiring in:
2006 .............................. $2,543,971
2007 .............................. 1,878,044
----------
$4,422,015
==========

At December 31, 1999, the Fund had deferred capital losses of $115,743
occurring subsequent to October 31, 1999. For tax purposes, such loss will be
reflected in the year ending December 31, 2000.

At June 30, 2000, the net unrealized appreciation based on the cost of
investments for income tax purposes of $28,288,835 was as follows:

Unrealized appreciation ............. $ 6,852,747
Unrealized depreciation ............. (3,018,769)
------------
Net unrealized appreciation ......... $ 3,833,978
============

5. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities) for the
period ended June 30, 2000 aggregated $6,525,233 and $4,769,247, respectively.

TIS-16
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SMALLER COMPANIES FUND

Tax Designation

The following table provides a breakdown by country of foreign source income
and foreign taxes paid, as designated by the Fund, to Class 1 and Class 2
shareholders of record on April 26, 2000.

<TABLE>
<CAPTION>
Class 1 Class 2
----------------------------------------------------------
Foreign Tax Foreign Foreign Tax Foreign
Paid Source Income Paid Source Income
Country Per Share Per Share Per Share Per Share
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Argentina .............. 0.0000 0.0024 0.0000 0.0024
Australia .............. 0.0024 0.0225 0.0024 0.0223
Austria ................ 0.0010 0.0046 0.0010 0.0046
Bermuda ................ 0.0000 0.0005 0.0000 0.0004
Brazil ................. 0.0040 0.0208 0.0040 0.0206
Canada ................. 0.0025 0.0119 0.0025 0.0118
China .................. 0.0000 0.0096 0.0000 0.0096
Colombia ............... 0.0000 0.0006 0.0000 0.0006
Denmark ................ 0.0004 0.0021 0.0004 0.0021
Finland ................ 0.0001 0.0006 0.0001 0.0006
France ................. 0.0007 0.0034 0.0007 0.0033
Germany ................ 0.0004 0.0029 0.0004 0.0029
Hong Kong .............. 0.0000 0.0296 0.0000 0.0294
India .................. 0.0000 0.0043 0.0000 0.0042
Indonesia .............. 0.0004 0.0021 0.0004 0.0021
Japan .................. 0.0003 0.0013 0.0003 0.0013
Luxembourg ............. -0.0001 0.0006 -0.0001 0.0006
Netherlands ............ 0.0051 0.0246 0.0051 0.0244
New Zealand ............ 0.0005 0.0022 0.0005 0.0022
Norway ................. 0.0020 0.0138 0.0020 0.0136
South Africa ........... 0.0000 0.0040 0.0000 0.0040
South Korea ............ 0.0002 0.0008 0.0002 0.0008
Spain .................. 0.0027 0.0132 0.0027 0.0131
Sweden ................. 0.0024 0.0113 0.0024 0.0112
Switzerland ............ 0.0016 0.0075 0.0016 0.0075
Thailand ............... 0.0002 0.0018 0.0002 0.0018
United Kingdom ......... 0.0080 0.0534 0.0080 0.0530
----------------------------------------------------
TOTAL .................. $ 0.0348 $0.2524 $ 0.0348 $0.2504
====================================================
</TABLE>

Shareholders are advised to check with their tax advisors for information on
the treatment of these amounts on their individual income tax returns.

TIS-17
<PAGE>

TEMPLETON PACIFIC GROWTH SECURITIES FUND

--------------------------------------------------------------------------------
Fund Goal and Primary Investments: Templeton Pacific Growth Securities Fund
(formerly Templeton Pacific Growth Fund) seeks long-term capital growth. The
Fund invests primarily in equity securities of companies with primary
operations in Pacific Rim countries, some of which may be considered emerging
markets.
--------------------------------------------------------------------------------
This semiannual report for Templeton Pacific Growth Securities Fund covers the
six months ended June 30, 2000. During the early part of the period, many Asian
nations experienced economic growth, but this appeared to taper off by period's
end. South Korea's economy was one of the best performing in the region, with
annualized gross domestic product (GDP) increasing 12.8% during the first
quarter of 2000.

In June, the historic meeting between North and South Korean leaders signaled
the possible beginning of increased cooperation between the two nations. Such
cooperation has the potential to benefit both countries, as well as the rest of
the region in the future. Hong Kong and China's economies grew impressively
during the period. Due in part to rising trade levels, increased consumer
spending and additional foreign investment, Hong Kong's annualized GDP rose
14.3% for the quarter ended March 31, 2000. And boosts in exports helped
China's GDP expand at an 8.1% annualized rate during that time.

Currencies throughout the region were generally stable relative to the U.S.
dollar, but the Japanese yen was surprisingly strong. The yen's rise was due
largely to the prospect of a healthier Japanese economy. With this expectation
came a wave of new foreign investment, putting upward pressure on the currency.
An exceptionally strong yen is a concern to many investors, because
approximately 40% of Japan's exports are sent to other Asian countries. And
while a stronger Asian economy is positive for Japanese exports, a strong yen
is generally not. However, the yen could weaken as a result of foreign
investors selling off their overweight positions in the Japanese market.

Japan's economy grew during the period under review, but slower than the
expected rate. However, Australia's economic growth exceeded expectations.
Singapore also made progress economically and, in our opinion, is poised for
long-term growth based on a combination of an excellent tax system, a solid
central bank and a pro-growth regulatory system.

TP-1
<PAGE>

Top 10 Holdings
Templeton Pacific Growth
Securities Fund
6/30/00

Company % of Total
Sector, Country Net Assets
-----------------------------------------
Fuji Heavy Industries Ltd. 4.7%
Industrial Components,
Japan

East Japan Railway Co. 3.6%
Transportation, Japan

Swire Pacific Ltd. 3.5%
Multi-Industry,
Hong Kong

Nisshinbo Industries Inc. 3.4%
Textiles & Apparel,
Japan

City Developments Ltd. 3.4%
Real Estate, Singapore

Overseas Union Bank Ltd. 3.2%
Banking, Singapore

Commerce Asset-
Holding Bhd. 3.1%
Financial Services,
Malaysia

Malaysian International
Shipping Corp. 2.9%
Transportation, Malaysia

Cheung Kong
Holdings Ltd. 2.9%
Multi-Industry,
Hong Kong

Kurita Water
Industries Ltd. 2.8%
Machinery &
Engineering, Japan

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

During the reporting period, many Pacific Rim equity markets were subjected to
selling pressure as investors fled apparently due to concerns about rising U.S.
interest rates and the meltdown in U.S. technology stocks. The Hong Kong Hang
Seng Index, which had been trading in tandem with the technology-laden U.S.
Nasdaq Composite Index (Nasdaq(R)), declined 3.8% year-to-date.(1,2) Property
stocks in particular suffered heavy losses.

From the beginning of the period to its end, the property sector in Hong Kong
lost an astonishing 24% of its market value. The Fund did not experience the
full effects of this decline because we sold a large number of our shares in
Cheung Kong Holdings early in the year. Financial stocks also performed poorly,
losing 15% of their market value during the period. Fortunately, our holdings
in financial issues were relatively light.

During the period under review, we increased our holdings in Japan, making it
the Fund's largest weighting on June 30, 2000. We focused on "new Japan"
companies involved in telecommunications, Internet and other technology-related
industries and initiated a position in Nippon Telephone and Telegraph, Japan's
largest telecommunications company. Our holdings of "old Japan" companies, such
as Fuji Photo Film and Toshiba, performed well and benefited the Fund because
many investors seemed to view them as a counterbalance to possible volatility
in the latest wave of high-tech issues coming to market.

The semiconductors sector in Korea proved to be an exception to the country's
strong growth, and taking advantage of what we found to be weak semiconductor
pricing in February, we purchased LG Electronics and Hyundai Electronics.
Throughout the period, we continued to favor investments in Singapore and took
the opportunity to purchase shares in Creative Technology, an electronics
company that specializes in multimedia solutions for PCs.

(1) The Hang Seng Index is a capitalization-weighted index of 33 companies that
represent approximately 70% of the total market capitalization of the Stock
Exchange of Hong Kong. The components of the index are divided into four
subindexes: Commerce and Industry, Finance, Utilities and Properties.

(2) The Nasdaq Composite Index measures all Nasdaq domestic and non-U.S. based
common stocks listed on the Nasdaq Stock Market(R). The Index is market-value
weighted and includes over 5,000 companies (as of 6/30/00).

TP-2
<PAGE>

Looking forward, we are optimistic about future prospects for Pacific Rim
equity markets, though we believe there may be significant volatility along the
way. Some of the factors we are monitoring include the possibility of rising
interest rates in Asian countries, the reactions of Asian markets to U.S.
monetary tightenings, the effect of high oil prices on trade and a heavy
calendar of new Asian equity issues in the second half of 2000. Even if equity
markets experience significant volatility in the near future, such volatility
could present our analysts with unique opportunities to discover undervalued
stocks with the potential to provide attractive long-term returns for
shareholders of Templeton Pacific Growth Securities Fund.

We thank you for your support and look forward to serving your investment needs
in the future.

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance
is no guarantee of future results, these insights may help you understand our
investment and management philosophy.

TP-3
<PAGE>

Templeton Pacific Growth Securities Fund - Class 1

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

PERFORMANCE SUMMARY AS OF 6/30/00

Templeton Pacific Growth Securities Fund - Class 1 delivered a -11.97%
cumulative total return for the six-month period ended 6/30/00. Total return of
Class 1 shares represents the cumulative or average annual change in value,
assuming reinvestment of dividends and capital gains. Average returns smooth
out variations in returns, which can be significant; they are not the same as
year-by-year results.

Templeton Pacific Growth Securities Fund - Class 1
Periods ended 6/30/00
Since
Inception
1-Year 5-Year (1/27/92)
---------------------------------------------------------------------
Average Annual Total Return -6.32% -4.69% +0.84%
Cumulative Total Return -6.32% -21.36% +7.28%
Value of $10,000 Investment $9,368 $7,864 $10,728

Ongoing stock market volatility can dramatically change the Fund's short-term
performance; current results may be lower.

Past performance does not guarantee future results.

TP-4
<PAGE>

FRANKLIN GLOBAL COMMUNICATIONS SECURITIES FUND

--------------------------------------------------------------------------------
Fund Goals and Primary Investments: Franklin Global Communications Securities
Fund (formerly Franklin Global Utilities Securities Fund) seeks both capital
appreciation and current income. The Fund invests primarily in equity
securities of companies that are primarily engaged in providing communications
services and communications equipment in any nation, including the U.S. and
emerging markets.
--------------------------------------------------------------------------------
This semiannual report covers the six months ended June 30, 2000 -- a period of
significant volatility for telecommunications stocks. However, in our opinion,
this volatility was caused more by valuation concerns than by weakening
fundamentals of the sector. Prices of many communication stocks had appreciated
substantially in the past year and were apparently overvalued when the sector
experienced a sell-off in March and April. Because the longer-term outlook for
many telecommunications companies still appeared to be positive, we took
advantage of this market weakness to add to our holdings in areas such as
telecommunications equipment and wireless service providers.

We generally evaluate potential investments based on the fundamentals of each
individual company and the regulatory and economic environment in which it
operates. While we want to own industry leaders, we also strive to maintain
broad diversification by investing in smaller and emerging companies with new
products and technologies. In addition to research on individual companies, we
consider investment themes, which we feel have the possibility of positively
impacting the industry and individual companies. We believe this second layer
of analysis helps us position the Fund for strong growth potential.

During the reporting period, established trends in telecommunications remained
firmly in place. Demand for bandwidth was strong due to the Internet's growth
and other data traffic. We believe this trend will continue as corporations
strive to increase productivity by giving employees Internet access, including
remote access to communications networks, and as the Internet becomes more
engrained in our daily lives. As the number of users and the complexity of the
information they send and retrieve increases, both network service companies
and network equipment providers should benefit. Global Crossing, one of our top
holdings, is an example of such a company. It is presently building a
state-of-the-art global telecommunications network that, in our opinion, should
serve as a complete solution to its customers' telecommunications needs.

This chart in pie chart format shows the geographic distribution of Franklin
Global Communications Securities Fund as a percentage of total net assets on
6/30/00.

North America 77.0%

Europe 12.9%

Asia 6.1%

Short-Term Investments
& Other Net Assets 4.0%

FGC-1
<PAGE>

Top 10 Holdings
Franklin Global Communications
Securities Fund
6/30/00

Company % of Total
Sector, Country Net Assets
---------------------------------------
SBC Communications Inc. 3.6%
Major U.S.
Telecommunications,
U.S.

VoiceStream 3.5%
Wireless Corp.
Cellular Telephone, U.S.

GTE Corp. 3.4%
Major U.S.
Telecommunications,
U.S.

U.S. West Inc. 3.0%
Major U.S.
Telecommunications,
U.S.

Redback Networks Inc. 2.9%
Telecommunications
Equipment, U.S.

Qwest Communications 2.7%
International Inc.
Other
Telecommunications,
U.S.

Time Warner Telecom Inc. 2.6%
Other
Telecommunications,
U.S.

BellSouth Corp. 2.5%
Major U.S.
Telecommunications,
U.S.

NEXTLINK 2.5%
Communications Inc.
Other
Telecommunications,
U.S.

Telecom Italia SpA 2.3%
Other
Telecommunications,
Italy

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

Another trend continuing to evolve is the growth of wireless communications.
The number of wireless subscribers continues to grow at record rates throughout
much of the world. Due to the relatively low percentage of cellular phone users
in the U.S., we are particularly bullish on the U.S. wireless market.
VoiceStream, a U.S. wireless provider, was our second largest Fund holding on
June 30, 2000. We think the company, which has been acquiring other operators
as it puts its national wireless network into place, has one of the finest
management teams in the industry and has an enviable record of creating
shareholder value.

Wireless growth was also strong in western Europe, where several countries have
wireless penetration above 50%. In some cases, this is higher than their wire
line penetration, indicating strong acceptance of the technology. Attempting to
take advantage of this, we maintained large positions in Telecom Italia and
Vodafone AirTouch. Telecom Italia, Italy's largest telecommunications services
provider and the country's leading manufacturer of telecommunications products,
appears to be well-positioned to benefit from continuing wireless growth in the
country. And Vodafone, which has been aggressively creating alliances to expand
its business, recently completed a joint venture with Bell Atlantic in the U.S.

Looking forward, we are optimistic about the potential of global communications
companies to deliver strong shareholder returns over the long term. These
companies are selling services to a rapidly expanding segment of the economy in
both developed and emerging nations. New Internet applications generally must
be accompanied by improvements in telecommunications infrastructure that will
allow content to reach end users, and we believe wireless telecommunications
growth will continue to drive the need for network construction, new handsets
and additional functionality. Because the Fund has exposure to all of these
areas, we feel it is well-positioned to benefit from the changes occurring in
global communications.

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance
does not guarantee future results, these insights may help you understand our
investment and management philosophy.

FGC-2
<PAGE>

PERFORMANCE SUMMARY AS OF 6/30/00

Franklin Global Communications Securities Fund - Class 1 delivered a -3.25%
cumulative total return for the six-month period ended 6/30/00. Total return of
Class 1 shares represents the cumulative or 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.

<TABLE>
<CAPTION>
Franklin Global Communications Securities Fund - Class 1
Periods ended 6/30/00
Since
Inception
1-Year 5-Year 10-Year (1/24/89)
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +23.69% +18.86% +14.12% +13.78%
Cumulative Total Return +23.69% +137.22% +274.66% +337.52%
Value of $10,000 Investment $12,369 $23,722 $37,466 $43,752
</TABLE>

Franklin Global Communications
Securities Fund - Class 1

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

Past performance does not guarantee future results.

FGC-3
<PAGE>

FRANKLIN GROWTH AND INCOME SECURITIES FUND

--------------------------------------------------------------------------------
Fund Goals and Primary Investments: Franklin Growth and Income Securities Fund
(formerly Franklin Growth and Income Fund) seeks capital appreciation, with
current income as a secondary goal. The Fund invests primarily in common stocks
offering above-market current dividend yields, and may invest a smaller portion
in foreign securities, including emerging markets.
--------------------------------------------------------------------------------
The market's infatuation with growth stocks over the past couple of years
continued into the first quarter of 2000. Apparently not wanting to be left
behind, many investors poured money into growth stocks despite valuations we
feel were extreme; however, the market seemed to begin sobering up at the end
of March. Wall Street analysts started reassessing the long-term viability of
many Internet business models and whether the technology sector in general was
really immune to higher interest rates. By mid-April, the Russell 3000 Growth
Index was off by 18% from its high posted on March 23.(1) Although the index
rebounded by the end of the reporting period, most investors appeared more
cautious than before and focused on companies with viable business models.

"Old economy" value stocks benefited from this rotation out of growth
companies. Investors were, in our view, at last paying attention to the
enormous gap in valuation between old and new economy stocks, and starting a
powerful rotation into the old economy laggards. Franklin Growth and Income
Securities Fund, which invests in value stocks that offer above-average
dividend yields, benefited from this trend.

We attempted to take advantage of numerous exciting investment opportunities
among value stocks during the first half of 2000. Financial stocks, including
real estate investment trusts (REITs), grew to 19.4% of the Fund's total net
assets. REITs were particularly strong through the first half of the year, with
returns of better than 13%. Insurance companies also performed well. We added
to our Lincoln National holding, and we initiated a position in Metlife. We
also increased our position in mortgage lender Fannie Mae, which was selling at
13 times earnings at the time of purchase despite its 14% five-year annual
growth record. Other sector changes included adding shares of KeyCorp. and U.S.
Bancorp to the Fund, while eliminating positions in Allstate and Bank One.

(1) Source: Standard and Poor's Micropal (Frank Russell and Company). The
Russell 3000 Growth Index measures the performance of those Russell 3000 Index
companies with higher price-to-book ratios and higher forecasted growth values.
The stocks in this index are also members of either the Russell 1000 Growth or
the Russell 2000 Growth indexes.

FGI-1
<PAGE>

Top 10 Holdings
Franklin Growth and Income
Securities Fund
6/30/00

Company % of Total
Sector Net Assets
-----------------------------------------
AT&T Corp. 2.8%
Telecommunications

U.S. West Inc. 2.5%
Telecommunications

GTE Corp. 2.5%
Telecommunications

Philip Morris Cos. Inc. 2.3%
Consumer Non-Durables

SBC Communications Inc. 2.2%
Telecommunications

Abbott Laboratories 2.1%
Health Technology

Baxter International Inc. 2.0%
Health Technology

Bristol-Myers Squibb Co. 1.7%
Health Technology

Conoco Inc., B 1.7%
Energy Minerals

Texaco Inc. 1.7%
Energy Minerals

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

Our overweight positions, relative to our benchmark Russell 3000 Value Index,
in health care and consumer non-durable investments proved beneficial to the
Fund's performance.(2) Shares of industry leaders Johnson & Johnson and
Bristol-Myers Squibb fell in price to substantial discounts to their industry
peers during the reporting period, thus providing what we believed were
exceptional investment opportunities. Health care companies, largely
pharmaceuticals, represented 11.3% of the Fund's total net assets at the end of
the period compared with 7.1% at the beginning.

Consumer non-durables comprised 7.2% of the Fund's total net assets on June 30,
up slightly from 7.0% at the end of 1999. We initiated positions in consumer
non-durable companies R.J. Reynolds and Nabisco Group Holdings, and we
eliminated our position in H.J. Heinz. Other portfolio changes included selling
Bestfoods after its management accepted Unilever's buyout offer and eliminating
our position in Nike after its shares reached what we believed was fair value.

Elsewhere, the basic materials sector (non-energy minerals and process
industries in the Statement of Investments), a strong performer in 1999,
produced disappointing results during the first half of 2000. In our view,
these notoriously cyclical stocks started declining as investors feared higher
interest rates would hurt the group's longer-term earnings growth. We took a
proactive role in paring down our exposure to this group, from 9.9% of the
Fund's total net assets at the end of 1999 to 5% at the end of June, by
reducing our exposure to DuPont and eliminating positions in Imperial Chemical
and Pall Corp. We also sold our position in American Can after it agreed to be
acquired by Rexam.

Our investments in telecommunications stocks, at 11.2% of the Fund's total net
assets on June 30, 2000, remained relatively large due to our projections of
that sector's continued exciting growth prospects and reasonable valuations.
Four of the Fund's largest investments at the end of the reporting period --
AT&T, U.S. West, GTE and SBC -- were telecommunications companies. Demand for
telecom services accelerated in response to Internet growth, yet during the
period under review, most of these companies were selling at less than 20 times
earnings compared to multiples in excess of 50 times earnings for most
technology-related stocks. We also maintained an above-average weighting (5.8%
of total net assets) in electric and gas utilities.

(2) The Russell 3000 Value Index measures the performance of those Russell 3000
Index companies with lower price-to-book ratios and lower forecasted growth
values. The stocks in this index are also members of either the Russell 1000
Value or the Russell 2000 Value indexes.

FGI-2
<PAGE>

Interestingly, utilities were among the stock market's best performers in the
first half of 2000 after underperforming the Standard & Poor's 500(R) (S&P
500(R)) Index since 1993. In our opinion, the combination of industry
consolidation, extremely attractive dividend yields (comparable to U.S.
Treasury bonds) and strong earnings growth potential from non-regulated
businesses are responsible for their improved relative performance. Our most
recent utility investment was Duke Energy, a utility company that we believe is
one of the nation's best-managed and -positioned for growth.

Our electronic technology investments, 10.4% of total net assets at the end of
the six-month period, remained slightly underweighted compared to the benchmark
index. In this sector, we looked for what were in our opinion entrenched
industry leaders in rapidly growing markets with exceptional earnings growth.
In addition, we attempted to ensure that any investments in this sector made
sense from a valuation standpoint. With this framework in mind, we realized
some profits but maintained positions in IBM, Motorola, Perkinelmer and
Hewlett-Packard, and we started new positions in LSI Logic, Corning and
Tektronix. We continued to add to stocks we believed were indiscriminately
ravaged by the technology sell-off during the first half of 2000.

Based upon valuations at the end of the period, we believe there continues to
be room for value stocks to outperform growth. According to the Frank Russell
Company, stocks comprising the Russell 3000 Value Index were selling at
approximately 17 times earnings compared with 19 times two years ago. Russell
3000 Growth Index stocks, on the other hand, grew from a multiple of 33 times
earnings two years ago to 48 times earnings at the end of the period.

FGI-3
<PAGE>

Looking forward, we remain very excited about the investment prospects for
above-average dividend yielding value stocks. The fundamentals for stock
investments, in terms of improving worldwide economic growth and favorable
profit trends, continues to be excellent, in our opinion. Valuation disparities
between growth stocks and value issues remain at historically extreme levels.
Also, growth investing has outperformed value investing for 5 consecutive years
-- long by historical standards. Although it is impossible to predict when this
cycle may reverse itself, we think the process may have already begun. We
believe our strategy and the Fund's investments are well-positioned for such a
turnaround.

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance
is no guarantee of future results, these insights may help you understand our
investment and management philosophy.

FGI-4
<PAGE>

PERFORMANCE SUMMARY AS OF 6/30/00

Franklin Growth and Income Securities Fund - Class 1 delivered a +1.77%
cumulative total return for the six-month period ended 6/30/00. Total return of
Class 1 shares represents the cumulative or 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.

<TABLE>
<CAPTION>
Franklin Growth and Income Securities Fund - Class 1
Periods ended 6/30/00
Since
Inception
1-Year 5-Year 10-Year (1/24/89)
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return -4.61% +13.40% +11.21% +10.39%
Cumulative Total Return -4.61% +87.54% +189.46% +209.53%
Value of $10,000 Investment $9,539 $18,754 $28,946 $30,953
</TABLE>

Ongoing stock market volatility can dramatically change the Fund's short-term
performance; current results may be lower.

Franklin Growth and Income Securities Fund Class 1

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

Past performance does not guarantee future results.

FGI-5
<PAGE>

FRANKLIN INCOME SECURITIES FUND

--------------------------------------------------------------------------------
Fund Goal and Primary Investments: Franklin Income Securities Fund seeks to
maximize income while maintaining prospects for capital appreciation. The Fund
invests in debt and equity securities, including lower-rated "junk bonds." The
Fund may also invest in foreign securities, including emerging markets.
--------------------------------------------------------------------------------
The U.S. stock market experienced significant volatility during the six months
under review, as investors tried to interpret shifting economic indicators and
the likelihood of the Federal Reserve Board (the Fed) continuing its recent
interest-rate tightening policy. Early in the calendar year, equity performance
varied significantly. The market favored those companies and sectors associated
with the technology-driven, growth economy and pressure valuations for many of
the traditional, industrial, slower-growth issuers. However, this trend began
to reverse in March, as the shares of many "slower growth" companies staged a
rally. Meanwhile, the U.S. economy's continued strength initially weighed on
the bond market, driving the 30-year Treasury bond yield up to 6.75% in
mid-January 2000. However, the U.S. Treasury bond repurchase plan announcement,
the Fed's short-term interest rate increases and signs of slowing economic
growth contributed to a Treasury long-bond rally that left the 30-year bond
yield below 6% at the period's end.

The Fund's corporate bond weighting remained stable, despite the negative
impact on the sector of interest-rate volatility and economic and equity market
uncertainty. Additionally, unfavorable technical factors such as asset outflows
from high yield mutual funds during much of the period helped push overall high
yield bond spreads over Treasuries to levels not seen since the "flight to
quality" in the fall of 1998. However, we feel the intermediate-term outlook
for a sound domestic economy bodes well for the credit quality of many high
yield issuers. In this environment that we view as generally favorable, we
initiated several positions during the period, including issues from
Spectrasite Holdings, a wireless communication service provider, P&L Coal
Holdings, the largest independent coal producer in the world, Sovereign
Bancorp, an eastern U.S. bank, and Dobson Communications, a cellular telephone
service provider.

FI-1
<PAGE>

Top Five Stock Holdings
Franklin Income Securities Fund
6/30/00

Company % of Total
Sector Net Assets
-----------------------------------------
Philip Morris Cos. Inc. 6.0%
Consumer Non-Durables

Florida Progress Corp. 1.9%
Utilities

American Electric Power 1.8%
Co. Inc.
Utilities

Entergy Corp. 1.5%
Utilities

Public Service Enterprise 1.2%
Group Inc.
Utilities

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

Top Five Bond Holdings
Franklin Income Securities Fund
6/30/00
% of Total
Issuer Net Assets
------------------------------------------
Conproca SA, SF 1.4%

Consoltex Group Inc. 1.4%

Playtex Family Products
Corp. 1.2%

Hartmarx Corp. 1.0%

Nextel Communications
Inc. 0.9%

The foreign bond sector performed relatively well during the period, given the
increased volatility in the U.S. stock and bond markets. The group's positive
performance was led by our Latin American, Russian and Turkish positions, which
experienced positive fundamental developments. The Latin American region
benefited from stronger global growth, a commodity price upturn and renewed
investor confidence in several countries. The Fund's largest emerging market
country holding, Brazil, passed key Congressional fiscal reforms, while the
central bank's anti-inflation stance managed to stabilize interest rates and
the currency exchange rate far more effectively than anticipated. Russia, for
its part, experienced a significant political transition at the end of 1999, as
parliamentary power shifted to more reform-minded representatives and Boris
Yeltsin resigned from the presidency. Upon his resignation, Yeltsin appointed
Prime Minister Vladimir Putin as interim president and Putin subsequently won
presidential elections in March. The Fund's Russian bonds appreciated
significantly, we believe as a result of these developments, allowing us to
take profits in our two positions. Strong performances from several other
foreign fixed income holdings also presented other profit-taking opportunities,
resulting in a decreased weighting for the Fund's foreign bond sector.

Treasury bonds were volatile during the six-month review period, as fears of
strong economic growth gave way to the positive implications of a decreased
30-year Treasury bond supply and the belief that the Fed was near the end of
its recent rate-tightening cycle. In this environment, the Treasury bond yield
curve inverted, with rates on long-term bonds declining below those of
short-term bonds. Believing that the inversion was unlikely to persist, we sold
our 30-year U.S. Treasury bonds and purchased 5-year Treasury notes and
shorter-duration government agency bonds.

The divergence in equity share performance between growth- and value-oriented
sectors reached what we considered extreme levels during the period. This
initially created a difficult environment for utility and other value-oriented
stock sectors. However, we saw this trend begin to reverse in March as
investors shifted their focus away from technology and other high valuation
sectors toward those with lower valuations and more stable operating results.
Accordingly, the Fund's utility, energy and real estate stocks all made
substantial gains over the past six months. We still believe utility stocks
represent an attractive value at recent levels. However, given the group's
recent

FI-2
<PAGE>

strong performance, we sought to maintain a stable sector weighting throughout
the period through selective security sales and participation in
company-sponsored tender offers.

Many of the Fund's energy stocks delivered solid returns during the six months
under review, benefiting from rising oil prices. We believe the sector should
continue its healthy performance, given the higher price of oil and still
attractive valuations. Although we selectively trimmed our energy holdings, the
sector remained our third largest equity investment and, due to appreciation,
increased as a percent of the Fund's total net assets from 4.9% on January 1,
2000, to 6.4% by the end of the period.

We sought to take advantage of real estate sector weakness in the middle of the
period by initiating a position in Liberty Property Trust, a diversified real
estate investment trust (REIT). Although the sector subsequently began to
rebound, we believe it still remains attractive at recent valuation levels. As
a testament to the sector's attractive valuations, nearly one half of publicly
traded REITs instituted share repurchase programs during the reporting period,
often funded by property sales at higher private-market valuations.

Lastly, the gold sector weakened during the period, partly due to general
investor disinterest and concerns about slowing economic growth. However, as
worldwide economic recovery increases demand, the Central Bank selling process
becomes more predictable and companies curtail their forward hedging programs,
signaling a positive view on the price of gold, we expect the sector's outlook
to improve for the remainder of 2000.

Looking forward to the second half of the Fund's fiscal year, wider yield
spreads in the corporate bond market and attractive valuations in specific
equity sectors should present many attractive investment opportunities. We
remain committed to our value-oriented approach and will continue to search for
new investments across asset classes and industries.

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance
is no guarantee of future results, these insights may help you understand our
investment and management philosophy.

FI-3
<PAGE>

Franklin Income
Securities Fund - Class 1

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

PERFORMANCE SUMMARY AS OF 6/30/00

Franklin Income Securities Fund - Class 1 delivered a +6.55% cumulative total
return for the six-month period ended 6/30/00. Total return of Class 1 shares
represents the cumulative or 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.

<TABLE>
<CAPTION>
Franklin Income Securities Fund - Class 1
Periods ended 6/30/00
Since
Inception
1-Year 5-Year 10-Year (1/24/89)
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +2.79% +8.64% +10.57% +10.13%
Cumulative Total Return +2.79% +51.31% +173.14% +201.27%
Value of $10,000 Investment $10,279 $15,131 $27,314 $30,127
</TABLE>

Ongoing stock market volatility can dramatically change the Fund's short-term
performance; current results may be lower.

Past performance does not guarantee future results.

FI-4
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN INCOME SECURITIES FUND

Financial Highlights

<TABLE>
<CAPTION>
Class 1
-----------------------------------------------------------------------------------
Six Months Ended Year Ended December 31,
June 30, 2000 -----------------------------------------------------------------
(unaudited) 1999 1998 1997 1996 1995
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period ............ $14.69 $16.92 $18.37 $17.21 $16.47 $14.31
-----------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) ....................... .57 1.19 1.37 1.40 1.32 1.16
Net realized and unrealized gains (losses) ..... .34 (1.43) (1.07) 1.38 .44 1.96
-----------------------------------------------------------------------------------
Total from investment operations ................ .91 (.24) .30 2.78 1.76 3.12
-----------------------------------------------------------------------------------
Less distributions from:
Net investment income .......................... (1.48) (1.46) (1.42) (1.33) (.87) (.89)
Net realized gains ............................. (.71) (.53) (.33) (.29) (.15) (.07)
-----------------------------------------------------------------------------------
Total distributions ............................. (2.19) (1.99) (1.75) (1.62) (1.02) (.96)
-----------------------------------------------------------------------------------
Net asset value, end of period .................. $13.41 $14.69 $16.92 $18.37 $17.21 $16.47
===================================================================================
Total return(b) ................................. 6.55% (1.82%) 1.64% 17.09% 11.28% 22.40%

Ratios/supplemental data
Net assets, end of period (000's) ............... $661,923 $775,116 $1,185,840 $1,406,787 $1,350,659 $1,266,538
Ratios to average net assets:
Expenses ....................................... .52%(c) .50% .49% .50% .50% .51%
Net investment income .......................... 8.04%(c) 7.41% 6.94% 7.53% 7.96% 8.05%
Portfolio turnover rate ......................... 14.25% 11.89% 12.22% 14.68% 15.28% 33.14%
</TABLE>

(a)Based on average shares outstanding effective December 31, 1999.
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for periods less than one
year.
(c)Annualized

FI-5
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN INCOME SECURITIES FUND

Financial Highlights (continued)

<TABLE>
<CAPTION>
Class 2
---------------------------------------
Six Months Ended
June 30, 2000 Year Ended
(unaudited) December 31, 1999(d)
---------------------------------------
<S> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period ................ $14.65 $17.07
---------------------------------------
Income from investment operations:
Net investment income(a) ........................... .55 1.10
Net realized and unrealized gains (losses) ......... .34 (1.53)
---------------------------------------
Total from investment operations .................... .89 (.43)
---------------------------------------
Less distributions from:
Net investment income .............................. (1.47) (1.46)
Net realized gains ................................. (.71) (.53)
---------------------------------------
Total distributions ................................. (2.18) (1.99)
---------------------------------------
Net asset value, end of period ...................... $13.36 $ 14.65
=======================================
Total return(b) ..................................... 6.39% (2.93%)

Ratios/supplemental data
Net assets, end of period (000's) ................... $1,507 $ 1,302
Ratios to average net assets:
Expenses ........................................... .76%(c) .75%(c)
Net investment income .............................. 7.78%(c) 7.36%(c)
Portfolio turnover rate ............................. 14.25% 11.89%
</TABLE>

See notes to financial statements.

FI-6
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN INCOME SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited)

<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stocks 37.0%
Consumer Durables .4%
General Motors Corp. ................................... United States 45,126 $ 2,620,128
------------
Consumer Non-Durables 6.6%
Nabisco Group Holdings Corp. ........................... United States 60,000 1,556,250
Philip Morris Cos. Inc. ................................ United States 1,500,000 39,843,750
R.J. Reynolds Tobacco Holdings Inc. .................... United States 90,000 2,514,375
------------
43,914,375
------------
Electronic Technology .2%
General Motors Corp., H ................................ United States 15,840 1,389,960
------------
Energy Minerals 2.5%
Athabasca Oil Sands Trust .............................. Canada 270,000 5,366,471
BP Prudhoe Bay Royalty Trust ........................... United States 50,000 596,875
Canadian Oil Sands Trust Units ......................... Canada 260,000 5,176,486
EOG Resources Inc. ..................................... United States 79,400 2,659,900
(a) Santa Fe Snyder Corp. .................................. United States 89,842 1,021,953
Ultramar Diamond Shamrock Corp. ........................ United States 65,000 1,612,813
------------
16,434,498
------------
Non-Energy Minerals 2.4%
Anglo American Platinum Corp. Ltd., ADR ................ South Africa 100,000 2,825,000
Anglogold Ltd., ADR .................................... South Africa 325,000 6,682,813
De Beers Consolidated Mines AG, ADR .................... South Africa 40,000 972,500
Impala Platinum Holdings Ltd., ADR ..................... South Africa 140,000 5,285,000
------------
15,765,313
------------
Process Industries .2%
(a) Dan River Inc., A ...................................... United States 42,600 202,350
Lyondell Chemical Co. .................................. United States 50,000 837,500
------------
1,039,850
------------
Producer Manufacturing .3%
McDermott International Inc. ........................... United States 260,000 2,291,250
------------
Real Estate .9%
FelCor Lodging Trust Inc. .............................. United States 275,000 5,087,500
Liberty Property Trust ................................. United States 30,000 778,125
------------
5,865,625
------------
Telecommunications 1.5%
Telecom Argentina Stet-France Telecom SA, ADR .......... Argentina 260,880 7,174,200
U.S. West Inc. ......................................... United States 30,000 2,572,500
------------
9,746,700
------------
Utilities 22.0%
American Electric Power Co. Inc. ....................... United States 395,000 11,701,875
Cinergy Corp. .......................................... United States 210,000 5,341,875
Conectiv Inc. .......................................... United States 200,000 3,112,500
Dominion Resources Inc. ................................ United States 114,800 4,922,050
Edison International ................................... United States 160,000 3,280,000
Energy East Corp. ...................................... United States 190,000 3,621,875
Entergy Corp. .......................................... United States 355,000 9,651,563
FirstEnergy Corp. ...................................... United States 160,000 3,740,000
Florida Progress Corp. ................................. United States 270,000 12,656,250
FPL Group Inc. ......................................... United States 140,000 6,930,000
GPU Inc. ............................................... United States 175,000 4,735,938
Hawaiian Electric Industries Inc. ...................... United States 76,500 2,510,156
KeySpan Corp. .......................................... United States 100,000 3,075,000
New Century Energies Inc. .............................. United States 185,000 5,550,000
</TABLE>

FI-7
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN INCOME SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stocks (cont.)
Utilities (cont.)
Northern States Power Co. ........................................... United States 182,800 $ 3,690,275
PECO Energy Co. ..................................................... United States 200,000 8,062,500
PG&E Corp. .......................................................... United States 310,000 7,633,750
Potomac Electric Power Co. .......................................... United States 210,000 5,250,000
Public Service Enterprise Group Inc. ................................ United States 235,000 8,136,875
Reliant Energy Inc. ................................................. United States 235,000 6,947,188
SCANA Corp. ......................................................... United States 56,792 1,370,107
Sempra Energy ....................................................... United States 292,810 4,977,770
Sierra Pacific Resources ............................................ United States 145,000 1,821,563
Southern Co. ........................................................ United States 270,000 6,294,375
TXU Corp. ........................................................... United States 265,000 7,817,500
Western Resources Inc. .............................................. United States 215,000 3,332,500
------------
146,163,485
------------
Total Common Stocks (Cost $226,328,474).............................. 245,231,184
------------
Preferred Stocks .9%
Non-Energy Minerals .3%
Freeport-McMoran Copper & Gold Inc., 0.00%, pfd. .................... United States 108,800 2,148,800
------------
Process Industries .6%
Asia Pulp & Paper Co. Ltd., 12.00%, 2/15/04 ......................... Indonesia 7,073,000 3,571,865
------------
Total Preferred Stocks (Cost $9,975,268)............................. 5,720,665
------------
Convertible Preferred Stocks 12.3%
Energy Minerals 3.9%
(a) Chesapeake Energy Corp., 7.00%, cvt. pfd., 144A ..................... United States 85,000 5,163,750
Enron Corp., 7.00%, cvt. pfd. ....................................... United States 97,700 3,028,700
Kerr-McGee Corp., 5.50%, cvt. pfd. .................................. United States 138,800 6,905,300
Lomak Financing Trust, 5.75%, cvt. pfd. ............................. United States 140,000 2,765,000
Newfield Financial Trust I, 6.50%, cvt. pfd. ........................ United States 72,600 4,319,700
Nuevo Financing I, 5.75%, cvt. pfd., A .............................. United States 140,000 3,570,000
------------
25,752,450
------------
Industrial Services .9%
Weatherford International Inc., 5.00%, cvt. pfd., 144A .............. United States 125,000 5,750,000
------------
Non-Energy Minerals 1.0%
Battle Mountain Gold Co., $3.25, cvt. pfd............................ United States 66,300 1,955,850
Hecla Mining Co., 7.00%, cvt. pfd., B ............................... United States 70,000 1,347,500
Kinam Gold Inc., $3.75, cvt. pfd., B................................. Canada 150,000 3,375,000
------------
6,678,350
------------
Process Industries .1%
Georgia-Pacific Corp., 7.50%, cvt. pfd. ............................. United States 30,000 960,000
------------
Real Estate 5.2%
Apartment Investment & Management Co., 8.00%, cvt. pfd., K .......... United States 160,000 4,360,000
Archstone Communities Trust, $1.75, cvt. pfd., A..................... United States 200,000 6,200,000
Glenborough Realty Trust Inc., 7.75%, cvt. pfd., A .................. United States 365,000 6,296,250
Host Marriott Corp., 6.75%, cvt. pfd. ............................... United States 110,000 3,719,375
Innkeepers USA Trust, 8.625%, cvt. pfd., A .......................... United States 175,000 2,931,250
ProLogis Trust, 7.00%, cvt. pfd., B ................................. United States 135,000 3,678,750
Reckson Associates Realty Corp., 7.625%, cvt. pfd., A ............... United States 180,000 3,993,750
Vornado Realty Trust, 6.50%, cvt. pfd., A ........................... United States 60,000 3,108,750
------------
34,288,125
------------
Transportation .4%
Union Pacific Capital Trust, 6.25%, cvt. pfd. ....................... United States 70,000 2,782,500
------------
</TABLE>

FI-8
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN INCOME SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)
<TABLE>
<CAPTION>
PRINCIPAL
COUNTRY AMOUNT* VALUE
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Convertible Preferred Stocks (cont.)
Utilities .8%
CMS Energy Trust I, 7.75%, cvt. pfd. ................................................. United States $ 160,000 $ 5,480,000
------------
Total Convertible Preferred Stocks (Cost $97,395,804)................................. 81,691,425
------------
Bonds 26.7%
Commercial Services
(b) AmeriServe Food Distribution Inc., senior sub. note, 10.125%, 7/15/07 ................ United States 1,000,000 35,000
------------
Consumer Durables .2%
E&S Holdings Corp., senior sub. note, B, 10.375%, 10/01/06 ........................... United States 3,750,000 1,518,750
------------
Consumer Non-Durables 4.0%
Compania De Alimentos Fargo SA, 13.25%, 8/01/08 ...................................... Argentina 2,000,000 1,715,000
Doane Pet Care Co., senior sub. note, 9.75%, 5/15/07 ................................. United States 2,197,000 1,878,435
Evenflo Company Inc., B, 11.75%, 8/15/06 ............................................. United States 2,000,000 1,970,000
Hartmarx Corp., senior sub. note, 10.875%, 1/15/02 ................................... United States 6,900,000 6,796,500
Playtex Family Products Corp., senior sub. note, 9.00%, 12/15/03 ..................... United States 8,000,000 7,800,000
Revlon Consumer Products Corp., senior sub. note, 8.625%, 2/01/08 .................... United States 4,600,000 2,346,000
Revlon Worldwide Corp., senior disc. note, B, zero cpn., 3/15/01 ..................... United States 1,200,000 498,000
SFC New Holdings Inc., senior note, 11.25%, 8/15/01 .................................. United States 3,033,000 2,972,340
SFC New Holdings Inc., zero cpn. to 6/15/05, 11.00% thereafter, 12/15/09 ............. United States 191,574 --
The William Carter Co., senior sub. note, A, 10.375%, 12/01/06 ....................... United States 500,000 480,000
------------
26,456,295
------------
Consumer Services 3.5%
Adelphia Communications, senior note, 7.875%, 5/01/09 ................................ United States 1,000,000 845,000
AMF Bowling Worldwide Inc., senior disc. note, B, zero cpn. to 3/15/01, 12.25%
thereafter, 3/15/06 .................................................................. United States 2,438,000 499,790
AMF Bowling Worldwide Inc., senior sub. note, B, 10.875%, 3/15/06 .................... United States 650,000 198,250
Cablevision SA, 13.75%, 5/01/09 ...................................................... Argentina 1,000,000 912,500
Charter Communications Holdings LLC, senior disc. note, zero cpn. to 4/01/04, 9.92%
thereafter, 4/01/11 .................................................................. United States 5,000,000 2,862,500
Coast Hotel & Casino Inc., senior sub. note, 9.50%, 4/01/09 .......................... United States 1,000,000 957,500
CSC Holdings Inc., senior sub. deb., 9.875%, 4/01/23 ................................. United States 4,000,000 4,100,000
Eldorado Resorts LLC, senior sub. note, 10.50%, 8/15/06 .............................. United States 500,000 497,500
Harveys Casino Resorts, senior sub. note, 10.625%, 6/01/06 ........................... United States 2,200,000 2,233,000
Lone Cypress Co., sub. note, 144A, 11.50%, 8/01/09 ................................... United States 4,703,000 4,638,334
Protection One Alarm Monitoring Inc., senior sub. note, 144A, 8.125%, 1/15/09 ........ United States 2,500,000 1,550,000
(d) Station Casinos Inc., senior sub. note, 144A, 9.875%, 7/01/10 ........................ United States 1,400,000 1,404,662
United Pan-Europe Communications NV, zero cpn. to 8/01/04, 12.50% thereafter, 8/01/09 Netherlands 3,500,000 1,715,000
Venetian Casino/Las Vegas Sands, mortgage note, 12.25%, 11/15/04 ..................... United States 1,000,000 1,015,000
------------
23,429,036
------------
Electronic Technology .6%
Anacomp Inc., senior sub. note, B, 10.875%, 4/01/04 .................................. United States 6,000,000 3,885,000
------------
Energy Minerals 3.1%
Bellwether Exploration Co., senior sub. note, 10.875%, 4/01/07 ....................... United States 3,000,000 2,805,000
Chesapeake Energy Corp., senior note, B, 7.875%, 3/15/04 ............................. United States 500,000 465,000
Conproca SA, S.F., senior secured note, 144A, 12.00%, 6/16/10 ........................ Mexico 9,000,000 9,472,500
Denbury Management Inc., senior sub. note, 9.00%, 3/01/08 ............................ United States 4,000,000 3,660,000
Mesa Operating Co., senior sub. note, 10.625%, 7/01/06 ............................... United States 950,000 912,000
Mesa Operating Co., zero cpn. to 7/01/01, 11.625% thereafter, 7/01/06 ................ United States 1,300,000 1,105,000
P&L Coal Holdings Corp., senior sub. note, B, 9.625%, 5/15/08 ........................ United States 1,200,000 1,119,000
Plains Resources Inc., senior sub. note, B, 10.25%, 3/15/06 .......................... United States 1,000,000 990,000
------------
20,528,500
------------
Finance .4%
Sovereign Bancorp Inc., senior note, 10.50%, 11/15/06 ................................ United States 2,800,000 2,779,000
------------
</TABLE>

FI-9
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN INCOME SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
PRINCIPAL
COUNTRY AMOUNT* VALUE
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bonds (cont.)
Health Technology .7%
Dade International Inc., senior sub. note, B, 11.125%, 5/01/06 ................... United States $ 3,000,000 $ 1,695,000
ICN Pharmaceuticals Inc., senior note, B, 9.25%, 8/15/05 ......................... United States 3,000,000 2,925,000
-------------
4,620,000
-------------
Industrial Services 1.0%
Allied Waste North America Inc., senior sub. note, 10.00%, 8/01/09 ............... United States 4,000,000 3,360,000
First Wave Marine Inc., senior note, 11.00%, 2/01/08 ............................. United States 1,000,000 595,000
Great Lakes Dredge & Dock Corp., senior sub. note, 11.25%, 8/15/08 ............... United States 1,000,000 1,003,750
R&B Falcon Corp., senior note, B, 6.50%, 4/15/03 ................................. United States 2,000,000 1,860,000
-------------
6,818,750
-------------
Process Industries 5.4%
Applied Extrusion Technology, senior note, B, 11.50%, 4/01/02 .................... United States 6,000,000 6,060,000
Consoltex Group Inc., senior sub. note, B, 11.00%, 10/01/03 ...................... United States 10,000,000 9,150,000
Four M Corp., senior note, B, 12.00%, 6/01/06 .................................... United States 2,000,000 1,882,500
Huntsman ICI Chemicals, zero cpn., 12/31/09 ...................................... United States 7,500,000 2,437,500
(b) Packaging Resources Inc., senior note, 11.625%, 5/01/03 .......................... United States 3,000,000 1,815,000
Printpack Inc., senior sub. note, B, 10.625%, 8/15/06 ............................ United States 4,000,000 3,740,000
(b) RBX Corp., senior sub. note, B, 11.25%, 10/15/05 ................................. United States 10,000,000 1,500,000
Riverwood International, senior sub. note, 10.875%, 4/01/08 ...................... United States 4,500,000 3,982,500
Tjiwi Kimia Finance Mauritius, senior note, 10.00%, 8/01/04 ...................... Indonesia 8,000,000 5,280,000
-------------
35,847,500
-------------
Producer Manufacturing 1.7%
Collins & Aikman Products, senior sub. note, 11.50%, 4/15/06 ..................... United States 4,000,000 3,850,000
Nortek Inc., senior sub. note, 9.875%, 3/01/04 ................................... United States 2,000,000 1,915,000
Outsourcing Services Group Inc., senior sub. note, 10.875%, 3/01/06 .............. United States 2,000,000 1,610,000
Thermadyne Industries Inc., sub. note, 10.75%, 11/01/03 .......................... United States 2,696,000 2,500,540
Trench Electric & Trench Inc., senior sub. deb., 10.25%, 12/15/07 ................ Canada 2,350,000 1,656,750
-------------
11,532,290
-------------
Technology Services .3%
PSINet Inc., senior note, 10.50%, 12/01/06 ....................................... United States 2,000,000 1,850,000
-------------

Telecommunications 5.8%
Crown Castle International Corp., senior disc. note, zero cpn. to 8/01/04, 11.25%
thereafter, 8/01/11 ............................................................ United States 5,000,000 3,125,000
Dobson Communications Corp., senior note, 144A, 10.875%, 7/10/10 ................. United States 3,400,000 3,425,500
Global Crossing Holdings Ltd., senior note, 9.50%, 11/15/09 ...................... Bermuda 1,000,000 969,006
Level 3 Communications Inc., zero cpn. to 12/01/03,10.50% thereafter, 12/01/08 ... United States 4,000,000 2,400,000
Metrocall Inc., senior sub. note, 11.00%, 9/15/08 ................................ United States 3,000,000 2,100,000
Microcell Telecommunications Inc., zero cpn. to 6/01/04, 12.00% thereafter,
6/01/09 ......................................................................... United States 3,000,000 1,987,500
Nextel Communications Inc., senior disc. note, zero cpn. to 2/15/03, 9.95%
thereafter, 2/15/08 ............................................................ United States 8,500,000 6,268,750
Nextel International Inc., senior disc. note, zero cpn. to 4/15/03, 12.125%
thereafter, 4/15/08 ............................................................ United States 5,000,000 3,300,000
NEXTLINK Communications Inc., senior note, 10.75%, 6/01/09 ....................... United States 4,000,000 3,940,000
NEXTLINK Communications Inc., zero cpn. to 6/01/04, 12.25% thereafter, 6/01/09 ... United States 4,000,000 2,500,000
Spectrasite Holdings Inc., senior disc. note, zero cpn. to 4/15/04, 11.25%
thereafter, 4/15/09 ............................................................ United States 1,750,000 1,023,750
Spectrasite Holdings Inc., senior disc. note, zero cpn. to 3/15/05, 12.875%
thereafter, 3/15/10 ............................................................ United States 4,000,000 2,220,000
Voicestream Wireless Corp., 10.375%, 11/15/09 .................................... United States 1,000,000 1,045,000
Voicestream Wireless Corp., senior disc. note, zero cpn. to 11/15/04, 11.875%
thereafter, 11/15/09 ........................................................... United States 1,750,000 1,181,250
Williams Communications Group Inc., senior note, 10.875%, 10/01/09 ............... United States 3,290,000 3,224,200
-------------
38,709,956
-------------
Total Bonds (Cost $206,511,564)................................................... 178,010,057
-------------
</TABLE>

FI-10
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN INCOME SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
PRINCIPAL
COUNTRY AMOUNT* VALUE
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Convertible Bonds 6.6%
Electronic Technology 1.0%
Trans-Lux Corp., cvt. sub. note, 7.50%, 12/01/06 .......................... United States $ 8,000,000 $ 6,480,000
------------
Energy Minerals 1.0%
Kerr McGee Corp., cvt., 7.50%, 5/15/14 .................................... United States 1,246,000 1,193,045
Swift Energy Co., cvt. sub. note, 6.25%, 11/15/06 ......................... United States 5,500,000 5,348,750
------------
6,541,795
------------
Health Services .3%
(b) Continucare Corp., cvt. sub. note, 144A, 8.00%, 10/31/02 .................. United States 9,500,000 1,900,000
------------
Industrial Services .5%
Key Energy Services Inc., cvt., 5.00%, 9/15/04 ............................ United States 3,200,000 2,542,336
Parker Drilling Co., cvt. sub. note, 5.50%, 8/01/04 ....................... United States 1,000,000 822,500
------------
3,364,836
------------
Non-Energy Minerals 1.6%
Ashanti Capital Ltd., cvt., 5.50%, 3/15/03 ................................ Ghana 5,000,000 3,125,000
Coeur D'Alene Mines Corp., cvt. senior sub. deb., 6.00%, 6/10/02 .......... United States 100,000 65,000
Coeur D'Alene Mines Corp., cvt. sub. deb., 6.375%, 1/31/04 ................ United States 6,000,000 2,730,000
Trizec Hahn Corp., cvt. senior deb., 3.00%, 1/29/21 ....................... Canada 7,000,000 4,634,210
------------
10,554,210
------------
Process Industries .3%
APP Finance VI Mauritius Ltd., cvt., zero cpn., 11/18/12 .................. Indonesia 11,500,000 1,940,625
------------
Producer Manufacturing .3%
Exide Corp., cvt. senior sub. note, 144A, 2.90%, 12/15/05 ................. United States 5,000,000 2,325,000
------------
Real Estate 1.6%
Macerich Co., cvt. sub. deb., 144A, 7.25%, 12/15/02 ....................... United States 6,000,000 5,370,000
Meristar Hospitality Corp., cvt. sub. note, 4.75%, 10/15/04 ............... United States 6,500,000 5,061,875
------------
10,431,875
------------
Total Convertible Bonds (Cost $59,909,011)................................. 43,538,341
------------
U.S. Government Securities 1.8%
FHLMC, 6.875%, 1/15/05 .................................................... United States 7,000,000 6,963,565
U.S. Treasury Note, 5.875%, 11/15/04 ...................................... United States 5,000,000 4,926,565
------------
Total U.S. Government Securities (Cost $11,742,369)........................ 11,890,130
------------
Foreign Government and Agency Securities 12.9%
ESCOM, E168, utility deb., 11.00%, 6/01/08 ................................ South Africa 27,000,000 ZAR 3,325,218
Republic of Argentina, L, FRN, 6.00%, 3/31/23 ............................. Argentina 20,900,000 13,846,250
Republic of Argentina, 11.75%, 6/15/15 .................................... Argentina 13,441,009 12,187,635
Republic of Brazil, 11.625%, 4/15/04 ...................................... Brazil 2,000,000 2,027,500
Republic of Brazil, FRN, 6.00%, 4/15/24 ................................... Brazil 29,000,000 18,958,750
Republic of Brazil, A, FRN, 7.00%, 1/01/01 ................................ Brazil 2,460,000 2,463,075
Republic of Brazil, L, FRN, 7.375%, 4/15/06 ............................... Brazil 14,880,000 13,568,700
Republic of Bulgaria, FRN, 7.063%, 7/28/11 ................................ Bulgaria 1,000,000 792,500
Republic of Korea, 8.875%, 4/15/08 ........................................ Korea (South) 6,000,000 6,187,200
Republic of South Africa, 12.00%, 2/28/05 ................................. South Africa 23,000,000 ZAR 3,213,141
Republic of Turkey, 12.375%, 6/15/09 ...................................... Turkey 7,000,000 7,437,500
Russia Ministry of Finance, 11.75%, 6/10/03 ............................... Russia 450,000 417,938
Russia Ministry of Finance, Reg S, 10.00%, 6/26/07 ........................ Russia 1,200,000 930,000
------------
Total Foreign Government and Agency Securities (Cost $79,899,076).......... 85,355,407
------------
Total Long Term Investments (Cost $691,761,566) 98.2%...................... 651,437,209
------------
</TABLE>

FI-11
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN INCOME SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
PRINCIPAL
COUNTRY AMOUNT* VALUE
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(c) Repurchase Agreement .4%
Joint Repurchase Agreement, 6.563%, 7/03/00 (Maturity Value $2,720,704)
(Cost $$2,719,217) United States $ 2,719,217 $2,719,217
Banc of America Securities LLC
Barclays Capital Inc.
Bear, Stearns & Co. Inc.
Donaldson, Lufkin & Jenrette Securities Corp.
Dresdner Kleinwort Benson, North America LLC
Goldman, Sachs & Co.
Greenwich Capital Markets Inc.
Lehman Brothers, Inc.
Nesbitt Burns Securities Inc.
Paine Webber Inc.
Paribas Corp.
UBS Warburg
Collateralized by U.S. Treasury Bills and Notes

Total Investments (Cost $694,480,783) 98.6%............................. 654,156,426
Other Assets, less Liabilities 1.4% .................................... 9,273,761
------------
Net Assets 100.0% ...................................................... $663,430,187
============
</TABLE>

Currency Abbreviations:

ZAR-South African Rand

*The principal amount is stated in U.S. dollars unless otherwise indicated.
(a)Non-income producing
(b)See Note 6 regarding defaulted securities.
(c)Investment is through participation in a joint account with other funds
managed by the investment advisor. At June 30, 2000, all repurchase
agreements had been entered into on that date.
(d)Sufficient collateral has been segregated for securities traded on a
when-issued or delayed delivery basis.

See notes to financial statements.

FI-12
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN INCOME SECURITIES FUND

Financial Statements

Statement of Assets and Liabilities
June 30, 2000 (unaudited)

Assets:
Investments in securities:
Cost ................................................ $ 694,480,783
-------------
Value ............................................... 654,156,426
Receivables:
Investment securities sold .......................... 3,731,021
Capital shares sold ................................. 6,341
Dividends and interest .............................. 8,434,532
Affiliates .......................................... 1,800
-------------
Total assets ...................................... 666,330,120
-------------
Liabilities:
Payables:
Investment securities purchased ..................... 2,102,974
Capital shares redeemed ............................. 393,975
Affiliates .......................................... 273,895
Other liabilities .................................... 129,089
-------------
Total liabilities ................................. 2,899,933
-------------
Net assets, at value ............................. $ 663,430,187
=============
Net assets consist of:
Undistributed net investment income .................. $ 28,195,209
Net unrealized depreciation .......................... (40,324,243)
Accumulated net realized gain ........................ 14,662,874
Capital shares ....................................... 660,896,347
-------------
Net assets, at value ............................. $ 663,430,187
=============
Class 1:
Net assets, at value ................................. $ 661,923,006
=============
Shares outstanding ................................... 49,372,826
=============
Net asset value and offering price per share ......... $ 13.41
=============
Class 2:
Net assets, at value ................................. $ 1,507,181
=============
Shares outstanding ................................... 112,822
=============
Net asset value and offering price per share ......... $ 13.36
=============

See notes to financial statements.

FI-13
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN INCOME SECURITIES FUND

Financial Statements (continued)

Statement of Operations
for the six months ended June 30, 2000 (unaudited)

<TABLE>
<S> <C>
Investment income:
(net of foreign taxes and fees of $35,295)
Dividends ............................................................... $10,615,616
Interest ................................................................ 19,608,093
-----------
Total investment income ................................................ 30,223,709
-----------
Expenses:
Management fees (Note 3) ................................................ 1,709,389
Distribution fees - Class 2 (Note 3) .................................... 1,755
Custodian fees .......................................................... 20,531
Reports to shareholders ................................................. 49,681
Professional fees (Note 3) .............................................. 21,778
Trustees' fees and expenses ............................................. 3,807
Other ................................................................... 17,918
-----------
Total expenses ......................................................... 1,824,859
-----------
Net investment income ................................................. 28,398,850
-----------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ............................................................ 15,171,277
Foreign currency transactions .......................................... (29,553)
-----------
Net realized gain ..................................................... 15,141,724
Net unrealized appreciation on:
Investments ............................................................ 41,041
Translation of assets and liabilities denominated in foreign currencies 1,468
-----------
Net unrealized appreciation ........................................... 42,509
-----------
Net realized and unrealized gain ......................................... 15,184,233
-----------
Net increase in net assets resulting from operations ..................... $43,583,083
===========
</TABLE>

See notes to financial statements.

FI-14
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN INCOME SECURITIES FUND

Financial Statements (continued)

Statements of Changes in Net Assets
for the six months ended June 30, 2000 (unaudited) and the year ended December
31, 1999

<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income .................................................................. $ 28,398,850 $ 71,767,692
Net realized gain from investments and foreign currency transactions ................... 15,141,724 24,830,510
Net unrealized appreciation (depreciation) on investments and translation of assets and
liabilities denominated in foreign currencies ........................................ 42,509 (113,078,942)
---------------------------------
Net increase (decrease) in net assets resulting from operations ....................... 43,583,083 (16,480,740)
Distributions to shareholders from:
Net investment income:
Class 1 ............................................................................... (66,981,624) (80,764,333)
Class 2 ............................................................................... (125,777) (43,625)
Net realized gains:
Class 1 ............................................................................... (32,026,055) (28,938,989)
Class 2 ............................................................................... (60,736) (15,631)
---------------------------------
Total distributions to shareholders ..................................................... (99,194,192) (109,762,578)
Capital share transactions: (Note 2)
Class 1 ............................................................................... (57,682,993) (284,567,490)
Class 2 ............................................................................... 305,829 1,389,381
---------------------------------
Total capital share transactions ........................................................ (57,377,164) (283,178,109)
Net decrease in net assets ............................................................ (112,988,273) (409,421,427)
Net assets:
Beginning of period ..................................................................... 776,418,460 1,185,839,887
---------------------------------
End of period ........................................................................... $ 663,430,187 $ 776,418,460
=================================
Undistributed net investment income included in net assets:
End of period ........................................................................... $ 28,195,209 $ 66,903,760
=================================
</TABLE>

See notes to financial statements.

FI-15
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN INCOME SECURITIES FUND

Notes to Financial Statements (unaudited)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The Franklin Income Securities Fund (the Fund) is a separate, diversified
series of the Franklin Templeton Variable Insurance Products Trust (the Trust),
which is an open-end investment company registered under the Investment Company
Act of 1940. Shares of the Fund are sold only to insurance company separate
accounts to fund the benefits of variable life insurance policies or variable
annuity contracts. As of June 30, 2000, 93% of the Fund's shares were sold
through one insurance company. The Fund seeks to maximize income while
maintaining prospects for capital appreciation.

The following summarizes the Fund's significant accounting policies.

a. Security Valuation

b. Foreign Currency Translation

c. Income Taxes

d. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and
losses on security transactions are determined on a specific identification
basis. Interest income and estimated expenses are accrued daily. Bond discount
is amortized on an income tax basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.

Distributions received by the Fund from securities may be a return of capital
(ROC). Such distributions reduce the cost basis of the securities, and any
distributions in excess of the cost basis are recognized as capital gains.

FI-16
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN INCOME SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

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

e. Accounting Estimates

2. SHARES OF BENEFICIAL INTEREST

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

At June 30, 2000, there were an unlimited number of shares authorized ($.01 par
value). Transactions in the Fund's shares were as follows:

<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999(a)
-------------------------------------------------------------------
Shares Amount Shares Amount
Class 1 Shares: -------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ................................... 531,253 $ 7,589,842 2,371,113 $ 38,308,568
Shares issued in reinvestment of distributions 7,546,317 99,007,679 7,222,075 109,703,322
Shares redeemed ............................... (11,468,310) (164,280,514) (26,903,414) (432,579,380)
-------------------------------------------------------------------
Net decrease .................................. (3,390,740) $ (57,682,993) (17,310,226) $ (284,567,490)
===================================================================
Class 2 Shares:
Shares sold ................................... 29,494 $ 405,754 85,908 $ 1,343,308
Shares issued in reinvestment of distributions 14,259 186,513 3,906 59,256
Shares redeemed ............................... (19,853) (286,438) (892) (13,183)
-------------------------------------------------------------------
Net increase .................................. 23,900 $ 305,829 88,922 $ 1,389,381
===================================================================
</TABLE>

(a)For the period January 6, 1999 (effective date) to December 31, 1999 for
Class 2.

3. TRANSACTIONS WITH AFFILIATES

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

<TABLE>
<CAPTION>
Entity Affiliation
--------------------------------------------------------------------------------------
<S> <C>
Franklin Templeton Services, Inc. (FT Services) Administrative manager
Franklin Advisers, Inc. (Advisers) Investment manager
Franklin/Templeton Distributors, Inc. (Distributors) Principal underwriter
Franklin/Templeton Investor Services, Inc. (Investor Services) Transfer agent
</TABLE>

FI-17
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN INCOME SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

3. TRANSACTIONS WITH AFFILIATES (cont.)

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

Annualized Fee Rate Daily Net Assets
-------------------------------------------------------------------------
.625% First $100 million
.50% Over $100 million, up to and including $250 million
.45% Over $250 million, up to and including $10 billion

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

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

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

Included in professional fees are legal fees of $2,203 that were paid to a law
firm in which a partner of that firm was an officer of the Fund.

4. INCOME TAXES

At December 31, 1999, the Fund has deferred capital losses occurring subsequent
to October 31, 1999 of $799,463. For tax purposes, such losses will be
reflected in the year ending December 31, 2000.

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

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

At June 30, 2000, the net unrealized depreciation based on the cost of
investments for income tax purposes of $694,510,439 was as follows:

Unrealized appreciation ............. $ 66,405,603
Unrealized depreciation ............. (106,759,616)
--------------
Net unrealized depreciation ......... $ (40,354,013)
==============

5. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities) for the
period ended June 30, 2000 aggregated $98,673,765 and $230,318,829,
respectively.

FI-18
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN INCOME SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

6. CREDIT RISK AND DEFAULTED SECURITIES

The Fund has 40.7% of its portfolio invested in lower rated and comparable
quality unrated high yield securities, which tend to be more sensitive to
economic conditions than higher rated securities. The risk of loss due to
default by the issuer may be significantly greater for the holders of high
yielding securities because such securities are generally unsecured and are
often subordinated to other creditors of the issuer. At June 30, 2000, the Fund
held defaulted securities with a value aggregating $5,250,000 representing .8%
of the Fund's net assets. For information as to specific securities, see the
accompanying Statement of Investments.

For financial reporting purposes, the Fund discontinues accruing income on
defaulted bonds and provides an estimate for losses on interest receivable.

FI-19
<PAGE>

FRANKLIN NATURAL RESOURCES SECURITIES FUND

--------------------------------------------------------------------------------
Fund Goals and Primary Investments: Franklin Natural Resources Securities Fund
seeks capital appreciation, with current income as a secondary goal. The Fund
invests primarily in U.S. and foreign equity securities of companies that own,
produce, refine, process or market natural resources, as well as those that
provide support services for natural resources companies.
--------------------------------------------------------------------------------
This semiannual report for Franklin Natural Resources Securities Fund covers
the six months ended June 30, 2000. During the period, many commodity markets
appeared to be adversely affected by investors' fears that potential inflation
and moderating global growth could lead to a slowdown in the U.S. economy.
However, the energy market performed exceptionally well, with most energy
prices rising due to declines in available supply and continued demand. Crude
oil traded at a post-Gulf War high and natural gas prices nearly doubled.

Because we were overweight in the energy sector relative to the Fund's
benchmark, the Financial Times/Standard & Poor's (Fin. Times/S&P) AW Energy and
Basic Industries Index, this environment benefited the Fund's performance
significantly.(1) We had a bias towards natural gas related securities because
we believed they exhibited the strongest supply and demand fundamentals. In our
opinion, demand for natural gas will outpace supply over the next year, leading
to even higher average prices as gas storage levels drop.

During the reporting period, our positions in Chesapeake Energy, EOG Resources,
Newfield Exploration and Devon Energy, oil and gas exploration and development
companies with a majority of their production and reserves in natural gas,
appreciated significantly. Our holdings of the following oil services
companies, Weatherford International, Transocean Sedco Forex, Baker Hughes and
Grey Wolf, each increased over 50% in value.

Of course, not all of our investments did this well. The Fund's performance was
negatively impacted by its exposure to paper and forest products companies, as
fear of slowing global economic growth contributed to decreased valuations.
However, believing that these stocks offered good value and growth potential if
the economy does

(1) The Fin. Times/S&P AW Energy and Basic Industries Index is a composite of
50% Fin. Times/S&P AW Energy Index and 50% Fin. Times/S&P AW Basic Industries
Index. It includes various natural resources industries dealing with:
construction and building materials, chemicals, mining, metals, minerals,
precious metals and minerals, forestry and paper products, and fabricated metal
products as well as with oil internationals, crude producers, petroleum
products and refineries, non-oil energy sources, and energy equipment and
services.

FN-1
<PAGE>

Top 10 Holdings
Franklin Natural Resources
Securities Fund
6/30/00

Company % of Total
Sector, Country Net Assets
-------------------------------------------
Chesapeake Energy Corp. 4.0%
Energy Minerals, U.S.

Conoco Inc., B 3.3%
Energy Minerals, U.S.

Weatherford
International Inc. 3.2%
Industrial Services, U.S.

Transocean Sedco
Forex Inc. 3.1%
Industrial Services, U.S.

EOG Resources Inc. 3.1%
Energy Minerals, U.S.

Baker Hughes Inc. 2.5%
Industrial Services, U.S.

IMC Global/Merrill Lynch,
6.25%, cvt. pfd., IGL 2.4%
Finance, U.S.

Pennaco Energy Inc. 2.4%
Energy Minerals, U.S.

Pohang Iron & Steel Co.
Ltd., ADR 2.4%
Non-Energy Minerals,
Korea

Superior Energy
Services Inc. 2.4%
Industrial Services, U.S.

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

not slow down excessively, we maintained our exposure to this sector and
purchased additional shares of Bowater, a manufacturer and distributor of pulp
and paper products. Since we were underweight in our exposure to the steel and
base metals sectors, the Fund's performance was not greatly affected by the
fact that prices of these stocks fell about 30% during the period.

Looking forward, we expect energy prices to remain above historical averages,
which could lead to stronger cash flow for individual energy companies. We also
believe that the prospects for companies in the broader natural resources
sector will improve over the long term. The Fund is well positioned with
investments in companies that have superior management, relatively low costs
and the capability to add value for our shareholders through commodity-price
cycles. We are optimistic that by combining our top-down industry research with
bottom-up stock analysis, we will provide our shareholders with the potential
for attractive long-term results.

We thank you for your participation in Franklin Natural Resources Securities
Fund and look forward to serving your investment needs in the future. Please
feel free to contact us with your comments or questions.

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance
is no guarantee of future results, these insights may help you understand our
investment and management philosophy.

FN-2
<PAGE>

PERFORMANCE SUMMARY AS OF 6/30/00

Franklin Natural Resources Securities Fund - Class 1 delivered a +20.83%
cumulative total return for the six-month period ended 6/30/00. Total return of
Class 1 shares represents the cumulative or 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.

<TABLE>
<CAPTION>
Franklin Natural Resources Securities Fund - Class 1
Periods ended 6/30/00
Since
Inception
1-Year 5-Year 10-Year (1/24/89)
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +23.67% +0.37% +3.20% +3.96%
Cumulative Total Return +23.67% +1.85% +37.01% +55.91%
Value of $10,000 Investment $12,367 $10,185 $13,701 $15,591
</TABLE>

Franklin Natural Resources Securities
Fund - Class 1

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

Past performance does not guarantee future results.

FN-3
<PAGE>

FRANKLIN REAL ESTATE FUND

--------------------------------------------------------------------------------
Fund Goals and Primary Investments: Franklin Real Estate Fund seeks capital
appreciation, with current income as a secondary goal. The Fund invests
primarily in equity securities of companies, including small capitalization
companies, in the real estate industry, primarily real estate investment trusts
(REITs).
--------------------------------------------------------------------------------
We are pleased to bring you this semiannual report for Franklin Real Estate
Fund. Following weak performances in 1998 and 1999, real estate stocks
rebounded significantly during the first six months of 2000, with the strongest
gains coming in the last half of the period as volatility in the broader
markets seemed to generate renewed interest in value stocks. As we entered
2000, shares of Real Estate Investment Trusts (REITs) were very attractively
priced, in our opinion. This, combined with promising operating fundamentals at
the property level, helped to provide the catalyst for higher stock prices in
the sector, and the Wilshire Real Estate Securities Index rose 15.21% for the
six months ended June 30, 2000.(1)

The diversified property sector, which is comprised of those companies whose
focus is not limited to one specific property type, represented the Fund's
largest weighting. The Fund's second largest weighting, office real estate
stocks, was one of the best performing property types during the reporting
period, partly as a result of favorable supply and demand characteristics and
compelling valuations. In our opinion, these two sectors, in addition to the
Fund's third largest weighting, apartments, have favorable long-term
fundamentals and reasonable stock valuations.

During the reporting period, we purchased stocks of two mall companies, Chelsea
CGA, an outlet mall REIT we believe has strong growth opportunities, and
Glimcher Realty, a regional mall repositioning its assets for improved growth
potential. Both stocks were trading at attractive valuations, in our view, and
offered relatively high dividend yields at the time we purchased them.

(1) Source: Standard and Poor's Micropal. The Wilshire Real Estate Securities
Index is a market capitalization-weighted index comprised of publicly traded
real estate investments trusts (REITs) and real estate operating companies. The
index is unmanaged and includes reinvested dividends. One cannot invest directly
in an index.

Sector Breakdown
Franklin Real Estate Fund
6/30/00

% of Total
Sector Net Assets
---------------------------------------
Diversified 26.8%

Office 21.5%

Apartment 14.8%

Retail 12.1%

Hotel 11.1%

Industrial 5.4%

Self Storage 3.7%

Manufactured Housing 1.7%

Health Care 0.4%

Short-Term Investments &
Other Net Assets 2.5%

FRE-1
<PAGE>

Top 10 Holdings
Franklin Real Estate Fund
6/30/00

Security % of Total
Security Type Net Assets
--------------------------------------------
Equity Office Properties 5.7%
Office

Starwood Hotels &
Resorts 5.6%
Hotel

Security Capital Group 4.7%
Diversified

Apartment Investment &
Management 4.7%
Apartment

Equity Residential
Property Trust 4.5%
Apartment

Prologis Trust 4.4%
Industrial

Glenborough Realty Trust 4.3%
Diversified

Meristar Hospitality Corp. 4.0%
Hotel

Liberty Property Trust 3.9%
Diversified

Public Storage Inc. 3.7%
Self Storage

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

Becoming concerned about overbuilding in the hotel sector, we sold our holdings
in Winston Hotels, Felcor Lodging and Host Marriott because of what we felt
were the companies' weak growth prospects. We also eliminated our positions in
Camden Properties, a regional apartment REIT, Crescent Realty, a diversified
REIT, and Developers Diversified, a retail community center REIT, due to their
exposure to overbuilt markets in the south and southeast.

Looking forward, we believe real estate fundamentals, with a few exceptions,
should continue to benefit from an environment of balanced supply and demand.
Given rising rents and selective development opportunities, earnings growth
through the rest of 2000 appears strong. Overall, we are optimistic about the
prospects for investing in real estate securities. In our opinion, they possess
a unique combination of strong fundamentals, favorable valuations and
attractive growth opportunities. Consequently, the sector appears to be once
again attracting investors due to the earnings visibility and the underlying
asset value of real estate companies.

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any industry, security or the Fund. Our
strategies and the Fund's portfolio composition will change depending on
market and economic conditions. Although historical performance is no
guarantee of future results, these insights may help you understand our
investment and management philosophy.

FRE-2
<PAGE>

PERFORMANCE SUMMARY AS OF 6/30/00

Franklin Real Estate Fund - Class 1 delivered a +17.28% cumulative total return
for the six-month period ended 6/30/00. Total return of Class 1 shares
represents the cumulative or 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.

<TABLE>
<CAPTION>
Franklin Real Estate Fund - Class 1
Periods ended 6/30/00
Since
Inception
1-Year 5-Year 10-Year (1/24/89)
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +4.32% +10.61% +11.01% +9.82%
Cumulative Total Return +4.32% +65.54% +184.25% +191.62%
Value of $10,000 Investment $10,432 $16,554 $28,425 $29,162
</TABLE>

Ongoing stock market volatility can dramatically change the Fund's short-term
performance; current results may be lower.

Franklin Real Estate
Fund - Class 1

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

Past performance does not guarantee future results.

FRE-3
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN REAL ESTATE FUND

Financial Highlights

<TABLE>
<CAPTION>
Class 1
-----------------------------------------------------------------------------------
Six Months Ended Year Ended December 31,
June 30, 2000 ----------------------------------------------------------------
(unaudited) 1999 1998 1997 1996 1995
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $14.92 $19.93 $25.60 $22.15 $17.40 $15.31
----------------------------------------------------------------------------
Income from investment operations:
Net investment income(a)...................... .36 .88 1.45 .72 .79 .78
Net realized and unrealized gains (losses) ... 2.08 (1.77) (5.60) 3.72 4.74 1.83
----------------------------------------------------------------------------
Total from investment operations .............. 2.44 (.89) (4.15) 4.44 5.53 2.61
----------------------------------------------------------------------------
Less distributions from:
Net investment income ........................ (1.15) (1.73) (.94) (.67) (.78) (.52)
Net realized gains ........................... (.69) (2.39) (.58) (.32) -- --
----------------------------------------------------------------------------
Total distributions ........................... (1.84) (4.12) (1.52) (.99) (.78) (.52)
----------------------------------------------------------------------------
Net asset value, end of period ................ $15.52 $14.92 $19.93 $25.60 $22.15 $17.40
============================================================================
Total return(b)................................ 17.28% (6.14%) (16.82%) 20.70% 32.82% 17.53%

Ratios/supplemental data
Net assets, end of period (000's) ............. $152,346 $158,553 $282,290 $440,554 $322,721 $213,473
Ratios to average net assets:
Expenses ..................................... .60%(c) .58% .54% .54% .57% .59%
Net investment income ........................ 4.72%(c) 4.83% 5.44% 3.59% 4.80% 4.74%
Portfolio turnover rate ....................... 7.35% 10.27% 13.21% 11.62% 10.32% 22.15%
</TABLE>

FRE-4
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN REAL ESTATE FUND

Financial Highlights (continued)

<TABLE>
<CAPTION>
Class 2
---------------------------------------
Six Months Ended
June 30, 2000 Year Ended
(unaudited) December 31, 1999(d)
---------------------------------------
<S> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period ................ $14.88 $20.21
---------------------------------------
Income from investment operations:
Net investment incomea ............................. .39 1.29
Net realized and unrealized gains (losses) ......... 2.02 (2.50)
---------------------------------------
Total from investment operations .................... 2.41 (1.21)
---------------------------------------
Less distributions from:
Net investment income .............................. (1.15) (1.73)
Net realized gains ................................. (.69) (2.39)
---------------------------------------
Total distributions ................................. (1.84) (4.12)
---------------------------------------
Net asset value, end of period ...................... $15.45 $14.88
=======================================
Total returnb ....................................... 17.11% (7.66%)

Ratios/supplemental data
Net assets, end of period (000's) ................... $8,842 $ 2,449
Ratios to average net assets:
Expenses ........................................... .85%(c) .83%(c)
Net investment income .............................. 5.16%(c) 8.84%(c)
Portfolio turnover rate ............................. 7.35% 10.27%
</TABLE>

See notes to financial statements.

FRE-5
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN REAL ESTATE FUND

Statement of Investments, June 30, 2000 (unaudited)

<TABLE>
<CAPTION>
SHARES VALUE
---------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks 97.5%
Equity REIT - Apartments 14.8%
Apartment Investment & Management Co., A .......... 175,000 $ 7,568,750
Archstone Communities Trust ....................... 150,035 3,160,112
Avalonbay Communities Inc. ........................ 80,000 3,340,000
Charles E. Smith Residential Realty Inc. .......... 64,000 2,432,000
Equity Residential Properties Trust ............... 157,500 7,245,000
------------
23,745,862
------------
Equity REIT - Diversified Property Type 19.5%
Duke-Weeks Realty Corp. ........................... 195,000 4,363,125
Glenborough Realty Trust Inc. ..................... 398,700 6,952,331
Istar Financial Inc. .............................. 240,000 5,025,000
Liberty Property Trust ............................ 240,000 6,225,000
Reckson Associates Realty Corp., B ................ 149,000 3,790,188
Spieker Properties Inc. ........................... 50,000 2,362,500
Vornado Realty Trust .............................. 78,300 2,720,925
------------
31,439,069
------------
Equity REIT - Health Care .4%
OMEGA Healthcare Investors Inc. ................... 142,000 639,000
------------
Equity REIT - Hotels 4.0%
MeriStar Hospitality Corp. ........................ 310,000 6,510,000
------------
Equity REIT - Industrial 5.4%
Cabot Industrial Trust ............................ 82,900 1,632,094
Prologis Trust .................................... 333,800 7,114,113
------------
8,746,207
------------
Equity REIT - Office 21.5%
Alexandria Real Estate Equities Inc. .............. 128,400 4,405,725
Arden Realty Inc. ................................. 140,600 3,304,100
Brandywine Realty Trust ........................... 300,700 5,750,888
CarrAmerica Realty Corp. .......................... 152,200 4,033,300
Equity Office Properties Trust .................... 335,008 9,233,658
Highwoods Properties Inc. ......................... 135,000 3,240,000
Mack-Cali Realty Corp. ............................ 120,000 3,082,500
SL Green Realty Corp. ............................. 58,400 1,562,200
------------
34,612,371
------------
Equity REIT- Residential Communities 1.7%
Sun Communities Inc. .............................. 80,000 2,675,000
------------
Equity REIT - Retail - Community Centers 2.7%
Kimco Realty Corp. ................................ 108,000 4,428,000
------------
Equity REIT - Retail - Regional Malls 9.4%
Chelsea GCA Realty Inc. ........................... 35,000 1,209,688
General Growth Properties Inc. .................... 135,000 4,286,250
Glimcher Realty Trust ............................. 217,800 3,130,875
Simon Property Group Inc. ......................... 190,000 4,215,625
The Macerich Co. .................................. 103,000 2,272,438
------------
15,114,876
------------
Equity REIT - Storage 3.7%
Public Storage Inc. ............................... 256,600 6,014,063
------------
</TABLE>

FRE-6
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN REAL ESTATE FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
SHARES VALUE
-------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stocks (cont.)
(a) Diversified Property Type 7.3%
Security Capital Group Inc., B .......................... 450,200 $ 7,653,400
Security Capital U.S. Realty (Luxembourg) ............... 232,300 4,174,141
------------
11,827,541
------------
Hotels 7.1%
(a) Candlewood Hotel Co. Inc. ............................... 350,000 831,250
(a) MeriStar Hotels & Resorts Inc. .......................... 170,000 488,750
Starwood Hotels & Resorts Worldwide Inc. ................ 275,000 8,954,688
(a) Wyndham International Inc., A ........................... 442,038 1,105,091
------------
11,379,779
------------
Total Long Term Investments (Cost $140,948,425).......... 157,131,768
------------
</TABLE>

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
-------------
<S> <C> <C> <C>
(b) Repurchase Agreement 2.0%
Joint Repurchase Agreement, 6.563%, 7/03/00, (Maturity Value $3,279,616)
(Cost $ $3,277,823 .................................................... $3,277,823 3,277,823
Banc of America Securities LLC
Barclays Capital Inc.
Bear, Stearns & Co. Inc.
Donaldson, Lufkin & Jenrette Securities Corp.
Dresdner Kleinwort Benson, North America LLC
Goldman, Sachs & Co.
Greenwich Capital Markets Inc.
Lehman Brothers, Inc.
Nesbitt Burns Securities Inc.
Paine Webber Inc.
Paribas Corp.
UBS Warburg
Collateralized by U.S. Treasury Bills & Notes
Total Investments (Cost $144,226,248) 99.5%.............................. 160,409,591
Other Assets, less Liabilities .5% ...................................... 778,082
-----------
Net Assets 100% ......................................................... $161,187,673
============
</TABLE>

See notes to financial statements.

FRE-7
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN REAL ESTATE FUND

Financial Statements

Statement of Assets and Liabilities
June 30, 2000 (unaudited)

Assets:
Investments in securities:
Cost ................................................ $144,226,248
============
Value ............................................... 160,409,591
Receivables:
Investment securities sold .......................... 369,082
Dividends ........................................... 959,599
------------
Total assets ....................................... 161,738,272
------------
Liabilities:
Payables:
Capital shares redeemed ............................. 454,167
Affiliates .......................................... 79,058
Other liabilities .................................... 17,374
------------
Total liabilities .................................. 550,599
------------
Net assets, at value .............................. $161,187,673
============
Net assets consist of:
Undistributed net investment income .................. $ 3,969,322
Net unrealized appreciation .......................... 16,183,343
Accumulated net realized loss ........................ (9,438,043)
Capital shares ....................................... 150,473,051
------------
Net assets, at value .............................. $161,187,673
============
Class 1:
Net assets, at value ................................. $152,345,969
============
Shares outstanding ................................... 9,815,875
============
Net asset value and offering price per share ......... $ 15.52
============
Class 2:
Net assets, at value ................................. $ 8,841,704
============
Shares outstanding ................................... 572,214
============
Net asset value and offering price per share ......... $ 15.45
============

See notes to financial statements.

FRE-8
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN REAL ESTATE FUND

Financial Statements (continued)

Statement of Operations
for the six months ended June 30, 2000 (unaudited)

Investment income:
Dividends ................................................... $ 4,039,972
Interest .................................................... 76,520
------------
Total investment income .................................... 4,116,492
------------
Expenses:
Management fees (Note 3) .................................... 445,847
Distribution fees - Class 2 (Note 3) ........................ 6,453
Custodian fees .............................................. 1,059
Reports to shareholders ..................................... 8,812
Professional fees (Note 3) .................................. 5,434
Trustees' fees and expenses ................................. 670
Other ....................................................... 656
------------
Total expenses ............................................. 468,931
------------
Net investment income ..................................... 3,647,561
------------
Realized and unrealized gains (losses):
Net realized loss from investments .......................... (4,808,834)
Net unrealized appreciation on investments .................. 25,535,729
------------
Net realized and unrealized gain ............................. 20,726,895
------------
Net increase in net assets resulting from operations ......... $ 24,374,456
============

See notes to financial statements.

FRE-9
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN REAL ESTATE FUND

Financial Statements (continued)

Statements of Changes in Net Assets
for the six months ended June 30, 2000 (unaudited) and the year ended December
31, 1999

<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999
---------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income .................................................. $ 3,647,561 $ 10,382,093
Net realized gain (loss) from investments .............................. (4,808,834) 2,394,868
Net unrealized appreciation (depreciation) on investments .............. 25,535,729 (25,421,990)
-----------------------------------
Net increase (decrease) in net assets resulting from operations ....... 24,374,456 (12,645,029)
Distributions to shareholders from:
Net investment income:
Class 1 ............................................................... (10,465,200) (18,056,331)
Class 2 ............................................................... (442,237) (5,537)
Net realized gains:
Class 1 ............................................................... (6,229,113) (25,020,454)
Class 2 ............................................................... (263,710) (7,673)
-----------------------------------
Total distributions to shareholders ..................................... (17,400,260) (43,089,995)
Capital share transactions: (Note 2)
Class 1 ............................................................... (12,925,718) (67,959,433)
Class 2 ............................................................... 6,137,452 2,405,793
-----------------------------------
Total capital share transactions ........................................ (6,788,266) (65,553,640)
Net increase (decrease) in net assets ................................. 185,930 (121,288,664)
Net assets:
Beginning of period ..................................................... 161,001,743 282,290,407
-----------------------------------
End of period ........................................................... $ 161,187,673 $ 161,001,743
===================================
Undistributed net investment income included in net assets:
End of period ........................................................... $ 3,969,322 $ 11,229,198
===================================
</TABLE>

See notes to financial statements.

FRE-10
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN REAL ESTATE FUND

Notes to Financial Statements (unaudited)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The Franklin Real Estate Fund (the Fund) is a separate, diversified series of
the Franklin Templeton Variable Insurance Products Trust (the Trust), which is
an open-end investment company registered under the Investment Company Act of
1940. Shares of the Fund are sold only to insurance company separate accounts
to fund the benefits of variable life insurance policies or variable annuity
contracts. As of June 30, 2000, 89% of the Fund's shares were sold through one
insurance company. The Fund seeks capital appreciation with current income as a
secondary goal.

The following summarizes the Fund's significant accounting policies.

a. Security Valuation

b. Income Taxes

c. Security Transactions, Investment Income, Expenses and Distributions

d. Accounting Estimates

2. SHARES OF BENEFICIAL INTEREST

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

FRE-11
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN REAL ESTATE FUND

Notes to Financial Statements (unaudited) (continued)

2. SHARES OF BENEFICIAL INTEREST (cont.)

At June 30, 2000, there were an unlimited number of shares authorized ($.01 par
value). Transactions in the Fund's shares were as follows:

<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999(a)
------------------------------------------------------------------
Shares Amount Shares Amount
Class 1 Shares: ------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ................................... 359,544 $ 5,444,886 575,363 $ 10,691,098
Shares issued in reinvestment of distributions 1,159,327 16,694,313 2,652,511 43,076,785
Shares redeemed ............................... (2,329,948) (35,064,917) (6,765,476) (121,727,316)
------------------------------------------------------------------
Net decrease .................................. (811,077) $ (12,925,718) (3,537,602) $ (67,959,433)
==================================================================
Class 2 Shares:
Shares sold ................................... 499,842 $ 7,581,471 165,395 $ 2,415,677
Shares issued in reinvestment of distributions 49,229 705,947 815 13,209
Shares redeemed ............................... (141,500) (2,149,966) (1,567) (23,093)
------------------------------------------------------------------
Net increase .................................. 407,571 $ 6,137,452 164,643 $ 2,405,793
==================================================================
</TABLE>

(a)For the period January 6, 1999 (effective date) to December 31, 1999 for
Class 2.

3. TRANSACTIONS WITH AFFILIATES

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

<TABLE>
<CAPTION>
Entity Affiliation
---------------------------------------------------------------------------------------
<S> <C>
Franklin Templeton Services, Inc. (FT Services) Administrative manager
Franklin Advisers, Inc. (Advisers) Investment manager
Franklin/Templeton Distributors, Inc. (Distributors) Principal underwriter
Franklin/Templeton Investor Services, Inc. (Investor Services) Transfer agent
</TABLE>

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

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

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

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

Included in professional fees are legal fees of $516 that were paid to a law
firm in which a partner of that firm was an officer of the Fund.

FRE-12
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN REAL ESTATE FUND

Notes to Financial Statements (unaudited) (continued)

4. INCOME TAXES

At December 31, 1999, the Fund has deferred capital losses occurring subsequent
to October 31, 1999 of $4,078,609. For tax purposes, such losses will be
reflected in the year ending December 31, 2000.

At June 30, 2000, the net unrealized appreciation based on the cost of
investments for income tax purposes of $144,226,248 was as follows:

Unrealized appreciation ............. $ 30,484,102
Unrealized depreciation ............. (14,300,759)
-------------
Net unrealized appreciation ......... $ 16,183,343
=============

5. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities) for the
period ended June 30, 2000 aggregated $11,050,698 and $28,226,604,
respectively.

FRE-13
<PAGE>

FRANKLIN RISING DIVIDENDS SECURITIES FUND

--------------------------------------------------------------------------------
Fund Goal and Primary Investments: Franklin Rising Dividends Securities Fund
seeks long-term capital appreciation. The Fund invests primarily in equity
securities of companies that have paid consistently rising dividends over the
past 10 years, including small capitalization companies.
--------------------------------------------------------------------------------
During the period under review, the U.S. economy continued to strengthen, as
gross domestic product (GDP) grew at annualized rates of 4.8% and 5.2% in the
first and second quarters of 2000, respectively. The Federal Reserve Board (the
Fed) was concerned that the economy was expanding beyond its capacity to grow
at a non-inflationary rate, partly due to the tight labor market. Accordingly,
the Fed increased the federal funds target rate by one percentage point during
the reporting period, bringing it to 6.5% by June 30, 2000. It appears likely
that the combination of rising short-term interest rates, high gasoline prices
and somewhat lower stock prices may begin to slow the economy. At the period's
end, it seemed market participants were trying to determine the likely duration
and depth of any slowdown.

The stock market began the year with the stocks of most "new economy" companies
-- mainly those involved in technology, telecommunications and biotechnology --
soaring while many "old economy" stocks declined in price. This caused the
valuations of the favored stocks to reach unprecedented levels while many other
stocks seemed priced for a recession that we believe does not appear likely.
Later in the period, we saw a market rotation out of the favored stocks and
into many out-of-favor groups. In June, "new economy" stocks seemed to regain
investor favor. From our perspective, relative valuations were still
extraordinarily stretched. Some stocks appeared to be discounting very high
growth rates for many years, if not decades, to come. Conversely, other
companies seemed to be priced as if their growth were suddenly going to stop
and never again approach historical rates.

We base our investment strategy on our belief that companies with consistently
rising dividends should, over time, also realize appreciation in their stock
prices. We look for securities that have had consistent and substantial
dividend increases, strong balance sheets and relatively low price-to-earnings
ratios. We seek fundamentally sound companies that meet our standards and
attempt to acquire them at what we feel are attractive prices, often when they
are out of favor with other investors.

FRD-1
<PAGE>

Top 10 Stock Holdings
Franklin Rising Dividends
Securities Fund
6/30/00

Company % of Total
Sector Net Assets
-------------------------------------------
Family Dollar Stores Inc. 7.0%
Retail Trade

Alberto-Culver Co. 4.5%
Consumer Non-Durables

West Pharmaceutical
Services Inc. 4.5%
Health Technology

Leggett & Platt Inc. 4.3%
Consumer Durables

Cohu Inc. 4.2%
Electronic Technology

Teleflex Inc. 3.6%
Producer Manufacturing

Reynolds & Reynolds Co. 3.5%
Technology Services

Washington Mutual Inc. 3.3%
Finance

Bemis Co. Inc. 3.0%
Process Industries

National Commerce
Bancorp. 2.7%
Finance

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

Dover Corp., a diversified manufacturer of industrial products, is a good
example of what we consider an out-of-favor company with rising dividends and
other positive fundamental characteristics. Dover has increased its dividend for
44 consecutive years. Over this long period, its earnings-per-share (EPS) growth
rate has averaged about 13%, and excluding its now divested elevator business,
Dover's EPS growth rate increased 18% over the past 10 years. Last year, EPS
growth was a robust 31%. These growth rates exceed the historical earnings
growth of the Standard & Poor's 500(R) (S&P 500(R)) Index, and yet Dover's
price-to-earnings ratio of 17 (based on 2000 consensus estimates) is below the
S&P 500's ratio of 25.(1)

National Commerce Bancorp. (NCBC), one of our larger positions, also
exemplifies the Fund's strategy. NCBC has increased its dividend for the past
25 years. Over the past 10 years, the company's dividends grew at a 16% annual
rate, its EPS grew at a 15% rate and its return on equity consistently exceeded
18%. In our opinion, these results were largely driven by a 13% average annual
revenue growth, strong and improving cost control and outstanding asset
quality. Nevertheless, NCBC's price-to-earnings ratio is only slightly greater
than 13 based on 2000 consensus estimates.

During the period, the Fund benefited from corporate activity involving two of
our holdings. ReliaStar Financial Corp., a life insurance company, agreed to be
acquired by ING Group, in a cash transaction that was at a substantial premium
to its previous trading level. Block Drug Co. Inc., a health care and dental
products manufacturer, announced that they hired an investment banker to review
strategic alternatives for enhancing shareholder value.

The Fund's top-performing stock during the period was State Street Corp. The
company provides a variety of services to institutional investors and recently
achieved market recognition as a dominant global information processor.
Teleflex Inc., which rapidly increased shipments of its popular, adjustable
foot pedals for automobiles, and Diebold Inc., which seems poised to benefit
from an automatic teller machine upgrade cycle, also yielded superior returns
during the past six months.

FRD-2
<PAGE>

Family Dollar Stores Inc., with its "convenience discount" stores, and
Alberto-Culver Co., with its successful Sally Beauty Supply distribution
business, delivered strong earnings performance during the period.

West Pharmaceutical Services Inc., on the other hand, proved to be a
disappointment. West has three main businesses. The largest, designing and
manufacturing packaging components for pharmaceutical and health care
companies, performed well during the first six months of the year. West's
newest business segment, identifying and developing drug delivery systems for
biopharmaceutical and other drugs, saw its products move smoothly through the
development process. Although so far, this business line has failed to generate
any material revenues for the company, it appears to have a bright future.
However, West's third business unit, which provides contract manufacturing and
packaging services to pharmaceutical and personal care companies, recently
delivered unsatisfactory operating results. We expect this business to recover
later in the calendar year. As of period-end, West's stock price assumed little
future growth in any of these businesses.

Notable year-over-year dividend increases during the past six months came from
Washington Mutual Inc. (+17%), Alberto-Culver Co. - Class A (+15%), Nucor Corp.
(+15%), Teleflex Inc. (+14%), and Mercury General Corp. (+14%).

As the table shows, our 10 largest positions on June 30, 2000, comprised 40.6%
of the Fund's total net assets. It is interesting to note how these 10
companies would, in the aggregate, respond to our screening criteria based on a
simple average of statistical measures. On average, these 10 companies have
raised their dividends 17 years in a row and by 312% in the last 10 years.
Their most recent dividend increases averaged 11.7%, for a yield of 2.2% on
June 30, 2000, and a dividend payout ratio of 26%. Long-term debt averaged 22%
of capitalization, and the average price-to-earnings ratio was 12.5 on calendar
2000 estimates versus 25.0 for that of the unmanaged S&P 500 on the same date.

FRD-3
<PAGE>

It is our opinion that these companies are representative of the Fund's
fundamentally high quality. We also believe that, over the long term, companies
that increase cash payments to shareholders, year after year, will be superior
builders of wealth.

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance
is no guarantee of future results, these insights may help you understand our
investment and management philosophy.

FRD-4
<PAGE>

PERFORMANCE SUMMARY AS OF 6/30/00

Franklin Rising Dividends Securities Fund - Class 1 delivered a -1.16%
cumulative total return for the six-month period ended 6/30/00. Total return of
Class 1 shares represents the cumulative or 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.

<TABLE>
<CAPTION>
Franklin Rising Dividends Securities Fund - Class 1
Periods ended 6/30/00
Since
Inception
1-Year 5-Year (1/27/92)
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Average Annual Total Return -13.19% +12.45% +9.08%
Cumulative Total Return -13.19% +79.80% +107.93%
Value of $10,000 Investment $8,681 $17,980 $20,793
</TABLE>

Ongoing stock market volatility can dramatically change the Fund's short-term
performance; current results may be lower.

Franklin Rising Dividends Securities Fund - Class 1

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

Past performance does not guarantee future results.

FRD-5
<PAGE>
FRANKLIN VALUE SECURITIES FUND

--------------------------------------------------------------------------------
Fund Goal and Primary Investments: Franklin Value Securities Fund seeks
long-term total return. The Fund invests primarily in equity securities of
companies, including small capitalization companies, which in the portfolio
manager's opinion, are selling substantially below the underlying value of
their assets or private market value. The Fund may also invest a small portion
in foreign securities.
--------------------------------------------------------------------------------
During the six-month period ended June 30, 2000, the domestic economy remained
strong as it entered a record 10th year of expansion, fueled by high spending,
consumer confidence and a savings rate near zero. The Federal Reserve Board
implemented three separate interest rate increases, bringing the federal funds
target rate to 6.5% -- the highest rate in five years -- and by the end of the
period, signs of economic weakness began to appear.

The stock markets experienced extreme volatility during the period, with many
records shattered. Value stocks generally remained out of favor, while
technology stocks continued their climb until the middle of March, when
investors seemed to realize that the uncertain rewards did not justify the
risk. During the six months under review, the price difference between value
and growth stocks registered the widest gap in the market's history.

Our value investment strategy focuses on bargain stocks that we believe are
selling at a low price relative to earnings, cash flow or book value. Other
stocks may have overlooked assets, such as land or tax-loss carry forwards, or
valuable intangibles like patents or distribution systems. Usually, these
stocks are out-of-favor when we buy them, which is why we can generally pick
them up at bargain prices. If these companies perform as we expect, investors
or strategic buyers often will discover their value and bid prices up.

As the table to the right shows, on June 30, 2000, the Fund's largest sector
weighting was finance companies at 22.2% of the Fund's total net assets. This
significant exposure to a single sector may result in the Fund's experiencing
greater volatility than a fund with a more broadly diversified portfolio.

This horizontal bar chart shows the portfolio breakdown of Franklin Value
Securities Fund, as a percentage of total net assets on 6/30/00.

Finance 22.2%

Producer Manufacturing 17.3%

Industrial Services 9.8%

Consumer Non-Durables 8.5%

Transportation 6.5%

Consumer Durables 6.3%

Process Industries 5.9%

Retail Trade 4.6%

Electronic Technology 4.0%

Non-Energy Minerals 2.8%

Energy Minerals 2.3%

Technology Services 1.9%

Health Technology 1.7%

Consumer Services 1.4%

Commercial Services 0.9%

Short-Term Investments & Other Net Assets 3.9%

FV-1
<PAGE>

Top 10 Holdings
Franklin Value Securities Fund
6/30/00

Company % of Total
Sector Net Assets
---------------------------------------
JLG Industries Inc. 3.2%
Producer Manufacturing
Block Drug
Company Inc., A 3.1%
Consumer Non-Durables
American National
Insurance Co. 2.5%
Finance
Presidential Life Corp. 2.4%
Finance
D.R. Horton Inc. 2.4%
Consumer Durables
Tidewater Inc. 2.4%
Transportation
R&B Falcon Corp. 2.3%
Industrial Services
Diebold Inc. 2.3%
Electronic Technology
Household
International Inc. 2.3%
Finance
Rowan Cos. Inc. 2.2%
Industrial Services

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

During the reporting period, we concentrated new purchases on companies that we
think have strong financial positions and quality management. Two examples are
Family Dollar Stores and Leggett & Platt. Family Dollar is a mid-sized manager
of a national chain of convenience discount stores. Publicly held for over 30
years, Family Dollar has increased its dividend for 24 consecutive years, has
no long-term debt and has achieved accelerated earnings growth in recent years
due to the company's popular, everyday low-pricing strategy. At the end of the
period, Family Dollar traded at about 18 times this year's estimated earnings,
while its larger and better-known competitor, Wal-Mart, sold at around 43
times. Leggett & Platt, incorporated in 1901, manufactures a wide range of
engineered products, including components for commercial and retail furnishings
and retail store fixtures and displays. Leggett has posted 29 years of
increased dividends, which have grown at a greater than 15% compounded annual
rate. The company has generated compound annual growth rates of 13.0% in sales
and 19.5% in net earnings over the past 10 years, yet traded at the end of the
period at a mere 11 times this year's estimated earnings.

Although value investing was out of favor during most of the period, many
strategic buyers were still looking for bargains. At the beginning of the
reporting period, ING Groep NV agreed to purchase Fund holding ReliaStar
Financial Corp. at a substantial premium to ReliaStar's closing price, sending
the price of our shares of the company up about 65%. In addition, one of our
newer holdings, Duff & Phelps Credit Rating Co., announced that it would be
acquired at a 24% premium to our purchase price for the stock. Elsewhere, our
oil drilling and oil services stocks performed well during the period, as oil
prices continued to climb and ended the period at $32 a barrel, up from $25 six
months earlier.

FV-2
<PAGE>

Looking forward, we are hopeful that with the increase in market volatility,
more investors will seek what we believe to be rational valuations and return
to common sense investing. We remain steadfast and committed to our value
investing strategy and believe Franklin Value Securities Fund provides its
shareholders with a portfolio of well-managed, financially sound companies with
the potential for solid earnings growth and stock price appreciation over the
long term.

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance
is no guarantee of future results, these insights may help you understand our
investment and management philosophy.

FV-3
<PAGE>

Franklin Value Securities Fund - Class 1

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

PERFORMANCE SUMMARY AS OF 6/30/00

Franklin Value Securities Fund - Class 1 delivered a +5.80% cumulative total
return for the six-month period ended 6/30/00. Total return of Class 1 shares
represents the cumulative or average annual change in value, assuming
reinvestment of dividends and capital gains. Average returns smooth out
variations in returns, which can be significant; they are not the same as
year-by-year results.

Franklin Value Securities Fund - Class 1
Periods ended 6/30/00
Since
Inception
1-Year (5/1/98)
-------------------------------------------------------
Average Annual Total Return -3.04% -7.84%
Cumulative Total Return -3.04% -16.22%
Value of $10,000 Investment $9,696 $8,378

Ongoing stock market volatility can dramatically change the Fund's short-term
performance; current results may be lower.

Past performance does not guarantee future results.

FV-4
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN VALUE SECURITIES FUND

Financial Highlights

<TABLE>
<CAPTION>
Class 1
------------------------------------------------
Six Months Ended Year Ended December 31,
June 30, 2000 ---------------------------
(unaudited) 1999 1998(c)
------------------------------------------------
<S> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period .................. $7.90 $7.79 $10.00
------------------------------------------------
Income from investment operations:
Net investment income(d) ............................. .05 .05 .02
Net realized and unrealized gains (losses) ........... .41 .08 (2.23)
------------------------------------------------
Total from investment operations ...................... .46 .13 (2.21)
------------------------------------------------
Less distributions from net investment income ......... (.03) (.02) --
------------------------------------------------
Net asset value, end of period ........................ $8.33 $7.90 $7.79
================================================
Total return(b) ....................................... 5.80% 1.65% (22.10%)

Ratios/supplemental data
Net assets, end of period (000's) ..................... $14,323 $11,320 $9,013
Ratios to average net assets:
Expenses ............................................. .78%(a) .81% .83%(a)
Net investment income ................................ 1.20%(a) .65% .95%(a)
Portfolio turnover rate ............................... 32.15% 61.23% 22.79%
</TABLE>

(a)Annualized
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for periods less than one
year.
(c)For the period May 1, 1998 (effective date) to December 31, 1998.
(d)Based on average shares outstanding effective year ended December 31, 1999.

FV-5
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN VALUE SECURITIES FUND

Financial Highlights (continued)

Ratios/supplemental data
Net assets, end of period (000's) ..................... $3,992 $1,263
Ratios to average net assets:
Expenses ............................................. 1.03%(a) 1.06%(a)
Net investment income ................................ 1.04%(a) .62%(a)
Portfolio turnover rate ............................... 32.15% 61.23%
</TABLE>

(a)Annualized
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for periods less than one
year.
(c)For the period January 6, 1999 (effective date) to December 31, 1999.
(d)Based on average shares outstanding.

See notes to financial statements.

FV-6
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN VALUE SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited)
<TABLE>
<CAPTION>
SHARES VALUE
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stocks 96.1%
(a) Commercial Services .9%
Robert Half International Inc. ................... 6,000 $ 171,000
----------
Consumer Durables 6.3%
D.R. Horton Inc. ................................. 32,500 440,781
Engle Homes Inc. ................................. 6,000 57,375
La-Z-Boy Inc. .................................... 22,000 308,000
Leggett & Platt Inc. ............................. 16,500 272,250
M/I Schottenstein Homes Inc. ..................... 5,000 78,750
----------
1,157,156
----------
Consumer Non-Durables 8.5%
Block Drug Co. Inc., A ........................... 13,500 571,219
DIMON Inc. ....................................... 40,000 85,000
Standard Commercial Corp. ........................ 40,000 182,500
(a) Timberland Co., A ................................ 2,500 177,031
(a) Tropical Sportswear International Corp. .......... 16,500 288,750
Wolverine World Wide Inc. ........................ 26,000 256,750
----------
1,561,250
----------
(a) Consumer Services 1.4%
Aztar Corp. ...................................... 16,000 248,000
----------
Electronic Technology 4.0%
B.F. Goodrich Co. ................................ 2,500 85,156
Cohu Inc. ........................................ 6,000 161,813
Diebold Inc. ..................................... 15,000 418,125
(a) ESCO Electronics Corp. ........................... 600 10,200
(a) SPACEHAB Inc. .................................... 13,500 60,750
----------
736,044
----------
Energy Minerals 2.3%
(a) Nuevo Energy Co. ................................. 6,000 113,250
USX-Marathon Group Inc. .......................... 12,000 300,750
----------
414,000
----------
Finance 22.2%
Allstate Corp. ................................... 16,500 367,125
American General Corp. ........................... 800 48,800
American National Insurance Co. .................. 9,000 459,000
Harleysville Group Inc. .......................... 17,500 293,125
Household International Inc. ..................... 10,000 415,625
(a) John Hancock Financial Services Inc. ............. 800 18,950
Manulife Financial Corp. (Canada) ................ 12,000 213,750
National Commerce Bancorp. ....................... 21,000 337,313
(a) PBOC Holdings Inc. ............................... 16,000 136,000
Penn-America Group Inc. .......................... 9,500 74,813
Presidential Life Corp. .......................... 32,000 444,000
(a) Professionals Group Inc. ......................... 13,750 336,016
Reinsurance Group of America Inc. ................ 4,900 147,613
StanCorp Financial Group Inc. .................... 5,500 176,688
The PMI Group Inc. ............................... 4,700 223,250
Washington Mutual Inc. ........................... 13,000 375,375
----------
4,067,443
----------
Health Technology 1.7%
West Pharmaceutical Services Inc. ................ 14,200 307,070
----------
</TABLE>

FV-7
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN VALUE SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)
<TABLE>
<CAPTION>

SHARES VALUE
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stocks (cont.)
Industrial Services 9.8%
(a) Atwood Oceanics Inc. ............................ 5,100 $ 226,313
ENSCO International Inc. ........................ 11,000 393,938
(a) R&B Falcon Corp. ................................ 18,000 424,125
(a) Rowan Cos. Inc. ................................. 13,000 394,875
Santa Fe International Corp. .................... 10,000 349,375
----------
1,788,626
----------
Non-Energy Minerals 2.8%
Commonwealth Industries Inc. .................... 10,000 58,750
(a) Lone Star Technologies Inc. ..................... 8,000 370,000
LTV Corp. ....................................... 33,000 94,875
----------
523,625
----------
Process Industries 5.9%
Lancaster Colony Corp. .......................... 12,000 230,250
Myers Industries Inc. ........................... 20,000 215,000
RPM Inc. ........................................ 30,000 303,750
Sherwin-Williams Co. ............................ 8,000 169,500
Tuscarora Inc. .................................. 10,000 156,250
----------
1,074,750
----------
Producer Manufacturing 17.3%
Baldor Electric Co. ............................. 10,500 195,563
CIRCOR International Inc. ....................... 5,250 42,984
Dana Corp. ...................................... 10,000 211,875
Graco Inc. ...................................... 7,500 243,750
JLG Industries Inc. ............................. 50,000 593,750
Kaydon Corp. .................................... 11,000 231,000
Patrick Industries Inc. ......................... 2,200 13,750
Reliance Steel & Aluminum Co. ................... 9,000 172,125
Superior Industries International Inc. .......... 10,500 270,375
Teleflex Inc. ................................... 7,500 277,969
Timken Co. ...................................... 18,000 335,250
(a) Tower Automotive Inc. ........................... 23,500 293,750
Watts Industries Inc., A ........................ 15,000 189,375
Woodhead Industries Inc. ........................ 5,000 91,250
----------
3,162,766
----------
Retail Trade 4.6%
Family Dollar Stores Inc. ....................... 19,000 371,688
(a) Rite Aid Corp. .................................. 15,000 98,438
Schultz Sav-O Stores Inc. ....................... 3,800 39,425
The TJX Companies Inc. .......................... 17,500 328,125
----------
837,676
----------
Technology Services 1.9%
Reynolds & Reynolds Co., A ...................... 14,500 264,625
(a) Ultrak Inc. ..................................... 11,400 92,625
----------
357,250
----------
Transportation 6.5%
(a) Atlantic Coast Airlines Holdings Inc. ........... 8,600 273,050
Kenan Transport Co. ............................. 4,300 88,688
(a) Midwest Express Holdings ........................ 3,500 75,250
Teekay Shipping Corp. ........................... 10,000 328,750
Tidewater Inc. .................................. 12,000 432,000
----------
1,197,738
----------
</TABLE>

FV-8
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN VALUE SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
SHARES VALUE
----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stocks (cont.)
Total Long Term Investments (Cost $17,254,242)................. $17,604,394
-----------
Short Term Investments 3.6%
(b) Franklin Institutional Fiduciary Trust Money Market Portfolio
(Cost $660,535) .............................................. 660,535 660,535
-----------
Total Investments (Cost $17,914,777) 99.7%..................... 18,264,929
Other Assets, less Liabilities .3% ............................ 49,801
-----------
Net Assets 100.0% ............................................. $18,314,730
===========
</TABLE>

(a)Non-income producing
(b)The Franklin Institutional Fiduciary Trust Money Market Portfolio is managed
by Franklin Advisers, Inc.

See notes to financial statements.

FV-9
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN VALUE SECURITIES FUND

Financial Statements

Statement of Assets and Liabilities
June 30, 2000 (unaudited)

Assets:
Investments in securities:
Cost ................................................ $17,914,777
===========
Value ............................................... 18,264,929
Receivables:
Investment securities sold .......................... 29,442
Capital shares sold ................................. 35,599
Dividends ........................................... 27,012
-----------
Total assets ....................................... 18,356,982
-----------
Liabilities:
Payables:
Capital shares redeemed ............................. 26,102
Affiliates .......................................... 12,882
Other liabilities .................................... 3,268
-----------
Total liabilities .................................. 42,252
-----------
Net assets, at value .............................. $18,314,730
===========
Net assets consist of:
Undistributed net investment income .................. $ 94,336
Net unrealized appreciation .......................... 350,159
Accumulated net realized gain ........................ 136,483
Capital shares ....................................... 17,733,752
-----------
Net assets, at value .............................. $18,314,730
===========
Class 1:
Net assets, at value ................................. $14,322,682
===========
Shares outstanding ................................... 1,720,413
===========
Net asset value and offering price per share ......... $ 8.33
===========
Class 2:
Net assets, at value ................................. $ 3,992,048
===========
Shares outstanding ................................... 481,358
===========
Net asset value and offering price per share ......... $ 8.29
===========

See notes to financial statements.

FV-10
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN VALUE SECURITIES FUND

Financial Statements (continued)

Statement of Operations
for the six months ended June 30, 2000 (unaudited)

<TABLE>
<S> <C>
Investment income:
Dividends ................................................................ $ 160,242
Interest ................................................................. 127
----------
Total investment income ................................................. 160,369
----------
Expenses:
Management fees (Note 3) ................................................. 46,747
Administrative fees (Note 3) ............................................. 12,031
Distribution fees - Class 2 (Note 3) ..................................... 3,148
Custodian fees ........................................................... 55
Reports to shareholders .................................................. 617
Professional fees (Note 3) ............................................... 3,012
Trustees' fees and expenses .............................................. 88
Other .................................................................... 304
----------
Total expenses .......................................................... 66,002
----------
Net investment income .................................................. 94,367
----------
Realized and unrealized gains:
Net realized gain from investments ....................................... 744,433
----------
Net unrealized appreciation on:
Investments ............................................................. 355,917
Translation of assets and liabilities denominated in foreign curriencies 7
----------
Net unrealized appreciation ............................................ 355,924
==========
Net realized and unrealized gain .......................................... 1,100,357
==========
Net increase in net assets resulting from operations ...................... $1,194,724
==========
</TABLE>

See notes to financial statements.

FV-11
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN VALUE SECURITIES FUND

Financial Statements (continued)

Statements of Changes in Net Assets
for the six months ended June 30, 2000 (unaudited) and the year ended December
31, 1999

<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999
-------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income .................................................................. $ 94,367 $ 68,025
Net realized gain (loss) from investments and foreign currency transactions ............ 744,433 (517,910)
Net unrealized appreciation on investments and translation of assets and liabilities
denominated in foreign currencies .................................................... 355,924 396,623
-------------------------------------
Net increase (decrease) in net assets resulting from operations ....................... 1,194,724 (53,262)
Distributions to shareholders from:
Net investment income:
Class 1 ............................................................................... (58,683) (28,103)
Class 2 ............................................................................... (9,308) (138)
-------------------------------------
Total distributions to shareholders ..................................................... (67,991) (28,241)
Capital share transactions: (Note 2)
Class 1 ............................................................................... 2,032,745 2,419,613
Class 2 ............................................................................... 2,571,890 1,231,781
-------------------------------------
Total capital share transactions ........................................................ 4,604,635 3,651,394
Net increase in net assets ............................................................ 5,731,368 3,569,891
Net assets:
Beginning of period ..................................................................... 12,583,362 9,013,471
-------------------------------------
End of period ........................................................................... $18,314,730 $12,583,362
=====================================
Undistributed net investment income included in net assets:
End of period ........................................................................... $ 94,336 $ 67,960
=====================================
</TABLE>

See notes to financial statements.

FV-12
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN VALUE SECURITIES FUND

Notes to Financial Statements (unaudited)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The Franklin Value Securities Fund (the Fund) is a separate, non-diversified
series of the Franklin Templeton Variable Insurance Products Trust (the Trust),
which is an open-end investment company registered under the Investment Company
Act of 1940. Shares of the Fund are sold only to insurance company separate
accounts to fund the benefits of variable life insurance policies or variable
annuity contracts. As of June 30, 2000, 75% of the Fund's shares were sold
through one insurance company. The Fund seeks growth and income.

The following summarizes the Fund's significant accounting policies.

a. Security Valuation

b. Foreign Currency Translation

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

c. Income Taxes

d. Security Transactions, Investment Income, Expenses and Distributions

FV-13
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN VALUE SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

e. Accounting Estimates

2. SHARES OF BENEFICIAL INTEREST

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

At June 30, 2000, there were an unlimited number of shares authorized ($.01 par
value). Transactions in the Fund's shares were as follows:

<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999(a)
--------------------------------------------------------------
Shares Amount Shares Amount
Class 1 Shares: --------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ................................... 1,304,519 $ 10,267,990 1,587,252 $ 12,476,029
Shares issued in reinvestment of distributions 7,200 58,684 3,306 28,103
Shares redeemed ............................... (1,024,077) (8,293,929) (1,314,579) (10,084,519)
--------------------------------------------------------------
Net increase .................................. 287,642 $ 2,032,745 275,979 $ 2,419,613
==============================================================
Class 2 Shares:
Shares sold ................................... 384,157 $ 3,064,383 195,613 $ 1,501,629
Shares issued in reinvestment of distributions 1,146 9,308 16 138
Shares redeemed ............................... (64,255) (501,801) (35,319) (269,986)
--------------------------------------------------------------
Net increase .................................. 321,048 $ 2,571,890 160,310 $ 1,231,781
==============================================================
</TABLE>

(a)For the period January 6, 1999 (effective date) to December 31, 1999, for
Class 2.

3. TRANSACTIONS WITH AFFILIATES

Certain officers and trustees of the Trust are also officers and/or directors
of the following entities:
<TABLE>
<CAPTION>
Entity Affiliation
---------------------------------------------------------------------------------------
<S> <C>
Franklin Templeton Services, Inc. (FT Services) Administrative manager
Franklin Advisory Services, LLC (Advisory Services) Investment manager
Franklin/Templeton Distributors, Inc. (Distributors) Principal underwriter
Franklin/Templeton Investor Services, Inc. (Investor Services) Transfer agent
</TABLE>

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

Annualized Fee Rate Daily Net Assets
-------------------------------------------------------------------------
.60% First $200 million
.50% Over $200 million, up to and including $1.3 billion
.40% Over $1.3 billion

FV-14
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN VALUE SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

3. TRANSACTIONS WITH AFFILIATES (cont.)

The Fund pays administrative fees to FT Services based on the average net
assets of the Fund as follows:

Fees are further reduced on net assets over $1.2 billion.

Management fees were reduced on assets invested in the Franklin Institutional
Fiduciary Trust Money Market Portfolio.

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

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

Included in professional fees are legal fees of $123 that were paid to law firm
in which a partner of that firm was an officer of the Fund.

4. INCOME TAXES

At December 31, 1999, the Fund had tax basis capital losses, which may be
carried over to offset future capital gains. Such losses expire as follows:

Capital loss carryover expiring in:
2006 .............................. $ 64,007
2007 .............................. 382,947
--------
$446,954
========

At December 31, 1999, the Fund had deferred capital losses of $27,329 occurring
subsequent to October 31, 1999. For tax purposes such losses will be reflected
in the year ending December 31, 2000.

Net realized capital gains differ for financial statements and tax purposes
primarily due to differing treatments of wash sales.

At June 30, 2000, the net unrealized appreciation based on the cost of
investments for income tax purposes of $18,241,867 was as follows:

Unrealized appreciation ............. $ 2,417,020
Unrealized depreciation ............. (2,393,958)
------------
Net unrealized appreciation ......... $ 23,062
============

5. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities) for the
period ended June 30, 2000 aggregated $9,243,988 and $4,843,132 respectively.

FV-15
<PAGE>

MUTUAL SHARES SECURITIES FUND

--------------------------------------------------------------------------------
Fund Goals and Primary Investments: Mutual Shares Securities Fund seeks capital
appreciation, with income as a secondary goal. Using a value-driven approach,
the Fund invests primarily in U.S. equity securities. Investments include
securities of small capitalization companies, undervalued stocks, restructuring
companies and distressed companies. The Fund may also invest a small portion in
foreign securities.
--------------------------------------------------------------------------------
For most of the six-month period under review, the U.S. economy continued to
grow at a robust pace. Apparently concerned about the possibility of future
inflation, the U.S. Federal Reserve Board (the Fed) raised the federal funds
target rate three times. Though consumer spending receded following the rate
hikes, the U.S. economy continued to grow at a surprisingly robust 5.2% annual
rate in the second quarter. U.S. and European equity markets experienced unusual
volatility throughout the reporting period. For example, the Standard &
Poor's(R) 500 (S&P 500(R)) Composite Index declined by 7.00% from January
through February, rallied nearly 10% in March, then dropped 9.48% from the end
of March through mid-April before rebounding to end the six-month period at
-0.42%.(1) The technology-heavy Nasdaq Composite Index was even more
volatile.(2) Whipsawed by investor concerns over such issues as historically
high valuations and the federal district court's anti-monopoly ruling against
technology bellwether Microsoft, the Nasdaq(R) soared 24.07% through mid-March,
then plummeted 37.32% in the succeeding 2-1/2 months before rebounding in June
to end the six-month period at -2.02%. Within this environment, the Fund's
returns compared favorably to the S&P 500 Index which, as noted, declined 0.42%,
and to the Lipper Multi-Cap Value Funds Average, which declined 0.47% during the
same period.(3)

We believe the Fund's performance relative to these indexes was due largely to
our disciplined value and special situations approach. As the Fed waged a war
against inflation by raising interest rates, prices of

(3) Sources: Standard & Poor's Micropal and Lipper Analytical Services, Inc. The
Lipper Multi-Cap Value Funds Average is an equally weighted average consisting
of 518 mutual funds (including Mutual Shares Securities Fund) within the
Multi-Cap Value investment objective. Returns are adjusted for the reinvestment
of capital gains distributions and income dividends.

This horizontal bar chart shows the geographic distribution as a percentage of
total net assets on 6/30/00 for Mutual Shares Securities Fund.

United States 66.5%

United Kingdom 4.6%

France 2.8%

Sweden 2.5%

Netherlands 0.6%

Other Countries 2.1%

Fixed-Income Securities 6.6%

Government Agencies
& Other Net Assets 14.3%

MS-1
<PAGE>

Top 10 Holdings
Mutual Shares Securities Fund
6/30/00

Company % of Total
Sector, Country Net Assets
-----------------------------------------
Investor AB 2.5%
Multi-Industry, Sweden

Telephone & Data
Systems Inc. 2.4%
Telecommunications,
United States

AT&T Corp. 2.4%
Telecommunications,
United States

United Asset
Management Corp. 2.1%
Financial Services,
United States

Washington Post Co. 1.8%
Broadcasting &
Publishing, United States

Federated Department
Stores Inc. 1.8%
Merchandising,
United States

BF Goodrich Co. 1.7%
Aerospace & Military
Technology,
United States

Bear Stearns
Companies Inc. 1.6%
Financial Services,
United States

Scripps Co. 1.6%
Broadcasting &
Publishing, United States

Delphi Automotive
Systems, Inc. 1.6%
Automobiles,
United States

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

some cyclical stocks fell to levels we have not seen for many years. This
situation provided us with opportunities to purchase what we believed to be
high-quality stocks that had been unduly neglected by the marketplace.

B.F. Goodrich is an example of how we were able to use the market's volatility
to our advantage. As old economy stocks seemed to fall out of favor with
investors chasing after the new economy high flyers, Goodrich's stock price
declined to the low $20s partly due to fears of a cyclical downturn in the
commercial aerospace industry. In early 2000, Goodrich was trading at just
seven times earnings and a 50% discount to its estimated intrinsic value. In
addition, management's intention to restructure the company into a more
focused, profitable organization gave us the catalyst we needed to seek to
unlock its hidden value. Subsequently, management announced its plan to sell
Goodrich's sizable chemicals division, aggressively repurchased stock, and the
outlook for the commercial aerospace industry improved. The stock appreciated
over 50% from its lows and, during the first six months of 2000, was the
second-largest contributor to the Fund's performance.

The largest contributor to the Fund's returns during the reporting period was
Lagardere, a family-controlled French defense and media holding company that
has been transforming itself into a media powerhouse. Until recently, the
company's primary focus was in the defense industry, it did not own its media
assets outright, and margins were below those of its peers. This caused
Lagardere's stock valuation to become steeply discounted, and we were able to
buy shares at less than 50% of what we believed the assets to be worth.
Lagardere has made tremendous strides since then, increasing ownership of its
non-wholly owned media assets while broadening and strengthening its media
portfolio. Today, it is the world's largest magazine publisher and controls
assets including newspapers, radio stations, book publishers and a movie
production company. Investors finally started to recognize Lagardere as a
premier media conglomerate, causing its stock to appreciate more than 43% from
the start of the reporting period to June 30, 2000.

Of course, not all of our stocks proved to be success stories. The share price
of Finova (financial services) fell sharply when the company missed first
quarter earnings targets partly due to a special charge needed to bolster loan
loss reserves. Faced with higher financing costs

MS-2
<PAGE>

and slowing growth, Finova's board of directors announced in May their
intention to explore strategic alternatives to maximize the value of the firm.
Owens Illinois (a glass packaging manufacturer) was another disappointment. Its
share price declined when its South American and Eastern European operations
were negatively impacted by economic weakness in those regions. However, we
expect economic recovery to stimulate future demand for Owens Illinois
products, and we believe the stock could prove to be a profitable investment
for the Fund.

During the reporting period, we added to our positions in out-of-favor sectors
such as traditional media, purchasing shares of Washington Post and E.W.
Scripps. We also added to or established positions in the retailing sector,
buying shares of May Department Stores and Sears.

On the sell side -- adhering to our strategy of seeking to buy assets at a
discount and sell near full value -- we pared our holdings of stocks whose
prices had appreciated significantly since their original purchase date. These
included Investor (Swedish holding company), Kansas City Southern (U.S.
railroad and financial services company) and Aventis (French life sciences and
pharmaceutical company). We also sold positions in companies we believed were
subject to deteriorating business conditions or whose management did not act
like owners.

Throughout the period, we continued to seek out undervalued opportunities in
the risk arbitrage and bankruptcy arenas. One notable arbitrage success story
during the period was our investment in U.S. West, a telecommunications company
that was acquired by Qwest Communications. With the deal structured as an
equity swap, our investment in U.S. West enabled us to indirectly accumulate a
position in a high-growth company such as Qwest in what we believed to be a
low-risk way. Since having initially purchased U.S. West in the mid-$50s range
in the summer of 1999, the stock price appreciated more than 50% by its
acquisition date in June of 2000. Regarding bankruptcies, we believe if the Fed
continues to raise rates and the economy slows, there will be an increasing
supply of distressed bonds and bank debt from which to choose.

Top 10 Sectors
Mutual Shares Securities Fund
Based on Equity Securities
6/30/00

% of Total
Sector Net Assets
-------------------------------------------
Multi-Industry 9.1%
Financial Services 8.6%
Broadcasting & Publishing 8.1%
Telecommunications 6.9%
Merchandising 5.3%
Insurance 4.1%
Automobiles 3.6%
Transportation 3.4%
Forest Products & Paper 3.4%
Banking 3.3%

MS-3
<PAGE>

Looking forward, we will continue to search for what we consider to be
undervalued investments that provide our shareholders with the potential for
excellent long-term, low-risk returns. With our disciplined due diligence and
our three-pronged approach to value combining bargain stocks, bankruptcies and
special situations, we believe Mutual Shares Securities Fund is well positioned
to capitalize on today's volatile marketplace.

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance
is no guarantee of future results, these insights may help you understand our
investment and management philosophy.

MS-4
<PAGE>

PERFORMANCE SUMMARY AS OF 6/30/00

Mutual Shares Securities Fund - Class 1 delivered a +1.25% cumulative total
return for the six-month period ended 6/30/00. Total return of Class 1 shares
represents the cumulative or 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.

<TABLE>
<CAPTION>
Mutual Shares Securities Fund - Class 1
Periods ended 6/30/00
Since
Inception
1-Year 3-Year (11/8/96)
-----------------------------------------------------------------------------------
<S> <C> <C> <C>
Average Annual Total Return +0.24% +7.91% +9.69%
Cumulative Total Return +0.24% +25.65% +40.04%
Value of $10,000 Investment $10,024 $12,565 $14,004
</TABLE>

Ongoing stock market volatility can dramatically change the Fund's short-term
performance; current results may be lower.

Mutual Shares Securities Fund - Class 1

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

Past performance does not guarantee future results.

MS-5
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Financial Highlights

<TABLE>
<CAPTION>
Class 1
--------------------------------------------------------------------
Six Months Ended Year Ended December 31,
June 30, 2000 -------------------------------------------------
(unaudited) 1999 1998 1997 1996(c)
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period ................. $13.23 $11.96 $12.18 $10.35 $10.00
--------------------------------------------------------------------
Income from investment operations:
Net investment income(d)............................. .16 .20 .28 .13 .02
Net realized and unrealized gains (losses) .......... .01 1.41 (.25) 1.71 .33
--------------------------------------------------------------------
Total from investment operations ..................... .17 1.61 .03 1.84 .35
--------------------------------------------------------------------
Less distributions from:
Net investment income ............................... (.38) (.34) (.13) (.01) --
Net realized gains .................................. (.33) -- (.12) -- --
--------------------------------------------------------------------
Total distributions .................................. (.71) (.34) (.25) (.01) --
--------------------------------------------------------------------
Net asset value, end of period ....................... $12.69 $13.23 $11.96 $12.18 $10.35
====================================================================
Total return(b)....................................... 1.25% 13.40% .09% 17.73% 3.50%
Ratios/supplemental data
Net assets, end of period (000's) .................... $393,798 $448,278 $482,444 $387,787 $27,677

Ratios to average net assets:
Expensese ........................................... .80%(a) .79% .79% .80% 1.00%(a)
Net investment income ............................... 2.42%(a) 1.59% 2.60% 2.10% 2.56%(a)
Portfolio turnover rate .............................. 33.82% 80.02% 70.19% 49.01% 1.31%
(e)Excluding dividend expense on securities
sold short, the ratios of expenses to
average net assets would have been:
Expenses ............................................. 77%(a) .77% .77% .80% 1.00%(a)
</TABLE>

(a)Annualized
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for periods less than one
year.
(c)For the period November 8, 1996 (effective date) to December 31, 1996.
(d)Based on average shares outstanding effective year ended December 31, 1999.

MS-6
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Financial Highlights (continued)

<TABLE>
<CAPTION>
Class 2
-------------------------------------
Six Months Ended
June 30, 2000 Year Ended
(unaudited) December 31, 1999(c)
-------------------------------------
<S> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period ......................... $13.25 $12.36
-------------------------------------
Income from investment operations:
Net investment income(d) .................................... .14 .16
Net realized and unrealized gains ........................... -- 1.07
-------------------------------------
Total from investment operations ............................. .14 1.23
-------------------------------------
Less distributions from:
Net investment income ....................................... (.37) (.34)
Net realized gains .......................................... (.33) --
-------------------------------------
Total distributions .......................................... (.70) (.34)
-------------------------------------
Net asset value, end of period ............................... $12.69 $13.25
=====================================
Total returnb ................................................ .98% 9.91%
Ratios/supplemental data
Net assets, end of period (000's) ............................ $19,655 $5,716
Ratios to average net assets:
Expensese ................................................... 1.05%(a) 1.04%(a)
Net investment income ....................................... 2.27%(a) 1.26%(a)
Portfolio turnover rate ...................................... 33.82% 80.02%
(e)Excluding dividend expense on securities
sold short, the ratios of expenses to average
net assets would have been:
Expenses ..................................................... 1.02%(a) 1.04%(a)
</TABLE>

(a)Annualized
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for periods less than one
year.
(c)For the period January 6, 1999 (effective date) to December 31, 1999.
(d)Based on average shares outstanding.

See notes to financial statements.

MS-7
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited)

<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stocks and Rights 79.7%
Aerospace & Military Technology 2.2%
B.F. Goodrich Co. ................................ United States 206,732 $ 7,041,807
(a) Hexcel Corp. ..................................... United States 42,000 399,000
Rockwell International Corp. ..................... United States 49,600 1,562,400
------------
9,003,207
------------
Appliances & Household Durables .7%
Maytag Corp. ..................................... United States 78,290 2,886,944
------------
Automobiles 3.6%
Borg Warner Inc. ................................. United States 42,655 1,498,257
(a) Consorcio G Grupo Dina SA de CV, L, ADR .......... Mexico 77,350 154,700
Delphi Automotive Systems Corp. .................. United States 442,560 6,444,779
General Motors Corp. ............................. United States 45,626 2,649,160
(a) Lear Corp. ....................................... United States 195,696 3,913,920
------------
14,660,816
------------
Banking 3.3%
Bank of Ireland .................................. Irish Republic 210,350 1,330,768
Banknorth Group Inc. ............................. United States 178,255 2,729,530
Chase Manhattan Corp. ............................ United States 62,100 2,860,481
National City Corp. .............................. United States 65,189 1,112,287
Sovereign Bancorp Inc. ........................... United States 255,200 1,794,375
U.S. Bancorp. .................................... United States 198,124 3,813,887
------------
13,641,328
------------
Beverages & Tobacco 2.6%
Brown-Forman Corp., A ............................ United States 500 26,375
Brown-Forman Corp., B ............................ United States 37,200 1,999,500
Gallaher Group PLC ............................... United Kingdom 410,150 2,243,013
Gallaher Group PLC, ADR .......................... United Kingdom 18,200 390,163
Pepsi Bottling Group Inc. ........................ United States 144,000 4,203,000
UST Inc. ......................................... United States 139,000 2,041,562
------------
10,903,613
------------
Broadcasting & Publishing 8.1%
(a) AT&T Corp. - Liberty Media Group, A .............. United States 157,296 3,814,427
Central Newspapers Inc., A ....................... United States 42,560 2,691,920
Dow Jones & Co. Inc. ............................. United States 12,600 922,950
Dun & Bradstreet Corp. ........................... United States 140,800 4,030,400
(a) Fox Entertainment Group Inc., A .................. United States 47,500 1,442,813
Knight-Ridder Inc. ............................... United States 46,120 2,453,008
Media General Inc., A ............................ United States 17,790 863,927
Meredith Corp. ................................... United States 86,859 2,931,491
NV Holdingsmig de Telegraaf ...................... Netherlands 1,468 33,772
Scripps Co., A ................................... United States 134,185 6,608,611
Washington Post Co., B ........................... United States 15,890 7,595,420
------------
33,388,739
------------
Building Materials & Components 1.2%
(a) American Standard Cos. Inc. ...................... United States 88,050 3,610,050
Sherwin-Williams Co. ............................. United States 61,100 1,294,556
------------
4,904,606
------------
</TABLE>

MS-8
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
SHARES
COUNTRY /RIGHTS VALUE
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stocks and Rights (cont.)
Business & Public Services 2.5%
(a) DecisionOne Corp. ................................ United States 24,761 $ 111,425
National Service Industries Inc. ................. United States 57,600 1,123,200
Rentokil Initial PLC ............................. United Kingdom 677,000 1,542,433
(a) Republic Services Inc. ........................... United States 276,300 4,420,800
Suez Lyonnaise des Eaux SA ....................... France 17,174 3,020,808
-----------
10,218,666
-----------
Chemicals 1.4%
(a) Cytec Industries Inc. ............................ United States 139,900 3,453,781
(a) Henkel KGAA, pfd. ................................ Germany 3,200 184,042
Union Carbide Corp. .............................. United States 49,450 2,447,775
-----------
6,085,598
-----------
Data Processing & Reproduction .9%
Compaq Computer Corp. ............................ United States 56,200 1,436,613
(a) NCR Corp. ........................................ United States 16,600 646,363
(a) Unisys Corp. ..................................... United States 101,080 1,471,978
-----------
3,554,954
-----------
Electronic Components & Instruments .7%
Williams PLC ..................................... United Kingdom 527,160 3,068,455
-----------
Energy Sources 1.1%
(a) Abraxas Petroleum Corp. .......................... United States 24,741 37,112
(a) Abraxas Petroleum Corp., rts., 11/01/04 .......... United States 24,741 12,371
Burlington Resources Inc. ........................ United States 110,700 4,234,274
Conoco Inc., A ................................... United States 7,800 171,600
-----------
4,455,357
-----------
Financial Services 8.6%
Ambac Financial Group Inc. ....................... United States 25,800 1,414,163
Bear Stearns Cos. Inc. ........................... United States 159,651 6,645,472
CIT Group Inc., A ................................ United States 284,270 4,619,388
Finova Group Inc. ................................ United States 142,000 1,846,000
Greenpoint Financial Corp. ....................... United States 158,994 2,981,138
Heller Financial Inc. ............................ United States 4,900 100,450
Household International Inc. ..................... United States 101,765 4,229,608
Lehman Brothers Holdings Inc. .................... United States 27,800 2,628,838
Liberty Financial Cos. Inc. ...................... United States 1,647 36,131
(a) MFN Financial Corp. .............................. United States 39,778 246,126
PMI Group Inc. ................................... United States 46,450 2,206,375
United Asset Management Corp. .................... United States 364,700 8,524,863
-----------
35,478,552
-----------
Food & Household Products 2.6%
Bestfoods ........................................ United States 5,200 360,100
(a) Fine Host Corp. .................................. United States 139,062 1,376,714
(a) Pactiv Corp. ..................................... United States 244,425 1,924,847
Sara Lee Corp. ................................... United States 100,100 1,933,181
U.S. Industries Inc. ............................. United States 188,150 2,281,319
(a) Universal Foods Corp. ............................ United States 16,600 307,100
Van Melle NV ..................................... Netherlands 92,696 2,532,338
-----------
10,715,599
-----------
</TABLE>

MS-9
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stocks and Rights (cont.)
Forest Products & Paper 3.4%
Abitibi-Consolidated Inc. ........................... Canada 93,073 $ 863,706
Boise Cascade Corp. ................................. United States 114,400 2,960,100
International Paper Co. ............................. United States 113,200 3,374,775
Mead Corp. .......................................... United States 124,800 3,151,200
Rayonier Inc. ....................................... United States 62,850 2,254,744
St. Joe Co. ......................................... United States 50,700 1,521,000
-----------
14,125,525
-----------
Health & Personal Care 2.3%
Aventis SA .......................................... France 44,301 3,246,436
Bristol-Myers Squibb Co. ............................ United States 30,400 1,770,800
(a) Foundation Health Systems Inc., A ................... United States 184,355 2,396,615
Tenet Healthcare Corp. .............................. United States 72,785 1,965,195
(a) Ventas Inc. ......................................... United States 83,500 266,156
-----------
9,645,202
-----------
Industrial Components .6%
(a) Owens-Illinois Inc. ................................. United States 212,810 2,487,217
-----------
Insurance 4.1%
Allmerica Financial Corp. ........................... United States 58,100 3,042,987
Financial Security Assurance Holdings Ltd. .......... United States 3,900 295,913
Hartford Financial Services Group Inc. .............. United States 36,100 2,019,344
MBIA Inc. ........................................... United States 94,200 4,539,263
(a) MetLife Inc. ........................................ United States 56,800 1,196,350
Old Republic International Corp. .................... United States 196,800 3,247,200
White Mountain Insurance Group Inc. ................. United States 15,600 2,496,000
-----------
16,837,057
-----------
Leisure & Tourism 2.9%
Galileo International Inc. .......................... United States 166,730 3,480,489
(a) Park Place Entertainment Corp. ...................... United States 277,200 3,378,375
Starwood Hotels & Resorts Worldwide Inc. ............ United States 162,315 5,285,382
-----------
12,144,246
-----------
Machinery & Engineering .6%
Invensys PLC ........................................ United Kingdom 705,112 2,641,888
-----------
Merchandising 5.3%
(a) Brunos Inc. ......................................... United States 5,044 479,180
(a) Cendant Corp. ....................................... United States 34,200 478,800
(a) Federated Department Stores Inc. .................... United States 221,254 7,467,322
Hasbro Inc. ......................................... United States 117,675 1,772,480
May Department Stores Co. ........................... United States 173,200 4,156,800
(a) Payless Shoesource Inc. ............................. United States 38,015 1,948,269
(a) Saks Inc. ........................................... United States 240,400 2,524,200
Sears, Roebuck & Co. ................................ United States 95,600 3,118,950
-----------
21,946,001
-----------
Metals & Mining .1%
(a) Philip Services Corp. ............................... Canada 24,393 153,219
-----------
</TABLE>

MS-10
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stocks and Rights (cont.)
Multi-Industry 9.1%
(a) Alleghany Corp. ............................................. United States 17,377 $ 2,919,336
(a) Berkshire-Hathaway Inc., A .................................. United States 57 3,066,600
(a) Berkshire Hathaway Inc., B .................................. United States 22 38,720
Cheung Kong Holdings Ltd. ................................... Hong Kong 126,900 1,404,067
Compagnie Financiere Richemont AG, Br., A ................... Switzerland 547 1,478,424
Compagnie Generale D'Industrie et de Participation .......... France 23,137 989,140
Corporacion Financiera Alba SA .............................. Spain 36,037 953,396
Investor AB, A .............................................. Sweden 620,910 8,424,157
Investor AB, B .............................................. Sweden 127,421 1,750,568
Kansas City Southern Industries Inc. ........................ United States 20,200 1,791,488
Kinnevik AB, B .............................................. Sweden 10,100 259,092
Lagardere SCA ............................................... France 54,472 4,177,139
(a) Thermo Electron Corp. ....................................... United States 261,000 5,497,313
TRW Inc. .................................................... United States 109,506 4,749,823
------------
37,499,263
------------
Real Estate .2%
(a) Alexander's Inc. ............................................ United States 8,000 586,000
(a,b) Security Capital European Realty ............................ United States 27,030 398,557
------------
984,557
------------
Recreation & Other Consumer Goods .8%
Carnival Corp. .............................................. United States 63,600 1,240,200
Xerox Corp. ................................................. United States 89,600 1,859,200
------------
3,099,400
------------
Telecommunications 6.9%
AT&T Corp. .................................................. United States 115,100 3,640,037
AT&T Corp., W/I ............................................. United States 185,060 6,106,980
British Telecommunications PLC .............................. United Kingdom 157,800 2,037,686
Centurytel Inc. ............................................. United States 107,300 3,084,875
(a) General Motors Corp., H ..................................... United States 16,016 1,405,404
SBC Communications Inc. ..................................... United States 58,200 2,517,150
Telephone & Data Systems Inc. ............................... United States 98,910 9,915,728
------------
28,707,860
------------
Transportation 3.4%
Burlington Northern Santa Fe Corp. .......................... United States 111,600 2,559,825
Florida East Coast Industries Inc. .......................... United States 110,600 4,424,000
Peninsular & Oriental Steam Navigation Co. .................. United Kingdom 267,740 2,281,933
Railtrack Group PLC ......................................... United Kingdom 318,002 4,944,033
------------
14,209,791
------------
Utilities Electrical & Gas .5%
(a) Citizens Communications Co., B .............................. United States 5,443 93,892
E.On AG ..................................................... Germany 42,600 2,062,133
------------
2,156,025
------------
Total Common Stocks and Rights (Cost $315,343,267)........... 329,603,685
------------
</TABLE>

MS-11
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
PRINCIPAL
COUNTRY AMOUNT* VALUE
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Corporate Bonds & Notes 2.6%
Abraxas Petroleum Corp., Series A, 11.50%, 11/01/04 .......... United States $ 290,500 $ 245,473
DecisionOne Corp., Term Loan ................................. United States 935,503 795,178
Eurotunnel Finance Ltd.:
Equity Note, 12/31/03 ........................................ United Kingdom 286,406 GBP 164,758
Participation Loan Note, 4/30/40 ............................. United Kingdom 158,000 GBP 35,121
Eurotunnel PLC:
12/31/18, Tier 2 ............................................. United Kingdom 1,051,800 GBP 1,098,660
12/31/25, Tier 3 ............................................. United Kingdom 791,758 GBP 695,187
12/31/50, Resettable Advance R5 .............................. United Kingdom 342,767 GBP 191,991
Stabilization Advance S8, Tier 1 ............................. United Kingdom 220,793 GBP 86,904
Stabilization Advance S8, Tier 2 ............................. United Kingdom 186,822 GBP 65,049
Eurotunnel SA:
12/31/18, Tier 2 (Libor) ..................................... France 441,192 EUR 287,576
12/31/18, Tier 2 (Pibor) ..................................... France 133,474 EUR 87,001
12/31/25, Tier 3 (Libor) ..................................... France 581,383 EUR 317,653
12/31/25, Tier 3 (Pibor) ..................................... France 242,272 EUR 132,372
12/31/50, Resettable Advance R4 .............................. France 297,824 EUR 104,200
Stabilization Advance S6, Tier 1(Pibor) ...................... France 109,282 EUR 27,236
Stabilization Advance S7, Tier 1(Pibor) ...................... France 74,647 EUR 18,604
Stabilization Advance S6, Tier 2 ............................. France 159,795 EUR 33,698
Finova Capital Corp.:
6.11%, 2/18/03 ............................................... United States 313,000 269,902
6.15%, 3/31/03 ............................................... United States 55,000 46,596
7.25%, 11/08/04 .............................................. United States 190,000 166,488
Golden Books Publishing Inc., 10.75%, 2/20/49 ................ United States 133,400 61,364
HIH Capital Ltd., cvt., 144A, 7.50%, 9/25/06 ................. United Kingdom 1,235,000 710,125
La Quinta Inns Inc.:
7.25%, 3/15/04 ............................................... United States 89,000 66,750
7.33%, 4/01/08 ............................................... United States 205,000 137,350
Laidlaw Inc.:
7.70%, 8/15/02 ............................................... Canada 74,000 21,830
7.05%, 5/15/03 ............................................... Canada 20,000 5,950
6.65%, 10/01/04 .............................................. Canada 225,000 54,000
7.875%, 4/15/05 .............................................. Canada 225,000 66,375
7.65%, 5/15/06 ............................................... Canada 200,000 48,000
8.75%, 4/15/25 ............................................... Canada 331,000 97,645
6.72%, 10/01/27 .............................................. Canada 535,000 132,413
Levi Straus & Co.:
6.80%, 11/01/03 .............................................. United States 20,000 16,400
7.00%, 11/01/06 .............................................. United States 85,000 64,600
Meditrust Corp.
7.00%, 8/15/07 ............................................... United States 170,000 113,900
7.82%, 9/10/26 ............................................... United States 665,000 512,050
MFN Financial Corp.:
Series A, 10.00%, 3/23/01 .................................... United States 114,027 109,181
Series B, FRN, 11.26%, 3/23/01 ............................... United States 139,024 134,506
Philip Services Corp.:
PIK, 10.00%, 5/01/05 ......................................... Canada 111,689 89,351
Senior Term Debt, 9.00%, 5/01/05 ............................. Canada 213,053 191,747
</TABLE>

MS-12
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
PRINCIPAL
COUNTRY AMOUNT* VALUE
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Corporate Bonds & Notes (cont.)
Rite Aid Corp.:
7.125%, 1/15/07 ................................................ United States $ 145,000 $ 71,775
144A, 6.125%, 12/15/08 ......................................... United States 45,000 21,825
6.875%, 8/15/13 ................................................ United States 55,000 26,400
7.70%, 2/15/27 ................................................. United States 70,000 31,500
Service Corp. International:
7.375%, 4/15/04 ................................................ United States 335,000 206,025
6.00%, 12/15/05 ................................................ United States 80,000 43,600
7.70%, 4/15/09 ................................................. United States 44,000 23,100
SFC New Holdings Inc., PIK, 13.25%, 8/15/03 .................... United States 1,273,000 1,018,400
Southwest Royalties Inc., B, 10.50%, 10/15/04 .................. United States 870,000 561,150
TFM SA de CV:
senior disc. note, zero cpn. ................................... Mexico 165,000 114,263
10.25%, 6/15/07 ................................................ Mexico 250,000 218,750
Ventas Inc.:
Tranche A, Term Loan, 12/31/02 ................................. United States 144,581 130,364
Tranche B, Term Loan, 12/31/05 ................................. United States 548,862 480,254
Tranche C, Term Loan, 12/31/07 ................................. United States 163,970 143,473
Vlasic Foods International Inc., 10.25%, 7/01/09 ............... United States 487,000 172,885
-----------
Total Corporate Bonds & Notes (Cost $11,418,988)................ 10,766,948
-----------
(c) Bonds & Notes In Reorganization 4.0%
(a) Aiken Cnty S C Indl Rev Ref Beloit, 6.00%, 12/01/11 ............ United States 45,000 17,213
(a) Altos Hornos de Mexico SA:
cvt., 5.50%, 12/15/01 .......................................... Mexico 20,000 7,100
Series A, 11.375%, 4/30/02 ..................................... Mexico 391,000 138,805
Series B, 11.875%, 4/30/04 ..................................... Mexico 460,000 158,700
Tranche A, Term Loan ........................................... United States 117,181 48,044
(a) Consorcio G Grupo Dina SA de CV, cvt., 8.00%, 8/08/04 .......... Mexico 5,657,000 2,008,234
(a) Crown Leasing, Bank Claim ...................................... Japan 77,969,709 JPY 51,584
(a) Dow Corning Corp.:
9.375%, 2/01/08 ................................................ United States 550,000 783,750
Bank Debt #1 ................................................... United States 100,000 136,000
(a) Genesis Health Ventures Inc.:
Revolver ....................................................... United States 722,380 452,210
Term Loan A .................................................... United States 39,642 24,419
Term Loan B .................................................... United States 77,937 48,711
Term Loan C .................................................... United States 78,077 48,798
(a) Harnischfeger Industries Inc.:
8.90%, 3/01/22 ................................................. United States 370,000 141,525
8.70%, 6/15/22 ................................................. United States 260,000 99,450
7.25%, 12/15/25 ................................................ United States 615,000 235,238
6.875%, 2/15/27 ................................................ United States 353,000 135,023
(a) Integrated Health Services Inc.:
Revolver ....................................................... United States 166,000 53,120
Tranche B, Term Loan ........................................... United States 491,985 157,435
Tranche C, Term Loan ........................................... United States 447,458 143,187
(a) Loewen Group Inc., Series 5, 6.10%, 10/01/02 ................... Canada 426,000 CAD 158,129
(a) Loewen Group International Inc.:
144A, 6.70%, 10/01/99 .......................................... Canada 1,120,000 392,000
Revolver ....................................................... United States 126,691 68,413
Series 3, 7.50%, 4/15/01 ....................................... Canada 350,000 192,500
Series 3, 7.75%, 10/15/01 ...................................... Canada 245,000 112,700
Series 2, 8.25%, 4/15/03 ....................................... Canada 270,000 148,500
Series 6, 7.20%, 6/01/03 ....................................... Canada 1,765,000 617,750
Series 4, 8.25%, 10/15/03 ...................................... Canada 385,000 177,100
Series 7, 7.60%, 6/01/08 ....................................... Canada 1,335,000 440,550
</TABLE>

MS-13
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
PRINCIPAL
COUNTRY AMOUNT* VALUE
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(c) Bonds & Notes In Reorganization (cont.)
(a) Multicare Companies Inc.:
Revolver .................................................................... United States $ 39,958 $ 21,977
Term Loan A ................................................................. United States 47,464 26,105
Term Loan B ................................................................. United States 73,471 40,409
Term Loan C ................................................................. United States 24,361 13,399
(a) Nippon Credit Bank Ltd., Bank Claim ......................................... Japan 40,328,966 JPY 60,986
(a) Nippon Total Finance, Bank Claim ............................................ Japan 43,525,019 JPY 24,682
Optel Inc.:
13.00%, 2/15/02 ............................................................. United States 720,000 504,000
11.50%, 7/01/08 ............................................................. United States 25,000 17,500
(a) Paging Network Inc.:
Revolver A .................................................................. United States 2,113,477 1,698,329
10.125%, 8/01/07 ............................................................ United States 98,000 41,650
10.00%, 10/15/08 ............................................................ United States 135,000 57,375
(a) Peregrine Investments Holdings Ltd., zero cpn., 1/22/98 ..................... Hong Kong 5,000,000 JPY 5,435
(a) PIV Investment Finance (Cayman) Ltd., cvt, 4.50%, 12/01/01 .................. Hong Kong 12,200,000 2,745,000
(a) Port Seattle Wash Rev Ref-Beloit Proj., 6.00%, 12/01/17 ..................... United States 20,000 7,650
(a) Pratama Datakom Asia BV:
144A, 12.75%, 7/15/05 ....................................................... Indonesia 665,000 106,400
Reg S, 12.75%, 7/15/05 ...................................................... Indonesia 140,000 22,400
(a) Safety Kleen Corp.:
9.25%, 5/15/09 .............................................................. United States 3,000 75
Term Loan A ................................................................. United States 128,833 47,668
Term Loan B ................................................................. United States 65,067 24,075
Term Loan C ................................................................. United States 65,067 24,075
(a) Safety Kleen Services, 9.25%, 6/01/08 ....................................... United States 5,000 238
(a) United Companies Financial Corp., Revolver .................................. United States 2,351,700 1,622,673
(a) Vencor Inc.:
9.875%, 5/01/05 ............................................................. United States 1,635,000 147,150
Revolver .................................................................... United States 325,492 240,864
Term Loan A ................................................................. United States 1,369,467 1,013,406
Term Loan B ................................................................. United States 738,496 546,487
Tranche A, DIP Revolver, Term Loan 9/30/00 .................................. United States 157,609 156,033
Tranche B, DIP Revolver, Term Loan 9/30/00 .................................. United States 62,500 61,875
------------
Total Bonds & Notes in Reorganization (Cost $16,844,644)..................... 16,474,104
------------

Short Term Investments 11.3%
Federal Home Loan Bank, 6.10% - 6.57% with maturities to 9/29/00 ............ United States 10,300,000 10,226,622
Federal Home Loan Mortgage Corp., 6.02% - 6.57%, with maturities to 7/06/00 . United States 2,600,000 2,598,588
Fannie Mae, 6.04% - 6.64% with maturities to 12/21/00 ....................... United States 34,609,000 33,904,778
------------
Total Short Term Investments (Cost $46,714,312).............................. 46,729,988
------------

Total Investments (Cost $390,321,211) 97.6%.................................. 403,574,725
Securities Sold Short (.6%) ................................................. (2,405,974)
Net Equity in Forward Contracts ............................................. 74,851
Other Assets, less Liabilities 3.0% ......................................... 12,209,627
------------
Total Net Assets 100.0% ..................................................... $413,453,229
============
</TABLE>

MS-14
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
ISSUER COUNTRY SHARES VALUE
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Securities Sold Short (Proceeds $3,067,641)
(a) Dow Chemical Co. .......................... United States 79,701 $ 2,405,974
------------
Currency Abbreviations:
CAD - Canadian Dollar
EUR - European Unit
GBP - British Pound
JPY - Japanese Yen
</TABLE>

*The principal amount is stated in U.S. dollars unless otherwise indicated.
(a)Non-income producing.
(b)See Note 8 regarding restricted securities.
(c)See Note 7 regarding defaulted securities.

See notes to financial statements.

MS-15
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Financial Statements

Statement of Assets and Liabilities
June 30, 2000 (unaudited)

<TABLE>
<S> <C>
Assets:
Investments in securities:
Cost .......................................................... $390,321,211
============
Value ......................................................... 403,574,725
Cash ........................................................... 2,404,566
Receivables:
Investment securities sold .................................... 12,085,146
Capital shares sold ........................................... 150,535
Dividends and interest ........................................ 879,206
Unrealized gain on forward exchange contracts (Note 6) ......... 796,487
Deposits with broker for securities sold short ................. 2,855,228
------------
Total assets ................................................ 422,745,893
------------
Liabilities:
Payables:
Investment securities purchased ............................... 5,502,081
Capital shares redeemed ....................................... 349,993
Affiliates .................................................... 265,094
Securities sold short, at value (proceeds $3,067,641)........... 2,405,974
Unrealized loss on forward exchange contracts (Note 6) ......... 721,636
Other liabilities .............................................. 47,886
------------
Total liabilities ........................................... 9,292,664
------------
Net assets, at value ....................................... $413,453,229
============
Net assets consist of:
Undistributed net investment income ............................ $ 1,651,905
Net unrealized appreciation .................................... 13,990,032
Accumulated net realized gain .................................. 31,092,492
Capital shares ................................................. 366,718,800
------------
Net assets, at value ....................................... $413,453,229
============
Class 1:
Net assets, at value ........................................... $393,798,028
============
Shares outstanding ............................................. 31,039,002
============
Net asset value and offering price per share ................... $ 12.69
============
Class 2:
Net assets, at value ........................................... $ 19,655,201
============
Shares outstanding ............................................. 1,549,475
============
Net asset value and offering price per share ................... $ 12.69
============
</TABLE>

See notes to financial statements.

MS-16
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Financial Statements (continued)

Statement of Operations
for the six months ended June 30, 2000 (unaudited)

<TABLE>
<S> <C>
Investment income:
(net of foreign taxes of $131,223)
Dividends ............................................................... $ 3,182,663
Interest ................................................................ 3,597,160
-------------
Total investment income ................................................ 6,779,823
-------------
Expenses:
Management fees (Note 3) ................................................ 1,259,803
Administrative fees (Note 3) ............................................ 298,375
Distribution fees - Class 2 (Note 3) .................................... 14,147
Custodian fees .......................................................... 13,300
Reports to shareholders ................................................. 25,300
Professional fees (Note 3) .............................................. 28,200
Trustees' fees and expenses ............................................. 1,600
Dividends for securities sold short ..................................... 57,237
Other ................................................................... 3,400
-------------
Total expenses ......................................................... 1,701,362
-------------
Net investment income ................................................ 5,078,461
-------------
Realized and unrealized gains (losses):
Net realized gain from:
Investments ............................................................ 28,405,499
Foreign currency transactions .......................................... 4,988,656
-------------
Net realized gain .................................................... 33,394,155
Net unrealized depreciation on:
Investments ............................................................ (33,296,175)
Translation of assets and liabilities denominated in foreign currencies (1,104,666)
-------------
Net unrealized depreciation .......................................... (34,400,841)
-------------
Net realized and unrealized loss ......................................... (1,006,686)
-------------
Net increase in net assets resulting from operations ..................... $ 4,071,775
=============
</TABLE>

See notes to financial statements.

MS-17
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Financial Statements (continued)

Statements of Changes in Net Assets
for the six months ended June 30, 2000 (unaudited) and the year ended December
31, 1999

<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999
-------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ................................................................. $ 5,078,461 $ 7,507,126
Net realized gain from investments and foreign currency transactions .................. 33,394,155 19,103,586
Net unrealized appreciation (depreciation) on investments and translation of assets
and liabilities denominated in foreign currencies .................................... (34,400,841) 31,554,044
-------------------------------------
Net increase in net assets resulting from operations ................................. 4,071,775 58,164,756
Distributions to shareholders from:
Net investment income:
Class 1 .............................................................................. (11,439,569) (12,213,087)
Class 2 .............................................................................. (324,220) (45,323)
Net realized gains:
Class 1 .............................................................................. (9,903,995) --
Class 2 .............................................................................. (284,007) --
-------------------------------------
Total distributions to shareholders ..................................................... (21,951,791) (12,258,410)
Capital share transactions: (Note 2)
Class 1 .............................................................................. (37,030,478) (79,961,449)
Class 2 .............................................................................. 14,369,129 5,606,010
-------------------------------------
Total capital share transactions ........................................................ (22,661,349) (74,355,439)
Net decrease in net assets ........................................................... (40,541,365) (28,449,093)
Net assets:
Beginning of period ..................................................................... 453,994,594 482,443,687
-------------------------------------
End of period ........................................................................... $ 413,453,229 $ 453,994,594
=====================================
Undistributed net investment income included in net assets:
End of period ........................................................................... $ 1,651,905 $ 8,337,233
=====================================
</TABLE>

See notes to financial statements.

MS-18
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Notes to Financial Statements (unaudited)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The Mutual Shares Securities Fund (the Fund) is a separate, diversified series
of Franklin Templeton Variable Insurance Products Trust (the Trust), which is
an open-end investment company registered under the Investment Company Act of
1940. Shares of the Fund are sold only to insurance company separate accounts
to fund the benefits of variable life insurance policies or variable annuity
contracts. As of June 30, 2000, 89% of the Fund's shares were sold through one
insurance company. The Fund seeks capital appreciation, with income as a
secondary goal. Using a value-driven approach, the portfolio invests primarily
in U.S. equity securities. Investments include securities of small
capitalization companies, undervalued stocks, reorganizing companies and
distressed companies. The portfolio may also invest in foreign securities.

The following summarizes the Fund's significant accounting policies.

a. Security Valuation

Securities listed or traded on a recognized national exchange or NASDAQ are
valued at the latest reported sales price. Over-the-counter securities and
listed securities for which no sale is reported are valued within the range of
the latest quoted bid and asked prices. Restricted securities and securities
for which market quotations are not readily available are valued at fair value
as determined by management in accordance with procedures established by the
Board of Trustees.

b. Foreign Currency Translation

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 currency denominated assets and liabilities other than investments
in securities held at the end of the reporting period.

c. Forward Exchange Contracts

The Fund may enter into forward exchange contracts to hedge against foreign
exchange risks. These contracts are valued daily and the Fund's equity therein
is included in the Statement of Assets and Liabilities. Realized and unrealized
gains and losses are included in the Statement of Operations.

d. Contracts for Differences

The Fund may engage in short contracts for differences. Short contracts for
differences are contracts entered into between a broker and the Fund under
which the parties agree to make payments to each other so as to replicate the
economic consequences that would apply had a short sale of the underlying
security taken place. Upon entering into short contracts for differences, the
Fund is required to pledge to the broker an amount of cash and/or other assets
equal to a certain percentage of the contract amount ("initial margin").
Subsequent payments known as "variation margin", are made or received by the
Fund periodically, depending on fluctuations in the value of the underlying
security. When the contract is

MS-19
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

d. Contracts for Differences (cont.)

closed, the Fund records a realized gain or loss equal to the difference
between the value of the contract at the time it was opened and the value at
the time it was closed. Should market conditions move unexpectedly, the Fund
may not achieve the anticipated benefits of the contracts for the differences
and may realize a loss.

e. Securities Sold Short

The Fund is engaged in selling securities short, which obligates the Fund to
replace a security borrowed with the same security at the current market value.
The Fund would incur a loss if the price of the security increases between the
date of the short sale and the date on which the fund replaces the borrowed
security. The Fund would realize a gain if the price of the security declines
between those dates.

The Fund is required to establish a margin account with the broker lending the
security sold short. While the short sale is outstanding, the broker retains
the proceeds of the short sale and the Fund must maintain a deposit for the
broker consisting of cash and securities having a value equal to a specified
percentage of the value of the securities sold short.

f. Income Taxes

g. Security Transactions, Investment Income, Expenses and Distributions

h. Accounting Estimates

2. SHARES OF BENEFICIAL INTEREST

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

MS-20
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

2. SHARES OF BENEFICIAL INTEREST (cont.)

At June 30, 2000, there were an unlimited number of shares authorized ($0.01
par value). Transactions in the Fund's shares were as follows:

<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999(a)
--------------------------------------------------------------------
Shares Amount Shares Amount
Class 1 Shares: --------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ....................................... 1,156,387 $ 15,045,410 5,163,014 $ 66,279,367
Shares issued on merger (Note 9) .................. 295,300 3,756,224 -- --
Shares issued on reinvestment of distributions .... 1,683,246 21,343,564 914,838 12,213,087
Shares redeemed ................................... (5,990,875) (77,175,676) (12,518,155) (158,453,903)
--------------------------------------------------------------------
Net decrease ...................................... (2,855,942) $ (37,030,478) (6,440,303) $ (79,961,449)
====================================================================
Class 2 Shares:
Shares sold ....................................... 845,668 $ 10,908,788 436,840 $ 5,671,654
Shares issued on merger (Note 9) .................. 251,168 3,197,391 -- --
Shares issued on reinvestment of distributions .... 47,967 608,227 3,403 45,323
Shares redeemed ................................... (26,720) (345,277) (8,851) (110,967)
--------------------------------------------------------------------
Net increase ...................................... 1,118,083 $ 14,369,129 431,392 $ 5,606,010
====================================================================
</TABLE>

(a)For the period January 6, 1999 (effective date) to December 31, 1999 for
Class 2.

3. TRANSACTIONS WITH AFFILIATES

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

<TABLE>
<CAPTION>
Entity Affiliation
---------------------------------------------------------------------------------------
<S> <C>
Franklin Templeton Services, Inc. (FT Services) Administrative manager
Franklin Mutual Advisers, LLC (Franklin Mutual) Investment manager
Franklin/Templeton Distributors, Inc. (Distributors) Principal underwriter
Franklin/Templeton Investor Services, Inc. (Investor Services) Transfer agent
</TABLE>

The Fund pays an investment management fee to Franklin Mutual of .60% per year
of the average daily net assets of the Fund.

The Fund pays administrative fees to FT Services based on the average net
assets of the Fund as follows:

Fees are further reduced on net assets over $1.2 billion.

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

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

Included in professional fees are legal fees of $1,136 that were paid to a law
firm in which a partner of that firm was an officer of the Fund.

MS-21
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

4. INCOME TAXES

Net investment income and net realized capital gains (losses) differ for
financial statement and tax purposes primarily due to differing treatments of
foreign currency transactions, wash sales, and merger related expenses.

At June 30, 2000, the net unrealized appreciation based on the cost of
investments for income tax purposes of $392,826,745 was as follows:

Unrealized appreciation ............. $ 52,257,979
Unrealized depreciation ............. (41,509,999)
-------------
Net unrealized appreciation ......... $ 10,747,980
=============

5. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities) for the
period ended June 30, 2000 aggregated $126,130,156 and $157,994,160,
respectively.

6. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

The Fund has been a party to financial instruments with off-balance-sheet risk,
primarily forward exchange contracts, in order to minimize the impact on the
Fund from adverse changes in the relationship between the U.S. dollar and
foreign currencies and interest rates. These instruments involve market risk in
excess of the amount recognized on the Statement of Assets and Liabilities.
Some of these risks have been minimized by offsetting contracts. Risks arise
from the possible inability of counterparties to meet the terms of their
contracts, future movement in currency values and interest rates and contract
positions that are not exact offsets. The contract amount indicates the extent
of the Fund's involvement in such contracts.

A forward exchange contract is an agreement between two parties to exchange
different currencies at a specific rate at an agreed future date. At June 30,
2000, the Fund had outstanding forward exchange contracts for the sale or
purchase of currencies as set out below. The contracts are reported in the
financial statements at the Fund's net equity, as measured by the difference
between the forward exchange rates at the reporting date and the forward
exchange rates at the day of entry into the contract.

MS-22
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

6. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK (cont.)

<TABLE>
<CAPTION>
In Unrealized
Contracts to Buy Exchange for Settlement Date Gain (Loss)
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
609,626 Canadian Dollars U.S. $ 405,489 7/31/00 U.S. $ 6,287
3,300,000 Swedish Krona 375,136 8/21/00 2,638
----------- ----------
U.S. $ 780,625 U.S. $ 8,925
----------- ==========
Contracts to Sell
----------------------------------
2,779,139 Hong Kong Dollars U.S. $ 356,640 7/19/00 U.S. $ 8
5,282,025 Canadian Dollars 3,642,734 7/31/00 74,950
12,224,151 Swedish Krona 1,421,992 8/21/00 22,605
1,100,000 European Unit 1,113,275 8/24/00 55,179
35,795,968 Swedish Krona 4,178,648 9/15/00 73,529
18,190,586 Swedish Krona 2,117,812 9/18/00 31,253
7,996,841 British Pounds 12,551,117 9/25/00 425,101
569,140 British Pounds 881,074 10/17/00 17,629
18,108,193 Swedish Krona 2,096,411 10/20/00 14,978
2,934,044 European Unit 2,853,358 12/20/00 11,432
----------- ----------
U.S. $31,213,061 U.S. $ 726,664
-----------
Net unrealized gain on offsetting
forward exchange contracts 60,898
----------

Unrealized gain on forward
exchange contracts U.S. $ 796,487
==========

Contracts to Buy
----------------------------------
3,645,239 Canadian Dollars U.S. $ 2,489,388 7/31/00 U.S. $ (27,183)
1,712,500 Swedish Krona 199,070 8/21/00 (3,028)
----------- ----------
U.S. $ 2,688,458 U.S. $ (30,211)
----------- ----------
Contracts to Sell
----------------------------------
7,562,070 Hong Kong Dollars U.S. $ 970,253 7/19/00 U.S. $ (147)
429,500 Canadian Dollars 289,240 7/31/00 (869)
13,634,596 European Unit 12,540,641 8/15/00 (567,665)
321,712 British Pounds 474,003 8/22/00 (13,513)
1,550,000 European Unit 1,483,831 8/24/00 (7,123)
200,000 European Unit 181,090 9/12/00 (11,508)
2,162,511 Swiss Francs 1,327,102 9/13/00 (12,300)
100,000 British Pounds 151,100 9/25/00 (535)
3,800,000 Swedish Krona 432,039 10/20/00 (4,749)
2,362,198 British Pounds 3,514,596 11/22/00 (72,085)
936,510 British Pounds 1,421,955 12/20/00 (931)
----------- ----------
U.S. $22,785,850 U.S. $ (691,425)
----------- ----------
Unrealized loss on forward
exchange contracts (721,636)
----------

Net unrealized gain on forward
exchange contracts U.S. $ 74,851
==========

</TABLE>

MS-23
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

7. CREDIT RISK AND DEFAULTED SECURITIES

At June 30, 2000, the Fund held defaulted securities with a value aggregating
$16,474,104, representing 4.0% of the Fund's net assets. For information as to
specific securities, see the accompanying Statement of Investments.

For financial reporting purposes, the Fund discontinued accruing income on
defaulted bonds and provided an estimate for losses on interest receivable.

8. RESTRICTED SECURITIES

The Fund may purchase securities through a private offering that generally
cannot be resold to the public without prior registration under the Securities
Act of 1933. The costs of registering such securities are paid by the issuer.
Restricted securities held at June 30, 2000 are as follows:

<TABLE>
<CAPTION>
Acquisition
Shares Issuer Date Cost Value
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
27,030 Security Capital European Realty (.1% of net assets) 4/08/98 $540,600 $398,557
--------
</TABLE>

9. MERGER

On May 1, 2000, the Franklin Templeton Variable Insurance Products Trust
(FTVIPT) - Mutual Shares Securities Fund acquired the net assets of the
Templeton Variable Products Series Fund (TVP) - Mutual Shares Investments Fund
pursuant to a plan of reorganization approved by TVP - Mutual Shares
Investments Fund's shareholders. The merger was accomplished by a tax-free
exchange of 295,300 Class 1 shares and 251,168 Class 2 shares of the FTVIPT -
Mutual Shares Securities Fund (valued at $12.72 per share and $12.73 per share,
respectively) for the net assets of the TVP - Mutual Shares Investments Fund
which aggregated $6,953,615, including $196,155 of unrealized appreciation. The
merger was accounted for as a pooling-of-interests without restatement for
financial reporting purposes. The combined net assets of the FTVIPT - Mutual
Shares Securities Fund immediately after the merger were $424,728,065.

MS-24
<PAGE>

TEMPLETON ASSET STRATEGY FUND

--------------------------------------------------------------------------------
Fund Goal and Primary Investments: Templeton Asset Strategy Fund (formerly
Templeton Asset Allocation Fund) seeks high total return. The Fund will invest
in equity securities of companies of any nation, debt securities of companies
and governments of any nation, and in money market instruments. The Fund may
invest to a lesser extent in lower-rated "junk bonds."
--------------------------------------------------------------------------------
Financial markets generally saw a "return to earnings" in the first half of
2000, partially deflating 1999's dot-com frenzy. As more Internet stocks came
into the market, investors appeared to take a closer look at these companies'
earnings capabilities. In the U.S., the Federal Reserve Board again raised
interest rates because of inflationary fears. This shook growth stocks as a
whole, including the technology-laden Nasdaq(R) Index, whose sell-off sent
ripples around the globe, placing pressure on media and telecommunications
stocks worldwide. In this environment, the benchmark Morgan Stanley Capital
International World Index and J.P. Morgan Global Government Bond Index returned
-2.41% and 0.41% in U.S.-dollar terms, respectively.(1) As of June 30, 2000, the
Fund held 82.0% of its total net assets in equities, 13.3% in fixed income and
4.7% in short-term investments and other net assets.

Equity

Merger and acquisition activity remained robust in the first half of the year,
and the Fund benefited from consolidation activity, especially in the financial
and energy sectors, where several holdings registered solid double-digit gains.
Nordic Baltic Holdings, now the largest bank in the Nordic region, was formed
through the merger of Merita Nordbanken and Unidanmark, while Canadian oil
company, Ranger Oil, is being acquired by Canadian Natural Resources.

Individual stocks, rather than broad industry or geographic weightings, mainly
accounted for the Fund's equity performance. Celltech, a British biotechnology
company, was among the Fund's best performers, up over 125% during the
six-month period. Celltech rose amid the apparent investor enthusiasm for
biotech stocks that accompanied the Human Genome Project's exciting
breakthrough in mapping all the

(1) Source: Standard and Poor's Micropal (Morgan Stanley Capital International,
J.P. Morgan). The Morgan Stanley Capital International World Index is an
arithmetic average, weighted by market value, of the performance of
approximately 1,450 securities listed on the stock exchanges of 22 countries
including the U.S., Europe, Canada, Australia, New Zealand, and the Far East.
The J.P. Morgan Global Government Bond Index measures and tracks bonds from
around the world. Indexes are measured in U.S. dollars and include reinvested
dividends and interest. One cannot invest directly in an index, nor is an index
representative of the Fund's portfolio.

This chart in pie format shows the asset allocation of Templeton Asset Strategy
Fund as a percentage of total net assets on 6/30/00.

Stocks 82.0%
Fixed-Income Securities 13.3%
Short-Term Investments & Other Net Assets 4.7%

TA-1
<PAGE>

Top Five Sectors
Templeton Asset Strategy Fund
6/30/00
% of Total
Sector Net Assets
-----------------------------------------
Telecommunications 11.6%
Health & Personal Care 8.4%
Financial Services 7.3%
Energy Sources 5.8%
Electrical & Electronics 5.7%

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

genes in the human genetic blueprint. The stock hit our valuation target and we
reduced the position at what we considered to be an excellent price.

Alcatel was another outstanding performer during the reporting period, up more
than 40%. Investors apparently began to place more value on the French
company's optical networking capabilities and its leading position in broadband
telecommunications access equipment. After an earnings disappointment in late
1998, we believe the company's management has proven its ability to unlock
shareholder value though cost-cutting and renewed dedication to profitable
growth.

Nomura Securities also fueled the Fund's performance, rising more than 35% in
the six months under review. Nomura is Japan's leading stock brokerage. We
initiated this position in 1999, when Nomura was trading at what we felt was an
attractive level, quite a bit cheaper than U.S. competitors like Morgan Stanley
and Merrill Lynch. We bought the stock, believing in the tremendous growth
potential for Japanese managed assets. In 2000, that premise began to play out,
with many Japanese savers moving assets out of the postal savings system and
into managed equity investments. Nomura capitalized on its commanding domestic
market position to garner a sizeable percentage of this new money. Feeling the
company is well-placed to make further gains, we partially retained our
investment in Nomura.

Fixed Income

Early in the review period investors generally remained cautious regarding
interest rates, we believe partly because of inflationary fears stemming from
higher oil prices, but largely because of upward revisions in global economic
growth forecasts. Confirmed European economic recovery, better-than-expected
growth in Japan, as well as continued U.S. growth, appeared to fuel this
cautious approach. Improving global economies led to expectations of higher
commodity prices, productivity and employment rates, which added to
inflationary pressures and a tighter monetary policy stance by central banks.
In our opinion, these conditions supported the consensus view that the
industrial economies, with the possible exception of Japan, had reached the
bottom of their respective interest-rate cycles. Later in the period, reduced
U.S. bond supply and equity market volatility helped to offset these
interest-rate concerns. Bonds began to appear more attractive to investors who
put money back into the global fixed income markets.

TA-2
<PAGE>

Volatile equity markets during the six months under review, combined with
expectations for reduced government bond supply resulting in part from U.S.
fiscal surpluses and lower deficits in Europe led the global fixed income
market higher toward the end of the period. The U.S. Treasury buyback
contributed significantly to the U.S. yield curve inversion during the period.
As bond prices and yields move in an inverse relationship, higher prices on
long-term bonds shifted their yields downward, while short-term bond prices
fell lower and their yields inched higher. In contrast, European Monetary Union
(EMU) countries' yield curve only flattened, as yields rose on the short end.
Hence, EMU bond prices fell, while those in the U.S. market rose. Most major
currencies' weakness against the U.S. dollar resulted in lower returns for the
global index in U.S. dollar terms.

In local currency terms, European bonds rose 2.84%, as all European bond
markets offered positive returns. The U.K. index increased 4.26% and the EMU
bond index gained 2.56%. The Danish market underperformed the EMU countries,
while Japan remained relatively flat, as economic recovery expectations, stable
interest rates and a stronger yen seemed to result in capital inflows. The
Australia/New Zealand dollar-bloc bond markets, where rising commodity prices
supported the local currency and helped contain inflation, outperformed the
U.S. bond market in local currency terms.

Emerging market bond prices rose during the period, apparently as a result of
higher commodity prices and improved economic fundamentals for the respective
countries. The J.P. Morgan Emerging Market Bond Index Plus (EMBI+) increased
8.10% during the six-month period.(2) Most countries in the index experienced
positive returns, with the exception of Nigeria, Colombia, the Philippines and
Peru. Russian bonds were among the best performers, increasing 49.78%, followed
by those of Algeria, Venezuela, Mexico and Turkey.

(2) Source: J.P. Morgan. The J.P. Morgan Emerging Markets Bond Index Plus
(EMBI+) tracks total returns for external debt instruments in the emerging
markets. Included in the index are U.S. dollar and other external currency
denominated Brady bonds, loans, Eurobonds, and local markets instruments. It
provides investors with a definition of the market for emerging markets
external-currency debt, a list of the traded instruments, and a compilation of
their terms. The EMBI+ includes 49 instruments from 14 countries, with a total
face value of $175 billion and a market capitalization of $98 billion.

Top Five Country Holdings
Templeton Asset Strategy Fund
6/30/00

% of Total
Country Net Assets
-----------------------------
U.S. 18.1%
U.K. 12.9%
Japan 9.7%
France 6.6%
Netherlands 5.5%

TA-3
<PAGE>

This chart in pie format shows the geographic distribution of Templeton Asset
Strategy Fund as a percentage of total net assets on 6/30/00.

Europe 42.5%
North America 23.5%
Asia 17.1%
Latin America/Caribbean 9.8%
Mid-East/Africa 2.9%
Australia/New Zealand 2.4%

We attempted to maximize total return, including income, during the period by
focusing the Fund's assets on intermediate- and long-term investment grade
bonds and allocating a small amount to what we believe are the highest quality
and most liquid bonds we found in the emerging markets. We believe that this
balance offers the opportunity for higher long-term returns at the cost of
modestly higher short-term volatility.

The Fund's geographic allocation changed slightly during the period. Our North
American market allocation increased, with Canadian exposure unchanged and the
U.S. allocation increasing. We increased the European allocation slightly,
adjusting the underlying country mix to decrease our exposure to Sweden, and
added to positions in Denmark, Germany and Italy. The Fund's Japanese and
Australia/New Zealand allocations remained relatively unchanged. Meanwhile, we
took advantage of the premium on Mexican assets, following the country's debt
upgrade, to sell Mexican securities and add to positions in Argentina, Brazil
and Venezuela.

Our emerging markets exposure continued to have a relatively low duration with
respect to the J.P. Morgan EMBI+, thereby reducing its sensitivity to
interest-rate movements and market uncertainty. At the period's end, the Fund's
bonds were U.S. dollar-denominated sovereign Eurobonds, with fixed coupons
issued by countries we believe to have strong repayment capacity. We also
continued to emphasize Latin America, because we feel the region has improving
fundamentals.

Looking Ahead

We believe the reporting period proved encouraging for our value-oriented
investment style. For three years the market's love affair with
technology-related, new economy stocks significantly contributed to euphoric
valuations for those companies, in our opinion. However, we feel the first six
months of 2000 may signal a shift back to stock assessment based on future
earnings. If, indeed, such a shift is underway, your investment in the Fund
should benefit. Our analysts believe that every stock in the Fund compares
favorably with future earnings prospects, something that we cannot say for many
recently favored stocks. On the fixed income front, we believe that global

TA-4
<PAGE>

inflationary pressures will continue to increase in the near term and world
economic growth will remain strong throughout the year. In such a challenging
environment for bonds, a globally diversified investment strategy can reduce
risks of declines in any particular market or sector.

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance
is no guarantee of future results, these insights may help you understand our
investment and management philosophy.

TA-5
<PAGE>

Templeton Asset Strategy Fund - Class 1

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

PERFORMANCE SUMMARY AS OF 6/30/00

Templeton Asset Strategy Fund - Class 1 delivered a +2.43% cumulative total
return for the six-month period ended 6/30/00. Total return of Class 1 shares
represents the cumulative or average annual change in value, assuming
reinvestment of dividends and capital gains. Average returns smooth out
variations in returns, which can be significant; they are not the same as
year-by-year results.

Templeton Asset Strategy Fund - Class 1*
Periods ended 6/30/00
Since
Inception
1-Year 5-Year 10-Year (8/24/88)
-------------------------------------------------
Average Annual Total Return +13.39% +15.02% +13.09% +12.59%
Cumulative Total Return +13.39% +101.29% +242.19% +307.72%
Value of $10,000 Investment $11,339 $20,129 $34,219 $40,772

* Performance prior to the 5/1/00 merger reflects the historical performance of
the Templeton Asset Allocation Fund.

Ongoing stock market volatility can dramatically change the Fund's short-term
performance; current results may be lower.

Past performance does not guarantee future results.

TA-6
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON ASSET STRATEGY FUND

Financial Highlights
<TABLE>
<CAPTION>

Class 1
---------------------------------------------------------------------------------
Six Months Ended Year Ended December 31,
June 30, 2000 --------------------------------------------------------------
(unaudited) 1999 1998 1997 1996 1995
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $23.37 $22.46 $22.35 $21.08 $18.72 $15.69
-----------------------------------------------------------------------------
Income from investment operations:
Net investment income(c) ..................... .24 .44 .69 .67 .63 .57
Net realized and unrealized gains ............ .16 3.78 .75 2.44 2.76 2.87
-----------------------------------------------------------------------------
Total from investment operations .............. .40 4.22 1.44 3.11 3.39 3.44
-----------------------------------------------------------------------------
Less distributions from:
Net investment income ........................ (.52) (.50) (.66) (.63) (.58) (.41)
Net realized gains ........................... (3.62) (2.81) (.67) (1.21) (.45) --
-----------------------------------------------------------------------------
Total distributions ........................... (4.14) (3.31) (1.33) (1.84) (1.03) (.41)
-----------------------------------------------------------------------------
Net asset value, end of period ................ $19.63 $23.37 $22.46 $22.35 $21.08 $18.72
=============================================================================
Total return(b) ............................... 2.43% 22.86% 6.41% 15.52% 18.93% 22.48%

Ratios/supplemental data
Net assets, end of period (000's) ............. $693,637 $671,549 $692,163 $735,568 $556,027 $406,123
Ratios to average net assets:
Expenses ..................................... .78%(a) .74% .78% .74% .64% .66%
Net investment income ........................ 2.37%(a) 2.06% 2.88% 3.32% 3.56% 3.73%
Portfolio turnover rate ....................... 15.33% 45.34% 43.18% 45.27% 57.50% 43.02%
</TABLE>

(a)Annualized
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for periods less than one
year.
(c)Based on average shares outstanding effective year ended December 31, 1999.

TA-7
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON ASSET STRATEGY FUND

Financial Highlights (continued)

<TABLE>
<CAPTION>
Class 2
------------------------------------------------------------
Six Months Ended Year Ended December 31,
June 30, 2000 ---------------------------------------
(unaudited) 1999 1998 1997(c)
------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $23.27 $22.38 $22.32 $20.40
----------------------------------------------------
Income from investment operations:
Net investment income(d) ..................... .22 .36 .63 .16
Net realized and unrealized gains ............ .15 3.80 .74 1.76
----------------------------------------------------
Total from investment operations .............. .37 4.16 1.37 1.92
----------------------------------------------------
Less distributions from:
Net investment income ........................ (.46) (.46) (.64) --
Net realized gains ........................... (3.62) (2.81) (.67) --
----------------------------------------------------
Total distributions ........................... (4.08) (3.27) (1.31) --
----------------------------------------------------
Net asset value, end of period ................ $19.56 $23.27 $22.38 $22.32
====================================================
Total return(b) ............................... 2.29% 22.54% 6.10% 9.41%
Ratios/supplemental data
Net assets, end of period (000's) ............. $26,429 $20,962 $15,763 $9,665
Ratios to average net assets:
Expenses ..................................... 1.03%(a) .99% 1.03% 1.03%(a)
Net investment income ........................ 2.15%(a) 1.71% 2.61% 1.97%(a)
Portfolio turnover rate ....................... 15.33% 45.34% 43.18% 45.27%
</TABLE>

(a)Annualized
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for periods less than one
year.
(c)For the period May 1, 1997 (effective date) to December 31, 1997.
(d)Based on average shares outstanding effective year ended December 31, 1999.

See notes to financial statements.

TA-8
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON ASSET STRATEGY FUND

Statement of Investments, June 30, 2000 (unaudited)

<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stocks and Warrants 79.4%
Aerospace & Military Technology 1.7%
BAE Systems PLC .................................. United Kingdom 153,055 $ 947,659
Hong Kong Aircraft Engineering Co. Ltd. .......... Hong Kong 363,200 698,883
Raytheon Co., A .................................. United States 21,775 423,252
Rolls-Royce PLC .................................. United Kingdom 2,733,657 9,714,729
Saab AB, B ....................................... Sweden 54,400 458,967
-----------
12,243,490
-----------
Appliances & Household Durables .1%
Laox Co. Ltd. .................................... Japan 70,000 383,725
-----------
Automobiles 4.7%
Autoliv Inc. ..................................... Sweden 246,900 5,941,031
Autoliv Inc., SDR ................................ Sweden 129,000 3,176,833
Fiat SpA ......................................... Italy 236,170 6,159,834
Ford Motor Co. ................................... United States 220,000 9,459,999
General Motors Corp. ............................. United States 42,700 2,479,269
(a) Visteon Corp. .................................... United States 28,805 349,264
Volkswagen AG .................................... Germany 14,430 557,426
Volvo AB, B ...................................... Sweden 260,000 5,676,662
-----------
33,800,318
-----------
Banking 4.8%
Banca Nazionale Del Lavoro SpA ................... Italy 225,160 792,087
(a) Bangkok Bank Public Co. Ltd., fgn. ............... Thailand 193,400 236,665
Canadian Imperial Bank of Commerce ............... Canada 140,000 3,840,858
DNB Holding ASA .................................. Norway 2,178,900 9,074,819
Foreningssparbanken AB, A ........................ Sweden 170,700 2,510,580
Nordic Baltic Holding AB, FDR .................... Sweden 2,502,060 18,275,465
-----------
34,730,474
-----------
Broadcasting & Publishing .1%
Wolters Kluwer NV ................................ Netherlands 25,861 691,616
-----------
Building Materials & Components
Gujarat Ambuja Cements Ltd. ...................... India 400 1,746
-----------
Business & Public Services .2%
(a) Complete Business Solutions Inc. ................. United States 24,060 422,554
(a) Gartner Group Inc., B ............................ United States 46,630 460,471
HCA-The Healthcare Corp. ......................... United States 13,600 413,100
(a) Humana Inc. ...................................... United States 6,200 30,225
-----------
1,326,350
-----------
Chemicals 1.5%
Akzo Nobel NV .................................... Netherlands 178,695 7,622,337
BASF AG .......................................... Germany 17,150 698,665
DSM NV, Br. ...................................... Netherlands 75,000 2,415,552
-----------
10,736,554
-----------
Data Processing & Reproduction 2.7%
(a) 3Com Corp. ....................................... United States 14,390 829,224
Compaq Computer Corp. ............................ United States 420,790 10,756,444
Fujitsu Ltd. ..................................... Japan 216,000 7,492,274
(a) Palm Inc. ........................................ United States 5,300 176,888
-----------
19,254,830
-----------
</TABLE>

TA-9
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON ASSET STRATEGY FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stocks and Warrants (cont.)
Electrical & Electronics 5.7%
Alcatel SA ........................................ France 195,745 $12,890,305
(a) Hyundai Electronics Industries Co. ................ South Korea 438,700 8,655,770
Koninklijke Philips Electronics NV ................ Netherlands 200,268 9,483,186
Marconi PLC ....................................... United Kingdom 63,620 826,828
Motorola Inc. ..................................... United States 153,930 4,473,591
Sony Corp. ........................................ Japan 51,800 4,846,841
-----------
41,176,521
-----------
Electronic Components & Instruments 2.4%
Hewlett-Packard Co. ............................... United States 63,750 7,960,781
Williams PLC ...................................... United Kingdom 1,581,900 9,207,814
-----------
17,168,595
-----------
Energy Sources 4.3%
Consol Energy ..................................... United States 351,600 5,317,950
Lasmo PLC ......................................... United Kingdom 197,410 417,640
(a) Ranger Oil Ltd. ................................... Canada 1,153,490 6,344,195
(a) Renaissance Energy Ltd. ........................... Canada 549,350 5,320,357
Repsol SA ......................................... Spain 24,000 479,660
Shell Transport & Trading Co. PLC ................. United Kingdom 1,525,600 12,921,768
-----------
30,801,570
-----------
Financial Services 7.3%
AXA SA ............................................ France 102,651 16,235,435
CIT Group Inc., A ................................. United States 497,000 8,076,250
ING Groep NV ...................................... Netherlands 235,686 15,994,947
Nomura Securities Co. Ltd. ........................ Japan 500,600 12,277,841
Old Mutual PLC .................................... South Africa 132,000 290,249
-----------
52,874,722
-----------
Forest Products & Paper 1.4%
(a) Asia Pulp & Paper Co. Ltd., ADR ................... Indonesia 454,800 2,302,425
Assidoman AB ...................................... Sweden 90,000 1,287,767
Assidoman AB, 144A ................................ Sweden 27,000 386,330
Stora Enso OYJ, R ................................. Finland 706,300 6,465,593
-----------
10,442,115
-----------
Health & Personal Care 8.4%
Aventis SA ........................................ France 219,340 16,073,524
(a) CellTech Group PLC ................................ United Kingdom 733,609 14,126,446
Mayne Nickless Ltd., A ............................ Australia 1,730,400 3,563,529
Merck KGAA ........................................ Germany 14,700 450,903
Mylan Laboratories Inc. ........................... United States 14,460 263,895
Ono Pharmaceutical Co Ltd. ........................ Japan 247,000 10,621,899
Teva Pharmaceutical Industries Ltd., ADR .......... Israel 281,700 15,616,744
-----------
60,716,940
-----------
Industrial Components .2%
Goodyear Tire & Rubber Co. ........................ United States 3,600 72,000
(a) Madeco Manufacturera de Cobre SA, ADR ............. Chile 162,500 1,239,063
-----------
1,311,063
-----------
</TABLE>

TA-10
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON ASSET STRATEGY FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
SHARES/
COUNTRY WARRANTS VALUE
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stocks and Warrants (cont.)
Insurance 4.0%
Ace Ltd. ................................................. Bermuda 25,200 $ 705,600
Aetna Inc. ............................................... United States 23,890 1,533,439
Allstate Corp. ........................................... United States 80,000 1,780,000
Partnerre Ltd. ........................................... Bermuda 17,500 620,156
ReliaStar Financial Corp. ................................ United States 18,310 960,131
Scor ..................................................... France 9,470 414,024
Torchmark Corp. .......................................... United States 90,000 2,221,875
Unumprovident Corp. ...................................... United States 18,530 371,758
XL Capital Ltd., A ....................................... Bermuda 179,400 9,710,025
Zurich Allied AG ......................................... Switzerland 21,200 10,508,087
-----------
28,825,095
-----------
Leisure & Tourism
Mandarin Oriental International Ltd. ..................... Hong Kong 524,000 348,460
-----------
Machinery & Engineering 1.6%
Invensys PLC ............................................. United Kingdom 189,439 709,783
Kurita Water Industries Ltd. ............................. Japan 432,000 9,533,765
Makita Corp. ............................................. Japan 59,000 563,764
Mckechnie Group PLC ...................................... United Kingdom 101,800 567,893
-----------
11,375,205
-----------
Merchandising 2.9%
Best Denki Co. Ltd. ...................................... Japan 777,000 5,353,556
J.C. Penney Co. Inc. ..................................... United States 8,800 162,250
J.Sainsbury PLC .......................................... United Kingdom 1,670,700 7,562,246
Marks & Spencer PLC ...................................... United Kingdom 1,339,010 4,692,626
Sears, Roebuck & Co. ..................................... United States 42,000 1,370,250
Storehouse ............................................... United Kingdom 3,079,116 2,027,666
-----------
21,168,594
-----------
Metals & Mining 2.9%
Anglogold Ltd., ADR ...................................... South Africa 229,700 4,723,206
Barrick Gold Corp. ....................................... Canada 419,390 7,571,494
Companhia Siderurgica Nacional Sid Nacional CSN .......... Brazil 16,300,000 511,227
Corus Group PLC .......................................... United Kingdom 3,943,000 5,745,247
Industrias Penoles SA .................................... Mexico 168,200 271,690
(a) Kinross Gold Corp. ....................................... Canada 1,727,800 1,539,243
Pohang Iron & Steel Co. Ltd. ............................. South Korea 4,450 386,982
-----------
20,749,089
-----------
Multi-Industry 3.5%
Alfa SA de CV, A ......................................... Mexico 1,277,251 2,919,505
Broken Hill Proprietary Co. Ltd. ......................... Australia 53,794 637,882
Cheung Kong Holdings Ltd. ................................ Hong Kong 652,500 7,219,494
Hanson PLC ............................................... United Kingdom 96,900 683,582
Hutchison Whampoa Ltd. ................................... Hong Kong 38,500 484,010
Swire Pacific Ltd., A .................................... Hong Kong 2,200,000 12,869,293
Swire Pacific Ltd., B .................................... Hong Kong 945,000 769,791
-----------
25,583,557
-----------
Real Estate .1%
(a) Hon Kwok Land Investment Co. Ltd. ........................ Hong Kong 1,226,456 62,146
(a) Hon Kwok Land Investment Co Ltd, wts., 10/28/00 .......... Hong Kong 245,291 535
New World Development Co. Ltd. ........................... Hong Kong 303,543 338,771
-----------
401,452
-----------
</TABLE>

TA-11
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON ASSET STRATEGY FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stocks and Warrants (cont.)
Recreation & Other Consumer Goods .7%
Mattel Inc. ..................................................... United States 377,100 $ 4,973,006
Yue Yuen Industrial Holdings Ltd. ............................... Hong Kong 140 311
------------
4,973,317
------------
Telecommunications 11.3%
AT&T Corp. ...................................................... United States 193,620 6,123,233
Nippon Telegraph & Telephone Corp. .............................. Japan 1,046 13,939,417
Nippon Telegraph & Telephone Corp., ADR ......................... Japan 5,680 388,370
PT Indosat, ADR ................................................. Indonesia 370,800 4,217,850
SBC Communications Inc. ......................................... United States 318,400 13,770,800
Telecom Argentina Stet-France SA (Teco), B, ADR ................. Argentina 4,000 110,000
Telecom Corp. of New Zealand Ltd. ............................... New Zealand 2,562,970 8,988,559
Telecom Italia SpA, di Risp ..................................... Italy 1,200,000 7,974,771
Telefonica de Argentina SA, ADR ................................. Argentina 350,620 11,132,185
Telefonica del Peru SA, ADR ..................................... Peru 225,400 2,563,925
Telefonos de Mexico SA (Telmex), L, ADR ......................... Mexico 212,758 12,153,801
------------
81,362,911
------------
Textiles & Apparel .1%
Adidas-Salomon AG ............................................... Germany 6,510 359,434
(a) Fruit of the Loom Ltd. .......................................... United States 160,000 43,200
------------
402,634
------------
Transportation 2.4%
British Airways PLC ............................................. United Kingdom 1,925,900 11,071,658
(a) Fritz Cos. Inc. ................................................. United States 90,300 931,219
Gesco Corp. Ltd. ................................................ India 522 117
Great Eastern Shipping Co. Ltd. ................................. India 2,552 885
Peninsular & Oriental Steam Navigation Co. ...................... United Kingdom 580,000 4,943,307
Seino Transportation Co. Ltd. ................................... Japan 115,000 580,407
------------
17,527,593
------------
Utilities Electrical & Gas 4.4%
E.On AG ......................................................... Germany 173,800 8,413,117
Endesa SA ....................................................... Spain 122,000 2,372,781
Endesa SA, ADR .................................................. Spain 88,000 1,716,000
Gener SA, ADR ................................................... Chile 287,050 4,216,047
Hong Kong Electric Holdings Ltd. ................................ Hong Kong 2,131,500 6,863,193
Iberdrola SA, Br. ............................................... Spain 85,000 1,099,939
Korea Electric Power Corp. ...................................... South Korea 215,280 6,680,288
------------
31,361,365
------------
Total Common Stocks and Warrants (Cost $480,201,840)............. 571,739,901
------------
Preferred Stocks 2.6%
(a) Empresa Nacional de Comercio Redito Participacoe, pfd. .......... Brazil 275,000 610
Petroleo Brasileiro SA, pfd. .................................... Brazil 360,000 10,875,831
Telecomunicacoes de Sao Paulo SA, ADR, pfd. ..................... Brazil 121,810 2,253,485
Vale do Rio Doce, A, ADR, pfd. .................................. Brazil 196,500 5,551,125
------------
Total Preferred Stocks (Cost $15,523,211)........................ 18,681,051
------------
</TABLE>

TA-12
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON ASSET STRATEGY FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
PRINCIPAL
COUNTRY AMOUNT* VALUE
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bonds 13.3%
Bonos y Oblig del Estado, 3.25%, 1/31/05 ............................. Spain 2,174,000 EUR $ 1,915,618
Buoni Poliennali del Tesoro:
10.50%, 7/15/00 ...................................................... Italy 581,013 EUR 556,876
7.75%, 11/01/06 ...................................................... Italy 9,208,191 EUR 9,898,955
(b) Essar Steel Ltd., Reg. S, FRN, 7.635%, 7/20/99 ....................... India 445,000 224,725
Federal Republic of Germany:
3.25%, 2/17/04 ....................................................... Germany 2,837,000 EUR 2,563,046
4.50%, 7/04/09 ....................................................... Germany 4,919,000 EUR 4,475,119
General Motors Acceptance Corp., 5.50%, 2/02/05 ...................... United States 4,888,000 4,597,083
Government of Brazil:
14.50%, 10/15/09 ..................................................... Brazil 2,970,000 3,176,415
12.25%, 3/06/30 ...................................................... Brazil 2,000,000 1,840,000
Government of Canada:
8.75%, 12/01/05 ...................................................... Canada 612,000 CAD 465,028
7.00%, 12/01/06 ...................................................... Canada 843,000 CAD 599,897
6.00%, 6/01/08 ....................................................... Canada 2,812,000 CAD 1,907,822
Government of France, 3.50%, 7/12/04 ................................. France 2,437,000 EUR 2,203,074
Government of Netherlands, 5.75%, 2/15/07 ............................ Netherlands 3,484,000 EUR 3,422,752
Government of New Zealand, 7.00%, 7/15/09 ............................ New Zealand 3,914,000 NZD 1,872,156
Government of Spain, 7.35%, 3/31/07 .................................. Spain 3,201,000 EUR 3,384,977
International Bank for Reconstruction & Development, 5.25%, 3/20/02 .. Japan 381,700,000 JPY 3,913,503
Kingdom of Belgium, 7.75%, 10/15/04 .................................. Belgium 2,574,000 EUR 2,694,676
Kingdom of Denmark:
7.00%, 12/15/04 ...................................................... Denmark 20,285,000 DKK 2,729,159
5.00%, 8/15/05 ....................................................... Denmark 15,411,000 DKK 1,918,058
Kingdom of Sweden, 6.00%, 2/09/05 .................................... Sweden 7,200,000 SEK 843,983
New South Wales Treasury Corp., 144A, 7.00%, 4/01/04 ................. Australia 2,200,000 AUD 1,353,602
Protexa Construcciones SA de CV, 144A, 12.125%, 7/24/02 .............. Mexico 62,039 48,080
Queensland Treasury Corp., 6.50%, 6/14/05 ............................ Australia 889,000 AUD 537,662
Republic of Argentina:
11.375%, 3/15/10 ..................................................... Argentina 1,930,000 1,763,538
11.75%, 6/15/15 ...................................................... Argentina 1,700,000 1,541,475
Republic of Ecuador, 144A, 11.25%, 4/25/02 ........................... Ecuador 185,000 66,600
Republic of Panama, 8.875%, 9/30/27 .................................. Panama 960,000 812,400
Republic of Peru, FRN, 4.50%, 3/07/17 ................................ Peru 1,560,000 1,046,183
Republic of Turkey, 12.375%, 6/15/09 ................................. Turkey 1,165,000 1,237,813
Republic of Venezuela:
144A, 9.125%, 6/18/07 ................................................ Venezuela 1,640,000 1,303,800
Reg S, 9.125%, 6/18/07 ............................................... Venezuela 600,000 477,000
9.25%, 9/15/27 ....................................................... Venezuela 1,760,000 1,160,500
SEI Holdings IX Inc., 144A, 11.00%, 11/30/00 .........................Trinidad and Tobago 170,000 170,000
U.S. Treasury Bond, 5.25%, 11/15/28 .................................. United States 1,065,000 942,858
U.S. Treasury Note:
4.50%, 1/31/01 ....................................................... United States 1,400,000 1,384,688
6.375%, 6/30/02 ...................................................... United States 5,000,000 5,003,125
5.875%, 11/15/04 ..................................................... United States 3,300,000 3,251,533
6.75%, 5/15/05 ....................................................... United States 5,000,000 5,118,750
6.50%, 2/15/10 ....................................................... United States 3,300,000 3,413,438
United Kingdom:
6.50%, 12/07/03 ...................................................... United Kingdom 150,000 GBP 231,391
7.50%, 12/07/06 ...................................................... United Kingdom 3,885,000 GBP 6,477,059
United Mexican States, 11.50%, 5/15/26 ............................... Mexico 2,895,000 3,477,620
-----------
Total Bonds (Cost $103,215,362)....................................... 96,022,037
-----------
</TABLE>

TA-13
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON ASSET STRATEGY FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
PRINCIPAL
COUNTRY AMOUNT* VALUE
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Short Term Investments 5.6%
Deutsche Bank AG, 6.875%, 7/03/00, Time Deposit ........................ United States $14,000,000 $ 14,000,000
Dresdner Bank AG, 7.00%, 7/03/00, Time Deposit ......................... United States 5,700,000 5,700,000
U.S. Treasury Bills, 5.65% - 5.66% with maturities to 9/07/00 .......... United States 20,900,000 20,683,518
------------
Total Short Term Investments (Cost $40,373,437)......................... 40,383,518
------------
Total Investments (Cost $639,313,850) 100.9%............................ 726,826,507
Net Equity in Forward Contracts ........................................ (15,969)
Other Assets, less Liabilities (.9%) ................................... (6,744,520)
------------
Total Net Assets 100.0% ................................................ $720,066,018
============
</TABLE>
Currency Abbreviations:

AUD- Australian Dollar
CAD- Canadian Dollar
DKK- Danish Krone
EUR- European Unit
GBP- British Pound
JPY- Japanese Yen
NZD- New Zealand Dollar
SEK- Swedish Krona

*The principal amount is stated in U.S. dollars unless otherwise indicated.
(a)Non-income producing
(b)Represents bond in default.

See notes to financial statements.

TA-14
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON ASSET STRATEGY FUND

Financial Statements

Statement of Assets and Liabilities
June 30, 2000 (unaudited)

Assets:
Investments in securities:
Cost ....................................................... $639,313,850
============
Value ...................................................... 726,826,507
Receivables:
Investment securities sold ................................. 1,415,821
Capital shares sold ........................................ 26,987
Dividends and interest ..................................... 4,004,917
Unrealized gain on forward exchange contracts (Note 6) ...... 5,319
------------
Total assets ............................................. 732,279,551
------------
Liabilities:
Payables:
Investment securities purchased ............................ 10,647,921
Capital shares redeemed .................................... 881,320
Affiliates ................................................. 449,161
Funds advanced by custodian ................................. 60,631
Unrealized loss on forward exchange contracts (Note 6) ...... 21,288
Other liabilities ........................................... 153,212
------------
Total liabilities ........................................ 12,213,533
------------
Net assets, at value .................................... $720,066,018
============
Net assets consist of:
Undistributed net investment income ......................... $ 4,020,090
Net unrealized appreciation ................................. 87,470,832
Accumulated net realized gain ............................... 25,487,630
Capital shares .............................................. 603,087,466
------------
Net assets, at value .................................... $720,066,018
============
Class 1:
Net assets, at value ........................................ $693,636,741
============
Shares outstanding .......................................... 35,338,815
============
Net asset value and offering price per share ................ $ 19.63
============
Class 2:
Net assets, at value ........................................ $ 26,429,277
============
Shares outstanding .......................................... 1,350,905
============
Net asset value and offering price per share ................ $ 19.56
============

See notes to financial statements.

TA-15
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON ASSET STRATEGY FUND

Financial Statements (continued)

Statement of Operations
for the six months ended June 30, 2000 (unaudited)

<TABLE>
<S> <C>
Investment income:
(net of foreign taxes of $1,021,939)
Dividends ................................................................ $ 7,802,649
Interest ................................................................. 2,985,587
-------------
Total investment income ................................................ 10,788,236
-------------
Expenses:
Management fees (Note 3) ................................................. 2,068,757
Administrative fees (Note 3) ............................................. 375,777
Distribution fees - Class 2 (Note 3) ..................................... 28,795
Custodian fees ........................................................... 95,387
Reports to shareholders .................................................. 82,550
Professional fees (Note 3) ............................................... 43,852
Trustees' fees and expenses .............................................. 4,123
Other .................................................................... 1,673
-------------
Total expenses ......................................................... 2,700,914
-------------
Net investment income ................................................. 8,087,322
-------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ............................................................ 43,217,208
Foreign currency transactions .......................................... (403,742)
-------------
Net realized gain ..................................................... 42,813,466
Net unrealized appreciation (depreciation) on:
Investments ............................................................ (33,315,088)
Translation of assets and liabilities denominated in foreign currencies 121,166
-------------
Net unrealized depreciation ........................................... (33,193,922)
-------------
Net realized and unrealized gain .......................................... 9,619,544
-------------
Net increase in net assets resulting from operations ...................... $ 17,706,866
=============
</TABLE>

See notes to financial statements.

TA-16
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON ASSET STRATEGY FUND

Financial Statements (continued)

Statements of Changes in Net Assets
for the six months ended June 30, 2000 (unaudited) and the year ended December
31, 1999

<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999
-------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ................................................................. $ 8,087,322 $ 13,810,413
Net realized gain from investments and foreign currency transactions .................. 42,813,466 88,790,440
Net unrealized appreciation (depreciation) on investments and translation of assets
and liabilities denominated in foreign currencies .................................... (33,193,922) 36,425,123
--------------------------------
Net increase in net assets resulting from operations ................................. 17,706,866 139,025,976
Distributions to shareholders from:
Net investment income:
Class 1 .............................................................................. (15,153,507) (14,822,362)
Class 2 .............................................................................. (472,676) (310,147)
Net realized gains:
Class 1 .............................................................................. (104,057,396) (82,476,906)
Class 2 .............................................................................. (3,633,708) (1,907,029)
--------------------------------
Total distributions to shareholders ..................................................... (123,317,287) (99,516,444)
Capital share transactions: (Note 2)
Class 1 .............................................................................. 124,215,964 (58,852,355)
Class 2 .............................................................................. 8,949,637 3,928,278
--------------------------------
Total capital share transactions ........................................................ 133,165,601 (54,924,077)
Net increase (decrease) in net assets ................................................ 27,555,180 (15,414,545)
Net assets:
Beginning of period ..................................................................... 692,510,838 707,925,383
--------------------------------
End of period ........................................................................... $ 720,066,018 $ 692,510,838
================================
Undistributed net investment income included in net assets:
End of period ........................................................................... $ 4,020,090 $ 11,558,951
================================
</TABLE>

See notes to financial statements.

TA-17
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON ASSET STRATEGY FUND

Notes to Financial Statements (unaudited)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The Templeton Asset Strategy Fund (the Fund) is a separate, diversified series
of Franklin Templeton Variable Insurance Products Trust (the Trust), which is
an open-end investment company registered under the Investment Company Act of
1940. Shares of the Fund are sold only to insurance company separate accounts
to fund the benefits of variable life insurance policies or variable annuity
contracts. The Fund seeks a high level of total return through a flexible
policy of investing in stocks of companies in any nation, debt obligations of
companies and governments of any nation, and money market instruments.

Effective May 1, 2000, the name of the Templeton Asset Allocation Fund changed
to Templeton Asset Strategy Fund, as a result of fund mergers, as discussed in
Note 7. The Fund's investment objectives and other policies did not change as a
result of the name change.

The following summarizes the Fund's significant accounting policies.

a. Security Valuation

b. Foreign Currency Translation

Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the exchange rate of such
currencies against U.S. dollars on the date of valuation. Purchases and sales
of securities and income items denominated in foreign currencies are translated
into U.S. dollars at the exchange rate in effect on the transaction date. When
the Fund purchases or sells foreign securities it will customarily enter into a
foreign exchange contract to minimize foreign exchange risk from the trade date
to the settlement date of such transactions.

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 currency denominated assets and liabilities other than investments
in securities held at the end of the reporting period.

c. Forward Exchange Contracts

d. Income Taxes

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

TA-18
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON ASSET STRATEGY FUND

Notes to Financial Statements (unaudited) (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

e. Security Transactions, Investment Income, Expenses and Distributions

f. Indexed Securities

The Fund may invest in debt instruments in which the principal and/or interest
is dependent on other factors such as yield curves, currency exchange rates or
commodity prices. The fund's objective in holding these securities, commonly
called indexed securities or structured notes, is to tailor its investments to
the specific risk and returns it wishes to assume while avoiding unwanted risk
or change in the Fund's exposure to a particular foreign exchange rate or the
spread between two foreign exchange rates.

g. Accounting Estimates

TA-19
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON ASSET STRATEGY FUND

Notes to Financial Statements (unaudited) (continued)

2. SHARES OF BENEFICIAL INTEREST

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

At June 30, 2000, there were an unlimited number of shares authorized ($0.01
par value). Transactions in the Fund's shares were as follows:

<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999
------------------------------------------------------------------
Shares Amount Shares Amount
Class 1 Shares: ------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ....................................... 303,121 $ 6,028,866 240,379 $ 5,144,326
Shares issued on merger (Note 7) .................. 2,830,073 53,573,397 -- --
Shares issued on reinvestment of distributions .... 6,151,475 119,210,903 5,305,304 97,299,268
Shares redeemed ................................... (2,681,179) (54,597,202) (7,631,687) (161,295,949)
-------------------------------------------------------------
Net increase (decrease) ........................... 6,603,490 $ 124,215,964 (2,086,004) $ (58,852,355)
=============================================================
Class 2 Shares:
Shares sold ....................................... 340,652 $ 6,899,314 279,540 $ 5,948,034
Shares issued on merger (Note 7) .................. 2,893 54,613 -- --
Shares issued on reinvestment of distributions .... 212,594 4,106,384 121,157 2,217,176
Shares redeemed ................................... (105,859) (2,110,674) (204,412) (4,236,932)
-------------------------------------------------------------
Net increase ...................................... 450,280 $ 8,949,637 196,285 $ 3,928,278
=============================================================
</TABLE>

3. TRANSACTIONS WITH AFFILIATES

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

<TABLE>
<CAPTION>
Entity Affiliation
---------------------------------------------------------------------------------------
<S> <C>
Franklin Templeton Services, Inc. (FT Services) Administrative manager
Templeton Investment Counsel, Inc. (TICI) Investment manager
Franklin/Templeton Distributors, Inc. (Distributors) Principal underwriter
Franklin/Templeton Investor Services, Inc. (Investor Services) Transfer agent
</TABLE>

The Fund pays administrative fees to FT Services based on the average net
assets as follows:

Fees are further reduced on net assets over $1.2 billion.

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

Annualized Fee Rate Daily Net Assets
-------------------------------------------------------------------------
.65% First $200 million
.585% Over $200 million, up to and including $1.3 billion
.52% Over $1.3 billion

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

TA-20
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON ASSET STRATEGY FUND

Notes to Financial Statements (unaudited) (continued)

3. TRANSACTIONS WITH AFFILIATES (cont.)

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

Included in professional fees are legal fees of $12,633 that were paid to a law
firm in which a partner of that firm was an officer of the Fund.

4. INCOME TAXES

At December 31, 1999, the fund had tax basis capital losses of $867,232, which
will expire on 2007. Such losses may be carried over to offset future capital
gains.

At December 31, 1999, the Fund had $989,065 deferred capital and currency
losses occurring subsequent to October 31, 1999. For tax purposes, such losses
will be reflected in the year ending December 31, 2000.

At June 30, 2000, the net unrealized appreciation based on the cost of
investments for income tax purposes of $639,317,113 was as follows:

Unrealized appreciation ............. $ 164,422,807
Unrealized depreciation ............. (76,913,413)
-------------
Net unrealized appreciation ......... $ 87,509,394
=============

5. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities) for the
period ended June 30, 2000 aggregated $100,889,433 and $175,799,656,
respectively.

6. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

The Fund has been a party to financial instruments with off-balance-sheet risk,
primarily forward exchange contracts, in order to minimize the impact on the
Fund from adverse changes in the relationship between the U.S. dollar and
foreign currencies and interest rates. These instruments involve market risk in
excess of the amount recognized in the Statement of Assets and Liabilities.
Some of these risks have been minimized by offsetting contracts. Risks arise
from the possible inability of counterparties to meet the terms of their
contracts, future movement in currency values and interest rates, and contract
positions that are not exact offsets. The contract amount indicates the extent
of the Fund's involvement in such contracts.

TA-21
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON ASSET STRATEGY FUND

Notes to Financial Statements (unaudited) (continued)

6. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK (cont.)

<TABLE>
<CAPTION>
In Unrealized
Contracts to Sell: Exchange For Settlement Date Gain (Loss)
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
38,100,000 Japanese Yen U.S. $ 367,052 7/26/00 U.S. $ 5,319
---------
Contracts to Sell:
---------------------------------------------------------------
241,795,000 Japanese Yen U.S. $2,287,559 7/19/00 U.S. $ (4,947)
---------
Net unrealized loss on offsetting forward exchange contracts (16,341)
---------
Unrealized loss on forward exchange contracts (21,288)
---------
Net unrealized loss on forward exchange contracts U.S. $ (15,969)
---------
</TABLE>

7. MERGER

On May 1, 2000, the Franklin Templeton Variable Insurance Products (FTVIPT) -
Templeton Asset Strategy Fund acquired the net assets of Templeton Variable
Products Series Fund (TVP) - Templeton Asset Allocation Fund pursuant to a plan
of reorganization approved by the TVP - Templeton Asset Allocation Fund's
shareholders. The merger was accounted for by the method of accounting for
tax-free business combinations of investment companies. The financial
statements of TVP - Templeton Asset Allocation Fund survived the
reorganization; therefore, the financial statements of FTVIPT - Templeton Asset
Strategy Fund reflect the financial statements of TVP - Templeton Asset
Allocation Fund. Immediately preceding the merger, FTVIPT - Templeton Asset
Strategy Fund completed a reverse split of its shares in the ratio of one new
Class 1 share for each .6062 existing Class 1 share and one new Class 2 share
for each .6066 existing Class 2 share. As a result, the FTVIPT - Templeton
Asset Strategy Fund net asset value per share was $18.93 for Class 1 and $18.88
for Class 2 on May 1, 2000. TVP - Templeton Asset Allocation Fund's
shareholders contributed net assets having an aggregate value of $653,548,460
(including $91,802,754 of unrealized appreciation) in exchange for 2,830,073
Class 1 shares and 2,893 Class 2 shares (post-split) of the FTVIPT - Tempelton
Asset Strategy Fund. Immediately prior to the merger, FTVIPT - Templeton Asset
Strategy Fund had net assets of $53,628,010 (including unrealized depreciation
of $347,919). Upon completion of the merger, the combined net assets of the
FTVIPT - Templeton Asset Strategy Fund were $707,176,470.

TA-22
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON ASSET STRATEGY FUND

Tax Designation

The following table provides a breakdown by country of foreign source income
and foreign taxes paid, as designated by the Fund, to Class 1 and Class 2
shareholders of record on December 29, 1999.

Class 1 Class 2
----------------------------------------------------------
Foreign Tax Foreign Foreign Tax Foreign
Paid Source Income Paid Source Income
Country Per Share Per Share Per Share Per Share
-------------------------------------------------------------------------------
Argentina .......... 0.0000 0.0019 0.0000 0.0019
Australia .......... 0.0006 0.0188 0.0006 0.0178
Bermuda ............ 0.0000 0.0040 0.0000 0.0037
Brazil ............. 0.0040 0.0221 0.0040 0.0210
Canada ............. 0.0002 0.0011 0.0002 0.0011
Chile .............. 0.0004 0.0014 0.0004 0.0014
China .............. 0.0000 0.0005 0.0000 0.0005
Finland ............ 0.0001 0.0006 0.0001 0.0006
France ............. 0.0027 0.0145 0.0027 0.0138
Germany ............ 0.0001 0.0022 0.0001 0.0022
Hong Kong .......... 0.0000 0.0233 0.0000 0.0221
Hungary ............ 0.0003 0.0007 0.0003 0.0007
India .............. 0.0000 0.0007 0.0000 0.0007
Italy .............. 0.0003 0.0017 0.0003 0.0017
Japan .............. 0.0009 0.0046 0.0009 0.0043
Mexico ............. 0.0004 0.0039 0.0004 0.0036
Netherlands ........ 0.0010 0.0144 0.0010 0.0137
New Zealand ........ 0.0002 0.0009 0.0002 0.0009
Norway ............. 0.0011 0.0061 0.0011 0.0059
Peru ............... 0.0000 0.0001 0.0000 0.0001
Singapore .......... 0.0006 0.0033 0.0006 0.0031
South Korea ........ 0.0009 0.0043 0.0009 0.0040
Sweden ............. 0.0019 0.0102 0.0019 0.0098
Switzerland ........ 0.0005 0.0019 0.0005 0.0019
Turkey ............. 0.0000 0.0001 0.0000 0.0001
United Kingdom ..... 0.0068 0.0520 0.0068 0.0494
----------------------------------------------------------
TOTAL .............. $0.0230 $0.1953 $0.0230 $0.1860
==========================================================

Shareholders are advised to check with their tax advisors for information on
the treatment of these amounts on their individual income tax returns.

TA-23
<PAGE>

FRANKLIN HIGH INCOME FUND

--------------------------------------------------------------------------------
Fund Goals and Primary Investments: Franklin High Income Fund seeks a high
level of current income, with capital appreciation as a secondary goal. The
Fund invests primarily in debt securities, including lower-rated "junk bonds,"
offering high yield and expected total return. The Fund may also invest a small
portion in foreign securities, including emerging markets.
--------------------------------------------------------------------------------
The first half of 2000 proved to be a difficult environment for fixed income
assets, including high yield bonds. Fears of rising inflation helped to prompt
the Federal Reserve Board to make a series of interest rate increases, which,
coupled with uncertainty over the future path of inflation, contributed to
significant financial market volatility. This combination seemed to have a
negative affect on the high yield market, and the benchmark CS First Boston
Global High Yield index returned -0.79% during the six months under review.(1)

Within this environment, we continued to emphasize growth-oriented sectors that
we feel should benefit from overall economic strength and favorable
industry-specific dynamics. During the period, we increased our wireless
communications and telecommunications sector allocations.

In the wireless communications sector, which outperformed the benchmark index
for the period, we favored companies with, in our view, strong market
positions, funded business plans and experienced management teams. The sector's
solid performers included VoiceStream Wireless and Nextel Communications. We
sought to take advantage of the paging sector's apparent strength by
eliminating our position in Arch Communications, and we maintained our holding
in Metrocall. Finally, we initiated a position during the period in Crown
Castle, a leading operator of communications towers. In the telecommunications
sector, which we continued to favor due to the ongoing global
telecommunications boom, notable performers included Intelcom and Intermedia,
both of which provide Internet infrastructure services.

During the reporting period, the Fund's exposure to most other sectors did not
vary materially. A reduction in the transportation sector's allocation
represented the Fund's most significant change during the period, as we began
to trim our holdings in cyclical industries based on our expectation of an
eventual economic slowdown.

(1) Source: Standard and Poor's Micropal (Credit Suisse First Boston). The
unmanaged index is constructed to mirror the high yield debt market and
includes reinvested interest.

Sector Breakdown
Franklin High Income Fund
6/30/00

% of Total
Sector Net Assets
-----------------------------------------
Telecommunications 31.7%

Consumer Services 24.4%

Process Industries 6.5%

Industrial Services 4.9%

Transportation 3.7%

Energy Minerals 3.5%

Electronic Technology 2.7%

Commercial Services 2.5%

Finance 2.5%

Technology Services 2.5%

Consumer Non-Durables 2.4%

Producer Manufacturing 2.3%

Consumer Durables 1.9%

Retail Trade 1.4%

Health Services 1.0%

Utilities 0.6%

Short-Term Investments &
Other Net Assets 5.5%

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

FH-1
<PAGE>

Looking forward, our outlook for the domestic economy remains positive, despite
recent market volatility. Although we expect slower economic expansion, we
think that continued macroeconomic growth should enable corporate fundamentals
to remain healthy. On a valuation basis, the high yield market continues to be
attractive, as yield spreads relative to Treasury securities remain higher than
historical norms. This combination of apparently solid corporate fundamentals
and attractive yields leads us to feel comfortable about the high yield
market's future.

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance
is no guarantee of future results, these insights may help you understand our
investment and management philosophy.

FH-2
<PAGE>

PERFORMANCE SUMMARY AS OF 6/30/00

Franklin High Income Fund - Class 1 delivered a -1.90% cumulative total return
for the six-month period ended 6/30/00. Total return of Class 1 shares
represents the cumulative or 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.

<TABLE>
<CAPTION>
Franklin High Income Fund - Class 1
Periods ended 6/30/00
Since
Inception
1-Year 5-Year 10-Year (1/24/89)
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Retur n -3.20% +5.84% +8.91% +7.89%
Cumulative Total Return -3.20% +32.80% +134.71% +138.27%
</TABLE>

Franklin High Income
Fund - Class 1

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

Past performance does not guarantee future results.

FH-3
<PAGE>

FRANKLIN STRATEGIC INCOME SECURITIES FUND

--------------------------------------------------------------------------------
Fund Goals and Primary Investments: Franklin Strategic Income Securities Fund
seeks to earn a high level of current income, with long-term capital
appreciation as a secondary goal. The Fund invests primarily in U.S. and
foreign debt securities, including lower-rated "junk bonds," government
securities, mortgage and other asset-backed securities, convertible securities
and preferred stock.
--------------------------------------------------------------------------------
During the six months under review, the broad fixed income markets provided
varied results, as rising equity market volatility seemed to somewhat offset
the benefit from a modest decline in long-term interest rates. In an apparent
effort to contain domestic inflationary pressures, the Federal Reserve Board
(the Fed) increased its federal funds target rate 100 basis points (1.0%) to
6.5% during the first half of 2000. Although domestic pricing levels, led by an
energy cost increase, did show signs of upward pressure during the first
quarter of the year, both wholesale (Producer Price Index) and retail (Consumer
Price Index) inflation measures appeared to ease during the second quarter.
Partly due to this moderation, as well as increasing sentiment that the Fed's
tightening bias may be approaching its end, domestic interest rates declined
during the period, and the 10-year Treasury note's yield fell from 6.4% at the
beginning of the period to 6.0% at the end.

In the first half of 2000, we tried to take advantage of relative value
opportunities within the fixed income universe, given our flexibility to invest
across six primary asset classes -- high yield corporate bonds, international
developed-market bonds, emerging market debt securities, U.S. government bonds,
mortgage and other asset-backed securities, and convertible securities. In
particular, the Fund benefited during the period from its relatively heavy
emerging market fixed income sector weighting, which provided one of the
strongest fixed income asset class returns during the period. Our decision to
maintain relatively modest exposure to the international developed country bond
market also proved timely, as the U.S. dollar's general strength appeared to
constrain returns from that sector.

Going forward, we continue to favor more growth-oriented sectors, such as high
yield corporate bonds and emerging market debt securities, over interest-rate
sensitive sectors, which we believe is appropriate given relative valuation
levels at the end of the period. In our opinion, this sector positioning could
lead to superior returns for our shareholders over the longer term, which is
our daily focus as we manage the Fund.

This pie bar chart shows the portfolio breakdown based on the percentage of
total net assets on 6/30/00 for Franklin Strategic Income Securities Fund.

High Yield Corporate Bonds/Preferred Stock 37.2%
Emerging Market Bonds 19.6%
Mortgage Securities 11.1%
International Bonds 9.3%
Convertible Securities 7.5%
U.S. Government Bonds 4.8%
Short-Term Investments & Other Net Assets 10.5%

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

FSI-1
<PAGE>

High Yield Corporate Bonds

During the past six months, unfavorable technical trading factors seemed to
pressure pricing levels in the high yield corporate bond market. In particular,
asset outflows from dedicated high yield mutual funds during much of the period
helped push this sector's yield spread over Treasuries to levels not seen since
the capital markets' "flight to quality" in the fall of 1998. Fundamentally,
the intermediate-term outlook for a probably sound domestic economy can bode
well for many high yield issuers' credit quality and should help to moderate
the increase in default rates experienced during 1999. Given, in our view, a
generally sanguine fundamental outlook combined with the relatively wide yield
spreads over Treasuries that this sector offered, we increased the Fund's
exposure to high yield corporate bonds during the period, and such bonds
remained the Fund's largest sector holding at period-end.

We remained focused on companies operating in the communications sector, given,
in our opinion, their favorable long-term growth prospects, improving credit
profiles, less cyclical nature, and their ongoing trend toward consolidation.
During the period, we initiated a position in Spectrasite, an owner and
operator of wireless communications towers, which we think should benefit from
growing demand for transmission towers fueled by rapid wireless communication
penetration increases in the U.S. Our holding in VoiceStream Wireless, a
provider of wireless personal communications services, benefited from the
seemingly bullish outlook for wireless communications growth, as well as the
potential for that sector's credit-enhancing merger and acquisition activity.
Rising energy prices helped to buoy our energy holdings; in particular, our
position in Chesapeake Energy, a developer of natural gas properties, was a
beneficiary of natural gas prices' significant increase during the period.

Emerging Market Debt Securities

An apparently more sanguine fundamental outlook for many developing countries
drove the emerging market bond sector higher during the period, providing one
of the strongest total return performances across the fixed income asset
classes. Emerging market sovereign bonds represented our second-largest sector
weighting at period-end, reflecting what we consider to be the improving fiscal
and monetary outlooks for many developing countries and the still-attractive
yield spreads over Treasuries available in this market.

FSI-2
<PAGE>

Throughout the period, Latin America was our top region within this sector's
holdings. Our largest position there at the beginning of the period, Mexico,
benefited from Moody's upgrade of that country's sovereign debt to an
investment-grade rating (Baa3). We sought to take advantage of appreciation in
Mexican bonds by moderately reducing our exposure there, while increasing our
weighting in other core Latin American countries, including Brazil. We also
initiated positions in Peru, Turkey and the Philippines during the period
because of attractive yields available in these markets and what we found to be
these countries' improving fundamental outlooks.

Developed Country International Bonds

The U.S. dollar's strength for much of the reporting period seemed to
negatively impact returns from our international developed country bonds.
However, we maintained a fairly moderate exposure to this sector because we
believe its total return potential, absent major currency moves, remains rather
constrained compared to other fixed income sectors due to the low nominal
yields being offered in many developed country international fixed income
markets. In terms of currency exposure, the Fund's positions were generally
unhedged at period-end, which allowed the Fund to benefit from the dollar's
relative weakness during the latter part of the reporting period. Our two
largest allocations in the Euro-bloc sector remained Germany and Italy. During
the period, we reduced our exposure to Sweden and initiated positions in the
U.K., Denmark, Belgium and the Netherlands, based upon relative valuation. We
added a Canadian position to our existing dollar-bloc country holdings in
Australia and New Zealand.

Convertible Securities

In addition to experiencing a relatively high degree of volatility during the
period, both the broad-based S&P 500(R) Index and the technology-heavy Nasdaq
Composite Index posted negative total return results for the six months under
review.(1) We maintained a moderately underweighted exposure to the convertible
securities market during the period, since we felt that many companies were at
fairly high valuation

(1) The S&P 500 Composite Index consists of 500 domestic stocks, consisting of
four broad sectors: industrials, utilities, financials and transportation. The
S&P 500 serves as standard for measuring large-cap U.S. stock market
performance. Since some industries are characterized by companies of relatively
small stock capitalization, the Index is not composed of the 500 largest
companies on the New York Stock Exchange. The Nasdaq Composite Index measures
all Nasdaq domestic and U.S.-based common stocks listed on the index. The index
is market-weighted and includes over 5,000 companies (as of 4/30/00).

FSI-3
<PAGE>

levels. However, given our expectations for a healthy domestic economy in the
second half of 2000 and positive earnings growth for the corporate sector, we
may look at future dips in the equity markets to add attractive names at what
we consider to be more reasonable prices.

During the period, we initiated a convertible position in Level 3
Communications, which is constructing a national telecommunications network,
and we found an opportunity to purchase the position during a period of
telecommunications sector volatility. This sector's equity valuation
subsequently stabilized and the Fund experienced a meaningful gain on its
investment by the end of the period. The spike in energy prices also helped
propel higher the value of our position in the Kerr-McGee preferred stock
(convertible to Devon Energy common stock). We took advantage of this gain by
selling a portion of that holding for a profit.

U.S. Government Securities

We maintained an underweighted exposure to the U.S. government securities
sector during the six months under review. Although the possibility of a more
neutral future position from the Fed may help to stabilize interest rates over
the near to intermediate term, we believe this sector's total return potential
remains relatively limited compared to other fixed income alternatives.
Consequently, the Fund's exposure remained generally low at period-end. Within
the government bond sector, we favored U.S. agency issues, as concerns over the
potential loss of these agencies' quasi-government status apparently
contributed to yield spread levels over Treasuries rising toward historically
wide levels.

U.S. Mortgage and Other Asset-Backed Securities

We continued to overweight our mortgage and other asset-backed securities
relative to the Fund's U.S. government exposure given the attractive yield
spreads over Treasuries available in this market. During the period, we
initiated positions in two asset-backed securities (a commercial
mortgage-backed and a manufactured housing security) that offered attractive
yields, in our opinion, given the credit quality of the pool of assets that
supports these securities.

FSI-4
<PAGE>

Future Outlook

We expect the domestic economy to post moderate gains throughout calendar 2000,
following the 4.8% annualized growth rate set in the first quarter of 2000.
Although we had some concerns about the jumps in inflationary pressures that
occurred early in the year, the Fed's interest rate increases appear to have
provided some relief. Recent indications point toward healthy economic growth
and manageable inflationary pressure through the remainder of 2000.

Internationally, we believe the euro's adoption, combined with deregulatory
trends, may sustain Europe's economic growth, while much of the developing
world may continue to benefit from financial market stabilization and improving
fiscal accounts. Against this backdrop, we ended the period with an
underweighted exposure to the Fund's more interest-rate sensitive sectors,
considering the relatively low nominal yields in these markets and what we
believed was the more limited intermediate-term total return potential. The
Fund was most heavily weighted in the fixed income market's more
growth-oriented sectors, namely high yield corporate bonds and emerging market
debt securities. This approach reflected our view of these sectors' yields as
attractive, as well as the likely favorable fundamental credit outlooks for
these issuers. As always, we will continue to look for opportunities to enhance
the Fund's long-term returns, while seeking to reduce overall volatility by
actively managing its sector and security allocations.

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance
is no guarantee of future results, these insights may help you understand our
investment and management philosophy.

FSI-5
<PAGE>

Franklin Strategic Income
Securities Fund - Class 1

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

PERFORMANCE SUMMARY AS OF 6/30/00

Franklin Strategic Income Securities Fund - Class 1 delivered a +1.44%
cumulative total return for the six-month period ended 6/30/00. Total return of
Class 1 shares represents the cumulative or 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. The manager and administrator had 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 Total Fund Operating Expenses do
not exceed 0.75% of the Fund's Class 1 net assets through 2000. Had they not
taken this action, the Fund's total return would have been lower. After
December 31, 2001, the manager and administrator may end this arrangement at
any time.

Franklin Strategic Income Securities Fund - Class 1
Periods ended 6/30/00

Since
Inception
1-Year (7/1/99)
----------------------------------------------------
Average Annual Total Return +4.09% +4.09%
Cumulative Total Return +4.09% +4.09%

Past performance does not guarantee future results.

FSI-6
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN STRATEGIC INCOME SECURITIES FUND

Financial Highlights

<TABLE>
<CAPTION>
Six Months Ended
June 30, 2000 Year Ended
(unaudited) December 31, 1999(e)
-----------------------------------------
<S> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period .......................... $9.96 $10.00
---------------------------
Income from investment operations:
Net investment income(a)...................................... .40 .38
Net realized and unrealized losses ........................... (.26) (.12)
---------------------------
Total from investment operations .............................. .14 .26
---------------------------
Less distributions from net investment income ................. --(c) (.30)
---------------------------
Net asset value, end of period ................................ $10.10 $ 9.96
===========================
Total return(b)................................................ 1.44% 2.61%

Ratios/supplemental data
Net assets, end of period (000's) ............................. $7,344 $4,741
Ratios to average net assets:
Expenses ..................................................... .75%(d) .75%(d)
Expenses, excluding waiver and payments by affiliate ......... 1.08%(d) 1.46%(d)
Net investment income ........................................ 8.17%(d) 7.52%(d)
Portfolio turnover rate ....................................... 10.02% 9.96%
</TABLE>

(a)Based on average shares outstanding.
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for periods less than one
year.
(c)Includes distribution of net investment income in the amount of $.004.
(d)Annualized
(e)For the period July 1, 1999 (effective date) to December 31, 1999.

See notes to financial statements.

FSI-7
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN STRATEGIC INCOME SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited)
<TABLE>
<CAPTION>

COUNTRY SHARES VALUE
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Preferred Stocks 1.2%
Health Services 1.2%
(b) Fresenius Medical Care Capital Trust, 7.875%, 2/01/08 (Cost $91,799)............. Germany 100 $ 89,500
----------
Convertible Preferred Stocks 3.7%
Consumer Services 1.3%
MediaOne Group Inc., 7.00%, cvt. pfd. ........................................... United States 2,300 93,150
----------
Energy Minerals 1.0%
Kerr-McGee Corp., 5.50%, cvt. pfd. .............................................. United States 1,500 74,625
----------
Transportation 1.4%
Union Pacific Capital Trust, 6.25%, cvt. pfd. ................................... United States 2,500 99,375
----------
Total Convertible Preferred Stocks (Cost $252,896)............................... 267,150
----------
PRINCIPAL
AMOUNT*
----------
Bonds 36.0%
Consumer Services 9.9%
AMFM Inc., senior note, 8.00%, 11/01/08 ......................................... United States $ 100,000 100,375
Charter Communications Holdings LLC, senior disc. note, zero cpn. to 4/01/04,
9.92% thereafter, 4/01/11 ....................................................... United States 150,000 85,875
CSC Holdings Inc., senior sub. deb., 9.875%, 4/01/23 ............................ United States 100,000 102,500
Park Place Entertainment, senior sub. note, 144A, 9.375%, 2/15/07 ............... United States 100,000 100,250
Sinclair Broadcast Group Inc., senior sub. note, 8.75%, 12/15/07 ................ United States 100,000 88,500
Six Flags Entertainment Corp., senior note, 8.875%, 4/01/06 ..................... United States 100,000 95,750
Telewest Communications PLC, senior disc. note, zero cpn. to 2/01/05, 144A,
11.375% thereafter, 2/01/10 ..................................................... United Kingdom 150,000 79,500
United Pan-Europe Communications NV, senior disc. note, zero cpn. to 8/01/04,
12.50%, thereafter, 8/01/09 ..................................................... Netherlands 150,000 73,500
----------
726,250
----------
Energy Minerals 4.0%
Chesapeake Energy Corp., senior note, B, 9.625%, 5/01/05 ........................ United States 100,000 97,500
P&L Coal Holdings Corp., senior sub. note, B, 9.625%, 5/15/08 ................... United States 100,000 93,250
Pioneer Natural Resources Co., senior note, 9.625%, 4/01/10 ..................... United States 100,000 102,750
----------
293,500
----------
Finance 1.3%
Sovereign Bancorp Inc., senior note, 10.50%, 11/15/06 ........................... United States 100,000 99,250
----------
Industrial Services 1.2%
Allied Waste North America Inc., senior note, B, 7.875%, 1/01/09 ................ United States 100,000 86,000
----------
Process Industries 3.7%
Anchor Glass, first mortgage, 11.25%, 4/01/05 ................................... United States 100,000 76,500
Lyondell Chemical Co., senior secured note, 9.875%, 5/01/07 ..................... United States 100,000 99,000
Packaging Corp. of America, senior sub. note, 9.625%, 4/01/09 ................... United States 100,000 100,125
----------
275,625
----------
Producer Manufacturing 1.2%
Nortek Inc., senior note, 8.875%, 8/01/08 ....................................... United States 100,000 91,000
----------
Technology Services 1.3%
PSINet Inc., senior note, 10.50%, 12/01/06 ...................................... United States 100,000 92,500
----------
Utilities 1.3%
AES Corp., senior note, 9.50%, 6/01/09 .......................................... United States 100,000 98,000
----------
</TABLE>

FSI-8
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN STRATEGIC INCOME SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
PRINCIPAL
COUNTRY AMOUNT* VALUE
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Telecommunications 12.1%
Crown Castle International Corp., senior note, 10.75%, 8/01/11 ............ United States 100,000 $ 102,000
Dobson Communications Corp., senior note, 144A, 10.875%, 7/01/10 .......... United States 100,000 100,750
Global Crossing Holdings Ltd., senior note, 9.50%, 11/15/09 ............... Bermuda 100,000 96,901
Level 3 Communications Inc., senior disc. note, zero cpn. to 12/01/03,
10.50% thereafter, 12/01/08 ............................................. United States 150,000 90,000
Nextel Communications Inc., senior disc. note, zero cpn. to 10/31/02,
9.75% thereafter, 10/31/07 .............................................. United States 150,000 112,500
NEXTLINK Communications Inc., senior disc. note, zero cpn. to 6/01/04,
12.25% thereafter, 6/01/09 .............................................. United States 150,000 93,750
Spectrasite Holdings Inc., senior disc. note, zero cpn. to 4/15/04,
11.25% thereafter, 04/15/09 ............................................. United States 150,000 87,750
Voicestream Wireless Corp., senior disc. note, zero cpn. to 11/15/04,
11.875% thereafter, 11/15/09 ............................................ United States 150,000 101,250
Williams Communications Group Inc., senior note, 10.875%, 10/01/09 ........ United States 100,000 98,000
----------
882,901
----------
Total Bonds (Cost $2,717,848).............................................. 2,645,026
----------
Convertible Bonds 3.8%
Electronic Technology 1.2%
Amkor Technology Inc., cvt., sub. note, 144A, 5.00%, 3/15/07 .............. United States 100,000 91,500
----------
Technology Services 1.3%
Affiliated Computer Services, cvt., sub. note, 4.00%, 3/15/05 ............. United States 100,000 98,250
----------
Telecommunications 1.3%
Level 3 Communications Inc., cvt., sub. note, 6.00%, 3/15/10 .............. United States 100,000 92,010
----------
Total Convertible Bonds (Cost $299,580).................................... 281,760
----------
Other Mortgages/Other Asset Backed Securities 3.4%
Green Tree Financial Corp., 8.37%, 2/01/31 ................................ United States 50,000 44,203
JP Morgan Commercial Mortgage Finance Corp., 7.866%, 10/15/32 ............. United States 200,000 204,029
----------
Total Other Mortgages/Other Asset Backed Securities (Cost $243,126)........ 248,232
----------
U.S. Government and Agency Securities 12.5% ...............................
Other U.S. Government and Agency Securities 4.8%
FHLMC, 6.60%, 4/20/09 ..................................................... United States 140,000 131,472
FNMA, 5.25%, 1/15/09 ...................................................... United States 250,000 219,750
----------
351,222
----------
U.S. Government Agencies/Mortgages 7.7% ...................................
FNMA, 6.00%, 2/01/29 ...................................................... United States 95,057 87,154
FNMA, 6.00%, 5/01/29 ...................................................... United States 99,882 91,474
FNMA, 6.50%, 7/01/28 ...................................................... United States 93,297 88,065
FNMA, 6.50%, 7/01/29 ...................................................... United States 49,942 47,120
FNMA, 7.00%, 5/01/12 ...................................................... United States 84,891 83,503
FNMA, 7.00%, 2/01/30 ...................................................... United States 99,199 95,771
GNMA, SF, 8.00%, 6/15/26 .................................................. United States 74,151 75,168
----------
568,255
----------
Total U.S. Government and Agency Securities (Cost $937,650)................ 919,477
----------
Foreign Government and Agency Securities 28.9%
Republic of Argentina, 11.375%, 3/15/10 ................................... Argentina 20,000 18,275
Republic of Argentina, 11.75%, 4/07/09 .................................... Argentina 150,000 140,063
Republic of Argentina, 11.75%, 6/15/15 .................................... Argentina 100,000 90,675
Australian Government, 7.50%, 7/15/05 ..................................... Australia 97,000 AUD 61,851
Kingdom of Belgium, 7.75%, 10/15/04 ....................................... Belgium 45,000 EUR 47,110
Republic of Brazil, 12.25%, 3/06/30 ....................................... Brazil 35,000 32,200
</TABLE>

FSI-9
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN STRATEGIC INCOME SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
PRINCIPAL
COUNTRY AMOUNT* VALUE
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Foreign Government and Agency Securities (cont.)
Republic of Brazil, 9.375%, 4/07/08 ............................................. Brazil 150,000 $ 128,250
Republic of Brazil, 14.50%, 10/15/09 ............................................ Brazil 195,000 208,553
Republic of Bulgaria, FRN, 7.063%, 7/28/11 ...................................... Bulgaria 100,000 79,250
Government of Canada, 7.00%, 12/01/06 ........................................... Canada 30,000 CAD 21,349
Republic of Colombia, 9.75%, 4/23/09 ............................................ Colombia 20,000 17,728
Kingdom of Denmark, 5.00%, 8/15/05 .............................................. Denmark 212,000 DKK 26,386
French Treasury Note, 3.50%, 7/12/04 ............................................ France 28,000 EUR 25,312
Federal Republic of Germany, 3.25%, 2/17/04 ..................................... Germany 41,000 EUR 37,041
Federal Republic of Germany, 4.50%, 7/04/09 ..................................... Germany 73,000 EUR 66,413
Buoni Poliennali del Tesoro, 7.75%, 11/01/06 .................................... Italy 100,000 EUR 107,502
United Mexican States, 8.625%, 3/12/08 .......................................... Mexico 180,000 173,700
United Mexican States, 9.875%, 2/01/10 .......................................... Mexico 100,000 104,500
Government of Netherlands, 5.75%, 2/15/07 ....................................... Netherlands 50,000 EUR 49,121
Government of New Zealand, 7.00%, 7/15/09 ....................................... New Zealand 125,000 NZD 59,790
Republic of Panama, 9.375%, 4/01/29 ............................................. Panama 120,000 114,900
Republic of Peru, FRN, 4.50%, 3/07/17 ........................................... Peru 70,000 46,944
Republic of Philippines, 9.875%, 3/16/10 ........................................ Philippines 30,000 27,675
Russia Ministry of Finance, Reg S, 10.00%, 6/26/07 .............................. Russia 50,000 38,750
Bonos y Oblig del Estado, 3.25%, 1/31/05 ........................................ Spain 67,000 EUR 59,035
Swedish Government, 10.25%, 5/05/03 ............................................. Sweden 100,000 SEK 12,904
Republic of Turkey, 12.375%, 6/15/09 ............................................ Turkey 75,000 79,688
United Kingdom, 7.50%, 12/07/06 .................................................United Kingdom 65,000 GBP 108,368
Republic of Venezuela, 9.25%, 9/15/27 ........................................... Venezuela 215,000 141,766
----------
Total Foreign Government and Agency Securities (Cost $2,164,463)................. 2,125,099
----------
Total Long Term Investments (Cost $6,707,362).................................... $6,576,244
----------
SHARES
------
Short Term Investments 14.3%
(a) Franklin Institutional Fiduciary Trust Money Market Portfolio (Cost $1,048,482).. United States 1,048,482 1,048,482
----------
Total Investments (Cost $7,755,844) 103.8%....................................... 7,624,726
Other Assets, less Liabilities (3.8%) ........................................... (280,266)
----------
Net Assets 100.0% ............................................................... $7,344,460
==========
</TABLE>

Currency Abbreviations:

AUD-Australian Dollar
CAD-Canadian Dollar
DKK-Danish Krona
EUR-European Currency Unit
GBP-British Pound
NZD-New Zealand Dollars
SEK-Swedish Krona

*Securities denominated in U.S. dollars unless otherwise indicated.
(a)The Franklin Institutional Fiduciary Trust Money Market Portfolio is managed
by Franklin Advisers Inc.
(b)1 share = $1,000 par value

See notes to financial statements.

FSI-10
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN STRATEGIC INCOME SECURITIES FUND

Financial Statements

Statement of Assets and Liabilities
June 30, 2000 (unaudited)

<TABLE>
<S> <C>
Assets:
Investments in securities:
Cost ................................................ $7,755,844
==========
Value ............................................... 7,624,726
Receivables:
Capital shares sold ................................. 1,342
Dividends and interest .............................. 112,723
Affiliates .......................................... 2,364
----------
Total assets ....................................... 7,741,155
----------
Liabilities:
Payables:
Investment securities purchased ..................... 380,452
Affiliates .......................................... 2,099
Other liabilities .................................... 14,144
----------
Total liabilities .................................. 396,695
----------
Net assets, at value .............................. $7,344,460
==========
Net assets consist of:
Undistributed net investment income .................. $ 242,370
Net unrealized depreciation .......................... (130,911)
Accumulated net realized loss ........................ (5,309)
Capital shares ....................................... 7,238,310
----------
Net assets, at value .............................. $7,344,460
==========
Class 1:
Net assets, at value ................................. $7,344,460
==========
Shares outstanding ................................... 727,486
==========
Net asset value and offering price per share ......... $ 10.10
==========
</TABLE>

See notes to financial statements.

FSI-11
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN STRATEGIC INCOME SECURITIES FUND

Financial Statements (continued)

Statement of Operations
for the six months ended June 30, 2000 (unaudited)

<TABLE>
<S> <C>
Investment income:
(net of foreign taxes of $680)
Dividends ............................................................... $ 35,558
Interest ................................................................ 229,216
----------
Total investment income ................................................ 264,774
----------
Expenses:
Management fees (Note 3) ................................................ 11,103
Administrative fees (Note 3) ............................................ 5,930
Custodian fees .......................................................... 412
Reports to shareholders ................................................. 107
Professional fees (Note 3) .............................................. 11,353
Trustees' fees and expenses ............................................. 70
Other ................................................................... 2,997
----------
Total expenses ......................................................... 31,972
Expenses waived/paid by affiliate (Note 3) ............................. (9,596)
----------
Net expenses .......................................................... 22,376
----------
Net investment income ................................................ 242,398
----------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ............................................................ 15,437
Foreign currency transactions .......................................... (602)
----------
Net realized gain ..................................................... 14,835
Net unrealized appreciation (depreciation) on:
Investments ............................................................ (133,959)
Translation of assets and liabilities denominated in foreign currencies 321
----------
Net unrealized depreciation ........................................... (133,638)
----------
Net realized and unrealized loss ......................................... (118,803)
----------
Net increase in net assets resulting from operations ..................... $ 123,595
==========
</TABLE>

See notes to financial statements.

FSI-12
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN STRATEGIC INCOME SECURITIES FUND

Financial Statements (continued)

Statements of Changes in Net Assets
for the six months ended June 30, 2000 (unaudited) and the year ended December
31, 1999

<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999(a)
----------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income .................................................................. $ 242,398 $ 133,560
Net realized gain (loss) from investments and foreign currency transactions ............ 14,835 (20,511)
Net unrealized appreciation (depreciation) on investments and translation of assets and
liabilities denominated in foreign currencies ........................................ (133,638) 2,727
-----------------------------
Net increase in net assets resulting from operations .................................. 123,595 115,776
Distributions to shareholders from net investment income ................................ (1,978) (131,241)
Capital share transactions (Note 2) ..................................................... 2,481,777 4,756,531
-----------------------------
Net increase in net assets ............................................................ 2,603,394 4,741,066
Net assets:
Beginning of period ..................................................................... 4,741,066 --
-----------------------------
End of period ........................................................................... $7,344,460 $4,741,066
=============================
Undistributed net investment income included in net assets:
End of period ........................................................................... $ 242,370 $ 1,950
=============================
</TABLE>

(a)For the period July 1, 1999 (effective date) to December 31, 1999.

See notes to financial statements.

FSI-13
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN STRATEGIC INCOME SECURITIES FUND

Notes to Financial Statements (unaudited)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The Franklin Strategic Income Securities Fund (the Fund) is a separate,
diversified series of the Franklin Templeton Variable Insurance Products Trust
(the Trust), which is an open-end investment company registered under the
Investment Company Act of 1940. Shares of the Fund are sold only to insurance
company separate accounts to fund the benefits of variable life insurance
policies or variable annuity contracts. As of June 30, 2000, 57% of the total
Fund's shares were sold through one insurance company. The Fund seeks high
current income.

The following summarizes the Fund's significant accounting policies.

Effective May 1, 2000, the name of the Templeton Variable Products Series Fund
- Franklin Strategic Income Investments Fund changed to Franklin Templeton
Variable Insurance Products Trust - Franklin Strategic Income Securities Fund.
The Fund's investment objectives and other policies did not change as a result
of the name change.

a. Security Valuation

b. Foreign Currency Translation

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

c. Income Taxes

d. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and
losses on security transactions are determined on a specific identification
basis. Interest income and estimated expenses are accrued daily. Bond discount
is amortized on an income tax basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.

FSI-14
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN STRATEGIC INCOME SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

e. Accounting Estimates

2. SHARES OF BENEFICIAL INTEREST

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

At June 30, 2000, there were an unlimited number of shares authorized ($.01 par
value). Transactions in the Fund's shares were as follows:

<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999(a)
--------------------------------------------------
Shares Amount Shares Amount
Class 1 Shares: --------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ................................... 281,031 $2,776,378 463,525 $4,632,471
Shares issued in reinvestment of distributions 200 1,978 13,257 131,241
Shares redeemed ............................... (29,799) (296,579) (728) (7,181)
-----------------------------------------------
Net increase .................................. 251,432 $2,481,777 476,054 $4,756,531
===============================================
</TABLE>

(a)For the period July 1, 1999 (effective date) to December 31, 1999.

As of June 30, 2000 there were no transactions in the Fund's Class 2 shares.

3. TRANSACTIONS WITH AFFILIATES

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

<TABLE>
<CAPTION>
Entity Affiliation
---------------------------------------------------------------------------------------
<S> <C>
Franklin Templeton Services, Inc. (FT Services) Administrative manager
Franklin Advisers, Inc (Advisers) Investment manager
Franklin/Templeton Distributors, Inc. (Distributors) Principal underwriter
Templeton Investment Counsel, Inc. (TICI) Sub-adviser
Franklin/Templeton Investor Services, Inc. (Investor Services) Transfer agent
</TABLE>

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

Annualized Fee Rate Daily Net Assets
-----------------------------------------------------------------------
.425% First $500 million
.325% Over $500 million, up to and including $1 billion
.28% Over $1 billion, up to and including $1.5 billion

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

Management fees were reduced on assets invested in the Franklin Institutional
Fiduciary Trust Money Market Portfolio.

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

FSI-15
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN STRATEGIC INCOME SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

3. TRANSACTIONS WITH AFFILIATES (cont.)

Under a subadvisory agreement, TICI provides subadvisory services to the Fund
and receives fees from Advisers based on the average daily net assets of the
Fund.

Advisers agreed in advance to waive management fees as noted in the Statement
of Operations.

The Fund reimburses Distributors up to .25% per year of its average daily net
assets of Class 2, for costs incurred in marketing the Fund's shares. No
payments were made by the Fund for the period ended June 30, 2000.

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

Included in professional fees are legal fees of $174 that were paid to a law
firm in which a partner of that firm was an officer of the Fund.

4. INCOME TAXES

At December 31, 1999, the Fund had tax basis capital losses of $18,246 which
may be carried over to offset future capital gains. Such losses expire in
December 31, 2007.

At December 31, 1999, the Fund had deferred capital losses of $1,898 occurring
subsequent to October 31, 1999. For tax purposes, such losses will be reflected
in the year ending December 31, 2000.

Net investment income differs for financial statement and tax purposes
primarily due to differing treatment of foreign currency transactions and
merger related expenses.

Net realized capital gains (losses) differ for financial statements and tax
purposes primarily due to differing treatment of foreign currency transactions.

At June 30, 2000, the net unrealized depreciation based on the cost of
investments for income tax purposes of $7,755,844 was as follows:

Unrealized appreciation ............. $ 109,920
Unrealized depreciation ............. (241,038)
----------
Net unrealized depreciation ......... $ (131,118)
==========

5. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities) for the
period ended June 30, 2000 aggregated $3,163,153 and $514,844, respectively.

6. CREDIT RISK

The Fund has 59.8% of its portfolio invested in lower rated and comparable
quality unrated high yield securities, which tend to be more sensitive to
economic conditions than higher rated securities. The risk of loss due to
default by the issuer may be significantly greater for the holders of high
yielding securities because of such securities are generally unsecured and are
often subordinated to other creditors of the issuer.

The Fund has investments in excess of 10% of its total net assets in the
Telecommunications industry. Such concentration may subject the Fund more
significantly to economic changes occurring within this industry.

FSI-16
<PAGE>

FRANKLIN U.S. GOVERNMENT FUND

--------------------------------------------------------------------------------
Fund Goal and Primary Investments: Franklin U.S. Government Fund seeks income.
The Fund invests exclusively in U.S. government securities, primarily fixed and
variable-rate mortgage-backed securities.
--------------------------------------------------------------------------------
The U.S. economy continued its rapid expansion during the first half of 2000.
This above-trend growth, coupled with an extremely tight labor market and
commodity price increases, contributed to the Federal Reserve Board's (the
Fed's) raising interest rates three times during the reporting period for a
total of 100 basis points (1.0%), in an apparent effort to relieve inflationary
pressures. While this caused short-term interest rates to rise, longer-term
Treasury interest rates began to fall partly due to increasingly positive
federal budget surplus projections. In addition, the U.S. Treasury Department
conducted several buyback operations of long-term bonds during the reporting
period, which pushed longer-term yields even lower. This helped to create an
inverted Treasury yield curve -- the uncommon phenomenon where long-term yields
are lower than short-term yields. However, because the inversion was primarily
supply-related, mortgage pass-throughs and other fixed income securities, such
as those in which the Fund invests, did not participate in this event. The
yield spreads between mortgage pass-throughs and Treasury bonds generally
widened during the reporting period, increasing these securities' income
advantage over Treasuries.

Investors generally began to favor Ginnie Mae (Government National Mortgage
Association or GNMA) pass-throughs over Fannie Mae (Federal National Mortgage
Association or FNMA) and Freddie Mac (Federal Home Loan Mortgage Association or
FHLMC) pass-throughs in March 2000, largely because of news about possible
changes in Fannie Mae's and Freddie Mac's status as quasi-government agencies.
Treasury Undersecretary Gary Gensler and Senate Banking Committee Chairman Phil
Gramm suggested that Congress should re-evaluate Fannie Mae's and Freddie Mac's
relationship with the U.S. government. This process could take some time to
complete, and likely will be highly influenced by the agencies' powerful
political network. There may be some refinement of their relationship, but we
do not think the government would cut all ties with these agencies. In sum, we
believe that investor fears over these issues are exaggerated. Still, this
seemed to cause spreads on Fannie Mae and Freddie Mac pass-throughs to widen
significantly, and allowed us to increase our weightings in these securities at
attractive levels.

This chart in pie format shows the investment holdings of Franklin U.S.
Government Fund as a percentage of total net assets on 6/30/00.

Mortgage-Backed Securities 73.9%
Agency Notes & Bonds 22.7%
Short-Term Investments & Other Net Assets 3.4%

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

FUS-1
<PAGE>

Looking forward, we will manage Franklin U.S. Government Fund primarily as a
mortgage income fund as we have always done, emphasizing agency mortgage
pass-throughs for their attractive income advantages versus Treasury
securities. In addition, the Fund will continue to use non-mortgage securities,
such as Treasury and U.S. government agency securities, for diversification
purposes.

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any industry, security or the Fund. Our
strategies and the Fund's portfolio composition will change depending on
market and economic conditions. Although historical performance is no
guarantee of future results, these insights may help you understand our
investment and management philosophy.

FUS-2
<PAGE>

PERFORMANCE SUMMARY AS OF 6/30/00

Franklin U.S. Government Fund - Class 1 delivered a +3.92% cumulative total
return for the six-month period ended 6/30/00. Total return of Class 1 shares
represents the cumulative or 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.

<TABLE>
<CAPTION>
Franklin U.S. Government Fund - Class 1
Periods ended 6/30/00
Since
Inception
1-Year 5-Year 10-Year (3/14/89)
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Retur n +4.29% +5.88% +7.60% +7.43%
Cumulative Total Return +4.29% +33.06% +108.10% +124.59%
</TABLE>

Franklin U.S. Government
Fund - Class 1

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

Past performance does not guarantee future results.

FUS-3
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN U.S. GOVERNMENT FUND

Financial Highlights

<TABLE>
<CAPTION>
Class 1
--------------------------------------------------------------------------------
Six Months Ended Year Ended December 31,
June 30, 2000 -------------------------------------------------------------
(unaudited) 1999 1998 1997 1996 1995
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period ........... $11.78 $13.89 $13.92 $13.47 $14.00 $12.57
---------------------------------------------------------------------------
Income from investment operations:
Net investment income(a)....................... .39 .83 .99 1.00 .75 .93
Net realized and unrealized gains (losses) .... .07 (.96) .01 .21 (.31) 1.46
---------------------------------------------------------------------------
Total from investment operations ............... .46 (.13) 1.00 1.21 .44 2.39
---------------------------------------------------------------------------
Less distributions from net investment income .. (.01) (1.98) (1.03) (.76) (.97) (.96)
---------------------------------------------------------------------------
Net asset value, end of period ................. $12.23 $11.78 $13.89 $13.92 $13.47 $14.00
===========================================================================
Total return(b)................................. 3.92% (.94%) 7.44% 9.31% 3.62% 19.46%
Ratios/supplemental data
Net assets, end of period (000's) .............. $449,956 $515,033 $710,832 $765,084 $843,858 $643,165
Ratios to average net assets:
Expenses ...................................... .52%(e) .51% .50% .50% .51% .52%
Net investment income ......................... 6.54%(e) 6.25% 6.22% 6.49% 6.66% 6.72%
Portfolio turnover rate ........................ 2.93% 7.90% 31.34% 16.84% 12.93%(d) 18.68%(c)
</TABLE>

(a)Based on average shares outstanding effective year ended December 31, 1999.
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for periods less than one
year.
(c)The portfolio turnover rate excludes mortgage dollar roll transactions.
(d)The portfolio turnover rate excludes transactions related to the merger of
the Investment Grade Intermediate Bond Fund and the Adjustable U.S.
Government Fund and mortgage dollar roll transactions.
(e)Annualized

FUS-4
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN U.S. GOVERNMENT FUND

Financial Highlights (continued)

<TABLE>
<CAPTION>
Class 2
-----------------------------------------
Six Months Ended
June 30, 2000 Year Ended
(unaudited) December 31, 1999(c)
-----------------------------------------
<S> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period .................. $11.78 $13.89
----------------------------
Income from investment operations:
Net investment income(a).............................. .37 .77
Net realized and unrealized gains (losses) ........... .07 (.92)
----------------------------
Total from investment operations ...................... .44 (.15)
----------------------------
Less distributions from net investment income ......... (.01) (1.96)
----------------------------
Net asset value, end of period ........................ $12.21 $ 11.78
============================
Total return(b)........................................ 3.75% (1.10%)

Ratios/supplemental data
Net assets, end of period (000's) ..................... $1,512 $ 1,877
Ratios to average net assets:
Expenses ............................................. .77%(d) .77%(d)
Net investment income ................................ 6.30%(d) 5.95%(d)
Portfolio turnover rate ............................... 2.93% 7.90%
</TABLE>

(a)Based on average shares outstanding.
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for periods less than one
year.
(c)For the period January 6, 1999 (effective date) to December 31, 1999.
(d)Annualized

See notes to financial statements.

FUS-5
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN U.S. GOVERNMENT FUND

Statement of Investments, June 30, 2000 (unaudited)

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Mortgage-Backed Securities 73.9%
Government National Mortgage Association (GNMA) - Fixed Rate 45.9%
GNMA I, SF, 5.50%, 11/15/28 - 1/15/29 ........................................ $ 6,714,898 $ 5,988,294
GNMA II, 5.50%, 9/20/28 - 1/20/29 ............................................ 3,015,106 2,674,025
GNMA I, SF, 6.00%, 11/15/23 - 4/15/24 ........................................ 13,095,985 12,170,580
GNMA II, 6.00%, 1/20/24 - 8/20/28 ............................................ 28,863,086 26,482,933
GNMA I, SF, 6.50%, 5/15/23 - 7/15/28 ......................................... 31,150,736 29,741,362
GNMA II, 6.50%, 3/20/28 ...................................................... 16,766,776 15,831,930
GNMA I, SF, 7.00%, 3/15/22 - 5/15/28 ......................................... 47,782,201 46,613,583
GNMA I, SF, 7.25%, 11/15/25 .................................................. 1,137,124 1,119,372
GNMA, PL, 7.25%, 5/15/22 - 8/15/22 ........................................... 2,123,030 2,089,884
GNMA I, SF, 7.50%, 2/15/17 - 5/15/28 ......................................... 22,876,330 22,825,820
GNMA II, 7.50%, 11/20/16 - 11/20/26 .......................................... 15,296,042 15,159,524
GNMA I, SF, 8.00%, 4/15/05 - 6/15/25 ......................................... 12,975,938 13,190,749
GNMA II, 8.00%, 2/20/16 - 8/20/26 ............................................ 1,228,390 1,241,042
GNMA I, SF, 8.25%, 4/15/25 ................................................... 544,572 552,721
GNMA I, SF, 8.50%, 8/15/21 - 12/15/24 ........................................ 3,254,298 3,346,804
GNMA I, SF, 9.00%, 4/15/16 - 2/15/21 ......................................... 1,612,130 1,675,786
GNMA I, SF, 9.50%, 7/15/16 - 12/15/21 ........................................ 3,018,955 3,159,961
GNMA II, 9.50%, 4/20/25 ...................................................... 346,679 358,801
GNMA I, SF, 10.00%, 8/15/17 - 8/15/21 ........................................ 2,997,269 3,161,063
------------
207,384,234
------------
Federal National Mortgage Association (FNMA) - Fixed Rate 12.9%
FNMA, 6.00%, 10/01/23 - 10/01/29 ............................................. 28,110,153 25,815,041
FNMA, 6.50%, 1/01/24 - 2/01/30 ............................................... 20,947,179 19,840,645
FNMA, 7.00%, 5/01/24 ......................................................... 1,115,219 1,080,108
FNMA, PL, 7.00%, 3/17/35 ..................................................... 2,995,087 2,783,559
FNMA, 7.50%, 4/01/23 - 8/01/25 ............................................... 4,165,120 4,125,589
FNMA, 8.00%, 7/01/16 - 2/01/25 ............................................... 4,320,501 4,359,970
FNMA, 8.50%, 10/01/19 - 2/01/22 .............................................. 244,015 249,667
------------
58,254,579
------------
Federal National Mortgage Association (FNMA) - Adjustable Rate 4.8%
FNMA, Cap 12.49%, Margin 2.00% + CMT, Resets Annually, 7.243%, 2/01/19 ....... 2,723,858 2,795,269
FNMA, Cap 12.819%, Margin 2.127% + CMT, Resets Annually, 7.592%, 9/01/18 ..... 2,898,580 2,980,019
FNMA, Cap 13.313%, Margin 2.126% + CMT, Resets Annually, 7.548%, 7/01/19 ..... 2,532,091 2,601,610
FNMA, Cap 13.644%, Margin 2.011% + CMT, Resets Annually, 7.329%, 1/01/18 ..... 7,247,360 7,424,003
FNMA, Cap 14.625%, Margin 1.25% + COFI, Resets Monthly, 6.217%, 6/01/02 ...... 4,456,902 4,412,066
FNMA, Cap 15.156%, Margin 2.284% + 3CMT, Resets Tri-Annually, 7.889%, 3/01/20 1,551,938 1,581,235
------------
21,794,202
------------
Federal Home Loan Mortgage Corp. (FHLMC) - Fixed Rate 9.1%
FHLMC, 6.00%, 1/01/24 - 8/01/28 .............................................. 8,928,295 8,191,677
FHLMC, 6.50%, 6/01/08 - 6/01/29 .............................................. 18,908,855 18,003,846
FHLMC, 7.00%, 4/01/24 ........................................................ 10,162,850 9,849,176
FHLMC, 7.50%, 11/01/22 - 5/01/24 ............................................. 2,885,465 2,866,175
FHLMC, 8.00%, 1/01/17 - 5/01/22 .............................................. 1,399,395 1,413,687
FHLMC, 8.50%, 4/01/18 - 3/01/22 .............................................. 575,504 588,186
FHLMC, 9.00%, 3/01/03 ........................................................ 192,850 195,717
------------
41,108,464
------------
Federal Home Loan Mortgage Corp. (FHLMC) - Adjustable Rate 1.2%
FHLMC, Cap 12.522%, Margin 2.105% + CMT, Resets Annually, 6.886%, 6/01/22 .... 2,192,725 2,240,758
FHLMC, Cap 13.458%, Margin 2.195% + CMT, Resets Annually, 7.264%, 2/01/19 .... 2,861,957 2,953,468
------------
5,194,226
------------
Total Mortgage-Backed Securities (Cost $339,056,739).......................... 333,735,705
------------
</TABLE>

FUS-6
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN U.S. GOVERNMENT FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Other Agency Securities 22.7%
Federal Agriculture Mortgage Corp., 7.23%, 1/17/07 ..................................................$ 5,000,000 $ 4,900,795
Federal Home Loan Bank, zero cpn., 1/23/23 .......................................................... 10,000,000 1,664,060
FICO Strip, zero cpn., 12/06/14 ..................................................................... 13,569,000 4,921,938
FICO Strip, zero cpn., 5/11/13 ...................................................................... 10,000,000 4,063,640
FICO Strip, 12, zero cpn., 6/06/14 .................................................................. 9,454,000 3,554,373
FICO Strip, 13, zero cpn., 6/27/09 .................................................................. 11,024,000 5,933,734
FICO Strip, 16, zero cpn., 10/05/10 ................................................................. 4,745,000 2,334,289
Housing Urban Development, 96-A, 7.63%, 8/01/14 ..................................................... 5,000,000 4,899,660
Housing Urban Development, 96-A, 7.66%, 8/01/15 ..................................................... 5,000,000 4,888,785
Small Business Administration, 6.00%, 9/01/18 ....................................................... 9,230,439 8,336,240
Small Business Administration, 6.45%, 12/01/15 ...................................................... 3,720,185 3,466,748
Small Business Administration, 6.70%, 12/01/16 ...................................................... 4,158,674 3,927,349
Small Business Administration, 6.85%, 7/01/17 ....................................................... 4,323,003 4,120,363
Small Business Administration, Cap 10.85%, Margin Prime - 0.40%, Resets Quarterly, 8.10%, 6/25/19 ... 2,267,813 2,301,830
Small Business Administration, Cap 10.875%, Margin Prime - 0.125%, Resets Quarterly, 8.375%, 3/25/18 3,173,605 3,242,632
Student Loan Marketing Association, zero cpn., 5/15/14 .............................................. 15,000,000 4,644,465
Tennessee Valley Authority, zero cpn., 4/15/42 ...................................................... 6,000,000 2,446,500
Tennessee Valley Authority, 5.88%, 4/01/36 .......................................................... 10,000,000 9,543,280
Tennessee Valley Authority, 6.235%, 7/15/45 ......................................................... 14,249,000 14,152,392
Tennessee Valley Authority, 7.25%, 7/15/43 .......................................................... 10,000,000 9,136,495
------------
Total Other Agency Securities (Cost $106,258,642).................................................... 102,479,568
------------
Total Long Term Investments (Cost $445,315,381)...................................................... 436,215,273
------------
(a) Repurchase Agreement 2.7%
Joint Repurchase Agreement, 6.563%, 7/03/00, (Maturity Value $12,153,034) (Cost $12,146,391)......... 12,146,391 12,146,391
Banc of America Securities LLC
Barclays Capital Inc.
Bear, Stearns & Co. Inc.
Donaldson, Lufkin & Jenrette Securities Corp.
Dresdner Kleinwort Benson, North America LLC
Goldman, Sachs & Co.
Greenwich Capital Markets Inc.
Lehman Brothers Inc.
Nesbitt Burns Securities Inc.
Paine Webber Inc.
Paribas Corp.
UBS Warburg
Collateralized by U.S. Treasury Bills & Notes ------------
Total Investments (Cost $457,461,772) 99.3%.......................................................... 448,361,664
Other Assets, less Liabilities .7% .................................................................. 3,106,928
------------
Net Assets 100% ..................................................................................... $451,468,592
============
</TABLE>

(a)Investment is through participation in a joint account with other funds
managed by the investment advisor. At June 30, 2000, all repurchase
agreements had been entered into on that date.

See notes to financial statements.

FUS-7
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN U.S. GOVERNMENT FUND

Financial Statements

Statement of Assets and Liabilities
June 30, 2000 (unaudited)

<TABLE>
<S> <C>
Assets:
Investments in securities:
Cost ................................................ $ 457,461,772
-------------
Value ............................................... 448,361,664
Receivables:
Investment securities sold .......................... 26,322
Interest ............................................ 3,835,678
-------------
Total assets ...................................... 452,223,664
-------------
Liabilities:
Payables:
Capital shares redeemed ............................. 519,589
Affiliates .......................................... 189,541
Other liabilities .................................... 45,942
-------------
Total liabilities ................................. 755,072
-------------
Net assets, at value ............................. $ 451,468,592
=============
Net assets consist of:
Undistributed net investment income .................. $ 15,627,382
Net unrealized depreciation .......................... (9,100,108)
Accumulated net realized loss ........................ (16,283,705)
Capital shares ....................................... 461,225,023
-------------
Net assets, at value ............................. $ 451,468,592
=============
Class 1:
Net assets, at value ................................. $ 449,956,210
=============
Shares outstanding ................................... 36,782,407
=============
Net asset value and offering price per share ......... $ 12.23
=============
Class 2:
Net assets, at value ................................. $ 1,512,382
=============
Shares outstanding ................................... 123,898
=============
Net asset value and offering price per share ......... $ 12.21
=============
</TABLE>

See notes to financial statements.

FUS-8
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN U.S. GOVERNMENT FUND

Financial Statements (continued)

Statement of Operations
for the six months ended June 30, 2000 (unaudited)

<TABLE>
<S> <C>
Investment income:
Interest .................................................... $ 16,886,132
------------
Expenses:
Management fees (Note 3) .................................... 1,197,723
Distribution fees - Class 2 (Note 3) ........................ 2,175
Custodian fees .............................................. 2,746
Reports to shareholders ..................................... 28,012
Professional fees (Note 3) .................................. 16,212
Trustees' fees and expenses ................................. 2,808
Other ....................................................... 5,622
------------
Total expenses ............................................. 1,255,298
------------
Net investment income ..................................... 15,630,834
------------
Realized and unrealized gains (losses):
Net realized loss from investments .......................... (5,409,291)
Net unrealized appreciation on investments .................. 7,624,249
------------
Net realized and unrealized gain ............................. 2,214,958
------------
Net increase in net assets resulting from operations ......... $ 17,845,792
============
</TABLE>

See notes to financial statements.

FUS-9
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN U.S. GOVERNMENT FUND

Financial Statements (continued)

Statements of Changes in Net Assets
for the six months ended June 30, 2000 (unaudited) and the year ended December
31, 1999

<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999
---------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income .................................................. $ 15,630,834 $ 38,162,814
Net realized gain (loss) from investments .............................. (5,409,291) 2,048,000
Net unrealized appreciation (depreciation) on investments .............. 7,624,249 (45,913,508)
-----------------------------------
Net increase (decrease) in net assets resulting from operations ....... 17,845,792 (5,702,694)
Distributions to shareholders from:
Net investment income:
Class 1 ............................................................... (430,710) (82,724,494)
Class 2 ............................................................... (1,808) (257,323)
-----------------------------------
Total distributions to shareholders ..................................... (432,518) (82,981,817)
Capital share transactions: (Note 2)
Class 1 ............................................................... (82,430,357) (107,385,179)
Class 2 ............................................................... (424,631) 2,148,073
-----------------------------------
Total capital share transactions ........................................ (82,854,988) (105,237,106)
Net decrease in net assets ............................................ (65,441,714) (193,921,617)
Net assets:
Beginning of period ..................................................... 516,910,306 710,831,923
-----------------------------------
End of period ........................................................... $ 451,468,592 $ 516,910,306
===================================
Undistributed net investment income included in net assets:
End of period ........................................................... $ 15,627,382 $ 429,066
===================================
</TABLE>

See notes to financial statements.

FUS-10
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN U.S. GOVERNMENT FUND

Notes to Financial Statements (unaudited)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The Franklin U.S. Government Fund (the Fund) is a separate, diversified series
of the Franklin Templeton Variable Insurance Products Trust (the Trust), which
is an open-end investment company registered under the Investment Company Act
of 1940. Shares of the Fund are sold only to insurance company separate
accounts to fund the benefits of variable life insurance policies or variable
annuity contracts. As of June 30, 2000, 90% of the Fund's shares were sold
through one insurance company. The Funds investment objective is current
income.

The following summarizes the Fund's significant accounting policies.

a. Security Valuation

b. Income Taxes

c. Security Transactions, Investment Income, Expenses and Distributions

d. Accounting Estimates

2. SHARES OF BENEFICIAL INTEREST

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

FUS-11
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN U.S. GOVERNMENT FUND

Notes to Financial Statements (unaudited) (continued)

2. SHARES OF BENEFICIAL INTEREST (cont.)

At June 30, 2000, there were an unlimited number of shares authorized ($.01 par
value). Transactions in the Fund's shares were as follows:

<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999(a)
-------------------------------------------------------------------
Shares Amount Shares Amount
Class 1 Shares: -------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ................................... 1,272,103 $ 15,101,219 4,229,311 $ 56,773,998
Shares issued in reinvestment of distributions 35,952 430,710 6,745,264 82,724,494
Shares redeemed ............................... (8,233,196) (97,962,286) (18,460,763) (246,883,671)
--------------------------------------------------------------
Net decrease .................................. (6,925,141) $ (82,430,357) (7,486,188) $ (107,385,179)
==============================================================
Class 2 Shares:
Shares sold ................................... 30,850 $ 367,994 165,968 $ 2,244,294
Shares issued in reinvestment of distributions 151 1,808 21,095 257,323
Shares redeemed ............................... (66,496) (794,433) (27,670) (353,544)
--------------------------------------------------------------
Net increase (decrease) ....................... (35,495) $ (424,631) 159,393 $ 2,148,073
==============================================================
</TABLE>

(a)For the period January 6, 1999 (effective date) to December 31, 1999 for
Class 2.

3. TRANSACTIONS WITH AFFILIATES

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

<TABLE>
<CAPTION>
Entity Affiliation
---------------------------------------------------------------------------------------
<S> <C>
Franklin Templeton Services, Inc. (FT Services) Administrative manager
Franklin Advisers, Inc. (Advisers) Investment manager
Franklin/Templeton Distributors, Inc. (Distributors) Principal underwriter
Franklin/Templeton Investor Services, Inc. (Investor Services) Transfer agent
</TABLE>

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

Annualized Fee Rate Daily Net Assets
-------------------------------------------------------------------------
.625% First $100 million
.500% Over $100 million, up to and including $250 million
.450% Over $250 million, up to and including $10 billion

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

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

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

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

Included in professional fees are legal fees of $1,482 that were paid to a law
firm in which a partner of that firm was an officer of the Fund.

FUS-12
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN U.S. GOVERNMENT FUND

Notes to Financial Statements (unaudited) (continued)

4. INCOME TAXES

At December 31, 1999, the Fund had tax basis capital losses, which may be
carried over to offset future capital gains. Such losses expire as follows:

Capital loss carryover expiring in:
2002 .............................. $8,408,494
2003 .............................. 826,481
2005 .............................. 169,754
----------
$9,404,729
==========

At December 31, 1999, the Fund had a deferred capital loss occurring subsequent
to October 31, 1999 of $1,160,146. For tax purposes, such loss will be
reflected in the year ending December 31, 2000.

Net realized capital gains (losses) differ for financial statements and tax
purposes primarily due to differing treatments of mortgage dollar rolls.

At June 30, 2000, the net unrealized depreciation based on the cost of
investments for income tax purposes of $457,771,312 was as follows:

Unrealized appreciation ............. $ 5,827,607
Unrealized depreciation ............. (15,237,255)
-------------
Net unrealized depreciation ......... $ (9,409,648)
=============

5. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities) for the
period ended June 30, 2000 aggregated $1,361,977 and $83,332,412, respectively.

FUS-13
<PAGE>

FRANKLIN ZERO COUPON FUNDS - 2000, 2005, 2010

--------------------------------------------------------------------------------
Funds' Goal and Primary Investments: The three Zero Coupon Funds seek as high
an investment return as is consistent with capital preservation. The Funds
invest primarily in dollar-denominated zero coupon debt securities, primarily
U.S. Treasury-issued stripped securities and stripped securities issued by the
U.S. government, its agencies and authorities. Each Zero Coupon Fund seeks to
return a reasonably assured target dollar amount, predictable at the time of
the investment, on a specific date in the future. The Funds may not be
appropriate for those who intend to redeem units before the maturity dates.
--------------------------------------------------------------------------------
During the six months under review, there was a significant divergence between
the movement of short-term and long-term interest rates, largely as a result of
the U.S. economy's continued rapid expansion and the Federal Reserve Board's
(the Fed's) attempt to control inflation. Above-trend economic growth, an
extremely tight labor market and commodity price increases contributed to the
Fed's raising interest rates three times during the reporting period for a
total of 100 basis points (1.0%), leaving the federal funds target rate at 6.5%
on June 30, 2000. While this caused short-term interest rates to rise,
longer-term Treasury interest rates began to fall partly due to increasingly
positive federal budget surplus projections. In addition, the U.S. Treasury
Department conducted several buyback operations of long-term bonds during the
reporting period, which pushed longer-term yields even lower. This helped to
create an inverted Treasury yield curve -- the uncommon phenomenon where
long-term yields are lower than short-term yields. Franklin Zero Coupon 2010
Fund, with its longer-term securities, benefited the most from this
environment.

Franklin Zero Coupon Funds invest primarily in securities issued by government
sponsored agencies. In our view, there is only slightly more risk in agency
securities than direct obligations of the U.S. government. However, agency
securities historically have offered a higher yield advantage than Treasuries.

The dollar value, number of shares or principal value, and complete legal
titles of all portfolio holdings are listed in the Funds' Statement of
Investments.

FZ-1
<PAGE>

Typically, individual zero coupon bonds will return a fixed rate, if held to
maturity. Zero coupon investments, therefore, can be attractive for relatively
short-term investors and risk-averse, long-term investors. Of course, a managed
portfolio of zero coupon bonds will fluctuate with cash flow into or out of the
portfolio, and vary with market conditions. We do not try to time the market;
instead, our portfolio activity mirrors shareholder activity.

Looking ahead, we think inflation should remain subdued, making fixed income
investments attractive. Zero coupon bonds and the Franklin Zero Coupon Funds,
while subject to price fluctuation as a result of changes in interest rates,
can offer investors relatively certain returns if held to maturity. For each
Fund, we strive to maintain the weighted average maturity as close to the
target maturity as possible so that the Fund will mirror the features of a zero
coupon bond.

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any industry, security or the Funds. Our
strategies and the Funds' portfolio compositions will change depending on
market and economic conditions. Although historical performance is no
guarantee of future results, these insights may help you understand our
investment and management philosophy.

FZ-2
<PAGE>

PERFORMANCE SUMMARY AS OF 6/30/00

Franklin Zero Coupon 2000 Fund - Class 1 delivered a +2.83% cumulative total
return for the six-month period ended 6/30/00. Total return of Class 1 shares
represents the cumulative or 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. Past expense reductions by the manager increased returns.

<TABLE>
<CAPTION>
Franklin Zero Coupon 2000 Fund - Class 1
Periods ended 6/30/00
Since
Inception
1-Year 5-Year 10-Year (3/14/89)
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +4.92% +5.80% +8.68% +8.50%
Cumulative Total Return +4.92% +32.58% +129.84% +151.25%
</TABLE>

Franklin Zero Coupon
2000 Fund - Class 1

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

Past performance does not guarantee future results.

FZ-3
<PAGE>

Franklin Zero Coupon
2005 Fund - Class 1

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

PERFORMANCE SUMMARY AS OF 6/30/00

Franklin Zero Coupon 2005 Fund - Class 1 delivered a +3.91% cumulative total
return for the six-month period ended 6/30/00. Total return of Class 1 shares
represents the cumulative or 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. Past expense reductions by the manager increased returns.

<TABLE>
<CAPTION>
Franklin Zero Coupon 2005 Fund - Class 1
Periods ended 6/30/00
Since
Inception
1-Year 5-Year 10-Year (3/14/89)
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +2.91% +6.15% +9.75% +9.56%
Cumulative Total Return +2.91% +34.75% +153.45% +180.44%
</TABLE>

Past performance does not guarantee future results.

FZ-4
<PAGE>

PERFORMANCE SUMMARY AS OF 6/30/00

Franklin Zero Coupon 2010 Fund - Class 1 delivered a +5.69% cumulative total
return for the six-month period ended 6/30/00. Total return of Class 1 shares
represents the cumulative or 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. Past expense reductions by the manager increased returns.

<TABLE>
<CAPTION>
Franklin Zero Coupon 2010 Fund - Class 1
Periods ended 6/30/00
Since
Inception
1-Year 5-Year 10-Year (3/14/89)
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +1.73% +6.78% +10.38% +10.12%
Cumulative Total Return +1.73% +38.82% +168.54% +197.10%
</TABLE>

Franklin Zero Coupon
2010 Fund - Class 1

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

Past performance does not guarantee future results.

FZ-5
<PAGE>

TEMPLETON GLOBAL INCOME SECURITIES FUND

--------------------------------------------------------------------------------
Fund Goals and Primary Investments: Templeton Global Income Securities Fund
seeks high current income, consistent with preservation of capital. Capital
appreciation is a secondary consideration. The Fund invests primarily in debt
securities of governments and their political subdivisions and agencies,
supranational organizations and companies of any nation, including emerging
markets. The Fund may also invest in lower-rated "junk bonds."
--------------------------------------------------------------------------------
Economic Overview

Early in the review period investors generally remained cautious regarding
interest rates partly because of inflationary fears stemming from higher oil
prices, but mostly, we believe, because of upward revisions in global economic
growth forecasts. Confirmed European economic recovery, better-than-expected
growth in Japan, as well as continued U.S. growth, appeared to fuel this
cautious approach. Improving global economies led to expectations of higher
commodity prices, productivity and employment rates, all of which would add to
inflationary pressures and a tighter monetary policy stance by central banks.
In our opinion, these conditions supported the consensus view that the
industrial economies, with the possible exception of Japan, had reached the
bottom of their respective interest-rate cycles. Later in the period, reduced
U.S. bond supply and equity market volatility helped to offset these
interest-rate concerns. Bonds began to appear more attractive to investors who
put money back into the global fixed income markets.

In this environment, the J.P. Morgan Global Government Bond Index (GGBI) posted
a 3.28% return in local currency terms for the six months under review, despite
tighter monetary policies by major central banks.(1) Expectations for reduced
government bond supply, resulting in part from U.S. fiscal surpluses and lower
deficits in Europe, contributed to this positive performance. In addition to
supply concerns, volatile equity markets led the global fixed income market
higher toward the end of the period. We note that the GGBI underperformed the
J.P. Morgan U.S. Government Bond Index's 5.55% return, which benefited from the
U.S. Treasury buyback program.(2) The

(1) Source: Standard and Poor's Micropal. The J.P. Morgan Global Government Bond
Index measures and tracks bonds from around the world.

(2) Source: Standard and Poor's Micropal. The J.P. Morgan U.S. Government Bond
Index includes actively traded U.S. fixed-rate bonds with a remaining maturity
of one year or longer.

This chart in pie format shows the geographic distribution of Templeton Global
Income Securities Fund as a percentage of total net assets on 6/30/00.

Europe 49.5%
North America 18.4%
Latin America 14.6%
Australia/New Zealand 7.8%
Asia 6.1%
Short-Term Investments &
Other Net Assets 3.6%

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

TGI-1
<PAGE>

buyback contributed significantly to the U.S. yield curve inversion during the
period. As bond prices and yields move in an inverse relationship, higher
prices on long-term bonds shifted their yields downward, while short-term bond
prices fell lower and their yields inched higher. In contrast, European
Monetary Union (EMU) countries' yield curve only flattened, as yields rose on
the short end. Hence, EMU bond prices fell, while those in the U.S. market
rose. Most major currencies' weakness against the U.S. dollar resulted in lower
returns for the global index in U.S. dollar terms, and the GGBI posted a U.S.
dollar return of 0.41%.

Emerging market bond prices rose during the period, apparently as a result of
higher commodity prices and improved economic fundamentals for the respective
countries. The J.P. Morgan Emerging Market Bond Index Plus (EMBI+) increased
8.10% during the six-month period. Most countries in the index experienced
positive returns, with the exception of Nigeria, Colombia, the Philippines and
Peru. Russian bonds were among the best performers, increasing 49.78%, followed
by those of Algeria, Venezuela, Mexico and Turkey.

Portfolio Notes

Templeton Global Income Securities Fund attempted to maximize its total return,
including income, during the period by allocating about 80%-85% of its assets
to intermediate- and long-term investment grade bonds and about 15%-20% of its
assets to the highest quality and most liquid bonds we found in the emerging
markets. We believe that this balance offers the opportunity for higher
long-term returns at the cost of modestly higher short-term volatility.

TGI-2
<PAGE>

The Fund's geographic allocation changed slightly during the period. North
American markets decreased from 23.8% to 18.4% of total net assets, with
Canadian exposure increasing slightly and the U.S. allocation decreasing 4.0%.
We increased the European allocation slightly to 49.5%, adjusting the
underlying country mix to decrease our exposure to Sweden, and add to positions
in Denmark, Germany and Italy. The Fund's Australia/New Zealand and Japanese
allocations remained relatively unchanged. Meanwhile, we took advantage of the
premium on Mexican assets, following the country's debt upgrade, to sell
Mexican securities and add to positions in Argentina, Brazil and Venezuela.
This left the Fund's Latin American exposure at 14.6% on June 30, 2000.

The Fund's emerging markets exposure continued to have a relatively low
duration with respect to the J.P. Morgan EMBI+, thereby reducing its
sensitivity to interest-rate movements and market uncertainty.(3) At period's
end, the Fund's bonds were U.S. dollar-denominated sovereign Eurobonds, with
fixed coupons issued by countries we believe to have strong repayment capacity.
We also continued to emphasize Latin America, because we feel the region has
improving fundamentals.

Looking forward, we believe that global inflationary pressures will continue to
increase in the near term and world economic growth will remain strong
throughout the year. In such a challenging environment for bonds, investing in
a fully diversified global fixed income portfolio can reduce risks of declines
in any particular market or sector.

(3) Source: J.P. Morgan. The J.P. Morgan Emerging Markets Bond Index Plus
(EMBI+) tracks total returns for external debt instruments in the emerging
markets. Included in the index are U.S. dollar and other external currency
denominated Brady bonds, loans, Eurobonds, and local markets instruments. It
provides investors with a definition of the market for emerging markets
external-currency debt, a list of the traded instruments, and a compilation of
their terms. The EMBI+ includes 49 instruments from 14 countries, with a total
face value of $175 billion and a market capitalization of $98 billion.

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance
is no guarantee of future results, these insights may help you understand our
investment and management philosophy.

TGI-3
<PAGE>

Templeton Global Income
Securities Fund - Class 1

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

PERFORMANCE SUMMARY AS OF 6/30/00

Templeton Global Income Securities Fund - Class 1 delivered a +0.15% cumulative
total return for the six-month period ended 6/30/00. Total return of Class 1
shares represents the cumulative or 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.

<TABLE>
<CAPTION>
Templeton Global Income Securities Fund - Class 1
Periods ended 6/30/00
Since
Inception
1-Year 5-Year 10-Year (1/24/89)
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return -0.46% +3.80% +5.40% +5.96%
Cumulative Total Return -0.46% +20.51% +69.25% +93.86%
</TABLE>

Past performance does not guarantee future results.

TGI-4
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL INCOME SECURITIES FUND

Financial Highlights

<TABLE>
<CAPTION>
Class 1
-----------------------------------------------------------------------------------
Six Months Ended Year Ended December 31,
June 30, 2000 ----------------------------------------------------------------
(unaudited) 1999 1998 1997 1996 1995
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period ........... $11.07 $12.87 $12.97 $13.61 $13.46 $12.19
-------------------------------------------------------------------------------
Income from investment operations:
Net investment income(c)....................... .34 .68 1.07 1.05 1.02 .29
Net realized and unrealized gains (losses) .... (.32) (1.42) (.19) (.73) .17 1.47
-------------------------------------------------------------------------------
Total from investment operations ............... .02 (.74) .88 .32 1.19 1.76
-------------------------------------------------------------------------------
Less distributions from net investment income .. (.02) (1.06) (.98) (.96) (1.04) (.49)
-------------------------------------------------------------------------------
Net asset value, end of period ................. $11.07 $11.07 $12.87 $12.97 $13.61 $13.46
===============================================================================
Total return(b)................................. .15% (5.79%) 7.08% 2.55% 9.56% 14.68%

Ratios/supplemental data
Net assets, end of period (000's) .............. $90,505 $90,537 $150,941 $185,016 $221,722 $243,194
Ratios to average net assets:
Expenses ...................................... 72%(a) .65% .63% .62% .61% .64%
Net investment income ......................... 6.21%(a) 5.65% 6.86% 7.03% 7.30% 7.59%
Portfolio turnover rate ........................ 14.15% 80.76% 84.17% 181.61% 140.96% 152.89%
</TABLE>

(a)Annualized
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for periods less than one
year.
(c)Based on average shares outstanding effective year ended December 31, 1999.

TGI-5
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL INCOME SECURITIES FUND

Financial Highlights (continued)

<TABLE>
<CAPTION>
Class 2
-----------------------------------------
Six Months Ended
June 30, 2000 Year Ended
(unaudited) December 31, 1999(c)
-----------------------------------------
<S> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period .................. $11.04 $12.93
---------------------------
Income from investment operations:
Net investment income(d).............................. .32 .60
Net realized and unrealized losses ................... (.31) (1.44)
---------------------------
Total from investment operations ...................... .01 (.84)
---------------------------
Less distributions from net investment income ......... (.02) (1.05)
---------------------------
Net asset value, end of period ........................ $11.03 $11.04
===========================
Total return(b)........................................ .06% (6.53%)

Ratios/supplemental data
Net assets, end of period (000's) ..................... $1,150 $443
Ratios to average net assets:
Expenses ............................................. .97%(a) .91%(a)
Net investment income ................................ 6.05%(a) 5.36%(a)
Portfolio turnover rate ............................... 14.15% 80.76%
</TABLE>

(a)Annualized
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for periods less than one
year.
(c)For the period January 6, 1999 (effective date) to December 31, 1999.
(d)Based on average shares outstanding.

See notes to financial statements.

TGI-6
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL INCOME SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited)

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Long Term Investments 96.4%
Argentina 3.6%
Republic of Argentina:
11.75%, 4/07/09 ........................................................... $ 1,645,000 $ 1,536,019
11.375%, 3/15/10 .......................................................... 1,880,000 1,717,850
------------
3,253,869
------------
Australia 4.6%
New South Wales Treasury Corp., 144A, 7.00%, 4/01/04 ...................... 4,900,000 AUD 3,014,840
Queensland Treasury Corp., 6.50%, 6/14/05 ................................. 1,930,000 AUD 1,167,252
------------
4,182,092
------------
Belgium 3.6%
Kingdom of Belgium, 7.75%, 10/15/04 ....................................... 3,113,000 EUR 3,258,946
------------
Brazil 5.0%
Government of Brazil:
FRN, 7.4375%, 4/15/09 ..................................................... 1,680,000 1,407,000
14.50%, 10/15/09 .......................................................... 2,950,000 3,155,025
------------
4,562,025
------------
Bulgaria 3.1%
Republic of Bulgaria, FRN, 7.0625%, 7/28/11 ............................... 3,580,000 2,837,150
------------
Canada 2.2%
Government of Canada:
8.75%, 12/01/05 ........................................................... 1,247,000 CAD 947,533
7.00%, 12/01/06 ........................................................... 1,478,000 CAD 1,051,777
------------
1,999,310
------------
Colombia .2%
Republic of Colombia, 9.75%, 4/23/09 ...................................... 160,000 141,824
------------
Denmark 4.1%
Kingdom of Denmark:
7.00%, 12/15/04 ........................................................... 18,150,000 DKK 2,441,915
5.00%, 8/15/05 ............................................................ 10,885,000 DKK 1,354,751
------------
3,796,666
------------
Germany 17.9%
Federal Republic of Germany:
3.25%, 2/17/04 ............................................................ 6,493,000 EUR 5,866,006
4.50%, 7/04/09 ............................................................ 11,588,000 EUR 10,542,321
------------
16,408,327
------------
India
(a) Essar Steel Ltd., FRN, 7.635%, 7/20/99 .................................... 50,000 25,250
------------
Italy 7.9%
Buoni Poliennali del Tesoro:
10.50%, 7/15/00 ........................................................... 2,884,406 EUR 2,764,578
7.75%, 11/01/06 ........................................................... 4,183,293 EUR 4,497,109
------------
7,261,687
------------
Japan 5.4%
International Bank for Reconstruction & Development, 5.25%, 3/20/02 ....... 482,100,000 JPY 4,942,886
------------
Mexico 1.2%
United Mexican States, 11.50%, 5/15/26 .................................... 885,000 1,063,106
------------
New Zealand 3.1%
Government of New Zealand, 7.00%, 7/15/09 ................................. 6,040,000 NZD 2,889,070
------------
</TABLE>

TGI-7
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL INCOME SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Long Term Investments (cont.)
Spain 3.1%
Bonos y Oblig del Estado, 3.25%, 1/31/05 ..................... 3,238,000 EUR $ 2,853,161
------------
Sweden 1.0%
Kingdom of Sweden, 6.00%, 2/09/05 ............................ 8,000,000 SEK 937,759
------------
Turkey .7%
Republic of Turkey, 12.375%, 6/15/09 ......................... 635,000 674,688
------------
United Kingdom 8.9%
United Kingdom:
6.50%, 12/07/03 .............................................. 3,600,000 GBP 5,553,386
7.50%, 12/07/06 .............................................. 1,550,000 GBP 2,584,155
------------
8,137,541
------------
United States 16.2%
U.S. Treasury Bond:
6.125%, 11/15/27 ............................................. 412,000 410,841
5.25%, 11/15/28 .............................................. 10,370,000 9,180,696
U.S. Treasury Note:
4.50%, 1/31/01 ............................................... 3,500,000 3,461,721
7.25%, 8/15/04 ............................................... 1,772,000 1,831,805
------------
14,885,063
------------
Venezuela 4.6%
Republic of Venezuela:
144A, 9.125%, 6/18/07 ........................................ 2,240,000 1,780,800
9.25%, 9/15/27 ............................................... 3,755,000 2,475,951
------------
4,256,751
------------
Total Long Term Investments before Repurchase Agreement (Cost $97,868,855) 88,367,171
------------
(b) Repurchase Agreement (Cost $780,000) .8%
Deutsche Bank AG, 6.80%, 7/03/00 (Maturity Value $780,442)
Collateralized by U.S. Treasury Notes and Bonds .............. 780,000 780,000
------------
Total Investments (Cost $98,648,855) 97.2%.................... 89,147,171
Net Equity in Forwards Contracts ............................. (23,607)
Other Assets, less Liabilities 2.8% .......................... 2,531,449
------------
Total Net Assets 100.0% ...................................... $ 91,655,013
============
</TABLE>

Currency Abbreviations:

AUD--Australian Dollar
CAD --Canadian Dollar
DKK --Danish Krone
EUR --European Unit
GBP --British Pound
JPY --Japanese Yen
NZD --New Zealand Dollar
SEK --Swedish Krona

*The principal amount is stated in U.S. dollars unless otherwise indicated.
(a)Represents bonds in default.
(b)At June 30, 2000, all repurchase agreements held by the Fund had been entered
into on that date.

See notes to financial statements.

TGI-8
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL INCOME SECURITIES FUND

Financial Statements

Statement of Assets and Liabilities
June 30, 2000 (unaudited)

<TABLE>
<S> <C>
Assets:
Investments in securities:
Cost .......................................................... $ 98,648,855
============
Value ......................................................... 89,147,171
Cash ........................................................... 942,969
Receivables:
Capital shares sold ........................................... 55,185
Interest ...................................................... 2,055,954
Unrealized gain on forward exchange contracts (Note 6) ......... 6,444
------------
Total assets ................................................. 92,207,723
------------
Liabilities:
Payables:
Investment securities purchased ............................... 287,510
Capital shares redeemed ....................................... 163,172
Affiliates .................................................... 48,518
Unrealized loss on forward exchange contracts (Note 6) ......... 30,051
Other liabilities .............................................. 23,459
------------
Total liabilities ............................................ 552,710
------------
Net assets, at value ........................................ $ 91,655,013
============
Net assets consist of:
Undistributed net investment income ............................ $ 2,796,359
Net unrealized depreciation .................................... (9,537,403)
Accumulated net realized loss .................................. (7,688,172)
Capital shares ................................................. 106,084,229
------------
Net assets, at value ........................................ $ 91,655,013
============
Class 1:
Net assets, at value ........................................... $ 90,504,841
============
Shares outstanding ............................................. 8,172,441
============
Net asset value and offering price per share ................... $ 11.07
============
Class 2:
Net assets, at value ........................................... $ 1,150,172
============
Shares outstanding ............................................. 104,253
============
Net asset value and offering price per share ................... $ 11.03
============
</TABLE>

See notes to financial statements.

TGI-9
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL INCOME SECURITIES FUND

Financial Statements (continued)

Statement of Operations
for the six months ended June 30, 2000 (unaudited)

<TABLE>
<S> <C>
Interest income ......................................................... $ 2,996,010
============
Expenses:
Management fees (Note 3) ............................................... 275,535
Distribution fees - Class 2 (Note 3) ................................... 838
Custodian fees ......................................................... 18,039
Reports to shareholders ................................................ 4,030
Professional fees (Note 3) ............................................. 10,842
Trustees' fees and expenses ............................................ 125
Other .................................................................. 2,517
------------
Total expenses ........................................................ 311,926
------------
Net investment income ................................................ 2,684,084
------------
Realized and unrealized gains (losses):
Net realized loss from:
Investments ........................................................... (157,670)
Foreign currency transactions ......................................... (48,209)
------------
Net realized loss .................................................... (205,879)
Net unrealized appreciation (depreciation) on:
Investments ............................................................ (2,194,928)
Translation of assets and liabilities denominated in foreign currencies 155,403
------------
Net unrealized depreciation ........................................... (2,039,525)
------------
Net realized and unrealized loss ........................................ (2,245,404)
------------
Net increase in net assets resulting from operations .................... $ 438,680
============
</TABLE>

See notes to financial statements.

TGI-10
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL INCOME SECURITIES FUND

Financial Statements (continued)

Statements of Changes in Net Assets
for the six months ended June 30, 2000 (unaudited) and the year ended December
31, 1999

<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999
-------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income .................................................................. $ 2,684,084 $ 6,655,075
Net realized loss from investments and foreign currency transactions ................... (205,879) (6,055,260)
Net unrealized depreciation on investments and translation of assets and liabilities
denominated in foreign currencies .................................................... (2,039,525) (8,370,208)
-------------------------------
Net increase (decrease) in net assets resulting from operations ....................... 438,680 (7,770,393)
Distributions to shareholders from:
Net investment income:
Class 1 ............................................................................... (116,818) (9,277,104)
Class 2 ............................................................................... (812) (19,727)
-------------------------------
Total distributions to shareholders ..................................................... (117,630) (9,296,831)
Capital share transactions: (Note 2)
Class 1 ............................................................................... (338,968) (43,358,906)
Class 2 ............................................................................... 693,020 465,304
-------------------------------
Total capital share transactions ........................................................ 354,052 (42,893,602)
Net increase (decrease) in net assets ................................................. 675,102 (59,960,826)
Net assets:
Beginning of period ..................................................................... 90,979,911 150,940,737
-------------------------------
End of period ........................................................................... $ 91,655,013 $ 90,979,911
===============================
Undistributed net investment income included in net assets:
End of period ........................................................................... $ 2,796,359 $ 229,905
===============================
</TABLE>

See notes to financial statements.

TGI-11
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL INCOME SECURITIES FUND

Notes to Financial Statements (unaudited)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The Templeton Global Income Securities Fund (the Fund) is a separate,
non-diversified series of the Franklin Templeton Variable Insurance Products
Trust (the Trust), which is an open-end investment company registered under the
Investment Company Act of 1940. Shares of the Fund are sold only to insurance
company separate accounts to fund the benefits of variable life insurance
policies or variable annuity contracts. As of June 30, 2000, 72% of the Fund's
shares were sold through one insurance company. The Fund seeks high current
income, with capital appreciation as a secondary goal. The portfolio invests in
debt securities of governments and their political subdivisions and agencies,
supranational organizations and companies of any nation, including emerging
markets. The portfolio may also invest in lower-rated "junk bonds."

The following summarizes the Fund's significant accounting policies.

a. Security Valuation

b. Foreign Currency Translation

Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the exchange rate of such
currencies against U.S. dollars on the date of valuation. Purchases and sales
of securities and income items denominated in foreign currencies are translated
into U.S. dollars at the exchange rate in effect on the transaction date. When
the Fund purchases or sells foreign securities the Fund will customarily enter
into a foreign exchange contract to minimize foreign exchange risk from the
trade date to the settlement date of such transactions.

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. Forward Exchange Contracts

d. Income Taxes

TGI-12
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL INCOME SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

e. Security Transactions, Investment Income, Expenses and Distributions

f. Indexed Securities

The Fund may invest in debt instruments in which the principal and/or interest
is dependent on other factors such as yield curves, currency exchange rates or
commodity prices. The Fund's objective in holding these securities, commonly
called indexed securities or structured notes, is to tailor its investments to
the specific risk and returns it wishes to assume while avoiding unwanted risk
or change in the Fund's exposure to a particular foreign exchange rate or the
spread between two foreign exchange rates.

g. Accounting Estimates

2. SHARES OF BENEFICIAL INTEREST

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

TGI-13
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL INCOME SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

2. SHARES OF BENEFICIAL INTEREST (cont.)

At June 30, 2000, there were an unlimited number of shares authorized ($.01 par
value). Transactions in the Fund's shares were as follows:

<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999(a)
-----------------------------------------------------------------
Shares Amount Shares Amount
Class 1 Shares: -----------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ...................................... 150,065 $ 1,611,401 755,763 $ 9,398,931
Shares issued on merger (Note 7) ................. 1,620,086 17,464,656 -- --
Shares issued on reinvestment of distributions ... 10,838 116,818 815,256 9,277,104
Shares redeemed .................................. (1,788,206) (19,531,843) (5,116,543) (62,034,941)
------------------------------------------------------------
Net decrease ..................................... (7,217) $ (338,968) (3,545,524) $ (43,358,906)
============================================================
Class 2 Shares:
Shares sold ...................................... 14,333 $ 156,866 40,368 $ 470,374
Shares issued on merger (Note 7) ................. 70,754 759,809 -- --
Shares issued on reinvestment of distributions ... 76 812 1,764 19,727
Shares redeemed .................................. (20,987) (224,467) (2,055) (24,797)
------------------------------------------------------------
Net increase ..................................... 64,176 $ 693,020 40,077 $ 465,304
============================================================
</TABLE>

(a)For the period January 6, 1999 (effective date) to December 31, 1999 for
Class 2.

3. TRANSACTIONS WITH AFFILIATES

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

<TABLE>
<CAPTION>
Entity Affiliation
----------------------------------------------------------------------------------------
<S> <C>
Franklin Templeton Services, Inc. (FT Services) Administrative manager
Franklin Advisers, Inc. (Advisers) Investment manager
Templeton Investment Counsel, Inc. (TICI) Investment manager
Franklin/Templeton Distributors, Inc. (Distributors) Principal underwriter
Franklin/Templeton Investor Services, Inc. (Investor Services) Transfer Agent
</TABLE>

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

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

Under a subadvisory agreement, TICI provides subadvisory services to the Fund
and receives fees from Advisers based on the average daily net assets of the
Fund.

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

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

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

TGI-14
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
TEMPLETON GLOBAL INCOME SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

3. TRANSACTIONS WITH AFFILIATES (cont.)

Included in professional fees are legal fees of $236 that were paid to a law
firm in which a partner of that firm was an officer of the Fund.

4. INCOME TAXES

As of December 31, 1999, Franklin Templeton Variable Insurance Products Trust
(FTVIPT) - Templeton Global Income Securities Fund had tax basis capital
losses. The capital loss carryovers of the FTVIPT - Templeton Global Income
Securities Fund include December 31, 1999 capital loss carryovers of $2,367,359
acquired as a result of the reorganization with the Templeton Variable Products
Series Fund (TVP) - Templeton Bond Fund (See note 7). The capital loss
carryovers are available to offset future realized capital gains to the extent
provided in the Internal Revenue Code and regulations thereunder.

Capital loss carryover expiring in:
2002 .............................. $ 1,294,963
2003 .............................. 1,605,323
2007 .............................. 5,595,723
-----------
$ 8,496,009
===========

At December 31, 1999, the Fund had deferred capital losses and deferred
currency losses of $1,407,836 occurring subsequent to October 31, 1999. For tax
purposes, such loss will be reflected in the year ending December 31, 2000.

The cost of securities for income tax purposes is the same as that shown in the
Statement of Investments. At June 30, 2000, the net unrealized depreciation
based on the cost of investments for income tax purposes was as follows:

Unrealized appreciation ............. $ 128,972
Unrealized depreciation ............. (9,630,656)
------------
Net unrealized depreciation ......... $ (9,501,684)
============

5. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities) for the
period ended June 30, 2000 aggregated $11,819,718 and $26,678,045,
respectively.

6. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

The Fund has been a party to financial instruments with off-balance-sheet risk,
primarily forward exchange contracts, in order to minimize the impact on the
funds from adverse changes in the relationship between the U.S. dollar and
foreign currencies and interest rates. These instruments involve market risk in
excess of the amount recognized on the Statement of Assets and Liabilities.
Some of these risks have been minimized by offsetting contracts. Risks arise
from the possible inability of counterparties to meet the terms of their
contracts, future movement in currency values and interest rates and contract
positions that are not exact offsets. The contract amount indicates the extent
of the Fund's involvement in such contracts.

A forward exchange contract is an agreement between two parties to exchange
different currencies at a specific rate at an agreed future date. At June 30,
2000, the Fund has outstanding forward exchange contracts for the sale or
purchase of currencies as set out below. The contracts are reported in the
financial statements at the Fund's net equity, as measured by

TGI-15
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL INCOME SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

6. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK (cont.)

the difference between the forward exchange rates at the reporting date and the
forward exchange rates at the day of entry into the contract.

<TABLE>
<CAPTION>
In Unrealized
Contracts to Sell Exchange for Settlement Date Gain (Loss)
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
48,100,000 Japanese Yen U.S. $ 463,391 7/26/00 U.S. $ 6,444

Contracts to Sell
--------------------------------------------------------------
294,520,000 Japanese Yen U.S. $2,786,377 7/19/00 U.S. $ (7,679)
--------
Net unrealized loss on offsetting forward exchange contracts (22,372)
--------
Unrealized loss on forward exchange contracts (30,051)
--------
Net unrealized loss on forward exchange contracts U.S. $(23,607)
========
</TABLE>

7. CREDIT RISK

The Fund has investments in excess of 10% of its total net assets in Germany,
such concentration may subject the Fund more significantly to economic changes
occurring within this country.

8. MERGER

On May 1, 2000, the Franklin Templeton Variable Insurance Products Trust
(FTVIPT) - Templeton Global Income Securities Fund acquired the net assets of
the Templeton Variable Products Series Fund (TVP) - Templeton Bond Fund
pursuant to a plan of reorganization approved by TVP - Templeton Bond Fund's
shareholders. The merger was accomplished by a tax-free exchange of 1,620,086
Class 1 shares and 70,754 Class 2 shares of the FTVIPT - Templeton Global
Income Securities Fund (valued at $10.78 per share and $10.74 per share,
respectively) for the net assets of the TVP - Templeton Bond Fund which
aggregated $18,224,465, including $1,980,489 of unrealized depreciation. The
merger was accounted for as a pooling-of-interests without restatement for
financial reporting purposes. The combined net assets of the FTVIPT - Templeton
Global Income Securities Fund immediately after the merger were $94,683,176.

TGI-16
<PAGE>

FRANKLIN MONEY MARKET FUND

--------------------------------------------------------------------------------
Fund Goal and Primary Investments: Franklin Money Market Fund seeks high
current income consistent with capital preservation and liquidity. The Fund
also seeks to maintain a stable share price of $1.00.(1) The Fund invests in
high quality U.S. dollar-denominated money market debt instruments.
--------------------------------------------------------------------------------
U.S. economic growth remained very strong for most of the six-month period
under review. During the first and second quarters of 2000, U.S. gross domestic
product (GDP) grew at robust annualized rates of 4.8% and 5.2%, respectively,
and consumer spending rose at the fastest pace in more than 17 years. In April,
the nation's unemployment rate fell to 3.9%, a 30-year low. Faster growth,
tight labor markets and higher commodity prices contributed to the acceleration
in the inflation rate as measured by the Consumer Price Index to a 3.7%
seasonally adjusted annual rate through June. Apparently, in response to the
strong growth and higher inflation, the Federal Reserve Board (the Fed)
increased the federal funds target rate three times during the period, leaving
it at 6.5% on June 30, 2000.

However, toward the end of the period, there were preliminary signs the economy
was beginning to slow. Consecutive monthly declines in retail sales during
April and May combined with drops in factory orders and housing starts seemed
to signal an economic slowdown to many analysts.

During the period, we continued to invest the Fund's assets in only the highest
quality money market securities. More than 75% of the Fund's positions carry
long-term credit ratings of AA or higher by Standard & Poor's(R) and
Moody's(R), two independent credit rating agencies, with the balance rated A.(2)
Consistent with the Fund's objective of providing shareholders with a higher
quality and conservative investment vehicle, we did not invest the Fund's cash
in derivatives or other potentially volatile securities that we believe involve
undue risk.

(1) There is no assurance that the Fund's $1.00 per share price will be
maintained. An investment in the Fund is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.

(2) This does not indicate a rating of the Fund.

Top 10 Holdings
Franklin Money Market Fund
6/30/00

% of Total
Security Name Net Assets
------------------------------------------
U.S. Treasury Repurchase
Agreements 23.1%

Bank of America NA 5.5%

Credit Agricole 5.5%

Toronto Dominion Bank 5.5%

American Express Credit
Corp. 5.5%

Salomon Smith Barney
Holdings Inc. 5.4%

Merrill Lynch & Co., Inc. 5.4%

National Rural Utilities
Cooperative Finance Corp. 5.4%

Morgan Stanley Dean
Witter & Co. 5.4%

Credit Communal de
Belgique 3.6%

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

FM-1
<PAGE>

As we enter the second half of the year, U.S. economic growth appears to be
moderating slightly from its earlier rapid pace. However, it is too soon to
tell if the recent slowing in economic activity is just a temporary pause or
the start of the long-awaited "soft landing" the Fed has been attempting to
engineer. Until there are more definite signs that the economy is slowing and
inflationary pressures are abating, we believe the Fed will likely remain on
alert for further tightening.

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance
is no guarantee of future results, these insights may help you understand our
investment and management philosophy.

FM-2
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN MONEY MARKET FUND

Financial Highlights

Ratios/supplemental data
Net assets, end of period (000's) .............. $273,892 $364,028 $414,341 $367,449 $408,930 $429,547
Ratios to average net assets:
Expenses ...................................... .54%(a) .53% .45% .45% .43% .40%
Expenses excluding waiver
and payments by affiliate..................... -- -- .53% .53% .53% .53%
Net investment income ......................... 5.49%(a) 4.64% 5.08% 5.11% 5.04% 5.58%
</TABLE>

FM-3
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN MONEY MARKET FUND

Financial Highlights (continued)

<TABLE>
<CAPTION>
Class 2
-----------------------------------------
Six Months Ended
June 30, 2000 Year Ended
(unaudited) December 31, 1999(c)
-----------------------------------------
<S> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period .............................. $1.00 $1.00
---------------------------
Income from investment operations - net investment income ......... .03 .04
Less distributions from net investment income ..................... (.03) (.04)
---------------------------
Net asset value, end of period .................................... $ 1.00 $ 1.00
===========================
Total return(b).................................................... 2.67% 4.39%

Ratios/supplemental data
Net assets, end of period (000's) ................................. $1,174 $8,602
Ratios to average net assets:
Expenses ......................................................... .79%(a) .79%(a)
Net investment income ............................................ 5.27%(a) 4.51%(a)
</TABLE>

(a)Annualized
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for periods less than one
year.
(c)For the period January 6, 1999 (effective date) to December 31, 1999.

See notes to financial statements.

FM-4
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN MONEY MARKET FUND

Statement of Investments, June 30, 2000 (unaudited)

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bank Notes 5.4%
Bank of America NA, 6.29%, 8/01/00 - 8/03/00 (Cost $15,000,000)............................... $15,000,000 $ 15,000,000
-------------
Certificates of Deposit 16.4%
Credit Agricole, New York Branch, 6.76% - 6.86%, 4/11/01 - 4/12/01 ........................... 15,000,000 14,999,354
Credit Communal de Belgique, New York Branch, 7.075% - 7.25%, 5/03/01 - 5/09/01 .............. 10,000,000 10,000,985
Dexia Bank, New York Branch, 7.105%, 6/18/01 ................................................. 5,000,000 4,999,761
Toronto Dominion Bank, New York Branch, 6.30% - 7.16%, 8/04/00 - 6/08/01 ..................... 15,000,000 14,999,132
-------------
Total Certificates of Deposit (Cost $44,999,232).............................................. 44,999,232
-------------
(a) Commercial Paper 59.4%
Abbey National North America Corp., 6.00%, 7/17/00 ........................................... 5,000,000 4,986,667
American Express Credit Corp., 6.40% - 6.64%, 7/07/00 - 7/26/00 .............................. 15,000,000 14,994,665
Associates Corp. of North America, 6.56%, 8/22/00 - 8/24/00 .................................. 10,000,000 9,903,422
Canadian Imperial Holdings Inc., 6.60%, 9/08/00 .............................................. 5,000,000 4,936,750
Chevron U.K. Investment PLC, 6.47%, 7/12/00 - 7/13/00 ........................................ 10,000,000 9,979,332
CIESCO LP, 6.47%, 7/10/00 .................................................................... 5,000,000 4,991,913
Delaware Funding Corp., 144A, 6.65%, 8/23/00 ................................................. 5,000,000 4,951,049
Dupont de Nemours & Co., 6.09%, 7/25/00 ...................................................... 5,000,000 4,979,700
General Electric Capital Corp., 6.55% - 6.63%, 7/11/00 - 8/14/00 ............................. 10,000,000 9,959,972
International Lease Finance Co., 6.57%, 9/12/00 .............................................. 5,000,000 4,933,388
Merrill Lynch & Co. Inc., 6.55% - 6.60%, 7/05/00 - 7/28/00 ................................... 15,000,000 14,947,778
Morgan Stanley Dean Witter & Co., 6.58%, 8/07/00 - 8/11/00 ................................... 15,000,000 14,893,075
National Rural Utilities Cooperative Finance Corp., 6.15% - 6.58%, 7/18/00 - 8/10/00 ......... 15,000,000 14,933,548
Nestle Capital Corp., 6.50%, 7/03/00 ......................................................... 10,000,000 9,996,389
Pepsico Inc., 6.90% - 6.95%, 7/03/00 ......................................................... 4,300,000 4,298,347
Province of British Columbia, 6.58%, 7/31/00 ................................................. 4,800,000 4,773,680
Salomon Smith Barney Holdings Inc., 6.15% - 6.19%, 7/14/00 - 7/21/00 ......................... 15,000,000 14,955,512
Schering Corp., 5.94% - 6.15%, 7/06/00 - 8/08/00 ............................................. 10,000,000 9,963,417
-------------
Total Commercial Paper (Cost $163,378,604).................................................... 163,378,604
-------------
Total Investments before Repurchase Agreements (Cost $223,377,836) ........................... 223,377,836
-------------
(b) Repurchase Agreements 23.1%
Banc of America Securities LLC, 6.20%, 7/03/00, (Maturity Value $5,617,901)
Collaterized by U.S. Treasury Notes ........................................................ 5,615,000 5,615,000
Barclays Capital Inc., 6.45%, 7/03/00, (Maturity Value $12,006,450)
Collaterized by U.S. Treasury Notes ........................................................ 12,000,000 12,000,000
Bear, Stearns & Co. Inc., 6.50%, 7/03/00, (Maturity Value $12,006,500)
Collaterized by U.S. Treasury Bills ........................................................ 12,000,000 12,000,000
Dresdner Kleinwort Benson, North America LLC, 6.55%, 7/03/00, (Maturity Value $10,005,208)
Collaterized by U.S. Treasury Bills ........................................................ 10,000,000 10,000,000
Nesbitt Burns Securities Inc., 6.55%, 7/03/00, (Maturity Value $12,006,550)
Collaterized by U.S. Treasury Notes ........................................................ 12,000,000 12,000,000
UBS Warburg, 6.80%, 7/03/00, (Maturity Value $12,006,800)
Collaterized by U.S. Treasury Notes ........................................................ 12,000,000 12,000,000
-------------
Total Repurchase Agreements (Cost $63,615,000)................................................ 63,615,000
-------------
Total Investments (Cost $286,992,836) 104.3%.................................................. 286,992,836
Other Assets, less Liabilities (4.3%) ........................................................ (11,926,774)
-------------
Net Assets 100.0% ............................................................................ $275,066,062
============
</TABLE>

(a)Securities are traded on a discount basis; the rates shown are the discount
rates at the time of purchase by the Fund.
(b)See Note 1 regarding repurchase agreements.

See notes to financial statements.

FM-5
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN MONEY MARKET FUND

Financial Statements

Statement of Assets and Liabilities
June 30, 2000 (unaudited)

<TABLE>
<S> <C>
Assets:
Investments in securities, at value and cost ......... $223,377,836
Repurchase agreements, at value and cost ............. 63,615,000
Cash ................................................. 809
Receivables:
Capital shares sold ................................. 7,506
Interest ............................................ 946,544
------------
Total assets ....................................... 287,947,695
------------
Liabilities:
Payables:
Capital shares redeemed ............................. 12,734,526
Affiliates .......................................... 132,560
Other liabilities .................................... 14,547
------------
Total liabilities .................................. 12,881,633
------------
Net assets, at value .............................. $275,066,062
============
Class 1:
Net assets, at value ................................. $273,892,062
============
Shares outstanding ................................... 273,892,062
============
Net asset value and offering price per share ......... $ 1.00
============
Class 2:
Net assets, at value ................................. $ 1,174,000
============
Shares outstanding ................................... 1,174,000
============
Net asset value and offering price per share ......... $ 1.00
============
</TABLE>

See notes to financial statements.

FM-6
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN MONEY MARKET FUND

Financial Statements (continued)

Statement of Operations
for the six months ended June 30, 2000 (unaudited)

<TABLE>
<S> <C>
Investment income:
Interest .................................................... $9,805,627
----------
Expenses:
Management fees (Note 3) .................................... 853,600
Distribution fees - Class 2 (Note 3) ........................ 8,071
Custodian fees .............................................. 2,101
Reports to shareholders ..................................... 6,308
Professional fees ........................................... 11,671
Trustees' fees and expenses ................................. 1,642
Other ....................................................... 6,941
----------
Total expenses ............................................. 890,334
----------
Net investment income ..................................... 8,915,293
----------
Net realized loss from investments ........................... (486)
----------
Net increase in net assets resulting from operations ......... $8,914,807
==========
</TABLE>

See notes to financial statements.

FM-7
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN MONEY MARKET FUND

Financial Statements (continued)

Statements of Changes in Net Assets
for the six months ended June 30, 2000 (unaudited) and the year ended December
31, 1999

<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999
-------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income .................................................................. $ 8,915,293 $ 17,724,122
Net realized gain (loss) from investments .............................................. (486) 208
--------------------------------
Net increase in net assets resulting from operations .................................. 8,914,807 17,724,330
Distributions to shareholders from net investment income:(a)
Class 1 ................................................................................ (8,743,050) (17,613,140)
Class 2 ................................................................................ (171,757) (111,190)
--------------------------------
Total distributions to shareholders ..................................................... (8,914,807) (17,724,330)
Capital share transactions: (Note 2)
Class 1 ................................................................................ (90,135,681) (50,313,015)
Class 2 ................................................................................ (7,427,600) 8,601,600
--------------------------------
Total capital share transactions ........................................................ (97,563,281) (41,711,415)
Net decrease in net assets ............................................................ (97,563,281) (41,711,415)
Net assets (there is no undistributed net investment income at beginning or end of period):
Beginning of period ..................................................................... 372,629,343 414,340,758
--------------------------------
End of period ........................................................................... $ 275,066,062 $ 372,629,343
================================
</TABLE>

(a)Distributions were increased by net realized gains of $208 from security
transactions for the year ended December 31, 1999.

See notes to financial statements.

FM-8
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN MONEY MARKET FUND

Notes to Financial Statements (unaudited)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The Franklin Money Market Fund (the Fund) is a separate, diversified series of
the Franklin Templeton Variable Insurance Products Trust (the Trust), which is
an open-end investment company registered under the Investment Company Act of
1940. Shares of the Fund are sold only to insurance company separate accounts
to fund the benefits of variable life insurance policies or variable annuity
contracts. As of June 30, 2000, over XX% of the total Fund's shares were sold
through one insurance company. The Fund seeks high current income, while
maintaining a stable share price of $1.00.

The following summarizes the Fund's significant accounting policies.

a. Security Valuation

Securities in the Fund are valued at amortized cost which approximates value.

b. Repurchase Agreements

The Fund may enter into repurchase agreements, which are accounted for as a
loan by the Fund to the seller, collateralized by securities which are
delivered to the Fund's custodian. The market value, including accrued
interest, of the initial collateralization is required to be at least 102% of
the dollar amount invested by the Fund, with the value of the underlying
securities marked to market daily to maintain coverage of at least 100%. At
June 30, 2000, all repurchase agreements held by the Fund had been entered into
on that date.

c. Income Taxes

d. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and
losses on security transactions are determined on a specific identification
basis. Interest income and estimated expenses are accrued daily. Security
discount is amortized on an income tax basis. Dividends from net investment
income and capital gains or losses are normally declared daily. Such
distributions are reinvested in additional shares of the Fund.

FM-9
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN MONEY MARKET FUND

Notes to Financial Statements (unaudited) (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

e. Accounting Estimates

2. SHARES OF BENEFICIAL INTEREST

Effective January 6, 1999, the Fund began offering two classes of shares: Class
1 and Class 2. Outstanding shares before that date were designated Class 1
shares. Each class of shares differ by their distribution fees, voting rights
on matters affecting a single class, and the exchange privilege of each class.

At June 30, 2000, there were an unlimited number of shares authorized ($.01 par
value). Transactions in the Fund's shares were as follows:

<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999(a)
-------------------------------------------------------------------------
Shares Amount Shares Amount
Class 1 Shares: -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ................................... 424,177,001 $ 424,177,001 705,526,809 $ 705,526,809
Shares issued in reinvestment of distributions 8,749,122 8,749,122 17,609,674 17,609,674
Shares redeemed ............................... (523,061,804) (523,061,804) (773,449,498) (773,449,498)
--------------------------------------------------------------------
Net decrease .................................. (90,135,681) $ (90,135,681) (50,313,015) $ (50,313,015)
====================================================================
Class 2 Shares:
Shares sold ................................... 257,836,413 $ 257,836,413 219,800,400 $ 219,800,400
Shares issued in reinvestment of distributions 171,949 171,949 111,092 111,092
Shares redeemed ............................... (265,435,962) (265,435,962) (211,309,892) (211,309,892)
--------------------------------------------------------------------
Net increase (decrease) ....................... (7,472,600) $ (7,427,600) 8,601,600 $ 8,601,600
====================================================================
</TABLE>

(a)For the period January 6, 1999 (effective date) to December 31, 1999, for
Class 2.

3. TRANSACTIONS WITH AFFILIATES

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

<TABLE>
<CAPTION>
Entity Affiliation
---------------------------------------------------------------------------------------
<S> <C>
Franklin Templeton Services, Inc. (FT Services) Administrative manager
Franklin Advisers, Inc. (Advisers) Investment manager
Franklin/Templeton Distributors, Inc. (Distributors) Principal underwriter
Franklin/Templeton Investor Services, Inc. (Investor Services) Transfer agent
</TABLE>

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

Annualized Fee Rate Daily Net Assets
-------------------------------------------------------------------------
.625% First $100 million
.50% over $100 million, up to and including $250 million
.45% over $250 million, up to and including $10 billion

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

FM-10
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN MONEY MARKET FUND

Notes to Financial Statements (unaudited) (continued)

3. TRANSACTIONS WITH AFFILIATES (cont.)

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

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

Included in professional fees are legal fees of $919 that were paid to a law
firm in which a partner of that firm was an officer of the Fund.

4. INCOME TAXES

At December 31, 1999, the Fund had tax basis capital losses which may be
carried over to offset future capital gains. Such losses expire as follows:

Capital loss carryovers expiring in:
2000 ............................... $ 210
2001 ............................... 523
2002 ............................... 7,568
2003 ............................... --
2004 ............................... --
2005 ............................... --
2006 ............................... 371
------
$8,672
======

FM-11

FRANKLIN TEMPLETON VARIABLE INSURANCE
PRODUCTS TRUST SEMIANNUAL REPORT
TABLE OF CONTENTS [GRAPHIC OMITTED]

Letter to Contract Owners ........................................ 2
Fund Summaries
Funds Seeking Capital Growth
Franklin Global Health Care Securities Fund ..................... FGH-1
Franklin Large Cap Growth Securities Fund
(formerly Franklin Capital Growth Fund) ........................ FL-1
Prospectus Supplement .......................................... FL-5
Franklin S&P 500 Index Fund ..................................... FSP-1
Prospectus Supplement .......................................... FSP-4
Franklin Small Cap Fund ......................................... FS-1
Mutual Discovery Securities Fund ................................ MD-1
Templeton Developing Markets Securities Fund
(formerly Templeton Developing Markets Fund) ................. TD-1
Templeton Growth Securities Fund
(formerly Templeton Global Growth Fund) ...................... TG-1
Templeton International Securities Fund
(formerly Templeton International Fund) ...................... TI-1
Templeton International Smaller Companies Fund .................. TIS-1
Templeton Pacific Growth Securities Fund
(formerly Templeton Pacific Growth Fund) ..................... TP-1
Funds Seeking Growth and Income
Franklin Global Communications Securities Fund
(formerly Franklin Global Utilities Securities Fund) ......... FGC-1
Franklin Growth and Income Securities Fund
(formerly Franklin Growth and Income Fund) ................... FGI-1
Franklin Income Securities Fund ................................. FI-1
Franklin Natural Resources Securities Fund ...................... FN-1
Franklin Real Estate Fund ....................................... FRE-1
Franklin Rising Dividends Securities Fund ....................... FRD-1
Franklin Value Securities Fund .................................. FV-1
Mutual Shares Securities Fund ................................... MS-1
Templeton Asset Strategy Fund
(formerly Templeton Asset Allocation Fund) ................... TA-1
Funds Seeking Income
Franklin High Income Fund ....................................... FH-1
Franklin Strategic Income Securities Fund ....................... FSI-1
Franklin U.S. Government Fund ................................... FUS-1
Templeton Global Income Securities Fund ......................... TGI-1

<PAGE>

LETTER TO CONTRACT OWNERS

Dear Contract Owners:

We are pleased to bring you Franklin Templeton Variable Insurance Products
Trust's semiannual report for the period ended June 30, 2000.

2
<PAGE>

Sincerely,

/s/ RUPERT H. JOHNSON, JR.

Rupert H. Johnson, Jr.
Vice President
Franklin Templeton Variable Insurance Products Trust

3
<PAGE>

FRANKLIN GLOBAL HEALTH CARE SECURITIES FUND

FGH-1
<PAGE>
Top 10 Equity Holdings
Franklin Global Health Care
Securities Fund
6/30/00
% of Total
Company Net Assets
----------------------------------------
Schering-Plough Corp. 4.8%

Pfizer Inc. 4.7%

Abbott Laboratories 4.2%

Baxter International Inc. 4.1%

Inhale Therapeutic
Systems Inc. 3.9%

American Home
Products Corp. 3.8%

Pharmacia Corp. 3.7%

Bristol-Myers Squibb Co. 3.4%

Genentech Inc. 2.9%

Johnson & Johnson 2.4%

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

FGH-2
<PAGE>

Thank you for your participation in Franklin Global Health Care Securities
Fund. We look forward to servicing your investment needs in the years to come.

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance
is no guarantee of future results, these insights may help you understand our
investment and management philosophy.

FGH-3
<PAGE>

Franklin Global
Health Care Securities
Fund - Class 2

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

PERFORMANCE SUMMARY AS OF 6/30/00

Franklin Global Health Care Securities Fund - Class 2 delivered a +48.63%
cumulative total return for the six-month period ended 6/30/00. Total return of
Class 2 shares represents the cumulative or average annual change in value,
assuming reinvestment of dividends and capital gains. Average returns smooth
out variations in returns, which can be significant; they are not the same as
year-by-year results.

Franklin Global Health Care Securities Fund - Class 2*
Periods ended 6/30/00
Since Since Class 2
Inception Inception
1-Year (5/1/98) (1/6/99)
---------------------------------------------------------------------------
Average Annual Total Return +60.27% +19.02% +22.75%
Cumulative Total Return +60.27% +45.85% +35.42%
Value of $10,000 Investment $16,027 $14,585 $13,542

* Because Class 2 shares were not offered until 1/6/99, standardized Class 2
Fund performance for prior periods represents the historical results of Class 1
shares. For periods beginning on 1/6/99, Class 2's results reflect an
additional 12b-1 fee expense, which also affects all future performance.

Past performance does not guarantee future results.

FGH-4
<PAGE>

FRANKLIN LARGE CAP GROWTH SECURITIES FUND

Top 10 Sectors
Franklin Large Cap Growth
Securities Fund
6/30/00
% of Total
Sector Net Assets
-----------------------------------------
Electronic Technology 24.2%

Technology Services 13.8%

Health Technology 13.1%

Utilities 7.7%

Finance 7.1%

Telecommunications 7.0%

Industrial Services 3.9%

Retail Trade 3.7%

Consumer Non-Durables 3.1%

Consumer Services 2.3%

FL-1
<PAGE>
Top 10 Holdings
Franklin Large Cap Growth
Securities Fund
6/30/00

Company % of Total
Sector Net Assets
----------------------------------------
JDS Uniphase Corp. 2.2%
Electronic Technology

Genentech, Inc. 2.0%
Health Technology

EMC Corp. 1.9%
Electronic Technology

Johnson & Johnson 1.8%
Health Technology

Microsoft Corp. 1.7%
Technology Services

Amgen Inc. 1.6%
Health Technology

Enron Corp. 1.6%
Utilities

Concord EFS Inc. 1.5%
Commercial Services

Cisco Systems Inc. 1.5%
Electronic Technology

Entrust Technologies Inc. 1.5%
Technology Services

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

FL-2
<PAGE>

We think it is wise to maintain a healthy respect for the past history of the
American economy's business cycles and traditional methods of security
valuations. By any of these traditional measures, many technology companies are
selling at unusually high valuations. The volatility the market experienced
during the review period may be a precursor of a return to traditional
price/earnings and book value analysis -- or it may be a temporary bump in the
road. However, one thing is clear. None of us can realistically rely on these
valuations and the resulting performance to continue indefinitely. We will try
our hardest to deliver last year's performance every year -- but no one should
expect that to be the case for this, or any, Fund.

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any industry, security or the Fund. Our
strategies and the Fund's portfolio composition will change depending on
market and economic conditions. Although historical performance is no
guarantee of future results, these insights may help you understand our
investment and management philosophy.

FL-3
<PAGE>

Franklin Large Cap
Growth Securities Fund
Class 2

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

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

PERFORMANCE SUMMARY AS OF 6/30/00

Franklin Large Cap Growth Securities Fund - Class 2 delivered a +11.91%
cumulative total return for the six-month period ended 6/30/00. Total return of
Class 2 shares represents the cumulative or 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.

<TABLE>
<CAPTION>
Franklin Large Cap Growth Securities Fund - Class 2*
Periods ended 6/30/00
Since Since Class 2
Inception Inception
1-Year 3-Year (5/1/96) (1/6/99)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +30.96% +23.91% +23.06% +27.57%
Cumulative Total Return +30.96% +90.25% +137.41% +43.37%
Value of $10,000 Investment $13,096 $19,025 $23,741 $14,337
</TABLE>

Past performance does not guarantee future results.

FL-4
<PAGE>

FRANKLIN LARGE CAP GROWTH SECURITIES FUND

CLASS 1 AND CLASS 2

(FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST)

SUPPLEMENT DATED AUGUST 25, 2000

TO PROSPECTUS DATED MAY 1, 2000

The prospectus is amended as follows:

I. Under "Goals and Strategies," the following is added to the Main
Investments discussion:

The fund may invest up to 25% of its total assets in foreign
securities.

II. Under "Main Risks," the following is added after the third paragraph:

FOREIGN SECURITIES Securities of companies located outside the U.S.
involve risks that can increase losses in the fund.

Please keep this supplement with your current prospectus for future
reference.

FL-5
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN LARGE CAP GROWTH SECURITIES FUND

Financial Highlights

FL-6
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN LARGE CAP GROWTH SECURITIES FUND

Financial Highlights (continued)

See notes to financial statements.

FL-7
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN LARGE CAP GROWTH SECURITIES FUND

FL-8
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN LARGE CAP GROWTH SECURITIES FUND

FL-9
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN LARGE CAP GROWTH SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stocks (cont.)
Technology Services (cont.)
(a) Exodus Communications Inc. .............................. United States 80,000 $ 3,685,000
(a) Mercury Interactive Corp. ............................... United States 30,000 2,902,500
(a) Microsoft Corp. ......................................... United States 99,000 7,920,000
(a) Oracle Corp. ............................................ United States 40,000 3,362,500
(a) Siebel Systems Inc. ..................................... United States 17,300 2,829,631
(a) SonicWALL Inc. .......................................... United States 40,000 3,522,500
(a) StorageNetworks Inc. .................................... United States 29,100 2,626,275
(a) VeriSign Inc. ........................................... United States 26,400 4,659,600
(a) VERITAS Software Corp. .................................. United States 24,300 2,746,280
(a) WatchGuard Technologies Inc. ............................ United States 79,400 4,362,038
------------
65,115,302
------------
Telecommunications 7.0%
AT&T Corp. .............................................. United States 140,000 4,427,500
(a) KPNQwest NV ............................................. Netherlands 36,500 1,446,313
(a) Qwest Communications International Inc. ................. United States 125,600 6,240,750
SBC Communications Inc. ................................. United States 126,300 5,462,474
Sprint Corp. (FON Group) ................................ United States 55,000 2,805,000
(a) STET Hellas Telecommunications SA, ADR .................. Greece 200 3,975
Vodafone AirTouch PLC, ADR .............................. United Kingdom 135,450 5,612,707
(a) VoiceStream Wireless Corp. .............................. United States 20,600 2,395,714
(a) WorldCom Inc. ........................................... United States 96,050 4,406,294
------------
32,800,727
------------
Transportation 1.8%
Expeditors International of Washington Inc. ............. United States 120,000 5,700,000
United Parcel Service Inc., B ........................... United States 50,500 2,979,500
------------
8,679,500
------------
Utilities 7.7%
CMS Energy Corp. ........................................ United States 162,000 3,584,250
Dominion Resources Inc. ................................. United States 62,681 2,687,448
DTE Energy Co. .......................................... United States 115,000 3,514,687
Enron Corp. ............................................. United States 115,800 7,469,100
(a) Global Crossing Ltd. .................................... Bermuda 50,000 1,315,624
GPU Inc. ................................................ United States 175,000 4,735,937
GTE Corp. ............................................... United States 50,000 3,112,500
PECO Energy Co. ......................................... United States 155,800 6,280,687
Pinnacle West Capital Corp. ............................. United States 101,200 3,428,150
------------
36,128,383
------------
Total Long Term Investments (Cost $337,596,725).......... 449,861,945
------------
</TABLE>

FL-10
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN LARGE CAP GROWTH SECURITIES FUND

See notes to financial statements.

FL-11
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN LARGE CAP GROWTH SECURITIES FUND

Financial Statements

Statement of Assets and Liabilities
June 30, 2000 (unaudited)

See notes to financial statements.

FL-12
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN LARGE CAP GROWTH SECURITIES FUND

Financial Statements (continued)

Statement of Operations
for the six months ended June 30, 2000 (unaudited)

See notes to financial statements.

FL-13
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN LARGE CAP GROWTH SECURITIES FUND

Financial Statements (continued)

Statements of Changes in Net Assets
for the six months ended June 30, 2000 (unaudited) and the year ended December
31, 1999

See notes to financial statements.

FL-14
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN LARGE CAP GROWTH SECURITIES FUND

Notes to Financial Statements (unaudited)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The following summarizes the Fund's significant accounting policies.

a. Security Valuation

b. Foreign Currency Translation

c. Income Taxes

d. Security Transactions, Investment Income, Expenses and Distributions

FL-15
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN LARGE CAP GROWTH SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

e. Accounting Estimates

2. SHARES OF BENEFICIAL INTEREST

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

(a)For the period January 6, 1999 (effective date) to December 31, 1999 for
Class 2.

3. TRANSACTIONS WITH AFFILIATES

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

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

FL-16
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN LARGE CAP GROWTH SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

3. TRANSACTIONS WITH AFFILIATES (cont.)

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

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

Included in professional fees are legal fees of $1,072 that were paid to a law
firm in which a partner of that firm was an officer of the Fund.

4. INCOME TAXES

At December 31, 1999, the Fund had deferred capital losses occurring subsequent
to October 31, 1999 of $65,023. For tax purposes, such losses will be reflected
in the year ending December 31, 2000.

Net investment income differs for financial statement and tax purposes
primarily due to differing treatment of merger related expenses.

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

At June 30, 2000, the net unrealized appreciation based on the cost of
investments for income tax purposes of $358,896,874 was as follows:

Unrealized appreciation ............. $ 139,072,897
Unrealized depreciation ............. (27,732,499)
-------------
Net unrealized appreciation ......... $ 111,340,398
=============

5. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities) for the
year ended June 30, 2000 aggregated $161,596,628 and $153,636,070,
respectively.

6. MERGER

FL-17
<PAGE>

FRANKLIN S&P 500 INDEX FUND

FSP-1
<PAGE>
Top 10 Holdings
Franklin S&P 500 Index Fund
6/30/00

Company % of Total
Sector Net Assets
-----------------------------------
General Electric Co. 4.0%
Process Industries

Intel Corp. 3.5%
Electronic Technology

Cisco Systems Inc. 3.4%
Electronic Technology

Microsoft Corp. 3.2%
Technology Services

Pfizer Inc. 2.3%
Health Technology

Exxon Mobil Corp. 2.1%
Energy Minerals

Wal-Mart Stores Inc. 2.0%
Retail Trade

Oracle Corp. 1.8%
Technology Services

Citigroup Inc. 1.6%
Finance

Nortel Networks Corp.
(Canada) 1.6%
Electronic Technology

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

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any industry, security, indexing strategy
or the Fund. Our indexing strategy and the Fund's portfolio composition may
change depending on market and economic conditions and the composition of the
S&P 500 Index. Although historical performance is no guarantee of future
results, these insights may help you understand our management philosophy.

FSP-2
<PAGE>

PERFORMANCE SUMMARY AS OF 6/30/00

Franklin S&P 500 Index Fund - Class 3 delivered a +0.24% cumulative total
return for the six-month period ended 6/30/00. Aggregate total return
represents the cumulative change in value, assuming reinvestment of dividends
and capital gains. Since Class 3 shares have existed for less than one year,
average annual total returns are not provided. The manager and administrator
had 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 Total
Fund Operating Expenses do not exceed 0.80% of the Fund's Class 3 net assets
through 2000. Had they not taken this action, the Fund's total return would
have been lower. After December 31, 2001, the manager and administrator may end
this arrangement at any time.

Franklin S&P 500 Index Fund - Class 3
Periods ended 6/30/00
Since
Inception
(11/1/99)
------------------------------------------------------
Average Total Return +5.76%
Value of $10,000 Investment $10,576

Ongoing stock market volatility can dramatically change the Fund's short-term
performance; current results may be lower.

Franklin S&P 500 Index
Fund - Class 3

Performance reflects the Fund's Class 3 operating expenses, but does not
include any contract fees, expenses or sales charges. If they had been
included, performance would be lower. These charges and deductions,
particularly for variable life policies, can have a significant effect on
contract values and insurance benefits. See the contract prospectus for a
complete description of these expenses, including sales charges.

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

Past performance does not guarantee future results.

FSP-3
<PAGE>

FRANKLIN S&P 500 INDEX FUND

CLASS 1, CLASS 2, AND CLASS 3

(FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST)

SUPPLEMENT DATED AUGUST 25, 2000

TO PROSPECTUS DATED MAY 1, 2000

Under "Management," the third paragraph is replaced with the following:

The fund's lead portfolio manager is:

T. Anthony Coffey, CFA Mr. Coffey has been a manager of the fund since
VICE PRESIDENT August 2000, and has been with Franklin Templeton
FRANKLIN ADVISERS, INC. Investments since 1989.

Please keep this supplement with your current prospectus for future reference.

FSP-4
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN S&P 500 INDEX FUND

Financial Highlights

(a)Based on average shares outstanding.
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for periods less than one
year.
(c)Annualized
(d)For the period November 1, 1999 (effective date) to December 31, 1999.

FSP-5
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN S&P 500 INDEX FUND

Financial Highlights (continued)

<TABLE>
<CAPTION>
Class 2
---------------------------------------
Six Months Ended
June 30, 2000 Year Ended
(unaudited) December 31, 1999(d)
---------------------------------------
<S> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period .......................... $10.55 $10.00
----------------------------
Income from investment operations:
Net investment income(a) ..................................... .04 .04
Net realized and unrealized gains (losses) ................... (.02) .51
----------------------------
Total from investment operations .............................. .02 .55
----------------------------
Less distributions from net investment income ................. --(e) --
----------------------------
Net asset value, end of period ................................ $10.57 $10.55
============================
Total return(b) ............................................... .27% 5.50%
Ratios/supplemental data
Net assets, end of period (000's) ............................. $88 $88
Ratios to average net assets:
Expenses ..................................................... .72%(c) .80%(c)
Expenses, excluding waiver and payments by affiliate ......... .72%(c) 1.23%(c)
Net investment income ........................................ .72%(c) 2.17%(c)
Portfolio turnover rate ....................................... 10.41% --
</TABLE>

(a)Based on average shares outstanding.
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for periods less than one
year.
(c)Annualized
(d)For the period November 1, 1999 (effective date) to December 31, 1999.
(e)Includes distributions of net investment income in the amount of $.002.

FSP-6
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN S&P 500 INDEX FUND

Financial Highlights (continued)

(a)Based on average shares outstanding.
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for periods less than one
year.
(c)Annualized
(d)For the period November 1, 1999 (effective date) to December 31, 1999.

See notes to financial statements.

FSP-7
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN S&P 500 INDEX FUND

Statement of Investments, June 30, 2000 (unaudited)

FSP-8
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN S&P 500 INDEX FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

FSP-9
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN S&P 500 INDEX FUND

FSP-10
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN S&P 500 INDEX FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

FSP-11
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN S&P 500 INDEX FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

FSP-12
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN S&P 500 INDEX FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

FSP-13
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN S&P 500 INDEX FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

FSP-14
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN S&P 500 INDEX FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

FSP-15
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN S&P 500 INDEX FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

FSP-16
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN S&P 500 INDEX FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

FSP-17
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN S&P 500 INDEX FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

See notes to financial statements.

FSP-18
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN S&P 500 INDEX FUND

Financial Statements

Statement of Assets and Liabilities
June 30, 2000 (unaudited)

See notes to financial statements.

FSP-19
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN S&P 500 INDEX FUND

Financial Statements (continued)

Statement of Operations
for the six months ended June 30, 2000 (unaudited)

See notes to financial statements.

FSP-20
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN S&P 500 INDEX FUND

Financial Statements (continued)

Statements of Changes in Net Assets
for the six months ended June 30, 2000 (unaudited) and the year ended December
31, 1999

(a)For the period November 1, 1999 (effective date) to December 31, 1999.

See notes to financial statements.

FSP-21
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN S&P 500 INDEX FUND

Notes to Financial Statements (unaudited)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The following summarizes the Fund's significant accounting policies.

a. Security Valuation

b. Futures Contracts

c. Income Taxes

d. Security Transactions, Investment Income, Expenses and Distributions

e. Offering Costs

Offering costs are amortized on a straight-line basis over twelve months.

FSP-22
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN S&P 500 INDEX FUND

Notes to Financial Statements (unaudited) (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

f. Accounting Estimates

2. SHARES OF BENEFICIAL INTEREST

At June 30, 2000, there were an unlimited number of shares authorized ($.01 par
value). Transactions in the Fund's shares were as follows:

(a)For the period November 1, 1999 (effective date) to December 31, 1999.

Templeton Funds Annuity Company, the Fund's subadministrative manager, is the
record owner of 8,335 of the Fund's Class 2 shares as of June 30, 2000.

3. TRANSACTIONS WITH AFFILIATES

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

The Fund pays an investment management fee to Advisers of .15% per year of the
average daily net assets of the Fund.

FSP-23
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN S&P 500 INDEX FUND

Notes to Financial Statements (unaudited) (continued)

3. TRANSACTIONS WITH AFFILIATES (cont.)

Management fees were reduced on assets invested in the Franklin Institutional
Fiduciary Trust Money Market Portfolio.

The Fund pays an administrative fee to FT Services of .10% per year of the
Fund's average daily net assets.

Under a subadvisory agreement, State Street Global Advisors (SSgA) provides
subadvisory services to the Fund and receives from Advisers fees based on the
average daily net assets of the Fund.

The Fund reimburses Distributors up to .25% per year of its average daily net
assets of Class 2 and Class 3, for costs incurred in marketing the Fund's
shares.

Included in professional fees are legal fees of $180 that were paid to a law
firm in which a partner of that firm was an officer of the Fund.

4. INCOME TAXES

At June 30, 2000, the net unrealized appreciation based on the cost of
investments for income tax purposes of $50,097,742 was as follows:

Unrealized appreciation ............. $ 5,794,302
Unrealized depreciation ............. (3,993,368)
------------
Net unrealized appreciation ......... $ 1,800,934
============

5. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities) for the
period ended June 30, 2000 aggregated $38,974,910 and $3,947,074, respectively.

6. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

As of June 30, 2000, the Fund had the following futures contracts outstanding:

FSP-24
<PAGE>

FRANKLIN SMALL CAP FUND

(1) Source: Standard & Poor's Micropal. The Russell 2000 Growth Index measures
the performance of those Russell 2000 companies with higher price-to-book ratios
and higher forecasted growth values.

Top 10 Sector Breakdown
Franklin Small Cap Fund
6/30/00
% of Total
Sector Net Assets
--------------------------------------
Electronic Technology 30.0%

Technology Services 23.6%

Telecommunications 6.1%

Finance 4.8%

Industrial Services 3.1%

Real Estate 2.6%

Transportation 2.2%

Energy Minerals 2.1%

Consumer Services 1.8%

Health Technology 1.6%

FS-1
<PAGE>

Top 10 Holdings
Franklin Small Cap Fund
6/30/00

Company % of Total
Sector, Country Net Assets
---------------------------------------
JDS Uniphase Corp. 5.9%
Electronic Technology,
United States

PMC-Sierra Inc. 4.3%
Electronic Technology,
Canada

i2Technologies Inc. 2.4%
Technology Services,
United States

VERITAS Software Corp. 2.3%
Technology Services,
United States

Micromuse Inc. 2.0%
Technology Services,
United States

BroadVision Inc. 1.6%
Technology Services,
United States

VoiceStream Wireless
Corp. 1.5%
Telecommunications,
United States

RSA Security Inc. 1.3%
Electronic Technology,
United States

Coherent Inc. 1.3%
Electronic Technology,
United States

Waters Corp. 1.2%
Electronic Technology,
United States

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

FS-2
<PAGE>

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance
is no guarantee of future results, these insights may help you understand our
investment and management philosophy.

FS-3
<PAGE>

Franklin Small Cap Fund
Class 2

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

PERFORMANCE SUMMARY AS OF 6/30/00

Franklin Small Cap Fund - Class 2 delivered a +6.48% cumulative total return
for the six-month period ended 6/30/00. Total return of Class 2 shares
represents the cumulative or 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.

<TABLE>
<CAPTION>
Franklin Small Cap Fund - Class 2*
Periods ended 6/30/00
Since Since Class 2
Inception Inception
1-Year 3-Year (11/1/95) (1/6/99)
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +79.86% +31.03% +28.40% +60.47%
Cumulative Total Return +79.86% +124.98% +221.01% +101.31%
Value of $10,000 Investment $17,986 $22,498 $32,101 $20,131
</TABLE>

Past performance does not guarantee future results.

FS-4
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN SMALL CAP FUND

Financial Highlights

</TABLE>

FS-5
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN SMALL CAP FUND

Financial Highlights (continued)

<TABLE>
<CAPTION>
Class 2
---------------------------------------
Six Months Ended
June 30, 2000 Year Ended
(unaudited) December 31, 1999(d)
---------------------------------------
<S> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $26.80 $14.25
---------------------------------------
Income from investment operations:
Net investment income (loss)(c) .............. .05 (.04)
Net realized and unrealized gains ............ 1.49 12.68
---------------------------------------
Total from investment operations .............. 1.54 12.64
---------------------------------------
Less distributions from:
Net investment income ........................ -- (.08)
Net realized gains ........................... (1.92) (.01)
---------------------------------------
Total distributions ........................... (1.92) (.09)
---------------------------------------
Net asset value, end of period ................ $26.42 $26.80
=======================================
Total return(a) ............................... 6.48% 89.05%

(a)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for periods less than one
year.
(b)Annualized
(c)Based on average shares outstanding.
(d)For the period January 6, 1999 (effective date) to December 31, 1999.

See notes to financial statements.

FS-6
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN SMALL CAP FUND

Statement of Investments, June 30, 2000 (unaudited)

FS-7
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN SMALL CAP FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

FS-8
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN SMALL CAP FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

FS-9
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN SMALL CAP FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

FS-10
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN SMALL CAP FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

FS-11
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN SMALL CAP FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

FS-12
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN SMALL CAP FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stocks (cont.)
(a) Technology Services (cont.)
Internap Network Services Corp. ............... United States 5,800 $ 240,791
Intertrust Technologies Corp. ................. United States 6,700 137,769
Interwoven Inc ................................ United States 1,800 197,972
Intuit Inc. ................................... United States 67,800 2,805,225
ISS Group Inc. ................................ United States 8,400 829,369
ITXC Corp. .................................... United States 9,500 336,359
Keane Inc. .................................... United States 31,600 683,350
Keynote Systems Inc. .......................... United States 5,600 395,150
Liberate Technologies Inc. .................... United States 41,200 1,207,675
Lightspan Inc. ................................ United States 21,400 117,700
Liquid Audio Inc. ............................. United States 47,700 451,659
Luminant Worldwide Corp. ...................... United States 9,200 82,225
MarchFirst Inc. ............................... United States 62,100 1,133,325
McAfee.com Corp. .............................. United States 2,900 75,581
Mercury Interactive Corp. ..................... United States 13,100 1,267,425
Micromuse Inc. ................................ United States 87,680 14,509,670
N2H2 Inc. ..................................... United States 28,100 140,500
National Information Consortium Inc. .......... United States 15,700 178,588
National Instruments Corp. .................... United States 150 6,544
Navisite Inc. ................................. United States 9,800 409,763
NBC Internet Inc., A .......................... United States 20,000 250,000
Netegrity Inc. ................................ United States 15,000 1,129,688
Netiq Corp. ................................... United States 20,749 1,237,158
NetSolve Inc. ................................. United States 40,600 1,055,600
Predictive Systems Inc. ....................... United States 53,000 1,904,687
Proxicom Inc. ................................. United States 34,200 1,637,324
PSINet Inc. ................................... United States 121,560 3,054,194
Quest Software Inc. ........................... United States 200 11,074
Rare Medium Group Inc. ........................ United States 36,300 573,993
Rational Software Corp. ....................... United States 9,000 836,437
Sapient Corp. ................................. United States 56,800 6,074,050
Selectica Inc. ................................ United States 200 14,012
Serena Software Inc. .......................... United States 34,050 1,546,082
Software.com Inc. ............................. United States 2,500 324,687
Sonic Foundry Inc. ............................ United States 3,000 60,000
SonicWALL Inc. ................................ United States 1,500 132,093
StarMedia Network Inc. ........................ United States 24,800 468,100
Tanning Technology Corp. ...................... United States 209,500 4,032,874
TenFold Corp. ................................. United States 3,500 57,530
Tumbleweed Communications Corp. ............... United States 25,900 1,317,662
U.S. Interactive Inc. ......................... United States 19,900 257,455
Verio Inc. .................................... United States 97,600 5,415,274
VERITAS Software Corp. ........................ United States 143,550 16,223,392
Verity Inc. ................................... United States 91,400 3,473,200
Versata Inc. .................................. United States 1,200 48,374
Viant Corp. ................................... United States 9,200 272,550
Vicinity Corp. ................................ United States 19,800 388,574
Vignette Corp. ................................ United States 91,800 4,775,033
Vitria Technology Inc. ........................ United States 11,200 684,600
Wind River Systems Inc. ....................... United States 215,092 8,146,610
Xpedior Inc. .................................. United States 48,100 664,380
------------
168,361,078
------------
</TABLE>

FS-13
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN SMALL CAP FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

(a)Non-income producing
(b)See Note 3 regarding investments in the "Sweep Money Fund."

See notes to financial statements.

FS-14
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN SMALL CAP FUND

Financial Statements

Statement of Assets and Liabilities
June 30, 2000 (unaudited)

See notes to financial statements.

FS-15
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN SMALL CAP FUND

Financial Statements (continued)

Statement of Operations
for the six months ended June 30, 2000 (unaudited)

See notes to financial statements.

FS-16
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN SMALL CAP FUND

Financial Statements (continued)

Statements of Changes in Net Assets
for the six months ended June 30, 2000 (unaudited) and the year ended December
31, 1999

See notes to financial statements.

FS-17
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN SMALL CAP FUND

Notes to Financial Statements (unaudited)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The following summarizes the Fund's significant accounting policies.

a. Security Valuation

b. Foreign Currency Translation

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

c. Income Taxes

d. Security Transactions, Investment Income, Expenses and Distributions

FS-18
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN SMALL CAP FUND

Notes to Financial Statements (unaudited) (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

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

e. Accounting Estimates

2. SHARES OF BENEFICIAL INTEREST

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

At June 30, 2000, there were an unlimited number of shares authorized ($.01 par
value). Transactions in the Fund's shares were as follows:

(a)For the period January 6, 1999 (effective date) to December 31, 1999, for
Class 2.

FS-19
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN SMALL CAP FUND

Notes to Financial Statements (unaudited) (continued)

3. TRANSACTIONS WITH AFFILIATES

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

The Fund may invest in the Franklin Institutional Fiduciary Trust Money Market
Portfolio (the Sweep Money Fund) which is managed by Advisers.

The Fund earned dividend income of $1,148,631 from the investment in the Sweep
Money Fund.

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

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

Effective May 1, 2000, the Fund's annualized fee rate was reduced from .75%,
.625%, and .50% to .55%, .45%, and .40%, respectively.

Effective May 1, 2000, the Fund pays an administrative fee to FT Services of
.25% per year of the average daily net assets of the Fund.

Management fees were reduced on assets invested in Sweep Money Fund.

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

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

Included in professional fees are legal fees of $1,101 that were paid to a law
firm in which a partner of that firm was an officer of the Fund.

4. INCOME TAXES

At December 31, 1999, the Fund had deferred currency losses occurring
subsequent to October 31, 1999 of $103. For tax purposes, such losses will be
reflected in the year ending December 31, 2000.

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

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

FS-20
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST FRANKLIN SMALL CAP FUND

Notes to Financial Statements (unaudited) (continued)

4. INCOME TAXES (cont.)
At June 30, 2000, the net unrealized appreciation based on the cost of
investments for income tax purposes of $439,832,899 was as follows:

Unrealized appreciation ............. $ 325,651,502
Unrealized depreciation ............. (45,642,892)
-------------
Net unrealized appreciation ......... $ 280,008,610
=============

5. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities) for the
period ended June 30, 2000 aggregated $65,534,902 and $43,719,164,
respectively.

6. MERGERS

FS-21
<PAGE>

MUTUAL DISCOVERY SECURITIES FUND

This horizontal bar chart shows the geographic distribution as a percentage of
total net assets on 6/30/00 for Mutual Discovery Securities Fund.

MD-1
<PAGE>
Top 10 Holdings
Mutual Discovery Securities Fund
6/30/00

Company % of Total
Sector, Country Net Assets
-----------------------------------
Lagardere SCA 3.6%
Multi-Industry, France

Investor AB 2.7%
Multi-Industry, Sweden

Railtrack Group PLC 2.4%
Transportation,
United Kingdom

Aventis SA 2.3%
Health & Personal Care,
France

Suez Lyonnaise Des
Eaux SA 2.3%
Business & Public
Services, France

Williams PLC 2.2%
Electronic Components &
Instruments,
United Kingdom

Modern Times Group AB 1.7%
Broadcasting &
Publishing, Sweden

Thermo Electron Corp. 1.4%
Multi-Industry,
United States

Invik & Co. AB 1.3%
Multi-Industry, Sweden

Delphi Automotive
Systems Corp. 1.3%
Automobiles,
United States

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

MD-2
<PAGE>

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance
is no guarantee of future results, these insights may help you understand our
investment and management philosophy.

Top 10 Sectors
Mutual Discovery Securities Fund
Based on Equity Securities
6/30/00

% of Total
Sector Net Assets
------------------------------------------
Multi-Industry 17.0%

Broadcasting & Publishing 7.0%

Telecommunications 4.6%

Business & Public Services 4.4%

Food & Household
Products 3.6%

Transportation 3.6%

Beverages & Tobacco 3.4%

Financial Services 3.2%

Health & Personal Care 3.0%

Machinery & Engineering 2.7%

MD-3
<PAGE>

Mutual Discovery
Securities Fund - Class 2

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

PERFORMANCE SUMMARY AS OF 6/30/00

Mutual Discovery Securities Fund - Class 2 delivered a +6.46% cumulative total
return for the six-month period ended 6/30/00. Total return of Class 2 shares
represents the cumulative or 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.

<TABLE>
<CAPTION>
Mutual Discovery Securities Fund - Class 2*
Periods ended 6/30/00
Since Since Class 2
Inception Inception
1-Year 3-Year (11/8/96) (1/6/99)
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +17.54% +10.36% +12.23% +17.87%
Cumulative Total Return +17.54% +34.41% +52.22% +27.53%
Value of $10,000 Investment $11,754 $13,441 $15,222 $12,753
</TABLE>

Ongoing stock market volatility can dramatically change the Fund's short-term
performance; current results may be lower.

Past performance does not guarantee future results.

MD-4
<PAGE>

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

In Eastern Europe, Russia's first-quarter GDP jumped an annualized 8.4%, while
investment growth, GDP growth and slowing inflation continued to demonstrate
the strength of Hungary's economy.

This chart in pie format shows the geographic distribution of Templeton
Developing Markets Securities Fund as a percentage of total net assets on
6/30/00.

Asia 42.0%
Latin America 26.6%
Mid-East/Africa 13.6%
Europe 12.2%
Short-Term Investments
& Other Net Assets 5.6%

TD-1
<PAGE>

Top 10 Countries
Templeton Developing Markets
Securities Fund
6/30/00

% of Total
Country Net Assets
---------------------------
Brazil 11.7%

South Africa 11.5%

South Korea 11.3%

Mexico 9.6%

Thailand 6.6%

Singapore 5.4%

Hong Kong 4.7%

Turkey 4.6%

Indonesia 4.2%

Poland 4.0%

TD-2
<PAGE>

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance
is no guarantee of future results, these insights may help you understand our
investment and management philosophy.

Top 10 Holdings
Templeton Developing Markets
Securities Fund
6/30/00

Company % of Total
Sector, Country Net Assets
--------------------------------------------
Cemex SA 3.7%
Building Materials and
Components, Mexico

Grupo Financiero 3.0%
Banamex Accival SA
de CV
Banking, Mexico

Centrais Eletricas 3.0%
Brasileiras SA (Eletrobras)
Utilities Electrical and
Gas, Brazil

Samsung Electronics Co. 2.7%
Ltd.
Electrical and Electronics,
South Korea

Korea Electric Power Corp. 2.4%
Utilities Electrical & Gas,
South Korea

Cheung Kong Holdings 1.9%
Ltd.
Multi-Industry, Hong
Kong

Telefonos de Mexico SA 1.8%
(Telmex)
Telecommunications,
Mexico

Akbank 1.8%
Banking, Turkey

Tele Norte Leste 1.6%
Participacoes SA
Telecommunications,
Brazil

Banco Bradesco SA 1.6%
Banking, Brazil

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

TD-3
<PAGE>

Templeton Developing
Markets Securities
Fund - Class 2

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

PERFORMANCE SUMMARY AS OF 6/30/00

Templeton Developing Markets Securities Fund - Class 2 delivered a -17.07%
cumulative total return for the six-month period ended 6/30/00. Total return of
Class 2 shares represents the cumulative or 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.

<TABLE>
<CAPTION>
Templeton Developing Markets Securities Fund - Class 2*
Periods ended 6/30/00
Since Since Class 2
Inception Inception
1-Year 3-Year (3/4/96) (5/1/97)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return -10.97% -12.47% -8.88% -11.70%
Cumulative Total Return -10.97% -32.95% -33.11% -32.54%
Value of $10,000 Investment $8,903 $6,705 $6,689 $6,746
</TABLE>

* Performance prior to the 5/1/00 merger reflects the historical performance of
the Templeton Developing Markets Fund. Additionally, because Class 2 shares
were not offered until 5/1/97, standardized Class 2 Fund performance for prior
periods represents the historical results of Class 1 shares. For periods
beginning on 5/1/97, Class 2's results reflect an additional 12b-1 fee expense,
which also affects all future performance.

Ongoing stock market volatility can dramatically change the Fund's short-term
performance; current results may be lower.

Past performance does not guarantee future results.

TD-4
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Financial Highlights

</TABLE>

TD-5
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Financial Highlights (continued)

(a)Annualized
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for periods less than one
year.
(c)For the period May 1, 1997 (effective date) to December 31, 1997.
(d)Based on average shares outstanding effective year ended December 31, 1999.

See notes to financial statements.

TD-6
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited)

TD-7
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
SHARES/
INDUSTRY WARRANTS VALUE
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long Term Securities (cont.)
Croatia
Pliva D D, GDR, Reg S ..................................... Health & Personal Care 19,100 $ 197,208
-----------
Czech Republic 1.5%
(a) Cesky Telecom AS .......................................... Telecommunications 29,950 507,534
(a) CEZ AS .................................................... Utilities Electrical & Gas 2,462,805 6,527,278
Tabak AS .................................................. Beverages & Tobacco 225 35,114
-----------
7,069,926
-----------
Egypt .9%
(a) Al Ahram Beverages Co., GDR ............................... Beverages & Tobacco 58,906 1,011,711
Commercial International Bank Ltd. ........................ Banking 201,750 2,150,443
(a) Suez Cement Co. ........................................... Building Materials & Components 71,710 749,483
(a) Suez Cement Co., GDR ...................................... Building Materials & Components 20,130 201,300
-----------
4,112,937
-----------
Estonia .2%
Eesti Telekom AS, GDR ..................................... Telecommunications 4,900 98,490
Hansabank Ltd. ............................................ Banking 103,450 777,441
-----------
875,931
-----------
Finland
Hartwall OYJ, A ........................................... Beverages & Tobacco 6,520 131,245
-----------
Greece .4%
Hellenic Telecommunications Organization SA ............... Telecommunications 75,040 1,892,922
-----------
Hong Kong 4.7%
Cheung Kong Holdings Ltd. ................................. Multi-Industry 788,000 8,718,715
(a) China Aerospace International Holdings Ltd. ............... Electronic Components & Instruments 2,285,200 354,713
Dairy Farm International Holdings Ltd. .................... Merchandising 1,561,333 936,800
Hang Lung Development Co. Ltd. ............................ Real Estate 1,650,000 1,280,579
Hong Kong & Shanghai Hotels Ltd. .......................... Leisure & Tourism 1,015,000 589,185
Hong Kong Land Holdings Ltd. .............................. Real Estate 789,000 1,262,400
HSBC Holdings PLC ......................................... Banking 203,654 2,325,145
Hutchison Whampoa Ltd. .................................... Multi-Industry 227,400 2,858,800
Jardine Matheson Holdings Ltd. ............................ Multi-Industry 501,861 2,198,151
Jardine Strategic Holdings Ltd. ........................... Multi-Industry 110,000 328,900
Shangri-La Asia Ltd. ...................................... Leisure & Tourism 158,000 186,471
Swire Pacific Ltd., A ..................................... Multi-Industry 79,500 465,049
-----------
21,504,908
-----------
Hungary 2.2%
Borsodchem RT ............................................. Chemicals 78,919 2,447,992
Egis RT ................................................... Multi-Industry 10,638 447,032
(a) Fotex First Hungarian American Photo Service Co. .......... Multi-Industry 2,485 2,904
Gedeon Richter Ltd. ....................................... Health & Personal Care 53,450 2,894,301
(a) Graphisoft NV ............................................. Data Processing & Reproduction 1,300 24,549
Matav RT .................................................. Telecommunications 59,500 415,624
Mol Magyar Olay-Es Gazipari RT ............................ Energy Sources 81,300 1,125,317
OTP Bank .................................................. Banking 19,960 1,044,776
Tiszai Vegyi Kombinat RT .................................. Chemicals 117,573 1,627,390
-----------
10,029,885
-----------
</TABLE>

TD-8
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
SHARES/
INDUSTRY WARRANTS VALUE
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long Term Securities (cont.)
India .9%
Associated Cement Cos. Ltd. ............................. Building Materials & Components 85,350 $ 225,352
BSES Ltd. ............................................... Utilities Electrical & Gas 47,900 263,237
(a) Colgate-Palmolive (INDIA) Ltd. .......................... Health & Personal Care 5,000 20,158
Gas Authority Of India Ltd., GDR ........................ Energy Sources 25,200 170,100
Grasim Industries Ltd. .................................. Multi-Industry 5,962 38,196
Hindalco Industries Inc. ................................ Metals & Mining 31,500 556,807
Hindustan Petroleum Corporation Ltd. .................... Energy Sources 48,850 134,229
Mahanagar Telephone Nigam Ltd. .......................... Telecommunications 289,800 1,391,831
NIIT Ltd. ............................................... Data Processing & Reproduction 15,228 753,466
Tata Engineering & Locomotive Co. ....................... Machinery & Engineering 129,900 358,535
(a) Wipro Ltd. .............................................. Data Processing & Reproduction 5,600 363,535
-----------
4,275,446
-----------
Indonesia 4.2%
(a) Asia Pulp & Paper Co. Ltd., ADR ......................... Forest Products & Paper 396,230 2,005,914
(a) PT Barito Pacific Timber TBK ............................ Forest Products & Paper 1,644,000 70,437
PT Gudang Garamm ........................................ Beverages & Tobacco 521,000 842,291
(a) PT Indah Kiat Pulp & Paper Corp. ........................ Forest Products & Paper 11,463,750 2,324,839
(a) PT Indocement Tunggal Prakarsa .......................... Building Materials & Components 2,790,500 1,028,205
(a) PT Indofoods Sukses Makmurr ............................. Food & Household Products 3,552,705 1,938,208
PT Indosat .............................................. Telecommunications 1,854,000 2,181,799
PT Semen Gresik (Persero) ............................... Building Materials & Components 1,493,618 1,356,671
(a) PT Sinar Mas Agro Resources & Technology Corp. .......... Food & Household Products 268,800 117,470
PT Telekomunikasi Indonesia (Persero), B ................ Telecommunications 18,738,900 6,583,504
PT Timah TBK ............................................ Metals & Mining 1,788,500 531,288
(a) PT Tjiwi Kimia .......................................... Forest Products & Paper 2,233,380 369,997
-----------
19,350,623
-----------
Israel 1.2%
(a) Ampal-American Israel Corp. ............................. Financial Services 4,150 62,250
(a) Crystal Systems Solutions Ltd. .......................... Electronic Components & Instruments 4,230 39,921
Elron Electronic Industries Ltd. ........................ Financial Services 20,010 747,373
(a) Formula Systems Ltd. .................................... Data Processing & Reproduction 15,910 859,600
(a) Fundtech Ltd. ........................................... Data Processing & Reproduction 61,150 1,589,900
Koor Industries Ltd. .................................... Multi-Industry 2,452 263,817
(a) Nice Systems Ltd. ....................................... Telecommunications 9,880 768,525
(a) Sapiens International Corp. ............................. Data Processing & Reproduction 600 3,788
(a) Tecnomatix Technologies Ltd. ............................ Data Processing & Reproduction 27,989 381,350
(a) TTI Team Telecom International Ltd. ..................... Telecommunications 15,000 540,000
(a) Vocaltec Communications Ltd. ............................ Data Processing & Reproduction 19,550 449,650
-----------
5,706,174
-----------
</TABLE>

TD-9
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
SHARES/
INDUSTRY WARRANTS VALUE
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long Term Securities (cont.)
Malaysia .9%
Genting Bhd. ......................................... Leisure & Tourism 629,800 $ 2,320,316
Golden Hope Plantations Bhd. ......................... Misc Materials & Commodities 189,000 209,889
IOI Corp. Bhd. ....................................... Misc Materials & Commodities 926,000 728,616
Resorts World Bhd. ................................... Leisure & Tourism 286,000 782,737
------------
4,041,558
------------
Mexico 9.6%
Alfa SA de CV, A ..................................... Multi-Industry 359,500 821,735
Cemex SA ............................................. Building Materials & Components 3,601,555 16,885,433
DESC SA de CV DESC, B ................................ Multi-Industry 602,400 385,546
(a) Fomento Economico Mexicano SA de CV Femsa ............ Beverages & Tobacco 45,570 1,962,358
Grupo Bimbo SA de CV, A .............................. Food & Household Products 434,500 684,182
(a) Grupo Financiero Banamex Accival SA de CV ............ Banking 3,278,853 13,790,269
(a) Grupo Financiero Bancomer SA de CV ................... Banking 2,680,000 1,361,304
Telefonos de Mexico SA (Telmex), ADR ................. Telecommunications 142,234 8,125,117
Vitro SA de CV, A .................................... Food & Household Products 238,349 266,352
------------
44,282,296
------------
Pakistan .9%
(a) Hub Power Co. Ltd. ................................... Energy Sources 5,254,000 1,463,636
Pakistan Telecommunications Corp., A ................. Telecommunications 5,577,500 2,883,257
------------
4,346,893
------------
Peru
Credicorp Ltd. ....................................... Banking 13,100 117,900
------------
Philippines 1.9%
(a) Filinvest Development Corp. .......................... Real Estate 1,296,000 41,971
Philippine Long Distance Telephone Co., ADR .......... Telecommunications 117,890 2,092,548
(a) Philippine National Bank ............................. Banking 1,369,861 1,790,357
RFM Corp. ............................................ Food & Household Products 1,190,715 63,351
San Miguel Corp., B .................................. Food & Household Products 3,659,800 4,529,246
------------
8,517,473
------------
Poland 4.0%
Bank Rozwoju Eksportu SA ............................. Banking 38,125 1,181,831
(a) Bank Slaski SA W Katowicach .......................... Banking 29,820 1,605,692
Elektrim SA .......................................... Multi-Industry 239,250 2,746,843
Impexmetal SA ........................................ Metals & Mining 93,892 627,384
(a) Orbis SA ............................................. Leisure & Tourism 74,000 577,727
Polski Koncern Naftowy Orlen SA ...................... Energy Sources 488,607 2,356,084
Prokom Software SA ................................... Data Processing & Reproduction 68,016 3,560,884
(a) Telekomunikacja Polska SA ............................ Telecommunications 567,801 4,067,828
Warta SA ............................................. Insurance 43,104 1,445,048
------------
18,169,321
------------
</TABLE>

TD-10
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
SHARES/
INDUSTRY WARRANTS VALUE
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long Term Securities (cont.)
Russia 1.6%
GAZ Auto Works .............................. Automobiles 2,330 $ 60,697
Lukoil Holdings ............................. Energy Sources 18,700 238,986
Lukoil Holdings, ADR ........................ Energy Sources 64,410 3,188,295
Mosenergo, ADR .............................. Utilities Electrical & Gas 103,450 362,075
Mosenergo, GDR .............................. Utilities Electrical & Gas 23,100 88,349
Novorosissk Sea Shipping .................... Transportation 28,000 2,520
Novorosissk Sea Shipping, pfd. .............. Transportation 224,000 9,184
Rostelecom, ADR ............................. Telecommunications 172,930 2,356,171
Rostelecom, pfd. ............................ Telecommunications 257,300 184,227
(a) Unified Energy Systems ...................... Utilities Electrical & Gas 5,581,800 641,907
(a) Unified Energy Systems, pfd. ................ Utilities Electrical & Gas 18,000 819
-----------
7,133,230
-----------
Singapore 5.4%
Cycle & Carriage Ltd. ....................... Automobiles 28,000 65,749
DBS Group Holdings Ltd. ..................... Banking 176,608 2,267,610
First Capital Corp. Ltd. .................... Real Estate 152,000 145,055
Fraser and Neave Ltd. ....................... Beverages & Tobacco 1,140,100 4,055,301
(a) Golden Agri-Resources Ltd. .................. Misc Materials & Commodities 1,780,000 355,176
Keppel Corp., Ltd. .......................... Transportation 2,380,600 5,149,476
MCL Land Ltd. ............................... Real Estate 29,000 22,308
Natsteel Ltd. ............................... Metals & Mining 1,876,000 2,582,348
Oversea Chinese Banking Corp. Ltd. .......... Banking 538,350 3,705,243
Overseas Union Enterprise Ltd. .............. Leisure & Tourism 261,300 634,737
Sembcorp Industries Ltd. .................... Multi-Industry 1,631,694 1,774,196
Sembcorp Marine Ltd. ........................ Machinery & Engineering 3,501,000 1,316,165
United Industrial Corporation Ltd. .......... Multi-Industry 1,654,000 779,647
United Overseas Bank Ltd. ................... Banking 297,000 1,941,064
-----------
24,794,075
-----------
Slovak Republic .1%
(a) Slovnaft AS ................................. Chemicals 39,010 465,011
(a) Vychodoslovenske Zeleziarne AS .............. Metals & Mining 31,257 78,034
-----------
543,045
-----------
South Africa 11.5%
(a) African Bank Investments Ltd. ............... Financial Services 1,084,000 1,416,555
Anglo American PLC .......................... Metals & Mining 135,267 6,428,175
Barlow Ltd. ................................. Multi-Industry 741,700 4,463,327
CG Smith Ltd. ............................... Multi-Industry 1,143,900 16,872
Comparex Holdings Ltd. ...................... Data Processing & Reproduction 130,000 229,130
De Beers Centenary AG ....................... Misc Materials & Commodities 75,190 1,829,845
(a) Dimension Data Holdings Ltd. ................ Multi-Industry 21,350 176,657
Fedsure Holdings Ltd. ....................... Insurance 360,299 1,753,668
Firstrand Ltd. .............................. Insurance 115,000 118,732
(a) Imperial Holdings Ltd. ...................... Multi-Industry 110,900 902,903
Iscor Ltd. .................................. Metals & Mining 922,984 1,572,340
Kersaf Investments Ltd. ..................... Leisure & Tourism 188,867 740,983
Liberty Group Ltd. .......................... Insurance 290,762 2,766,105
Nampak Ltd. ................................. Forest Products & Paper 544,894 1,177,388
Nedcor Ltd. ................................. Financial Services 15,400 323,445
Old Mutual PLC .............................. Financial Services 1,106,470 2,432,971
Palabora Mining Co. Ltd. .................... Metals & Mining 89,700 488,190
</TABLE>

TD-11
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
SHARES/
INDUSTRY WARRANTS VALUE
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long Term Securities (cont.)
South Africa (cont.)
Rembrandt Group Ltd. ................................ Multi-Industry 429,170 $ 4,139,781
Reunert Ltd. ........................................ Electrical & Electronics 78,000 115,044
Sanlam Ltd. ......................................... Financial Services 1,334,000 1,576,009
Sappi Ltd. .......................................... Forest Products & Paper 270,124 2,031,906
Sasol Ltd. .......................................... Energy Sources 986,200 6,618,304
South African Breweries PLC ......................... Beverages & Tobacco 855,924 6,387,869
Super Group Ltd. .................................... Transportation 197,000 233,320
Tiger Brands Ltd. ................................... Food & Household Products 468,638 4,202,536
Tongaat-Hulett Group Ltd. ........................... Multi-Industry 179,995 789,801
------------
52,931,856
------------
South Korea 11.3%
Cheil Jedang Corp. .................................. Food & Household Products 27,450 1,257,994
Hana Bank ........................................... Banking 396,568 2,471,826
(a) Hyundai Electronics Industries Co. .................. Electrical & Electronics 150,760 2,974,570
(a) Hyundai Heavy Industries ............................ Energy Equipment & Services 38,440 723,966
Hyundai Motor Co. Ltd. .............................. Automobiles 131,090 1,681,206
(a) Korea Data Systems .................................. Data Processing & Reproduction 164,610 817,865
Korea Electric Power Corp. .......................... Utilities Electrical & Gas 350,170 10,866,018
Korea Telecom Corp., ADR ............................ Telecommunications 18,119 876,507
L.G. Chemical Ltd. .................................. Chemicals 57,510 1,150,174
LG Electronics Inc. ................................. Electrical & Electronics 163,040 4,562,093
Samsung Corp. ....................................... Multi-Industry 77,680 669,496
Samsung Electronics Co. Ltd. ........................ Electrical & Electronics 37,656 12,461,661
(a) Samsung Heavy Industries Co. Ltd. ................... Machinery & Engineering 855,507 3,997,391
Samsung SDI Co. Ltd. ................................ Electrical & Electronics 64,693 3,104,034
SK Corp. ............................................ Energy Sources 186,840 3,426,720
(a) SK Global ........................................... Wholesale & International Trade 47,810 572,421
------------
51,613,942
------------
Taiwan .5%
(a) Accton Technology Corp. ............................. Data Processing & Reproduction 134,000 298,019
(a) Hon Hai Precision Industry Co. Ltd. ................. Electrical & Electronics 92,000 830,390
(a) UNI-President Enterprises Corp. ..................... Food & Household Products 528,000 401,143
(a) Via Technologies Inc. ............................... Electronic Components & Instruments 52,000 801,948
------------
2,331,500
------------
Thailand 6.6%
(a) Advanced Info Service Public Co. Ltd., fgn. ......... Telecommunications 20,300 252,553
(a) American Standard Sanitaryware Public Co. Ltd. fgn. . Building Materials & Components 24,500 112,428
(a) Bangkok Bank Public Co. Ltd. ........................ Banking 28,287 21,995
(a) Bangkok Bank Public Co. Ltd., fgn. .................. Banking 1,589,700 1,945,331
BEC World Public Co Ltd., fgn. ...................... Telecommunications 121,890 714,715
Charoen Pokphand Foods Public Co. Ltd., fgn. ........ Food & Household Products 2,091,360 3,145,704
(a) Charoen Pokphand Foods Public Co. Ltd.,
fgn., wts., 4/29/02 ............................... Food & Household Products 1,079,130 3
Electricity Generating Public Co. Ltd. .............. Energy Sources 264,400 283,105
Hana Microelectronics Co. Ltd., fgn. ................ Electrical & Electronics 145,200 1,110,146
(a) Italian-Thai Development Public Co. Ltd., fgn. ...... Construction & Housing 50,300 24,044
(a) Jasmine International Public Co. Ltd., fgn. ......... Telecommunications 824,400 220,681
(a) Land and House Public Co. Ltd., fgn. ................ Real Estate 530,826 277,423
PTT Exploration & Production Public Co. Ltd., fgn. .. Energy Sources 330,400 1,600,408
</TABLE>

TD-12
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

(a)Non-income producing

See notes to financial statements.

TD-13
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Financial Statements

Statement of Assets and Liabilities
June 30, 2000 (unaudited)

See notes to financial statements. See notes to financial statements.

TD-14
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Financial Statements (continued)

Statement of Operations
for the six months ended June 30, 2000 (unaudited)

See notes to financial statements.

TD-15
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Financial Statements (continued)

Statements of Changes in Net Assets
for the six months ended June 30, 2000 (unaudited) and the year ended December
31, 1999

<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999
-------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ................................................................. $ 2,464,675 $ 2,058,823
Net realized gain (loss) from investments and foreign currency transactions ........... 3,513,717 (41,927,283)
Net unrealized appreciation (depreciation) on investments and translation of assets
and liabilites denominated in foreign currencies ..................................... (68,978,175) 153,871,630
--------------------------------
Net increase (decrease) in net assets resulting from operations ...................... (62,999,783) 114,003,170
Distributions to shareholders from:
Net investment income:
Class 1 .............................................................................. (2,663,594) (2,683,606)
Class 2 .............................................................................. (412,198) (248,619)
--------------------------------
Total distributions to shareholders ..................................................... (3,075,792) (2,932,225)
Capital share transactions: (Note 2)
Class 1 .............................................................................. 154,255,416 18,804,002
Class 2 .............................................................................. 24,096,992 19,412,917
--------------------------------
Total capital share transactions ........................................................ 178,352,408 38,216,919
Net increase in net assets ........................................................... 112,276,833 149,287,864
Net assets:
Beginning of period ..................................................................... 347,258,606 197,970,742
--------------------------------
End of period ........................................................................... $ 459,535,439 $ 347,258,606
================================
Undistributed net investment income included in net assets:
End of period ........................................................................... $ 1,037,972 $ 1,649,089
================================
</TABLE>

See notes to financial statements.

TD-16
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Notes to Financial Statements (unaudited)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The following summarizes the Fund's significant accounting policies.

a. Security Valuation

b. Foreign Currency Translation

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 currency denominated assets and liabilities other than investments
in securities held at the end of the reporting period.

c. Income Taxes

TD-17
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

d. Security Transactions, Investment Income, Expenses and Distributions

e. Accounting Estimates

2. SHARES OF BENEFICIAL INTEREST

At June 30, 2000, there were an unlimited number of shares authorized ($.01 par
value). Transactions in the Fund's shares were as follows:

TD-18
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

3. TRANSACTIONS WITH AFFILIATES

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

The Fund pays an investment management fee to TAML of 1.25% per year of the
average daily net assets of the Fund.

The Fund pays administrative fees to FT Services based on the average net
assets of the Fund as follows:

Fees are further reduced on net assets over $1.2 billion.

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

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

Included in professional fees are legal fees of $5,749 that were paid to a law
firm in which a partner of that firm was an officer of the Fund.

4. INCOME TAXES

Capital loss carryover expiring in:
2006 .............................. $ 43,807,774
2007 .............................. 88,451,296
------------
$132,259,070
============

TD-19
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

4. INCOME TAXES (cont.)

At June 30, 2000, the net unrealized appreciation based on the cost of
investments for income tax purposes of $465,549,221 was as follows:

Unrealized appreciation ............. $ 54,726,429
Unrealized depreciation ............. (50,364,195)
-------------
Net unrealized appreciation ......... $ 4,362,234
=============

5. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities) for the
period ended June 30, 2000 aggregated $228,427,678 and $267,654,610,
respectively.

6. MERGERS

TD-20
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON DEVELOPING MARKETS SECURITIES FUND

Tax Designation

The following table provides a breakdown by country of foreign source income
and foreign taxes paid, as designated by the Fund, to Class 1 and Class 2
shareholders of record on April 26, 2000.

Shareholders are advised to check with their tax advisors for information on
the treatment of these amounts on their individual income tax returns.

TD-21
<PAGE>

TEMPLETON GROWTH SECURITIES FUND

This chart in pie format shows the geographic distribution of Templeton Growth
Securities Fund, as a percentage of total net assets as of 6/30/00.

North America 34.5%
Europe 32.8%
Asia 14.6%
Latin America 4.5%
Australia/New Zealand 4.0%
Short-Term Investments & Other Net Assets 9.6%

TG-1
<PAGE>

Top 10 Holdings
Templeton Growth Securities Fund
6/30/00

Company % of Total
Sector, Country Net Assets
---------------------------------------
H.J. Heinz Co. 2.1%
Food & Household
Products, U.S.

Cheung Kong
Holdings Ltd. 1.8%
Multi-Industry,
Hong Kong

Australia & New Zealand
Banking Group Ltd. 1.7%
Banking, Australia

HSBC Holdings PLC 1.6%
Banking, Hong Kong

Kroger Co. 1.5%
Merchandising, U.S.

Abbott Laboratories 1.5%
Health & Personal Care,
U.S.

Aventis SA 1.5%
Health & Personal Care,
France

Fuji Photo Film Co. Ltd. 1.4%
Electrical & Electronics,
Japan

Ford Motor Co. 1.3%
Automobiles, U.S.

Albertson's Inc. 1.3%
Merchandising, U.S.

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

TG-2
<PAGE>

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance
is no guarantee of future results, these insights may help you understand our
investment and management philosophy.

TG-3
<PAGE>

Templeton Growth Securities Fund - Class 2

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

PERFORMANCE SUMMARY AS OF 6/30/00

Templeton Growth Securities Fund - Class 2 delivered a -2.08% cumulative total
return for the six-month period ended 6/30/00. Total return of Class 2 shares
represents the cumulative or 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.

<TABLE>
<CAPTION>
Templeton Growth Securities Fund - Class 2*
Periods ended 6/30/00
Since Since Class 2
Inception Inception
1-Year 5-Year (3/15/94) (1/6/99)
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +5.79% +13.30% +12.20% +9.21%
Cumulative Total Return +5.79% +86.72% +106.38% +13.93%
Value of $10,000 Investment $10,579 $18,672 $20,638 $11,393
</TABLE>

Ongoing stock market volatility can dramatically change the Fund's short-term
performance; current results may be lower.

Past performance does not guarantee future results.

TG-4
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Financial Highlights (continued)

(a)Annualized
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for period less than one
year.
(c)Based on average shares outstanding effective year ended December 31, 1999.

TG-5
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Financial Highlights (continued)

(a)Annualized
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for periods less than one
year.
(c)For the period January 6, 1999 (effective date) to December 31, 1999.
(d)Based on average shares outstanding.

See notes to financial statements.

TG-6
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited)

TG-7
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

TG-8
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stocks (cont.)
Forest Products & Paper 2.9%
Assidoman AB ........................ Sweden 192,100 $ 2,748,666
Assidoman AB, 144A .................. Sweden 57,630 824,600
Bowater Inc. ........................ United States 225,000 9,928,125
Carter Holt Harvey Ltd. ............. New Zealand 1,155,252 1,006,094
Georgia-Pacific Timber Co. .......... United States 222,200 4,805,075
International Paper Co. ............. United States 200,000 5,962,500
Metsa Serla OY, B ................... Finland 270,000 2,005,770
Stora Enso OYJ, R ................... Finland 132,700 1,214,759
UPM-Kymmene Corp. ................... Finland 400,000 9,968,943
------------
38,464,532
------------
Health & Personal Care 4.4%
Abbott Laboratories ................. United States 445,370 19,846,801
Aventis SA .......................... France 260,002 19,053,289
(a) CellTech Group PLC .................. United Kingdom 796,142 15,330,588
Pharmacia Corp. ..................... United States 69,000 3,566,438
------------
57,797,116
------------
Industrial Components 1.2%
Goodyear Tire & Rubber Co. .......... United States 269,000 5,380,000
Michelin SA, B ...................... France 120,000 3,866,033
Sandvik AB .......................... Sweden 200,000 4,218,447
Yamato Kogyo Co. Ltd. ............... Japan 539,000 2,496,196
------------
15,960,676
------------
Insurance 5.4%
Ace Ltd. ............................ Bermuda 302,000 8,456,000
Aetna Inc. .......................... United States 110,000 7,060,625
Allstate Corp. ...................... United States 457,700 10,183,825
Partnerre Ltd. ...................... Bermuda 214,500 7,601,344
Scor ................................ France 8,542 373,453
Torchmark Corp. ..................... United States 273,400 6,749,563
Unumprovident Corp. ................. United States 81,100 1,627,069
XL Capital Ltd., A .................. Bermuda 127,100 6,879,288
Zurich Allied AG .................... Switzerland 11,500 5,700,141
Zurich Allied PLC ................... United Kingdom 1,386,000 16,302,920
------------
70,934,228
------------
Leisure & Tourism .3%
Galileo International Inc. .......... United States 160,000 3,340,000
------------
Machinery & Engineering .9%
CNH Global NV ....................... Netherlands 106,800 987,900
Invensys PLC ........................ United Kingdom 1,769,383 6,629,461
METSO OYJ ........................... Finland 392,800 4,744,143
------------
12,361,504
------------
Merchandising 6.4%
Albertson's Inc. .................... United States 512,800 17,050,600
J.C. Penney Co. Inc. ................ United States 180,000 3,318,750
(a) Kmart Corp. ......................... United States 1,100,000 7,493,750
(a) Kroger Co. .......................... United States 910,000 20,076,875
Marks & Spencer PLC ................. United Kingdom 3,261,000 11,428,335
Safeway PLC ......................... United Kingdom 3,223,718 12,542,131
Sears, Roebuck & Co. ................ United States 255,900 8,348,738
W.H. Smith PLC ...................... United Kingdom 673,850 4,014,109
------------
84,273,288
------------
</TABLE>

TG-9
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stocks (cont.)
Metals & Mining 3.3%
AK Steel Holding Corp. ................................... United States 695,400 $ 5,563,200
Barrick Gold Corp. ....................................... Canada 668,800 12,120,948
Companhia Siderurgica Nacional Sid Nacional CSN .......... Brazil 129,100,000 4,049,045
Corus Group PLC .......................................... United Kingdom 2,000,000 2,914,150
Industrias Penoles SA .................................... Mexico 1,875,300 3,029,133
Pohang Iron & Steel Co. Ltd. ............................. South Korea 127,102 11,053,066
USX-U. S. Steel Group .................................... United States 250,000 4,640,625
------------
43,370,167
------------
Multi-Industry 4.4%
Amoy Properties Ltd. ..................................... Hong Kong 2,935,500 1,977,009
Beijing Datang Power Generation Co. Ltd., H .............. China 6,860,000 1,540,031
Broken Hill Proprietary Co. Ltd. ......................... Australia 231,654 2,746,924
Cheung Kong Holdings Ltd. ................................ Hong Kong 2,114,500 23,395,585
Cheung Kong Infrastructure Holdings Ltd. ................. Hong Kong 1,768,000 2,903,083
DESC SA de CV DESC, B .................................... Mexico 5,237,300 3,351,957
DESC SA de CV DESC, C .................................... Mexico 2,671,800 1,682,853
Hutchison Whampoa Ltd. ................................... Hong Kong 207,570 2,609,503
Pacific Dunlop Ltd. ...................................... Australia 1,979,000 1,770,402
Swire Pacific Ltd., A .................................... Hong Kong 2,463,800 14,412,438
Swire Pacific Ltd., B .................................... Hong Kong 1,304,000 1,062,230
------------
57,452,015
------------
Real Estate 1.4%
China Resources Beijing Land Ltd. ........................ China 4,652,000 620,641
General Growth Properties Inc. ........................... United States 164,500 5,222,875
Hang Lung Development Co. Ltd. ........................... Hong Kong 3,624,000 2,812,618
Highwoods Properties Inc. ................................ United States 107,900 2,589,600
National Health Investors Inc. ........................... United States 311,100 3,422,100
New World Development Co. Ltd. ........................... Hong Kong 13,457 15,019
Rouse Co. ................................................ United States 180,000 4,455,000
------------
19,137,853
------------
Recreation & Other Consumer Goods .4%
Eastman Kodak Co. ........................................ United States 89,600 5,331,200
------------
Telecommunications 3.3%
Cable & Wireless HKT Ltd. ................................ Hong Kong 209,746 461,450
(a) General Motors Corp., H .................................. United States 18,000 526,500
Nippon Telegraph & Telephone Corp. ....................... Japan 848 11,300,789
SK Telecom Co. Ltd., ADR ................................. South Korea 100,000 3,631,250
Smartone Telecommunications Holdings Ltd. ................ Hong Kong 310,000 685,990
Telecom Corp. of New Zealand Ltd. ........................ New Zealand 2,362,716 8,286,251
Telecomunicacoes de Sao Paulo SA ......................... Brazil 276,690,000 3,021,504
Telefonica de Argentina SA, ADR .......................... Argentina 67,000 2,127,250
Telefonos de Mexico SA (Telmex), ADR ..................... Mexico 229,855 13,130,467
------------
43,171,451
------------
Textiles & Apparel .3%
Adidas-Salomon AG ........................................ Germany 80,000 4,417,009
------------
Transportation 1.9%
Airborne Freight Corp. ................................... United States 272,000 5,151,000
British Airways PLC ...................................... United Kingdom 1,745,832 10,036,479
Peninsular & Oriental Steam Navigation Co. ............... United Kingdom 294,200 2,507,450
Singapore Airlines Ltd. .................................. Singapore 703,100 6,953,736
------------
24,648,665
------------
</TABLE>

TG-10
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stocks (cont.)
Utilities Electrical & Gas 8.0%
Centrais Eletricas Brasileiras SA (Eletrobras), ADR ....................... Brazil 514,400 $ 5,144,000
CLP Holdings Ltd. ......................................................... Hong Kong 2,043,000 9,513,540
E.On AG ................................................................... Germany 258,000 12,488,977
Endesa SA ................................................................. Spain 200,000 3,889,805
Entergy Corp. ............................................................. United States 97,900 2,661,656
Evn AG .................................................................... Austria 83,370 3,116,665
Hong Kong Electric Holdings Ltd. .......................................... Hong Kong 2,944,000 9,479,353
Iberdrola SA, Br. ......................................................... Spain 981,200 12,697,174
Korea Electric Power Corp. ................................................ South Korea 458,200 14,218,264
National Grid Group PLC ................................................... United Kingdom 275,100 2,157,255
National Power PLC ........................................................ United Kingdom 1,802,600 11,474,837
Potomac Electric Power Co. ................................................ United States 100,000 2,500,000
Powergen PLC .............................................................. United Kingdom 600,000 5,054,725
Thames Water Group PLC .................................................... United Kingdom 530,800 6,826,144
Transportadora de Gas del Sur SA, B, ADR .................................. Argentina 386,900 3,482,100
--------------
104,704,495
--------------
Total Common Stocks (Cost $1,115,126,998).................................. 1,172,708,668
--------------
Preferred Stocks 1.3%
Centrais Eletricas Brasileiras SA (Electrobras), ADR, pfd. ................ Brazil 158,760 1,686,825
Embotelladora Andina SA, B, ADR, pfd. ..................................... Chile 302,900 2,896,481
News Corp. Ltd., pfd. ..................................................... Australia 185,422 2,244,911
Petroleo Brasileiro SA, pfd. .............................................. Brazil 157,470 4,757,270
Telecomunicacoes de Sao Paulo SA, ADR, pfd. ............................... Brazil 205,300 3,798,050
Volkswagen AG, pfd. ....................................................... Germany 60,000 1,432,077
--------------
Total Preferred Stocks (Cost $18,882,057).................................. 16,815,614
--------------
Total Investments before Repurchase Agreements (Cost $1,134,009,055)....... 1,189,524,282
--------------
</TABLE>

TG-11
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

(a)Non-income producing
(b)At June 30, 2000, all repurchase agreements held by the Fund had been entered
into on that date.

See notes to financial statements.

TG-12
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Financial Statements

Statement of Assets and Liabilities
June 30, 2000 (unaudited)

See notes to financial statements.

TG-13
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Financial Statements (continued)

Statement of Operations
for the six months ended June 30, 2000 (unaudited)

See notes to financial statements.

TG-14
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Financial Statements (continued)

Statements of Changes in Net Assets
for the six months ended June 30, 2000 (unaudited) and the year ended December
31, 1999

See notes to financial statements.

TG-15
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Notes to Financial Statements (unaudited)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The following summarizes the Fund's significant accounting policies.

a. Security Valuation

b. Foreign Currency Translation

c. Income Taxes

d. Security Transactions, Investment Income, Expenses and Distributions

TG-16
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

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

e. Accounting Estimates

2. SHARES OF BENEFICIAL INTEREST

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

At June 30, 2000, there were an unlimited number of shares authorized ($.01 par
value). Transactions in the Fund's shares were as follows:

<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999(a)
--------------------------------------------------------------------
Shares Amount Shares Amount
Class 1 Shares: --------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ........................................ 6,155,205 $ 82,942,043 3,559,626 $ 53,423,886
Shares issued on merger (Note 6) ................... 48,592,348 628,298,597 -- --
Shares issued in reinvestment of distributions ..... 6,513,470 84,219,176 6,314,237 91,430,148
Shares redeemed .................................... (12,780,815) (175,440,833) (15,136,586) (225,779,930)
--------------------------------------------------------------------
Net increase (decrease) ............................ 48,480,208 $ 620,018,983 (5,262,723) $ (80,925,896)
====================================================================
Class 2 Shares:
Shares sold ........................................ 5,301,315 $ 73,217,208 3,228,083 $ 46,873,543
Shares issued on merger (Note 6) ................... 4,308,381 55,535,000 -- --
Shares issued in reinvestment of distributions ..... 91,595 1,181,572 7,976 115,255
Shares redeemed .................................... (4,528,932) (62,715,757) (2,948,742) (42,993,192)
--------------------------------------------------------------------
Net increase ....................................... 5,172,359 $ 67,218,023 287,317 $ 3,995,606
====================================================================
</TABLE>

(a)For the period January 6, 1999 (effective date) to December 31, 1999, for
Class 2.

TG-17
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

3. TRANSACTIONS WITH AFFILIATES

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

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

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

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

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

Included in professional fees are legal fees of $616 that were paid to a law
firm in which a partner of that firm was an officer of the Fund.

4. INCOME TAXES

At June 30, 2000, the net unrealized appreciation based on the cost of
investments for income tax purposes of $1,259,349,622 was as follows:

Unrealized appreciation ............. $ 181,924,154
Unrealized depreciation ............. (127,978,494)
--------------
Net unrealized appreciation ......... $ 53,945,660
==============

5. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities) for the
period ended June 30, 2000 aggregated $912,419,966 and $512,178,868,
respectively.

TG-18
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

6. MERGERS

TG-19
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GROWTH SECURITIES FUND

Tax Designation

The following table provides a breakdown by country of foreign source income
and foreign taxes paid, as designated by the Fund, to Class 1 and Class 2
shareholders of record on April 26, 2000.

Shareholders are advised to check with their tax advisors for information on
the treatment of these amounts on their individual income tax returns.

TG-20
<PAGE>

TEMPLETON INTERNATIONAL SECURITIES FUND

(1) Source: Morgan Stanley Capital International.

This chart in pie format shows the geographic distribution of Templeton
International Securities Fund as a percentage of total net assets on 6/30/00.

Europe 60.1%
Asia 17.8%
Latin America 7.2%
Australia/New Zealand 4.4%
North America 3.8%
Mid-East/Africa 1.7%
Short-Term Investments & Other Net Assets 5.0%

TI-1
<PAGE>
Top 10 Holdings
Templeton International
Securities Fund
6/30/00

Company % of Total
Sector, Country Net Assets
----------------------------------------
Cheung Kong
Holdings Ltd. 2.3%
Multi-Industry,
Hong Kong

Total Fina Elf SA, B 2.1%
Energy Sources, France

AXA SA 2.0%
Financial Services, France

Nomura Securities Co. Ltd. 1.9%
Financial Services, Japan

Nordic Baltic Holding AB 1.9%
Banking, Sweden

Elan Corp., PLC, ADR 1.9%
Health & Personal Care,
Irish Republic

Aventis SA 1.9%
Health & Personal Care,
France

Nippon Telegraph &
Telephone Corp. 1.8%
Telecommunications,
Japan

Koninklijke Philips
Electronics NV 1.8%
Electrical & Electronics,
Netherlands

Muenchener
Rueckversicherungs- 1.7%
Gesellschaft
Insurance, Germany

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

TI-2
<PAGE>

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance
is no guarantee of future results, these insights may help you understand our
investment and management philosophy.

TI-3
<PAGE>

Templeton International
Securities Fund
Class 2

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

PERFORMANCE SUMMARY AS OF 6/30/00

Templeton International Securities Fund - Class 2 delivered a +0.50% cumulative
total return for the six-month period ended 6/30/00. Total return of Class 2
shares represents the cumulative or 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.

<TABLE>
<CAPTION>
Templeton International Securities Fund - Class 2*
Periods ended 6/30/00
Since Since Class 2
Inception Inception
1-Year 5-Year (5/1/92) (5/1/97)
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +12.44% +15.34% +14.32% +13.14%
Cumulative Total Return +12.44% +104.10% +198.21% +47.79%
Value of $10,000 Investment $11,244 20,410 $29,821 $14,779
</TABLE>

* Performance prior to the 5/1/00 merger reflects the historical performance of
the Templeton International Fund. Additionally, because Class 2 shares were not
offered until 5/1/97, standardized Class 2 Fund performance for prior periods
represents the historical results of Class 1 shares. For periods beginning on
5/1/97, Class 2's results reflect an additional 12b-1 fee expense, which also
affects all future performance.

Ongoing stock market volatility can dramatically change the Fund's short-term
performance; current results may be lower.

Past performance does not guarantee future results.

TI-4
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SECURITIES FUND

Financial Highlights

(a)Annualized
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for periods less than one
year.
(c)Based on average shares outstanding effective year ended December 31, 1999.

TI-5
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SECURITIES FUND

Financial Highlights (continued)

(a)Annualized
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for periods less than one
year.
(c)For the period May 1, 1997 (effective date) to December 31, 1997.
(d)Based on average shares outstanding effective year ended December 31,1999.

See notes to financial statements.

TI-6
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited)

TI-7
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

TI-8
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stocks (cont.)
Merchandising 2.4%
Hudsons Bay Co. ...................................... Canada 360,774 $ 3,822,739
Marks & Spencer PLC .................................. United Kingdom 4,772,000 16,723,708
Safeway PLC .......................................... United Kingdom 4,943,186 19,231,857
Storehouse ........................................... United Kingdom 6,812,781 4,486,367
------------
44,264,671
------------
Metals & Mining 3.7%
Anglo American Platinum Corp. Ltd. ................... South Africa 145,609 4,196,460
Barrick Gold Corp. ................................... Canada 1,042,900 18,828,086
Boehler-Uddeholm AG .................................. Austria 64,505 2,266,121
Boehler-Uddeholm AG, 144A ............................ Austria 60,855 2,137,894
Corus Group PLC ...................................... United Kingdom 8,123,200 11,836,111
Industrias Penoles SA ................................ Mexico 1,893,000 3,057,723
Ispat International NV, A ............................ Netherlands 227,600 2,162,200
Pohang Iron & Steel Co. Ltd. ......................... South Korea 128,901 11,209,511
WMC Ltd. ............................................. Australia 2,399,500 10,766,027
------------
66,460,133
------------
Multi-Industry 4.4%
Broken Hill Proprietary Co. Ltd. ..................... Australia 945,543 11,212,129
Cheung Kong Holdings Ltd. ............................ Hong Kong 3,792,825 41,965,179
Elementis PLC ........................................ United Kingdom 5,428,174 6,450,666
Hanson PLC ........................................... United Kingdom 446,211 3,147,802
Next PLC ............................................. United Kingdom 775,500 6,814,989
Swire Pacific Ltd., B ................................ Hong Kong 13,622,100 11,096,473
------------
80,687,238
------------
Telecommunications 8.3%
Cia de Telecomunicaciones de Chile SA, ADR ........... Chile 431,500 7,820,938
Korea Telecom Corp., ADR ............................. South Korea 163,020 7,886,093
Nippon Telegraph & Telephone Corp. ................... Japan 2,510 33,449,270
Philippine Long Distance Telephone Co., ADR .......... Philippines 722,400 12,822,600
Portugal Telecom SA .................................. Portugal 808,010 9,108,352
Smartone Telecommunications Holdings Ltd. ............ Hong Kong 7,652,000 16,932,895
Telecom Corp. of New Zealand Ltd. .................... New Zealand 5,087,400 17,841,955
Telecom Italia SpA, di Risp .......................... Italy 1,887,750 12,545,311
Telefonica del Peru SA, ADR .......................... Peru 267,700 3,045,088
Telefonica del Peru SA, B ............................ Peru 5,365,602 7,722,836
Telefonos de Mexico SA (Telmex), L, ADR .............. Mexico 360,760 20,608,415
------------
149,783,753
------------
Transportation 2.9%
British Airways PLC .................................. United Kingdom 2,575,000 14,803,219
Koninklijke Nedlloyd Groep NV ........................ Netherlands 216,300 4,206,824
Peninsular & Oriental Steam Navigation Co. ........... United Kingdom 1,355,414 11,552,115
Seino Transportation Co. Ltd. ........................ Japan 552,000 2,785,955
Stagecoach Holdings PLC .............................. United Kingdom 16,914,690 18,756,544
------------
52,104,657
------------
</TABLE>

TI-9
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stocks (cont.)
Utilities Electrical & Gas 7.1%
CLP Holdings Ltd. ......................................................... Hong Kong 4,081,000 $ 19,003,797
E.On AG ................................................................... Germany 465,650 22,540,667
Evn AG .................................................................... Austria 23,475 877,579
Gener SA, ADR ............................................................. Chile 303,800 4,462,063
Hong Kong Electric Holdings Ltd. .......................................... Hong Kong 4,062,365 13,080,364
Iberdrola SA, Br. ......................................................... Spain 1,575,700 20,390,275
Korea Electric Power Corp. ................................................ South Korea 250,000 7,757,674
National Power PLC ........................................................ United Kingdom 1,972,900 12,558,918
Thames Water Group PLC .................................................... United Kingdom 2,223,811 28,598,444
--------------
129,269,781
--------------
Total Common Stocks (Cost $1,444,014,133).................................. 1,651,413,168
--------------
Preferred Stocks 3.8%
Cia Vale do Rio Doce, A, ADR, pfd. ........................................ Brazil 350,400 9,898,800
Embratel Participacoes SA, ADR, pfd. ...................................... Brazil 420,490 9,934,076
Petroleo Brasileiro SA, pfd. .............................................. Brazil 300,000 9,063,193
Telecomunicacoes Brasileiras SA (Telebras), ADR, pfd. ..................... Brazil 221,950 21,556,894
Telecomunicacoes de Sao Paulo SA, ADR, pfd. ............................... Brazil 556,750 10,299,875
Telemig Celular SA, C, pfd. ............................................... Brazil 1,705,000 43,476
Tele Norte Leste Participacoes SA, ADR, pfd. .............................. Brazil 11,702 276,460
Volkswagen AG, pfd. ....................................................... Germany 275,000 6,563,686
--------------
Total Preferred Stocks (Cost $57,239,299).................................. 67,636,460
--------------
Total Investments before Repurchase Agreements (Cost $1,501,253,432)....... 1,719,049,628
--------------
PRINCIPAL
AMOUNT
---------
(b) Repurchase Agreements 4.4%
Dresdner Bank AG, 6.40%, 7/03/00 (Maturity Value $20,111,721)
Collateralized by U.S. Treasury Notes and Bonds ........................... United States 20,101,000 20,101,000
Paribas Corp., 6.85%, 7/03/00 (Maturity Value $60,034,250)
Collateralized by U.S. Treasury Notes and Bonds ........................... United States 60,000,000 60,000,000
--------------
Total Repurchase Agreements (Cost $80,101,000)............................. 80,101,000
--------------
Total Investments (Cost $1,581,354,432) 99.4%.............................. 1,799,150,628
Other Assets, less Liabilities .6% ........................................ 11,571,531
--------------
Total Net Assets 100.0% ................................................... $1,810,722,159
==============
</TABLE>

(a)Non-income producing
(b)At June 30, 2000, all repurchase agreements held by the Fund had been entered
into on that date.

See notes to financial statements.

TI-10
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SECURITIES FUND

Financial Statements

Statement of Assets and Liabilities
June 30, 2000 (unaudited)

See notes to financial statements.

TI-11
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SECURITIES FUND

Financial Statements (continued)

Statement of Operations
for the six months ended June 30, 2000 (unaudited)

See notes to financial statements.

TI-12
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SECURITIES FUND

Financial Statements (continued)

Statements of Changes in Net Assets
for the six months ended June 30, 2000 (unaudited) and the year ended December
31, 1999

<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999
---------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ............................................... $ 16,882,590 $ 17,320,878
Net realized gain from investments and foreign currency transactions 77,668,190 84,997,543
Net unrealized appreciation (depreciation) on investments ........... (47,373,112) 128,046,409
---------------------------------------
Net increase in net assets resulting from operations ............... 47,177,668 230,364,830
Distributions to shareholders from:
Net investment income:
Class 1 ........................................................... (20,195,709) (26,406,410)
Class 2 ........................................................... (2,255,259) (1,047,921)
Net realized gains:
Class 1 ........................................................... (118,600,706) (91,727,528)
Class 2 ........................................................... (14,798,195) (3,898,692)
---------------------------------------
Total distributions to shareholders .................................. (155,849,869) (123,080,551)
Capital share transactions: (Note 2)
Class 1 ........................................................... 692,644,895 (14,797,710)
Class 2 ........................................................... 68,586,998 45,319,734
---------------------------------------
Total capital share transactions ..................................... 761,231,893 30,522,024
Net increase in net assets ....................................... 652,559,692 137,806,303
Net assets:
Beginning of period .................................................. 1,158,162,467 1,020,356,164
---------------------------------------
End of period ........................................................ $1,810,722,159 $1,158,162,467
=======================================
Undistributed net investment income included in net assets:
End of period ........................................................ $ 11,204,261 $ 16,772,639
=======================================
</TABLE>

See notes to financial statements.

TI-13
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SECURITIES FUND

Notes to Financial Statements (unaudited)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The following summarizes the Fund's significant accounting policies.

a. Security Valuation

b. Foreign Currency Translation

c. Income Taxes

d. Security Transactions, Investment Income, Expenses and Distributions

TI-14
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

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

e. Accounting Estimates

2. SHARES OF BENEFICIAL INTEREST

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

At June 30, 2000, there were an unlimited number of shares authorized ($.01 par
value). Transactions in the Fund's shares were as follows:

TI-15
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

3. TRANSACTIONS WITH AFFILIATES

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

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

The Fund pays administrative fees to FT Services based on the average net
assets of the fund as follows:

Fees are further reduced on net assets over $1.2 billion.

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

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

Included in professional fees are legal fees of $97 that were paid to a law
firm in which a partner of that firm was an officer of the Fund.

4. INCOME TAXES

Unrealized appreciation ............. $ 399,857,380
Unrealized depreciation ............. (182,061,184)
--------------
Net unrealized appreciation ......... $ 217,796,196
==============

TI-16
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

5. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities) for the
period ended June 30, 2000 aggregated $267,634,383 and $325,183,049,
respectively.

6. MERGERS

TI-17
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SECURITIES FUND

Tax Designation

The following table provides a breakdown by country of foreign source income
and foreign taxes paid, as designated by the Fund, to Class 1 and Class 2
shareholders of record on December 29, 1999.

Shareholders are advised to check with their tax advisors for information on
the treatment of these amounts on their individual income tax returns.

TI-18
<PAGE>

TEMPLETON INTERNATIONAL SMALLER COMPANIES FUND

This chart in pie format shows the geographic distribution for Templeton
International Smaller Companies Fund, as a percentage of total net assets on
6/30/00.

Europe 41.4%
Asia 26.4%
North America 5.3%
Australia/New Zealand 4.1%
Latin America/Caribbean 3.4%
Mid-East/Africa 1.4%
Short-Term Investments
& Other Net Assets 18.0%

TIS-1
<PAGE>

Top 10 Holdings
Templeton International Smaller
Companies Fund
6/30/00

Company % of Total
Sector, Country Net Assets
---------------------------------------
Giordano
International Ltd. 4.1%
Merchandising,
Hong Kong

Li & Fung Ltd. 3.0%
Merchandising,
Hong Kong

Sa des Galeries Lafayette 2.7%
Merchandising, France

GTC Transcontinental
Group 2.4%
Broadcasting &
Publishing, Canada

Kardex AG 1.9%
Business & Public
Services, Switzerland

Dah Sing Financial
Holdings Ltd. 1.6%
Financial Services,
Hong Kong

Ono Pharmaceutical
Co. Ltd. 1.6%
Health & Personal Care,
Japan

VTech Holdings Ltd. 1.6%
Electronic Components &
Instruments, Hong Kong

Swisslog Holding AG 1.5%
Electronic Components &
Instruments, Switzerland

Observer AB 1.4%
Business & Public
Services, Sweden

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

countries, while Germany, the U.K. and Spain were hit hard by a mixture of
financial uncertainties despite the positive economic climate.

TIS-2
<PAGE>

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance
is no guarantee of future results, these insights may help you understand our
investment and management philosophy.

Top 10 Sectors
Templeton International Smaller
Companies Fund
Based on Equity Securities
6/30/00

% of Total
Sector Net Assets
------------------------------------------
Merchandising 13.1%

Health & Personal Care 5.8%
Building Materials &
Components 5.7%

Financial Services 5.4%

Transportation 4.6%

Business & Public Services 4.1%

Industrial Components 4.0%

Electronic Components &
Instruments 3.8%

Food & Household
Products 3.4%

Textiles & Apparel 3.4%

TIS-3
<PAGE>

Templeton International
Smaller Companies
Fund - Class 2

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

PERFORMANCE SUMMARY AS OF 6/30/00

Templeton International Smaller Companies Fund - Class 2 delivered a +6.21%
cumulative total return for the six-month period ended 6/30/00. Total return of
Class 2 shares represents the cumulative or 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.

<TABLE>
<CAPTION>
Templeton International Smaller Companies Fund - Class 2*
Periods ended 6/30/00
Since Since Class 2
Inception Inception
1-Year 3-Year (5/1/96) (1/6/99)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +12.91% +2.46% +6.18% +18.59%
Cumulative Total Return +12.91% +7.55% +28.37% +28.70%
Value of $10,000 Investment $11,291 $10,755 $12,837 $12,870
</TABLE>

Ongoing stock market volatility can dramatically change the Fund's short-term
performance; current results may be lower.

Past performance does not guarantee future results.

TIS-4
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SMALLER COMPANIES FUND

Financial Highlights

(a)Annualized
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying vehicle.
Total return is not annualized for periods less than one year.
(c)For the period May 1, 1996 (effective date) to December 31, 1996.
(d)Based on average shares outstanding effective year ended December 31, 1999.

TIS-5
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SMALLER COMPANIES FUND

Financial Highlights (continued)

(a)Annualized
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for periods less than one
year.
(c)For the period January 6, 1999 (effective date) to December 31, 1999.
(d)Based on average shares outstanding.

See notes to financial statements.

TIS-6
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SMALLER COMPANIES FUND

Statement of Investments, June 30, 2000 (unaudited)

TIS-7
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SMALLER COMPANIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stocks (cont.)
Electronic Components & Instruments 3.8%
Swisslog Holding AG ................................... Switzerland 1,000 $ 491,975
Twentsche Kabel Holdings NV ........................... Netherlands 6,850 256,077
VTech Holdings Ltd. ................................... Hong Kong 136,000 514,669
----------
1,262,721
----------
Energy Sources 2.0%
Fletcher Challenge Energy Ltd. ........................ New Zealand 138,820 454,179
Gas Authority of India Ltd., 144A, GDR ................ India 29,000 195,750
----------
649,929
----------
Financial Services 5.2%
Dah Sing Financial Holdings Ltd. ...................... Hong Kong 134,800 542,984
Housing Development Finance Corp. Ltd. ................ India 36,710 459,404
Laurentian Bank of Canada ............................. Canada 21,000 320,308
Morgan Stanley Growth Fund ............................ India 6,800 1,804
Mutual Risk Management Ltd. ........................... Bermuda 23,350 404,247
----------
1,728,747
----------
Food & Household Products 3.4%
Chareon Pokphand Foods Public Co. Ltd., fgn. .......... Thailand 86,273 129,767
Geest PLC ............................................. United Kingdom 44,750 332,626
Hazlewood Foods PLC ................................... United Kingdom 111,770 145,514
Illovo Sugar Ltd. ..................................... South Africa 187,000 136,527
McBride PLC ........................................... United Kingdom 64,100 80,056
Perkins Foods PLC ..................................... United Kingdom 189,240 293,642
----------
1,118,132
----------
Forest Products & Paper .8%
Crown Van Gelder Papierfabrieken NV ................... Netherlands 6,115 89,096
(a) Empaques Ponderosa SA de CV, B ........................ Mexico 151,800 86,051
Munksjo AB ............................................ Sweden 12,995 85,932
----------
261,079
----------
Health & Personal Care 5.8%
Apothekers Cooperatie OPG VA .......................... Netherlands 16,110 409,220
Internatio-Muller NV .................................. Netherlands 5,844 100,832
(a) Medison Co Ltd. ....................................... South Korea 40,000 435,865
Moulin International Holdings Ltd. .................... Hong Kong 2,271,176 195,206
Ono Pharmaceutical Co Ltd. ............................ Japan 12,000 516,044
(a) Skyepharma PLC ........................................ United Kingdom 200,000 263,409
----------
1,920,576
----------
Industrial Components 3.6%
Aalberts Industries NV ................................ Netherlands 20,980 417,291
Sapa AB ............................................... Sweden 14,679 259,405
Weir Group PLC ........................................ United Kingdom 120,900 340,424
Yamato Kogyo Co. Ltd. ................................. Japan 41,000 189,878
----------
1,206,998
----------
Machinery & Engineering 3.3%
Arcadis NV ............................................ Netherlands 39,625 284,870
Fives-Lille Cie De .................................... France 3,984 297,872
Laird Group PLC ....................................... United Kingdom 62,000 227,606
METSO OYJ ............................................. Finland 22,780 275,131
----------
1,085,479
----------
</TABLE>

TIS-8
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SMALLER COMPANIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stocks (cont.)
Merchandising 13.1%
Debenhams PLC ............................................... United Kingdom 109,700 $ 360,784
(a) Dickson Concepts International Ltd. ......................... Hong Kong 339,000 308,763
Giordano International Ltd. ................................. Hong Kong 901,000 1,369,652
Li & Fung Ltd. .............................................. Hong Kong 195,000 975,588
North West Company Fund ..................................... Canada 31,365 245,552
Sa des Galeries Lafayette ................................... France 4,300 875,877
Samas-Groep NV .............................................. Netherlands 11,125 178,087
-----------
4,314,303
-----------
Metals & Mining 3.3%
Arbed SA .................................................... Luxembourg 1,448 133,108
Boehler-Uddeholm AG ......................................... Austria 4,993 175,409
Elkem ASA, A ................................................ Norway 23,850 449,226
Iluka Resources Ltd. ........................................ Australia 110,370 316,818
-----------
1,074,561
-----------
Multi-Industry 2.3%
Amer Group Ltd., A .......................................... Finland 11,300 311,951
Elementis PLC ............................................... United Kingdom 142,000 168,748
Zehnder Holding AG, Br. ..................................... Switzerland 465 284,816
-----------
765,515
-----------
Real Estate .5%
(a) Corporacion Geo SA, Series B ................................ Mexico 100,000 163,560
-----------
Textiles & Apparel 2.1%
Gamma Holding NV ............................................ Netherlands 3,000 115,026
(a) Inner Mongolia Erdos Cashmere Products Co. Ltd., B .......... China 497,000 172,956
(a) Tefron Ltd. ................................................. Israel 19,920 341,130
Yizheng Chemical Fibre Co. Ltd., H .......................... China 326,000 64,821
-----------
693,933
-----------
Transportation 4.6%
(a) Anangel-American Shipholdings Ltd., ADR ..................... Greece 20,000 96,250
(a) Neptune Orient Lines Ltd. ................................... Singapore 269,000 248,930
Orient Overseas International Ltd. .......................... Hong Kong 825,000 415,395
Stagecoach Holdings PLC ..................................... United Kingdom 300,870 333,632
Stolt Nielsen SA, ADR ....................................... Norway 15,000 269,063
(a) Transportes Azkar SA ........................................ Spain 16,785 140,781
-----------
1,504,051
-----------
Utilities Electrical & Gas .6%
Guangdong Electric Power Development Co Ltd., B ............. China 338,520 213,657
-----------
Total Common Stocks (Cost $22,211,613)....................... 25,776,823
-----------
Preferred Stocks 4.0%
Confab Industrial SA, pfd. .................................. Brazil 212,800 125,038
Fertilizantes Fosfatados SA, pfd. ........................... Brazil 12,895,000 38,599
Hugo Boss AG, pfd. .......................................... Germany 2,430 423,929
Telemig Celular Participacoes SA, ADR, pfd. ................. Brazil 6,285 449,378
Weg SA, pfd. ................................................ Brazil 507,200 275,530
-----------
Total Preferred Stocks (Cost $1,024,718)..................... 1,312,474
-----------
</TABLE>

TIS-9
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SMALLER COMPANIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
PRINCIPAL
COUNTRY AMOUNT VALUE
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Short Term Investments (Cost $4,431,409) 13.4%
U.S. Treasury Bills, 5.65% - 5.66%, with maturities to 9/07/00 .......... United States $4,480,000 $ 4,433,516
-----------
Total Investments before Repurchase Agreement (Cost $27,667,740) 31,522,813
-----------
(b) Repurchase Agreement (Cost $600,000) 1.8%
HSBC Securities Inc., 6.80%, 7/03/00 (Maturity Value $600,340)
Collateralized by U.S. Treasury Notes and Bonds ......................... United States 600,000 600,000
-----------
Total Investments (Cost $28,267,740) 97.2%............................... 32,122,813
Other Assets, less Liabilities 2.8% ..................................... 910,314
-----------
Total Net Assets 100.0% ................................................. $33,033,127
===========
</TABLE>

(a)Non-income producing
(b)At June 30, 2000, all repurchase agreements held by the Fund had been entered
into on that date.

See notes to financial statements.

TIS-10
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SMALLER COMPANIES FUND

Financial Statements

Statement of Assets and Liabilities
June 30, 2000 (unaudited)

See notes to financial statements.

TIS-11
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SMALLER COMPANIES FUND

Financial Statements (continued)

Statement of Operations
for the six months ended June 30, 2000 (unaudited)

See notes to financial statements.

TIS-12
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SMALLER COMPANIES FUND

Financial Statements (continued)

Statements of Changes in Net Assets
for the six months ended June 30, 2000 (unaudited) and the year ended December
31, 1999

See notes to financial statements.

TIS-13
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SMALLER COMPANIES FUND

Notes to Financial Statements (unaudited)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The following summarizes the Fund's significant accounting policies.

a. Security Valuation

b. Foreign Currency Translation

c. Income Taxes

d. Security Transactions, Investment Income, Expenses and Distributions

TIS-14
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SMALLER COMPANIES FUND

Notes to Financial Statements (unaudited) (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

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

e. Accounting Estimates

2. SHARES OF BENEFICIAL INTEREST

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

At June 30, 2000, there were an unlimited number of shares authorized ($.01 par
value). Transactions in the Fund's shares were as follows:

(a)For the period January 6, 1999 (effective date) to December 31, 1999 for
Class 2.

3. TRANSACTIONS WITH AFFILIATES

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

<TABLE>
<CAPTION>
Entity Affiliation
--------------------------------------------------------------------------------------
<S> <C>
Franklin Templeton Services, Inc. (FT Services) Administrative manager
Templeton Investment Counsel, Inc. (TICI) Investment manager
Franklin/Templeton Distributors, Inc. (Distributors) Principal underwriter
Franklin/Templeton Investor Services, Inc. (Investor Services) Transfer agent
</TABLE>

TIS-15
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SMALLER COMPANIES FUND

Notes to Financial Statements (unaudited) (continued)

3. TRANSACTIONS WITH AFFILIATES (cont.)

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

The Fund pays administrative fees to FT Services based on the average net
assets of the Fund as follows:

Fees are further reduced on net assets over $1.2 billion.

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

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

Included in professional fees are legal fees of $45 that were paid to a law
firm in which a partner of that firm was an officer of the Fund.

4. INCOME TAXES

At December 31, 1999, the Fund had tax basis capital losses, which may be
carried over to offset future capital gains. Such losses expire as follows:

Capital loss carryover expiring in:
2006 .............................. $2,543,971
2007 .............................. 1,878,044
----------
$4,422,015
==========

At December 31, 1999, the Fund had deferred capital losses of $115,743
occurring subsequent to October 31, 1999. For tax purposes, such loss will be
reflected in the year ending December 31, 2000.

At June 30, 2000, the net unrealized appreciation based on the cost of
investments for income tax purposes of $28,288,835 was as follows:

Unrealized appreciation ............. $ 6,852,747
Unrealized depreciation ............. (3,018,769)
------------
Net unrealized appreciation ......... $ 3,833,978
============

5. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities) for the
period ended June 30, 2000 aggregated $6,525,233 and $4,769,247, respectively.

TIS-16
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON INTERNATIONAL SMALLER COMPANIES FUND

Tax Designation

The following table provides a breakdown by country of foreign source income
and foreign taxes paid, as designated by the Fund, to Class 1 and Class 2
shareholders of record on April 26, 2000.

<TABLE>
<CAPTION>
Class 1 Class 2
----------------------------------------------------------
Foreign Tax Foreign Foreign Tax Foreign
Paid Source Income Paid Source Income
Country Per Share Per Share Per Share Per Share
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Argentina .............. 0.0000 0.0024 0.0000 0.0024
Australia .............. 0.0024 0.0225 0.0024 0.0223
Austria ................ 0.0010 0.0046 0.0010 0.0046
Bermuda ................ 0.0000 0.0005 0.0000 0.0004
Brazil ................. 0.0040 0.0208 0.0040 0.0206
Canada ................. 0.0025 0.0119 0.0025 0.0118
China .................. 0.0000 0.0096 0.0000 0.0096
Colombia ............... 0.0000 0.0006 0.0000 0.0006
Denmark ................ 0.0004 0.0021 0.0004 0.0021
Finland ................ 0.0001 0.0006 0.0001 0.0006
France ................. 0.0007 0.0034 0.0007 0.0033
Germany ................ 0.0004 0.0029 0.0004 0.0029
Hong Kong .............. 0.0000 0.0296 0.0000 0.0294
India .................. 0.0000 0.0043 0.0000 0.0042
Indonesia .............. 0.0004 0.0021 0.0004 0.0021
Japan .................. 0.0003 0.0013 0.0003 0.0013
Luxembourg ............. -0.0001 0.0006 -0.0001 0.0006
Netherlands ............ 0.0051 0.0246 0.0051 0.0244
New Zealand ............ 0.0005 0.0022 0.0005 0.0022
Norway ................. 0.0020 0.0138 0.0020 0.0136
South Africa ........... 0.0000 0.0040 0.0000 0.0040
South Korea ............ 0.0002 0.0008 0.0002 0.0008
Spain .................. 0.0027 0.0132 0.0027 0.0131
Sweden ................. 0.0024 0.0113 0.0024 0.0112
Switzerland ............ 0.0016 0.0075 0.0016 0.0075
Thailand ............... 0.0002 0.0018 0.0002 0.0018
United Kingdom ......... 0.0080 0.0534 0.0080 0.0530
----------------------------------------------------
TOTAL .................. $ 0.0348 $0.2524 $ 0.0348 $0.2504
====================================================
</TABLE>

Shareholders are advised to check with their tax advisors for information on
the treatment of these amounts on their individual income tax returns.

TIS-17
<PAGE>

TEMPLETON PACIFIC GROWTH SECURITIES FUND

TP-1
<PAGE>

Top 10 Holdings
Templeton Pacific Growth
Securities Fund
6/30/00

Company % of Total
Sector, Country Net Assets
-----------------------------------------
Fuji Heavy Industries Ltd. 4.7%
Industrial Components,
Japan

East Japan Railway Co. 3.6%
Transportation, Japan

Swire Pacific Ltd. 3.5%
Multi-Industry,
Hong Kong

Nisshinbo Industries Inc. 3.4%
Textiles & Apparel,
Japan

City Developments Ltd. 3.4%
Real Estate, Singapore

Overseas Union Bank Ltd. 3.2%
Banking, Singapore

Commerce Asset-
Holding Bhd. 3.1%
Financial Services,
Malaysia

Malaysian International
Shipping Corp. 2.9%
Transportation, Malaysia

Cheung Kong
Holdings Ltd. 2.9%
Multi-Industry,
Hong Kong

Kurita Water
Industries Ltd. 2.8%
Machinery &
Engineering, Japan

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

TP-2
<PAGE>

We thank you for your support and look forward to serving your investment needs
in the future.

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance
is no guarantee of future results, these insights may help you understand our
investment and management philosophy.

TP-3
<PAGE>

Templeton Pacific Growth
Securities Fund - Class 2

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

PERFORMANCE SUMMARY AS OF 6/30/00

Templeton Pacific Growth Securities Fund - Class 2 delivered a -11.86%
cumulative total return for the six-month period ended 6/30/00. Total return of
Class 2 shares represents the cumulative or 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.

<TABLE>
<CAPTION>
Templeton Pacific Growth Securities Fund - Class 2*
Periods ended 6/30/00
Since Since Class 2
Inception Inception
1-Year 5-Year (1/27/92) (1/6/99)
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return -6.10% -4.69% +0.84% +12.32%
Cumulative Total Return -6.10% -21.34% +7.31% +18.76%
Value of $10,000 Investment $9,390 $7,866 $10,731 $11,876
</TABLE>

Ongoing stock market volatility can dramatically change the Fund's short-term
performance; current results may be lower.

Past performance does not guarantee future results.

TP-4
<PAGE>

FRANKLIN GLOBAL COMMUNICATIONS SECURITIES FUND

This chart in pie chart format shows the geographic distribution of Franklin
Global Communications Securities Fund as a percentage of total net assets on
6/30/00.

North America 77.0%

Europe 12.9%

Asia 6.1%

Short-Term Investments
& Other Net Assets 4.0%

FGC-1
<PAGE>

Top 10 Holdings
Franklin Global Communications
Securities Fund
6/30/00

Company % of Total
Sector, Country Net Assets
---------------------------------------
SBC Communications Inc. 3.6%
Major U.S.
Telecommunications,
U.S.

VoiceStream 3.5%
Wireless Corp.
Cellular Telephone, U.S.

GTE Corp. 3.4%
Major U.S.
Telecommunications,
U.S.

U.S. West Inc. 3.0%
Major U.S.
Telecommunications,
U.S.

Redback Networks Inc. 2.9%
Telecommunications
Equipment, U.S.

Qwest Communications 2.7%
International Inc.
Other
Telecommunications,
U.S.

Time Warner Telecom Inc. 2.6%
Other
Telecommunications,
U.S.

BellSouth Corp. 2.5%
Major U.S.
Telecommunications,
U.S.

NEXTLINK 2.5%
Communications Inc.
Other
Telecommunications,
U.S.

Telecom Italia SpA 2.3%
Other
Telecommunications,
Italy

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

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance
does not guarantee future results, these insights may help you understand our
investment and management philosophy.

FGC-2
<PAGE>

PERFORMANCE SUMMARY AS OF 6/30/00

Franklin Global Communications Securities Fund - Class 2 delivered a -3.35%
cumulative total return for the six-month period ended 6/30/00. Total return of
Class 2 shares represents the cumulative or 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.

<TABLE>
<CAPTION>
Franklin Global Communications Securities Fund - Class 2*
Periods ended 6/30/00
Since Since Class 2
Inception Inception
1-Year 5-Year 10-Year (1/24/89) (1/6/99)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Average Annual Total Return +23.41% +18.76% +14.07% +13.74% +19.80%
Cumulative Total Return +23.41% +136.27% +273.15% +335.75% +30.63%
Value of $10,000 Investment $12,341 $23,627 $37,315 $43,575 $13,063
</TABLE>

Franklin Global
Communications
Securities Fund - Class 2

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

Past performance does not guarantee future results.

FGC-3
<PAGE>

FRANKLIN GROWTH AND INCOME SECURITIES FUND

FGI-1
<PAGE>

Top 10 Holdings
Franklin Growth and Income
Securities Fund
6/30/00

Company % of Total
Sector Net Assets
-----------------------------------------
AT&T Corp. 2.8%
Telecommunications

U.S. West Inc. 2.5%
Telecommunications

GTE Corp. 2.5%
Telecommunications

Philip Morris Cos. Inc. 2.3%
Consumer Non-Durables

SBC Communications Inc. 2.2%
Telecommunications

Abbott Laboratories 2.1%
Health Technology

Baxter International Inc. 2.0%
Health Technology

Bristol-Myers Squibb Co. 1.7%
Health Technology

Conoco Inc., B 1.7%
Energy Minerals

Texaco Inc. 1.7%
Energy Minerals

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

FGI-2
<PAGE>

FGI-3
<PAGE>

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance
is no guarantee of future results, these insights may help you understand our
investment and management philosophy.

FGI-4
<PAGE>

PERFORMANCE SUMMARY AS OF 6/30/00

Franklin Growth and Income Securities Fund - Class 2 delivered a +1.67%
cumulative total return for the six-month period ended 6/30/00. Total return of
Class 2 shares represents the cumulative or 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.

<TABLE>
<CAPTION>
Franklin Growth and Income Securities Fund - Class 2*
Periods ended 6/30/00
Since Since Class 2
Inception Inception
1-Year 5-Year 10-Year (1/24/89) (1/6/99)
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Average Annual Total Return -4.82% +13.32% +11.17% +10.36% +0.53%
Cumulative Total Return -4.82% +86.88% +188.44% +208.44% +0.79%
Value of $10,000 Investment $9,518 $18,688 $28,844 $30,844 $10,079
</TABLE>

Ongoing stock market volatility can dramatically change the Fund's short-term
performance; current results may be lower.

Past performance does not guarantee future results.

Franklin Growth and
Income Securities Fund
Class 2

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

FGI-5
<PAGE>

FRANKLIN INCOME SECURITIES FUND

FI-1
<PAGE>

Top Five Stock Holdings
Franklin Income Securities Fund
6/30/00

Company % of Total
Sector Net Assets
-----------------------------------------
Philip Morris Cos. Inc. 6.0%
Consumer Non-Durables

Florida Progress Corp. 1.9%
Utilities

American Electric Power 1.8%
Co. Inc.
Utilities

Entergy Corp. 1.5%
Utilities

Public Service Enterprise 1.2%
Group Inc.
Utilities

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

Top Five Bond Holdings
Franklin Income Securities Fund
6/30/00
% of Total
Issuer Net Assets
------------------------------------------
Conproca SA, SF 1.4%

Consoltex Group Inc. 1.4%

Playtex Family Products
Corp. 1.2%

Hartmarx Corp. 1.0%

Nextel Communications
Inc. 0.9%

FI-2
<PAGE>

strong performance, we sought to maintain a stable sector weighting throughout
the period through selective security sales and participation in
company-sponsored tender offers.

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance
is no guarantee of future results, these insights may help you understand our
investment and management philosophy.

FI-3
<PAGE>

Franklin Income
Securities Fund - Class 2

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

PERFORMANCE SUMMARY AS OF 6/30/00

Franklin Income Securities Fund - Class 2 delivered a +6.39% cumulative total
return for the six-month period ended 6/30/00. Total return of Class 2 shares
represents the cumulative or 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.

<TABLE>
<CAPTION>
Franklin Income Securities Fund - Class 2*
Periods ended 6/30/00
Since Since Class 2
Inception Inception
1-Year 5-Year 10-Year (1/24/89) (1/6/99)
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Average Annual Total Return +2.49% +8.55% +10.52% +10.09% +2.20%
Cumulative Total Return +2.49% +50.69% +172.02% +200.03% +3.27%
Value of $10,000 Investment $10,249 $15,069 $27,202 $30,003 $10,327
</TABLE>

Ongoing stock market volatility can dramatically change the Fund's short-term
performance; current results may be lower.

Past performance does not guarantee future results.

FI-4
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN INCOME SECURITIES FUND

Financial Highlights

FI-5
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN INCOME SECURITIES FUND

Financial Highlights (continued)

<TABLE>
<CAPTION>
Class 2
---------------------------------------
Six Months Ended
June 30, 2000 Year Ended
(unaudited) December 31, 1999(d)
---------------------------------------
<S> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period ................ $14.65 $17.07
---------------------------------------
Income from investment operations:
Net investment income(a) ........................... .55 1.10
Net realized and unrealized gains (losses) ......... .34 (1.53)
---------------------------------------
Total from investment operations .................... .89 (.43)
---------------------------------------
Less distributions from:
Net investment income .............................. (1.47) (1.46)
Net realized gains ................................. (.71) (.53)
---------------------------------------
Total distributions ................................. (2.18) (1.99)
---------------------------------------
Net asset value, end of period ...................... $13.36 $ 14.65
=======================================
Total return(b) ..................................... 6.39% (2.93%)

See notes to financial statements.

FI-6
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN INCOME SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited)

FI-7
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN INCOME SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stocks (cont.)
Utilities (cont.)
Northern States Power Co. ........................................... United States 182,800 $ 3,690,275
PECO Energy Co. ..................................................... United States 200,000 8,062,500
PG&E Corp. .......................................................... United States 310,000 7,633,750
Potomac Electric Power Co. .......................................... United States 210,000 5,250,000
Public Service Enterprise Group Inc. ................................ United States 235,000 8,136,875
Reliant Energy Inc. ................................................. United States 235,000 6,947,188
SCANA Corp. ......................................................... United States 56,792 1,370,107
Sempra Energy ....................................................... United States 292,810 4,977,770
Sierra Pacific Resources ............................................ United States 145,000 1,821,563
Southern Co. ........................................................ United States 270,000 6,294,375
TXU Corp. ........................................................... United States 265,000 7,817,500
Western Resources Inc. .............................................. United States 215,000 3,332,500
------------
146,163,485
------------
Total Common Stocks (Cost $226,328,474).............................. 245,231,184
------------
Preferred Stocks .9%
Non-Energy Minerals .3%
Freeport-McMoran Copper & Gold Inc., 0.00%, pfd. .................... United States 108,800 2,148,800
------------
Process Industries .6%
Asia Pulp & Paper Co. Ltd., 12.00%, 2/15/04 ......................... Indonesia 7,073,000 3,571,865
------------
Total Preferred Stocks (Cost $9,975,268)............................. 5,720,665
------------
Convertible Preferred Stocks 12.3%
Energy Minerals 3.9%
(a) Chesapeake Energy Corp., 7.00%, cvt. pfd., 144A ..................... United States 85,000 5,163,750
Enron Corp., 7.00%, cvt. pfd. ....................................... United States 97,700 3,028,700
Kerr-McGee Corp., 5.50%, cvt. pfd. .................................. United States 138,800 6,905,300
Lomak Financing Trust, 5.75%, cvt. pfd. ............................. United States 140,000 2,765,000
Newfield Financial Trust I, 6.50%, cvt. pfd. ........................ United States 72,600 4,319,700
Nuevo Financing I, 5.75%, cvt. pfd., A .............................. United States 140,000 3,570,000
------------
25,752,450
------------
Industrial Services .9%
Weatherford International Inc., 5.00%, cvt. pfd., 144A .............. United States 125,000 5,750,000
------------
Non-Energy Minerals 1.0%
Battle Mountain Gold Co., $3.25, cvt. pfd............................ United States 66,300 1,955,850
Hecla Mining Co., 7.00%, cvt. pfd., B ............................... United States 70,000 1,347,500
Kinam Gold Inc., $3.75, cvt. pfd., B................................. Canada 150,000 3,375,000
------------
6,678,350
------------
Process Industries .1%
Georgia-Pacific Corp., 7.50%, cvt. pfd. ............................. United States 30,000 960,000
------------
Real Estate 5.2%
Apartment Investment & Management Co., 8.00%, cvt. pfd., K .......... United States 160,000 4,360,000
Archstone Communities Trust, $1.75, cvt. pfd., A..................... United States 200,000 6,200,000
Glenborough Realty Trust Inc., 7.75%, cvt. pfd., A .................. United States 365,000 6,296,250
Host Marriott Corp., 6.75%, cvt. pfd. ............................... United States 110,000 3,719,375
Innkeepers USA Trust, 8.625%, cvt. pfd., A .......................... United States 175,000 2,931,250
ProLogis Trust, 7.00%, cvt. pfd., B ................................. United States 135,000 3,678,750
Reckson Associates Realty Corp., 7.625%, cvt. pfd., A ............... United States 180,000 3,993,750
Vornado Realty Trust, 6.50%, cvt. pfd., A ........................... United States 60,000 3,108,750
------------
34,288,125
------------
Transportation .4%
Union Pacific Capital Trust, 6.25%, cvt. pfd. ....................... United States 70,000 2,782,500
------------
</TABLE>

FI-8
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN INCOME SECURITIES FUND

FI-9
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN INCOME SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
PRINCIPAL
COUNTRY AMOUNT* VALUE
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bonds (cont.)
Health Technology .7%
Dade International Inc., senior sub. note, B, 11.125%, 5/01/06 ................... United States $ 3,000,000 $ 1,695,000
ICN Pharmaceuticals Inc., senior note, B, 9.25%, 8/15/05 ......................... United States 3,000,000 2,925,000
-------------
4,620,000
-------------
Industrial Services 1.0%
Allied Waste North America Inc., senior sub. note, 10.00%, 8/01/09 ............... United States 4,000,000 3,360,000
First Wave Marine Inc., senior note, 11.00%, 2/01/08 ............................. United States 1,000,000 595,000
Great Lakes Dredge & Dock Corp., senior sub. note, 11.25%, 8/15/08 ............... United States 1,000,000 1,003,750
R&B Falcon Corp., senior note, B, 6.50%, 4/15/03 ................................. United States 2,000,000 1,860,000
-------------
6,818,750
-------------
Process Industries 5.4%
Applied Extrusion Technology, senior note, B, 11.50%, 4/01/02 .................... United States 6,000,000 6,060,000
Consoltex Group Inc., senior sub. note, B, 11.00%, 10/01/03 ...................... United States 10,000,000 9,150,000
Four M Corp., senior note, B, 12.00%, 6/01/06 .................................... United States 2,000,000 1,882,500
Huntsman ICI Chemicals, zero cpn., 12/31/09 ...................................... United States 7,500,000 2,437,500
(b) Packaging Resources Inc., senior note, 11.625%, 5/01/03 .......................... United States 3,000,000 1,815,000
Printpack Inc., senior sub. note, B, 10.625%, 8/15/06 ............................ United States 4,000,000 3,740,000
(b) RBX Corp., senior sub. note, B, 11.25%, 10/15/05 ................................. United States 10,000,000 1,500,000
Riverwood International, senior sub. note, 10.875%, 4/01/08 ...................... United States 4,500,000 3,982,500
Tjiwi Kimia Finance Mauritius, senior note, 10.00%, 8/01/04 ...................... Indonesia 8,000,000 5,280,000
-------------
35,847,500
-------------
Producer Manufacturing 1.7%
Collins & Aikman Products, senior sub. note, 11.50%, 4/15/06 ..................... United States 4,000,000 3,850,000
Nortek Inc., senior sub. note, 9.875%, 3/01/04 ................................... United States 2,000,000 1,915,000
Outsourcing Services Group Inc., senior sub. note, 10.875%, 3/01/06 .............. United States 2,000,000 1,610,000
Thermadyne Industries Inc., sub. note, 10.75%, 11/01/03 .......................... United States 2,696,000 2,500,540
Trench Electric & Trench Inc., senior sub. deb., 10.25%, 12/15/07 ................ Canada 2,350,000 1,656,750
-------------
11,532,290
-------------
Technology Services .3%
PSINet Inc., senior note, 10.50%, 12/01/06 ....................................... United States 2,000,000 1,850,000
-------------

FI-10
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN INCOME SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
PRINCIPAL
COUNTRY AMOUNT* VALUE
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Convertible Bonds 6.6%
Electronic Technology 1.0%
Trans-Lux Corp., cvt. sub. note, 7.50%, 12/01/06 .......................... United States $ 8,000,000 $ 6,480,000
------------
Energy Minerals 1.0%
Kerr McGee Corp., cvt., 7.50%, 5/15/14 .................................... United States 1,246,000 1,193,045
Swift Energy Co., cvt. sub. note, 6.25%, 11/15/06 ......................... United States 5,500,000 5,348,750
------------
6,541,795
------------
Health Services .3%
(b) Continucare Corp., cvt. sub. note, 144A, 8.00%, 10/31/02 .................. United States 9,500,000 1,900,000
------------
Industrial Services .5%
Key Energy Services Inc., cvt., 5.00%, 9/15/04 ............................ United States 3,200,000 2,542,336
Parker Drilling Co., cvt. sub. note, 5.50%, 8/01/04 ....................... United States 1,000,000 822,500
------------
3,364,836
------------
Non-Energy Minerals 1.6%
Ashanti Capital Ltd., cvt., 5.50%, 3/15/03 ................................ Ghana 5,000,000 3,125,000
Coeur D'Alene Mines Corp., cvt. senior sub. deb., 6.00%, 6/10/02 .......... United States 100,000 65,000
Coeur D'Alene Mines Corp., cvt. sub. deb., 6.375%, 1/31/04 ................ United States 6,000,000 2,730,000
Trizec Hahn Corp., cvt. senior deb., 3.00%, 1/29/21 ....................... Canada 7,000,000 4,634,210
------------
10,554,210
------------
Process Industries .3%
APP Finance VI Mauritius Ltd., cvt., zero cpn., 11/18/12 .................. Indonesia 11,500,000 1,940,625
------------
Producer Manufacturing .3%
Exide Corp., cvt. senior sub. note, 144A, 2.90%, 12/15/05 ................. United States 5,000,000 2,325,000
------------
Real Estate 1.6%
Macerich Co., cvt. sub. deb., 144A, 7.25%, 12/15/02 ....................... United States 6,000,000 5,370,000
Meristar Hospitality Corp., cvt. sub. note, 4.75%, 10/15/04 ............... United States 6,500,000 5,061,875
------------
10,431,875
------------
Total Convertible Bonds (Cost $59,909,011)................................. 43,538,341
------------
U.S. Government Securities 1.8%
FHLMC, 6.875%, 1/15/05 .................................................... United States 7,000,000 6,963,565
U.S. Treasury Note, 5.875%, 11/15/04 ...................................... United States 5,000,000 4,926,565
------------
Total U.S. Government Securities (Cost $11,742,369)........................ 11,890,130
------------
Foreign Government and Agency Securities 12.9%
ESCOM, E168, utility deb., 11.00%, 6/01/08 ................................ South Africa 27,000,000 ZAR 3,325,218
Republic of Argentina, L, FRN, 6.00%, 3/31/23 ............................. Argentina 20,900,000 13,846,250
Republic of Argentina, 11.75%, 6/15/15 .................................... Argentina 13,441,009 12,187,635
Republic of Brazil, 11.625%, 4/15/04 ...................................... Brazil 2,000,000 2,027,500
Republic of Brazil, FRN, 6.00%, 4/15/24 ................................... Brazil 29,000,000 18,958,750
Republic of Brazil, A, FRN, 7.00%, 1/01/01 ................................ Brazil 2,460,000 2,463,075
Republic of Brazil, L, FRN, 7.375%, 4/15/06 ............................... Brazil 14,880,000 13,568,700
Republic of Bulgaria, FRN, 7.063%, 7/28/11 ................................ Bulgaria 1,000,000 792,500
Republic of Korea, 8.875%, 4/15/08 ........................................ Korea (South) 6,000,000 6,187,200
Republic of South Africa, 12.00%, 2/28/05 ................................. South Africa 23,000,000 ZAR 3,213,141
Republic of Turkey, 12.375%, 6/15/09 ...................................... Turkey 7,000,000 7,437,500
Russia Ministry of Finance, 11.75%, 6/10/03 ............................... Russia 450,000 417,938
Russia Ministry of Finance, Reg S, 10.00%, 6/26/07 ........................ Russia 1,200,000 930,000
------------
Total Foreign Government and Agency Securities (Cost $79,899,076).......... 85,355,407
------------
Total Long Term Investments (Cost $691,761,566) 98.2%...................... 651,437,209
------------
</TABLE>

FI-11
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN INCOME SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
PRINCIPAL
COUNTRY AMOUNT* VALUE
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(c) Repurchase Agreement .4%
Joint Repurchase Agreement, 6.563%, 7/03/00 (Maturity Value $2,720,704)
(Cost $$2,719,217) United States $ 2,719,217 $2,719,217
Banc of America Securities LLC
Barclays Capital Inc.
Bear, Stearns & Co. Inc.
Donaldson, Lufkin & Jenrette Securities Corp.
Dresdner Kleinwort Benson, North America LLC
Goldman, Sachs & Co.
Greenwich Capital Markets Inc.
Lehman Brothers, Inc.
Nesbitt Burns Securities Inc.
Paine Webber Inc.
Paribas Corp.
UBS Warburg
Collateralized by U.S. Treasury Bills and Notes

Currency Abbreviations:

ZAR-South African Rand

See notes to financial statements.

FI-12
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN INCOME SECURITIES FUND

Financial Statements

Statement of Assets and Liabilities
June 30, 2000 (unaudited)

See notes to financial statements.

FI-13
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN INCOME SECURITIES FUND

Financial Statements (continued)

Statement of Operations
for the six months ended June 30, 2000 (unaudited)

See notes to financial statements.

FI-14
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN INCOME SECURITIES FUND

Financial Statements (continued)

Statements of Changes in Net Assets
for the six months ended June 30, 2000 (unaudited) and the year ended December
31, 1999

See notes to financial statements.

FI-15
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN INCOME SECURITIES FUND

Notes to Financial Statements (unaudited)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The following summarizes the Fund's significant accounting policies.

a. Security Valuation

b. Foreign Currency Translation

c. Income Taxes

d. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and
losses on security transactions are determined on a specific identification
basis. Interest income and estimated expenses are accrued daily. Bond discount
is amortized on an income tax basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.

FI-16
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN INCOME SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

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

e. Accounting Estimates

2. SHARES OF BENEFICIAL INTEREST

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

At June 30, 2000, there were an unlimited number of shares authorized ($.01 par
value). Transactions in the Fund's shares were as follows:

(a)For the period January 6, 1999 (effective date) to December 31, 1999 for
Class 2.

3. TRANSACTIONS WITH AFFILIATES

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

<TABLE>
<CAPTION>
Entity Affiliation
--------------------------------------------------------------------------------------
<S> <C>
Franklin Templeton Services, Inc. (FT Services) Administrative manager
Franklin Advisers, Inc. (Advisers) Investment manager
Franklin/Templeton Distributors, Inc. (Distributors) Principal underwriter
Franklin/Templeton Investor Services, Inc. (Investor Services) Transfer agent
</TABLE>

FI-17
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN INCOME SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

3. TRANSACTIONS WITH AFFILIATES (cont.)

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

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

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

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

Included in professional fees are legal fees of $2,203 that were paid to a law
firm in which a partner of that firm was an officer of the Fund.

4. INCOME TAXES

At December 31, 1999, the Fund has deferred capital losses occurring subsequent
to October 31, 1999 of $799,463. For tax purposes, such losses will be
reflected in the year ending December 31, 2000.

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

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

At June 30, 2000, the net unrealized depreciation based on the cost of
investments for income tax purposes of $694,510,439 was as follows:

Unrealized appreciation ............. $ 66,405,603
Unrealized depreciation ............. (106,759,616)
--------------
Net unrealized depreciation ......... $ (40,354,013)
==============

5. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities) for the
period ended June 30, 2000 aggregated $98,673,765 and $230,318,829,
respectively.

FI-18
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN INCOME SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

6. CREDIT RISK AND DEFAULTED SECURITIES

For financial reporting purposes, the Fund discontinues accruing income on
defaulted bonds and provides an estimate for losses on interest receivable.

FI-19
<PAGE>

FRANKLIN NATURAL RESOURCES SECURITIES FUND

FN-1
<PAGE>

Top 10 Holdings
Franklin Natural Resources
Securities Fund
6/30/00

Company % of Total
Sector, Country Net Assets
-------------------------------------------
Chesapeake Energy Corp. 4.0%
Energy Minerals, U.S.

Conoco Inc., B 3.3%
Energy Minerals, U.S.

Weatherford
International Inc. 3.2%
Industrial Services, U.S.

Transocean Sedco
Forex Inc. 3.1%
Industrial Services, U.S.

EOG Resources Inc. 3.1%
Energy Minerals, U.S.

Baker Hughes Inc. 2.5%
Industrial Services, U.S.

IMC Global/Merrill Lynch,
6.25%, cvt. pfd., IGL 2.4%
Finance, U.S.

Pennaco Energy Inc. 2.4%
Energy Minerals, U.S.

Pohang Iron & Steel Co.
Ltd., ADR 2.4%
Non-Energy Minerals,
Korea

Superior Energy
Services Inc. 2.4%
Industrial Services, U.S.

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

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance
is no guarantee of future results, these insights may help you understand our
investment and management philosophy.

FN-2
<PAGE>

PERFORMANCE SUMMARY AS OF 6/30/00

Franklin Natural Resources Securities Fund - Class 2 delivered a +20.69%
cumulative total return for the six-month period ended 6/30/00. Total return of
Class 2 shares represents the cumulative or 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.

<TABLE>
<CAPTION>
Franklin Natural Resources Securities Fund - Class 2*
Periods ended 6/30/00
Since Since Class 2
Inception Inception
1-Year 5-Year 10-Year (1/24/89) (1/6/99)
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Average Annual Total Return +23.42% +0.31% +3.17% +3.94% +33.68%
Cumulative Total Return +23.42% +1.54% +36.60% +55.45% +53.64%
Value of $10,000 Investment $12,342 $10,154 $13,660 $15,545 $15,364
</TABLE>

Franklin Natural
Resources Securities
Fund - Class 2

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

Past performance does not guarantee future results.

FN-3
<PAGE>

FRANKLIN REAL ESTATE FUND

Sector Breakdown
Franklin Real Estate Fund
6/30/00

% of Total
Sector Net Assets
---------------------------------------
Diversified 26.8%

Office 21.5%

Apartment 14.8%

Retail 12.1%

Hotel 11.1%

Industrial 5.4%

Self Storage 3.7%

Manufactured Housing 1.7%

Health Care 0.4%

Short-Term Investments &
Other Net Assets 2.5%

FRE-1
<PAGE>

Top 10 Holdings
Franklin Real Estate Fund
6/30/00

Security % of Total
Security Type Net Assets
--------------------------------------------
Equity Office Properties 5.7%
Office

Starwood Hotels &
Resorts 5.6%
Hotel

Security Capital Group 4.7%
Diversified

Apartment Investment &
Management 4.7%
Apartment

Equity Residential
Property Trust 4.5%
Apartment

Prologis Trust 4.4%
Industrial

Glenborough Realty Trust 4.3%
Diversified

Meristar Hospitality Corp. 4.0%
Hotel

Liberty Property Trust 3.9%
Diversified

Public Storage Inc. 3.7%
Self Storage

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

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any industry, security or the Fund. Our
strategies and the Fund's portfolio composition will change depending on
market and economic conditions. Although historical performance is no
guarantee of future results, these insights may help you understand our
investment and management philosophy.

FRE-2
<PAGE>

PERFORMANCE SUMMARY AS OF 6/30/00

Franklin Real Estate Fund - Class 2 delivered a +17.11% cumulative total return
for the six-month period ended 6/30/00. Total return of Class 2 shares
represents the cumulative or 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.

<TABLE>
<CAPTION>
Franklin Real Estate Fund - Class 2*
Periods ended 6/30/00
Since Since Class 2
Inception Inception
1-Year 5-Year 10-Year (1/24/89) (1/6/99)
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Average Annual Total Return +4.08% +10.52% +10.97% +9.78% +5.43%
Cumulative Total Return +4.08% +64.91% +183.17% +190.51% +8.14%
Value of $10,000 Investment $10,408 $16,491 $28,317 $29,051 $10,814
</TABLE>

Ongoing stock market volatility can dramatically change the Fund's short-term
performance; current results may be lower.

Franklin Real Estate
Fund - Class 2

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

Past performance does not guarantee future results.

FRE-3
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN REAL ESTATE FUND

Financial Highlights

<TABLE>
<CAPTION>
Class 1
-----------------------------------------------------------------------------------
Six Months Ended Year Ended December 31,
June 30, 2000 ----------------------------------------------------------------
(unaudited) 1999 1998 1997 1996 1995
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $14.92 $19.93 $25.60 $22.15 $17.40 $15.31
----------------------------------------------------------------------------
Income from investment operations:
Net investment income(a)...................... .36 .88 1.45 .72 .79 .78
Net realized and unrealized gains (losses) ... 2.08 (1.77) (5.60) 3.72 4.74 1.83
----------------------------------------------------------------------------
Total from investment operations .............. 2.44 (.89) (4.15) 4.44 5.53 2.61
----------------------------------------------------------------------------
Less distributions from:
Net investment income ........................ (1.15) (1.73) (.94) (.67) (.78) (.52)
Net realized gains ........................... (.69) (2.39) (.58) (.32) -- --
----------------------------------------------------------------------------
Total distributions ........................... (1.84) (4.12) (1.52) (.99) (.78) (.52)
----------------------------------------------------------------------------
Net asset value, end of period ................ $15.52 $14.92 $19.93 $25.60 $22.15 $17.40
============================================================================
Total return(b)................................ 17.28% (6.14%) (16.82%) 20.70% 32.82% 17.53%

FRE-4
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN REAL ESTATE FUND

Financial Highlights (continued)

<TABLE>
<CAPTION>
Class 2
---------------------------------------
Six Months Ended
June 30, 2000 Year Ended
(unaudited) December 31, 1999(d)
---------------------------------------
<S> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period ................ $14.88 $20.21
---------------------------------------
Income from investment operations:
Net investment incomea ............................. .39 1.29
Net realized and unrealized gains (losses) ......... 2.02 (2.50)
---------------------------------------
Total from investment operations .................... 2.41 (1.21)
---------------------------------------
Less distributions from:
Net investment income .............................. (1.15) (1.73)
Net realized gains ................................. (.69) (2.39)
---------------------------------------
Total distributions ................................. (1.84) (4.12)
---------------------------------------
Net asset value, end of period ...................... $15.45 $14.88
=======================================
Total returnb ....................................... 17.11% (7.66%)

See notes to financial statements.

FRE-5
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN REAL ESTATE FUND

Statement of Investments, June 30, 2000 (unaudited)

FRE-6
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN REAL ESTATE FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

See notes to financial statements.

FRE-7
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN REAL ESTATE FUND

Financial Statements

Statement of Assets and Liabilities
June 30, 2000 (unaudited)

See notes to financial statements.

FRE-8
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN REAL ESTATE FUND

Financial Statements (continued)

Statement of Operations
for the six months ended June 30, 2000 (unaudited)

See notes to financial statements.

FRE-9
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN REAL ESTATE FUND

Financial Statements (continued)

Statements of Changes in Net Assets
for the six months ended June 30, 2000 (unaudited) and the year ended December
31, 1999

<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999
---------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income .................................................. $ 3,647,561 $ 10,382,093
Net realized gain (loss) from investments .............................. (4,808,834) 2,394,868
Net unrealized appreciation (depreciation) on investments .............. 25,535,729 (25,421,990)
-----------------------------------
Net increase (decrease) in net assets resulting from operations ....... 24,374,456 (12,645,029)
Distributions to shareholders from:
Net investment income:
Class 1 ............................................................... (10,465,200) (18,056,331)
Class 2 ............................................................... (442,237) (5,537)
Net realized gains:
Class 1 ............................................................... (6,229,113) (25,020,454)
Class 2 ............................................................... (263,710) (7,673)
-----------------------------------
Total distributions to shareholders ..................................... (17,400,260) (43,089,995)
Capital share transactions: (Note 2)
Class 1 ............................................................... (12,925,718) (67,959,433)
Class 2 ............................................................... 6,137,452 2,405,793
-----------------------------------
Total capital share transactions ........................................ (6,788,266) (65,553,640)
Net increase (decrease) in net assets ................................. 185,930 (121,288,664)
Net assets:
Beginning of period ..................................................... 161,001,743 282,290,407
-----------------------------------
End of period ........................................................... $ 161,187,673 $ 161,001,743
===================================
Undistributed net investment income included in net assets:
End of period ........................................................... $ 3,969,322 $ 11,229,198
===================================
</TABLE>

See notes to financial statements.

FRE-10
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN REAL ESTATE FUND

Notes to Financial Statements (unaudited)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The following summarizes the Fund's significant accounting policies.

a. Security Valuation

b. Income Taxes

c. Security Transactions, Investment Income, Expenses and Distributions

d. Accounting Estimates

2. SHARES OF BENEFICIAL INTEREST

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

FRE-11
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN REAL ESTATE FUND

Notes to Financial Statements (unaudited) (continued)

2. SHARES OF BENEFICIAL INTEREST (cont.)

At June 30, 2000, there were an unlimited number of shares authorized ($.01 par
value). Transactions in the Fund's shares were as follows:

(a)For the period January 6, 1999 (effective date) to December 31, 1999 for
Class 2.

3. TRANSACTIONS WITH AFFILIATES

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

<TABLE>
<CAPTION>
Entity Affiliation
---------------------------------------------------------------------------------------
<S> <C>
Franklin Templeton Services, Inc. (FT Services) Administrative manager
Franklin Advisers, Inc. (Advisers) Investment manager
Franklin/Templeton Distributors, Inc. (Distributors) Principal underwriter
Franklin/Templeton Investor Services, Inc. (Investor Services) Transfer agent
</TABLE>

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

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

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

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

Included in professional fees are legal fees of $516 that were paid to a law
firm in which a partner of that firm was an officer of the Fund.

FRE-12
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN REAL ESTATE FUND

Notes to Financial Statements (unaudited) (continued)

4. INCOME TAXES

At June 30, 2000, the net unrealized appreciation based on the cost of
investments for income tax purposes of $144,226,248 was as follows:

Unrealized appreciation ............. $ 30,484,102
Unrealized depreciation ............. (14,300,759)
-------------
Net unrealized appreciation ......... $ 16,183,343
=============

5. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities) for the
period ended June 30, 2000 aggregated $11,050,698 and $28,226,604,
respectively.

FRE-13
<PAGE>

FRANKLIN RISING DIVIDENDS SECURITIES FUND

FRD-1
<PAGE>

Top 10 Stock Holdings
Franklin Rising Dividends
Securities Fund
6/30/00

Company % of Total
Sector Net Assets
-------------------------------------------
Family Dollar Stores Inc. 7.0%
Retail Trade

Alberto-Culver Co. 4.5%
Consumer Non-Durables

West Pharmaceutical
Services Inc. 4.5%
Health Technology

Leggett & Platt Inc. 4.3%
Consumer Durables

Cohu Inc. 4.2%
Electronic Technology

Teleflex Inc. 3.6%
Producer Manufacturing

Reynolds & Reynolds Co. 3.5%
Technology Services

Washington Mutual Inc. 3.3%
Finance

Bemis Co. Inc. 3.0%
Process Industries

National Commerce
Bancorp. 2.7%
Finance

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

FRD-2
<PAGE>

FRD-3
<PAGE>

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance
is no guarantee of future results, these insights may help you understand our
investment and management philosophy.

FRD-4
<PAGE>

PERFORMANCE SUMMARY AS OF 6/30/00

Franklin Rising Dividends Securities Fund - Class 2 delivered a -1.18%
cumulative total return for the six-month period ended 6/30/00. Total return of
Class 2 shares represents the cumulative or 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.

<TABLE>
<CAPTION>
Franklin Rising Dividends Securities Fund - Class 2*
Periods ended 6/30/00
Since Since Class 2
Inception Inception
1-Year 5-Year (1/27/92) (1/6/99)
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return -13.36% +12.37% +9.03% -8.20%
Cumulative Total Return -13.36% +79.17% +107.19% -11.89%
Value of $10,000 Investment $8,664 $17,917 $20,719 $8,811
</TABLE>

Ongoing stock market volatility can dramatically change the Fund's short-term
performance; current results may be lower.

Franklin Rising Dividends
Securities Fund - Class 2

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

Past performance does not guarantee future results.

FRD-5
<PAGE>
FRANKLIN VALUE SECURITIES FUND

This horizontal bar chart shows the portfolio breakdown of Franklin Value
Securities Fund, as a percentage of total net assets on 6/30/00.

Finance 22.2%

Producer Manufacturing 17.3%

Industrial Services 9.8%

Consumer Non-Durables 8.5%

Transportation 6.5%

Consumer Durables 6.3%

Process Industries 5.9%

Retail Trade 4.6%

Electronic Technology 4.0%

Non-Energy Minerals 2.8%

Energy Minerals 2.3%

Technology Services 1.9%

Health Technology 1.7%

Consumer Services 1.4%

Commercial Services 0.9%

Short-Term Investments & Other Net Assets 3.9%

FV-1
<PAGE>

Top 10 Holdings
Franklin Value Securities Fund
6/30/00

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

FV-2
<PAGE>

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance
is no guarantee of future results, these insights may help you understand our
investment and management philosophy.

FV-3
<PAGE>

Franklin Value Securities
Fund - Class 2

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

PERFORMANCE SUMMARY AS OF 6/30/00

Franklin Value Securities Fund - Class 2 delivered a +5.54% cumulative total
return for the six-month period ended 6/30/00. Total return of Class 2 shares
represents the cumulative or average annual change in value, assuming
reinvestment of dividends and capital gains. Average returns smooth out
variations in returns, which can be significant; they are not the same as
year-by-year results.

Franklin Value Securities Fund - Class 2*
Periods ended 6/30/00
Since Since Class 2
Inception Inception
1-Year (5/1/98) (1/6/99)
-------------------------------------------------------------------------
Average Annual Total Return -3.41% -8.06% +3.08%
Cumulative Total Return -3.41% -16.64% +4.59%
Value of $10,000 Investment $9,659 $8,336 $10,459

Ongoing stock market volatility can dramatically change the Fund's short-term
performance; current results may be lower.

Past performance does not guarantee future results.

FV-4
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN VALUE SECURITIES FUND

Financial Highlights

(a)Annualized
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for periods less than one
year.
(c)For the period May 1, 1998 (effective date) to December 31, 1998.
(d)Based on average shares outstanding effective year ended December 31, 1999.

FV-5
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN VALUE SECURITIES FUND

Financial Highlights (continued)

(a)Annualized
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for periods less than one
year.
(c)For the period January 6, 1999 (effective date) to December 31, 1999.
(d)Based on average shares outstanding.

See notes to financial statements.

FV-6
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN VALUE SECURITIES FUND

FV-7
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN VALUE SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)
<TABLE>
<CAPTION>

FV-8
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN VALUE SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

(a)Non-income producing
(b)The Franklin Institutional Fiduciary Trust Money Market Portfolio is managed
by Franklin Advisers, Inc.

See notes to financial statements.

FV-9
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN VALUE SECURITIES FUND

Financial Statements

Statement of Assets and Liabilities
June 30, 2000 (unaudited)

See notes to financial statements.

FV-10
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN VALUE SECURITIES FUND

Financial Statements (continued)

Statement of Operations
for the six months ended June 30, 2000 (unaudited)

See notes to financial statements.

FV-11
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN VALUE SECURITIES FUND

Financial Statements (continued)

Statements of Changes in Net Assets
for the six months ended June 30, 2000 (unaudited) and the year ended December
31, 1999

<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999
-------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income .................................................................. $ 94,367 $ 68,025
Net realized gain (loss) from investments and foreign currency transactions ............ 744,433 (517,910)
Net unrealized appreciation on investments and translation of assets and liabilities
denominated in foreign currencies .................................................... 355,924 396,623
-------------------------------------
Net increase (decrease) in net assets resulting from operations ....................... 1,194,724 (53,262)
Distributions to shareholders from:
Net investment income:
Class 1 ............................................................................... (58,683) (28,103)
Class 2 ............................................................................... (9,308) (138)
-------------------------------------
Total distributions to shareholders ..................................................... (67,991) (28,241)
Capital share transactions: (Note 2)
Class 1 ............................................................................... 2,032,745 2,419,613
Class 2 ............................................................................... 2,571,890 1,231,781
-------------------------------------
Total capital share transactions ........................................................ 4,604,635 3,651,394
Net increase in net assets ............................................................ 5,731,368 3,569,891
Net assets:
Beginning of period ..................................................................... 12,583,362 9,013,471
-------------------------------------
End of period ........................................................................... $18,314,730 $12,583,362
=====================================
Undistributed net investment income included in net assets:
End of period ........................................................................... $ 94,336 $ 67,960
=====================================
</TABLE>

See notes to financial statements.

FV-12
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN VALUE SECURITIES FUND

Notes to Financial Statements (unaudited)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The following summarizes the Fund's significant accounting policies.

a. Security Valuation

b. Foreign Currency Translation

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

c. Income Taxes

d. Security Transactions, Investment Income, Expenses and Distributions

FV-13
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN VALUE SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

e. Accounting Estimates

2. SHARES OF BENEFICIAL INTEREST

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

At June 30, 2000, there were an unlimited number of shares authorized ($.01 par
value). Transactions in the Fund's shares were as follows:

(a)For the period January 6, 1999 (effective date) to December 31, 1999, for
Class 2.

3. TRANSACTIONS WITH AFFILIATES

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

FV-14
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN VALUE SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

3. TRANSACTIONS WITH AFFILIATES (cont.)

The Fund pays administrative fees to FT Services based on the average net
assets of the Fund as follows:

Fees are further reduced on net assets over $1.2 billion.

Management fees were reduced on assets invested in the Franklin Institutional
Fiduciary Trust Money Market Portfolio.

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

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

Included in professional fees are legal fees of $123 that were paid to law firm
in which a partner of that firm was an officer of the Fund.

4. INCOME TAXES

At December 31, 1999, the Fund had tax basis capital losses, which may be
carried over to offset future capital gains. Such losses expire as follows:

Capital loss carryover expiring in:
2006 .............................. $ 64,007
2007 .............................. 382,947
--------
$446,954
========

At December 31, 1999, the Fund had deferred capital losses of $27,329 occurring
subsequent to October 31, 1999. For tax purposes such losses will be reflected
in the year ending December 31, 2000.

Net realized capital gains differ for financial statements and tax purposes
primarily due to differing treatments of wash sales.

At June 30, 2000, the net unrealized appreciation based on the cost of
investments for income tax purposes of $18,241,867 was as follows:

Unrealized appreciation ............. $ 2,417,020
Unrealized depreciation ............. (2,393,958)
------------
Net unrealized appreciation ......... $ 23,062
============

5. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities) for the
period ended June 30, 2000 aggregated $9,243,988 and $4,843,132 respectively.

FV-15
<PAGE>

MUTUAL SHARES SECURITIES FUND

This horizontal bar chart shows the geographic distribution as a percentage of
total net assets on 6/30/00 for Mutual Shares Securities Fund.

United States 66.5%

United Kingdom 4.6%

France 2.8%

Sweden 2.5%

Netherlands 0.6%

Other Countries 2.1%

Fixed-Income Securities 6.6%

Government Agencies
& Other Net Assets 14.3%

MS-1
<PAGE>

Top 10 Holdings
Mutual Shares Securities Fund
6/30/00

Company % of Total
Sector, Country Net Assets
-----------------------------------------
Investor AB 2.5%
Multi-Industry, Sweden

Telephone & Data
Systems Inc. 2.4%
Telecommunications,
United States

AT&T Corp. 2.4%
Telecommunications,
United States

United Asset
Management Corp. 2.1%
Financial Services,
United States

Washington Post Co. 1.8%
Broadcasting &
Publishing, United States

Federated Department
Stores Inc. 1.8%
Merchandising,
United States

BF Goodrich Co. 1.7%
Aerospace & Military
Technology,
United States

Bear Stearns
Companies Inc. 1.6%
Financial Services,
United States

Scripps Co. 1.6%
Broadcasting &
Publishing, United States

Delphi Automotive
Systems, Inc. 1.6%
Automobiles,
United States

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

MS-2
<PAGE>

Top 10 Sectors
Mutual Shares Securities Fund
Based on Equity Securities
6/30/00

MS-3
<PAGE>

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance
is no guarantee of future results, these insights may help you understand our
investment and management philosophy.

MS-4
<PAGE>

PERFORMANCE SUMMARY AS OF 6/30/00

Mutual Shares Securities Fund - Class 2 delivered a +0.98% cumulative total
return for the six-month period ended 6/30/00. Total return of Class 2 shares
represents the cumulative or 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.

<TABLE>
<CAPTION>
Mutual Shares Securities Fund - Class 2*
Periods ended 6/30/00
Since Since Class 2
Inception Inception
1-Year 3-Year (11/8/96) (1/6/99)
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +0.28% +7.87% +9.66% +7.30%
Cumulative Total Return +0.28% +25.52% +39.89% +10.99%
Value of $10,000 Investment $10,028 $12,552 $13,989 $11,099
</TABLE>

Ongoing stock market volatility can dramatically change the Fund's short-term
performance; current results may be lower.

Mutual Shares Securities
Fund - Class 2

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

Past performance does not guarantee future results.

MS-5
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Financial Highlights

(a)Annualized
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for periods less than one
year.
(c)For the period November 8, 1996 (effective date) to December 31, 1996.
(d)Based on average shares outstanding effective year ended December 31, 1999.

MS-6
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Financial Highlights (continued)

(a)Annualized
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for periods less than one
year.
(c)For the period January 6, 1999 (effective date) to December 31, 1999.
(d)Based on average shares outstanding.

See notes to financial statements.

MS-7
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited)

<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stocks and Rights 79.7%
Aerospace & Military Technology 2.2%
B.F. Goodrich Co. ................................ United States 206,732 $ 7,041,807
(a) Hexcel Corp. ..................................... United States 42,000 399,000
Rockwell International Corp. ..................... United States 49,600 1,562,400
------------
9,003,207
------------
Appliances & Household Durables .7%
Maytag Corp. ..................................... United States 78,290 2,886,944
------------
Automobiles 3.6%
Borg Warner Inc. ................................. United States 42,655 1,498,257
(a) Consorcio G Grupo Dina SA de CV, L, ADR .......... Mexico 77,350 154,700
Delphi Automotive Systems Corp. .................. United States 442,560 6,444,779
General Motors Corp. ............................. United States 45,626 2,649,160
(a) Lear Corp. ....................................... United States 195,696 3,913,920
------------
14,660,816
------------
Banking 3.3%
Bank of Ireland .................................. Irish Republic 210,350 1,330,768
Banknorth Group Inc. ............................. United States 178,255 2,729,530
Chase Manhattan Corp. ............................ United States 62,100 2,860,481
National City Corp. .............................. United States 65,189 1,112,287
Sovereign Bancorp Inc. ........................... United States 255,200 1,794,375
U.S. Bancorp. .................................... United States 198,124 3,813,887
------------
13,641,328
------------
Beverages & Tobacco 2.6%
Brown-Forman Corp., A ............................ United States 500 26,375
Brown-Forman Corp., B ............................ United States 37,200 1,999,500
Gallaher Group PLC ............................... United Kingdom 410,150 2,243,013
Gallaher Group PLC, ADR .......................... United Kingdom 18,200 390,163
Pepsi Bottling Group Inc. ........................ United States 144,000 4,203,000
UST Inc. ......................................... United States 139,000 2,041,562
------------
10,903,613
------------
Broadcasting & Publishing 8.1%
(a) AT&T Corp. - Liberty Media Group, A .............. United States 157,296 3,814,427
Central Newspapers Inc., A ....................... United States 42,560 2,691,920
Dow Jones & Co. Inc. ............................. United States 12,600 922,950
Dun & Bradstreet Corp. ........................... United States 140,800 4,030,400
(a) Fox Entertainment Group Inc., A .................. United States 47,500 1,442,813
Knight-Ridder Inc. ............................... United States 46,120 2,453,008
Media General Inc., A ............................ United States 17,790 863,927
Meredith Corp. ................................... United States 86,859 2,931,491
NV Holdingsmig de Telegraaf ...................... Netherlands 1,468 33,772
Scripps Co., A ................................... United States 134,185 6,608,611
Washington Post Co., B ........................... United States 15,890 7,595,420
------------
33,388,739
------------
Building Materials & Components 1.2%
(a) American Standard Cos. Inc. ...................... United States 88,050 3,610,050
Sherwin-Williams Co. ............................. United States 61,100 1,294,556
------------
4,904,606
------------
</TABLE>

MS-8
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

MS-9
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

MS-10
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

MS-11
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
PRINCIPAL
COUNTRY AMOUNT* VALUE
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Corporate Bonds & Notes 2.6%
Abraxas Petroleum Corp., Series A, 11.50%, 11/01/04 .......... United States $ 290,500 $ 245,473
DecisionOne Corp., Term Loan ................................. United States 935,503 795,178
Eurotunnel Finance Ltd.:
Equity Note, 12/31/03 ........................................ United Kingdom 286,406 GBP 164,758
Participation Loan Note, 4/30/40 ............................. United Kingdom 158,000 GBP 35,121
Eurotunnel PLC:
12/31/18, Tier 2 ............................................. United Kingdom 1,051,800 GBP 1,098,660
12/31/25, Tier 3 ............................................. United Kingdom 791,758 GBP 695,187
12/31/50, Resettable Advance R5 .............................. United Kingdom 342,767 GBP 191,991
Stabilization Advance S8, Tier 1 ............................. United Kingdom 220,793 GBP 86,904
Stabilization Advance S8, Tier 2 ............................. United Kingdom 186,822 GBP 65,049
Eurotunnel SA:
12/31/18, Tier 2 (Libor) ..................................... France 441,192 EUR 287,576
12/31/18, Tier 2 (Pibor) ..................................... France 133,474 EUR 87,001
12/31/25, Tier 3 (Libor) ..................................... France 581,383 EUR 317,653
12/31/25, Tier 3 (Pibor) ..................................... France 242,272 EUR 132,372
12/31/50, Resettable Advance R4 .............................. France 297,824 EUR 104,200
Stabilization Advance S6, Tier 1(Pibor) ...................... France 109,282 EUR 27,236
Stabilization Advance S7, Tier 1(Pibor) ...................... France 74,647 EUR 18,604
Stabilization Advance S6, Tier 2 ............................. France 159,795 EUR 33,698
Finova Capital Corp.:
6.11%, 2/18/03 ............................................... United States 313,000 269,902
6.15%, 3/31/03 ............................................... United States 55,000 46,596
7.25%, 11/08/04 .............................................. United States 190,000 166,488
Golden Books Publishing Inc., 10.75%, 2/20/49 ................ United States 133,400 61,364
HIH Capital Ltd., cvt., 144A, 7.50%, 9/25/06 ................. United Kingdom 1,235,000 710,125
La Quinta Inns Inc.:
7.25%, 3/15/04 ............................................... United States 89,000 66,750
7.33%, 4/01/08 ............................................... United States 205,000 137,350
Laidlaw Inc.:
7.70%, 8/15/02 ............................................... Canada 74,000 21,830
7.05%, 5/15/03 ............................................... Canada 20,000 5,950
6.65%, 10/01/04 .............................................. Canada 225,000 54,000
7.875%, 4/15/05 .............................................. Canada 225,000 66,375
7.65%, 5/15/06 ............................................... Canada 200,000 48,000
8.75%, 4/15/25 ............................................... Canada 331,000 97,645
6.72%, 10/01/27 .............................................. Canada 535,000 132,413
Levi Straus & Co.:
6.80%, 11/01/03 .............................................. United States 20,000 16,400
7.00%, 11/01/06 .............................................. United States 85,000 64,600
Meditrust Corp.
7.00%, 8/15/07 ............................................... United States 170,000 113,900
7.82%, 9/10/26 ............................................... United States 665,000 512,050
MFN Financial Corp.:
Series A, 10.00%, 3/23/01 .................................... United States 114,027 109,181
Series B, FRN, 11.26%, 3/23/01 ............................... United States 139,024 134,506
Philip Services Corp.:
PIK, 10.00%, 5/01/05 ......................................... Canada 111,689 89,351
Senior Term Debt, 9.00%, 5/01/05 ............................. Canada 213,053 191,747
</TABLE>

MS-12
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
PRINCIPAL
COUNTRY AMOUNT* VALUE
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Corporate Bonds & Notes (cont.)
Rite Aid Corp.:
7.125%, 1/15/07 ................................................ United States $ 145,000 $ 71,775
144A, 6.125%, 12/15/08 ......................................... United States 45,000 21,825
6.875%, 8/15/13 ................................................ United States 55,000 26,400
7.70%, 2/15/27 ................................................. United States 70,000 31,500
Service Corp. International:
7.375%, 4/15/04 ................................................ United States 335,000 206,025
6.00%, 12/15/05 ................................................ United States 80,000 43,600
7.70%, 4/15/09 ................................................. United States 44,000 23,100
SFC New Holdings Inc., PIK, 13.25%, 8/15/03 .................... United States 1,273,000 1,018,400
Southwest Royalties Inc., B, 10.50%, 10/15/04 .................. United States 870,000 561,150
TFM SA de CV:
senior disc. note, zero cpn. ................................... Mexico 165,000 114,263
10.25%, 6/15/07 ................................................ Mexico 250,000 218,750
Ventas Inc.:
Tranche A, Term Loan, 12/31/02 ................................. United States 144,581 130,364
Tranche B, Term Loan, 12/31/05 ................................. United States 548,862 480,254
Tranche C, Term Loan, 12/31/07 ................................. United States 163,970 143,473
Vlasic Foods International Inc., 10.25%, 7/01/09 ............... United States 487,000 172,885
-----------
Total Corporate Bonds & Notes (Cost $11,418,988)................ 10,766,948
-----------
(c) Bonds & Notes In Reorganization 4.0%
(a) Aiken Cnty S C Indl Rev Ref Beloit, 6.00%, 12/01/11 ............ United States 45,000 17,213
(a) Altos Hornos de Mexico SA:
cvt., 5.50%, 12/15/01 .......................................... Mexico 20,000 7,100
Series A, 11.375%, 4/30/02 ..................................... Mexico 391,000 138,805
Series B, 11.875%, 4/30/04 ..................................... Mexico 460,000 158,700
Tranche A, Term Loan ........................................... United States 117,181 48,044
(a) Consorcio G Grupo Dina SA de CV, cvt., 8.00%, 8/08/04 .......... Mexico 5,657,000 2,008,234
(a) Crown Leasing, Bank Claim ...................................... Japan 77,969,709 JPY 51,584
(a) Dow Corning Corp.:
9.375%, 2/01/08 ................................................ United States 550,000 783,750
Bank Debt #1 ................................................... United States 100,000 136,000
(a) Genesis Health Ventures Inc.:
Revolver ....................................................... United States 722,380 452,210
Term Loan A .................................................... United States 39,642 24,419
Term Loan B .................................................... United States 77,937 48,711
Term Loan C .................................................... United States 78,077 48,798
(a) Harnischfeger Industries Inc.:
8.90%, 3/01/22 ................................................. United States 370,000 141,525
8.70%, 6/15/22 ................................................. United States 260,000 99,450
7.25%, 12/15/25 ................................................ United States 615,000 235,238
6.875%, 2/15/27 ................................................ United States 353,000 135,023
(a) Integrated Health Services Inc.:
Revolver ....................................................... United States 166,000 53,120
Tranche B, Term Loan ........................................... United States 491,985 157,435
Tranche C, Term Loan ........................................... United States 447,458 143,187
(a) Loewen Group Inc., Series 5, 6.10%, 10/01/02 ................... Canada 426,000 CAD 158,129
(a) Loewen Group International Inc.:
144A, 6.70%, 10/01/99 .......................................... Canada 1,120,000 392,000
Revolver ....................................................... United States 126,691 68,413
Series 3, 7.50%, 4/15/01 ....................................... Canada 350,000 192,500
Series 3, 7.75%, 10/15/01 ...................................... Canada 245,000 112,700
Series 2, 8.25%, 4/15/03 ....................................... Canada 270,000 148,500
Series 6, 7.20%, 6/01/03 ....................................... Canada 1,765,000 617,750
Series 4, 8.25%, 10/15/03 ...................................... Canada 385,000 177,100
Series 7, 7.60%, 6/01/08 ....................................... Canada 1,335,000 440,550
</TABLE>

MS-13
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
PRINCIPAL
COUNTRY AMOUNT* VALUE
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(c) Bonds & Notes In Reorganization (cont.)
(a) Multicare Companies Inc.:
Revolver .................................................................... United States $ 39,958 $ 21,977
Term Loan A ................................................................. United States 47,464 26,105
Term Loan B ................................................................. United States 73,471 40,409
Term Loan C ................................................................. United States 24,361 13,399
(a) Nippon Credit Bank Ltd., Bank Claim ......................................... Japan 40,328,966 JPY 60,986
(a) Nippon Total Finance, Bank Claim ............................................ Japan 43,525,019 JPY 24,682
Optel Inc.:
13.00%, 2/15/02 ............................................................. United States 720,000 504,000
11.50%, 7/01/08 ............................................................. United States 25,000 17,500
(a) Paging Network Inc.:
Revolver A .................................................................. United States 2,113,477 1,698,329
10.125%, 8/01/07 ............................................................ United States 98,000 41,650
10.00%, 10/15/08 ............................................................ United States 135,000 57,375
(a) Peregrine Investments Holdings Ltd., zero cpn., 1/22/98 ..................... Hong Kong 5,000,000 JPY 5,435
(a) PIV Investment Finance (Cayman) Ltd., cvt, 4.50%, 12/01/01 .................. Hong Kong 12,200,000 2,745,000
(a) Port Seattle Wash Rev Ref-Beloit Proj., 6.00%, 12/01/17 ..................... United States 20,000 7,650
(a) Pratama Datakom Asia BV:
144A, 12.75%, 7/15/05 ....................................................... Indonesia 665,000 106,400
Reg S, 12.75%, 7/15/05 ...................................................... Indonesia 140,000 22,400
(a) Safety Kleen Corp.:
9.25%, 5/15/09 .............................................................. United States 3,000 75
Term Loan A ................................................................. United States 128,833 47,668
Term Loan B ................................................................. United States 65,067 24,075
Term Loan C ................................................................. United States 65,067 24,075
(a) Safety Kleen Services, 9.25%, 6/01/08 ....................................... United States 5,000 238
(a) United Companies Financial Corp., Revolver .................................. United States 2,351,700 1,622,673
(a) Vencor Inc.:
9.875%, 5/01/05 ............................................................. United States 1,635,000 147,150
Revolver .................................................................... United States 325,492 240,864
Term Loan A ................................................................. United States 1,369,467 1,013,406
Term Loan B ................................................................. United States 738,496 546,487
Tranche A, DIP Revolver, Term Loan 9/30/00 .................................. United States 157,609 156,033
Tranche B, DIP Revolver, Term Loan 9/30/00 .................................. United States 62,500 61,875
------------
Total Bonds & Notes in Reorganization (Cost $16,844,644)..................... 16,474,104
------------

MS-14
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

*The principal amount is stated in U.S. dollars unless otherwise indicated.
(a)Non-income producing.
(b)See Note 8 regarding restricted securities.
(c)See Note 7 regarding defaulted securities.

See notes to financial statements.

MS-15
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Financial Statements

Statement of Assets and Liabilities
June 30, 2000 (unaudited)

See notes to financial statements.

MS-16
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Financial Statements (continued)

Statement of Operations
for the six months ended June 30, 2000 (unaudited)

See notes to financial statements.

MS-17
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Financial Statements (continued)

Statements of Changes in Net Assets
for the six months ended June 30, 2000 (unaudited) and the year ended December
31, 1999

<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999
-------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ................................................................. $ 5,078,461 $ 7,507,126
Net realized gain from investments and foreign currency transactions .................. 33,394,155 19,103,586
Net unrealized appreciation (depreciation) on investments and translation of assets
and liabilities denominated in foreign currencies .................................... (34,400,841) 31,554,044
-------------------------------------
Net increase in net assets resulting from operations ................................. 4,071,775 58,164,756
Distributions to shareholders from:
Net investment income:
Class 1 .............................................................................. (11,439,569) (12,213,087)
Class 2 .............................................................................. (324,220) (45,323)
Net realized gains:
Class 1 .............................................................................. (9,903,995) --
Class 2 .............................................................................. (284,007) --
-------------------------------------
Total distributions to shareholders ..................................................... (21,951,791) (12,258,410)
Capital share transactions: (Note 2)
Class 1 .............................................................................. (37,030,478) (79,961,449)
Class 2 .............................................................................. 14,369,129 5,606,010
-------------------------------------
Total capital share transactions ........................................................ (22,661,349) (74,355,439)
Net decrease in net assets ........................................................... (40,541,365) (28,449,093)
Net assets:
Beginning of period ..................................................................... 453,994,594 482,443,687
-------------------------------------
End of period ........................................................................... $ 413,453,229 $ 453,994,594
=====================================
Undistributed net investment income included in net assets:
End of period ........................................................................... $ 1,651,905 $ 8,337,233
=====================================
</TABLE>

See notes to financial statements.

MS-18
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Notes to Financial Statements (unaudited)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The following summarizes the Fund's significant accounting policies.

a. Security Valuation

Securities listed or traded on a recognized national exchange or NASDAQ are
valued at the latest reported sales price. Over-the-counter securities and
listed securities for which no sale is reported are valued within the range of
the latest quoted bid and asked prices. Restricted securities and securities
for which market quotations are not readily available are valued at fair value
as determined by management in accordance with procedures established by the
Board of Trustees.

b. Foreign Currency Translation

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 currency denominated assets and liabilities other than investments
in securities held at the end of the reporting period.

c. Forward Exchange Contracts

d. Contracts for Differences

MS-19
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

d. Contracts for Differences (cont.)

e. Securities Sold Short

f. Income Taxes

g. Security Transactions, Investment Income, Expenses and Distributions

h. Accounting Estimates

2. SHARES OF BENEFICIAL INTEREST

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

MS-20
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

2. SHARES OF BENEFICIAL INTEREST (cont.)

At June 30, 2000, there were an unlimited number of shares authorized ($0.01
par value). Transactions in the Fund's shares were as follows:

<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999(a)
--------------------------------------------------------------------
Shares Amount Shares Amount
Class 1 Shares: --------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ....................................... 1,156,387 $ 15,045,410 5,163,014 $ 66,279,367
Shares issued on merger (Note 9) .................. 295,300 3,756,224 -- --
Shares issued on reinvestment of distributions .... 1,683,246 21,343,564 914,838 12,213,087
Shares redeemed ................................... (5,990,875) (77,175,676) (12,518,155) (158,453,903)
--------------------------------------------------------------------
Net decrease ...................................... (2,855,942) $ (37,030,478) (6,440,303) $ (79,961,449)
====================================================================
Class 2 Shares:
Shares sold ....................................... 845,668 $ 10,908,788 436,840 $ 5,671,654
Shares issued on merger (Note 9) .................. 251,168 3,197,391 -- --
Shares issued on reinvestment of distributions .... 47,967 608,227 3,403 45,323
Shares redeemed ................................... (26,720) (345,277) (8,851) (110,967)
--------------------------------------------------------------------
Net increase ...................................... 1,118,083 $ 14,369,129 431,392 $ 5,606,010
====================================================================
</TABLE>

(a)For the period January 6, 1999 (effective date) to December 31, 1999 for
Class 2.

3. TRANSACTIONS WITH AFFILIATES

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

<TABLE>
<CAPTION>
Entity Affiliation
---------------------------------------------------------------------------------------
<S> <C>
Franklin Templeton Services, Inc. (FT Services) Administrative manager
Franklin Mutual Advisers, LLC (Franklin Mutual) Investment manager
Franklin/Templeton Distributors, Inc. (Distributors) Principal underwriter
Franklin/Templeton Investor Services, Inc. (Investor Services) Transfer agent
</TABLE>

The Fund pays an investment management fee to Franklin Mutual of .60% per year
of the average daily net assets of the Fund.

The Fund pays administrative fees to FT Services based on the average net
assets of the Fund as follows:

Fees are further reduced on net assets over $1.2 billion.

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

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

Included in professional fees are legal fees of $1,136 that were paid to a law
firm in which a partner of that firm was an officer of the Fund.

MS-21
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

4. INCOME TAXES

At June 30, 2000, the net unrealized appreciation based on the cost of
investments for income tax purposes of $392,826,745 was as follows:

Unrealized appreciation ............. $ 52,257,979
Unrealized depreciation ............. (41,509,999)
-------------
Net unrealized appreciation ......... $ 10,747,980
=============

5. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities) for the
period ended June 30, 2000 aggregated $126,130,156 and $157,994,160,
respectively.

6. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

MS-22
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

6. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK (cont.)

Unrealized gain on forward
exchange contracts U.S. $ 796,487
==========

Net unrealized gain on forward
exchange contracts U.S. $ 74,851
==========

</TABLE>

MS-23
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

MUTUAL SHARES SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

7. CREDIT RISK AND DEFAULTED SECURITIES

For financial reporting purposes, the Fund discontinued accruing income on
defaulted bonds and provided an estimate for losses on interest receivable.

8. RESTRICTED SECURITIES

9. MERGER

MS-24
<PAGE>

TEMPLETON ASSET STRATEGY FUND

Equity

This chart in pie format shows the asset allocation of Templeton Asset Strategy
Fund as a percentage of total net assets on 6/30/00.

Stocks 82.0%
Fixed-Income Securities 13.3%
Short-Term Investments & Other Net Assets 4.7%

TA-1
<PAGE>

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

genes in the human genetic blueprint. The stock hit our valuation target and we
reduced the position at what we considered to be an excellent price.

Fixed Income

TA-2
<PAGE>

Top Five Country Holdings
Templeton Asset Strategy Fund
6/30/00

% of Total
Country Net Assets
-----------------------------
U.S. 18.1%
U.K. 12.9%
Japan 9.7%
France 6.6%
Netherlands 5.5%

TA-3
<PAGE>

This chart in pie format shows the geographic distribution of Templeton Asset
Strategy Fund as a percentage of total net assets on 6/30/00.

Europe 42.5%
North America 23.5%
Asia 17.1%
Latin America/Caribbean 9.8%
Mid-East/Africa 2.9%
Australia/New Zealand 2.4%

Looking Ahead

TA-4
<PAGE>

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance
is no guarantee of future results, these insights may help you understand our
investment and management philosophy.

TA-5
<PAGE>

Templeton Asset Strategy
Fund - Class 2

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

PERFORMANCE SUMMARY AS OF 6/30/00

Templeton Asset Strategy Fund - Class 2 delivered a +2.29% cumulative total
return for the six-month period ended 6/30/00. Total return of Class 2 shares
represents the cumulative or 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.

<TABLE>
<CAPTION>
Templeton Asset Strategy Fund - Class 2*
Periods ended 6/30/00
Since Since Class 2
Inception Inception
1-Year 5-Year 10-Year (8/24/88) (5/1/97)
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Average Annual Total Return +13.13% +14.84% +13.00% +12.52% +12.60%
Cumulative Total Return +13.13% +99.74% +239.57% +304.59% +45.58%
Value of $10,000 Investment $11,313 $19,974 $33,957 $40,459 $14,558
</TABLE>

* Performance prior to the 5/1/00 merger reflects the historical performance of
the Templeton Asset Allocation Fund. Additionally, because Class 2 shares were
not offered until 5/1/97, standardized Class 2 Fund performance for prior
periods represents the historical results of Class 1 shares. For periods
beginning on 5/1/97, Class 2's results reflect an additional 12b-1 fee expense,
which also affects all future performance.

Ongoing stock market volatility can dramatically change the Fund's short-term
performance; current results may be lower.

Past performance does not guarantee future results.

TA-6
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON ASSET STRATEGY FUND

Financial Highlights
<TABLE>
<CAPTION>

(a)Annualized
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for periods less than one
year.
(c)Based on average shares outstanding effective year ended December 31, 1999.

TA-7
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON ASSET STRATEGY FUND

Financial Highlights (continued)

(a)Annualized
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for periods less than one
year.
(c)For the period May 1, 1997 (effective date) to December 31, 1997.
(d)Based on average shares outstanding effective year ended December 31, 1999.

See notes to financial statements.

TA-8
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON ASSET STRATEGY FUND

Statement of Investments, June 30, 2000 (unaudited)

<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stocks and Warrants 79.4%
Aerospace & Military Technology 1.7%
BAE Systems PLC .................................. United Kingdom 153,055 $ 947,659
Hong Kong Aircraft Engineering Co. Ltd. .......... Hong Kong 363,200 698,883
Raytheon Co., A .................................. United States 21,775 423,252
Rolls-Royce PLC .................................. United Kingdom 2,733,657 9,714,729
Saab AB, B ....................................... Sweden 54,400 458,967
-----------
12,243,490
-----------
Appliances & Household Durables .1%
Laox Co. Ltd. .................................... Japan 70,000 383,725
-----------
Automobiles 4.7%
Autoliv Inc. ..................................... Sweden 246,900 5,941,031
Autoliv Inc., SDR ................................ Sweden 129,000 3,176,833
Fiat SpA ......................................... Italy 236,170 6,159,834
Ford Motor Co. ................................... United States 220,000 9,459,999
General Motors Corp. ............................. United States 42,700 2,479,269
(a) Visteon Corp. .................................... United States 28,805 349,264
Volkswagen AG .................................... Germany 14,430 557,426
Volvo AB, B ...................................... Sweden 260,000 5,676,662
-----------
33,800,318
-----------
Banking 4.8%
Banca Nazionale Del Lavoro SpA ................... Italy 225,160 792,087
(a) Bangkok Bank Public Co. Ltd., fgn. ............... Thailand 193,400 236,665
Canadian Imperial Bank of Commerce ............... Canada 140,000 3,840,858
DNB Holding ASA .................................. Norway 2,178,900 9,074,819
Foreningssparbanken AB, A ........................ Sweden 170,700 2,510,580
Nordic Baltic Holding AB, FDR .................... Sweden 2,502,060 18,275,465
-----------
34,730,474
-----------
Broadcasting & Publishing .1%
Wolters Kluwer NV ................................ Netherlands 25,861 691,616
-----------
Building Materials & Components
Gujarat Ambuja Cements Ltd. ...................... India 400 1,746
-----------
Business & Public Services .2%
(a) Complete Business Solutions Inc. ................. United States 24,060 422,554
(a) Gartner Group Inc., B ............................ United States 46,630 460,471
HCA-The Healthcare Corp. ......................... United States 13,600 413,100
(a) Humana Inc. ...................................... United States 6,200 30,225
-----------
1,326,350
-----------
Chemicals 1.5%
Akzo Nobel NV .................................... Netherlands 178,695 7,622,337
BASF AG .......................................... Germany 17,150 698,665
DSM NV, Br. ...................................... Netherlands 75,000 2,415,552
-----------
10,736,554
-----------
Data Processing & Reproduction 2.7%
(a) 3Com Corp. ....................................... United States 14,390 829,224
Compaq Computer Corp. ............................ United States 420,790 10,756,444
Fujitsu Ltd. ..................................... Japan 216,000 7,492,274
(a) Palm Inc. ........................................ United States 5,300 176,888
-----------
19,254,830
-----------
</TABLE>

TA-9
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON ASSET STRATEGY FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

TA-10
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON ASSET STRATEGY FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

TA-11
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON ASSET STRATEGY FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stocks and Warrants (cont.)
Recreation & Other Consumer Goods .7%
Mattel Inc. ..................................................... United States 377,100 $ 4,973,006
Yue Yuen Industrial Holdings Ltd. ............................... Hong Kong 140 311
------------
4,973,317
------------
Telecommunications 11.3%
AT&T Corp. ...................................................... United States 193,620 6,123,233
Nippon Telegraph & Telephone Corp. .............................. Japan 1,046 13,939,417
Nippon Telegraph & Telephone Corp., ADR ......................... Japan 5,680 388,370
PT Indosat, ADR ................................................. Indonesia 370,800 4,217,850
SBC Communications Inc. ......................................... United States 318,400 13,770,800
Telecom Argentina Stet-France SA (Teco), B, ADR ................. Argentina 4,000 110,000
Telecom Corp. of New Zealand Ltd. ............................... New Zealand 2,562,970 8,988,559
Telecom Italia SpA, di Risp ..................................... Italy 1,200,000 7,974,771
Telefonica de Argentina SA, ADR ................................. Argentina 350,620 11,132,185
Telefonica del Peru SA, ADR ..................................... Peru 225,400 2,563,925
Telefonos de Mexico SA (Telmex), L, ADR ......................... Mexico 212,758 12,153,801
------------
81,362,911
------------
Textiles & Apparel .1%
Adidas-Salomon AG ............................................... Germany 6,510 359,434
(a) Fruit of the Loom Ltd. .......................................... United States 160,000 43,200
------------
402,634
------------
Transportation 2.4%
British Airways PLC ............................................. United Kingdom 1,925,900 11,071,658
(a) Fritz Cos. Inc. ................................................. United States 90,300 931,219
Gesco Corp. Ltd. ................................................ India 522 117
Great Eastern Shipping Co. Ltd. ................................. India 2,552 885
Peninsular & Oriental Steam Navigation Co. ...................... United Kingdom 580,000 4,943,307
Seino Transportation Co. Ltd. ................................... Japan 115,000 580,407
------------
17,527,593
------------
Utilities Electrical & Gas 4.4%
E.On AG ......................................................... Germany 173,800 8,413,117
Endesa SA ....................................................... Spain 122,000 2,372,781
Endesa SA, ADR .................................................. Spain 88,000 1,716,000
Gener SA, ADR ................................................... Chile 287,050 4,216,047
Hong Kong Electric Holdings Ltd. ................................ Hong Kong 2,131,500 6,863,193
Iberdrola SA, Br. ............................................... Spain 85,000 1,099,939
Korea Electric Power Corp. ...................................... South Korea 215,280 6,680,288
------------
31,361,365
------------
Total Common Stocks and Warrants (Cost $480,201,840)............. 571,739,901
------------
Preferred Stocks 2.6%
(a) Empresa Nacional de Comercio Redito Participacoe, pfd. .......... Brazil 275,000 610
Petroleo Brasileiro SA, pfd. .................................... Brazil 360,000 10,875,831
Telecomunicacoes de Sao Paulo SA, ADR, pfd. ..................... Brazil 121,810 2,253,485
Vale do Rio Doce, A, ADR, pfd. .................................. Brazil 196,500 5,551,125
------------
Total Preferred Stocks (Cost $15,523,211)........................ 18,681,051
------------
</TABLE>

TA-12
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON ASSET STRATEGY FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
PRINCIPAL
COUNTRY AMOUNT* VALUE
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bonds 13.3%
Bonos y Oblig del Estado, 3.25%, 1/31/05 ............................. Spain 2,174,000 EUR $ 1,915,618
Buoni Poliennali del Tesoro:
10.50%, 7/15/00 ...................................................... Italy 581,013 EUR 556,876
7.75%, 11/01/06 ...................................................... Italy 9,208,191 EUR 9,898,955
(b) Essar Steel Ltd., Reg. S, FRN, 7.635%, 7/20/99 ....................... India 445,000 224,725
Federal Republic of Germany:
3.25%, 2/17/04 ....................................................... Germany 2,837,000 EUR 2,563,046
4.50%, 7/04/09 ....................................................... Germany 4,919,000 EUR 4,475,119
General Motors Acceptance Corp., 5.50%, 2/02/05 ...................... United States 4,888,000 4,597,083
Government of Brazil:
14.50%, 10/15/09 ..................................................... Brazil 2,970,000 3,176,415
12.25%, 3/06/30 ...................................................... Brazil 2,000,000 1,840,000
Government of Canada:
8.75%, 12/01/05 ...................................................... Canada 612,000 CAD 465,028
7.00%, 12/01/06 ...................................................... Canada 843,000 CAD 599,897
6.00%, 6/01/08 ....................................................... Canada 2,812,000 CAD 1,907,822
Government of France, 3.50%, 7/12/04 ................................. France 2,437,000 EUR 2,203,074
Government of Netherlands, 5.75%, 2/15/07 ............................ Netherlands 3,484,000 EUR 3,422,752
Government of New Zealand, 7.00%, 7/15/09 ............................ New Zealand 3,914,000 NZD 1,872,156
Government of Spain, 7.35%, 3/31/07 .................................. Spain 3,201,000 EUR 3,384,977
International Bank for Reconstruction & Development, 5.25%, 3/20/02 .. Japan 381,700,000 JPY 3,913,503
Kingdom of Belgium, 7.75%, 10/15/04 .................................. Belgium 2,574,000 EUR 2,694,676
Kingdom of Denmark:
7.00%, 12/15/04 ...................................................... Denmark 20,285,000 DKK 2,729,159
5.00%, 8/15/05 ....................................................... Denmark 15,411,000 DKK 1,918,058
Kingdom of Sweden, 6.00%, 2/09/05 .................................... Sweden 7,200,000 SEK 843,983
New South Wales Treasury Corp., 144A, 7.00%, 4/01/04 ................. Australia 2,200,000 AUD 1,353,602
Protexa Construcciones SA de CV, 144A, 12.125%, 7/24/02 .............. Mexico 62,039 48,080
Queensland Treasury Corp., 6.50%, 6/14/05 ............................ Australia 889,000 AUD 537,662
Republic of Argentina:
11.375%, 3/15/10 ..................................................... Argentina 1,930,000 1,763,538
11.75%, 6/15/15 ...................................................... Argentina 1,700,000 1,541,475
Republic of Ecuador, 144A, 11.25%, 4/25/02 ........................... Ecuador 185,000 66,600
Republic of Panama, 8.875%, 9/30/27 .................................. Panama 960,000 812,400
Republic of Peru, FRN, 4.50%, 3/07/17 ................................ Peru 1,560,000 1,046,183
Republic of Turkey, 12.375%, 6/15/09 ................................. Turkey 1,165,000 1,237,813
Republic of Venezuela:
144A, 9.125%, 6/18/07 ................................................ Venezuela 1,640,000 1,303,800
Reg S, 9.125%, 6/18/07 ............................................... Venezuela 600,000 477,000
9.25%, 9/15/27 ....................................................... Venezuela 1,760,000 1,160,500
SEI Holdings IX Inc., 144A, 11.00%, 11/30/00 .........................Trinidad and Tobago 170,000 170,000
U.S. Treasury Bond, 5.25%, 11/15/28 .................................. United States 1,065,000 942,858
U.S. Treasury Note:
4.50%, 1/31/01 ....................................................... United States 1,400,000 1,384,688
6.375%, 6/30/02 ...................................................... United States 5,000,000 5,003,125
5.875%, 11/15/04 ..................................................... United States 3,300,000 3,251,533
6.75%, 5/15/05 ....................................................... United States 5,000,000 5,118,750
6.50%, 2/15/10 ....................................................... United States 3,300,000 3,413,438
United Kingdom:
6.50%, 12/07/03 ...................................................... United Kingdom 150,000 GBP 231,391
7.50%, 12/07/06 ...................................................... United Kingdom 3,885,000 GBP 6,477,059
United Mexican States, 11.50%, 5/15/26 ............................... Mexico 2,895,000 3,477,620
-----------
Total Bonds (Cost $103,215,362)....................................... 96,022,037
-----------
</TABLE>

TA-13
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON ASSET STRATEGY FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
PRINCIPAL
COUNTRY AMOUNT* VALUE
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Short Term Investments 5.6%
Deutsche Bank AG, 6.875%, 7/03/00, Time Deposit ........................ United States $14,000,000 $ 14,000,000
Dresdner Bank AG, 7.00%, 7/03/00, Time Deposit ......................... United States 5,700,000 5,700,000
U.S. Treasury Bills, 5.65% - 5.66% with maturities to 9/07/00 .......... United States 20,900,000 20,683,518
------------
Total Short Term Investments (Cost $40,373,437)......................... 40,383,518
------------
Total Investments (Cost $639,313,850) 100.9%............................ 726,826,507
Net Equity in Forward Contracts ........................................ (15,969)
Other Assets, less Liabilities (.9%) ................................... (6,744,520)
------------
Total Net Assets 100.0% ................................................ $720,066,018
============
</TABLE>
Currency Abbreviations:

AUD- Australian Dollar
CAD- Canadian Dollar
DKK- Danish Krone
EUR- European Unit
GBP- British Pound
JPY- Japanese Yen
NZD- New Zealand Dollar
SEK- Swedish Krona

*The principal amount is stated in U.S. dollars unless otherwise indicated.
(a)Non-income producing
(b)Represents bond in default.

See notes to financial statements.

TA-14
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON ASSET STRATEGY FUND

Financial Statements

Statement of Assets and Liabilities
June 30, 2000 (unaudited)

See notes to financial statements.

TA-15
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON ASSET STRATEGY FUND

Financial Statements (continued)

Statement of Operations
for the six months ended June 30, 2000 (unaudited)

See notes to financial statements.

TA-16
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON ASSET STRATEGY FUND

Financial Statements (continued)

Statements of Changes in Net Assets
for the six months ended June 30, 2000 (unaudited) and the year ended December
31, 1999

<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999
-------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ................................................................. $ 8,087,322 $ 13,810,413
Net realized gain from investments and foreign currency transactions .................. 42,813,466 88,790,440
Net unrealized appreciation (depreciation) on investments and translation of assets
and liabilities denominated in foreign currencies .................................... (33,193,922) 36,425,123
--------------------------------
Net increase in net assets resulting from operations ................................. 17,706,866 139,025,976
Distributions to shareholders from:
Net investment income:
Class 1 .............................................................................. (15,153,507) (14,822,362)
Class 2 .............................................................................. (472,676) (310,147)
Net realized gains:
Class 1 .............................................................................. (104,057,396) (82,476,906)
Class 2 .............................................................................. (3,633,708) (1,907,029)
--------------------------------
Total distributions to shareholders ..................................................... (123,317,287) (99,516,444)
Capital share transactions: (Note 2)
Class 1 .............................................................................. 124,215,964 (58,852,355)
Class 2 .............................................................................. 8,949,637 3,928,278
--------------------------------
Total capital share transactions ........................................................ 133,165,601 (54,924,077)
Net increase (decrease) in net assets ................................................ 27,555,180 (15,414,545)
Net assets:
Beginning of period ..................................................................... 692,510,838 707,925,383
--------------------------------
End of period ........................................................................... $ 720,066,018 $ 692,510,838
================================
Undistributed net investment income included in net assets:
End of period ........................................................................... $ 4,020,090 $ 11,558,951
================================
</TABLE>

See notes to financial statements.

TA-17
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON ASSET STRATEGY FUND

Notes to Financial Statements (unaudited)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The following summarizes the Fund's significant accounting policies.

a. Security Valuation

b. Foreign Currency Translation

Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the exchange rate of such
currencies against U.S. dollars on the date of valuation. Purchases and sales
of securities and income items denominated in foreign currencies are translated
into U.S. dollars at the exchange rate in effect on the transaction date. When
the Fund purchases or sells foreign securities it will customarily enter into a
foreign exchange contract to minimize foreign exchange risk from the trade date
to the settlement date of such transactions.

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 currency denominated assets and liabilities other than investments
in securities held at the end of the reporting period.

c. Forward Exchange Contracts

d. Income Taxes

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

TA-18
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON ASSET STRATEGY FUND

Notes to Financial Statements (unaudited) (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

e. Security Transactions, Investment Income, Expenses and Distributions

f. Indexed Securities

g. Accounting Estimates

TA-19
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON ASSET STRATEGY FUND

Notes to Financial Statements (unaudited) (continued)

2. SHARES OF BENEFICIAL INTEREST

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

At June 30, 2000, there were an unlimited number of shares authorized ($0.01
par value). Transactions in the Fund's shares were as follows:

3. TRANSACTIONS WITH AFFILIATES

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

<TABLE>
<CAPTION>
Entity Affiliation
---------------------------------------------------------------------------------------
<S> <C>
Franklin Templeton Services, Inc. (FT Services) Administrative manager
Templeton Investment Counsel, Inc. (TICI) Investment manager
Franklin/Templeton Distributors, Inc. (Distributors) Principal underwriter
Franklin/Templeton Investor Services, Inc. (Investor Services) Transfer agent
</TABLE>

The Fund pays administrative fees to FT Services based on the average net
assets as follows:

Fees are further reduced on net assets over $1.2 billion.

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

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

TA-20
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON ASSET STRATEGY FUND

Notes to Financial Statements (unaudited) (continued)

3. TRANSACTIONS WITH AFFILIATES (cont.)

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

Included in professional fees are legal fees of $12,633 that were paid to a law
firm in which a partner of that firm was an officer of the Fund.

4. INCOME TAXES

At December 31, 1999, the fund had tax basis capital losses of $867,232, which
will expire on 2007. Such losses may be carried over to offset future capital
gains.

At June 30, 2000, the net unrealized appreciation based on the cost of
investments for income tax purposes of $639,317,113 was as follows:

Unrealized appreciation ............. $ 164,422,807
Unrealized depreciation ............. (76,913,413)
-------------
Net unrealized appreciation ......... $ 87,509,394
=============

5. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities) for the
period ended June 30, 2000 aggregated $100,889,433 and $175,799,656,
respectively.

6. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

The Fund has been a party to financial instruments with off-balance-sheet risk,
primarily forward exchange contracts, in order to minimize the impact on the
Fund from adverse changes in the relationship between the U.S. dollar and
foreign currencies and interest rates. These instruments involve market risk in
excess of the amount recognized in the Statement of Assets and Liabilities.
Some of these risks have been minimized by offsetting contracts. Risks arise
from the possible inability of counterparties to meet the terms of their
contracts, future movement in currency values and interest rates, and contract
positions that are not exact offsets. The contract amount indicates the extent
of the Fund's involvement in such contracts.

TA-21
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON ASSET STRATEGY FUND

Notes to Financial Statements (unaudited) (continued)

6. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK (cont.)

7. MERGER

TA-22
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON ASSET STRATEGY FUND

Tax Designation

The following table provides a breakdown by country of foreign source income
and foreign taxes paid, as designated by the Fund, to Class 1 and Class 2
shareholders of record on December 29, 1999.

Class 1 Class 2
----------------------------------------------------------
Foreign Tax Foreign Foreign Tax Foreign
Paid Source Income Paid Source Income
Country Per Share Per Share Per Share Per Share
-------------------------------------------------------------------------------
Argentina .......... 0.0000 0.0019 0.0000 0.0019
Australia .......... 0.0006 0.0188 0.0006 0.0178
Bermuda ............ 0.0000 0.0040 0.0000 0.0037
Brazil ............. 0.0040 0.0221 0.0040 0.0210
Canada ............. 0.0002 0.0011 0.0002 0.0011
Chile .............. 0.0004 0.0014 0.0004 0.0014
China .............. 0.0000 0.0005 0.0000 0.0005
Finland ............ 0.0001 0.0006 0.0001 0.0006
France ............. 0.0027 0.0145 0.0027 0.0138
Germany ............ 0.0001 0.0022 0.0001 0.0022
Hong Kong .......... 0.0000 0.0233 0.0000 0.0221
Hungary ............ 0.0003 0.0007 0.0003 0.0007
India .............. 0.0000 0.0007 0.0000 0.0007
Italy .............. 0.0003 0.0017 0.0003 0.0017
Japan .............. 0.0009 0.0046 0.0009 0.0043
Mexico ............. 0.0004 0.0039 0.0004 0.0036
Netherlands ........ 0.0010 0.0144 0.0010 0.0137
New Zealand ........ 0.0002 0.0009 0.0002 0.0009
Norway ............. 0.0011 0.0061 0.0011 0.0059
Peru ............... 0.0000 0.0001 0.0000 0.0001
Singapore .......... 0.0006 0.0033 0.0006 0.0031
South Korea ........ 0.0009 0.0043 0.0009 0.0040
Sweden ............. 0.0019 0.0102 0.0019 0.0098
Switzerland ........ 0.0005 0.0019 0.0005 0.0019
Turkey ............. 0.0000 0.0001 0.0000 0.0001
United Kingdom ..... 0.0068 0.0520 0.0068 0.0494
----------------------------------------------------------
TOTAL .............. $0.0230 $0.1953 $0.0230 $0.1860
==========================================================

Shareholders are advised to check with their tax advisors for information on
the treatment of these amounts on their individual income tax returns.

TA-23
<PAGE>

FRANKLIN HIGH INCOME FUND

(1) Source: Standard and Poor's Micropal (Credit Suisse First Boston). The
unmanaged index is constructed to mirror the high yield debt market and
includes reinvested interest.

Sector Breakdown
Franklin High Income Fund
6/30/00

% of Total
Sector Net Assets
-----------------------------------------
Telecommunications 31.7%

Consumer Services 24.4%

Process Industries 6.5%

Industrial Services 4.9%

Transportation 3.7%

Energy Minerals 3.5%

Electronic Technology 2.7%

Commercial Services 2.5%

Finance 2.5%

Technology Services 2.5%

Consumer Non-Durables 2.4%

Producer Manufacturing 2.3%

Consumer Durables 1.9%

Retail Trade 1.4%

Health Services 1.0%

Utilities 0.6%

Short-Term Investments &
Other Net Assets 5.5%

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

FH-1
<PAGE>

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance
is no guarantee of future results, these insights may help you understand our
investment and management philosophy.

FH-2
<PAGE>

PERFORMANCE SUMMARY AS OF 6/30/00

Franklin High Income Fund - Class 2 delivered a -2.01% cumulative total return
for the six-month period ended 6/30/00. Total return of Class 2 shares
represents the cumulative or 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.

<TABLE>
<CAPTION>
Franklin High Income Fund - Class 2*
Periods ended 6/30/00
Since Since Class 2
Inception Inception
1-Year 5-Year 10-Year (1/24/89) (1/6/99)
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Average Annual Total Return -3.46% +5.75% +8.86% +7.85% -2.01%
Cumulative Total Return -3.46% +32.25% +133.74% +137.28% -2.95%
</TABLE>

Franklin High Income
Fund - Class 2

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

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

Past performance does not guarantee future results.

FH-3
<PAGE>

FRANKLIN STRATEGIC INCOME SECURITIES FUND

This pie bar chart shows the portfolio breakdown based on the percentage of
total net assets on 6/30/00 for Franklin Strategic Income Securities Fund.

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

FSI-1
<PAGE>

High Yield Corporate Bonds

Emerging Market Debt Securities

FSI-2
<PAGE>

Developed Country International Bonds

Convertible Securities

FSI-3
<PAGE>

U.S. Government Securities

U.S. Mortgage and Other Asset-Backed Securities

FSI-4
<PAGE>

Future Outlook

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance
is no guarantee of future results, these insights may help you understand our
investment and management philosophy.

FSI-5
<PAGE>

Franklin Strategic Income
Securities Fund - Class 1

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

PERFORMANCE SUMMARY AS OF 6/30/00

Franklin Strategic Income Securities Fund - Class 1
Periods ended 6/30/00

Since
Inception
1-Year (7/1/99)
----------------------------------------------------
Average Annual Total Return +4.09% +4.09%
Cumulative Total Return +4.09% +4.09%

Past performance does not guarantee future results.

FSI-6
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN STRATEGIC INCOME SECURITIES FUND

Financial Highlights

(a)Based on average shares outstanding.
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for periods less than one
year.
(c)Includes distribution of net investment income in the amount of $.004.
(d)Annualized
(e)For the period July 1, 1999 (effective date) to December 31, 1999.

See notes to financial statements.

FSI-7
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN STRATEGIC INCOME SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited)
<TABLE>
<CAPTION>

FSI-8
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN STRATEGIC INCOME SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
PRINCIPAL
COUNTRY AMOUNT* VALUE
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Telecommunications 12.1%
Crown Castle International Corp., senior note, 10.75%, 8/01/11 ............ United States 100,000 $ 102,000
Dobson Communications Corp., senior note, 144A, 10.875%, 7/01/10 .......... United States 100,000 100,750
Global Crossing Holdings Ltd., senior note, 9.50%, 11/15/09 ............... Bermuda 100,000 96,901
Level 3 Communications Inc., senior disc. note, zero cpn. to 12/01/03,
10.50% thereafter, 12/01/08 ............................................. United States 150,000 90,000
Nextel Communications Inc., senior disc. note, zero cpn. to 10/31/02,
9.75% thereafter, 10/31/07 .............................................. United States 150,000 112,500
NEXTLINK Communications Inc., senior disc. note, zero cpn. to 6/01/04,
12.25% thereafter, 6/01/09 .............................................. United States 150,000 93,750
Spectrasite Holdings Inc., senior disc. note, zero cpn. to 4/15/04,
11.25% thereafter, 04/15/09 ............................................. United States 150,000 87,750
Voicestream Wireless Corp., senior disc. note, zero cpn. to 11/15/04,
11.875% thereafter, 11/15/09 ............................................ United States 150,000 101,250
Williams Communications Group Inc., senior note, 10.875%, 10/01/09 ........ United States 100,000 98,000
----------
882,901
----------
Total Bonds (Cost $2,717,848).............................................. 2,645,026
----------
Convertible Bonds 3.8%
Electronic Technology 1.2%
Amkor Technology Inc., cvt., sub. note, 144A, 5.00%, 3/15/07 .............. United States 100,000 91,500
----------
Technology Services 1.3%
Affiliated Computer Services, cvt., sub. note, 4.00%, 3/15/05 ............. United States 100,000 98,250
----------
Telecommunications 1.3%
Level 3 Communications Inc., cvt., sub. note, 6.00%, 3/15/10 .............. United States 100,000 92,010
----------
Total Convertible Bonds (Cost $299,580).................................... 281,760
----------
Other Mortgages/Other Asset Backed Securities 3.4%
Green Tree Financial Corp., 8.37%, 2/01/31 ................................ United States 50,000 44,203
JP Morgan Commercial Mortgage Finance Corp., 7.866%, 10/15/32 ............. United States 200,000 204,029
----------
Total Other Mortgages/Other Asset Backed Securities (Cost $243,126)........ 248,232
----------
U.S. Government and Agency Securities 12.5% ...............................
Other U.S. Government and Agency Securities 4.8%
FHLMC, 6.60%, 4/20/09 ..................................................... United States 140,000 131,472
FNMA, 5.25%, 1/15/09 ...................................................... United States 250,000 219,750
----------
351,222
----------
U.S. Government Agencies/Mortgages 7.7% ...................................
FNMA, 6.00%, 2/01/29 ...................................................... United States 95,057 87,154
FNMA, 6.00%, 5/01/29 ...................................................... United States 99,882 91,474
FNMA, 6.50%, 7/01/28 ...................................................... United States 93,297 88,065
FNMA, 6.50%, 7/01/29 ...................................................... United States 49,942 47,120
FNMA, 7.00%, 5/01/12 ...................................................... United States 84,891 83,503
FNMA, 7.00%, 2/01/30 ...................................................... United States 99,199 95,771
GNMA, SF, 8.00%, 6/15/26 .................................................. United States 74,151 75,168
----------
568,255
----------
Total U.S. Government and Agency Securities (Cost $937,650)................ 919,477
----------
Foreign Government and Agency Securities 28.9%
Republic of Argentina, 11.375%, 3/15/10 ................................... Argentina 20,000 18,275
Republic of Argentina, 11.75%, 4/07/09 .................................... Argentina 150,000 140,063
Republic of Argentina, 11.75%, 6/15/15 .................................... Argentina 100,000 90,675
Australian Government, 7.50%, 7/15/05 ..................................... Australia 97,000 AUD 61,851
Kingdom of Belgium, 7.75%, 10/15/04 ....................................... Belgium 45,000 EUR 47,110
Republic of Brazil, 12.25%, 3/06/30 ....................................... Brazil 35,000 32,200
</TABLE>

FSI-9
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN STRATEGIC INCOME SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

<TABLE>
<CAPTION>
PRINCIPAL
COUNTRY AMOUNT* VALUE
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Foreign Government and Agency Securities (cont.)
Republic of Brazil, 9.375%, 4/07/08 ............................................. Brazil 150,000 $ 128,250
Republic of Brazil, 14.50%, 10/15/09 ............................................ Brazil 195,000 208,553
Republic of Bulgaria, FRN, 7.063%, 7/28/11 ...................................... Bulgaria 100,000 79,250
Government of Canada, 7.00%, 12/01/06 ........................................... Canada 30,000 CAD 21,349
Republic of Colombia, 9.75%, 4/23/09 ............................................ Colombia 20,000 17,728
Kingdom of Denmark, 5.00%, 8/15/05 .............................................. Denmark 212,000 DKK 26,386
French Treasury Note, 3.50%, 7/12/04 ............................................ France 28,000 EUR 25,312
Federal Republic of Germany, 3.25%, 2/17/04 ..................................... Germany 41,000 EUR 37,041
Federal Republic of Germany, 4.50%, 7/04/09 ..................................... Germany 73,000 EUR 66,413
Buoni Poliennali del Tesoro, 7.75%, 11/01/06 .................................... Italy 100,000 EUR 107,502
United Mexican States, 8.625%, 3/12/08 .......................................... Mexico 180,000 173,700
United Mexican States, 9.875%, 2/01/10 .......................................... Mexico 100,000 104,500
Government of Netherlands, 5.75%, 2/15/07 ....................................... Netherlands 50,000 EUR 49,121
Government of New Zealand, 7.00%, 7/15/09 ....................................... New Zealand 125,000 NZD 59,790
Republic of Panama, 9.375%, 4/01/29 ............................................. Panama 120,000 114,900
Republic of Peru, FRN, 4.50%, 3/07/17 ........................................... Peru 70,000 46,944
Republic of Philippines, 9.875%, 3/16/10 ........................................ Philippines 30,000 27,675
Russia Ministry of Finance, Reg S, 10.00%, 6/26/07 .............................. Russia 50,000 38,750
Bonos y Oblig del Estado, 3.25%, 1/31/05 ........................................ Spain 67,000 EUR 59,035
Swedish Government, 10.25%, 5/05/03 ............................................. Sweden 100,000 SEK 12,904
Republic of Turkey, 12.375%, 6/15/09 ............................................ Turkey 75,000 79,688
United Kingdom, 7.50%, 12/07/06 .................................................United Kingdom 65,000 GBP 108,368
Republic of Venezuela, 9.25%, 9/15/27 ........................................... Venezuela 215,000 141,766
----------
Total Foreign Government and Agency Securities (Cost $2,164,463)................. 2,125,099
----------
Total Long Term Investments (Cost $6,707,362).................................... $6,576,244
----------
SHARES
------
Short Term Investments 14.3%
(a) Franklin Institutional Fiduciary Trust Money Market Portfolio (Cost $1,048,482).. United States 1,048,482 1,048,482
----------
Total Investments (Cost $7,755,844) 103.8%....................................... 7,624,726
Other Assets, less Liabilities (3.8%) ........................................... (280,266)
----------
Net Assets 100.0% ............................................................... $7,344,460
==========
</TABLE>

Currency Abbreviations:

AUD-Australian Dollar
CAD-Canadian Dollar
DKK-Danish Krona
EUR-European Currency Unit
GBP-British Pound
NZD-New Zealand Dollars
SEK-Swedish Krona

See notes to financial statements.

FSI-10
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN STRATEGIC INCOME SECURITIES FUND

Financial Statements

Statement of Assets and Liabilities
June 30, 2000 (unaudited)

See notes to financial statements.

FSI-11
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN STRATEGIC INCOME SECURITIES FUND

Financial Statements (continued)

Statement of Operations
for the six months ended June 30, 2000 (unaudited)

See notes to financial statements.

FSI-12
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN STRATEGIC INCOME SECURITIES FUND

Financial Statements (continued)

Statements of Changes in Net Assets
for the six months ended June 30, 2000 (unaudited) and the year ended December
31, 1999

<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999(a)
----------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income .................................................................. $ 242,398 $ 133,560
Net realized gain (loss) from investments and foreign currency transactions ............ 14,835 (20,511)
Net unrealized appreciation (depreciation) on investments and translation of assets and
liabilities denominated in foreign currencies ........................................ (133,638) 2,727
-----------------------------
Net increase in net assets resulting from operations .................................. 123,595 115,776
Distributions to shareholders from net investment income ................................ (1,978) (131,241)
Capital share transactions (Note 2) ..................................................... 2,481,777 4,756,531
-----------------------------
Net increase in net assets ............................................................ 2,603,394 4,741,066
Net assets:
Beginning of period ..................................................................... 4,741,066 --
-----------------------------
End of period ........................................................................... $7,344,460 $4,741,066
=============================
Undistributed net investment income included in net assets:
End of period ........................................................................... $ 242,370 $ 1,950
=============================
</TABLE>

(a)For the period July 1, 1999 (effective date) to December 31, 1999.

See notes to financial statements.

FSI-13
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN STRATEGIC INCOME SECURITIES FUND

Notes to Financial Statements (unaudited)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The following summarizes the Fund's significant accounting policies.

a. Security Valuation

b. Foreign Currency Translation

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

c. Income Taxes

d. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and
losses on security transactions are determined on a specific identification
basis. Interest income and estimated expenses are accrued daily. Bond discount
is amortized on an income tax basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.

FSI-14
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN STRATEGIC INCOME SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

e. Accounting Estimates

2. SHARES OF BENEFICIAL INTEREST

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

At June 30, 2000, there were an unlimited number of shares authorized ($.01 par
value). Transactions in the Fund's shares were as follows:

(a)For the period July 1, 1999 (effective date) to December 31, 1999.

As of June 30, 2000 there were no transactions in the Fund's Class 2 shares.

3. TRANSACTIONS WITH AFFILIATES

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

<TABLE>
<CAPTION>
Entity Affiliation
---------------------------------------------------------------------------------------
<S> <C>
Franklin Templeton Services, Inc. (FT Services) Administrative manager
Franklin Advisers, Inc (Advisers) Investment manager
Franklin/Templeton Distributors, Inc. (Distributors) Principal underwriter
Templeton Investment Counsel, Inc. (TICI) Sub-adviser
Franklin/Templeton Investor Services, Inc. (Investor Services) Transfer agent
</TABLE>

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

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

Management fees were reduced on assets invested in the Franklin Institutional
Fiduciary Trust Money Market Portfolio.

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

FSI-15
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN STRATEGIC INCOME SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

3. TRANSACTIONS WITH AFFILIATES (cont.)

Under a subadvisory agreement, TICI provides subadvisory services to the Fund
and receives fees from Advisers based on the average daily net assets of the
Fund.

Advisers agreed in advance to waive management fees as noted in the Statement
of Operations.

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

Included in professional fees are legal fees of $174 that were paid to a law
firm in which a partner of that firm was an officer of the Fund.

4. INCOME TAXES

At December 31, 1999, the Fund had tax basis capital losses of $18,246 which
may be carried over to offset future capital gains. Such losses expire in
December 31, 2007.

At December 31, 1999, the Fund had deferred capital losses of $1,898 occurring
subsequent to October 31, 1999. For tax purposes, such losses will be reflected
in the year ending December 31, 2000.

Net investment income differs for financial statement and tax purposes
primarily due to differing treatment of foreign currency transactions and
merger related expenses.

Net realized capital gains (losses) differ for financial statements and tax
purposes primarily due to differing treatment of foreign currency transactions.

At June 30, 2000, the net unrealized depreciation based on the cost of
investments for income tax purposes of $7,755,844 was as follows:

Unrealized appreciation ............. $ 109,920
Unrealized depreciation ............. (241,038)
----------
Net unrealized depreciation ......... $ (131,118)
==========

5. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities) for the
period ended June 30, 2000 aggregated $3,163,153 and $514,844, respectively.

6. CREDIT RISK

FSI-16
<PAGE>

FRANKLIN U.S. GOVERNMENT FUND

This chart in pie format shows the investment holdings of Franklin U.S.
Government Fund as a percentage of total net assets on 6/30/00.

Mortgage-Backed Securities 73.9%
Agency Notes & Bonds 22.7%
Short-Term Investments & Other Net Assets 3.4%

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

FUS-1
<PAGE>

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any industry, security or the Fund. Our
strategies and the Fund's portfolio composition will change depending on
market and economic conditions. Although historical performance is no
guarantee of future results, these insights may help you understand our
investment and management philosophy.

FUS-2
<PAGE>

PERFORMANCE SUMMARY AS OF 6/30/00

Franklin U.S. Government Fund - Class 2 delivered a +3.75% cumulative total
return for the six-month period ended 6/30/00. Total return of Class 2 shares
represents the cumulative or 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.

<TABLE>
<CAPTION>
Franklin U.S. Government Fund - Class 2*
Periods ended 6/30/00
Since Since Class 2
Inception Inception
1-Year 5-Year 10-Year (3/14/89) (1/6/99)
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Average Annual Total Return +4.10% +5.81% +7.57% +7.39% +1.75%
Cumulative Total Return +4.10% +32.62% +107.42% +123.86% +2.60%
</TABLE>

Franklin U.S. Government
Fund - Class 2

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

Past performance does not guarantee future results.

FUS-3
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN U.S. GOVERNMENT FUND

Financial Highlights

FUS-4
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN U.S. GOVERNMENT FUND

Financial Highlights (continued)

(a)Based on average shares outstanding.
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for periods less than one
year.
(c)For the period January 6, 1999 (effective date) to December 31, 1999.
(d)Annualized

See notes to financial statements.

FUS-5
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN U.S. GOVERNMENT FUND

Statement of Investments, June 30, 2000 (unaudited)

FUS-6
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN U.S. GOVERNMENT FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

(a)Investment is through participation in a joint account with other funds
managed by the investment advisor. At June 30, 2000, all repurchase
agreements had been entered into on that date.

See notes to financial statements.

FUS-7
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN U.S. GOVERNMENT FUND

Financial Statements

Statement of Assets and Liabilities
June 30, 2000 (unaudited)

See notes to financial statements.

FUS-8
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN U.S. GOVERNMENT FUND

Financial Statements (continued)

Statement of Operations
for the six months ended June 30, 2000 (unaudited)

See notes to financial statements.

FUS-9
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN U.S. GOVERNMENT FUND

Financial Statements (continued)

Statements of Changes in Net Assets
for the six months ended June 30, 2000 (unaudited) and the year ended December
31, 1999

<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999
---------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income .................................................. $ 15,630,834 $ 38,162,814
Net realized gain (loss) from investments .............................. (5,409,291) 2,048,000
Net unrealized appreciation (depreciation) on investments .............. 7,624,249 (45,913,508)
-----------------------------------
Net increase (decrease) in net assets resulting from operations ....... 17,845,792 (5,702,694)
Distributions to shareholders from:
Net investment income:
Class 1 ............................................................... (430,710) (82,724,494)
Class 2 ............................................................... (1,808) (257,323)
-----------------------------------
Total distributions to shareholders ..................................... (432,518) (82,981,817)
Capital share transactions: (Note 2)
Class 1 ............................................................... (82,430,357) (107,385,179)
Class 2 ............................................................... (424,631) 2,148,073
-----------------------------------
Total capital share transactions ........................................ (82,854,988) (105,237,106)
Net decrease in net assets ............................................ (65,441,714) (193,921,617)
Net assets:
Beginning of period ..................................................... 516,910,306 710,831,923
-----------------------------------
End of period ........................................................... $ 451,468,592 $ 516,910,306
===================================
Undistributed net investment income included in net assets:
End of period ........................................................... $ 15,627,382 $ 429,066
===================================
</TABLE>

See notes to financial statements.

FUS-10
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN U.S. GOVERNMENT FUND

Notes to Financial Statements (unaudited)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The following summarizes the Fund's significant accounting policies.

a. Security Valuation

b. Income Taxes

c. Security Transactions, Investment Income, Expenses and Distributions

d. Accounting Estimates

2. SHARES OF BENEFICIAL INTEREST

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

FUS-11
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN U.S. GOVERNMENT FUND

Notes to Financial Statements (unaudited) (continued)

2. SHARES OF BENEFICIAL INTEREST (cont.)

At June 30, 2000, there were an unlimited number of shares authorized ($.01 par
value). Transactions in the Fund's shares were as follows:

<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999(a)
-------------------------------------------------------------------
Shares Amount Shares Amount
Class 1 Shares: -------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ................................... 1,272,103 $ 15,101,219 4,229,311 $ 56,773,998
Shares issued in reinvestment of distributions 35,952 430,710 6,745,264 82,724,494
Shares redeemed ............................... (8,233,196) (97,962,286) (18,460,763) (246,883,671)
--------------------------------------------------------------
Net decrease .................................. (6,925,141) $ (82,430,357) (7,486,188) $ (107,385,179)
==============================================================
Class 2 Shares:
Shares sold ................................... 30,850 $ 367,994 165,968 $ 2,244,294
Shares issued in reinvestment of distributions 151 1,808 21,095 257,323
Shares redeemed ............................... (66,496) (794,433) (27,670) (353,544)
--------------------------------------------------------------
Net increase (decrease) ....................... (35,495) $ (424,631) 159,393 $ 2,148,073
==============================================================
</TABLE>

(a)For the period January 6, 1999 (effective date) to December 31, 1999 for
Class 2.

3. TRANSACTIONS WITH AFFILIATES

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

<TABLE>
<CAPTION>
Entity Affiliation
---------------------------------------------------------------------------------------
<S> <C>
Franklin Templeton Services, Inc. (FT Services) Administrative manager
Franklin Advisers, Inc. (Advisers) Investment manager
Franklin/Templeton Distributors, Inc. (Distributors) Principal underwriter
Franklin/Templeton Investor Services, Inc. (Investor Services) Transfer agent
</TABLE>

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

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

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

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

Included in professional fees are legal fees of $1,482 that were paid to a law
firm in which a partner of that firm was an officer of the Fund.

FUS-12
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

FRANKLIN U.S. GOVERNMENT FUND

Notes to Financial Statements (unaudited) (continued)

4. INCOME TAXES

At December 31, 1999, the Fund had tax basis capital losses, which may be
carried over to offset future capital gains. Such losses expire as follows:

At December 31, 1999, the Fund had a deferred capital loss occurring subsequent
to October 31, 1999 of $1,160,146. For tax purposes, such loss will be
reflected in the year ending December 31, 2000.

Net realized capital gains (losses) differ for financial statements and tax
purposes primarily due to differing treatments of mortgage dollar rolls.

At June 30, 2000, the net unrealized depreciation based on the cost of
investments for income tax purposes of $457,771,312 was as follows:

Unrealized appreciation ............. $ 5,827,607
Unrealized depreciation ............. (15,237,255)
-------------
Net unrealized depreciation ......... $ (9,409,648)
=============

5. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities) for the
period ended June 30, 2000 aggregated $1,361,977 and $83,332,412, respectively.

FUS-13
<PAGE>

TEMPLETON GLOBAL INCOME SECURITIES FUND

(1) Source: Standard and Poor's Micropal. The J.P. Morgan Global Government Bond
Index measures and tracks bonds from around the world.

(2) Source: Standard and Poor's Micropal. The J.P. Morgan U.S. Government Bond
Index includes actively traded U.S. fixed-rate bonds with a remaining maturity
of one year or longer.

This chart in pie format shows the geographic distribution of Templeton Global
Income Securities Fund as a percentage of total net assets on 6/30/00.

Europe 49.5%
North America 18.4%
Latin America 14.6%
Australia/New Zealand 7.8%
Asia 6.1%
Short-Term Investments &
Other Net Assets 3.6%

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

TGI-1
<PAGE>

Emerging market bond prices rose during the period, apparently as a result of
higher commodity prices and improved economic fundamentals for the respective
countries. The J.P. Morgan Emerging Market Bond Index Plus (EMBI+) increased
8.10% during the six-month period. Most countries in the index experienced
positive returns, with the exception of Nigeria, Colombia, the Philippines and
Peru. Russian bonds were among the best performers, increasing 49.78%, followed
by those of Algeria, Venezuela, Mexico and Turkey.

Portfolio Notes

TGI-2
<PAGE>

This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance
is no guarantee of future results, these insights may help you understand our
investment and management philosophy.

TGI-3
<PAGE>

Templeton Global Income
Securities Fund - Class 2

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

PERFORMANCE SUMMARY AS OF 6/30/00

Templeton Global Income Securities Fund - Class 2 delivered a +0.06% cumulative
total return for the six-month period ended 6/30/00. Total return of Class 2
shares represents the cumulative or 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.

<TABLE>
<CAPTION>
Templeton Global Income Securities Fund - Class 2*
Periods ended 6/30/00
Since Since Class 2
Inception Inception
1-Year 5-Year 10-Year (1/24/89) (1/6/99)
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Average Annual Total Return -0.71% +3.71% +5.36% +5.92% -4.42%
Cumulative Total Return -0.71% +20.01% +68.55% +93.05% -6.47%
</TABLE>

Past performance does not guarantee future results.

TGI-4

<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL INCOME SECURITIES FUND

Financial Highlights

<TABLE>
<CAPTION>
Class 1
-----------------------------------------------------------------------------------
Six Months Ended Year Ended December 31,
June 30, 2000 ----------------------------------------------------------------
(unaudited) 1999 1998 1997 1996 1995
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period ........... $11.07 $12.87 $12.97 $13.61 $13.46 $12.19
-------------------------------------------------------------------------------
Income from investment operations:
Net investment income(c)....................... .34 .68 1.07 1.05 1.02 .29
Net realized and unrealized gains (losses) .... (.32) (1.42) (.19) (.73) .17 1.47
-------------------------------------------------------------------------------
Total from investment operations ............... .02 (.74) .88 .32 1.19 1.76
-------------------------------------------------------------------------------
Less distributions from net investment income .. (.02) (1.06) (.98) (.96) (1.04) (.49)
-------------------------------------------------------------------------------
Net asset value, end of period ................. $11.07 $11.07 $12.87 $12.97 $13.61 $13.46
===============================================================================
Total return(b)................................. .15% (5.79%) 7.08% 2.55% 9.56% 14.68%

(a)Annualized
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for periods less than one
year.
(c)Based on average shares outstanding effective year ended December 31, 1999.

TGI-5
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL INCOME SECURITIES FUND

Financial Highlights (continued)

<TABLE>
<CAPTION>
Class 2
-----------------------------------------
Six Months Ended
June 30, 2000 Year Ended
(unaudited) December 31, 1999(c)
-----------------------------------------
<S> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period .................. $11.04 $12.93
---------------------------
Income from investment operations:
Net investment income(d).............................. .32 .60
Net realized and unrealized losses ................... (.31) (1.44)
---------------------------
Total from investment operations ...................... .01 (.84)
---------------------------
Less distributions from net investment income ......... (.02) (1.05)
---------------------------
Net asset value, end of period ........................ $11.03 $11.04
===========================
Total return(b)........................................ .06% (6.53%)

(a)Annualized
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for periods less than one
year.
(c)For the period January 6, 1999 (effective date) to December 31, 1999.
(d)Based on average shares outstanding.

See notes to financial statements.

TGI-6
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL INCOME SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited)

TGI-7
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL INCOME SECURITIES FUND

Statement of Investments, June 30, 2000 (unaudited) (cont.)

Currency Abbreviations:

AUD--Australian Dollar
CAD --Canadian Dollar
DKK --Danish Krone
EUR --European Unit
GBP --British Pound
JPY --Japanese Yen
NZD --New Zealand Dollar
SEK --Swedish Krona

See notes to financial statements.

TGI-8
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL INCOME SECURITIES FUND

Financial Statements

Statement of Assets and Liabilities
June 30, 2000 (unaudited)

See notes to financial statements.

TGI-9
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL INCOME SECURITIES FUND

Financial Statements (continued)

Statement of Operations
for the six months ended June 30, 2000 (unaudited)

See notes to financial statements.

TGI-10
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL INCOME SECURITIES FUND

Financial Statements (continued)

Statements of Changes in Net Assets
for the six months ended June 30, 2000 (unaudited) and the year ended December
31, 1999

<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999
-------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income .................................................................. $ 2,684,084 $ 6,655,075
Net realized loss from investments and foreign currency transactions ................... (205,879) (6,055,260)
Net unrealized depreciation on investments and translation of assets and liabilities
denominated in foreign currencies .................................................... (2,039,525) (8,370,208)
-------------------------------
Net increase (decrease) in net assets resulting from operations ....................... 438,680 (7,770,393)
Distributions to shareholders from:
Net investment income:
Class 1 ............................................................................... (116,818) (9,277,104)
Class 2 ............................................................................... (812) (19,727)
-------------------------------
Total distributions to shareholders ..................................................... (117,630) (9,296,831)
Capital share transactions: (Note 2)
Class 1 ............................................................................... (338,968) (43,358,906)
Class 2 ............................................................................... 693,020 465,304
-------------------------------
Total capital share transactions ........................................................ 354,052 (42,893,602)
Net increase (decrease) in net assets ................................................. 675,102 (59,960,826)
Net assets:
Beginning of period ..................................................................... 90,979,911 150,940,737
-------------------------------
End of period ........................................................................... $ 91,655,013 $ 90,979,911
===============================
Undistributed net investment income included in net assets:
End of period ........................................................................... $ 2,796,359 $ 229,905
===============================
</TABLE>

See notes to financial statements.

TGI-11
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL INCOME SECURITIES FUND

Notes to Financial Statements (unaudited)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The following summarizes the Fund's significant accounting policies.

a. Security Valuation

b. Foreign Currency Translation

Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the exchange rate of such
currencies against U.S. dollars on the date of valuation. Purchases and sales
of securities and income items denominated in foreign currencies are translated
into U.S. dollars at the exchange rate in effect on the transaction date. When
the Fund purchases or sells foreign securities the Fund will customarily enter
into a foreign exchange contract to minimize foreign exchange risk from the
trade date to the settlement date of such transactions.

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. Forward Exchange Contracts

d. Income Taxes

TGI-12
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL INCOME SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

e. Security Transactions, Investment Income, Expenses and Distributions

f. Indexed Securities

The Fund may invest in debt instruments in which the principal and/or interest
is dependent on other factors such as yield curves, currency exchange rates or
commodity prices. The Fund's objective in holding these securities, commonly
called indexed securities or structured notes, is to tailor its investments to
the specific risk and returns it wishes to assume while avoiding unwanted risk
or change in the Fund's exposure to a particular foreign exchange rate or the
spread between two foreign exchange rates.

g. Accounting Estimates

2. SHARES OF BENEFICIAL INTEREST

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

TGI-13
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL INCOME SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

2. SHARES OF BENEFICIAL INTEREST (cont.)

At June 30, 2000, there were an unlimited number of shares authorized ($.01 par
value). Transactions in the Fund's shares were as follows:

<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999(a)
-----------------------------------------------------------------
Shares Amount Shares Amount
Class 1 Shares: -----------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ...................................... 150,065 $ 1,611,401 755,763 $ 9,398,931
Shares issued on merger (Note 7) ................. 1,620,086 17,464,656 -- --
Shares issued on reinvestment of distributions ... 10,838 116,818 815,256 9,277,104
Shares redeemed .................................. (1,788,206) (19,531,843) (5,116,543) (62,034,941)
------------------------------------------------------------
Net decrease ..................................... (7,217) $ (338,968) (3,545,524) $ (43,358,906)
============================================================
Class 2 Shares:
Shares sold ...................................... 14,333 $ 156,866 40,368 $ 470,374
Shares issued on merger (Note 7) ................. 70,754 759,809 -- --
Shares issued on reinvestment of distributions ... 76 812 1,764 19,727
Shares redeemed .................................. (20,987) (224,467) (2,055) (24,797)
------------------------------------------------------------
Net increase ..................................... 64,176 $ 693,020 40,077 $ 465,304
============================================================
</TABLE>

(a)For the period January 6, 1999 (effective date) to December 31, 1999 for
Class 2.

3. TRANSACTIONS WITH AFFILIATES

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

<TABLE>
<CAPTION>
Entity Affiliation
----------------------------------------------------------------------------------------
<S> <C>
Franklin Templeton Services, Inc. (FT Services) Administrative manager
Franklin Advisers, Inc. (Advisers) Investment manager
Templeton Investment Counsel, Inc. (TICI) Investment manager
Franklin/Templeton Distributors, Inc. (Distributors) Principal underwriter
Franklin/Templeton Investor Services, Inc. (Investor Services) Transfer Agent
</TABLE>

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

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

Under a subadvisory agreement, TICI provides subadvisory services to the Fund
and receives fees from Advisers based on the average daily net assets of the
Fund.

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

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

TGI-14
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
TEMPLETON GLOBAL INCOME SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

3. TRANSACTIONS WITH AFFILIATES (cont.)

Included in professional fees are legal fees of $236 that were paid to a law
firm in which a partner of that firm was an officer of the Fund.

4. INCOME TAXES

Unrealized appreciation ............. $ 128,972
Unrealized depreciation ............. (9,630,656)
------------
Net unrealized depreciation ......... $ (9,501,684)
============

5. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities) for the
period ended June 30, 2000 aggregated $11,819,718 and $26,678,045,
respectively.

6. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

TGI-15
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

TEMPLETON GLOBAL INCOME SECURITIES FUND

Notes to Financial Statements (unaudited) (continued)

6. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK (cont.)

the difference between the forward exchange rates at the reporting date and the
forward exchange rates at the day of entry into the contract.

7. CREDIT RISK

The Fund has investments in excess of 10% of its total net assets in Germany,
such concentration may subject the Fund more significantly to economic changes
occurring within this country.

8. MERGER

TGI-16